Appendix VolI — World Airways, Inc. v. Pan American World Airways, Inc.

Supreme Court brief1968

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“8

| : : bat VOLUME 1 cus

oa Supreme rt of the Huited States oe

ear : Ocrosus Tena, er"

Costin Ween. No. 800 Se tag: oy

' -. .* Wortp Airways, Ino., Er Au, Petitioners,

. ae re : : ae

| Pan Amertcan Wort Airways, Ino., TRANS Wort EE OK.

73° | om, Inc. and AMERICAN AIRLINES, Ivo, - | ages

a tN ‘ Be hae ‘Respondents ;

a ee

ee oan ee: Maret

Oxi, Awnonaurics Boann, Petitioner,

. 3 hs .

- Pay AMERICAN Wort AIRWAYS, name TRANS Wort |

AIRLINES, Inc, sok RPE Amines, Ino, ..

4 ., Respondents.

No. 969

Raamicas Sogury OF p TRAVEL Agaarie Io, Petitioner, —

\: v. :

e ’ Pan Aue Womna Ammwavs, Ixo., TRANS Wont

Aruines, Ino. arid AMERICAN Arurnes, Inc.,.

ot sie eicemas

_ ON PETITIONS FOR WRIT OF CERTIORARI TO THE UNITED STATES 4

' COURT OF APPEALS FOR THE SECOND CIRCUIT ~

A. ‘

. 4 — —

nia =)

Petition For Certiorari Filed In No. 800, November i

_ Petition For Certiorari(Filed In No. 946, December 22, 1967

Petition For Certiorari Filed In No. 969, December 28, 1967 -

Certiorari granted and consolidated January ” 1968"

= ee " PREBLE ANE PAO RIED BRE SOLE A I REI RN * NER eS Ser YO Be ARONA ARIE CORNED aera te bane er i 2 ee AD

SS .. : . : . ° :

-s . . . ° se

Z . ’

. .

Me ri

March 19, 1965 ‘ cosenneseecedigne

| *. INDEX TO APPENDIX ee es

” Pagee'ta | o ‘ res

Certified Appendix

"Records _ Pages

AS VOLUME a oe

“Relevan anes Entries’ . Ia

* Docket No. 13795 be

115 Notice by CAB that it will el with |

processing of appliéations for supplemental —

-, air service, July'12, 1963 . : R la

304° Order No. 20573 | ee

633 Report of Prehearing Conference, June 2, or

, 1964 7a...

4108 Holiday his Inc., HOLT. cus ay ;

Testimony of Richard D. ‘Neumann.«. 20a

—— ‘World Airways, Ine.: ROY se Cag Vat Ss

6065 World—300 .... : Qa

6229 . World Form D a

. 6414 | World W-5 . ee: |

6622 Bureau of Economie Regulation, BER Een ooo ay

ue Index ‘" 27a |

7174 Joint intervenor? JES“. sediwaosens a

7386 Joint Exhibits of ‘Ameriesh Flyers Air- pe ree

line, et al., Je211 = natal «30a

sie Joint Intervenors:

7788 > JI-1080 Riven . 81a

— 8084 JLB: ......... —_ 37a |

"9847 —« Joint Intervenors’. brief to the Examiner

| . 39a

LATA ART TT PRIN Wo

il a — Sek

Guat 2 fe nae eine

. Docket No. 13795, (Continued) | | | ro

- 10010 Recommended Detision of Examiner, Au are

2. gust 27, 1965 oe eaten a MB

10269" Excepti —— of J Joint - Intervenors, aa enya oe |

e | ber G1 eececvee aclucctmesteess ea 312a . ;

. A cater “yl Joini Titervenors September %, a 3

aus. 965, f perinboswenens - 3lla

3 -11275- ‘Answet of Joint Intervénors, September eas:

| 3 at, 1965 | Nicincnnsees ori ‘pie, _323a

—. * 14859 Oral Argument, October 13 and 14, 1965... ~ 825a

.., A1T34 » Order No, E-23350 ......... ARE aes

SE 11982. Petition for Reconsideration by. Jo éint: ) “e

* en 2 tervenors, April 4, 1966 an ¢ . 485a

“\- - 12008 Answer of Joint apa, April 1, | . .

\ | 1966" TRECee - 500a -

“42044 ‘ihe of haf ween, — > i :

Oe . dgpnicwsn ---- 508a

12093 is Order No. E- 23600 sab piiiedaleicin < R

: VOLUME 1 ea

12129 Order.No. B-24237 co.cc lescsssoseqeeeneee 543a

12171 Order No. E-24238 ciecccecccccncnencnlennen 5968

|, 12181 Order ‘No, $-24289 neces BOBS,

12322 Order No. E-24431. ...... ne

. ° . . . .

Dae MELT TTR EL FIN VENEREOL NE Sen aR ARR et son aneway One ee ie ree eee nee Geen a

Docket No. 13795 (Continied) Ba

12324 ER-478, November. 22, 1966 on

2 12827 e ER-479; November 22, 1966 ..

Docket No11908 =

- 12335 Order No. E-16028 |

12348 .: Notice of Proposed. Rulemaking, Novem.

ware: 1960 (EDR-21) heisat

12520! Order No. B-17190 ........

. 12703 Order No. E-17607 ..

te Transcript of Transatlantic Charter :

. =. Investigation® ee

15082 Cross examination of Phillip R: - Capellupo

is (PAA) | by’ Charles A. Hobbs of the

, American Society: of Travel Agents, _. .

15338. | Keniieth L. Briggs (TWA)

16308 — United States Overseas” Airways, Ine. »

Se IB ccscias os

17575 - Trans World Airlines, tea: TWA _

19438. Examiner’ s Decision—Transatlantic Char.’

i ter Investigation sistanstitishenshcessbinkasean ens .

19553 Appendix B to Examiner’s Decision—

Pas Transatlantic Charter Investigation’ ear

20642 Orders Nos. B-20530 and £20531 and‘Sup-. |

: plemental Orders — _E- _ and

E;20531 ssseeenessinnnenabanstonscnsennnnsconhesecbeuis tities Z

: 613a

6l5a

-. 6360

Ey eon ee

an: Se

6440

Certified Heo "56a Appendi

-. Records . - ee : Sn pee ate _ Pages

Docket No. 11908, (Continued) Peon hee ?

20868 Petition to Intervene by American Air- : :

Tae - lines and. Others, March 23, 1964 .. s 884a - |

"21179 Order ‘No, B-20650. “ aosnnne ae weet 8898

21199 Order ‘No. E-20776 : tions: aS

21909. \ Reeommended Decision of Examiner, eee ee ;

} ents tober 8, 1964 Sai ) »... 9278 -

22609 - ‘Order No. E.21966° aes sacuecni x 9440”

22954 - Order No. B-22255 7 secnngn nme 954a .

z * World ‘Airways, Ine. : Hest ost : " Ae

.*- 27823 ‘World R-1. ...... : creas | SUGG -

Ce a = A a =

27352 World R-7 eceteenieactennssneenenivcne , SR.

-. 28299 “Order No. F-28686 Se aria Se

28389. Pan American ‘Airways? os Ce: ede

RD tint wa. 9638

28442 Trans World. Airlines’. Brief, October 8, 3 as

: * 965 ,. evoneneedh es wowtef. 9688 -

28743. _ Recommended Decision of Examiner, De-- — :

~ eernber- 22, 1965 -..... ‘crete wtoosennten 976a

29582 Order No. E-24240 neccpenenennmemneee 10608

«° » 29611 Order No. E-24241 AINE

29618» Order No. E-24242 i. cccccecsnenaeeeeee “10972;

; INDEX

me United States Court of. Appeals for the Second ee

: Circuit ba ue ees :

- \ Opinion, July-20,. 1967). petietremnsaniensitan

Judgment, July 22.,1967 sat

Order on ‘Rehearing, are 29, 1967 ee

1967 ou

- Banc, September 2

+» ° Order Granting Stay. of Issuance of Mandate’

Under —_ 28(¢),, October 13, 267

Appendix

Page

1119a

| 11440

. .1146a- a

Order -Denying Petition for Rehearing En |

1148a° , .

1150a

: “RELEVANT DOCKET ENTRIES — -

on,

° os

a ae

I. At Civil Aeronautics Board.

a * Transatlantic Charter Indestigation,

Docket 11908 et.al.

a a

E-16023, dated November 14, 1960. :

Order -of-. Inyestigation \and Consolidation,

. Supplemental Order of Investigatign and Con-

solidation, E-17 190, dated July 8, 1961.

. Order No. E- 17607, dated Csteher 18, 1961.

Recommended Deciston of Examiner, dated

September: 21, 1962.

“Orders - Nos. E-20530 and 5.20531, dated .

October 8, 1963 and Supplemental Orders Nos.”

_ E-20530 and B- 20531, dated March 3, 1964,

- 6.

Or der No. B: 20776, dated “?— 30, 1964.

i _ iB. Supplemental Air Servi awe Proceeding, Docket 18795

‘et al.:

~* 1. Order on Presniiha: B-20573, March 13, 1964. |

2. Recommended Decision of Examiner (cover-

.ing domestic, overseas and foreign isspes),

- August 27, 1965. ; + i.

3. Opinion (covering domestic issues only),

_H-23350, Mareh 11, 1966. %

&: ‘Supplemental. Opinidi ‘and Order on Recon- |

ae effective Hovesinar 26, ——

sideration (covering domestic issues . only),

E- 23600, April 29, 1966.

Opinion- (covering. ‘overseas and foreign is- .

sues), E-24237,. approved by the President,

_ September 27, 1966.-

-6. Order (adopting amendments té Parts 208:

and 378 of the Board's me E-24238,

-TIa

. Order ‘Deayiie Reconsideration (covering.

overseas. and foreign issues), ‘E- 24431, No--

'. vember 22, 1966. *

Reg. No. ER-478, dated Wisin ‘29, 1966.

Reg. No. ER-479, dated November 22, 1966.

Oar peeopinat Transatlantic Charter Investigation,

‘Daemes 11908 et al.

ie. %

or -

Order No. E- 20776, dated April 30, 1964.

Revommended Decision of ‘Examiner, dated

October 8, 1964. ;

Order (reopening Investigation for additional

Rete applicants), . E-21966, March:30, 1965. «

Order (adding. All-Expense. Tour issue), .

E- 22686, September 23, 1965.

‘ Recommended *Décision of ‘Examiner, Decem:

ber 22, 1965...

- Opinion (All- Expense a Phase, amending +

authority ‘of “Capitol and Saturn), E-24240,

approv ed by the President, September 27, 1966.

%, Opinion (adopting amendments: to Parts 295

and 378 of the Board’s Regulations), E- see,

effective: November. 26, 1966.

Opinion (issuing certificates to four additional

carriers), E+24242, appr oved eid the President,

September 27, 1966.

II. At. -_ United States Court of Appeals for the Second —

Circuit, Nos. 30947-8. .

2 a wow

Petition for Review, ‘Was ember 25, 1966,

Argument Heard, June 15, 1967.

Judgmeiit Remanded, July 20, 1967.

Filed J udgment, J uly 20, 1967.

Petitions for Rehearing -and Reheari en

bane, er 1967.

Petitions for Rehearing Denied, September 29, .

190!.

curiam, September 29, 1967.

Filed Orders Denying Petition for Rehearing

en bane, September 29, 1967..

. Filed Motions ‘to Stay Issuance of Mandate,

October 4, 1967.

. Filed Order Granting Stay. of ‘Jewustice of

Mandate under Rule 28(c), October 13, 1967.

2. Filed Notice of Filing of Petition of Writ of

Certiorari (World Kei et al. ), November

11, 1967.

. Filed Notice of: Filing of Petition for Writ of

- Certiorari (CAB), December 26, 1967.

| Filed Notice of Filing’ of Petition for Writ of

Certiorari (American Society of” Travel

Agents), December 29, 1967.

. Fited Certified Copy of Order of Supreme

Court Granting Petition for Writ of Certiorari .

(World: Airways et al... CAB, American So-

~ ciety of Travel Agents), February 6, 1968.

. Filed Orders Denying Petitions for Rehearing,. .

September 29, 1967."

. Petitions for Rehearing ¢ en banc Denied, per -

ams

_ (115, 117)

- 115

UNITED STATES OF AMERICA |

Crvm Axrronavtics Boarp. | ae”

Wasuneton, D. C.

‘SUPPLEMENTAL Arm SERVICE

Docket — ‘et al.

ane NOTICE ‘

Notice i is hereby given that the Civil Aeronauties Board q

: has-decided to move forward with the processing of the —

applications listed below whith seek certificates of public :

convenience and. necessity authorizing supplemental air

‘ transportation der section 401(d)(3)-of the Federal Avi-

ation Act of 1958>as amended :

* *. « * ¢

Po: i: ee 0

In order to facilitate and expedite the Board’s deter-

mination of the scope of the proceeding, the issues therein,

and the manner in which the proceéding*will be processed,

parties are instructed to submit on. or before August 5,

1963, written expressions of their views on these questions.

ae e x *

“304

‘Order No., F-20573.”

UNITED STATES. OF AMERICA

Crvin Arronavutics Boarp -

WasHINGTON, D. C.

oo Served MAR 13 1964 _ |

- Adopted by the Civil Aeronautics Board

at its office in Washington, D.C.

on the 13th day of March, 1964

SUPPLEMENTAL AIR. SERVICE.

Docket. 13795 et al.

. ORDER ON PROCEDURE.

- By Notice of July B, 1963, from the Chief a ——_—

~. ~° “the Board announced its intention. to move forward with .

‘the processing of some 55: applications listed in the Notice

__ which appeared to. seek certificates of public convenience

and necessity authorizing supplemental air transportation

under section 401(d)(3) of the Act. All interested persons

were offered an opportunity , to express their views on ~

‘such matters as the scope of the proceeding, the issues - 3

therein, and the manner in-which the proceeding should be ~

provessed, and to comment on, -the suggestions made by

others. ; Rate

Numerous motions, snigextionn, and coinments have been .

a received.’ The Board has carefully considered all docu- .-

. Applicants filing motions were AAXICO Airlines, Inc., Ameri-

ean Flyers Airline Corp. and Capitol Airways, Inc., California. Air i

Charter, Inc. and Richard D. Neumann, Coral Airlines, East Coast -

-6

| (304, 305)

ments filed and is taking this opportunity to set forth its -

conclusions with respect to procedural matters to the ex-

tent that ‘such action is appropriate at this time.

A matter of paramount importance is the establishment

of the issues to be tried in the proceeding. The applica-

tions noticed for hearing raise a multitude “of questions

305 |

apart from requests for certification . to provide gsupple- -

mental air transportation services. Some involve issues

. solely in terms of conventional route-type certificates; a

_ few request interim operating authérity under Public Law

- 87-528; others speeifically or- implicitly seek individually |

ticketed and individually waybilled authority for the trans-

portation of persons ‘and property; and still others re-

' quest. authority cast in terms of “charter” and “non-

Scheduled” air“transportation, ‘air transportation “on a

_ charter basis”, or similar variants from the statutory defi-

nition of supplemental air -transportation.?

‘Flying a vite,; Tae, Edde Airlines, Inc., Johnson Flying Service,

- Ine., Modern Air Transport, Inc., Overseas National Airways, Inc.,

esPurdue Aeronautics ‘Corp., Saturn Airways, Ine., Sourdough Air -

- Transport, In®., Southern Air Transport, Ine:, Standard: Airways,

. Ine., Trans International Airlines, U. S. Overseas Airlines, Ine.,

‘World Airways, Inc., and Zantop Air Transport, Inc. Motions or °

statements were filed on behalf of the 11 certificated route carriers,

Bureau of Economic Regulation, Bonanza Air Lines, Ine., Lake

Central Airlines, Inc., Pan American-Grace Airways, Inc., and

‘Seaboard World Airlines, Inc: Answers ‘were submitted by’ the.11.

certificated route carriers, Bureau of Economie Regulation, Capitol |

Airways, Inc. and American Flyers Airline Corp., Modern Air

Transport, Inc., Richard D. Neumann, Overseas National Airways,

_Inc., Saturn Airways, Inc., and Southern Air Transport, Ince.

* Section 401(d) (3) of the Act authorizing the- issuance of cer-

tificates for supplemental air transportatjon. provides as follows:

“(3) In the case of an application for a certificate to engage

‘in supplemental air transportation, the Board may “issue a

est a 4a

(305, 306) :

As indicated initially, the Board’s purpose in ‘causing

issuance of the Notice was to considef such applications ‘as -

request authority to engage -in supplemental air transpor-

tation within the meaning of the Act. We adhere. to that

determination, and we will consolidate the noticed appli-

cations herein only insofar as the relief they seek comports

. with the statutory definition. Were the Board also to per-

mit: litigation of the host of extraneous ae Roch

outlined; the basic function and utility of this proceeding

effectively would be destroyed and there would be sub-

Ye stituted #h its place a proceeding of clearly unmanageable

| proportions. Because of the extremely broad nature and

Scope of many.of the applications, a precise severance of

particular applications or portions thereof is for the most

part eT - All applicants are Placed on notice

certificate, to any applicant not holding a certificate under

paragraph (1) or (2) of.this subsection, authorizing the whole

- or any part thereof, and for such periods as may be required

by-the public convenience and necessity, if it finds that the .

applicant is fit, willing, and able properly to perform the

transportation covered by the application dhd to conform to

the provisions of this Act and the rules, regulations, and re-

quirements of the Board hereunder. Any certificate issued

pursuant to this paragraph shall contain such limitations as-the

Board shall find necessary to assure that the service rendered -

pursuant thereta will be limited to a air _——

tion as defined in this Act.” :

“Supplemental air transportation” is in turn defined i in section

101(33) of the Act to mean “charter trips in air transportation,

other than the transportation of mail by aircraft, rendered pursuant

to a certificate of public convenience and. necessity issued pursuant

,. to section 401(d)(3) of this Act to supplement thé scheduled ser-

vice authorized by certificates of public convenience and necessity ©

. issued pursuant . to sections 401(d) (1) and (2) of this Act. x

*Some applications are, however, clearly subject to severance.

Included in this ee are the re of mate in‘ Docket

* .

(306)

that to the extent they intetided by their applications under

. _ consideration to seek authority not falling within the scope

of supplemental air transportation, it will be inéumbent

‘upon them to file new applications which will take their |

_ «+ * regular place-on the Board’s docket. Wieea

With ‘the proceeding restricted in this manner, the ulti-

: mate issues to be determined are those posed by section

401(d) (3). - These issues are (1) whether the. public con-

venience and necessity require the. supplemental air trans- |

portation requested by the applications; (2) whether the. © .*

applicants ‘are fit, willing;’and able- properly to perform: )

the transportation covered by ‘their applications and to

conform to the provisions of the Act and the rules, regu-

lations, and requirements‘ of the Board thereunder ;. and

(3) what_limitations, if any, should be imposed by the:

Board to assure that the service rendered pursuant to any

certificate to be issued will be limited to supplemental air

transportation as defined in the Act. Since the authority

of supplemental. air carriers to engage in operations for .

the military. is now contained in their currently effective

14044 and World“in Dockets 14529 and 14530, which in substance “

seek certification undér other provisions of section 401(d).

The applications: of World Wide in Dockets 13915 and 13916

are interim applications which were denied by the: Board, with the

* qualification that action upon the request for reconsideration of the

-denial of‘interim authority would be held in abeyance pending an

‘expedited hearing on the fitness issues involved in the carrier’s

applications for permanent certification. Order E-19009,. dated ‘

November 14, 1962. The carrier did not whe be ngs of the oppor-

tunity afforded. Since we are not here consider ng further requests

for interim authority and the basis for the deferment in Order *

«H-19009 no longer exists, the applications’ will be ‘finally denied.

