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job in a competitive market and we have produced a fine gasoline, and we maintain research facilities for improving it at all times. We think under a competitive system we have given the air lines the benefit of prices that they would not otherwise receive, and we prefer to continue to do business under that basis, which is in accordance with the American way of doing business.
The second point of this bill on which Mr. Ramspeck has spoken at some length relates to the charges for so-called delivery services or supply services rendered at airports. As he pointed out, all of those charges that the oil companies are called upon to pay for the privilege of doing business at airports are passed on to our customers. The air lines pay them in the last instance. So that, theoretically, we become merely a collection agency, and you might say that it is no concern of ours. However, we feel that it is, because the air lines are our customers, and we want to be in a position of doing the best job for them that we can.
I should explain that there are two ways of supplying aviation products in airports. Under one system, the oil company does business directly on the airport. We have an installation there, and we bring our products in and store them in tanks that are leased or licensed to us, and from those tanks we make deliveries by airport tenders into planes. We are a lessee of the airport, and we have absolutely no objection to paying our fair share of the charges on those airports where we do business in that way.
We think that such charges should be based on the amount of space that we occupy and that we should be charged for that space an amount proportionate to the total expenses of the airport. We are asking no favors, and we want no subsidies. We are willing to pay our way. That is one method of doing business.
A second method of operating is for the air lines or someone else, perhaps the municipality that owns the airport, to engage directly in the distribution of the product, and the oil company in that type of operation does nothing more than drive its truck on the airport to make a delivery to its customer, an air line, and from that point on, the product is stored, distributed, handled, and delivered by someone else through facilities that are operated on that airport.
It is in that type of situation that we object very strenuously to paying what is called a delivery or service charge for the privilege of driving our truck on that airport. There have been two cities that have attempted to impose just such charges on us. They may not sound very extensive when you talk in terms of 1 cent or 2 cents or even 3 cents a gallon, but when you consider that one of these large transports can haul from 5,000 to 6,000 gallons of gasoline, and you propose to charge us what amounts to several hundred dollars for the privilege of putting that truck on our field and emptying its contents irto a storage tank, it becomes, it seems to me, exorbitant.
It is that type of charge that Mr. Ramspeck is objecting to, because it bears no reasonable relationship to any service that is performed for
We have no objection, as I said before, to paying a charge that is based upon something that is done for us on the airport, but when you ask us to pay what amounts really to a tax, we think that it becomes unreasonable, particularly on our customers, against whom we have no recourse but to attempt to pass it on.
The main objection to the principles of this legislation seems to be that it would impose a strait-jacket on local managements, would result in the CAA holding a club over the heads of local airport operators on what have been described as purely economic matters. I confess that I fail to see or appreciate the reason for that type of argument. If it is a strait-jacket that is being imposed on local airport managements, it seems to me that it is exactly the type of strait-jacket that is imposed on practically every type of business activity that I can think of.
My own oil company is prohibited by Federal statute from engaging in monopolies or monopolistic practices, and it would be foolhardy for us wholly apart from the law to attempt as a business matter to levy charges on our customers that bore no relationship to any services performed by us; and it would be equally foolhardy for us to attempt to say to our customers, “This is the way the product is going to be delivered and you have no choice but to use those facilities."
Yet, it seems to me that the opposition to this type of legislation is based on the opposite of those very principles. When you oppose this legislation, you are, in effect, saying that local airport managements contrary to any other type of business activity should be permitted to engage in a monopoly. They should also be permitted to levy charges that bear no relationship to any services they may perform for those who use the airport, and finally, they should be permitted to designate a particular type of facility, and regardless of its convenience, suitability, or the charges in connection with it, say to a particular line, “This is the one you must use.
It is because we are opposed legally and economically to that method of doing business that we very emphatically support this type of legislation.
Mr. BUSBEY. Mr. Bermingham, will you yield there for a thought? I was wondering, if we granted the municipally owned airports this type of monopoly, would not there be a tendency for political considerations and political favoritisms to creep into granting the concession to who is going to sunply the gasoline?
Mr. BERMINGHAM. I am afraid that that is all too true; yes.
