Senator MONRONEY. Finally, it comes down, for these irregular nonscheduled carriers, to what is a nonscheduled run? A certain number of flights a month between two given points is a nonscheduled service. I think you have admitted that?

Mr. TIPTON. That is right.

Senator MONRONEY. When does it become a scheduled service and who is going to try to determine it when the Board finds that 10 round trips is not a scheduled service and allows an exemption on that fact, and finds itself in court on that matter? How are you going to reach it? I do not think these nonskeds actually went in and asked for this I may be wrong-for these supplemental certificates. I think they were trying to get a definition of how much flying they could do between two given points and many of them wanted to observe the rules of the CAB and not be in violation.

Mr. TIPTON. Yes; that is correct. I do not know the extent to which the irregular carrier groups have urged this legislation.

Senator MONRONEY. I have not heard any of them urge it. The first time I heard about it was when the CAB recommended supplemental service, which I presumed would be coach service, winter service maybe, in Florida and different places.

Mr. TIPTON. I think I am going to try to apply this problem we have got here directly to the question of regulating and authorizing the supplemental carriers that the Board now has before it.

As you know, the Board does have this argument before it right at the moment as to how this shall be done. They have come up with this very broad proposal but I suspect that the reason they bring it up now is to give themselves leeway in the Irregular Carrier case.

Now, in the first place, it seems to me that you are dealing with a relatively it is an important-but a relatively narrow problem here with a very broad statute which does not merely cover irregular carriers, it covers the entire waterfront, but looking at it from the standpoint of its coverage of the irregular carriers it presents a question of regulatory policy for this committee as to whether the Board should continue to classify and regulate the so-called irregular carriers on the basis of a limitation of schedules.

Senator MONRONEY. Was that not what the fighting was about before on this All-American Airlines?

Mr. TIPTON. It was.

Senator MONRONEY. They had no limitation on schedules, apparently, so that they were finally taken out of the air for violation of economic rules of the CAB.

Mr. TIPTON. And that is one of the major reasons

Senator MONRONEY (interposing). Did they not try to correct that? Was that not the CAB's desire to correct that in the certificate limitation, by specifying no more than 10 round-trip flights by any irregular carrier, and then to avoid the legal device of scheduling several socalled independent or irregulars on 1 type of scheduling through 1 booking office?

Mr. TIPTON. That is exactly right. For 10 years, I guess 10 years ago now, the Board has been attempting to regulate the irregular carriers by prescribing a particular number of schedules that they can operate between a particular pair of points, and that just has not worked. The Trans-American instance is a good example of 1 group of

men getting together 4 or 5 of these little so-called irregular carriers and adding them all up and running a regularly scheduled service with them. That was one defect in that method of regulation.

The Board has been in constant enforcement proceedings, both formal and informal, ever since they have had that regulation, attempting to regulate on the basis of a limitation in the number of schedules.

Now, it seems to me that that method of regulation has been demonstrated through the Board's experience to be no good; that because of the tendency that any carrier has-if he operates 10 he wants to operate 12; if he operates 12 he wants to operate 15. That is kind of normal, and it is for that reason that this limitation on schedules has not worked.

What I am saying here is that the Congress should not change the regulatory policy by encouraging the Board to continue that kind of a method of regulation which has demonstrably failed up to now.

Before I stop, though, I want to point out that there are other methods of regulating, other methods of classification. The Board can, as the ICC can under their law which is similar to this, authorize a special class of carriers to do nothing but operate full plane charters. Now, that is a good business in which many of the irregular carriers are engaged and many of the members of the Air Transport Association are engaged. The thing about the full plane charter is that it has no limitation on the number of schedules that you can run. If they certificate you for operating full plane charters within a particular area you can operate as many charters as you see fit so far as they are bona fide charters.

Senator MONRONEY. You cannot charter to one company and operate schedules as you see fit?

Mr. TIPTON. Charter to

Senator MONRONEY. One booking company, for example.

