to the Government as a program to the Congress, and it was the view of the Bureau of the Budget and the President, I presume, that no more than $3 million of the national resources should be allocated for this use.

Senator HRUSKA. And what do they say about the pendency of these temporary permits which are in the nature of contractual obligations outstanding against the U.S. Government? Have we reached a point where in order to determine policy, we will repudiate our legitimate contractual obligations? Is that the position they assume?

Mr. BOYD. No, sir.

Senator HRUSKA. What do they say about the tenure of these temporary permits?

Mr. BOYD. Well, I find it very difficult to answer for the Bureau of the Budget, but my impression is that they feel that by allocating the sum of $3 million on the one hand and by the Board cutting the service to fit the $3 million requirement, the obligation of the United States has been fully carried out.

Senator HRUSKA. Oh, I am sure that the integrity of the U.S. Government would suffer if such a process was resorted to.

Mr. BOYD. I do not think there is any-I would not want to give any impression that I think there is any bad faith or bad motive on the part of the Bureau of the Budget. Far from it.

Senator HRUSKA. I do not think so either except, of course, they lead one to think through rather strange reasoning here where in good faith that policy is being implemented by an instrumentality of the U.S. Government, to wit, the CAB, and then in the middle of the stream and without projecting thinking a year or so beyond where the temporary permits would expire, they want that done now with the temporary service still in force.

Mr. BOYD. Gentlemen, I think the real problem here is that we are dealing with a gnat, and if this were a substantial sum of money, there would be completely different consideration given it by the Bureau of the Budget, and I think by the Congress, but it is such a small amount of money that it just seems to serve as an irritant all the way around, and it is really unfortunate, I think.

Senator ALLOTT. Mr. Chairman-are you through?
Senator HRUSKA. Yes, sir. Thank you.

SECTION 406(b) FOR RECORD

Senator ALLOTT. Mr. Chairman, I would like to get two or three things clear. You pin your position completely on 406(b). Mr. BOYD. Yes, sir.

Senator ALLOTT. I would like to ask that 406(b) be printed in the record.

Senator MAGNUSON. All right.

Senator ALLOTT. I do not quite agree with their interpretation of it. But I do want to get your position, your own position, and the Board's position clear. Putting the interpretation that you do on 406(b), you do believe that whether Congress provides the money to implement that or not, you have the right to proceed and authorize activities and operations which could increase the amount or cause a cause of action to arise against the Government in excess of the amounts which Congress appropriates.

Mr. BOYD. Yes, sir.

Senator ALLOTT. Even though Congress has expressly shown its will be refusing to appropriate these moneys.

Mr. BOYD. Well, my understanding, Senator Allott, is that that is exactly what a ruling of the General Accounting Office says.

Senator ALLOTT. The only reason I am asking these questions is because I want the situation here to be perfectly clear as to what you are saying and what the implications of it are both for us and for you. As a matter of fact, both the chairman and I and Senator Saltonstall and, I think, Senator Young, in conferences with the other body have used the arguments you have used so many times that I am sure that I could recite them from memory.

Mr. BOYD. I would like to excuse me.

Senator ALLOTT. Not the one as to the obligation. I do not agree on that. I think if we refuse to appropriate so much, this is the limit. Senator MAGNUSON. And if we tell why we refuse to appropriate so, it is clear.

Mr. BOYD. I would like to say, gentlemen, that this is not a happy

Senator MAGNUSON. Put in a-406 (a), as well as (b). (The material referred to follows:)

RATES FOR TRANSPORTATION OF MAIL

AUTHORITY TO FIX RATES

SEC. 406 (72 Stat. 763, as amended by 76 Stat. 145, 49 U.S.C. 1376). (a) The Board is empowered and directed, upon its own initiative or upon petition of the Postmaster General or an air carrier, (1) to fix and determine from time to time, after notice and hearing, the fair and reasonable rates of compensation for the transportation of mail by aircraft, the facilities used and useful therefor, and the services connected therewith (including the transportation of mail by an air carrier by other means than aircraft whenever such transportation is incidental to the transportation of mail by aircraft or is made necessary by conditions of emergency arising from aircraft operation), by each holder of a certificate authorizing the transportation of mail by aircraft, and to make such rates effective from such date as it shall determine to be proper; (2) to prescribe the method or methods, by aircraft-mile, pound-mile, weight, space, or any combination thereof, or otherwise, for ascertaining such rates of compensation for each air carrier or class of air carriers; and (3) to publish the same.

