percent of the total MAC business awarded. Indeed, their present contribution to the defense effort amply justifies the Congressional purpose in enacting the supplemental legislation to preserve the carriers as a valuable adjunct to the military.

The Congress also recognized in 1962 in legislation a permanent place for the supplementals that they required civilian sources of revenue to sustain them when not engaged in operations for the military. This policy was emphasized in 1966 by a new Defense Department commercial airlift policy. Under that policy, only those carriers receiving at least 30 percent of their air transportation revenues from commercial sources were to be awarded military contracts. One of the reasons for the policy was to preclude excess reliance upon military business alone. This was for the purpose of insuring that the supplementals would maintain the required reserve capacity which could be called upon by the Defense Department in time of need. Thus, if the supplementals were not permitted to enlarge their civilian services, they would be deprived of the principal source of their revenue-military charters. This, in turn, would have deprived them of funds for the purchase of new aircraft to attract civilian passengers. The result would have been that the reserve capacity needed by the mili tary would have been diminished. Under these circumstances, the Board believes that revenues derived from inclusive tours will continue to be an even greater factor in the ability of the supplementals to provide the expanded capability required in time of emergency.

At the present time, the 13 supplemental air carriers have a total investment of $217 million, and employ approximately 5,000 people. They operate a variety of large aircraft-about 192 in number. Forty-six of these are large jet aircraft, and additional jet aircraft are on order. Despite the fact that their revenues in 1967 were approximately 150 percent greater than those in 1962, they continue to rely heavily on military business. For example, in 1967, revenues derived from military contracts represented more than 60 percent of their total charter revenues. The inclusive tour charter revenues in 1967 amounted to some $7,000,000, almost 3% of the total. While we expect other types of charters to continue to provide the bulk of the carrier's revenues, it is obvious that inclusive tour business constitutes a source of additional business which will become increasingly important to the carriers upon any falling off of military business.

H. COMMENTS ON THE WORDING OF THE BILL

S. 3566 accomplishes the broad objective of confirming the Board's interpretation of the statute and the various authorizations which it has issued. Certain technical changes would appear to be desirable, however. These are mentioned here as specific suggestions:

(a) The definition of "inclusive tour charter" trip in section 1 of the bill is not required to achieve the stated objectives and we would recommend its exclusion. To the extent that there is an unexpressed desire to legislatively establish or change the definition of an "inclusive tour charter" trip we believe that it would be unwise. Changes in such definition may be required from time to time but in our view they should be left to the informed discretion of the Board, the agent of Congress, as circumstances warrant.

(b) Likewise, the provision in section 1 (which redefines "supplemental air transportation") that certain matters are "subject to regulations prescribed by the Board" is both ambiguous and unnecessary. It is not clear whether the regulations referred to relate to supplemental air transportation or to certificates of public convenience and necessity issued pursuant to section 401 (d)(3). The Board already has adequate power to issue regulations in either area. The inclusion of the words "subject to regulations prescribed by the Board" should be omitted since they make no affirmative contribution and may confuse.

(c) Moreover, the present provision of the Act that "supplemental air transportation" is "to supplement the schedule service" of the regular route carriers should be restored to S. 3566. There is nothing in the inclusive tour charter prob lem which requires its elimination.

(d) Certain technical changes would also appear to be desirable in Section 2 of S. 3566. Section 2 validates certain certificates and statements of authorization permitting the performance of inclusive tour charter trips "which are in effect on the date of enactment of this Act" notwithstanding any contrary determination by any court. The above quoted words should be excluded from section 2 since it is possible that some certificates, which we desire to preserve, may be

invalidated by court action before congress enacts this legislation. However, the only purpose of Section 2 is to preserve certificates and statements of authorization from extinction because a court concluded that the Board lacked power to authorize inclusive tour charters. The language of Section 2 needs to be modified to clearly indicate that the powers of the Board and the courts to change or set aside certificates or statements of authorization for other reasons have not been touched.

All of the foregoing technical changes in S. 3566 (both deletions and additions) are shown in the comparative print which is attached.

As the Committee is undoubtedly aware, H.R. 17685 was introduced in the House on June 5, 1968, by Congressman Moss and others. The most significant difference between that bill and S. 3566 is its apparent intention to authorize the supplementals to market inclusive tours themselves rather than through tour operators. The Board has never made a definitive determination as to its legal authority to permit such activity by supplementals under their authority to engage in "charter trips" in air transportation. Rather, as a mater of policy, the Board concluded that supplementals should not market inclusive tour trips directly to the traveling public, and its regulations specifically prohibit such activity.

We do not now ask for any change in the statute to specifically authorize the Board to permit supplementals to market inclusive tour trips directly to the traveling public. If the Committee should decide that the Board should have this power, then we ask that the legislation clearly indicate that the Board has discretion to determine whether or not to exercise such power just as it has in connection with the authorization of inclusive tour charters.

