Senator MONRONEY. This is always a question of when people want to travel they want to travel, and they are penalized by working in companies that must arrange long ahead of time and very often this comes at a time when the airlines are running at their capacity for scheduling.

Mr. MONTGOMERY. We should bring the figures up to date this year for you, Mr. Chairman, because as you know we have been working under some difficulties. High-placed authorities have said that the general populace will not travel to Europe this year. That has had a distinct effect.

Senator MONRONEY. You also run to Latin America.

Mr. MONTGOMERY. Yes.

Senator MONRONEY. They say travel to Latin America.

Mr. MONTGOMERY. If we had hotel rooms, we would be in good shape. Senator MONRONEY. Senator Cannon?

Senator CANNON. Thank you, Mr. Chairman.

Mr. Montgomery, I want to congratulate you for a fine statement here. I think your company does a tremendous job, and I am inclined to agree with the chairman, however, that in view of the competitive. aspects that you pointed out here you actually show that you are outcompeting the supplementals.

I don't know why you are so much concerned about this particular situation. I think that we might again be missing the point that I tried to make with Mr. Tipton, when I drew the analogy of the old closed-door restriction, because I think actually what you are seeing here is a condition that is going to promote more business for you and for all the other trunks as well as for the supplementals.

We have a study here that I think is going to be made a part of the record-it was furnished the chairman. This is a survey which was conducted between May 3, 1968, and May 20, 1968, and it showed that-and these were on promoting new travel markets on this allinclusive-tour situation-20 percent had never flown before; 46 percent said they would not have taken the trip to Hawaii if the low-cost inclusive-tour charter was not available; 60 percent were more than 50 years of age; and 32 percent of the passengers were over 60 years of

age.

The inclusive-tour passenger on the average is considerably less a flight passenger than the typical Hawaiian visitor. To me that points up that we are opening up completely new markets here and stimulating people to travel that might have never been stimulated before.

You pointed out in your statement here, "Pan Am currently offers the choice of 443 tours day after day to passengers desiring to visit Hawaii." That's good. You do offer it from certain points, and you have interconnections that permit you to serve other points.

But I am impressed by the statistics that were furnished yesterday from States that have no trunkline connections. For example, and if I may be a little parochial about this, a number of these supplemental tours go through my hometown, Las Vegas, Nev. Unfortunately you don't serve that. I wish you did. We would be glad to have you in. If you want to make an application, I would be glad to put in a word for

you.

Many of the States that were the initiating point of the tours for the supplementals were States where we have no good trunkline connec

95-299 0-68- -8

tions. If you put all the trunks together, you wouldn't have good trunkline connections to some of these States, particularly at some of the points of origination.

If you can sell to a market that doesn't have an easy connection, an easy through route, and you can sell to a group of people through your travel agent and say, "Look, here we are going to take a group and we are going to leave from here, which is Podunk, and we are going to go and fly from Las Vegas, Nev., we are going from there and fly to Honolulu, we are going from there back to San Francisco and back to Podunk or whatever connection you want to make," you are going to have quite an inducement, I believe, to some people that might be in this 20-percent category that have never flown before or the 46 prcent that said they would never have gone there had they not had this type of thing available.

I think in the long run you are going to find, as I said on the closeddoor restriction, that business begets business, and you are going to have a lot more people traveling on your line as a result of these types of promotional activities.

Don't you think there is some validity to that position?

Mr. MONTGOMERY. Senator, I read that survey, too, of course, from the testimony yesterday, and the only thing which truly surprised me about it from my experience is that only 20 percent said they had never flown before.

It is precisely for this kind of development reason that we for all these years have been concentrating on tour sales. To us the tour sale is the new passenger. The new traveler likes to have everything packaged for the first or second time he goes. We find by our surveys that after that he figures he can do it himself and he goes on what we call a FIT basis not on the package basis. (Free Independent Traveltour arrangements without an escort and not belonging to a group.)

The figures of increase in States like Kentucky are, of course, encouraging and we long to see this same thing. We had a steep increase from Oklahoma last year, with some good reason. But the bases on which these percentages are figured are small.

We have the Hawaii Visitors' Bureau figures, we get them each month, and they do not represent too much in terms of passengers. The characteristics of an area as far as Hawaii has been the west coast primarily and some areas around Chicago and the east coast. We love to see these increases. We are doing this kind of thing ourselves.