Mr. TIPTON. No, that would not be a bona fide charter. Of course, the ICC has had the question of what are bona fide charters and what are not. The Civil Aeronautics Board is getting into that problem now, too. But it is that type of certification that is better than attempting to certificate on the basis of limitation of schedules which demonstrably over the past 10 years have not worked.

Senator MONRONEY. But there has been very little business to give you-if you drew the line completely accurately on charters, whether you were going to get 1 group of 50 people and charter a plane and limit the charters or nonskeds to that type of business. They are not going to be able to exist. You have to be realistic enough to know it. Except the charters to the Government or maybe excursions or something of that nature.

Mr. TIPTON. I would not reach that conclusion, Mr. Chairman, that there was not much of that business. The military business aloneSenator MONRONEY (interposing). I mean aside from the military. Mr. TIPTON (Continuing). Which is a very substantial business and there is a substantial and growing business in handling groups of all

sorts.

Now, that is a pretty substantial business if it were worked on and developed with high concentration and by carriers of high responsibility.

Senator MONRONEY. But then they would be limited to how many trips could be flown in between two given points, would they not run into getting themselves fouled up on this court test on no more than ten?

Mr. TIPTON. No. If they operated bona fide charters and a bona fide charter is the transportation of a homogeneous group, the military, the clubs, baseball teams, football teams, that sort of thing, in the case of bona fide charters. And referring now to the Interstate Commerce Commission primarily for experience you can either operate a charter every hour on the hour if it is a bona fide one.

Senator MONRONEY. Well, what other ways do you think that you could live with the system as applied to irregular, non-sked air carriers? Any other service that they could perform other than the charter? You say the trip exemption would not work and the certification on a limited basis would not work, that the charters would, but is there any other place in the aviation picture that these people who have been operating since the end of the World War II could be given some hope of staying in business?

Mr. TIPTON. The charter, I think, is the most prominent one that comes to my mind right now.

You have quite a number of specialized services. The present allcargo carriers, of course, were irregular carriers in their beginning operations.

Senator MONRONEY. There are still a lot of those working in the freight field, are there not?

Mr. TIPTON. And that is a specialized type of service, that might be possible. But the continuation of the tour arrangements, which is the field that resort has occupied, all those the Board has available to them, and I think that rather than the Board providing for a kind of a service that is neither fish nor fowl nor good red herring, which is a regularly scheduled service but with a limited amount of it, it would be better for both the applicant carriers and the Board itself to search further for specialized types of service.

Senator MONRONEY. You have named the charter service and the resort service and maybe the French service, maybe that is about the limitations that you, with all your experience, have been able to name. Mr. TIPTON. That is correct.

Senator MONRONEY. Do you not think anything as dynamic as aviation must have some possibility for new entries into the passengercarrying field, even on a small basis? I mean, these carriers are not going to put Pan American out of business, or TWA, or any of these great lines if they fly a limited number of schedules, the complaint against All-American was they were getting themselves in a major airline business by violation of economic regulations, but then the Board came back with the 10-schedule limitation and now finds themselves tied up in court on that, and I think they had tried hard to find a way of keeping alive the small-business element of aviation and still not be competitive or destructive of the certificated airlines that have a responsibility to maintain satisfactory service to the certificated points.

I think the Board had a problem there that they cannot ignore. If they are going to compel a line to serve a point, they cannot let it be rated completely by noncertificated carriers or by carriers operating under exemptions that operate as certificated carriers.

Mr. TIPTON. Your question as to whether, being in a dynamic business like the one that we are in, there should not be availability of a new entry into the business-I surely would not challenge that. We have had a great deal of new entry into the business, a lot of new people. From my own experience, I started out representing 18 carriers and now represent 49.

We have constant applications being considered at the Board for new entry into the business for regularly scheduled operations and that is the line that the Congress has laid down for entry into and development of this business, and the only thing we are asking you here is, do not destroy a principle which to us has seemed to be-and a very important one-and that is the power of the present certificated carriers or any certificated carrier in the future to make up his own mind with respect to the number of schedules he will operate and make up his own mind with respect to the accommodations and equipment that he is going to provide for the public.

