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gallonage fee system at the airports will mean that the airport managements are going to collect some more money out of Uncle Sam to pay this deficit.
Mr. HESELTON. Of course, you can use that argument any time you get into the field of subsidies.
Mr. RAMSPECK. I cannot see why the airport managements would not just as soon collect their necessary funds based on a fair charge for the use of the field through landing fees, rather than to force us to pay a fee on a commodity which is essential to the operation of the air line, or to any other airplane for that matter, and pay it on a basis that bears no relation to the service they render.
Now, certainly you would not argue with me that the amount of gasoline it takes to cross the Atlantic Ocean in a big four-motored plane is a fair charge for one landing on the Boston airport.
Mr. HESELTON. I do not know, maybe I would. I would have to think that over.
Mr. RAMSPECK. I do not believe that you would, because I know that you are a fair-minded man.
Mr. HESELTON. Thank you.
Mr. ELLSWORTH. Is there any formula or uniform basis or any known basis by which landing fees are set by the various municipalities and their airports at the present time?
Mr. RAMSPECK. There is certainly no uniform charge made in the United States at the present time, Mr. Ellsworth.
Mr. ELLSWORTH. I do not mean uniform.
Mr. ElLSWORTH. I realize that many situations can develop on which a local participation in the creation of an airport depends on the revenue, so that there has to be an income, and therefore, in some cases, in some cities there might have to be a larger charge than others. But I was wondering whether there is any general formula used under the Airport Act for Federal participation that would help solve the problem that you are talking about.
In other words, after all, we cannot do away with one system without setting up something to take its place.
Mr. RAMSPECK. The landing fees can be used to meet the situation, provided the deficit that Mr. Heselton refers to is not due to bad management. I do not say that it is due to bad management. I do not know anything about the amount of th: deficit there, or what it arose from or anything about it, but that airport is still under construction.
Mr. ELLSWORTH. You might actually pay more money under a landing-fee system than on the present basis, but you would prefer that in order to really know what the score was, I take it.
Mr. RAMSPECK. We prefer the landing-fee system over the gasolinefee system because it can be fixed and definite, subject to negotiation for fixed amounts per landing. Then, if the air line wants to increase its schedules, why, of course, they can do it, and they know what it is going to cost them. We object to the gasoline charge for the simple reason that it bears no relation to the services we receive at a particular airport, and the amount of gasoline we take on is dictated by many factors.
It is dictated there by the length of the next hop, for instance. If a plane is going from here to the State of Oregon, they may make only one stop at Chicago, and they would take on a lot of gasoline at Chicago, all they could carry. Well, another plane would come along and they were going only from Chicago to Des Moines, and they would not take on near às much gasoline; so it is not an equitable method. And then we are in this different situation as compared to any other users of the airports. The schedule air lines are the only people who use an airport who cannot stop using it without permission of the Civil Aeronautics Board.
A private flyer can fly in, and if he does not like what they charge, he will go somewhere else and so can the nonscheduled operator.
Mr. ELLSWORTH. This bill has only to do with scheduled carriers? Mr. RAMSPECK. Yes, sir.
Mr. ELLSWORTH. All other people, the airport can do what they please?
Mr. RAMSPECK. That is right.
Mr. ELLSWORTH. Is gasoline the only commodity or service that you are concerned with? Of course, everything is covered by the bill, but I wonder if the air lines were concerned with any other thing besides gasoline.
Mr. RAMSPECK. I am glad that you asked that question, because it brings to my mind a thing that I failed to mention. At the Washington National Airport several years ago the management of that airport undertook to force the air lines to buy their food that they serve en route from the concessionnaire at the Washington National Airport that operates the restaurant.
The air lines refused to do it because in their leases at the Washington National Airport they have the right to buy their supplies wherever they please. In order to get around it, one of the air lines, to avoid a row about it, put one of their own trucks in use to deliver the food into the airport and onto the planes; but there was an effort made there to apply this same rule to the food which is served to the passengers on the plane. One of the reasons we are so interested in this thing is that we know from experience of other people that if this system ever gets imbedded in the air transport system of this country, it is going to cost the traveling public millions and millions of dollars, because it is such an easy way to get money. Just like it has been applied to the automobile. I think the most over-taxed man in the world is a man who operates the motor vehicle, because it is so easy.
