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dent carriers or as carriers carrying the colors of a certificated carrier (such as Allegheny Commuters). The terms of such agreements usually make it rather difficult for other commuters to compete against them effectively in given markets as those working for and with the certificated carriers have so many advantages. So such carriers ask: "Why should we support route protection if it could mean the imposition of additional federal regulations that could kill us contrary to the best interests of our customers?"

Others feel they don't need federal route protection as they already enjoy it on an intra-state basis. Their reasoning in support of such a position is similar to the previously quoted question.

Still others feel that the ability of being able to enter any market at any time is essential to the growth and development of the commuter airline industry in the public interest. They reason that if it were not for this important provision, the industry would not be where it is today. Many of these enterprising entrepreneurs furthermore feel that they do not want or need route protection at the expense of being permanently or temporarily prohibited from entering markets that are deserving of competition. In other words, it is an attitude that goes something like this: "Don't worry about me. I can take care of myself. My main reason for being opposed to route protection is that it may restrain my company's growth by protecting commuter airlines who are failing to fulfill adequately the opportunities associated with given markets."

Are you saying that the route protection provisions of the Act would terminate the free entry opportunities now enjoyed by commuter airlines? Not necessarily. Commuter airlines would still be able to enter any market not covered by a Commuter Certificate. This means that they could continue to explore, test and serve unprotected markets with the same degree of flexibility as they are doing today. And if such markets did not respond to their efforts, they could withdraw accordingly without obtaining CAB арproval.

There appears to be some confusion as to the applicability of the route protection provisions of the Act. Can you clarify these issues which are of concern to so many?

One of the primary reasons for the Act is to protect commuter airlines from commuter airlines under cer

tain given circumstances. It has nothing whatsoever to do with protecting CAB-certificated carriers from commuter airlines, or vice versa. Therefore, a Commuter Certificate would protect a commuter airline operating a route under a suspension/replacement agreement with a certificated carrier. Such a limited certificate would likewise protect a commuter airline operating over a certificated route for the purpose of supplementing or complementing the ill-timed and/or infrequent schedules of the certificated airline(s). But such protection would not be absolute. The Board could issue a Commuter Certificate to another commuter airline if, after hearing as set forth in the Act, it found that there was need for competitive service. Or, the Board could issue a full certificate of public convenience and necessity to any carrier (certificated or commuter) pursuant to section 401 of the Federal Aviation Act of 1958. In such an event, the holder of the Commuter Certificate could likewise file an application for a 401 certificate. And it would probably do so if it felt such action would be the best way to protect its vested rights in the market.

In order to gain route protection under the provisions of the Act, would the holders of Commuter Certificates be faced with additional CAB regulations?

Not necessarily. The Act includes a statement of Congressional policy that the CAB should relieve commuter airlines, including those operating under a Commuter Certificate, from all regulations "to the maximum extent consistent with the public interest" so that such carriers may remain economically viable to the nation and the public.

In developing the Act, the participating members of the Commuter Air Carrier Conference accepted the CAB's long standing position that commuter airlines could not stand the onerous burdens of full CAB certification; therefore, they agreed to leave it up to the Board to decide what, if any, additional economic regulations should be imposed on commuter airlines for the privilege of carrying a Commuter Certificate and gaining route protection. Their hope is that they will not be saddled with additional and costly regulations that cannot be fully justified.

Do you envision the CAB imposing "service obligations" on commuter airlines as a condition for the granting of Commuter Certificates?

Perhaps, but only in a rather perfunctory form. The Board recognizes that if the commuter airlines are to profit through service to the nation and the public, they cannot be saddled with the "service obligations" as imposed on the certificated airlines. Small and/or isolated communities served by commuter airlines, or potential candidates for commuter airline service, will have to be sold on the concept that if they want scheduled air service, their best bet rests with commuter airlines rather than the certificated airlines (trunk or local service carriers). This reminds me of the statement made by former CAB Chairman, Secor D. Browne, before the Senate Aviation Subcommittee, May, 1970, wherein he said:

"The ability to transport people and products by air is an important national asset. It should not be denied citizens who live outside the great metropolitan areas for whatever reason: logistical, legal, or economic.