We find no persuasive basis for severarice and separate considera-

tion of the applications of Purdue in Dockets 18798 and 13799 ass w-

. requested Ry Lake Central, and therefore the carrier’s motion seek-

ing this relief will be denied. fie a

“oe

i (308, 306)

Pane

. determination, and we will ¢ solidate the noticed. appli- 2

cations herein only insofar as thn relief they seek Comports

’ As” indicated ‘initially, the: Board’s purpose in causing:

issuance of the Notice was to consider such’ applications as ©

request authority to engage in supplemental air transpor-

tation within the meaning of the Act. We adhere to that

with the statutory definition. Were the Board-also to per-

mit litigation of the host of extraneous questions of the t

outlined, the basic function. and utility of. this om i

effectively -would be destroyed and there would be sub-

stituted in its place a proceeding of clearly unmanageable

* proportions. Because of the: extremely broad nature and

scope of many of the applications, ‘@ precise severance of

"~~ $06

particular applications or penthens thereof‘ is for the most ;

— impracticable.” $ ‘All er: are. yams. on notice

[

certificate, ‘to any enaliaint not holding a certificate under

paragraph (1) or (2) of this subsection, au orizing the whole

or any: part thereof, and for such periods may be required

by-the public conyenience and-necessity, if it finds that the

applicant is fit, willing, and able properly to perform the

transportation covered’ by the application and .to confotm to

the provisions of this Act and the rules, regulations, and: re-:

quirements of the. Board hereunder. Any eertificate issued

' pursuant to this-paragraph shall-contain such limitations as the -

Board shall find necessary to assure that the service rendered

- pursuant thereto will be limited'to: — air a

_ ‘tion as defined in this Act.”

“Supplemental air transportation” is in turn defined in section

101(33) of the-Act to mean “charter trips in air transportation,

to a certificate of public convenience and: necessity issued pursuant

to section 401(d)(3) of this Act to supplement the scheduled ser-

' vice authorized by certificates of public convenience and necessity

_ issued pursuant to sections 401(a)(1) and (2) of this Act.”

“8 Some applications are, however, clearly subject to severance.

Included in this category are “the ee of. Edde in Docket

Mic

other than the transportation of mail-by aircraft, rendered pursuant —

wi DP

(806)

that to the extent they intended by their applications under

consideration to seek authority not falling within the scope

of supplemental, air transpgtation, it will be incumbent -_

upon them to file new applications whieh will .take ‘their ©

regular place on the Board’s dogget.

With the proeceding restficted in this manner, the ulti-

mate issues to.be detefmined are those ‘posed by section.

401(d)(3). These issyes are (1) Whether the: public con-

venience and necessi#¥ require the supplemental air trans-

portation. requested by .the applications; (2) whether the

applicants are fit, willing, and able properly to perform:

the ‘transportation covered by their applications and to

conform‘ to the provisions of the Act and the rules, regu-

lations, and, requirements of the- Board theretinder ; and

(3). what limitations, if any, should be imposed by the

Board to assure that the service rendered pursuant to any

- certifiéate to be issued will be limited to supplemental air

transportation as defined in the Act. Since the authority

of supplemental air carriers to engage in operations for

the military ‘is now contained in their eurrently* effective

- 14044 and World in Dockets 14529 and 14530, which in substance

seek certification under other provisions of section 401(d). —

The applications of World Wide in Dockets 13915 and 13916

are interim applications which were denied by the Board, with the

‘qualification that action upon the request for reconsideration of the

‘ denial of interim authority would be held in abeyance pending an

expedited hearing on the fitness issues involved in the carrier’s °

applications for ‘permanent certification. Order E+19009, dated

November 14, 1962. The carrier did not avail itself of the oppor. |

tunity afforded. Since we are not. here considering further requests

for interim authority and the basis for the deferment in Order

E-19009 no longer exists, the applications will be finally denied.

_ _ We find no persuasive basis for severance and-separate considera-

tion of the a, yr of Purdue in.Dockets 13798 and 13799 as

requested by

ing this relief will be denied.

‘

ake Central, and therefore the carrier’s motion seek-

(806, 307),

interim bectttionian: also pertinent is the quinine the

ce ce extent to which any of the applicants should be certificated

ay _ to provide air transportation services for the Department’

framework may well be desirable. These are, however; mat-

_ ters best left for formulation and resolution by the exam-

iner as a result’ ‘of the prehearing’ conference or in some

‘ other appropriate manner.

]

‘In view of the breadth of the, authority requested, the

- complexity of the questions involved, and the f&mbeér of

applicants seeking authorizations, the determination. of the.

best means of procpssing the applications is a particularly

reveal a’ wide divergence of views.

A few applicants’ desire separate hearings on their in- .

dividual applications. Most. recognize -that some. form/of

— consolidated hearings i is both necessary and desirable but

differ markedly on the procedures to be followed. As far :

as geographic area is concerned, some applicants degire

* that all applications be heard together so that the*issues—

will be wérld-wide in scope; others.suggest separate pro-

ceedings to be conducted: successively, the first dealing

with overseas and foreign authority and the second with

ing into three or more geographic areas for separate con-

sideration. A similar diversity of opinion exists on whether

the questions of .public convenience and necessity and the

. fitness of the individual applicants should’ be heard -to-

. gether or separately, and’ if separately, which should pre- :

‘ \

§ ce this dcineee,: be limited to bilgi who now, hold”

difficult one. On this question the: filings of the. oun k .

Y ~ domestic i issues; and still others would divide the proceed- pte

_eede the other. Also,. there are suggestions to the effect .

7 Se

~~. anddisposition.

oa i ree

ec ea ce

interim -operating authority as supplemental air carriers

and that all other applications be set for separate hearing .

After giving due weight to all of the’ views ‘expressed, ome

we have concluded that: the public intendt would best be

ae served -by hearing all applications on both public conven- Ps *

jence and necessity and fitness questions ina single con-

solidated proceeding. If the applications were compart:

mentalized for. separate’ consideration’ in’ terms of such °

matters as issues, geographic scope, and type of applicant, _

some benéfits would be. achieved, particularly from the -

standpoint of narrowing the questions: to be resolved at.

"* any one time. However, these applications raise common

_» and interrelated problems. which. in many* respects trans-—

. _ cend geographical divisions and can .best be treated in

broad perspective: All things considered, the single- pro-—

-ceeding conducted with all issues present offers the pro-

sn cedural vehicle most likely to provide for a comprehensive _

and cohesive review of the future role of the supplemental

air transportation industry,, which is our primary task.

‘We consider it likely that ‘the area approach would in. -

-. erease the total time neeessary to process the applications. *

'. _. Moreover, the division of.the applications on an area basis =

would require multiple participation by at least’a majority —

of the applicants in two of more separate proceedings,

" since virtually/all of -ther. ‘seek Overseas and foreign as |

well as interstate authority, and this procedure might thus .

constitute a substantial drain on their energies and re-*.

sources.. From the standpoint of most of the applicants,

the single. proceeding in’ which all applications are. heard

would appear to provide the least costly and burdensome ie

procedure. .°>.5 > shoe i iG aa zy

* (308)

Fela eS 8,

As so constituted, ‘the proceeding will encompass all ap-

plications’ to the extent that they request ‘authority to en--

_ gage in interstate, overseas, ‘and foreign supplemental air ..

‘ransportation.* We are not persuaded that anything i is to

be gained here by segregating public ‘convenience and ne-

. cessity and fitness i issues for separate hearing and decision.

~ On the contrary, in the circumstances of the present pro-

ceeding, we believe that; the Board woud benefit from the |

‘ abilify to assess public convenience and necessity in the

light of data concerning the operating plans, financial

status, and other attributes of the fitness of particular -ap-

plicants, Nor do we find any sound ae excluding |

from participation in this proceeding any“of the three

. categories of applicants. desiring supplemental air trans-

portation. authorizations—new applicants, applicants hold-

ing interim authority, and those denied interim authority.

Except to the extent that particular applicants may be

affected by the outcome of periding cases, it would appear

that all — be ‘entitled to prosecute their — |

herein.®

* As urged by : some of the parties, we will not, however, consider

herein issues related to civil passenger. chafter authority in the

transatlantic area. Such issues are under consideration in 4#he

‘Transatlantic: Charter Investigation, Docket 11908 et al.; and

reason is apparent to relitigate-them in this proceeding. The

_Board’s decision in the Charter Investigatjon was served on March

’ -3, 1964 (Orders E-20530'and 20531).

_ § By Order E- 19009, dated November 14, 1962; the Board, aieeee ‘

: other things, set the 401(d) (3) applications “ef the following car-

riers for hearing, with the direction that the question of fitness,

willjngness, and ability be heard and decided before any remaining

issues: Air Cargo Express, Inc: (ACE), d/b/a Columbia Airlirtes

(Dockets 13894: and 13895); Airline Transport Carriers, Inc.,

« d/b/a California-Hawaiian Airlines (13884 and 13885) ; Blatz Air.

lines, Inc. (13871 and 13872); ‘Paramount Airlines, Ine. (13897

* and es ; Quaker City tat Inc. d/b/a’ Admiral iti

zs . . ve ss é % j

, 2 ‘ ‘ a

. .

. .” =

NB crctsienineo hectic oo teen

° .

. e .

Be i © (308, 308)

‘_ Several of the parties have suggested that once the Board

has set -the scope of this proceeding and acted ‘upon re- -

lated procedural questions, further procedural steps should _

309

be held in abeyance. until after final decision in th Trans-

atlantic Charter Investigation, Docket 11908: e¢ al. and in

the rulemaking proceeding in Docket -14148.° The pro-

ponents point out that at.issue in the Charter Investiga-

tion are questions such as market size, liberalization of the

charter rules, and?whether the applicants therein will be

treated as a‘class, all df, which could have a béaring on the

future course of this proceeding.. Further, the possible .

‘amendments to Part 207 involved. in’ Docket 14148 might

__ have a major effect'on the size of the charter market realis-

- tically-available. to the supplemental air carriers. It $s as-

‘serted that. for these reasons the - deferment. suggested

-would permit\the development of a more meaningful record.

Inc. (13877 and 13878); and World Wide ‘Airlines, Inc. (13904

‘and- 13905). Subsequently, Airline Transport Carriers, Blatz and:

- Paramount were found unfit for permanent certification and their

applications were therefore denied in their entirety (Orders. E-

20227 and 20228, served December 3, 1968, E-20474 and E-20475,

. Served February 14, 1964, and E-20263 and E-202 8 .Decem- . ..

ber 16, 1963) ; and prehearing conferences on the ACE and World, ‘

Wide applications were indefinitely postponed at the request of the °

_ applicants, while further procedural steps with réspect to Admiral

-* “were postponed pending Board decision in the Paramount case.

' . If the latter three carriers desire to ‘further prosecufe their appli-

cations, it will be incumbent upon them to make that desire known

_', by an appropriate filing within the period allowed for reguesting

reconsideration of this order, after which the Board will prescribe

the appropriate further procedures. — Cam,

* Docket 14148 is concerned. with revisions in Part 207 of the.

Economic Regulations which may be necessary or desirable-as the.

result of section 3 of Public Law 87-528, which amended section

401(e) of the Act so as to grant certificated all-cargo route carriers -

_. the statutory. right to engage in passenger charters: subject: to reg-

’ ulations prescribed by the Board. ies hie > ra

Me /

’ j

y : ; /

10a

'. (309) |

While there is substantial’ merit to this suggestion, there -

are countervailing factors ‘to be considered. Since. the

Board’s decision in the Charter: Investigation has been is-

sued, any pertinent principles to be gleaned from that pro-

ceeding are now available subject, of course, to the normal

‘ procedures with respect to petitions. for reconsideration.

‘The time of final decision in Docket 14148 is presently un- -

_ determined, and awaiting its final outcome could mean a

substantial further delay in the process of -hearing and

deciding the ‘present applications—a. process which, under

the most favorable cormiitions, will be protracted. More-

over, while the decisions rendered’ in the Charter Investi-

gation and: Docket 14148 may be useful in the conduct of *

this proceeding, they can serve only as guides and will not - ©

preclude the applicants herein from contending for the use,

_of different rules, standards and concepts in the disposi-

tion of their-applications. In addition, we cannot overlook

the distinct element of public interest in avoiding unneces-

sary delay in disposing of: the applications of carriers who

have lo sought the stability which would flow from per-

manent Status. Balancing all of these considerations, we

believe the better course is to move forward with this pro-

ceeding at this time. _

- Included in some of the filings are sadinsety eat the

. Board establish ground rules for the trial of this proceed-

_ ing on a variety of questions, such as the scope of new

authorizations that might be granted, the standards of fit-

"ness to be cage and the type of limitations that might

be imposed to assure that operations are truly supplemen-

tal in nature. These questions go beyond considerations of

‘procedure and: involve matters of substance which the

Board should not undertake to decide in advance of de-

velopment and evaluation of the ee a

lla |

(310)

310 .

For —" the seope of permissible operations will be -

governed i in large measure by the meaning ascribed “char-

Aer”, a term undefined in the Act. As in the case af the

Transatlantic Charter Investigation, the parties herein will

be free to urge their own constructions of the term as‘it

‘should be applied to ahy awards for supplemental air

transportation. Similarly, in the Large Irregular Air Car-

rier Investigation, the Board made its views known in some

defail on considerations affecting fitness. The question of.

_ whether and to what extent the standards heretofore ap- .

plied must or should be changed or modified in. the light

. of the Court’s decision in the United case’ and the enact- .

ment of Public Law 87: 528 is a matter to be ee in

this proceeding. .

In the course ‘of processing the’ ciialiiadbiais for interim

operating authority pursuant to Public Law 87-528, the

Board reviewed, insofar as pertinent here, the fitness of

some 23 carriers, granting interim authority to 15 carriers

and denying it to the remaining 8. The Bureau of Eco-

nomic Regulation (Bureau) proposes that, as to the scope

of the fitness issues in the present proceeding, the Board’s

decisions on the. interim applications should “as a matter

of policy be deemed res jud cata” with respect to events

- which occurred prior to the interim proceedings. In view

of the fact that those decisions were related to the grant

of interim authorizations and were not based on a hearing

record, we are not prepared to treat the interim decisions

as res judicata. :

- ™United Air Lines, Inc. v. ¢. A. B, 278 F. 2d 446 (1960), va- .

cated sub nom. All American Airwoys, et al. v. United Air Lines,

et al., 364 U.S. 297 (798Q). ‘

. tas 2 SE en eee ae ae ee 4 ‘ Jae Ba ntinks

SAT SENMAR MA Eth in nds Sree ern a) _ =—_— :

: % ea

(310, 311)

12a

A petition for’ leave to intervene has been filed on behalf

of 11 certificated route carriers,* and the petition is opposed

_by Modern, ‘Saturn, and World. Modern asserts that no

facts or circumstances have been demonstrated which war- .

rant intervention, particularly - since - petitioners “are not

themselves engaged -in supplemental air transportation.

Saturn takes the position that intervention by these car-

riers should be limited to specific areas in which they have —

a legitimate interest. World charges ‘that the petitioners

-have entered into a conspiracy to drive the supplemental .

air carriers out of business, and that in furtherance of that

conspiracy they have entered into various agreements sub-

ject to section 412 of the Act which have not been filed with

311

the Board for approval. World concludes that intervention

. Should be denied on the grounds that petitioners “are law

violators and come into this case with unélean hands and’

. the real purpose of said carriers is to monopolize air trans-

_ portation.”

ie We find that petitioners have sufficient competitive inter-

est to warrant intervention and that their participation

"may reasonably be: expected to assist in the development

of a sound record. Petitioners possess extensive authority

to provide charter services without regard to the points

-. naméd in their certificates. For the most part, the applica- |

tions herein are equally broad in scope,.so that limiting

petitioners’ participation to specific areas is not practica-

ble. However, we expect petitioner's to utilize joint pres- -

. 8 American Airlines, Inc., Braniff Airways, Inc., Continental Air

Lines, Inc., Delta Air Lines, Inc., Eastern Air Lines, Inc., National -

: Airlines, Inc., Northwest ‘Airlines, Ine., Pan American World Air-

ways, Inc., Trans World Airlines, "Ine., "United Air Lines, Inc., and

ae,

Western Air Lines, Inc.

13a

(311),

entations and joint representation to the maximum extent

deemed feasible’ by the examiner, and the use of multiple_

counsel is to’ be avoided. These steps will go far in sim-.

plifying the record | and expediting the conduct of the pro- .

ceeding.® an

_-—The contentions of World are aie inerit: No facts

are set forth ‘in support. of the carrier’s. allegations, and if

such facts exist, there are ample procedures available by

* . which World may seek to have them brought on in appro-

- - priate fashion for consideration by the: Board. Unsup-

ported’ charges. of this: ‘nature, however, pr ovide. no gana -

basis for withholding intervention. !

On the matter of intervention, we note ‘that while the

American et al. and Flying Tiger petitions are directéd to

the coiisolidated proceeding,: other carriers and. persons

previously have filed petitions for leave to intervene’ with

respect to many of the individual] applications’ being con- .

solidated herein. All such persons dre placed on notice

that if they desire to seek leave to intervene ‘in this pro-

ceeding as now constituted, it will be necessary for them

to file-new petitions within the time limits prescribed by

_ the Board’s Rules of Practice. | :

One further procedural matter requires comment. The —

applications here ‘under consideration, which were respon-

sive to amendments to the Act made by Public Law 87- 528,

have been on file for over a year, ‘and by the notice process"

preceding the issuance of this order all interested persons

‘ have been. given a full opportunity to comment upon ‘the _

principal factors involved in establishing this proceeding.

Under these Cereumnatenees, there is no necessity for ait ;

' For siniilar reasons we will grant the petition for leave to’ inter-

vene filed by The Flying Tiger Line Inc., — is “opposed by

Saturn. —

_asaaeaiies

ya)

es 14a

(311, 312) |

-Viding an éxtensive further period for the filing of néw

“applications; motions-to_consolidate, or other requests ad-

_ dressed. to the isgues. Our order will therefore provide an .

acceler ed cuto date for the filing of stich documents,

ve been found not to require comment or action by.

the Board.

| _ AcconprNazy, Ir Is OnpERED Tua:

.1.. The following applications be and they hetbby are |

the extent that they request certificates of public conven-

ience and necessity for supplemental air transportation

pursuant to section 401(d)(3) of the Act: AAXICO Air-

lines, Inc., Dockeés 13795 and 13796; American Flyers

Airline Corp., Dockets ‘13860, 13861, and 13862; California

‘Ait Charter, Inc., Dockets: 13886 and 13887; Capitol Air- —

ways, Inc., Dockets 13863, 13864, and 13865; Conner Air

Lines, Inc., Dockets 13874 and 13875; Coral Airlines, Dock-

ets 14372 and 14382; East Coast Flying Service, Inc.,

Docket 14464; Imperial Airlines, Inc., Dockets 13929 and

13930;. Johnson Flying Service, Inc., Dockets 13867 :and

Air Transport, Inc.; Dockets 13857 and 13858; Overseas

. National Airways, Inc., Dockets 13881 and 13882; Purdue

- Aeronautics Corp.,° ‘Dockets 13798 and 13799; Richard D.

