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what additional traffic he can pick up by including
Deleting such a segment on a given flight would only require CAB approval if it represented the carrier's only service at either of the two cities under authority of a given "route segment." It is important to note that CAB approval often is not required either to add the first nonstop or delete the last nonstop in a given city-pair market. For example, nothing in American Airlines' certificate currently compels it to offer nonstop service in any of the Arizona city-pairs mentioned in the ATA simulation. Indeed, during July 1973, American eliminated, without seeking CAB approval, the Palm Springs segments from Flights 159, 221, and 622, thus ending nonstop service by American between Palm Springs, on the one hand, and Phoenix and Tucson, on the other.
To see how widespread this carrier authority to add and delete service currently is, I had Mike Roach check the certificates of the carriers serving the Arizona markets. He informs me that, perhaps with the single exception of Frontier's Phoenix-Tucson service, the carriers involved are currently free to terminate service over all the indicated segments. In other words, American, under its current certificate, has no obligation to provide service in any of the six city-pairs where it currently is certificated (it does not hold a certificate allowing it to fly between Kansas City and Tucson).
This brings me to my final point service reauctions on segments that the ATA model predicts would be retained. As you can see, in many cases, the hypothetical reductions indeed would be massive. ChicagoPhoenix service would be cut from 18 to 8 flights per day. Again it is vital to be clear about what is and is not being simulated by the ATA model. As I indicated
in my April 29 memo, the ATA model simulates the response of a monopolist. I am not surprised that a monopolist, if free to drop all flights he didn't wish to offer, and protected from entry by other carriers, would choose substantially to curtail service. He might even drop the amount of service that the ATA model indicates.
However, the current air transport system is not a monopoly. It is a competitive system where carriers face controlled prices, are free to determine the amount of service they wish to provide at these controlled prices, and are even free to exit from many city-pairs without explicit permission of the CAB if they find their operations unprofitable. The fact that they currently choose to operate large numbers of flights and routes which the simulation indicates are "unprofitable" indicates not that there is crosssubsidization in the system, but that the simulation is faulty in the way it determines whether a particular route or flight if "profitable" or "unprofitable.
SCHEDULED Daily HIR SERVICE PROVIDE TO PHOENIX AMD Tuscan, frizend
As of July 1, 1973
Honorable Edward M. Kennedy, Chairman
United States Senate
School of Aeronautics and Astronautics
West Lafayette, Indiana 47907
of the Scheduled Air Transport Industry Date: 15 May 1975
make more segments appear unprofitable.
travelled segment yields, thus making more appear
The model used is very questionable for this appli-