The First Fare Wars

After World War II, passenger travel surged to new levels. The federal government reorganized its regulatory agencies to manage the rapidly growing airline industry. When wartime travel restrictions ended, airlines were overwhelmed with passengers. With revenues on the rise and new, more efficient airliners in the air, airlines no longer needed economic support. In 1952 the government ended its decades-old subsidy for flying the mail. While air mail remained a valuable source of income, airlines no longer needed it to survive. 

New carriers emerged, and new technology began to revolutionize civil aviation. However, through the new Civil Aeronautics Board and later the Federal Aviation Agency, the U.S. government remained a guiding force, working to ensure safety and fair competition. 

Created in 1940 from the Civil Aeronautics Authority, the Civil Aeronautics Board (CAB) merged the regulatory functions of the Interstate Commerce Commission, Post Office, and Commerce Department. It would set airline fares and routes for four decades. 

The CAB continued to favor a system anchored by a few large, well-financed airlines—United, American, Eastern, and TWA—with several regional airlines flying north-south routes. Limited competition ensured stability and allowed the CAB to control the young industry's growth. 

With the widespread availability of surplus Douglas C-47 transports (military versions of the DC-3) after World War II, many freight service airlines arose and prospered. Returning veterans eager to continue flying formed such airlines as Flying Tigers, Slick, Airlift, and Seaboard World. 

New airlines emerging after World War II began operating on a nonscheduled basis and offering the first discount fares, undermining the government's regulated airfare system. The Civil Aeronautics Board's efforts to limit competition on transcontinental routes were seriously challenged by these scores of new airlines. These nonscheduled airlines, or "non-skeds," carried cargo and passengers on irregular or charter services. By combining their resources, some non-skeds were able to offer transcontinental service at discount fares, which other airlines were forced to match. 

Reacting to competition from nonscheduled airlines, Capital Airlines in 1948 introduced the first coach fares. Although approved reluctantly by the CAB, these lower fares immediately became popular and introduced air travel to a much broader passenger market. 

Several "non-skeds" pooled their resources to create North American Airlines in 1950. NAA began offering daily Los Angeles-New York service at a one-way fare of only $99. Other airlines responded, and they too discovered that low-cost service could be profitable. Even so, under pressure from the major airlines, the CAB closed down NAA in 1955.     

After the CAB closed down North American Airlines, it changed the "non-sked," designation to "supplemental." Under this designation, the charter business flourished. World, Trans International, Overseas National, Transocean, Standard, Saturn, Capitol, and other carriers provided cargo and passenger service for tour operators and the military, but they could not compete directly against the major passenger airlines.      

This brief episode foreshadowed the turbulent competition to come in the late 1970s, when the government deregulated the airline industry.