ANNEX 4

ANNEX 5

Airline orders for turbine-powered aircraft, airlines of the United States

1. Title

ANNEX 6. S. 2774, Senator Monroney-Introduced January 11, 1960

"To foster national defense, the postal service, the development of civil aeronautics, air commerce in the United States and abroad, and for other purposes, by providing for Government guarantee of loans to certain air carriers for purchase of efficient, newly developed modern cargo aircraft and components of a cargo airlift system."

2. How it would work

For a 5-year period after enactment of the bill, the Civil Aeronautics Board can enter into agreement with any lender guaranteeing him against loss of principal or interest on any cargo aircraft purchase loan made under specifications listed :

(a) CAB will make certain aircraft purchased under guaranteed loans are insured against loss or damage.

(b) Maximum loan is 90 percent of unpaid principal but not to exceed 75 percent of purchase price of aircraft. (This is interpreted to mean a 25 percent "downpayment" is required, with the Government guaranteeing 90 percent of unpaid balance.)

(c) Loan itself must call for repayment in equal annual installments not to exceed 10 years from date of loan to repayment.

(d) Loans to any one carrier could not exceed $75 million.

(e) DOD and FAA must pass on design characteristics of cargo aircraft to be purchased.

(f) DOD must certify that the borrower has already contracted for the aircraft to be immediately available "in event of war, a national emergency or whenever a military situation requires as determined by the Secretary of Defense" on basis of pricing criteria and arrangements for operation of the aircraft agreed to prior to making the loan.

(g) Cargo aircraft only. To remain cargo throughout period of the loan unless approved for passengers by DOD.

3. What the bill would really do (Senator Monroney's view)

(a) Increase the commercial cargo fleet greatly. Make it easier to go into the cargo airlines business.

(b) By requiring CAB approval in advance of loan guarantee, force any "paper airlines" to show know-how and sound management potential before qualifying. (c) Would foster production of cargo aircraft with design characteristics mutually acceptable to industry, FAA, and DOD. Would hasten design of a modern workhorse aircraft which industry at present is reluctant to sink money into because no assurance of purchasers.

(d) "I suggest that it is inexcusable that the richest and greatest nation in the world let itself continue in a defense posture which makes it incapable of responding to anything but an all-out thermonuclear war ** The indispensable element in preparedness for limited war situations is mobility. The decade of the "sixties" military mobility means military airlift ***. I believe this bill is the means to achieve that reserve fleet. There is no greater contribution toward an adequate defense which can be taken at this session of Congress than the passage of this legislation" (Congressional Record, p. 157, January 11, 1960).

4. Additional considerations

(a) If the bill works as represented by Senator Monroney, old and new airlines will go into cargo aircraft procurement in large amounts. The guaranteed loan itself is enough to assure this. While no overt promises of large government business can be written into the bill, it does state "Departments and agencies of the Federal Government shall exercise their powers, duties, and functions in such a manner as will assist in carrying out the objectives of this act, including an immediate and orderly transfer of increasing quantities of routine Government-sponsored air cargo traffic to the certificated air carriers." This paragraph makes a promise of business which is even more attractive than a guarantee of a mere loan. It places DOD under an obligation to still further support commercial operations, which action would be to the detriment of MATS. Congress last year gave MATS $85 million for fiscal year 1959 commercial airlift. MATS spent only $70.8 million. "There just is no more business than that $70 million-unless MATS flies its aircraft empty," says Lieutenant General Tunner. If Senator Monroney's bill passes, MATS will have to fly empty or remain on the ground.

(b) This bill is definitely tied to a proportionate reduction of MATS. It doesn't say so in so many words, but certainly past statements of Senator Monroney make this point quite clear.

(c) The bill is good for only 5 years. It takes 4 or 5 years leadtime to make a purchase of a newly designed cargo aircraft a reality. By the time FAA, CAB, DOD, and everyone else gets together with carriers and aircraft companies to agree on the mutually acceptable design and make delivery, the bill will have expired.

(d) The bill doesn't assure uniformity in types of aircraft procured. Any number of aircraft types, as long as they are "cargo," will qualify.

(e) The bill still does not assure availability of CREWS or other necessary personnel when the aircraft themselves are needed. The bill makes more available than under CRAF, however.

(f) Senator Monroney is inconsistent when (a) he states that availability of CRAF aircraft needs no particular expansion or clarification; while at the same time in his bill saying (b) these guaranteed loan aircraft will be immediately available in "war, national emergency, or whenever a military situation requires." If that all-inclusive wording is needed on the guaranteed-loan aircraft, why is he so opposed to similar legislation on the whole CRAF fleet? The CRAF fleet is available for all-out war only. Monroney states he is concerned with limited war. Yet, he has not supported anything making CRAF a limited-war potential.