to the President at the time. It is a very good airport but I think it is still losing money. I hope you don't mind this question because I have been waiting for years to ask it.

Why did you build it so far from town?

Mr. QUESADA. That is a contradiction to my views which I am free to admit. Of course, I can rationalize it. Dulles was built to provide an airport for the Nation's Capital, and there are many things in the Nation's Capital that are federally funded, because they serve the Nation's Capital.

Senator YOUNG. Why did you built it so far from the Capital? That is my question.

Mr. QUESADA. We were trying to find a place that was some 20 to 25 miles from another major airport. Andrews is on the east and National was in the center. Dulles is on the west. Chairman ELLENDER. Senator Case.

SST DEVELOPMENT: POSTPONEMENT BY INDUSTRY

Senator CASE. You don't worry about the United States losing civil aviation superiority or its place in the industry, in the art, to other countries if we don't approve this appropriation; do you?

Mr. QUESADA. Senator, I don't, strange as it may seem. If the marketplace demanded a supersonic transport program, our industry would find a way of fulfilling it.

I can't make myself believe that the air transportation industry at this time longs for this airplane. I think the air transportation industry would love to have a breathing spell and not be forced into another round of new equipment.

Senator CASE. Thank you, Mr. Chairman.

RETURN OF INVESTMENT TO GOVERNMENT

Chairman ELLENDER. Senator Proxmire.

Senator PROXMIRE. General, I want to thank you for very refreshingly honest testimony. You make everybody mad in this testimony. You didn't let us, who were against the SST, off the hook. You hit some of us with what we think is our best issue, the ecology issue.

You seem to feel it is exaggerated, overstated. I happen to disagree with that view, but I think it is refreshing to have an opponent of the SST come in, as you have, and indicate you have looked at some of the arguments against the SST and rejected them. I think that gives a greater credibility to your remarks.

Senator CASE. Now you are putting it in the right light.

Senator PROXMIRE. You replied very briefly to the chairman who asked you about the Government getting back $1 billion in addition to its investment.

Isn't it true that if everything worked out beautifully and they sold 500 of these, which I would seriously question and I think perhaps you would, though I don't know-the Federal Government would get back its capital plus something like a 4.5 percent return on that capital, which is what the $1 billion means, which is less than the Government paid for it. So Uncle Sam would not get its full investment and interest back.

57-918-71- -9

Isn't that correct?

Mr. QUESADA. That is the arithmetic of it. But I am skeptical of the Government getting it back either with or without the 4.5 percent. Senator PROXMIRE. Why are you?

Mr. QUESADA. I have a hard time convincing myself that there will be 500 of them built. I would hope so, but I have serious doubts about it. I just don't know where the passengers would come from to fly in them. I doubt if the demand would exist for them.

SST DEVELOPMENTS POSTPONEMENT BY INDUSTRY

Senator PROXMIRE. In all candor, do you think that the airlines want supersonic transports in 1978, in view of their present financial conditions and prospective financial conditions?

Mr. QUESADA. My personal opinion is that the air transport industry would like to postpone it. In my opinion, it is a logical extension of the state of the art, but here the air transportation industry has undertaken a tremendous investment in the 747, the trijet, the MacDonald-Douglas DC-1011. I think the air transportation industry as a whole-this is my view and I am not speaking for them-would like to let that cycle of equipment have a longer run and permit a period of increased earnings which would result because of the dollar depreciation of the airplane.

Airplanes just don't wear out. They are not like old soldiers.

SST PURCHASES

Senator PROXMIRE. What are the prospects they will be able to come up with $50 million per plane to buy the supersonic transports? Mr. QUESADA. At this time I think it is questionable.

Senator PROXMIRE. If they are going to buy 500 in a period of 12 years, they would have to buy something like 40 or 50 a year. It is an enormous capital investment; is it not?

Mr. QUESADA. It is a large capital investment, and the air transportation industry are real social climbers. If one air transportation company has a new hat or a new airplane, they all have to buy it.

