The Civil Aeronautics Board yesterday moved a giant step closer to airline fare deregulation by giving the carriers authority to raise domestic ticket prices dramatically -- in some cases as much as they want.
The CAB approved a three-tiered system that would allow carriers, effective today, to raise fares an unlimited amount on routes 200 miles or less, 50 percent above the route base price for distances between 201 and 400 miles and 30 percent above the base for distances above 400 miles.
Before yesterday's action, airlines had been allowed to charge 5 percent, and in some cases 10 percent, above base prices to recover increases in fuel and other costs.
For example, the base price for the Washington to New York shuttle is $59. Eastern Airlines currently charges $60, which is acceptable under the previous rules.
But now, that fare could rise as much as 50 percent, to $88 because the distance between the two cities is 216 miles, a CAB official said.
In addition, the board will allow airlines flying to Latin America to raise fares 5 percent above their base prices, effective June 1. Flights to the Pacific can rise 10 percent above the base, a CAB official said.
Fares to Western Europe already were allowed to rise 5 percent above the base, and by Friday the board is expected to permit a further increase, a CAB official said. The board will also decide by Friday how much the base prices will be increased for all international flights.
The CAB's action on domestic fares was made on an interim rather than final basis to allow the board and staff to monitor the effect of the gradual deregulation, particularly before it loses its fare regulation authority at the end of 1982.
It is also intended to provide relief to the airline industry, which is suffering from reduced traffic and increased costs, particularly of fuel.
"We will closely monitor what happens and maintain the power to pull back if there are consumer abuses, if there are too many changes at one time or if there is consumer confusion," said board chairman Marvin S. Cohen.
The possible fare increases will come right at the summer vacation season.
"We're sailing into somewhat uncharted waters for this summer by letting carriers decide how to price their product upward," Cohen said. "But given the nation's economic problems and already high air fares, I don't feel the carriers will abuse consumers."
For example, the CAB official said he doubted that the Eastern shuttle one-way fares would increase to $88 because competition would hold prices down. o
Airline officials emphasized that the board's action does not mean fares will automatically go up to the allowed limit.
American Airlines, for example, declined to comment on whether it plans to increase fares soon, even though it had asked the CAB for a fuel surcharge or an increase in the base fare rate. The company lost $42 million during the first quarter; industrywide losses reached $300 million.
The CAB also yesterday gave the carriers authority to lower domestic fares as much as they want. Fare cuts had been limited to 50 to 70 percent under the old rules.
The action yesterday is expected to increase competition between the major airlines and the local carriers, which had been allowed to charge 30 percent more than base fares. Some major airlines had dropped some regional routes because the local carriers could charge more, a CAB spokesman said.
"This will put trunks [major carriers] and locals on equal footing in setting fares," the spokesman said. "This could keep trunk lines in short-haul markets in competition with the locals."
Decision on air fare flexibility for flights to Puerto Rico, Hawaii and Alaska were deferred.
"We're basically pleased with the upward flexibility and we will certainly make use of it," said Trans World Airlines Vice President John Ash.
The number of passengers flying the airline has declined recently, Ash said. "There's certainly a pullback because of the recession but some of that is due to higher fares."