Air Coach

English

Embry-Riddle Aeronautical University

l \ I NORTH AMERICAN AIRLINES first in aircoach Air Transportation is Monopolized by the Grandfather carriers 1938 ~31,000,000 .. Since the Passage of the Act, Air Transportation has Increased 40 Times 1954 ~1,249,C>OqOOO* *COmmerciol Revenue Air transportation ha~ grown forty-fold since the passage of the Civil Aero-nautics Act. In 19 38, it was a small subsidized business with total com-mercial revenue of only $31,000,000. Today it is a highly profitable big industry with revenues of about l ¼ billion dollars. And it is one of , t Americ~ ·s fastest growing industrie_s. It gr~wth in 1954 alone was over[--~ .-::t':-three times as qreat as the total industry in 1938. t, - •• .;; . .::, · f-t 4 Air Transportation is Monopolized by the Grandfather Carriers The Board has Certificated 13 Local Service Carriers but,,, Commercial Revenues of Local Service Carriers are less than 2-3% of Comm~rcial Industry Revenue 1 L Total Industry Revenues $1,249,000,000 .._~ ---Rev. Local Service Carriers 29,000,000 Feeder Routes are non-competitive with trunks source CAB for m 415 The Civil Aeronautics Board has certificated a number of additional carriers but only for small, limited operations. Thus, the Board has certificated thirteen local service carriers to serve small towns. But their routes are generally non-competitive with trunks and their commercial revenues are less than 2.3 % of the industry revenue. Likewise, th~ Board has certificated four new all-freight carriers but air freight is a very small part of the business today and their revenues amount to only 1.4 % of industry revenue. Air lransportation is Monopolized by the Grandfather carriers i The 'Board has Certificated 4 new Al I-Freight Carriers who compete with Grandfather carriers but,,, Commercial revenues of Alf-freight carriers are only 1.4% of Industry commercial Revenue Revenues- l Total Industry Commercial Rev. h, 249,000,000 New Carriers ~ 17,000,000 sourc.e C AB torm 4 1~ 5 Monopoly by the Grandfather carriers has stunted the Development of Air Coach The Grandfather Carriers Long Opposed the Development of Air Coach American said: "We do not believe we can presently enqaqe In coach serrlce,,, without consequent loss" United said: 11 We just cannot afford to t;ake the chance 11 North American said: "This new morlet /or low co.rt 01r ser-y/ce hos o potelltiolit!I HJQ/Jf limes qreoter t/Jon thot heretofore ser~ed b!f those ( qrondlother) carriers'' !>O'-'f"U' A1r1me l•1dus tr~ lrivotSt13.\t1011 Hedn •l(JS bei?re u,,..,..1ttee .. ., l 'lft'<Sl4t'e .i !'ld f,.....15., c;.;, ..... ,,er~ . Rl\.1 C.n~r('!i ; 11 • U .,·1 The success of the American economic system has been keyed to the oppor-tunity of new companies with new ideas to test those ideas in the market. In the face of this success, those who would exclude new competitors face a heavy burden of proof. That burden has not been met. In fact, the most important and dynamic development in air transportation during the past decade, air coach, was developed by an independent air carrie r-North American Airlines. 7 8 Monopoly by the Grandfather carriers has Stunted the Development of Low Fare Coach No.American Fares 3.23 Certificated Coach Fares are 49% Higher than No .. American Fares cents per mile Certif. Coach Fares 4 .. 8 sourc.e OtfK•<U A1rhne 6u1'1t" oen•~r :.erv1-.1P ... o:.e 11,.,.,,..,., • •O·-il New competition is needed today to assure low coach fares and prevent excessive profits. Certificated coach fares are 49 % above the North Amer-ican level. This means that air pa ssenge rs today are paying 49 % too much for service. More than that, the proper development of air transportation is being stunted by fare levels beyond the means of a large proportion of the market. Yet virtually every certificated carrier is clamoring for still higher fare levels. Monopoly by the Grandfather car-riers has led to Excessive Profits Air Lines 15.1% Airline profits on net worth are nearly 50% higher than for non-regulated mfg. in-dustries 23 Mfg. Ind. 10.5% ~ urO? 1q!; .', C. Ats t on., 4t C p ,::. ,, ,, J !" LC iO Monopoly by the Grandfather carriers has led to Excessive Profits Air Lines 5 .. 