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( (1
IMPACT OF INTERLINING ON COMMUTER
AIRLINES
(95-51)
DEPOSITORY
HEARING
BEFORE THE
SUBCOMMITTEE ON AVIATION
OF THE
COMMITTEE ON
PUBLIC WORKS AND TRANSPORTATION
HOUSE OF REPRESENTATIVES
NINETY-FIFTH CONGRESS
SECOND SESSION
MARCH 18, 1978; AT MIAMI, FLA.
Printed for the use of the Committee on Public Works
and Transportation
r~' 0
U.S. GOVERNMENT PRINTING OFFICE
ss-su 0 WASHINGTON : 1978
/ RUTGEt~S LPW SCHOOL L~B~Pt~
I CAMDEN, N. J. 08102
GOVERNMENT D3CM~J~
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COMMITTEE ON PUBLIC WORKS AND TRANSPORTATION
HAROLD T. (BIZZ) JOHNSON, California, Chairman
RAY ROBERTS, Texas
JAMES J. HOWARD, New Jersey
GLENN M. ANDERSON, California
ROBERT A. ROE, New Jersey
TENO RONCALIO, Wyoming
MIKE McCORMACK, Washington
JOHN B. BREAUX, Louisiana
BO GINN, Georgia
DALE MILFORD, Texas
NORMAN Y. MINETA, California
ELLIOTT H. LEVITAS, Georgia
JAMES L. OBERSTAR, Minnesota
JEROME A. AMBRO, New York
HENRY J. NOWAK, New York
ROBERT W. EDGAR, PennsylvanIa
MARILYN LLOYD, Tennessee
JOHN G. ~FARY, Illinois
TED RISENHOOVER, Oklahoma
W. G. (BILL) HEFNER, North Carolina
DAVID L. CORNWELL, Indiana
ROBERT A. YOUNG, Missouri
DAVID E. BONIOR, Michigan
ALLEN E. ERTEL, Pennsylvania
BILLY LEE EVANS, Georgia
RONNIE G. FLIPPO, Alabama
NICK JOE RAHALL II, West Virginia
BOB STUMP, Arizona
DOUGLAS APPLEGATE, Ohio
PRoFESSIONAL STAET
RICHARD J. SULLIVAN, Chief Counsel
LLoYD A. BIVARD, Chief Engineer
LESTER EDELMAN, Counsel
LARRY REIDA, Minority Counsel
ROBERT K. DAWSON, Administrator
Eanon L. TYLER, Associate Counsel
DAVID A. HEYMSFELD, Assistant Counsel (Aviation)
DAVID L. MAHAN, Assistant Coufl8el (Aviation)
JOHN F. FRYER, Assistant Counsel (Transportation Regulation)
CLYDE WOODLE, Transportation Engineer
JAMES H. SCOTT, Staff Member (Budget)
DARRELL NETHERTON, Assistant Counsel
JOAN M. K0vALIC, Staff Member (Water Resources)
GORDON E. WOOD, Assistant Minority Counsel
JACK SCHENENDORF, Assistant Minority Counsel
RICHARD A. ASHWORTH, Associate Minority Counsel
DOUGLAS COPLEY, Minority Staff Member (Aviation)
RICHARD C. BARNETT, Minority Economist
CHARLES C. ZIEGLER, Assistant Minority Counsel
JEFFREY O'NEILL, Minority Staff Member
Smrr ASSISTANTS
DOROTHY A. BEAM, Eo,ecutive Staff Assistant
ERLA S. YOUMANS, Minority Ea,ecutive Staff Assistant
JOSEPH A. ITALIANO, Editor
CATHY EVANS, Calendar Clerk
Cv ANDERSON, JR.; TRULY BURTON; STERLYN B. CARROLL; ANN CLINEBUEG; RUTH S. CoS-
TELLo; LINDA Cox; MAR3ORIE D0wLING; MARVIN EVANS; ROGER FUREY; AGNES GANUN;
CAROL GRANVILLE; JANET HOOBLER; MACHELE IRBY; ROBERT F. LOFTUS; WALTER MAZAN
VIRGINIA MIDDLEDORF; SHIRLEY N0v0TNY; NICK ScHoLz; ROBERT F. SPENCE; T0BY
STEIN; NELL TALBERT; DENISE VALENTINE; OLGA WYNNYK
BARBARA BANNISTER; KAREN LARISON; Jo LOUGULIN; CHERYL MEYERS; ALISE PEYTON;
C0LLEEN RAINEY; ANNADELE RASZICK; PAT STONE
* WILLIAM H. HARSHA, Ohio
JAMES C. CLEVELAND, New Hampshire
DON H. CLAUSEN, California
GENE SNYDER, Kentucky
JOHN PAUL HAMMERSCHMIDT, Arkansas
BUD SHUSTER, Pennsylvania
WILLIAM F. WALSH, New York
THAI) COCHRAN, Mississippi
JAMES D. ABDNOR, South Dakota
GENE TAYLOR, Missouri
BARRY M. GOLDWATER, JR., California
TOM HAGEDORN, Minnesota
GARY A. MYERS, Pennsylvania
ARLAN STANGELAND, Minnesota
ROBERT L. (BOB) LIVINGSTON, Louisiana
(II)
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III
SUBCOMMITTEE ON AVIATION
GLENN M. ANDERSON; California, Chafrman
TENO RONCALIO, Wyoming
DALE MILFORD, Texas
ELLIOTT H. LEVITAS, Georgia
W. 0. (BILL) HEFNER, North Carolina
ROBERT A. YOUNG, Missouri
BOB STUMP, Arizona
NORMAN Y. MINETA, California
JEROME A. AMBRO, New York
ROBERT W. EDGAR, Pennsylvania
JOHN G. FARY, Illinois
ALLEN E. ERTEL, Pennsylvania
BILLY LEE EVANS, Georgia
RONNIE G. FLIPPO, Alabama
NICK JOE RAHALL II, West Virginia
GENE SNYDER, Kentucky
* JOHN PAUL HAMMERSCHMIDT, Arkansas
THAD COCHRAN, Mississippi
JAMES ABDNOR, South Dakota
GENE TAYLOR, Missouri
BARRY M. GOLDWATER, JR., California
BUD SHUSTER, Pennsylvania
WILLIAM F. WALSH, New York
DARREL STEARNS, Profes8ionai staff Member
HENRY PFLANZ, Minority Prof e88ional Staff Member
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CONTENTS
TESTIMONY
Páge
Bervaldi, Frank V., president and chief executive officer of AAT Airlines,
Inc. doing business as Air Sunshine; accompanied by Adrian Naranjo,
executive vice president and general manager; Thomas A. Stevens, as-
sistant vice president of public relations; Robert J. Paterno, counsel for
the airline, and Emillo Dirube, vice president of traffic and sales 38
McMaster, Jim, southern regional manager of Florida Airlines 102
Marthaler, Larry, director of sales of Florida Airlines 102
Morgan, Ray, president of Panhandle Airlines 32
Timoner, Eli, president of Air Florida; accompanied by Richard T. Scully,
senior vice president for operations; and C. R. Bergner, senior vice presi-
dent for marketing 17
Van Arsdaie, John C., president of Naples Airlines 110
Weidner, Donald W., executive assistant to the chairman of the Florida
Public Service Commission 2
MATERIAL RECEIVED FOR THE RECORD
Bervaldi, Frank V., president and chief executive officer, Air Sunshine,
news articles, charts, related exhibits. 59
Hardin, Doyle E., general manager, Marco Island Airways, Inc.,
statement 114
Systems Analysis and Research Corporation (SARO): Technical report
"Florida Intrastate Aviation Study" 116
Timener, Eli, president, Air Florida, statement 6
(V)
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IMPACT OF INTERLINING ON COMMUTER AIRLINES
SATURDAY, MARCH 18, 1978
HOUSE o~' REPRESENTATIVES,
SUBCOMMITTEE ON AVIATION
OF THE COMMITTEE ON PUBLIC WORKS AND TRANSPORTA"I'ION,
Miami, Fla.
The subcommittee met at 9:07 a.m., in the commission chambers
Room 250, Dade County Courthouse, Hon. Glenn M. Anderson (chair~
man of the subcommittee) presiding.
Present: Representatives Hammerschmidt, Shuster, and Fascell.
Also present: Mr. David Heymsfeld, assistant counsel, Mr. Darrell
Stearns, professional staff member, and Mr. John Stratton, minority
professional staff member.
Mr. ANDERSON. The meeting of the Aviation Subcommittee will
come to order.
At today's hearings of the Aviation Subcommittee of the Public
Works Committee we are concerned with the commuter airlines in
Florida and how these airlines are being affected by the authority
which Congress granted to Air Florida last fall.
On November 9, 1977, the President signed into law H.R. 6010.
One of the provisions of this law allows intrastate airlines in Flori-
da to enter into through-service and joint-fare agreements with inter-
state air carriers.
We needed legislation to allow this, because, under prior law, intra-
state carriers were not allowed to offer through-ticketing and baggage
services for passengers connecting with interstate carriers.
For example, if a passenger wished to travel on Air Florida between
Miami and Tampa, and then to connect with Delta Airlines, to fly
to Atlanta, the passenger would have to purchase separate tickets
from the two airlines, and then he would have to transfer his own
baggage at Tampa.
The law we passed allows Air Florida and an interstate carrier,
such as Delta, to enter into an agreement which would permit a Miami-
Atlanta passenger to purchase a single ticket at a joint fare.
The agreement would also allow the two airlines to provide baggage
transfer services.
When we passed this law, Congressman Fascell, and other Florida
Congressman expressed concern at allowing Air Florida to enter mto
these joint-fare agreements, because this might give Air Florida an
unfair competitive advantage over commuter airlines in Florida.
In the debates on H.R. 6010, I promised that the Aviation Sub-
committee would monitor the situation carefully and hold hearings on
the problem in the early months of 1978.
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This is the background of today's hearings, where we will receive
testimony on competitive situations between Air Florida and the com-
muter airlines.
I am very happy to have with us today here other members of the
subcommittee, ,John Paul Hammerschmjdt from Arkansas; and Bud
Shuster from Pennsylvania.
We are particularly pleased to have the great Congressman from
this area, who is one of our great leaders in the House-Dante Fascell.
Dante, would,you like to welcome us?
Mr. FASCELL. I would.
Mr. ANDERSON. Say whatever you would like.
Mr. FASCELL. I am delighted to have you here.
I also want to thank you and the members of the committee for
taking the time to come here to hear these folks.
It is a very important issue, and we are extremely grateful to you.
Mr. ANDERSON. Thank you, Dante.
John Paul, would you like to say something?
Mr. HAMMERSCHMIDT. Only that I am delighted to be in Dante
Fascell's territory.
We know the keen interest that he and other members have in this
interline matter.
It is a pleasure to be here to listen to what the witnesses have to say.
Mr. ANDERSON. Congressman Bud Shuster, of Pennsylvania-in ad-
dition to being a member of the subcommittee-is also the Chairman
of our National Transportation Policy Study Commission, whose job
is-in about a year from now-to give us a full national transporta-
tion policy study, along with recommendations.
We will expect a good report from him at that time.
Mr. SHUSTER. Mr. Chairman, thank you, and it is great to be here
in Dante Fascell's congressional district.
You certainly do have an outstanding leader in the Congress, rep-
resenting you.
You are right, Mr. Chairman; I am here wearing two hats-the
second one being as the Chairman of the National Transportation
Commission that you referred to, so I am very much interested in
listening to this testimony today.
Thank you very much.
Mr. ANDERSON. We have a statement on behalf of Paula Hawkins,
chairman of the Florida Public Service Commission, which will be
given by Don Weidner, assistant to the director of the Florida Public
Service Commission.
Mr. Weidner.
STATEMENT OF DONALD W. WEIDNER, EXECUTIVE ASSISTANT TO
CHAIRMAN PAULA HAWKINS, FLORIDA PUBLIC SERVICE
COMMISSION
Mr. WEIDNER. Thank you, Mr. Chairman.
Good morning, my name in Donald W. Weidner and I am executive
assistant to Paula Hawkins, chairman of the-Florida Public Service
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Commission. Chairman Hawkins regrets that she is unable to be here
this morning but she is out of the country on a brief vacation.
Mrs. Hawkins asked that I appear here this morning to exj~ress
her support for the provisions of H.R. 6010, which allows interlining
by Florida's intrastate air carriers.
The chairman supports that provision because of the tremendous
benefits it provides for Florida's citizens and those who come to visit
Florida.
Essentially there are three benefits resulting from this section of
H.R. 6010, which are of in~portance.
First, under the interlining provisions, airline passengers in Florida
may now obtain through ticketing even though a part of their trip
will be on an intrastate airline. Prior to the advent of this bill we had
received numerous complaints regarding the inconveniences en-
countered when a passenger had to purchase separate tickets for por-
tions of a trip. Even more common, were complaints about the inability
to turn in unused tickets-particularly when the passenger was now
in a city not served by the intrastate carrier.
The second advantage is a companion to the first-the availability
under H.R. 6010 to check baggage through to the final destination
even though part of a trip is on an intrastate carrier. Prior to H.R.
6010 we had also received numerous complaints about the problems
encountered when, for example, a passenger landed at Tampa Inter-
national had to go into the main terminal all the way down to the
baggage claim area, find his baggage, then back up to the ticket area,
check the baggage, and then go all the way back out to a gate right
next to one he had arrived at originally-and all in a limited period
of time. Not only is this an inconvenience to the passenger, but it is
also wasteful and, therefore, expensive for the airlines since more
employees must spend more time with such customers.
The last advantage which I wish to discuss deals with the size of
aircraft utilized by the intrastate carrier. Prior to H.R. 6010, in order
for an intrastate carrier to have the benefits of interlining, the carrier
also had to be certificated or exempted by the CAB. Along with exemp-
tion, however, were various restrictions on aircraft size. Generally,
the intrastate carrier was limited to flying small (less than 31 seat)
aircraft. Under H.R. 6010 our intrastate carriers need not obtain the
CAB certification in order to interline, therefore the CAB restric-
tions on aircraft size need no longer be applicable. I believe this will
eventually work to the benefit of intrastate airline passengers since,
hopefully, the airlines will begin upgrading to jet aircraft. There are
many potential passengers in markets served only by an intrastate
state airlines who have confied to me that they are simply afraid to
fly on a small prop-driven airplane.
Finally, a word should be said about objections to 6010~ Since the
bill was first proposed, I have tried hard to find out what, if any,
objections exist to it. In all honesty, I `have not learned of one single
objection which applies directly to this provision of 6010. The only oh-
jections I have heard relate to what might happen if deregulation
occurs-or what might happen if one airline applies to the Florida
PSO for extension of route authority and after a full review of the
evidence presented, the FPSC votes to grant the application. With all
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due respect to those raising such arguments, I find them totally in-
valid; 6010 is a great benefit to those traveling by air to and within
Florida. It should be judged solely on its merits.
The battle over deregulation should be fought over the bills which
provide for deregulation just as `route a~ithority requests med with
the Florida Public Service Commission will be judged solely on the
evidence presented in hearings on the request.
On behalf of Chairman Hawkins, I sincerely appreciate the op-
portunity to appear before you and we appreciate your coming to the
Sunshine S4ate for these hearings.
Mr. ANDERSON. Thank you, Mr. Weidner.
As I understand it, some commuters are concerned that the PSC
might award Air Florida authority to serve markets that are now being
served by commuters.
If this occurred, the commuters believe that Air Florida's large air-
* craft authority and its interlining authority from H.R.. 6010 would
give it a great competitive advantage over commuters.
Suppose that Air Florida applied to the PSC for authority to serve
a commuter market.
* In reaching its decision, would the P50 consider the impact on a
commuter of an award to Air Florida ~
Mr. WEIDNER. I believe it would.
The law mandates that we look into the necessity of the service that
is going to be provided: Is there going to be a necessity for that
service?
Of course, we would have to look at whether the present carrier were
serving the market well, and whether there would be a need for addi-
tional service to that market.
Mr. ANDERSON. In other words, you do consider the economic impact
upon the commuters?
Mr. WEIDNER. Yes, sir.
Mr. ANDERSON. Do the certificates.which the PSO gives commuters
limit the size of aircraft that they may use?
In other words, could a commuter use the same aircraft as Air
Florida?
Mr. WEIDNER. I believe so.
There may be-I am not certain whether they have to get permis-
sion to upgrade, but, generally, that is just a perfunctory thing; as a
matter of fact, we have a couple of applications coming up now, where
carriers requested to go up to larger aircraft, and the staff recom-
mended them favorably in record time.
The commission has not acted upon them yet.
Mr. ANDERSON. If Air Florida made application, about how long
would it take the P50 to reach a decision?
Mr. WEIDNER. That depends on a lot of different factors.
The first factor is: Are there any protests to the route authorityj
request?
If Air Florida requested temporary authority, and there were no
objections to the request, they could get that authority in a very short
period of time-perhaps a month.
If there were protests to the authority, then it would be up to the
commission to decide whether to grant it on a temporary basis or
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whether to deny it on a temporary basis, pending the outcome of full
hearings, and the full hearings could take several months.
Mr. ANDERSON. Does the PSC regulate commuters operating under
CAB exemptions?
Mr. WEIDNER. We regulate any intrastate commuter.
Mr. ANDERSON. Do you consider commuters in Florida intrastate?
Mr. WEIDNER. If I understand your question: Yes.
Mr. ANDERSON. To follow up on the previous question-Does the
PSC regulate commuters operating under CAB exemptions? Are the
PSC's regulations compatible with the CAB's regulations?
Mr. WEIDNER. In what particular area, Congressman?
Mr. ANDERSON. Are there any conflicts between your rulings and
ours, or do they work together?
Mr. WEIDNER. I am unware of any specific conflicts between them,
and, if there are any, I am unaware of them.
Mr. ANDERSON. We do not regulate the commuters at all.
We do not regulate the fares or-
Mr. WEIDNER. That is right.
Mr. ANDERSON. You step in there and do it; is that correct?
Mr. WEIDNER. That is correct.
Mr. ANDERSON. Mr. Hammerschmidt?
Mr. HAMMERSCHMIDT. Thank you, Mr. Chairman. I do not have any
questions.
I think that, from your questioning, Mr. Weidner has made their
position on this matter and their activities very clear.
I regret that Paula Hawkins is not here-not that you did not do
a fine job-but because she is a personal friend.
I hope that you will extend to her my best.
Mr. WEIDNER. I surely will.
Mr. HAMMERSCHMIDT. Thank you very much.
Mr. ANDERSON. Mr. Shuster?
Mr. SHUSTER. Thank you, Mr. Chairman.
If my understanding is correct, a commuter here is defined as:
less than 30 seats-30 or fewer seats.
Mr. WEIDNER. Well-
Mr. SHUSTER. If that is not correct, how do you define a commuter
airline?
Mr. WEIDNER. I do not know that we define a commuter airline,
per Se.
The intrastate airlines are the ones which we regulate, and those
are just the ones that fly solely within Florida.
We regulate all intrastate airlines.
Mr. SHUSTER. In other words, you do not differentiate between a
commuter and-~
Mr. WEIDNER. I do not think that, specifically, we do; no.
Mr. SHUSTER. Thank you.
Mr. ANDERSON. Mr. Fascell?
Mr. FASCELL. Mr. Chairman, you asked the $64 questions; thank
you.
Mr. ANDERSON. Thank you, Mr. Fascell, and thank you,
Mr. Weidner, for your testimony.
Mr. WEIDNER. Thank you.
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Mr. ANrn~nsoN. The next witness will be Mr. Eli Timoner, presi-
dent of Air Florida; accompanied by Mr. 0. Edward Acker, chair-
man; Mr. Richard T. Scully, senior vice president for operations, and
Mr. 0. R. Bergner, senior vice president for rnarketmg.
Mr. Timoner, we do have your prepared statement, and it will be
made a part of the record at this point.
[Statement referred to follows:]
STATEMENT OF Eu TIMONEB, PRESIDENT, AIR FLORIDA
Congressman Anderson, Members of the Committee: We are grateful for the
opportunity to give testimony today and put to rest concerns that some may
have bad that legislation enabling Air Florida to interline passengers and bag-
gage with CAB certificated air carriers represents a threat to the Commuters.
Gentlemen, let me tell you that this is a paper tiger. Air Florida's routes have
been awarded either as a result of grandfathering under the Florida Air Carrier
Act of 1972 or by the hearing process in which public convenience and necessity
were demonstrated before the Public Service Commission (PSC) of the State
of Florida. It is not possible, therefore, for us to fly any new routes without
Due Process. Consequently, Air Florida cannot "fly over" the routes of any
Commuter just because it chooses to.
* It is a matter of fact that subsequent to the passage of H.R. 6010, Air Florida
withdrew the two route applications it had which could have put it in conflict
with Commuter carriers, and instead has filed for and been awarded temporary
authority to start service between Daytona Beach and West Palm Beach to all
points on our system.
Air Florida has brought service to two communities which were so poorly
served previously that it was impossible for people in Palm Beach or Daytona
Beach to do business at the State's capital and return in the same day. These
are not large markets, they are not served by any Commuters and very poorly
served by CAB certificated carriers. Air Florida's new service starting March 1
provides five services a day at Daytona Beach and three at West Palm Beach.
To this date it has not been profitable. We are working on the marketing, and
building prOgrams with carriers such as Braniff, Continental and others to de-
velop and sell connections on Air Florida connecting to CAB carriers through
Tampa and Miami to interline passengers who travel to the north and west.
With access to the WHOLE market potential, we believe that we can make these
routes economically feasible and, together with the stimulation and develop-
ment of our low-cost intrastate service, increase the number of flights to these
communities. We have to this date signed interline agreements with 13 domestic
and international carriers. We have worked out a series of charts which graphi-
cally demonstrate the number of connections available utilizing Air Florida's
intrastate service with several of the carriers bring people to and from this
State. As you can see, there are a myriad of fine connections~ all of which are
designed to save residents and visitors of the State time and money.
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On February 10, 1978, we invited Florida Airlines, Naples Airlines, Marco
Island Airways and Air Sunshine, Florida's principal Commuter airlines, to
join Air Florida in interline ticketing and baggage agreements. As of this date
no communication has been received accepting or rejecting this offer and it is
unfortunate because the Florida traveling public and particularly residents of
the State will be better served once these connections are made available.
At a recent hearing before the Transportation Committee of the Senate of
the State of Florida, discussing a bill to deregulate the intrastate system in
Florida, we pointed out some important statistics which might be useful today.
Air Florida is currently carrying at the rate of 500,000 passengers annually
and we project passenger traffic at a rate of 1 million passengers per annum by
the end of this calendar year. Our average yield is approximately $29.00. As best
as we can determine, the yield at CAB rates is approximately $10.00 higher on
a composite fare basis throughout the State. That means we are going to be
saving our passengers, whether they be residents of this State or connecting
passengers on interline, about $7 million this year. It also means we have some
700,000 passengers who work in and visit this State, who think our service and
savings are pretty terrific.
We were also able to illustrate to the Committee the results of market stimula-
tion by both price and increased service in an analysis of the Miami-Gainesville
market. In September 1977, we were awarded a route between Miami and Gaines-
ville. By December 1977, airport statistics at Gainesville reveal that we were able
to carry 4,066 passengers for the month of December in and out of that com-
munity. During that month, Eastern Air Lines, the historic air carrier between
Miami and Gainesville also reported about 4,000 passengers, the same as they
did in December 1976, the prior ye-ar. Therefore Air Florida's December busi-
ness in this market represents all new business and is clearly growth in the
market by diversion from cars and other means of transportation and represents
people who made a travel decision because of the improved service and low
fares.
We think it is important to address these subjects with consistency. A major
effect of HR 6010 on the intrastate carriers in the State of Florida means that
the Commuters in this State, which are also certificated by the Florida PSC,
can continue to interline without seeking exemptions from the CAB in order to
increase the size of equipment etc. Currently, Air Sunshine, which has histori-
cally operated DC-~3's has filed for authority with the Florida PSC to change
their service between Miami and Orlando, served at Kissimmee Airport, and
Miami and Tampa to Convair 440's. Under the Florida Law, this is a Class II
aircraft, 50 to 100 seats, versus a Class 111 aircraft, 1 to 49 seats, which they
are certificated to use on this route. There is no questien that with improved
aircraft and with greater frequencies, Air Sunshine will divert traffic from
Air Florida~and we grandfathered these routes. We could object and delay the
use of this superior equipment by this airline but we feel that it would not be
in the interest of the traveling public for us to contest this change of equip-
inent and force a costly and lengthy public hearing process. Again it is important
that all parties say and do the same things in Tallahassee that they say and
do in Washington. This then is the major single effect on a Commuter as a
result of HR 6010. It has freed the Florida Commuters from dual regulation
and will undoubtedly afford them greater opportunities for growth.
There may be some concerns on the part of the other intrastate carriers in
Florida that so-called automatic entry provisions being considered in the Regu-
latory Reform Act of 1978 could be used by Air Florida to obtain intrastate
authority without the requirement of the hearing process before the Florida P5G.
Let me assure all of you that Air Florida would be happy to accept an intra-
state exclusion should automatic entry become part of a new law which gave
large scheduled intrastates the opportunity to expand their rocte system.
It has been stated by some that the passage of HR 6010 allowed Air Florida
to avoid the costly process of start up under Federal regulation. We operate,
as you know, under F.A.R. Part 121. Until the quarter ended January 31. 1978,
when we made our first profit after 5~ years, we had lost over $6 million in
operations, we have at this point $15 million in jet equipment dedicated to our
business. Certainly no one can claim that we have avoided the high cost of
start-up, we have in fact put up the necessary risk capital to build this airline.
There are two other items -that we think bear special attention in this discussion,
From the point in time when HR 6020 became law until February 28, there have
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17
been 69 incidents in which scheduled CAB carriers have delayed or cancelled
flights between points that we serve at times relatively close to our departures,
due to weather and mechanical problems. During that period of time it is our
estimate that more than 2,000 passengers were afforded the convenience of
travel on Air Florida using their existing tickets. We were able to accept their
baggage from another carrier to be checked through on to Air Florida and to
turn over their baggage for an on-going destination, thereby eliminating all the
inconveniences suffered by these passengers except for the cancellation of their
original flight. Before this law went into effect, these passengers would have
had to personally claim their baggage, carry it to our counter, purchase a
ticket and return to the carrier that they had been ticketed on in order to
obtain a credit or refund. The personnel at our ticket counter had to patiently
explain to each of them that Federal law prevented us from accepting their
ticket or arranging for the baggage transfer and the cancelled carrier had to
do the same thing. The consumer, already late and angry, would have been
further frustrated because Federal law prevented us from dealing with the
airline at the very next counter.
If you want to know the effect of interlining legislation on the commuter and
the commuter is written with a small "c" meaning commuter or consumer, then
the effect has been beneficial and long overdue and so persuasively in the public's
interest as to be the most compelling argument in favor of this law.
That concludes our presentation, and we would like to take this opportunity
of extending an invitation to our Florida Congressman, the Committee, staff and
guests here today to attend the premiere showing of Air Florida's new Multi
Media Three Screen Presentation, "We're on our Way". It will be shown today
for the first time to our staff at 3:00 P.M. at the Ramada Airport Inn, 3941
N.W. 22nd Street, and we will welcome all those present today who join us at
that time.
Mr. ANDERSON. Please proceed, Mr. Timoner.
TESTIMONY OP ELI TIMONER, PRESIDENT OF AIR FLORIDA; ACCOM-
PANIED BY RICHARD T. SCULLY, SENIOR VICE PRESIDENT FOR
OPERATIONS, AND C. R. BERGNER, SENIOR VICE PRESIDENT FOR
MARKETING-
Mr. TIMONER. Thank you, Congressman, and thank you, members of
the committee and staff, and Congressman Fascell.
We appreciate the opportunity to express our views on this issue.
If I may, for a moment, I think I could be helpful on the last ques-
tion that was asked.
In 1972, when the Air Carrier Act was passed, all carriers-or all
airlines-operating within the State came under the jurisdiction of
the Public Service Commission.
If an airline had been a commuter before that date, then they had the
advantage of interlining.
If they happened to be operating large aircraft, they did not have
the advantage of interlining.
If the PSC does not have jurisdiction over the commuters in this
State, they sure are wasting a lot of time in Tallahassee, so they do on
everything that they do, and I do not think it is a conflict with the
CAB; I think it is the contrary-that they probably have more lati-
tude as a result of the changes of sizes of equipment.
I think the concern that the passage of 6010 represents a threat to
the commuters in the State of Florida is a paper tiger.
Our routes were either grandfathered or awarded by the hearing
process, when we demonstrated public convenience and necessity be-
PAGENO="0024"
18
fore the P50, so it is not possible for us to fly over the routes of any
commuter just because we choose to; as a matter of fact, subsequent to
the passage of H.R. 0010, we withdrew two route applications which
we had, and which would have put us in conflict with commuter car-
riers, and, instead, we ified for-and were awarded-temporary au-
thority to start service between Daytona Beach and West Palm Beach
to all points on our system.
We brought service to two communities that were previously so
poorly serviced that it was impossible for people in Palm Beach or
Daytona Beach to do business in Tallahassee and to return on the same
day.
These markets were not large markets.
They were not served by any commuters, and they were very poorly
served by the CAB certificated carriers.
On March 1, our new service started with five flights a day in and
out of Daytona Beach and three ffights a day in and out of West Palm
Beach.
To this date, these routes are not profitable.
We have been working on the marketing of our product in the area,
and we have been building programs with carriers such as Braniff,
Continental, and others to develop and sell connections on Air Florida
to CAB carriers in Tampa and Miami, interlining passengers who
travel to the north and to the west.
With access to this whole market potential, we believe that we can
make these routes economically feasible, and, together with the stimu-
lation of our low fare intrastate service, we can increase the number
of flights into these communities.
Without access to the interline market, there is little likelihood that
we could continue to sustain service to these communities.
We have, to this date, signed interline agreements with 13 domestic
and international carriers.
In my presentation, I have included a number of charts which
demonstrate the number of connections available, utilizing Air
Floi~ida's intrastate service with several of the carriers that bring
people to and from this State.
There are a great number of connections available, and the connec-
tions that we have described in the next number of pages are actually
viable and usea.ble connections, and they will soon be featured in the
official airline guide and be available through the computer reservation
system on these various carriers.
What is particularly important to realize is: Most of these connec-
tions afford possibilities for people totravel to and from Florida with-
out passing through Atlanta and some of the other very high density,
difficult points to make connections.
The connections demonstrated on the next number of pages are all
with carriers with whom we have signed interline agreements.
We want to point out that, on February 10 of this year, we invited
Florida Airlines, Naples Airlines, Marco Island Airways, and Air
Sunshine-Florida's principal commuter airlines-to join Air Force
in interline ticketing and baggage arrangements.
No conimunication has been received accepting or rejecting this
offer.
PAGENO="0025"
19
We believe that this is very unfortunate, because the Florida travel-
ing public-and particularly the residents of this State-would be
better served once these connections were made available.
Recently, we were in Tallahassee to discuss deregulation at the State
level, before the Transportation Committee of the Senate of the State
of Florida, and we were, at that point and at that time, able to point
out some things that we thought might be interesting today.
In Florida, the composite or average fare or yield works out to
about $29 a ticket.
As best we can determine, a composite fare on a similar route struc-
ture on CAB carriers would cost about $10 more, so, at the current
rate at which we are carrying passengers, we are saving the citizens
of this State some $5 million a year, since we are carrying passengers
at the rate of slightly over 500,000 a year.
At the end of this year, we expect to be carrying passengers at
about the rate of 1 million a year.
We estimate an annual saving to the people using our services of
some $7 million in calendar 1978.
It also means that 700,000 people who have used this service have
enjoyed the benefits of the savings and the frequency of the carrier.
We would also like to illustrate to the committee what market stimu-
lation of price and frequency has done, and we think that a model that
might be used not only in this State, but elsewhere, might be a service
between Miami and Gainesville.
We were awarded the route in September 1977.
By December, we carried 4,066 passengers in and out of `Gainesville-
between Miami and Gainesville.
Airport statistics reveal that Eastern Airlines, which has historically
served the market between Miami and Gainesville, also carried 4,000
peorple in December, as they did in December 1976.
It is clear that, in 3 months' time, we were able to generate an addi-
tional 4,000 passengers in and out of that market by bringing in low
cost and frequent service, which diverted people from the highways,
buses, cars, or whatever means of transportation they used, or we
created travel opportunities in the first place, which had not existed
before, because of price and infrequency of service, and we feel that
it is very important that the parties interested in today's discussion
address these matters with consistency.
There are great benefits to the ability of intrastate carriers, within
the State, to be covered under H.R. 6010-particularly in the up-
grading of equipment.
Air Sunshine, whose primary route is between Miami and Key West,
has filed with the Public Service Commission to use their Convair air-
craft between Miami and Orlando and Tampa, and they serve Orlando
at the Kissimmee Airport.
This is a route that is competitive with Air Florida.
While we do fly DC-9 equipment, and the Convair is not quite as
attractive to the consumer, frequency and good marketing will take
passengers away from us, but we do not-we believe that we have
every right to get into the hearing process and cause a delay of what-
ever that may be.
PAGENO="0026"
20
That is not our purpose, and we have no objection to-nor will we
voice any objection to-their upgradmg of their equipment; as a mat-
ter of fact, we encourage it, because we believe that is the way a fine
intrastate system in this State will be developed-as a result of the
advantages that H.R. 6010 made available-so we think it is very un-
portant that people say the same things in Tallahassee that they say
in Washington.
All legislation is a double-edged sword, with benefits and disad-
vantages, but, by and large, the ability for Florida intrastate carriers
to interline tickets and baggage gives such great benefits to the de-
veloping intrastate system here that it seems difficult for us to under-
stand what objections could be raised.
There have been some concerns that-should an automatic entry pro-
vision be provided in the regulatory format that is being considered,
which provides for certain large intrastate carriers to enter new
markets-Air Florida might use this tool as a method to obtain ad-
ditional intrastate routes without the hearing process.
We would like to publicly state that-should automatic entry in
some form be made available to large intrastate carriers-~---we would
be happy to accept an intrastate exclusion to automatic entry, if, in
fact, we should qualify in the first place.
Our interest in obtaining an expanded route structure through auto-
matic entry would be to bring our innovative fare structuring and
marketing program to an interstate market.
We would not use it in an intrastate circumstance, and we would be
:happy to be precluded from using it in that way, if tha.t ivould put
the fears of some of the other intrastates to rest.
We recently heard an argument that Air Florida had avoided the
costly start-up, which is required under Federal regulations, so I would
like to just describe to you what has been involved in the 5i/2 years
of the development of Air Florida, to this date.
We have succeeded in losing $61/2 million in operating losses as a
result of the price that one pays to get known in the marketplace.
We have got $15 million worth of equipment dedicated to this
business, and it is all private-risk capital, and we certainly think that
qualifies us as having paid the price to start a business, which I am
happy to tell you-effective with the quarter ended January 31-
turned into its first profit after ~~/2 years of plugging away.
There is one other thing that I think graphically would describe
what the benefits to the consumer are of interlining.
From the period of the passage of H.R. 6010 to February 28, we have
counted and can document 69 incidents in which CAB carriers have
had delayed or canceled flights between points which we serve at times
relatively close to our departures, due to weather and mechanical
problems.
During that period of time, it is our estimate that just over 2,000
passengers were afforded the convenience of traveling on Air Florida,
using their existing tickets.
We were able to accept their baggage from another carrier, to be
checked through on Air Florida, and to turn over their baggage at an
ongoing destination.
We eliminated all of the inconveniences suffered by these passengers,
except for the cancellation of their original flight.
PAGENO="0027"
21
Before this law went into effect, these passengers had to personally
claim their baggage and carry it to our counter, and then they had to
purchase a ticket, and then they had to return to the carrier that they
had been ticketed on in the first place to obtain a refund or a credit.
The personnel at our counter had to patiently explain to very frus-
trated people that Federal law prevented us from accepting their
ticket or arranging for the baggage transfer, and the canceled car-
rier had to do about the same thing.
The consumer, already late and angry, was further frustrated be-
cause the law prevented us from dealing with the airline which was
very often at the very next counter.
We think that-if this discussion is concerned with the effect of
interlining legislation on the commuter, and one thinks of the com-
muter as being the commuter or the consumer-the effect has been bene-
ficial and long overdue and so persuasively in the public interest as to
be a most compelling argument in favor of this law.
That concludes my remarks.
I did want to take a moment to invite all present today to-it is a
comcidence, but we happen to be `having a presentation this afternoon,
for the first time of a multimedia production of Air Florida, which
is going to be shown to our staff, and we respectfully invite everyone
here, if you have the time this afternoon.
We think it is a very exciting production, and we would be delighted
to have you as our guests.
I would be happy to answer any quest~Qns, of course.
Mr. ANDERSON. Thank you, Mr. Timoner.
I want to get our semantics straightened out here.
A moment ago, Mr. Weidner indicated that, in Florida, you do not
distinguish between an intrastate carrier and the commuters; that in
Tallahassee, they are all treated the same.
Mr. TIMONER. Yes, sir.
Mr. ANDERSON. In California, it is a little bit different.
We have the intrastate carriers, such as Air `California and PSA,
that are in one category, and then we have the commuters, such as
Golden West.
Golden West is considered interstate because, for the most part,
everybody they bring to the airports gets on anotherline that is going
out of California.
Golden West and the other commuters in California are pretty well
recognized as interstate carriers, whereas PSA and Air California
are the only two intrastate carriers.
Can you help me distinguish between how you do this here and
how we do it in Califorinia?
Mr. TIMONER. Well, we have never operated as a commuter.
We started the airline with large aircraft and only qualified as an
intrastate-
Mr. ANDERSON. It is very similar to PSA?
Mr. TIMONER. PSA or Air California, but it is my belief that, when
the law went into effect, the State took jurisdiction on any carrier
flying on their intrastate routes.
In other words, if they fly between Naples and Tampa, that is an
intrastate route, and the public service commission took jurisdiction
over it, and, of course, at the same time, while they impose a certain
PAGENO="0028"
22
amount of regulation, they also put the protective process in, as well,
because another commuter cannot decide to fly competitively between
Naples and Tampa without demonstrating to the public service com-
mission that there is a need for that service, so the intrastate sys-
tem-the development of the intrastate systeI~n was taken under the
jurisdiction of the public service commission, with the view of build-
ing a low-cost high-density intrastate airline system. -
Mr. ANDERSON. Do I assume, then, that most commuters in Florida
carry people just from two places within the State, and that the pas-
sengers do not then get on an interstate carrier?
Mr. TIMoNi~at I believe that a large portion of them get onto an
interstate carriei', but I believe that they have maintained a dual
authority.
They have been regulated by the public service commission as to
the rates and routes within the State, and they have had the advan-
tages of the ability to interline passengers and baggage-to receive
and deliver passengers and baggage from the scheduled interstate
carriers.
Mr. ANDERSON. `Since H.R. 6010 was enacted, have you entered into
anyjoint-fare arrangements with any interstate carriers?
If so, are the fares determined by the CAB formula?
Is the division of revenues between the carriers determined by the
CAB formula?
Mr. TIMONER. As I have stated, we have entered into 13 arrange-
ments to this date, with foreign and domestic carriers, and we have
a number of additional ones pending, and I would like to ask Mr.
Bergner to-he is our vice president for marketing.
I would like to ask him to discuss the fare basis.
Mr. ANDERSON. Mr. Bergner.
Mr. BERGNER. No; we have not signed any agreements with the car-
riers, as they relate to our fare structure.
We are an add-on fare, which I believe is how the bill was written.
There is nothing less than our existing intrastate fares.
Mr. ANDERSON. The fares, then, are not determined by the CAB
formula?
Mr. BERONER. No; not at this point.
We are not a member of Squires' Tariff, nor are we in any of the
passenger rules at this point in time.
It is a part of the negotiation that we have got to conduct.
Mr. ANDERSON. The division of revenue between the carriers is not
determined by the CAB formula; is it?
Mr. Tmio~m~n. No; it is not on a pro rate basis, based upon the mile-
age or-it is strictly an add-on fare.
Mr. ANDERSON. I know that you have partially answered the next
question.
I gather, from your testimony, that you are familiar with the re-
form legislation Congress is now considering.
If this legislation is enacted, is Air Florida likely to try to obtain
a CAB certificate or to participate in CAB automatic entry programs?
Would you be deterred from taking a CAB certificate if this meant
State regulation would be preempted and Air Florida would be regu-
lated exclusively by the CAB?
PAGENO="0029"
23
You are aware of the bill and how it is moving; are you not?
Mr. TIMONER. Yes; I am.
