Bower, Richard S., professor of business economics, Dartmouth College, special study for the subcommittee on the appropriate return on equity Page in the airline industry-- Trunk airlines, ratio of market value of stock to book value, and return on book value, by carrier, 1964–73_ Table showing association of market price per share/book value per share with return on book equity-- Civil Aeronautics Board, William B. Caldwell, Jr., Director, Bureau of Operating Rights, letter to Senator Edward M. Kennedy, dated Feb. 28, 1975, categorizing 8,057 interairline agreements submitted to the CAB, 1967-74 Civil Aeronautics Board, materials inserted in the record by the subcom- CAB Order 70-11-35 (Nov. 6, 1970), rejecting the "cluster" agreement 2284a 2284g 2284k 1790 1800 1805 1818 1846 CAB Order 73-7-147 (July 27, 1973), approving the 2d extension of the "transcontinental economic agreement”. CAB Order 72-6-70 (June 16, 1971), approving the N.Y.-San Juan "economic" agreement between American, Eastern, and Pan American 1884 CAB Order 72-11-7 (Nov. 2, 1972), approving the first extension of the 1892 CAB Order 73–8–59 (Aug. 10, 1973), approving the 2d extension of the 1902 CAB Order 73-10-110 (Oct. 31, 1973), approving the "20-market fuelrelated agreement" and the "transcontinental fuel-related agreement" between American, TWA, and United___ 1913 CAB Order 74-7-105 (July 24, 1974) approving the 2d extension of the "20-market fuel-related agreement" and the "transcontinental fuelrelated agreement". 1927 CAB Order 75-1-140 (Jan. 31, 1975), approving the 3d extension of the "20-market fuel-related agreement" and the "transcontinental fuelrelated agreement".. 1957 Capacity Reduction Agreements Case, initial decision___ Clark County, Nevada, prepared exhibits: 1984 Traffic in the Las Vegas-New York market, the Las Vegas-Chicago market, and for the Las Vegas station, before and after the capacity reduction agreements were initiated_ 1769 Actual vs. standard load factors, Las Vegas-Denver, Jan.-Mar. 1974_. Las Vegas markets subject to capacity reduction agreements and duration of agreements--- 1770 1772 Bar graph showing deleterious effect of capacity reduction agreements 1773 1773 Bar graph showing actual vs. standard load factors, Las Vegas-Denver market, Jan.-Mar. 1974_. 1774 Las Vegas-Denver agreement cost Las Vegas $1 million (excluding gambling) 1775 Clark County, Nev., Richard P. Taylor, attorney for Erle Taylor, letter to the subcommittee, dated Mar. 27, 1975, commenting upon American Airlines' letter of Mar. 13, 1975. 1776 Delta Air Lines, R. S. Maurer, senior vice president and general counsel, letter to Senator Edward M. Kennedy, dated Mar. 7, 1975, concerning East coast-Florida load factors, Mar. 1974-Feb. 1975. 1710 Delta Air Lines, R. S. Maurer, senior vice president and general counsel, letter to Senator Edward M. Kennedy, dated Mar. 21, 1975, commenting generally on the antitrust immunity for interairline agreements----Federal Aviation Act of 1958, secs. 412, 414, 49 U.S.C. secs. 1382, 1384 (1970) (inserted in the record by the subcommittee for clarification). 1735 1782 Karth, Joseph E., Congressman, Fourth District, Minnesota, prepared state- Kimbriel, Harry A., Jr., vice president, Alliance One, prepared statement. Personal outlays on transportation and recreation services as percent- Relative weight of factors contributing to increase in traffic, 1962-66_- Distribution of travel by purpose of trip, for automobile and airplane, Characteristics of nonbusiness travel, by automobile and airplane, 1972 Page 2228 2234 2240 2242 2243 2244 2244 2246 2247 2248 2249 2250 2252 2253 2254 Travel agents' commissions and reservations and sales expense as a 2255 Capital and stock structure comparisons, U.S. trunk airlines and man- 2256 Airline increases in employment costs outpace those of other U.S. in- Projection of families by income class percent distribution, 1970–80- 2262 2262 2265 Trans World Airlines, Melvin A. Brenner, vice president, marketing planning, prepared statement (Mar 4, 1975)__ 2155 Industry load factors, New York-Los Angeles market, before and after 2158 Trunk airlines' return on investment, 1955–74. 2159 2160 Trunk airlines' load factors, Nov. 1973-Jan 1974 compared with Nov. 2161 Brief of TWA in the Capacity Reduction Agreements Case, CAB docket 2162 Trunkline airlines' rate of return on investment, domestic operations, 2183 F.2d Load factors in the transcontinental agreement markets, 1967-71, compared with the load factors of the domestic trunkline operations_ Percentage changes in domestic trunkline traffic, 1972-74_. U.S., Circuit Court of Appeals for the D.C. Circuit, materials, inserted in the record by the subcommittee for clarification and documentation: Air Line Pilots Ass'n. v. CAB, 475 F.2d 900 (D.C. Cir. 1973) United States v. CAB, U.S. Department of Transportation, John W. Barnum, Acting Secretary, prepared statement (Mar 4, 1975) U.S. Department of Transportation, John W. Barnum, Deputy Secretary, Subcommittee staff, an insert for the general reader explaining "capacity 2152 2285 2289 1694 FRIDAY, MARCH 21, 1975 TESTIMONY Alterman, Stephen A., former Assistant Chief, Formal Proceedings Divi- Page 2303 2323 Rickey, Robert F., former Assistant Chief, Investigation Division, Bureau 2326 2329 2336 Knudson, John V., former investigator, Bureau of Enforcement, Civil Aeronautics Board__. 