try by providing closer ties with the large cities and centers of industry. For some communities it has ended relative isolation in a business and social sense. There is little doubt that the local service air carrier is a permanent and integral part of our expanding economy and must and will continue to expand with it. Very few of the communities which have now been given the advantage of air service will willingly be deprived of it. As our population and economy expand and the tempo of our industry is geared more and more to faster and more efficient means of communication and transportation, these carriers will expand and will be required to keep pace with that development.

We have had the opportunity, due to the nature of our association with the industry, to participate and observe at first hand the advancements which the local service lines have made and to evaluate the underlying problems which must be solved if they are to effectively fulfill their potential in our economy. We have reached the conclusion that permanent certification of these carriers is essential to their continued development for many reasons.

1. Permanent certification will relieve these air carriers of the uncertainty which constantly surrounds their present existence and every decision that they are required to make as to their future. The temporary nature of the certificates of these carriers has been a skeleton in the closet for management and employees alike. It has made it impossible and impractical to plan into the future. Permanent certification will help to relieve the uncertainty on the part of investors, management, and employees.

2. It will relieve management of the tedious and expensive procedures which are required every few years in a certificate renewal proceeding. These proceedings consume too much of the energy and resources of these small companies.

3. It will permit this industry to attract capital which is vital to its expansion and growth. One of the great handicaps of this young industry has been its inability to attract adequate financing due to the temporary nature of its existence. If this industry is to fulfill its vital role in our economy, it must expand and grow; it must be capable of securing new equipment, and in putting into effect modern procedures which will enable it to keep pace with the times and its competitors.

4. It will reduce employee turnover and encourage capable people to invest their future in this business. For example, an airline pilot is considered too old for initial employment by most air carriers after age 28. He must, therefore, invest his career with a particular air carrier prior to that age and thereafter remain with it. In making this important decision an individual must have some assurance as to the future possibilities of the company. The temporary nature of the certificates granted these carriers has been a handicap to them in attracting and maintaining capable personnel.

5. These carriers are badly in need of a more efficient aircraft. This is probably one of the most important technical problems now facing the industry in increasing their productivity and keeping costs under control. New aircraft are expensive to design, construct, and introduce into service. To secure an aircraft adapted to this service, a manufacturer must first see a sufficient market to justify the design and development cost, and these air carriers must be able to secure sufficient financing to acquire the aircraft, introduce them into service, and have a future expectation during which they may be amortized.

It is our belief that the decision on permanent certification of these carriers is one that should properly be made by the Congress rather than the Civil Aeronautics Board. It is our belief that the Congress is requested in this legislation to provide policy-making guidance for one of its agencies, the Civil Aeronautics Board, on the question of the future of this important segment of our airtransportation structure. In our opinion, this is properly the function of the Congress and a decision which should be made by it.

Concern is often expressed regarding the so-called subsidy payments which are being made to these air carriers in the present state of their development. We take issue with the term "subsidy" as applied to these payments. It is estimated that such payments to these air carriers this year will approximate $24 million. We believe that such payments must be viewed in the overall national interest and as such, an evaluation must be made as to whether there is value being received in the national interest. We contend that these payments represent an excellent investment for several reasons.

1. They are payments not necessarily to the air carriers involved, but payments made to provide essential air service to 440 communities of this country. The payments will be made only so long as they are necessary to develop this

air route structure and enable these communities to support this air service without the help of the Federal Government.

2. The national interest is securing a return in the national defense in excess of the total subsidy bill. For example, approximately 900 airline pilots are being maintained, available to the national defense in the highest possible state of proficiency, as transport pilots. Figures recently released by the Defense Department estimate that at present, it costs approximately $120,000 to train a pilot to the minimum proficiency required in order that he may be assigned to a mission. In order for a pilot to be available to the national defense in accordance with the demands of modern warfare, he must be in a constant state of readiness. This can only be achieved by the pilot being constantly in service or constantly in training.