We have got counties in my home State that operate their entire county business off motor vehicle fuel taxes, and they do not levy any property tax at all. It is an outrage.
Mr. ELLSWORTH. I think that you will agree that if Congress should take this method of collecting away from the airports, along with it there should be some system worked out by those who understand the problems, and I think the air lines themselves probably should take the lead in it, so that the airports which undoubtedly need the revenue they are obtaining in this way would have some basis on which to establish landing fees which would make this type of operation successful.
Mr. RAMSPECK. They do have that now through the landing fees. The airlines are absolutely helpless about these landing fees. All they can do is to argue with the management about what they should be. They have got to pay them.
Mr. ELLSWORTH. Of course, you have landing fees and the service fee, too, and you do not like the system of the service fee. The argument is rather clear on that; but it does seem to me that the airports must need some additional revenue, and that that is a point of negotiation with the airports to increase the landing fee in place of this revenue.
In one way, I think that it might be argued that is the way the air lines ought to do that, independently and separately with each airport
Mr. RAMSPECK. They do. They negotiate a contract on landing fees with each airport.
Mr. ELLSWORTH. But make a part of that negotiation and part of the contract that there will be none of this monopoly business as an extra tax, that you want to pay it all in one chunk. Would not it be possible to eliminate a great deal of your annoyance brought about from this charge on gasoline or delivery or something else, would not it be possible to sit down and negotiate with the airport authority or owner in each case and say, “Now, if you will rid us of that, we will increase the landing fees so much?” And might that not be a better way of getting at it than by statute?
Mr. ŘAMSPECK. Well, that would be a pretty slow process I am afraid. What we are afraid of is that these big airports are just going to slap this on us and keep the landing fees, too. I think that that is what they have got in mind.
Mr. MILLER. I have just one question. I have wondered why an airport like Washington Airport, which is an expensive airport, puts in an elaborate system of fueling planes, and they speed up the service they give you and they have well-trained men to service or render that service, why are not they entitled to a profit for the service rendered as compared to an inefficient airport that has an old truck that runs up and ties you up for half an hour and puts the gasoline in, to be ridiculous, in gallon cans?
Mr. RAMSPECK. If they put in that system, they would be entitled to a fair profit. What we object to is being forced to buy our requirements for the operation of our planes from one supplier. There is where we get caught on the price, and when you have to take it through a central dispensing system, as you do here in Washington, you have either got to commingle your gasoline or else you have got to limit yourself to one oil company.
Mr. MILLER. Cannot you insist on the gasoline being up to a minimum standard?
Mr. RAMSPECK. You can, but if you take it from different suppliers, how are you going to hold anybody responsible if you get bad gasoline? How are you going to know who gave you the bad gasoline?
Mr. MILLER. Can you ever prove it other than testing each tankful that goes in?
Mr. RAMSPECK. If you are dealing with only one supplier, as the various air lines do, where they make their own contracts, you can do that. We object in principle to being circumscribed as to our right, as every other businessman exercises it, to buy his necessary requirements in the open market.
Mr. MILLER. Are not you in the same boat as the average automobilist who goes across the country, and be buys his gasoline and he depends on the sign? But I have been awfully suspicious when I paid for premium gasoline that I did not get premium gasoline.
Mr. RAMSPECK. That is a problem of fair business practices, and it may be violated sometime, but I think that we can rely on the oil companies who deal with the air lines to give us the specifications that are agreed upon. Of course, they do a big business, and if anything goes bad with the gasoline, they would be responsible. If you are traveling across the continent, you mix your gasoline and you could not tell which filling station you got the bad gasoline at, unless something happened to you immediately after you left the particular station.
But the principal objection we have, Mr. Miller, is that this system that is proposed to be put in by these big airports, of requiring us to use their systems of dispensing gasoline, is an interference and putting a burden on the right of any business to buy its necessary supplies in the open market. It is really creating a monopoly. That is what they are doing.
The air lines are already helpless enough in their operations. They must operate in the public domain, and they must land at particular airports, and they must pay whatever rentals are exacted from them there and whatever landing fees are exacted, and then to pile on one of their principal items of cost a gallonage fee which cannot be equitably charged for; it is charged on the basis of the number of gallons that goes into a tank at a particular airport. The airplane would be off that airport in a few seconds.
