I am amazed the great guru of deregulation, Alfred Kahn, "believes that loosening the restrictions on foreign carriers may be the key to preserving competition" {"A Shrinking Field of Giants," Business, Dec. 2}.

As a former Eastern Airlines pilot, I know the system that Mr. Kahn and others deregulated in 1978 was far from perfect, but it worked. The Airline Deregulation Act of 1978 took slots away from established carriers and offered FAA guaranteed loans to upstart carriers such as People Express, Air Florida and New York Air. These carriers succeeded as long as people thought only of price and not service. Two of those carriers mentioned were merged into Texas Air (now Continental Airlines Holdings), run by the darling of the Republican administration, ex-chairman and CEO Frank Lorenzo.

Continental Air declared bankruptcy, got rid of its unions, borrowed heavily using junk bonds and, again, emphasized only price. It entered bankruptcy for a second time on Dec. 3, using high jet-fuel prices as an excuse this time. It failed to mention that in a survey of business travelers only 9 percent of this bread-and-butter of the airlines preferred Continental versus 53 percent who preferred American -- because of better service.

Now Mr. Kahn et al. want to inject foreign carriers into the free-for-all we call the airline industry today to protect the consumer against "higher fares." Well, for one thing the foreign carriers are not that dumb. The well-established, well-run foreign carriers represent a total transportation system for Europe and the world that emphasizes service over price. If Eastern, Continental or Pan American Airways go out of business, so what? They deserve to.

Government oversight controlled carrier entry and made the system perform better as a whole at the expense of price. Let the free market re-establish the system of who, where and for how much. There shouldn't be an implied guarantee that every American can afford air travel. Rebuild the railroads, and fix the highways. Look at transportation as a whole system, not just one part.

CHARLES W. BEATTIE Alexandria