To those communities that have lost, or are about to lose, service from the major airlines, and to those communities that may have given up all hope of ever being served by the major airlines, Browne said:

"There is much that can be done with commuter airlines. But there are problems, here, too. Many communities are unwilling to accept substitute service because of their pride or fear of unreliability. To those communities which can generate only a few passengers daily. I say maybe substitute or third-level service (commuter airlines) is the price of admission to the rest of the system, so accept it, get behind it. The willingness of a city or town to support a commuter airline physically, promotionally and financially is probably the single most important ingredient to the long term success of that service."

What do you mean by saying that perhaps the Board would impose service obligations on commuter airlines as a condition for the granting of Commuter Certificates, "but only in a rather perfunctory form"?

Perhaps I can best explain it this way. There are those who feel that it is wrong for a commuter airline to build up the hopes of a community for safe, reliable scheduled service only to discontinue such service after an insufficient test and/or without advance notice to the community. That's the beauty of the Commuter Air Carrier Act. It precludes the granting of a Commuter Certificate to a carrier that has not been operating over a given route or routes for a period of at least six months prior to the date of application for a Commuter Certificate. It is reasoned that six months should be sufficient time for a carrier to determine for itself whether or not the service will be profitable. The six

months should likewise be sufficient time for the community to crank up its support in the desire to attain by an early date the amount of traffic (passenger and cargo) necessary to make the operation profitable with or without financial assistance from the government (federal, state or local). If the commuter airline then applies for a Commuter Certificate on the premise that the route will be profitable, it should perhaps be required to give 30-days advance notice prior to the suspension or termination of service over such a route. It would be out of the question for the Board to require a commuter airline to continue to operate over a nonprofitable route unless some form of financial assistance sufficient to cover the commuter's costs was associated with the certificate.

Would there be any advantage to "limited certification" for commuter airlines without route protection as embodied in the Commuter Air Carrier Act?

The consensus of many would probably be "YES". And they would undoubtedly take this position on the premise that a piece of paper from the Board, whether it be a limited certificate or a license to serve, would improve their credibility in the eyes of so many. Many feel that such recognition would:

• give small/medium communities and the people who reside and/or do business therein one more reason for supporting commuter airline services;

• give the industry much needed identification and thus make it easier for the carriers to attract debt and/or equity capital necessary to improve their services in currently served markets and to expand their services to other communities that want and need scheduled air service (passenger, cargo and mail);

• improve the opportunity for commuter airlines to obtain appropriate financial assistance, if necessary. from the government (federal, state or local) or from the private sector, in order to provide air service to those communities where the traffic is not sufficient to produce enough revenue at reasonable fares and under prudent management to cover the cost of operation. and particularly in those cases where the service is considered essential for the economic, cultural and social well-being of such communities;

• improve the opportunity for commuter airlines to become full participants in the nation's air transport system by participating with all CAB certificated car riers in such things as: interline traffic agreements

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(passenger and cargo); scheduled airline ticket offices at military posts and camps; Universal Air Travel Plan; Airlines Clearing House; Airline Tariff Publications; Standard Agent's Ticket & Area Settlement Plan; joint fares; participation in the Official Airline Guide on an equal footing with the certificated carriers with respect to the listing of their single plane and connecting schedules, etc.

⚫ make the commuter airlines eligible for appropriate government guaranteed loans covering the financing of new aircraft or refinancing of old aircraft, on the same basis as the certificated carriers.

It should be pointed out that still other commuter airlines support the philosophy that the objectives listed above are not conditioned upon getting a certificate or other piece of paper from the Board. They feel there are other ways; therefore, they are working on their own to achieve such objectives.

Would it be possible for commuter airlines to achieve their "limited certification" and route protection objectives through CAB regulation rather than legislation?

Some say "YES". Some say the CAB has the statutory authority under the Federal Aviation Act of 1958, as amended, to give the commuter airlines what they want and need as embodied, in principle, in the Commuter Air Carrier Act of 1973. Others claim that a few minor amendments would have to be made to the Act of '58. primarily to resolve the issue raised by ALPA in the case now before the U.S. Court of Appeals of the District of Columbia wherein ALPA is challenging the CAB's statutory authority to encourage and permit commuter airlines to provide an adequate level of scheduled air-service between those points which are not served by the CAB-certificated air carriers, or are served with infrequent and illtimed schedules of the CAB-certificated carriers. In pursuing the regulation route, with whatever legislation is required, some of the commuters have expressed the desire to see a new part of the CAB's economic regulations governing the operations of commuter airlines electing to operate under additional regulations applicable to a form of limited certification or "license" covering a given route or route system. Still others remain unimpressed by the regulation approach. They favor retention of the status quo as represented by the existing Part 298.

