We made inquiry, some time previous to that, as to limited war plans. I quote the following from the letter:

Planning to meet that contingency situation is being progressed by unified and specified commanders in accordance with guidance furnished by the Joint Chiefs of Staff. Concurrently MATS is working with the elements of the military services to develop implementing plans for the movement of applicable forces. These plans, while not as yet formally submitted to the Joint Chiefs of Staff for approval, now permit effective employment of our airlift resources should conditions require to meet contingency requirements. * * *

The import of this letter, which is exactly 13 months old, is that something more specific and definite is just about to happen, but it has not happened yet.

General KELLY. That is the situation I was just describing. We have accomplished planning with all of the specified and unified commands, and have worked out both capabilities plans and detailed plans to furnish the airlift-we have one with Admiral Felt in the Pacific, we have one with CINCNELM. We have just been over to Europe and worked one out with EUCOM. While those have not been specifically approved by the Joint Chiefs of Staff, they are an operating plan which we are ready to execute. We have coordinated it with the specified and unified commands, and we consider them a contingency plan that, if the bell rings, we go. We just exercised one of those contingency plans with Admiral Felt's forces in the Far East.

Mr. MAHON. How do you explain the failure to finalize and completely authenticate these plans prior to this date?

General KELLY. Annually the Joint Chiefs get together and work out the war plan. As I stated earlier, we have only one approved limited war plan which involves airlift of combat forces in contingencies.

Mr. MAHON. But my question is: What is the explanation of that? General KELLY. I think the explanation is that they probably have not assigned specific airlift requirements to the limited war plans because of the many variables of limited war. I am certain that one commander comes in with his requirements, which would take everything. I do not think the Joint Chiefs up to this time have been able to assign definite transportation requirements to each contingency war plan.

PLANNED USE OF C-135 AIRCRAFT

Mr. MAHON. With further reference to this C-135, we are advised that the first of these aircraft are to be located at McGuire and Travis. Does this mean that they are to be engaged in channel traffic and thus not really available in an emergency when a lift might be required?

General KELLY. Mr. Chairman, I do not visualize those airplanes ever being used in what you call channel traffic. The whole nature of MATS is changing considerably. I would visualize those airplanes would be used for troop movements. They would be ready for Army, Navy, Air Force exercises. They would haul cargo, they would bring back air evacuee patients, but I can never visualize those airplanes being used to haul women and children in what you call channel traffic, ever.

At the present time we are rotating POLARIS crews and critical equipment for POLARIS, and they have only a very limited number This is going to increase radically. I would visualize these

airplanes would be used for such things as that. We are rotating SAC crews on alert posture. We are rotating TAC rotation units. We are going to be rotating some Army units. This is the type of utilization that I would visualize these airplanes to be used in, and a certain portion of them will be in our alert force. I think you are aware that we stand a runway alert along with SAC and the other elements of the Department of Defense with a certain number of crews and aircraft at the end of the runway, a certain percentage of these aircraft would be utilized in that fashion.

OPERATION AND MAINTENANCE COST

Mr. MAHON. What will be the annual operation and maintenance cost of a mix of turbojet and turbofan engine aircraft as compared with a fleet of all turbojets? You are getting into that situation with the C-135.

General KELLY. I am afraid I would have to give you some specific figures for the record.

Mr. MAHON. All right, give us a general feel for that problem for the record.

(The information follows:)

TURBOJET VERSUS TURBOFAN COSTS

We do not have precise data which will allow us to definitely state the annual operations and maintenance costs of the type which would be paid by the industrial fund. We can, however, make some comparisons.

The annual operating and maintenance cost of a mix of turbojet and turbofanequipped C-135's would be less than the 100 percent turbojet-equipped aircraft due to the decreased operating costs of the turbofan engine. The degree of reduction would be dependent upon the percentage of mix; i.e., if 15 C-135's were equipped with turbofan engines and 15 with turbojet, there would be an estimated annual operating cost reduction of approximately one-half million dollars in fuel savings alone.