Neumann, Dockets 13888 and 13889; Saturn Airways, Inc.,

Dockets 13853 and 13854; Sourdough at Transport, Inc. "

consolidated for hearing and decision in this proceeding: ‘to )

13868; .Marshfield Airways, Inc., Docket 14284; Modern |

-§ spielen neacdbals

‘15a |

(312)

Dockets 13820 and 13821; Southern ‘Air Transport, Inc.,

‘Dockets 13818 and 13819; Standard Airways, Inc., Dockets

13816 and 13817; Trans International Airlines, Dockets

13835 and 13836; Transocean Air Lines, Dockets 13921 and

13922; U. S. Overseas. Airlines, Inc., Bockets ‘13906. and:

13907; Vance’ Roberts, Dockets 13827 and 13828; World

Airways, Inc., Dockets 13811 and 13812; and Zantop Air

é Transport, Inc.; Dockets 13912 and 13913 ; |

ef The following applications ‘be and. they hereby are

severed from this proceeding: Edde Airlines, Inc., Docket

14044; World Airways, Inc., Dockets 14529 and 14530; and

World Wide Airlines, Inc., Dockets-13904, 13905, 13915 and

13916;: ees: agile

3. Order E-19009, dated November 14, 1962, be and it

hereby is vacated insofar-as it deferred action on portions

of the petition of World Wide for reconsideration of Order

E-18877 and consolidated. the petition, as deferred, with

proceedings on the carrier’s applications for certificates of

public convenience and necessity in Dockets 13904 and °

13905, and the said petition of World Wide for reconsid-

eration of Order E-18877 and its applications in Dockets

. 13915 and 13916. be and they ‘hereby are denied in their: °

entirety; a

4. Petitions for reconsideration of this order, motions

to consolidate applications, and all other requests ad-

_ dressed to the issues shall be filed within twenty (20) days

after the date of service of this order, and no further such

petitions, motions, or requests filed thereafter will be enter-

tained ;

16a ae =

(313) |

“5. Answers ‘to. the petitions, motions, and requests, de-

scribed in ordering paragraph 4 hereof shall be filed within

ten (10) days after‘the expiration of the period provided . -

for the _ of san petitions, motions, and requests ; ee

pe 6 The persons having applications listedn ordering. |

| paragraph 1 ‘hereof be and. they hereby are made parties .

to this proceeding; en \ e

y \ o

v \ ,

7. The petitions for leave to intervene filed by the Fly-

ing Tiger Line Inc. and on'behalf of American Airlines,

Inc., Braniff Airways, Iac., Continental Air Lines; Inc.,

- Delta Air Lines, Inc., Eastern Air Lines, Inc., National

Airlines, Inc., Northwest Airlines, Ine., Pan American

World Airways, Inc., Trans World Airlines, Inc:, Uffited

Air Lines, Inc., and Western aad ‘Lines, Ine., be and they

hereby are granted; =>. me

8. ‘To. the extent not granted herein, all motions and re-

quests be and they hereby are denied; ;

9. This proceeding shall be set down before an examiner

of the Board for further proceedings in conformity with °

. the provisions. of this order} and :

10. This order shall be’ published in the Federal Reg. ,

ister. , ;

By the Civil Acronantics Board:

Hanotp R. SanpERson

; _ Secretary

(SEAL) | |

(633, 634, 637)

‘| UNITED STATES OF AMERICA

: _ Crvin AERONAUTICS Boarp -

Wasurnerton, D. C.

. . es - £ . ? eh @

, > | aes

_ SUPPLEMENTADAIR SERVICE PROCEEDING

. Sams Docket 13795 et al. saath ,

Report or Prenearinc ConrerENCE

Served: JUN 2 1964

a an 2? oe er °

- 634 @

-CaRRIER INTERVENORs:

2. i, : .-2..% ° a,

James Bell, Pogue &. Neal, 1001 Connecticut Avenue,

- N. W., Washington, D. C. 20036, for Alaska Airlines, Inc.

and the Trunkline Intervenors _ at $

> eam

637

_ This proceeding. is concerned with applications’ seeking

certificates of public convenience and necessity authorizing

supplemental air transportation, under Section 401(d) (3)

of the Act. The scope of the proeeeding, the ultimate is-

sues, and other procedural matters, were established by

. = .

: : \

° . Se

on sere a . a

: . 5

sy k \

RS \

. X

7 @, 639, 647)

) the ‘Board in Order E- 20573, dated March. 13, 1964. ‘As |

presently constituted, ‘the case involves. some 23 applicants :

and 47 ——

‘Issues. -

The suggestions of the. parties tor: specification of - -par-

ticular subsidiary issues; within the broad. framework of

‘ - the ultimate’ issues stated by the Board in Order E-20573

were discussed extensively. The statement of issuessprevi- _

. , ously: circulated by the. Bureau, as revised after discugsion

at the conference, was accepted for the purposes of this —

proceeding (Appendix A). The following matters of ex-

planation, clarification, qualification, or addition should

also be noted: > ;

1. There is no issue in this proceeding. concerning the

_ award of authority to perform civil passenger charters:

. in the Sa, area.

647

Afrewprs - TO Report OF PREHEARING: ConFERENCE -

SraTeMent oF. Issuzs

The Board in Order E- 20573, March 13, 1964, dade the

ultimate issues to be determined in this. a to be

as follows: ‘ :

“ * See —_ Order E- 20747, ‘April 217, 1964.

e : . . o's 2s : . .

" ¢ . ‘ . .

. ° . . “eae .

I lei eMsbinainass : 2 . ree on wa” ; em ’ :

. ° . . > . . ?

19a . .

641; 649, #50)

= Whether the public converiience and necessity 7 re-"

quire the supplémental air.. transportation requested

sa the applications;* : :

* ° e. ee @

d. How should the term “charter”, -as ‘related to sup-

c _ plemental service, be defined? .

(1) Should the’ term = Ne any one or.

-more or.a combination ‘of the fo lowing:

-(i) Traditional planeload charter.

es Hire-of aircraft by-more than one charterer

—Passenge? and/or Cargo, eT and/or

Civil.

cops oe (iii) All -Expense Tour Charter — By travel

agents, hotels, resorts, or other ‘persons.

(2) How shoud the types of charters indicated in ‘item,

d. (1), (i), (ii), (iii) be defined and what ‘terms, .con- .

' ditions, and limitations, if any, shouldbe imposed on

each if found to ‘be h eeees as bile

ie)

—e. To what extent, if any, eu the services applied for

herein involve diversion of traffic from the scheduled

"carriers! Fate NaS oe ee

' Sat, en ee a : eee

* The awards of civil passenger charter authority in the trans-

atlantic area is not in. issue in this proceeding, Order E-20573,

‘March 13, 1964 (p: 7”

OPTED ae

. ae ;

(4108) oie

ss 4108 |

“HOLIDAY AIRWAYS, INC.

oS 0. EXHIBIT HOLT

TEsTIMoNY: oF Ricwarp D. Neumann

esis As an example, a tour would leave Thursday, ar |

riving Los Angeles\early Thursday evening. e passen-

ger stays overnight hursday night, and. departs for San

Francisco Friday ‘evening, arriving in San Francisco’ early

evening.. Arrangements. will be mse in “both. Los Angeles

‘and San Francisco r entertainment and hatels. On. Fri... .

-day night the passenger would stay in San. Francisco. On

Satfirday; they will be taken on a sightseeing: tour. through- .

out the San Fran¢isco Area. On Saturday ‘night, . they

would be taken % on a tour of. night spots: and restaurants.

~ ‘Sunday morning the passenger would be free to attend -~ .

_ the Church. of his ‘choice. He would return to Chicago *.

_ Sunday évening. We. would’ intend. to price these tours."

at eer $15.00 to $20.00 higher than the sum of - ~

- the lowest ‘local propeller~or:jet segment fares. -

- Howmay Armways, Inc, " considers overseas and interna- _

ee ~tional ‘all expense paid | tours a considerably more lucrative

' market than the domestic tours, and therefore, would :ex-

pend considerably more coca and money on their pro-.

motion.* ** ay a :

. \ ad d

md] @ \ eo. . ¢ °

\ wy

- = .

> .

‘

y = ae 4 a .

- : ¢

e , . > -

: ‘ ; , x

: ; ‘ ga aT ‘

. : ae ; - Pa

Gt ecretitn ss wes cueuc asnispecal : . ‘ : ‘

t - r "it Oo Src . ;

{ a” s . . Ps

| ; 7 . : *. ° se *

21a : Baas _—

3 | 3 (6065)

2. Pa ait :

a « °* e * °

“ worip AIRWAYS," INC.

: WORLD EXHIBIT 300

“ @« 2 * . . “

% Charter Revenue of." | :

senapeet Revenue - « Z

: s International &

ae Domestic ee ——— an. 5

1959 - = ae. ates, ie ntoe Nana

1960 © EO ee

“1961 .

eet 1962 ee

» 1963 | 0.5 a | oe

ce (Sdurée: World Exhibits 304 and sense

% Ra a * ¢ * co

whe

‘

6229

“WORLD AIRWAYS EXHIBIT }

(See opposite) jQ37

peeinnen 24 NaGhSTD:

-—

= m4

a "| .

J e

Schedule of Statistics for Charter Operations

January 1, 1961 - December 31, 1963

; Rae ian = ne No. of Gir: ‘. aa Passenger

, | 4 - Charter . __ Period eit Charter . . No. of Pax Miles .- ne ;

| Category - Quarter Fnded - ° Flights Pax » (thousands) - ~ Revenue

; cane _ Civil Passenger: -. * March 31, 1961 | : |

. on et Interstate ay = | - ss 27h «ee $. 19,513

; Overseas tae oes 5 -. 450 1,096 83 ,646

; ; Foreign : sa iget a « ae 7

Civil Cargo: ® iste ote |

Interstate - ” eee, Fe: - ; ee .

| Overseas _ . oo. . + = =. ¢ .. : ‘*

iow _ Foreign et oes ae F 7 boi ' A ?

Military Passenger: ie | an a Broce t “

ial Interstate ae, ; 2. é -.. SEGERD yaaa -.

, Overseas a= - ee ae , os

Foreign : 108. 7,059 a 9,482 | ~ 274,978

ee sem $95 to Military Cargo: oe Ce ees :

° Interstate aoe ef 360 - - fe

& ' Overseas bars: : e:: eee - ~

Foreign : : ™ : oa p) eS : - : :

Total Quarter _ SP tend, ‘ rele eee 7,783 °° 11,0909 «= $=«-378, 137°

Civil Passenger: -. ie June 30, 1961 = , : voltae faa"

Interstate we :; . 17 , 2,530 4,662 - ~ $. 123,004

Overseas - eo a 1,170 39555 28}, ,338

; Foreign = - - - =

Civil Cargo: Peet ” ar

-——~ _ Interstate : | si . PM wd. _. ia A -

- : Overseas : eet Cite Ak as . - Se ee

fs a 9

Charter

_ Satenory

7 ( Civil Passenger:

Interstate —

Overseas

Foreign»

i Civil Cargo:

J < a

tr TRA te IAS OM MBN Se tin yk 20 Set

Interstate

Overseas

Foreign

Military Passenger:

Interstate

Overseas |

_ Foreign

_.4 Military Cargo: -

Interstate

. Overseas

Foreign

- “fotal Quarter

' @ Civil Passenger:

Interstate

Overseas

. Foreign

Civil Cargo:

-- Interstate -

_ Overseas

: Foreign

Period

’ Quarter Fnded

March 31, 1961

“

June 30, 1961

—_

Schedule of Statistics for Charter Operations

‘he °

‘ < , Pa

Form PD .

January 1,'1961 - December 31,.1963 ‘

No. of. Mer Passenger Cargo

Charter _ No. of Pax Miles : -Ton Miles as °

-Flights "Pax. (thousands) , Revenue Tons (thousands ) Revenue -

ea ; , “9 . a cn aie.

3 274 512 | $ 19,513 ; - @ - -$ ie

5 450 1,096 83,646 - = args -

- , - ; ao te - ‘ - - -

-(2) ~ soll = ge | . 56 -(1)

- - - - a. eee ee -

108 14059 9 82 * 274,978 * “ -

360 | * . - 3,285 8,373 1,664 ,079 “si

"4 ee aie : 7 . : 110 1,516 155,324

(482 7,783 11,090 $ 378,137 4,355 9,945 $1,819,403

17 1,530 4 ,662 $ 123,084 - - pags

13 1,170 39595 . 284,338 - - -

(1) - - . S17. (180 0)

6414

- WORLD AIRWAYS EXHIBIT W-5-

‘In its rane of U. S. domestic traffie (including over-

seas and territorial traffic), the authors felt that traffie is

reaching maturity. “Opportunities for substantial fare

reductions do not seem great.” This highlights the con-

__tinuing need to bring more Americans into the air travel =. -

--amarket by lower fares made possible via charters.

| Gait sae 2.6:

"With respect to the Pacific, the forecast “is based on an

anticipated high order. of growth‘ in ‘both business and.

| pleasure travel and, again, on a gradual decrease in fares. .

Business travel should be stimulated greatly by the dynamic

growth expected in J apan and Australia. Tourist. travel!

- will increase as hotels, restaurants, and other tourist facili-

ties are brought to higher standards. The Pacific. area is

offering the tourist an increasingly popular alternative

to Europe and consequently i is becoming a steadily increas-

ing travel market. The annual fraffic growth rates under-

lying» this forecast vary from just under 20 percent.in the

early 1960’s to about 9 percent by the end of the forecast ~

oneal 7

: oes oe oe

—~ pet.

- isd creecev

‘oS

(6417, 6418)

: see

What Travellers Say About Pacific Area Tourism. é

A later survey (November 1963) conducted by PATA®

of travelers known to have toured the Pacific area indicated

that 63.2% traveled for pleasure only, 16.1%. for a com-

bination’ of business and pleasure, 15% for business, 5.7% -

for personal and other reasons. ° ©. Moree ges

The, (weighted) average trip length was 67.7 days for

pleasure travel, 61.1 days for business. Less than a quarter

_of the pleasura travelers reported trips of less than 40

_ days, whereas slightly more than half the business travelers

indicated that their last trip fell into this category, (The:

. Modgl group .of pleasure travelers [= 34% of total] re-

quired 41-60 days; that of business travelers [= 36.5%]

took 21 to 40 days.) a é

The pleasure traveler visited 6.1 areas,‘on the average,

compared with 4.1 for the business traveler. Most visits

» took 2 to 5 days each, although Japan generally required

over 6 days. |

ee °* + @ *

’ ” 6418. -

e ©. .@ ¢€ = :

Many of the ‘respondents: (44) were taking the Pacific

trip as a vacation and had also spent their prior vacation

on a Pacific trip or on a vacation within the, US. (Cali- .

" 371% of those sampled had used air’ travel. 51% of the Pacific

. trips took place in 1963-82 o-in 1962 or 1963. Returns constituted

- 24.9% of the mail-out. “Only persons who indicated their last trip

- was beyond Hawaii were included among the tabulations”. The.

_ Survey ‘was conducted in conjunction with Holiday magazine. |

: ) eee oe : \

‘e

o . e

" .

2 . :

SIN Nh i I ee ae PF Awe

. ‘ es

—

on: alt, bhieateamhaine nt

aS at)

a aS

+ (ois re419) | a te eae

for 266. ‘ee

" fetait or Flor ida. primaniy} or in: Finacivinis ‘is a group.

they had ‘cons iderable ‘timé- at their disposal for vacation

:@ or 8 weeks—those of, business trips to’ the Pacifid areas

took: 4 week}). This Amplies that Pacific, travel is limited :

‘to ‘those with lots 6f time and’ correspéniling means: Con-

_ sideration aust; however, ‘be given: to the fact that’ there”

«is idesire to have the “time spent commensurate with the

“cost, especially the. cost of. transportation: ‘The lower the

“ost. of: transportation, the’ less time one: feels-one™ as to’

“be abroad: to “get your money’ s. worth”. The: lower cost

_of ‘inclusive: tours. opens up: a ‘market atiiong those with less

ae .-timie for. vacations as well: as Jese-meanss, to pay for fhem,”

. ee ee WEEE... Gree eam

Fe ie .

BL% of all P leasure travelers Sported ‘they: tad bought 8 as

+ pbé-arranged tour, of ‘whom 44%. replied. that they. traveled

St as menibers of pn organized . group, 52% ‘traveled. on an...

~ individual basis. (4% did not reply)..47 % of the pleasure.

- traye $- who spurchased- pre-arranged tours ‘were -mem- |

yo tiem bers of 4 party of two. The averlige ees all parties - =

A was 3.5 persons. * MOF Sar ree

4 i | ~ pee - ‘< , : ie tay.

_” BUREAU OF ECONOMIC REGULATION

-* EXHIBIT. BER INDEX’

ee i - . [wpex -

imo ae 6 is : .

_ EXHIBIT NO. - . ___—DESORIPTION. ee

\ % 5 eae .

oy ee Bureau’ s Dacian of. Areas.

Ne tad OPS a

a 100°. ~~ Civil Passenger Charters—Summary by nam, Me

, 1961-1963 |

- é 101 ts Aivil. Interstate Passenger Charters—Supple-

Bk ) » mental Carriers

eA “to2 | ~ Cit Interstate Passengers Charters—Sched. es,

eee ork eed: ula: Carriers. | :

* 4 103-A | ‘Civil ‘Overseas Passenger ‘Charters—Supple-

+ a mental Carriers Latin esau and” Carib-

bean .

: 103-8... \- Civil sinha Passenger Charterd<—Supple ies

: ‘3 Beri mental, Carriers Transpacific . ne

104A Civil Overseas Passenger. Charters—Sched--.

