End of the Great Race

One of the last great underdeveloped markets for air travel reaches from the U.S. across the Pacific--to Japan, Australia, Southeast Asia and the islands in between. No major Pacific routes have been awarded by the U.S. Government since 1946, and airline executives have been lobbying long and hard to get more. The first leg of the air race ended last spring, when a Civil Aeronautics Board examiner recommended that the international business be divided up among five carriers. The final decision was up to the White House, which last week finally put an end to the marathon.

Winners and Losers. In picking the winner, President Johnson went along with many--but not all--of the original recommendations. Probably the greatest gainer was Los Angeles-based Continental Airlines, only the eleventh biggest U.S. airline. Its new runs to Samoa, Micronesia, Australia and New Zealand will make it a sizable inter national carrier. Another big gainer was TWA, which was awarded rights to fly from the U.S. to Hong Kong, Taiwan and other places. By linking its new Pacific runs with its existing transatlantic ones, which go as far as Hong Kong, TWA will become a round-the-world air line.

Pan American, which already flies to Japan from California, got new routes from Seattle and New York over the North Pole to Japan. Northwest Airlines, also a Pacific veteran, will get an additional route to Japan via Hawaii. Result: more competition between Pan Am and Northwest, but also more opportunity for each to attract traffic. Finally, the Flying Tiger Line landed an all-cargo route to Southeast Asia.

The biggest loser was Eastern Air Lines, which ran an $11.8 million deficit in this year's first eleven months. It failed in a bid to broaden its horizons to Pago Pago, Papeete and other South Pacific spots. Not even close connections in the White House did much for an other loser, American Airlines. Its former chairman, C. R. Smith, is Johnson's Commerce Secretary, but American's application for a Tokyo run was rejected.

Long and High. For the airlines, the Pacific routes are economical and profitable because they are so long, with relatively few costly takeoffs and landings. Pan Am gets a return on investment of close to 13% in the Pacific compared with less than 5% on transatlantic flights. By CAB estimate, each of last week's five winners stands to add at least $10 million a year to its revenues. But passengers should not expect any rate reductions. Such fares are set by the International Air Transport Association, a 104-airline group that does not necessarily feel that higher profitability should be reflected in cheaper tickets.

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