"I open my mouth and a fare goes down," Alfred Kahn says in a voice touched with equal parts wonder and pleasure. And that's almost an understatement, for Jimmy Carter's pick as chairman of the Civil Aeronautics Board is presiding over sweeping changes in American aviation by increasing open market competition in an industry traditionally subject to inflexible government regulation.

Suddenly air travelers are finding bargain basement special fares with fewer strings attached. Two new interstate airlines are about to receive CAB certification - the first granted in 40 years. And industry lawyers are finding their proposals for route changes and innovative fare systems falling on sympathetic ears at the CAB, which by law controls such things.

Kahn is the man behind the new activity.

"What luxury to inherit a rigid, cartelized regulatory regime where there's a clear opportunity if you'll just take your hands off to let competition work to benefit people without killing industry," he says. "And everybody's in favor of it."

Well, not everyone is as excited about the CAB's new direction as Kahn, though his enthusiasm, plain speaking ("we must unconstipate the bureaucracy") and quick action has endeared him to most airline execs accustomed to waiting years for CAB approval of small details.

"There's a great confusion of fares and one of the results has been to confuse the public and slow up reservation calls," notes Delta vice president Morris Shipley. "It's too soon to predict the ultimate outcome, but at the rate he's going with multiple and permissive [market] entry, some of the carriers are beginning to feel "Let's just abolish the CAB and have at it.'"

Deregulation has been Kahn's specialty since his years as an economics professor and, between 1969 and 1974, dean of arts and sciences at Cornell. In the early '70s he wrote The Economics of Regulation , a close study of the government's role in the regulation of private industry.Nelson Rockefeller asked him to head New York's Public Service Commission, which oversaw such things as electrical rates (Kahn introduced time-of-day pricing that gave breaks to users during non-peak hours) and telephone service (Kahn permitted competitors of the Bell System to hook up to the giant's equipment).

In the spring of 1977 the White House called Kahn to ask him to head the CAB. He said no. Jimmy Carter met with him privately to encourage him to take the post. So did Edward Kennedy.

"I'm not immune to flattery, having been a professor all my life," admits Kahn, who said he decided he didn't know quite how to begin deregulating the airline industry, "but I figured no one else did either."

Four days after he began work, Kahn made news by writing a memo begging his staff to write memos and letters "in straightforward, quasi-conversational, humane prose . . . I once asked a young lawyer who wanted us to say 'we deem it inappropriate' to try that kind of language out on his children - and if they did not drive him out of the room with their derisive laughter, to disown them."

Kahn, whose real yearning is to be a Zero Mostel-like actor, sometimes "consciously hams it up to induce a kind of freedom" during CAB meetings. And, as in his approach to grammar, Kahn wants to bring a kind of simplicity to America's friendly skies. Where a market will permit aggressive competition, he and his board will encourage it, which is why two airlines flying between Miami and Los Angeles have slashed their normal fares (no minimum stay, no advance payment required) by 35 percent.

Kahn's reluctance to require airlines to serve mid-sized cities whose passenger traffic doesn't justify the service has earned him some enemies. One of several upstate New York cities facing that problem is Kahn's hometown of Ithaca; the CAB won't block Allegheny's plan to eliminate service there, service in effect subsidized by Allegheny's profitable routes elsewhere. Kahn says it's just part of the difficult process of introducing competition; to cities similarly situated, he promises help in arranging adequate commuter airline service. Intrastate airlines, free from CAB fare regulation, have traditionally offered lower rates than major carriers forced to serve unprofitable market.

"Kahn is charming as hell, has a voracious appetite for work and has an enormous press following," says an aviation attorney, who says he's heard rumor that Kahn could be the next secretary of energy. (Kahn says he hasn't been asked.) "The feeling is all of this deregulation is fine as long as everyone has enough money to buy as many planes as they want. But that will depend on bankers, insurance companies, whoever lends the money."

It will also depend on the bottom line of the airlines' balance sheets that will tell the tale of just how much free enterprise the flying business can stomach.