The eagerness of the nation's airlines to merge is merely a search for another "security blanket" in an industry that is swiftly losing the protection of federal regulations, Civil Aeronautics Board Chairman Alfred E. Kahn said yesterday.
"It seems clear to me that if you have companies that have been living under a security blanket for 40 years or with a pacifier for 40 years and the government threatens to take them away, they're going to look for other security blankets," he said in explaining the trend.
Two merger cases - Pan American World Airways with National Airlines and Southern Airways with North Central Airways - will come up for CAB consideration next Spring, Kahn said. He said the pending mergers prevented him from expressing his feelings about mergers.
He noted, however, that the board has "expressed reservations about the wave of mergers. In many of these cases, many of these airlines are direct competitors in one market or another, and in other markets, they are clearly potential competitors."
Kahn, who spoke during an hour long news conference before addressing the 20th annual meeting of the National Association of Business Economists, was appointed to head the board by President Carter shortly after his inauguration. Since then, Kahn has actively been pursuing a policy of government deregulation along with ways to make it easier for airlines to enter new markets and thereby heighten competition.
Kahn told the news conference the board was "uneasy about airlines turning to mergers when the new policies are just beginning to take effect."
Nevertheless, he said, airlines have pointed out some advantages of merging, including:
Producing "pro-competition effects."
Providing easier access to better equipment and more money.
Improving their ability to build up lucrative feeder routes which would direct traffic into major cities.
Although Kahn seemed concerned about the trend toward corporate coupling, he said he was "absolutely delighted" about the success of the multitude of discount fare plans. "It's been successful beyond my wildest expectations."
So far, many of these reductions have required passengers to fly at odd hours or to stay for certain amounts of time at their destinations. But once airlines achieve the degree of competitiveness Kahn envisions, he said these restrictions will not remain in effect and the discounts will be replaced by an overall decline in ticket prices.
In another forecast, he said the air traffic should grow between 6 percent and 8 percent annually.
Although airlines' profits have zoomed during the past year. Kahn said that they have learned a lesson from the late 1960s and early 1970s, when they bought equipment but lost money because there were comparatively few passengers.
With the present boom in flying, he said "demand is pressing hard on capacity, and there's no prospect of being stuck with excess capacity."
If airlines tried to be more adventurous, "the investment market wouldn't let them," said Kahn, who noted that many airlines are waiting for the "next generation" of airplanes - those that won't even begin to be designed until the mid-1960s.