That began a long time ago, with heavy efforts and special price arrangements, to attract the personal traveler to the scheduled airline. It has been successful. Hawaii is a part of it.

Senator MONRONEY. Do you have any further questions, Senator Cannon?

Senator CANNON. I just was going to comment on one point, to get back on this individual ticket thing, the rule provides, this is subdivision 5:

An aircraft under charter to one tour operator may carry a maximum of three tour groups providing that if more than one group is carried each of the groups consist of 40 or more tour participants.

I think that is quite a good protective feature there, don't you, as distinguished from the airlines who are selling to and advertising to individual Joe Doaks, me, or me and my wife, or someone else and their girl friend to go on a tour other than a group?

Mr. TIPTON. NO; I don't think it is a significant protective device because the supplemental carrier was supposed not to engage in the individual ticketing of passengers. Whether it is rigged up in that fashion or any other fashion, it can just sell them through a travel agent. You don't change the character of the service by introducing an intermediary. Everybody sells their transportation that way, and I don't think it is a protective element at all.

Senator CANNON. When you sell through the travel agent with these constraints, aren't you actually selling, let's say, to a group of 40 people, exactly the same thing; whereas the airline may be selling 40 different things to the same 40 people?

Mr. TIPTON. These 40 people are not necessarily a preexisting group. They are not necessarily a club or anything of that sort. They are just the first 40 people who walk into the agent's office.

Senator CANNON. I understand that, and there are likely to be 40 people from one of these areas that the chairman just pointed out that have not had service, and really have no available through service to go to these places they are going. This is a completely new world to them, and they are selling 40 people to go exactly the same places on a tour. It is really something that hasn't been available before.

Mr. TIPTON. As I say, the tours are all the same. They are all sold in the same fashion.

Senator CANNON. All right, Mr. Chairman.

Senator MONRONEY Again, the issue here, and the only issue, has nothing to do with individual ticketing because we haven't changed the bill in any regard from what the Civil Aeronautics Board has evolved after long hearings, careful considerations, and, I'm sure, fairness to all parties concerned, at least by their lights.

The language which the Senate wrote into the bill was put in to help them have a service that was at least not exploiting, publicitywise, an all-inclusive tour.

It is inconceivable to me that the great scheduled airline industry that is the marvel of the world would act like a lion running from a mouse, because these people are going to be able to book hotels ahead of time and let the buyer know what the whole trip from home to Timbuktu and back is going to cost them, so they can withdraw their savings and take this trip.

You hold a certificate of convenience and necessity. I say it is convenient and necessary to fill the gap of travel that is desired by lower income groups; I think it is being selfish in the extreme to say, you can't let us include the hotels or the bus tours or the meals in the hotel.

Sure they are going to pay, as you say in your statement, for hamburger that is bought when they are out looking at the beach or something of that kind. You expect to do that.

Senator PEARSON. Would the chairman yield?

Senator MONRONEY. Yes.

Senator PEARSON. You indicated we were with this bill ratifying the CAB position. Mr. Tipton, you contend otherwise, don't you? You contend that this bill goes beyond ratification of the CAB and beyond at least the Congress intent after the House overcame the Senate position?

Mr. TIPTON. Yes.

Senator PEARSON. Will you run through that again? I apologize, I went to an Armed Services Committee.

Mr. TIPTON. The contention is this

Senator PEARSON. To what extent do we go beyond?

Mr. TIPTON. This bill goes beyond the CAB's determination by authorizing the partial charters of inclusive tours. The Civil Aeronautics Board did not permit partial charter of an airplane for an inclusive tour. That is one.

Secondly, the CAB has a requirement that it must include three points. This bill says one point. That is the sort of thing in which this bill goes beyond the present requirements.

I take it that our position is clear here in saying that the Congress should not follow the Board's determination either, but should reinforce the line of distinction that they drew between scheduled carriers and supplemental carriers by not permitting inclusive tours or individually ticketed tours of that sort at all.

Senator PEARSON. Thank you, Mr. Chairman.

Senator MONRONEY. Any further questions? If not, we thank you very much, Mr. Tipton, for your courtesy and as always the completeness of your testimony, sir.

Mr. TIPTON. Thank you, Mr. Chairman and members of the subcommittee.

I appreciated the opportunity to present our views to the subcommittee, as I always do.

Senator MONRONEY. Our next witness will be Mr. James Montgomery, vice president of Pan American Airways.