The training is very expensive, whether it be given as part of a Reserve unit or on active duty with the Air Force. The pilots of these local service carriers are being maintained at a high state of proficiency, constantly available to the national defense of our country, while, at the same time, providing essential air services to the citizens of hundreds of communities. We contend that the value of these pilots to the national defense far exceeds the total so-called subsidy payments that have been made to the local service air carriers from their inception. It is not sound economics to merely take money out of one pocket and put it in another, and if the Federal Government were to terminate the local service air carriers today, we believe that it would be necessary to increase military appropriations by an amount in excess of the total amount being paid the local service air carriers if the same number of highly trained available pilots were to be maintained.

In addition to the foregoing, we must consider the value to the national defense of the trained mechanics and other highly skilled personnel made available by these carriers.

In the event of the necessity of a rapid mobilization in this country, all of our air transport force would probably be required. These carriers are maintaining approximately 160 aircraft available for essential military or civilian use in such an emergency.

3. The local service carriers have stimulated air travel and served as feeder lines into our larger trunk carriers. In recent years, the growth of air travel combined with increased efficiency has made it possible for most of the trunk carriers to free themselves from a dependence on the Government for so-called subsidy payments. Some of the increase in air traffic must be attributed to the feeder capacity of the local service lines. Undoubtedly this has been a factor in reducing the subsidy requirements of some of the trunk carriers and the so-called subsidy payments have, in effect, been transferred from them to this new development of our air route structure. As our air transport increases these carriers, called at one time feeder lines, will undoubtedly feed more and more passengers into the trunk air carrier systems.

4. It is important to the national interest that local communities develop, maintain, and expand their aviation facilities. The local service industry has stimulated local communities to improve their airports and other aviation facilities. It has provided a source of income that has been of help to communities toward this end and so-called Federal subsidy payments have found their way by the medium of the local service carrier to this worthwhile purpose.

We concur completely in the desirability of making our entire air transportation free from any dependence upon Government support as rapidly as possible. We believe that this will best be accomplished by the realistic support of these carriers in order that they may expand their service, increase their efficiency. and perform their assigned functions in order that they will grow with our economy. In this light, we view the present so-called subsidy payments as a sound investment in the future.

In summation, we believe the adoption of this proposed legislation by the Congress will be in the national interest. It will provide important policymaking guidance for the Civil Aeronautics Board. It will enable the carriers who have been assigned to develop this important segment of our air-route structure to better perform their assigned function. It will bring needed stability to these carriers. It will mean added security for the employees and remove the uncertainty that is present when a constant repetition of renewal proceedings and temporary certificates are present. It will enable the industry to attract financing, develop new efficient equipment, and attract capable personnel.

We greatly appreciate the opportunity to appear and make our views known on this important legislation.

Senator MONRONEY. Is Mr. H. B. Johnston of the Air Coach Transport Association present?

(No response.)

Senator MONRONEY. Mr. Floberg, I understand, has a statement for Mr. Nick Bez, president of West Coast Airlines.

Mr. FLOBERG. Yes; he is still ill in Chicago. We have a statement for him.

Senator MONRONEY. That will be received and given the same consideration as if he were present to read it.

(The statement above referred to is as follows:)

STATEMENT OF NICK BEZ

Our

My name is Nick Bez. I am president of West Coast Airlines, Inc. headquarters are in Seattle, Wash. I appreciate the opportunity to express to you and this committee the views of West Coast on the question of permanent certification of the local-service air carriers as covered by bill S. 651. I believe a brief summary of the history of West Coast Airlines, Inc., is in order.

West Coast Airlines, Inc., was one of the first local-service carriers to be certificated by the Civil Aeronautics Board. Our application for a certificate of public convenience and necessity was originally filed with the Civil Aeronautics Board in 1941, and the certificate was granted on May 22, 1946, for service to cities in western Washington and Oregon.

