Airlines: More of Everything but Earnings

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U.S. airlines pride themselves on being the industry of tomorrow. On the way to that roseate tomorrow, they are running into considerable turbulence today.

In a sense, the airlines have been buffeted by their own success. Airline revenues have more than tripled during the past decade, and the industry expects to transport 300 million passen gers a year on domestic flights by 1975, compared with 125 million last year. Gearing themselves to the crush of expected business, most major carriers have been busily adding new flights to their schedules and laying out huge sums for stretched jet transports, jum bo jets and supersonic aircraft. In the process, they have found themselves trapped in an ever worsening cost-profit squeeze.

Alarming Rate. With bigger planes operating more flights in anticipation of that happy future, the number of empty seats is growing at an alarming rate. In addition, the industry has been bedeviled by spiraling expenses, which increased by 21.2% last year and are up almost as much more in 1968. The one-two punch has battered the profits of some of the biggest carriers. United has suffered an earnings decline this year of 49.2%, Continental Airlines of 62.5%, Eastern of 63.3%. Even worse off is Trans World Airlines, which lost $1.78 million during the year's first half, compared with a profit of $7.62 mil lion in the same period last year.

Labor accounts for one of the industry's fastest-growing expenses, as evidenced by the salary increases of roughly 20% that airline pilots have recently been winning. Air-traffic delays, brought on in large measure by the proliferation of scheduled flights, have cost the airlines some $90 million so far this year. But new aircraft purchases are far and away the most expensive item. Under contract, U.S. airlines will take delivery of 451 new jet planes this year, at a cost of $2.6 billion. In all, they have commitments or options to buy $7.6 billion worth of jets by the end of 1971.

Shakedown Ahead. On the revenue side, the airlines have clearly been misled by overoptimistic passenger projections. Carriers flying between New York and Los Angeles have added enough new seats this year to accommodate an anticipated 15% growth of traffic, but the number of passengers has increased by only 7%. Last year American Airlines scheduled 103 weekly flights from New York to Los Angeles, operated them at 70% of capacity. This year, after adding 43 flights to the route, American has seen that occupancy figure drop to 55%.