Precarious Position of U.S. Airlines
Difficult Financial Position of Trunk Airlines
A plan to merge American Airlines and Eastern Air Lines was greeted on its announcement, January 23, by a burst of protest from members of Congress, labor leaders, and officials of competing air carriers. Only two weeks earlier, Chairman Alan S. Boyd of the Civil Aeronautics Board had suggested that consolidation offered a “particularly promising avenue for a solution” of airline problems. But Congress, the antitrust division of the Department of Justice, and C.A.B, itself appeared to have strong reservations about a merger which would result in formation of the biggest airline in the world.
Concern over the shaky financial position of the airline industry is nevertheless widespread. Revenues of the 11 domestic trunk lines exceeded $2 billion for the first time last year, but expenditures topped that figure. The combined deficit of $30 million run up by the 11 carriers in 1961 was half again as large as their previous record loss of $20.2 million in 1947. Barring a sudden spurt of passenger traffic, the condition of the airlines is likely to get worse before it gets better. A large investment in jet airliners, begun in 1956, has imposed a heavy burden of debt on the carriers. And development of supersonic transports, which may make even the most advanced of today's subsonic jets obsolete by 1970, clouds the longer financial future.
Distress of Airlines Over Tax Proposals
Airline officials are disturbed, meanwhile, by President Kennedy's proposals for airway user charges. In his budget message, Jan. 18, the President asked Congress to repeal the 10 per cent federal tax on railroad and bus fares as of July 1, but to continue the tax on airline fares at the present 10 per cent rate until Dec. 31 and at a rate of 5 per cent thereafter. Kennedy proposed also that the present federal tax of 2c a gallon on aviation gasoline be extended to jet fuel, which is not now subject to the excise levy.