provide in a regular administrative procedure that our plan met all the conventional standards for certification.

Let me add one other point that may be a bit tangential to your major theme. On page 4 of my written statement, I have summarized fees paid to the CAB by air carriers. Those related to charter matters represented 24 percent of the total paid, even though charter revenues are only 3 percent of industry revenues. This is the clearest possible summary of the overregulation to which we are subjected.

I thank you.

Senator KENNEDY. Could you not have gotten judicial review of the Board's action if you wanted to challenge it?

Mr. HARDENSTINE. I do not know, sir.

Senator KENNEDY. Do you still think you could profitably fly the route cheaper than the prevailing fare?

Mr. HARDENSTINE. I know absolutely.

Senator KENNEDY. You could not tell us now what rate. At that time it was $75.

Mr. HARDENSTINE. Right, and I think today it would still come into an area of 50 percent.

Senator KENNEDY. You might give us a note if your legal counsel did consider taking some court action. Obviously you should not have to go through that process, but I would be interested to know if that was given thought. You can submit that as an addendum to your statement later on. Do you intend to refile your application?

Mr. HARDENSTINE. At the present time, and I would say under the present climate, I do not think we would.

Senator KENNEDY. Why would you not? What is there about the present climate that would discourage you from refiling?

Mr. HARDENSTINE. No. 1 would be the economic condition of the country at the present time and also the status of the action of the CAB in not granting any of the applications that have been submitted. Senator KENNEDY. How could the Board dismiss the application without even giving you a hearing?

Mr. HARDENSTINE. Well, as I have stated, the application was in for 612 years and then it was dismissed as stale, and this is just one case that World had presented and did not

Senator KENNEDY. What happened when you raised this? Your application had been in for 612 years. Were you told only that it was dismissed as stale? What kind of response did you get?

Mr. HARDENSTINE. If I recall correctly, Senator, a number of applications were dismissed around the same time as being stale after they had been submitted in the midsixties.

Senator KENNEDY. Did your company try during this period of time to get a hearing, and were you unable to do so?

Mr. HARDENSTINE. That is right, sir. They were submitted and we were, during the period, attempting to get everything set up.

Senator KENNEDY. Do you think it is possible that the Board thought you could not fly at that fare without losing money, and therefore did not feel it was worthwhile to have a hearing given the fares you were talking about?

Mr. HARDENSTINE. No, I would not think so, because in the case that was submitted and in the submission to the Board, it clearly showed it could be operated and operated at a profit.

Senator KENNEDY. How could you fly with a fare so much lower than the other carriers and still make a profit?

Mr. HARDENSTINE. Our feeling was that basically in operating out of secondary airports, first, we could get away from the congested areas our cost of operation would be less, generally, from the secondary airports.

Second, with the price that we were offering we would be able to have approximately 75- to 80-percent load factor.

Senator KENNEDY. How much of a factor was less congested airports, how much a load factor? What weight would you say you would give to each of those considerations? Could you have flown at 75-percent load factor out of the primary air terminals and still made a profit, or would you have to go at 75 percent out of secondary, and 80 percent out of primary airports? What is the difference?

Mr. HARDENSTINE. The difference in the secondary is, one, you are away completely from the congestion of the airport and generally the fees would be less.

Senator KENNEDY. Landing fees?

Mr. HARDENSTINE. Landing fees, handling fees, space fees.

Senator KENNEDY. Why do not some of the scheduled airlines fly out of secondary airports and reduce fares?

Mr. HARDENSTINE. I think probably the scheduled airlines are serving the secondary airports, but in general, they are serving them with one- or two-stop service. As an example, San Francisco to the east coast, there are a number of nonstop services. If you were looking at Oakland to the east coast, I do not think that Oakland today has any nonstop service.

Senator KENNEDY. Are the primary reasons, then, that you are not resubmitting an application: (1) because of the policy that has been adopted by the CAB, and (2) because of the economic situation? If the economy turns around will you reconsider submitting an application? Do you still think you can fly substantially below scheduled fares? Would you give consideration if the CAB indicated that they would hold hearings-would you give consideration, then, to getting back in the market?