Operation of West Coast Airlines started December 5, 1946, between Seattle, Wash., and Portland, Oreg., serving intermediate cities of Olympia, CentraliaChehalis, Aberdeen-Hoquiam, and Astoria, Oreg. Our service began with three 24-passenger DC-3 airplanes.

In May of 1947 we started service to Port Angeles from Seattle; in July of that year additional routes were added from Portland to Medford, Oreg., and by September 1947 we began service from Seattle to Bellingham, Wash. By this time we were operating five DC-3 aircraft.

West Coast Airlines, as now constituted, is the result of the merger of two local-service air carriers, i. e., Empire Airlines, Inc., and West Coast Airlines, Inc. The merger of these two carriers was approved by the Civil Aeronautics Board in July of 1952 and became effective on August 1, 1952.

In connection with this merger and to give better service to the area additional routes through central Washington were granted by the Civil Aeronautics Board to connect Empire Airlines and West Coast Airlines. It is interesting to note the 5 communities added enplaned 24,327 revenue passengers in 1954.

The consolidation now represented by West Coast Airlines serves 44 communities in Washington, Oregon, and Idaho, and of these 44 communities 30 are served exclusively by West Coast Airlines, Inc.

Communities served by West Coast Airlines, Inc.: Port Angeles1

Ellensburg1
Yakima
Wenatchee1

1 Communities served exclusively by West Coast Airlines, Inc.

As of the moment we have approximately 360 employees and operate 12 24-passenger DC-3 aircraft. From the small beginning in 1946 we show a steady and sustained growth. Revenue passengers for the 8 years ended last December 1954 totaled 954,270.

Since 1946 we have flown over 158 million passenger-miles without a single passenger injury or fatality.

In 1954 we carried 167,221 passengers between the communities over which we operate. A typical example of the need for and the service we render is at North Bend, Oreg. The 1950 census lists the population of North Bend-Coos Bay as 12,000. In 1954 West Coast boarded 11,011 passengers from this airport in spite of economic conditions seriously hampered by a long and protracted lumber strike. Almost the entire population of the two cities paid to fly with West Coast during the year.

Port Angeles, way up on the Olympic Peninsula, has a population of 11,233. In 1954 West Coast boarded 6,774 passengers from this airport.

We are proud of the passenger traffic we have generated. According to the latest industry figures for each 1,000 population in the communities served by us we had 109 people board a West Coast plane during 1954.

Seattle, Portland, and Spokane account for approximately two-thirds of the total population served by West Coast Airlines but gave us less than one-third of passengers boarded during 1954. Conversely, one-third of our population gave us more than two-thirds of our 1954 passengers.

Lewiston-Clarkston with a combined population of 18,602 boarded 7,732 passengers in 1954. For each 1,000 population 415 persons used West Coast Airlines from this area. Examples like this could be shown for the majority of the smaller communities served by us.

We feel we not only have generated air traffic not thought possible a few years ago, but of much more importance is our contribution to business and the living standards of the smaller communities. Many communities were formerly isolated from metropolitan areas and could not attract industry, but with air transportation they have moved next door to their markets. We have provided this opportunity.

I am certain if your committee could spend the needed hours taking testimony from business concerns you would compile statistical figures to show the close tiein of business, large and small, with the development of air transportation. In the States of Washington, Oregon, and Idaho distances between communities are great and the natural land and water barriers make air transportation a necessity. We talk to people who board our planes. We continually see businessmen, salesmen, and industrial experts from the eastern and midwestern sections traveling on our planes and accomplishing in a matter of hours what previously would have taken days by existing surface transportation. Housewives also ride with us to the metropolitan areas. They leave in the morning and return to their homes the same evening.

On almost any flight a list of passengers would represent a cross section of the people who live in these three great Northwestern States.

It would be impossible for me to appear before this committee without repeating some of my statements made publicly and before other committees. I firmly believe the growth and development of all areas of population are connected and tied in closely with the airline industry.