The first part had to do with: If there were automtic entry, would
we be interested in participating?
Yes; we would be, and we would accept jurisdiction of the CAB,
you know, if it were imposed as a result of the fact that we had
automatic entry in the first place.
It was my understanding for some time that the determination was
based upon where your business were derived from, and, if more were
as a result of interstate activity-more than 50 percent-that would
be where you would fall under `CAB jurisdiction.
I have understood lately that it is as much as 1 percent.
Mr. ANDERSON. Our original bill that was introduced was 50 percent.
If the revenues went to as much as 50 percent interstate, then you
were totally regulated by the CAB.
That was then changed, and a sort of a concensus bill was put to-
gether for markup, and we changed that to 25 percent.
We went into markup the other day, and they struck out the per-
centage entirely, and the provision that appears in the bill right now,
that we are still in the process of marking up-if you decide to go
interstate at all, or if you cross the state line, you then become a total
interstate carrier, and all of your intrastate lines would be interstate.
Mr. TIMONER. It is our feeling that we would accept the jurisdiction
of CAB coverage if we moved into interstate commerce.
Our main concern would be the protection of the low-fare marketing
package that we have, which we feel was very beneficial to the people
in this State, and, as long as the other provisions in the act provide the
amount of latitude in pricing down, which I gather would also be
included so that we would continue with the present fare structure and
the rest of our marketing program, we would be happy to be covered
under the CAB once we entered into interstate routes.
Mr. ANDERSON. Does Air Florida now have any routes where it com-
petes with commuters?
Mr. TIM0NER. No.
Mr. ANDERSON. Does Air Florida plan to file any applications with
the PSC for routes now served by commuters?
Mr. TIM0NER. At the present time, we `do not plan `any filing, but I
must tell you that we are a growing company, with a growing demand
for our services, and we regularly conduct market surveys on our
aircraft and ask our customers what they like and what they do not
like about what we are doing, and where they would like us to go next.
We went to Daytona Beach and Palm Beach in the first place because
those communities came to us and asked us to start service.
Their chambers of commerce and their aviation committees and
State legislators and State senators and representatives-there present-
ly are two communities that asked us to start service, and they dis-
cussed with us ways that they might help us financially, if we would
be willing to put service into the communities.
Now, sooner or later, there are going to be communities-communi-
ties that are served by commuters-that are going to ask us to do that.
If our determination is that there is a market that is not being
properly served, and we think it is in the public interest to ifie for the
PAGENO="0030"
24
route, we will try to demonstrate that we can bring in improved service
and better transportation to the area.
Mr. ANDERSON. Mr. Hammerschmidt.
Mr. HAMMERSCHMIDT. Thank you, Mr. Chairman.
In the major Federal involvement in your airline just the aircraft
operating certificate that you get from the FAA?
Mr. TIMONER. Yes; we are under part 129; that is correct.
Mr. HAMMERSCHMIDT. Your carrier's certificate is by the public
service commission?
Mr. TIMONER. That is correct.
Mr. HAMMERSCHM1DT. Where would the projected expansion that
you mentioned in your testimony-500,000 passengers to 1 miffion
passepgers-come from?
What market would those passengers come from?
Mr. TIMo~1ui. The eight cities that we serve right now.
Mr. HAMMERSCHMIDT. You are presently serving those cities?
Mr. TIMo~en. Yes.
Mr. HAMMERSOHMIDT. That would be without extending into other
markets?
Mr. TIMoN]~. Not interstate markets.
We have five DG-9 jets now, and we expect that, by the end of the
year, we will have eight.
The only service that we provide now, which we consider somewhat
similar to the level that Congressman Anderson is familiar with in
California is our Miami-Tampa and Miami-Jacksonville service, in
which case we have seven services a day in each direction.
We have a route to Orlando, which we serve twice a day, and to
other communities that we serve less than that, so we would expect to
build with more product in the markets we have and to perhaps ifie
for othei'. markets which require service.
Mr. HAMMERSOHMIDT. You do not fly outside of the State of Florida?
Mr. TIMoi~n~R. No; we have no scheduled service outside of the State
of Florida.
Mr. HAMMERSCHMIDT. Do you do charter activity-
Mr. TIMONER. Yes.
Mr. HAMMERSCHMIDT [continuing]. Outside of the State of Florida
Mr. TIMo~R. We do charter activity for the casino interests in
Freeport, in which the passengers do not pay for any part of the
transportation, but they are the guests of the casino.
We do a certain amount of that, and we do a certain amount of
intrastate charters for various groups, teams and so forth and so on,
within the State.
Mr. ANDERSON. Mr. Shuster.
Mr. SIIus~rER. Thank you, Mr. Chairman.
I have before me a map of Florida, showing various air routes of
Air Florida and the various commuters, and one line shows Miami-
Orlando for Air Florida.
I think you mentioned just a minute ago that you serve Orlando to
Miami. . .
There is another line-a blue ime-which shows Air Sunshine fly-
ing from Orlando to Miami.
PAGENO="0031"
25:
Perhaps I misunderstood you 5 minutes ago, or so, when you said
that you were not competing with any commuters.
Would this not be competition between Air Florida and Air
Sunshine?
Mr. TIMoi~u~R. Yes, Congressman Shuster; I was incorrect.
Air Florida was grandfathered on that route between Miami and
Orlando, and Air Sunshine filed to serve Orlando at the Kissimmee
Airport, and the* public service commission granted them the route,
so they fly over us.
Mr. SHUSTER. If I am a passenger who is coming from Pennsylvania
and flying across the State line into Florida to Orlando, and I want
to get from Orlando to Miami, I have at least two choices, if not more.
I see at least two.
I can go Air Florida, or lean go Air Sunshine.
Air Florida has an interlining capability.
Does Air Sunshine?
Mr. TIMONER. Air Sunshine always had interlining capability.
Before the passage of 6010, they were a commuter, and they always
had that.
Mr. SHUSTER. What would the difference be to me, as a passenger
who is flying into the State of Florida, to Orlando, in having to make
a judgment to go on to Miami?
Do I go Air Florida, or do I go Air Sunshine?
Do I have to pick up my bags?
You are telling me: No.
In either case, would I have to?
Mr. TIMONER. In that particular case, Congressman Shuster, the
problem would be that Air Sunshine services into the Kissimmee Air-
port, and, if you came in from an out-of-State location, you would
have landed at McCoy, where most of the other carriers are, and you
would have to take ground transportation to get to the other airport.
That probably is not a fair question.
At McCoy, you would have the choice of the Delta, National,
Eastern, Southern, or Air Florida flights down to Miami.
Mr. SHUSTER. What I am trying to get to and to understand is: Is
there some unfair advantage that you have by your being able to
interline?
As I understand it, commuters can interline-
Mr. TIMONER. That is correct.
Mr. SIrn5TER [continuing]. And previously you could not.
Mr. TIMONER. That is correct.
Mr. SHUSTER. So, one could, in fact, turn the coin around and say
that, until 6010, you were discriminated against.
You did not have the ability to interline; is that correct?
Mr. rIIIM0NER That is correct.
Mr. SHUSTER. The commuters, however, did have the ability to
interline, so, giving you that ability simply gave you the same thing
that commuters already had; is that correct?
Mr. TIM0NER. That is correct.
Mr. SHUSTER. Educate me on this 30-seat differentiation.
What happens if a commuter goes to 30 or more seats?
Something happens here; does it not?
PAGENO="0032"
28
Mr. TIMo~R. In the State of Florida, under the dual certification
or dual regulation, they file to change from class 3 to class 2 aircraft,
and they have over 50 seats, and, as the gentleman from the Public
Service Commission said: "If the staff recommends it, it is pretty
much an automatic process," so they could become a. jet airline.
Mr. SHUSTER. The implications are simply that they can fly it,
and-
Mr. TIMONER. They can fly it, and they can continue to interline,
because, once 6010 passed, and they had the ability to interline because
they were a Florida interstate carrier, certificated by the public serv-
ice commission of the State of Florida, they could move to better
equipment without going through the CAB process, which would re-
quire them pretty much to demonstrate that they need a CAB
certificate, and that they are a certificated airline, which is a difficult
process.
Mr. Siius~IR. Are there capacity limits on Air Florida?
Must you fly a certain sized plane?
Mr. TIMONER. If we wish to change it, we have to go to the public
service commission.
We have to do that by the same process, and we have to ask for
larger or smaller-
Mr. SHUSTER. You could go below a 30-seat plane, if you wanted
to get approval to do that.
Mr. TIMONER. We have no interest in it. We have never had any
interest in it. I presume that we could.
Mr. SIm&rER. You have all DC-9's; do you not?
Mr. Tmro~. Yes, sir.
Mr. SHUSTER. Thank you very much.
Mr. ANDERSON. Mr. Fascell.
Mr. FASCELL. Thank you very much, Mr. Chairman.
Eli, Air Florida certainly has impressive management.
I congratulate you on that.
You made a forthright statement on your willingness for exclusion
on automatic intrastate service in the event that it is granted at the
congressional level, but that then leaves the State to provide for auto-
matic entry on intrastate routes.
That is another political problem; is it not?
Mr. TIMONER. The State bill?
Mr. FASOELL. Could the State not then followup, let us say, with
automatic entry intrastate?
It could, as I understand it.
Mr. TIM0NER. Well, the hearings that we referred to awhile ago-
Mr. FASCELL. The Federal hearings?
Mr. TIM0NER. No; the hearings at Tailahassce, before the senate
committee, at which I think Air Sunshine testified, and we did.
Mr. FASCELL. The State senate?
Mr. TIMONER. Yes.
Mr. FASCELL. That is what I was trying to get clear.
Mr. TIMONER. It. was before Senator Kenneth Myers' committee.
I think they decided to pass the bill.
I do not think it is a viable prospect-that the State is considering
deregulating internally.
PAGENO="0033"
27
Mr. FASOELL. Fine; that is what I was interested in.
Mr. TIMONER. The primary interest there was one or two-it was
getting improved service to certain communities, and they wondered
whether-if they deregulated-it would, in fact, improve~the service,
and I think they have pretty well determined that it would eliminate
the service-the service they had.
Mr. FASOELL. I was interested, also, in the manner in which you see
automatic entry as a challenge.
Most people see it the other way around.
It certainly is an interesting counterargument to all of the other
arguments that I have heard from the certificated carriers, which is
that the big ones will gobble up the little ones.
Here you are, a growing and aggressive airline, and all you want
is an opportunity to get in and take a chance.
That is the way that. I understand what you are talking about,
interstate.
Mr. TIMONER. We think we might brmg some interesting fares and
programs to the eastern half of the tTmted States and let PSA and
the others worry with the western half, if the opportunity develops.
Mr. FASCELL. I have one other question, Mr. Chairman.
The way I understand it-correct me if I am wrong-the advantage
that you had before interlining came into effect under H.R. 6010 was
the fact that you could get larger equipment.
Mr. TIMONER. Pardon?
Mr. FA5CELL. The advantage that you had before H.R. 6010 and
interlining-as against other commuter airlines-was that you were
not classed as a commuter airline.
You could go to bigger equipment.
Mr. TIMONER. Congressman Fascell, the truth of the matter is that,
if there had not been a law in 1972, in this State, we could not have
started the airline, because, without a law, there was no way that
we could get an FAA certificate to operate a 121 airplane without a
certificate from the State saying that we had a route structure.
Mr. FASCELL. What you are now saying is: Commuters may upgrade
their equipment and improve their carrying capacity and such a
request is almost automatically granted, so you really, in effect, have
no hearing, so it now puts everybody on the same basis; is that not
correct?
Mr. SHusi~R. Would the gentleman yield?
Mr. ANDERSON. Certainly.
Mr. SHUSTER. I think I understand the point that he made, but let
me just say it for the record, to be sure that I do understand.
Any commuter airline may, indeed, upgrade its equipment so that
there is virtually no difference between your firm and the commuter
airline.
You both have interlining, and you both have larger aircraft, and
there is no difference.
Mr. TIMONER. That certainly is possible; yes.
It is possible for them to buy bigger equipment and to get it
approved in the State easily.
Mr. SHUSTER. When we think in terms of an intrastate line-as Air
Florida-we think of a commuter as being something different.
28-911 0 - 78 - 3
PAGENO="0034"
28
That difference really does not necessarily exist.
Mr. TIMONER. We still cannot, as an intrastate, fly outside of the
State with the size equipment that is approved, and they can, but we
understand that.
Mr. FASCELL. I have just one ftnal question, Mr. Chairman.
If I understood Eli's testimony about going interstate, it is this:
If the pattern follows with intrastate airlines, which has followed
with respect to other matters, the decision will be made, I predict,
that whatever is done is interstate. Because with interlining, and inov-
ing people and baggage, it is all interstate, thus everyone comes under
CAB jurisdiction.
That has been the normal trend.
I assume you are willing to accept certification nnder that basis?
Mr. TI3roN1~ Yes.
Mr. FASCELL. That is what I thought.
Mr. ANDERSON. Mr. Hannnerschmidt.
Mr. HAMMERSOHMIDT. I have a question for the record.
How many routes and passenger miles does Air Florida fly per year?
Mr. TIMoi~mt. Available seat miles?
Mr. HAMMERSCHMIDT. Yes.
Mr. TIMONER. The available seat miles at the current-in the last
month, we made available a little over 15 million, which would-at
the current rate, we are operating, let us say, about 150 million available
seat miles.
Mr. HAMMERSOIIMDYT. Per year?
Mr. TIMoN~a. Yes.
For the year ended December 31, I think we were over 100 million,
but our-we are getting more equipment all the time, and, so, we are
adding available seat miles.
Mr. HAMMERSCHMIDT. You would pick up most of those extra pas-
sengers in added flights, or more seats?
Mr. TIMONER. Density.
Mr. HAMMERSCHMIDT. Density?
Mr. TIMoi~R. Yes.
I think both are happening in our company.
Our load factors are moving up, and we are adding ffights, and,
without deterioration in our load factor, which means that we are
generating additional business through both means-primarily, I think
that the largest input is in another unit.
With only five units in operation, if we add another one, it is a 20-
percent increase in the potential product.
Mr. HAMMERSCHMIDT. I believe that is all the questions I have.
Mr. ANDERSON. A moment ago, Mr. Timoner, you mentioned that
commuters could go out of the State, but, on this map that we have
in front of us here-which we appreciate Mr. Stratton's drawing up-
it does not show any of the commuters going Qut of the State.
Do they all stay within the State?
Mr. TIMONER. I am afraid that I am not qualified to answer that.
It seems to me thatr-well, I know that Florida Airlines has a sister
company, which is in Georgia-Air South-and, whether they actually
fly back and forth over the State line or not, I do not know, but it is
my understanding that a commuter can operate across State lines,
historically, and, if they do have routes, I guess they would not be
shown in an intrastate system, anyway.
PAGENO="0035"
29
Mr. SHUSTER. Would the gentleman yield on that point?
Suppose the commuter upgrades to a larger aircraft.
Can it still go across State lines?
Mr. TIM0NER. It would seem to me that it would clearly become a
CAB matter, because they might upgrade based upon State law, but
that would only be allowed on a specific intrastate route.
Mr. SHUSTER. Would counsel care to comment on that?
Mr. HEYMSFELD. Under existing law and CAB regulations, a com-
muter cannot operate aircraft of over 30-seat capacity without a spe-
cial exemption. .
Under the regulatory reform legislation being marked up, it would
be 56 seats, but, beyond that, they cannot cross State lines.
Mr. Siiusi~iui. Thank you.
Mr. ANDERSON. Mr. Timoner, is it difficult for airlines, such as com-
muters and yourself, to get permission in Florida?
Mr. TIMONER. No; I do not think so.
I think that the public service commission has been very respon-
sive in developing an intrastate system here, and, really, has encour-
aged development.
Mr. ANDERSON. It looks like it on the map that we have here.
How about the airports?
I know that one of the problems that we have in California is not
so much getting the permission to operate as it is getting the permis-
sion to land.
You cannot get landing rights at most of the airports that you would
want to land in out in California.
Is that same situation true here?
Mr. TIMONER. It depends upon the area.
Our greatest problem has been finding equal facilities within the
terminal, and gate space, and, you know, it is sort of that the club
has basically remained closed-the historic carriers.
It has been a battle.
The best example, I think, might be Tallahassee.
Here we are, carrying certainly our fair share of people in and out
of Tallahassee, and-I do not know comparatively, but, within the
State, probably more than anyone, and we still ticket our people with
our backs against the plate glass window, which is the front of the
airport, in a little key house there, and you drop your baggage on the
curb, outside, and we have a hand truck and take it around to the
airplane.
You know, if we had a horse and buggy to take you to Miami, it
would be perfectly appropriate to match it with the way that we take
your baggage on the outside, but we are now going to be able to share
part of a facility with National, but it has only been after a number
of years of trying, and finally we have broken through, and I think
H.R. 6010, was instrumental because, in fact, we started doing business
with these carriers, and the airlines are their own best customers, and,
in the end result, you know, it was more reasonable and more realistic
to sign a document and sublease some space and make it possible for
us to take care of our people equally to the CAB carriers.
Mr. ANDERSON. One of my concerns-particularly with the bill that
we are now working on, which is the regulatory reform bill-is that it
would allow a concern like yours to go interstate, and to have your
PAGENO="0036"
30
entire operation go interstate, and we are afraid-particularly in (Jali-
fornia-that this is going to cost the traveler a whole lot more money.
Now, the PUG-that is the California Public Service Commission,
which is similar to your PSC-is very much opposed to what we are
doing.
They are saying that, if PSA goes interstate, and the whole system
goes interstate automatically, there will be a low of $68 million and a
high of 200 million dollars' worth of additional cost to travelers in
California as a result of the higher CAB rate structure,
Now, there are arguments against that, but the PUG says that: "If
we do that, we are going to cost the travelers in California $68 to $200
million each year more travel."
My question was: if PSA goes interstate and raises their rates, then
could some other concern not come in and give the competition of low
prices that PSA now gives and be solely intrastate?
They say: "That is great, except that they cannot land at the air-
port," because you cannot get even a little corner like you say that
you have in Tallahassee.
You cannot get in at LAX and some of the other airports.
Long Beach will not let you in.
Burbank will not let you in.
At most of them, you cannot get in at all.
This is a concern that we have to face in California.
How do you relate to that same situation here in Florida?
Mr. TIMo~R. I think you have a range of different circumstances
in California, Texas, and Florida.
In California, it is my understanding that the PUG has set the rates
for intrastate route fares for all carriers, no matter what their juris-
diction is.
Mr. ANDERSON. Some of the interstates had to come down to them.
Mr. TIMONER. In this State, the legislature provides for-legislation
provided for a high-density, low-cost air transportation.
I am not aware of any other carrier that has attempted to deliver
low-cost transportation but Air Florida, and we have experimented
-~i-~ discount on our daytime fare, and a very heavy discount on our
night~ie and evening fares-our pleasure fares-and we have had
to move these fares about and try to explain to the Public Service Com-
missiOn that we were seeking a realistic point of traffic-RPM's versus
ASM's-and break even, so we have established a fare, and, in the
daytime, it is a discount from the CAB carriers, and, in the evening,
it is a very much deeper disáount.
Recently, there are some new fares that are being introduced-
souped up supersavers, or whatever the new names are-and it was
in the ad yesterday.
Those fares, in one case, would be even lower than our fares.
Our concern is the opposite of what the PUC's in California seems
to be.
Our concern is that, if we did get into automatic entry, and if we
did go under the CAB, would we be able to maintain our marketing
strategy, which is to provide really low-cost transportation in evening
and weekend times, and a price benefit during the day?
PAGENO="0037"
31
You know, would the CAB come in and mandate and say: "Wipe out
all of these fares, and everybody is going to charge the same thing"?
If they did, it would be a disservice to the people of this State, and
we would not go into any automatic entry, if we were precluded from
keeping this low-cost transportation system going.
Mr. ANDERSON. Are there any questions?
Mr. FASOELL. Mr. Chairman, I just could not help but remark on
that.
If price structure went along with automatic entry, why would the
certified carrier not keep you gentlemen from skimming the cream
just by dropping their prices below yours until you ran out of capital?
They are going to fight until the last breath, as I see it, and not allow
somebody to come into their paying routes and undercut them forever,
while they are stuck with one rate structure.
You are going to have to meet the same rate structure.
I do not see how you can get both ends of the stick.
Mr. TIMONER. I am not saying that we would offer these lower fares
in Florida.
Mr. FASOELL. I am just expressing my concern, as I see it.
There are the certificated carriers, in the first place, and I am just
trying to relate it to you gentlemen who want a chance to expand.
Mr. TIMONER. I would like to say this, Congressman Fascell-Dante,
if I may.
Mr. FASOELL. Absolutely.
Mr. TIMONER. The expression: "Skimming the cream" really gets
me hot. I have heard that a lot. That is an interesting expression that
one hears.
The only American trunk carrier that does not fly between Tampa
and Miami is American Airlines.
Everyone else with a U.S. certificate-called a trunk-flies between
those cities, and, if Air Florida, with its big five airplanes-and finally
turning the corner last month-is skimming the cream against that
kind of DC-1O and 747 competition, I would like to know what it is.
We are providing service every other hour on the hour, free drinks,
a smile, real concern, and a fight for the business.
Mr. FASCELL. I think one thing that you say that is valid is: You
are providing service to those who otherwise would not be on the air-
plane, and I just wonder what the picture is-Mr. Chairman, you
have been very gracious in permitting me to inquire, and I appreciate
that.
Take Tallahassee, as an example.
How do you compare with the certificated carriers from Miami to
Tallahassee with buses, railroads, and all of that?
As a layman who just has an outside look on it, it looks to me asif
Air Florida is really providing a service there that did not exist
before.
Mr. TIMONER. We think so.
Our fare is about 12 percent less than the CAB carriers' fares during
the day, and it is 49 percent less in the evening and on the weekends,
and how it compares with the bus transportation-I think it is about
$5 more than the bus, but the bus is an 11-hour ride.
Mr. FASCELL. There is no train service?
PAGENO="0038"
32
Mr. TIMONER. There is no train service, so a large part of the market
that we have developed is really new business that was frustrated and
did not travel.
Let us take our new route from Palm Beach to Tallahassee and
back, or from Daytona Beach.
There was no way to make the connection and go back and forth in
the same day on any of the other airlines or combinations of airlines
before this service came in.
Mr. FASOELL. Thank you.
Mr. ANDERSON. Mr. Hammerschitiidt.
Mr. HAMMERSCHMIDT. Mr. Chairman, I would like to ask one more
question.
These commuter airlines in Florida also fly interstate.
Most of them have interstate routes; do they not?
Mr. TIMONER. I am not certain that they do.
Mr. HAMMERSCHMIDT. If they do, that is what would keep them
from becoming an intrastate airline, I assume, because they have to
register with the CAB under part 298 to be commuter airlines.
Mr. TIMONER. I believe they are commuters, and, to the extent that
they have intrastate routes, they are intrastate carriers, as far as the
State of Florida and the public service commission are concerned, and
they are regulated in that manner and protected in that manner, too.
Mr~ HAMMER5CHMIDT. If they tried to compete with your airline in
interlining, they would have to become an intrastate airline, per se?
Mr. TIMONER. They have historically been able to interline, and they
have always been able to interline, and they do it now.
They do it by both methods-by the fact that they are a commuter
and by the fact that 6010 allows them to do it as an intrastate carrier,
so, no matter what designation they call themselves by, they can
interline.
Mr. ANDERSON. Are there any other questions?
[No response.]
Mr. ANDERSON. Thank you, Mr. Timoner.
Our next speaker is Mr. Doyle E. Hardin, general manager of Marco
Island Airways.
Apparently he is not here.
We have his prepared statement, anyway, and we will hold it until
later.
If he comes in, we will hear from him; if not, we will make the pre-
pared statement a tart of the record.
Mr. Ray Morgan, president of Panhandle Airlines.
Mr. Morgan, we understand that you have a statement, but that it
has not been prepared.
TESTIMONY OP RAY MORGAN, PRESIDENT, PANHANDLE AIRLINES
Mr. MORGAN. Mr. Chairman, members of the subcommittee, ladies
and gentlemen, thank you for letting me appear before this hearing.
I have no prepared statement, but I have taken several notes durmg
Mr. Timoner's testimony.
There are a few things that I would like to bring to the attention
of the committee.
PAGENO="0039"
33
No. 1, Mr. Timoner mentioned that they have no interlining agree-
ments at this time, in effect. Well, I have an interline agreement in
effect with Air Florida.
Back in July, a year ago, Air Florida and myself entered into an
interline agreement, and we went to the public service commission,
and we had joint fares and everything approved at that time.
We began our interline agreements, and the FAA, at that point,
came along and said that we were illegal to interline,, and my conten-
tion was: Why should we be illegal, as long as a passenger boards an
aircraft within the State of Florida, and he connects with another
aircraft within the State of Florida, and his final destination is within
the State of Florida?
There is no violation of interline, so, at this point, I personally made
a trip to Washington.
I visited the CAB, and I brought this information forth.
At that time, they requested that I submit, in writing, this informa-
tion, which I did, and it was submitted, and it came back that no vio-
lations were being committed for the fact that none of us crossed a
State line.
Now; their contention was that Panhandle Airlines is an interstate
carrier, and not an intrastate carrier, because we have the CAB
exemption.
Well, as I said: As long as it was done within the State, what was
the violation?
It was approved, so Air Florida and myself could have continued on
the interline agreements within the state, with baggage agreements as
to where my bags could be checked-a passenger's bag on my carrier
could be checked through Tallahassee to Miami, without the passenger
having to pick his bags up, so, as far as intrastate interlining is con-
cerned, there is no problem.
Now, the only problem that we have, as far as interlining within
the State of Florida, is Florida's Airlines' schedules.
They seem to change quite frequently. Without anyone's knowledge,
they are changed.
I, as having an interlining agreement with them, never received
any communique as to changes in schedules.
Their ticket agents, most of whom were not even aware that we
could interline-their fares were not published with their ticket agents,
so, consequently. there was quite a bit of chaos.
At this point,. again, I am forced to open a new route between
Pensacola and Tampa, because I cannot make any connections whatso-
ever for the traveling businessman, which leaves Pensacola for Miami,
Jacksonville, Tampa, Orlando or whatever to make a connection with
Air Florida, so, consequently, I have to apply for a route to Tampa
so that I can make connecting flights with other commuters in the
State, which is a costly, needless route for me to have to go into,
whereas, if Air Florida wanted to participate and wanted to do the
coimmunity service bit-if their schedules would get in line with early
morning businessmen out of Tallahassee to Jacksonville, or wherever,
we could make this a terminal area.
This would cut back my cost of having to buy additional aircraft,
additional booth space and additional insurance-which is consider-
able-just to get into Tampa.
PAGENO="0040"
34
One of the other things that was brought up is the equipment.
They say that the jet is more eye appealing and better for the traveling
public; they are more willing to get on the jet. This is not a fact.
The fact is that I ran the same route that National Airlines flew-
between Pensacola and Tallahassee-for over 1½ years, using the
same fare structure, and I have 56 percent of the traffic.
No. 1, it is frequencies of time.
I get the people who have to be at hearings, and so forth, to Tallahas-
see in the early morning, and I get them back in the early afternoon,
which is a convenience, and it is not because of equipment.
National is running 727's between the two.
The way I look at a commuter air service, that is exactly what we
are. We commute a businessman to and from an area in the morning.
I am not worried about the traffic that is going from here to Los
Angeles, or from here to New York. My whole operation is set for the
traveling businessman.
Now, again, it was brought up that passengers are afraid of flying
little aircraft. If this were true, Southern would not have just pur-
chased a great number of small aircraft to put in the commuter serv-
ice, because they have found that these aircraft of the jet type-the
DC-9 type-cannot serve the smaller communities and show a profit,
so they are bringing in smaller commuter aircraft. and running more
frequent flights, and they are giving the public what they want.
Having one jet flight into Pensacola and out in a day-as opposed
to three round trips of a small commuter-is more convenient to any
industiy.
Now, for the vacationer, they can take National, Eastern, United,
Delta or whatever.
One of the other things that I would like to mention is that Air
Florida mentioned that they were not worried about overlapping any
of our routes.
Mr. Timoner did mention- and I will bring it up-that he is
initiating, or was an instrument to initiating, the abolition of the
Public Service Commission regulating intrastate regulations. Well, by
having this abolished, they can go anywhere that they want to go, so,
consequently, again, they can come in and they can run over our
routes, which we have patiently, over the years-as Air Sunshine,
Marco Island, Florida Airlines, and a few others-worked to build.
We have worked to build these routes.
They had applied for the same routes that I had-from Talla-
hassee to Pensacola and from Tampa to Pensacola and Panama City-
and they withdrew on the basis of 6010.
In this way, they are not trying to overlap any of my routes, but,
for years, they have been in operation-5 years-and, again, no one,
at this point, attempted to take on the Pensacola-Panama City
market.
I am building a market, and now, all of a sudden, other carriers are
interested in my market again.
Now, if the deregulation comes along, I am sure that it will put me
out of business, but I have tried to develop this market for the com-
munity that I live in and for the needs of the community of which I
am a resident.
PAGENO="0041"
35
With this type of a situation, where they would be instrumental in
deregulating, you are going to find that numerous of the commuters
are going to be as they were some years back, when there was no
regulation.
One commuter would go in and build it up, and someone else, with
a little more capital, would come in and knock it down.
There are several cases on file where this has happened.
I believe that Shawnee had built up a nice run, and then Eastern
decided to move in and pick up their routes that they had approved
from years before, so these are examples of the things that we, as
commuters, have to look forward to.
As far as my statement, that is about-that about concludes my
viewpoints on the commuter operation and the H.R. 6010.
Mr. ANDERSON. Thank you, Mr. Morgan, for your statement.
A couple of times I had the feeling that, when you were saying:
"Florida Airlines," you meant to say: Air Florida; is that correct?
Mr. MORGAN. Right; Air Florida.
Mr. ANDERSON. I think you said that Florida Airlines was changing
schedules, and you meant Air Florida; is that correct?
Mr. MORGAN. Air Florida; yes, sir.
Mr. ANDERSON. Under existing law, aren't CAB commuters free to
enter your market if they carry only interstate traffic?
Mr. MORGAN. Would you repeat that, sir?
Mr. ANDERSON. Under existing law, are CAB commuters not free
to enter your market if they carry only interstate traffic?
Mr. MORGAN. If they carry only interstate traffic; yes, sir.
For instance, if a commuter comes in from Birmingham, or if one
comes in from New Orleans, they, at this point, can come in, but this
would not affect my market, but, if a commuter comes in and stops
within two points within the State, he must have approval from the
public service commission.
In other words, if a commuter wanted to come in from New Or-
leans, to Pensacola and Tallahassee, he would have to get the route
from Pensacola to Tallahassee approved by the public service
commission.
Mr. ANDERSON. Why, then, are you concerned about deregulation?
Mr. MORGAN. Deregulation of intrastate carriers.
If the public service commission is abolished at this point, anyone
can run over anyone's routes.
For instance, if the public service commission is abolished, tomor-
row I can start a Pensacola-Panama City, Tampa-Miami run, or I
can start a Pensacola-Panama City, Jacksonville-Maimi run, but, with
the public service commission regulating the intrastate carriers, then
they have to have approval from the public service commission.
Mr. ANDERSON. Do you think it is likely that Air Florida will try
to enter markets served by Panhandle Airlines?
Mr. MORGAN. I would take this as an indication that, if they want
to help to get the State authority deregulated, they would; yes.
I think that is a very good indication that this is what is facing us.
Mr. ANDERSON. Are we talking about two different deregulations?
Mr. MORGAN. Two `different deregulations; yes, sir.
* Mr. ANDERSON. When you are talking about deregulation, you are
not talking about-
PAGENO="0042"
36
Mr. MORGAN. Not Federal deregulation; no, sir.
I am talking about the State.
Mr. ANDERSON. You are talking about a similar state deregulation?
Mr. MORGAN. Right.
Mr. ANDERSON. Does Panhandle Airlines have any joint fares with
any interstate carriers?
Mr. MORGAN. Yes, sir; I have joint fares with ~ ational, Eastern
and Southern.
Mr. ANDERSON. Are those joint fares set by the CAB formula?
Mr. MORGAN. Yes, sir.
Mr. ANDERSON. Is the division of revenues also set by the CAB for-
mula, or do you have to negotiate each one?
Mr. MORGAN. We negotiate that; yes, sir.
We try to stay within what has already been set, and then it is just
how we are going to break it down as to what percentage who gets.
Mr. ANDERSON. Does the Florida PSC regulate your rates, and, if
so, please describe how your rates are regulated.
Mr. MORGAN. Yes, sir; they are regulated by the State.
Any intrastate fare is regulated by the State.
You submit your initial fare-of which most of us are within rea-
son-and this is approved by the Public Service Commission, and
then, if we intend to raise the fare, we have to show a good reason and
cause as to why our fare is going to increase, with documentation.
Mr. ANDERSON. Are your interstate passenger and your intrastate
passengers on the same route charged the same fare?
Mr. MORGAN. It would depend upon the area that the interstate pas-
senger were coming from.
If he were coming from Atlanta-let us say to Tallahassee, through
Pensacola-the *fare would be taken from Eastern's DOAG-, for
instance.
That would be the fare from Atlanta to Tallahassee.
The connections are better coming through Pensacola.
I would take a portion of that, but that would be less than my
normal fare-from Pensacola toTallahassee-because we have the one
set fare, and it is up to the carriers to negotiate that price.
Mr. ANDERSON. Mr. Hammerschmidt.
Mr. HAMMERSc,HMIDT. Let me pursue that in a little different way.
Did you say that you have one route that coincides with that of
National Airlines?
Mr. MORGAN. Yes, sir.
Mr. HAMMERSCHMIDT. What route is that?
Mr. MORGAN. The Pensacola-Tallahassee route, which National is
going to be applying to drop.
Mr. HAMMERSCHMIDT. How many flights a day do they run?
Mr. MORGAN. They were running one flight a day, sir.
Mr. HAMMERSOHMIDT. How many do you run?
Mr. MORGAN. Two.
Mr. HAMMERSOHMIDT. Are your fares the same on that route?
Mr. MORGL~N. Mine is $2 lower now, because they raised theirs.
Mr. HAMMERSCHMrDT. What is the fare?
Mr. MORGAN. $31, sir.
Mr. HAMMERscHMIDT. That is yours?
PAGENO="0043"
37
Mr. MORGAN. Yes, sir, and that includes tax.
Mr. HAMMERSOHMTDT. I have no further questions.
Mr. ANDERSON. If someone gets off another airline and gets on yours,
is he governed by their ticket price-the $2 higher?
In other words, are there different levels on the same plane?
Mr. MORGAN. If an individual-say, for instance, that he flew to
Tallahassee on National, and that; he had a return trip.
Mr. ANDERSON. Suppose that he is going to Tallahassee, from
Atlanta, but that he wants to get off at Pensacola.
We will assume that he bought a through ticket, but that he is using
the second part of the ticket on your plane.
Would he be paying $2 more than the person who is sitting next
to him, and who got on at Pensacola and is going to Tallahassee?
Mr. MORGAN. No, sir, that would be reimbursed to him at the
counter.
Mr. ANDERSON. Mr. Shuster.
Mr. SHTJSTER. If I understood you correctly, Panhandle has 56
percent of the Pensacola-Tallahassee market.
Mr. MORGAN. Yes, sir.
Mr. SHUSTER. Does that mean that National has the balance-44
percent?
Mr. MORGAN. Yes, sir.
Mr. SHUSTER. If National has 44 percent, and if National has one
flight a day, and you have 56 percent, and you have two fights, a day,
all else being equal, you should really have 662/s percent.
Might one not, therefore, infer that the argument that people prefer
the bigger planes is, perhaps, true?
Mr. MORGAN. No, sir, you will find, again, that it is convenience.
Let me say, for instance, that you had a 2 or 3 o'clock hearing.
Our flight leaves at 6:30.
Mr. SHUSTER. You have less than the share of the market that you
should have, based upon the number of flights that you have flying.
You have two flights a day, and National has one flight a day, so
there is a total of three flights.
If the market were distributed evenly, across those three flights,
each flight would have 33 percent of the market.
That being the case, you should have 66% percent of the market.
Mr. MORGAN. That would be right if everybody were going at the
same time, but let me ask you this:
If you had a hearing at 1 o'clock in the afternoon, would you get
on the 6:30 flight, or would you take National's 10 o'clock flight?
Mr. SHUSTER. My point is that, actually, your two flights have less
than the share of the market that one would expect them to have, even
though-
Mr. MORGAN. If we were running at the same time, I would, yes, sir.
If I were running at the exact same time, I would have less; yes, sir.
Again, as I say, we do not run at the same time.
We are a complimentary to the major carrier, to get these people
there and back, and-
Mr. SHUSTER. I have to say that I do understand that the distribu-
tion of the market is not a straight line over 24 hours.
PAGENO="0044"
38
Mr. MORGAN. Also, YOU have to realize that, when we say: "56 per-
cent," or: "44 percent," we have to figure that a 727 carriers quite a
few seats, as opposed to mine.
Now, I am probably, in reality, running a much higher percentage,
because they might take on four passengers.
Mr. SHUSTER. Are you flying a DC-3?
Mr. MORGAN. I have one D(2-3 and two smaller aircraft; yes, sir.
Mr. SHtTSTER. Which do you use?
Mr. MORGAN. I am using the 10-passenger aircraft to Tallahassee,
because that is the approximate number of people that travel-ap-
proximately 25 to 30 people-to and from Tallahassee in a day.
Mr. SHUSTER. Does National use the 727?
Mr. MORGAN.~ Yes, sir.
Mr. SHUSTER. Thai~k you very much.
Mr. ANDERsON. Mr. Fascell.
Mr. FASGELL. I have one question.
You heard Mr. Timoner say that, on the Federal bill, they would
support an exclusion for intrastate carriers.
What, if anything, does that mean to you?
Mr. MORGAN. I have not really gotten into this, sir.
I am sure that one of the other commuters, that has been operating
a little longer than I have, can probably explain that in a little more
detail.
Mr. FASCELL. Thank you.
Mr. ANDERSON. Are there any further questions?
[No response.]
Mr. ANDERSON. If there are not, again, we thank you, Mr. Morgan.
Our next witness is Mr. Frank V. Bervaldi, president and chief
executive officer of Air Sunshine.
TESTIMONY OP PRANK V. BERVALDI, PRESIDENT AND CHIEF EX-
ECUTIVE OFFICER OP AAT AIRLINES, INC. d/b/9. AIR SUNSHINE;
ACCOMPANIED BY ADRIAN NARANJO, EXECUTIVE VICE PRESI-
DENT AND GENERAL MANAGER; THOMAS A. STEVENS, ASSISTANT
VICE PRESIDENT OP PUBLIC RELATIONS; ROBERT ~. PATERNO,
COUNSEL FOR THE AIRLINE, AND EMILIO DIRUBE, VICE PRESI-
DENT OP TRAFFIC AND SALES
Mr. BFAWALDI. Chairman Anderson, I would like to read the entire
statement.
I do not think that we need to go into any of the exhibits; they are
for the record.
We have studied this very extensively, and I think that all of the
material which we have here is very important.
With me today are Adrian Naranjo, our executive vice president
and general manager; Thomas A. Stevens, our vice president of public
affairs; Robert J. Paterno, our counsel; and Emilio Dirube, who is
our vice president in traffic and sales.
We are a scheduled commuter airline, servicing Key West, Mara-
thon, Miami, Kissimmee, and Tampa, Fla..
We are a 135.2 taxi operator, servicing the Miami-Key West. market
as a CAB-approved substitute carrier for ~ai.ional Airlines.
PAGENO="0045"
39
We also operate our Florida routes pursuant to a certificate of
public convenience and necessity issued by the Florida Public Service
Commission, which regulates our intrastate operations.
Air Sunshine's intrastate air operations have certain characteristics
which are typical of all Florida State-certificated commuter carriers.
First, our traffic is highly seasonal, peaking in the winter months
and falling off very, very dramatically in the summer months.
Bear in mind that all of Florida is a Sun destination.
Second, the majority of Air Sunshine's traffic is interline passenger
traffic.
The vast majority of this interline traffic is interstate.
It is this second peculiarity which has created grave concern about
the interlining provision of House bill 6010, as it affects our airline,
and, of course, all of the other part 298 commuter air carriers who
engage in intrastate air transportation pursuant to Florida certificates
of public convenience and necessity issued by the Florida Public Serv-
ice Commission pursuant to the laws of the State of Florida.
Significantly, with the exception of Air Florida, all State-certificated
commuter carriers are part 298 carriers.