We have attached a 707 the other day to go around the Midwest just to publish the availability of international airline service.

You mentioned in the beginning, Senator, why we were concerned. I hope I have developed that we are concerned about this European situation which we have watched for years rather helplessly because we are not involved as much as we like to be in it. We are watching now the Hawaii situation, but perhaps most of all we are watching our declining profits, and we have a real and lively fear that our ability to provide a scheduled pattern which we are presently providing might be curtailed.

Senator CANNON. I think the Board, though, is in a position to keep a close eye on this. In the first place, the inclusive-tour authority is temporary, and the Board could change that if and when they wanted

to.

Second, the Board must authorize a tour. This means that if the

Board sees that there is an unfair economic advantage being granted or an unfair economic hardship being imposed on someone else, the Board is in a position to take action on that. I think they have been very responsive in the past. That has been my experience with them. I wonder-I asked Mr. Tipton this do you have any statistics that would show the percent of people on inclusive-tour charters on your lines who traveled either individually or as couples as distinguished from the tour groups themselves?

Mr. MONTGOMERY. Senator, we don't operate ourselves inclusivetour charters. The inclusive tours we have been talking about have been riding on our scheduled services.

It is a little difficult to answer your question because in the process of our development, and in order to make sure that we didn't suffer too much diversion from our normal fares, we have imposed a restriction on most of our inclusive carriers around the world. They are affectionately known as ITC's (Inclusive Tour Charters). Those groups are made up actually of individuals. They do not have any affinity or anything like that.

I can supply-I thought I had them with me, but I don't-the results of the most recent port authority survey of the North Atlantic run, which has not yet been published, showing the numbers of passengers who cross the Atlantic alone, in groups of three, four, five, six, and

more.

(The information referred to follows:)

Pan Am surveyed its traffic on the New York to London Trans-Atlantic route for the year 1967 and found that 11.2% of its passengers traveled under group fares.

Senator CANNON. That might be helpful. I am sorry when I used the term "inclusive tour charter" I didn't intend that the charter was operated by you. I meant inclusive tours for people who travel individually as distinguished from groups.

As you state there, you actually discourage the large groups because you are not really in a position to handle them. Isn't that correct? Mr. MONTGOMERY. No.

Senator CANNON. You said you discouraged them. Why is it you discourage them?

Mr. MONTGOMERY. I haven't made myself clear. We did feel when we took the further big step at the wrong conference of reducing the transatlantic fares, to take one example, we did feel before we put in a fare of $230 London-New York round trip, we had to protect that fare against undue diversion so that all the businessmen, the others who were going in any case, would not immediately switch to that fare and the airlines would merely suffer the diversion and not enjoy the promotional effect of the fare. That is what I meant. But we are deeply in the charter business ourselves, Senator. We have pulled some of the largest movements around the world by any carrier, between some 5,000 and 6,000 Gibson dealers and distributors to Hong Kong a couple of years ago. We will take the groups whether they be large or small in all aspects of this business.

Senator CANNON. Thank you, Mr. Chairman.

Senator MONRONEY. Thank you, Senator Cannon.

I am glad to know about Oklahoma coming forward in travel. I might suggest, however, that sometimes competition makes more business for everyone because TWA very graciously has a departure for

Rome from Will Rogers International, and they have had that for several years, and it goes to show if you have one line doing well, then the people think more of travel, and so we are now able to supply you with more passengers. I think this is the same thing except you happen to be scheduled airlines.

I have no further questions. We thank you for your patience and for the clarity of your testimony, sir.

Mr. TIPTON. Mr. Chairman, I have used up a lot of the committee's time, but may I have one second because I left the impression with you when I testified that in discussing the statements on the floor of the Senate with respect to inclusive tours that I rather picked and chose the ones. I do want to correct that impression. In quoting those gentlemen, we, of course, examined the statements that you had made and we found no statement by you on the floor of the Senate on that occasion dealing with inclusive tours. However, your statement dealt with split charters. Consequently, since that is not relevant to this discussion, we did not quote you.

Senator MONRONEY. This was the big issue before us at that time and we felt as we left the conference that by leaving out all language regarding all-inclusive tours we were leaving it up to the Civil Aeronautics Board, and the courts have found both ways, so it comes to the committee again for resolution of what we did mean.

