SUBSONIC JET AND SST COSTS

How about the costs expected per plane, the 747 versus the SST? Mr. SOUCIE. The 747 costs $23 to $24 million. On the SST it is very difficult to get a cost because Boeing, after all, will have to charge enough money to make money. I don't know that Boeing has really predicted a cost, given to the airlines a cost and said this is what it is going to cost.

Last week, Mr. Magruder and Congressman Yates in their colloquy in the House hearings went through this sort of thing and using the best available figures, apparently, within DOT, which are something like $40.7 million per plane, and applying average inflation rates through 1978, which is the beginning of the commercial service, that works out to about $51 million per plane.

Senator PERCY. So, for a plane that has a shorter range, that holds fewer passengers, the cost will be double. The per passenger mile cost is going to have to be higher for the SST than for the 747.

Mr. SOUCIE. In the case of the SST, this is a first-generation airplane. If you look at the history of aviation first-generation planes are nearly always marginal planes.

SST SPEED ADVANTAGES: LOSS ON LONG TRIPS BECAUSE OF RANGE

In the case of the SST the greatest advantage, speed, is best realized on the Pacific routes, which Senator Allott alluded to.

New York-Sidney is not a fun trip today. However, the Boeing SST couldn't make New York-Sidney. Therefore, it would have to land once, so it is cutting down on its time.

This is the thing Mr. Godfrey was referring to, that part of the advantage is eaten up by nonflying time. The airports are jammed today. Using the FAA's current regulations, the SST taking off in London, because its flight time would be relatively short, would have to get landing clearance at Kennedy Airport before it could leave Heathrow Airport.

Therefore, it could conceivably sit at Heathrow before the controllers at Kennedy decided to let it take off. With this limited range, it could not be expected to hold in a holding pattern very long.

U.S. SUPERSONIC KNOWLEDGE VIS-A-VIS RUSSIA: POLLUTION AND

SALE POTENTIAL

Senator PERCY. In earlier testimony the question came up concerning the Soviet Union versus the United States race for knowledge in the supersonic fields. During the last hour or so I have asked the Department of Defense for figures on where we stand as against the Soviet Union on military supersonic aircraft.

I would like the record to show that the United States has flown 458,000 hours of military supersonic flights over the past 20 years. We have between 350 and 450 planes. I cannot give the exact figure because the RF-70 is a classified figure.

I think we all know, particularly those of us in the Senate who are on the Investigating Committee on the F-111, that we paid for a couple hundred airplanes $9 billion, and we have had a great deal of grief with those planes.

So this is a tremendous decision that we face. I have had airline executives tell me if we make a mistake, if an airline makes a mistake, in buying an aircraft at these prices, the force of that decision could break the airline with the force of that decision.

I think this explains why no airline has yet placed an order. It is one thing to put an option down, which you don't have to take up, and quite another thing to order a plane. They haven't purchased because they don't have the confidence in what they are really buying here.

It is a major decision.

Mr. Godfrey, from the standpoint of the effect on the environment, I understand that if we had a fleet of 400 to 500 SST's, in 20 weeks we would equal the 20 years' military experience in terms of the actual flying hours even though there might be a supersonic plane flying overhead right now.

Do we then really know or would we know much about the effect on the environment of two more planes being tested?

Mr. GODFREY. That is exactly my question. I don't think you would. To further augment your statement just now on the consequences of a mistake, I just came back from Dallas where I have been at school for the 747 with the American Airlines people, who told me that they just got by, and they are still shaking over the choice of the GE engine over the Rolls Royce.

If they had made that choice, they would have been busted.

You are so right about that.

Mr. SOUCIE. May I also answer, Senator?

Senator PERCY. Yes.

CONFERENCE ON AIRCRAFT IN THE ENVIRONMENT: REPORT ON
AIR POLLUTION DISTRIBUTION

Mr. SOUCIE. Three weeks ago in Washington, the Department of Transportation and the Society of Automotive Engineers sponsored a much-needed conference called the Conference on Aircraft and the Environment.

It was largely a technical conference. One of the technical sessions was on air pollution distribution. They considered two basic problems. One was the problem around the airports, where most of the pollutants from aircraft engines actually are deposited, because that is where they are running at incredible inefficiencies.

The other one was on high altitude. Unfortunately, although volume I of contributing papers is available, volume II, the discussions that went on at the Conference, won't be available for a couple of months.

I managed to obtain from the Chairman of this technical session on air pollution distribution a copy of his report which will become a part of the proceedings.

I think it is worth reading a couple of paragraphs. The Chairman, by the way, is Prof. John B. Heywood of M.I.T., a meteorologist. His report begins:

In our workship about 50 participants took part. The level of discussion was technical and informed.

After this long discussion here about the airport problem, we get down to high altitude dispersal of jet exhaust trails. They briefly reviewed the evidence of increased cirrus cloudiness in the upper atmosphere as a result of the water vapor emissions from current subsonic jet activity.

Then they go on to the difficulty of coming up with any kind of conclusion about the meaning of SST's operating in the stratosphere because of ignorance of the upper atmosphere.

It was brought out quite clearly in our technical discussions-and by the way, the chief participants in this discussion were Dr. Goldberg of Boeing, Dr. Lester Machta of ESSA, Jim Thompson of DOT and several other people whose names I didn't happen to know, who too kpart in the discussion.

But actually Dr. Machta and Dr. Goldberg did most of the discussion.

It was brought out quite clearly that the testing of two prototypes is primarily to test vehicle performance. Such testing would give no direct information on possible large-scale atmospheric effects of SST exhausts, though it could give more precise data on engine emissions.