I am happy to have you back, Mr. Montgomery.

STATEMENT OF JAMES MONTGOMERY, VICE PRESIDENT, PASSENGER SALES, PAN AMERICAN AIRWAYS, NEW YORK, N.Y.

Mr. MONTGOMERY. Mr. Chairman and members of the Aviation Committee, my name is James Montgomery. I am vice president of passenger sales of Pan American. I am representing this morning Mr. Najeeb Halaby, our president, who asked me to extend his apologies for the fact that urgent and unexpected business affairs called him away from Washington earlier this morning.

Pan American joins with the other scheduled U.S.-flag carriers in opposing the proposed legislation. As Mr. Tipton has pointed out, the proposed legislation would fundamentally change the sound regulatory system established under existing law. The carriers certificated to provide scheduled service under that law have the obligation to operate on a year-round basis regardless of whether the loads are good or bad. Charter operations, on the other hand, are conducted only when the price for a full load is obtained and the operation is profitable.

Accordingly, the Congress has wisely provided a basic distinction between the charter business operations to be offered by supplemental carriers and the individually ticketed operations of the scheduled carriers. The proposed legislation would destroy this fundamental distinction and would permit the supplemental carriers to have access to a major part of the individually ticketed air travel market with freedom to operate when and where they choose, based solely on profitability. This would not be a matter of minor diversion of traffic or invasion of some peripheral fields of operation. It would be a matter of fundamental importance for the scheduled carriers. It could undermine and, in the long run, destroy the basic air transport system. It will certainly weaken the ability of the scheduled U.S.-flag carriers to meet their foreign-flag competition. We, therefore, wish to lend our strong endorsement to what Mr. Tipton has said in this regard.

It is important to emphasize that inclusive tour charters, notwithstanding the nomenclature, are in reality individually ticketed travel for individual members of the public. They are marketed and promoted to individual members of the public, not to preexisting groups. Moreover, it should be clear that the so-called restrictions in the Board's regulations at least three places included in the tour, minimum time period of 7 days, land accommodations, et cetera-do not operate to distinguish inclusive tour charters from individually ticketed travel. This can confine the supplemental carriers to the group charter market and to exclude them from individually ticketed service.

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

I still must respectfully disagree that this bill has anything to do with individually ticketed traffic. This is an assumption which seems to be part of a creed that your scheduled airlines have adopted. Yet 1 fail to find anyplace in the bill that includes it.

Do you have any language that you would like to submit for an amendment to make sure that there is no individual ticketing done? The committee has gone through it with a fine-tooth comb and changed some language. There has been suggested modification of language by the CAB.

It is the purpose of this committee to refrain from individual ticketing and to continue the very careful system that has been worked out by the Civil Aeronautics Board.

Mr. MONTGOMERY. Mr. Chairman, I don't think there is any language that would answer the basic problem. Perhaps I would illustrate it in one way.

Suppose the tour operator, a group of tour operators working with the supplementals, has set up a series of packages to Europe, shall we say, with specific departure times on proper days of the week during the peak season. They introduce those to the first people who

come through the doors of the travel agencies looking for such particular tours. They become inevitable competition with us on a major part of our business.

They do not, having enjoyed that peak season traffic, have to work those flights on a cold, wet Wednesday night in the middle of December, which is our obligation, as we understand it, under our certificate.

Senator MONRONEY. Of course, you mentioned the cold, wet nights in December. Try to get an airline reservation to Miami on a scheduled airline, or to Hawaii. In rushing back for an emergency meeting in Washington, if you are abroad on official business and trying to get a reservation on any of our scheduled lines at this peak period as a U.S. Senator on official business, you will have to go through your embassy to get it.

Who is going to fill this void if these men go out of business? They supply planes at peak periods. Otherwise you are just laughed at on almost any reservation that you seek to make through our current service.

Supplementals take care of the overload at times when you are not expected to provide all of the planes necessary to carry this unusual bulge of traffic that occurs at the time people want to travel.

Mr. MONTGOMERY. I hope, Mr. Chairman, and I believe, that no one in Pan American would laugh at anyone desiring a reservation. If 1 had ever heard of them doing so, I think I would terminate their employment.

Senator MONRONEY. I have had to go through the embassy two or three times to get back on an emergency call.

Mr. MONTGOMERY. There are times in the year.