2344 Edison, Peter C., former Assistant Chief, Informal Compliance Division, 2348 Rodriguez, Elias C., former Chief, Informal Compliance Division, Bureau of Enforcement, Civil Aeronautics Board...-- 2349 O'Melia, Richard J., Acting Chairman, Civil Aeronautics Board; formerly 2350 Timm, Robert D., member, Civil Aeronautics Board; formerly Chairman, 2374 EXHIBITS Civil Aeronautics Board, material inserted in the record by the subcommittee for clarification or documentation: Alterman, Stephen A., memorandum to the Director, BOE, dated July 12, 1973, on the subject of "contributions: analysis of Federal Aviation Act violations". Alterman, Stephen A., memorandum to the Director, BOE, dated July Alterman, Stephen A., memorandum to the Director, BOE, dated July Alterman, Stephen A., memorandum to the file on "Unreported Cam- Memorandum from Assistant Chief, Legal Division, CAB, to Chief, 2304 2305 2307 2312 2317 2336 2345 O'Melia, Richard J., Director, BOE, memorandum to Chairman, CAB, dated Aug. 8, 1973, on the subject of "industry wide survey regarding political contributions by air carriers" 2355 Timm, Robert D., Chairman, memorandum to Director, BOE, on the subject of "industrywide survey regarding political contributions by air carriers" 2356 Stout. Joseph W., Jr., memorandum to Chairman, CAB. dated Mar. 7, 1975, on the subject of "political contribution investigation". Example of field report of the "industrywide survey regarding political contributions by air carriers" (July 1973) _ 2364 2367 Stout, Joseph W.. Jr.. Chief. Investigation and Audit Division, BOE, to Director, BOE, dated Mar. 18, 1974, on the subject of "completed investigation cases”. 2368 Gingerv, William M., former Director. Bureau of Enforcement. CAB. letter to the subcommittee, dated February 15, 1975, concerning his investigation of BOE's investigation of the failure of certain airlines to report certain campaign contributions in 1973_. 2300 Kennedy, Senator Edward M., letter to Edward H. Levi, U.S. Attorney General, dated May 12, 1975, requesting an investigation to determine whether Federal criminal laws were violated in connection with sworn testimony before the Subcommittee on Administrative Practice and Procedure of the Senate Committee on the Judiciary on Mar. 21, 1975 and in connection with the CAB's investigation of possible corporate political contributions by air carriers in 1973__ Page 2385 DEPOSITIONS TAKEN BY THE SUBCOMMITTEE Heye, Thomas, former Administrative Assistant to Robert D. Timm, Chair- 2387 2419 List of witnesses by name and organization....... 2471 Persons who submitted additional material at the subcommittee's request__ Volume 1 OVERVIEW OF FEDERAL ECONOMIC REGULATION OF DOMESTIC AIR TRANSPORT THURSDAY, FEBRUARY 6, 1975 U.S. SENATE, SUBCOMMITTEE ON ADMINISTRATIVE PRACTICE AND PROCEDURE OF THE The subcommittee met, pursuant to notice, at 10:20 a.m., in room 2228, Dirksen Office Building, Senator Edward M. Kennedy (chairman of the subcommittee) presiding. Present: Senator Kennedy. Also present: Stephen Breyer, special counsel; Philip Bakes, assistant counsel; Thomas M. Susman, chief counsel; and Lewis Beasley, assistant to Senator Thurmond. Senator KENNEDY. The subcommittee will come to order. OPENING STATEMENT OF SENATOR KENNEDY The Senate Subcommittee on Administrative Practice and Procedure is today continuing the examination it began last November of the procedures and practices of the Civil Aeronautics Board. The subcommittee has scheduled 7 days of hearings this winter to look into the CAB's activities relating to rates, entry, enforcement, and antitrust. Federal regulation of transportation began in the 1880's with two objectives: First, to protect the consumer from concentrations of economic power, and second, to guarantee that essential transportation would be available to all Americans. But regulation has gone astray. What may have been good for the last quarter of the 19th century is a disaster for the last quarter of the 20th century. Either because they have become captives of regulated industries or captains of outmoded administrative agencies, regulators all too often encourage or approve unreasonably high prices, inadequate service, and anticompetitive behavior. The cost of this regulation is always passed on to the consumer. And that cost is astronomical. In the transportation area alone, studies have estimated the cost to the public of Federal regulation to be $8 to $16 billion each year. X That is an unreasonable price at any time. It is wholly unacceptable under our present economic conditions. President Ford is asking the American people to absorb billions of dollars in additional living costs to alleviate our energy problems. At the same time, he is asking Congress to freeze or reduce spending on social programs designed to ease the financial burden on those least able to cope with recession and inflation. The President is predicting a frightening unemployment rate of over 8 percent to continue during the next several years. 51-146 O 76 pt. 1 2 |