RA TEMAKING ELEMENTS

(b) In fixing and determining fair and reasonable rates of compensation under this section, the Board, considering the conditions peculiar to transportation by aircraft and to the particular air carrier or class of air carriers, may fix different rates for different air carriers or classes of air carriers, and different classes of service. In determining the rate in each case, the Board shall take into consideration, among other factors, (1) the condition that such air carriers may hold and operate under certificates authorizing the carriage of mail only by providing necessary and adequate facilities and service for the transportation of mail; (2) such standards respecting the character and quality of service to be rendered by air carriers as may be prescribed by or pursuant to law; (3) the need of each such air carrier (other than a supplemental air carrier) for compensation for the transportation of mail sufficient to insure the performance of such service, and, together with all other revenue of the air carrier, to enable such air carrier under honest, economical, and efficient management, to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the Postal Service, and the national defense.

LIMITATION OF HELICOPTER EXPERIMENT

Senator YOUNG. Mr. Chairman, Mr. Boyd, you talk of this as a piddling amount. It is not a big amount, but you have something else involved here. Here are three cities that have been given preferential treatment for 10 years on an experimental treatment. Other cities in the United States, as you know, would like to have this service, too, and this is what concerns many Members of Congress.

Mr. BOYD. Well, Senator, as we have stated before, you are exactly right. This is an experimental thing, and it is limited to three cities, and the reason--the three cities was arbitrary. There was no-it could have been 5, it could have been 10 except as a matter of realism I do not think we could have expected the Congress to come up with 10 times what we are asking for for helicopter experiments. But the rationale of the Board in establishing these services at three cities was that here we can try the experiment. If it is a success, these people will have worked it out so that then helicopter service can be provided at all major cities without the need for subsidy.

Now, the second point, if I may, sir, is this. The origin and destination figures on the helicopter operations presently existing show that about one-half of the people who use the services are not natives of the city where the helicopter operation is. So it is not-the fact that there is a helicopter operation in New York does not mean that only the people of New York City are getting the benefit of that operation in terms of passengers,

END OF SUBSIDY FOR HELICOPTERS

Senator YOUNG. There is some preferential treatment. Do you have any estimate as to how long the situation will go on where only the three cities have it and the Federal Government will have to subsidize? Do you think it could end in 5 years?

Mr. BOYD. Oh, yes; sure.

Senator YOUNG. One year?

Mr. BOYD. I would say 5 years with a great deal of assurance. Senator ALLOTT. Well, on that subject, now, let us keep the record straight. Testimony before this committee for the last 5 years has been that by the fiscal year 1965–66, at the latest, we should be able to operate on a nonsubsidy basis. This is from the operators-and I think you have given testimony to this general effect yourself.

Mr. BOYD. Yes, sir; and I am not trying to contradict that, but the Senator gave me a longer option, and I was sure going to take it.

SUBSIDY FOR NORTHEAST AIRLINES

Senator MAGNUSON. All right, then. Now, the bells are ringing. The next item on page 21 is of interest to the committee. You are asking for $3.7 million to give a subsidy to Northeast Airlines.

Mr. BOYD. Yes, sir.

Senator MAGNUSON. And this is solely for service in the New England area.

Mr. BOYD. Yes, sir.

Senator MAGNUSON. And all other domestic trunklines are expected to continue to be subsidy free.

Mr. BOYD. Yes, sir.

Senator MAGNUSON. Now, why do you have to pay them $3.7 million? I think the record ought to show that.