Mr. MILLER. If Washington Airport management wanted to be cussed and increased its gasoline 5 cents a gallon, there would be no redress at all?
Mr. RAMSPECK. Yes, sir. We do have at Washington, because we have the right in our lease to go out and buy it from anybody else.
Mr. MILLER. But, in one of these exclusive airports do any redress at all?
Mr. RAMSPECK. None at all.
Mr. DOLLIVER. That seems to be all. Thank you, Mr. Ramspeck, for your testimony.
We will now hear Mr. Paul Bermingham, member of the legal department of Socony-Vacuum Oil Co., 26 Broadway, New York City.
STATEMENT OF PAUL E. BERMINGHAM, COUNSEL FOR SOCONY
VACUUM OIL CO., INC., NEW YORK CITY Mr. BERMINGHAM. Mr. Chairman, I am submitting a very brief statement. It is the only one that I had sufficient time to prepare, with the short notice that I had of this hearing today. With your permission, I would like to amplify that statement, if I may.
This bill is apparently designed to change by law some of the provisions in the recently revised regulations of the Civil Aeronautics Administration, 113 Federal Register 1398, in respect of the sale and delivery of aviation gasoline at federally financed airports.
The new CAA regulations do rot prohibit the granting or operation of exclusive concessions for supplying aviation fuel at airports. It is provided, however, that the existence of an exclusive concession at an airport shall not prevent an air line from buying its fuel off the airport from any supplier it chooses and having such fuel delivered on the airport. A proviso to this privilege states that the airport owner or operator may require fuel so purchased off the airport to be handled in designated storage and distribution facilities on the airport "if necessary for the safe and efficient operation of the airport."
H. R. 6180 would change these provisions (1) by prohibiting an airport owner or operator from granting or exercising an exclusive concession for supplying fuel and other aviation products at airports, (2) by prohibiting the imposition of gallonage charges on fuel sold or delivered at airports except for services rendered, and (3) by prohibiting airport owners and operators from requiring air lines to use designated storage and distribution facilities at airports.
Objectives one and two are sound. In a competitive economy, air lines should be free to purchase fuel and other products from suppliers of their choice on or off airports. Also, they should not be saddled with unfair and unreasonable charges, having no relation to services rendered, for the privilege of buying supplies or having them delivered.
Objective three, which would bar the compulsory use of specified facilities is also sound even though in some cases the air lines are themselves responsible for situations resulting in the designation of such facilities. For financial and other reasons, air lines sometimes do not want to install their own storage and distribution facilities at airports for handling aviation fuel. They prefer to have such facilities installed and paid for by others with the understanding that the cost will be recovered through the imposition of a service charge on products handled by such facilities. Such an understanding may be augmented by a provision in the contract between the installer of the facility, that is, an oil company, and the airport owner to the effect that fuel delivered to the airport must go through the facility in question. However, cases of this general type are exceptional and when they do arise can, undoubtedly, be covered by contractual arrangements with the air lines under which investments made by others for the benefit of the air lines will be protected. Therefore, objective three is also considered sound.
I represent one of the large oil companies that is in the business of supplying aviation products to air lines throughout the country. We find ourselves rather in the middle on this issue between airport owners and operators and the scheduled air lines. However, in one respect the argument between these two opposing factions does concern us directly and very importantly; and that issue relates to the question of exclusive supply contracts at airports as opposed to free and open competition among oil-company suppliers.
Obviously, if we are going to follow the route of exclusive supply contracts, it means that companies such as mine will be 100 percent out of business at those ports from which they are barred under the local exclusive arrangement. Wholly apart from the inconvenience of attempting to maintain a country-wide distribution system for aviation products, we have the question of passing on to the air lines the charges that we must pay at each one of these ports where we are successful in acquiring the exclusive right to do business. That is a right, quite frankly, that we are not eager to have.
My company has been opposing the principle of exclusive supply contracts now for some years. We were instrumental in having the Civil Aeronautics Administration in the first instance adopt a rule that would prohibit such arrangements, and we have continued to fight for that principle ever since. We feel that we have done a good