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Mr. MCKINNON. Yes, sir, I do.
Senator CANNON. What empirical evidence would you cite to show that air deregulation is working successfully?
Mr. MCKINNON. It is my understanding that since that time the consumer has saved over $1 billion in ticket costs by traveling in the United States because of deregulation. It seems to me you also have a more efficient system. You have less subsidies, taxpayer subsidies, to airlines because you had deregulation, and the essential air service program that was an outgrowth of that, as I study it, seems to me to be a brilliant concept, and as Chairman of the CAB I would certainly work to preserve that system and hand it over to DOT in good shape.
Senator CANNON. How do you perceive the Chairman's role at the CAB with respect to the other four members?
Mr. MCKINNON. Well, I believe the Chairman's role should be one of leadership among the Board. There are only five votes on the Board and each person's vote counts the same. But the Chairman has the responsibility of leadership of the Board in setting directions and providing for people to have a focal point and also to report to you all here in the Congress when you have any questions.
Senator CANNON. A cornerstone of deregulation's foundation is that actual and potential entry will police upward pricing without Government regulation. Now with the PATCO strike crippling entry and even reducing existing competition, how can we justify the elimination of the fare regulation by October 1, 1982? Mr. MCKINNON. That is a good question, sir.
Unfortunately, as far as the total regulation, the CAB does not have all control of that now with the FAA and the PATCO labor situation.
On the first part of your question, I would work with the FAA to try to be sure that all airlines are protected as far as access and entry into airport, particularly with the 22 regulated airports.
I would have to study as far as how it relates to the fares, with the PATCO strike and what effect that would have on the airlines and whether that really would serve a useful purpose to continue regulating fares.
Senator CANNON. If the administration should adopt a position opposed to the CAB decision on the IATA show-cause order or on any other matter that may come up before the Board, how would that influence your decision?
Mr. MCKINNON. Well, it is my understanding the CAB is an independent regulatory agency and by appointment of the President and confirmation of the Senate I am obligated to carry out the responsibilities outlined in the laws passed by the Congress, and I would fulfill those responsibilities. I just think if you are an independent regulatory agency you need to have independent thinking, and that is my responsibility as chairman.
Senator CANNON. What is your view of the Board's past procompetitive international policy?
Mr. MCKINNON. Sir, that is a complex issue. I generally favor competition and I favor a free enterprise system, and that gets into the IATA show-cause order to a degree, and I am really studying that. That is to me probably one of the two major issues that I am
going to face during the period I am on the CAB, the international situation, and I am still, quite frankly, forming some opinions on it. I don't have it all resolved in my own mind.
Senator CANNON. The International Aviation Competition Act provides a procedure for airlines to file complaints against foreign countries if they believe they are being treated unfairly. An example is one recently filed by Flying Tiger against the Canadian Government. How do you believe the United Stats should respond in cases where we find out that in fact the U.S. airline is being competitively disadvantaged by a foreign country?
Mr. MCKINNON. If I think there is discrimination against our airlines I am going to do what I can to back up our airlines with foreign countries.
Senator CANNON. In my view the Board has been overly conservative in its administration of the small community essential air service program set up by deregulation. In my own State the Board has permitted replacement service with aircraft that don't have enough performance to handle the high altitude service that is necessary. Now I hope you give this program your immediate attention and high priority, because I plan to see that Congress reexamines the laws and the criteria for essential air service if the Board won't handle these problems on a case-by-case basis as we originally intended.
Mr. MCKINNON. You can rest assured I will do so, sir.
Senator CANNON. Merger cases have taken up much of the Board's time of late and in a little more than a year the Board's 408 and 409 authority will expire, but in the meantime the Board has expressed the possibility that future and pending cases be handled by show-cause procedures. I can understand that procedure in noncontested mergers, but in a contested case I don't see how the Board can tell a party that wants to make his case in a hearing that he can't when in the past all parties to a contested merger have always been given a full hearing of their views.
How important do you believe that precedent is for the Board in its remaining life?
Mr. MCKINNON. I think some of the merger issues, as I have read through the past history of the CAB, have been very complex issues. It would seem to me that each case would be an individual case to be set up on its own merits. It would be hard to come up with a whole blanket policy, although I am sure in fairness to all parties involved all the facts should be able to be brought out and everybody should have an opportunity to present the facts.
Senator CANNON. Well, I am not sure that that lets me know what your position is going to be on that particular issue, but you may want to provide some added information to me later on that point.
Travel agents have recently and vocally expressed to me the feeling that the Board lacks understanding of their industry and the time that they need to adjust to a deregulated environment. Will you make an effort to meet with this group and spend some of your initial time familiarizing yourself with their adjustment problems?
Mr. MCKINNON. I certainly will, sir. As a matter of fact, for your information, before I left San Diego I met with a group of different
travel agents at my own volition. I called them to ask them about what their problems and concerns were.
