I would like also, if I may, to comment on the suggested char to the bill that were proposed by Chairman Murphy. First of al proposed that the language permit, alter, modify, amend, or limi well as suspend, is certainly one that we agree will. And as to suggestion that the language "like or similar nature" be changed "appropriate" is also one that we think is worthwhile.

Finally, he has suggested that the use of "designated U.S. carrie be removed, and his suggestion would accomplish our objective, t As I previously stated, Mr. Loy's suggestion to remove the ref ence to "agreed upon" is something we feel is essential if the legis tion is to assist the problem of the supplemental air carriers' rights, With that, Mr. Chairman, I want to thank you again for the opp tunity to state our problem.

(Attachment to prepared text follows:)

Amend S. 3198 by striking the words, beginning on page 1, line 10, "ag upon" and on page 1, line 11, "designated by the United States" and inser. lieu thereof Authorized by the Civil Aeronautics Board.

Senator MONRONEY. Thank you very much, Mr. Cooke, for y helpful testimony.

These countries that you name, Brazil, Greece, Israel. Ini Japan and one or two others, do we have anything in our bilater to provide for supplemental service? I know they tried to negot that with Japan when the bilateral was up and we were unsuccess as I recall.

Mr. COOKE. There is nothing in the bilateral dealing with " charter privileges.

Senator MONRONEY. How about the other countries?
Mr. COOKE. No.

Senator MONRONEY. Any country in the world?

Mr. COOKE. Not to my knowledge. In the case of Japan it 5. proposed that the charter issue be resolved as a side issue, n part of the bilateral, but before settlement that this be resol Answering your question, I know of none.

Senator MONRONEY. Usually in most all of the countries. from a very few democracies and perhaps some Latin Amer countries, the government runs a chosen instrument line, does it! Mr. COOKE. Yes.

Senator MONRONEY. And they have not yet come to the char field which we feel is a further advance of air transportation larger market and one that affords an opportunity for large num of people to travel. Do you feel that it would be possible to nege charter rights until those people also have similar flights on which could bargain on an equal basis with us?

Mr. COOKE. I think that there is still good prospect that st advance could be made in developing an understanding that W open the door to a greater extent than now in that there needs to explained more clearly than I think has been done thus far the act of the U.S. Government in establishing the supplemental indus to be the charter arm of the United States.

The attitude of Japan, for example, is that the rights that rest " the scheduled carrier for charter to Japan constitutes reciprocity w the rights that Japan Airlines may activate on charters to the U States. But in actual fact the U.S. Government has restricted v sharply the U.S. scheduled carrier on its off-route charter busine

that actually there is a lack of reciprocity today. I think that this eds to be clearly communicated and I believe that there can be some ins achieved even in those cases where countries do not have a parate charter carrier.

Senator MONRONEY. In your proposed amendment, can you tell e committee how that would work?

Mr. COOKE. Yes. The proposed amendment would permit the overnment CAB-to impose restrictions or limitations on the arter operations of a foreign air carrier into the United States. Senator MONRONEY. It would apply only to the charter and not to e scheduled.

Mr. COOKE. This would be out intent, that the power be given to hieve reciprocity in that area.

Senator MONRONEY. That is assuming there is mention of charter ghts or negotiation on charter flights in the bilaterals, is that correct? Mr. COOKE. Not so. Actually in our foreign air carrier permit anted to carriers, we include the privilege of on-route charter rights the foreign air carrier. And in this way, by permitting the CAB take some action to redefine that, or restrict it in those cases where ciprocity is not being granted to the U.S. supplemental carrier, ere would be a means for showing the foreign government that less reciprocity is granted there may be some restriction placed their charter operations into the United States.

Senator MONRONEY. But only as far as their charter operations. Mr. COOKE. I think this would be a matter for the CAB to deterine.

Senator MONRONEY. In other words, you wouldn't penalize the heduled services, regularly scheduled traffic, for their refusal-if ey had no charter service or contemplated no charter service-to ant a charter into their country.

