I can readily visualize a case where some States would have enough! of an interest that they would want to come in and advocate that an exemption be granted." Senator MONRONEY. The bill, section 2, says, subsection 416 b relating to exemption of air carriers, amends paragraph 1 by adding at the end thereof the following: In addition, if an air carrier has filed an application under Section 401% engage in overseas or foreign air transportation, the Board may exempt the carrier from the enforcement of Section 401 with respect to air transportation covered by the application, for a temporary period to continue not longer tha sixty days after the final decision by the Board * * * Does that mean that anybody could be considered by just filing ar application for the exemption? Mr. MURPHY. First Senator MONRONEY. As I understand it, it doesn't give any par ticular rights to carriers now flying the route, or who would be d advantaged by the foreign competition. Mr. MURPHY. Any air carrier, Mr. Chairman, can apply for a route. We have now pending in the Transpacific case, and as I re call we have 23 or more air carriers Senator MONROENY. Twenty-three or more now. Mr. MURPHY (continuing). Who have applied for authority t provide service across the Pacific Ocean. Just because they can apply doesn't necessarily follow that they can establish a compelling claim or compelling case for exemption. I think the Board, in considering whether or not to grant an exemption, and in selecting a carrier for exemption, would take into account the same kinds of things that it takes into account now when it awards a certificate. It would do it in a more expeditious fashion and it would do it, I think, only when there is a rather clear case that prompt action is necessary as distinguished from letting the forma proceeding run its full course. Senator MONRONEY. How are you going to determine the length of the hearings if you have 23 applicants for the route and they don't have to demonstrate any prior rights to fly that area or to service that area? Mr. MURPHY. This I think gets us into the question of the difference between the existing law and the proposal that is now before you Under the existing law, so far as I know, there is nothing we can do except to give each of these carriers full opportunity in an evidentiary hearing and consider the applications on a comparative basis and at length. The proposal here is that some of those procedures be omitted. We would not recommend that a hearing be required before granting at exemption. When I say hearing for this purpose I mean to use that world in a technical sense and to say that we would not suggest that the full evidentiary hearing before a hearing examiner be required. We would draw a line between that and giving interested parties notice that the matter is under consideration and giving them an adequate opportunity to present their views to the Board. Senator MONRONEY. Each applicant would have that right? Senator MONRONEY. And the right to appear and to be heard? Mr. MURPHY. To appear and I think normally, if there were a 'equest for oral argument, that we would grant the request. I would hink it is quite possible that there would be some cases that would rise that would be of little enough significance and little enough ontroversy involved that we might decide that oral argument is not ustified. But some machinery would be provided so that every nterested party, including all the interested carriers, could get their iews before the Civil Aeronautics Board. Senator MONRONEY. You are trying to shorten the time, of course, which has been about 6 years, has it not, in an international case? Mr. MURPHY. Trying to do two things simultaneously. One to horten the time and the other to provide fair play. Senator MONRONEY. The 6-year case will still be going on? Senator MONRONEY. For permanent certification. But how long ould you anticipate this exemption authority hearing to take? Mr. MURPHY. I would think that we might do a case of this kind 13 or 4 months. Senator MONRONEY. It would depend on the number who had led applications, I suppose. Mr. MURPHY. That is true. And we could provide procedures nder which they would file arguments, including affidavits, as to e facts that they would like the Board to take into account, and ey could file briefs to the Board, and we could set this down for ral argument. This might go on for a couple of days. Senator MONRONEY. On foreign cases, do you have requirements here you can grant coterminal authority for a foreign line to serve ore than one location in the United States? Mr. MURPHY. We would be authorized to authorize a coterminal. Senator MONRONEY. This is done by a rather rapid consideration E the Board. Mr. MURPHY. That is true. Senator MONRONEY. Under essentially existing authority; is that orrect? Mr. MURPHY. Usually the points to be served by a foreign air rrier are agreed upon in the negotiations that result in a bilateral greement. Those negotiations are followed by applications of the reign air carrier to the Civil Aeronautics Board for permit. The ard has to find that granting such permit would be in the public terest. One very important factor, and usually a controlling factor, is that this has been agreed to between the United States and the foreign untry, that it is in the public interest to grant it. So I think my answer would be first that this is usually covered by e bilateral agreement and then it is almost a matter of course. he foreign government designates the particular carrier to whom it nts the authority to be given. So you don't have the question of mpeting applicants. Senator MONRONEY. You mean the particular carrier? Mr. MURPHY. Yes. So you don't have competing carriers to give nsideration to. Occasionally you have objections from U.S. riers for one reason or another who contend that, notwithstanding e agreement, it would not be in the public interest to grant the operating authority, or asking that some conditions are in.peri And that slows things down some, but usually not very 1. Senator MONRONEY. Would not the purposes sought by this met by the Board considering, as it I think now has, the reg, m the President for expedited action on the coterminal for the atlantic, which of course also would apply to the transpacite you explain why? Mr. MURPHY. I will try. This matter is divided into The first part is the coterininals. This case, as I remember just one U.S.