What effect could limited certification of commuter airlines have on Reuben H. Donnelley's policies concerning the publication of commuters' single-plane and connecting schedules in the Official Airline Guide?

It could be the answer to the problem for both the carriers and the publisher. The lack of commuter airline certification and its inherent provisions covering service obligations is one of the principal reasons why the OAG is: (1) refusing to include commuter airline single-plane schedules with those of the certificated carriers in city-pair markets where the commuters are supplementing or complementing the services of the certificated carriers in response, to public and community needs; and (2) refusing to publish connecting schedules involving joint commuter/certificated services even though the carriers participate in joint fares (through fares lower than the sum of the local fares) or are involved in cooperative advertising programs for the purpose of promoting such connecting schedules.

Speaking of financial assistance to commuter airlines, what ever happened to the "Competitive Bid Proposal" developed by the CAB's Bureau of Operating Rights?

The legislation which would permit the CAB to test the competitive bid proposal over a three-year period was introduced in the 92nd Congress by Senator James B. Pearson (R-Kan.) at the suggestion of former CAB Chairman Secor D. Browne. It was known as S. 3460. Limited hearings were held by the Senate Aviation Subcommittee, but it was never reported out of Committee. And it has not been re-introduced in the 93rd Congress. Perhaps the reason for this is that the local service carriers have been paid over $1 billion dollars in federal subsidy since their inception for the purpose of serving small communities and members of the Senate Commerce Committee are waiting for them to take appropriate action in support of the experiment. But why this should be a problem to responsive Congressmen is difficult to understand as the local service carriers have demonstrated time and time again their lack of interest in serving certain short-haul lowdensity markets; therefore, concerned Congressmen should not expect the local service carriers to champion the proposal or to even comment on it. Such carriers simply are not interested in operating small aircraft over short stage lengths as envisioned under the proposal. And their position is understandable. It just nor the small aircraft of the non-subsidized commuter airlines. Perhaps the best and most effective way for getting the Board's competitive bid proposal back on the track is for the National Association of State Aviation Officials, the National League of Cities/Conference of Mayors; the National Governors' Conference, the National Association of Regulatory Utility Commissioners and NATC to work in concert with the CAB in order to get the competitive bid experiment underway by the earliest possible date with the understanding that such a three-year experiment will not require resources and energies of the CAB staff to the detriment of other problems and opportunities facing the certificated and commuter airlines in improving and expanding scheduled air service to communities that would not be eligible for financial assistance under the criteria established for the competitive bid proposal. What are some of the main features of the CAB'S Competitive Bid Proposal? Let me summarize it as follows:

isn't their bag.

Back in May 1972, the Commuter Air Carrier Conference endorsed and applauded BOR's efforts as embodied in S. 3460 which calls for the testing of a competitive bid concept for providing scheduled airservice to isolated communities with the potential of boarding between 5 and 25 passengers per day. As set forth in the proposal, it was BOR's contention that those markets enplaning 25 to 40 passengers a day could be served by commuter airlines without subsidy and points enplaning more than 40 passengers per day could be served by the certificated carriers without subsidy, thus giving the federal government the opportunity to either (1) expand scheduled service to more communities without increasing the subsidy need; or (2) reduce or eliminate subsidy subject to the findings from the test involving points enplaning between 5 and 25 passengers per day.

At that time, the Conference urged the Board to expedite the development of proposed criteria and standards, including possible alternatives, covering all facets of the proposal with the intent to avoid the problems encountered by the Post Office Department with its competitive bid method for granting air taxi mail contracts. To this day, BOR has not been responsive to the commuters' request for more information; therefore, the Commuter Air Carrier Conference has had no alternative but to defer its unqualified support for S. 3460.

In considering the competitive bid proposal, it should be noted that commuter airlines have proven through actual experience that they can serve many markets with timely scheduled services without any financial assistance whatsoever from the government (federal, state or local). However, there are a countless number of deserving points throughout the nation, with and without scheduled air service, that do indeed require some form of financial assistance if they are to be served now and in the future. And unless that service is timely, frequent and reliable, it will not be supported by travelers and shippers by air. From the point of view of many commuter airlines, S. 3460 may be the answer to the Board's over 20-year dilemma for finding an efficient and economical way to improve and expand scheduled air service to small and/or isolated communities-communities which deserve scheduled air service but which cannot support the large aircraft of the subsidized local service carriers

• Only those communities judged to be "isolated" would be eligible for service under the competitive bid proposal. Under the CAB's standard, any community less than ninety minutes driving time from an air service center is not isolated. Any community 140 minutes or more from a service center is isolated. Within this range, a community is isolated or not isolated depending on the frequency of service at the adjacent air service center.

