Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, March 28, 1991                   TAG: 9103280139
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: DANIEL HOWES/ BUSINESS WRITER
DATELINE:                                 LENGTH: Medium

ROANOKE'S SERVICE FINE, AIRLINE DEREGULATOR INSISTS

But Alfred Kahn, former chairman of the Civil Aeronautics Board, warned that the merger mania of the 1980s could lead to a domestic airline industry dominated by just three carriers - American Airlines, Delta Air Lines and United.

"The reason so many of these carriers are going out of business is the competition in the industry," Kahn said after a speech to the Roanoke College Public Forum. Indeed, a fourth U.S. airline - Chicago-based Midway Airlines Inc. - sought protection from its creditors Tuesday under federal bankruptcy law.

Midway's move followed in the footsteps of Pan American World Airways and Continental, which are still operating under federal protection. Eastern Air Lines shut down in January after nearly two years of unsuccessful attempts to rescue itself.

Kahn - former inflation adviser to President Carter and a longtime economics professor at Cornell University - said increased foreign ownership of some ailing U.S. airlines may help shore up those ripe for takeover or, more likely, on the verge of extinction.

U.S. Transportation Secretary Samuel Skinner appears receptive to the idea of allowing as much as 49 percent foreign ownership of U.S. airlines, a move Kahn thinks would expose ailing domestic carriers to more profitable international routes.

Another boon for carriers such as Arlington-based USAir would be securing the international routes without foreign ownership. The competition pendulum, unleashed by deregulation, may already have reached its apex.

Federal regulators charged with approving the sale of vacated gates at airports around the country and in Britain have balked at attempts by the Big Three - American Airlines, Delta Air Lines and United - to gobble up the space left by their defunct or ailing competitors.

United's bid for Eastern gates at Washington's National Airport was rejected in favor of Minneapolis-based Northwest. Meanwhile, United's and American's attempts to procure Pan Am and Trans World Airways routes to London's Heathrow Airport were only partly approved, leaving room for smaller carriers.

Kahn said he was skeptical of persistent complaints that Roanoke's air service has deteriorated in the wake of deregulation. He cited federal statistics that indicate marked improvements in service at most U.S. airports.

"In general, a community gets the air service it deserves," he said. "Jets have always been uneconomic for serving smaller cities and have become more uneconomic with higher fuel costs."

Deregulation spawned a now-common hub-and-spoke system often criticized for less convenient flights to more congested airports, Kahn said. But he quickly added that the federal move also bolstered service to and from airports across the country.

One caveat, however: Should Roanoke's primary carrier, USAir, be unable to rescue itself from its current downturn, the region's air service might well suffer, Kahn said.

"I'm not saying USAir is in imminent danger of disappearance," he said. "I do say their costs are too high."

USAir ended last year with a costly restructuring and a net loss of $454 million. Officials indicated in a recent Securities and Exchange Commission filing that they anticipate USAir's first-quarter losses this year to exceed the $168 million lost in the final quarter of 1990.