In addition, although there is presently no actual experience data available for turbofan engines, it is anticipated that there will be appreciable maintenance cost savings related to the turbofan engine, attributable to reduced acoustical vibrations and reduced airframe and engine fatigue brought about by shorter takeoff roll and less climb time to altitudes. There will also be operating-cost reductions associated with the increased range of the turbofan-equipped aircraft through some overflying of enroute stations required by turbojet-equipped aircraft.

The great advantage of the turbofan engine is not a cost advantage but its effect upon aircraft performance. Aircraft equipped with turbofan engines as opposed to turbojet engines require runways approximately 15 percent shorter and have mission distance capabilities 10 percent farther and faster; thus, yielding considerably greater operational flexibility throughout the world.

IMPACT OF CAB MILEAGE RATES

Mr. MAHON. Now I would like to ask you what the impact will be of this Civil Aeronautics Board mileage charge, this new rate structure. What is that all about and what is going to be the impact of it?

General KELLY. The impact of that is to cause us to raise the tariffs in our industrial fund for passengers. It will have an impact on your limitation that you put on the money for travel.

This past year we have operated 3 months under the old competitive bidding. Our average cost was about roughly 2.1 cents per passenger mile. Civil Aeronautics Board has put a floor of 2.9 cents per passenger mile.

Mr. MAHON. 2.1 to 2.9.

General KELLY. We have been collecting roughly 2.2 cents as our tariff per passenger mile. You can see that if we have to pay 2.9 cents per passenger mile and cannot get any commercial business under that figure and we are only collecting 2.2, that we must raise the tariff in fiscal year 1962 or the industrial fund is going broke. If we try, by some method, to balance the industrial fund, we will be circumventing this committee's limitation on the number of dollars for travel.

By balancing roughly where we are now, with the military carrying some 50 percent or a little less and the civilian airlines carrying a little more than 50 percent, we will have to raise the passenger tariff in fiscal year 1962 some 13.5 percent as a result of this Civil Aeronautics Board floor.

They have put further floors on various types of traffic, one-way traffic. They have also put some floors on the cargo. It results that for what we call Category A that we are paying 4.3 cents a mile, and we are still only collecting 2.2. We are discontinuing the Atlantic Express, which is commonly known as the Blue Plate, the Hot Dog, or various other names, on the first of April. We are going to send those passengers by commercial air ticketed basis at the 4.3 cents per mile. This will cost the Government roughly $300,000 a year more for that service than it has in the past, and it will cost the industrial fund under the present rates just about double what we collect. Mr. MAHON. Is that a desirable action?

General KELLY. It is an action that has been a very great controversy and football by all elements of the Government to get MATS out of the plush passenger business. It is going to take more money to move the same number of people, and we will have to increase our rates under the industrial fund.

Mr. FORD. May I ask a question, Mr. Chairman?

Mr. MAHON. Mr. Ford.

Mr. FORD. That raises the question in my mind: Why have you not raised the rates to your users?

General KELLY. One reason we are breaking even on the passengers for this fiscal year is the fact that the Army took 55,000 passengers away from us. Had they left those passengers with us, it would have meant we lost money because we would have had to contract under these CAB rates, and if we raised the rates to them they cannot ship by air because the increased cost would preclude this mode of travel due to the travel limitation.

Mr. FORD. What did they do with these 55,000? How did they transport them?

General KELLY. They shipped them by boat as troop movements. Mr. FORD. MSTS?

General KELLY. MSTS by troop movement.

Mr. FORD. They could do that more cheaply than through your service?

General KELLY. They can do it more cheaply in actual outlay, of transportation money, but when you count the time lost and the pipeline, and so on, it is a very false economy.

Mr. MAHON. It all depends upon how valuable time is under the

circumstances.

General KELLY. We could not have broken even if 2.9 had been in effect for the whole year. We would have had to raise the tariff, but on this industrial fund we neither want to make nor lose money. We want to break even.

PROCUREMENT OF COMMERCIAL AIRLIFT

Mr. MAHON. How much commercial airlift is to be procured in fiscal 1962 according to your plans and as shown in your budget and as it will be revised in the light of a change in aircraft available during 1962?

General FRIEDMAN. That is $117.6 million commercial augmentation. The airmail amount included within that total, Mr. Chairman, is about $23.7 million.

