President Carter indicated yesterday that his administration plans to support broad reform of federal airline regulations, as proposed recently by Sens. Edward M. Kennedy (D-Mass.) and Howard W. Cannon (D-Nev.).
The General Accounting office, meanwhile, reported to Congress yesterday that domestic air fares may be anywhere from 22 per cent to 52 per cent higher today than they would be under less regulation by the Civil Aeronautics Board.
GAO's report, prepared over 18 months at the request of Kennedy, said federally regulated airline companies could have operated with lower costs and that travelers could have saved $1.4 billion to $1.8 billion annually, if the CAB had fewer controls over fares and entry into specific markets.
At a news conference yesterday, Carter did not endorse specifically a recent compromise of Kennedy and Cannon, who last year had supported different measures. Instead, Carter said the administration would respond to the legislation already proposed and would not submit a separate bill.
The President said a message on regulatory agency reform as soon would be sent to Congress and that the airline issue will receive initial attention.
According to White House aides, this is the course of action advocated by a transition task force, which told Carter he could score a "quick hit" to meet campaign commitments on the regulatory issue by embracing CAB reform measures in progress for two years in the Senate and House.
Well-placed sources said last night that Carter had decided to take this advice. The sources said Carter had opted for a stronger deregulation position than his Secretary of Transportation, Brock Adams, had favored in the past.
Carter was advised not to back any specific legislation, so he would not alieniate any members of Congress who had backed one of several bills now being considered.
Administration sources said Carter's regulatory reform message will outline principles he wants enacted in separate legislation that would affect CAB regulation of the airlines or Interstate Commerce Commission rules for trucking companies.
The decision of Kennedy and Cannon to join forces on the airline issue virtually assures passage in the Senate of a CAB reform measure this year with House action still an open question, according to industry sources.
Basically, the Kennedy-Cannon bill would allow airlines to compete in price and make it easier for established or new airline companies to offer reduced-fare services and start services in new markets. Legislation sponsored by Republicans James B. Pearson (Kans.) and Minority Leader Howard H. Baker (Tenn.) would require the CAB to start a "phased and progressive" transition to a system that encourages competition.
Many airline firms and unions are opposed to the thrust of the regulatory reform measures, including a House bill of Rep. Glenn Anderson (D-Calif.).
Kennedy said yesterday the new GAO report "dramatizes a need for quick action by Congress . . . it would be irresponsible to continue to tolerate an outmoded regulatory system that taxes the nation's business and pleasure travelers with high air fares." Cannon has scheduled hearings starting next month before his Senate Aviation Subcommittee.
The GAO studied domestic airlines that accounted for nearly 90 per cent of passenger business in the 1969-1974 period, seeking to review a private study in 1972 by economic professor Theodore E. Keeler of the University of California and Berkeley.
In essence, the GAO assumed with Keeler that under less CAB regulation, there would be more frequent entry and departure from specific city-to-city markets, that airlines would be able to raise or lower fares on their own and that new airline firms could win CAB certification.
Given this environment, the GAO said, that airlines probably would have charged lower first-class and coach fares. To the extend that lower fares would have induced increased air travel, savings would have been even higher, the conressional watchdog agency concluded.
Passengers would have given up some conveniences, however. For example, some flights would have been more crowded and fewer flights might have been scheduled for some routes.
GAO said airlines could have saved money by putting more seats on each aircraft, filling more of the available seats, increasing average annual use of aircraft and using more efficient aircraft available. All the while, the airlines would have retained rates of profitability comparable to the entire corporate sector, the GAO stated.
Under the Kennedy-Cannon plan, the five largest airlines could add no more than one new pair of city markets each year separated by a maximum of 2,000 miles. Smaller airlines and charter firms would be allowed to expand by four markets pairs each year with a cumulative annual total of 4,000 miles.