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The CHAIRMAN. So, therefore, in one period of time, when the fleet was built, the minimum-age longevity hits about the same time now. Therefore, after this bunch is built, you drop off.

Mr. ALEXANDER. Yes, sir. That is correct.

The CHAIRMAN. All right.

Mr. ALEXANDER. A year ago we developed this plan which contemplated a level of construction between 25 ships per year and 30 ships per year. This carried the heavy building program out to the year 1967. But again we had this rapid fall-off, and we would have completed the program in 1975 with about a 5-year dry spell between 1975 and 1980.

Recently we have developed this plan for replacement of the vessels in the subsidized fleet because we think this makes more sense from a business point of view, from the point of view of the shipbuilding industry, and from the standpoint of the Government.

This contemplates a level of construction of between 15 ships per year and 20 ships per year. Actually, in 1962 we will have awarded contracts for a total of 13 ships and in fiscal 1963 for a total of 18 ships. This is our current program.

With this award of 18 ships for fiscal year 1963 we will have contracted for a total of 108 out of the 300 ships in the subsidized fleet. Then, as you see, this program carries along on a regular scheduled basis and would reach its conclusion in 1975.

We have applications from Isbrandtsen Steamship Co. and Waterman. They both have fleets which must be replaced. And that would permit us to carry on this shipbuilding schedule until about the year 1980 when our second flight of ships would come in.

In other words, we have a regular and a consistent level of shipbuilding under this program, sir.

The CHAIRMAN. It is my understanding that the reason you evolved this plan is so that you can give the operators and the shipbuilders a projection on which they can do better planning—

Mr. ALEXANDER. Yes, sir.

The CHAIRMAN. Rather than the ups and downs that we have?
Mr. ALEXANDER. That is correct.

We believe that from the standpoint of employment in the shipyards this is good. Certainly from the standpoint of financing of this new construction it would assist the operating lines.

The CHAIRMAN. The financing, too, would be a very important part of it.

Mr. ALEXANDER. Yes, sir. Thank you.

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CHART A

CURRENT SCHEDULE FOR REPLACEMENT OF

WAR-BUILT SUBSIDIZED SHIPS

BY FISCAL YEARS

1962-1971

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CHART B

SCHEDULE FOR REPLACEMENT OF WAR-BUILT

SUBSIDIZED SHIPS, AS OF 9-1-61

BY FISCAL YEARS 1962-1975

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91496-63-7

CHART C

POSSIBLE SCHEDULE FOR REPLACEMENT
OF ALL SUBSIDIZED SHIPS, AS OF 2-8-62
BY FISCAL YEARS 1962-1975

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The CHAIRMAN. Any questions on this item by members of the committee?

(No response.)

We thank you for that clarification, and we are glad to have it in

the record.

Getting back now to the question of subsidies, construction and operational, what does the budget this year the bill is now over in the House-provide for operational subsidies?

Mr. ALEXANDER. A total of $225 million are provided for fiscal year 1963 for operations.

The CHAIRMAN. 1963?

Mr. ALEXANDER. Yes, sir.

The CHAIRMAN. Is that up or down from last year?

Mr. ALEXANDER. That is up, sir.

The CHAIRMAN. How far up?

Mr. ALEXANDER. I would like to refer to notes so that I can give you the exact figures.

The CHAIRMAN. All right. Fine.

Mr. ALEXANDER. It is up from about $185 million.

The CHAIRMAN. I was going to say I remembered last year it was around $180 million.

Mr. ALEXANDER. Yes, sir.

The CHAIRMAN. So it is up approximately $45 million?

Mr. ALEXANDER. Yes, sir.

The CHAIRMAN. What is the reason for that?

Mr. ALEXANDER. There really are several reasons for this increase. The operating subsidies are paid on the basis of voyages, and the number of voyages has increased slightly during the past year. That accounts for part of the increase.

But the more important reason is that we have been trying to make faster payments. The Congress provided for more rapid payment of subsidies to the operating lines and an increase in the initial payment from 75 to 90 percent, so that this increase largely comes about so that we can pay these subsidies faster and assist the operating lines again

The CHAIRMAN. Which you are obligated by law to pay anyway? Mr. ALEXANDER. Yes, sir.

The CHAIRMAN. What existing applications are there down there for further subsidies?

Mr. ALEXANDER. We have at the present time four pending applications for operating-differential subsidy. These have been filed by the Isbrandtsen Steamship Co., the Waterman Steamship Co., the States Marine Line, and the Atlantic Express Line.

The CHAIRMAN. Four?

Mr. ALEXANDER. Yes, sir.

The CHAIRMAN. Are they on established trade routes now?

Mr. ALEXANDER. The first three are. Isbrandtsen, Waterman, and States Marine are on established trade routes now.

The fourth, the Atlantic Express Line, does not have any service. They have no ships at the present time.

The CHAIRMAN. It has no ships and no service?

Mr. ALEXANDER. That is right.

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