(1) Reimbursement all moving and travel expenses for employee and family, including living expenses.

(2) Wage loss up to 2 days.

(3) Reimbursed for fair market value of home.

Senator CANNON. Next we have a panel. Mr. Ordway, would you please introduce the gentlemen that you have with you?

STATEMENT OF WILLIAM A. ORDWAY, DIRECTOR OF ARIZONA DEPARTMENT OF TRANSPORTATION, CHAIRMAN, AMERICAN ASSOCIATION OF STATE HIGHWAY AND TRANSPORTATION OFFICIALS STANDING COMMITTEE ON AVIATION; ACCOMPANIED BY HENRIK STAFSETH, EXECUTIVE DIRECTOR; AND BOB AARONSON, STATE AVIATION ADMINISTRATOR FOR THE MARYLAND DEPARTMENT OF TRANSPORTATION

Mr. ORDWAY. I am Bill Ordway, speaking today for the American Association of State Highway and Transportation Officials. I am Director of the Arizona Department of Transportation and the Chairman of the AASHTO's Standing Committee on Aviation.

With me is Henrik Stafseth, the Executive Director of that organization, and Bob Aaronson, State Aviation Administrator for the Maryland DOT.

I would like to just speak directly and not from the testimony, if I may. The testimony is short and I will try to be even shorter. AASHTO is concerned with regulatory reform from the top to the bottom of the aviation spectrum. We have taken a look at what we think are some very positive efforts.

The Cannon-Kennedy bill, the Pearson bill, a couple of us had a chance to look at the CAB proposal. I would think that all are very positive efforts, but as yet the 50 States have not agreed on a specific position as it relates to the upper end of the spectrum of regulatory reform except to agree that something has to be done to increase the competitive ingenuity of the carriers. We realize that these various proposals are attacking that.

Our real concern is that what we call the bottom end of the spectrum and that has to do with the small communities, the level that feeds the major national air system.

88-737 77 pt. 2 14

We are aware of your concern about this area, Mr. Chairman, and we would like to make some comments with regard to small communities today. I think that the point we would like to make is while there has been a tremendous loss of service from the local service carriers over the last few years and while that slack has been picked up to a large extent by noncertificated commuters, there still exists in some parts of the country, in a number of states, a real problem which we think can only be attacked by certificating commuters.

We are aware the CAB has made a noncertificate type of proposal. We think many aspects of that proposal are quite positive and we are pleased to see it.

In our view, the certification process for commuters is really the best way to go for a variety of reasons. Number one, it implies a Federal commitment to the small community, to the carrier itself.

It implies a continuity and stability which we think would not be there with some of the other proposals that have been advanced. We think also that the certification process does not need to be a costly process. It does not need to be a process that implies a lot of red tape regulation.

And in fact, it is our opinion that probably the certification process can end up being a simples and less workload process as far as the CAB is concerned.

We like this approach because what it does is address systems instead of individual route segments. I guess that would have to be one of the concerns we might have with the CAB proposal. We think there is strength and stability to be gained by trying to certificate a commuter carrier for a system instead of individual routing segments.

I think that one point we would like to make as an organization representing States is that we urge, and we would hope that Congress would urge the CAB as it tackles the small community third level problem, to consult with the States.

I notice in reading the CAB testimony last night that the States really weren't mentioned. It was consultation between the CAB and the local communities. We believe that working through the governors and the appropriate DOTs, the States can make a significant partnership contribution with the CAB toward solving the problem. Senator CANNON. I will have to go. We are in the middle of another vote. Counsel will finish up.

Thank you very much.

Mr. ORDWAY. In summary, Mr. Ginther, we feel that it is imperative that whatever legislation comes out of Congress this year tackle the so-called third level problem, the small community problem. And our suggested day of solving the problem is through simplified-I want to emphasize voluntary-certification of commuters.

We were fully aware there are a number of commuters in the country that don't want to have anything to do with certification. They are operating successfully. They don't need the help that subsidy can bring.

Either method, whether it be the CAB or the proposal we make, envisions joint fares, guaranteed loans and all those good things. Our position is that those amenities, if you want to call them that, come with certification.

There should be some sort of control if those privileges are going to be given. We don't consider the introduction of what is called a certificate as any more red tape than other proposals that have been made.

That concludes my statement.

