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MILES (Millions) PASSENGERS (Thousands) 10.000 8,000 6.000
LOCAL SERVICE CARRIERS
LOCAL SERVICE CARRIERS
Mr. Boyd. All right, sir.
With respect to our second appropriation, “Payments to Air Carriers," we estimate an appropriation of $82,824,000 for 1965. This appropriation is of the no-year liquidation of contract type and is, therefore, to provide the Board with the funds required to pay subsidy to the carriers as the subsidy becomes due.
Subsidy payments are estimated at $82.8 million in 1965, a reduction of $2.7 million compared with estimated payments of $85.5 million in 1964.
Consistent with the limitation in the subsidy appropriation language for fiscal 1964, subsidy for the three helicopter operators serving the Chicago, Los Angeles, and New York metropolitan areas is budgeted at $4,300,000 for 1964. A total of $3 million is requested for fiscal 1965.
HELICOPTER SUBSIDIES The three helicopter operators had been operating under an open rate for the period starting July 1, 1963, and received temporary subsidy on that basis. The Board on February 20, issued an order fixing final subsidy rates for these operators aggregating $4,300,000 a year, based on its determination of such rates in accordance with section 406 of the act and the limitations in the appropriation act for fiscal 1964.
In order for these three carriers to live within the $4.3 million rate which we have proposed for fiscal 1964, they must, in our view, contract their volume of service. On the basis of our present knowledge of the facts, we believe that any further significant contraction below the levels of service to which they must reduce for the current fiscal year would render the helicopter experiment of little value.
PERIOD OF EFFECTIVENESS OF ORDER
The order which the Board issued on February 20 is effective for an indefinite period. In other words, it is effective for a period which will extend into fiscal 1965 and beyond. This is unless, or until, it is challenged by one or more of the carriers or reopened by the Board on its own initiative. We decided on this course of action because termination of the rates for the helicopter operators at the close of the fiscal year for which they were being established has tended to impair the stability of the carriers and their opportunity to plan ahead for the conduct of required services on a sound economic basis. Another factor, as explained earlier, is that $4.3 million subsidy per annum will in any event support a minimal level of operations. This will mean that an annual governmental obligation in the same amount will exist on a continuing basis by virtue of this order unless reopened by the carriers or the Board.
1964 APPROPRIATIon, 1965 REQUEST
Senator ALLOTT. Now, Mr. Boyd, despite this $4.3 million that you say that you propose for 1964, this is a figure that was arrived at in the final appropriation bill this year.
Mr. Boyd. Yes, sir.
Senator ALLOTT. And the amount requested by you, if I recall it correctly, for this year was $5,575,000.
Mr. Boyd. $5,775,000.
Senator MAGNUson. You mean for this year.
Mr. BOYD. For fiscal 1964.
Senator MAGNUson. Let's get this straight. We have cut it to $4.3 million. What are you asking now?
Mr. Boyd. $3 million. But we are advising you—
Senator MAGNUson. Yes, I understand. I just wanted to get the figures straight.
MINIMUM SUBSIDY REQUIRED FOR HELICOPTER OPERATION
Senator ALLOTT. But you are advising us that in your opinion the minimal amount necessary is $4,300,000.
Mr. Boyd. Yes, sir.
Senator ALLOTT. Well, now, where are you going to come up with the $1.3 million that is necessary to take up the gap?
Mr. Boyd. That is in the next paragraph, Senator.
Senator MAGNUson. All right. Go to the next paragraph.
Mr. Boyd. It has been the opinion of the Board's counsel that the limitation on the helicopter subsidy appropriations by Congress in fiscal years 1962 through 1964 does not constitute an amendment or modification of the standards of section 406 of the Federal Aviation Act.
POSSIBLE SUPPLEMENTAL REQUEST
As a result, unless action is taken by Congress to amend the act, the Board must necessarily continue to be guided by such standards and principles in carrying out its duties and responsibilities. If the promulgation of subsidy orders= one of February 20– pursuant to section 40° " ms by the helicopter operators in excess of the amounts appropriated by the Congress, we believe that the Board would be obliged to seek a supplemental appropriation, or alternatively, the operators would be entitled to pursue their remedy in the Court of Claims to recover the amounts of *ily due them over and above the amounts appropriated to the Board. I have gone into this in some detail, Mr. Chairman, so that you and the committee would have a clear understanding of where we think our duty lies in carrying out the intent of Congress as expressed in the Federal Aviation Act of 1958 and the appropriation acts.
SUBSIDY ACCRUALS REDUCTION
The estimate of subsidy accruals, which are the amounts due the carriers under final subsidy rates and on which the payment estimates are based, shows a reduction of $1.8 million from $85 million in 1964 to $83.2 million in 1965.
Senator ALLOTT. Let's stop there, Mr. Chairman, if we may. Why did you not ask, then, for $4.3 million this year instead of $3 million.
HELICOPTER SUBSIDY REQUEST TO BUREAU OF THE BUD GET
Mr. Boyd. Well, this is a-let me put it this way, Senator Allott. As you know, the various agencies, both executive and independent, are required to submit a budget proposal to the Bureau of the Budget. This we did. ...We are then given a figure by the Bureau of the Budget which we shall submit to the Congress. This we–
Senator ALLOTT. In other words, your dictation is from the Budget sources, that this is the limit you should ask for, $3 million.
Mr. Boyd. That is the amount we are asking for, yes.
BUD GET BUREAU CUT IN REQUEST
Senator MAGNUson. Well, let us get this straight. You asked for $4.3 million, did you not? You got $3 million.
Mr. Boyd. Actually, Senator, #. we asked for over $5 million.
Senator MAGNUson. You asked for more, and they cut you to $3 million.
Mr. Boyd. Yes, sir.
Senator MAGNUson. OK.
LEGAL ASPECT OF BUD GET BUREAU REQUEST
Senator ALLOTT. Then the Budget, the action of the Budget permitting you to come in and ask for $3 million then, according to your own opinion, is contrary to the law.
Mr. Boyd. We do not feel—
Senator ALLOTT. From what you said here.
Mr. Boyd. We do not feel, Senator, that our obligations under section 406 of the act, which is to pay for the needs of the carriers under honest, efficient, and economic operation, is related to the amount of appropriation that is awarded.
Senator ALLOTT. Well, you have said here you have made your position very clear, and I think we all understand it. But if this is true, then the action of the Budget Bureau in limiting you to a request