Senator PROXMIRE. Isn't that the heart of their problem now, that one of the principal reasons why so many of them lost a whale of a lot of money last year-TWA lost $120 million, United lost $40 million-is because they have invested heavily in new equipment and have to pay for it?

Mr. QUESADA. That is only one.

Senator PROXMIRE. Isn't it a major reason for it?

Mr. QUESADA. I don't know if it is a major one but it is a substantial one. There are others. We are suffering from recession.

SIDELINE NOISE TRADEOFFS

Senator PROXMIRE. The Department of Transportation told us recently that the problem of sideline noise is under control, that it is possible to reduce from 124 down to 108 perceived noise decibels.

Can you give us some kind of idea what kind of tradeoffs might be entailed in terms of payload, and so forth? I tried to get that from Mr. Magruder this morning and he indicated that this new sound sup

pressor would give a better plane, that they would be able to take off with the same passenger load, no more cost, same range.

He said he had confidence that before 1978 they will be able to come up with answers to enable them to do that. I ask you: Maybe you can give us not rhetoric but some kind of statistics on what would be the effect of this kind of a reduction.

Mr. QUESADA. Sir, my confidence in the aircraft industry of this Nation is boundless. I have been living in this community since 1924, and I have seen the impossible accomplished time after time.

The ability of the industry to overcome, for example, the sideline noise, I think is there. I think they have the incentive to do it. I think they have the ability to do it, and I think they will do it.

Senator PROXMIRE. They have indicated in interviews that they can do it. Boeing has said they can do it. But to do it they have to reduce their range. They have to have a certain economic trade-off. It increases their weight, and so forth.

Mr. QUESADA. All of these things do have costs. They are not going to reduce sideline noise without cost. In the first place, right away the experimentation that they are doing now and will have to do in the future is very, very costly. Just to do it is cost. It just doesn't happen without effort, and effort can be translated into dollars.

The public is eventually going to have to pay it. In addition to dollar costs, it might very well turn out to entail other costs.

It might require, and probably will require, payload being traded for extra weight in the engine cowlings that are essential to overcoming these sideline noises.

It is traditional for a benefit to be achieved through compromise, and compromise nearly always can be measured in some costs.

Senator PROXMIRE. Wouldn't it make sense that if you are going to have to increase the weight as has been estimated from 750,000 pounds to 800,000 pounds, you would have to increase the fuel, you would have to reduce the range, you would have to reduce the payload, and all of those would deteriorate the economic feasibility of the plane? Mr. QUESADA. All of those things result in cost. The airplane might have to be bigger. As soon as it gets bigger, the structure has to be changed to more structure. When you put in more fuel you have to have bigger tanks, with more structure. All of these things represent

cost.

In the final analysis, the person who rides in that airplane eventually pays for it.

RESEARCH, DEVELOPMENT, AND PRODUCTION: GOVERNMENT ASSISTANCE

Senator PROXMIRE. One other question that has bothered me a lot, and I think the advocates of the SST have a very strong point here and I haven't heard it satisfactorily answered and I hope you can answer it, is that they say the argument has been made that the spinoff from military planes gave us the kind of research and development and the kind of prototypes that made the 707 and the other subsonic jets possible; that that same military development is not present with the supersonic plane, especially with brushed titanium honeycombed metal involved and, therefore, that it is necessary, if you are going to have a plane, for the Federal Government to do the research and development and prototype production.

The military is not going to do it. Our whole history has been that the Federal Government does it in a military way first and then the private sector picks it up.

What is your answer, if there is an answer to this?

Mr. QUESADA. The answer that I give will only be mine, sir, and I hope you don't give it any more weight than my answer is entitled to. A supersonic transport such as is now being developed, in my opinion, achieving a substantially lesser help from military programs than most commercial aircraft have received in the past.