Mr. HARDENSTINE. Absolutely we would, and we still feel that the operation of the type that we did submit is valid.

Senator KENNEDY. Just the assurance, though, that the Board would give you a hearing would not be enough to get you into the business, given the economic problems at the present time, or would it?

Mr. HARDENSTINE. If we knew we would get a hearing and move ahead with the proposal we would go ahead with it at the present time. Senator KENNEEDY. Your application gave a fare of $75, about onehalf what the fare was then?

Mr. HARDENSTINE. Yes, sir.

Senator KENNEDY. And flying at 75 percent of capacity out of secondary airports, you still think that at half the scheduled fare you could make a profit?

Mr. HARDENSTINE. Yes, sir.

Senator KENNEDY. If you operated out of the primary airports what do you think your fare would have to be, can you give us any idea, given 75-percent load factor?

Mr. HARDENSTINE. If we were operating out of the primary areas, here again you would be in the situation of attempting to find space at the primary airport to do a good job for the public and to provide a good passenger service situation. I think that the use of the secondary airports and the use of passengers coming to the secondary airports for a lower fare travel would by all means be the way that any thrift-class service would take place.

Senator KENNEDY. Had you given consideration to other routes, besides the transcontinental flight?

Mr. HARDENSTINE. No, we had not, not at the time.

Senator KENNEDY. OK. Thank you very much. Can you stay with us for just a little while?

[The prepared statement of Mr. Hardenstine is printed at the end of the oral testimony of the airline panel, pp. 365-73, below.]

Senator KENNEDY. Our next witness is Mr. Raymond J. Rasenberger, representing North Central Airlines.

For the past 10 years, Mr. Rasenberger has been a partner in the Washington, D.C., law firm of Zuckert, Scoutt, & Rasenberger.

Mr. Rasenberger has submitted a very illuminating statement to the subcommittee, which describes the legal and practical ramifications of the CAB's route moratorium and points out the problems raised under the Federal Aviation Act and the Administrative Procedure Act. We want to thank you, Mr. Rasenberger, for focusing on the procedural implications of the Board's route freeze. This subcommittee is concerned with administrative procedures, and your statement has aided our work. I would appreciate it if you would briefly summarize your statement for us.

Mr. RASENBERGER. Thank you, Mr. Chairman.

I will summarize my statement.

As you mentioned, we are here at the request of the staff to talk about the CAB so-called route moratorium. We are not here to discuss the merits of any cases pending before the Civil Aeronautics Board— as distinguished from the procedural history of cases we have presented. The merits of cases are things we will deal with before the Board.

CAB'S "ROUTE MORATORIUM,'

"" 1969-1974: HISTORICAL PERSPECTIVE

We are also not here to join in any broad attack on either the Federal Aviation Act or the CAB. Of course, we have had many iisagreements, and the route moratorium is certainly one of the major ones, but on the whole we have worked under an excellent statute. And we think the CAB, looking at it from a longer and broader view, has done a very credible job in administering that statute.

I hasten to add we are not saying no changes should be made in the act at all. As a matter of fact, we think these hearings are very useful in order to consider the possibility of change.

What we are saying is that we do not think radical changes are warranted, and especially changes involving unregulated entry and exit. With respect to the route moratorium, as you know, and as I think the CAB staff has acknowledge, the moratorium began in 1970. As I indicated in our written statement, for perspective, however, it is useful to look before 1970. First, of course, at the language of the

statute itself, which calls for public hearings as speedily as possible, and which supports the idea of competition. Second, at the history of aviation before the 1938 Civil Aeronautics Act, which seems to me to underscore the importance of both public hearings and competition. Then it is useful, I think, to look at CAB history between World War II and 1970. During that long period, the CAB did hear a lot of route applications. It did grant a lot of routes, and it certificated, and many people seem to forget this, a large number of new airlines. In short, it built the system we have today.