It was agreed that 100 hours of prototype flights in the stratosphere would have no significant effect. Obviously, this whole area of SST emissions and effects is in need of more analysis.

The additional information required can only come from carefully developed, comprehensive and vigorously pursued research programs. The detailed goals of such programs have yet to be worked out. Their planning and execution must be such as to insure the complete credibility of their results.

ABILITY OF AIRLINES TO PURCHASE SST AIRCRAFT

Senator PERCY. My last question and the area I would like to explore, Mr. Chairman, is the area of the economics.

I would like to say that though I am concerned about the environment, I have not really, on the floor of the Senate or any other time, spent a great deal of time on the environmental aspects. I have looked at it from the standpoint of a businessman, in public life, a former director of Chase Manhattan Bank, which serves many of our airlines. When I look at the fact that the Penn Central has failed and gone bankrupt, the Lackawanna Railroad has gone bankrupt, and the New Haven, the Central Railroad of New Jersey and others' problems when I look at the balance sheet of airline companies today with an 80-percent debt ratio, with the huge losess that they are experiencing, even with the TWA pledge to put out 110 percent for every pilot now on a $25-a-month contribution to a kitty, I think that even though someone has said the airlines want the SST, from the business judgement I must apply, it seems to me they would be terrified if we had one and they had to buy it. They couldn't possibly do it.

We are going to have testimony from a director of the American Airlines, and he is going to talk turkey about this. He doesn't have the direct responsibility as chairman or president in a regulated industry when he knows that if the administration with its power wants it.

There are very few people that could step up, wth a responsibility to stockholders, and say what might be in their hearts. I have talked to many of these airline executives directly.

The former chairman of the board of one of the largest airlines, in fact the largest airline in the United States, told me this is not a $1,300 million Government decision.

He said:

I think you men in the Senate are trying to make the decision whether you are willing to spend $20 bililon, because you have to finance, if this is successful, the production costs of these airlines because the banks, the aircraft manufacturers and the airlines aren't going to pay for them.

My judgment says they won't pay for it, especially if it is that uneconomical, and since our last vote it has become less economical because of noise standards imposed by the Magnuson resolution which we all supported and passed.

More costs and more weight are going to be added to those engines to silence them and get the noise level down.

In that case it will all come out of the payload which is razor thin right now. So I would say that we are then really talking about whether we are going to make a decision that could bankrupt the airlines in this country.

I can't possibly see how we can finance it. That is the decision we have to face. We are going to vote on not just finishing up a couple of models, but whether we are willing to finance the whole thing all the way through.

GOVERNMENT FUNDING THROUGH BORROWINGS

This project isn't worth very much unless you buy 350 to 500 of them. I can't for the life of me see anyone who could afford that but the Government and, let's face it, we are going to borrow every penny to do it. We are borrowing every single penny today to finance even the $290 million. We are borrowing that money. It is an item of very low priority-the bottom of the barrel, so far as I am concerned.

So, I think we have some very, very tough decisions, and I hope when we do get financial people here, economists, people who know something about the banking ends, the financing ends of it, we will question them on it.

I am very concerned that under the terms of the contract the Boeing Co., was required to produce a plan to show how we would finance the production costs and the requirement was to furnish that plan by June 1968.

Now the contract has been changed. It has been delayed and we are not going to find out until maybe June of 1972 how we are going to finance them. I think we have to make that decision now and at least try to find out how we are going to finance them.

Chairman ELLENDER. The purpose of these hearings is to get the facts on that very issue. That is what we are trying to do.

Senator PERCY. I respectfully ask that we then focus a great deal of attention on the economics and the financing of it, not just the environment, which is important, but the economics of it is the real gut issue.

Chairman ELLENDER. That was done this morning. We had witnesses who testified this morning to the fact that the planes would be constructed by capital from private enterprise, and the prototypes that we are now in the process of constructing would be the extent of U.S. Government investments.

Senator PERCY. Thank you.

Chairman ELLENDER. Are there any further questions?

SIZE AND CRUISING SPEED OF SUBSONIC JETS

Senator MAGNUSON. Mr. Chairman, may I put into the record, and I think it will answer this question, the size and cruising speed of the three jets?

Chairman ELLENDER. Without objection. (The information follows:)

Mr. SOUCIE. Senator Magnuson?

Chairman ELLENDER. We don't want to argue any more.

Mr. SOUCIE. I wanted to ask the Senator if he could try to use his influence with Boeing and DOT to find out the operational trade-off of the new quiet engine.

Senator ALLOTT. Mr. Chairman, that was covered in some detail this morning in the testimony of Mr. Magruder.

Senator PROXMIRE. He didn't give us any answers, though.
Senator ALLOTT. Perhaps you didn't understand.

Senator PROXMIRE. I was listening.

Mr. SOUCIE. Actually, we have been trying to find this out.

Chairman ELLENDER. We have several witnesses who might be able to give us the answers to what Senator Percy was asking about. I suggest that we proceed.

Thank you very much, Mr. Godfrey.

Mr. GODFREY. Thank you, Mr. Chairman.

STATEMENT OF ARTHUR M. OKUN, SENIOR FELLOW, BROOKINGS INSTITUTION

ECONOMIC ISSUES: FEDERAL BUDGETARY RESPONSIBILITIES, BALANCE OF PAYMENTS AND JOB OPPORTUNITIES

Chairman ELLENDER. Our next witness will be Dr. Okun.

Mr. OKUN. I am Arthur M. Okun, senior fellow, Brookings Institution. I would like to make clear that the views expressed are my