-flag carrier in connection with operation of atlantic routes. That is a matter which the President Las an Board to consider on an expedited basis, because it was at iss transatlantic route case. This case was decided by the E a year ago, as I recall, with respect to which the Prese::.. action a few months ago. When he acted on this case he approved some of the B mendations. In this particular matter he sent this questi the Board for reexamination and asked that it be done ex; This is coterminals, east coast and west coast, ass transatlantic routes. The other part of the same question is cotermir. and west coast, associated with transpacific routes. W that in this same proceeding, because this question was t in the transatlantic route case. It was at issue severni the last Pacific route case. In 1959 or 1960, or there Board did recommend to the President that this coterni ought to be granted, but that decision was disapproved ty dent, not on that particular ground, but the whole s is the same transpacific route case that we have only w: few months managed to get started on again for a fresh, It is, I would say, conceivable that an exception u; der might be granted for this kind of authority. Bit we likely that this exemption would not be defendable if it were in the courts. We think it very doubtful, I would say, that the exer ity under existing law would be broad enough to prove minal authority in connection with the transpacific retes Senator MONRONEY. For a number of years you ba competition on the west coast, from the west coast to E. „ you? Mr. MURPHY. Yes, sir. Senator MONRONEY. Particularly over the poles and ex-face. How many foreign airlines have that? Mr. MURPHY, I will have to ask for some help on that Mr. MURPHY. There are three, four, five, or six . Senator MonrONEY. Yet you have never huashed the case other than the TWA. I believe, has west coast to E Mr. M↑ KPHY. That is true. I think other US ca: coast to Europe rights by the polar route Senator MoNrONEY. But not through the New Y Serator MoNDONEY. So we are meeting the cor pet on the North Atlantic by the polar route! Mr. MURPHY. Not completely; no, sir. Senator MONRONEY. This legislation would apply anywhere, to Latin America traffic Mr. MURPHY. It would apply anywhere. It happens that in the case of the west coast to Europe question, that we do have the proceeding to which you referred earlier. The President has asked us to decide on an expedited basis, so we can consider that quickly. I do not mean to imply here, because I do not think it would be appropriate, what I think the result might be, but at least we have the procedure available to consider this question very promptly. That is an unusual situation in that respect. Senator MONRONEY. If one carrier is selected for the route under an exemption, a preferred position, the other applicants would not be prejudiced when the final decision is made in the full certificate proceeding. Mr. MURPHY. It is my view that they should not be in a preferred position, and that other applicants should not be prejudiced. I think people argue indefinitely about whether or not it actually would work that way. I think it would. I think it would. I think that if this provision were written into the law, that the Board in effect, and in fact, would observe the following. Senator MONRONEY. Is there any additional language that you could suggest that would provide for adequate hearings for all those who are eligible to be taken care of under this bill, but still not make them so long that it would defeat the purposes of the act? We would like to have your suggestions. We think if there is some intermediate type of hearing, that these people could be assured of adequate time, without undue delay, this might eliminate some of the fears raised about the bill. Mr. MURPHY. The suggestion we made here would provide adequate procedural steps. However, we will be glad to give it further thought. I think the very thought we want to avoid is reestablishing the full requirements relating to hearings and formal procedures because if we were to do that we would be exactly where we started. Senator MONRONEY. We thank you very much, Mr. Chairman, for your very helpful testimony. We appreciate your appearance before us. Mr. MURPHY. Thank you, sir. Senator MONRONEY. The next witness if Mr. Frank E. Loy, Deputy Assistant Secretary, Transportation and Telecommunications, Department of State. Mr. Loy, we are glad to have you here. STATEMENT OF FRANK E. LOY, DEPUTY ASSISTANT SECRETARY Senator MONRONEY. You may proceed in your own way. Mr. Loy. I am Frank Loy, Assistant Deputy Secretary of State for Transportation and Telecommunications." 63-350-66- -5 I appreciate the opportunity to testify on behalf of the De: A of State in support of S. 3197 and S. 3198. Both of these bu® interest to the Department of State. I would like first to direct my testimony to S. 319%, whic the conduct of U.S. civil aviation relations with foreign in a most critical fashion. This bill proposes to amend of the Federal Aviation Act to permit the Civil Aeronauties E to act against foreign air carriers whose governments are in U.S. airline operating rights abroad. Since the inception of the international air age in 1946, the l States has consistently and all around the world put forth the that it is wise to permit airlines to make their own managem cisions on the volume of services that should be providesi er national routes. We have further maintained that this is pattern contemplated by our many bilateral air transport a We hold that, in these agreements, the airlines' rights at only by the requirement that the services actually operated e to certain standards. Thus, for example, an airline should not operate a volume .! which is patently excessive in terms of the public need for portation, nor should it offer services designed principally r traffic moving wholly between foreign points The prov bilateral agreements dealing with volume of services known as the Bermuda capacity principles. In 1962, a major study was undertaken by the adn in-*: review U.S. international civil aviation policy. The conclusion was reached and endorsed by President h.. 1963 that the basic path the United States had been f supporting the Bermuda capacity concepts was sound be continued. This conclusion is even more valid today. Internation port is thriving and the prospects for further growth The U.S.-flag carriers are playing a leading role in this in large part because of U.S. insistence upon the in tert ance of the concept of managerial freedom which he Bermuda principles. U.S. airline success in the future may on how well and extensively the United States can pe countries to follow this approach We do not thar k international aviation or for international airlines States and foreign to drift toward the alternative to that is a system in which governments would period. the volume of service to be provided by the carriers of concerned It is however, true that the United States has been universal acceptance of the Bermaids capaery pry evantries cor siste tly restrict US airlines in the be... rational carriers need protection Others impose (2) lace from time to time when they believe they are threatened) lar artin e proposal or for bargain v. 2 pirposer These trista, ces of restrictions have probably r growth of US arlize services abroad to a sinifica ndivid, al case as Earmuf d to the US airlie concer constant de ger that restrictionism will spread if mbated Capacity restrictions have probably bee |