-. . \.” “uled Carriers Latin America and Caribbean |

~*105-A Civil Foreign Passenger Suctice—Mepide: yan

~ " . mental Carriers Latin. America and Carib- . <r

: _ bean : ie |

..105-B | "Civil Senclais Passenger Cliattere—Supple- :

: / : mental Carriers Transpacific :

fe ; 105-C " Civil F Foreign. Passenger Charters—Supple-

Pete ase TS —-mental Carriers North America’

Seas oi: ke oa a

i (6622)

: : ‘EXHIBiT No. " " "DESCRIPTION -

7 - 106-A Civil Foreign Possinger Charters —Schéduled |

ep Eh aly abe Carriers Latin America and Caribbean

eS =, Sa Civil Foreign Passenger Chiarters—Scheduled

Carriers Transpacific

106-C' Civil Foreign Passenger Charters—Scheduled at

- Carriers North America |

q i as 200 : Civil Cargo Charters—Summary wy Area, as

". os .° 2) 1961-1963.- ;

° 90t Civil: Interstate Cargo ‘Chartere—Suple

a. mental Carriers sate:

Civil Interstate Cargo Charters-Scheduled

Carriers. 7

ae :

<—)

203-A Civil Overseas Cargo (Riartare~Dipoleceental

: * Carriers Latin America and Caribbean

- 203-B - Civil Overseas Cargo Charters—Suppleméntal ‘

; : Carriers Transpacific ;

204-A Civil, Overseas Cargo - Chieeiieesstbiaadiica ;

a ak Carriers Latin America and Caribbean

204-B Civil Overseas. Cargo Charters—Scheduled |

- Carriers Transpacific

205-A Civil Foreign Cargo Chartice— Supplemental

wes Carriers Latin America and Caribbean -

205-B . Civil Foreign Cargo Charters—Supplemental -

a Carriers Transpacific

eet CPi amr ar eh -~ -

(7174)

‘1174

- JOINT INTERVENORS’ EXHIBIT JI-8

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‘szaqrenb repusTseo’g.4SeT ayy go yovs Sutmmp squeeze

ae ppenren. oBrEd pues asZuessed jo ‘ATOR

‘ased “9 ——"

“(Cy "rr wear ‘

‘qaodou eousz97U0) ‘Bupreeyorg) PTIOM pue. anping “OOTXWV go _— ee 04 9sU sou

“2961 ava

~_/RNOTEVEEEO ort = SYONTAWSINI LNTOL

f:-

ee UaDEESVE OL. Sarvs NIONSESVA KONGOV mr 30 SSW IILVER,

€

» 9°92 . 9°lz 9°Se 2° le o°9e |

6°92 o°te o°l2 —G°0€ o*l2 | /G_a2104804

L°o€ 9°et 6°0€ S*0€ L°g2 /% parte

0°92 9°92 0°S2 o’ae =“ G* hz : PT1OM suery,

A L°02 G°t2- o°€2 2°22 4SanqzI0N

9°62 o°te | T°9g2 €°62 T°O€ TSUOT {EN

T°ze Loe | L'te L°€€ 6°E€ | “TE uzeqseq

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€°22 6°42 <= Q°ez €°6T Tequsutza0g

_—— Q°Lt L°9T Slt i _ gFyueag

“hice gta - O°e2 _T'22 $:Te ¢ weopiomy

£ | ie se Josuessed TeIOL jo TW Rous - aDequsoieg

60S‘StTo°2 §=2le‘loy = QE “STS £6 ‘EEC 16 Tah TSI0L

olt’tg © Len"6T Bnb’ze. Te9*02 192°QT /¢_uzeqsem

€L6‘2ES ~ + gle*eet 9g9‘esTt pe S2g‘eTT | /_ perFUn

+79 ‘ole LSE ‘69 Be el €ST‘99 | CTE ‘T9 “ pTION suBZy

99°06, Gzo‘Te. - $992 6TT S42 1o9‘gt © ZSSAYZION ©

CTH‘ T6 TL6‘0e. ° 610%l2 4 H€E'Te T60 ‘22 TSUOTIBN

66H Eze Cen ‘6S 6he ‘ST 661 ‘69 99s 6L | JE usaqseq

ene‘eltT § 620%EH 6£9 0S C64 ‘En 6LTSTH . e4T=q *

959 409 GOS “ST ~~ SL6SST 099 ‘HT TeS ‘nT ‘| - Tequeutquo

606 ‘SL 6Sn‘et™ 3 =—s: Sr “OT Zt S6T 16S “gt gg rweig

aaa * teh §Q6 ~ gETSEOT .0 : G¢ uBoTisuy

ay z / 7000 (peTPAYDS ) sonTOAPy RE) reseed TeqVOL

*9€G_ EG SHET 8 =—s_-- GS 66 SOET get ‘StT Opt ger TSqOL

ES — ey ae ay — OE SQ Of6 St © /S_Ut99S9M -

9£6 ‘E91 Log ‘6E Tet Slt nne ‘nh = ==. QE SSE. /% pedTUn

qt ‘OL. Oz f ‘eT TTS ‘QT 70S‘ET ~ . 6€0*ST PT10M suet],

‘ 262 602 gne*h 922 ‘9 ae%. aE t , gSamnqQON

ero £12 6£S ‘9 209‘) ' Tae ’9 0999 _ TeUOTReN oo

6€g‘TL ~ 692 ‘QT ETE E OTE ‘Ez LH6 92 /€ uzeqseq ;

OTE fet 2ES ‘OT 6eS ‘TT... HOT‘OT - 6tT ‘OT 84190

GES SET 999 ‘E QTS ‘E. 6H SE 209 ‘2 Tequeutquog

019‘2T 4620 *€ Qte ‘€ cee fe 66L ‘2 _ vgTueig

TEL ‘16 en '€eY 76.°Se . . o6T at 3 G uwedtiony

: wi o JaBUaS SB .

Te}0L, °° «degaen® = =——s« agrend \ Joqaenp _ qaqzren® TayarIeD

Tenuuy YyINT PATYL © | puosas. . 9SITa |

eget “Te zequeseq SuTpUg +O8K

, P

Pe Oe nee MOOR ee OO re ee, Ee eet on

(7386)

7386

JOINT EXHIBITS OF AMERICAN FLYERS

AIRLINE, ET AL.

EXHIBIT ica J211-

Almost half of all respondents "reported that they “bed

‘bought a pre-arranged tour for their Pacifie journey. Natu-

rally, pleasure travelers were more inclined to do so

(56.8 per cent stated they had purchased such a tour),

although 11.8 per cent of the business travelers reported

that they also had bought a prearranged tour.

Of the 811 pleasure travelers who bought a ‘pre-arranged -

tour, 43.9 per cent indicated that they had traveled as a.

member of an organized group and 52.2 per cent reported

they had traveled on an individual basis. (Ne o reply was

received from 3.9 per cent.)

The average number of persons in a party travelling. for:

pleasure on a pre-arranged tour was’ 3.5 persons. Distribu- A

tion was:

ae we Percentage of Pleasure

Number of Persons in ~ % eee Travelers Who Purchased —

Immediate Party ; om Pre-Arranged Tours

- 1 Person cr 15.8%

“ Q-Persons ook St

3 Persons» . : . ee

4 Persons: . | «os 60

5 Persons ise

More than 5 Persons. -d 20.1

Noreply _ 4.8

100.0%

Source: Survey of Pacific Traveets PATA/Holiday Magazine,

December, 1963.

— —

3la |

(7788)

. JOINT INTERVENORS’ EXHIBIT JI-1080

Narrative Statement: Promotion Of All-Expense Tours

The ‘exhibits contained in Volume II relate to the de-

velopment and promotion of all-expense tours in the inter-

_ national, overseas, Hawaiian’ and Alaskan markets by the

- Scheduled carriers. : es

. The “all-expense “tour” j is ‘defiried by industry agreement

(e.g., IATA Resolution 810e, annexed hereto) as an ad-

vertised round or circle trip, arranged and promoted with

tour literature, and paid for in full by the purchaser prior

~ to commencement of the tour. The tour must also provide,

for the total duration of the’ tour, sleeping or hotel accom- -

modations, and may include other facilities or attractions.

such as transfers, sightseeing, motor coach trips, and car

rentals. These ground features amount to not less than

20% of the air fare, or $15. 00, whichever is the greater.

The all-expense tour 4 be purchased by ag individual

traveller, or by a group g people, travelling with or with-

out an escort provided by the tour operator. In addition,

_ the ground arrangements of such a tour also may: be pur-

' chased by passengers on a bona fide charter.

A further requirement is that “the’ price for all such i

land arrangements shall be published in the tour literature :

-or a rate sheet insert” so that the passenger can éstablish

what he is getting for-his money in air: transportation and —_.

' ground arrangements and thereby has an opportunity of

comparing the value of one tour ona against another.

vo on ee

rere es ee

' package, in the printing or purchasing of the tour folder,

| : 32a

(7788, 7789) a

I. The Manner I n Which AULBzpense Tours -

Are Developed. a

y ann tours ‘abe of most importance to the. air

transportation industry generally in. the new market and

for the first or. me" time traveller. é

7789

As a new international tour market is detected, either: oc

carrier or a-tour operator proceeds ; ‘to develop a package

to.sell that. market. If it is the tour operator who takes

the lead, he usually comes to a carrier or carricrs and asks

for support of ‘the air tour. he is‘ developing. If it is the

carrier which decides to take the lead, it may. itself create

the “package” ‘and then have-a tour operator perform the

.. details of the ground arrangements. In this case the car-

rier itself then prints and distributes the tour folders. For

' example, UAL in addition to using tour operators, services.

to Hawaii, also has some tours for which it fulfills the role.

_ of the tour producer. More commonly, however, the car-

Tier will, at the outset, interest and involve a tour operator

and permit hini to develop the tour package itself, to print

the tour folder and distribute it, we, of course, with

the carrier’s support. . ; °

In either case the applicable TATA agfeement requires

the tour operator to print. or purchase, at least 5,000 tour

folders to obtain this support. There is no limit, of course, °

‘on how. many the carrier may itself print or estan from

the operator.

‘ The foregoing i is the basic 1anner inf-which an interna- —

tional air carrier supports and makes possible the tour -

package: by participating in the development of°the tour

(CR

Pan td aisek Ania

: peonatia eas _ (7789, 7790)

reg SN

and in its distribution, as well as by advertising the our

package. Once the tour packavs js is developed, it is then °

retailed througli the vast network of travel agency loca-

tions and through the carrier’s, own offices. ,

The carrier, ¢ also participates in the tour business with

its field force of sales aberes aid es who work oomnety

7790 *

with the retail tray ‘el agent to me sure that be i is properly .

stocked with tour folders and that he is properly trained

in how to sell them. The carrier moreover publicizes these

tours. For example, Pan American has experts who do

nothing but write articles on the tourist areas covered by |

the ‘tours and these are widely distributed to the press. In -

. addition, the retail travel agents throughout the world are

supplied with various. tour sales manuals by both the tour

‘operators and the carriers at the expense of either the

‘tour. = or the carrier. Complications of interna:

tional rou gs and the. great variety of tour offerings in

this field have so far prevented the consolidation of these ”

manuals into an industry publication but there is no lack

._ of technical guidance meaner to the retailing travel agents

in this area. .

It wo ‘be useful te lay out the actual economies of ©

tour proguction here. When. the tour package meets the

requirem t of the IATA ‘Resolution, the carrier pays

» to the’ agent a 10% commission on the’air fare instead of

’ the standard 19. This amount is generally passed along

by the tour operator to fhe retailer, ifa retailer is involved.

‘The retail travel agent thus draws 10% on the air. fare .

when selling a tour and. will receive, in addition, 10% or

= imore from the hotels and wr oe

cr, 7701):

| savediel in the package, either direetly froin thea. or. free gay

the tour operator who- produced ‘the package’. The tour

operator derivés‘his: profit from special arrangements made

with sightseeing operators: and hotels which often involve

‘net rates. or commissions rising to a fairly average level

of 15%, and from marking up the total price,of the ground _

arrgagemente involved in n the tour.

7791

ww’

»The carrier. also makes other contributions to the devel- ;

- Opment of the tour. TATA Resolution 204 permits the

grant of one free ticket to a tour conductor for every

fifteen tour passengers and a 50% reduction, fora tour

- conductor. accompanying eleven to fourteen passengers. °

A, partial survey has been made of.the amounts ex-

pended by certain: carriers on all-expense tour promotion .

for the calendar year. 1963. For Pan American this promo-.

tional activity. for Hawaii, Alaska and Pacific markets

cost: $258,000, and for Latin American markets the ex-.

penditure amounted to $357,000. Northwest’s expendithre

‘for Hawaii, Alaska and Pacific tour promotion was $93;000 -

_ and United . spent $100,000 in promoting’ its Hawaii all-

expense tour market. Braniff estimates its expenditure |

for the Latin American area at $99,000, and for Mexico -

“only. American “expended $8,000 while Western estimates

; expendifures of — 000 in this market.

IL. "Specific Examples Of Rosenatbiis Of Al-Expense Tours. |

Exhibit J 1-1082 consists of Northwest’s Tour Manual

~aind JJ-1081 consists of folders of Pan American, TWA,

Northwest, UAL, Américan, Braniff and Western relating

te international, overseas, Hawaiian and Alaskan markets.

- a, a ee ee

35a nS .

= it91, 7792)

It should be sanpihanined that these folders A ee on

"+ selection. from the total production bye. tour Operators and — i

carriers each yeer. As. to their scale, no tour. operator.

would approach ‘the national U. 8S. market with: the print- .

“ ing pf less than. 50,000 copies, and — of the ‘Tolders

: ta ; of 4 ‘ 7792 ; .

7 illustrated in the exhibit have. been printed i in n numbers:

_Tunning well over 100,000 copies per year. The total tour —

* availability runs into many, ‘millions of individual folders,

* both of special and of general interest to the prospective

passengef, . be he golfer, skin-diver, _ archeologist, camera

fan, theatre critic, historian, or. just /plain tourist. Thus

an immense variety. of offerings is ‘available to him to: :

, Meet his. most varied desires. Moreover, this is true not

only in the U. S. sales market but everywhere that a mass

tourist market exists throughout the world. In the case

of Pan American, the copies. 6f these folders are. distrib-

.. uted by the tour operator or the carrier. to. all of “Pan.

_ American’s own 289 sales outlets and to the 8 000 fravel.

agency” locations which \Pan American, under its highly

_ conservative appointment: policy, has under appointment

throughoy the world, and to many of the 9 000 interline

ticket of és which are trained to issue tickets on Pan

- American’ s' behalf. Thus in the ease of Pan American

alone there are some 15,000 sales outlets. fof these pack-

ages around the world. This policy. is generally followed’

-by other carriers as well.in promoting this type of service.

TIL Dollar Volume Of All-Expense Tour Operations.

‘While it has. not been possible to obtain figures for all

x of the u. S. flag international carriers, all-expense tour

. ~—

wo *

\ a

(7792, 7788), | :

rat ae

business | is of immense importance to all of them and they,

as well as travel agents, derive great benefit from the car-

my of this kind of traffic.. pies 6

) The Pan .American figures’ will serve as an example of es;

this ee. >For. the calendar | ‘Year ae, revenues _

: “T7193 -

from the carriage of all:expense ‘tour passengers in the.

Pacific and ‘Hawaiian area amounted to $17,939, 000 .or

Latin America, the revenue figure was $10,302,000, or 8% | -

- of its: applicable. passenger revenue, and in its Alaska ee

operations $153,000, or 3.5% of passenger revenues in that

=¥

13.6% of its passenger revenues obtained in this area. In ‘/

/ .

geographic area. Northwest’ has estimated revenues from | -

the carriage of such passengers at $2,670 000, producing for

fhat carrier. 7.6% of its Pacific, Hawaii and Alaska area -

passenger revenues and. representing 8,900 passengers. . In

"its Hawaii market, United carried 40,542 passengers, 15.1%

of its total Hawaii passengers, for revenues of $5,000, p00.

<> °

JOINT INTERVENORS’ EXHIBIT JEB

fed se f “ Desriony or James F, Montgomery

D. The grant of all expense tour authority:would cause

* serious diversion. - cepts Ate er

ae expense tours Would appeal primarily to the vaca- ;

- tion traveler. Attached to my testimony as Appendix ‘A

is a table which shows the enormous amount of such reve- —

nue now obtained by the certificated carriers which would

- be exposed to diversion by grant of the authorizations

herein. — Se hota. Aes pr sees ee |

It is also pertinent ‘to’ note the amount of: revenues ob-

_tained by the scheduled carriers from travel agents’ sales:

_ for example, 64% for Braniff in its Latin American opera-

tions, and almost 39% for. Pan ‘American in its Pacific

operations.’ The passengers: who produced these’ révenues

are, in effect, subject to the control of the travel agents.

: Now this: is a situation of which I approve entirely. Pan.

‘geeezuecee ~American-and, I-bélieve, most other carriers fully recog- -

nize that agents are of vital importance in the air trans:

port business because the agent and the airline today. have |

a common goal. However, this. situatién would radically

* Both figures are low because they do not include interline and

general agents’ sales made by agents, and because the total sales

against which the percentages are calculated include: both military -

and charter revenue. ae ee a aia Dy

¢ : a : ok °

(8084) ; ta " | ; ie |

change if’ agents were allowed to charter aircraft ‘for all

FS expense tours, Assuming such an agent’s charter, his. pri- —

“mary economic incentive would be to fill his ‘plane, and he

would do all i in his power to. persuade a passénger to take

that charter flight instead of saling him a ticket on.a — |

- 4

a uled —. -

. BErore THE

Civ AERONAUTICS Boarp,

WasuiNeron, D. C.

Supplemental Air Service Proceeding

Docket No. 13795

Brrr To THE EXaMINER oF

“March 19,3965.

American. Airlines, Inc. -

Braniff Airways, Inc., |

: Continental Air Lines, Ine. 7

‘Delta Air Lines, im, °. PN ae

Kastern Air Lines, Inc., . ° | ee

‘National Airlines, Inc; = -----~ ? ;

Northwest. Airlines, Inc., 9

Pan American World Airways, Ine, | \. °

Trans World Airlines, Inc., Parsi

United Air Lines, Inc., and -

Western Air Lines, Bev.

Poous &N at j :

» 1001 Connecticut Avenue, N. W.

"Washington, D. C. 20036 acee ‘

ee oe

(8848),

INDEX

. IntRopuctioN | Siegen : , ee te

Oe ee

I. Alt ‘ipeliatiins to cael: all ‘expertise tour char-

‘ters to travel agents, should be denied as unlaw-*

ful, . unneedéd, and . highly detrimental to the ;

A. The- Board lacks the. statutory authority . to

rmit supplementals to charter aircraft ‘to

/trayel agents for all-expense tours: ‘ 2

: f 1.. The legislative history of P.L. 87. 528 doit

A onstrates _ that Congress considered all.

expense tour charters to travel agents'sell- _

ing individual space to the genéral ‘public

tantamount to prohibited individually tick-

‘ eted travel we é. .@~

2. -In any event, the failtire of travel agents to

appear. in this s_- proceeding to present evi- |

dence: as to. how, when, ‘and where all-

expense tours will be performed, and their

qualifications to provide such service, pre-. -

cludes the Board from making the required

‘statutory findings in this proceeding to im-

plement an all-expense. —_ charter as

gram .... nh : 6

. B.. There is. no public need for the applicants all

capeite tour proposal - wn «8 i

_orderly-development of air transportation re ete ae

Bite ne ote

“

(8848, 8849) |

gies 3 , 7 Se

1. The applicants all-expense Bour proposal

. would merely duplicate, not supplement, the

_ public service benefits now available through

the literally hundreds of all-expense tours.

offered, and vigorously promoted, by. the- , .

certificated carriers. ..... : . 8

a. ‘The argument that: the cut-rate feature

of the applicants’ all expense tour pro. |:

posal will.generate an entirely new class —

of air tral not presently moving by air

_is sheer. verbalization ......: ett: Wh

b. The*applicants all-expense tour program

will permit travel agents to mount an.

~ extensivé’ Solicitation of the general pub-

__liein mass media advertising based on’

* cut rate fares, thereby exposing to di-

versions ‘in excess of $380 million de-

rived by the trunklines from pleasure ~

travel ' |

8849 |

C. A “restricted” all-expense tour program

would still embrace diversion: of such

significance, without redeeming public

benefits, as never i warrant adoption

- of the program ...... ; 2

3. -Relianee by the malian upon the Wro: .

pean inclusive tour experience as a ee

‘stration of “need” is utterly erroneous ..

The argument of the applicants that’ hate

, 22-.-

“Ko S P

.. .23

e s

all-expense teur' program is needed to solve’ a

... the U..8. balance of ‘payments — is

: without merit . |

C. The applicants’ dlLexpease tour ‘petpenal is

~ highly detrimental to the orderly eee

of. air transportation 3

ee Impiementation of the stains nur pro-

* .Sposal-will thwart achievement of.the goal of -

eontrolléd by: an uncontrolled tour: eae

American flag air transportation : improved

service with low, nondiscriminatory fares .

2 86

There i is a very real public danger arising se

out of having an all-expense tour program

industry ¢

‘applicants réquires the grant of all-expense

tour authority must be rejé@¥ed as both in-

accurate and as an invalid. enw: for operating

: authority

-. that the supplementals are “marginglly . ss

— and need — 2 anol

. x, 4

One of the most incredible current myths i is

2% hh eee le

D. The argument that the “private” ‘aoed/oe the .—

42 |

a. ‘Page

B The’ aripumnt: that : the © supplementals

“need” all- -expense tour authority in order

to meet the 30% @ommercial | revenue rule

of the DOD is both inaccurate ‘and an in- |

‘valid: basis for certification ;

The ‘12 supplémentals eertivine ; in an ine’

' dustry once comprising 105 carriers have

; available to.them a substantial affinity com-

‘mercial charter market} within the 48 con-

_~tinental United States: which; along with

| oe

R {inue as | profitable asi cincee

* The ‘argnment of the applicants thint their -

all -expense tour program is needed to sdlve -

military. charters, will permit them to con-,

their alleged seasonal. problems, is without.

merit

—;

) ‘

II. The eieicaiiees abandoned on the jenand’ their coe

request to ) provide split charters

— oe oe * e@

AS : cy .

ws ceen, >. Site ates ae

oe “10010 yet

. ie : .

