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Is Half Fare Only Half Fair?

By Eric Redman

(The author, a senior in Lowell House, spent the last nine months working for Senator Warren G. Magnuson (D-Wash.), first as a campaign aide and later as a personal staff member in Washington, D.C.)

IN THE OLD DAYS, of course, we had to ride the train from Boston to Seattle--four days and three nights, coast to coast. In fairness to the Great Northern and Northern Pacific, one has to admit a limited nostalgia when looking back. The railroads could each you many things--you gained a sense of "the vastness of America," to which, your parents insisted, your richer classmates aboard those jets remained forever oblivious.

West of Chicago, the scenery was always invigorating. Along the Mississippi, turtles and egrets watched the Empire Builder roll by. Deer and antelope really did play by the banks of the Yellowstone, and the Rockies and Cascades loomed ahead with jig-saw puzzle perfection.

For amusement, you could hold your breath while going through tunnels, and at night you could generally find time alone in the darkened Vistadome with some impressionable young thing, going home to Pocatello after a week with her aunt in Minneapolis.

But for all that, you never forgot what railroading was really like: derailments in Montana, $2.00 hamburgers in the Lewis and Clark Car, perverts in the men's room at Union Station, and worst of all, the interminable length of time it took to get home.

Youth Fare, appearing as it did after my friends and I had made 18 transcontinental train trips, was an Emancipation Proclamation for the middleclass student. Across the country, youths in the 12-22 age bracket swarmed to the airports; by 1968 six million per year were taking advantage of the reduced fares.

American and Allegheny had led the way with their respective half-and two-thirds fare plans, beginning January 21, 1966. The Civil Aeronautics Board not only approved a Youth Fare scheme; it dismissed the complaints filed by the other airlines who wanted to see Youth Fare killed in its infancy. (Bonanza and several other carriers had tried Youth Fare briefly in 1961, but lost money on the service.)

Exactly three years after American and Allegheny ushered in the new era, CAB Examiner Arthur S. Present on January 21, 1969 ruled that Youth Fare was 'unjustly discriminatory" and must be canceled. Acceptance of the Examiner's Report -- a routine formality in most cases--was held up this time by the CAB in order to allow the Board to "independently review" the matter. Should the Board adopt the Report--and a decision is expected late this month--Youth Fare will be dead before exam period begins.

THE PUBLICATION of the CAB Examiner's Report is the culmination of years of controversy. Complaints from other airlines had been vociferous in the past but short-lived; 24 of them, including all 11 domestic trunk lines, eventually dropped one of the two systems, and 14 tried to convince the Examiner to retain it.

The bus companies provided more sustained opposition, however. Transcontinental Bus Systems, in fact, took the question of the fares' legality to court in a suit against the CAB. In 1967, the Fifth U.S. District Court of Appeals ruled that the CAB had abused its discretion in its hasty approval of Youth Fare. The CAB was ordered by the court to re-examine the controversy and to come up with findings "not inconsistent with this decision."

The CAB derives its power to approve or deny proposed air fares from the Federal Aviation Act of 1958. A crucial section of that act, and the one that Youth Fare appeared to violate, specifices: "No air carrier . . . shall make, give, or cause any undue or unreasonable preference or advantage or subject any particular person . . . or description of traffic in air transportation to any unjust discrimination . . . " (Italics added)

The twin tests of "reasonableness" and "non-discrimination" have become, after numerous CAB and court rulings, the Scylla and Charybdis between which any proposed fare must chart a course in order to gain approval. Non-discrimination is, of course, the test that the court and the Examiner claim Youth Fare does not pass. But the question of "reasonableness" is also worth looking at, if only to dispel the misconceptions of those who resented Youth Fare.

An "unreasonable fare," by traditional CAB idiom, is not one that is too high: it is a fare that clearly does not allow the airline to cover the cost of transporting the ticket-holder. For competitive reasons, an airline might conceivably want to introduce such a fare; even though it lost money, it would lure customers away from the competitor and thereby increase "brand identification." The "reasonableness test" attempts to preclude such cut-throat tactics. To the CAB and the airlines, a fare is "reasonable" if it passes the "profit-impact" test: the revenues generated by the fare must excede the combined total of carrying costs and the amount of revenue lost through diversion from other fare plans. The bus companies, of course, argued that a more stringent test should be used.

Although the airlines presented only fragmentary estimates based on remarkably unsophisticated tests (inflight questionnaires asking if Youth Fare had induced the student to fly), the Examiner could find no evidence to suggest that Youth Fare was in fact unreasonable. Youth Fare was paying its own way and making a profit besides: full-fare passengers were not subsidizing students, as many of them believed. The fact that Youth Fare was profitable had another implication: the airlines would try to block acceptance of the Examiner's report designed to eliminate the service.