Mr. GINTHER. Do you support that aspect of the CAB proposals which would over a period of 7 years relieve the local service airlines of the subsidy and the responsibility of service to small communities?

Mr. ORDWAY. Yes, sir. We believe that a phasing out of service— high subsidy cost service by the local service carriers over a period of time is the appropriate way to go. Whether 7 years is the appropriate time, we are not prepared to say.

On the face of it, that sounds reasonable. I hasten to add that we haven't had a chance to sit down and have serious discussion yet of the CAB proposal.

Mr. GINTHER. One of the suggestions raised from time to time. regarding small community service has been one in which the CAB and the States and/or regional bodies of government would form some sort of partnership in providing for local airline service including the responsibility to share in whatever subsidy need was apparent to assure the service.

Have you examined that concept? Have you any recommendations to make there?

Mr. ORDWAY. I would have to speak personally to do that. That has not been examined within AASHTO. At least, it was not the subject of our discussion. It has been discussed by the Conference of State departments of Transportation.

You would probably find a willingness for state involvement. At what level. I don't know. As our discussion showed, there is considerable difficulty with existing State statutes.

In our State, for example, constitutionally, money can't be advanced to a private carrier. Arguments have been advanced in these discussions that as long as you are attempting to tie in to the national system, that it should properly remain a national subsidy responsibility.

So I can't give you what AASHTO's answer would be. That would have to be taken up later.

Mr. GINTHER. How do you view the argument that a certification. program which would envision certificating 25 or maybe more commuter air carriers would severly strain the resources of the Board, that is, it would work a considerable delay, perhaps of many years, in achieving the final result?

Mr. ORDWAY. Well, certainly, Mr. Ginther, there has been plenty of delay so far. We happen to be experiencing it, as you probably know, within our state. What AASHTO suggests-AASHTO's suggestion, by the way, is consonant with a number of other organizations-National Governors Conference, National Association of State Aviation Officials, and so on-what we suggest is a simplified certification process.

Various ideas could be advanced. One of them that I am quite familiar with is that a carrier wishing to become certificated, if there are no protesting civic parties or no protest from another carrier, and if the carrier is fit, willing and able to the satisfaction

of the Board, be certificated without a hearing-to be certificated. within a relatively short period of time.

We believe that the hearing process is not necessary unless there is protest, as long as the carrier fulfills certain requirements. We think it can be greatly simplified as we see it, if the system approach is used for certification as opposed to the link-by-link or city pairby-city pair approach as suggested by the CAB where you are looking at a number of carriers bidding for a specific link. Actually the workload could be considerably lessened for the CAB instead of made worse.

Mr. GINTHER. Thank you very much, gentlemen. We appreciate you testifying and providing your views to the subcommittee. Thank you for coming.

We will be in recess until Monday at 10:30. [The statement follows:]

STATEMENT OF WILLIAM A. ORDWAY, DIRECTOR, ARIZONA DEPARTMENT OF TRANSPORTATION AND CHAIRMAN, STANDING COMMITTEE ON AVIATION, AMERICAN ASSOCIATION OF STATE HIGHWAY AND TRANSPORTATION OFFICIALS

Mr. Chairman and Members of the Subcommittee: I appreciate this opportunity to speak to you today on behalf of the American Association of State Highway and Transportation Officials as Chairman of its Standing Committee on Aviation. Our Association, as many of you know, is comprised of representatives of the transportation agencies of all 50 States for the purpose of "fostering the development, operation and maintenance of a nationwide integrated transportation system."

I suspect that all of us here today have witnessed first-hand in our lifetimes the ascendancy of aviation to a position of full partnership in the nation's transportation network, carrying a major responsibility for the socio-economic vitality that's made this country great. We've seen the unique contribution of aviation in many ways, not the least of which is its capability to provide the 20th Century with a speed of transport that sometimes boggles the mindin remarkable safety and within financial reach of many citizens.

It is truly an amazing story of a strapping, complex industry that's become of age, an industry that's given us the finest air transportation system in the world. And Congress now faces some tough and far-reaching decisions . . not unlike many a Legal Guardian at such a stage of development. I want to say at the outset that we of AASHTO are optimistic about the continually unfolding role of aviation in transportation... and we're eager to move on with you in new, promising, yet realistic directions.

