Airline deregulation: bargain fares if you're taking long trip
If you're flying somewhere this summer, you may discover that farther is often cheaper. On one major airline from Chicago, it currently costs $99 for a one-way coach seat to Los Angeles but $229 for a ticket only as far as Salt Lake City. On another line you'll pay $122 from Chicago all the way to Miami, but $129 to get to Atlanta, which is closer.
The reason: Competition is strongest on the more heavily traveled long-distance routes. Seven airlines now compete for coast-to-coast traffic, up from three just three years ago. Much of the change is due to a 1978 decision by Congress to let the marketplace, rather than the Civil Aeronatics Board (CAB) , slowly begin to regulate air fares and routes.
Passengers now find that fares per mile often are higher on short flights, more of which now are provided by so-calle commuter airlines. Operating costs per mile are greater for these shorter runs. Nevertheless, many of the small airlines, facing less competition in their areas, are doing better economically than their larger counterparts.
Now short-haul fares are free to go even higher. A few weeks ago, in an effort to encourage regular carriers to pick up some of the shorter routes once again, the CAB ruled that airlines can raise ticket prices as much as they like on any flight up to 200 miles. They may also raise them as high as 50 percent above the CAB's ceiling on any route of 200 to 400 miles. Price-hike limits are considerably tighter on longer flights.
"We felt we may have been driving the larger carriers out of these short-haul markets because we weren't giving them the flexibility to cover their costs," explains CAB spokesman Alan Pollock.
But Ralph Nader's Aviation Consumer Action Project, one of the original supporters of airline deregulation, views the CAB's latest hands-off action as too much, too soon for the public good. ACAP has filed suit to block the policy from taking effect, on grounds that the timetable for lifting controls set by the 1978 airline deregulation should be followed.
"The problem is that after 40 years of tight regulation, it takes a while for the kinks to work out. You don't try to do it all and declare a victory overnight," insists ACAP's Con Hitchcock.
The CAB also recently reversed a policy that banned special fares for such groups as family members or young people on the theory that they were discriminatory.
"It's all kind of an experiment of offer more flexibility and see whether or not we need to crack down before we lose all control over air fares, as we're scheduled to do by January 1983," Mr. Pollock explains.
For the airlines, all this new-found freedom to shift routes and juggle fares comes at a tough economic time. They, like many other businesses, are particularly hard hit by rising fuel costs and a falloff in business. Continental and United Airlines have announced plans to lay off employees after the summer travel season.
But United chairman Richard J. Ferris, a longtime supporter of deregulation, told a group of airline financial analysts a few days ago: "Deregulation is not the cause of our problems. It's been a help. . . . It has allowed us the freedom to restructure our route system in a way that cuts our costs and better suits customer demand. And it has given us new freedom to offer innovative discount fares."
Yet to keep their share of the market on heavily traveled long-distance routes, some carriers feel they must provide bargain fares which, though welcomed by passengers, force the airlines to absorb losses where they can least afford. The going New York-to-California rate moved up this month from $99 to $ 129, but it is still considered a major bargain. One airline executive admits," "We'll be lucky to cover our cash costs" on the route, but says his line has no intention of giving up its share of the market.