The Civil Aeronautics Board yesterday tentatively decided to let Pan American World Airways keep the lucrative Miami-London route it was going to have to give up as a condition for CAB approval of its merger with National Airlines.
The change in Pan Am's fortunes came about because of recent modifications to the bilateral agreement governing air services between the United States and the United Kindom.
In the latest go-around, which resulted in the initialing of an altered agreement being dubbed Bermuda 2 1/3, the British agreed to let another U.S. airline fly between Miami and London beginning in 1981. Also during the talks, U.S. negotiators gave up their long-held position that the U.S. government was entitled to name whatever airlines it wanted to the existing slots held by U.S. airlines at busy Heathrow Airport. It agreed instead to the British view that any, new carrier flying to Britain must use the more-distant and less-developed Gatwick Airport. The British have been promoting Gatwick to reduce congestion at Heathrow but Heathrow is more popular with airlines because of its vast network of connecting flights.
The pratical result of the new agreement is that only Pan Am and Trans World Airlines will be able to use Heathrow in the future because they are already using it. So the board's choice of a U.S. -Heathrow carrier is limited to Pan Am or TWA, it noted yesterday, adding that the selection of one or the other would not make a major difference from the standpoint of concentration or market power.
To select another carrier would be "unacceptable," the board said, since it would hand over to British Airways, currently serving Heathrow, a virtual monopoly on carriage of passengers beyond London on connecting flights.
In its tentative decision yesterday, the CAB reasoned that its original reasons for forcing Pan Am to give up National's Miami-London route were no longer valid. At the time of its earlier decision, only one U.S. airline was being permitted by the then-existing agreement to fly Miami-London, and the CAB said then that allowing Pan Am to keep the route would increase its share of the U.S.-London market and reduce the number of competitors.Even though a new carrier will have to serve Gatwick, there will be additional U.S. service, the board said.
The new agreement supersedes an initial decision by Administrative Law Judge Elias Rodriguez, who would have awarded Pan Am's route to Eastern Airlines, the board noted.
After a period of public comment, the board must send its decision to the President for his approval. The agency also set up a new proceeding to determine what airline should get the new route from Miami to London's Gatwick Airport.
In another development, the board proposed new rules to give airlines more flexibility to alter fares, both up and down. The options being considered would give the airlines flexibility to drop prices as far as they want; the flexibility to raise prices as much as they want or partly; and expanded flexibility on short routes or a portion of each airline's available capacity.