Historically, to the present date, these carriers have been limited
to the utilization of aircraft having 30 seats or less, unless they
obtain a special waiver for larger aircraft from the CAB, which is a
very timely, very difficult, and, most importantly, a very costly process.
Air Sunshine has an exemption to operate aircraft with up to 55
seats.
Air Florida operates exclusively under its State certificate of public
convenience and necessity, and it is authorized to operate aircraft in
excess of 99 seats.
House bill 6010 allowed intrastate carriers in Florida and in Cali-
fornia to interline with both certificated and noncertificated carriers.
The effect on Air Sunshine is that in excess of one-half of Air
Sunshine's traffic base is exposed to serious diversion in any market
that would be subjected to this very unfair and devastating
competition.
An excellent example of this recently occurred.
No sooner had House bill 6010 commenced moving through the con-
gressional process than Air Florida filed an application with the
Florida Public Service Commission to (provide DC-9 jet service be-
tween Fort Lauderdale and Key West, Fla.
The Miami-Fort Lauderdale airports are coterminals; that is to say,
they serve the very same market.
The application was filed on August 13, 1977, but it was withdrawn
by Air Florida in December of 1977, thereby enabling them to refile
this application at any subsequent date.
Since that time, Air Florida has, on numerous occasions, indicated
its intent to continue to seek authority to provide service over Air
Sunshine's primary Miami-Key West market.
We have exhibits in the package that really point this thing out.
Quoting Air Florida's president, Eli Timoner, in a February 17,
1978, Miami Herald news article: "I am going to project that we are
going to be servicing the Key West market by the end of the year."
[See attachment 1, p. 59.]
PAGENO="0046"
40
The advent of House bill 6010 now make,s it possible for Air
Florida to attempt to reach into our primary market, including the
interline portion of that market, which constitutes in excess of 50
percent of all of our traffic.
Keep in mind, gentlemen, that Air Sunshine provides DC-3 and
Convair 440 service on a very high frequency basis.
We would be faced with competing against D~-9 jet aircraft op-
erating on a two-trip-a-day basis during the peak periods of daily
traffic.
The effect would be to divert enough revenues so that Air Sunshine
would have to cut its frequency of service on this market and very
possibly even have to leave the market entirely.
It is particularly important that, under the present draft preemp-
tion sections of House bill 11145 and Senate bill 2493, the Florida
Public Service Commission would have no jurisdiction to regulate any
carrier-for example, Air Florida, Air Sunshine, or any other taxi
operator in the State, of which there are approximately 3,000 in the
United States of America, and of which over 250 operate on a sched-
uled basis-except where the existing State-certificated carrier has less
than 50 percent of its revenues derived from interstate passengers.
In this regard, it should be noted that Air Florida-as well as Air
Sunshine-either presently have or within the next 12 months will
have, in excess of 50 percent of their revenues classified as coming from
an interstate source.
In Air Sunshine's principal market-Miami-Key West-interstate
traffic accounted for about 50 percent of the passenger volume and 55
percent of the passenger revenue during the year ending March 31:
1978.
During the peak season, the proration of interstate passengers was
even higher.
In December of 1977 and in January of 1978, interstate traffic was,
respectively, 58 percent and 55 percent of the total.
Similarly, in the second summer peak-August, for example-over
53 percent of the traffic total moved to and from out-of-State points;
however, even if the offpeak months~ interstate traffic does not drop
below about 48 percent of the total traffic.
Air Sunshine, throughout the year, is, therefore, heavily dependent
upon interstate traffic that is subject to diversion to an intrastate
carrier that is given authority to operate on Air Sunshine's routes.
All of Air Sunshine's markets are heavily dependent upon inter-
state traffic.
In the year ended January 31, 1978, about 52 percent of the total
Air Sunshine traffic was comprised of interstate passengers, who con-
tributed 53 percent of Air Sunshine's revenues.
Miami-Key West traffic contributes about three-fourths of Air
Sunshine's total passenger count, which means that heavy diversion
in this market would have very serious consequences for Air Sunshine.
If another carrier, such as Air Florida, became eligible to partici-
pate in the interstate traffic carried by Air Sunshine and ended up
sharing in 50 percent of the Miami-Key West market, the result would
be a devastating 40 percent decrease in Air Sunshine's total traffic and
a 41-percent decline in passenger revenue. [See attachment 2, p. 63.]
PAGENO="0047"
41
In effect, House bill 6010 has placed the proverbial big stick in the
hands of a highly aggressive and exclusively State-certificated air
carrier-to wit: Air Florida-which can be utilized by them to at-
tempt to reach into and raid every part 298 State-certificated Florida
commuter carrier, particularly to the extent that such carrier's mar-
kets consist primarily, or substantially, of interstate traffic.
That description, frankly, fits every part 298 certificated commuter
carrier in the State of Florida, such as, for example: Naples, Marco
Island, Florida Airlines, and, of course, Air Sunshine.
By their actions over the past several months, since the advent of
House bill 6010, Air Florida has made known its intention to become
the only intrastate airline in the State of Florida.
Another example is the one that Mr. Morgan just gave about their
applying for his route.
It is respectfully suggested to this committee that the immediate
short-term history of the effect of House bill 6010-and more specifi-
cally the inclusion of Florida within its provisions-has had, and will
continue to have, a potential for injury, abuse and, very possibly, a
monopoly in the Florida intrastate air transportation system.
Whatever may have been the unique or special circumstances which
may have justified the inclusion of California, those circumstances are
not necessarily manifest or appropriate in the State of Florida.
We would strongly urge and suggest that Florida be withdrawn
from the provisions of House bill 6010 at the very, very earliest prac-
tical date.
The impact of House bill 6010 is not isolated.
Its impact upon Air Sunshine and every other part 298 State-certi-
ficated commuter carrier in the State of Florida is ever broadening
and expanding, as demonstrated by an analysis and evaluation of the
proposed airline deregulation package contained in the drafts of House
bill 11145 and Senate bill 2493.
House bill 6010 is intrinsically related to and magnifies the scope
and impact of the proposed airline deregulation package before the
Congress.
The House and Senate dereglulation package seeks to amend the
FAA Act of 1958 in certain specific areas which have critical impact
upon Air Sunshine and every other State-certificated commuter car-
rier servicing the State of Florida, as well as the entire course and
development of the future or nonfuture of the Florida intrastate air
transportation system.
There are several positive provisions.
First, in increasing the size of aircraft, air taxi operators may utilize
from the current level of 30 seats to either 36 or 55.
Second, there are the provisions which prescribe a uniform method
of joint fare and the division thereof between air carriers holding
certificates and commuter air carriers.
Such parity is long overdue and will eliminate fundamental unfair-
ness to the commuters and their passengers, who now must depend
upon voluntary hit-or-miss joint fares and division agreements deter-
mined at the will of the major carriers.
Third, there is the inclusion of commuters in the government guaran-
tee of equipment loans.
PAGENO="0048"
42
Fourth, there is the eligibility of commuter airlines for direct sub-
sidy, when necessary to provide and maintain service to small and
isolated communities.
On the other hand, there are provisions in the deregulation package
which, if not modified, could jeopardize the future growth and devel-
opment of the commuter airline system in the State of Florida, as well
as in the other States which have developed, through the years. a stable
intrastate air transportation system through sound State regulation.
The primary areas of concern which I would like to address my re-
marks to are the Federal preemption provisions of the deregulation
package.
The thrust of the House deregulation package is aimed at eliminat-
ing all State regulation of intrastate air transportation, except in
Alaska, and except that any State which has authorized an air carrier
to provide intrastate air transportation in that State may continue to
regulate such intrastate operations for as long as not less than 50 per-
cent of the revenues of such carrier are derived from such intrastate
operations.
The Senate deregulation package effectively eliminates State regu-
lation of intrastate air transportation, except in Alaska, and except
that any State which has authorized an air carrier to provide intra-
state air transportation in that State may continue to regulate such
intrastate operations for as long as not less than 50 percent of the reve-
nues of such carrier are derived from such intrastate operations.
The Senate methodology is different.
First, it creates a new class of certificated carrier under section 420.
Under this section, every current air taxi operator in the United
States would qualify and could secure a local air transportation cer-
tificate authorizing the use of aircraft having up to a 36-seat passenger
capacity anywhere in the United States, except in Alaska.
In the State of Alaska, that carrier must also obtain the authority
from the State of Alaska.
As pointed out, the Senate and House bills would ostensibly author-
ize continued State regulation of existing State-certificated intrastate
commuters in Florida, Texas, and California as long as the carrier's
revenue from the interline traffic did not exceed 50 percent of their
operating revenue.
I should mention that Air Sunshine-as does practically every other
major commuter in the State of Florida-now derives more than 50
percent of their operating revenues from interstate interline sources.
Incidentally, because of House bill 6010, Air Florida will surely fall
outside of the sphere of State regulations, and, because of its route
structure and use of large aircraft, it will fall within the automatic
entry provisions of the deregulation package.
The saving language of section 423 (a) (1) or 105 (a) (1) is simply
not realistically substantive. .
The Federal preemption language in the deregulation package is
obviously aimed at eliminatmg the possible interference by a ~tate
regulatory body with the operations of 401 certificated carriers to the
extent that part of their operations fall within a single State.
We certainly do agree with this principle. . .
The Federal preemption language is also aimed at eliminating the
possible interference by a State regulatory body~with the operations of
PAGENO="0049"
43
an air taxi operator, engaging in truly interstate operations, where the
points of origination and destination are in two separate States.
We agree with this principle.
We do not, however, agree that, in order to accomplish those two
principles, the proper and important role of States to regulate intra-
state commuter airline operations should be eliminated or effectively
gutted.
Unfortunately, without careful modification, the deregulation pack-
age will do precisely and exactly this very undesirable thing.
Air Sunshine, along with the Florida Public Service Commission,
feels very strongly that Florida should be treated like Alaska was
treated, as it related to the Alaska exemption on authority over com-
muters that would be certificated by the CAB as a result of the new
420 language in Senate bill 2493, as it related to exempting Alaska
from the preemption provisions of House bill 11145, section 105 (a) (3).
[See attachments 3 and 4, pps. 68 and 72.]
The National Association of Regulatory Utility Commissions also
supports State regulation of intrastate air transportation. [See attach-
meiits 5 and 6, pps. 81 and 87.]
Furthermore, knowing the State of California to have such a fine
public service commission that has provided such good direction as
far as the intrastate air transportation system in the State of Cali-
fornia is concerned, I would imagine that the State would want to re-
tain certification over newly certificated commuters that would com-
pete against California commuters.
Air Sunshine feels the same way.
The Florida PSC feels the same way.
Florida should be treated the same as Alaska.
We respectfully suggest, Mr. Chairman, that the State of Florida-
and perhaps California or even Texas-should be included in the ex-
emption provision contained in House bill 11145, section 105 (a) (3),
or alternatively, that these States should be included in the exemption
provision contained in Senate bill 2493, section 420(g).
Why should Florida be exempted?
As the president and chief executive officer of a commuter airline
that has had to fight for its very survival since its inception, I cannot
conceive of how the deregulation of intrastate airlines by the public
service commission would create a better intrastate system of air trans-
portation in Florida.
Florida is unique geographically; it is a long peninsular, with its
most populace areas being located hundreds of miles from the nearest
bordering State. .
There are no scheduled air taxi operations providing interstate air
transportation to or from Florida, and I think that this question has
come up several times here.
There are none going outside of the State's boundaries at this time.
Mr. ANDERSON. None of these airlines that you have mentioned-
like Florida Airlines, Air Sunshine, Marco Island, Naples and Pan-
handle-go outside of the State?
Mr. BERvALDI. That is correct; they are all on intrastate routes.
The reason is that they are not practical or necessary?
28-911 0 - 78 - 4
PAGENO="0050"
44
Indeed, to our knowledge, there has never been an air taxi operator
providing scheduled interstate air transportation between a city in
Florida and some other city in another State.
Furthermore, the State of Florida is literally surrounded by wateI~
Most of the air routes between cities in the State of Florida require,
by necessity or practice, flight over international water.
In order to insure State regulation of such flights, which are truly
intrastate in nature, Air Sunshine is most pleased with the proposed
language that is set forth in Senate bill 2493, section 423(5), which
clarifies that such flights are intrastate in character.
This language should be incorporated in any deregulation package.
Air Sunshine, the Florida Public Service Commission, and the other
commuter carriers in the State of Florida strongly support that
provision.
The Florida intrastate markets are not only isolated. but are also
limited in size.
The markets generally connect small communities with other small
communities or with major gateways such as Tampa and Miami.
Traffic between such route segments usually is well under 200,000
passengers a year.
Additionally, all of the Florida markets, without exception, are
seasonal in nature; that is to say that, during the 7-month winter
period, there is a high traffic demand, which falls off dramatically
during the 5-summer month season.
The history of Florida's intrastate air transportation system-be-
fore and after State regulation-is a landmark example of the critical
importance of maintaining State regulation of intrastate air trans-
portation in the State of Florida.
The Florida Department of Transportation has released a study-
the study was completed in April of 1976-which shows that airline
competition in Florida's intrastate markets invariably results in heavy
financial losses for both competing airlines.
This is the most extensive study of intrastate air service to be under-
taken by any State.
The study was prepared for the Florida Department of Transporta-
tion's Division of Planning a.nd Programing by the Systems Analysis
and Research Corp. of Washington. D.C.. which is generally con-
sidered one of the Nation's most prestigious think tanks.
The study is unequivocal in its findings that competition on Florida's
intrastate air routes, far from resulting in more efficient service, re-
sults wholly-and in every case that they studied-in financial disaster
for both competing airlines.
The SARC study states:
Proof is available in the long history of airline failures in Florida. Without
exception, every intrastate carrier who has ever operated in Florida has either
failed, been sold to refinance, or is currently in tenuous financial condition. Also,
without exception, they have attempted to compete with the interstate carriers
or other intrastate carriers, often as strong as themselves. The theory that the
stronger will survive in an economic struggle does not produce lasting air service.
It more easily results in the death of both competitors. Should one survive, he
does not necessarily reap the rewards of the victor to recover from the drain of
battle, for he may be immediately confronted with a fresh entrepreneur who has
not yet lost his backing.
PAGENO="0051"
45
Summarizing its findings, the study group states:
Competition, as observed in Florida, has not produced stable, adequate intra-
state service and has caused well-intentioned Floridians to lose large sums of
money in efforts to provide intrastate air service. In contrast, given all the local
traffic, and a share of the connecting traffic, a single carrier who provides mini-
mum standard service will earn a profit. Dividing that traffic with any compe-
tition assures that both operators will incur losses, reduce service and, in all
probability, fail.
In the 1960's, two major air taxi operators-Shawnee and Execu-
tive Airlines-operated on numerous parallel Florida routes without
regulation by the CAB or the State of Florida.
The result was catastrophic.
Within a brief period of time, the two airlines lost literally millions
of dollars, and both airlines went out of business.
The result was that the Florida routes previously being served then
had no services whatsoever.
Again, in the Miami-Key West market, multiple airlines servicing
the Miami-Key West market either went out of business or withdrew
entirely from the market. [See attachment 7, p. 97.]
The frequency and dependability of service in this market suffered
as a result of this unstable atmosphere.
After State regulation-and with one carrier servicing this limited,
isolated market during the past 2 years-Air Sunshine has been ex-
periencing modest profits, and it has been providing the best fre-
quency of service-almost hourly service at this point in time.
This is the best quality of service that this route has ever experi-
enced in its entire history.
Furthermore, prior to State regulation in Florida, it was not un-
usual for fly-by-night air taxi operators to provide service during the
specific peak 3, 4, or 5-month periods of the year, while opting to with-
draw from the market, or, alternatively, to provide no real service to
the market during the off-peak seasons of the year.
Since the early 1970's, with the advent of State regulation of intra-
state air transportation in Florida, there has been a rapid growth and
expansion of intrastate commuter air transportation.
Route protection has been an essential ingredient in this growth,
development, and expansion of the intrastate air transportation system
in Florida, and it bears out and supports the conclusions of the SARC
study relating to the State of Florida and its unique characteristics.
It is, in our judgment, unnecessary, harmful, and inappropriate to
destroy or substantially gut, by limitation, the scope of State regula-
tion of intrastate air transportation, particularly in Florida, as well as
perhaps California and Texas.
Significantly, we believe that House bill 11145 and Senate bill
2493-in their present format, without appropriate modification-
will do precisely that. .
For example, Senate bill 2493 provides that existing State-certifi-,
cated carriers would continue to be regulated by the State until 50
percent or more of that carrier's revenue is interline, but it allows air
tax operators, which are under section 420 of the local air transporta-
tion certificates, to fly anywhere and at any time in the State of Flor-
ida without economic or route regulation from either the CAB or the
State of Florida's Public Service Commission.
PAGENO="0052"
46
Indeed, it would provide a situation where existing State-
certificated carriers in Florida would be regulated by the State com-
mission for a limited period of time, where their rates and continuity
of service are regulated to meet State transportation needs, while, a't
the very same time, it would allow any of the thousands of air taxi
operators to operate at any time and anywhere in the State of Florida
without any regulation whatsoever from the CAB or the State regula-
tory body.
It would literally gut and destroy any market protection now avail-
able on the isolated and limited Florida intrastate markets.
We would be reverting back to the pre-State regulatory period of
the sixties, and to the chaotic conditions in Florida which led to the
dissipation and elimination of intrastate air transportation capable of
meeting the public needs for such Florida intrastate air transportation.
We strongly urge that the State of Florida be exempted from the
Federal preemption language contained in both House bill 11145, sec-
tion 105(a) (1), and the provisions of Senate bill 2493, section 423 (a)
(1), and section 420-the latter by including Florida in section
420(g).
One final observation: The automatic entry' provisions of the de-
regulation package could have devastating potential effect on State-
certificated intrastate commuter airlines.
Air Florida's operations-because it uses large DG-9 aircraft~ with
85-seat configuration-will surely meet the requirements of flying in
excess of 125 million available seat miles.
No other Florida commuter could-or would-reasonably expect to
meet such a requirement.
Couple this aspect of the deregulation package with the prohibition
of State regulation over existing State-certificated carriers having
more than 50 percent of their operating revenues derived from inter-
state interline operations.
Stir it together, and Air Florida will be the only intrastate com-
~muter in Florida who will be available to automatically enter any
Florida market presently served by another State-certificated Florida
commuter.
Air Florida could simply reach into and literally destroy Air Sun-
shine, or Marco Island Airlines, or Naples Airlines, or any other Flor-
ida airline, and, the State regulatory body would be powerless to stop
it,' irrespective of what damage such automatic entry might have upon
the Florida intrastate air transportation system.
This big stick could be-and should be-eliminated from the dereg-
ulati'on package by, No. 1, exempting Florida from the preemption
provisions of the deregulation package, or, No.2, by exempting Florida
from the provisions of section 420 of Senate bill 2493 by mcludmg
Florida in section 420-there is a. mistake there, and that should le
420(g), rather than (a)~-and either, No. 3. modifying the automatic
entry provisions to interstate markets originating or terminatmg be-
tween two or more States, or, No. 4, by modifying the. automatic entry
provisions to markets having a demonstrated annual passenger traffic
count in excess of 1 million passengers per year, or even perhaps 5
hundred thousand passengers per year.
Mr. Chairman, and members o~ the committee, I would like to take
this opportunity to express our appreciation for the committee's in-
PAGENO="0053"
47
terest and concern in affording Florida commuter airlines an oppor-
tunity to express our views and concerns relative to House bill 6010
and the pending airline deregulation package.
I have a couple of questions that I would like to ask, if that is
appropriate.
There are some things that, up to this point in time, we have had
some questions about, and we are still not sure about them.
Mr. ANDERSON. You may ask the questions, but we may or may not
be able to answer them.
Mr. BERVALDI. One is on the dormant market theory or question.
Air Sunshine is presently serving the Miami-Key West market as
a CAB-approved substitute carrier for National Airlines.
Under such circumstances, would the Miami-Key West market fall
within the dormant market classification, or would it not be included
in it?
Mr. ANDERSON. It might be wise to discuss that after the meeting.
Mr. BERVALDI. That will be all right.
Mr. ANDERSON. We have had markup, and Congressman Ertel, of
Pennsylvania, put in an amendment that changed the whole structure
around, and we are in the middle of marking it up, and it is changing
a little bit.
Mr. BERVALDI. We would appreciate that very much.
Mr. ANDERSON. What are your other questions?
Mr. BERVALDI. Another question is: We need an interpretation of
interstate revenue-whether this revenue is from having to fly across
the State line, or whether this revenue can be classified as interstate
revenue even if it is derived from an intrastate route on interlining.
Mr. ANDERSON. That is something that I was going to mention to you.
You mentioned that you were concerned with:
Except that any state which has authorized an air carrier to provide intra-
state transportation in that state may continue to regulate such intrastate opera-
tions for as long as not less than fifty percent of the revenues of such carrier are
derived from such intrastate operations.
Mr. BERVALDI. Yes, sir.
Mr. ANDERSON. That is no longer going to be in there.
Originally, I had the 50-percent provision in my initial bill, and
then we compromised on that, and, as a result, we changed that to
25 percent.
In the markup the other day, it was stricken out entirely so that any
airline that is no intrastate and goes outside of the State-even across
the line-would become interstate in its entirety.
Mr. BERVALDI. Is this right?
My understanding of your answer was that, as long as we would fly
strictly between two points within the same state, any revenue derived
would be considered intrastate.
Mr. ANDERSON. No, no, then there are the people who are bound for
someplace outside of your State?
Mr. BERVALDI. Yes, sir.
Mr. ANDERSON. In other words, if they go between two cities and
then transfer to another airline, outside of your State, that is con-
sidered interstate revenue.
Mr. FASCELL. Yes, sir.
PAGENO="0054"
48
Mr. BERVALDI. So, then, almost at this point in time. there is no
carrier within the State of Florida that would be regulated by the
Public Service Commission.
Mr. ANDERSON. Your percentages are different, I think, than those
of most other States that we have had reference to.
Mr. SHUSTER. If the gentleman will yield, did the amendment not
say that it is not a question as far as CAB regulation-as to how many
passengers get off and get onto another airplane, and go out of the
State, but, as long as his airline flies only within the State, it is not
subject to CAB?
Mr. HEYMSFELD. Tinder the revised bill, a commuter operates under
the CAB commuter exemption, which a commuter has to do to carry
interstate passengers between points in the same State.
If there is preemption of the State's regulation over that commuter's
operation, regardless of the percentage of its operation that is inter-
state, as long as there is operation under Federal authority, such as
commuter exemption-
Mr. ANDERSON. Is that not also true under the present law?
Mr. HEYMSPELD. The present law permits dual regulation.
The CAB regulates the interstate passengers that they carry, such
as connecting passengers whom they are carrying between points in
the State, but the State can regulate purely intrastate passengers.
Under the bill, there would be preemption if the commuter were
operating under the CAB exemption.
Mr. BERVALDI. By the Federal regulation?
Mr. HEYMSFELD. Yes.
Mr. BERVALDI. In other words, it would be the public service com-
mission, and the State of Florida would then not have authority over
the present intrastates or commuter part 298 carriers; is that correct?
Mr. HEYMSFELD. Yes; that is correct.
Mr. BERVALDI. There would be-actually, they would be totally
wiped out.
Mr. HEYMSFELD. The State regulation would be totally wiped out.
Mr. HAMMERSOHMThT. Your apprehensions-as you have given them
to us in your statement-are valid.
Mr. BERVALDI. Yes; that is what I was afraid of.
The other item that I had-just to bring these points up, and we
can discuss them afterwards, which I would like very much-is : What,
exactly, is an exempt carrier?
A part 298 carrier, like we are now, is an exempt carrier; is that
correct? .
Mr. HEYMSFELD. Are you looking at a particular section of the bill?
That is generally correct.
If you are looking at a particular section of the bill, I would not
want to-
Mr. BERVALDL It is section 423 of the Senate bill.
If I could just read this first part to you-section 423 (a) (1)-that
I have referred to many times:
No State shall enact any law or establish any standard determining routes,
schedules, rates or fares, or changes in tariffs, or otherwise promulgate economic
regulations for any air carrier certificated or exempted `by the board under the
provisions of this title, except that any State which on or before January 1, 19 ~9,
had authorized that carrier to do this.
PAGENO="0055"
.49.
But then it gets down further into the 50 percent of the revenues, so,
whichever way you turn, the State will not have any more authority,
and I think we will be in a mess, and I think the only saving grace is
the situation such as Alaska is going into, and I think that, because of
the uniqueness of our State, it may be very applicable here, where these
carriers would be regulated by the CAB, but they would have to have
certificates issued by the State of Alaska or the State of Florida.
This is one of the points that we were bringing up.
Mr. ANDERSON. We tried to get California exempted, but we could
not do it, and we have several members on the committee.
Mr. BERVALDI. I would think that we would try to stir the interest
of the Florida delegation in this and try to do whatever we can with it.
The history of this market is very evident.
it has been a history of fresh starts, and direct competition for the
few isolated markets, and it is entirely different from the California
situation, because everybody gets wiped out, and then they go back to
no service again, and it has only been since we have had State regula-
tion that we have had a good intrastate network of air transportation
in the State.
The public service commission is fighting to retain this.
I think all of the part 298 commuter carriers in this State are going
to fight to retain this.
We think it is very important.
Without this, we could have one carrier servicing the whole State.
There would be one or two frequencies a day.
Without a great frequency of service, which we have found is the
important thing in the Florida market-both the purely intrastate
traffic need frequency of service and the interstate traffic.
They need the hourly type of service on these markets.
They demand that, and you cannot do it with large jet aircraft.
The proposals of Air Florida, when they applied for the Key West
route, were two frequencies a day.
Do you know what this does?
We are flying eight round trips a day between Miami and Key West,
and, if the demand is there, there are extra sections on those flights.
We do not leave anybody behind.
If a carrier comes in twice a day with large aircraft, to meet the peak
demands of the connecting interline flights, this gets into that very
nasty situation where the cream is skimmed off the top, and it leaves
the present carrier, who is trying to provide the numerous frequen-
cies, in the hole again.
Pretty soon, this carrier is driven out of the market, and the public
is left with inadequate service.
This is our concern, Mr. Chairman.
Mr. ANDERSON. Thank you, Mr. Bervaldi.
In your testimony, you state the situation of your company, and
I am not exactly sure of what you consider your company.
I cannot tell whether you consider it interstate or intrastate.
For example, you say: "Second, a majority of Air Sunshine's traf-
fic is interline passenger traffic. The vast majority of this interline
traffic is interstate."
Mr. BERVALDI. We-
PAGENO="0056"
50
Mr. ANDERSON. You continue: "It is this second peculiarity which
has created grave concern about the interlining provision of House
bill 6010, as it affects our airline, and, of course, all of the other
part 298 commuter carriers who engage in intrastate air transporta-
tion pursuant to Florida certificates of public convenience and neces-
sity," and so on.
In the same breath, you are basically identifying yourself as inter-
state and intrastate.
It appears that you are doing both at the same time.
How do you really define yourself?
Mr. BERVALDI. We feel that we are truly an intrastate commuter
carrier, being exempted from the Federal regulation under part 298.
The Public Service Commission of the State of Florida feels this
way.
They have regulated us totally as to fare structure, route structure,
and everything else, and, until we got deep into the discussion of the
deregulation package, we never thought of ourselves in any other
way, and we still do not.
We just thought that we had the ability to interline through this
exemption, which required us to fly an airplane of a certain size, and
we still do, right now, consider ourselves strictly intrastate.
Mr. ANDERSON. Even though the greatest majority of your business
is interstate, in that it goes on beyond the State boundary-
Mr. BERVALDI. That is due to the fact that Florida has become more
and more popular, and we have more and more of a tourist flow into
the area, and now over 50 percent of our traffic is from this interline
source.
We feel that it is intrastate traffic, because we are carrying it be-
tween two points within the same State, as far as operational-
Mr. ANDERSON. Are you familiar with Golden West, of my area?
Mr. BERVALDI. Not totally; no, sir.
Mr. ANDERSON. They are, I think, one of the larger commuters.
They consider themselves totally interstate, and they never talk
about themselves as being intrastate.
Their commuters bring most of them to the airports, and then they
get on other planes.
How would you distinguish between your company and their
company?
Mr. BERVALDI. Is Golden West a part 298 commuter?
Mr. ANDERSON. Yes, sir.
Mr. BERVALDI. Just like us?
Mr. ANDERSON. It is only that they are operating in California-
basically in the southern part of the State: the Orange County-Los
Angeles area.
Mr. BERVALDI. Have they been totally regulated by the Califorma
Public Utilities Commission, like we have been?
Mr. ANIERSON. I think they have some regulation; yes.
They identify themselves as interstate, really.
When you talk to them, they interline, and everything, and they
consider themselves interstate.
Mr. HAMMERSCHMIDT. Does Golden West fly out of the State of
California?
PAGENO="0057"
51
Mr. ANDERSON. No.
Mr. BERVALDI. Several years ago-before this period of time-the
majority of our traffic was intrastate, and we have continued to be
totally regulated by the State.
We think the State has been fair in this regulation.
There has been enough route protection, it seems to me, and enough
approval of new routes, and this has developed quite a nice network
in this State.
We would, very frankly, like to continue to be regulated by the
State.
I guess the differences in the characteristics of the route system in
your State and ours is such that we are happy with State regulation
and Golden West is not.
Mr. ANDERSON. I would not say that they are not happy.
They have had some complaints.
Tinder your Florida certificate, could Air Sunshine operate the same
aircraft as Air Florida?
Mr. BERVALDI. No, sir; not at this point in time.
Mr. ANDERSON. Do you feel that House bill 6010 favors Air Florida
over carriers such as Air Sunshine?
Is Air Sunshine subject to dual regulation by the CAB for inter-
state passengers and by the Florida Public Service Commission for
intrastate passengers?
Mr. BERVALDI. We do not feel that we are, and we have not been, as
long as we have continued to fly less than 30-seat aircraft and do not
cross the State line.
Mr. ANDERSON. Does Air Sunshine have joint fares with interstate
carriers?
Mr. BERVALDI. We have joint fares with almost all of the major
carriers in the United States, and we have had them for a number of
years; yes, sir.
Mr. ANDERSON. Is the CAB formula used in such fares?
Mr. BERVALDI. I think the fares are set by a negotiation between
the commuter carrier and the CAB certificated carrier.
It is not on a specific formula.
It is CAB approved, but they are negotiated.
Mr. ANDERSON. Does the division of revenues go the same way, or
does the CAB-
Mr. BERVALDI. It is the division of revenues that is negotiated.
Mr. ANDERSON. It is negotiated?
Mr. BERVALDI. Yes, sir.
Mr. ANDERSON. Is that also approved by the CAB?
Mr. BERVALDI. No, no.
Mr. ANDERSON. If Air Florida applied for a Miami-Key West route,
do you think that the public service commission would consider the
impact of the Air Florida's service on Air Sunshine?
Mr. BERVALDI. If the public service commission of this State were
allowed to continue to regulate the air routes and the fares charged in
this State, I think that they would consider that, and this is the one
thing that we are very, very concerned about here-that the deregula-
tion package is going to completely cut their effectiveness, and they
will not have any control over it, no matter what they want to do.
PAGENO="0058"
52
Mr. ANDERSON. Mr. Hammerschmidt?
Mr. HAMMERSCHMIDT. Thank you, Mr. Chairman.
On this discussion about interstate and intrastate revenues, I thmk
that what determines an interstate airline is whether they go outside
of the State or not with their service.
If you have revenues from interhnmg, I thmk that has nothing to
do with making you an interstate airline.
You would still be an intrastate commuter.
Mr. BERVALDI. I would hope very much that this is completely ac-
curate.
Mr. HAMMERSCHMIDT. Could counsel comment on that?
Mr. HEYMSFELD. As I understand the law, Mr. Hamnierschmidt,
carrying interstate passengers-even though you only operate between
points in a single State-puts you under the jurisdiction of the CAB,
and you need CAB authority to do that.
If you are a commuter, you may not realize that you need CA]3
authority, because, if the CAB exempts you, all you have to do is
ifie your schedule, but this jurisdiction of the CAB is what kept Air
Florida and PSA from interlining.
The CAB would not let them do it, and. that is why we needed
legislation to let them do it.
Mr. IIAMMER5CHMIDT. I am sure that counsel's interpretation is
correct.
I wanted to get it into the record.
Mr. BERVALDI. Yes, sir; I am glad that it has been clarified, too.
This is the exact thing that we brought up in this presentation-
the thing that we were very concerned about.
This is what we feel will destroy the network of the intrastate air
transportation system within the State of Florida.
We feel, as I have said here, that we have a unique situation that
is different from that of any of the other States that have other
States at every border.
We have hundreds and hundreds of miles of our borders that do
not contact or connect with another State.
Almost all of the routes are strictly connecting small communities
or small communities with larger communities within the State, and
there is no need to have an entire State market where we fly outside
of the State.
We feel, for that reason, that we should be exempt within the State
of Florida, like Alaska has been exempt.
We feel that this would solve our problems.
Mr. HAMMERSCHMIDT. Mr. Chairman. I know that it is elementary
to point this out, but you know that the~ bottom fine of our reason for
being here and our activity-and I am sure that it is also true of the
Public Service Commission of the State of Florida-is to insure what
is in the best interest of the traveling public, and not necessarily to
protect airline capital.
As I said, we all know that without me saying it, but~ Mr. Bervaldi,
you are suggesting to us that, if you were deregulated, the best interest
of the consumer-the traveling public-would not be served.
Mr. BERvALDI. The traveling public definitely would not be pro-
tected in this case.
PAGENO="0059"
53
Mr. HAMMERSCHMIDT. Thank you, Mr. Chairman.
Mr. ANDERSON. Mr. Shuster.
Mr. SHIISTER. If I understood you correctly, you said that you could
not go above 30 seats in a plane; is `that correct?
Mr. BERVALDI. Not without a special waiver from the CAB.
Mr. SHnSTER. I would ask this of counsel: Would this waiver be
pretty much automatic?
Mr. HEYMSFELD. It would not be automatic from the CAB-not
for the carrier of interstate traffic.
There would also be the question of whether-for the intrastate
traffic, it would be automatic, or virtually automatic, from the Florida
Public Service Commission.
Mr. SHUSTER. When you say "interstate traffic," even though `he is
flying the plane only intrastste, since a large percentage of the passen-
gers are coming from other States, it is, indeed, interstate; is it not?
Mr. HEYMSFELD. Yes, sir.
Mr. SHUSTER. Therefore, you are saying that it is not a simple
automatic matter for the commuters to go above 30 seats; is that
correct?
Mr. HEmrsrm~n. It gets complicated, because I think that, under
6010, if they could get authority from the State to go above 30 seats
for intrastate traffice, 6010 would, I believe, give them authority to
interline.
Mr. SHUSTER. But most of them are really in interstate.
Mr. HEYMSFELD. Yes, but 6010 says that, if you have State authority
to operate aircraft of over 30 seats, you may interline.
Mr. SHUSTER. For interstate passengers, as well?
Mr. HEYMSFELD. Yes, sir.
Mr. SHUSTER. As a practical matter, commuters can go above 30
seats; is that not correct?
1\fr. HEYMSFELD. In Florida and California.
Mr. SHUSTER. In Florida and California; yes.
Mr. HEYMSFELD. I cannot comment upon what the State of Florida's
PSC law is on this.
We heard testimony earlier that it is fairly easy to get that kind
of waiver or authority from the Florida PSO.
Mr. SHUSTER. Do you agree with that?
Mr. BERVALDI. Let me say this: We have currently pending before
the CAB an application to fly larger than 30-seat aircraft on a couple
of our other routes, and, of course, we are required to do exhaustive
and very costly environmental impact studies and a lot of legal drafts,
and then there is the very long time wait before this is authorized,
and it is-we feel that 6010 may have clarified this, hut I am still not
totally sure of it.
Mr. SHUSTER. Thank you.
Mr. ANDERSON. Mr. F~scell.
Mr. FASCELL. Thank you, Mr. Chairman.
The point is that, under the proposed law which is pending, you
would make every carrier-and certainly your carrier-interstate and
subject to deregulation for automatic entry purposes because you gen-
erate a single dollar of revenue from interstate passengers; is that not
correct?
PAGENO="0060"
54
Mr. BERVALDI. That is correct, sir.
Mr. FASOELL. Therefore, that would leave the PSC the job of regulat-
ing solely intrastate carriers, who had not one single dollar generated
from interstate passengers, and-
Mr. BERVALDL There are none of those.
Mr. FASOELL. I understand that, but that is all they would have left
to regulate, so the definition under the law is one think that raises a
question, since it is going to change the entire concept of what is an
interstate carrier.
Now, anybody who generates a single dollar under that proposed
law would be classified as an "interstate carrier."
That is basically what it boils down to, subject to the CAB, or,
rather, subject to the deregulation package, which means automatic
entry, so you are right back to square 1.
That is what you are talking about; is that not correët?
Mr. BERVALDI. Yes, sir.
Mr. ANDERSON. Counsel, would you comment on that, please, sir?
Mr. HEYMSFELD. I think that the conclusions that you reach, Con-
gressman, are generally correct.
I think that the definition of "interstate" has rot been changed by
the pending regulatory reforiri bills, but, when a carrier is interstate,
the State can no longer regulate it.
Mr. ANDERSON. It is the same difference?
Mr. HEYMSEELD. You end up in the same place.
There is now no autmatic entry in the pending deregulation bifi.
That was stricken out in markup.
Mr. ANDERSON. If they go outside of the State of California, and
if they go to Las Vegas, for instance, they become interstate-the im-
plication being that, if they did not take the route outside of the State,
they would still be intrastate.
Do you want to give me a different story on that?
Can PSA retain its intrastate character if it decides not to go outside
of the State of California?
Mr. HEYMSPELD. This will depend upon how the bill that comes out
* of markup is finally drafted.
Mr. ANDERSON. As it is right now-
Mr. HEYMSFELD. As it is right now, there is a question about that.
The way that it was originally drafted, you only became interstate
for purposes of preemption if you had a CAB certificate or were
operating as a commuter.
* Congressman Millford's bill says that, if you have any authority
from the CAB-the interlining is not, at this point, authority from
the CAB, but PSA does have some over-the-water exemptions.
That needs clarification.
Mr. ANDERSON. Let us go back to Texas.
The problem is Southwest, which is solely within the State of Texas.
It does not cross water or anything, but, obviously, some of the
passengers must be interstate.
At least some of the passengers must be interstate.
Are you telling me that Southwest will not still be an intrastate
carrier?
Mr. HEYMSFELD. I think that would be all right, because the pre-
emption amendment says that you have got to have authority under
the Federal Aviation Act.
PAGENO="0061"
55
Mr. ANDERSON. For what-to go outside of the State?
Mr. HEYMSFELD. Any authority is sufficient.
Mr. FASOELL. Mr. Chairman, I have not read it yet, but I am guess-
ing that what is happening is: By changing the definition of inter-
state, by indirection, if you consider simply crossing a State line, and
operating in two States, that is a classic definition of interstate, but,
when you add to it the generation of revenue as a classification for
interstate, you have added another dimension to it, and this is the
same thing that happens with electricity and gas, and it happens with
everything else in interstate commerce, and that is what is being con-
sidered under the new bill.
If you generate a single dollar of revenue, notwithstanding the fact
that you do not cross a State line-if a single dollar of your revenue
is from a passenger whose origination is outside of the State of your
operation-you are then subject to the Federal law.
Mr. HAMMERSCHMIDT. We have 40 or 50 amendments, and some of
them have been adopted, and some of them are pending, and that leads
to all of this ambiguity.
Mr. FASOELL. I understand that.
As an outsider, I get this impression of what is going on, and I do
not know whether it is true or not, and that is the reason that I pref-
aced my remarks by saying that I had not read the amendments, and,
therefore, that I am not confident about what I am saying.
That is the way that it appears that we are heading; therefore, I
think that the objections or concerns expressed by Mr. Bervaldi are
very real, and I wanted to get to the other point.
As I underst'and Air Florida's statement, they support a Florida
exemption.
Did I understand you correctly, Mr. Timoner?
In the Federal bill that is now pending, Air Florida would support
an exemption, or did I misunderstand you?
Mr. TIMONER. Specifically to the automatic entry provision?
Mr. FASCELL. Yes.
Mr. SHUSTER. Preemption is what you are talking about; is it not?
Mr. FASOELL. We are talking about two different things, as I under-
stand it, and I was not clear, myself.
Mr. TIMONER. In my remarks, I said that, if by some provision of
the new act, we were allowed automatic entry, we would accept an
intrastate exclusion so that we could not use that entry as a means of
getting another intrastate route.
