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any fees or taxes except such fees as represent fair and reasonable compensation for cost of service, and except for taxes imposed by the airport owner or operator upon business organizations generally in the taxing jurisdiction. It would also provide that the air carrier shall not be required to use any storage, dispensing, or delivery system, equipment or facilities operated by, or under contract with, the airport owner or operator.
The proposed provision would regulate substantially the same activities as are presently covered by regulations of the Administrator of Civil Aeronautics (title 14, Federal Regulations, pt. 550, appendix C, pt. III), two copies of which are enclosed for your information. H. R. 6180 would be more limited in its coverage than the current regulations in that it would apply only to scheduled air carriers using the airports, while the regulations encompass all users. On the other hand, it is less limited than current regulations in that it would also apply to purchasers of personal property such as food and beverages, while the regulations do not cover such purchases. The proposal would give to the scheduled air carrier a choice of whether or not he would use the storage, dispensing or delivery system designated by the airport operator, while the regulations do not require that user be given discretion in this matter. Insofar as scheduled air carriers are concerned, the proposal would substantially alter those portions of the CAA regulations which would appear to be in conflict.
The Department of Commerce has considered the proposal and has the following objections to the bill:
(1) The provision here proposed should be effected as regulations of the Administrator of Civil Aeronautics, rather than by means of permanent legislation. Economics of the aviation industry, are subject to continuous changes, and the Administrator is able to continuously adjust the regulations within the limits of flexibility permitted under the Federal Airport Act in step with economic changes. If the control were in basic law, inequalities which arise as a result of economic changes and affecting an air carrier or an owning agency could not be promptly corrected.
(2) It would take from municipalities and other sponsors of airport projects certain privileges which may be required for the economic success of the airport. The current regulations of the Administrator do not endanger these privileges and at the same time, protect the interests of airport users by not allowing discriminating practices or unreasonable terms to exist.
(3) It would grant to a certain class of airport users, the scheduled air carriers, privileges not enjoyed by other classes of airport users such as fixed base, charter, nonscheduled and intrastate operators.
The Department is aware of the existence of conflicting interests with regard to the problem here considered. There is a vital need for new airports and the financial success of such developments is therefore essential. In encouraging these developments, however, the protection of air carriers from discriminating financial burdens which would limit air line expansion and development must also be considered. It is the opinion of this Department that the proposed bill would not maintain as equitable a balance of these interests as is maintained under regulations of the Administrator of Civil Aeronautics, and that if any modification of this balance is found necessary due to changes in circumstances, it could better be accomplished in the interests of flexibility by amending the regulations. In view of these considerations, the Department of Commerce is unable to recommend enactment of H. R. 6180.
We are informed by the Director of the Bureau of the Budget that there is no objection to the submission of this report for the consideration of the committee.
If we can be of further assistance to the committee in this matter, please feel free to call upon us. Sincerely yours,
WILLIAM C. FOSTER,
Acting Secretary of Commerce. Mr. DOLLIVER. The first witness is the Honorable Robert Ramspeck, executive vice president of the Air Transport Association of America, 1107 Sixteenth Street NW., Washington, D. C.
STATEMENT OF ROBERT RAMSPECK, EXECUTIVE VICE PRESIDENT
OF THE AIR TRANSPORT ASSOCIATION OF AMERICA, WASHINGTON, D. C.
Mr. RAMSPECK. Mr. Chairman, my name is Robert Ramspeck. I am executive vice president of the Air Transport Association of America, the industry association of the scheduled American flag air lines. Included in our membership are the air lines which furnish substantially all of the scheduled domestic and international air service operated by American flag air lines.
Section 11 of the Federal Airport Act enumerates the assurances which the Administrator of Civil Aeronautics must obtain from the municipality or other public agency seeking funds under the act, as a condition precedent to his approval of Federal assistance. H. R. 6180 amends section 11 by adding thereto one additional requirement for this approval. As we understand the bill, it is designed to guarantee that air carriers operating from airports on which Federal funds are expended under the act shall have the right to obtain supplies, equipment and materials from suppliers and vendors of their choice, without payment of surcharges or special taxes upon such transactions. Stated differently, the bill, as we interpret it, has as its purpose the prevention of exclusive concessions or monopolies for the sale or delivery of supplies, equipment and materials needed by air carriers, or surcharges or special taxes thereon.
This association strongly supports this bill and urges its passage by the Congress at an early date.