North Central is a primary example of what that building process could and did accomplish. When North Central was certificated in 1946 it was operating two five-place Cessnas out of Clintonville, Wis. Last year it carried 41/2 million passengers, serving 90 cities, mostly in the upper Midwest but going all the way from New York to Denver. While North Central's primary mission still is today serving these smaller cities, it also serves a number of large routes where it provides strong competition for some of the grandfather carriers, such as United and Northwest and Western.

Now, a great deal of North Central's development as a strong competitive carrier took place by virtue of those route awards particularly in the last half of the sixties. That is why the route moratorium has had a particularly dramatic impact on us. Since 1969, no applications for competitive service by North Central have been set down for hearing by the CAB.

There is one exception to that, an application that was set down in 1970. But that case has never gone forward since that time.

Now, this has not exactly been what you would call a self-imposed moratorium. North Central is a young, very strong, aggressive airline. It wants to compete. It thinks it knows how to run a tight ship. It has been able to make money year after year when many other airlines have not, even with one of the worst route systems. In other words, it thinks it can compete effectively with larger carriers and it wants the opportunity to provide more of that kind of competition.

EXAMPLES OF NORTH CENTRAL ROUTE APPLICATIONS NOT HEARD BY CAB

That is why we have found the route moratorium so frustrating. In my statement I have given three examples how that moratorium has impacted on us.

One was an application filed in 1972 to give nonstop competition between Detroit and Boston. That market is the largest monopoly market in the United States with about 600 origin and destination passengers a day. Today it actually has less service than when we sought a hearing.

We filed that application and a motion for expedited hearing. The principal civic parties supported us at both ends of the route, including civil parties beyond Detroit in Michigan. After 9 months, the CAB denied that motion for hearing. A petition for reconsideration was denied 7 months later.

Another example was our application for Milwaukee-Denver nonstop authority. Milwaukee-Denver is a United Air Lines nonstop monopoly, and has been one since 1946. Since 1969 we filed once for single plane one-stop authority in the market. Later we filed two mo

tions for expedited hearing for nonstop authority. In these cases we were, of course, supported by the cities such as Milwaukee and Denver. We have had no success in getting that application heard, although I should emphasize there have been dissents among Board members on this question.

The third example is Milwaukee-Philadelphia. That is a market where the CAB found in 1970, at the conclusion of a long case, that competition was needed. It was a United monopoly at that time. The Board, therefore, certificated Northwest to compete. In 1972 United dropped its service in the market. By the start of 1973 Northwest had yet to begin the service it had been authorized to provide. So in 1973 we filed an application, supported by Philadelphia and Milwaukee and ports beyond Milwaukee, to have us certificated to provide that nonstop service. Our motion for a hearing on that application was denied 2 days after Northwest inaugurated a single nonstop flight. That is the service the market is still getting, one flight from Northwest, still none from United.

DIFFERENCE BETWEEN DENIAL OF HEARING AND DISMISSAL

Now, let me emphasize something about each of these three examples. The issue that we presented to the Board was not whether to grant our application, but whether to hold a hearing on it. If a hearing had been scheduled, obviously the applications of other carriers would have been heard. There was a very good chance that some of those applications would have been granted in lieu of our own. There was a very good chance that no one's application would have been granted. But, to us at least, there is a big difference between denying an application after hearing and denying it by refusing to hear it.

A decision that is made after a hearing has to be made on a public record, where the forecasts and all the allegations of all the parties, including the CAB staff, are open to review and cross-examination. And that hearing process imposes on the agency a discipline, the discipline of making a record and of making findings based on that record. Those findings, of course, are reviewable by courts, which is not true in general of decisions not to go forward with hearing applications.

When the Board refuses to hear an application it usually does so on the basis of internal staff memorandums which are generally not subject to challenge by other parties or, as I said, to review by the courts.

SUGGESTIONS FOR REFORM

Now, the question has been raised as to what ought to be done to change all this. We have only a few preliminary thoughts on the matter, Senator, but let me give them to you. First, we think the Board ought to hear every application it can hear as speedily as possible. Now, we recognize that unless the Board gets more staff it can not hear every application that is filed. It is going to have to pick and choose. But we think that picking and choosing ought to be on the basis of public interest standards that are adopted after public proceedings. We think further those standards ought to be simple and ob