By standing in line outside the Civil Aeronautics Board for a week, Eastern Airlines now stands to pick up almost immediately about 30 brand-new routes in one fell swoop, routes from major cities including Miami-Minneapolis, Boston-Houston and Chicago-San Juan.
The line of airline representatives and what it represents - the immediate availability of scores of new routes without having to spend millions of dollars and years to get them through CAB administrative hearings - is just one of the far-reaching changes in store for the airline industry as a result of new law.
Not very often do negotiations between the House and Senate, an arena noted for compromise, produce a piece of legislation that is stronger than the two bills of either house. But that is what happened with the Airline Deregulation Act of 1978 that President Carter signed into law last week.
At final passage, the once-controversial measure already had become non-controversial measure already had become non-controversial, thanks to the partial administrative deregulation of the industry the board had already engaged in under the leadership of Chairman Alfred E. Kahn - and the consumer and industry benefits it had produced.
"When I announced my own support of airline deregulation soon after taking office, this bill had few friends, "Carter noted during the signing ceremony. "I'm happy to say today that it appears to have few enemies."
Although Kahn's predecessor as CAB chairman, John Robson, had supported deregulation, he believed he was legally constrained by the 1938 statute from carrying out the procompetitive polices he believed the board - using innovative legal theories - began to introduce competition into the industry without waiting for the law to be changed. The benefits of lifting the tight constraints under which the airlines traditionally operated became apparent; Airlines were lowering prices, offering different services, attracting more passengers, putting more people to work, and making more money than they ever had before.
"It took the wind out of the arguments against deregulation," one congressional source says.
The result is a stronger measure, one with fewer protections for existing airlines and freer entry into the industry by new ones, than any deregulation proponent would have believed politically possibly when the Ford administration and Sen. Edward M. Kennedy (D-Mass.) teamed up to push the idea nearly four years ago. As the measure wound through the congressional process, it picked up support from a unique coalition of public interest, business and professional groups as well as legislators from a wide political spectrum, including the strong support of Senate Commerce Committee Chairman Sen. Howard W. Cannon (D-Nev.>
Under the law, the board's route and fare powers - tools used in a restrictive manner for nearly four decades to protect incumbent carriers - must be used to stimulate competition, not hamper it. And those powers will be phased out by 1983; the board itself is dissolved in 1985.
The new law requires expedited board procedures, grants the airlines flexibility in pricing, puts the onus on opponents - not the applicants - for new routes and entry, and directs the board to place "maximum reliance on competitive market forces and on actual and potential competition" in making all its decisions. Although the board has been saying similar things in its recent orders, they were subject to legal challenge, and board officials couldn't be sure, even though they believed that the courts would sustain their novel interpretations of the original statute.
Delta Airlines, for instance, had been challenging the authority of the board to issue route awards on a "multiple, permissive" basis. Pan American World Airways was challenging the right of the board to give airlines "by exemption" new authority to fly to Europe (even though Pan Am was the recipient of some domestic exemption authority itself.)
Nowhere is the board's mandate to promote new competition clearer than in the act's new freedom-of-entry provisions, which Kahn calls "the sinaqua non of effective competition."
Except for the limited freeing-up in the very recent past, new route authority was very hard to come by. It was doled out, usually to single carrier, after a costly and time-consuming hearing, and after the board had become convinced that the new route authority was "required" by the "public convenience and necessity."
Because new routes weren't given out very often - for one five-year period not very long ago, there was an infamous "route moratorium" during which the board declined to set route, each dumping all kinds of "evidence" into the record to prove it was the carrier that should be selected. The board then picked a carrier, a process outgoing chairman Kahn likened to "looking terriby hard for a real but elusive black cat in a very dark room.
"The problem is that there is no cat there," Kahn told the American Bar Association this summer in a speech critical of lawyers for tying up the agency's proceedings. The more clearly we decisions on the seletion of carriers, the more transparent it becomes that there is nothing there - not even gossamer.
"The board is simply not equipped to make a rational selection of carriers," he said. "It is not equipped to plan the optimum future structure and growth of this dynamic industry, to select for each market the ideal price, the ideal supplier, the ideal aircraft. No board is."
With the new act, no board will have to - nor even be able to - make those decisions. In the future, they are the decisions of the airlines themselves.
The act not only endorses the idea of multiple, permissive route awards, which allows an airline to decide whether to start the route depending on its analysis of market conditions, it contains three route award provisions.
One allows airlines, on a first-come first-served basis, to pick up almost immediately authority to fly other airlines' routes that are now going unserved - the so-called "dormant" routes - or to reactivate their own. Twenty airlines applied last week for hundreds of others' unusued routes when the door was opened.
Another provision, at one time considered the most controversial and one that occupied the congressional committees for an inordinately long time, allows each airline to select one new route a year for the next three years without any CAB proceedings. (Each airline also is allowed to protect one route a year from this "automatic" entry.)