I am here, as I said, to speak on behalf of my own company, which is Socony-Vacuum Oil Co., and I am not authorized to speak for any other part of the industry. However, I do know what the policies of the industry are as reflected through their association, the American Petroleum Institute. This question has been considered at great length by the API, and its board of directors not so long ago passed unanimously a resolution on these very questions. With your permission, I would like to close by reading this very brief statement of the principles advocated by the American Petroleum Institute. I am quoting:
All conduct of aviation business, including specifically the sale of aviation petroleum products and services relating in any manner to aviation at a public airport, should be reserved to private enterprise. Free and open competition should prevail in the operation of all business establishments on and connected in any manner with public airports. This means the prohibition of any exclusive concessions which would result in discrimination or monopoly.
The sale, storage, or delivery of petroleum products at a public airport should not be burdened by gallonage charges or other special fees. Where a charge is made for the use of property or facilities for dispensing petroleum products, it should be on the basis of a flat rental, reasonably commensurate in amount with the rental charge to other lessees.
Mr. DOLLIVER. Are there any questions, gentlemen? Mr. HESELTON. Mr. Bermingham, I suppose that one can differ with another person without necessarily imputing any particular motives to the opinions expressed, and I hope that you will consider the few questions I want to ask you in that light.
Mr. BERMINGHAM. Certainly, sir.
Mr. HESELTON. Not with reference to your own company, but with reference to the industry as a whole, is not the sale of gasoline a very profitable portion of the business done?
Mr. BERMINGHAM. Is not the sale of gasoline very profitable, you mean? I would say the sale of gasoline is probably the most profitabl part of our petroleum business.
Mr. HESELTON. I am not sure whether the sale of aviation gasoline as distinguished from motor gasoline or ordinary gasoline is more profitable or not. Do you have any knowledge of that?
Mr. BERMINGHAM. On the basis of my experience, which I will have to say is not directly concerned with the marketing of these products, but through my connection with the company I represent, I would say that the sale of aviation gasoline is not as profitable as the sale of motor gasoline. I might go so far as to say this.
Mr. HESELTON. Is that due to volume, or what other factor?
Mr. BERMINGHAM. I think the main factor is the strong purchasing power on the part of these air lines. I will have to give them credit for having very astute buying organizations, and they do a good job on buying gasoline on a competitive market.
Mr. HESELTON. I asked that question for this reason: There is no question but what your company and other companies in your business are paying very substantial Federal taxes. That is true, is it not?
Mr. BERMINGHAM. That is true.
Mr. HESELTON. And maybe we have gotten ourselves into a tangle from which we cannot extricate ourselves, but it seems crystal clear to me that your company has a direct interest in doing the thing that has been discussed this morning, and that is developing a sound method of placing these publicly owned airports on a self-sustaining basis, even if you disregard the profit.
Mr. BERMINGHAM. Yes, sir.
Mr. HESELTON. To that extent you said that your company wished to pay a fair part of the operation of airports generally.
Mr. BERMINGHAM. That is right.
Mr. HESELTON. You have indicated that possibly it might be developed on a space basis.
Mr. BERMINGHAM. That is right.
Mr. HESELTON. Now, I have some difficulty understanding that in terms of what I believe to be the space occupancy of the oil companies at an airport in contrast to the space occupied of other individuals using the airport. For instance, there may be a restaurant on the airport, and I assume that that restaurant might very well occupy as much or more space than an individual oil company would occupy in selling its products.
Mr. BERMINGHAM. It might be.
Mr. HESELTON. Then how would you relate a rental charge for space to a fair proportion of the operating costs of that airport, assuming that to be the case?
Mr. BERMINGHAM. Well, on your assumption, it would seem to me that the restaurant, if it is going to occupy more space than a particular oil company, should be expected to pay a larger rental.
Mr. HESELTON. Let us make another assumption. Suppose the restaurant is operating on half of the profit basis that the oil company is, would that be a fair formula to use?
Mr. BERMINGHAM. Well, I suppose we would have to recognize that there would be other considerations that would enter into the computation of a rent. I think, however, that the basic point should be the amount of space occupied. Now, from that you may have to make exceptions or additions, depending upon the type of business activity you are discussing.
Mr. HESELTON. I wondered if you did mean that that was the standard you felt most fair to establish a fair charge.
Mr. BERMINGHAM. As a basic principle, I think it is.
