The Civil Aeronautics Board yesterday approved requests from all federally regulated airlines to reduce first-class fares by between 13 percent and 20 percent on domestic routes.
The board action, which takes effect May 19, sets first-class fares at 130 percent of normal coach fares, instead of the current 150 percent 163 percent which was mandated by the board after a lengthy proceeding in 1974.
Although the agency decision is a reversal of its past policy, it is consistent with a new domestic fare policy the CAB recently proposed. Although that policy not fainal, the board said yesterday it saw "no reason to deny consumers the benefits of lower fares which the carriers also perceive to be in their own best interest."
Ironically the policy reversal comes after many airlines had made seating configuration changes in their airplanes to reduce first-class sections because the first-class/economy fare differentials mandated by the board and generally opposed by the airlines reduced demand for first-class tickets. (United Airlines, for instance, has been altering its Boeing 737 aircraft to make them all-coach seating.)
In its earlier proceeding, the board had decided the holders of economy tickets were subsidizing first-class services, and that first-class seats should be priced above coach at a differential reflecting their respective costs.
But the new board, led by, economist Alfred Kahn, has questioned the underlying economic assumptions used in the earlier decision and appears to have found them wanting.
The board's pending pricing policy would eliminate the required first-class differential altogether.
The board now says that, "If carriers were free to vary the first-class fare markup, and if they felt demand for that service were fairly price elastic, they could lower the premium, sell more seats, get the added net contribution to revenues that our present rule. prevents and, in the process, confer benefits on travelers willing to pay somewhat more for first-class comfort."
Currently first-class fares for trips of less than 350 miles are set at 150 percent of the coach fare; first-class fares for trips of 1,750 miles and more are set at 163 percent of the normal coach fare.
Because all first-class fars will be 130 precent of coach fares beginning May 19, fare reductions will be more pronounced on longer trips. As examples, the CAB noted that the one-way first-class fare from New York to Boston will fall from $57 to $49, to Chicago-New York one-way first-class fare will drop from $136 to $114, and the New York-Los Angeles one-way first-class fare will be reduced from $359 to $286.