Mr. BERVALDI. I think that maybe what you are-
Mr. FASCELL. I just want to know-
Mr. BERVALDI. Excuse me.
Mr. FASCELL. I just waift to know whether you are or are not to-
gether, or whether there is a difference of opinion.
That is the main reason why I asked the question.
Mr. BERVALDI. If I may tr~ to answer that: We are not considering
going interstate at all. .
Mr. FASCELL. When you say that you do not want to consider going
interstate, do you mean that ~n the sense that you do not want to cross
the State boundaries?
Mr. BERVALDI. Crossing the State boundaries; yes.
Whether we get automatic entry or not, we are not concerned about
that.
PAGENO="0062"
56
We want to continue to service the Florida routes that we have to
the best of our ability.
Mr. FASCELL. I know that, but does the position that 1~fr. Timoner
just expressed coincide with your position?
That is what I am trying to find out so that, if some amendment or
consideration is given by the committee to changing the proposal
law-
Mr. ANDERSON. Let us suppose that the law were changed so that it
were just the going out of the State that made you interstate.
That could be done; could it not?
Mr. HEYMSFELD. For preemption purposes?
Mr. ANDERSON. For preemption purposes; yes.
Mr. HEYMSPELD. Yes, sir.
Mr. ANDERSON. How would that affect you?
Mr. BERvALDI. That would be very, very important to us.
That way, the carriers in this State would be regulated by the State,
and that is what the carriers in this State want. -
Mr. ANDERSON. Their revenue would still be under the CAB, but, for
purposes of preemption-
Mr. FASCELL. As far as Air Florida is concerned, I understand that
they would welcome deregulation on an interstate basis with the defini-
tion of crossing a State line.
They want to expand and get into that market, but they are not
particularly concerned about automatic entry intrastate.
Am I correct, Mr. Timoner?
Mr. TIMONER. That is correct, and part of the question was also: Do
we think that the regulatory process in the State has helped to develop
the system as far as it is?
I tried to make that clear.
We do, and we have no difference of opinion with Air Sunshine.
The.re was no atmosphere here for the creation of an intrastate
system until State regulation put order into the development of an
air transportation system.
I do not know what the effect would be if it were totally removed.
Mr. FASCELL. Let me add my comment to that, as a layman who has
lived in this State for a long time.
Everything that these gentlemen have said about intrastate service
before order was brought into the market by the Public Service Com-
mission is absolutely true.
It was a disaster.
Mr. HEYMSFELD. I would like to ask a question for clarification.
Under the existing law, as I interpret it and as the CAB interprets
it, when a commuter-carrier operating between two cities in a single
State and carries connecting passengers, such service is under Federal
CAB regulations, and the State cannot regulate it. The way that the
CAB regulates it is: There is free entry and freedom to charge what-
ever fares you want in carrying that interstate traffic.
My question is: Is it your position that the existing law should be
changed, and that there should be a cutback in the CAB's jurisdic-
tion under the existing law, and that this type of service should also
be under State regulation?
PAGENO="0063"
57
Mr. BERVALDI. It has been my understanding that this, practically
speaking, is not the way that it has been handled, and it never has
been handled that way.
It would be handled this way if aircraft under the 30-seat con-
figuration flew in from a point in another State to a point within the
State of Florida; then it would come under CAB regulation.
Practically speaking, it has never been handled this way.
If that is the intent, it has not been followed.
It was never followed.
Mr. CURA5I. I would have to disagree about what the existing law is.
Mr. Chairman, I-
The REPORTER. Excuse me, but please give me your name.
Mr. Ctnt~si. I am Jim Curasi.
Mr. ANDERSON. Excuse me 1 minute, please, Mr. Curasi.
Please continue, Mr. Bervaldi.
Mr. BERVALDI. I was saying that, although this might have been the
intent of the law, to my knowledge, it has never been applied in the
past.
Mr. HEYMSFELD. Are you aware of a recent CAB order applying to
California, saying that a carrier needed no special State authorization
to start up an operation within the State of California under the
CAB's commuter exemption?
Mr. BERVALDI. No, sir; I am not.
Mr. Ctrm&si. Mr. Chairman, if I may-
Mr. ANDERSON. Please identify yourself for the record.
Mr. Cuit&si. Yes, sir; I am Jim Curasi, C-u-r-a-s-i, and I am counsel
for Air Florida.
With respect to your counsel's question as to the regulatory scheme
in the State of Florida, the definition of air carrier for purposes of
Florida law, as contained in section 330.4(8), states that:
Any carrier who operates between two points in the State, and not possessing
a certificate pursuant to section 401 of the Federal act, is an air carrier for the
purposes of Florida law, and, therefore, `must obtain a certificate from the
Florida commission.
Now, because of the definition contained in section 330.4(8), you
have two types of carriers in Florida.
You have your part 298 exempt carriers and the commission has
taken the position that they still have to get a certificate from the
commission.
You have carriers such as Air Florida, who has no part 298 exemp-
tion.
Now, your point about that order that just came out from the CAB
raises a very interesting question about the validity of the Florida
statute defining it, so I think that kind of clarifies it.
That has not been interpreted, but, in light of the order that you
are referring to, it does bring into question the validity of the Florida
law.
Mr. HEYMSFELD. Would you agree with my interpretation of what
the CAB thinks of the existing laws?
Mr. CtmAsI. As of right now, I would; yes, sir.
Mr. PATERNO. I might just-
Mr. ANDERSON. Identify yourself-, please, sir.
PAGENO="0064"
58
Mr. PATERNO. Robert Paterno, counsel for Air Sunshine.
I might point out that the practical effect of the interpretation which
is being suggested-and which may well be the CAB's interpretation
in a specific case-as a practical matter has not been enforced on an
ongoing basis by the CAB, and they have taken a kind of a: "I am not
going to look" attitude, and they are not going to do anything. unless
somebody forces them to make that kind of a decision.
That, in effect, would be that 330.4(8)-the Florida statute would.
literally, be invalid forthwith.
Air Florida, is not a part 298, or a 401 certificated carrier.
It, literally, would have absolutely no authority whatsoever to fly
anywhere with any kind of equipment.
The only way that they are flying today is under a valid Florida
statute.
If that statute is knocked out, they are gone.
I suggest that we have got a horribly confused situation, and,
frankly, I think that this committee could benefit everybody by ad-
dressing this problem and maybe looking at the existing law, as it is
interpreted by the CAB, and seeing whether some appropriate modi-
fication or clarification would not help States like Florida and Alaska
that need State regulation by the PSC of intrastate routes.
Mr. ANDERSON. Mr. Hammerschmidt?
Mr. HAMMERSCHMIDT. No; I have no further questions.
Mr. ANDERSON. Mr. Shuster ~
Mr. SHtTSTER. I have no more questions.
Mr. ANDERSON. Mr. Fascell?
Mr. FASCELJJ. No, thank you, Mr. Chairman.
Mr. ANDERSON. Thank you very much, Mr. Bervaldi, for an excellent
presentation.
Mr. BERVALDI. Thank you, sir.
[Attachments 1-7 previously referred to in Mr. Bervaldi's testimony
follow:]
PAGENO="0065"
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SECTiON C
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PAGENO="0066"
L~\o0c~ YAY1~
* SECTION D
Sunday, February 12, 1978
U CLASSIFIED - 12D
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PAGENO="0067"
ha
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S
At the Poet Chica station, Ensign
Deborah Hartowe. a pubbc affairs
officer, said Thursday. "The onty
thing we know and can truthfulty
say (about the airport) is to quote
from a fetter by the commanding
officer from April 1976. `There is
no change in current status at the
present time.'
Bob Putman, a civilian with the
Naval Facitities Engineering Corn'
mand in Washington. said Thurs-
day. "I have spoken to no one with
Air Florida."
Air Florida Board Chairman C.
Edward Acker said Tuesday his
company has had "some prebmi'
nary talks with" the Navy about
the airport. "but it's not far enough
atong to determine whether the
Navy will say yes or no."
ACKER CHANGED that Thurs-
day. saying "We have made inqut-
rico through one of our Florida sen-
ators' offices and asked them to
help its dcs'elop a dialogue with the
Nas'v"
"All I knosv is we started the ball
rolling." said Acker Tuesday.
But it was apparently Lawrence
Gornez who "started the ball roll-
The Key West mon said, "We
need a new market down here and
the best way to get it is to use that
big Navy base lying fallow. We can
get a couple hundred-thousand
more people down here if they fly
from Fort Lauderdale."
Key Wesl.based Air Sunshine,
the only airline currently using Key
West International Airport, does
not fly to Fort Lauderdale. But
Miaml'based Air Florida , whose
jets may be too big for the Key
West airport, did apply for a route
between Fort Lauddrdale.Hotfy-
wood International Airport and Key
West last year.
THEY WITHDREW that applica-
tion after the runway at Key West
had been repaved and narrowed
from 150 to 100 feet.
Gomez wrote Chiles last Decem-
ber, and then passed along Chiles'
response, including the admiral's
memo, to Air Florida.
`Mr. Gomez called me and sent
us copies of the letter. I did not
have direct communication with the
senators office," Air Florida Presi-
dent Eli Timoner said Thursday.
"Under the circumstances, I
thought it best to wait until the
Navy made its decision known," Ti-
61
Open Airport Considered
Navy Denies
Negotiating
With Airline
By BRAD SWANSON
Navy officials denied Thursday negotiating with Air Florida
about opening up the Boca Chico Naval Air Station to commercial
use.
But a Navy admiral, in a memo last December to U.S. Sen.
Lawton Chiles (D., Fla.), said that allowing commercial airlines use'
the naval airport "is being thoroughly investigated."
The memo - from Rear Admiral D. C. McCormick in the
Washington Office of Chief of Naval Operations - informed
Chiles: "You may expect a reply from this office by Jan. 27, 1978."
CHILES, WHO could qot be reached for comment, sent a copy
of the memo to Lawrence Gomez, a Key West man who had wrE-
ten the senator about the air station.
PAGENO="0068"
By BRAI) SWANSON
Six weeks after withdrawing Its up-
ptication to fly into Key West Interna-
tional Airport, Air Ftsrida is negotiating
with the Navy to open the Naval Air-
port for commercial use.
"I don't hetieve in starting an opera-
lion into what we heilevc' is a tuarginat
airport," Air Florida board chairman C,
Edward Acker said Tuesday of Key
West International.
"We concluded that tsr rtsoway to too
short and too narrow. So we've concen-
trated on efforts to detrrnsine whether
the Navy airport soul se available far
commercial flights. Wevc' had some
preliminary toiks, hut l's not far
enough along to deternsiue whether the
Navy will say yes or no."
NAVY OFFICIALS would not con-
fIrm Tuesday whether negotiations
were In progress with Air Florida about
the future of the Navy airport.
AIr FlorIda had sought to get permls-
stun to fly the route hetweeo Fort Lau-
derdate-Ftottysvood International Air-
port and Key West, hut withdrew after
the runway at Key West was repaved
and narrowed from 150 feet to 100 feet,
The Miami-based airline said at that
time the runway might be too narrow
for its 85-passenger L)C9 jets, the only
planes Air Florida files.
But "decrease of runway width has
not decreased the usage of lIce airport,"
Manuel Rodriguez, planning ectgineer
with the Federal Aviation Administra-
tion, said Tuesday.
I-fe said Key West aIrport had "an ex-
cess of runway svidth" before the modI-
fications and that the rssosvay had been
narrowed to save maintenance and cc-
pavlag costs,
"LENGTH OF a runway Is the con-
trolling factor, not widtls," Rodriyuez
said. The 480ti'lecl te.uglis of the Key
West runway, he said, would enable a
DC9 to take off or lund euiy if it were
"very cottstrained whit regard to
weight - and that reticctt upua pan.
senger capacity."
But a IDC9 did toad once at Key West
airport last sumttu'r, said airport man-
agOr George ttoagland. "II was sort of
like Air Florida's inaugural flight here,"
he said. "It had `It people ass board."
The flight was not repeated.
Itoagland saId the aIrport could allow
DC9s to fund, but added the airlines may
have more utrlegettt restrictIons. One
aviatiun source who did not want his
name mentIoned estlmoted that DC9s
could safely use a runway as short as
Key West's on a regular hasls with
half-capacity loads.
The Air FLorida jet hod no difficulty
landing or taking off, sold Itoaglond,
hut, "we wIlt never have a real jetport
here," he saId.
"REALLY, WE'RE locked In here. If
we try to extend the runway to the
west, we'll have to tower the approach
zone, which means the airplanes wttl be
flying a tot lower over the high school.
"Aad If we try to extend to the cost,"
"Plus, we've got envIronmental prob-
lems you wouldn't believe. All site per-
mits we'd have to get ovlsea we started
filling in those ponds . -
Bat Acker says there sverss plans to
lengthen the runway In 1976, iselure
Hoagland became macsager.
"It would take some sort of eoiight-
coed citizenry" to hove the ruoway
lengthened now, he said. "I duu't see too
much push for It. It vvoulsf scent lhey're
not really interested in lospruvlng their
airport."
~Ijc !Thaint 1~cratb
[ £~c~j~ L~o~c~ `E~ffi~~
SECTION C
Wednesday, February 1, 1978
* Key ~Vest Airport Called `Marginal'
Air Florida Is Seeking
To Use Navy Airfield
he cnnttnued, "they'll save to lake the
power lines down off Roosevelt Bottle'
yard and deepen the ruadw.'y or luonel
It or samething - It would cost mit'
liens.
PAGENO="0069"
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PAGENO="0074"
68
FLORIDA PUBLIC SERVICE CO~-iNISSION
PROPOSED ANENDRENT TO SECTION 17
OF S. 2493, PAGE 39
MARCH 8, 1978
FEDERAL PREEMPTION
Sec. 17. Title IV of the Federal Aviation Act of 1958, as
amended by this act, is further amended by adding at the end thereof
the following new section:
"FEDERAL PREEMPTION
"Sec. 423. (a) (1) No State shall enact any law, establish any
stanclarddeterrnining routes, schedules, or rates, fares, or charges
in tariffs of, or otherwise proi~iulgate economic regulations for, any
air carrier certificated er-exeiepte~, by the Board under the provisions
of this title, except that any State whichr-em-er-~eese-~eneasy-~r
19~-had-attthes~sed authorizes an air carrier to provide intrastate
air transportation in that State, may continue to regulate such
intrastate operations of- such air carrier notwithstanding the fact
that such air carri er7-a~tes-~a~easy-~7- ~
t~me~ holds a certificate under this title, for so long as not less
than 50 percent of the revenues of such air carrier is derived, during
the most recent period for which data is available, from such intrastate
operations. For the next year following such a period during which such
air carrier derived mere than 50 percent of its paosengor revenues
directly from ~mterst&te operations conducted with its aircraft in scheduled
interstate air transportation7-en~-~er-eaeh-year-theseaftery the enti~e
air tränspurtation operations of such air carrier shall be subject to
PAGENO="0075"
69
Page Two
subject to regulation by the Board under this title7 provided, however,
that should such air carrier's passenger revenues derived from scheduled
interstate operations fall below 50% and remain so for any period of
six consecutive months, the Board and the State regulatory authority
shall consult and determine jointly whether regulation of the air
carrier shall continue by the Board or revert to the State. 4/ The
Board shall provide just and reasonable 5/ regulations for allocating
revenues of air carriers specified in the first and second sentences
of this paragraph between intrastate and interstate air transportation
operationsT, after consultation with the State regulatory authority. 5/
`(2) When any air carrier which is specified in the first sentence
of paragrapa (1) becomes totally regulated by the Board, any authority
received from the State to provide air transportation shall be
considered to be part of its authority to provide air transportation
received from the Board under this title, until modified, suspended,
revoked, amended, or terminated as provided under this title.
"(3) Except with respect to air transportation authorized by the
Board under a certificate issued under section 401 or, air transportation
for which compensation may be paid under section 419, the provisions
of paragraph (1) shall not apply to the air transportation of persons,
pioperty, or mail conducted wholly within the State of Alaska.
"(4) Any air carrier certificated by the Board under this title,
and who enters into an agreement with an intrastate air carrier for
the through handling of baggage or passengers, shall not, by reason
PAGENO="0076"
70
Page Three
of that agreement, be subject to regulation by any State. Neither
shall such intrastate air carrier become subject to regulation by
the Board by reason of entering into such an agreement. Nothing
in this paragraph shall be construed, however, as affecting in any
manner the Board's authority, otherwise conferred, over air trans-
portation transactions covered by an agreement between air carriers,
including agreements between interstate and intrastate air carriers
for the through handling of baggage or passengers.
"(5) Any aircraft being used in flights (except flights between
points in the State of Hawaii) in air transportation between points
in the same State which, in the course of such flights, crosses a
boundary between two States, or between the United States and any
other country, or between a State and the beginning of the territorial
waters of the United States shall not, by reason of crossing such
boundary, be considered to be operating in interstate or overseas
air transportation. ~,State may exercise economic regulatory
aut~~4~y over transportation by aircraft between plddes in the same
Stats, or across the boundaries defined in the preceding sentence,
* when such transportation includes: (a) the carriage of mail; or (b)
the carriage of passengers or property who moved by air or ground
transportation in interstate commerce either before or after the
"DEFINITION
`(b) For the purposes of this section, the term `State' includes
the several States of the United States, the Commonwealth of Puerto
PAGENO="0077"
71
Page Four
Rico, the Virgin Islands, Guam, the District of Columbia, the
territories and possessions of the United States, any political
subdivision of any State, and any agency or entity of two or more
States.".
PAGENO="0078"
72
.FLI1BhIJA~~ PUBLIC SERVICE COMMISS'IIJN
7CR SCRJTH AD*.MS STREET
PAL LA HAWKINS, CHAIRMAN TMLETASSEY 32CR~
WILUAM T. MAYO
THE NEED FOR
STATE REGULATION OF
INTRASTATE AIR TRANSPORTATION
IN FLORIDA
~ ~ 9
PAGENO="0079"
73
The goal of state regulation by this Commission, in it~
exercise of authority under Sections 330.45-330.53, Florida
Statutes, is to provide for the air transportation needs of small
and large communities, statewide, by insuring:
1. Dependable Service `- certain knowledge that published
schedules are In fact timely and representative of services truly
available. Reasonable assurance that flights will operate on time
so that passengers can make business appointments, connecting
flights, etc.
2. Frequency of Service - a reasonable number of flights
that will allow the development of a. market to its fullest
potential, which will generate the number of passengers to make
service ecorotni~-.~l and nrofitable.
3. Adequate Aircraft - aircr*~ft desigfled with the passenger
and his safety as prime considerat"ions. Roomier aircraft with
passenger comforts and convenieflces heretofore u~:vail~b1e in
"third level air carrier" fleets will in turn attract additional
passenger revenue.
PAGENO="0080"
74
In most Florida markets, traffic volumes are insufficient
*for competitive forces to work, therefore, State regulation is
required to foster the intra-Flori4a ai~r carrier netvork. If
orderly, efficient, economical and healthy service to the
public is to prevail, the State must have jurisdictional
control, through economic regulation, over carriers
contributing to that service. Sections 330.45 through 330.53, FS
provide that control.
PAGENO="0081"
75
Without state regulation the following factors will prevail:
1. No Rate Control, either passengers or ,~roperty.
2. No Liability for Property (baggage or freight).
3. No Effective Control for Insurance Requirements.
4. 1o Financial Responsibility Control.
5. No Control over Cut-Throat Competition.
6. No Entry - Exit Control in Any Markets.
7. No Control over Minimum Levels of Service in any Markets.
Go - ro go strictly at the whim of the carrie~.
8. No Denied Boarding Rights for Passenger, the customer is
at ti.a mercy (?) of the carrier.
9. No Interface with Federal Officials, wherein the state
provides effective field surveillance and investigation
of operators, and more effective enforcement due to
limitations in FAA manning (i.e.: their non-scheduled
operations workload, involving licensing and airworthi-
ness, etc.)
10. No Control over Aeronaut3cal and Business Experience of
Operators.
11. No Control over Aircraft Type and Ownership or iinanci~i
status for same.
12. No Requirements for Identity of officers, directors,
share holders, so that responsibility may be fixed.
13. No Basis for a Healthy Competitive Structure of the
industry, nor for regulated monopoly - where appropriate.
14. No Protection for Investors Against Unscrupulous Promoters.
28-911 0 - 78 - 6
PAGENO="0082"
76
In the scramble for intrastate business, commuter airlijies
appear and disappear all too frequently - the victims of under
funding, over expansion and seasonal traffic. Without route
protection, without schedule requirements and with unregulated
fares, the small airlines cut each others' throats and crash
financially in the process.
PAGENO="0083"
77
8
COMPETITION AND ADEQUATE SERVICE
A review of alternatives for obtaining service must
consider competitive authority as a possibility. One theory
of regulation holds that the problems of inadequate service
and excessive fares can be solved by authorizing an additional
carrier in the market. Another current theory holds that
abolition of all, or at least most, regulation to pcrmit
"freedom of entry and exit" and `freedom of fare experimantation"
will promptly achieve abundant service and low fares.
Like many sophisticated theories of economics, either of
these theories might be eminently sound in a specific market
at a specific time, but as a generality they brush aside or
ignore some very important facts. In Florida, the presence
of competitive authority has not assured adequate air service.
On the seventeen routes being considered by the State, there
are 75 city pairs where service is inadequate. Seven have
two carriers authorized and the remaining 30 city pairs are
authorized to three or more (up to seven in one case) C.A.B. -
certificated carriers with.full uninhibited permission to
compete. Still the service is inadequate.
The operators of intrastate air service in Florida ar~
undoubtedly reasonably intelligent and clever and have a
desire and need to prosper. Their reluctance to join in
competitive struggle in these markets is precisely because
the markets are not large enough to support two or more
competitors. The profit estimates of route sections show
that revenue to be earned from these routes cannot be divided
between two or more operators and either of them remain viable.
PAGENO="0084"
78
Even the most profitable routes must be viewed realistically-.
If a competitor enters these markets, his revenue comes first
from the incumbent carrier's profits and then is reflected in
both of their losses. A few of the routes may later be found
capable of supporting competition but initially it will be
fatal to both carriers.
Proof of the above reasoning is available in the long
history of airline failures in florida. The theory that the
stronger will survive in an economic struggle does not
produce lasting air service; it more easily results in the
death of both competitors. Should one survive, he does not
necessarily reap the reward of the victor to recover from the
drain of battle, for he may be immediately confronted with a
fresh entrepreneur who has not yet lost his backing.
A classic demonstration of this type of competition
occurred in Florida in recent years. Two well-financed
carriers, Shawnee and Executive, entered the State with
extensive route systems, using identical aircraft. Their -.
route systems were unregulated and overlapped in critical
areas. Each had it~ own management philosophy but both were
agressive and built aconsiderable following with the public.
Over about a four-year period, it is reported that one lest
$3.5 million and the other about $5.0 million. At about the
* mid-point of this period, it was apparent that so much had
been lost that the survivor on the routes, if lert alone,
could not~ recoup his losses through profits. The final result
was the demise of both carriers with the public losing ~j.i
the service and the backers a significant sum, along with
PAGENO="0085"
79
10
their desire to perform a worthwhile public service. It Is a
simple fact that competition--or the multiple designation of
carriers between points--has failed to produce service.
Further, there is no reason to expect that it will produce in
the future.
The Official Airline Guide shows that the eight trunklines
and one local service carrier in Florida offer only ten
entirely intrastate schedules providing four markets with
nonstop roundtrip service, five markets with one stop roundtrip
service, two markets with two stop roundtrip, and eight markets
with one-way nonstop service. It follows that in order for
Florida to be able to assure adequate air service within the
State, smaller types of aircraft must be introduced. Since
it is probably unreasonable to expect the long-haul carrier to
purchase aircraft to be used only in Florida intrastate
service, the State will have to look to the intrastate
operators to provide the bulk of the intrastate service.
PAGENO="0086"
80
I II
BENEFITS OF STATE REGULATORY CONTROL
The major advantage of regulation by the State of its air
transjortation system is the element of control which the State
is able to exercise. Theoretically, the power could be
absolute--over the entry and exit of air carriers, fares,
rates and schedules. The State can establish, and then enforcc,
standards and thus insure that appropriate service, responsive
to the State~s needs, will be provided. Should a carrier's
economic life depend entirely upon intrastate traffic, the
advantage of State regulation would be greatest because the
power which could be exerted over the carrier would indeed be
real.
The experience in California and Texas seems to reflect
additional advantages--to the traveling public--in the form
of improved service and lower fares, compared with that which
was available when service was provided exclusively by
C.A.B.-certificated airlines. Active state participation in
regulating air transportation between its cities will --
encourage purely intrastate services in Florida which will be
beneficial to Florida air passengers.
In summary, competition, as observed in Florida, ha~ nc~
produced stable, adequate intrastate service, and has caused
well-intentioned Floridians to lose large sums of money in
efforts to provide intrastate air service.
PAGENO="0087"
81
March 1, 1978
To Each Member of the House
Subcommittee on Aviation
Re: H.R. 11145, a bill proposing
- the Air Service Improvement
Act of 1978
Dear Congressman:
The National Association of Regulatory Utility Commissioners (NARUC) re-
spectfully urges the Subcommittee on Aviation to adopt the enclosed NARUC
~proposed amendments to Section 4(a) of the above bill. In essence, these
proposed amendments reflect the form of Section 17 of S. 2493, a bill proposing
the Air Transportation Regulatory Reform Act of 1978, with NARUC amendments
engrafted thereon as indicated.
The purpose of these amendments is to confirm and clarify the role of
the States in the economic regulation of intrastate air transportation without
interfering with national regulatory reforns.
The Federal Aviation Act of 1958, as ainen~dcd, leaves such local regulation
to the States. The usefulness and importance of State regulation is perhaps
be:;t exemplified by the existence of, and services provided by, Air California
and Pacific Southwest Airlines in California and Southwest Airlines in Texas.
We believe that the success stories of those airlines are a great credit
to a policy of federalism which has allowed the States to encourage and ex-
periment with the development of intrastate air service that is both
ecanomical and responsive to local needs.
State regulation has proven to be highly beneficial not only to the
citizens of such Stat-es as California and Texas, but also to the Nation for
serving as yardsticks against which Federally-authorized rates and services
could be compared. As you know, some of the impetus and rationale for the
reforms contained in the pending legislation stem from comparisons which have.
been made between State-regulated and CAB-regulated carriage -
PAGENO="0088"
82
March 1, l97S
Pa~,e 2
Accordingly, the NARUC respectfully urges that Section 4(a) be amended
as indicated to permit State regulation of the intrastate operations of a
GAB certificated carrier engaged primarily in intrastate air transportation.
thder the liberalized entry provisions of the legislation, itis anticipated
that virtually all carriers of any significance will receive CAB certifica-
tion. Therefore, we do not believe that it is in the public interest for
carriers engaged primarily in intrastate air transportation to escape State
regulation of such transportation by obtaining CAB certification.
In addition, we respectfully urge the addition of the ne~ sentence at
the end of Section 4(a) as indicated in the enclosure to provide that State
regulation of intrastate air transportation will not be thwarted by the
carriage of mail or by the carriage of passengers or property who moved by
ground transportation in interstate commerce either before or after the
intrastate flight.
We congratulate you and your colleagues for your energy and imagination
in seeking to fashion a better air transportation system for .4merica. The
comparisons drawn from State regulation have strengthened your desire to re-
form Federal air regulation. We only hope that, when the Congress works its
will on this legislation, the role of the States will be clarified and con-
firmed so that future Congresses will also have the ability to corrare.
Accordingly, your support of these amendments will be deeply appreciated.
With warm personal regards and best wishes, I an
Paul Rodgers
Administrative Director
PR/mr
Enclosure
cc: Mr. David Mahan, Counsel
Mr. David Heynsfeld, Counsel
Mr. Henry. Pflanz, Counsel.
Subconiiittee on Aviation
PAGENO="0089"
83
NARUC Prupo~;ed ,\mentbl'.nt to Sec. 4 (a) of
H .R. 11145 , page 4, lines 15-23,_p~ge 5, lines 1-21
1 FEDERAL Pr~EEMPTION
4(a) I
2 SEC,-177-Title4V-Of the Federal Aviation Act of lOSS,
as amended by this Act, is further amended by adding at the
~ end thereof the following new section: -
5 "Federal Preemption
105
6 "SEc.-42~ (a) (1) No State shall enact any law, estab-
~ lish any standard determining routes, schedules~ or rates,
s fares, or charges in tariffs of, or otherwise pron~ii1gate ceo-
9 nomic regulations for, any air earlier certificated or exempted
10 by the Board under the prOvisiOnS of this title, except that
~1 any State which,-~ ~ au-
S
12 thorize~ an air carrier to provide intrastate air transportation
13 in that State, may continue to regulate such intrastate opera-
14 tions of such air carrier notwithstanding the fact that. such air
holds
15 carrier~ .aft~&i~ Ja-14uaFy-1~ -1-9.'~Q~. 4s-i~sHed~ -f@i~-th~ -fwst4ime,- a
16 certificate under this title, far so long as not less than 50 per-
17 eent of the revenues of such air carrier is derived, during the
18 most recent period for which data is available, from such
19 intrastate operations. For the next year following such a
20 period during which such an air carrier derived more than 50
21 percent of its revenues from interstate operations,--and-für
22 Qa~h-yc~r-the-r-a&f~o~,- the entire air transportation operations
23 of such air carrier shall be subject to regulation by the Board
PAGENO="0090"
84
-2-
just and reasonable
~. under this title. The Board shall provide/regulations for al-
2 locating revenues of air carriers specified in the first sentence
,3 of this paragraph between intrastate and interstate air trans-
4 portation operations, after consultation with the State regulatoiy
authority.
5 "(2) When any air carrier which is specified in the
6 first sentence of paragraph (1) becomes totally regulated
7 by the Board, any authority received from the State to
8 provide air transportation shall be considered to be part of
9 its authority to provide air transportation received from the
10 Board under this title, until modified, suspended, revoked,
~u amended, or terminated as provided under this title.
12 " (3) Except with respect to air transportation an-
13 thorized by the Board under a certificate issued under sec-
14 tion 401 or, air transportation for which compensation may
15 be paid under section 419, the provisions of paragraph (1)
16 shall not apply to the air transportation of persons, pi~operty,
17 or mail conducted wholly within the State of Alaska.
iS "(4) Any air carrier certificated by the Board under
19 this title, and who enters into an agreement with an intra~
20 state air carrier for the through handling of l)aggage or pas-
21 sengers, shall not, by reason of that agreement, be subject
22 to regulation by any State. Ndither shall such intrastate
23 air carrier become subject to regulation by the Board by
24 reason of entering into such an agreement. Nothing in this
25 paragraph shall be construed, however, as aiiect.ing in any
PAGENO="0091"
85
~ manner the Board's authority, otherwise confcried, over air
2 transportation transactions covered by an agreement between
~ air carriers, including agreements between interstate and
~ intrastate air carriers for the through handling of baggage
or passengers.
6 "(5) Any aircraft being used in flights (except flights
r~ between points in t.he State of Hawaii) in air transportation
8 between. points in the same Stste which, in the course of
~ such flights, crosses a boundary between two States, or be-
10 tween the United States and any other country, or between
a State and the beginning of the territorial waters of the
12 United States shall not, by reason. of crossing such boundary,
13 be considered to be operating in inter3tate or overseas air
~4 transportation. A State may exercise economic re~ulatorv
authority over transportation by aircraft between places
in the same State, or across the boundaries defined in
the ~oceeding sentence, when such transoortat ion in-
cludes: (a) the carriage of mail; or (b) the carriage of
passe gers or property who moved by ground transportation
in interstate coiirnerce either before or after the flight.
PAGENO="0092"
86
UNITED STATES HOUSE OF PEPRESHNTATIVES
CO~I'IITTEE ON PUBLIC ORKS AND TRANSPCNTATION
NINEJY-FIFOf CONGRESS
February 3, 1973
Democrats
Harold Johnson, (Calif.)
Qiairoan
Ray Roberts, (Texas)
James J. Howard, (N.J.)
Glenn N. Anderson, (Calif.) 1/
Robert Roe, (N.J.)
Teno Roncalio, (Wyo.) 1/
Mike McConnack, (Wash.T
John Breaux, (La.)
Bo 0mm, (Ga.)
Dale Milford, (Texas) 1/
Norman Mineta, (Calif.TlI
Elliott Levitas, (Ga.) TI
James Oberstar, (Minn.)
Jerome Ambro, (N.Y.) 1/
Henry Nowak, (N.Y.). -
Robert Edgar, (Pa.) 1/
Marilyn Lloyd, (Tenn)
John Fary, (Ill.) 1/
Ted Risenhoover, (Okla.)
W. G. Heftier, (N.C.) 11
David Coruwell, (Ind.~
Robert Young, (No.) 11
David Bonior, (Mich.J
Allen Ertel, (Pa.) 1/
Billy Lee Evans, (Ga.) 11
Ronnie Flippo, (Ala.) 17
Nick Joe Rahall, II, (R~.Va.) 1/
Bob Stump, (Aria.) 11
Douglas Applegate, tOhio)
Republicans
William Harsha, (Ohio)
James Cleveland, (N.H.)
Don Clausen, (Calif.)
Gene Snyder, (Ky.) 1/
John P. Harmerschmidt, (Ark.) 1/
Bud Shuster, (Pa.) 1/
William Walsh, (N.Y.)
Thad Cochran, (Miss.) 11
James Abdnor, (S.D.) ~T
Gene Taylor, (Mo.) 11
Barry Goldwater, Jr., (Calif.) 11
Tom Hagedorn, (Ninn.)
Gary Myers, (Pa.)
Arlan Stangeland, (Ninn.)
RobertL. Livingston, (La.)
Suggestea Address:
Honorable ___________________, M.C.
U.S. House of Representatives
Washington, D.C. 20515
Capitol Switchboard Telephone
i~inaber: (202) 224-3121
iT Member, Subcoranjttee on Aviation (Anderson, Chairman).
PAGENO="0093"
87
rrt r'~ ~ g ,.~ p.
Lo~J Lu.eJ ~ ~ ~t~'--~
W15'~'Ifl UnrOll
--------------------------
~e~'iris FCJ C.~T 001333 ~&bnTlorida Public Service Co~iiss~on
Honorable Glenn 11. Anderson larch 7, 1978
United States Representative
Washington, D. C. 20515
The florida Public Service Co~aiiission urges you to support
State position on air transportation regulatory reform legislation
as stated by I1ARUC letter to you of Marcn 1, 1978. It is
imperative to preserve the States abilities to respond to and
support local air travellers needs.
David 1. Swafford
Executive Director
FLORIDA PUBLIC SERVICE CO:sIISSION
SENDING BLANK'
$.,U to. ~ `~..ug.. &,bj*cf to I.,,.. oob.cke.,.of ohkO .`* hv.by .g..O It
PLEASE TYPE OR WRITE PLAINLY WITHIN BORDER-DO NOT FOLD
WU 200 (59/60)
western union
~~ns FCJ CAT 001888 ~ Florida Public Service Conrsissio
Honorab~e Don Fuqua * March 7, 1978
United States Representative
Washington, D. C. 20515
The Florida Public Service Ccmission urges you to support
State position on air transportatien regulatory reform legislation
as stated by NARUC letter to you of March 1, 1978. It is
imperative to preserve the States' abilities to respond to and
support local air travellers needs.
David L. Swafford
Executive Director
FLORIDA PUBLIC SERVICE COMMISSION
SENDING BLANK
S.od IC* o~ot.uag..wb/.ct to tt,rna oo b*ct h*,tot. ,hIoM 0/ by0gto~dIt
PLEASE TYPE OR WRITE PLAINLY WITHIN BORDER-DO NOT FOLD
wu oea(Ra/eo)
~c~J] i~c~
western union
~ FCJ CAT 0)1888 CHARs/florida Publ ic Service Commf~T3n
Honorable Gene Snyder March 7, 1978
United States Representative
Washington, D. C. 20515
The Florida Public Service Commission urges you to support
State position on air transportation regulatory reform legislation
as stated by lIARUC letter to you cf Marc'~ 1, 1978. It is
imperative to preserve the Statc~' abilities to respond to and
support local air travellers needs.
David L. Swafford
Executive Director
FLORIDA PUBLIC SERVICE .C0;DIISSION
SENDING BLANK
FOLD
PAGENO="0094"
88
t...!L~i ~
wu~t~rn union L ..- ~
~~9FCJ CAT_001838 ~ Florida Public Service Cornn~ission
Honorable Lawton ti. Chiles March 7, 1978
United States Senator
Washington, B. C. 20510
The Florida Public Service Commission urges you to support
State position on air transportation regulatory reform legislation
as stated by NARUC letter to you of March 1, 1978. It is
imperative to preserve the States' abilities to respond to end
support local air travellers needs.
David L. Swafford
Executive Director
FLORIDA PUBLIC SERVICE COlIMISSION
SENDING BLANK
Send the ~ove message, subject to terms ott back hereof, which are hereby spread to
PLEASE TYPE OR WRITE PLAINLY WITHIN BORDER-DO NOT FOLD
WU 269 CR9189)
western ~jnion
ERS FCJ CAT 001888 ~~~~lorida Public Service Commission
Honorable Richard (Dick). Stone March 7, 1978
Un'i ted States Senator
Washington, D. C. 20510
The Florida Public Service Commission urges you to support
State position on air transportation regulatory reform legislation
as stated by NARUC letter to you of March 1, 1978. It is
imperative to preserve the States' abilities to respond to and
support local air travellers needs.
David L. Swafford
Executive Director
FLORIDA PUBLIC SERVICE C0M~4ISSI0N
SENDING BLANK
Send he above niessage, sub/oct to terms on back hereof, which are horsby aprsod 10
PLEASE TYPE OR WRITE PLAINLY WITHIN BORDER-DO NOT FOLD
wu 289 CR9169)
PAGENO="0095"
89
National Association of Regulatory Utility Commissioners
1102 I~l~'st'~* C~~~,r04 ~ U~iId~4
To .plo~. 202.6207325 20044
\ \
\ ~r~rrr~
4I~1i;p~ ~ ... ~ \ ~
March 1, 1978
Request for Action by
Tuesday, March 7, 1978
To Each State Cormeissioner
Engaged in Carrier Regulation
* Re: H.R. 11145, a bill proposing the
- Air Service Improvement Act of 1978
Dear Commissioner:
The Subconirnittee on Aviation of the House Committee on Public Works and
Transportation will begin the mark-up on the above bill at 10:00 a.rn. on
Wednesday, March 8, 1978, in Room 2167 of the Rayburn House Office Building.
A copy of this bill is enclosed with the copy of this letter to the ~hainnan
of your Commission.
The State interest is.adversely affected by Section 4(a) of H.R. 11145
which would add a new Section l05~a) to the Federal Aviation Act to hereafter
prohibit the State regulation of the intrastate operations of any CAB certifi-
cated or exempted air carrier, except any carrier which was State regulated
on August 1, 1977, but only for as long as not "more than 25 per centum of its
revenues for the preceding calendar year are derived freon interstate air
tro~nsDortation." A copy of Section 4(a) is enclosed.
In the Senat~, S. 2493, a bill proposing the Air Transportation Regulatory
Reform Act of 1978, was favorably reported on February ó, 1978, by the Senate
Committee on Commerce, Science, and Transportation (S. Rept. No. 95-631). It
is anticipated that S. 2493 will receive Senate floor consideration upon the
conclusion of the debate on the Panama Canal Treaty.
The comnarable State provision in S. 2493 is Section 17, pages 77-79
(copy enclosed), which would add a new Section 423 ~o the Federal Aviation
Act to~
(a) Prohibit the State regulation of the intrastate dperations
of any CAB certificated or exempted air carrier, except any carrier
which was State regulated on January 1, 1979, but only "for so long
as not less than 50 percent of the revenues of such air carrier is
derived.. . from such intrastate operations";
PAGENO="0096"
90
- ~ i~ J.~llQ
Page 2
(b) Permit interlining of passengers and baggage between
C~B certificated carriers and intrastate air carriers; and
(c) ~clare that any aircraft operating between points in
the same State shall not be deemed in interstate transportation
if it crosses State or internirional boundaries (except flights
between points in the State of Hawaii).
Obviously, the Senate provision is more favorable to State regulation than
the House provision. Accordingly, the N.~.P.UC is urging the House Subcormittee on
Aviation to revise Section 4(a) of H.R. 11145 by substituting the Senate pro-
visions as amended to remove the State regulatory `freeze" date of January 1,
1979, to provide that interstate ground transportation shall not be connected to
intrastate flights to turn-them into interstate flights, and to provide that
the carriage of mail on intrastate flights will not defeat State jurisdiction.