Mr. COOKE. We are not recommending that that particular means action be employed.

Senator MONRONEY. It should be perfectly all right to negotiate r it.

Mr. COOKE. Yes, sir.

Senator MONRONEY. You would like to see us do that, as I underand your statement.

Mr. COOKE. That is correct.

Senator MONRONEY. But not to use their failure to have charter rvice and their unwillingness to observe our hours to cut off another pe of service.

Mr. COOKE. I don't think that this would be our recommendation. Senator MONRONEY. Senator Cannon?

Senator CANNON. Thank you very much.

Mr. Cooke, the language now that has been proposed for amending 3198 would seem to me to do the same thing that you are attempting have done in your suggested amendment. I would like to ask you pout it.

On line 10 it has been proposed to delete "agreed upon" which you int out is good. I suggested inserting "operating rights of any Ŭ.S. r carrier" to make it absolutely clear, and then eliminating "desigted by the United States" so that that would simply read "whenever e Board finds that the government of the airline authorities of any reign country have over the objections of the Government of the

United States taken action which impairs, limits, terminates or den operating rights of any U.S. air carrier to conduct flight operations from, through or over the territory of such foreign country, the Ba may" and so on.

With that language would that meet the objective that your ame ment is pointed toward?

Mr. CooкE. Yes, it would, Senator.

Senator CANNON. In other words, that would satisfy you, you fe to make it very clear that the supplementals would be included there that language were adopted?

Mr. COOKE. Yes.

Senator CANNON. Thank you very much. That is all that I ha Senator MONRONEY. Thank you, Mr. Cooke, for your appearan before the committee.

Mr. COOKE. Thank you very much.

Senator MONRONEY. The record will remain open for the submissi of additional written statements or other material until 5 p.m. May 20.

The committee will also consider requests made prior to that time reopen hearings for the purpose of taking additional testimony fro any person interested in appearing before the committee on thetwo bills.

We will stand in recess, subject to the call of the Chair.

(Whereupon, at 3:48 p.m., the subcommittee was adjourned.) (The following statement and letters were received:)

STATEMENT OF B. CRAIG RAUPE, STAFF VICE PRESIDENT FEDERAL AFFAIES EASTERN AIR LINES, INC.

Eastern Air Lines appreciates this opportunity to submit its views on S. 31% This bill and S. 3198, on both of which this Subcommittee held a hearing May 13, 1966, are designed to strengthen the competitive position of United States flag carriers in international air transportation. Eastern is in accord wit this objective and through the Air Transport Association has urged the enstment of S. 3198. For the reasons stated herein, however, Eastern has conclude that broadening of the exemption power of the Civil Aeronautics Board as templated by S. 3197 will not provide a satisfactory additional tool with whit that Board can fabricate a sounder competitive structure in international transportation.

Eastern does not believe that the Board has been restricted under its exist: exemption power in any way that has been deterimental to the national inter or the development of a great United States air transportation system. T Board has shown in numerous instances in the past, in both domestic and fore air transportation, that it has sufficient flexibility under the existing Section 4 to deal with meritorious applications for exemptions that are actually susceptib of being handled under the abbreviated exemption procedure, which complete bypasses the evidentiary hearing process and other steps which are so essents to procedural due process.