The air lines urgently need the safeguards provided by this bill. In my statement this morning, I shall address myself principally to concessions at airports for the sale or dispensing of aviation fuel, and to surcharges and special taxes on such sales or delivery. However, my remarks are equally pertinent to the furnishing, at airports, of other air-line supplies and equipment. Aviation fuel has received the most attention of airport managements because of the quantity of the fuel delivered at airports and, consequently, the large amount of money involved.
The air lines are unanimously and vigorously opposed to exclusive concessions at airports for the sale or dispensing of aviation petroleum products, whether the monopoly is exercised by the airport management itself, or granted to another person. They are equally opposed to the imposition by airport managements of surcharges or special taxes or fees on aviation fuel sold or delivered at airports-so-called gallonage charges—other than charges which represent reasonable compensation for services rendered with respect to such gasoline.
Monopolies for the sale of aviation gasoline: I should sike to turn for a moment to the undesirability of monopolies at airports for the sale of aviation gasoline.
Such exclusive concessions or monopolies remove the factor of competition among oil companies which has always been found to be the best guaranty of reasonable prices, satisfactory products and adequate service to the air lines. Moreover, such an arrangement results in making the air lines using a particular airport dependent upon one source of supply, which increases the danger of interruption of service, with a resultant hardship to the public.
Secondly, if an air line is forced to buy gasoline at an airport from the concessionaire, it has no control over the specification of the fuel purchased, nor over the manner in which the gasoline is dispensed, and the aircraft serviced. In public opinion, if not at law, the air lines alone, and not the concessionaire or the airport management, are charged with the responsibility for the safe operation of their aircraft. There cannot, consistent with safety, be any restriction on their freedom to select the product of their choice and the supplier of their choice.
Thirdly, the oil companies frankly admit that the amount which they, as concessionaires, have to pay for the monopoly, is passed on to the air lines supplied with gasoline at the airport concerned. This additional cost to the air lines must be recovered by increased charges to the traveling public or increases in mail pay. In the latter contingency the result is that the Federal Government is granting additional subsidy to the airport concerned, over and above Federal expenditures made under the Airport Act.
Fourthly, perhaps the most serious objection to the granting or exercise of monopolies for the sale of aviation gasoline is that, if the practice receives general acceptance, the air lines will completely lose control of one of the most important items of their operating costs. Increases in gasoline costs would result from the fact that the air lines bear the cost to the concessionaire of obtaining the monopoly, and also because the air lines could no longer obtain the price advantage of so-called system contracts with suppliers. By such contracts they have been able, due to the large volume contracted for, to obtain advantageous prices. However, the most serious aspect of this situation is that, in the final analysis, the price which an air line would have to pay for gasoline at an airport would be completely out of its control, and would depend upon the price the concessionaire had to pay for the monopoly, or, if the monopoly were exercised by the airport management, upon the amount of revenue which the latter desired to raise from this source. The air lines are not free, as are most business enterprises, to "take their business elsewhere" to avoid excessive prices.
I would like to interpolate there, Mr. Chairman, to emphasize the fact that the scheduled air lines being certificated to a particular airport must serve that airport, and if conditions there are not fair to them, they are more or less helpless. The only recourse they would have would be to go to the Civil Aeronautics 'Board and ask for permission to suspend the service at the airport.
Moreover, they are seriously restricted in their ability to avoid excessive gasoline prices by refraining from buying gasoline at airports where such prices are charged. Safety requirements, of course, must be observed in determining the amount of gasoline to be purchased at a particular airport. Moreover, sound economy requires that the available pay load, and not the desire to avoid excessive price, ahould determine the gallonage taken on at a given airport.
Others testifying on this bill may take the position that there is no need for an amendment to the Federal Airport Act to prevent monopolies or exclusive concessions for the sale of aviation fuel, inasmuch as the present regulations under the Federal Airport Act prevent such monopolies. The present regulations apparently are designed to prohibit the exercise or granting, by the airport authority, of any right or privilege which would operate to prevent any air line using the airport from purchasing aviation gasoline off the airport from the supplier of its choice.
The original draft of the regulations, which appeared in the Federal Register on September 7, 1946, permitted monopolies for the sale of aviation gasoline at Federal aid airports. This provision drew such strong and adverse criticism that it was removed from the regulations as finally promulgated on January 9, 1947, and there was substituted a provision prohibiting airport authorities from granting such privileges. However, when the proposed revised regulations were released by the Civil Aeronautics Administration on December 31, 1947, the provision in question was again changed to permit the airport authority to exercise in its own right, or to grant to another person, a monopoly to sell aviation gasoline or oil at the airport.
When the revised regulations were released in their final form on March 18, 1948, that is, in the form in which they are now in effect, they were again changed to permit airport users to purchase, off the airport, supplies--presumably including gasoline-necessary for the servicing of their aircraft.