Mr. HESELTON. Now, let me ask you this question: Do you agree in principle that all users of a given installation, of a given airport, should contribute in some manner, whatever the formula is, so that that airport built on public funds should be placed as soon as possible on at least a self-sustaining basis?
Mr. BERMINGHAM. I do, yes, sir.
Mr. HESELTON. You would be perfectly willing, or your company, as a substantially interested party in that sort of a project, would try to work out a scheme by which the air lines and the oil companies and everybody else who uses that for a profit themselves would be willing to establish a formula that would place those airports on a self-sustaining basis? Mr. BERMINGHAM. Absolutely. Mr. HESELTON. That is all, Mr. Chairman. Mr. DOLLIVER. Are there other questions?
Mr. MILLER. I have just one question. I cannot understand, you take the case of a city-owned airport and the manager called for bids among the various oil companies to supply that airport with aviation gasoline; the company supplying the gas uses the airport-owned facilities and the equipment that is put in there for the servicing of planes and all of that; and he may award that contract for a month and then call for new bids. Why does that violate our competitive system?
Mr. BERMINGHAM. Because during that 1 month, if it is just 1 week that you will have one company in there to the exclusion of all others, you have a monopoly.
Mr. MILLER. It is not an unusual type of monopoly. Is it any more a monopoly than the air line has? I go to a city-owned airport, and I might prefer to fly on airline C, but airline A has a monopoly.
Mr. BERMINGHAM. Well, is it not true that between most of our major cities, there is competition among the air lines? It might not be true at Hartford, I do not know.
Mr. MILLER. I do not know about most of them; I would say that in most of them, it was not true.
Mr. BERMINGHAM. Do not you have a choice between New York and Washington and New York and Chicago and so on?
Mr. MILLER. You do at New York and Washington, but at New York and Washington you have a choice of gas, too.
Mr. BERMINGHAM. That is right.
Mr. MILLER. In a comparatively small airport like the city of Hartford, with a relatively small and not too active an airport, they do not need a whole lot of equipment, and one servicing unit operated by the city is ample and adequate to meet all of the demands of the air lines that come in there. I do not see anything unusual about that airport management contracting with one oil company, and as a matter of policy, I do not think that you should make it permanent, and you should call for bids frequently.
Mr. BERMINGHAM. There may be nothing unusual with it, and if the city of Hartford in its operation of the airport wants to go into the business of distributing petroleum products, I would have to say that I would not like it, and I am opposed to it because it means a governmental agency competing with private enterprise; but wholly apart from that, under this statute all that we are asking is that a. particular air line should not be required to buy its gasoline from the city of Hartford. If the city of Hartford wants to go into the gasoline business, why should it not be willing, even with all of the changes it gets from being a municipal operation, why should it not be willing to compete with Socony and Shell or anybody else that has customers on that field that may want to use the gasoline from one of those companies?
Mr. MILLER. Is it not true that you can get a much more efficient system of servicing planes by installing a system such as they have at National Airport than the old system of having the trucks run on the field?
Mr. BERMINGHAM. There may be lots of efficiencies that you will accomplish by doing away with the competitive system, but we are trying to enforce that system in this country. The Department of Justice and the Federal Trade Commission are vigorously protesting at all times anyone who departs from that method of doing business, and the Supreme Court is giving its utmost cooperation in seeing to it that those principles are adhered to.
Mr. MILLER. I cannot see where the monopoly comes into that kind of a situation at all.
Mr. BERMINGHAM. It is monopolistic if the city of Hartford says to the air lines using the field, "You must buy your gasoline from us."
Mr. MILLER. This is the facilities used for the servicing of the planes.
Mr. BERMINGHAM. Including a particular type of gasoline.
Mr. BERMINGHAM. During that month or 2 months, everybody else is excluded from doing business on your field, which to my mind meets all of the tests of a monopoly.
Mr. MILLER. I have not made up my mind on this bill. I am just asking the questions that come to my mind, and I am trying to clarify it. You take the American Woolen Corp., every month they call for bids for gasoline, and they get their specifications and they award the contract.
Mr. BERMINGHAM. That is right.
Mr. MILLER. They are not excluding any other companies. That is simply their decision for that month.
Mr. BERMINGHAM. The American Woolen Co. is a consumer, and it is making up its own mind whose product it wants to use on the basis of the competitive bids received by it, and it makes its selection