You mentioned Hawaii, Mr. Chairman. I had a look at our current seat factor to Hawaii before coming down here, are it is only 56 percent, meaning that 44 percent of the seats are going day-after-day empty.

Senator MONRONEY. But you also have a lot of competition for Hawaii by United and by Northwest, probably lots more before you get through this Transpacific case.

It seems to be a market that is growing.

You refer to the lack of growth in Hawaii, the visitor's bureau gain of 18.2 percent between the first quarter of 1968 and the first quarter of 1967, and that in contrast the traffic of scheduled carriers was growing at only one-half this rate, at 9 percent, whereas the supplement carriers had a growth of 220.5. But I think Mr. Tipton's statisics are a little more revealing as to the profitability of the Hawaiian market.

He said, talking about the same type of competitive service:

The scheduled carriers, with the strong assistance of the travel agency industry, have always vigorously promoted the domestic and international tour market. In 1963, sales of such tours amounted to almost $100 million. In 1966, almost 2 million tour passengers, representing $251 million in sales took advantage of the scheduled carriers' tour program. In 1967 which figures had risen to almost 3 million passengers and $344 million in sales, an increase of 47 per cent in passagers and 37 percent in revenue over 1966.

Mr. MONTGOMERY. I think I must point out that those are worldwide increases, and during the period that Mr. Tipton was talking about the supplemental inclusive tour charters were really at work on the

Hawaii route. There were, if I recall, only 20 ITC's operated to Europe during the entire year.

What will happen in the future is what is a matter of our deep

concern.

Senator MONRONEY. But you are doing pretty well right now, and you are meeting the competition, and this is a competitive system. We protect you on your regular scheduled lines. You can't get a route to Hawaii or to Thailand or Hong Kong or other places unless it is shown that the traffic that will be generated will support the additional service. So you have a great fund, worth hundreds of millions of dollars in franchised routes. No route in the world is given to an airline such as you have, and have enjoyed over the many, many years. And you have fulfilled that trust with great distinction, I might say, and have carried the flag with pride.

All we are trying here to do is what the Senate itself insisted on doing when original bill was passed, and what we insisted on doing in the conference. ATA didn't incorporate my remarks in the record. I am not going to bore this group here. They quoted all of the favorable ones to their positions. This is a legislative body and we have a minority and a majority. The minority views were ably expressed. I did my best to represent the majority side of the Senate and the majority side of this committee in explaining that matter. I will insert that for the purposes of the record.

(The material referred to follows:)

Mr. MONRONEY. Mr. President, this is a unanimous report of the conferees of both the House and the Senate on the supplemental air carrier bill.

I regret to have to report to the Senate that the bill as agreed upon in con ference departs quite substantially from the economic provisions which the Sen ate has endorsed on two occasions in passing this bill. The conference report contemplates a supplemental air carrier industry much more limited in terms of its role in air transportation than that which was envisaged by the committee and endorsed by the Senate.

The conference report adopts the provisions of the House bill limiting the permanent role of these carriers to charter service. The Senate bill had provided that the Board might issue certificates to these carriers permitting them to engage in individually ticketed operations as might be required by public convenience and necessity, but required the Board to impose such limitations on certificates as are necessary to insure that individually ticketed operations did not result in a significant diversion of traffic from the regularly certificated route carriers.

This amendment was included by reason of the diligence of the distinguished Senator from New Hampshire [Mr. COTTON].

I am convinced that the provisions of the Senate bill would have produced a stronger supplemental industry, one better able to serve the needs of the Nation in both peace and war. However, it became apparent the only way legis lation could be obtained was by accepting the House provision limiting these carriers to charter operations. The Senate conferees therefore agreed to the provisions of the House bill provided the House agreed to an amendment making temporary provision for limited individually ticketed service by supplemental carriers for a period of 2 years from the date of passage of the act. The Senate conferees felt that such a provision was essential because many supplemental carriers had derived a significant proportion of their revenues from individually ticketed operations. We did not believe that it was reasonable to expect that such carriers could immediately convert to an all-charter operation and still survive.

Section 9 of the bill as agreed to in conference provides that the Civil Aeronautics Board may, if it finds such authorization to be in the public interest to permit an orderly transition to all-charter operations, authorize a supplemental carrier to perform individually ticketed and individually waybilled services for a 2-year period subject to such terms, conditions, and limitations as the Board ay prescribe. This authority is subject to the restriction that the annual gross