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was under the Federal Government and received substantial sums from them.
They are normally things that we buy and they borrow on, because every railroad-Norfolk Southern does not pay cash for its cars and locomotives. It borrows in order to buy them.
CONRAIL BOARD OF DIRECTORS MEETING
Senator LAUTENBERG. The chairman has requested my yielding for a minute, and knowing how things work, I never deny my chairman an opportunity.
Senator ANDREWS. I just want to clean up a few loose ends.
Mr. BURNLEY. I frankly do not know the answer to that. Some time in mid-April, but I cannot give you the precise date.
Senator ANDREWS. Mr. Crane?
Mr. CRANE. Did you ask me, Mr. Chairman? The next Conrail board of directors meeting is on Wednesday, April 17.
Senator ANDREWS. Will there be any new information regarding Conrail operations for the board members at that meeting that you could share with the committee today?
Mr. CRANE. Well, let me say it so happens, Mr. Chairman, that that is the organizational meeting of the company each year. Let me say our directors are elected at yearly intervals. Six of them are nominated and elected by the U.S. Railway Association. Five of them are now nominated and elected by the Department of Transportation.
That board then sitting as a board of 11 members will elect a chairman and a chief executive officer and a chief operating officer and certain other senior officers of the company. All of that will take place at that April 17 board meeting, as it has in each of the previous years.
Senator ANDREWS. That I suspected.
Mr. Burnley and Mr. Berger, given the operations and financial record of the present Conrail team, does the Department foresee any changes that would affect Conrail before a sales transaction is completed?
Mr. BURNLEY. Changes of what sort, Senator?
Mr. BURNLEY. Oh. The answer to that is that between now and April 17, the Secretary will have to make her appointments, and the USRA board will have to make its appointments, and she still has that matter under consideration and review, and I frankly do not know how she is going to come out on it, so we will just have to see when she makes her decision.
Senator ANDREWS. Given the study that Mr. Berger just mentioned, that things are going well, it could well be a freestanding operation, given all of the other laudatory comments about how well it is being run, are you contemplating changing it?
Do you want to in effect, are you going to slide in through the back door and gut the good operation so that it will have to be sold?
Mr. BURNLEY. Senator, far from it. We are very proud of Conrail's good operations, and we think that the Congress gets the lion's share of the credit for the ability Conrail management has had to become competitive.
We have no intention of sliding in through any back doors.
I might just point out a most unusual situation that leads to what we have here, where management can openly use all the company's resources to oppose the stockholders' recommendation on a sale. The Secretary only elects 5 of 13 directors, and I think that has a little something to do with the current situation.
So, regardless of the Secretary's decision on that, we do not have the ability to affect the majority of the board members.
Senator ANDREWS. Well, Mr. Berger, do you have any plans to change the management team in Conrail?
Mr. BERGER. My personal plans would be no. Let me just suggest, I have talked to the Deputy Secretary about this over some period of time, and I have suggested that I thought it would be in the interest of the company as well as of the process now taking place here on the Hill to maintain stability in the company.
The approach of USRA, both the previous board and this board, has not been to try to direct the voting habits of its members of the board of directors. We have chosen people, some on the recommendations of the administration, some who have sat for some time, on the basis of what we believe is their broad general competence in managing and sitting on the board of directors of what is a major corporation.
I keep saying that because the Government owns the stock but it is functioning as a corporation. My predilection clearly, Mr. Chairman, would be to see stability during this process and until the process is completed, but obviously I cannot speak for the Secretary on her appointments.
AMTRAK ELIMINATION IMPACT Senator ANDREWS. On another subject, because we also examine their budget, Mr. Burnley, the subcommittee heard testimony yesterday from the FAA Administrator—and you speak for the Office of the Secretary-Engen regarding the aviation impact in the Northeast corridor of the elimination of Amtrak service.
He indicated that FAA does not currently have a contingency plan that can absorb 17,500 additional daily passengers in the air space system around New York. He also acknowledged that airport investments to accommodate such an increase in traffic would be necessary and highly expensive, as would airway investments.
Why did the department not take these factors into consideration in FAA budget deliberations?
Mr. BURNLEY. Senator, there are two answers to that. First, it is by no means clear and plainly evident from our perspective that passenger rail service would no longer be available if the Congress eliminated Amtrak
subsidies as to the Northeast corridor. As you know, that is one of the two runs in this country where at least Amtrak today more often than not is recovering its operating costs, and perhaps doing a little better than that sometimes.
As I think Admiral Engen testified yesterday—and he told me about your questions on this after the hearing was over-there are by his count some 5 million empty seats on airplanes already in service between Washington and New York, and since only 10 percent of all of the intercity passenger traffic today between those two cities moves by rail, it would seem that we would not have too much problem being able to absorb those folks.
Senator ANDREWS. In his testimony, he mentioned those 5 million empty seats per year. We were talking about 17,500 passengers per day, and you know, if you can shoehorn those passengers into those empty seats, the precise number of passengers at the precise proper time, to get a 100-percent load factor, you will have done better than any management team on any airline in the history of any nation.
So filling those empty seats borders on smoke and mirrors and Alice's rabbit, but the key thing he said after he mentioned the seats was that they not only had problems with airport facility size, they also had problems with the radar and the other setup in the New York area that would be seriously impacted by additional flights.
Now, they are requesting $31 million of us just to buy the equipment to keep that facility in New York on track given a normal passenger increase. And he testified to us that that would not be adequate if you dumped 17,500 daily passengers onto the system.
