The nation's airlines were given unprecedented flexibility yesterday to lower air fares by as much as 70 percent and to raise them as much as 10 percent without getting prior government approval.
As a result of a significant Civil Aeronautics Board decision, federally regulated airlines for the first time will have the power to set their own domestic fares - within certain limits. The ruling would force the airlines to use their talents to assess marketplace without the protections of total government regulations.
The board's action, which becomes effective as soon as it is published in the Federal Register - possibly next Friday - can be expected to further intensify fare competition among the airlines for the consumer travel dollar.
At a meeting yesterday, the CAB voted 4 to 0 to radically alter its domestic passenger fare structure by allowing airlines, without board approval, to:
Cut normal fares by as much as 50 percent below a maximum ceiling, which has been set at existing normal coach levels.
Cut fares by an additional 20 percent, for a total of 70 percent, on up to 40 percent of each carrier's weekly passenger capacity.
Raise fares by up to 5 to 10 percent, depending on the amount of competition on each route. Airlines could raise fares by up to 10 percent on routes where there are at least four carriers, including intrastate carriers, flying nonstop.
On routes with less competition, the carriers will be more restricted in how much they can raise fares. On routes with two or three carriers, an airline could raise its fare by as much as 5 percent for 110 days a year. On routes served by a single airline, a monopoly carrier could raise its fares by as much as 5 percent only 58 days a year.
It is expected that airlines would use the days when higher fares are allowe during peak travel periods.
The board also abandoned formally its past prescription requiring the airlines to maintain a certain differential between coach and first-class fares, giving airlines the opportunity to experiment with different levels of quality of service and price.
The decision by the board officially abandons many of the principles and procedures used by the agency in past years to approve and disapprove fares. Instead of filing applications seeking board approval for their proposed fares, airlines will now be able to simply notify the board 45 days in advance of fare changes within the "suspend-free" zones.
Within those zones, the fares will be considered reasonable by the board - without the extensive economic justifications the airlines have been required to file - unless a later board hearing finds the fares to have been predatory or discriminatory. If one airline challenges another's fares, the complaining airline will have the burden of proving that the fare is not justified.
By eliminating previous requirement that the airlines charge identical fares for all routes of equal distance, the board's decision is expected to encourage airlines to lower fares on selected routes where lower costs or other factors make that more feasible.
The board action ushers in a significant amount of deregulation while legislation designed to accomplish the same thing is stalled in Congress. The decision is one of many the CAB has taken to reduce government restrictions on air fares and route selection, since Alfred E. Kahn became chairman.
In a related development yesterday, members of the board instructed the staff to draw up an order giving new route authority between Philadelphia and Bermuda to all five airlines that were seeking it. In the past, the board ordinarily used to give new authority to a single carrier, increasingly it has been giving more than one airline the same authority and letting them choose to start service or not start it as market conditions dictate.
The board said it hoped to approve a final order by Sept. 14 which has been goes to President Carter for approval because it involves a foreign air destination.
There is currently no nonstop air service between Philadelphia and Bermuda; Allgeny, American, Delta, Eastern, and North Central airlines asked for the authority.