It will be a rare event for this town when the Civil Aeronautics Board holds its last meeting Monday, then steals into history, 46 years after it was created to bring decorum to the fledgling U.S. airline industry.
The party in power will take credit for terminating one of those unnecessary, intrusive federal regulators, but the execution is in fact a bipartisan deed, culminating in President Jimmy Carter's signature on the Airline Deregulation Act of 1978 that set in motion the "sunset" of a governmental agency.
Since then, the big stick the CAB once wielded to tell airlines where they could fly and what they could charge has been broken. The stifling decorum -- some called it protectionism -- the CAB created among the nation's airlines has become fierce competition, complete with fare wars, bankruptcies, innovative salesmanship, antitrust suits and charges of predatory practices. Airline executives, who once met in friendly comfort, confident that their markets would be protected from competitors, now "sit with our backs to the wall," as one of them said.
Deregulation has dramatically changed the patterns of how we get from here to there. There are fewer nonstop or direct flights from city to city and more emphasis on "hubs and spokes," where connections to many points can be made from one flight. The idea is to make it possible for travelers to change planes, not airlines.
The consumer has a bewildering choice of fares and routes and options between most major cities, but pays through the nose to go to a small one. For example, in December 1978, shortly after deregulation was enacted, it cost $78 to fly from Washington National Airport to Huntsville, Ala. Now it costs $230, which is considerably higher than the 55 percent increase in the Consumer Price Index since then.
It cost $207 to fly from Washington Dulles to Los Angeles; now it costs $457 nonstop, but only $225 if you are willing to change planes in Salt Lake City. Those prices are full-fare economy class; almost four out of five travelers get some kind of discount on the 14,000 scheduled daily U.S. airline flights.
Many travel agents seem to have trouble keeping up with the choices and may soon face competition from supermarkets, department stores and car rental agencies, because the death of the CAB also means that travel agents have lost their exclusive franchises to sell airline tickets.
Airline employes' wages have dropped like a rock and, although there are at least 100 more domestic airlines now than in 1978, there are about 7,000 fewer employes altogether. Many of them own pieces of the airlines where they work, because giving them stock in lieu of salary was the only way their employers could survive the wrenching recession that saw three consecutive years of record losses.
Although the days of strict regulation appear to be irretrievable, legislative tinkering with the system is certain because a number of issues remain that could require governmental intervention. They include:
* An unresolved debate over how to allocate takeoff and landing rights at crowded major airports. Established airlines want to be protected; the new guys want a piece of the action.
* A question as to whether individual airlines -- specifically industry giants United and American -- should be permitted to own the computer reservation systems through which travel agents book the vast majority of flights. The concern is that computers are programmed in a way that favors United and American flights over those of their smaller competitors.
* A continuing concern about airline safety, especially in the small-plane commuter business, and whether the Federal Aviation Administration -- which has not been deregulated -- has the manpower to assure that an economically strapped airline isn't cutting corners.
"The airline industry is still undergoing a major restructuring," Continental Airlines Chairman Frank Lorenzo said in a recent speech. "We are only in the fourth inning." If his analogy is correct, it was the bottom of the third when he deftly executed a squeeze play by taking his airline into bankruptcy, abrogating its labor contracts, cutting salaries in half and resuming service, all in three days. Continental will show its biggest profit ever this year.
"I certainly wouldn't want to go back" to regulation, said Sen. Nancy Landon Kassebaum (R-Kan.), chairman of the Senate aviation subcommittee, but she is planning hearings in March on legislation that would "be working toward" requiring divestiture by American and United of their computer reservation systems, she said. "It is probably the major aviation issue on the agenda right now," she said.
"Since deregulation began, the airlines have not had a chance to play on a level field," said Rep. Norman Y. Mineta (D-Calif.), chairman of a House aviation subcommittee. "They have had sharp increases in fuel prices; they had the air traffic controllers' strike; they have had high interest rates and a general economic recession."
Many new airlines are commuter carriers, the fastest growing segment of the industry. They provide small-plane, high-frequency service between major centers like Atlanta and dots on the map, like Dothan, Ala. Many have agreements with major carriers so the passenger doesn't know that his one-stop, two-plane flight that begins on a Delta Airlines Boeing 727 will end on a 15-seat Atlantic Southeast Airlines Embraer Bandeirante, "A Delta Connection" carrying a Delta flight number stamped on a Delta ticket and loaded at a Delta gate.