Our position we hold very strongly because it is a policy question that we think is of great importance, as I say, much broader than the iregular carrier certification problem which is now before the Board. In order to meet what is a problem to the Board now, they are prepared to ask you to come up and virtually destroy a principle of limitation on their powers which is one of the great things of importance which we do not think should be done either for that purpose or for any other purpose.

Senator MONRONEY. Do you have any further questions?

Senator SCHOEPPEL. No questions.

Senator MONRONEY. Do you have any questions?

Mr. BAYNTON. Mr. Tipton, in this proposed legislation is there any grandfather-clause problem that you might see?

Mr. TIPTON. In the legislation that I have seen, that has been introduced in the past, I saw no grandfather problem in it. There was no provision for a grandfather clause or any reference to it.

This new legislation that the Board brought forward yesterday I have just merely had a chance to glance at, and I cannot speak with too much assurance about that.

Senator MONRONEY. Neither can the committee. As a matter of fact, the main purpose of the hearing now is to try to evaluate some of the reasons for the suggestion and all, and then maybe consider a possible investigation for introduction of legislation that might achieve that end and maybe properly safeguard it.

The committee has that before it.

Any further questions?

Senator SCHOEPPEL. No questions.

Mr. BAYNTON. No questions.

Senator MONRONEY. Thank you very much, Mr. Tipton.

Mr. TIPTON. Thank you, Mr. Chairman, Senator Schoeppel.

Senator MONRONEY. Our next witness is Mr. Ralph Cox, president

of the Aircoach Transport Association.

Will you come forward, please? We are glad to have you before us, Mr. Cox, and you may proceed in your own way.

STATEMENT OF RALPH COX, JR., PRESIDENT, AIRCOACH TRANSPORT ASSOCIATION, ACCOMPANIED BY ALBERT F. BEITEL, COUNSEL FOR AIRCOACH TRANSPORT ASSOCIATION

Mr. Cox. Thank you.

Mr. Chairman and members of the committee, may name is Ralph Cox, Jr., president of the Aircoach Transport Association, a trade association of supplemental air carriers. We have 30 member carriers with a combined fleet totaling 67 aircraft.

I am also the founder and executive vice president of the United States Overseas Airlines which has been operating 13 DC-4 aircraft domestic and worldwide.

In the interest of saving the committee's time I will summarize my prepared statement then comment briefly on a bill proposed by the CAB for certification of limited-service carriers.

Generally speaking we favor legislation that would implement the recommendations of the Senate Small Business Committee. My statement includes quotations from both reports of the Committee on Irregular Airlines, one in 1951 under the chairmanship of Senator Sparkman, and one in 1953 under the chairmanship of Senator Thye, both reports recommend permanent authorization for the irregular airlines.

The heart of our recommendation is found at the bottom of page 15 of my prepared testimony.

We believe that the recommendations of the two previous studies of the Senate Small Business Committee, as well as the current study, should be implemented now by legislation.

Such legislation should first establish permanent operating authority for all air carriers who have prosecuted their applications on the 6-year Large Irregular Air Carrier Investigation, Docket No. 5132 of the Civil Aeronautics Board.

As in the case of the trunkline air carriers in 1936 and the feeder line and Territorial air carriers more recently, the legislation should establish grandfather rights whereby every applicant that has survived the 6 years of CAB hearings and investigations should be afforded an opportunity to apply within 120 days of the effective date of the legislation for permanent operating authority as a licensed supplemental air carrier.

While it does not matter if certificates or another new form of license is issued to applicants, the legislation should recognize supplemental air carriers as a permanent part of the transportation system of this country. The license should authorize 14 trips per month and an unlimited number of charter trips in line with Senate Small Business Committee recommendations rather than the 10 trips authorized by the Civil Aeronautics Board. Our studies have indicated that carriers have operated successfully with 12 to 14 trips between 2 points, but at 10 trips or less the operation is a marginal one.

I would like to emphasize the final paragraph of my statement which gives ample precedent for the kind of congressional action we are urging here today.

Now a word about the CAB bill which was presented yesterday.

This bill simply falls short of doing what ought to be done. The Senate Small Business Committee report says that "the record of the