Enclosed is a copy of the NARUC letter of today to the members of the Subcorrmittee
on Aviation.*
It is quite likely that air transportation regulatory reform legislation
will be enacted in sorts form by this Congress. Therefore, it is necessary
that the States exert every effort to see that the State role over local air
regulation is clarified and confirmed.
I recognize that many State corrmissions are not engaged in the regulation
of air carriers. However, as local air transportation continues to grow, your
State may subsequently develop an interest in entering this field of regulation.
Fof this reason, it behooves all of us to see that the State role is not fore-
closed.
Accordingly, it is very important for your Corrrnission to promptly support
the NARUC effort to amend the legislation to prote~t the State regulatory role.
Therefore, I respectfully urge you and your colleagues to telephone or send
* telegrams by .Tuesda~, March 7, 1978, or as soon thereafter as practicable,
supporting our position to each~ryour members on the Subcorrtnittee. A draft of
a proposed telegram is respectfully submitted as follcws:
Corrtnission urges you to support State
positf&i~TFT~iisportation regulatory reform legislation as
stated by NARUC letter to you of March 1, 1978. It is imperative
that Congress not impair the ability of the States to. protect the
interest of local air travellers. Please let me know how you
voted.
Enclosed is a copy of themembership list of the Subcormnittee.
- The Capitol switchboard telephone nunber is (202) 224-3121.
~`the text~öfthe ~`L~.RUC testimony on air regulator~z reform legislation in the
Senate is reported in NARUC Bulletin No. 18-1977, pp. 19-26, 3-5. Similar
testimony was .presented in the House. on October 5, 1977, by Cotarissioner-
Richard 0. Gravelle of the California Public Utilities Corrrtrission. The earlier -
NARUC action request letters on this subject are dated June 28 and August 26,
1977.
PAGENO="0097"
91
Narch 1, 1978
Page 3
Also, whether or not you have representation on the Subcommittee, please
send similar telegrams supp&ting our position to the following Representatives:
Glenn M. Anderson, California, Chairman
Gene Snyder, Kentucky, Ranking Minority Member
Such telegrams are especially effective since they provide an in~ortant
indication of national concern. In order to prevent the receipt of identical
telegrams by these members of Congress front many States, please vary the text
of your telegram to reflect local needs. --
Please furnish me with a copy of your communication.
Your active support at this time is crucial to our success.
With warn personal i~egards and best wishes, I
General Counsel
PRjmr
Enclosures
28-911 0 - 78 - 7
PAGENO="0098"
92
?.larth 1, ~
Section 4 of H.R. 11145, a Bill Proposing the
Air Service ImDroverncnt ACt of 1978 -
~e4
15 FEDERAL PREEMPTION
16 SEc. 4. (a) Title I of the Federal Aviation Act of 1958
17 (49 U.S.C. 1301 et seq.) is amended by adding at the end
18 thereof the following new section:
19 "FEDERAL PREEMPTION
20 "PREEMPTION
21 "SEc. 105. (a) No State or political subdivision thereof
22 and no interstate agency or other political agency of two or
23 more States shall enact or enforce any law, rule, regulation,
~ standard, or other provision having the force and effect of
2 law relating to rates, routes, or services of any air carrier-
3 "(1) holding a valid certificate issued by the Board
under section 401 of this Act;
* "(2) granted an exemption to provide interstate
6 air transportation or overseas air transportation under
7 section4l6(b) (3) of this Act; or
8 "(3) holding a valid certificate issued by the~Boa.rd
9 ander section 418 of this Act.
10 Any air carrier which on August 1, 1977, was operating
11 prunanly ifl intrastate air traiisportatioii and which after such
12 date and before the date of enactment of this section was
13 issued, or which on or after the date of enactment of this
14 section is issi~ed, a certificate under section 401, granted an
PAGENO="0099"
93
15 exemption under section 41G (b) (3), or issued a certificate
16 under section 418, shall, notwithstanding this section, con-
17 tinue to be subject to regulation as to its intrastate rates,
18 routes, and services by the State in which it is operating
19 until more than 25 per centum of its revenues for the pre-
20 ceding calendar year are derived from interstate air trans-
21 portation;
22 "PROPRIETARY POWERS AND RIGHTS
23 "(b) Nothing in subsection (a)* of this section shall be
24 construed to limit the authority of any State as the owner or
1 operator of an airport served by any air carrier certificated
2 by the Board to exercise its proprietary powers and rights.
3 "DEFINITION
4 "(c) For purposes of this section, the term `State' means
5 any State, the District of Columbia, the Commonwealth of
6 Puerto Rico, the Commonwealth of the Northerii Mariana
7 Islands, Guam, the Virgin Islands, and any territory or
8 possession of the United States.".
(b) That portion of the table of contents contained in
10 the first section of such Act which appears under the center
1~ heading .
"TiTLE I-GExEIt~L PRovisIoNs
12 is amended by adding at the end thereof
"Sec. 105. Federal preemption.
"(a) Preemption.
`(b) Proprietary powers and rights.
"(c) Definition.".
PAGENO="0100"
94
Section 17 of S. 249.~, a Bill Proposing
the Air Transportation Regulatoiy .Refoi-n Act of 1973
77
1 FEDERAL PREEMPTION
SEC. 17. Title IV of the Federal Aviation Act of 1958,
as amended by this Act, is further amended by adding at the
~ end thereof the following new sec~on:
5 "Federal Preemption
c "SEC. 423. (a) (1) No State shall enact any law, estab~
~ lish any standard determining routes, schedules, or rates,
s fares, or charges in tariffs of, or otherwise promulgate ceo-
~ nomic regulations for, any air carrier certificated or exempted
10 by the Board under the provisions of this title, except that
~ any State which, on or before January 1, 1979,' had au-
12 thorized an air carrier to provide intrastate air transportation
13 in that State, may continue to regulate such intrastate opera-
14 tions of such air carrier notwithstanding the fact that such air
15 carrier, after January 1, 1979, is issued, for the first time, a
16 certificate under this title, for so long as not less than 50 per-
17 cent. of the revenues of such air carrier is derived, during the
18 most recent period for which data is available, from such
19 intrastate operations. For the next year following such a
20 period during which such an air carrier derived more than 50
21 percent of its revenues from interstate operations, and for
22 each year thereafter, the entire air transportation operations
23 of such air carrier shall be subject to regulation by the Board
PAGENO="0101"
95
78
i under this title. The Board shall provide regulations for al~
2 locating revenues of air carriers specified in the first sentence
3 of this paragraph between intrastate and interstate air trans~
4 portation operations.
5 "(2) When any air carrier which is specified in the
6 first sentence of paragraph (1) becomes totally~ regulated
7 by the Board, any authority received from the State to
8 provide air transportation shall be considered to be part of
9 its authority to provide air transportation received from the
10 Board under this title, until modified, suspended, revoked,
U amended, or terminated as provided under this title.
12 "(3) Except with respect to air transportation au~
13 thorized by the Board under a certificate issued under see-
14 t.ion 401 or, air transportation for which compensation may
15 *be paid under section 419, the provisions of paragraph (1)
16 shall not apply to the air transportation of persons, ~ropcrty,
17 or mail conducted wholly within the State of Alaska.
18 "(4) Any air carrier certificated by the Board under
19 this title, and who enters into an agreement with an intra-
20 state air carrier for the through handling of baggage or pas-
21 sengers, shall not, by reason of that agreement, be subject
22 to regulation by any State. Neither shall such intrastate
2~ air carrier become subject to regulation by the Board by
24 reason of entering into such an agreement. Nothing in this
25 paragraph shall be construed, however, as affecting in any
PAGENO="0102"
96
79
~ manner the Board's authority, other~vi~e conferred, over air
2 transportation transactions covered by an agreement between
~ air carriers, including agreements between interstate and
~ intrastate air carriers for the through handling of baggage
or passengers.
6 "(5) Any aircraft being used in flights (except flights
~ between points in the State of Hawaii) in air transportation
s between points in the same State which, in the course of
~ such flights, crosses a boundary between two States, or be~
10 tween the United States and any other country, or between
a State and the beginning of the territorial waters of the
12 United States shall not, by reason of crossing such boundary,
13 be considered to be operating in interstate or overseas air
14 transportation.
is "Definition
16 "(b) For the purposes of this section, the term `State'
17 includes the several States of the LTnited States, the Common-
is wealth of Puerto Rico, the Virgin Islands, Guam, the District
19 of Columbia, the territories and possessions of the United
20 States, any political subdivision of any State, and any agency
21 or entity of ~TØ or more States.".
PAGENO="0103"
0
97
CHART ~1O, 12
`5OOTHT~~AS1 I*~~iO /~SZGONJP'~UT
MIAMI - Rp~TH0~J/KE.'1 V~JESr rRAFPIC t9&c ,~jo ,~
?aenc~e~s
-. 3000
* 2000
/ (000
Source: Table No,
PAGENO="0104"
98
CHART NO. 13
- K~? .AJE~r -r~FFcC ,13~' cA~RR~tR %4 -
~hQUc~Y~c~( Q2s5en3E(S
,J~iIOtJF~L
* 4o * . S~UT~4~A~7
2°-
go
19G4 I vf~o/~::7
~ Y~o +(~{4 cr_ ~(`L~D (~Qc!, -cb~- ~o~UZ~
Source: Exhibit SL-138, ~ocket 18610
PAGENO="0105"
ChART NO. 14
99
5oOTH~~4ST Pr~O MR SU~JSP~I~ P~cTf~~~ 5(3A-~S
~J~L ~~~Ml- ~c~WT/ R~rTt+ot~) rn~tPIC,
* -* .- - -.-.-* c~uA(2~~ I91~.- t~iS~ .. ~... ..... . -
oC m~Y~e~
76o7o
Source: Exhibit No.
PAGENO="0106"
100
CHART NO, 10.
~ou'VWE/'~7 A~Jt Ai~. 5Ut)~I4tP3~ PHO~I1$ Ap.~) LOSSES
FRO~A SCUET)ULED OPEI~TIOr.3S BY I~T~ tCil3. icic
Ls~r~d doI~ys
/ + 00
J t 50
R So~.j1tiE~~S7
A~ 5u4St+I'~E
60
-I
C.) ~ S
Source: Exhibit No. 14
PAGENO="0107"
I
5ou~eS~- ~ r5u~'shn~ Coynbined O~e~ebIonS'.
?~`oc~t 2n~ Loss F~'orn Scheduiea Ope~EonS :
C)1~~ 1915
- --.-------~---- -
- So~)T'~o~~ST
As~ SL)pJ5t4LNe
- ~ 7~
913 `374- 975
101
CHART NO. 11
pROF 1
* +400
+2o0
eeKeyen.
- ~oo
* LOSS
- Go~
I.
I
Source: Exhibit No. 1/i
PAGENO="0108"
102
Mr. Aimi~soN. Our next witness is Mr. Larry Marthaler.
Mr. Marthaler is the director of sale,s of Florida Airlines, and he is
accompanied by Mr. Jim McMaster, the southern regional manager.
TESTIMONY OP LARRY MARTHALER, DIRECTOR OP SALES, FLORIDA
AIRLINES; ACCOMPANIED BY JIM MeMASTER, SOUTHERN
REGIONAL MANAGER, FLORIDA AIRLINES
Mr. MARTHALER. Mr. Chairman, members of the subcommittee,
ladies and gentlemen:
Thank you for the opportunity to come before you today.
I am here on behalf of Florida Airlines, a commuter airline, which
serves the citizens of Florida and those persons who travel to Florida
each year to take advantage of our usual good weather.
Florida Airlines has provided reliable air service since 1962, and it
hopes to continue far into the future.
House bill 6010, however, poses a serious threat to those hopes.
When we operated our first flight on April 29, 1962, very few com-
muter airlines existed anywhere in the country.
There were no so-called intrastate airlines in Florida.
The concept of the commuter airline-as an integral part of the
national transportation system-has become accepted during these in-
tervening years.
Our role, as a commuter airline, is to provide efficient and conven-
ient air transportation from small communities to hub cities, where
connections are available to points throughout the United States and
the world.
In order to fulfill this role, we have worked closely with the certifi-
cated airlines in such areas as schedules, joint fares, advertising, and-
from the computer standpoint-expensive computerized reservations
systems.
The key ingredient to making this program a success has been our
ability to provide the public with the convenience of complete travel
planning, interline ticketing from point of origin to destination, and,
similarly, the through interlining of baggage.
This program has succeeded, and it is common today for a person to
call a commuter airline for complete travel plans, to purchase a ticket,
and to check their luggage through to final destination anywhere in the
world-all in one transaction.
Commuter airlines were allowed to offer this type of full service by
registering with the Civil Aeronautics Board in Washington, D.C.,
under part 298 of the Board's economic regulations, and by acceptmg
the limitations contained therein.
Specifically, this meant a prohibition on the operation of large
aircraft in scheduled service.
In realistic terms, this equated to small, usually non-air-conditioned
and nonpressurized equipment. .
In an age of all jet fleets in the certificated airlines industry~ the
limitation on the size of the aircraft that commuter airlines could
operate served to preclude the imposition of a commuter airlme on top
of a certificated carrier.
The logic of this was obvious.
PAGENO="0109"
103
The place of the commuter airline in the overall transportation
system was assured, without threatening the place of the certificated
carrier in the same system.
The public convenience and necessity is well served.
In the development of this type of national transportation sys-
tem, commuter airlines have made tremendous investments in equip-
ment, hired many employees and have served millions of passengers-
all without the benefit of either State or Federal financial aid.
Commuter airlines are the only portion of the national air trans-
portation system which has been developed solely from private capital.
Totally unrelated to the foregoing is the intrastate airline.
I say "the intrastate airline," because there is only one-Air Florida.
Inasmuch as it has already been demonstrated, I will not go into
any further details as to the confusion that the name causes.
Air Florida came into existence during 1972, with the publicly
stated purpose of serving those persons requiring air travel between
two large metropolitan areas within the State of Florida, mainly
Miami and St. Petersburg.
Over the past few years, they have expanded to various other metro-
politan areas, and they seem to be providing a needed service.
At no time, however, was there any public indication that they
wished to be part of a nationwide transportation system.
Because they had as their objective service only within the State,
they did not deem it necessary to become a computer airline with the
inherent privileges of interlining.
Also, because they were not engaging in interstate commerce, the
Civil Aeronautics Board claimed no jurisdiction over their routes,
rate,s or the size of the aircraft that they operated.
This enabled them to compete on the intrastate routes with the
certificated air carriers.
For whatever reason, someone decided that Air Florida might like
to try to become a part of the national air transportation system.
Perhaps Air Florida made a mistake when they originally elected
to become an intrastate airline instead of a commuter airline.
Perhaps they were unsuccessful in trying to serve only the local
passengers.
Only they know the answers to these questions.
The rules of the game did not allow them to become a part of the
national air transportation system unless they registered with the
CAB under part 298, gave up their rights to operate large aircraft
and became a commuter airline.
They evidently did not wish to do these things.
Changing the rules would be more advantageous to their self-
interest.
Enter H.E. 6010.
Because of H.R. 6010, Air Florida now has the best of both worlds.
They are free to operate any type of aircraft that they desire, and
they are free to cater to that portion of the air travel market that is
traveling to points outside of the State of Florida.
We, at Florida Airlines, feel that this situation is unjust to those of
us who made our plans and invested our money in commuter airlines
based upon the rules of the game as they were originally written.
PAGENO="0110"
104
More important than this, however, is the threat that this type of
loophole creates to the national air transportation system.
We do not wish to indicate that we have all of the answers to the
current debate on deregulation of the air transportation system, but
we do feel, however, that the type of piecemeal deregulation that is
contained in H.R. 6010 may result in the destructiçn of a coordinated
system within the area with which we are most familiar.
It has been suggested by some that we-Florida Airlines-react
to the passage of }LR. 6010 by withdrawing our registration with the
CAB, under part 298, and becoming an intrastate carrier.
Unfortunately, this is not possible, since we do have operations out-
side of the State of Florida, in addition to our intrastate routes.
Another commuter airline-which operates within the State of
Florida-had a similar situation, and it could not avail itself of such
a remedy.
We believe that the enactment of the interlining provisions of
H.R. 6010 will enable Air Florida to become predatory on established
commuter airlines within Florida.
While the Florida Public Service Commission-which regulates in-
trastate operations in the State of Florida-has acted judiciously to
date, to avoid this eventuality, future decisions by the commission
could be affected by circumstances made possible by H.R. 6010.
Consider, if you will, a specific case.
Florida Airlines serves the Fort Myers-Tampa market with four
flights a day in each direction during peak winter months.
Our customers are visitors to Florida from northern cities and
Canada.
We are able to offer our customers the same convenience as National
and Eastern for we have interline ticketing and baggage agreements
and joint fares with most certificated carriers serving Tampa.
To date, Air Florida has not made a serious effort to enter this mar-
ket because of their inability to interline.
Under the provisions of H.R. 6010, this is no longer true.
If Air Florida were to apply for this route, offering DC-9 equip-
ment, the commission would experience considerable pressure from
certain parties in the Fort Myers area to approve jet service.
Reaction to such pressure would cause the demise of Florida
Airlines.
In conclusion, we cannot emphasize enough the adverse effects that
H.R. 6010 will have on the commuter carriers within the State of
Florida, particularly Florida Airlines.
The provisions of H.R. 6010, relative to interlining, should be re-
scinded, and Air Florida should be left to serve the needs of the major
cities within the State, while the commuter airlines serve Florida and
the Nation.
Thank you very much.
Mr. ANDERSON. Thank you, Mr. Marthaler.
I have just a little clarification.
A moment ago, we were told that none of the Florida airiines on
this map have, connections outside of the State of Florida.
Apparently you do.
You did say: "We have operations outside of the State of Florida,"
did you not ~
PAGENO="0111"
105
Mr. MARTHALER. Yes, sir; we have a sister company that is called
Air South.
It is operated by Florida Airlines.
Air South presently flies from Atlanta to-I thrnk someone is there
this weekend-Saint Simons Island.
We `will also be commencing service from Atlanta to Hilton Head,
S.C., under the name of Air South.
Mr. ANDERSON. None of your airplanes-Florida Airlines' air-
planes-cross the State line?
Mr. MARTHALER. Not at the present time.
Up until about a year ago, we did offer service from Sarasota and
Tampa to Jacksonville and Saint Simons Island.
This was more or less of a necessity to interchange aircraft from
our main `maintenance base in Sarastota to the route up in Georgia.
Mr. ANDERSON. When you say another commuter airline in Florida
has had a similar situation, is that one that has an association with a
subsidiary airline, or something like yours, or do they actually cross
the State line?
Mr. MARTHALER. No; this is the Naples-Provincetown Airlines,
which operates in Massachusetts and Florida.
Mr. ANDERSON. Do you think it likely that Air Florida will try to
enter markets served by Florida Airlines?
Mr. MARTHALER. I think there are certain markets that we serve
that Air Florida would be interested in; yes.
Mr. ANDERSON. If they do file with the public service commission
an application to enter your markets, do you think that the public serv-
ice commission will take account of your concerns-the economic effects
and so forth on your company-before they approve the application?
Mr. MARTHALER. I think they would give very serious consideration
to our situation; however, going by past experience and some other
issues that have gone before the commission-local community pres-
sure can get extremely heavy on the commission, particularly when
you are considering a DC-9 versus a DC-3, and a non-air-conditioned
and nonpressurized aircraft-unfortunately, down here in the summer,
they get a little bit warm.
Mr. ANDERSON. Mr. Hammerschmidt.
Mr. HAMMERSGHMIDT. Thank you, Mr. Chairman.
Mr. Marthaler, you know that one of the projected end results of the
House deregulation bill that we now have before us-that we are
marking up-would be to create a relatively large third-level carrier
system, with the assumption being that the currently operating com-
muter lines would make the most significant contribution to that
concept.
I realize, from what was said here earlier-and which we already
know-that the State of Florida is somewhat unique because of its
boundaries and lack of connections with interstate lines.
It appears-from what I have heard from the commuters her9-
that this might not occur at all, and, in fact, that we might be doing
great damage to commuter airlines with the deregulation bill.
Not only while it is the subject of these hearings, but while we
have the commuter operators hei~e, I think this is a pertinent question,
because H.R. 6010 went somewhat in that direction.
PAGENO="0112"
106
Would you comment on my original question about the deregulation
bill?
Mr. MARTHALER. Congressman, if I may, I would like to ask my
associate, Mr. McMaster, to come up and comment on some of these
things.
My affiliation in the commuter field has been relatively limited.
Mr. McMaster has considerably more experience than I do.
Mr. ANDERSON. For the reèord, Mr. Jim McMaster is the southern
regional manager of Florida Airlines.
Mr. MARTHALER. Yes.
Mr. MOMASTER. The situation on deregulation that you brought up
just now-we are kind of caught in the middle of the situation here.
The problem that brings the whole thing into focus-why we are
here today, really-you had a situation in Florida where you had a
commuter airline system.
You had several commuter airlines operating, and the State came
up with regulation, which was needed, back in 1972. -
Everybody was putting everybody else out of business.
This enabled a company named Air Florida to come into existence,
operating like a PSA.
Our problem is-with 6010, specifically, and, also, it carries forward
to what you are talking about there-that Air Florida is really get-
ting in the back door, and we are not against it just because they are
getting something that we are not.
They are getting something that we have.
We made sacrifices, and we made a decision back in 1972 that we
did not want to operate big airplanes.
We did not want to carry people from Tampa to Miami.
We wanted to carry people from Fort Myers to New York by
working with other airlines.
We were tied up, and we could~ not fly any airplanes.
At that time, we could not fly any airplanes that weighed over
12,500 pounds, as a matter of i~act, which typically meant that we
could carry about 10 or 15 passengers.
Now, Air Florida gets into business, alleging that they are going
to carry people between Tampa and Miami, and between Orlando
and Tallahassee, and so forth and so on, and they carve out a niche
in the market, and they do-to hear them talk-a credible job.
They say they make money, so they must be doing the right thing,
but then they want to come in and take what is our market-what
we are allowed to do-away from us.
They do not want to go through the expensive certification before
the CAB, as it is called for under the current Aviation Act~
They do not want to spend the money to become a carrier under
part 401.
*They do not want to make the sacrifice of flying small airplanes.
They want to fly bigger planes, and they want to be a big airline,
and they want to make connections, and they want to have nobody
regulating them, whatsoever, except maybe the State, which you are
now telling me will be wiped out, or, from what I have heard today,
it will be wiped out, potentially.
Mr. HAMMERSCHMIDT. I thank you for your response.
PAGENO="0113"
107
Mr. ANDERSON. Before YOU sit down, Mr. McMaster, we have a prob..
lem, too, in that the commuter association-whatever it is, and it is
kind of fragmented, but it is pretty vocal-has endorsed our bill, and
many things in our bill were presented to us by the commuter associa-
tion, including the 56 seats, the possible subsidy in place of some of the
local joint fares and loan guarantees.
These were all put in at the request of your association.
Could you enlarge a little bit upon thai?
Mr. MCMASTER. If all you had was the bill that you are talking
about there, we would certainly be 100 percent behind it.
It is just like Air Sunshine said today.
Those are things that we support.
We agree with those, but you crank into that the effects of 6010,
and it really has a deleterious effect upon us, ultimately.
Now, we are potentially-the things that we have to give up in order
to get that bill-we have to give up State regulation.
In order to get that bill, we lose State regulation.
Mr. ANDERSON. Which bill is this?
Mr. MOMASTER. You are talking about the Federal loan guarantees,
and everything else, and I believe that is the same bill, or it is in the
same discussion of this that precludes State regulation, if you have
interstate travel.
Am I not correct that it is basically the same bill?
Mr. ANDERSON. The regulatory reform bill; yes.
Mr. MCMASTER. We lose that State route proteOtion, which we do not
mind if we are competing with other airlines on the same basis.
In other words, they are restricted to 56 seats, but we do not have
that.
We have Air Florida, who can interline and who can fly on our
routes, but they can fly a 150 or 200 seats, if they want to, because
of 6010.
The tie-in is what we are afraid of.
Mr. HAMMERSOHMIDT. Let me ask you this: Do you agree with the
previous witness?
Do you have the same apprehensions that he does: That if the Fed-
eral Government preempted the State of California's regulations,
would this-
Mr. MCMASTER. The State of Florida's regulations.
Mr. HAMMERSCHMIDT. Yes; if it eliminated them.
Mr. MCMASTER. It is awfully hard to say on something like that.
Yes; I would say that it would create a problem under the present
circumstances, with 6010 in effect.
Mr. ANDERSON. Should the States, such as the State of Florida, be
allowed to regulate service which operates mainly to carry passengers
at the beginning or end of an interstate trip? Is the regulation of this
service not a matter of legitimate Federal concern?
Mr. MOMASTER. Well, we at Florida Airlines have always considered
that it was. . .
It is our contention that we are an interstate air carrier.
We have always felt that we were, and even to the point that it has
always been our opinion that, if we wanted to excluded carrying
intrastate passengers, we really would not even need the public service
commission's permission.
28-911 0 - 78 - 8
PAGENO="0114"
los
We have never decided to challenge that, because we liked carrying
the local passengers, also.
Mr. ANDERSON. Why are you opposed to the preemption?
Mr. MOMASTER. Because you have now let them-well, I am not ex-
pressing myself very well, but you have let Air Florida out without
regulation.
The CAB is not going to regulate Air Florida.
The public service commission is not going to regulate Air Florida.
Air Florida has no restrictions on them.
We have restrictions on us: 56 seats.
That is our restriction.
We have restrictions, but they do not.
They can fly where we can fly.
We can fly where they can fly, but they can use a bigger airplane.
Mr. ANDERSON. Air Florida would have the same restrictions that
you would have.
Mr. MCMASTER. Do you mean the 56 seats?
Mr. ANDERSON. Under the preemption-the one that we are talking
about, as it is written now-apparently any airline that crosses a line,
and even this further interpretation that any airline that carries any
passenger who is going to eventually be an interstate passenger-
Mr. HEYMSFELD. That is inadvertent.
Mr. ANDERSON. You think that is inadvertent?
Mr. HEYMSFELD. Yes.
Mr. ANDERSON. All right.
If they get a CAB certificate and go outside of the State, they are
going to be interstate.
Mr. MCMAS~ER. Are you telling me that Air Florida will not be able
to fly DC-9's?
Is that correct?
If that is correct, we have no objection.
If they are going to be limited to 56 seat&-
Mr. ANDERSON. They would have to get a CAB certificate to use
D~J-9's.
Is that not right?
Mr. HEYMSFELD. I think the intent of the preemption provision
that is now pending is that, if Air Florida continues doing what it is
doing today, there is no preemption.
If Air Florida gets its certificate for an out-of-State route from
the CAB, then there is preemption, and, once they get that certificate
for the out-of-State route, all of their State routes get added to their
CAB certificate, and then they will be regulated by the CAB.
Mr. MOMASTER. If they carry interline passengers-interstate
passengers, but on an intrastate route, only-are they not still pre-
empted by State-
Mr. HEYMSFELD. No; I do not think that was the intent of the pro-
vision that is now pending.
Mr. FASCELL. Excuse me, but may I inquire at this point?
Mr. ANDERSON. Mr. Fascell.
Mr. FASOELL. Do I understand you to say that what the proposed
legislation intends is that the 298 exemption will still apply?
Mr. IiE~rsr~rn. The treatment of the commuters is different.
PAGENO="0115"
109
For a commuter, there is immediate preemption, if they are carrying
interstate traffic.
They are already operating under the CAB commuter exemption
Mr. FASCELL. A 298 exemption that generates $1 of revenue from
an interstate passenger would not be an exempt carrier.
He would be deregulated.
Mr. HEYM5FELD. They are deregulated under part 298.
Part 298 would govern all of `their services.
There would be preemption of further State regulation.
Under 298, the CAB treats commuters as basically unregulated
carriers.
They may charge what rates they want.
The preemption section says that the commuters who are taking
advantage of that, and carrying interstate passengers-the States could
not adopt an inconsistent regulatory scheme, but, for an airline op-
erating large aircraft, such as Air Florida, which does not qualify
under the CAB commuter exemption, there would be no preemption
until they got a CAB certificate for an out-of-State routing.
Mr. FASCELL. What would be the regulatory requirement, if any,
with respect to operations intrastate?
That is the point that I want to get to.
What would be the regulatory requirement of that same airline?
Mr. HEYMSFELD. Once there was preemption in their State routes,
under the preemption section, that would be put into the CAB cer-
tificate, and they would be federally regulated by the CAB.
Mr. FA5CELL. You would have federally regulated airlines against
the 298's, which are unregulated.
Is that not correct?
Mr. HEYMSFELD. By Federal policy.
Mr. FA5CELL. By Federal policy?
Mr. HEYMSFELD. Yes.
Mr. FASCELL. Under the law, the 298's would come in under regula-
tion because they generated a dollar of interstate traffic, and, therefore,
you know, you have open entry.
That is the whole point.
You would have open entry for all airlines, whether they are 298
exempt or not.
Mr. HEYMSFELD. Well, I think that the-
Mr. FASCELL. The limitations on the 298's would still exist.
That is the way I understand it, but I'm not sure I am right.
Mr. HEYMSFELD. I would like to take one more crack at it.
If Air Florida got a Federal certificate, and it were preempted, I
think the situation would be that Air Florida would be regulated as a
large aircraft operator.
That is how it would be regulated by the CAB for all of its routes,
and how much regulation or deregulation there were would depend
upon the rest of the regulatory reform bill.
Mr. FASCELL. Let us assume for the moment that there is no dereg-
ulation providing automatic entry.
In this case, we will just use Air Florida because it happens to be
handy. . .
Let us say that they are certificated; all right?
PAGENO="0116"
110
Mr. HEYMSFELD. Yes, sir.
Mr. FASOELL. You have now the situation of an unregulated carrier
that is exempted under 298, and then you have the case of a regulated
carrier who is going to the CAB, and that regulated carrier wants to
expand its intrastate routes.
The exempt carrier is then forced to go to the CAB to compete.
Mr. HEYMSFELD. I think that the exempt carrier would have author-
ity under part 298 to operate in the markets where he wants to.
Mr. FASCELL. Except that he is operating with smaller aircraft~ be-
cause of the limitations, and, whether that is an advantage or a dis-
advantage would be anybody's guess.
I have seen people with the bigger airplanes who have had to get
out of the market because they could~not serve the market.
The only point that I am making is: You are saying that they are
both federally regulated carriers, and, therefore, their fight has to be
at the CAB level.
That is the only point that I am making. I am not saying that it is
good or that it is bad. I am just saying that this is where it would go.
Mr. ANDERSON. That is under the present law, as it exists right now.
Is that not correct?
Mr. HEYMSFELD. For interstate carriers. The commuters have free
entry, and the certificated carriers do not. On the other hand, the
commuters are limited to the smaller aircraft.
Mr. ANDERSON. Mr. Hammerschmidt.
Mr. HAMMERSCHMIDT. I have no more questions.
Mr. ANDERSON. Mr. Fascell.
Mr. FASCELL. Thank you, Mr. Chairman. I have nothing further.
Mr. ANDERSON. Our final witness is Mr. John C. Van Arsdale, presi-
dent of Naples Airlines.
TESTIMONY OP JOHN C. VAN ARSDALE, PRESIDENT,
NAPLES AIRLINES
Mr. VAN ARSDALE. I would like to read my statement, sir, because
I have covered some points that have been raised as questions here
today.
First, I would like to thank you for holding this hearing, as you
promised on the floors of Congress to Representative Sikes and to
the Congressman from my home area, which is Massachusetts, Gerry
Studds. I certainly appreciate the consideration that you are giving
to this matter.
I am John C. Van Arsdale, president of Provincetown-Boston, Air-
line, Inc.
It is a Massachusetts corporation that is doing business as Province-
town-Boston Airline, Inc., in Massachusetts, and as Naples Airlines
in Florida.
I personally started the business on November 30, 1949, in Massa-
chusetts, and PBA is the oldest commuter airline in the United States.
On January 1, 1960, we started Naples Airlines in Naples, Fla:, as
an operating division, to compliment the highly seasonal operations
in Massachusetts.
We hold Florida Public Service Commission Certificate of Public
Convenience and Necessity No. 1, granting us scheduled aircraft an-
PAGENO="0117"
111
thority, with aircraft of 49 seats or less, between Naples and Miami,
Naples and Tampa, Naples and Punta Gorda-Port Charlotte, and
Punta Gorda-Port Charlotte and Tampa, and, finally, Punta Gorda-
Port Charlotte and Miami.
We carried 170,000 passengers in Florida in 1970, of which over 90
percent were interline connections with the large certificated carriers
at Tampa or Miami.
We have joint fare agreements with Braniff, Continental, Delta,
Eastern, National, Northwest, TWA, United, and Western.
The original Civil Aeronautics Act of 1938-later amended by the
Federal Aviation Act of 1958 and subsequent changes-among other
things, defines interstate commerce as the transportation of passengers
originating in one State and terminating in another.
It further establishes the Civil Aeronautics Board as the economic
regulatory agent for the enforcement of the act.
In 1951, while licensed by the Massachusetts Aeronautics Commis-
sion to fly between Provincetown and Boston, PBA-my company--
was issued a cease and desist order by the Civil Aeronautics Board for
engaging in interstate commerce, in violation of the act.
I was forced to apply for-and later obtained-a `CAB exemption
order to operate this service.
In Florida, we were first issued a CAB order granting an exemp-
tion to operate 32-passenger DC-3 aircraft in 1968, for a period of
2 years.
We have regularly-and at a great legal expense-applied for re-
newal orders, requiring proof of economic need and public benefit of
the requested exemption.
Later, this exemption was increased to 50 seats, to permit Martin 404
operation, and this authority is currently in effect under CAB
jurisdiction.
We are restricted to propeller-driven aircraft of 50 seats or less.
Outside of Federal jurisdiction, and under States rights authority,
it has always been possible for any air carrier to commence operations
wholly within a State, as an intrastate commercial operator. The car-
rier is issued only an aircraft operating certificate by the Federal
Aviation Administration.
Some States establish economic regulation of intrastate carriers;
some do not. These intrastate carriers are not recognized by the Civil
Aeronautics Board, as they could not engage in federally legislated
interstate commerce. I guess we have the same type of situation in the
trucking industry.
In 1972, after a chaotic period of economic failures by Florida car-
riers, the Florida legislature passed a law regulating carriers within
the State of Florida and assigned supervision to the Florida Public
Service Commission.
This body has certificated Air Florida among others; however, Air
Florida-aS relatively newcomer to the Florida scene, and with a very
poor economic track record-is the only carrier operating under the
Florida Public Service Commission's economic control, while, at the
same time, it is not recognized or regulated by the Civil Aeronautics
Board.
Air Florida operates pure jet DC-9 aircraft-an operational au-
thority that has consistently been denied by CAB exemption orders.
PAGENO="0118"
112
When Congress passed House Bill 6010 last fall, after inserting
the words: "And the State of Florida," it effectively bypassed for one
carrier alone-Air Florida-long established CAB regulatory policies
and procedures.
Air Florida ceased being an intraState carrier, as respects interline
privileges, and through congressional action, acquired a backdoor
CAB exemption to operate DC-9 aircraft in interstate commerce.
The track record of Congress, in writing specific technical regula-
tions, such as the inserting of emergency locator transmitters into the
Federal aviation regulations, following the loss of a fellow Congress-
man in Alaska, has been less than successful.
We feel that the same is true in the interline provisions of House
Bill 6010.
In a few words, Congress writes a whole new set of rules for an
established industry.
It would be like Congress passing a law that baseball rules will,
henceforth, require four strikes before you are out.
Long established comthuter air carriers within the State of
Florida-who have pioneered and developed routes, such as~ Naples
Airlines-are sitting ducks for predatory and destructive competition
from a large, pure jet air carrier.
Before the interline provisions of House bill 6010, these commuters
had some feeling of security, as they well recognized that Florida
is primarily an interline market.
Our only salvation now lies with the regulatory wisdom of the
Florida Public Service Commission, but this body is more susceptible
to the whims and pressures of local State politics.
The future is even more clouded by the current introduction in
the Florida legislature of Senate Bill 187, by Senator Tom Gallant
of Sarasota, to abolish the State law regulating carriers within the
State of Florida.
If this bill is passed, we question the effectiveness of House Bill
6010, which refers to authority within the State of Florida, granted
by the Florida Public Service Commission of such State.
Naples Airlines believes that House Bill 6010 is special-interest
legislation, solely for Air Florida, and that it is extremely unfair,
as it authorizes the big guy to come in on top of the little guy who
has pioneered and developed commuter airline service.
The end result may well be no service at all, and small airline history
in the State of Florida clearly bears this out.
The Florida interline provisions should be repealed from House
Bill 6010.
Thank you.
Mr. ANDERSON. Thank you very much, Mr. Van Arsdale.
What has your experience been in arranging joint fares with CAB-
certificated airlines?
Mr. VAN ARSDALE. We have found them to be very willing to do so
* in competitive situations, and this has been our case in Naples and
also in Punta Gorda.
Mr. ANDERSON. Do you think it likely that Air Florida will try
to enter the Florida markets which Naples serves?
Mr. VAN~ ARSDALE. I do not know the internal workings of Air
PAGENO="0119"
113
I certainly think it is a possibility, and I think that the forum for
this would be the Florida Public Service Commission.
The thing that I feel is unfair about this is: If they enter this
market, they are basically becoming an interstate carrier with author-
ity that would normally be granted by a Federal regulatory board,
but, instead, Congress is passing this authority back to the Florida
Public Service Commission, and that-to answer your question, I do
not know whether they would come into our market or not.
I certainly think that it would merely he a question of an applica-
tion to the Florida Public Service Commission and a question of
whether they granted it or not.
I do not want to go back to these chaotic days of the middle 1960's,
which Congressman Fascell has so clearly indicated were very poor
and not in the public interest.
Destructive competition in airline history in Florida has not proven
to be in the long-range best. public interest.
Mr. ANDERSON. Do you favor the CAB system of free entry and no
regulation of commuters, or do you favor the Florida system of re-
stricted entry and route protection of Florida commuters?
Mr. VAN ARSDALE. I prefer the Florida system.
I think-I just feel that you can encourage destructive competition,
as we have seen it.
We saw the case of Executive Airlines and Shawnee in the State
of Florida, where they rode all over each other, and then Executive
disappeared in the middle of the night and Shawnee went down the
tube a little while later.
You have to-you do not allow two telephone companies, and you
do not allow two electric light companies.
You try to-they should be more regulated in the form of utility,
and not in the form of a wide open-an airplane is something that
you cannot run a half of.
When you start getting destructive competition, you wind up with
no service at all.
I have some serious concern over this.
Mr. ANDERSON. Mr. Hammerschmidt.
Mr. HAMMERSOHMIDT. I do not believe that I have any questions,
Mr. Chairman.
I do know, Mr. Van Arsdale, that Garry Studds has given us your
position quite clearly on the House floor, and, in fact, has inserted a
letter from you to him into the record, so we knew, before we got here,
what your position was
I appreciate your testimony.
Mr. VAN ARSDALE. I appreciate your taking the time to listen to it.
Mr. HAMMERSCHMIDT. Thank you.
Mr. ANDERSON. Mr. Fascell.
Mr. FASCELL. I have no questions, Mr. Chairman.
Mr. ANDERSON. Mr. Van Arsdale, thank you very much for a very
fine presentation.
Mr. VAN Aii5DALE. Thank you, sir.
Mr. ANDERSON. 1 still have the statement that was given to us ear-
lier by Mr. Doyle E. Hardin, general manager of Marco Island
Airways.
PAGENO="0120"
114
He has not come in.
If there is no objection, his statement will be made a matter of the
record.
[No response.]
Mr. ANDERSON. There being no objection, it is so ordered.
[Statement referred to follows:]
STATEMENT OF DOYLE E. HABDIN, GENERAL MANAGER, MARCO ISLAND AIRWAYS, INC.
EFFECTS OF INTERLINING BETWEEN COMMUTER AND MAJOR AIR CARRIERS
Passenger convenience
Marco Island Airways, Inc. derives approximately 75 percent of its total pas-
senger volume from interline exchange with the major air carriers.
Without interline agreements which permit through ticketing and baggage,
passengers would be required to check themselves through only to the connecting
points we serve and would then be required to purchase continuing tickets and
re-check their luggage. Needless to say, the inconvenience to the passenger would
be very great and would cause the commuter industry many problems with not
only their operations but place a tremendous obstacle before their marketing
efforts.
Passenger revenues
Marco Island Airways, Inc. has joint fare agreements with 10 major airlines
in the United States. These joint fares allows passengers traveling between 73
U.S. cities and Marco Island to enjoy a sizeable fare reduction compared to point
to point fares between their origin or destination and Marco Island, Florida.
