Civil Aeronautics Board Chairman Alfred E. Kahn yesterday warned airline management to begin planning for the competitive environment that is in their future "rather than spend most of their time trying to make it go away."
In his first major speech to the New York financial community, Kahn said seven months at the CAB had only reinforced his "distaste" for regulation when competition is possible. He pledged, move the "overgrown infant," as he calls the airline industry, from the incubator of the CAB to the outside world.
"This industry must know what its future regulatory environment is going to be like," Kahn told the New York Society of Security Analysts.
"So long as its management continues to hope or believe that it can stay in the incubator, that its prospects of success will continue to be best assured by fighting in the halls of the CAB and Congress against the eventual necessity for emerging into the adult world , it will refuse to begin the process of fundamental reorientation that is the key to ultimate survival in that world."
In his address, Kahn laid out the main components of a program that has been evolving over the last several months. In the area of new entry which Kahn calls the heart of competition, he noted that the board was proliferating situations in which carriers have authority to enter markets in which they do not yet operate. They are "standing in the wings, ready to enter whenever in their judgment the market's situation justifies it, just as it is in that great world outside the airline industry," he said.
In the area of pricing, Kahn noted that the board was abandoning an his torically paternalistic role, leaving the introduction of discount fares increasingly to management discretion.
He suggested that the board now is contemplating a codification of its new pro-competitive polices in a comprehensive revision of the industry pricing standards it issued just a few years ago.
Kahn said both charges could involve abandoning its current prescription of a minimum markup of first class over coach fares, its requirements that uniform rates per mile in all markets he charged by all carriers, and the subsidizing of short-haul traffic by longer route passengers.
While he said he couldn't guarantee that the industry would be a model of prosperity in the transition to a more competitive regime, he reminded them that the industry's financial record under the CAB's protection "has not exactly been eclatant."
Members of the audience, who included seven airline presidents, were more receptive to Kahn's message than they were to former CAB Chairman John Robson who sounded a similar call two years ago.