• The CAB would select those communities for participation in the test and would work with each such community in developing specifications for service that would fulfill its needs. Such specifications would include hub airport(s) to be served, type of aircraft to be used, frequency of service, etc.

• All carriers (trunk, local service and commuter airlines) could submit bids to provide the service specified by the Board.

• Additional service could be provided by commuter airlines independently of the contract.

• Contract awards, based on bids by reliable, responsible carriers and subject to performance safeguards, would be for two or three years.

• Contractors would have no vested grandfather type rights for follow-on contracts that might be awarded.

• Renegotiation rights during the life of the contract would be precluded, thus barring the likelihood of

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uneconomic bids. The Board also would screen out unrealistic bids and each contractor would have to provide financial guarantees which would assure completion of the contract and, in the event of failure provide funds for immediate substitution of service by a sub

stitute carrier.

• Minimum standards for filing bids would include corporate financial condition, insurance, officer and employee experience, compliance with safety standards.

We understand that more and more states are looking to commuter airlines as their best hope for expanding and improving scheduled air service over the short-haul low-density markets and that some are even supporting the position that if the CAB does not establish appropriate regulations governing the certification of commuter airlines, including route protection, then the states should set up the mechanism for regulating the commuter airlines on a state and regional basis. What is the industry's position on this possibility?

It is a known fact that many states are very much concerned about the Board's policy of regulating commuter airlines under the exemption process. And there is a real threat that if the Board is not responsive to the concern of the states as represented by the National Association of State Aviation Officials and the National Association of Regulatory Utility Commissioners, the states may well take things into their own hands. This, in turn, could be a disastrous or costly blow to the orderly growth and development of commuter airlines. The Board, on the one hand, takes the position that if the commuter airlines are to grow and prosper in the national and public interests, they must be relieved of the onerous burdens of CAB economic regulations. Many states, on the other hand, support the position that if the Board does not impose certain economic regulations on the commuter airlines, they should do it. This cross fire between agencies of the federal and state governments places the commuter airlines in a precarious situation. And for those who serve two or more states, it is only reasonable to assume that they would prefer to adhere to one set of economic regulations as imposed by the Board than be required to meet the different regulations of two or more states. The more regulations that are imposed on commuter airlines without justification, the less likely they will be able to succeed So perhaps now is the time for the

Board and the states to get together for the purpose of working out the best possible solution in the national and public interests.

If a company or person wants to create a commuter airline to operate primarily between two points within a given state, may such state through its own laws or regulations prohibit such an operation even though same would be conducted under Part 298 of the CAB's Economic Regulations? Although many say "NO", a few say "YES". A recent court case in the State of Texas sustained the former. But the decision is being appealed. There was another situation where certain employees in one of the Divisions of the Trust Territory of the Pacific Islands questioned or sought to restrain a commuter airline's activities in the Trust Territory. Upon inquiry with the CAB as to the rights of the Trust Territory (which holds rights similar to those held by the individual states) to deny the commuter air carrier its rights as stipulated in Part 298, the CAB's legal counsel, on September 12, 1973, advised that the CAB does indeed assert jurisdiction over air transportation between Guam and points in the Trust Territory, as well as between points in the Trust Territory. Richard Littell said: ". the Board considers that operations conducted in accordance with Part 298 are no less Board-authorized than are operations conducted pursuant to a certificate of public convenience and necessity by the Board. Whether conducted under Part 298 exemption or under a certificate, operations authorized by the Board, i.e. 'air transportation' as defined by the Federal Aviation Act, are, in its view, subject to its exclusive jurisdiction." That statement reaffirms the position that a state may not prohibit a commuter airline from operating within its state when such operations are conducted under Part

298.

Although a state may not be able to prohibit a commuter airline from operating within its state, may it impose economic regulations on the carrier, such as requiring it to: (1) obtain a state certificate, or license, after meeting certain prescribed criteria; (2) file its schedules with the state for approval prior to implementation; (3) obtain state approval for all rates, fares and charges; (4) file traffic and financial data?

Although it is our understanding the issue has never been tested in the courts, certain states are currrently

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