Marco Island Airways, Inc. derives about 60 percent of its passenger revenues
from its overall passenger yield from these joint fares. The offering of these joint
fares is without doubt, the best marketing feature we have to maintain our pres-
ent market and continue a reasonable rate of increase.
Interline exchange of passengers between commuters and major carriers is
not only absolutely necessary but economically vital to preserve the National
Air Transportation System.
Mr. ANDERSON. Is there anyone else who wishes to be heard before
we close this meeting?
Is there anyone who would like to say something?
Mr. FASCELL. Mr. Chairman, let me just express my appreciation
to you, the members of the subcommittee, and the staff for taking the
time to listen to the people here in Florida.
This is a matter that is obviously of great concern to all of them.
We wish you well in your deliberations, and we urge your very
prayerful consideration of this important matter.
Mr. HAMMERSCHMIDT. Mr. Chairman, I do not think that I said it
earlier, or, if I did, I did not elaborate upon it, but I want all of these
gentlemen to know what a great job Dante Fascell does in Washingtom
As you all know, he is very highly respected, and we listen to him.
I am delighted to have been here.
Mr. BERVALDI. Mr. Chairman, may I say something now?
Mr. ANDERSON. Yes, sir.
Mr. BERVALDI. I would like to ask you to put this SARC study mto
the record.
Mr. ANDERSON. Is there any objection?
[No response.]
Mr. ANDERSON. There being no objection, that study will be made a
part of the record. ISee p. 116.]
Mr. BERVALDI. The other thing that I would like to say is that the
Commuter Association of America has endorsed this open entry pro-
PAGENO="0121"
115
vision, and they have done so because, in many States of the country,
that may be required.
I hope that our point that the State of Florida has unique charac-
teristics and needs the regulation of the State authoriy-its markets
are different and its boundaries are different, and it is not surrounded
by other States.
I hope that we have made this point, and I hope that the State of
Florida will be given special consideration.
Mr. ANDERSON. Thank you very much.
Mr. VAN ARSDALE. Mr. Chairman, if I may make one further state-
ment and answer a question which you addressed to some of the other
speakers, but not to me, with respect to prorates under the joint-fare
agreements that we have: We settle with seven carriers in three differ-
ent manners, and none of them are by the CAB formula.
Mr. ANDERSON. They are all negotiated?
Mr. VAN ARSDALE. They are either negotiated or imposed.
Mr. ANDERSON. Do they have to have CAB approval?
Mr. VAN ARSDALE. No, sir; there is no approval on the prorate.
The prorate is strictly between the two carriers.
The most notorious rival that I have is United.
With Eastern, Delta, Northwest, and National we have an agreed
prorate that is what we consider reasonable.
It is less than our local, but it is more than the straight-rate prorate.
We have an average prorate with Braniff.
We have a straight-rate prorate with United, and it does not con-
sider the costs that are involved to the short-haul carrier.
Mr. ANDERSON. Are your joint fares also negotiated, or those CAB
approved?
Mr. VAN ARSDALE. They are all competitive, sir.
We have a common rate with Naples, Fort Myers, and Punta Gorda.
The passengers have the choice of going to any one of those three
cities.
The fare from Fort Myers to New York equals the fare from Naples
to Ne.w York, and it equals the fare from Punta Gorda to New York,
but the prorates are the problem.
Mr. HAMMERSCHMIDT. Mr. van Arsdale, I might remark that I rec-
ognized your astuteness before I heard you speak, and that is for an-
other reason.
Mr. VAN ARSDALE. What is that?
Mr. HAMMERSCHMrDT. Anyone who could figure out how to be in
Martha's Vineyard on business in the summer and in Naples on busi-
ness in the winter is a very astute businessman.
Mr. VAN ARSDALE. It took a bit of doing, and I am pleased to say
that we contribute substantially to the Internal Revenue Service,
March 15 of each year.
Mr. ANDERSON. If there is nothing further, on that note, the meeting
is adjourned.
[Whereupon, at 12:25 p.m. the committee adjourned.]
PAGENO="0122"
116
t"ni)n;
!3VSTEMS ANAL.YSIS AND flESE~RCI? cor~Po5aarIoN. :~
d/llI~/7
* April 15, 1976
Mr. Torn Webb
Secretary
Departrent of Transportation
State of Florida
Hayden Burns Building
605 Suwannee Street
Ta11ahas~ee, Florida 32304
Dear Mr. Webb:
We are pleased to subn~t our Technical Report of the Florida
Intrastate Aviation Study. This is a study of needs for scheduled
air service within the State of Florida and a plan for how those
needs may be met.
This is the most uxtensiwe study Oq intrastate air service to be
undertaken by any state. Florida's need for gocd intrastate air
service is ~.n many ways almost obvious but the means of obtaining
adequate servic~ can he very illusive. both the regulatory acd
econernic probleas as identif ted ar~~ dcscribsd in the study are
complex and not a~anable to simple solutiens.
This study has beer very challengis; and s'~ have enjoyed the
cooperation and assistance many people in the Depsrtnent of
Transportatton, the PiaL~ic Serv:ce Cerreinsics and in the reasy
cities of the State. A ~p~r~ia! ward of eppr.*~ciation is extended
to each person for the time and effort contributed.
Sinfarel; yccfs,
~
1i:.r.ry L Sweezy
* Vicc~ President
PAGENO="0123"
117
FLORIDA INTRASTATE
AVIATION STUDY
Job Number 99000-1560
Prepared For The
Florida Department Of Transportation
Division Of Planning And Programming
By
Systems Aiial~sis and Research Corporation
1801 1< Street, NW. - Suite 801
~Zashington, D.C. 20006
(202) 223-5830
April, 1976
PAGENO="0124"
118
TABLE OF CONTENTS -
FLORiDA INTRASTATE AVIATION STUDY
PAGE
NUMBER
BACKGROUND - AN INTRODUCTION I
FINDINGS AND CONCLUSIONS viii
CHAPTER 1 - STANDARDS OF ADEQUATE AIR SERVICE FOR
`FLORIDA'S INTRASTATE AIR SERVICE MARKETS 1-1
Proposed Air Service Standards For Florida 1-2
Federal And State Regulation Of Adequacy
Of Service 1-4
Concept And Design Of Uniform Air Service
Standards For Florida 1-10
Benefits To The Public 1-10
Problems And Limitations 1-10
Minimum Requirements For Air Service
Between Florida Cities 1-13
The Limitations Imposed By Intercity
* `Distance 1-13
The Minimum Effective Level Of Air
Service 1-15
The Minimum Traffic Demand To Require
And Support Air Services 1-17
Additional `Scheduling Requirements 1-18
Bibliography Appendix D
CHAPTER 2 -. REGULATORY ALTERNATIVES FOR OWIAINING
SERVICE 2-1
Statement Of The Problem ` 2-1
Possible Alternatives For A Florida System 2-2
Dependence Solely On CAB Regulatory Actions 2-3
Background 2-3
Problems Involved In Depending On CAB
Regulation Exclusively 2-5
PAGENO="0125"
119
TABLE OF CONTENTS (Continuedj
PAGE
NUMBER
CHAPTER 2 (Continued)
Beneflt5 To Fe Derived From CAB
Regulation
Dependence Exclusively On State Regulatory
F owe r s
Experience Of Other States
Problems Pith Exclusive Regulation By
The States
Benefits Of State Regulatory Control
The Integration Ot Federal And State
Regulation
Complications Of Dual State-Federal
Regulations
The Realities In Florida
Competition And Adequate Service
AIRCRAFT SELECTION
The Current Ser~iice Environment
Aircraft Currently Serving Florida Intrastate
Routes
Use Of Turbo-Fan (Pure Jet) Aircraft
Ai~rcraft Selection Criteria
Aircraft Seating Capacity
Block Speed Curves
Take-Off Performance
Performance Competition
Price Conpetition
Aircraft Used Fon Analysis
Type 2
Type 3
Type 4
CHAPTER 3 -
2-6
2-7
2-8
2-10
2-10
2-li
2-11
2-14
2-15
3-1
3-1
3-1
3-2
3-4
3-4
3-7
3-10
3-10
3-11
3-12
3-12
3-l2~
3-13
PAGENO="0126"
120
TABLE OP CONTENTS (pont in~~j
PAGE
NUMBER
CHAPTER 4 - COSTING OF AIR SERVICE 4-1
Aircraft Direct Operating costs 4-2
Relationship Of Aircraft Size To Direct
Operating Cost 4-6
Relationships Of Commuter Airline DCC
And Certificated Carrier DOC 4-7
Crew Cost 4-S
Fuel And Oil Costs 4-10
Maintenance Costs 4-10
Depreciation And Lease Costs 4-13
Other Costs 4-15
Summary Of Direct Operating Cost
Considerations 4-17
CHAPTER 5 - FLORIDA INTRASTATE AIR FARES 5-1
Federal And State Guidelines 5-1
Joint Fares 5-3
Discount And Promo~iona1 Fares 5-9
Fare Assumptions Of This Study 5-10
CHAPTE.R 6 - A FLORIDA INTRASTATE AIR ROUTE SYSTEM 6-1
Development Of Route System 6-2
Algorithm Constrnints 6-4
Judgmental Modifications Of Route Structure 6-5
Route Segments Excluded From Meute Analysis 6-7
Assumptions And Comnents On Route Analyses 6-7
Sensitivity Of Costs To Mix Of Aircraft
Types
PAGENO="0127"
121
TABLE OF CONTENTS LCc~Jy~1
PAGE
NUMBER
CHAPTER 7 - A PROPOSE1) PLAN FOR FLORIDA INTRASTATE AIR
SERVICE 7-1
The Federally (CAB) Certificated Carriers
The Commuter Carriers
The Intrastate Carriers
Action Tasks Of Proposed Plan
Coordination With The Civil Aeronautics
Board
SUBSIDY - NEEDS AND PRACTICES
Federal Subsidy Payments
The Basis For Federal Subsidy
How The Federal Subsidy Program
Operates
Flow-Through Subsidy
Subsidy And Florida's Intrastate Routes
CHAPTER 8 -
7-1
7-1
7-2
7-3
7-6
8-1
8-1
8-2
8-2
8-3
8-4
PAGENO="0128"
122
LIST OF APPENDICES
PAGE
NUMBER
APPENDIX A - AIR SERVICE AUTHORIZATION IN FLORIDA A-i
Civil Aeronautics Board Certificates A-i
Florida Pub~ic Service Commission Certificates A6
APPENDIX B - AUTHORITY, SERVICE AND SCHEDULE ANALYSIS B-i
APPENDIX C - PASSENGER FORECASTS C-i
APPENDIX D - BIBLIOGRAPHY OF CHAPTER 1 * D-i
PAGENO="0129"
123
LIST OF TABLES
TABLE PAGE
NUMBER NUMBER
1-1 LOCAL AIR TRAFFIC IN FLORiDA'S SHORTEST CITY-PAIR
MARKETS 1-16
1-2 FLORIDA'S TWENTY-SIX MOST ELIGIBLE CITIES FOR
INTRASTATE AIR TRANSPORTATION DERVICES 1-21
3-1 AIRCRAFT USEI) IN FLORIDA INTRASTATE SERVICE 3-2
3-2 CHARACTERISTICS OF REPRESENTATIVE AIRCRAFT 3-5
3-3 AIRCRAFT CHARACTERISTICS 3-6
3-4 AIRCRAFT BLOCK SPEED ANI) AVERAGE STAGE LENGTH 3-8
3-S BLOCK SPEED OF AIRCRAFT NOT USED BY CAB CARRIERS 3-9
3-6 BLOCK SPEEI) FUNCTIONS 3-9
4-1 ESTIMATED 1975 BLOCK HOUR COSTS FOR CO~1UTER
CARRIERS 4-3,4,5
4-2 BLOCK HOUR MAINTENANCE COST COMPARISON (1973) 4-11
4-3 BLOCK HOUR CREW COST COMPARISON (1973) 4-11
4-4 ANALYSIS OF DEPRECIATION COSTS PER AIRCRAFT
MILE 4-14
4-5 COST OF OJIPP.ECIATION INCURRED IN CHANGE FROM DC-3
TO DASH 7 OR CONVAIR 580 4-16
4-6 ESTIMATED 1975 COMPOSITE UNIT COSTS OF
CERTIFICATED LOCAL SERVICE CARRIERS 4-17
4-7 ESTIMATED 1975 COMPOSITE UNIT COSTS OF COI~D4UTER
CARRIERS IN FLORIDA 4-18
6-1 MARKETS ADEQUATELY SERVED - SERVICE AND SCHEDULES 6-8, 9
6-2 ANALYSIS OF COST SENSiTIVITY OF MIX OF AIRCRAFT
TYPES 6-24, 25
28-911 0 - 78 - 9
PAGENO="0130"
124
LIST OF TABLES (Continued)
TABLE PAGE
NUMBER NUNBER
B-i CARRIER AUTHORITY, SERVICE AND SCHEDULES BY
CITY-PAIRS OF PROPOSED ROUTES B-i
C-i COMBINED FORECAST OF FLORIDA INTRASTATE TRAFFIC
(1975) C-i
C-2 COMBINED FORECAST OF FLORIDA INTRASTATE TRAFFIC
(1980) C-4
C-3 COMBINED FORECAST OF FLORIDA INTRASTATE TRAFFIC
(1985) C-6
C-4 SU?~II~ARY. FORECAST OF INTRASTATE PASSENGERS
ENPLANED BY CITY C-8
PAGENO="0131"
125
LIST OF CHARTS
CHART PAGE
NUMBER NUMBER
1-1 SURFACE TRANSPORTA1'ION VLRSUS SURFACE-PLUS -AIR
TRANSPORTATION: A ~OMPARJSON 01: DOOR-TO-
DOOR ELAPSEI) TIME 1-14
5-1 COMPARISON OF CAB CARRIERS AND COM:'1UTER
CARRIERS' DAYCOACII AIR FARES IN INTRASTATE
FLORIDA MARKETS 5-4
5-2 SELECTED SERIES OF COMMUTER CARRIERS AND
INTRASTATE AIR FARES 5-S
6-1 INI)EX TO ROUTE CHARTS 6-13
PAGENO="0132"
126
BACKGROUND - TiLE NEED FOR
INTRASTATE AIR TRANSPORTATIOK IN FLORIDA
Geographic dimensions, location and other features make the State
cf Florida unique in its needs for intrastate air service. It is
a long, narrow peninsula at one extremity of the United States;
it exchanges large numbers of passengers with many communities
throughout the United States; its major traffic centers are
located linearly along the length of the peninsula. As a result
cf these characteristics the great proportion of its air trans- *
portation service (and needs) is interstate in nature, with the
result that schedules, predominantly, are so arranged that they
operate along the peninsula and service the large traffic centers.
however, there are many other communities which are far enough
apart that driving or other surface transportation is time-
consuming or tedious. These communities are substantial in size
and commercial activity and have significant interrelated interests
to justify serious attention to their intercity air transport needs.
Carriers certificated by the Civil Aeronautics Board provide much
air service to cities in Florida, including numerous flights which
permit intrastate transportation. Unfortunately this service is
not sufficient to meet Florida's total intrastate needs.
In recent years gaps in air transportation service vithin the
State have made it increasingly aFparent that Florida s needs
are not being satisfied under existing regulatory arrangements.
This situation has developed because a subetuntial part of
Florida's intrastate air transport service is authorized and
nerved, or authorized but not adequately served, by airlines
whose basic interest is in interstate, rather than intrastate,
traffic.
The concern of the State has led it to embark upon a program which
gives it a more positive role in assuring that Florida citizens
have dependable and convenient air service between points in the
Stato. The program agrees with the goal, as stated by the Dopart-
raent of Transportation, to `optimaze movEment of people and goods
within the State of Flomiua.
To assist in fommi4sting and implementing its plans for air
:ransportation, the Department of Transportation authorized
"Florida Intrastate Air Transportation Study.' This project
has as its broad objectives:
PAGENO="0133"
127
1. The determination of Florida's needs for intrastate
air transportation.
2. The development of an economically feasible air route
system to meet these needs.
3. The most logical regulatory arrangement for implementing
the system plan.
The results of tho. study are presented in this report.
The report is comprehensive, and in some respects unique. It
includes the usual economic analysis of intrastate needs and
service in Florida. However, in addition it providos guide-
lines for establishing snd enforcing service standards, a
detailed review of regulatory background and alternatives, a
broad evaluation of aircraft types -- including their costs and
operating characteristics, a model intrastate route system and a
discussion of fares. In short, the report provides the State
with a plan and supporting reference f or its decisions in almost
any area of regulatory jurisdiction.
In conducting the study the first effort was to determine the
need for intrastate air service.
Florida's intrastate traffic is comprised of three separate
categories; local origin and destination, interstate connecting
and international connecting. The local O&D passengers are those
who began and terminated their journeys within Florida. Interstate
connecting passengers fly between two Florida cities for the purpose
of taking a connecting flight to a destination in some other state.
International connecting passengers, after a flight between two
points in Florida, proceed to an international destination.
Phase I - Forecasts
The report on Phase I of this project, that of estimating the
traffic potential of those city-pairs which warrant consideration
for air service, has been transmitted to the Department of
Transportation. That document deals with alternative methods of
estimating traffic, selection of the markets, and a discussion
of forecast elements.
The work of developing the estimates of city-pair traffic, for
1975 with projections to 1980 and 1985, was extensive. It re-
quired detailed analyses of city-pair traffic behavior, the
accumulation and examination of much data on city and city-pair
characteristics which might have a bearing on air traffic
generation, comparative evaluation, method testing, and adjusting
for level of service if service was inadequate.
PAGENO="0134"
128
The essential objective of the study, to determine those combinations
of cities between which intrastate air service might be economically
successful and to devise a p-lan so that such service might be
assured by the State, has not been changed or affected by those
events associated with the passage of time. For these reasons
t:he substance of the study remains valid, while we acknowledge
that in a particular detail change may have occurred.
The study should be used as a guide for the State and for intrastate
operators. It provides a great amount of valuable background data,
analytical methods and policy guidance. The final decision as to
service needed in the public interest at a particular time rests
with the State. In a free enterprise system the~ final decision
as to the expected viability of an operation ultimately rests
with the operator who must in"est his assets.
Public Service And The StatusQ~~
The conclusions of the study will be controversial and, since full
implementation of them will require legislative action, they can
he easily brushed aside as impractical or unacceptable. The
controversial conclusions relate to the proposed restraints on
CAB-certificated air carriers as a last resort in efforts to
obtain needed service between Florida cities. Even as a last
resort the finding is not made lightly or without concern that
it has inherent objectionable qualities. The research and findings
support no other conclusions if the objectives of public service
are to be achieved. The first and overriding criteria or standard
throughout the study was service. A brief summary statement of
explanation is appropriate in this introduction.
I~ir service between over ?O pairs of cities in thestate is
inadequate. The Federal Government (CAB) does not have power to
authorize or require that any airline provide adequate service;
only the State can exercise that authority. Under Florida's
current statute the P~iblic Service Commission lacks the power to
require a CAB-certificated carrier to provide any service.
The long history of intrastate service by the CAB carrier shows
conclusively that those carriers, with on'y very minor exceptions,
schedule for interstate opportunities with little regard to intra-
Florida. needs. The study finds that the operation of their
inadequate services in many m~rkets is such that an intrastate
carrier cannot establish itself and survive as a head-to-head
competitor or by trying to "fill out' an adequate service pattern
in these markets. It also finds thatFloricia markets are not
large enough to permit an intrastate carrier to establish itself
es a competitor by the "high frequency-low fare' technique used
in Texas and California.
111
PAGENO="0135"
129
As a result of the analytical work described above a total of
ninety-three markets merit consideration for air service. These
markets serve as the basis for determining, among other things,
the route patterns to be developed, the types of aircraft to be
considered, the types of carriers to perform the service, and
regulatory actions required to implement the route system.
Estinates developed in the Phase I report may be summarized as
follows:
Florida Intrastate Passengers
1975 1980 1985
Intrastate Origin and
Destination 1,519,780 2,715,080 4,321,730
Interstate Connecting 981,960 1,614,270 2,422,730
International Connecting 258,310 370,890 532,500
Total 2,76,0,050 .4,700,240 7,276,960
The figures show clearly the importance of interstate and inter-
national traffic, which makes up more than 40% of the total
intrastate passengers. The projections reflect an expectation
that the number of intrastate air passengers will increase,~ pro-
vided adequate flights are available. Increases on a statewide
basis are expected to be about 11% annually until 1980 and 9%
annually until 1985. By city and city-pair the rates of growth
of local traffic are related to forecast growth of personal in-
come for the cities. These rates of growth for local passengers
vary from .7% to 14% per year through 1985. Traffic estimates
for the individual city-pairs as reported in Phase I are given
in Appendix C.
Standards Of Service
It was recognized that u~iless standards were dstablished and
adhered to, service offered in effect could be nonresponsive to
the need'. Standards for service to the communities and standards
of service by the airline were therefore developed.
With the markets and levels of traffic determined, a survey was
made of aircraft types which could logical~y be used to provide
the necessary service. Because of the wide variance in levels
of passenger traffic, numerous types -- ranging from f our-
engined jet to single reciprocating engine types -- were con-
sidered. Operating characteristics were studied, along with the
cost of operating the various types in Florida markets, and
representative, usable aircraft selected.
A review of fare levels and fare structures was then made with
suggestions of the probable best approach for Florida, recognizing
traffic demand and aircraft characteristics. -
iv
PAGENO="0136"
130
?rom the foregoing analyses a route structure for Florida
intrastate air traffic has been delineated, and a determination
::~ade of whether the routes can be operated on an economically
feasible basis. The route structure is described and evaluated
in this report. Finally, a program for implementing the route
structure was developed, the regulatory options available to the
;tate are reviewed, and realistic actions are recommended.
The research developed during the course of the project, as
oresented in this report, outlines intrastate air transportation
requirements for Florida. It also provides a reasonable blueprint
for the State to follow in its efforts to achieve air service
commensurate with its requirements.
Effect Of Time Lag
This study has been prepared over a period of two years. Numerous
changes have occurred subsequent to preparation of the various
parts of the report. Wherever, the reader encounters reference to -
facts which he knows have subsequently changed the question na-
turally arises as to the validity of the conclusions relying upon
those facts.
Airline schedules and fares have been in an almost constant state
of flux and it is in this area where the most significant changes
might occur. However, change in schedules and fares has always
been frequent in Florida and data compiled at any point in time
~ould be "out of date" a month later. Such changes do not effect
the findings of need for service or available total traffic.
For example, a major change in CAB-certificated carrier operation
occurred recently when Southern Airways began operating between
Tallahassee-Orlando and Ft. Lauderdale. This study finds a need
for service between Ft. Lauderdale and Tallahassee as part of the
recommended Route 5. Service between Ft. Lauderdale and Orlando
was found to be adequate in 1975 and Southern's service is also
adequate. The fact that these services are nov provided by an
interstate rather than an intrastate carrier does not affect the
findings of this study.
:~he forecasts and estimates are all made on a total mcrl:et rather
than a share of ezarhet basis so that changu in a particular service
pattern does not have an effect upon the forecast. There is one
exception to this which should be noted. Eastern Air Lines has
been granted an interstate route between Ft. Flyers and Atlanta,
-3eorgia which will now handle a large volume of the traffic which
oreviously was required to change planes at either Tampa or Miami.
This traffic thus disappears from the intrastate Florida traffic
volume to and front Ft. Myers and reduces the frequency of flights
previously required between Ft. Myers and Tamma and to a lesser
degree between Ft. Myers ard Miami. It does not however remove
the need for a route between Tampa and Miami via Ft. Myers.
PAGENO="0137"
131
The study concludes that adequate service can be obtained in all
of the 76 identified markets through a combination of CAB-
certificated carriers and intrastate carriers without subsidy.
The plan requires several action steps controlled by the State
Government.
1. Improved coordination with CAB on route awards
affecting Florida.
2. Legislative authority to certificate and control
the intra-Florida operation of interstate carriers.
3. Adopt minimum standards of service.
4. Issue certificates to existing airlines in all
markets they now serve, provided they agree to
provide at least the minimum standard of service.
These carriers are given a clear "right of first
refusal", but in markets they choose not to serve
they will not be required to serve or permitted
to carry intrastate passengers. 1/
5. Award all other markets to intrastate carriers.
There are other recommendations about ticketing and baggage
authority and Federal/State jurisdictional issues to be resolved,
but these have little use if the above route authority recornmenda-
tions are not implemented.
The mechanisms to implement the recommendations were nota part
of this study. It is clear however that legislative authority
is needed to take even the first steps involving the interstate
carriers. It can be expected that opposition will arise to any
restraint on any operating carrier. The opposition will be from
the carriers and from some of the public: the carriers -- because
they will be forced to provide adequate service or give up the
privilege to do so; the public -- because there may be an intra-
state flight operating between two points in Florida on which an
intrastate traveller would be refused.
The premise of the study is that adequate seryice is desired by
the public and that a carrier willing to provide adequate service
will be allowed to do so at a profit. Carriers unwilling or un-
able to provide adequate service will not be allowed, by erratic
scheduling, to make the service of the willing carrier unprof it-
able. Under the plan the major markets of the State (Miami-Tampa,
Miami-Orlando, Miami-Tallahassee and Orlando-Tallahassee) are to
be authorized to any carrier meeting minimum standards of service.
1/ They would carry connecting and stopover passengers who have
- an out-of-state origin or destination on their ticket.
vi
PAGENO="0138"
132
The other, and much lesser, markets will be restricted initially
to a single carrier required to meet the standards.
The content of the study is persuasive in justifying its position
that the status quo will not produce adequate service and viable
intrastate carriers, and that the plan presented can achieve this
objective.
The Standards of Service are fo~nd in Chapter 1 and the Plan for
Intrastate Air Service is given in Chapter 7.
vii
PAGENO="0139"
FINDINGS AND CONCLUSIONS
cp~l-StandardsoL~ry4~
The establishment of standards is essential as a means to assure
fairness and equity in providing for access to air transportation.
Communities will know what services they should have, and carriers
will know what, as a minimum, is expected of them. In practice,
the administration of standards is sore art than science, but,
without the basic points of reference, any semblance of objecti-
vity is lost.
Find~~__
1.
and Conclusions
Service standards for intrastate air transportation are
necessary, to make certain that the service will be
adequate, and to fix the responsibility for maintenance
of adequate service.
2. Standards for service to a community should be related
to the density of traffic and availability of alterna-
tive air transportation at proximate locations.
3. Standards of service should provide for minimum
frequencies, proper departure times and minimum
intermediate stops.
4. Service standards have not been established by the
Civil Aeronautics Board or any of the States although
the Board has recognized on numerous occasions that
service in certain markets was inadequate.
5. The route analyses demonstrate that the routes can be
operated profitably under the recompended service
standards.
133
viii
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FINDINGS AND CONCLUSIONS (Continued)
~ Regulatory Alternatives For Obtaining Service
primary markets in Florida are served by airlines certificated
~y the CAB. These carriers are not responsive to specific
~ntrastate requirements, because of transcending opportunities
in interstate transportation. Yet these same intrastate services
are beyond the reach of the CAB (which regulates interstate
transportation only) and, in Florida are exempt from PSC regula-
tion. Thus the Florida regulators are frustrated in any attempt
to have these carriers furnish service which meets the State's
standards of adequacy. On the other hand, if supplementary
service is authorized by state regulation to insure service
adequacy, the CAB-certificated carriers are a competitive fact
of life with the end result that the supplemental service can
expect to be uneconomic because of competitive pressures.
Findings and Conclusions
1. A plan which utilizes the positive features of
Federally-regulated services, with supplemental
service authorized by the State, presents the most
useful regulatory alternative available to the
State for insuring adequate intrastate service.
2. The Civil Aeronautics Board appears to lack
authority to regulate service between cities
within a single state.
3. Florida's statutes appear to exempt carriers
holding CAB certificates from State regulation
to the extent that those carriers cannot be re-
quired to provide adequate service.
4. In many intrastate markets an intrastate carrier
will need a share of interstate connecting traffic
to financially support adequate operations.
5. Several route segments betwean F~orida cities lie
ovor the high seas and appear to he interstate
routes under the definitions of the Federal Aviation
Act. A chanqe in the Federal 3ev may be needed to
put these routes under Sdct.e regulation.
6. Because of the unique geography of Florida the
intrastate regulatory experience of California
and Texas is not transferable.
ix
PAGENO="0141"
135
Findings and Conclusions (Continued)
.7. Unrestrained competition has resulted in failure of
carriers and poor service in the past and will not
assure adequate service in the foreseeable future.
8. Intrastate carriers nay use any aircraft; those
using aircraft. with 30 or less seats have dual
identity as interstate carriers and are permitted
to carry interstate traffic.
9. Special exemption authority from the CAB is needed
for en intrastate carrier to use an aircraft with
more than 30 seats and carry interstate traffic.
10. Interstate carriers are not dependent on local
intrastate traffic for their economic life, thus
they are unlikely to be responsive to intrastate
traffic needs.
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PAGENO="0142"
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FINDINGS AND CONCLUSIONS (CONTINUED)
3 - Aircraft Selection
yjorida's intrastate markets are currently being served by a
wide variety of aircraft ranging from single reciprocating
engine types to four-engine jet wide bodies. The vast majority
of the jet service within the State is provided as a result of
intermediate stops on interstate service. The type of aircraft
in these markets is dictated by the density of the long-haul
market and the equipment operated by the interstate carrier
rather than by any consideration of the intrastate traffic
demand or route characteristics. These operators primarily
require aircraft of a type which cannot be economically operated
at the stage lengths and frequencies required to provide adequate
intrastate service.
Findings atid Conclusions
1. Aircraft to serve Florida's intrastate needs are limited
to four general categories of size, depending upon the
route requirements of traffic and distance, as follows:
Type 1 80 seats
2 48 seats
3 28 seats
4 16 seats
2. In growth markets in which a jet can achieve breakeven
load factors the profit potential of the jet exceeds
that of a comparable sized piston engine or turbo-prop
aircraft due to the jet's high seat-mile productivity,
relative low, cost maintenance and passer~ger appeal.
3. The primary drawback to recommending jet aircraft
for service on Florida's intrastate routes not now
being served by CAB-certificated carriers is the
acquisition cost of jet aircraft as well as the high
cost per aircraft mile.
4. Most of Florida's intrastate markets cannot provide the
absolute nucher of passengers requirad to make the
potential economics of jet operation a reality to
an operator. .
5. Routes vhich COUld suDport Tyre 1 aircraft are
currently adequately served by at least one inter-
state carrier using Type 1 or larger aircraft.
6. Availability of new, modern Type 3 aircraft is
speculative because of production cost and sales
prices.
PAGENO="0143"
137
Findings and Conclus ions (Continued)
7. The DC-3 may continue, in the short term, to be the
first choice of Florida intrastate operators.
8. Type 2 aircraft, especially Convair 580 and Fairchild
F-27, ~iil be increasingly sought for intrastate routes
because of availability and relative price.
9. Aircraft of Types 2, 3 and 4 viii be turbo-prop
powered.
10. Operating costs of intrastate carriers can be
substantially less than the costs of the CAB-
certificated carriers.
11. No routes are discovered or recommended that will
require the unique flight characteristics, and higher
costs, of STOL aircraft.
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PAGENO="0144"
138
FINDINGS AND CONCLUSIONS (CONTINUED)
c~~p~r 4 - Cost of Air Service
The cost of scheduled air service is usually stated in direct
and indirect expenses.
Findings and Conclusions
1. Operating costs of intrastate carriers can be
substantially less than the costs of the CAB-
certificated carriers.
2. For purposes of cost estimates the Convair 580,
Mohawk 298 (Nord 262) and the Beechcraft 99A were
selected as representative of Type 2, Type 3 and
Type 4 aircraft, respectively.
3. The costs used in this study are all of the cost
incurred and assigned to a route. These are
fully allocated costs" and are appropriate to
this anelvsis.
4. Depreciation and interest (capital costs) are
the greatest single obstacle to aircraft up-
grading in intrastate air services. -
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PAGENO="0145"
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FINDINGS AND CONCLUSIONS (CONTINUED)
~
Revenue for intrastate airline operations come primarily from
passenger fares. Fares and charges are a major concern of the
State under its regulatory authority.
F inding and Co ens
1. Fare policies which will clearly serve the public
interest and strengthen the intrastate air transpor-
tation system should he eatablishe~ by the State. They
should be as simple as possible with one standard class
of service and limited discounted or promotional fares.
2. Intra-Florida traffic is primarily business oriented
and will not be greatly stimulated by reduced or low"
fares.
3. Commuter airline fares in Florida compare favorably
with those in markets of similar size in other areas.
C)
4. Joint fares involving trunklines and commuters are
established in selected markets at the initiative
and discretion of the carriers concerned.
5. The prorate of joint fare revenues between the
carriers is privately contracted and of little
interest to the passengers or to Federal regulators.
6. Revenue in this study is based on the fare formula
by the CAB and used by the interst~te carriers.
The fares yield revenue below that now charged on
many routes by ~ntrastate carriers in Florida.
7. On most routes revenue other than from passengers
will be minor.
xiv
28-911 0 - 78 - 10
PAGENO="0146"
140
FINDINGS AND CONCLUSIONS (CONTINUED)
6 - Routes and Service
The intrastate system propdsed here is made up of 17 routes.
Findings and Conclusions
1. Many intrastate air markets in Florida have not received
the quality of service needed for their full development.
2. Most air service in Florida is provided by airlines
certificated by the Civil Aeronautics Board for inter-
state routes, consequently the carriers' interest
basically is in the longer haul, interstate markets.
A substantial number of intrastate markets are, however,
receiving adequateservice from interstate and intra-
state carriers.
3. These city--pairs are receiving adequate service (March
1975) and are not included in the route plans.
Miami-Ft. Walton Beach Miami -Tampa
Miami-Jacksonville Orlando-Ft. Lauderdale
Miami-Key West Orlando-Ft. Walton Beach
Miami-Marathon Orlando-Panama City
Miami-Marco Island Orlando-Tallahassee
Miami-Naples Tampa -Ft. Myers
Miami-Orlando Tampa -Gainesville
Miami-Panama City Tampa -Jacksonville
Miami-Tallahassee Thmpa -Tallahassee
4. Seventeen air service routes, under the assumptions of
this study, can operate profitably.
5. The recommended plan for obtaining the proposed intra-
state air service should be adopted and implemented.
6. The route system recommended complies with or exceeds
the minimum Standards of ~ervico, is operationally
feasible and ~;ill provide ade~uat~ air service between
each of the city-parrs on each of the routes.
7. As compared to current interstate carrier costs and
revenues, profitmble operations on those routes result
from:
(a) Lower costs, -
(b) Equal fares, and,
(C) Higher load factors.
* assured by exclusive right to local traffic and a share
utterline connecting ref fic
W xv
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141
FINDINGS AND CONCLUSIONS (CONTINUED)
Chapter 7 - A Plan For Florida Intrastate Air Service
Implementation of adequate air service for Florida requires both
legislative and regulatory actions to,
1. Bring all routes and carriers under State control,
and,
2. Assure economic viability of the intrastate carriers.
This project has evolved a plan which uses the available resources
to the maximum extent while providing adequate service in all
essential markets. It will be necessary that the following
legislative and regulatory actions be taken by the Florida authori-
ties, in order to implement the planned route structure.
1. Amend Florida legislation titled, An Act Re1att~
To The Air Carriers Of Florida to make the interstate
~árriers operating between points within the State
subject to State regulation inthe same manner as
intrastate carriers now certificated by the Public
Service Commission. The amsnding legislation should
provide a date on which the present privilege -of
carrying intrastate traffic will terminate if not
specifically authorized by the State before that
date.
* This action will permit the carriage of
intrastate traffic by only those carriers
authorized by the State and will not affect
interstate operations or the c~arriage of
interstate traffic.
2. Adopt Standards of Minimum Service applicable to all
carriers serving intrastate passengers.
* This action will bring the intrastate
traffic of the interstate carriers under
State control.
3. Award intrastate certificates to all interstate carriers
operating in the following markets and meeting Standards
of Minimum Service:
* Miami-Tampa o Miami-Tallahassee
* Miami-Orlando o Orlando-Tallahassee
* These major market's (except Or1ando-Tal]~ahassee)
are each receiving more than adequate service
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PAGENO="0148"
142
Finding.s and Conclusions (Continued)
from two interstate carriers. The history of
service and route structure of the carriers
indicate that service will continue at this
level indefinitely.
4. Award intrastate certificates to interstate carriers in
any market not listed in (3) above, in which the carrier
requests certification.
o It is understood that such a request is
`agreement to operate in compliance with
the Standards and failure to do so will
result in termination of the authority
in the market. Further, failure to re-
quest authorization results in forfeiture
of all rights to any intrastate traffic
in the market. This action will permit
the interstate carriers to determine the
routes over which they do not intend to
provide adequate service.
5. Award limited certificates to interstate carriers in
markei~s where their CAB authority relies primarily on
intrastate traffic but where they do not meet the
Standards of Minimum Service.
* Such awards should be made only where
it is demonstrated that an intrastate
carrier can expect to profitably supply
the remainder of the standard service.
* The certificate will limit the interstate
carrier to the service performed at the
time of certification. Abandonment of
that service will result in permanent
loss of authdrity in the market.
o Gainesville-Miami is an illustration ot
such a route.
6. Award remaining routes to intrastate carriers.
o The State should announce the routes
available to be awarded and receive
applications for those routes. Action
on applications filed at random nay
result in failure to provide for some
essential services on routes expected to
be economically viable as planned.
xvii
PAGENO="0149"
143
Findings and Conclusions (Cant inue~
7. Request from the CAB appropriate exemptions for carriers
holding Florida intrastate certificates to enter into
interline ticketing and baggage agreements with inter-
state and international carriers.
o Intrastate carriers who also qualify as
co~rntuter airlines under Part 298 of the
CAB Economic Regulations now enjoy this
privilege which would be lost if they
acquire larger than 30 passenger aircraft.
* The probability is that new aircraft, even
under 30 passengers, will not otherwise be
used in many markets because they will be
(1) not available; (2) too expensive; or
(3) not large enough. Under these circum-
stances use of Convair 580 or Fairchild
F-27/227 throughout the State can be
expected and this exemption needed.
8. Undertake collaboration with the CAB to develop means
of making all cities in Florida equal in the applica-
tion of State as well as Federal regulations.
o The definitions of `interstate commerce"
and "interstate transportation" as stated
in the Federal Aviation Act make air routes
between many Florida cities interstate
rather than intrastate because the routes
lie over the high seas. Thus, the unique
geography of Florida and the wording of the
Act appear to impose unequal treatment or
benefits on certain cities.
o This overwater operations problem can
frustrate effective State regulation
intended to obtain better air service
throughout the State.
* This problem appears to be complex and
its solution nay require amendment of the
Federal Aviation Act.
xviii
PAGENO="0150"
144
FINDINGS AND CONCLUSIONS (CONTINUED)
cj~p~r 8 - Sub~4y~
The establishment by any unit of Government of~air service which
cannot support itself and thus requires a subsidy, is primarily
a political or social rather than an economic decision. While
such services are usually established to `develop a market to
the level where it will not require support, it is very difficult
to demonstrate with specific cities or city-pairs where this has
actually occurred with modern aircraft.
~n4~ns and Conclusions
1. The Federal Government subsidy program is the only
on-going subsidy program for air service in theU.S.
2. No Federal subsidy has been paid for air service in
Florida since 1950.
3. The route system designed in this study, established
as recommended, requires no subsidy.
4. Subsidy payment may take many forms. Subsidy is
public funds used to obtain services from private
individuals or companies. Each need can present
a different solution. There is no universally
applicable system of subsidy administration.
5. A system of subsidy for services not proposed by
this study would have to be designed to fit the
service desired and money available.
xix
PAGENO="0151"
145
CHAPTER 1
STANDARDS OF A~EQUATE AIR SERVICE FOR FLORIDA'S
INTRASTATE AIR SERVICE MARKETS
i~ is appropriate for the State of Florida to develop a set of
~iidelines for adequate air services. These guidelines can serve
a measure of how well the various air carriers are meeting the
cDnvenience and necessity of intra-Florida travellers. They can
jidicate markets where new or additional services are required.
Sich standards are an invaluable tool in the planning process and
a necessary ingredient for the rational development of a state-
wide network of air service.
