United Airlines, the nation's largest carrier, today became the first scheduled airline to back a specific program of industry deregulation.
United President Richard J. Ferris, in a speech to the Wings Club here, outlined his airline's plan for decreased government authority in airline pricing, market entry, and exit and regulatory procedures to effect what he termed "a gradual transition to a more market-oriented system."
The step by United appeared to be a somewhat belated attempt to get out in front of the movement in Washington to significantly deregulate the airline industry, a movement that in recent months has gained considerable momentum.
United's proposal is less sweeping than a bill introduced jointly by Sens. Edward M. Kennedy (D-Mass.) and Howard W. Cannon (D-Nev.) which almost certainly will be the main legislative vehicle for this year's deregulation push. Hearings on the Kennedy-Cannon bill begin March 21.
But it goes considerably further than any other airline has in staking out a positive position on this issue.
Ferris told the aviation industry audience that "United's conclusion to seek a new law is not one that has been reached lightly." But he premised his argument in favor of gradual deregulation on the poor financial condition of the airline industry under the present regulatory scheme. He noted that the airline industry's 3.6 per cent return on total capital over a five-year period was the lowest of 30 industries ranked by Forbes magazine.
"A change in the regulatory law is clearly the most promising possibility - if not the only possibility - for change that can get this industry on a course toward economic health," he said. "For airlines, their shareholders and lenders, regulatory reform could mean the ability to price air service to earn a reasonable profit."
Specifically, Ferris proposed on pricing that "carriers should be permitted to adjust their fares up or down within a reasonable zone" in through the process of getting advance approval from the Civil Aeronautics Board.
He indicated that annual readjustments of 10 per cent up or down from base fares "is a reasonable zone". This would potentially permit a 40 per cent move in fares in either direction over a four-year period. Fare changes outside the zone still could be proposed but would require CAB approval.
Speaking to reporters later, Ferris declined to predict whether fares initially would move up or down if such a system is put into place, but said that, "In the long-term, air fares are going to go up."
On entry of new carriers into service, Ferris endorsed a suggestion Sen. Kennedy made last year to limit the number of new carriers certified each year to two, so that the transition to a more competitive market would be gradual. The current version of the Kennedy-Cannon Bill, does not include such a limit however.
Existing carriers should be allowed to expand their own route systems unilaterally within prescribed limits, and "rout franchises should be continued in the public interest," Ferris suggested.
Conversely, he said that, "Along with increase competition should be greater for carriers to terminate unprofitable service." There should be some provision made for communities that would lose air service, he added.
The industry should retain its antitrust immunity so that airline arrangements for handling claims, baggage and tickets for connecting flights would continue, he said.
Because United is the country's biggest airline and relatively healthy financially, some observes believe it is in good shape to survive a shake-out period and could benefit in the longhaul.
But Ferris pointed out in his speech that United's costs are not the lowest in the industry, that it has many routes that could be subjected to new competition, and that it therefore would "not be spared the harsh realities of adjusting to a move competitive market."
The United Airlines president later said he expected other scheduled carriers to back his line's position on deregulation.
But American Airlines chairman Albert V. Casey, who was in the audience, called the position "very unrealistic. There isn't a society in the history of the world that has not had to have some kind of regulation for its transportation system," Casey said, indicating strong opposition to any kind of deregulation plan.