INTERNATIONAL AIR TRANSPORTATION RATES MONDAY, MAY 20, 1963 U.S. SENATE, COMMITTEE ON COMMERCE, Washington, D.C. The committee met, pursuant to recess, at 10:45 a.m., in room 5110, New Senate Office Building, Hon. Warren G. Magnuson (chairman of the committee) presiding. The CHAIRMAN. The committee will come to order. Our first witness today will be Tom Taylor, vice president of TWA, who we were unable to accommodate last week. And we will then hear from CAB and the State Department with specific regard to the pending legislation. Attention will be directed to S. 1540, a bill, which gives the CAB positive rate control authority, subject to the approval of the President, and then S. 1539, a bill to give the Board authority to suspend air fares when it determines them to be excessive or otherwise contrary to the public interest. The two bills are both before the committee. They have the same general objectives, but the procedural processes are somewhat different. So, Tom, we would be glad to hear from you and I am sorry we kept you waiting. STATEMENT OF THOMAS K. TAYLOR, VICE PRESIDENT, TRANS WORLD AIRLINES Mr. TAYLOR. Thank you very much. Senator, it would not be my purpose to read this statement, which has been distributed. The CHAIRMAN. It is very short. Why don't you do it? My name is Thomas Taylor, and I am a vice president of Trans World Airlines. We appreciate the opportunity afforded us of appearing here today. Our understanding is that this hearing is held for the purpose of inquiring into recent problems regarding North Atlantic fares, with a view toward considering such legislation as may be appropriate in the circumstances. Given these terms of reference, we trust it will suit the committee's purpose to summarize TWA's general philosophy on fares and to review the company's position on certain issues considered by international airlines in recent months. 85 As a generalization, TWA has long advocated low fares. We have supported and do support the lowest fares consistent with economic operation. We believe our growth and long-term profit potential are best served by this policy. Prior to and during the Chandler meeting of the IATA Traffic Conference last year, TWA held basic positions on the fare front. We felt the economy fares were about right and did not seek an increase. We felt first-class fares were too high and favored a reduction. We opposed those who sought fare increases as answers to their economic difficulties. We were very much concerned over the abuse of conference resolutions by those carriers who engage in practices which undercut fares. We were determined to try to put a stop to those practices. We were dedicated to the retention and expansion of certain promotional fares, designed to stimulate or generate additional traffic for our industry, such as excursion and group fares. I believe our views are matters of record in communications between TWA and the CAB and in the discussions of the Chandler traffic conferences. The Chandler resolutions represented a compromise among those who felt that economic salvation lay with fare increases and those of an opposite persuasion. We believe these divergent points of view were honestly held and that the final resolutions involved a good deal of give and take on both sides of the economic fence. The conclusions of the world's airlines were submitted to the CAB in late November or early December. In mid-February, the CAB indicated tentative disapproval, but announced a willingness to consider such additional evidence or data as IATA or its members might wish to submit in support of the Chandler resolutions. Having agreed to these IATA compromises, TWA felt honorbound to support them. Accordingly, we joined with other carriers in a joint response prepared for a number of international airlines by IATA. This supplementary justification by IATA in behalf of its members was duly submitted to the CAB. Subsequently the Board announced its final disapproval of certain of the IATA fare resolutions. When the CAB issued its final order, TWA accepted it as a policy position of our Government. Thereafter, so far as we were concerned, "Chandler" ceased to exist. Since that day we have abided by the decision of the Board. We have honored it in word and in deed. We have gone down the line in the Board's position. One clarification I would like to put in here, Senator, is when this statement was written, it was correct, that we had never filed a Chandler fare with any government, but since the statement was written, we have filed fares at Chandler levels, with certain governments, since the Board modified its instructions to us. The CHAIRMAN. When did you file your new fares with the other governments? Over the weekend? Mr. TAYLOR. We did three over the weekend, and we did United Kingdom and Switzerland last Wednesday, I think it was. The CHAIRMAN. What were the three over the weekend? The CHAIRMAN. Have you requests from any other governments? Mr. TAYLOR. We have indications that there will be two additional governments that intend to take measures or reprisals, but we don't know what those measures or reprisals are, nor have we been advised by our attorney in those two countries. The CHAIRMAN. What two countries are those? Mr. TAYLOR. Spain and Italy. The CHAIRMAN. And you don't know yet-in other words, it has been suggested there will be reprisals if you don't? Mr. TAYLOR. Yes, sir. The CHAIRMAN. But you have no detailed knowledge of what they may be, as of now? Mr. TAYLOR. That is correct. Senator COTTON. These new fares represent-what change do they represent over the previous fares? Mr. TAYLOR. They are these Chandler fares, sir. They are the change in the round trip discount on normal economy from a 10percent discount of a 5-percent and a reduction in th first-class oneway fare that nobody has mentioned so far. Senator COTTON. Well, the first, change you mentioned is in essence an increase in fare? Mr. TAYLOR. Yes, sir. Senator COTTON. The second one you mentioned that you say has not been alluded to yet is a counterbalancing decrease? Mr. TAYLOR. It is a decrease, but it does not offset the amount of the increase. Senator COTTON. So your new fares-Chandler fares do represent a net increase over what you had been changing heretofore? Mr. TAYLOR. That is correct. Senator COTTON. Both those you filed last Wednesday and the three you filed over the weekend? Mr. TAYLOR. Yes, sir. Senator COTTON. And you anticipate the probability, depending on the information you receive and the