The engine for the supersonic transport is substantially a new engine that is not the result of a military requirement. To the extent that they say the costs for the development of that engine has to come from some other source, it is, in my opinion, quite true.

Certain manufacturing techniques that are essential to producing this aircraft, within the state of the art, to a large extent are new and the cost is being thrust almost totally upon the aircraft companies.

However, I don't want to say that the supersonic transport is getting no assistance from military programs, because it is. Guidance systems that are available today, blind landing systems that are available today, many of the subsystems that are available today, many of the techniques of making blades for engines that are available today are the result of military programs.

Senator PROXMIRE. And those would be applicable to the SST as well as others?

Mr. QUESADA. Many would be applicable.

747 DEVELOPMENT AND PRODUCTION

Senator PROXMIRE. Just one other point. Was there a military equivalent of the 747 from which the Boeing people benefited in developing that fine plane?

Mr. QUESADA. That is what I tried to emphasize. The Boeing Co., in my opinion, deserves the accolade of the decade for building that airplane with very, very little military assistance.

It is an extraordinary airplane, one of the most efficient that the industry has ever come forward with, and it has done so with relatively little aid from prior military programs.

Senator PROXMIRE. Thank you, Mr. Chairman.

B-1 BOMBER

Senator MAGNUSON. General, could you answer this for my information: Isn't the B-1 supposed to be a supersonic military plane? Mr. QUESADA. Yes, sir.

Senator MAGNUSON. If it goes ahead, it would be supersonic? Mr. QUESADA. It would be a supersonic airplane and an airplane that has a sustained supersonic speed. The military have developed many supersonic airplanes, but the B-1, with the exception of another

one

Senator MAGNUSON. I wasn't clear on that.

Mr. QUESADA. It is a supersonic airplane whose concept is sustained supersonic speed.

ECOLOGICAL PROBLEMS

Chairman ELLENDER. General, as I understand your statement, if private enterprise were to build this, the question raised by ecologists that it would disturb our environment wouldn't bother you, am I correct in that?

Mr. QUESADA. I think that there are certain ecological problems that are to be faced, but I am not impressed by the degree to which some ecological groups have raised what I think are absolutely foundless fears.

This country has not progressed because it is afraid.

Chairman ELLENDER. My reason for asking that is that opposition to the construction of this plane developed in the last 18 months, and it was caused, I believe, by ecologists and people who thought that the construction of this plane would affect our environmental situation.

OBJECTION TO MANNER OF CONSTRUCTION

I am just wondering if you ever objected to the construction of this plane before?

Mr. QUESADA. I don't object to it now, I object to the manner in which it is being done.

Chairman ELLENDER. Did you object to the manner in which it was financed before now?

Mr. QUESADA. Yes, sir, I have. If you will permit, me, sir, I do want to comment again. It distresses me because I think, perhaps wrongly that Congress has responded more to the emotions of the ecologists than the substance of their objection justifies.

Chairman ELLENDER. I think you are correct.

Are there any further questions?

FINANCIAL CONDITION OF AIRLINES AND ABILITY TO FINANCE NEW GENERATION OF AIRCRAFT

Senator PERCY. Yes, Mr. Chairman. I am terribly sorry. I know the hour is quite late.

Chairman ELLENDER. We have another witness coming.

Senator PERCY. I want to express my personal appreciation for General Quesada's being here. He is one of the most respected figures in American aviation. His past record as Administrator of FAA was most distinguished.

As director of the American Airlines, you have kept very current on the problems of the airlines. Could you comment on the financial condition of the airlines today and their ability to finance a new generation of aircraft?

Mr. QUESADA. Senator Percy, I think the public at large knows that the air transportation industry, like several other industries, are currently undergoing a very severe impact from what might be called a recession that the country is going through.

In the case of the air transportation industry this is accented by the fact that the industry is at this moment, right now, going through a cycle that requires the outlay of tremendous amounts of funds in the purchase of new equipment.