Our survey before a flight consists of a walk around the aircraft to observe any obvious maintenance problems cleanliness of the aircraft, et cetera.

Mr. VAN ZANDT. Have you any estimate of the cost to MATS as a result of this directive?

Secretary RILEY. As a result of this directive?

Mr. VAN ZANDT. Yes. Are we going to have to set up teams to do the job, and what is it going to cost the taxpayer of the country? Secretary RILEY. MATS is now using 11-man teams which are part-time teams. As these contracts come up or as charters are arranged, MATS will review these various company's operations and their aircraft. They have about 30 or 35 people that are now engaged in performing this kind of survey. The cost is not going to be substantial.

Mr. VAN ZANDT. Mr. Riley, is it not true that there was a great amount of criticism directed at the Government as a result of the Imperial Airlines crash?

Secretary RILEY. Yes, sir.

Mr. VAN ZANDT. This directive no doubt was designed to ease some of the criticism. I doubt whether it did, because my mail indicates that the people are still very much disturbed over the accident and are still making critical comments regarding the safety factor.

That is all, Mr. Chairman.

Mr. HARDY. Thank you.

Thank you very much, Mr. Riley-Mr. Smart, have you any further questions?

Mr. SMART. No further questions, Mr. Chairman.

Mr. HARDY. Thank you very much, Mr. Secretary. The committee appreciates your help.

The Chair wants to acknowledge the presence of our colleague from Pennsylvania, Mr. Walter, who, Mr. Smart just tells me, has a statement.

Mr. Walter, we are glad to have you with us. Do you have a statement you would like to make to the committee?

Mr. WALTER. Yes, if I may, Mr. Chairman.

Mr. HARDY. We will be pleased to briefly have any statement you care to make.

Mr. Walter, the committee is glad to have you. I see you have a rather lengthy statement. But you proceed in your own way.

I have been aware of your interest in this subject matter, à part of which appeared in the press. And the committee shares your concern about this unfortunate situation.

You have your statement here, so just proceed as you would like. Mr. WALTER. Mr. Chairman, I thank you for the opportunity to appear before this subcommittee on this important matter.

As you know, my interest stems from the Imperial Airlines crash at Richmond, Va., November 8, 1961, in which 29 boys from my district. were killed. Initial information about that accident was so disturbing that I began looking in detail into the nonscheduled or supplemental carriers as a group. I have decided that the most helpful contribution I can make to your investigation is to summarize for you the facts I have been able to gather thus far on these companies.

I am very concerned about what I have investigated, and I hope the matters I have discovered will help lead to early legislation that will put this house in order.

It is my understanding that there are now approximately 32 carriers holding authority as nonscheduled or supplemental carriers. Without going into details of the type of authority they possessed earlier, the present authority of approximately 25 of them consists of certificates awarded by the Civil Aeronautics Board in the large irregular air carrier investigation, CAB docket 5132, in January 1959. Some of the certificates were for 2 years, the rest for 5. They gave each company unlimited domestic charter right, plus the right to operate 10 round trips per month in individually ticketed business on each of as many domestic routes as a carrier might wish. The court of appeals held that this award was illegal. Before appeal from this decision could come before the Supreme Court, the Congress, at the end of the session in 1960, passed a law simply extending for 20 months the authority which had been granted by the CAB. The idea was to give Congress time to decide either to let the authority of these carriers expire at the end of the 20 months, or to enact permanent legislation governing the type of authority to be given them. The 20-month laws expires March 14 of this year.

The Supreme Court, therefore, did not pass a judgment on the case. It returned it to the court of appeals which is retaining jurisdiction pending a decision by the Congress.

Mr. VAN ZANDT. Mr. Chairman, may I interrupt at this moment? Mr. WALTER. Yes, sir.

Mr. VAN ZANDT. Knowing that the gentleman is a member of the House Committee on the Judiciary and is quite conversant with congressional action in this field concerning the CAB and the FAA, is it not true there is a bill in conference, that came from the House Committee on Interstate and Foreign Commerce?

Mr. WALTER. The bill will be in conference unless the Senate accepts the House bill.

Mr. VAN ZANDT. Is it possible to write into the conference report. what you are proposing here?

Mr. WALTER. It is not only possible, but I think the Congress. would be open to great criticism if we didn't insist that the bill be meaningful.

I don't believe that the Senate version adequately deals with this situation.