Along with the new board policy direction, the third provision, however, is considered the most important because it makes it very difficult for the board not to grant airlines' applications for new routes. It requires the airlines asking for it - within a year at the most - unless the board finds that the new award is not consistent with the public interest. The burden of proof in these route proceedings is placed on the opponent, not on the applicant. No longer will a World Airways have to wait II years to be able to offer the public half-price scheduled air service across the country (it is just about to get final board approval.)
Michael E. Levine, director of the CAB's Bureau of Pricing and Domestic Aviation, jokes that the provision is so pro-competitive that it is just a step away from the "ultimate route proceeding" where every airline is awarded every conceivable air route is America.
"And the fouth entry provision is 1982," says Philip J. Bakes, the CAB's general counsel, when the CAB's control over the airlines' routes is ended altogether.
The general lack of available aircraft, and long lead time to get new ones - not the CAB - will be the constraint on carriers starting additional routes in the future. United Airlines, for instance, asked for only one dormant route after standing in line for seven days - Orlando to Buffalo - and said it would restart four of its own dormant routes. "We've been trying to get our foot in the door in Orlando (site of Disney World) for years," a United spokesman said. Why not more? "Who's got the airplanes?" he asked.
There are ambiguities in the new law and legal challenges are expected; even before the bill was signed by President Carter, for instance, Frontier Airlines had gone to court for a decision ordering the CAB to accept, at least for the time being, its application to restart its dormant routes before it accepted other carriers' applications for others' dormant routes. (The CAB is appealing.)
But most expect the airlines to stop fighting the CAB legally and to begin concentrating all their corporate energies on finding ways of attracting travelers to their airline. "I wouldn't be surprised to see their legal budgets go down," Bakes says.
Besides the legal freedom of entry, the new law containd numerous other provisions designed to lift the board's traditional controls of the airlines, moving them increasingly into the free marketplace. For instance, the new law does away with the "closed-door" restrictions placed on airlines by the board in the past to protect other carriers. United has a route that goes from Baltimore to Kanasas City to Denver. Because of a closed-door restriction, however, United was able to take people from Baltimore to either city, but was not allowed to pick up people in Kansas city who were bound for Denver. Now, it can open that door.
The new law not only legitimizes what the CAB has been doing, it is in fact "a compulsion to go father," according to outgoing CAB Chairman Kahn. "The CAB couldn't go back even it it want to," he said. "The momentum is there.
"The way to make social change is to create vested interests in the new regime who will then fight you if you try to back," he said. Airlines whose representatives lined up for a week to get a crack at the dormant routes that would become available when the bill was signed into law represent those new vested interests, he said.
To allay fears that Kahn's departure from the board to serve as the president's chief inflation counselor and the appointment of Marvin S. Cohen to succeed him portends any changes, Cohn on Friday made it clear he was a Kahn disciple. "I intend to pick up right where Fred left off, to complete the transition to a competitive air transportation system . . . " he said. "With the new legislation, we will be looking for ways to move more quickly towards the goals of free entry and maximum rate flexibility."
Among the new law's other major provisions are:
Fares. Airlines can reduce their fares up to 50 percent without obtaining CAB approval, and can raise them up to 5 percent a year on "competitive routes," those on which they don't hold 70 percent of the passenger traffic. The board can increase the downward zone limit. Board intervention on fares is ended at the end of 1962.
Small community service. Small communities are graranteed essential air service - subsidized by the federal governmemt - for 10 years, but the law establishes a new subsidy program based on the communities' needs, not a carrier's needs. Commuter airlines, which may now use planes with up to 56 seats instead of 30, are eligible for subsidies.
Employee protection if, within the next 10 years, there is a major bankruptcy or a 7.5 percent reduction in an airline's employment in one year, and the CAB determines that the major cause is airline deregulation legislation , federal assistance for up to six years is made available to the adversely affected workers at a percentage of the former wage to be determined by the Labor secretary.
Mutual aid pact. The existing airline strike insurance pact is terminated but the CAB is allowed to approve another if payments to struck carriers are no more than 60 percent of direct operating expenses for no more than 8 weeks and not until 30 days after the strike starts. Members must agree that before benefits are paid, they will submit issues to binding arbitration if the employees want that.
Presidential authority. The law provides that the president may overturn a CAB decision recommending a certain airline for an international route only on the basis of foreign relations or national defense considerations, not on the economic or carrierselection grounds that presidents have used in the past.
CAB procedures. The law streamlines and speeds up board proceedings, assuring that nothing again will linger for years, as past route applications have. The law also gives the board a wide exemption power to do things that aren't specified.
Mergers. Mergers among airlines are to be tested by the antitrust standards traditionally applied by the courts to unregulated industries; if they are not anticompetitive under the antitrust laws, they are okay. If they are deemed anticompetitive, they can be approved only if the merger meets significant transportation needs which cannot be met by less anticompetitive alternatives.