IMPACT OF CAB MILEAGE RATES

Mr. MAHON. Why did the Civil Aeronautics Board get into this picture?

General KELLY. The Civil Aeronautics Board got into this picture because there was the allegation made that through our competitive bidding procedures we were forcing the airlines into bankruptcy, that they were not making enough, in fact they were losing money through this competitive bidding procedure. They got into the rate-fixing structure to determine a fair return to the civil airlines. Mr. MAHON. Who spoke for the civil airlines in this business? General KELLY. This first came up through a proposal of the big four-TWA, Pan American, Seaboard & Western, and Northwest Airlines. They made a proposal to take over all the MATS business at a certain rate. This went to the Civil Aeronautics Board. This was the beginning of their getting into the MATS structure.

Also any carrier who gets a MATS contract must go to the Civil Aeronautics Board to get an exemption to carry out that contract. So it was in the granting of the exemptions that the 2.9 floor was set. I have 24 members of CRAF. When they bid, they all bid 2.9. There is no variance in the bid. Everyone bids the floor. Mr. MAHON. What do you do about it? General KELLY. Then it becomes incumbent upon us to set various standards. First, as prescribed by the Appropriation Act, they must be a member of CRAF before they can bid. Then we make criteria as to expansion capability, how many aircraft do they have in CRAF and how many of those will they make available short of a national emergency in expansion on this contract? Then we take into consideration the type of equipment they have. So you build up a little formula and divide the business.

Mr. MAHON. Does this work out fairly well?

General KELLY. We do not satisfy everyone, but I think we are getting along better with the commercial airlines right now than at any other time in MATS history.

Mr. MAHON. Would it be fair to say that the big businesses put the pressure on the Department of Defense and brought about this change?

General KELLY. I would have to say that that is a fair statement. Mr. MAHON. Do you think the rates and charges that were being

fixed as a result of competitive bidding were bringing about an unwholesome situation?

General KELLY. I personally feel the rates that were established through competitive bidding were too low. They were not returning a fair profit, although different airlines can operate with different operating costs, depending on the equipment they have, depending on whether or not they are certificated. Some of the certificated carriers have to run whether they have a passenger or not. Some of these airlines only have two or three airplanes. They operate only when they have a load to go. So I do not think you can take a 2.9 and say that is fair for everyone. I think 2.9 might be fair for someone operating a 707, being a certificated carrier, where somebody else with four DC-6's could operate much cheaper and is not operating a big terminal someplace 24 hours a day. These people rent this service, they contract for it when they need it. For one airline, 2.9 might be a fair return and 2.9 for another a gross overpayment.

Mr. FORD. Will the chairman yield?

Mr. MAHON. Yes.

CONTRACTS WITH CRAF PARTICIPANTS

Mr. FORD. As I recall the history of this prior to fiscal 1961, maybe prior to fiscal 1960, there was no requirement that on this bid basis the supplier of the service had to be a participant in the civil reserve air fleet.

General KELLY. That was never put in until it was written into the appropriation act this past year. Mr. FORD. For fiscal 1961?

General KELLY. That is right.

Mr. FORD. Has that been helpful, beneficial? What is the effect of that?

General KELLY. I would consider it very helpful. However, these airplanes in the civil reserve fleet are listed by tail number, and they change ownership quite drastically when bid time comes. Recently we had bids submitted, and we had four companies claim the ownership of specific airplanes by tail number. It turned out they all had options in case they got the contract.

Mr. FORD. Is that practice authorized under the civil reserve air fleet program?

General KELLY. We are working with the Department of Commerce to pin it down so that twice a year we get a list of who owns those airplanes and who has control of them. Many of these airplanes were turned into a pool by the big airlines when they got jets, and they are leased. General Dynamics owns a large number. They lease them to whoever wants them for business. There are several corporations that have been formed that actually own these airplanes and lease them to operators as they need them.

Mr. FORD. Is that practice detrimental to the aims and objectives of the civil reserve air fleet?

General KELLY. Yes; it is. We do not know from time to time who has the airplanes. It certainly does not make them responsive