Recommended Decision of Examiner Robert L. Park

. UNITED STATES OF AMERICA.

eis | _ Crvit. AERON utics Boarp -

ag: ite fhe * Wakmenenite, ‘D.C.

ae \

‘SUPPLEMENTAL AIR SERVICE PROCEEDIN G

yo - Docket 13795 et al.

PP torte bacon? August 27, 1965 ‘

. Upon: -. AppLicants:

Leonard Bebchick, 1225—19th Birest: N. W., », Washington,

‘D. C. 20036, for AAXICO Airlines, Inc.

Rae D: Potts, 910—17th Street, N. W,, Washington,

D. C. 50006, for American Flyers Airline Corporation.

een “George Berkowitz, 233 Broadway; New York 4, New

or: York, for Capitol Airways, Inc. —

| 0: OBR A. Commer, Agent, P. O. Box .122, ‘Miami; Springs,

es —_— for Conner Air Lines, Inc. -° «

_* arren E. Miller, 810—18th Street, N. W., Washington, ..

D. C.~for Conner | Air Lines, Ine.; and J hain Flying.

Service, Inc. .

_ Robert .R. Johnson, President, J siiaiom Flyin? Service, |

Inc., Box 1366, Missoula, \ for Johnson Flying

ervice, Inc. | |

Howard 8. Boros, T11—14th Street, N. W., ata |

‘- D. ©. 20005, for ow oe, Inn . |

we a . a - . ,

a , — 45a

= ¢ "

"Jeune P. Becker: adie, pico Ainpoct, ‘Trenton, New ec, |

J ersey, for Modern Air Transport, Ine.

Albert F. Beitel, 905 American Security Building, Wash-

ington, D. C., for Modern Air: ‘Transport, Ine.

C. Booker ‘Powell, 1010\Vermont Avenue, WwW ashington,

Dp. C., for Overseas National Airways, Ine. °

Jun Scoutt, Jr. 1104 Brawner’ Building, g88—17th:

* Street, N. W. Weshington, D. C. 20006, for Purdue Aero-

nautics Corporation and World Airways, Inc. .

‘Lester M. Bridgeman, 1027 Woodward Building, Wash-

ington 5, D. Cc, for Saturn Airways, Inc., and Vance Inter-

"national Aiwa, Ine. ™

' James J. Bierbower, P. 0. Box 19067, ‘Washington 6,

D.C: , far en Air oo Ine.

’ (continued)

ae We if any, must “ filed with the Docket Section,

Civil Aeronautics Board, Washington, D. C. 20428,. and

— served upon all parties within 10 days’ after the date of

ae Service shown above.’ Briefs may be filed and served én

all parties within 20 days ‘after the date fixed for*filing -

exegptions. .

10011

ftobeyt E. Fraley, 11065 Baird Avenue, Northridge,

California, for Standard naahmee, Inc., and ssaiciaiele Air

~ Service.

>. John J. Klak, Kak & Gerth, 818 LaSallé Building, 1028 3.

Connecticut Avenue, re D.C. 20036, for Standard

Airways, Ine..

- Edgar A. Stewart, Sr. , Municipal Airport, Chico, Califor. ,

“nia, for Stewart Air Service.

Clayton L. Burwell, 720 Federal] Bar Building, Washing.

ton, D. C. — for Trans International Airlines, Ine. 3

¢ 10010, 10011) .

seat

~—

;

gia

(10011) _ :

‘ Arnold Rotman, Weiner & Rotman, 6901 Topanga Canyon

_ Boulevard, -Canoga’ Park, California 91303, for United

States Overseas Airlines, Inc.

> . Vance Roberts, B. O. Box 320, Boeing Field, Seattle,

_ Washington, for Vance’ International Airways, Ine.

James H. French, 1625 K Street, N. W., Washington;

D. C. 20006, for Zantop Air Transport, Inc.

Robert J. Wilson, 1120 Connecticut Avenue, N. W., Wash- -

ington 6, D. C., for Zantop Air Transport, Inc.

CarRIER INTERVENORS . -

___ John W. Kern, III, 912 American Security Building)

Washington 5, D. C., for Airlift International, Inc. ?

James Bell; Pogue & ‘Neal, 1001. Connecticut Avenue,

N. W., ‘Washington, D. C., for the Trunkline Intervenors

, and Alaska Airlines, Inc.

_ James M. Verner, Verner, Liipfert and Bernhard, Suite

1035, Universal Building North, 1875. Connecticut Avenue, .

'N. W., Washington, D. C. 20009, for Allegheny Airlines, _

- Ine. Bonanza Air Lines, Inc., Frontier Airlines, Inc.,

Hawaiian Airlines; Inc., Lake Central ‘Airlines, Inc., Ozark

Air Lines, Inc., and Trans-Texas Airways, Ine.

. Edwin I. Colodny, Hangar 12, National Airport, Wash-. ae

ington, D. C. 20001, for Allegheny Airlines, Ince. -

. Harry.A. Bowen, 803 Jefferson Building; 1225—19th .

_. Street, N. W., Washington, D. C. 20036, for Aloha Ai¥lines,

Inc., and Frontier Airlines, Ine.

Albert F. Grisard, 412 Metropolitan Bank Building,

~ Washington, D..C. 20005, for Bonanza Air Lines, Ine., and

Lake Central Airlines, Inc.

(10011, 10012) |

Arthur M. Taylor, Jr., General Counsel; Bonanza Air.

Lines, Inc., P. O. Box 391, Las _ Vegas, Nevada, 89100; for

_ Bonanza Air Lines, ine.

alvan V. Kerno, 1201 Shoreham: Building, Washington,

D. C. 20005, for The Flying Tiger Line, Inc. |

Richard A. Fitzgerald, 5900 East 39th Avenue, —_— 7,

Colorado, for Frontier Airlinés, Inc. |

Vernon Bortz, Pratt, Moore, Bortz, and Vitousek, 11th

Floor, First National Bank Building, Honolulu 13, Hawaii,

for Hawaiian Airlines, Ine.

Lloyd W. Hartman, President, _ Central Airlines, 3

Inc., Weir Cook Airport, Indianapolis, Indiana, 46241, for

es tie Central Airlines, Ine. . a

Robert B. Hankins, Pierson, Ball, and Dowd, 1000 Ring

Building, en Db. C 200 » for Mackey’ Airlines,

Ine. ..

Jean Paul Bradshaw, 701 Woodruff Building, Spring. .

field, ‘Missouri 65805, ‘for Ozark Air Lines, Ine. |

. = . . 10012 F

Cecil A. Beasley, Jr., 730—15th Street, N. W. , Washing-

ton 5, D. C., for Pacific Air’ Lines, Inc., Piedmont Aviation,

Ine., and Southern Airways, Ine.

Harry White, Pacific Air Lines, Iné., Taleteedbaned Air.

port, San Francisco, California, for Pacific Air Lines, Inc.

Howard C. Westwood, 701 Union Trust Building, Wash-

ington, D. C. 20005, for Pan American-Grace Airways, Ine.

Jerry W. Ryan, Pan Am Building, 200 Park, New York,

-, New York, for Pan American World Airways, Ine.

Gerald P. O’Grady, Koepenick & O’Grady, 1625 I Street,

N. W., Washington, D. C. 20006, for Pacific Northern

Airlines, Ine.

48a

(10012) #

Robert Kadlec, Pietisont Aviation, Smith Reynolds Air- |

‘port, Winston-Salem, . North —_— for Piedmont |

Aviation, Inc. |. .

-Stephen- L. Gelband, 1001 Connecticut Avenne, N. W,

__ Washington, D. C. wee, for Seaboard World Airlines,

Ine. ~ i ° v

J. K. Courtenay, Southern Airways, ‘1. Atlanta Air.

port, Atlanta, Georgia, for Southern. Airways; Inc.

Theodore I. Seamon, 700 Woodward Building, Washing-

ton, D. C., for Trans Caribbean Airways, Inc.

R. E. McK aughan, President, 11th Floor, Lincoln Liberty .

bestest Houston 2, Texas, for Trans-Texas sirwaye, Tne. |

Rutz 14 PARTICIPANTS

Colonel Eugene B. Sisk, HQ MATS, Scott, Air Force

Base, Illinois, for the Department of Defense.

Clement T. Mayo, Defense Traffic Management Rareies, :

' Room 1929, Building T-7, Washington, D. C., for the De-

partment of Defense. *

Charles’ A. Hobbs, 1616 H Street, N. W., Waddtngtin

D. C., for the American Society of Travel Agents.

Jeias Lawrence Smith, Civil Aeronautics Board, Wash- |

_ ington, D. C., for the Bureau of Economic Regulation. :

Martin L. Sviedinah Chapman, Friedman, “Shea; Clubb,

and Duff, Pensylvania Building, Washington, D. C. 20004,

for United .States Overseas Airlines, ine. ( Change of

* Counsel)

- eiein Qnn>

49a

(10013)

10013 -

UNITED STATES OF AMERICA

' - Crvm Azronavtics Boarp

©. . Wasnineton, D.C. —

SUPPLEMEN TAL AIR SERVICE PROCEEDING -

| - Docket 18795 et al.

” Tt is recommended that the Board find:

1. Six applicants—Conner Air Lines, Ine, ‘Holiday Air-

ways, Inc., Overseas National Airways; Ine. ie Standard

Airways, Inc., Stewart Air Service, and United States

Overseas Airlines, Inc.—do not possess the qualifications | |

necessary for certification as’ supplemental air carriers and

_ their applications should ae eae

‘3° <eeceneaale®

acemstrencone Sonn ¥

| ~~. The remaining eleven epplicants—American Flyers

- Airline Corp., Capitol Airways, Inc., Johnson Flying Serv-

‘ice, Inc., Modern Air Transport, Inc., Purdue Aeronautics

Corp. = Saturn Airways, Inc-AAXICO Airlines, Inc. _

- Southern Air Transport, Inc., Trans International Airlines,

_‘Inc., Vance dnternational Mewen. Inc., Worid Airways,

. Ine., and Zantop Air . Transport, Ine.—should all be certif- «

'. jeated to engage in supplemental air transportation

- domestically betweerf the 50 States andthe District. of

Columbia. Certifications required for ‘supplemental air -

transportation between the United States and overseas and ©

foreign areas are as follows: (a) Canada—Johnson and

‘Purdue; (b) Canada and. Mexico—American Flyers,

(10013, 10014). -

Modern, Sin and Zantop; (c) ‘Caribbean—American |

* Flyers, Capitol, Saturn-AAXICO, Southern, TIA, and -

World; (d) Central and South America—TIA and World;

(e) Transpacific—Southern, TIA -and World; and’ (f)

Transatlantic (cargo _only)—Capitol and Saturn. Except-

_ in the transatlantic area where the carriers Sd@jected already ©

have passenger charter authority, all ‘certificates should

include operating rights with respect t to ‘both a and .

bist : e'

3. All of the successful applicants should-retain world-

wide authority to perform plareload charters for the

es Debergpent of Defense on a permanent basis.

4. The wenghemeniad air transportation services author-

- ized include’ the following: © (a) . traditional planeload

- passenger and cargo charters; .(b) split charter authority

limited to traditional passenger charters, which would

permit a maximum of three groups per aircraft with each

group to consist of 40 or more passengers; (c) ogee

tour charters to tour operators.

10014

5. ‘seagate ‘tour charters should be puthotized wniie

regulations which, among other things, (1) require in-- .

- dividual pre-flight ‘approvals from the Board and any

necessary exemptions for tour operators before. such

charters are operated; (2) set minimum duration and stop

requirements of seven days with: at least two destination

cities, no less than.50 miles from each other, ‘to be served

on each tour; and (3) require that the cost to the passenger

pes

earns. — (aooaay

- of the tour be at least 110 percent of. the lowest’ basic, |

applicable, fare of the scheduled air carriers, provided mm. «

in all cases the ground elements of = tonr — cost at

léast $15. | ce | =

6. Except for all-expense ous ‘enn authority, the _

| | certificates authorizing interstate supplemental air trans-

| portation ‘should be permanent. . Interstate all-expense tour

3 charter authority, and all certificates for overseas and

foreign supplemental air transportation, should be granted :

for an experimental period * five (9) dgraces

1. Regulations ‘relating.’ to supetediicnana’ “air Mriers

should be revised in accordance with the recommendations .

contained in _Appendix F hereto. }

, S oe

Appearances

Leonard Bebchick for AAXICO Airligos Ine. Seen

Ramsay D. Potts for American Flyers Airline caep.

- George Berkowitz for Capitol Airways, Ine.

Warren E. Miller for Conner Air Lines, Inc., and J ohn-

‘son Flying Service, Ine.

. Howard §. Boros for Holiday Airways, Inc; io

Albert F. Beitel for Modern Air Transport, Inc.

Stephen D. Potts for Overseas National Airways, Ine.

Jerrold Scoutt, Jr. and..Walter D: Hansen for Purdue

_. Aeronautics Corp. .» and World Airways, Ine.

Lester -M. Bridgeman ‘for. Saturn Airways, Inc., and

Vance International Airways, Inc.

. John J. Klak for Standard Airways, Tne.

52a

(10014, 10015) 7

Robert E. Fraley ‘for Standard ‘Airways, | Inc, and =

Stewart Air Service. . ©

: James J. Bierbower for Southern Ais. Transport, Inc.

Clayton L. Burwell for Trans International Airlines, Ire.

_ James H. French and Robert J. Wilson. for — Air

Transport, Inc:

James Bell, George N Arita Elmer, and Robert Shorb

for the Trunkline Interven ™~

James Bell for Alaska Airlines,Inc.. . F

. James M. Verner and John H. Suda for Allegheny Air-

rma Inc., Bonanza Air Lines, Inc., Frontier Airli es, Inc.,

' Hawaiian Airlines, Inc., Lake Central. Airlines, Inc., Ozark

Air Lines, Inc:, and Trane Teen Airways, Ine.

Edwin I, Colodny for Allegheny Airlines, Inc.

Albert F. Grisard for Bonanza Air Lines, Ine., and —_

Central Airlines Inc. — ; .

Ivan V. Kerno and Norman L. Meyers for The Flying

2 — Ling, I Ine.

10015

| He arsy A, Bowen: and Richard A, Fitegerald for Frontier

3 Airlines, Ine. ;

Vernon Bortz for Hawaiian Airlines, Ine. |

_ Robert B. Hankins for Mackey Airlines, Inc.

Jean Paul Bradshaw for Ozark Air Lines, Tne. * :

Cecil A. Beasley for Pacific Airlines, Inc., Piedmont. 3

- Aviation, Inc.. and Southern Airways, Inc. :

Alexander E. Bennett and H oward C. ‘Westwood: for Pan.

Ke " American-Grace Airways, Inc.

Jerry W. Ryan, James F. Bell, and George Neal for Pan

? — World eed Ine.

: Cee

| | 0015)

_ Stephen L. Gelband and Joel Fisher for : Seaboard World

Airlines, Ine.

Theodore I. Seamon for Trois Caribbean Airways, Ine.

Clement T. Mayo for the Department of Defense. ;

Charles A. Hobbs for the American oe: of Travel .

Agents.

James Lawrence Smith. and Billiam J. Driscoll nal the

' Bureau of Economic Re ation.

' .second to the fitness and qualific

’, ee

54a

: 10018° S

RECOMMENDED DECISION OF EXAMINER

re ROBERT L. PARK

4 IntRopucrion ; |

‘Sittply stated, the basic ‘purpose of this proceeding is

- to provide the factual record necessary for a tomprehen-

sive and cohesive review of the future role of the supple-

mental air transportation industry in this Nation’s air

transportation system. As finally constituted, the case in-

volves some 39 applications prosecuted by 18 applicants,

' which generally seek the most unrestricted pogsible type of

certificate of public convenience and necessity that would

authorize worldwide charter operations for the transporta-

tion of both ciyil and military passengers and property.:.

--After the’ usual preliminary procedural steps, the case m

_ procéeded to public hearings, which were conducted in two

stages: the first ‘was devoted to the more a con- —

siderations of public convenience and necessity, dnd the |

ations of the individual

*The applicants. are: AAXICO Airlines, Ine. (AAXICO),

American: Flyers Airline Corp. (American Flyers), Capitol Air,

ways, Inc. (Capitol); Conner Air. Lines, Inc. (Conner), Johnson

Flying Service, Inc. (Johnson); Modern Air.Transport, Inc. (Mod-

ern), Overseas National Airways, Inc. (ONA), Purdue Aeronau-

tics Corp. (Purdue), Holiday Airways, Inc. (Holiday), Saturn

' Airways, Ine. (Saturn), Southern Air Transport, Inc. (Southern),

. . Standard Airways, Inc. : (Standard), Stewart Air Service (Stew- ss’

art), Trans International Airlines, Inc. (TIA), United States

‘- Overseas Airlines, Inc. {USOA), Vance International Airways,

~ Ine. (Vance), World Airways, Inc. (World), and Zantop. Air

‘Transport, Inc. (Zantop). Two applications of an additional ap-

plicant, Sourdough Air Transport, were a part of the proceeding

through the hearing phase but subsequently were dismissed for

- want of prosecution. Order ‘E-21676, January 14, 1965. | :

so -

eS eet

: x (10018, 10019).

applicants. In addition ‘to-the applicants, numerous other

of which in their participation throughout the proceeding

2: 10019 pos

were the Board’s Bureau of Economic Regulation (Bureau)

and the calptificated route carriers (Joint Intervenors).°

- -. The hearings -have. been completed, briefs to. the Exam-

_iner have been filed and the matters at issue are now ripe

: fon decision.? 7 a sh

2 The Joint : Intervenors are composed of Pan American World

Airways, Inc. (Pan American) and all of the trunkline air carriers

except Northeast Airlines, ‘Ine., viz., American Airlines, Inc., Bran- _

‘iff. Airways, Inc,, Continental Air Lines, Inc., Delta -Air Lines, ©

parties were granted. leave to intervene, \the most active -

Ine., Eastern Air Lines, Inc., National Airlines, Inc., Northwest

- Airlines, Inc., Trans World Airlines, Inc., United Air Lines, Inc.,

and Western Air Lines, Inc. As shown by the service list: accom- .

‘ panying this decision, the other intervening parties are the Ameri-

can Society of Tgavel Agents, Mackey Airlines, Inc.,,.Pan American-

’ - @race Airways, Inc., Trans Caribbean Airways, Inc:, the two cer. -

tificated- Hawaiian carriers,,two mainland U. S.-Alaska carriers,

_ three all-cargo carriers, and nine local service carriers. __

ihe applications under consideration here involve requests not

only for certificates to engage in interstate supplemental air trans-

portation, on which the Board may take final ction, but alsé seek

authorizations to engage in overseas and foreign supplemental air

- transportation. Disposition of the applications to the extent that

. they request the latter types of authority is subject to the approval

-. of the President pursuant -to section 801 of the Act. The’ orders

and.proposed forms of certificates which are appended give recog- |

“nition to the Presidential and non-Presidential portions of the .

proceeding. However, in view of the “close interrelationship of the

facts, issues, and considerations applicable to both the domestic and

international phases of the. applications, the issuance of a separate

pe decision by. the. Examiner as to each phase was not considered to .

be either feasible’ or desirable. Accordingly, this regommended

decision encompasses all matters“involved in tle proceéding, cf.