advice given by your attorney, of filing two more shortly? Mr. TAYLOR. Yes, sir. Senator COTTON. Do you anticipate any more than that? Mr. TAYLOR. No, sir. Senator COTTON. Thank you. I meant any more countries, I beg your pardon. Mr. TAYLOR. No, sir. This course of conduct the company pursued throughout the recent events, it seems to us, is in keeping with TWA's traditional advocacy of reduced fares. We were the original sponsors of the 17-day excursion fares which offered the lowest rates. ever available for North Atlantic travel. We have pushed vigorously for economy fares, group fares, and other reduced rate promotional devices. The committee may be interested in our views as to why some foreign carriers seem to pursue the high-cost, static-volume school of ratemaking. We believe there are certain foreign carriers that engage in varying degree in uneconomic practices that force them to the high-fare philosophy. These practices include discounting and rebating of published fares, the provision of a large volume of charter services at below-cost rates and the absorption of unwarranted cost in connection with circuitous routings and layover expenses. These practices cost money. Therefore, some airlines seek to recoup the losses by higher fares on scheduled services. Why they should do this, we do not venture to say. We simply say we believe it is so and that we reject such reasoning. If all would agree to reasonable prices and scrupulously abide by such agreements, both the airlines and their customers would benefit. We believe that CAB has a realistic grasp of this situation and commend their strong stand in support of enforcement. I should like, also, sir, to thank you and this committee for their position on that matter. It has been very helpful to us. We are grateful also for the interest of this committee in all aspects of these problems and appreciate the leadership and assistance you have given in efforts to resolve them. Thank you. The CHAIRMAN. Before we go into some questions on this, do you have any opinion either personal or from your company as to the two bills mentioned by the chairman here this morning? Mr. TAYLOR. Yes, sir. We do. We support fully the bill offered by the Air Transport Association. I am familiar with Mr. Tipton's position and will rely on his testimony on it. The CHAIRMAN. Its suspension procedure? Mr. TAYLOR. Yes, sir. The CHAIRMAN. And I presume the reason you favor that procedure is that this would give the Board authority to work on fares whether low or high? Mr. TAYLOR. Yes, sir. It preserves their freedom of action to prevent the introduction of fares they don't like, providing, as you were saying last week, some teeth or something is put into their ability to deal with such situations. The CHAIRMAN. And they could so act under the one bill on the broad question of public interest, couldn't they? Mr. TAYLOR. Yes, sir. The CHAIRMAN. If fares were raised or if they were lowered, if they felt the public interest was hurt, they would have a right to suspend the fare and then you could talk about it. Mr. TAYLOR. Yes, sir. The fare would not go into effect. The CHAIRMAN. But now these fares do go into effect. Foreign governments have this type of rate authority. Sensible or reasonable arbitration only takes place after the fare is put into effect. Mr. TAYLOR. That would be the situation. The CHAIRMAN. Which is the case now in which you have filed now with five countries, or four, whatever it is. Mr. TAYLOR. Yes, sir. The CHAIRMAN. This could be changed and we hope it will be changed, but it is "locking the door after the horse is out."" Mr. TAYLOR. Yes, sir. If I may, sir, I would like to make mention of the fact that these airline members of IATA, who really I think are trying to do the best they can in these circumstances, had a meeting last week, to try to find some solution to the immediate difficulty. This has really nothing to do with the rate legislation, or the of the Board. powers But it is just an effort of the airlines to find some answer to the present confused situation, where different airlines are charging different fares in the same markets. And we hope very much that they will come up with a suggestion that is satisfactory all around. Senator COTTON. Excuse me. You mean that meeting was participated in by our airlines and foreign airlines both? Mr. TAYLOR. Yes, sir. Held in Bermuda last week. Senator COTTON. How long did that last? Mr. TAYLOR. It lasted 3 days. The CHAIRMAN. Do you know whether or not they discussed the present situation? Mr. TAYLOR. Yes, sir; they did. The CHAIRMAN. What conclusion did they come to, if any? Mr. TAYLOR. They have developed what looks like a compromise proposal, and they recessed their meeting in Bermuda, to give parties and airline members and governments time to consider it and it will be resumed in Montreal on Wednesday of this week to vote on this compromise proposal. The CHAIRMAN. Could you tell us-I know you don't have the best evidence-but in general, what was the compromise proposal, as you understand it? Mr. TAYLOR. Sir, I think the record will disclose the proposal put forward by U.S. Government at London, when the governments met to try to deal with this thing, and the U.S. Government, through Chairman Boyd, suggested that if the carriers or the governments saw to it that the one-way economy fares were reduced by $10, then this Government would go along with the change in the discount from 10 to 5 percent, because in effect the traveling public would not be paying any more money under that switch. What the carriers did in Bermuda, in essence, was to move $3 off of the reduction in the one-way fare suggested by Chairman Boyd, and suggested the one-way fares come down by $7 and on that basis the 5-percent discount would be adopted. The CHAIRMAN. So that this is still a raise that is suggested overall, but it is not as much as the original British proposal. Mr. TAYLOR. No, it is a good deal less, sir. The CHAIRMAN. A good deal less? Mr. TAYLOR. Yes. The CHAIRMAN. And then in Montreal they will take it up again? Mr. TAYLOR. Yes, sir. The CHAIRMAN. Montreal, for the record, is the headquarters, is it not, of IATA? Mr. TAYLOR. Yes, it is. Senator COTTON. Just as a practical matter-and don't take time on this unless you have the figures available, you can supply it laterbut what is the present one-way fare from New York to London? Mr. TAYLOR. Economy fare is $270. Senator COTTON. It is the economy fares that are involved here. That is how much? |