The Civil Aeronautics Board yesterday said it would allow Texas International Airlines, a federally-regulated airline serving nine southern and western states, to cut fares in half on some flights on five major routes beginning today.
The complaints filled by seven of TI's competitors who had urged the board. After the board vote, some of them were immediately making plans to met TI's prices.
In its application to the CAB, TI had argued that the low fares would increase its business - and profits - by generating new customers who can not now afford to fly.
"We're elated." Jim O'Donnell, TI vice president for marketing, said yesterday after the board decision. As of Friday, he said, the airline already had received 787 reservations from consumers at the not-yet advertising half-price fares.
In its filing, TI estimated the low fares would attract 130,000 new passengers and a minimum of $1.6 million in profits for the 12-months experimental period of the half-price "Peanuts" fares.
As of today, consumers who want to fly between Los Angeles and Albuquerque can fly on certain of TI's flights for $38 each way the regular coach fare is $76. The bus fare between the two cities was $52.85 last month.
Other "peanuts" fares and routes are:
Between Denver and Salt Lake City, $26 instead of $53.
Houston and New Orleans, =23, instead of $46.
Austin to Dallas Ft. Worth, $18 instead of $35.
Dallas/Ft, Worth to Midland/Odessa, $24 instead of $47.
The routes are all prohifitable, TI officials have said, but specific flights carry many empty seast, and those are the seats the carrier proposed to fill with passengers paying the lower fares. TI expects its load factors on those flights to jump from between 30 to 40 per cent to 65 per cent with the additional.
The "Peanuts" fare flights are scheduled between 7 and 10:30 a.m. and between 6:30 and 8:40 p.m.
Except for the Denver-Salt Lake City run, the bus fare in each case is higher than it will cost to fly the "peanuts" fares. TI officials were said to have become believers that low fares could attract new customers - not just divert traffic from other fares - when it instituted new service last fall between Houston's Hobby Airport and the Dallas/Ft. Worth Regional Airport with a two-tier pricing scheme like that used by its major Texas competitor, Southwest Airlines. As a promotion of the new service, TI had allowed standby passengers to fly for $1 on the first day of service, $2 on the second day and so on for the first two weeks.
Although the board allowed the carrier to put the fares in effect the board said it would institute an investigation to determine the long-term effects of the fares upon the airline industry.
The TI application, several applications to fly in and out of Midway Airport at lower than current fares, and an application filled by World Airways to fly coast-to-coast for half-priced represents serious challenges to a long standing way of life in the highly regulated airline industry.
The board has traditionally used its rate-making powers to establish standards for assessing whether proposed fares are "just and reasonable" based on industry-wide cost and revenue figures, rather than on what an individual airline believes it can charge for its services. Although the board has been criticized, especially vigorously over the last three years, for failing to encourage competition and the lower consumer air fares some believed possible, until recently there weren't many applications from carriers willing to test the system.