Recommended Decision of Examiner Wiser, American-Eastern

Merger, Docket 13355, November 27, 1962 (f.n. 2, p. 1).

.. a2

6 .

56a a

(10019, 10020) ® eee ee

7 Pee

Backarounp |

‘The present-day supplemental air’ carriers have had a

complicated and often turbulent history. While their de-

velopment has been consideréd in detail on numerous occa-

sions by the Board and the courts, a brief consideration

here of the more signifi¢ant background facts is necessary

to.an understanding of thé setting within, which this case

is to be decided. + :

ome , 10020 - ’

Since the inception of regulation in 1938 under the Civil -

Aeronautics Act, the predecessor to the present statute,

‘Ahe American air: transportation system has chad “non-

scheduled”, “irregular”, or “supplemental” ‘ operators.

* Originally they functioned under a general exemption

which relieved them of the necessity o biaining a certif-

icate of public convenience ‘and necessi y required by sec-

tion 401(a) of the Act and of complying with certain addi-

tional regulatory. provisions that. otherwise would be

applicable tq their limited operations.‘ In the initial years

_ their flight activities tended to be of a highly specialized:

. interest. 7

nature, condutted with small aircraft, and, normally of a

kind associated with a fixed base operation. a

The close of World War II brought with it-a substantial

surplus of large transport-type aircraft and flight-oriented

personnel desirous of placing them in commercial ‘service.

This dévelopment meant. an increased economical signifi-

‘* Then, as now, the exemption provigion (section 416(b)) enabled

the Board’to relieve an air carrier of such requirements upon ap-

propriate findings of undue burden upon the carrier and of public

a Se we Oe el RRR BR Ron oe op a OE Stee ed

. :

Gn.

REPEAL US ey “ee

~— °

wean | “5 (10020, 10021)

a ta io 07a *

: 2 of e . os

cance fer “nonscheduled” air transportation services and

it also posed additional regulatory problems for the Board.

The Board résponded first by modifying its blanket exemp- .

tion regulation in. 1947 to require, among other things, a °

Letter of Registration from the Board as a contition pre-. ae

_ ¢edent to operations ‘with large aircraft, the holders ‘of

which were known as large irregular carriers. enerally

speaking, these carriers were authorized ‘to engage in

' interstate and Overseas air transportation of persons and

property (and foreign air transportation of. property only)

> wa |

between any two points, provided that the services Were

held out and-operated on an infrequent and-irregular basis.°

. ‘Although the Board imposed a “freeze”. on issuance of

new Letters‘of Registration in 1948,* the large irregulars

continued ‘to operate in this fashion until 1949.° In that

_year the regulation was again revised so as to ternfinate

‘the blanket exemption, and the Board in lieu therevf begart

_to act upon applications for individual exemption author-’

‘the ‘Large I rregular Air Carrier Investigation, Docket 5132 .

ity. These applications were in various stages of -process-

ing when the Board, in September 1951, decided to institute

et al. The purpose of the “Investigation was to determine

(1). the appropriate place of the large irregulars in the

national air. transportation system and the extent of the ra

_ * The various geographic components of air transportation. are

-> defined in section 101(21). In general terms, interstate operations

ate between the 50 states; the overseas category involves air trans-

portation service between the United States and its territories and

', Possessions ; and foreign air transportation is that between, ¢ place

in the United States and a place outside thereof. .

yw.

dé

yy : 58a .

(10021, 10022) ;

‘ he : Co.

operations which they should be permitted .to conduct, (2)

the carriers to receive qperating authority, and (3) whether -

the- authorization should be by way of certificate, under

section 401 of the Act or by exemption from the certificate .

and other requirements. ia .

The Investigation consumed over'g-decade of hearings,

decisions, and court litigation. In 1955 the Board decided |

the public interest issues in the case.* It found that the

large irregular carriers, thereafter to be kriown as sup-

10022

7 plemental air carriers, were performing a useful public: |

service responsive'to a public need and that their authority .

should be continued and enlarged. The Board concluded

that, in addition to an unlimited number of planeload

charter operations, the supplementals should be permitted

to conduct regularly . scheduled individual services up to

_ & maximum frequency of 10 one-way flights per month be-

_ tween any two points.’ At the time the Board did not

- undertake to decide the questions concerning the applicants’

qualifications and the form of authority. ultimately to be

granted, but issued an exemption giving the entire class

of @arriers the new authority on an interim basis pending

™ Geographically, the authority to operate charter flights and .

limited frequency individual passenger and cargd services applied

in interstate, intraterritorial (excluding services within Alaska) ,

_and overseas air transportation, while flights in foreign air trans-:

portation were to be restricted to charter and individually waybilled

cargo services only. Fr reasons not here pertinent, the new au-

thorizations as to foreign air transportation did not become effec-

tive, and the authority in this area reverted to the preexisting “ir-

regular” authority. Order E-10161, April 3, 1956. ASO

ahd a

"59a

(10022, 10023)

resolution of these further. questions. ‘Upon judicial. re-

view ‘the Court; while not ‘taking issue with the Board’s

determination as to the need for’and scope of supplemental

services, found that the Board’s action was defective in

that: the Board had made: insufficient findings to support

the interim exemption, since it could not be determined

from the Board’s order what circumstances “could make

certification an undue burden” on the supplementals or

‘why their certification “i8 not in the public interest.”

10023 ' , . — 2

While the judicial review, proceeding was pending, and ©

_ Subsequently, the Investigation was going forward on the |

issues of carrier qualification, carrier selection, and ‘the

_ form of authority to be issued. In 1959 the Board reached ~

final decision in the interstate phase on these questions

and issued certificates to the applicants comprising the’

supplemental air carrier class who were found to be quali-

fied.° These certificates, among other things, authorized

the holders to engage in air transportation domestically

of the scope found required in. the 1955 decision, without

regard to fixed routes or designated points. Upon judicial

review, however, the Board’s action was again‘found to be

legally defective, this time by virtue of the Court’s holding

that section 401(e) of the Act. precluded the issuance of:

ernst | oo Ses

— - 8 American Airlines, Inc. v. C.\A. B., 98 U.S. App. D. ©. 348, -

235 F. 2d 845, 851 (1956), cert. den. 353 U..S. 905 (1957). ms

- * Investigation, 28 C. A. B. 224 (1959). The Board thereafter

decided to issué similar certificates in the overseas and foreign

phases, Investigation, 32 C. A. B. 856 (1961). However, the Presi-

dent withheld his approval and the certificates never. became effec-

tive in view of the Court’s action in the United case, infra.

| . 60a

(10023, 10024)

certificates as granted by the Board which did not contain

named terminal and: intermediate points, and also pre-

cluded the 10-flight limitation.” oo |

. Being thus ynsuccessful in its efforts to authorize: sup- ~ -

. plemental air carrier operations of -the type and scope x.

deemed required by the public interest, the Board presented

| to ee

_ the matter to Congress for clarifying legislation. The

Congress first enacted stop-gap interim legislation which

was designed to afford Congress further time within which

to consider the broader questions.” To this end, it author- ©

ized the Board to validate previously existing certificates

and to confer interim operating authority to engage in

supplemental ‘air transportation for a further ‘period of

_ 20 months, Then, on July 10, 1962, Congress enacted Pub-

lic Law 87-528,"* which is of direct relevance to the present

proceeding. . ake eL |

Among other things, Public Law’ 87-528 amended the

-Act by adding new definitions of “supplemental air car-

1° United Air Lines, Inc. v. €. A. B.108 U. S. App. D. C. 1,.

278 F. 2d 446 (1960), vacated sub nom. All American Airways, et

al. v. United Air Lines, et al., 364 U. S. 297 (1960). Section 401(e) -

of the Act, as‘it existed at that time contained an unqualified re-

quirement for specification of terminal and intermediate. points in

a certificate and an explicit direction that no certificate should re-

strict the right of a carrier to add or change schedules, equipment,

etc. As noted infra, there have been subsequent amendments of the

Act directed to these problems as they relate to supplemental.air

carriers (section 401(e) (3) and (e)(4)). , .

+4 Public Law 86-661, 74 Stat. 527, July 14, 1960.

1? 76 Stat. 143. eins |

6la

(10024, 10025)

rier” ® and “supplemental air transportation” 4 as well as

a new subparagraph to section 401 of. the Act concerning

the issuance of certificates for supplemental air transpor- —

_ tation.’* The net’ effect of these’ various actions was to.

supersede all prior regulation of the supplementals ‘and

_ to confine the future role of these carriers exclusively to

the operation of-charter services, The supplemental air

_transportation which the Board may authorize was lim-

ited to that which would supplement the scheduled ser-

10025

_ Vices certificated pursuant, to other subsections of section

401(d),** and is tobe made subject to “such limitations as

‘the. Board shall find ‘necessary to assure that the service -

rendered pursuant thereto will be limited to supplemental

_air transportation as defined in this Act.” ** As far as the

Specification of terminal and intermediate points. in sup-

plemental air carrier certificates is concerned, the amended

Act requires such specification to the extent that the Board |

considers it practicable, and otherwisé. it “shall designate

'. only the geographical area or areas within or between |

which service may be rendered.” *8

8 See, 101(32). | Berean eee ae be

™ Sec..101(33). | | |

-§ See. 401(d) (3).

18 Td.

*” See. 401(d) (3). - eae

#8 Section 401(e) (3). Other of the principal amendments of the

Act shouldbe briefly noted. Section 401(n) was added to give the

Board broad -powers with respect to supplemental air carriers ‘in

the imposition of requirements for insurance, performance bonds ©

— re

ae 62a °

(10025, 10026)

In addition, upon findings of fitness, willingness, and

cy ability properly to perform such transportation and to

‘s conform to regulatory requirements, the legislation em-

vw nnn pOwered the Board to issue new interim ‘certificates or

2 pein tase x

| 10026

4] ——Tatio to those applicants meeting specified requirements,

| Bias which would be effective pending disposition of their appli-

cations. for permanent authority pursuant to section

401(d)(3) of the Act.*® In order to ease the transition to

rE + ah ll-charter type of operation, Public Law 87-528. also

=a - authprized the Board to‘ permit, for a phase-out period not

to exceed two years from date of enactment of legislation,

billed services subject to certain -restrictions.”°

The Board’s initial processing of the requests¢for interim

" authority was completed in the fall of 1962. -All of the-sup-

plemental air carriers issued interim certificates were

4 . 2 = i

_, or equivalent security arrangements for the protection of the pub-

- lie, and minimum -standards of operational performance. It also

and gave the Board powers of suspension and revocation under

- alties was extended to violations of economic regulatory provisions

* (section 901), and under new section 417 the. Board may. issue

special operating authorizations to stipplemental air carriers so ‘as

to enable them to. meet temporary needs for individually ticketed

,and individually waybilled service between points within the United

States, upon finding the existence of the circumstances specified in

this section. pe

19 PL, 87-528, See. 7.

20 Sec. 9..

. . — . SE ee eS ee eee b

2s os “ ee eS ee eee ee ree ea at oe

4 e * .

. . ~

new interim authorizations for supplemental air transpor-

continuation of individually ticketed and individually way-

imposed a continuing fitness requirement upon the supplementals

particular conditions. The Board’s authority to impose civil pen- —

63a i .

(10026, 10027 )

authorized (1) to perform unlimited cargo and passenger

charter flights in interstate air transportation, (2) to en-

gage in air transportation of persons and property pur-

suant to contracts with the Department of Defense, and

(3) to conduct cargo. charter flights in overséas and foreign |

air transportation subject to certain conditions. Virtually

_ all were granted civil passenger charter rights in overseas -

air transportation, mostly for use as backhauls in con-

junction with military operations, and a few may conduct

* intraterritorial cargo and/or passenger charter flights.

_ No supplemental initially received authority to transport

_ passengers in foreign air transportation: However, more

recently two supplemental carriers were certificated to pro-

10027

vide transatlantic civil passenger charters,” and. the in-

‘terim certificates of four other. supplementals have been —

- amended ‘to’ include authority to: operate civil passenger

charters in the transpacific or transatlantic areas, or both,

for temporary periods.” About half of ‘the interim certif-

*1 Capitol and Saturn in the Transatlantic Charter Investigation,

Docket 11908 et al., Orders E-20530° and E-20531 served March 3,

1964.. The Board originally also selected ONA as a third carrier °

but the President returned the Board’s order without his approval

because of serious questions concerning ONA’s financial fitness that

arose after the Board’s decision. The record has flow been reopened

for further hearings to determine. whether supplemental service |

‘ additional to that provided by Capitol and Saturn should. be au-

thorized, and if so, by wom. Order E-21966, March 30, 1965.

** World and TIA both received such authority ‘with respect to .

transpacific operations for the interim period pending disposition in:

this proceéding of their applications for permanent certificates.

Orders E-21304, September 21, 1964, and. E-21574, Deceniber 9,

1964, The same two carriers may now perform transatlantic pas-

<. ee SS oe 0 eee IN i Peat i li eee Ne Mabe mee oe

: : . 6a th

(10027, aad

ee icate holders were. granted iatieadon that included au-

; ‘thority to’ conduct individually ticketed and individually

". waybilled services during the transitional period, authority

which expired on July 10, acre by the térms of —

Law 87-528... : 3

- Despite’ ‘the tortuous course of their fortunes through Ee

the entire period of their development, the large irregulars |

or and their successors, the supplementals, by one means or:

{ another retained continuous authority to opagate while the

} ; ‘. obstacles in their path were being removed. Their ranks,

however,: were. substantially depleted due to such factors

as economic attrition, certification for scheduled services,

revocation for violations or failure to operate, Board find-

ings of: lack of qualification, and the like. Thus, in -scrinieats

«© 10028

to the 142 Letters of Registration issued to irregular car- ,

riers in the 1947-1948 period, only 30 supplement) air

earriers held authority as of the date of. enactment of -

ae Public Law 87-528. . Twenty-seven applications for interim

authority under that: legislation were processed by the

Board and, insofar as relevant here, 15 were granted. _

The- present proceeding i is the culmination of this evolu-

tionary process, for it is here that disposition will be made -

of the applications for permanent certificates as supple-

‘mental air carriers filed pursuant. to Public Law 87-528:

‘ genger charters for the 1965 season, with their authority expiring

on September 30, 1965... Order E- 22045, April 16, 1965. More re-

cently American Flyers and Modern both received identical trans-

atlantic authority. Order E-22260, June- 2, 1965 ; yrtee: E-22357,

June 24, 1965.

65a,

(10028, 10029)

”

Fifteen of the 18 applicants are, the 15 survivors who

were issued interim certificates or authority;* two others,

Conner Air Lines and Stewart Air Service, are former

large irregular carriers which do not hold ‘interim author-

ity; and the remaining one, Holiday Airways, is a new:

company with no prior experience in conducting air trans.’ ~

portation services. ,

oa 2 THE Issuxs rant Ns

. From the foregoiny Wiscussicn it is evident:that the ques-

tions for decision run the entire gamut of matters relevant:

* to ascertaining the permanent place, if.any, of the supple-

mental air carriers in the air transportation system. As

pn orem 10029

stated by the Board, the ultimate issues are those posed ~

by section 401(d) (3) of the Act, viz., Ne facet

“(1) whether the public convenience’ and necessity

require the supplemental air transportation requested

by the applications; (2) whether the applicants are

fit, willing, and able properly to perform the transpor- :

_tation covered by their applications and to conform

to the provisions of thé ‘Act and the rules, regulations,

*8 Of the 15, only 12 ‘have been operating currently. They are

AAXICO, American Flyers, Capitol, Johnson, Modern, Purdue,

_ Saturn, Southern, TIA, Vance, World and Zantop. AAXICO pre-

viously was an ip. Breage rather: than a supplemental air’ ~

carrier but was able to.q alify under the provisions of P. L. 87-528.

USOA’s interim certifitate.was revoked for lack of financial quali-

~ fication (Order E-21325, September 24, 1964) ; Standard was sus-

pended on.the same grounds by Order E-20468, February i2, 1964;

*. and ONA discontinued operations on October 4, 1963, and is pres-

_ ently. involved in bankruptey proceedings. = hate

: -

(10029, 10030)

anes < 66a

* and requirements of the Board. thereunder ; and (3)

’ what limitations, if any, should be tnipoded by the

~ Board to assure that the service rendered pursuant

to any certificate to be issued will be limited to supple-

mental air * transportation is defined in the Act. m7 24.

Included are not only questions relating te civil opéra-

tions - -involving | supplemental air transportation but also ee

those concerned with the extent to which’ any of the appli-.

_ cants should be certificated: to provide air transportation

services for the Department of Defense. |

These extensive issues. logically. divide themselves. into

public convenience and necessity, fitness, and - regulation

issues, and include numerous subissues ‘within: each . cate-

-gory.”> In broad outline, public convenience and necessity

matters are concerned primarily with the public “need for:

supplemental air carrier service, and requiie consideration

_ of the impact: that certification of the applicants, or any

of them, would have on the other presently certificated

- earriers. Also inherent in the “need” aspect of the proceed:

ing is the determination of whether the public convenience .

and necessity require that any authority granted be issued

to a class of carriers, as has been the Board’s practice .

10030

> «

om heretofore, or whether such authorizations should be tai-

_lored to meet particular needs and requirements, Geo- .

_ Order E-20573, March 13, 1964, | p. 3, |

"88 The-subissues as eo as the result of the prehearing con-

' ference are contained in Appendix A to the ow Confer-

ence vines issued June 1964.

a dee el 3

_ the Act. . moe

ef Ta A eet

Sy | | _ (10080).

/ .

graphically, the possible areas for certificating Operations

_.by the applicants are worldwide in scope, except that the

- Board has excluded from consideration here any grant of...

_ authority to supplemental air carriers for civil passenger

_ charter flights in the-transatlantic area and the authoriza-

tion of supplemental air transportation within Alaska.”*. .

Fitness is essentially the matter of qualification appli-

cable. to any party seeking certification, and the standards

used in ‘making this judgment must give due recognition

to any inherent differences between supplemental air.

transportation and the mor

e conventional types of certif-

. leated operations, Innportant ingredients are both opera-

tional and financial fitness, as well as comparative qualifi- «

cations in those instances where the Board may be picking

and choosing between " competing applicants: The terms,

conditions, and limitations imposed on the supplementals

_ must. assure:sound regulation and adequate protection of |

the public;*and they must carry out the Congressional ae

directive. that the services permitted be of a kind: that

“supplement the scheduled service” authorized by other

types of certificates issued by the Board. Stated somewhat

As indicated previously, section 401(e) (3) requires.that any-cer- -

tificates issued designate terminal and intermediate points if “prac-:

area or areas for,service. In addition, it already has been noted

that the disposition of all applications is subject to approval of the

President insofar as they request. authority to engage in overseas

and foreign supplemental air transportation. Alle applicants ex- |

cept Stewart Air Service have requested this authgrity, and copies.

_ of their applications making this request have been transmitted to

the President in accordance with the provisions of section 801 of

tigable”, and if not, the designation in lieu thereof of the geographic ~*~

| - ‘ F 68a A a ;

“differently: there’! is a basic statutory mandate that iw

izations for supplemental air transportation, which by

definition is-confined to “charter trips in air transporta-..

tion”, respect the distinction between charter or: group

S transportation, on the one hand,-and individually ticketed-

_——

sa,

and individually - -waybilled air transportation services, on

the other.’ . Except fh situations contemplated by section

417 of the Act, individual services are, and have been,since ~

- the. enactment f Public Law :87-528, therfle — :

~ of the’ certificated scheduled carriers, — ¥

By far the greatest emphasis throughout has hoon 4 upon ‘

the geared efforts to expand. the scope and nature of

~ their ‘authori .» Virtually all of the applicants seek Te-

~ moval of the ie barriers against the supplenientals as

*a class engaging in passenger operations in foreign .air

transportation : SO that: they nay for the future provide

unlimited passenger and cargo charter operations - in all’

"geographic areas open to them under the issues in this

proceeding. Most applicants do not oppose. a grant of.

