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A bill that would free the CAB from its legal responsibility to fix fares and routes has passed the Senate but is bogged down in the House. It is expected to pass eventually, though probably not this year. Deregulation would be the most radical change in U.S. aviation history, greatly affecting the lines' ability to raise money for their next cycle of jet purchases.
This is supremely important because, even if the growth in air travel levels out to 6% a year, U.S. lines will need to borrow $56 billion by 1985 to replace their aging jets. Lenders will tend to favor the lines that stand to benefit the most from deregulation, meaning the bigger, richer carriers. Though the U.S. certainly needs more competition and fare flexibility in the air, the specter of unbridled price cutting and route grabbing frightens many financial experts, who fear that some lines will not be able to earn the returns needed to justify large loans. One airline financial officer calls the CAB'S free-enterprising Chairman Albert Kahn "an intellectual giant and a commercial idiot."
Assertive and gregarious, Economist Kahn, a former Cornell University Professor, thrives on controversy. In an interview with TIME Washington Correspondent Jerry Hannifin, he argued that the airlines are excessively panicked by the prospect of being exposed to the full force of a competitive marketplace. "What I suspect is that there is a search for another security blanket now that the CAB security blanket is being removed," he says. Rather than harming the airlines, Kahn contends, deregulation will help many of them prosper. "We are making every carrier in this country a potential competitor of the other carriers by saying if you want to enter a market, we will do everything we can to let you enter that market."
A few small airlines undoubtedly would prosper by moving into profitable niches overlooked by the bigger carriers. Southwest, a small regional carrier, has applied for routes to Chicago with a regular fare 50% below that of the major airlines, and it could perhaps make a marginal profit on that heavily traveled run. Freddie Laker is the perfect example of a small operator who chose a lucrative route and cut rates to fill his planes beyond the break-even point. But Laker incurs none of the costs of providing service to small communities that could not fill up his planes.
European airline leaders, who generally favor controlled competition, have serious quarrels with Carter's approach. Their objections would be more telling if they had done a better job of opening up air travel to the broad public. European fares are still twice as high as those in the U.S.; and promotional cheapies are few. Rather than compete for passengers, the European airlines band together in "pools," or market-sharing arrangements. On the Paris-London run, for example, Air France and British Airways schedule their flights at different times to avoid competition as well as costly excess capacity.