THE ECONOMICS of the airline industry are complex, but if you remember any Ec 1 at all you can understand the pricing policy pursued. By far the largest group of passengers are businessmen, who account for 40 to 60 per cent of all passenger seatmiles flown. Demand for air travel in this group is relatively inelastic: even a sharp reduction in fares would not substantially increase the number of businessmen who fly--and it would definitely lose money for the airlines.

The airlines therefore want to keep the basic fare for businessmen at a profitable level. At the same time, of course, they want to encourage more people to fly. Lower fares can greatly increase the numbers of non-businessmen using the airlines--grandmothers, students, housewives and virtually every middle-class group in society has a very elastic demand for air travel. In Ec 1 terms, the airlines know that through fare discrimination--one fare for the elastic sector and one for the inelastic business sector--they can greatly increase both their profits and the number of people who fly.

The problem, from the airlines' point of view, is that a statute specifically prohibits unjust discrimination in fares. Discrimination in fare policy consists of offering "a special tariff . . . to a limited class of persons . . . under substantially similar circumstances and conditions as the service rendered to those not eligible for the tariff." In other words, age alone is not justification for offering reduced fares so long as both old and young receive the same basic service--in this case, a plane ride from one city to another.

Non-discrimination in fares is a basic tenet of American transportation policy. And it makes promotional fares--like Youth Fare--hard to guide through the maze of regulatory agencies and courts.

In order to capture segments of the population that otherwise would not fly, the airlines have to devise special fares that are not discriminatory or, at the very least, not unjustly discriminatory. The range of fares paid by various passengers on any given flight today testifies to the ingenuity of the airlines in doing just that.

What is it then that makes Youth Fare different from Discover America (excursion) Fare, Family Fare, Group Fare, or Military Standby? Is it any more discriminatory than any of these?

The court and the Examiner believe that it is. Discover America is subject to restrictions that render it "substantially:" different from the service full-fare passengers receive. Family and Group Fares, by definition, do not deal with a single passenger but with a quantitatively different consumer unit. And Military Fare, which superficially appears to be the same as Youth Fare, is authorized by statute and by judicial decision because it contributes to the National Defense by raising the morale of out troops--but the government could probably demand it legally in any event.

Despite the arguments in Youth Fare's favor -- and the airlines presented many--neither the court nor the Examiner could find a legal basis for age being used to justify discrimination. As far as air travel goes, there is nothing about the 12-22 group that distinguishes it from any other subgroup of the population--all of whom would like to fly for less.

The argument that Youth Fare promotes education, incidentally, seems as specious to the Examiner as the contention that it promotes highway safety by keeping young people off the road. Said Present' "No probative evidence [suggests] that youth fares have in any way facilitated the acquisition of a college education by any youth."

Such was the reasoning of the CAB Examiner as he signed what he supposed was the document that would kill Youth Fare.

IS YOUTH FARE really dead then? Or will it, like the legendary Phoenix, rise from its funeral pyre to fly again?

My own inclination is not to throw my little plastic card away yet. For one thing, the fact that the CAB decided to review the Examiner's Report instead of routinely accepting it suggests that the Board's traditional pro-Youth Fare policy may not die easily. For another, there are many forces at work to encourage CAB leniency.

First, most of the airlines want to keep Youth Fare. Rumor has it they have retained President Nixon's former law firm to represent them in the matter (another rumor is that the firm turned them down). The CAB may very well accept the industry point of view, provided it can find statutory justification for doing so. Perhaps the controversial Trans-Pacific Case has involved the Board in enough recriminations for one year.

Congress, too, is pushing the CAB. On February 19, Senator Magnuson, Chairman of both the Senate Commerce Committee and its important Aviation Subcommittee, wrote CAB Chairman John Crooker. Magnuson asked the CAB to retain Youth Fare on "national interest" grounds--for which, conceivably, justification may be found in the 1958 Federal Aviation Act. The Magnuson letter stresses the role of Youth Fare in making possible the broad formal and informal education "so essential in our modern society." Congressman Olsen, in addition, has initiated a national campaign to flood the CAB with letters from students urging retention.

Whether or not such efforts can succeed remains unknown. Magnuson aides on the Commerce Committee aren't overly optimistic: even if the CAB rejects the Examiner's Report, further suits by the bus companies may ultimately result in the decision being overturned in court. The court has specifically stated that "social policy" is not one of the CAB's responsibilities. Enforcement of the existing statute is.

Only the CAB's decision later this month will tell whether Youth Fare is really dead or whether it faces, at best, another reprieve and another era of controversy. If the CAB does kill the Fare, or if the courts kill it at some time in the future, only special Congressional legislation can resurrect it. Senator Percy has in fact proposed such legislation, but even if his bill in its present form would be feasible (and some Hill veterans doubt that it would be), no one knows when, if at all, Congress will enact it.

So if you've always wanted to visit San Francisco, you'd better go over Spring Break: you may never get another chance -- at least not until you're fat, rich, and too old to enjoy it

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