I am not so sure that the House bill does, either. But as I understand the parliamentary situation, an entirely new bill could be written by the conferees. Certainly there can be written in this conference the type of legislation which will adequately protect the traveling public in this field.

The authority of some of the remaining six or seven carriers, which preexisted the Board's decision, was continued pending further hearings on the qualifications of those carriers, and two are new supplementals which have been certificated by the Board since its decision in docket 5132.

The House Committee on Interstate and Foreign Commerce. in its Report No. 1177 of September 13, 1961, on H.R. 7318, said of the Board's decision in docket No. 5132:

The so-called certificates issued by the Civil Aeronautics Board to the supplementals were illegal. This illegality was not a mere technical infraction of the act. It was fundamental. The 10-flight individually ticketed grant violated basic principles of the economic regulatory philosophy of the Federal Aviation Act of 1958.

I have made a very careful and detailed examination of the past record and fitness of these companies and, while the following is by no means a complete summary, it reveals what I think will cause this committee and the entire Congress the gravest concern.

Mr. VAN ZANDT. Mr. Chairman, may I ask a question at this point? Mr. WALTER. Yes. sir.

Mr. VAN ZANDT. Mr. Walter, when you used the quote taken from the House Committee on Interstate and Foreign Commerce——

Mr. WALTER. That is from the report.

Mr. VAN ZANDT. Report No. 1177.

Mr. WALTER. Yes, sir.

Mr. VAN ZANDT. This is the bill which is in conference now.

Mr. WALTER. It will be, unless the Senate decides to accept the House version.

Mr. VAN ZANDT. Very well. Thank you.

Mr. WALTER. Before beginning this review, one word about fitness. The word "fit" is not used by mere chance. It is a word of art. It is probably the single most important word in the entire statute. The Federal Aviation Act, using precisely the same phrase as was in its predecessor, the Civil Aeronautics Act, ever since its enactment in 1938, says in part that:

The Board shall issue a certificate authorizing the *** transportation covered by the application, if it finds that the applicant is fit, willing, and able to perform such transportation properly, and to conform to the provisions of this Act and the rules, regulations, and requirements of the Board * * * (sec. 401(d) (1)).

The statute does not say "somewhat fit," or "partially fit." It says "fit." One of the grounds for the court of appeals' reversal of the Board's decision in docket 5132 was precisely on this basis, for the Board did not require that each of the carriers show that it was "fit" to do all the things its certificate would authorize, but instead certificated them as a group, in effect allowing one carrier to "trade" on the qualifications of another. The court, in effect, said that by the plan words of the statute this was obvious error. Moreover, the Board not only said it would not require such high standards of fitness of this group of carriers as it does of others, but it even went further and divided this group into the "more fit," to which it gave 5-year certificates, and the "less fit" to which it therefore gave 2-year certificates. Thus the Board in effect said there are three different standards of fitness.

Now let's look at the record of each of these carriers to see just how "fit" they are.

First, there is a group of six that reportedly are bankrupt. I name the six in my prepared statement.

I want to make clear that I have not yet been able to see the official bankruptcy documents as to each of these carriers. However, I have been informed that each is bankrupt and the data in balance sheets, sent me by the CAB, certainly indicates this.

I have these balance sheets here.

Then, Mr Chairman

Mr. HARDY. Mr. Walter, would you permit an interruption for just a moment?

I don't know whether it is your intent to release all of these names that you have here or not.

Now, this is

Mr. WALTER. Yes, sir; I am going to release them because I have the bankruptcy dockets here.

To save time, I am going to skip over to page 4 of my prepared

statement.

Mr. HARDY. Well, this aspect of the matter is one, of course, which has a bearing on this matter that we are concerned with.

However, if when it gets into the individual company performances that are not involved in our immediate inquiry, it leads us into a territory which is pretty largely that of the Interstate and Foreign Commerce Committee.

Mr. WALTER. I don't think so, Mr Chairman-if I may disagree with you.

It seems to me that this has a very significant bearing on the whole matter, because fitness and financial responsibility are so closely associated that in considering the responsibility in this case and in trying to do something to avoid similar accidents it seems to me that it is important to bear this in mind.

Mr. HARDY. Of course, it is a major responsibility of this committee, and I think perhaps a most important part of our function, to try to see that we don't have a recurrence of this tragic situation.