5% Airline profits on soles are 25% higher than for non-regulated mfg .. industries 23 Mfg .. Ind. 4 .. 3% !,O >,1 f'"C.C 1-lS.!. UHi t or "' <I I;; FT<=. ""J !.l..: I I I I Today every fact demonstrates that there should be new competition in air transportation . There is no reason for complete exclusion of new carriers from the trunkline passenger business. The outstanding fact about air trans-portation is its growth-a growth of 98 million dollars in one year. This growth is equal to the combined annual revenues of three major trunk carriers, Western, Braniff, and National. There Should be New Competition in Air Transportation Increase One Years Growth is equal to the Total Combined Commercial Revenues of 3 Major Trunk Carriers $24✓000, 000 Western $3~000,000 Braniff $38,000,000 National in 1954- over 1953 commercial Revenues 3 Major Trunk. Carriers s.ou,.i;.e l,Aij iorm 410 11 12 The growth in air transportation is so great that if a new carrier were certificated and became in its first year the fifth largest carrier in the country , a virtually impossible undertaking, the rest of the industry could still grow ~50,000,000 in that same year. There Should be New Competition in Air Transportation If a newly Certificated Carrier should become the 5th Largest Carrier in its 1st year of Operation, the Grandfather Carriers Would Still Grow by ~SQ000,000 in that year Balance still Available to Grandfather Carrier }SQ000,000 5th Largest carrier }4-S,000,000 Increase in 1954-- over 1953 $98,000,000 13 There should be New Competition in Air Transportation Increase of Commercial Revenue yr: 1953-'54 Industry growth is more than adequate to eliminate existing trunkline subsidy and to admit new carriers ( $98,000,000 One year's growth is 26 times as great as total remaining trunk.-line subsidy }3,700,000 Total trunk.line subsidy 1954-sourc.e CAB t or m .q1 s Nor is subsisidy any longer a legitimate barrier to the admission of new companies. In 1938, the whole industry was subsidized. Competition hod to be restricted in order to restrict the Government 's commitment. Today one year's growth is 26 times as great as the total remaining trunkline 14 ~ ';';~t .~' .. ::, . . . -~--- ' . ---~~ ~~-~ ~ There Should be• New competition in Air Transportation % of tot a I Rev. 40 Existence of Subsidy is No longer a Reason for Limiting Entry 45 50 * 1954 is the First Vear the CAB has separated subsidy from service mail pay sourc.e C. A B torm 4! 5 1954* ~:"' .. :'4:7·i 'J.\~, ' There Should be New Competition in Air lransportation Trunk Line Service*at Small* Stations has become a smaller and smaller proportion of total service 6.1% 1..6% 1941 1947 t:proportion of Revenue Passenger Miles note-CAB hos suspended service at 42 stations in past 41/2. years .8% 1954 -t less than 775 passengers a month In the early days of the Civil Aeronautics Board, it was thought that compe-tition had to be restricted on routes between the larger cities so that airlines could make enough money on large city service to provide service to small towns. This kind of thinking is outmoded in today's billion dollar industry. In 19 54, stations with under 77 5 passengers accounted for only .8 of one percent of the traffic. Stations with over 5500 passengers per month accounted for 86.7 % of the traffic. 15 16 There Should be New Competition in Air Transportation Trunk. Line Serv,ce*at Big*Stations hos become a b'1gger and bigger proportion of total service 194-1 35.4% note-CAB hos suspended service at 42 stations in past 41/2 years ( 1947 72.9% *Proportion of Revenue Passenger Miles 1954 86.2"/o ':t more than 15,500 passengers a month Air transportation is not a "natural monopoly" where competition won't do the job. It does not have high investment and the large proportion of cash costs and the stable market which are characteristic of traditional public utilities. It is an industry where competition serves the public best. There should be New Competition in Air Transportation ~3.24 ratio of Investment to Soles AIR~INES ARE NOT LIKE PUBt.lC UT/t.lT/E~ Electric Utif ities have seven times as much investment per dollar of sales as Air carriers Elec. Utilities Air carriers }Q.45 17 8 The exclusion of any new airline from the trunk routes has reserved the wealth of air transportation largely for the grandfather carriers. However, there is no correlation between size and efficiency. For instance, the operat-ing costs of Continental Airlines, the third smallest of the grandfather carriers, are lower than TWA, the fourth largest. There should be New Competition in Air Transportation AIHLINES ARE NOT LIKE PUBLIC' UTILIT/EJt Public Utilities have twice as great a proportion of non-cash costs E.lectric Utilities Airlines The seventeen-year exclusion of new carriers from passenger trnnk-line transportation is wrong. It runs contrary to the intent of Congress and to basic economic principles. Air transportation has grown up . The travelling public should no longer be denied the benefits of competition from new entrants. The iron door that has barred all new competition from the trunkline passenger business should be opened. Lower fares and better service to the travelling public are the logical results of new competition. There should be New competition in Air Transportation Making Big Carriers Bigger Will Not Reduce Costs cents 50-40-30-20-10-Lorgest---Airlines--- Smallest Operating E.xpense't * Domestic Operations in cents per available Ton Mile -12 months ending June 195+ I ~ ... ~.. ,._wi! l ._-, ~~ North American Airlines, an ind epend ent air-line that is seeking pe rm anent operating authority, had its starl in late 1945 when a group of return-mg ,rar veterans dec ided th a t th e futur,e of a ir tran sportation lay in lo\\·-cos t air tra vel rath er than in the exclusive]~, high fare se rvi ce th en available. North America n originat eJ air coach and pio-neered its J evelopmenl. For more than four years, th e so-ca ll ed grandfather ca rri e rs insi sted that air coach ,ms eco nomica lly in1pos:-- ilile. North Ameri -can proved th e soundness of a ir coach whi ch ha s now been adopted liY a lmost all airlines and is fa st becoming th e stabl e market ba se for th e entire air transportation industry. North American has bee11 hi ghl y s uccessfu l. It has ahrays operated ,rith a profit ,rithout th e aid of any Government s11l,s id y. In 1954, it ranked as th e eleventh largest dom esti c airline 111 terms of revenu e pa ssenger mil es fl own. It ca rri ed 193,781 passengers 329,476,000 revenue passen-ger miles. North American operates both DC-6B's and DC-4's on its routes between New York a nd Cali-fornia and New York and Florida . The co mpany"s overhaul and maintenance base at Burbank, Cali-fornia is one of the largest and most modern on the West Coast. North American employs over a . hundred flight captains and first officers, many of whom are "million milers." North American's safety record is outstand-ing. It has flown more than a billion passenger miles without an accident. North American has always been among the first with the newest tech -nical developments . It was the first airline fleet to be completely equipped with dual omnirange receivers. It was one of the first airlines to use the revolving tail beacons. It was the first airline to introduce rearward facing seats as a measure for greater safety. North American Airlines is active in the national defense programs. Half of its fleet ( of planes is committed to the reserve program, subject lo immediate call in an emergency. Most of its crews maintain reserve commissions and many ,rere called liack into active service during the Korean emergency. North American has flown under contract for the Air Force both the Tokyo airlift across the Pacific and the Atlantic Airlift between the United States and Europe. . . I I I • . \~ Duffy, Oonold 0. /,::- ·,. ----.-,<-,. · Ci ... --I Hort, Roscoe R. L--- -~---LEWIN, JACK B. FISCHGRUNO, JAMES WEISS, STANLEY D. Reichgot!. Oonold & A~~~-

North American Airlines First in Aircoach

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North American Airlines First in Aircoach

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