The phenomenal development of the domestic trunk lines during the last 16 years has not only been due to effective management and technological developments arising out of World War II, but, also, due to the very wise subsidy provisions of the Civil Aeronautics Act of 1938. The trunklines did not reach full maturity overnight. I believe it was not until 1951, war years excepted, that any of the trunklines were able to exist without the aid of subsidy, and even today at least some of the trunklines require subsidy assistance.

When we compare the tremendous economic and social advantages which come to us because of the existence of the world's foremost air transportation system, I believe all of us would inevitably conclude that the cost to our Government in assisting the development of these trunklines through the subsidy provisions of the act is relatively minor. I make this statement without

any reference to the acknowledged value to our country of the air carriers during the last war and the present-day value in defense planning.

The last 9 years has seen the development of the local service carriers to a point which compares favorably with the development of the trunk airlines during their first 9 years, and to continue to think they are still in an experimental stage is, in my apinion, completely erroneous.

Since 1946 all of the local service carriers have gone through the procedure of renewal applications.

We no longer have to experiment to determine whether or not local service can be efficiently operated. During the last 2 years West Coast has had nearly 330,000 answers to that experiment from passengers carried as well as thousands of individuals who have used our service for the movement of freight and express. Shortly West Coast Airlines will board its one millionth revenue passenger. We think the need for experimentation has long since ceased. We think the costly process of reexamination and renewal of local service certificates is a waste of Government time and the imposition of an unnecessary cost upon the industry.

I could cite many examples of the cost and frustration in attempting to plan for extremely short periods of time. We cannot provide equipment and facilities which we know good sound business judgment requires of us. One specific example which I have cited before has to do with OMNI equipment. From an operational standpoint we are convinced we should replace the low frequency radio navigational equipment with OMNI equipment operating on a very high frequency. Without a doubt this is more efficient and provides for safer operations during bad weather conditions, and it undoubtedly would reduce flight operations cost.

Despite the fact that the Federal Government has spent millions of dollars installing the OMNI navigational aids throughout the United States, I do not believe that West Coast Airlines can ask its stockholders to contribute $100,000 of additional capital to install this equipment when our certificate expired last September 1954, and we are at present going through the long and costly process of renewal application. This problem is not peculiar to West Coast Airlines. I am certain other local service carriers can cite other examples of inadequate planning which is directly traceable to the fact that we do not have any guarauty whatsoever of continued existence.

I believe that to a very major degree the Civil Aeronautics Act of 1938 has accomplished its primary objectives. I believe the local-service air carriers have proven their right to be taken out of the experimental classification and take their place in the forward march of progress in the areas in which they

now serve.

I appreciate the opportunity to appear before you and talk about a subject which is very close to my heart, and that is the granting of grandfather rights to the local service airlines.

Others have appeared before this and other committees in previous hearings and outlined their views of the bills which would have the effect of giving the local service carriers so-called grandfather rights and would would entitle these local carriers to permanent certificates on showing they are fit, willing, and able to perform satisfactorily. The weaker spots in any local carrier service airline can be determined upon a fair and equitable basis, and, taking into consideration the convenience of the public, permanent certification would not unduly burden the Government with subsidy payments. With certain progress and the passing of time, self-sufficiency will be accomplished.

I believe everybody acknowledges that the greatest potential air market is moving people relatively short distances. Transportation by private automobile is becoming increasingly difficult and if even 5 percent of this traffic were diverted to air transportation it would result in an astounding growth. We are on the threshold of achievements that will make the past seem insignificant. The local service carriers want to plan a full part in this development and believe the granting of grandfather rights to the greater part of the routes we now operate will prepare a firm foundation for the future.

I thank you again for this opportunity to appear before you.

Senator MONRONEY. Mr. James G. Ray of Airline Consultants. We have heard some fine things about your operations this morning from Senator Lee.

Mr. RAY. I am very much indebted to him.