Our position in this respect is wholly consistent with our present powers under the Act. At the present time there is no absolute prohibition against a supplemental air carrier controlling an indirect air carrier, such as a tour operator. There is, however, a requirement in Section 408 of the Act that such a control relationship be approved by the Board when it is not inconsistent with the public interest. It is apparent, therefore, that the Board might presently permit a supplemental air carrier to market inclusive tour trips through a subsidiary tour operator. The position that I am now urging upon you is that no change be made in the Act which would require the Board to permit supplemental air carriers to market inclusive tour trips directly. Proper regulation of this entire area of the air transportation industry may best be accomplished when the Board has discretion to determine what authorizations to make in the light of the circumstances prevailing at any given time and their bearing upon the public interest, as defined in the Act.

In sum, the Board believes that inclusive tour charters have made a material contribution to the ability of the supplementals to meet their national defense requirements; that such charters have been beneficial to the traveling public; and that they have not had an adverse impact on scheduled services. For these reasons, the Board urges that the existing confusion and uncertainly surrounding the validity of inclusive tour charters be removed by legislation.

[S. 3566, 90th Cong., second sess.]

A BILL To amend the Federal Aviation Act of 1958 with respect to the definition of "supplemental air transportation", and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That paragraph (33) of subsection (a) of section 101 of the Federal Aviation Act of 1958 is amended to read as follows:

"(33) 'Supplemental air transportation' means charter trips, including inclusive tour charter trips, in interstate, overseas, and foreign air transportation, other than the transportation of mail by aircraft, rendered pursuant to a certificate of public convenience and necessity issued pursuant to section 401(d)(3) of this Act and subject to regulations prescribed by the Board; and inclusive tour charter' trip means the charter of an aireraft or portion thereof by a tour operator for the earriage by a supplemental air carrier of passengers in interstate, overseas, and foreign air transportation on a round trip tour which is to one or more points and combines air transportation and land services." to supplement the scheduled service authorized by certificates of public convenience and necessity issued pursuant to sections 401(d) (1) and (2) of this Act."

95-299 0-68

SEC. 2. Certificates of public convenience and necessity for supplemental air transportation and statements of authorization, issued by the Civil Aeronautics Board, which are in effect on the date of enactment of this Aet, are notwithstanding any contrary determination by any court, hereby validated, ratified, and continued in effect according to the their terms, notwithstanding any contrary determination by any court that the Board lacked power to insofar as such eertificates er statements authorize the performance of inclusive tour charter trips in interstate, overseas, and foreign air transportation.

NOTE.-Italic matter represents the Board's recommended additions to the bill; lined through matter represents the Board's recommended deletions in the bill.

Senator PEARSON. Donald Agger, Assistant Secretary for International Affairs and Special Programs, Department of Transportation. We are pleased to have you here today, sir, and I would ask you to proceed as you desire.

Mr. AGGER. Thank you.

STATEMENT OF DONALD G. AGGER, ASSISTANT SECRETARY OF TRANSPORTATION FOR INTERNATIONAL AFFAIRS AND SPECIAL PROGRAMS

Mr. AGGER. I am here today to present the views of the Department of Transportation on S. 3566, a bill to amend the definition of "supplemental air transportation" as it appears in section 101 of the Federal Aviation Act of 1958.

This bill would make clear the authority of the Civil Aeronautics Board to authorize certificated supplemental air carriers to charter to tour operators for inclusive tour trips.

The Department supports a clarification of this matter by the Congress so as to leave no question that the Board has authority to authorize supplemental air carriers to operate inclusive tour charter flights.

Public Law 87-528, enacted in July 1962, empowered the Board to award certificates of public convenience and necessity to this class of carrier. A great deal of controversy followed the enactment of this legislation, and the present situation is exceedingly confused. The District of Columbia Circuit Court of Appeals has held that the Board does have authority to authorize supplemental air carriers to engage in inclusive tour charters. The Second Circuit Court of Appeals has held that it does not, at least with respect to international flights. The Supreme Court affirmed the Second Circuit Court's decision by a 4-to-4 holding.

A second case involving the legality of the Board's authority to authorize domestic inclusive tour charters is now pending in the Second Circuit Court of Appeals.

It is apparent that this difference of opinion between two circuit. courts, with a 4-to-4 holding of the Supreme Court, provides no clear guideline or precedent for Board or industry thinking.

The Department of Transportation believes that Congress should resolve this matter with a clear statement that supplementals may engage in inclusive tour charters in domestic, overseas, and foreign air transportation. This is the only sound way in which to resolve the uncertainty.

Through their inclusive tour charters, the supplemental carriers have provided the benefits and experience of air transportation to

people who otherwise might not have traveled by air. The supplementals have provided a new degree of competitive endeavor which the scheduled airlines have been unwilling or unable to initiate, despite encouragement by the Board.

With this new traffic source, the supplemental carriers have been able to bring into better balance the ratio of their military and civilian charter business. They have operated competitively, fairly, and on a nondiscriminatory basis. In sum, the inclusive tour charter has meant a wider choice of services and prices, both domestically and internationally. By authorizing inclusive tour charters by the supplementals, the Board has been able to promote progress in aviation and has provided a flexibility which allows it to respond to changing opportunities

and needs.

