short-haul air transportation, both within the United States and within the Territories of Alaska and Hawaii." In furtherance of this policy the bill authorizes the Civil Aeronautics Board, for a 5-year period, to guarantee any lender against loss of principal or interest on any aircraft purchase loan made to any air carrier holding a certificate of public convenience (a) designated therein to be for local or feeder air service, or (b) providing for operations wholly within the Territory of Hawaii, or (c) providing for operations wholly within the Territory of Alaska (including service between Alaska and adjacent Canadian territory). The bill contains pertinent restrictions on the amount, term, interest, and the like of loans which may be thus guaranteed by the Board. Section 6 (b) of the bill provides that Departments and agencies of the Federal Government: "*** shall exercise their powers, duties, and functions in such manner as will assist in carrying out the objectives of this act." The measure appears to be of primary concern to other agencies of the Government rather than to the Post Office Department. In general the feeder airline and short-haul air service as now operated is adequate for airmail. In some areas better schedules, or new or additional feeder line service might expedite small quantities of mail. However, it is doubtful that such service improvements would justify the increased cost. If it is the intent that section 6 (b) would require the Department to use local service or short-haul air carriers for transporting mail in preference to surface transportation, we would not approve of this section. This Department maintains the position that we will use any transportation certified by the Civil Aeronautics Board when the interest of the Department may be sreved. The Bureau of the Budget has advised that there would be no objection to the submission of this report to the committee. Sincerely yours, ABE MCGREGOR GOFF, General Counsel. COMPTROLLER GENERAL OF THE UNITED STATES, Hon. WARREN G. MAGNUSON, Chairman, Committee on Interstate and Foreign Commerce, United States Senate. DEAR MR. CHAIRMAN: Further reference is made to your letter of June 6, 1957, acknowledged on June 7, 1957, requesting the comments of the General Accouting Office concerning S. 2229, 85th Congress, 1st session, entitled "A bill to provide for Government guaranty of private loans to certain air carriers for purchase of aircraft and equipment, and for other purposes." In our report on audit of the Civil Aeronautics Board, dated October 1955, we referred to the report of the President's Air Coordinating Committee entitled "Civil Air Policy" issued in May 1954, and commented as follows: "Therefore, as stated in the President's report, to ease the transition to a subsidy-free status for air carriers, temporary financial relief, including loans, loan guaranties, or other interim measures may be justified in lieu or outright subsidy grants to meet situations in which these carriers face temporary financial difficulties, and are unable to obtain private credit on reasonable terms." Since the purpose of the proposed legislation appears to be in line with this position, we would recommend its favorable consideration. Sincerely yours, JOSEPH CAMPBELL, Comptroller General of the United States. (The following letters concerning S. 2229 are inserted for the record :) ASSOCIATION OF LOCAL AND TERRITORIAL AIRLINES, Hon. ALAN BIBLE, DEAR SENATOR BIBLE: The patience and thoroughness which you demonstrated in conducting the 2 days of hearings on S. 2229 is sincerely appreciated by the members of this association and by myself. Particularly am I pleased that the fullness of the record includes letters commenting on S. 2229 by the Honorable Sinclair Weeks, Secretary of Commerce, and the Honorable W. Randolph Eurgess, Secretary of the Treasury, which letters purportedly opposed passage. The Secretary of the Treasury in a letter written prior to the hearings said, "With the present heavy demand for available credit, it is essential that we do all we can to avoid adding unnecessarily to this demand. Under these circumstances, the Department would be opposed to the enactment of S. 2229.” The Secretary of Commerce said, "Loan guaranties of the type proposed would be justified, in our opinion, only if there were convincing evidence sufficient to prove that they would shortly complete the transition of these carriers to a subsidy-free status. We think the evidence is lacking." These statements were necessarily prepared prior to the hearings at which time representatives of the local service and territorial carriers appeared from Hawaii, Alaska, and all areas of these United States. Further, the executive departments making the above comments did so without benefit of any hearing or the taking of any evidence from the industry which so sorely requires the legislation. In the light of the testimony given during 2 days of hearings, it is amply demonstrated, (1) that no subsidy reduction can be effected with the continued use of today's obsolete DC-3; (2) that new, more efficient airplanes on order which will effect subsidy reductions are not presently