We see these new directions as focusing on both ends of the air service spectrum: A revised and more efficient regulatory environment at "upper" levels that encourages increased competitive ingenuity among trunk and regional domestic carriers throughout the nation, yet does not ultimately lessen competition by creating market conditions conducive to mergers, acquisitions, and far fewer carriers . . . and an extension of federal support and encouragement to carriers at the "bottom" level in the broadening of the air service foundation that feeds the national system from the small community grassroots.

Both, we believe, are extremely important in order to offer more and more Americans the full benefits of air transportation.

We do not bring with us an endorsement of any particular reform proposal, but we compliment Senators Cannon, Kennedy, and Pearson for introducing their respective Senate Bills 689 and 292 for public debate. AASHTO is hopeful that the ideas presented at these hearings can be blended with these proposed bills to result in successful 1977 legislation that will benefit the entire top-tobottom spectrum of air travel.

Our testimony today will focus on breathing new life into air service at the small community level . . . to "complete" the air service delivery system in the nation with strengthened taproots to the outlying markets. Our views are consistent with those of the National Association of State Aviation Officials, and are also shared with many key organizations, including The National Governor's Conference and Conference of tSate Departments of Transportation. We are all aware that this most-local-of-all connection to the national system

has atrophied in recent years. Suspensions and deletions of scheduled service by certificated local service carriers to small communities have become common, Federal subsidies notwithstanding. It is our view that we can expect this problem to be magnified increasingly as free market forces gradually come more and more into play, as a natural eventuality of what now is essentially a bi-level national air service system of certificated Regional and Trunk carriers.

There's no mystery... the economics of air transportation dictate that the Local Service or Regional carriers cannot be all things to all people—an impossible role they've been cast in for many years. We can expect the growing number of regional jet fleets to reach out increasingly for more efficient region-wide service. And AASHTO believes they should do just that.

Meanwhile, there is a potential third level of the national system-the rapidly-growing Commuter/Feeder airlines-uniquely qualified to move into this critical local service void. They fly smaller, less costly aircraft than the larger airlines... they can be accommodated on runways requiring fewer capital dollars... their fuel efficiency is far superior for the small community, feedertype air operations . . . and their record for passenger safety is excellent.

But feeder airlines have little Federal recognition in the national system today and many of them desperately need the incentives available to CAB certificated carriers. . . recognition which would say to such carriers and the traveling public that their role is in the national interest and would make their vital services to smaller markets attractive to investors and aircraft manufacturers alike. This is the same type of commitment without which the Trunks and the Regionals could not have progressed to the point we find them today.

AASHTO is convinced full recognition of the Feeder industry in the country is sound economics because it scales small community air service to appropriate levels of equipment, facilities and public investment. And it strikes a major blow for the outlying towns that now are often isolated from the benefits of air service by many miles and accordingly disadvantaged in their aspirations for economic development. A linkup with the national air service system is a priority item with hundreds of such communities which find themselves increasingly frustrated under existing circumstances.

We do not believe that the contract approach for small community air service is a constructive step toward long-term solutions for either the industry or the outlying markets. The desired results will only come from a program that encourages continuity in market development by offering a solid opportunity to Feeder airlines to build an integral system of profitable service, sustained by an aircraft industry that sees helping equip them as good business. Short-term profiteering will not built this type of firm foundation.

Here are some of the elements AASHTO believes are necessary to truly bring about a tri-level national air service system that functions efficiently at all levels, in keeping with new directions in orderly regulatory revisions :

Establish provisions for limited certification for only those Feeder airlines desiring it-for not all airlines in this class do.

Provide for simpler, quicker certification procedures that minimize the delay and expense. We'd recommend that those carriers already providing adequate service and meeting certain qualifications and requirements to be provided for with a simple application to the CAB.

Make Feeder air carriers eligible for Federal subsidy where public necessity and market development indicate the need.

Give the CAB authority to limit the size of Feeder aircraft as determined in individual cases.

Offer appropriate route protection of certificated Feeder airlines who are making an investment in developing smaller markets.

Permit the Feeders to get out of unprofitable route commitments before costs eat them alive, say on 90 days' notice.

Require full joint fare privileges between these airlines and the Regionals and Trunks.

Grant third level carriers the same loan guarantees available to other certificated airlines for acquiring modern equipment that offers the passenger comforts.

Allow a year following passage of these provisions to rationalize the present air system to establish points as the nucleus of a third level Feeder Air Carrier system.

Direct the CAB and FAA to modify existing rules and regulations to this new class of Feeder carriers.