However, when we are getting into individual companies here, I am a little bit concerned, just for one aspect of this thing. And that is if we permit expressions or if we go into a discussion of the individual carrier's capabilities here and we have statements made to which the individual companies take exception, we may find ourselves in the position of getting bogged down in so much testimony that we will have a hard time ever concluding the Defense Department aspect of it. That is the only thought that I have. And that was why I rasied the question about it

Mr. WALTER. It seems to me that the records of the bankruptcy proceedings are available to the Defense Department. And furthermore, the Deputy Assistant Secretary of Defense in his statement, Mr. Paul Riley, Deputy Assistant, said on page 5:

These surveys have been helpful to the carriers, FAA, CAB, and to us. They permit us to award contracts with reasonable assurance that the air carrier receiving the award will perform efficiently and safely and that it has the resources necessary to sustain its operations in support of our requirements.

Now, Mr. Chairman, that brings us squarely up to the question of whether or not anybody was derelict in their duty in awarding a contract to somebody that was obviously not responsible under the law. Because here are the records of the U.S. Court for the District of Columbia.

Mr. HARDY. Of course, that is an aspect of the thing which the committee would want to be concerned with when we get specifically to the Imperial Airlines situation.

I call attention to this. I am going to let you proceed just as you desire, but I call attention to it just for this one reason. The committee is going to try to avoid getting into a situation which will call for hearing explanations and justification by all of these different carriers. Because if we get into that-it is not our function. I touched on that in my opening statement, at which time you were not here. You didn't hear it, I am sure. But we just don't want to get bogged and lose our main objective here, to try to see that the military do procure the kind of transportation which will be safe and avoid the kind of a situation which we are inquiring into now.

Mr. WALTER. Yes. I am trying to be helpful to you, Mr. Chairman, in reaching that.

Mr. HARDY. Proceed, Mr. Walter.

Mr. WALTER. There is an even larger group of 14 carriers which while apparently not bankrupt have revealed in the balance sheet they have most recently filed with the CAB conditions which merit the attention of the committee. I have in my statement the names of the companies and the dates of their balance sheets up to as recently as September 30, 1961.

Then, Mr. Chairman, I have analyzed the financial situation of these companies on page 12.

The rest of the matter has to do with the analysis of the financial conditions of these companies, which I say are not responsible.

At this point, gentlemen, in my prepared statement I reviewed 25 of the approximately 32 supplementals, and I am sure that by now the question of what demand exists for their service must have occurred

to you.

One of the claims these carriers have repeated over the years is that they are needed by the Department of Defense. It seems to me that in addition to being fit, the other basic test of the Department's need ought to be the equipment they own. Equipment they lease is irrelevant because its availability to the Department of Defense obviously does not depend on the existence of these carriers. Much of it is, in fact, leased from the Department, through the Air Force. As of September 30, 1961, ignoring DC-3's, C-46's, and 13 DC-4's as being obsolete, four-engine aircraft of the DC-6 or Constellation type reported as owned by all or virtually all the carriers total 32.

This total must, however, be reduced by eight, two of which have been destroyed in crashes. One belongs to a carrier in bankruptcy, and five belong to companies disqualified by MATS as unfit.

The remaining 24 belong to 7 carriers, 4 of them-American Flyers, Modern, Saturn, and United States Overseas being among those I already have discussed. The semimodern airlift available to the Department of Defense through companies not previously discussed therefore boils down to 13 airplanes owned by 3 carriers.

That is the sum and substance of it a sharp contrast to assertions made last summer by nonsked representatives of a fleet of around 165 aircraft.

All the facts point to one conclusion. The Imperial Airlines disaster at Richmond has dramatized the financial unfitness, unsafe operations, and law violations in the supplemental airline field.

The record makes it clear that we cannot rely on the CAB to regulate this industry and clean up these conditions. I am regretfully convinced that the CAB has emphasized preserving the companies rather than emphasizing the welfare of the public, despite the fact that the public interest is its paramount responsibility under the statute.

I believe it is up to the Congress to see to it that unfit supplemental operators are eliminated and to correct the conditions which have enabled them to exist.

In my judgment this can be done only by narrowing the discretion which the CAB has in regulating these carriers and by sharply reducing the permissible area of their operations. Frankly, gentlemen, I think we are sitting on a powder keg. I urge early congressional action as strongly as I can.