In view of the importance of this matter to the air line, and in view of the fluctuating position of the Civil Aeronautics Administration with regard to it, we strongly support the congressional action contemplated in H. R. 6180, which forbids, at Federal aid airports, monopolies for the sale of aviation fuel. Our members would appreciate final settlement of this issue. They would like very much to be relieved of the necessity of periodically filing briefs and objections with the CAA, and instead devote their undivided attention to operating their air lines.
Monopolies for the dispensing or delivery of aviation gasoline: The effect of the present regulations under the Federal Airport Act is to permit the managements of airports on which funds are expended under the Federal Airport Act, to exercise or grant what might be called an exclusive concession or monopoly to dispense or deliver aviation gasoline. I stated previously that the present regulations permit airport users to purchase off the airport their requirements of aviation fuel. The regulations, however, contain a proviso permitting airport managements to require persons furnishing their own aviation gasoline and oil “to utilize such storage, dispensing, and delivery system as the sponsor,” the airport authority, "may designate.” This monopoly for the storage, dispensing, and delivery of gasoline on the airport, can, under the regulations, be exercised by the airport authority itself or be granted to another person. The regulations also permit the airport authority to charge a fee for this service or to charge the concessionaire for the privilege granted to it.
The most serious objections which I mentioned previously against the granting or exercise of exclusive concessions for the sale of aviation gasoline or oil at airports, are equally applicable to the granting or exercise of exclusive concessions for the storage, delivery, or dispensing of such products.
Monopolies for the latter type of activity would, for all practical purposes, result in the loss by the air lines of control over the cleanliness of the gasoline and the manner in which it is dispensed and the aircraft serviced. As stated previously, since the safe operation of aircraft is the responsibility of the air line, there cannot, consistent
with safety, be any interference with its control over the manner in which its aircraft are serviced.
Moreover, in the final analysis, the in-plane cost of gasoline at any airport on which a storage or dispensing monopoly exists, will be completely out of control of the air line, and will depend upon the price the concessionaire had to pay for the monopoly or, if the monopoly is exercised by the airport authority, upon the amount of revenues which it desires to raise by this means.
As we interpret H. R. 6180, it is designed to prohibit monopolies for the storage, dispensing, or delivery of gasoline on airports on which Federal funds are expended under the Federal Airport Act. We strongly support this safeguard.
I would like to now discuss surcharges or special fees or taxes on aviation fuel sold or delivered at airports.
H. R. 6180 also is designed to prohibit, on airports on which Federal funds are expended under the Federal Airport Act, the imposition, on the air carriers or their suppliers, of surcharges or special fees or taxes on the sale, delivery, or other similar activity with respect to aviation gasoline and oil. The bill does not purport to require exemption from taxes imposed generally in the taxing jurisdiction.
The air lines are firmly opposed to airport surcharges and special fees or taxes. Experience has demonstrated that, regardless of the form of the tax or the person on whom the tax is imposed, the financial burden is borne by the air lines.
Moreover, as in the case of concessions for the sale or dispensing of gasoline, the result of gallonage surcharges or taxes is that, in the final analysis, the cost of gasoline in any airport is completely out of the control of the air line, and will depend upon the amount of revenue which the airport management wishes to obtain from this source. As I have stated before, the air lines' ability to avoid excessive gasoline prices at any airport is very limited.
Regardless of how designated, gallonage fees are, actually, taxes on aviation gasoline. In those States in which aviation gasoline is subject to tax, the imposition of gallonage fees or taxes by airport authorities would result in multiple taxation of aviation gasoline, and certainly, unduly burdensome taxation on the air lines serving those States. In its Report on Multiple Taxation of Air Commerce (ř. Doc. No. 141, 79th Cong., 1st sess.), the Civil Aeronautics Board vigorously condemned State and local taxation of aviation gasoline as a means of airport financing.
The fallacy in using concessions for the sale or dispensing of aviation gasoline, or gallonage surcharges or taxes, as a means of airport financing, is that while they may be easy ways to raise money, they are obviously unfair ways. The amounts of revenue raised by these means represent charges which are passed on to the air lines in the form of increased gasoline costs. However, it is only by accident, if at all, that the amount of gasoline purchased by an air line at a particular airport bears any relationship to the use of the field by that air line. For example, air line X may have only three flights per week from a particular field, whereas air line Y averages 20 flights per day. However, X's three flights are trans-Atlantic flights, and are fueled for that operation at the airport, with the result that a large amount of gasoline is purchased by X. Y's flights, however, are short “merrygo-round” flights, and very little or no gasoline is purchased at that