The Board believes that this confusion and uncertainty should be resolved promptly and it is pursuing its legal remedies in an effort to obtain a final decision one way or the other. However, this will take some time even if a decision favorable to the Board is obtained, and we think under these circumstances, it would be most desirable for the Congress promptly to confirm what the Board has understood to be the congressional intent with respect to inclusive tour charters.

Senator PEARSON. Do you have litigation pending now?

Mr. CROOKER. Yes. There is still a third case pending in the second circuit. If the second circuit reaches a conclusion in that matter, of course certiorari will be sought.

It is hoped that if some other case goes to the Supreme Court, Mr. Justice Marshall would not find himself in the position in which he found himself in the case recently decided.

Senator PEARSON. Are the issues identical, but the parties different? Mr. CROOKER. The parties are different.

The three cases, so far as we know, the one that didn't go to the court, the one recently decided by the court, and the one now in the second circuit, are identical except that some involved domestic operations and some international, but so far as we read the law, there could not be any differentiation on the ground that one was domestic and the other international. So, if the third matter went to the court and there was 5-to-4 decision either way, presumably that would resolve the conflict so far as the Supreme Court is concerned.

Senator PEARSON. When do you expect a decision out of the second circuit?

Mr. CROOKER. Senator Pearson, that is quite difficult. We don't know whether the other parties-the carriers-now want prompt action or not. We would hope that however the second circuit acted, they would act promptly, and we could seek to bring the matter to the Supreme Court next winter.

Without belaboring the point of the mechanics of an inclusive tour or the volume of inclusive tour business, I will merely say that the Board has deemed, as we set out on page 7 of this statement, that these tours have been of great public benefit to the traveling public. Travel base has been broadened, and a great many persons in lower income groups have traveled, who in our judgment would not have utilized the services of the scheduled carriers.

Additional benefit to the public has been the competitive incentive which the availability of inclusive tour charters has provided to the scheduled air carriers.

In our judgement, the diversionary impact has been minimal, as we set out on page 8 of this statement. For example, the inclusive tour business to Hawaii last year was about 25,000 passengers. This year it is expected to be about 136,000 passengers but at the same time scheduled air carriers had 1,700,000 passengers last year, and presumably will have about 2 million passengers this year, so the scheduled carrier operations are growing at the same time these operations are growing.

We do have some thoughts about some technical provisions in the proposed bill, and the wording of those provisions. If I am permitted to leave shortly, the General Counsel of the Civil Aeronautics Board is here, and could address himself to those detailed provisions if there is any desire to explore these matters.

Senator PEARSON. Are they more or less technical changes or are they substantive in nature?

Mr. CROOKER. I would hate to say that they are only technical. There may be some substance implications here. I am not sure

Senator PEARSON. Well, let's let staff get together on this thing. Mr. CROOKER. Yes, sir. I don't think there is any significant change, Senator, in the objectives.

Two points are not touched on here, which I will refer to briefly: Some question has existed about whether the position of the Board is the same as the position of the supplementals in this matter.

Essentially it is, in that we believe we should have the authority to approve these inclusive tours. The only place where it might be different is that we would definitely like a resolution of the uncertainty that exists. If, in the wisdom of the Congress, we are not going to have this authority, we would like some certainty on that point.

Whereas I suppose as a second line of defense, the supplementals would rather have uncertainty as a second choice, rather than resolution of the issue against them.

Except for that, I know of no differences substantial differencesin the two positions.

I had occasion recently to go back over the records of the CAB for the past 30 years because the Board is, and its predecessor CAA, will be 30 years old this month. I find that when the coach fares were first introduced, there was some little objection about the fare cutting aspects and it was thought this was going to be terribly bad for the industry.

Actually, from the 12 or 14 percent of the total traffic in the first year that coach fares were available that was in the coach seats, as distinguished from what was then called standard class seats (now called first-class seats), the very large majority of air travelers now go in the coach compartment. I think that the extent of air travel is definitely tied to reduced rates for air transportation, and we feel that the operations of the supplementals generally, especially in this inclusive tour charter area, provide to some segments of the public the opportunity to travel at reduced rates.

I am grateful for the opportunity to be here. As you are aware, we are engaged in oral argument in what is probably the largest case that has ever come before the Board, and I am deeply appreciative of the committee making it possible for us to appear at this particular time.

Senator PEARSON. We are glad to do so.

Before I let you go, I want to ask our counsel if he has any questions.

Mr. BURZIO. Yes, I have one question.

