What is your answer to that? Do you feel that you would be able to finance this, based on your past experience, and your present financial situation? AIRLINE OVERCOMPETITION Mr. HALABY. Certainly not on our present financial situation, which has very serious elements of Government-promoted competitive waste in it. We are assuming, and the Secretary of the Treasury's remarks were helpful, that the U.S. Government is going to do something about the present situation of the U.S. airline industry. Senator PROXMIRE. By that, you mean subsidize it in some way? For example, Pan Am is in a unique position, because we have no domestic interstate route structure. Every country in the world has an airline, but Pan Am is an airline without a country, so we have a quite unique position. We are also extremely vulnerable to 92 foreign and domestic scheduled carriers and supplementals, so we have, as you know, I believe, to go out and compete not only with BOAC and Air France on the Atlantic, but with Aeroflot and the other 43 airlines that are now flying the Atlantic. Something must be done to rationalize this wasteful overcompetition. Now, whether or not that is done depends to a very considerable extent on the Congress. There are hearings underway now on that subject. Senator PROXMIRE. Well, suppose we assume that this is done, and take favorable assumptions, and now my question is: In your view, can not just your company, but the airline industry itself finance this perfectly enormous capital investment on the basis of the very big difficulty they are in right now, and the realistic appraisal of what is likely to take place in your view in the future? Mr. HALABY. Senator Senator PROXMIRE. Let's make optimistic assumptions from the standpoint of efficiency. Mr. HALABY. Right. If there is an international air transport system that is an efficient one, it is a sensible use of U.S. civil airpower, we are confident that in the time frame we are talking about, 1978, 1979, 1980-you see, with the improvements of this engine, and the further reduction in noise, and the general improvement of the efficiency of the airplane, we may be talking about 1979 rather than 1977-but in any case, by that time we believe, assuming favorable Government action and continued prosperity of the type the Secretary of Treasury is talking about, we will be able to afford to buy these airplanes. Another way to look at it is we cannot afford to go without them. OPINIONS OF BANKERS Senator PROXMIRE. Yes, yes, I understand that, but my question is: Will you be able to finance it privately, in your best judgment? I talked to some bankers, and they question this very, very seriously. They point out that A.T. & T., for example, finances about $21% billion a year, and, of course, they have an assured market. They have a monoply. They have a tremendous advantage over the airlines, which have many disadvantages as compared to that, and they question whether they would be able to, in their view, come up with private financing under these circumstances. Mr. HALABY. I think this is a legitimate question, because there are so many people in our act, there are so many regulators, and so many competitors, that at the present time some of the bankers are very concerned about our capacity to manage the regulation of airlines, and the airlines' capacity to manage and finance themselves. I have enough confidence in our own Government, and in our own industry's capability, to proceed on the optimistic assumptions that we will solve these problems. After all, if we despair about going ahead with this, we lose the only thing that is working for our efficiency. The only way—— Senator PROXMIRE. I understand you have a very strong feeling, yes. IMPROVED TECHNOLOGY TO ABSORB LABOR COSTS Mr. HALABY. The only way we can improve our price to the public is to improve our technology. The labor costs alone-I agreed with everything Mr. Meany said, but his union action and power in this country is increasing our costs at 11 percent per year. Now, I have to get somewhere an improvement in the efficiency of my airline that will absorb those labor costs, to compete with 92 foreign-flag carriers, who pay their pilots a third of ours, their stewardesses an eighth of ours. Now, how do I do it? Technology is the only way I can do it. That is the only way I can get the productivity, and this airplane will do twice the work on an annual basis of the most efficient airplane I can buy today. MARKET GROWTH Senator PROXMIRE. I just have two quick questions, then. One is: Do you feel, or have you made, have you sat down and made an analysis, or had your experts make an analysis, of just where the money would come from to pay for the very large number of planes which you at Pan American would be expected to buy, the supersonic transports? Mr. HALABY. Yes. The growth in the market you have to assume will continue, and we hope to induce the growth of that market. NINETY-NINE DOLLAR STANDBY YOUTH FARE ACROSS ATLANTIC For example, we want to put in a $99 standby youth fare across the Atlantic, right away. Give the kids who want to change the world an opportunity to see the world they want to change. We want to do that very eagerly. Now, again, to get that across, we have to continuously upgrade our efficiency. We are able to do it with the 747 now, and we believe the growth in the market which the Secretary said for this past year, the international market, was around 18 percent, will continue. We offer the best bargain in any kind of international activity there is. We think we can continue to keep the fares down if our productivity goes up. EFFECTIVE COMPETITION WITH FOREIGN-FLAG CARRIERS The second area is that we will be able, as we see it, to compete with the foreign-flag carriers effectively. We can accumulate, through