Business: Dividends from Deregulation

A benefit, on balance, for travelers and traffic

Almost exactly a year ago, Congress passed the Airline Deregulation Act, which in the name of free market economics all but stripped away the bureaucracy that had controlled and coddled the U.S. air travel industry for 40 years. Generally, the skies were opened to many new carriers, and operators were given unprecedented freedom to change routes, flight schedules and even their fares. Result after twelve months: a spurt of competition that has brought benefits for travelers as well as some headaches, but that may be cut short by new financial woes afflicting the industry.

On balance, deregulation has led to improved service. Scheduled carriers have added flights at more than 100 cities, and 35 carriers began serving 231 routes that had not previously been flown by lines that had permission to use them. In addition, 32 carriers have taken advantage of a rule that allows each line to begin flying one new route each year without having to get the Civil Aeronautics Board's assent. Insists United Airlines Chairman Richard Ferris: "About 98% of the traveling public has as much or more service available today than a year ago."

The big gainers have been hub cities such as Los Angeles, Houston, Chicago and New York and recreation meccas like Hawaii and Florida. But there have been losers too. Some 60 cities have been stripped of all scheduled airline service. In Chattanooga, which lost much of its service when United and Eastern pulled out this year, James Hunt, a Chamber of Commerce executive, says unhappily of deregulation: "Count us as one of the minuses."

The hope was that in places where service was curtailed or ended altogether, commuter airlines flying small planes and endowed with subsidies would fill the gap. Indeed, in the past twelve months more than 60 such lines have started up. But as a group they are plagued by a shortage of suitable aircraft and a poor safety record. So far in 1979, crashes involving commuter planes have killed 61 persons, vs. 42 in all of 1978.

The increased competition brought on by deregulation has cut average air travel costs. Traffic is up by 13.5% for the first nine months of this year, on top of a 17% increase in 1978, and about half of all air travelers now pay discount fares. The flood of flights has overstrained airports, creating booking, check-in and departure delays. Planes are packed, and even first-class seats can be difficult to get because more and more passengers are paying the premium rates to avoid the crowding and hassle of cabin class. But despite this booming business and a 32% increase in basic fares, the airlines are encountering profit problems, chiefly as a result of higher fuel prices. Says Marvin Cohen, chairman of the CAB: "Fuel has been a real bitch."