03 November 2010

The Rise of Coach Class Airfares

Prior to the Second World War, several small airlines tried to break into the market by offering low fares, but none of them survived as at the time, passenger operations were only sustainable at charging fares that were roughly 10 cents a mile. The first serious attempt at low fares on a sustained basis came from United Air Lines which started what it called "Sky Coach" service on 10 April 1940 between San Francisco and Los Angeles with intermediate stops with a fare over the whole route coming out to $13.90 (approximately 3.5 cents per mile). The reasoning for the Sky Coach service's low fares were that it would only use 10-passenger Boeing 247s that were already old and paid off, therefore cheaper to operate and would offer a less extravagant level of service than on United's primary services between the two cities. The "Sky Coach" ended on 23 April 1942 with the mobilization of the US airline fleet to support the war effort. 

In the immediate postwar period, the boom in air travel meant there were more passengers than seats and the airlines were in no rush to cut prices. In those days, fares were governed by the US Civil Aeronautics Board (CAB) and any rate cut had to pass their review as not being detrimental to the general interest of the industry and the route in question. If an airline wished to offer low fares, they had to provide rationale to the CAB to approve those fares in the days before deregulation. A growing number of charter and non-scheduled airlines, however, began to slowly nip away at the passenger market that was long the exclusive domain on the established trunk and local service carriers. These airlines offered low-frills services at cut rate prices that eventually forced the established airlines to act. The first out of the block with the first scheduled coach class service in the United States on 4 November 1948 was Capital Airlines on the lucrative Chicago-New York route. Capital charted only 4 cents per mile instead of the standard 6 cents per mile on the route established by the CAB. It justified the coach class fares to the CAB by using older Douglas DC-4s with high-density seating for 60 passengers. Only the minimum of inflight services was provided and the flights were scheduled at off peak hours and late at night so not to detract from Capital's own premium services. After approving Capital's coach class services, other airlines raced to establish their own coach class services and the CAB was so flooded with applications for approval that it was forced to issue a policy statement, apprehensive that the airlines would end up offering services that was out of balance with their operating costs:

"We would caution the carriers that the burden of proof for additional coach class service is clearly on them. We do not propose to allow the indiscriminate extension of coach fares, no do we intend to permit a general debasement of the existing passenger fare level."

Regardless, on a case-by-case basis, the CAB approved numerous other coach class services and within a year of Capital's ground breaking services, coach fares could be found on most major routes. On 27 December 1949, both American Airlines and TWA offered the first transcontinental coach class services on high-density seating DC-4s with several stops. The fares were around $110, and due to the success of the services, in less than a year both airlines replaced the elderly DC-4s with better equipment- American put DC-6s on the routes and TWA put Lockheed Constellations on the coach routes. Curiously, though, United refused to start its own coach services despite its own experiments in 1940 with the Sky Coach. William "Pat" Patterson, United's paternalistic president, warned that expansion of coach fares would lead to chaos in the market and ruin the fare structure of the industry. After holding out, United finally introduced its own coach services on 14 May 1950 with 60-seat DC-4s between Los Angeles and San Francisco at 3 cents per mile. United's services ran at night and at off peak hours until later than summer when Western Air Lines added its own daytime coach services. For the remainder of the year, United and Western fought a small fare war on coach services in California.
To get CAB approval for these services, the airlines had voluntarily imposed all sorts of restrictions on the fares from off-peak schedules, no discounts, no refunds, less on-board amenities, and reduced seat pitch. Most of this was done freely by the industry to protect their own premium services. In 1950 the CAB issued another policy statement that the objective of fares should be to balance the ratio of fares to seating standards so that the net revenue per flight should be the same, irrespective of the ticket prices. This had the effect of eroding many of the previous restrictions on coach fares due to competition- since an airline merely had to demonstrate to the CAB that the net revenue on a given route didn't change much, airlines began to incorporate coach class cabins on their regular flights. Coach fares were now available for daytime flights and peak times. As a result, United set its coach fares on all flights on the West Coast at 4.5 cents per mile and for flights within California, coach fares were set at 3.5 cents per mile. Much to United's surprise (and undoubtedly to that of Pat Patterson), United's coach fares were a huge success and the airline aggressively introduced coach class cabins on its transcontinental services between San Francisco and New York at only $110 on 25 September 1951. 

But the expansion of United's coach class cabins got the attention of the United States Senate's Select Committee on Small Business. The committee investigated the CAB decisions regarding coach class services and found that the Board had unfairly been favoring the established airlines and criticized the CAB's strict policies on charter airlines and non-scheduled airlines that had shown a market for low airfares. So in November 1951 the CAB reversed direction but instead of taking a more favorable approach to the charter and non-scheduled carriers, the CAB denied transcontinental applications of several carriers and instead directed the established airlines to expand coach class fares on their network. Many of the smaller airlines cried foul, but the political influence of the established airlines maintained the CAB's change in policy. The airlines now began to aggressively push coach class fares, particularly on the transcontinental routes by by 1952 the coach class fare between New York and Los Angeles had fallen to $99 and New York to Chicago fell to only $32. By 1955, coach class fares had grown exponentially to the point that on some routes, the coach class cabin took up more space than the first class cabins that once made up the entire cabin of airliners of the day. As traffic soared into the 1960s, the majority of airline passengers in the United States would travel via coach class fares, laying down the foundation for the beginnings of deregulation in the 1970s.

Source: Airlines of the United States Since 1914 by R.E.G. Davies. Smithsonian Institution Press, 1998, p336-338.

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