Council on Wage and Price Stability Files Petition to the CAB on Passenger Rate Increases

by Council on Wage and Price Stability on May 19, 1975
by Council on Wage and Price Stability

In a petltlon to the CAB filed today, the Council on Wage and Price Stability urged that passenger fare increases filed by American Airlines and Trans World Airlines be suspended and investigated.

American Airlines is filing a 6 percent domestic passenger fare increase while TWA is asking for a 5 percent increase, In addition, both carriers are seeking renewal of the temporary 4 percent fare increase granted last fall for expiration June 3D, 1975.

In hearings last fall before the House Commerce Committee the Council stated its belief that the 4 percent increase granted at that time had not been adequately justified. In its current filing, the Council states that, unless adequate justification is forthcoming, this 4 percent increase should be allowed to expire June 30th as originally scheduled.

The Council urged that in reaching its decision on both the continuation of the 4 percent increase and the new 5 and 6 percent increases requested by TWA and American respectively, the CAB satisfy itself that:

1. price elasticity of higher fares will in fact produce higher total revenues,

2. carriers have made every effort to reduce their operating expenses.

Furthermore, the Council stated that under the present circumstances no fare increase should be granted for the purpose of raising the carriers’ return on investment to the 12 percent target level of Domestic Passenger Fare Investigation. The airlines have no more reason to expect 1975 to produce “full” profits than have firms in other industries.

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