~ authority of identical scope | to other applicants. found

qualified. 79 And all urge | that the Board in “delineating:

ssietanmaee ei

27 Section 101(33) defines’ “guppleniental air ‘tratpeetation” as

“ @ ® ® charter trips in-air transportation, other than the transpor-

tation of mail by aircraft, rendered pursuant to a certificate of

bliec convenience aiid necessity issued pursuant to section 401(d)

Oo) of this Act to supplement. the scheduled service authorized by

certificates of public yo nvenience and necessity — poureuant, to... ‘t.

i sections. 401 (d) (1) ani (2) of this Act.” :

28 Section 417 is the vehicle by which ascii may be au-

thorized to meet temporary and limited needs for se ser-

~ viees, See fn. 18,supra. |»

29'To the’ extent anal the positions of ‘ie various. applicants

‘are diseygsed in the ‘summaries set forth in Appendix A hereto.

mine | | , 69a. a. ees d ey

Be cs Pi eae ae

ae RR oe

their authority redefine the word “charter” ‘to include “all-. .

‘ expense tour” -charters ‘to ticket agents .or “split” omer -- . |

ters, or both, in addition to the traditional planeload char-—

ters now authorized.” . ee :

Ree aay f

.O oe

_ 3° As will*appear in more’ detail. later, the word “charter” is un-

defined in the Act. Generally, the Board has heretofore restricted.

*. its meaning to the engagement of the entire capacity of‘an aircraft

‘ by a person for his own use ar by a representative of: a group for

the use of such group, provided, however, that tickét agents may

not: charter aircraft themselves and in ‘turn sell transportation to,

the public on an individual basis. ‘The usual types of planeload

‘charters are “pro rata” charters, where the cost is divided among

the passengers transported; “single entity” charters, where the en-

tire cost is borne by the charterer; and “mixed” charters, where the ¥

cost is absorbed partly by the participants and partly by the char-

ee ; Hh ete e's “ts

“Split” charters are ones in which one-half of an aircraft is

engaged by one person or group otherwise eligible to obtain chirter

_ services, and the remaining half is engaged by another such person —

or group, thus permitting two relatively small groups jointly to-.

charter an aircraft, At present this*type of authority is enjoyed

by the supplemental carriers holding ‘authority to provide trans- —.

- atlarttic civil passenger charters. | hee Sones os oi

- The .“all-expense tour” charter does nét presently exist in our

* transportation system.. It is generally understood ‘to mean a char-

_‘«° ter In'which a tour operator or ticket, agent would engage an air-

craft for the carriage.of persons traveling on all-expense tours.

Such tours would involve not only the point-to-point air transporta- #

- tion but also related land portions such as the necessary surface tees

‘transportation; hotel accommodations, sightseeing, ete. The ques-

tion, of authorizing all-expense tour charters ‘has been litigated only

y in the Transatlantic Charter Investigation, and the Board’s deci-

_ gion denying applications for:such authority in that case has not

been finally acted upon by’the President. Order E-20776, April

a 30,.1964. In January 1965 the Board proposed to grant, such au-

.. thority. to all supplementals on an jnterim basis pending decision >

| on their applications in this case; but subsequently it deferred any-

~ further action at'this time. (SPDR, January 5, 1965; and SPDR- *

PS Sy ee

ie OO LN RV ADTs Ceti Bete

Pas SEs

“hada Gan

a a 70a

(10032, 10033). :

. The pertinent contentions of the parties concerning the

issues and the relevant evidence in support of their posi-.

tions are discussed in appropriate sections of this decision.

10033.

It is worthy of note at this point, however, that on public

which are not in dispute. Thus, no party opposes the grant.

of unlimited passenger and cargo authority to the appli--

..eants for the conduct of military operations on behalf of

the Department of Defense, although the Bureau, unlike

the applicants, would not grant such authority on a world-

authority, if} any, awarded to each applicant. , Further,

there is no objection, to the certification of qualified appli-’

_ eants to provide conventional passenger and cargo plane-

load charters between the contiguous 48 states (or between

such states and transborder points), provided. that the

_ Board imposes appropriate restrictions .to prevent ‘the

‘rendition of ‘individually ticketed services in the guise of _

charters.** The real controversy centers around any geo-

-6A, April 27,.1965, Docket 15777.): There is some suggestion by

various applicants here that they should be authorized to sell indi-°

vidually ticketed .all-expense tours directly as well as by charters

to ticket agents. The Board has already determined that such pro-

posals aré tantamount to individual services which do not fall

within the scope of. charter transportation. Transatiantic Charter

Investigation, Order E-17607, October 18, 1961.. —

30a A possible exception is Flying Tiger. Although its position is _

. - not entirely clear, its brief tothe Examiner (p. 4) is susceptible to

the interpretation that-the carrier opposes any: service, civil or -

milita¥y, by ‘any supplemental. However, Flying Tiger did not —

participate actively in the proceeding and has pointed to no evi-

dence in support of such a position. pie

Tla | ie

ie eee fee — (10033,- 10034)

graphical expansion of supplemental air carrier operations -

beyond these limits, any liberalization of the charter con-

cept to include split charters and all-expense tour charters,

‘and, to a lesser extent, upon the fitness, willingness, and —

- Historic CHarter OPERATIONS —

A great mass of statistical compilations and other data

- were submitted by the parties concerning the past charter ~

operations of the supplementals and the scheduled carriers.

.Perhaps the most significant is the informative and valu-

able work done by the Bureau in collecting and correlating

information for the years 1961 through 1963 submitted by

10034

all carrier ‘marten in this. seiiailtiea and much of this

data is reflected in capsule form in Appendix B to this

decision. Appendix C, which is based upon the reports filed

with the Board" by the 15 applicants herein which were

originally issued interim operating authority as supple-

mental air carriers, sets forth various comparative meas-

- urements ‘of revenue and financial results for the -sup-

_ plemental industry for the years ended September 30,

1961-1964. The more important: facts to: be gleaned from.

the record with respect to past. operations will now be con-

_ sidered.

The oiled of the Military (hist Services. Al-

- though the supplementals always have conducted substan-

tial operations for the military, -durifg the latter forties

- and the decade of the fifties rhany concentrated primarily

<0 ally

Werte tc ok eer OGL eet oe ae

REI IN 2 ANY Sts. Spt Apne) OTE DEBT.

1c RY al ts. GA

(10034, 10035) _

in other areas, particularly individually ticketed passenger

transportation. In recent years, however, the reliance by —

the supplementals as a group upon saltiness revenues as

their primary source of income has become plainly evident.

Today every operating supplemental except Johnson Fly-

_ Ing Service engages in some’ form of military carriage.

Whereas in 1959 military revenues represented: somewhat

- ever 50 percent of the total transport revenues of the sup-

plemental air carriers, they now contribute 70 percent or

more. The rising importance of the military dollar and

"the declining significance of individual sales for the years

___ 1961-1964 are shown i in the table below;

@ aa % Ind.

; ‘Some Revs. % Mil. : " eoin Sales

1961, - $ 59,290000 719 135 146

1962 "75,686,000 74.3. 12.2 13:5

1963 96,106,000. 78.7 15.5 “5.8

1964. 100,420,000 7160 HBB.

10035

The degree of dependence upon operations for the De-

partment of Defense is also shown by other indicators. In

‘calendar year 1963, for.example, 74.1 percent of the reve-

nue passenger-miles flown by the supplementals and 90.8

percent of their total cargo ton-miles were attributable to

. their military services.

' Notwithstanding the great difference in size when com- |

pared to the certificated route. industry, the supplemental

air carriers are firmly established as a source of primary -

reliance i in meeting military requirements for charter ser-

‘31 Appendix C._-

- *- . ‘ 7

‘ ee eee ee prc

oa Te

(10035, 10036)

vices. The situation in‘calendar year 1963, which was fairly

representative of the relationship between the supplemen-

tal carriers and the scheduled carriers over the past few

__ years, is graphically illustrated by the division ‘of milftary

‘ charter revenue shown below :* ) j

Scheduled ~ Supplemental ‘Total

Military Passenger |

Interstate $10,070,437 $ 6,911,686 $ 16,982,123

Overseas | ee 6,344,558 6,344,558

Foreign 20,747,767 21,348,793. 42,096,560

Military Cargo )

Interstate 5,363,230 . 27,406,534 32,769,764

Overseas _ — |. .1,450,791- 1,450,791

Foreign ~* 2,311,580 . 6,175,073 8,486,653

TOTAL $38,493,014 $69,637,435 $108,130,449

. 10036 -

Thus, about 64 percent of the total dollars spent by the .

military for civil aif transport was received by the sup-

primary or exclusive operators in all areas except inter-

state military passenger charter services, and even there

_ the supplementals were responsible for 40 percent of the

total revenue. The supplementals were particularly promi- _

*? As compiled from the Bureau’s. exhibits. There are some dif- .

ferences between these figures (as well as those concerning civil

operations, subsequently discussed) and the dollar amounts set

. forth in Appendix B. However, the discrepancies are minor and

have no material significance...

hei he Eh PRR ey be

Oe ne ee ae ee ee

-. © |

(10036, 10087) = “

nent in the transportation of military cargo, receiving —

roughly 80 —_ of the funds. expended for such ser-

vices:** ' ,

As might be expected, there has been a marked variation

between the individual supplementals in the degree of their

reliance on military revenues. ‘Looking at the year ended

September: 30, 1964, to illustrate the point, the supple-

mentals developed $71,865,000 in military contract and

charter revenues. Three of. the 15 applicants. here who

hold or thén-held supplemental authority—Johnson Fly-

ing Service, ONA, and USOA—performed no military ser-

vices while those operated by three others—Purdue, Vance ~

International, and Standard—developed under $80,000 each

for the year. At the other extreme, World Aitways was

the recipient of $22,162,000 in military revenues, repre-

senting 89.2 ‘percent of its total contract and charter rév-

-‘enues and about 30 percent of the military revenues of

«ll the supplementals combined. World, together - with four

of the other major. supplemental carriers having a rela-

: tively high — on military operations,” as a group

ae Bis 10037 eee |

accounted for 79 percent of the military revenues of the

entire supplemental industry.” . | |

83 The comparison may also be made on the basis of charter pas-

sengers and tons of cargo transported. In calendar 1963 the sup-

plementals carried some 330,000 military passengers and 26,048

tons of cargo as contrasted. to about 274 000 passengers and 3 467

tons for the route carriers.

% AAXICO (98.8 percent), Capitol (66. 4 pereent), Southern

(77.7 percent), and TIA (83.9 percent) - i

* The calendar year 1963 total of some $38.5 million in military

charter revenues of the certificated route carriers was divided

Piece ethene. wie

75a

(10037)

s Supplemental Civil Operations. During the latter 1950’s i

and early 1960’s the civil contract and charter revenues of

the supplementals tended to remain static with little in °

the way of a discernible pattern. However, starting with

1962 there has beén a sharp-acceleration in the absolute

volume and relative significance of such revenues, a devel-

opment which is largely attributable to two factors. The -

' first was the enactment of Public Law 87-528 which re-

quired a ‘phase-out of all individually ticketed and way-

billed services of the supplementals by July 10, 1964. The

second Was the announcement by. the Department of De-

fense of its new commercial contract airlift ‘policy under

which “contracts for. Fiscal Year 1966 * * * will be lim-

ited in amount so that carriers who receive eontracts will

_ derive at. least 30% of their air transportation revenues —

during’ Fiscal Year 1966 from commercial sources.” * This

combination of circumstances,has. compelled. the ‘supple-

mentals as a matter ‘of practicaldjecessity to lend every |

effort to the fullést possible éxploitation:of the civilian

charter markets. —

roughly on the basis of 70 percent for the combination passenger-

cargo carriers and 30 percent for ‘the all-cargo carriers. ‘The -all-.

cargo carriers generated 97 percent ($7.5 million) of the military

cargo revenues of the scheduled carrier industry, virtually all in

the interstate and transatlantic markets, and about’ 40 percent

($4,123,490) of the interstate military passenger revenues, The

largest single area for the combination carriers was military pas-

senger carriage across the Pacific for which they . received $20.7

- million.

¢ JI-R-11I. This policy contemplates that eventually the per-

centage of revenue from commercial sourccs should reach 60 per-

' cent. -

(10098)

. -' . 400388 Ct i(‘(i‘

‘Historic data for the calendar years 1961-1963 as com-

piled by the Bureau, sNowing the functional apd geographic

_ distribution of the contract and charter revenues of the

supplementals, is set forth below: . |

Se : 1961 _~—C«w 1962 1963

“Crvm Passencer ‘$3,847,262 $4,101,666 $6,003,769

__ Interstate - 2,565,924” 2,087;360 4,093,435

Overseas 1,121,881. - 1,865,184 1,730,437 —

Latin America . ; paar te ;

& Caribbean . 12,775 ~- 10,913 20,011

! _» Transpacific 1,109,106 1,854,271. 1,710,426

: - Foreign -. , 159,457 149,122 179,897

‘North America 92,147 53,887 125,617

Latin America = ; de

' '& Caribbean « — _ 21,101 oo

Crvm Carco 561,126 1,025,824 * 1,345,810 .

Interstate 147,740 - 524,182 . 778,231

‘Latin America Bae eee ek

& Caribbean 145,537 175,602 . 203,782

“ Transpacific . —s _ 85,500

—— Foreign 267,849: 326,040 278,297

_. North America 64,628 § 54,557 43,452

» Latin America Se eae is

—" & Caribbean =-_—s‘171,393 . 130,244 194,060

ros Transpacific $$ - —.- fae 26,785

Transatlantic. - 31,828. 141,239 —- 14,000

Toran . $4,408,388 $5,127,490 $7,349,579

o°°

eee, permet Gee (10039)

10039. Ne toe. Rt azae Ae h

olt will be noted that the mist sizeable increases in the 1963

* total took place in the interstate passenger and cargo reve-

_nues.and that revenues derived from operations in other |

geographic areas have not been large. The largest single

item in overseas and foreign markets is the $1,710,426 ap-

pearing as overseas passenger revenues -(transpacific),

all of which was earned by World Airways as the result e

of mixed passenger and cargo flights operated under con-

tract with Western Electric.Company.*" * ae

. . Appendix C provides a more dramatic illustration of the

rising tide of supplemental civil contract and charter reve-_

nues in both an absolute and relative: sense. The supple-

‘mental industry totals for such revenues and their rela-

tionship to prior years were as follows:

% Increase ‘

: Amount _ i I Total Prior Year

-°1962 * $9,222,000. 9» 12.2 15.4

| 1963 14,924,000 15.5 618

1964; + 25,040,000 Oa 69.1%

*? Since the-supplementals lack certificate authority to transport

civil passengers in.the foreign field, such operations as they have

had in this area were conducted pursuant to individual exemptions

granted by ‘the Board. In 1963, 49 applications were filed by the

supplementals for authority to operate flights in the Caribbean,

Latin America, and Bermuda areas. Between June 30, 1964, and.

June 1, 1965, the Board granted some 55 exemptions covering |

‘flights by the supplemental air carriers to Mexico,.the Bahamas,

_ Jamaica, and Bermuda, with the largest participants being Ameri-

~ can Flyers (19), Saturn (18), and Capitol (12). ‘CAB, Weekly -

Summary of ‘Orders and Regulations. | Ms

> 88 Appendix B, prepared by the Bureau on a calendar year basis,

. Shows civil charter revenues of $7;443,336 in 1963 and. $27,982,592

in 1964. Here again, the principal areas of increase are in inter-

state passenger and cargo operations. As noted in the appendix,

_ the. 1964 total includes ‘the substantial transatlantic ‘revenues of

Capitol and Saturn.-

inte

(10040)

~ Despite - the rapid growth of civil reventies in recent

‘ periods the. supplemental air carriers’ as a group remain

significantly short of the 30 percent requirement imposed .

by the Department of Defense. As of the year ended Sep-

tember 30, 1964,.seven s pplementals derived more than

30 percent of their ‘transp rtation revenues from civil -busi-

ness while the remaining five operating carriers were be-

-low this percentage in varying degrees.” ‘And, as in the

case of operations for the military, the participation in

civil revenues by the operating c; carriers does not fall info

a pattern of even distribution but shows a wide fluctuation

between the individual members of the class, In: the year *

. ended September 30, 1964, for example, civil contract and

charter revenues for supplementals operating throughout

-. the year ranged from a high of $7,793,000 for Zantop down-

ward to $104,000 for a carrier such as AAXICO, the fifth

ranking carrier in terms of military revenues. The top .

generators of civil revenues were Zantop ($7,793,000),

sh Capitol ($5,340,000),: Saturn - ($3,455 000), and’ World

($2,690,000), and these four carriers. together accounted

for over $19 million, or 76 percent, of the civil revenues’

of all the —— air. carriers combined.

*The Present Status of the Supplemental i Sia The —

vast differences between the supplemental my °

‘the value of generalizations and underline the nece ity for

e ; ¢ ; oe

39 Those) nesedion the 30 percent limitation were American Fly.

£%s (33,8 -percent), Capitol (31.8 percent), Johnson Flying Service

> “(100 percent); Purdue (86.9 percent), Vance International (53.4

percent), Saturn (73.6 percent) and Zantop (46:3: percent)... The

carriers with less than the 30 -percent ratio \were AAXICO (1.2.

percent), Modern (9 percent), Southern (18.9 percent), TIA (16. 1

percent), and World — 8 pa ; ee.

~pttn.

- _ stantial gains in civil. revenues.”

7 nae = Ee rae ase

‘ st wi aS 2 -

this caveat, some broad conclusions are apparent concern-- _

ing their present status. |

10041

There has been a: noticeable improvement for the sup-. .