Air service standards for Florida, as developed in this study,
appear on the following pages. Thereafter, federal and state
regulation in this area are reviewed, the concept and design of
standards for Florida are presented and finally, the development
of each component of the proposed standards is discussed in some
detail. *
1-1
PAGENO="0152"
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Proposed Air Service Standirds for Ilori.da
The following standards have been developed with due consider-
ation of the basic economic characteristics of short and medium
haul air transportation.
1. Local air transportation is not required between cities
located less than 100 higi~way miles apart, provided
that the expected driving tine does not exceed two
hours.
2. Where local and connecting traffic meets or exceeds
10 passengers daily in each direction, the market
requires and can support air service.
3. In any given market,!" the minimum level of effective
air service is two daily round trips.
4. The two flights should he timed to include a departure
between 7:00 a.m. and 11:00 a.m. and a departure
between 3:00 p.m. and 8:00 p.m. Six hours should be
the minimum time between departures.
5. In these cases where a carrier adds a third frequency,
it should depart in the .11:00 a.m.-3:00 p.m. time
frame. The minimum time between departures should be
three hours.
6. Average monthly load factors should not exceed 65%.
If larger equipment is not available for needed
capacity, the carrier will add another flight to make
sufficient seats available.
7. More than two intermediate stops are unacceptable on
flights required to mee.t the standards in Florida's
short and medium haul markets.
Adoption of the first two standards will greatly reduce the task
of regulating intrastate air services by limiting the number of
markets to be aegulated. By counting all possible combinations
of the 26 air traffic points under consideration, Florida's
potential intrastate air markets number 325.V The first
minimum guideline on intercity highway distance indicates that
76 city-pairs are so accessible by surface means as not to
1/ The term "market' as used herein refers to a pair of cities
or the traffic moving in such a city pair.
2/ See Table 1-2 (page 1-21) for a listing of the 26 Florida
cities being considered for air service.
1-2
PAGENO="0153"
147
require air services. The minimum requirement of 10 daily air
travellers eliminates many of the 325 markets. Remaining are
those intra~tate markets which need ahd can support air services
zud which warrant the State of Florida's regulatory concern.
Following this quantitative identification of Flo~ida's eligible
iir markets, the five remaining standards outline the essential
ingredients of the required services. These guidelines are
nased on the practical needs of the local air traveller, and
they ensure that the same quality of service will be available
in all markets of similar size. Fairness and equity require
that air transportation services be evenly distributed to the
travelling public, and these five standards point the way
toward that proper and legitimate regulatory goal.
Dverall, these standards will provide the State with an organ-
ized, planned, and consistent approach to the provision of
adequate intrastate air services. The particular circumstances
of each market will always have to be considered on an individual
oasis, but these guidelines are essential for an objective
administration of a statewide air transportation network.
A careful review has been made for any history of similar
standards. This research determined that no other state has
formally adopted service standards. The following section
reviews the record of the federal effort in regulating service
adequacy which is the responsibility of the Civil Aeronautics
Coard (CAB). --
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PAGENO="0154"
148
Federal and State Regulation of Adequacy of Service
As one of its regulatcry objectives since 1938, the CAB is required
to ensure that every certificated air carrier provide adequate
services in meeting the public convenience and necessity. Section
404(a) of the Federal Aviation Act reads:
* It shaZZ. be the dutp of evorp air carrier
to provide. . . adequate c~rvice, equipr.er.t, cud
faciii~ies in connection with [air) transpor-
tation,..."
The CAB's understanding and application of this statute is the
basis of this section.
From its early days, the Board has been confronted with the question
of adequacy. It has recognized its responsibility to define and
administer adequate air service, but it has also argued thdt fixed,
unchanging concepts are not workable. A thorough review of CAB
regulation indicates that the Board has always considered adequacy
in terms of changing contemporary standards.
At Senate hearings in.l965, then CAB Chairman Murphy testified
that the Board developed its criteria for measuring adequacy of
service on a case-by-case method. In 1969, CAB Chairman Crooker
gave a similar testimony in hearings before the House.
". . . The adequate service standard is not
fired and rigid, ~ut depends on the facts
and circumstances in a given case."
In interviews taken by SARC for this study, senior CAB staff
members indicated that ~he Board continues to view service
adequacy or inadequacy only within the context of each particular
case.
It is clear, then, that the State of Florida canr.ot turn to the
CAB for a precise definition of. adequate air service. Such hard
and fast standards do not exist. At best, a historical overview
of CAB regulation will reveal the general criteria which tradi-
tionally. have been considered. Over the years, some basic
guidelines have emerged and these will be explored as a basis
for establishing standards of air service within Florida.
The specific issue of air service adequacy has been the subject
of only four regulatory proceedings. In the late 1950's, the
Board decided four separate cases in response to demands by
civic groups for improved air service. The cities involved
were Ft. Worth, Texas, Toledo, Ohio, Baltimore, Maryland, and
Flint and Grand Rapids, Michigan. For all of the cities except -
Ft. Worth, the CAB ordered new and improved air services. These
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PAGENO="0155"
149
fourcases were the first and only time that the CAB has directly
enforced secti6n 404(a) of the Act. 1/
All of the major ingredients of adequate air service were dealt
with in these proceedings.
* Through-plane service to communities of interest.
* Number of daily schedules.
* Timing of schedules.
o Load factors and available seats.
* Type of aircraft.
* Number of intermediate stops on through-plane
service.
Although the question of service standards were under explicit
consideration, the Board declined to assign specific weights to
any of these factors.
"Expressions `adequate service' and `minimum standard
of service' are flexible terms and are not susceptible
to precise definition." Flint decision 30 CAB 1121.
The preferred approach was to analyze each market at issue and
rhcn apply reasonable administrative judgment.
Zn the Flint case, the Board ruled that Capital Airlines had not
:*en providing a sufficient level of service in several Flint and
rand Rapids markets. The Board decision called for a minimum of:
o 3 Daily Round Trips between Grand Rapids-New York.
* 2 Daily Round Trips between Flint-New York and
Grand Rapids-Minneapolis.
o 1 Daily Round Trip between Grand Rapids-Washington.
* :~ard also ruled that, `Morning and late afternoon or early
rc~ departures found necessary to provide adequate service."
~.ZS 1120. Capital was prohibited from scheduling more than
*~cps on the recuired flights. The Board felt that in these
-~O mile markets, more than two enroute stops would result in
:~sive delay in reaching the fina] point of destination. Another
~r. the case involved Capital's USC of unpressurized DC-3 and
- ~rcraft in first class sorvice at first class fares. The
page 1-4.
1-5
PAGENO="0156"
150
Board decided that, siven the industry'~ stage of development,
unpressurized aircraft such as these could not ho used in ffrot-
class servico. Thus the Board did not soccify the ecuipnent to
be used but the class of service (and the fare) that could be
operated with specific equipment.!!
The Baltimore investigation was based prirsarilv on the fact that
the carriers claimed to be seiving Baltinare' s rarkets through
the Washington National Airport. The City of Baltimore contended
that it was a major air traffic center in its own rfqht and that
it was unreasonable to ask Baltimore travellers to use a more
distant airport lo~ated in another city. In that case, the Board
found that Baltimore's air service was inadequate in a total of
31 markets.
Ruling in Baltimore's favor, the CAB ordered that markets which
had 10 or more daily passengers should have single-plane service,
if other factors were favorable.2! The Board also found fault
with the timing of the schedules at Baltimore and asked the
carriers to correct these deficiencies. For examole, the Board
objected to the lack of southbound service from Boston between
7:30 a.m. and 5:00 p.m. On equipment, the CAB ruled again that
trunklino service at first-class rates in the unpressurized DC-4's
was inadequate.
The Toledo case involved Capital's failure to provide schedules
in several markets which were already receiving some flights by
United. It was a situation in which the Board said that Capital
was not living up to its certificate obligations, more so than
there being a gross lack of service in the particular markets.
The intention of the Board, however, was to improve the total
availability of air transportation with the addition of Capital's
flights.
The results of the Board's intrusion into the carriers' scheduling
process was not impressive. The acquisition of Capital by United
Air Lines in a 1961 merger negated the Board's order for improved
competitive services at Toledo. The replacement of Capital by
United at Flint and Grand Rapids was undoubtedly an improvement
for those cities, but it cancelled that brief experience with
direct enforcement of adequate air service. Baltimore did see
some improvement, but the long-range effect of the Board's de-
cisiom in that case is very difficult to gauge. The congestion
1/ The Federal Aviatioh Act prohibits the Board from determining
equipment to be used.
2! This standard of 10 passengers a day was related strictly to
the record of facts developed in the Baltimore investigation.
It has net been used in any other proceedings before or since.
1-6
PAGENO="0157"
151
and restrictions on Washington National Airport, as well as the
completion of Dulles International Airport have been extenuating
circumstances for the levels of air services at Baltimore's air-
port.
In June, 1961, the Senate Commerce Committee issued a report,
National Transportation Polic~, which concluded that the public
would be better served by expanded air carrier competition than
by enforcement proceedings. In the same year, the Task Force
on National Aviation Goals called for a policy of minimizing
regulatory controls so that business incentives and competition
could play a more influential role in the regulation of service.
The Board apparently had come to similar conclusions, mostly due
to the poor results of their initial experience with direct
intervention. The CAB turned away from adequacy-of-service in-
vestigations and directed their attention to new route awards.
The Board concluded that service deficiencies were better resolved
by introducing new competition than by requiring the grudging
services of an unwilling carrier. Civic groups embraced this
doctrine also. In presenting their needs for additional services,
the communities called for certification of new carriers rather
than enforcement of the incumbent carriers' obligations to pro-
vide adequate service.
The Board processed scores of route certification applications in
the decade of the `60's. In those instances where new competitive
authority was at stake, the incumbent carriers usually attempted
to show that the markets were being adequately served. Applicants,
however, would cite evidence of short-comThgs as an argument
favoring their entry into the markets.
The criteria of adequate service, as evidenced in the decisions
of many cases, were the same as in the earlier enforcement pro-
ceedings. Heavier weight was given to the question of load
factorsand available seats. In one major case; the Southern
~ier_Invest4~9aticn, the CAB authorized new competition in several
rarkebs and cited historic load factors of over 70~ as one of
several factors requiring new authority. The load factor which
the Board would accept as reasonable was never precisely identified,
but in case after case the Board found that load factors exceeding
t.he 65~-700 range were evidence of less than adequate service. 1/
Other criteria were also applied in those cases, but they did not
aeon to be of decisional importance in deciding on the need for
competitive authorization. In fact, the Board made it clear
./ Gulf States-Midwest Points Service Investiqation, Docket 17726;
Dallas/Ft. Worth-Phoenix Nonstom Service Case, Docket 18579;
Central Route 81 Case, Docket 16196.
1-7
PAGENO="0158"
152
that a finding of adequate service by an incumbent was not
sufficient in itself to disapprove the application of an as-
piring competitor. As a result, there is no cldar, unambiguous
policy on service standards that emorgoo from this series of
decisions.
One other regulatory activity should he mentioned as. an e~:ample
of the Board's position on minimum standards of sarvice. This
activity was concerned with the problem of prov Id in~ scheduled
air services at cities that produced very little air traffic.
In this area the questions that have been asked are, "At what
minimum level of traffic should air service be provided?" and
"What is the minimum level of service?"
As early as 1946 in the Texas-Oklahoma case, the Board ruled
that two round trip flights are the basic minimum schedule
pattern for a small city. The local service carriers, whose
prirt~e responsibility was the smaller cities, were ramuired to
serve each station on each of their routes with at least two
daily flights. As subsidy programs to the locals have developed
through the years, the element of two daily services has been
retained as a guideline to the amount of federal support that
should go to small air traffic points. In practice, there have
been exceptions to this generalrule, but it still stands as a
measure of the Board's position on minimal service where subsidy
is involved.
The traffic levels which require and can support a minimum schedule
pa~tern depend on several variable factors. The very lowest that
the CAB was ever prepared to go was to require that a station en-
plane at least 5 passengers per day to justify continuation of
service. Even at the cost levels prevalent in the local carrier
industry in 1958-1962, this represented a situation where opera-
ting losses were inevitable. The CAB held that federal subsidy
should not be paid to a carrier to support operations at a city
which could not meet this bare minimum.
As the local carriers have gradually phased out the smallest
aircraft in their fleets, the cost of serving very small points
has risen proportionately. A minimum of 5 passengers a day would
no longer meet the CAB's policy of a reasonable balance between
the desire of a city for air service -- and the desire of the
Congress to limit federal subsidy payments. Overall, the CAB
recognizes this relationship and seeks to come to a balance on
the basis of contemporary air carrier economics. The Board has
not established any fixed minimum traffic levels to replace the
5 passenger per day criteria which is nc longer applied as a -
"use it or lose it" staddard.
A complete review of the history of CAB regulation fails to dis-
close any absolute standard for measuring adequate air service. -
Rapid changes in technology have outdated the Board's efforts to
set any quantitative guidelines. It is clear that a pattern of
1-8
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morning and evening service is desirable in any air market, but
even adherence to this minimum has not been strictly enforced.
At the state level, regulation of air transport has been practi-
cally non-existent except in Texas, California, Alaska, and
Hawaii. Here, as at the Federal level, issues have been resolved
on a case-by-case approach, and there are no clear, well-defined
standards that can be applied to Florida's particular needs.
As this report turns next to a consideration of air service
standards for the State of Florida, it is well to bear in mind
that clear, consistent, precise standards have not been developed
in over 35 years of Federal regulation. The reliance of the
states and the CAB on ad hoc regulation should serve as a caution,
suggesting either a political or a practical nedessity of avoiding
mechanical formulas in the economic regulation of commercial air
transport.
The failure of others to achieve or adopt workable standards does
not preclude or even argue successfully against Florida's need
for such regulation. Geographically, Florida is unique and the
intrastate travel needs of its people are unique.
1-9
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Concept and Design of Uniform Air Service
_______ Standards for Florida
Benefits to the Public
Although the State of Florida contains many substantial local air
transportation markets, uncontrolled and extraneous factors often
result in less than adequate air services. Air services in
Florida's intrastate markets vary with the trunklines' scheduling
decisions on interstate flights and with the economic health and
ambitions of various commuter carriers. By adopting a set of -
standards or guidelines, the State of Florida will have a regelatory
tool for ccping with these obstacles to consistent, reliable, and
convenient service.
A key effect of the enforcement of air service standards will be
the equalizing of the opportunity of public access to this node
of transportation. For the first tine, markets of similar size
will have the same basic level of air transport available to
them. Other factors may give some markets an excess cf service,
but every deserving city will be able to count on regular, con-
venient service to its primary communities of interest.
From the regulatory viewpoint, the establishment of standards is
essential as a means to preserve fairness and equity in providing
for access to air transportation. Communities will know what
services they should have, and the carriers will know what, as a
minimum,, is expected of then. In practice, the administration
of standards is more art than science, but, without the basic
points of reference, any semblance of objectivity is lost.
Problems and Limitations
As the research indicates, the CAB has avoided the very difficult
political and practical task of setting national air service
standards. For many of the same reasons, it is not any easier
to strike upon such standards for intra-Florida air markets.
Several obstacles to a simple, consistent, statewide standard
are apparent: -
3. The Wide range in market size.
* Variance in traffic compos~tion from one market to
the next, La. business, personal, tourism, inter-
state and intrastate, etc.
* Intercity distances ranging from 20 up to 663 miles.
* The unique characteristics of individual cities and
* of city-pair markets. V.
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PAGENO="0161"
155
* Two distinct levels of air carriers.
* Possible conflicts in regulatory jurisdiction.
These variables affect the intra-Florida markets as well as the
interstate markets which the CAB regulates, and they will be
reviewed in turn to illustrate their complexities.
The size of any given market is a primary factor in determining
how much air service should be provided. In Florida, markets
range from Tampa-Miami with 800+ daily passengers in 1973 to
scores of smaller markets with less than 5 passengers per day.
:t is illogical to propose a standard to be used for city-pair
markets at both extremes.
The disparity in intercity distances is another troublesome
consideration. These mileages range from 19 miles (Tampa-St.
Petersburg) to 663 miles (Miami-Pensacola). With the competition
of the passenger car to be considered, distance, as it converts
to time and cost, must be a primary factor in any determination
of standards of air service.
The subject of traffic composition present questions which go to
the nature of this study itself. By definition, this report is
concerned with the needs and problems of intrastate travellers.
rn many cases, however, a local true intrastate market would not
qualify for air service if it was not supported by the connecting
interstate flow of traffic. Complicating this question is the
fact that the proportions of local and connecting traffic vary
fiom market to market.
The individual characteristics of each city and each market must
also be considerod. Gainesville is a university-city, Eglin/
Ft. Walton Beach is a military market desiring to develop as a
resort market, Tallahassee is an educational center and the State
Capitol, and so on. Some cities are affected by the proximity of
larger points with better air service, such as -St. Petersburg
(Tampa), Ft. Lauderdale (Miami), TI-CO (Melbourne and Orlando),
Sarasota (Tampa), and Lake land (Tampa and Orlando). It is clear
that each market is unique and that generalized recommendations
may require exceptions in application.
Finally, the implementation of standards is complicated by the
existing levels of service by-various types of air carriers. The
trunk carriers operate schedules in Florida primarily for the needs
of long-haul interstate markets. They operate large jets with
plenty of available intrastate seats, but generally they completely
ignore the timing of their services for the intra-Florida traveller.
Only in the largest Miami and Tampa markets does the sheer fre-
quency of tervice ccmpensate for the lack of planning for local
needs. It is important to note that, whether or not they actually
provide the schedules, the trunkline carriers and Southern have
- 1--Il
28-911 0 - 78 - 11
PAGENO="0162"
156
CAB authority to serve most of the significant markets in the
State. In many of these markets, there era at least two inter-
state carriers with operating authority.
Further down on the scale are the commuter carriers currently
operating in the State. Their equipment is sized for smaller
markets and they do not generally attempt to compete head-on
with the CAB carriers. However, at the short distances
characteristic of most Florida markets, the ecuicment operated
by third level carriers is adapted to the task. The overall
speed advantage of the large trun}zline jets is not significant
in these short up-and-down hops. When a trunkline vacates a
market or leaves large gaps in the times of service, a third
level carrier can operate efficiently and successfully.
With these factors in mind, it seems most useful to outline the - -
simplest set of guidelines possible, with the expectation that
some administrative judgment may be required in the day-to-day
regulatory process.
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Minimum Requirements For Air
Service Between Florida Cities
From a.logical point of view; it is not difficult to arrive at
the simplest standard of air service -- either a market has a
scheduled air service or it doesn't. Beyond this absolute
minimum, the reasons for setting any particular level of service
as a standard are a matter of reasoned judgment. The essential
criteria to be considered include length of trip, traffic levels,
frequency of service, timing of service, availability of seats,
and type of aircraft.
In the following analysis of these factors, every effort has been
made to recognize the particular characteristics of the intra-
Florida markets. Each standard has been reviewed for its
applicability to the actual markets in question. The overall goal
has been to derive a set of uniform guidelines which can be
applied to-any given market in the state.
:rhe Limitations Imposed by Intercity Distance
The relative geographic location of Florida's population centers
and the excellent highway system which links them constitute a
very basic limitation on scheduled air services. Of the 325
city-pair combinations being reviewed, 76 are separated by less
than 120 miles of highway driving. Many of these roads are
four-lane and some are limited access expressways. None of the
cities are separated by mountainous terrain or other obstacles
to normal highway driving. At this level of accessibility, the
requirement for air transport may well be questioned.
A review of the relationship between airline schedules and
driving timesreveals the advantage of the passenger car for
short trips within Florida. As evident from Chart 1-1, savings
in door-to-door elapsed times cannot be achieved by using air
services at intercity distances of less than 70. miles. In the
70 to 120 mile range, tho advantage of air is questionable in
most circumstances. As mileages increase beyond 120 miles,
intercity driving times climb proportionately, and the overall
efficiency of air versus surface transport comes *into play.
Even at those greater distances where the intorcity speed of the
air vehicle exceeds the door-to-door performance of the passenger
car, the overall advantage may still go to the car, due to its
lo~-:er cost and its versatility for local travel at the destination.
~ctual experience in Flor.idi's short-haul markets bears out the
conclusion that air transport is not competitive with the
passenger car. In Table 1-1, markets which had air services in
1972 are ranked in ascending order by intercity highway mileage.
Traffic experience in these markets is not entirely the result
of the intercity distance, hut it is significant to note that the
1-13
PAGENO="0164"
158
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1-14
PAGENO="0165"
159
first substantial local market is Tampa-Ft. Myers, with 14,168
local travellers moving over a 123 mile segment. Of the 76
city-pairs less than 120 miles apart, only 8 generated 1,000 or
more local passengers in 1972. By way of contrast, the five
Largest intra-Florida air markets have an average intercity
distance of 308 miles.
Before reaching a conclusion based on this evidence, one special
circumstance should be mentioned. For some individuals, par-
ticularly those retired citizens who cannot or do not wish to
drive, an air service might be a convenience, even if no real
-:ime savings were realized. This may account for some of the
traffic which turns up between the first three city-pairs on
Table 1-1: Tampa-Sarasota, Miami-West Palm Beach and Tampa-
Orlando. In these, as well as most other short-haul markets,
there are convenient and less expensive alternatives to air
service. With the possibilities of bus, intercity limousine, or
passenger train services, it doeC not seem reasonable to assign
great weight to the provision of air service in markets that are
easily and economically accessible by surface means.
Although there is no magic in the particular number, 100 inter-
city highway miles can be used as a basic minimum standard, be-
low which the state need not be actively concerned with local
air transportation. Few travellers would find any advantage in
air versus surface transport at intercity distances below this
minimum. Assuming an average door-to-door driving time of 45 mph,
a 100-mile trip would take 2 hours and 12 minutes. With good
highways over generally level terrain, a local trip of this
length is not sufficiently burdensome to require the alternative
of air service.
The Minimum Effective Level of Air Service
In selecting a standard of minimum air services, it is desirable
to go beyond the physical minimum to the more widely pccepted
practical standard of two well-timed daily round trios. If a
market is qualified to receive scheduled air service at all, it
is necessary to provide at least two schedules. While better
than nothing, one flight a day does not.create and has never
developed a market for air transportation where alternative
means of travel are available.
The point may best be made clear by wee of an illustration. ii,
for example, a market of 240 miles receives only a 9:00 a.m.
flight, those travellers whose preferred departure time is be-
tween 7 and 11 a.in. may be able to adjust their affairs to use
the 9:00 a.m. departure. For passengers with any other preferred
departure time, the alternatives are to use other means of
transport or to wait until tho next day to use the 9:00 a.m.
flight. The frustration is heightened since the desired dest~na-
ties is so close by air but a 5-6 hour drive by car. The single
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PAGENO="0166"
160
TABLE 1-1
LOCAL AIR TRAFFIC IN FLORIDA'S SHORTEST
CITY PAIR MAPKETS
Calendar Year 1972
Market
Tampa-Sarasota
Miami-N. Palm Beach
Tampa-Orlando
Jacksonville-Oca la
Miami-Marco Island
Orlando-Gainesvi us
Miami-Naples
Niami-Marathon
Intercity
Iijt~:~,ev -1i1eace~
51
84
99
105
109
110
112
Local Air
?ossenoersY
* 4,972
6,479 -
7,252
1,000
2,045
1,340
* 2,945
2,585
Tampa-Ft. Myers
Tampa-Gainesville
Tampa-Melbourne
Pensacola-Daytona Beach
Jacksonville-Orlando
Miami-Vero Beach
Tampa-Daytona Beach
Miami-Ft. iiyers
Tallahassee-Ft. Walton Beach
Orlando-Ft. Myers
Miami-Key West
Tampa-Naples
Jacksonville-Tallahassee
Miami-Melbourne
Tampa- Jacksonvi lie
Tampa-N. Palm Beach
Tallahassee-Pensacola
14,168
1,310
3,120
950
7,475
980
1,941
11,066
1,630
2,244
18,000
1,298
8,516
8,335
35,076
19,924
3,483
123
130
132
133
133
137
138
146
151
154
158
160
168
171
196
199
199
NOTE: Includes only those markets which generated at least 1,000
local passengers in 1972 and which were separated by less
than 200 highway miles.
1/ SOURCE: Official Florida Highway Map, 1973.
2/ Passengers whose origin and destination are the cities shown.
In many cases there are very significant numbers of passengers-
who connect to interstate flights at the major terminal of these
city pairs.
1-16
PAGENO="0167"
161
9:00 a.m. flight may meet the needs of some but it can hardly
be said that the communities are being fully served.
The addition of a second daily flight demonstrates the utility
of air service by greatly reducing the compromise in travel
plans. With only one daily flight, the compromise required
between a preferred departure tine and the actual schedule may
go as high as 12 hours. With two flights well-spaced during
the 7 a.m. to 8 p.m. day, few travellers would be required to
make more than 4-5 hour adjustment. To the people and the
communities involved, this quantum leap in convenience and time-
saving is the difference between being knitted together by a
pattern of air service and being strung out on an under-utilized
air route.
The importance of a minimum standard of two daily round trips
can be measured by the CAB's long-standing position that any-
thing less is not a true test of a market's ability to require
cr support the continuation of services. In cases where
suspension or deletion of air service is at issue, civic parties
argue convincingly that the potential of their city has not
been adequately tested if less than two daily round trips have
been operated. On their part, the air carriers seldom propose
less than two daily round trips in markets for which they are
seeking certification. The CAB, civic and aviation interests,
and the carriers themselves are in agreement on this minimum
criteria of air service. There is no reason to believe that
Florida's markets deserve to have anything less or require
more as a minimum.
The Minimum Traffic Demand to Require and Support Air Services
The minimum level of traffic required to support economically
~riable air services depends largely on the type of equipment
and thus the carrier that will provide the service. Standards
developed for the commuter carriers may be inappropriate for
the trunklinea.. Since commuters operate on a smaller comxner-
cial scale, minimums for commuters are the levels of traffic
below which scheduled air service cannot ho economically
supported.
At the current level of commuter-type airline economics in
~lorida, a market that enplanes less than 5 passengers per
flight will rarely be economical to servo. In a recent
report, the CAB staff found that omerat.ions by third-level
carriers at less than 5 passengers per flight would seldom
meet breakeven needs. The report also concluded that payment
of federal subsidy was not justifiable at lower traffic levels,
1-17
PAGENO="0168"
162
even if a city was geographically isolated):" By the Board's
criteria, no significant point in Florida could be considered
as isolated from alternative air services.
Five, passengers per flight translates into 3,650 passengers
annually per round trip. Since 2 round trips have been
established as a minimum standard, the level of annual traffic
to support those flights would be 7,300. Looked at another
way, an annual traffic flow of 10 passengers per day in each
direction requires and can support two daily round trip services.
The question arises as to the consideration of interstate or
international connecting traffic in addition to local O~D
travellers. Since the economics of the service do not require
such a distinction, it follows that the 7,300 annual traffic
standard should be based on the total amount of available traffic.
In many intrastate markets, this connecting traffic will support
third-level services that would not otherwise be provimed. Such
traffic should be included in the test for a minimum standard.
Additions 1 Schedu i~ Regu irements
Having established the basic air service standards, it will be
useful to specify some additional conditions concerning the
provision of these services. These considerations involve the
timing of the schedules, the availability of seats, and the type
of equipment used. Another point to be resolved concerns the
permissible number of enroute stops.
The purpose of establishing a standard as to schedule timing is
to prevent schedules from being bunched together, a practice
which can leave long periods of the day without any service.
Well-timed air schedules are generally defined as morning,
mid-day, end evening departures in both directions. This allows
for one-day travel between the two cities, a particularly-useful -
feature for business travellers.
For intrastate purposes, the active traveling day can be broken
down as follows:
1/ Service to Small CommunitieS, CAB, March, 1972. In this.report,
the Bureau of Operating Rights at the Board traced the CAB's
recent history of suspensions and deletions of air service at
the nation's smallest communities. To be considered gee-
- graphically isolated, a city would have to be at least 1 1/2
hours drivinq time from the nearest air service point. If
the nearest point receives a large volume of schedules, th?
maximum allowable driving time rises to 2 hours and 20
minutes.
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PAGENO="0169"
163
Morning 7 a.m. to 11 a.m.
Mid-day 11 a.m. to 3 pT.m.
Evening 3 p.m. to 8 p.m.
tf a market can support the minimum level of 2 daily flights, these
should fall in the morning and evening categories, with at least a
hour separation. When a third flight can be justified, a mid-day
departure rounds out the pattern. If the three flights are spaced
at a minimum interval of 3 hours, the market is clearly receiving
a well rounded pattern of service. As mentioned earlier, such a
pattern of service ~iill minimize the compromise between preferred
and actual departure times.
Some judgment must be used when applying these guidelines to the
carrier's schedules. Since any efficient operator must use his
aircraft throughout the day, a pattern of service which will opti-
mize the utilization of these expensive vehicles may require some
deviation from the timing standard. For example, the departure
time from the city of origin could be within the morning time
frame, but the departure time from an intermediate stop could fall
into the mid-day zone. Depending on circumstances, this might not
be an unacceptable variation from the stated standard of morning
and evening services.
It is preferable to use departure times in a scheduling guideline
since arrival times can vary with the routing flown and with the
equipment used. Departure times indicate the moment of embarkation,
a factor which traditionally has been of more interest to air
travellers than the time of arrival. At the relatively short
distances of most Florida markets, the `time of departure can act
as a surrogate for arrival times, in terms of the `time slot being
served.
It is difficult to set forth objective guidelines as to when a third,
fourth or fifth service may be required. With this in mind, it may
be sufficient to require that schedule frequencies be a function of
enpianed load factors. If a market receiving the minimum service
pattern of two daily round trips consistently exceeds a 655 load
factor, the operator should be required to improve service, either
by using larger equiprent with more seats, or by adding a flight
to relieve the oreasure. At load factors above 65% there will be
inadequat.e capacity in the market to handle traffic demands in
peak periods. An alternative to requiring additional service by
an incumbent carrier is to authorize a new competitor over the route.
As mentioned earlier, this has been the CAB's method of dealing with'
excessively high load factors. 1/
1/ This is not to he taken as a recoirmendation of this study. The
subject of route competition is to be treated fully in a later
section of this study.
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PAGENO="0170"
164
Other phases of this study will e~:plore the question of aircraft
types in greater detail. As a standard, however, it is not neces-
sary tospecify particular types of equipment. The aircraft flown
* by the CAB carriers is certainly adequate. Comnuter aircraft
likely to be used will run the qanut from the DC-3 to the modern
turbo-prop planes soecially desiqncci for third-level omerations.
All of those aircraft will have to meet rimid F.A.A. safety
requirements. Whatever they may lack in the way of smeed and
comfort is coonensated fo~ by tho relatively short flvinq distances
of most intra-Florjda markets. Wv using older and less exoensive
aircraft, coanuters can provide basic short-haul air transoortation
at the lowest cost levels possible. For this reason, they should
be allowed substantial latitude in their choice of equioment.
As a final point, the actual onerating itinerary of intra-Florida
services warrants two particular commen~Es. In these relatively
short-haul markets, a routing should not include more than two
intermediate points. This kind of stop-and-go operation dissipates
much of the speed advantage of the airplane. The only exceotions
could be on potential routings between South Florida and the
panhandle area, where the distances involved do not make as many
as three intermediate stops an ove~helminq problem. Also,
services which require a change of o'lanes enroute are not included
in the proposed standards.. Although some few local travellers
may use intrastate connectinq services, this alternative is of
little interest in any market that qualifies to receive two daily
single-plane flights.
NOTE: For bibliography of research for this chapter see
Appendix D.
1-20
PAGENO="0171"
165
TABLE 1-2
FLORIDA'S TWENTY-SIX MOST ELIGIBLE CITIES FOR
INTRASTATE AIR TRANSPORTATION SERVICES
City
1. Miami
2. Ft. Lauderdale
3. St. Petersburg/Clearwater/New Port Richey
4. . Orlando/Leesburg/Eustis
5. Jacksonville
6. Tampa
7. West Palm Beach
8. MelBourne
9. Titusville-Cocoa)
10. Pensacola
11. Sarasota/Bradenton
12. Daytona Beach
13. Tallahassee
14. Lakeland
15. Gainesville
16. Ft. Myers/Cape Coral
17. Panama City
18. Ocala
19. Ft. Walton Beach/Eglin AFB
20. Vero Beach/Ft. Pierce
21. Bartow/Winter Haven/Auburndale
22. Key West
23. Marathon
24. Marco Island
25. Naples
26. Punta Gorda
* Not Available.
Proj ected
1990
Population
1,815,000
1,015,000
939,000
869,000
758,000
701,000
668,000
298,000
257,000
254,000
190,000
164,000
148,000
127,000
125,000
80,000
65,000
65,000
57,000
55,000
50,000
N.A. *
N.A. *
N.A. *
N.A. *
SOURCE: Florida's Statewide Transportation Plan and Program.
~E~te of Florida, Dopartuont of Transportation.
March, 1973. Table 3-1.
1- 21
PAGENO="0172"
166
CHAPTER 2
REGULATORY ALTERNATIVES FOR OBTAINING SERVICE
Any master design for air service must be concerned with the
authorizations which may be necessary from the governmental
agencies responsible for the regulation of air transportation.
appropriate authority for the operation, given to qualified
carriers, together with the application of accepted standards,
will provide the state regulators with a logical framework for
achieving the desired public service. -
At present air service in Florida is performed by ~ combination
of carriers, some regulated by the Civil Aeronautics Board (CAB),
others by the Florida Public Service Commission (PSC). Under
Florida law, the only jurisdiction which the PSC can assert over
CAB-certificated carriers is the right to disapprove fares, rates
or schedule changes between Florida points, if such changes would
impose an undue economic burden on State-certificated carriers
operating between the same points. This jurisdiction has not
been invoked since the legislation was enacted.
In designing Florida's air transportation system the State
properly is concerned with th~ type of regulatory authority which
should apply. It is evident from past experience that the pro-
vision of an adequate system for Florida's total air service
needs must be, primarily, the responsibility of the State. The
federal agency has provided some assistance to the states in
meeting intrastate traffic needs in addition to interstate
authorizations. The CAB's local service airline program, and the
exemption permitting air taxis and commuter carrie~s to operate
with practically complete freedom from federal economic regu-
lation are examples. However, the CAB has rot asserted regu-
latory authority over purely intrastate movements -- and such
mavements are basic for a Florida air transportation system.
Statement of the_Problem
Tie State of Florida, in implementing service in the markets
~iich form its air transuort.at~on system, must determine the
s'aurces of the service to be provided. Primlary markets in
Florida are served by airlines certi.frceted by the CAB. These
carriers are not responsive to specific intrastate requirements,
b~mcause of transcending opportunities in interstate transpor-
tation. Yet these same intrastate services arc beyond the reach
of the CAB (which regulates rnterstato transportation only) and,
in Florida are exempt from PSC regulation. Thus the Florida
ragulators are frustrated in cay attempt to have these carriers
furnish service which meets the State's standards of adequacy.
On the other hand, if supplemeutary service is authorized by
2-2
PAGENO="0173"
167
State regulation to ensuro service adequacy, the CAB-certificated
carriers are a competitive fact of life with the end result that
the supplemental service con expect to ho uneconomic because of
competitive pressures.
The jurisdictional conflict between federal and state regulators
illustrates the difficulty in achieving a proper regulatory re-
lationship to assure the desired service result. This is the
basic problem which the State of Florida must meet.
Possible Alternatives For A Florida System
It is necessary that each city-pair earket be judged individually
as to the optimum regulatory arrangement. However, before this
process is undertaken it is useful to identify alternatives
which may be available, and to discuss generally the constraints
and contributions inherent in each.
Options available for service authorizations in the various Florida
markets may be summarized as follows:
1'. Service presently authorized and performed by interstate
CAB-certificated airlines may be continued without any
change. -
2. Service not performed and not authorized, but deemed
necessary, may be sought by application to the CAB for
interstate carrier authorization.
3. Service presently authorized and performed by intra-
state carriers, under certificates from the Florida
Public Service Commission, may be continued without
change.
4. Service not performed and not authorized, but deemed
necessary, may be authorized by additional certifi-
cation to intrastate carriers.
Essentially, the foregoing possibilities for service authori--
zation embrace three basic regulatory philosophies:
1. Dependence on the Federal Government (the CAB) to pro-
vide the air service required for Florida by using
(1) interstate carriers, (2) commuter carriers, and
(3) air taxi operators.
2. Dependence on Florida PSC to provide exclusively intra-
state operations.
* 3. The integration of federal and state regulation to meet
Florida's needs.
2-2
PAGENO="0174"
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iach of these three approaches offers some advantage for imple-
menting air service plans. As a group they are adaptable to a
broad range of service needs -- differing densities of traffic,
varying interrcity distances, etc. For particular sithiations,
however, each also has some disadvantages.
Dqpg~ndence Solely On CAB Regulatory Action
Ba ckgr'ou nd
It is important to recognize ~that the primary interest of the
CAB is to provide a national system of air transportation. Con-
sequently, any intrastate services provided by carriers under
CAB authority are incidental to the broader interstate system.
The responsibilities of the Civil Aeronautics Board arise from
the legislation which governs that agency's operation -- the
Federal Aviation Act of 1958. In the Declaration of Policy,
Section 102, the Act states that the Board, in the performance
of its pawers and duties, shall consider the following:
102(a) The encouragement and develooment of an air trans-
portation system properly adapted to the~present
and future needs of the foreign and domestic com-
merce of the United States, of the Postal Service,
and of the national defense;
102 (b) The regulation of air transportation in such manner
as to recognize and preserve the inherent advantages
of, assure the highest degree of safety in, and
foster sound economic conditions in, such transpor-
tation, and to improve the relations between, and
coordinate transportation by air carriers;
102(c) The promotion of adequate, economical and efficient
service by air carriers at reasonable charges,
without unjust discriminations, undue preferences
or advantages, ox unfair or destructive policies;
102(d) Competition to the extent necessary to assure the
sound development of an air transportation system
properly adapted to the needs of the foreign and
domestic commerce of the United States, of the Postal
* Service, and of the national defense.
T~e following definitions contained in Section 101 of the Act
arc epplicable to the foregoing:
* "Air Carrier" - "any citizen of the United States who
undertakes. . . to engage in air tranaportation. .."
2-3
PAGENO="0175"
169
* "Air Commerce' - "interstate, overseas, or foreign air
commerce or the transportation of mail by aircraft...
which directly affects, or which may endanger safety in
interstate, overseas or foreign air commerce."
* `Air Transportation" - "interstate, overseas, or foreign
air transportation or the transportation of mail by air-
craft."
o "Interstate Air Commerce",. ..n.iean(s) the carriage by air-
craft of persons or property for compensation or hire,
or the carriage of mail by aircraft, or the operation
or navigation of aircraft in the conduct or furtherance
of a business or vocation, in commerce between, - a place
in any State of the United States,...and a place in any
other State of the United States ~or between places
in the same State of the United States through the air-
space over any place outside thereof;...
* "Interstate air transportation",.. .mean(s) the carriage
by aircraft of persons or property as a common carrier
for compensation or hire or the carriage of mail by air-
craft, in commerce between, - a place in any State of
the United States,...and a place in any other State of
the United States or between places in the same State
of the United States through the airspace over any place
outside thereof,...
The intent of Congress, as specified in the Fed~ral Aviation Act,
was to limit the authority of the CAB to interstate, overseas and
foreign air services. Thus, by apparent intent the Act eliminates
the Board as a ~significant factor in satisfying wholly intrastate
air service requirements.
This.policy is consistent with the original legislation -- The
Civil Aeronautics Act of 1938 -- in which the Congress did not
extend economic regulatory provisions of that Act to intrastate
air traffic. it did, however, assert full control over intrastate
and interstate flying with regard to safety regulation.~/
The definitions above delineate a problem which must be considered
further in later sections of this report. Several routes between
two points in Florida go outside the three-mile limit and "through
airspace over any place outside thereof." All flights between
1/ Regulation of Air Transport, State, Federal, Local, industry
Taxation, Stuart G. Tipton - The Chicago Association of
Commerce, 1945.
2-4
PAGENO="0176"
170
the following pairs of points are interstate flights under these
definitions:1/
1. Pensacola, Ft. Walton Beach and PànamaCity on the one
hand and all oth~r points in Florida, except Tallahassee
and Jacksonville, on the other.
2. Key West and Marathon on the one hand and all other points
in Florida on the other.
3. Tallahassee on the one hand and Tampa or St. Petersburg
and all points on the west coast of Florida south there-
of on the other.
Prob2errzs Involved Tn DeAending On CAB Regulation Eaclusivelu
The primary constraint inherent in looking to the CAB for action,
as. far as Florida is concerned, is simply that the Board's author-
ity is not sufficiently broad for Florida's total needs. CAB
certifications for air service in Florida were determined not by
Florida's internal requirements, but by the more extensive national
demands. Thus, Florida's needs, not structurally integrated with
interstate commerce, were not considered and are not provided for.