financed; and (3) that failure of passage of this legislation will in most cases result in cancellation of present aircraft orders by reason of inability to finance. Carrier after carrier indicated in some cases specific dollar amounts that would be saved in subsidy payments by the use of the new, more efficient aircraft, and in the case of several carriers a time limit was placed on when the carrier might be taken off subsidy completely, assuming, of course, the passage of S. 2229 and the availability of reasonable financing. Letters from many banks, introduced at the hearing, gave ample proof of the necessity for passage of S. 2229, if equipment loans are to be made to local service and territorial airlines. You, of course, are acquainted with these statements of witnesses and banking letters and will agree with me, I am sure, that the letter of the Secretary of Commerce cannot properly be interpreted as opposing the legislation under the evidence at hand indicating a definite reduction of subsidy. Further, the letter of the Secretary of the Treasury cannot be considered in opposition as the witnesses during the 2 days of hearings amply demonstrated that the additional credit to be provided by S. 2229 is in no sense an unnecessary addition to present credit demand. In fact, the Civil Aeronautics Act requiring an air transport fleet suitable for the needs of the commerce of the United States, the postal service and the national defense plainly requires the enactment of S. 2229 as an urgent necessity. Chairman James R. Durfee in his testimony made the necessity for the legislation crystal clear. Your decision to keep the record open until July 10 will, I trust, make it possible to include this letter as a part of your splendid record in this hearing. Sincerely yours, JOSEPH P. ADAMS, General Counsel. Hon. A. S. MONRONEY, LOS ANGELES AIRWAYS, INC.. United States Senate, Washington, D. C. MY DEAR SENATOR MONRONEY: I have been informed that your committee is about to start hearings on a bill concerning governmental loans to the airline industry, the date being next Monday, the 17th. At this time my schedule won't permit me to be present unless the hearings are still in progress the following week, at which time I plan on being in the East. Not having seen the bill, I am unable to take any position as to materiality as far as we are concerned. However, I would hasten to recommend that at such time as it may come to final form, it contain or omit no language which could be construed as placing the helicopter segment in an unfavorable light. You will recall in my testimony before your committee on the local airlines legislation I objected to the original draft which was exclusionary by language, and which you were considerate enough to delete before the bill became law. This then would be consistent with my position at that time. You may be interested in knowing that we have just finished our hearing for renewal by the Civil Aeronautics Board. This is our third "go-around," and I believe we gave the examiner a good case for permanency. With kindest personal regards, I remain Sincerely yours, LOS ANGELES AIRWAYS, INC., ALASKA COASTAL AIRLINES, CHAIRMAN, INTERSTATE AND FOREIGN COMMERCE COMMITTEE, United States Senate, Senate Office Building, Washington, D. C. DEAR SIR: By letter from our Washington attorney, Mr. Theodore I. Seamon, which was written July 3, but which did not reach our office until July 9, we are advised that the record on the Government guaranty loan bill for aircraft purchases by local-service carriers and Territorial carriers is being held open until July 10 for written statements by individual carriers. Mr. Seamon entered a short statement on behalf of this company as well as Cordova Airlines and Northern Consolidated Airlines during the hearing in Washington. As directed by us, he supported this legislation and mentioned, although perhaps not in too great detail, our problem regarding equipment purchases a problem which is not covered in the bill with sufficient clarity to avoid ambiguity. The bill is mute, and perhaps intentionally so, on whether the equipment that may be purchased under the guaranty loan provisions must be new or whether it may be used. Alaska Coastal Airlines is a certificated carrier which has been providing scheduled service in southeastern Alaska for nearly 20 years. Thirty of the thirty-three points we are scheduled to serve do not have land airports. They are located on tidal waters and are served by amphibious aircraft or seaplanes. The majority of our fleet is composed of Grumman G-21A amphibians and Consolidated PBY-5A amphibians. None of these aircraft have been manufactured since 1945. Furthermore, since that date, no amphibious equipment of similar type or capacity has been manufactured for civilian use nor any for military use that is eligible for certification by the CAA, even after modification. Accordingly, expansion of our fleet must, for the present at least, consist of additional aircraft of these types and particularly the PBY-5A. In recent years, the Government has sold as surplus many PBY-5A aircraft. Military versions can be purchased at this time for as little as $5,000 or $6,000. However, modification costs before they can be placed in commercial scheduled operation can run as high as $150,000. We, like the local-service carriers and other Territorial carriers, have experienced and are continuing to experience great difficulty in obtaining money to finance additional equipment. We can supply information to substantiate this; however, to do so would simply burden the record with duplicative information and testimony. The purpose of this letter is to urge the inclusion in the bill itself, or in the statement of purpose, positive and explicit language to the effect that, in addition to new aircraft, the provisions of the bill also apply to used aircraft and modification cost thereof. We respectfully request that this statement be included in the record, even though it will reach you after the stated closing date of July 10, 1957. Very truly yours, O. F. BENECKE, Comanager. FLIGHT ENGINEERS' INDUSTRIAL ASSOCIATION, AFL-CIO, Hon. A. S. MIKE MONRONEY, Chairman of the Senate Aviation Subcommittee, DEAR SIR: This is to inform you that the Flight Engineers' International Association, AFL-CIO, supports the passage of bill S. 2229. This bill, which would provide Government guaranty of private loans to the local feeder and short-haul air carriers, would do much to remove the carriers from the subsidy list and put them on the profitable side of the ledger. These small feeder lines have for years been faced with the dilemma of not being able to finance the type of equipment which would operate at a profit ove: the low-density and short-haul routes which they service. In the main, they have been forced to rely on the old DC-3 because of its low initial cost. This equipment, which first went into production in 1933, by today's standard is too outmoded and inefficient to be used in scheduled air transportation. It is interesting to compare the direct operating cost of the DC-3 with the postwar twinengine transport such as the Convair 240, which actually did replace the DC-3 on several of the larger trunklines. During the first 9 months of operation in 1956, the direct operating cost of the DC-3 was 47.4 cents per plane-mile. At the same time, the direct operating cost of the Convair 240 was 64.2 cents per planemile. Productivity in terms of seat-miles per hour shows that the DC-3 produces only 3,780 seat-miles in 1 hour, while the Convair 240 will produce 10,560 seatmiles per hour. Thus, while the direct operating cost of the Convair 240 was 16.8 percent more than the DC-3, the productivity of the Convair 240 was nearly 130 percent greater. However, the equipment which might be purchased as a result of the passage of this bill would be even more modern and efficient than the Convair, which was designed immediately after World War II. The passage of this bill should also encourage several of the American airframe manufacturers to proceed with the development of a short-haul transport. These people have in the past been reluctant to carry on the expensive development of such a transport until they could be reasonably assured of a good market for the airplane. The Government guaranty of loans for this purpose should provide the necessary stimulant. The aircraft which could be purchased as a result of the passage of the bill will also benefit the traveling public. The small communities will be provided with a more safe and modern form of air transportation, and more and more people will be attracted to this type of service. The Flight Engineers' International Association, AFL-CIO, holds no brief for any party that might be affected by this bill, since the very nature of the shorthaul, feeder-line operations dictates an airplane of such size and simplicity that a flight engineer would not be required. However, as a labor union, we can see that the stability and prosperity which this bill might bring to the small feeder lines should certainly allow these carriers to bring the wages and working conditions of their employees up to the standards set by the large trunklines. It should also allow the promulgation of pension and welfare plans in areas where these items are either substandard or nonexistent. The employees of some of the airframe manufacturers where such short-haul equipment might be produced should also prosper. Yours very truly, Senator A. S. MIKE MONRONEY, R. A. BROWN, Executive Vice President. AIR LINE PILOTS ASSOCIATION, Chairman, Aviation Subcommittee of the Senate Interstate and Foreign Commerce Committee, United States Senate, Washington, D. C. DEAR SENATOR MONRONEY: The purpose of this letter is to advise the Senate Interstate and Foreign Commerce Committee of the views of the Air Line Pilots Association with respect to Senate bill 2229, which would provide for Government guaranty of private loans to certain air carriers for the purpose of purchasing aircraft and equipment, and for other purposes. As the representative and spokesman for the pilots employed by the airlines which would be affected under the proposed statutory provision, we have had the opportunity to participate and observe at first hand the underlying problems which must be solved if these carriers are to effectively