-. plementals as a group.in many,of the indicia of opera-

tional and. financial strength. Considered on a year-end: —

September 30 basis, the total assets of the 15 applicants |

herein who “were issued interim authority rose fred

$27,716,000 in 1961 to $95,090,000 in 1964; their operatit

revenues for the same years fro $62 million to $103 mi

lion; and their operating profit in the same period from ~

$2 million to $13 million. In the critical area of civil .con-

- tract and charter revenues there has been an Increase

from $14,924,000 in 1963 to $25,240,000 in 1964, and such

revenue now accounts: for at least 25 percent of their total

transport revénues.’ All six carriers holding fiscal year

1965 long term military contracts managed to improve

‘their positions in this respect in this two year period. In

the case of two carriers, AAXICO and World, the improve- 5

ment on a percentage basis has been relatively small. How-

~ ever, two others—CapitoF and Zantop—now meet .the 30

percent criteria established by the Department of Defense, — :

and the remaining two—TIA and Southern—recorded sub:

_—_— . pt + re) . ‘ “?t

‘*° Appendix C. The incréases in the percentage of total operating

revenues represented by civil contract and charter business from the

year ended September 30, 1963, to the same point in 1964 were as

follows: AAXICO, 0.6 percent to 1.2 percent ; Capitol, 14.9 percent -

,to 31.8 percent; Southern, 8.5 percent to 18.9 percent; TIA, 1.3

percent to 16.1. percent; World, 8.3 percent to 10.8 percent; and

Zantep, 36.3 percent to 46.3 percent. - iy: j Riras

eo ; o 3

; 40044 10042) 3

von ' Despite the brightgr. sib for the ‘snpplementals “in

Be eh, --some réspects, there. are still significant problem ‘aréas

ee __piparent \from . an. overall ‘assessment ‘of their financial. '

“condition which affect most ‘Gomponents of the ardup. Their

ee -: total net, worth. hag shown a sharp: iherease—$1,2 million

a te oe ole oor and $19, 625,000 i in 1964. siya as an waa

: 4 s ee sew Ee eee a fei 2 : 10042 aie ake 4

| _-, ,assets. to, current liabilities, deemed desirable \for’ most: -*

6 ee aS business’ enterprises, for any year in’ this four-year period. ‘ i

vere ‘Fartler, ‘in-each of’ these four’ years the. supplementals as

-. “al glass have-had a. negative’ net worktig ‘capital position— 7

* — _ 1. $1,552,000; in, 1961," $5,208,000--in : 1962; $8,820,000 in 1963, -

aaa $2,978 8,000 j in 1964. Althotgh this unfavorable working ~ Moret

¢ 2a ee capital “p positior? has. been a characteristic of thé supple-7 | \s. |

ms. ore “ee “mental Andustry, it has spot’ den monstrably interfered with.

pitta. . ‘the. ability of: most of’ the operating. carriers to ‘expand ~

ea ty operations, and improve net worth,” For’ example, Capitol, -

7.7 » PTI, and Zantop had a combined negative working capital

we a _{position. in, the year. ended: September 30, 1964, of .about

oe . “$9.4 inilliok. Nonetheless, for the: samé peribd they showed -

. - substantial individual operating profits, a combined operat:

oh. aa ‘profit of over "$6. million, ‘and*a ‘potabined positive net

yt ~~ +S worth of $6 366,000 ; in fact, they.ranked“betwean the-seeond

} any Fs and fifth positions in the supplemental iniitey by. ‘these

Tare ee units. of qmeastiremént. el ye ae oe pes :

ee Wrst

AX, iripcn sy be: noted that both the e induatiyiet orth and work- pee

“f figures cited, are affected ‘adversely by the inclusion of

ling USOA, Standard; .and ONA, carriers which are not ~.

‘If they are excluded, sO as to limit the industry. ess

plementals, the negative -working capital posi- ~

8 ae eat

RRO EE «MALY BE SF

‘,

‘\,

_- . »," tion of the:industry for 1964 would be reduced to 2 a and total

| ee net: word, intréased by, 2. 3 million ; : }

: , Aes ar ae te =

A o , ae obs é

° a x: oor ad NY .

j r4 “ype, a: — : . e

eo ts

‘

°F pale net misint

. : s

Sla

weiss 7" @qoqas, 10048),

As‘the data in disp D disclosé, despite “such ‘gains

as they’ have been able to achieve the supplementals have :

occupied a ‘modest rote in the total air transportation pic-

ture. ‘Operating revenues for the certificated, route carriers

‘ ineréased from $3. 07 billion in the year ended September

30, 1963, to over $4 billion in 1964, or 12 percent, compared

‘to an increase from $98 —— to $103 million, or 5 pir |

alt

« > ae

eae "10043

vent, for the supplementals. s. While the. seuplemenials « as

a group were increasing - their operating profit from $5

millign in- 1963 to $13-million. in 1964, that of the certifi-

tion of $16 million in 1961; In terms of- distribution of the

“market, the. relative positions of the respective groups

have. remained substantially - unchanged—about 97.5 per-

cent for the ce'etificated route carriers and 2.5. percent for -

., the supplementAls. However, théir respective participa--

; ‘tion: in total industry operating profits clearly favors the

ie cértificated: route \carriers. In: 1962 the latter group of

carriers obtained 89.8 percent of the industry operating ~

profits as contrasted to 96.4 percent in 1964, while the share |

‘of the supplemental declined. from 10.2. -percentto, 3. 6 per- .

3 cent im the same — m:

y # The Joint Interv enors note that for he year ended September

* 30, 1964, five supplementals—AAXICO, Capitol, TIA, World, and

Zantop—had. sizeable rates of return. on investment and on &tock- .

holders’ equity... However, the Joint Intervenors would be the first . ~

to contend; were the question’ one relating to their own earnings,

- ‘that: profitability patterns must be assessed from a long range

standpoint rather than by a keyhole.approach. The record makes

clear that the results indicated are not. representative when viewed .

over a period of years, either for these individual carriers or for

og ‘the he supplemental industry generally.

+ eated route carriers more than doubled from $166 million

to $350 million and rose to the 1964 level from a loss posi-

a 4 a x on ° : - a

pditiaaiiaacs ahs ~ bite dies eneeites — a Oe i ct i A NER ti i a on iain ies ett *

(10043, 10044).

-As-has been the situation for: the past several .years,

the. paramount problem for the supplementals .is how best

to achieve a substantial expansion of their civil business. a

The solution to this problem is of fundamental importance

both to provide a‘sound economic base for their operations . .

and to permit ‘them maximum participation in military _

revenues. While it may be reasonably anticipated that the

level of military need for auxiliary assistance from civil

air. carriers will continue to be high or to’ increase,. two

- 40044

other factors are of particular significance. The first j is the

' Board’s action in March 1965 setting new and reduced :

minimum rates for both international .and domestic mili-

tary air transportation, the effect of which will be. to re-

duce the governmental cost for international military air

transportation alone of about $19 million annually with

additional savings to the’ government domestically. a.

less compensated for by carrier cost-savings or additional

‘volume, the supplementals, as major participants in. mili--

tary carriage, may be materially affected. ‘

The other military aspect is, of course, the future ,appli-

cation of the: Department of Defense “30 percent com-

-Mercial” requirement. Appendix E illustrates the situa-

tion: as it existed for the six supplemental air carriers

holding long t military contracts for fiscal year 1965,

based on operating results for the year ended September

30, 1964. Looking at their actual operating revenues for

the year, the six carriers as a group were. $5,265,000 short

2 of meeting the 30 percent ratio had it been i in effect during

4s CAB Press Release, 65- 25, March 18, 1965 (ER-432, PS-26).

aint 83a. :

; | (10044, 10045)

that period. Taking their actual: commercial revenues as

representing the 30 percent, their maximum entitlement,

_ ,aS,a group, to tilitary revenues .would have totaled

- $48,494,000, some $17.5 million less than the military reve-

nues actually received.. Put another way, in order to

maintain their actual 1964 military revenues of $66 mil- --’

lion, again assuming ‘effectiveness of the Department of

Defense policy, it would have been necessary for these car- _

riers as a group to generate an additional $7;522,000 from

civil business.* Viewing the carriers individually, in order

., to maintain their —_ 4 level of military business, Capitol

ee aa te

‘and Pectin would have no- difficulty since they fully met |

the 30. percen{ quota. . However, four carriers—A AXICO,

Southern, TLA. World—had shortages in civil reve- _.

nues necessary to comply with the 32 percent: standard

of $3,477,000, $56 6,000, $2,398,000, and $6,747,000, —

tively:* .

‘Since the close of the record the Department of Defense

contracts for fiscal year 1966 have beene awarded.** The

military will. pay approximately $155 million for airlift by

“civil air ‘carriers as compared to about. $129 million in. 12

fiscal 1965. The share of the supplementals has been in-

ereased to $52,354,000 ‘from the prior year‘ level of —

- $43,468,000 and the contracts will be performed by the ~

_ same six supplemental air carriers. By reason of the loss

of its LOGAIR contract in 1966 Capitol will experience a

** Should the Board approve the Saturn-AAXICO merger agree-

‘ment, AAXICO, as the surviving carrier, will have substantially -

solved its problem i in this respect.

_ 8 Press Release CAB 65-78, June 30, 1965. -

S4a

(10045, 10046) -

net loss in military revenues of $2,885,000. The remaining

five, however, will have net - increases—$1,925,000 for

‘. AAXTCO, . $670,000 . for’ Southern, $1,755,000. for TIA,

$51, 000 for. World, and $7,370,000 for Zantop. ,

Civil Operations of Other Carriers. In contrast to the

vital role of civil contract and charter revenues for the sup-

plementals, the civil charter business -of. the cértificated

route industry is a relatively minor part of their activities, -

_.Whether gauged by. passengers and tons of cargo carried,

revenue passenger-miles, revenue aircraft miles flown, or

‘received for 1963 presents a Kenied ee picture.

10046

-As reported to the Bureau, the civil charter revenues for

the scheduled- carriers—trunks, local service carriers, all-_

cargo carriers, and international combination _passenger-

‘cargo carriers—were as e as follows:

Total

_ Civi PasseNncER ve |

‘Interstate . | ig? eh $12,015,846

Overseas ert See ; 898,908

Latin America & Caribbéan | 898,908

Transpacific . en

Foreign . | wie 3,430,287 |

North America : an 1,098,184

. yLatin América & Caribbean — . _2,058,370

Transpacific 2 Pate 273,733

Total Civil Passenger ee as $16,345,041 —

oA. Ratrinataath a S8Bdeinnee! »nmewe ~* « aot te SN AN ne i A a A Sti GION A A ns le ei le tly ta, ahaa ni ee Met Dh

ra)

AR Se LD w mre eee Se

eee (10046, 10047)

\ : } ats i , é Bs

Civm Carco | 7 .

Interstate — « : 7 "885,170

Overseas . | ee “9 158,556 »

Latin America & Caribbean | 74,417

"Transpacific one oe _. 84,139

Foreign - | pot 7 : 2,564,538

, SOP Agee ; 24,566

Latin America & Caribbean Bory * 103,965

_Transpacific aes ' 376;204 +

* Transatlantic: Satie 2,059,803

Total Civil Cargo | 3 . ~ 3,058,264

Total, passenger and cargo | $19,403,305

Ta 10047 |

The ten trunklines Comprising the Joint Intervenors ac-_

a counted for $10,686,088 of the total of $12,015,846 in inter-

"~ . state passenger revenues, and of this amount one carrier— -

United—generated $5,604,938, or 52 percent. The balance

in the interstate passenger charter field’ was composed of

_ $833,603 for the local service carriers-and $496,155 for the

all-cargo carriers. Of the overseas passenger total, $891,548

was developed by the combination carriers to $7,360 for the

all-cargo carriers, while the foreign passenger’ charter

revenues were divided $169,100 for the all-cargo carriers

-*5 The remaining trunk, Northeast Airlines, was not included.

However, in 1963 Noftheast had only: $146,000 in passenger char-

ter business and none in freight charters as against overall trans-

port revenues of $6.86 million. CAB, Air Carrier, Financial Sta-

tistics. . ete ag Seas

q )

ee a ge eS

a 86a

(10047, 10048)

and $3,261,187 for the combination carriers. The all-cargo

carriers produced: $227,190" of the $335,170 earned from

interstate civil cargo charters and all of the $158,556 in

overseas cargo charters. Foreign cargo charters were also

dominated by the all- -cargo carriers which developed

_/*

$2,214,129 from this source to $350, 409 for the combination -

"carriers.

The comparative nam Ore of civil passengers and |

- eargo charters for the scheduled carriers is best illustrated

by relating the revenues received to the°overall transport .

revenues of the carriers “involved. The Joint Intervenors ,

claim for 1963 doniestic civil charter revenues of $9, 953,000,

-» about four-tenths of 1 percent of° their total transport

revenues of roughly’ $2.4 billion. In foreign and overseas

operations for, the same year the ratio ranged around

‘ percent or less for the individual carriers, with a high

of 2.4 percent for Pan American’s Latin American division. -

Included in the foregoing tabulation are reported civil

charter revenues of $838,351 for local service carriers as

10048

~_ eontrasted to 1963 overall transport revenues for the local

service industry of $156,689,000 (exclusive of an addi-

tional $68.million in subsidy)’ And the three all-cargo car- ..

riers supplying data—Airlift International, Flying Tiger, .

, and Seaboard—reported total civil, charter revenues of

$3,272 490, roughly 4 percent of their total system revenues

in 1963 of $83.2 million. Seaboard, which Strongly opposes

alry competition from supplementals for transatlantic. civil.

cargo charters, developed $755, 520 from ‘this source, which

represents less than 3 percent of its 1963 total transport

revenues, of $26, 552, 000. eae »

° .

eee Pere ee

, : (10048, 10049)

Even if the comparisor is made on the basis of all con-

tract and charter revenues—passenger and cargo, military

and civil—the result is not changed ‘materially and no sig-

nificant ‘growth trend for charter operations of the sched-

uled carriers is evident. While charter revenues a$ a.

percent of total transport revenues have progressively in-

creased for the supplementals from 65.1 percent in 1959

to 93.2. percent in 1963, they have remained static for the

-domestie trunks—0.4 percent in 1959..and 0.5 percent in -

1963. The same is true for the international and territorial

combination carriers (5.4 percent in 1959 and 5.8 percent

in 1963), and the charter revenues of local service carriers

as a percentag® of their total transport revenues declined ., |

from 2.5 percent in 1959. to 1 percent in 1963. For the,

all-cargo carriers, the percentage rose in 1962 to 86.8 per.

cent> (domestic) and 59.2 percent (international and ter-

‘ritorial) but declined to 76.2 percent and 48.4 percent, &

respectively, in 196346 , | |

10049

THE Future ror TRapiTionaL CuHarTER SERVICE

Historie data concerning traffic and participation have a

*° CAB Handbook of ‘Airline Statistics and Air Carrier Analytical

‘Charts and Summaries. The -above percentages for all-cargo car- “

riers are not representative of their civilian activities since, so far

as appears from this record, the bulk of their charter revenues are

obtained from military rather than civil operations... There is a

further distortion by reason of the type..of data included. The

1963 totals, for example, include substantial revenues for AAXICO,

now a supplemental air carrier, and for Slick and Aerovias Sud

Americana, air carriers which “did not furnish information or

_ otherwise participate in this proceeding.

we Qa.

Dini rendan d MALY. lal

ASIN Se retrnNigle Ling een eae ate LS

(1961), to accompany H. R. 7318, p. 16.

88a

;

(10049, 10050) _

not provide the exclusive-or necessarily the most inrportant

basis for resolving these questions. There are numerous .

other and often contradictory considerations to be assessed

in reaching the ultimate’ judgment: :

The substantial and valuable role of the supplemental

air carriers in providing passenger and cargo service for °

the Department of Defense cannot be’ seriously disputed,

--and no party*has undertaken te‘do.so on this record. ‘Their

past contribution in fulfilling day. to day military require-

_ ments, ‘as well as their response to-emergency situations

exemplified by the. Berlin blockade, the Korean war, and

the Lebanon crisis, have all been chronicled in detail and

need no reiteration.*7 The supplementals have provided

and-continue to provide a sizeable and flexible reservoir

of trained personnel and equipment, fully committed to the

purposes of national defense. In view of the worldwide

with the existing. state of political, upheaval and unrest,

notably in Southeast Asia and the Caribbean, there is every

indication ‘of a strong continuing need for the services of

: the supplemental air, carriers to meet present and future

defense requirements.

a - 10050

‘Similarly, there i is no ‘real argument with the proposition

that the traditional planeload passenger and cargo charter

operations ‘domestically between the 48 contiguous states

by the. Presently operating and. qualified supplementals

47 Large Savegiilale Air Carrier Senssitiaielion, 22 C. A. B. 838,

860 (1955) ; S. Rep. No. 688, 87th Cong., 1st Sess. (1961), to -accom-

pany S. 1969, p. 21; H. R. Rep. No. 1177, 87th Cong.,- ‘Ist Sess.

" ae

olhsabteiee x tahini pen

89a

(10050, 10051)

servé a useful public purpose responsive to public need.

By their past charter operations the supplementals have:

earned their. niche as an established part of the domestic

air transportation system. Their domestic cliarter opera- -

‘tions have shown substantial growth; particularly. since’

the enactment of Public Law 87-528 and the termination of

all individual sales authority; and the future charter

potential for the supplementals within these limitations is

conceded. Indeed, the.’ Joint Intervenors, in urging: re-

striction of.any award for the supplemental air carriers to

_ traditional planeload charters operated domestically. or to

~ transborder. points, contend that there is a vast reservoir-

-of underdeveloped affinity group charter business available

in the United States. To this end they presented an estimate .

purporting to slow that members of national charter-

worthy organizations’ and their families alone represent |

a group charter potential of some 300 million people. While

this forecast is suspect. in technique and unreliable as a fe

3 quantitative measurement of the probable market, it does

indicate a sizeable Souree of charter traffic that has not

been fully exploited by either the supplementals or the | :

certificated: route carriers.

Turning to overseas and foreign charter opera tions, the

past provides a less Rrormative guide to the future. In

the“ area of ¢ivil pastnger charters across the Atiantic,

which are not in issue here, the certificated route carriers

in recent years. have had intense. competition from the

10051

foreign air carriers and the ssupplementals for charter _

business;. yet the result has been that during this period

both scheduled and charter traffic stl grown substantially.

: ~ 90a.

(10051, ee

ee ee

With this exception, however, no parallel sitention exists in

which to measure ag précisely the probable future develop-

ment under comparable. competitive conditions.“* __

There are wide differences in the relative size of over-:

@eas and foreign markets as shown by past air traffic. The

- largest—the transatlantic—had 2.9 million passengers in

-1963,. followed ‘by Central, America and ‘the Caribbean

(2.4 million); the transpacific, composed of ‘Asian and

aoe Oceania ‘countries (600,000); and South-America (418,-

fo 000). The West Coast-Hawaii and principal U.S.-San Juan

markets, which the Joint Intervenors would withhold from .

| | ae Se. are. sizeablé¢ — accounting for 1963

ae ae cee 10052

- O & D. passengers totaling 645,000 and 1.2 million, re-

spéctively. In terms of the number of passenger charters

SAR artis hi MOAN ee A Co Soa aD

a ah

*® The more salient facts concerning the transatlantic passenger —

charters can be bridfly noted. Both scheduled service traffic and

charter traffic on the Notth Atlantic have shown strong growth

patterns, and while TWA and Pan American have shared in_the

scheduled traffic growth, their participation in charter traffic’ ‘has

been static or dwindling. Thus scheduled traffic of the U.S. and

foreign air carriers rose from about 1.7 million passengers in 1961

to 2.2 million in 1963, or approximately 31 percent, with the par-

- ticipation of Pan American increasing from 403,602 passengers to

539,015 and that of TWA from 207,630 passengers to 359,143.

. Although total charter traffic increased by some 97 percent, or

three times as fast (148,366 i in; 1961 to 292,352 in 1963), Pan Ameri--

4 can’s charter passengers declined from 22 490 to 16,014.and TWA’s

increased only slightly from 11,452 to 19, 415. Percentage partici-

ier pation in ‘charter traffic for foreign air carriers increased’ from: 28

go in 1957.to 77 percent, in 1962,; that of Pan American and

WA -decreased from 27 percent to’5 percent; and there was a

decrease from 45 percent to 18 percent for. the so-called Part. 295

. earrjers (including supplementals). .It is significant that the gain

in total market size have: persisted notwithstanding the. introdué-

tion of economy fares in 1958 and the April 1964 modifications that

effected decreases of up to 20 percent“in fares for both first-class

and economy service. . | “vg

CO Le ie a a Se ek eee

Aye ee ee

Transatlantic < . “301 296 45 2307 «= 2,879

9la

ae eae (10052)

operated in the Viigjous areas, the breakdown for 1963 is

shown below :*° bya sa

) = : S

“Toint An Foreign

Applicants Intervendrs Cargo Flag

- Caribbean, z

-” Central Ameriea, | Petans |

Bermuda | -— oo Seo oe oe

South. America —, . 21 — "NAA,

U.S.-Puerto Rico 2 5 — A =

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