NORTHEAST SERVICE TO NEW ENGLAND

Mr. BOYD. I refer you once again, Senator, to section 406(b) of the act. As a legal proposition, we felt that we were required to do it. As a policy matter we felt that it was essential that this be done to maintain the service in New England.

Senator MAGNUSON. All right; now, is that additional service that Northeast was giving prior to this matter that they got into when you -when the Florida run was canceled; is this additional service or is it the same service they have been giving?

Mr. BOYD. It is either the same or less service than they were giving.

NORTHEAST OPERATING LOSSES

Senator MAGNUSON. But because-maybe I can put this in perspective because of the loss of revenues from the cancellation of the Florida section.

Mr. BOYD. No, sir; that is

Senator MAGNUSON. That is not it?

Mr. BOYD. No; that does not follow. They have been losing their shirt on all of their operations except for the one run I mentioned earlier, Boston-New York-Miami. They have been losing in New England. They have been losing in Washington.

Senator MAGNUSON. If you cut Boston-New York-Miami out, then this would be the cause of them needing $3.7 million, wouldn't it? Or one of the causes.

Mr. BOYD. No; they still operate. They are still operating.
Senator MAGNUSON. Still?

Mr. BOYD. Yes, sir; and you can get a great argument as to whether the Miami operation has been profitable.

Senator MAGNUSON. Now, Senator Saltonstall will probably address himself to this when he gets to it again.

CHANGE IN TYPES OF AIRCRAFT

Senator SALTONSTALL. I might just say this. I think, Mr. Boyd, I am right that on this new feeder line business, they really have to change their whole type of airplanes, too, wouldn't they? All they have got now are two or three of these DC-3's, and they have got to change their whole type of airplane.

Mr. BOYD. We think certainly for adequate service to be provided there has got to be a new type airplane, yes, sir.

SUBSIDY FOR LOCAL SERVICE CARRIERS

Senator MONRONEY. Mr. Chairman, are we going to have time to go into the broader question of the subsidy requirements for the 13 local service

Senator MAGNUSON. That is the next subject. Now, this is off the record.

(Discussion off the record.)

SUBSIDY FOR ALASKAN CARRIERS

Mr. BOYD. I would like to get one thing in the record. On the subsidy estimates we have given you, we have not naturally included the cost to the Alaskan carriers as a result of earthquake. We do not know how much will be involved there, but it is certainly going to throw our estimates out of kilter to some extent.

Senator MAGNUSON. And I must say they will have, I understand, and you people are looking at it, too, a pretty good estimate of this within the next week or 10 days.

Mr. BOYD. Yes, sir; we hope so.

Senator MAGNUSON. So that we can put it all in one package. But I want to say for the Alaskan carriers, they did a yeoman job when this happened, and they really worked 24 hours a day and really did a job servicing Alaska. All of them.

Mr. BOYD. We are certainly proud of them.

Senator MAGNUSON. All right.

Senator MONRONEY. It is understood, Mr. Chairman, we will reopen this.

Senator MAGNUSON. Oh, yes; there are a lot of other things in here, but we thought we would at least get an hour and a half at this time.

Mr. BOYD. We have not been released.

Senator MAGNUSON. You will have to be subject to the call of the Chair because we do not know what hours we are going to have up in the Chamber, but I am hopeful that we can continue each morning while we are doing it at 8 or 8:30 and get some of these things out of the way. In the meantime, of course, as you know, the House will be working on the bill, and then we do not want to foreclose any agency from not-not be able to come back again after the House bill is passed so that we can discuss some items that you maybe wanted to present to us.

Mr. BOYD. Yes, sir; I will be out of town the rest of the week but

Senator MAGNUSON. Well, we won't get you this week because we have got others scheduled this week, Civil Service tomorrow.

Mr. BOYD. Thank you gentlemen. Nice to be with you.

(Whereupon, at 10 a.m., Wednesday, April 15, 1964, the subcommittee was recessed, to reconvene at 8:30 a.m., Thursday, April 16, 1964.)