fulfill their potential in our economy. Our interest in this subject is evidenced by our past efforts to be of material assistance in previous deliberations of the Congress with respect to aviation legislation. We appreciate the efforts of your committee members on this subject,and we favor the adoption of Senate bill 2229. Other witnesses have reviewed the economic history of the carriers here involved and, consequently, it is not felt necessary to become involved in useless repetition. We are confident that the economic facts previously submitted to the committee demonstrate that these carriers are now an essential part of our air-transportation system. Methods must now be found to assure their continued growth and development in a manner which will place them on a self-sustaining basis as rapidly as possible. I previous testimony before congressional committees, this association has expressed its belief that one of the greatest handicaps to the sound progress of these carriers has been their inability to secure more efficient equipment with which to lower operating costs and improve their service. That Members of Congress have been aware of this problem for some time is evidenced by the passage of the old prototype bill which contemplated a financial outlay by the Government to encourage the manufacturers to develop a suitable airplane for feeder type service. This enabling legislation, while adopted, was not utilized. Aircraft, however, are now becoming available or will in the immediate future. Consequently, the problem has shifted from one of developing a suitable airplane to a matter of acquiring the aircraft. In this regard, the carriers are presented with a serious problem of financing new equipment. The legislation here under consideration would guarantee the sources of capital against loss in proncipal or interest up to 90 percent of the aircraft cost. We believe that such guaranty would assure adequate financing at a reasonable cost for the new equipment which is so essential at this time. Although there is obviously some degree of risk involved, this cannot be considered as a bill which requires appropriation by the Congress. Rather, it is a bill which would utilize a Government guaranty to assure the development of this industry in a manner designed to make them self-sufficient as rapidly as possible and thus, in the overall picture, reduce the cost to the public treasury. This, we believe, would constitute good business judgment. Further, this action would remove the most important technical problem now confronting these carriers. We think it significant that the Civil Aeronautics Board, which has been charged by the Congress with the responsibility for the encouragement and development of air transportation, has proposed this legislation as the solution to this problem. We believe that all evidence indicates that the adoption of S. 2229 is very much in the public interest. We appreciate this opportunity to make our views known in this matter and wish to assure the committee that we would be happy to assist in any manner possible in the deliberations on this important matter. Sincerely yours, AIR LINE PILOTS ASSOCIATION, VIEWS OF CHICAGO HELICOPTER SERVICE, LOS ANGELES AIRWAYS, AND NEW YORK AIRWAYS ON S. 2229-GUARANTY OF LOANS TO AIR CARRIERS STATEMENT OF NEED FOR AMENDMENT OF PROPOSED LEGISLATION TO INCLUDE THE HELICOPTER CARRIERS S. 2229, a bill to provide for Government guaranty of private loans to certain air carriers for purchase of aircraft and equipment, and for other purposes, should be amended to make clear that the benefits of the bill would be available to the metropolitian helicopter carriers. There are now three of these carriers providing helicopter service in Chicago, Los Angeles, and New York. In addition to the Hawaii and Alaskan carriers, section 3 of the bill covers loans "to any air carrier holding a certificate of convenience and necessity (a) designated therein to be for local or feeder air service ***." The metropolitan helicopter carriers, in fact, hold certificates of convenience and necessity and, in fact, provide local or feeder air service exclusively. However, their certificates do not, in so many words, identify the service authorized as local or feeder air service. Consequently, if the bill is enacted in its present form, it may be doubted that the language in italics above is appropriate to describe the helicopter certificates. Since the status of the various classes of carrier should not be determined by the accidents of draftmanship, a clarifying amendment is required. There is no opposition to coverage of the helicopter carriers under the bill, and no legislative purpose would be served by their exclusion. On the contrary, their inclusion is required for the very reasons given by the Civil Aeronautics Board in its statement in support of the bill as applied to the other local service carriers. Thus, the Board refers to the present subsidy requirements of these carriers and states that "The most careful consideration should therefore be given to any development which might have the effect of reducing that oblig: tion" of the Government. The Board also states that: |