depreciation and earnings, enough money, over the coming years, to get ready to buy the SST's. Senator PROXMIRE. Have you made an analysis you can make available to the committee at all? Any overall general analysis of the conditions that would be necessary to make it possible for the private industry to finance the introduction and sale of the SST? Mr. HALABY. Well, first, I think you have to have a climate of confidence in the economy and the industry. Senator PROXMIRE. Yes, assuming that. All right. Mr. HALABY. And then I think we can move from there to the regulatory process, and improve it to the point where we are not wasting a lot on too many carriers, then on from there, we assure dynamic competition among foreign-flag and selected U.S. carriers, and assure that we continue to offer safety and a bargain. CONDITIONS PRECEDENT TO PURCHASE Now, we don't want this airplane, Senator, unless it is safe, economically sound, and environmentally acceptable. We honestly and absolutely do not want to discourage particularly our youthful passengers. We don't want a monstrosity, a technical tour de force. We want a businesslike airplane that gives them a safe, low-cost, high-speed ride, because that is all we have ever offered, is time, the conservation of time, which over the next 20 years is going to be the most valuable asset in the universe. POSSIBLE PURCHASE BY WITNESS CORPORATION OF CONCORDE: COMMERCIAL PROVING TEST Senator PROXMIRE. One final question. If you had to exercise your options on the Concorde today, would you do it? Mr. HALABY. We would not do it today, because we want to see the data. I would like to tell you that I have stated, and feel very strongly, that there should be a commercial proving test under actual conditions before anyone is required to make a firm, final contract for any SST. So I have proposed to the British and French, and they have given some thought to having BOAC, Air France and Pan Am, perhaps Pan Am on behalf of TWA, the other transatlantic carrier, run an actual test, get the data. TECHNOLOGY WITHOUT ENVIRONMENT DAMAGE One of the terrifying things to one who is dependent on technology is that there seems to be abroad a feeling of antitechnology, technology is the devil that has caused every problem that we have in the United States today. But my only resources, the only resource for American industry in the future, is to so improve the technology, without damaging the environment, that we can meet the payrolls, can keep the ride going at a low price, can increase the size of the market. And I am just as certain that we must have international standards, and international tests, so we are going to resist firming up a Concorde contract until we have the data. FLIGHT BY PAN AM PILOT OF AIRCRAFT UNDER SIMULATED CONDITIONS OVER WATER Now, we have convinced them that they should let our pilots fly the airplane under simulated conditions over water during the coming year. That data will give us a higher level of confidence about whether to go ahead and match the British and French airlines. Senator PROXMIRE. Thank you, Mr. Halaby. You are a fine witness and a superb salesman. Mr. HALABY. Well, I am not a salesman. I am a buyer of the airplane, who has to make the business decision on whether or not it is good for my shareholders. And I want to assure you that our current preoccupation is with the 747 and the 707, and running an airline at a profit. But when you look out ahead 10 years, if we are not willing to master change, we are going to be the victims of our competitors' mastering the change. Senator MAGNUSON. Thank you. COMMITTEE RECESS Chairman ELLENDER. Thank you very much, Mr. Halaby, and now I wish to announce that the committee will reconvene at 2:30 this afternoon, in order to hear opposition witnesses that will be brought in by Senator Proxmire. We will reconvene the committee at 2:30. (Whereupon, at 1 p.m., the committee was recessed, to reconvene at 2:30 p.m.) (AFTERNOON SESSION, 2:30 O'CLOCK, WEDNESDAY, MARCH 10, 1971) CIVIL SUPERSONIC AIRCRAFT DEVELOPMENT (SST) STATEMENTS OF: OPPONENTS TO DEVELOPMENT ARTHUR GODFREY, HONORARY CHAIRMAN, AND GARY A. SOUCIE, CHAIRMAN, COALITION AGAINST THE SST EXPERIENCES AS PILOT Chairman ELLENDER. The committee will please come to order. This afternoon we will hear witnesses who are opposed to the SST, and the first witness I have here is Arthur Godfrey. Mr. Godfrey, will you come forward, please? Mr. GODFREY. Good afternoon, sir. Chairman ELLENDER. How are you, sir? Mr. GODFREY. Mr. Chairman, gentlemen of this distinguished committee: I am honorary chairman of the Coalition Against the SST.I have brought with me, with your kind permission, the chairman of the Coalition, who, if I need some express figures, can give them to us, Mr. Gary Soucie. Chairman ELLENDER. Very well. Mr. GODFREY. I have prepared a short statement, sir. I think that perhaps it is more or less well known that I am now in my 42d year as a pilot, that I do remain au courant-in fact, I have just come from Dallas after 2 days of the 747 school of American Airlines. UNALTERABLE OPPOSITION TO DEVELOPMENT OF CIVILIAN AIRCRAFT WITH PUBLIC FUNDS I do, therefore, think that I know a little bit about the atmosphere above us, and I believe that, if the SST were needed by the Air Force, I would enthusiastically support it, as I did the B-36, the B-47, and the B-52. Since, however, the proposed SST is strictly a civilian, commercial project, I am unalterably opposed to its development at this time with public funds. In the light of the many other public works which have, in my opinion, unchallenged priority, Government funding of an SST, to me, is an obscenity. There is nothing anywhere in the world that I can imagine that even anyone in his thirties needs to get to in half the time now required. (76) |