Senator CANNON. Thank you, Madam Chairman.
Senator KASSEBAUM. I would like to continue with the question of mergers and acquisitions. Under section 801 of the Federal Aviation Act the President has traditionally reviewed Board action regarding mergers and acquisitions. However, it is my understanding that certain acquisitions have not been studied by the President and sent to him for review. Do you believe it is appropriate for the President to review all acquisition and merger cases or only certain ones? And if only certain cases should be submitted to the President for review, how should that determination be made? Mr. MCKINNON. Senator, that is one of the most complex parts of the whole CAB law. It is my understanding that the cases that have been submitted to the President for review have been cases that involve his considerations on national defense or foreign affairs issues, or at times when airline mergers really were where the airlines were merged into one system. Some of the issues that have not been sent to the President were when airlines merge but they really kept separate operational identities and the routes remained the same and did not merge.
I think it would be hard to have a blanket policy on that and each case would probably have to be considered on its individual merits because the law is somewhat cloudy on what issues go to the President and what don't.
I don't know if you had any specific examples in mind. I even hesitate to comment on them so I didn't prejudice myself when I get on the Board.
Senator KASSEBAUM. I think it will be an increasingly troublesome issue for us as more and more cases perhaps will need to be studied carefully. And with this proviso that the President also review those cases, I think that there will be a need for some clarification. I believe it should be clearly defined so that there will be understanding all around on how this will or should be handled. Mr. MCKINNON. I would submit to you, Senator, as I get in there and as I understand more of the details of how this has worked in the past, perhaps I could come back to you and offer some suggestions so you could develop some laws that can be very clearcut rather than fuzzy as it is today.
Senator KASSEBAUM. After the Board's sunset, what kind of price posting system do you believe would be appropriate?
Mr. MCKINNON. Well, it is my understanding that with the phaseout of the Board the price posting system is eliminated and there is none. In my industry, the broadcasting industry that I have come from for the last 20 years, they have over 8,000 broadcast stations and those stations have had a system that has worked for a long time and they have a lot of rates. I imagine they have got about as many rates as the airlines have. Maybe some of them even more. And they submit monthly their rates for every radio station in the United States to an organization called Standard Rate and Data, and those are published in a big book monthly. Anybody that is interested in the rates for any broadcast station in America, can acquire a copy of that book and they have them. I am wondering if such a similar system wouldn't work for the airline
industry as well, although I want to assure you I have an open mind on the issue and as we get more facts on it I can be persuaded otherwise.
Senator KASSEBAUM. Thank you very much, Mr. McKinnon. That is all the questions Senator Cannon and I have.
I would like to state that there are some letters from Fred Fielding, counsel to the President; David Kirstein, general counsel to CAB; and Stephen Sharp, general counsel of the FCC, that I would like to have made part of the record.
Also, any further written questions will be made part of the record along with any answers thereto that might be submitted. Thank you very much, and all best wishes in this very important job of dismantling an agency.
Mr. MCKINNON. Thank you, ma'am.
[The biographical sketch, answers to questions of the committee, and material submitted for the record follow:]
Senator KASSEBAUM. The hearing is adjourned.
[Whereupon at 10:06 a.m. the hearing was adjourned.]
BIOGRAPHICAL SKETCH OF CLINTON DAN MCKINNON
Name: Clinton Dan McKinnon. Known as Dan.
Address: Unit 608, Watergate South, 700 New Hampshire Ave., NW., Washington, D.C. 20037.
Date and place of birth: January 27, 1934, San Bernardino, Calif.
Marital Status: Single.
Names and ages of children: Holly Jean McKinnon, 20; Sherri Lynn McKinnon, 18; Clinton Scott McKinnon, 17.
Education: University of Missouri 1952-1956, BA 1956.
Employment: 1956-1960-Naval Aviator-U.S. Navy; 1960-1962-Sentinel Newspapers, San Diego, Calif., reporter, photographer, advertising salesman; 1962-present president and general manager, KSON owner, radio stations, San Diego, Calif. Government experience: 1950-1952-Page, U.S. House of Representatives. Memberships: President and board member-Country Music Assocation; board member-National Association of Broadcasters; board member-California Broadcasters Association; board member-Youth for Christ; board member-San Diego Rotary Club; member-San Diego Advertising and Sales Club; member-Delta Upsilon Fraternity; board member-San Diego Chamber of Commerce; board memberSan Diego Coalition; member-San Diego Chapter Navy League; member-Tail Hook.
Political affiliations and activities: Member, Republican State Central Committee-Calif.; financial contributions, too numerous to recall, to campaigns, including Ronald Reagan for President; Dan McKinnon for U.S. Congress; plus other Congressional, Assembly, City Council and State Senate candidates. Member, Republican Associates. Republican candidate for U.S. Congress 1980.