Because of "hub-and-spoke" patterns, such out-of-the-way airports as Dayton and Salt Lake City have become important centers. But the airlines have saturated Atlanta, Chicago, Denver and New York with more flights than their airports can handle and the FAA had to intervene last summer to sort out the chaos. Few think the FAA won't have to do the same thing again next summer. "It's a form of regulation," said Mineta.
"Hub and spoke" also means shorter flights, and thus the smaller jetliner has replaced the larger one as the airlines' purchase of choice. That fact created unanticipated convolutions in product planning at Boeing and McDonnell Douglas, where bigger and better jumbo jets ere the rage.
"Call us when you have something to show us," a senior Boeing executive remembers USAir Chairman Edwin I. Colodny telling him. Boeing was pushing big new 757s and 767s and Colodny wasn't buying. Boeing then created a smaller 737-300 for USAir and Southwest Airlines, the Texas version of People Express, and Colodny bought.
In its heyday, the CAB had 850 employes. When it ceases to exist, its 300 or so remaining employes will move across town to the Transportation Department -- where Secretary Elizabeth Hanford Dole did not want them. She threw herself under the bandwagon only when it became obvious that Congress was going to send them to her anyway.
There, on Wednesday, they will start doing exactly the same things they did on Monday. But just to make sure there is "no mini-CAB over here," as Deputy Secretary James H. Burnley IV is fond of saying, the employes have been parceled out among two assistant secretaries, four independent offices and one administrator.
There they will continue to decide such long-time CAB issues as which U.S. airline gets to fly an international route -- because international aviation is subject to treaties and still very much regulated -- and which small airline will be required (in exchange for a federal subsidy) to provide "essential air service" to such remote hamlets as Worland, Wyo.
Reimbursement for lost baggage, compensation for being bumped from a flight because of overbooking, and seating sections that ban smokers will continue to be required and enforced by former CAB employes in a new DOT consumer office.
Dole, a former Federal Trade Commission member and self-styled consumer advocate, promises faster service on complaints than the CAB provided. CAB experts who have been talking to DOT officials are, to put it carefully, skeptical. There is some concern in the airline industry that DOT isn't ready for the job and doesn't understand what it is getting.
Matthew V. Scocozza, assistant transportation secretary for policy and international affairs, disagrees. "We're ready," he said. A blackboard on his office wall reads "Days Till Sunset," followed by the appropriate number.
Much of what has happened since airline deregulation began was expected. It was assumed that there would be some bankruptcies; it was assumed that service patterns would change, it was assumed that there would be fare wars; it was assumed that small planes would replace large planes in regular service to many cities.
The CAB figures that, since deregulation, 40 airlines have gone out of business because of financial problems. Most were small carriers, such as Altair, which served a regional market. However, some big names -- Braniff, Continental and Air Florida -- have gone down, too. The planes, however, don't sit idle for long. Many of People Express' 727s and the pilots to fly them came from Braniff.
Despite what airline analysts are predicting will be a record year for the industry, some carriers have not been able to find a money-making niche. Frontier Airlines is widely regarded as on the critical list; a restructured Braniff has cut back and is looking for a merger partner; Eastern Airlines, which negotiated major givebacks with its unions just a year ago, needs still more help from labor to meet payments on its considerable debt. Analysts think that too many carriers are serving the West Coast and that a shakeout there is inevitable.
There are also some clear winners. United and American are well in front of the pack among the biggest names; USAir and Piedmont have done exceedingly well in protecting their regional markets and expanding to nationwide service in selected cities. Low-fare operators People Express and Southwest have been successful playing outside the system: no computer ticketing, no "interlining" or automatic transferring of luggage to other airlines, but high financial success and passenger acceptance.
George James, who is retiring as the chief economist at the Air Transport Association, which represents most major airlines, said that industrywide net profits this year will total about $2 billion, a record and the best year since deregulation began in 1978.
However, he warned, "the net profit margin of the industry still will amount to only about 1.5 percent. This is markedly below the U.S. industry average of about 5 percent."