An issue has been raised, Mr. Chairman, about the specific language of S. 3566 that limits the marketing of these charters to our operators. I would like your opinion whether or not that language limits the power which you believe the Board otherwise would have in defining the scope and extent of inclusive tour charters?

Mr. CROOKER. So far as the technical wording of the proposed legislation is concerned, I feel our general counsel has spent much more time on this than I have. I will say that so far as the policy matter is concerned, I apprehend that the present Board would prefer to

leave the charter or the tour operator in the position of putting these inclusive tours together rather than going the route of letting the supplemental carrier itself handle the operations of the tour and serve as a tour operator. I think that might be bringing the supplementals much closer to the functions carried out now by your scheduled carriers.

Mr. BURZIO. I raise this because this is an area where a substantive issue is involved.

Mr. CROOKER. The position of the Board members, as they now exist, as nearly as I can tell, is that there is still a very definite function to be carried out by your tour operators rather than leaving to the supplementals the matter of putting the tours together themselves.

Mr. BURZIO. Thank you.

Senator PEARSON. Mr. Chairman, we thank you for your testimony here today. As I indicated, your statement will be included in the record in its entirety.

I should like to have the suggestions that you were going to make made known to all the interested parties here. I assume our counsel will do that if anybody wants to get together with him and find out what the suggestions are.

Are they included in the statement?

Mr. CROOKER. Yes, they are. There are two or three pages of comments and actual deletions and insertions shown in an appendix. Senator PEARSON. All right.

I thank you very much.

Also there is a statement here by the chairman of this subcommittee, Senator Monroney and I will ask that that be included in the record at the proper place at the start of the hearings today.

(Statement of Senator Monroney, S. 3566, and statement of John H. Crooker follows:)

STATEMENT OF HON. A. S. MIKE MONRONEY, U.S. SENATOR FROM THE
STATE OF OKLAHOMA

The Senate Aviation Subcommittee begins hearings this morning on S. 3566, a bill which I introduced on May 29 for myself and Senator Magnuson. The bill would amend the Federal Aviation Act of 1958 with respect to the definition of "supplemental air transportation."

At this point in the record there will be included a copy of S. 3566, together with the remarks I made at the time of introduction.

The introduction of S. 3566 was prompted by the split decision of the Supreme Court on May 28 which left standing a Court of Appeals decision striking down the authority of supplemental air carriers to conduct international inclusive tour charter trips. This authority had previously been granted to supplemental air carriers by the Civil Aeronautics Board and had been approved by the President of the United States.

The rights of supplemental air carriers have been clouded for years by litigation. In 1962 the Congress enacted Public Law 87-528 to grant statutory authority for certificates of public convenience and necessity to supplementals to engage in certain types of air transportation. The litigation that has surrounded this public law since its enactment has again clouded the authority of the supple mental air carriers.

The most recent litigation has centered on the intent of Congress in regard to Public Law 87-528. In order to resolve all doubts, Congress has an obligation to act and make its intent clear.

S. 3566-INTRODUCTION OF BILL TO AMEND THE FEDERAL AVIATION ACT OF 1958NOTICE OF HEARINGS

Mr. President, yesterday the Supreme Court, equally divided, 4 to 4, with Justice Marshall taking no part, affirmed the decision of the Second Circuit Court of Appeals which struck down the inclusive tour authority of supplemental airlines granted by the Civil Aeronautics Board for international operations which had been approved by the President of the United States. The issue centered on the intent of Congress when it passed Public Law 87-528.

To clarify Congress' intent, I introduce, for appropriate reference, a bill to. first, authorize the Civil Aeronautics Board to grant to supplemental air carriers inclusive tour charter authority; second to the inclusive tour charter trips to insure that they would not involve individually ticketed service; and third, validate and ratify the existing certificates of public convenience and necessity for inclusive tour charters and authorizations issued by the Board, notwithstanding any contrary determination by any court.

Mr. President, in 1962 there were over 30 irregular carriers-some that were flagrant violators of Civil Aeronautics Board rules and regulations, some that were not financially fit, and some that had questionable operating practices and abilities. The legislation enacted by the Congress, Public Law 87-528, was necessarily designed to be somewhat restrictive and to insure that the Civil Aeronautics Board had the authority to certificate only those carriers which met the highest fitness standards and which the Board considered were essential to the public convenience and necessity.

In 1962 the financial status of the supplemental industry was not good. In fact, there were those who thought there was no need for a group of charter specialists. However, there were others who believed that the public convenience and necessity and the defense needs required at least some of the carriers currently operating to be designated as charter specialists.