Mr. TIPTON. You have put your statement in the record at this hearing, so that solves that problem. I just want to make it awfully clear that I wasn't guilty of picking and choosing.

Senator MONRONEY. There wasn't anything in your statement that was adverse to your position; true?

Mr. TIPTON. There wasn't anything in the Senate record that was adverse to my position.

Senator MONRONEY. You are too good a lawyer.

Senator CANNON. May I ask Mr. Tipton another question?

I already asked you if you supported the legislation if we made the corrections that you referred to on page 3, and you said no, but let me ask you this: If we report out legislation along this line, I presume you would prefer to have those points corrected that you have made on page 3; is that right?

Mr. TIPTON. You are quite right.

Senator MONRONEY. Thank you very much.

Our next witness is Mr. John Barch, vice president of industry association affairs for Trans World Airlines.

STATEMENT OF JOHN R. BARCH, VICE PRESIDENT, INDUSTRY ASSOCIATION AFFAIRS, TRANS WORLD AIRLINES, INC.

Mr. BARCH. Mr. Chairman, before proceeding with my statement, I would like to express the fact that Mr. Tillinghast has requested me to pass to you and the members of the subcommittee his regrets for not finding it possible to be present here today. He is engaged right now in attending a meeting of the Advisory Committee on Industrial Business Problems, which is under the aegis of the State Department. I wish to pass along his regrets for that particular reason.

I would like to thank you, Mr. Chairman, and the members of the subcommittee for this opportunity.

In June 1962, the Congress passed Public Law 87-528 after an extensive investigation into the proper role and need for supplemental air transportation. As a result of that study the Congress concluded that the proper role of supplemental air carriers was to perform air transportation solely on a charter basis and supplementing the services of the regularly scheduled trunk and local service carriers.

That purpose was carried out in the conference bill which became Public Law 87-528. The bill made clear that supplemental air transportation was not to include individually ticketed services by supplemental air carriers as a means of performing the charter services to which they were to be confined.

As the conference committee report pointed out:

The substitute agreed to in conference adopts the provisions of the House amendment with respect to the prohibition of individually ticketed and waybilled services on a permanent basis . . . supplemental air transportation would be limited to all-charter operations, except for limited individually ticketed service which may be authorized by the Board on a temporary basis.

At the hearings which led to Public Law 87-528 the certificated air carriers supported the establishment of the separate class of "supplemental air carriers" limited to the all-charter operations provided for in that legislation.

Unquestionably charter transportation fills a definite need. Preexisting groups should be able to travel together and to charter an aircraft for that purpose. We have not opposed, and do not now oppose, the charter operations of the supplemental air carriers which supplement the transportation services performed by the scheduled

carriers.

We do oppose, however, any attempt to destroy the distinction so clearly marked out in Public Law 87-528 between charter transportation on the one hand and the individually ticketed services performed by the certificated carriers on the other. We believe that S. 3566, in seeking to amend Public Law 87-528, would undermine the very purpose the Congress had in mind in adopting Public Law 87-528, which was intended to prohibit supplemental air carriers from engaging in individually ticketed services.

In enacting Public Law 87-528, the Congress was well aware of the established distinction between charter services and individually ticketed services. As was then pointed out by the chairman of the House Committee on Interstate and Foreign Commerce, former Representative and now Federal Judge Oren Harris:

The law is well established that, in air transportation, charter means essentially the lease of the entire capacity of an aircraft for a period of time or a particular trip, for the transportation of cargo or persons and baggage, on a basis which does not include solicitation of the general public, or any device where individually ticketed services would be offered or performed under guise of charter. The basic concept being thus clear, it is important that the Civil Aeronautics Board, by regulation and other appropriate measures, make sure that charter serves its planeload service concept and is not employed as a subterfuge to perform individually ticketed services. Manifestly, the nature of such subterfuge may change from time to time, and the regulatory agency needs some flexibility to modify its regulations to guard against any new subterfuges that may emerge. For this reason, the House committee objected to any attempt to freeze into the act a definition of charter service which would prevent the Board from dealing effectively with abuses. Thus the bill, as passed by the House, contained no definition of charter.