Honors and awards: 1980-Presidents Award, Country Music Association; 1980Media Man of the Year, Navy League, San Diego; 1980-Better Life Award, San Diego Health Care Association; 1978-Listed in Who's Who in America; 1976Mexican-American Foundation Man of Distinction Award; 1975-Youth for Christ's International President's Award for Community Service; 1973—“Good Guys” Award for businessmen and women by the Leukemia Society; 1973-Selected nationally as the Radio Station Manager of the Year by Billboard Magazine; 1971-Selected nationally as one of ten newsmen for special briefing of NATO headquarters in Brussels and Common Market; 1971-Advertising Man of the Year Award-San Diego Advertising and Sales Club; 1970-San Diego County VFW Award for Patriotism; 1968-Gavin Award, industry-wide, Radio Station Manager of the Year Award; 1967-National Safety Council Public Interest Award; 1967-George Washington Honor Medal-Freedom Foundation Award; 1967-Most Promotion Minded Radio Station Operator by Country Music Association; 1965-Selected one of ten Outstanding Young Mem of the Year by the Junior Chamber of Commerce of San Diego. Publishing writings: Author, The Good Life, 1973, Stackpole Books; coauthor Radio Programming in Action-Hasting House.
QUESTIONS OF THE COMMITTEE AND THE ANSWERS THERETO
Hon. BOB PACKWOOD,
CIVIL AERONAUTICS BOARD, Washington, D.C., November 5, 1981.
Chairman, Committee on Commerce, Science, and Transportation,
DEAR MR. CHAIRMAN: I am pleased to answer both the additional set of majority questions and the questions submitted by Senator Harrison Schmitt. Since these questions are to complete the record of my confirmation hearing, I have not prepared detailed answers based upon the work of the Board's staff. Rather, my answers reflect my general understanding of the issues based upon briefing materials and conversations with senior staff and members of the Board.
Question 1. I understand that a substantial proportion of the workload of the professional staff of the Board's Bureau of Consumer Protection is spent on investigating smoking and credit-card transaction refund complaints that passengers file with it. In light of the movement toward deregulation, do you believe that such a high level of government involvement in passenger-airline disputes is sensible? Answer. As the industry moves toward sunset and full deregulation, I believe the Board should continue to reassess the need for various regulations. Currently, the Board has a smoking rule and is required by the Consumer Credit Protection Act to handle complaints involving credit card transactions. I believe until the rules are abolished or the law is changed the Board has an obligation to take some action when complaints are filed. I understand, however, that the Board's Bureau of Compliance and Consumer Protection spends very little of its time in processing these complaints and in general encourages consumers to seek relief through state and local consumer protection agencies and state courts to which it has transferred much of the enforcement responsibility.
Question 2. In a recent order, the Board seems to have concluded that the FAA's Interim Operation Plan, which is designed to respond to the air traffic control system's currently diminished capacity, means that operations are back to nearnormal (Order 81-9-168.) Can you reconcile that conclusion with Secretary of Transportation Lewis' statement that users of the air transportation system are facing six months of disruption? (October 7, 1981 interview with UPI)
Answer. The Board is currently considering the Air Transport Associations petition for reconsideration of Order 81-9-168 so I cannot speak to the specifics. I believe the Board's Order indicated that passenger levels-and not operations-had returned to near normal. I'm sure the Board will consider fully all the concerns expressed by the ATA before issuing a final decision on whether to continue the special exemptions from various rules and statutory obligations it has granted the carriers to lessen the impact of the controller shortage.
Question 3. The Board has been engaged for about two years in a detailed investigation into the sale of air transportation in the Competitive Marketing Case. (Docket 36595) With the date of the sunset of the Board likely to be accelerated, do you regard this case as a wise use of the agency's diminishing resources?
Answer. Marketing, distributions and retail sales of a product is one of the most critical elements of a competitive industry. In the Competitive Marketing Case the Board is reviewing a marketing and distribution system which was born, nurtured and matured in a regulated environment. While much of this system still may be compatible with a competitive marketplace, parts of the current system may be seriously anticompetitive. It seems to me wise to get the facts and then base a decision on the facts. The CAB seems to be the only organization fully capable of getting all the facts. The issue will rise again in the future till all the facts are presented, so why not get them now and then the issue can be solved one way or the other for a long time to come. It seems to me the key area of study is domestic air transportation.
Question 4. Airport access problems have recently generated considerable interest in the aviation community. How do you see the Board's role in this matter? Answer. The Board's role is to implement the goals and objectives of the Airline Deregulation Act. Actions of airport proprietors may sometimes conflict with those goals. When conflicts occur, I believe the Board has an obligation to work with the airport operator and the Federal Aviation Administration to find a solution.