In overseas and foreign air transportation, the CAB has granted exemptions when to do so was in the national interest (for Braniff, Eastern, National, Parag and Pan American to conduct nonstop flights, through interchange agreemen overflying the route junction points of the interchange partners so that s nonstop flights could be made between the United States and points in South America, Order E-23267, February 17, 1966; for TWA and Pan American operate to Nairobi, Kenya, Order E-22581, August 26, 1965; for Pan Americ to serve additional East African points, Order E-22977, December 7, 1963 when a United States carrier needed authority to meet foreign competition Braniff to operate nonstop between Miami and Bogota in competition w Avianca, Order E-20248, December 10, 1963; for Pan American to operate to Lucia, West Indies, Order E-19680, June 13, 1963; for Pan American to operate Rock Sound in the Bahamas, Order E-21228, August 28, 1964); and when t

ostantial competitive implications were present and the exemption sought would ve the public interest (for Eastern, American, Western and Braniff to operate Acapulco, Order E-22698, September 28, 1965; for Trans Caribbean to operate Aruba, Order E-14850, January 19, 1960; for Caribair to operate to Pointe-atre, Guadeloupe, French West Indies, Order E-14976, March 2, 1960; for ribair to operate to Mayaguez, Puerto Rico, Order E-21717, January 26, 65). As the hearing on S. 3197 disclosed, although S. 3197 is couched in general rms, the specific area where the exercise of the new exemption power would be ost immediately invoked would be to link New York by one United States rrier, rather than by connecting United States carriers, to points in the Pacific. The question of direct one carrier service between Eastern United States terinals and points in the Pacific is at issue in the Transpacific Route Investigation, ocket 16242, now in progress before the CAB under Section 401 of the Federal viation Act. That proceeding was begun by a letter dated February 11, 1966, om the President to the Chairman of the CAB, followed by a Notice of Prehearg Conference dated February 17, 1966.

A final decision by the United States Court of Appeals for the District of olumbia Circuit had just previously been rendered on February 7, 1966, on an ppeal from a portion of the CAB's decision in an earlier Transpacific route case hat also embraced issues of service to both foreign and United States overseas nd domestic points in the Pacific.

es

The new Transpacific Case is a complicated one involving a whole complex of elated issues which are not susceptible to piecemeal treatment by the exemption rocess. As two participants in both the old and new Transpacific cases recogized, the old proceeding "involved a sensitive balancing of interests and equi." and a new proceeding would be "the only means by which an adequate nd up-to-date record can be developed, the rights of the parties protected, and a ound and comprehensive result reached." [Emphasis supplied.] (Pan Amercan and United brief to United States Court of Appeals for the District of Columbia Circuit, Western Air Lines v. CAB, Docket 18,305, April 10, 1964.)

The Transpacific Case also involves a great number of applicants-nearly 25 n all. The difficulty and unfairness of separating out one of the issues in that proceeding and attempting to solve it by prejudging it in favor of one of the pplicants through the grant of an exemption would be tremendous. In its ong experience in dealing with exemption applications under Section 416, the CAB as almost uniformly found that when competitive considerations are involved hey raise issues so complex and controversial as to preclude the grant of an exempion that would permit the conduct of new route operations. (See Appendix A.) Similarly, when the same route authority for which an exemption is sought is at issue in a certificate proceeding, the CAB has usually found that it should not grant an exemption to operate the route since that, to a certain extent, amounts to a prejudgment of the certificate proceeding. (See Appendix B.)

It is thus evident that the factors that have led the CAB in the past to deny exemptions are present in abundance in the Transpacific Case and as to transcontinental portions of possible new Pacific routes for which exemption authority would be sought if S. 3197 is enacted.

One further facet of S. 3197 deserves comment. That is the requirement for Presidential approval of all exemptions involving overseas or foreign air transportation, whether granted under the proposed new standard for such exemptions or under the existing standards of Section 416. Eastern believes that this requirement would impose a burden on the office of the President out of all proportion to the consequence of matters dealt with by most such exemptions. For example, during the period from December 28, 1964 through March 20, 1965, the CAB issued thirty-four orders dealing with overseas and foreign exemptions.

In summary, it is the position of Eastern Air Lines that S. 3197 should not be enacted since the short-cut it seeks to provide to certification of overseas and foreign air transportation services is pitted with substantive and procedural inequities and since in most instances susceptible of proper solution by the exemption process the CAB has demonstrated on repeated occasions that it has ample power to act under Section 416 as written. Eastern does not believe that it is in the overall public interest to expand the CAB's exemption power so as to allow the remaking of an important part of the world's air route pattern outside the normal certification process of the Federal Aviation Act with its requirements of public hearing, opportunity to cross-examine witnesses and other procedural safeguards.