The Department of Transportation believes that such goals should be encouraged.

Under S. 3566, "supplemental air transportation" would include inclusive tour charter trips. An "inclusive tour charter" would be defined as "the charter of an aircraft or portion thereof by a tour operator."

The reason for including the reference to tour operators is unclear. The term does not have a fixed meaning. The Board does have rules governing the financial responsibility of tour operators. But, in practice, a tour operator is anyone who operates tours.

We think it desirable to allow the Board to fix the precise characteristics of inclusive tour charters. The Board should have the flexibility it might need to determine, perhaps by experimentation, the kind of inclusive tour charters which best satisfy the public need. This should be left to the Board to prescribe by regulation, as it did in part 378 of its economic regulations.

We recommend, therefore, that paragraph 33 of section 101 of the Federal Aviation Act of 1958 be amended to provide that supplemental air transportation includes inclusive tour charter trips as prescribed by the Board.

Senator, the Department supports enactment of S. 3566 with some slight variations. I have the Department's recommended amendments with me and can either read them to you or, if you prefer, simply submit them to you in writing.

I appreciate the opportunity to appear here today.

Senator PEARSON. Are your amendments attached as appendixes I and II here?

Mr. AGGER. Yes, they are.

Senator PEARSON. All right. Thank you very much, Mr. Secretary. I don't think the chairman has had a chance to catch his breath yet. Senator MONRONEY. I apologize. I will go over the testimony of the Chairman of the CAB and I am interested to hear the rest of the testimony.

Senator PEARSON. Do you have any questions?

Senator HART. No questions.

Senator PEARSON. I don't think I have any questions either, Mr. Chairman. Do you have anything?

Mr. BURZIO. No.

Senator MONRONEY. Thank you very much, Mr. Agger, for your helpful testimony.

(Appendixes I and II of Mr. Agger's statement follow.)

APPENDIX I

The Department of Transportation recommends that paragraph 33 of Section 101 of the Federal Aviation Act of 1958 be amended to simply add the phrase "including inclusive tour charter trips" after the words "charter trips." In addition, we would add the phrase "and subject to regulations prescribed by the Board" after the reference to the certification of public convenience and necessity issued pursuant to Section 401 (d) (3) of this Act. Section 2 of the bill would remain as it is with certain modifications which the Board has suggested.

APPENDIX II

"Supplemental air transportation" means charter trips, including inclusive tour charter trips, in air transportation, other than the transportation of mail by aircraft, rendered pursuant to a certificate of public convenience and necessity issued pursuant to Section 401 (d) (3) of this Act, and subject to regulations prescribed by the Board, to supplement the scheduled service authorized by certificates of public convenience and necessity issued pursuant to Sections 401 (d) (1) and (2) of this Act.

Senator MONRONEY. Next is Glenn A. Cramer, first vice president, National Air Carrier Association, Washington, D.C., and president, Trans International Airlines, Oakland, Calif.

STATEMENT OF GLENN A. CRAMER, FIRST VICE PRESIDENT, NATIONAL AIR CARRIER ASSOCIATION, WASHINGTON, D.C., AND PRESIDENT, TRANS INTERNATIONAL AIRLINES, INC., OAKLAND, CALIF.; ACCOMPANIED BY EDWARD J. DRISCOLL, PRESIDENT, NATIONAL AIR CARRIER ASSOCIATION, WASHINGTON, D.C., AND CLAYTON BURWELL, ATTORNEY FOR TRANS INTERNATIONAL AIRLINES, INC., WASHINGTON, D.C.

Mr. CRAMER. Thank you, Mr. Chairman.

Senator MONRONEY. You may proceed in your own way.

We are happy to have you here testifying on this vital piece of legislation.

I see Mr. Driscoll here as well. Would you state your title again for the record?

Mr. DRISCOLL. Edward J. Driscoll, president of National Air Carrier Association.

Mr. CRAMER. And also with me is Mr. Clayton Burwell, attorney for National Air Carrier Association.

Senator MONRONEY. Yes, sir. Glad to have you back before the committee. You enjoy a certain amount of seniority in this business of testifying so you may proceed in your own way.

Mr. CRAMER, Mr. Chairman and members of the committee:

My name is Glenn A. Cramer and a biographical statement is attached. I represent the members of the National Air Carrier Association, a group of supplemental airlines embracing almost the entire industry. The members of the association include the following carriers: Capitol Internal Airways, Inc., Nashville, Tenn.; Modern Air Transport, Inc., Miami, Fla.; Överseas National Airways, Inc., Jamaica, N.Y.; Purdue Aeronautics Corp., Lafayette, Ind.; Saturn Airways, Inc., Miami, Fla.; Southern Air Transport, Inc., Miami, Fla.; Standard Airways, Inc., Seattle, Wash.; Trans International Air