Whereas in 1962 these carriers, to a large degree, were almost totally depend ent on military business, the supplemental carriers have now developed substantial commercial business of which the inclusive tour charter is an ever-increasing part of the commercial operation. For example, during the period 1962 through 1967 total revenues of the supplemental carriers increased 174 percent whereas commercial revenues increased 474 percent. The development of commercial markets clearly shows the need for charter-type operations.

Since the grant of inclusive tour authority by the Civil Aeronautics Board, the charter market has been considerably expanded. In 1967 over 51,000 passengers traveled on mainland to Hawaii inclusive tour charters, and conservative estimates indicate that the total will exceed 140,000 passengers in 1968. In the same period no impact on scheduled services has been evident as passenger traffic on the scheduled airlines in this market has grown from 1,090,000 passengers in 1966 to 1,722,000 in 1967. It is estimated that the total will reach 2,066,000 passengers in 1968.

The supplemental carriers today operate the most modern jet equipment. This equipment is not only available for the commercial charter market, but is committed to the Department of Defense for not only peacetime operations but, more importantly, for emergency airlift operations. The supplemental carriers provide to the Department of Defense, in the event of an emergency, a very substantial part of the expanded capability needed to deploy troops and cargo into troubled

areas.

Although the supplemental carriers have increased their reliance on commercial versus military business, there is still substantial reliance on the military. The overall industry average shows that, of the total supplemental business, 60 percent of the revenues are derived from military sources. This, however, is a marked improvement over the 90 percent reliance in 1962. It is therefore important that the supplemental carriers have the necessary authority to continue to expand and promote their commercial activities, especially in view of the phase-down in defense requirements as a result of curtailment in Vietnam and other related operations.

Inclusive tour charters have become an essential part of the U.S. air transportation system. Without them, many of our citizens, in the lower income groups, cannot afford to travel to vacation spots which aid in the overall economic development of the United States. In addition, inclusive tour charters are currently aiding the balance of payments by transporting large numbers of vacationers within the Western Hemisphere, and it is projected that the inclusive tour

program will aid in bringing many additional visitors to the United States from Europe and other foreign points. An inclusive tour program based on European originating traffic on a back-to-back basis could in 1 year transport up to 150,000 additional passengers to the United States, which would add to the positive side of our balance of payments.

Inclusive tours have already demonstrated that they are reaching an entirely new market. They are not only broadening the basis of air travel for charters, but are also developing the base of scheduled airlines. Recent demand for these charters has exceeded supply, and many potential passengers have been moved by the tour operator or travel agent on scheduled service.

The supplemental carriers, created by the Congress of these United States, should be granted the authority that is necessary to their well-being and essential to our transportation needs and the needs of our national defense. The inclusive tour authority is a system of transport that will enable the 50 to 60 percent of our American citizens who have never taken an airplane trip to partake of this seemingly commonplace mode of travel because of the reduced rates that the supplemental carriers through this authority are able to offer to the public.

Mr. President, the Congress should consider this legislation immediately. Congress should make clear it intended the Civil Aeronautics Board to have the authority to authorize the supplemental carriers to perform inclusive tour trips. The supplementals have pioneered and proved the concept of inclusive tour charters and Congress has an obligation to resolve the issue in their favor this year. Therefore, am announcing today that hearings will be held on this bill by the Senate Aviation Subcommittee beginning June 12.

[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 of 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 aircraft or portion thereof by a tour operator for the carriage by a supplemental air carrier of passengers in interstate, overseas, and foreign air transportation on a ground trip tour which is to one or more points and combines air transportation and land services."

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 Act, are, notwithstanding any contrary determination by any court, hereby validated, ratified, and continued in effect according to the terms, insofar as such certificates or statements authorize the performance of inclusive tour charter trips in interstate, overseas, and foreign air transportation.

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., June 11, 1968.

HON. WARREN G. MAGNUSON,
Chairman, Committee on Commerce,
U.S. Senate.

DEAR MR. CHAIRMAN: Reference is made to your letter of June 3, 1968, requesting our comments on S. 3566, which would amend paragraph (33) of section 101 of the Federal Aviation Act of 1958, 76 Stat. 143 (49 U.S.C. 1301 (33)) with respect to the definition of "supplemental air transportation," and for other purposes. Since you have scheduled hearings on the bill as of June 12 and 13, you ask for our comments prior to such dates.