My question goes back to that old one, Mr. Burnley. Why did you not take these factors into consideration?
Mr. BURNLEY. Well, Senator, we did take them into account, and we also took into account the fact that we have a struggling intercity bus industry, and I am sure they have been to see you as well as they have us, to complain bitterly about the fact that the U.S. Government is making it very difficult for them to stay in business, because every time they drop the bus rate between New York and Boston, Amtrak drops the fare, and the taxpayers make up the difference, and they have some difficulty understanding why we let that go on.
So, it is not just the 5 million empty seats. They are already there. But in addition you have intercity bus transportation. You have an interstate highway system. And again we are talking, unfortunately-because I share the very strong romantic interest and the nostalgic interest that many people have about passenger rail service—but unfortunately less than 1 percent of all the intercity travel in this country today is by pas
It is not because we do not have enough empty seats on the trains. In the Northeast corridor, trains carry only 10 percent of intercity travel. So it is really not a major problem.
Senator ANDREws. I am not worrying about the romance of riding on rails. The concern that this committee has to have is what improve
ments are we going to be forced to make, at high cost, to handle those passengers that go some other way.
If the administration believes that in time Amtrak beneficiaries will materialize to fund viable system portions, why does the Department's budget not allow fiscal year 1986 transitional funding as it does for Dulles and National airports, which are proposed for transfer to a local authority?
Mr. BURNLEY. Senator, in terms of transitional funding, I think you have to know first how you might propose to turn Amtrak over to either a regional authority or to have the States and local agencies running it, and frankly, although the Secretary has asked the Federal Railroad Administrator to talk to the States in the Northeast corridor, you certainly have got, at least at this point, an open question before the Congress about whether the subsidy is going to be eliminated.
I think once it becomes clear that Congress is moving in that direction we will see some rapid movement to pick up the Northeast corridor, and then we will be able to talk further with the Congress about how that would be done. As is true with National and Dulles, I am sure we would then have a plan that you would be very interested in as to how that would be transferred.
ESSENTIAL AIR SERVICE SUBSIDIES
Senator ANDREWS. Mr. Burnley, finally, on essential air service subsidies, Congress provided $52 million for essential air service subsidies. What actual obligations are estimated for fiscal year 1985?
Mr. BURNLEY. Senator, my understanding, if I recall correctly, is that the actual obligations for current subsidies will be in the neighborhood of $38 million.
Senator ANDREWS. In the event the program is continued, what is the estimated budget authority necessary in fiscal year 1986?
Mr. BURNLEY. I will have to supply that for the record. I do not have that number off the top of my head.
(The information follows:) Our present estimate is that $38 to $40 million would be required in fiscal year 1986.
Senator ANDREWS. How many communities that received the subsidy under the EAS last year obtained subsidy-free status?
Mr. BURNLEY. I cannot give you that number for last year. I can say that we have had, since 1978, when the Congress began deregulating the airline industry, very good success, and if memory serves me correctly, something close to half of the communities that were originally eligible have been able to get service without subsidy.
And as I think you know, we have had quite a few communities where the quality of the air service has been maintained without subsidy, but they may get smaller airplanes. They may be served with turboprops instead of jets. We have had a good record with that.
[The prior year information follows:)
Eight points were removed from the subsidy list between January 1984 and March 1985. These are: Chico, CA, Elko, NV, North Bend, OR, Prescott, AZ, Roswell, NM, Stillwater, OK, Waycross, GA, and Wenatchee, WA. Waycross is not presently receiving air service.
Senator ANDREWS. How many communities would lose service without the EAS?
Mr. BURNLEY. I think, Senator, that is probably very speculative. We do not have a number, because you really get to the question of whether there are operators who will come in with what may be smaller equipment, with commuter-class aircraft versus the 60-seat plus aircraft to pick up that service if the EAS program is terminated.
So, I think anything we give you on that would be highly speculative, because again we have a better experience than I think we anticipated or the Congress anticipated with communities getting service without subsidy.
Senator ANDREWS. Well, we have three in North Dakota in that category. We have Williston, Devil's Lake, and Jamestown.
How do you square cutting that program out when Secretary Dole at this hearing last year, responding to a question about the losers since deregulation, pointed out this program's value when she said no community that received certificated service at the time of the Airline Deregulation Act has lost all service?
As you know, the Essential Air Service Program, which will be transferring to the department at CAB sunset, provides that all communities receive some service.
Then she went on to say, the Essential Air Service Program provides a 10-year federally supported transition period.
Now, with the cutting out of this program and the blindsiding of three of our communities in North Dakota and, I suspect, others in other States, does that mean that the Secretary's remarks last year have been declared nonoperational?
Mr. BURNLEY. They have not been declared nonoperational, Senator, but we were in a different budget cycle last year, and I think we would all agree that the challenges that we face both in the executive branch and the Congress have required a second look at a lot of programs.
AIR SERVICE COVERAGE
Senator ANDREWS. Has the Department then thought of the possibility of going back to some type of requirement on the airlines and say, when you serve a region, that you serve all the facilities in the region that generate adequate passengers, which they did before we went with deregulation?
Mr. BURNLEY. Senator, we have not looked into that with any depth or detail, and the reason, very simply, is that therein lies a route back to reregulation, because once you tell them they have to do it, then they have a right to be guaranteed revenue sufficiency, and we end up right back where we were with a highly regulated industry pre-1978.
Senator ANDREWS. Some of these towns were being served without any subsidy, so what we are talking about is not reregulation, but a na