The only virtue that has been urged before this Subcommittee for S. 3197 is it would save time in getting a United States carrier in the air with authority to that of a foreign air carrier. The existence or extent of the necessity for

action is open to factual dispute. Since the Second World War, the United States has obtained air rights and the world for its international carriers. Often the foreign countries from wi these rights were obtained have been compensated for these rights by the States through the grant of rights to operate routes which divert traffic from U States domestic carriers not receiving any compensating benefit from the r exchange. While these domestic United States carriers are not in direct compe tion with such foreign carriers, they have nevertheless suffered real economic los To grant a United States international carrier, which competes with such forel carriers, rights across the United States would only compound the loss to domestic carriers which have already borne the brunt of the diversion by foreign carriers' transcontinental services. While there is an obvious dollar los domestic transcontinental carriers by the transcontinental operations of fore air carriers, a carrier operating only international routes suffers a loss by s operations not through diversion from its existing services, but only in the se of not having an additional route on which it would earn revenues diverted man from United States domestic carriers. It is thus not all clear that the author tion of a United States international carrier to fly across the United States Oimprove the balance of payments situation of the United States.

No catalogue of situations which involve competitive inequality betwe United States and foreign air carriers and which would be susceptible of solut.. by the power contained in S. 3197, has been documented before this Subcommitte Nor has any showing been made, of which Eastern is aware, that where such a ! parent inequalities exist they are not being remedied on an interim basis by in changes, connections or other arrangements between United States carr In addition, an unintended result of Š. 3197 could be an extension of the required for disposition of the very matters it is meant to deal with since evitably erect another procedural hurdle to the prompt dispositon of certifie proceedings under Section 401. On complicated matters the CAB would be for to spend several months dealing with exemption applications before turning “ the certificate proceeding.

For all of the above reasons, Eastern opposes the enactment of S. 3197. Should this Subcommittee, however, be of the opinion that some legisl nevertheless is needed in this area, we would urge that as a minimum such legs tion should not erect standards that can only be met by certain applicants.

Eastern would urge that consideration be given to language incorporating te suggestions outlined earlier in testimony by Under Secretary of Commerce. A Boyd. Such amendments to S. 3197 would at least offer fairer standards fv. broadened CAB exemption power in the field of foreign air transportation. would allow the CAB greater discretion in selecting the air carrier to receive exemption. This discretion is quite important in view of the past rights have been granted to foreign air carriers at the expense of American domes air carriers in exchange for rights which only benefited existing internati United States air carriers.

Eastern, as an ancillary point, sees no justification for extending the broade exemption power to overseas air transportation since no foreign air ea could be allowed to carry traffic in such transportation which is defined by Federal Aviation Act as encompassing air service between points in the States and points in its possessions and territories or between points in territory or possession and points in another territory or possession. Car of such traffic by foreign air carriers would be "cabotage" and hence not permit?

APPENDIX A

CASES WHERE EXEMPTIONS DENIED BY CAB BECAUSE COMPETITIVE C SIDERATIONS RAISE ISSUES TOO COMPLEX AND CONTROVERSIAL TO E DECIDED BY THE EXEMPTION PROCESS

1. Applications of American Airlines, Inc., and Braniff Airways, Inc., Ori E-23126, Jan. 18, 1966.

2. Application of American Airlines, Inc., Order E-22940, Nov. 29, 1965. 3. Joint Application of Lake Central Airlines, Inc., et al., Order E-2278 | Oct. 20, 1965.

4. Applications of Trans Caribbean Airways, Inc., and Eastern Air Lines, In Order E-22631, Sept. 8, 1965.