Other limitations which flow from this basic constraint involve
qLestions of carrier entry, adequacy of service and rates. The
CAB has demonstrated from its past actions that the possibility
of new carriers being certificated is remote indeed. Therefore,
any new services which Florida may desire would more than likely
be entrusted to one or more of the existing carriers, which are
primarily interstate in character.
The adequacy of air transport service between Florida cities is
beyond the reach of the CAB. The agency lacks authority to re-
quire air carriers to provide adequate service for purely local
intrastate traffic. Only if schedules between two Florida points
on an interstate route appear to be insufficient to meet interstate
demands can the CAB properly examine the matter.
Similarly, air fares arid rates are established by the CAB for
interstate system operations and are coi~itioned by interstate
traffic.
An additional problem exists in the CAB's ccr.ulea procedure which
is necessary before relief can be obtained. This procedure, in
1/ See ~AB Order 25483, Docket 18713,. 18759 (August 7, 1967);
CAB Order 24895, Docket 17528 (March 24, 1967), where PSA
was given authority to go beyond the three-mile limit off
the California coast.
2-5
PAGENO="0177"
171
effect, precludes prompt response to any need for improved or
additional air service. Because the CAB is concerned primarily
with interstate matters, and because as a federal regulator it
must conduct its proceedings in accordance with the Administrative
Procedures Act, the route, service and ra~o proceedings of the
Board tend to be cumbersome. To illustrate, if an application
affecting intrastate service were to be submitted by a carrier or
the State, it would be assigned a docket number and await its
turn to be processed, if in fact it is procesued at all.l/ De-
pending upon the urgency of the case, from the CAB's point of
view, months could elapse before it was set for he~rir~g. Prior
to hearing, all applications for service between the pairs of
cities named, including portions of applications which may con-
template the intrastate service only as part of an interstate
route, would be consolidated into the proceeding, to be certain
that all parties concerned would be heard.
Additionally, again because the Board's concern is with inter-
state routes, it is possible that the proceeding could be ex-
panded, and become a regional interstate proceeding. In such an.-
event the original application, basically for a limited intra-
state purpose, could be completely subordinated. S
The time required. for such proceedings varies, but a period of
two years from date of filing to a CAB decision is not uncommon.
The ability to respond promptly to a state's need is limited at
best.
Benefits To Be Derived From CAB Regi~lation
On the other hand there are advantages in having CAB-authorized
airlines provide intrastate services. Companies which meet rigid
CAB tests of fitness and ability generally are much larger and
usually are financially stable. Operations by such companies
are for the most part conducted with the most modern and corn-
fortable equipment. The companies are well-known and have wide
acceptance with the public. These, of course, are not trivial
considerations in choosing the source for any scheduled service.
These carriers are formidable competition for any intrastate
carrier. -
In addition to certificated carrier operations the Federal Govern-
ment has made available, as additional resources for a state air
transportation system, commuter airlines and air taxi operators.
These carriers operate pursuant to Part 298 of the CABs Economic
1/ If the application was for exclusively intrastate authority
- it should be rejected by the CAB and not docketed.
2-6
28-911 e - 78 - 12
PAGENO="0178"
172
Regulations)' These carriers are also int~rstate carriers and
as such may enter into interline ticketing agreements and file
joint tariffs with the CAB certificated carriers. In many
Florida markets the interstate traffic is absolutely essential
~o the continued existence of the intrastate service. Thus in
many instances the existence of the carrier is more dependent
upon the permissive nature of the CAB regulations than upon the
authorization of the PSC. This dual identity for these carriers
seems to have just happened in the course of events and is not
the product of legislative or CAB planning. It has a greater
impact on air service in Florida than in any other state.
Dependence Exclusively On State Regulatory Powers
State authority as an alternative for ensuring that a state
service plan is implemented is restrained because the State has
authority only over local, intrastate traffic. This excludes
traffic which may have as its ultimate destination a location in.
another state, a U.S. territory or a foreign country, whether or
not the total journey may include an intrastate trip, or segment.
Notwithstanding this limitation the regulation of air services
has been undertaken in several states. The number of such states
has been limited by the unusual factors which lend themselves to
intrastate air transport:
* geographical dimensions of the state;
* the existence of multiple high-density traffic centers;
* large concentrations of population; and
* the location of airports so that flight outside the state
can be avoided.
The primary example, in terms of its iniial involvement in this
activity and its volume of intrastate operations is, of course,
California. Others such as Illinois and Texas are also active.
Other large states, such as New York and Pennsylvania, are possible
future areas for increased state regulation. Because of its
geographical dimensions and demographic characteristics, expanded
State regulation by Florida is a logical alternative to consider
in obtaining better service.
1/ Except Air Florida which uses aircraft larger than permitted
under Part 298.
2-7
PAGENO="0179"
173
Experience Of Other States
The results of rather extensive reqblation by state authorities
in California and Texas, which have been well-documented, appear
tobe positive from the standpoint of the public.
From a small beginning in 1946, California intrastate operations
have grown steadily and substantially until today the State is
regulating the activity of two large-aircraft intrastate carriers
and at least 11 commuter airlines which together serve more than
100 intrastate city pairs.
The effect of intrastate carrier entry into intrastate markets,
under the aegis of California rather than the Federal Government,
was studied by the CASh in 1965. It examined service, traffic
and fare ~deve1opments in the Los Angeles-San Francisco market,
for the period 1957-1964. This interval covered the transition
from piston to turbo-prop to pure jet aircraft. The study com-
pares Pacific Southwest Airways with United, TWA and Western,
the CAB-ce~tificated airlines.
The study found that the Los Angeles-San Francisco market expanded
faster than the national average, service was improved, and the
average fare decreased.
The financial record of PSA was impressive. In 1959, it was
operating DC-4 equipment and by 1964 had converted to Lockheed
Electra turbo-props. At the beginning of 1959 stockholder equity
was less than $1 million; by 1964 it had grown to more than $10
million. In 1964 the return on total investment was 25%.2/ This
success story was accomplished with fare yields about one-half of
a cent per mile less than the CAB-certificated carriers.
An admonition must be entered that PSA's experience in California
cannot necessarily be duplicated in Florida. The Los Angeles-
San Francisco market is probably the largest air market in the
world. The two metropolitan areas have a combined population
twenty-five percent greater than the popu'ation of the entire
State of Florida. The routes of the interstate carriers are
basically at right angles to the intrastate route so that very
few interstate flights serve both cities as they leave the state.
In Florida interstate flights commonly serve Miami and another
1/ Traffic, Fares and Comoetition, Los Angeles-San Francisco Air
Corridor, Bureau of.Accounts and Statistics, Civil Aeronauti~s
Board, August 1965.
2/ No subsequent studies of PSA have been published and the CAB
study is 10 years old. Current (1975) reports indicate that
PSA is experiencing losses, has grounded part of its jet
fleet and is again requesting fare increases.
2-8
PAGENO="0180"
174
city as the flights leave the state and provide strong cornoetition
~o any intrastate flights in the markets. Other differences are
auparent between California and Florida air service but these
serve to amplify the admonition.
In Texas the results of the state-authorized services also were posi-
tive. Southwest Airlines began operating as a large aircraft
intrastate Carrier in June, 1971, under authority granted by the
Texas Aeronautics Commission. Operations are carried on in the -
Dallas-Houston, Dallas-San Antonio and Houston-San Antonio
markets. Recently Harlingen was added to both Houston and Dallas.
As in California, traffic expanded greatly in the markets served
by SouthwestA/ and participation by Southwest progressed almost
geometrically.
The situation in Texas is, of course, different from that in -
California. For example, in Texas the markets are limited in
number while in California many markets are served. Also in Texas
the intrastate airline uses different airports than the CAB
carriers and thus are closer to downtown areas. Southwest was
well-financed and managed, began its service with modern aircraft
and funded a strong sales and public identity program. It was
strongly supported by the State Commission.
It is interesting that Southwest did not always originate reduced
fares -- so did Braniff. The competitive efforts to capture the
markets were strong and varied. Several lawsuits kept Southwest's
name before the public and divided operations at two airports in
Dallas and Houston caused large problems for the competing carriers.
Fares have been both reduced and raised and are now on a two level
basis with a rather low fare off-peak and on weekends. The inter-
state carriers met the intrastate fares for a long period but are
now charging their normal fares, thus giving the fare-conscious
portion of the market to Southwest.
The financial effect on Southwest has been good, notwithstanding
the low revenue yield. For the 12 months ended September 30,
1974 the carrier reported net earninc~o of nearly $2 million on
revenues of $10 million.2/
1/ -For a complete statistical analysis see Recormnended Report of
Examiner Joan Holloway, Texac Aeronautics Commission Appli-
cation of Southwest Airlines Company for a Texas Air Carrier
Certificate of Public Convenience and Necessity for service
to the Pie Grande Valley.
2/ Currently (1975) Southwest reports earnings are continuing
- but at a reduced rate.
2-9
PAGENO="0181"
175
Prob less With ire lusi ~
The obvious disadvantage in depending solely on State regulation
is the lack of leverage which the State may have over the CAB~-
certificated airlines. This lack of leverage occurs because CAB
carriers are never dependent upon purely local intrastate traffic
for their economic life. This is particularly true in Florida
where, compared to the total movements of air traffic which in-
clude massive volumes to and from numerous out-of-State points,
the amount of purely local Florida travel is not significant.
The economic livelihood of CAB carriers is tied to interstate
routes, and interstate traffic; their participation in local
intrastate Florida traffic is an incidental economic benefit
and not a necessity.
Given this situation the State should expect to have little real
influence over these airlines. The most extreme action which a
state may take is to restrict participation in local traffic. It
cannot otherwise interfere with the rights of carriers.selected
by the Federal Government to perform interstate operations, as
part of a national transport system.
Other difficulties with exclusive state regulation of air service
are in fact related to the inability to effectively control CAB-
authorized carriers. Should the CAB carriers not be involved in
intrastate markets, because of their unwillingness to abide by
state regulation, the state would be forced to rely on small
companies which would lack the financial stability enjoyed by
CAB carriers. The types of aircraft would probably be less
modern and public acceptance, initially at least, might be sub-
stantially less.
~j~jitsOf State Re~rulatory Control
Paradoxically, the single major advantage of exclusive regulation
by the State of its air transportation system is the element of
control which the State is able to exercise. Theoretically, the
power could be absolute -- over the entry and exit of air carriers,
fares, rates and schedules. The State can establish, and then
enforce, standards and thus insure that appropriate service, re-
sponsive to the State's needs, will be provided. Should a carrier's
economic life depend entirely upon intrastate traffic, the ad-
vantage of State regulation would be greatest because the powgr
which could be exerted over the carrier would indeed be real.
The experience in California and Texas seems to reflect additional
advantages -- to the travelling public -- in th.e form of improved
service and lower fares, compared with that which was available 1/
when service was provided exclusively by CAB-certificated airlines.-
1/ Applicable only in the few major intrastate markets in these
states. In lesser markets the fares may be quite high.
2-10
PAGENO="0182"
176
The characteristics of intrastate markets in Florida differ great-
ly from those of California and Texas. Nevertheless, active state
participation in regulating air transportation between its cities
is likely to encourage purely~intrastate services in Florida which
will be beneficial to Florida air ~ssengers.
The Integration Of Federal And State Regulation
It is evident from the foregoing discussion that if the State of
Florida is to achieve an air transportation system which adequate-
ly serves the State's needs, it must rely ~5artially on the CAB
and partially on its own regulatory initiatives. The task con-
fronting the State, then, is to integrate the regulatory actions
of the CAB with its own in such a manner as to achieve optimum re-
~ults.
~`ornplications Qf Dual State-Federal Regulations
It has been pointed out earlier that, by implication, the CAB's
jurisdiction is limited to interstate air traffic and does not
encompass intrastate operations. However, the fact is that much
of the traffic which now moves between intrastate points is in
teality interstate in character, because passengers continue their
journey on connecting flights across state lines. Consequently,
the regulation of intrastate air operations is complicated be-
cause of the overlapping which exists on the jurisdictional issue.
A conflict has existed for most of the period during which federal
economic regulation of air transport has existed. Probably the
first major jurisdictional question occurred in California, with
the introduction of large aircraft, scheduled service by intra-
state carriers in 1949. In an article appearing in the California
Law Review~/ the need for Congressional review of the inter-
relation of federal and state economic jurisdiction over air
carriers was emphasized. The author commented that the complexity
of regulation arising out of dual jurisdiction, and the attendant
confusion, had an important adverse effect on the development of
an air transportation system which will meet all needs -- national,
regional and local -- adequately.
D~spite this and other pleas for clarification, the jurisdiction
issue remains unresolved. Robert F. Naris, writing for the
1/ Economic Regulation of Intrastate Air Carriers in California,
Marvel £4. Taylor, California Law Review, Fall 1953, Volume 43,
No. 3, page 454.
2-11
PAGENO="0183"
177
1/
Journal of Air Law and Commerce in 1973- comments that the
language of the Federal Aviation Act of 1958 clearly gives the
Federal Aviation Administration power in intrastate aviation with
respect to safety matters, but is not so specific on the question
of economic regulation.2/ He cites a court decision3! in which
the court endorsed the language in the Federal Aviation Act as
being a deliberate act on the part of Coneress to differentiate
between safety and economic jurisdiction by the Federal Govern-
ment. The court reasoned that it was not the intent of Conoress
to extend federal jurisdiction in economic regulation, and that
there is room for state regulation as well. There are limits, of
course, which Mans discusses. He mentioned the case of CAB vs.
Fniedkin .~~eronautics, inc.4/ where the carrier had in effect con-
cluded interline arrangements with CAB-certificated carriers to
carry passengers entering and leaving California. The court
held that the transport of these interstate passengers changed
the character of the airline's services from intrastate to
interstate.
Mans pointed out that current Supreme Court interpretation of
the "interstate commerce" clause of the Federal Aviation Act
would permit Congress to create exclusive federal regulation in
all phases of aviation -- economics as well as safety, intrastate
as well as interstate. It is Marie' opinion that federal authorIty
could be made adequate to handle local as well as national problems,
and is needed to assure that a national air transport system will
be regulated uniformly. He recommends that Congress amend the
Federal Aviation Act to give the Federal Government equal power
in both the safety and economic fields.
In several of its decisions the CAB has said that the states may
regulate "purely intrastate" air operations and that only a "de
minimis" amount of interstate traffic would be tolerated. What
constitutes a "de minirsis" volume has not been defined, nor has
a mechanism for actually identifying and mea~uring such traffic
been developed. Nevertheless, the CAB on occasion has exercised
jurisdiction, and has been upheld in the courts, if and when it
felt that an airline operating wholly within a state is in fact
carrying interstate traffic.5/ The CAB has given some guidance
1/ State vs. Federal Regulation of Commercial Aeronautics, Robert
F. Hans, Journal of Air Law and Commerce, Autumn 1973.
See also Tiptom. Footnote 1, page 2-4.
3/ Texas International Airlines vs. Civil Aeronautics Board,
473 F.2d 1150 (D.C. Cir. 1972).
4/ 246 F.2d 173 (9th Cir. 1957) .
5/ Civil Aeronautics Board vs. Canadian Colonial Airways, Inc.,
- 41 F Supp. 1006 S.D. N.Y. (1940).
2-12
PAGENO="0184"
178
as to what it expects as a `purely intrastate" operation. In
its decision on the application of Southeast Airlines, Inc. in
connection with a Florida intrastate operation~ the Board
stated:
"We note that Southeast represents that the proposed flights
will be confined wholly to the airspace over the State of
Florida; that the proposed operations will be conducted
without any arrangements with interstate carriers for
joint, through-plane service; that the service will not
be advertised in out-of-state media; and that even if
some out-of-state visitors are carried there will be a
break in the journey of these passengers, between the
flight from another state to Florida and the flight on
Southeast. If Southeast's operations are in fact con-
ducted in the foregoing manner, carrying no more than a
de minig~~p volume of interstate traffic. . . the flights
will not constitute air transportation subject to the
Board's jurisdiction. "1/2/
The question of state vs. federal regulation of air transoorta-
tion is still receiving much official attention, along with the
rather basic question of whether regulatory powers of the CAB
~and the Interstate Commerce Commission) should be drastically
curtailed (not, however, in favor of state control). A CAB
member recently raised the issue of extensive state regulation of
interstate carriers which also are engaged in intrastate commerce.
In a speech before the Association of Local Transport Airlines,
CAB Acting Chairman Richard J. O'Helia exoressed concern that a
number of state governments are authorizing large aircraft intra-
state operations, usually at fare levels below those found
reasonable by the Board for similar interstate operations. He
stated that the Board in the past has scrupulously respected the
limits of its jurisdiction in the light of its present statutory
provisions and urged state governments to present regulatory
natters involving intrastate air service to the. CAB for adjudica-
tion if a jurisdictional problem arises. If this is not done,
OMelia said that "it may be necessary to appeal to the lawmaker
to amend the law."
Fignificaetlv, Acting Chairman O'Melia pointed out that the
crrowth of large aircraft onerations by intrastate carriers in
part resulted from decisions by the interstate carriers to abandon
cr limit their services in intrastate markets. This left un-
tended market opportunities offering substantial economic rewards
to the intrastate carriers.
3/ Order 70-7-57, Docket 21864.
2/ It appears here that the Board has applied `dc nininis volume"
as a condition rather than as a finding or as satisfaction of
a criteria.
2-13
PAGENO="0185"
179
The state-federal jurisdictional conflict appears to have deepened
as a result of Mr. O'Melia'S remarks. In a recommendation to the
Texas Aeronautics Commission relating to intrastate route awards1!
the hearing examiner took the unusual action of attaching a "pro
posed Statement of Policy which in part constituted a response
to O'Melia. That Statement if adopted, would announce that Texas
intends to encourage and develop an independent system, over which
it may exercise control, in order to meet the needs of the travel-
ing public in Texas.
Given the determination of the states to seek.means of assuring
adequate air services, for their local traffic, and the existing
conflicts in interpretation as to jurisdiction, it appears that
full resolution of the dual regulation dilemma is not imminent.
The Realities In Florida
Notwithstanding any confusion which exists in some areas where
joint federal-state regulation is attempted, the realities of the
situation in Florida are that combined control offers the best
solution if a state air transportation plan is to be implemented,
and adequate service provided at reasonable cost.
First of all, about half of the Florida markets included in this
study are currently receiving service from interstate carriers
which meets the standards for adequate service developed in this
report. Thus, a substantial base of intrastate operations, which
meet Florida's intrastate needs, already exists as provided by
interstate carriers. The schedules meet the criteria for service
and require no regulatory action or financial support by the
State.
Secondly, the total number and percentage of interstate passengers
estimated to be moving in the markets studied here, is high. Of
4.7 million intrastate passengers, only 2.7 million are local
Florida passengers. This means that 2 million, or about 42% of
the total passengers moving between Florida points, originate or
terminate their journeys outside the State of Florida. Clearly
the volume of interstate movements in these markets exceeds de
minirsis level by any definition.
Thirdly, several routes between pairs of Florida cities are, by
virtue of the State's geography and the language of the Federal
Aviation Act, actually interstate routes since they use the air-
space outside the three-nile limit. While a commuter carrier
may operate between such points~/ it would do so under Part 298
1/ See Holloway, footnote 1, page 2-9.
2/ See page 2-5 for list of city-pairs.
2-14
PAGENO="0186"
180
of the CAB regulations and not as an intrastate carrier under
contrólof the State. An intrastate carrier using large air-
craft could not be regulated by the State between these Florida
cities.
Finally, even if its legislation is revised to cover all intra-
state services, the State of Florida would have little leverage
cri CAB-certificated airlines to compel them to respond to demands
for adequate service. The intrastate traffic utilizing these
carriers is not imoortant enough econonically to persuade the
carriers to respond favorably, particularly if the response en-
tailed a change which would have an adverse inpact on their
interstate services. For example, in 1973 the interstate air-
lines carried 26,293 million revenue passenger miles into, out of
and within Florida. Of the total, 158 nillion were generated by
passengers traveling intrastate -- or about six tenths of one
percent. Their revenue earned from intrastate passengers is
estimated to be about 1.3 percent of total revenue fron all do-
mastic passengers boarding flights in Florida.
It is apparent from these facts that dependence solely uoon posi-
tive State regulation would not be a realistic alternative in
Florida. Consequently, a plan which utilizes the positive features
of Federally regulated services, with supplemental services au-
thorized by the State, seems to represent the most useful regulatory
vehicle.
competition And Adequate Service
A review of alternatives for obtaining service must consider com-
petitive authority as a possibility. One theory of regulation
holds that the problems of inadequate service and excessive fares
can be solved by authorizing an additional carrier in the market.
Another current theory holds that abolition of allr or at least
most, regulation to mermit "freedom of entry and exit" and
"freedom of fare experimentation" will mromntly achieve abundant
service and low fares.
Like most sophisticated theories of economics either of these
theories might be eminently sound in a specific market at a
specific time but as a generality they brush aside or ignore some
very important facts. In Florida neither the oresence or absence
of competitive authority has assured adequate air service. On
the 17 routes recommended by this study there are 75 city pairs
where service is inadequate. Seven have no air service, 26 have
one carrier authorized, 12 have two carriers authorized and the
remaining 30 city pairs are authorized to three or more (uo to
seven in one case) carriers with full uninhibited permiasion to
compete. Still the service is inadequate and only one carrier
ir~ the State has attempted comuetition in rates. That carrier
is in financial difficulty.
2-15
PAGENO="0187"
181
The operators of the air service in Florida are undoubtedly
reasonably intelligent and clever and have a desire and need to
prosper. Their reluctance to join in competitive strugqle in
these markets is precisely because the markets ate not large
enough to support two or more competitors.
The forecasts of this study indicate that very few markets will
show dramatic growth as a result of installing adequate service.
The profit estimates of the route section show that revenue to
be earned from these routes cannot he divided between two or more
operators and either of them remain viable. Even the most orofit-
able routes must be viewed realistically -- if a competitor enters
these markets, his reven:~e comes first from the incumbent carriers'
profits and then is reflected in both of their losses. A few of
the routes may later be found canable o~ supporting competition
but initially it will be fatal to both carriers.
Proof of the above reasoning is available in the long history of
airline failures in Florida. Without exception every intrastate
carrier who has ever operated in Florida has (1) failed, (2) been
sold to refinance or (3) is currently in tenuous financial con-
dition. Also without exception, they have attempted to connate
with the interstate carriers or other intrastate carriers as
strong as themselves.
The theory that the stronger will survive in an economic struggle
does not produce lasting air service; it more easily results in
the death of both competitors. Should one survive he doab not
necessarily reap the rewards of the victor to recover from the
drain of battle, for he may be immediately confronted with a
fresh entrepreneur who has not yet lost his backing.
A classic demonstration of this type of competition occurred in
Florida in recent years. Two well-financed carriers, Shawnee
and Executive, entered the State with extensive route systems,
using identical aircraft. Their route systems were unregulated
and overlapped in critical areas. Each had its own management
philosophy but both were aggressive and built considerable
following with the public. Over about a four-year period it is
reported that one lost $3.5 million and the other up to ~5.O
million. At about the mid-point of this period it was apoarent
that so much had been lost that the survivor on the routes, if
left alone, could not recoup his losses through profits. The
final result was the demise of both carriers with the public
losing all the service and the backers a significant sum along
with their desire to perform a worthwhile public service.
The recommendation of this study will reduce competition except
in the major city pair markets. This is necessary to resolve
the long standing dile~nma of how to obtain adequate service in
the lesser markets of the State. It is a simple fact that
competition -- or the multiple designation of carriers between
2-16
PAGENO="0188"
182
points -- has failed to produce service. Further, there is no
reason to expect that it will produce in the future. The analysis
of the plan developed herein shows that a single carrier on any of
the 17 routes who provides a minimum of two well-timed daily
roundtrips over the route will earn a profit, provided he (1) is
free of competition for the local traffic and (2) gets a reasonable
share of the connecting and stopover traffic. On every route it
appears that splitting the traffic between two or more carriers,
w~ether intrastate or CAB-interstate, will result in csrtain
losses for the carriers.
The impact of the proposed limitations on the interstate carriers
is varied but not critical. In fact they can be granted exclusive
rights in many markets if they request it. First of all, no re-
straint is proposed on any carrier currently meeting the Minimum
Standards of Service if the carrier requests the privilege to con-
tLnue. Secondly, authority will be given to any present carrier
who agrees to meet the Standards and that carrier will have ex-
clusive authority. Finally, new carrier authority will be used
o;~Zy on those routes where existinq carriers are unwilling to
provide the service and on new routes.
Thus, the interstate carriers can only lose intrastate traffic in
m~rkets whore they are unwilling to provide minimum standard
service. Their interstate revenue is not affected in any way ex-
ccpt that an intrastate carrier can comoete for connecting and
S :opover passengers.
In summary, competition as observed in Florida has not produced
s:able, adequate intrastate service and has caused well-intentioned
Floridians to lose large suns of money in efforts to provide
intrastate air service.
In contrast, given all of the local traffic and a share of connec-
t:~ng traffic on any of the 17 proposed routes, a single carrier
who' provides minimum standard service will earn a profit. Divifing
that troffic with competitor assures that both operators will'
incur losses, reduce service and probably fail.
2-17
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183
CHAPTER 3
AIRCRAFT SELECTION
The Current Service Environment
Florida's intrastate markets are currently being served by a wide
variety of aircraft ranging from single reciprocating engine types
to four-engine jet wide bodies. The vast majority of the jet
service within the State is provided as a result of intermediate
stops on interstate service. The type of aircraft in these
markets is dictated by the density of the long-haul market and
the equipment operated by the interstate carrier rather than by
any consideration of the intrastate traffic demand or route
characteristics. These operators primarily require aircraft of
a type which cannot be economically operated at the stage lengths
and frequencies required to provide adequate intrastate service.
The March 15, 1075 Official Airline Guide shows that the eight
trunklines and one local service carrier in Florida offered ènly
ten entirely intrastate schedules providing four markets with
nonstcp roundtrfp service, five markets with one-stop roundtrip
service, two markets with two-stop roundtrip, and eight markets
with one-way nonstop service. It follows that in. order for
Florida to be able to assure adequate air service within the
State, smaller types of aircraft must be introduced. Since it is
probably unreasonable to expect the long-haul carrier to purchase
aircraft to be used only in Florida intrastate service, the State
will have to look to the intrastate operators to provide the bulk
of the intrastate service.
Aircraft Currently Serving lorida Intras Rou
The CAB-certificated carriers operate jet aircraft exclusively
in Florida markets. The intrastate carriers operate aircraft
iangi.ng from small twin-engined aircraft to turbine-powered
Lockheed Electras. Table 3-3. indicates the type of aircraft
being operated by each of the carriers offering scheauled intra-
state service as of March 15, 1975.
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184
TABLE 3-1
Al RCRAFT USED IN FLORIDA INTRASTATE SERVICE
CAB Certificated Carriers
Braniff International 13-727, DC-S
Delta 13-727, DC-8
Eastern DC-9, 13-727, L-lOll
National DC-lO, 13-727, 13-747
Northwest DC-lO -
Southern DC-9
Trans World B-727
United DC-lO
Commuter Lines and Intrastate
Air Florida Lockheed Electra
Air Sunshine DC-3
Florida Airlines DC-3
Nonmouth Airlines (Ceased Operation)
Southeast Airlines M-404
Marco Island Airway.5 13-404
Sun Airline B-30
Naples Airlines DC-3
Use Of Turbo-Fan (Pure Jet) Aircraft
All of the certificated trunklines (with the exception of Eastern
Air Lines back-up service on the Air Shuttle) have now converted
to jet aircraft and local service carriers are converting to this
type of aircraft as quickly as possible, although several have
many routes for which the available jets are not suited.
In markets which can support a jet the profit potential of the
jet exceeds that of other comparable sized aircraft due to the
jet's high seat-mile productivity, relative low cost maintenance
and passenger appeal.
The primary drawbacks to use of jet aircraft on Florida's intra-
state routes are the acquisition cost of jet aircraft and the
high cost per aircraft mile. Most of Florida's intrastate~
markets cannot provide the number of passengers required to make
jet operation economically practical. For example, for an average
stage length of 150 miles,. the. 80-passenger DC-9-lO requires 40
passengers just to breakeven on costs. This translates to 58,240
annual passengers in a market receiving minimum service of two
roundtrips per day. Only the followir.g markets are forecast~tO
exceed this traffic volume (1975):
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PAGENO="0191"
185
Ft. Lauderdale-Tampa Miami-Tallahassee
Ft. Myers-Tampa Miami-Tampa
Jacksonville-Miami Sarasota-Tampa
Jacksonville-Tampa Tallahassee-Tampa
Key West-Miami Tampa-P. Palm Beach
Miami-Orlando
All of the above except Sarasota-Tampa and Tampa-P. Palm Beach
are currently adequately served. Sarasota-Tampa is only 41 miles
and, therefore, cannot be considered a true jet market. It is
unrealistic to expect that an intrastate carrier could compete
with the carriers serving the other jet markets.
By 1985 traffic is forecasted to exceed the 60,000 level in the
following additional markets:
Daytona Beach-Miami 88,740
Ft. Lauderdale-Jacksonville 66,790
Ft. Lauderdale-Orlando 174,160
Ft. Lauderdale-Tallahassee 62,400
Ft. Myers-Miami 89,880
Gainesville-Miami 99,080
Jacksonville-Orlando 108,150
Jacksonville--p. Palm Beach 89,650
Marco Island-Miami 101,540
Melbourne-Miami 76,760
Melbourne-Tampa 64,230
Miami-Naples 100,680
Miami-Pensacola 65,440
Miami-Sarasota 124,960
Miami-W. Palm Beach 86,300
Orlando-Tallahassee 107,200
Orlando-Tampa 90,260
Orlando-P. Palm Beach 61,170
Pensacola-Tampa 73,720
Six of the above markets currently have adequate service -
predominantly by jet aircraft. All but ~wo have some air service,
again, predominantly by jets. This means that an intrastate opera-
tor contemplating use of jet aircraft would have to become the
dominant carrier in each of the above markets in order to pay for
~ dtrect operating costs. This conclusion presupposes that the
a~arketswill require nonstop service which would preclude
markets as segments of routes. Of the above markets,
~cola-Tampa are now receiving sor~ie nonstop service -
et aircraft.
3-3
PAGENO="0192"
186
Aircraft SeZection Criteria
The following aircraft characteristics were used in the routing
analysis to select aircraft types:
1. Seating capacity;
2. Block speed;
3. Range;
4. Performance; and,
5. Price.
These characteristics were studied to determine a reasonable
economic and performance profile of the types of aircraft avail-
able to provide air service in Florida. Selection of a "best"
aircraft in terms of manufacturer and model, is not intended in
this analysis.
As discussed previously aircraft types have been selected by
reference to traffic volume, service level, and aircraft capacity.
Aircraft Seating Carag~~y
Competition between manufactureps has resulted in a number of
similar-sized aircraft being available at fairly discrete levels
of capacity. Rather than debate the exact merits of one aircraft
over a very similar one built by a different manufacturer this
study uses categories or types of aircraft having approximately
the same seating capacity:
Type 1 80 seats
2 48
3 28
4 16
Tables 3-2 and 3-3 give operating data and other information on
representative aircraft of each type. Only limited data is in-
cluded on Type 1 aircraft since they are considered tco large for
potential new markets in Florida.
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PAGENO="0193"
TABLE 3-2
CHARACTERISTICS OF REPRESENTATIVE AIRCRAFT
Hex. Fuel Fuel/ Range Country of MFR
Max. Take- Seating Cruise Block Block Con- Avg. (SMJa/ Type of Air-
Aircraft Tjrpe ~ Capacit~y1 ~gg~ Tise ~ ~ ~ Power Lo~s. ~o&~o~
(Lbs.) (MPH) (9 150 Miles) (Lbs.) (Lbs.)
TYPE 2
Convair 580 57,000 50 325 228 :39 1,408 28.2 895 1.010 Turbo-prop U.S.A. U.S.A.
Deflavllland Dash 7 43,500 45 294 224 :40 1.110 24.7 958 1,073 Turbo-prop U.S.A. `England
Fairchild-Miller F-227 43,000 50 276 215 :42 1,385 27.7 565 680 Turbo-prop Canada Canada
TYPE 3
Douglas DC-3 25,200 28 165 133 1:05 503 18.0 90 205 Piston U.S.A. U.S.A.
Mohawk 298 23,810 26 246 192 :47 568 21.8 380 432 Turbo-prop France Canada
Short SD 3-30 21,100 30 228 182 :49 605 20.2 133 248 Turbo-prop England Canada
TYPE 6
Beech 5-99A 10,725 15 227 211 :43 389 25.9 247 362 Turbo-prop U.S.A. Canada
Britten-bream Trislander 9,350 11 175 137 1:05 226 20.5 138 254 Piston England U.S.A.
Dellaviliand DILC-6 12,500 19 192 157 :57 529 27.8 224 339 Turbo-prop Canada Canada
Swearingen Metro II 12,500 19 294 222 :40 426 22.4 127 242 Turbo-prop U.S.A. U.S.A.
1/ These are common configurations. Other confi~gurations with either higher or lower density are possible.
2/ Range calculationswere mmdc on a direct comparative basis with equal loads assigned to aircraft in each type of equipment.
Type 2 - 45 seats
Type 3 - 26 seats
Type 4 - 15 seats
IFR ranges assume a distance to alternate of 115 SM at maximum cruise speed and :45 hold. VFR assumes :45 reserves.
PAGENO="0194"
7~ircraft Type
Type l-8OSeat
DoucTias DC-9-lO, Bceing 737
Lockheed 188 (Electra)
Fokker F-28
Type 2 - 48 Seat
Fairchild Miller F-27
Fairchild Miller F-227
Convair 580
DeHavilland Dash 7*
FN Fokker 614*
MS 748
Martin 404
Prop-jet
Pron-jet
Prop-jet
Prop-jet
Turbo-fan
Prop-jet
Reciprocating
The above list includes aircraft which are either currently available
or programmed to be available within 24 months. The future aircraft
are indicated with an asterisk.
1/ Typical seating density for airline operations.
2/ ERR - Signifies that there is no range restriction on stage
lengths which will be flown in Florida intrastate service.
3/ 115 statute miles to alternate; :45 hold.
188
TABLE 3-3
AT RCRAFTCIIARACTERISTtCS
Max. Payload
11 Range
Seats- W/IFP. Reser~7es~
(Statute ~ilesT
Power
Turbo-fan
Prom-jet
Turbo- fan
UNR~
UNR
UNR
ERR
ERR
ERR
ERR
UNR
ERR
ERR
80
87
75
48
52
52
50
44
40
40
30
26
32
26
15
15
19
11
~pe 3 - 28 Seat
Short SD 3_30*
Nord-262 (M_298)*
YAX4O
Douglas DC-3
~ 4 - 16 Seat
Beech B-99A
DeHavilland DHC-6
Swearingen Metro II
Britten-Norman Trislander
133 Prop-jet
380 Prop-jet
ERR Turbo-fan
90 Reciprocating
247 Prop-jet
224 Prop-jet
127 Prop-jet
138 Reciprocating
3-6
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189
3loc~' Speed Curves
The speed of.an aircraft over its assigned route (block speed) is
a primary determinant of the economics of that route. Block time
is the time elapsing between departure from the gate (blocks) at
one airport and arrival at the parking position (blocks) at
another. Block speed is the average speed of the aircraft during
thia time.
Block speed is not solely an aircraft capability - it is controlled
by many factors, including airport congestion, availability of
navigational aides, and the mix of aircraft using an airport.
Other significant characteristics of the flight itself are flight
altitude, desired speed versus fuel economy trade-off, aircraft
loading, pilot training and technique, and weather.
Any or all ~of the above considerations bear to some degree on
variations in block time (speed) over a given flight segment.
For this reason, an empirical speed curve approach rather than
a flight stage time approach was used in this study to relate
block speed ~to stage length. The data used to develop the curve
included reports by the certificated carriers to the Civil
Aeronautics Board, manufacturer's data, carriers' route opera-
tions analysis and personal interviews with carrier operating
personnel. Table 3-4 shows the block speeds, by aircraft type,
reported to the CAB for the year ended December 31, 1973. Table
3-5 gives data on aircraft not used by CAB carriers and is derived
from manufacturers and commuter operator sources for block speeds
at 150 mile stage length. These speeds differ from the speed
in Table 3-2 because of different taxiing times used by SARC and
the manufacturers.
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PAGENO="0196"
190
TABLE 3-4
AIRCRAFT BLOCK SPEED ~ND AVERA(E STAGE LENGTH
Average
Block Stage
Aircraft Speed ~g~gth
(SI~Y
Convair 580
Allegheny 198 147
Frontier 206 124
North Central 181 100
Convair 600
Texas International 184 131
DHC-6 (Twin Otter)
Frontier 140 90
Ozark (1972) 148 175
F-27/227
Airwest 148 175
Mohawk (1972) 168 128
Ozark * 160 102
Piedmont 173 110
Martin 404
Southern 147 100
Word 262
Allegheny (1970) 153 96
Do~g1as DC-3
Central (1966) 133 94
Frontier (1966) 133 87
North Central (1966) 128 90
Ozark (1966) 118 88
Southern (1966) 119 83
Trans-Texas (1966) 140 111
West Coast (1966) 120 82
SOURCE: Aircraft Operating Cost and-Performance Report, Civil
Aeronautics Board, June, 1974.
3-8
PAGENO="0197"
Aircraft
Type
TABLE 3-5
Beech B-99
Swearingen Metro II
DeHavilland DHC-6
DeHavilland Dash 7
Britten-Norman Trislander
TABLE 3-6
Block
Speed
(mph)
219
208 1/
138
230
135 2/
Fairchild F-227
DeHavilland Dash 7
Convair 580
Short SD-3-30
Mohawk 298 (Nord 262)
Douglas DC-3
Beech B-99A
DeHavilland DHC-6
Britten-Norman Trislander
Swearingen Metro II
-52 + 127 log x
-50 + 122 log x
-55 + 130 log x
-55 + 109 log x
-56 + 114 log x
-80 + 100 log x
-54 + 122 log x
-17+ 8Ologx
-20 + 72 log x
-50 + 125 log x
191
BLOCK SPEED OF AIRCRAFT NOT USED
BY CAB CARRIERS
A review of the available empirical and published information led
to the adoption of the block speed fundtions shown in Table 3-6.
BLOCK SPEED FUNCTIONS
(x = stage length in statute miles)
NOTE: These functions are to be applied only in a range of stage
lengths from 50 through 350 statute miles.
1/ Composite of carrier data for actual operation including into
LaGuardia in New York City and O'Hare in Chicago. Operation
into high density areas will result in lower block speeds than
would ordinarily he expected.
2/ At 100 mile stage length (from operator experience).
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PAGENO="0198"
192
Take-Off Pformonce
All cities considered for scheduled service within the scope.of
this study have airports capable of handling aircraft un to, but
not necessarily including, the Lockheed Electra without im~osing
any fuel and/or payload restrictions on the aircraft's operation
under density altitude conditions likely to be encountered in the
State. The Electra and DC-9 type aircraft reauire a minimum of
5,400 ft. and 6,000 ft. of runway, respectively, to avoid weicht
restrictions at 90~F. AirDorts, included in this study which
cannot presently meet this criteria are:
Ft. Walton Beach 3,400 ft.
Key West 4,800 ft.
Marathon 5,000 ft.
Naples 5,000 ft.
Ocala 5,000 ft.
Punta Gorda 5,000 ft.
DC-9 service at Ft. Walton Beach is provided by Southern at Eglin
AFB through special arrangement with the US1~Y. Destin Airoort
does not have sufficient runway length for either Tyne one or Type
two aircraft with the exception of the DHC-7 under STOL performance
regulations.
Performance Coop e tition
Engineering state-of-the-art and cost considerations also tend to
minimize performance differentials between competitive types of
aircraft. Each manufacturer has access to comparable construction
skills and design talent and pays essentially the same for its raw
materials. There is even a remarkable degree of commonality in
power plants. Competition also requires thataircr~ft comoeting
in a certain type of market (i.e. short-haul, low density) pro-
vide basically similar performance. Variations can be expected
in the emphasis of trade-of fs between standard seating capacity
and fuel capacity or speed vs. short-field performance.
There is really only one major performance difference between
similar sized aircraft in the relatively low density short-haul
market. This occurs between the short take-off/landing (STOL)
designed aircraft and more conventional designs. Perhaps the best
example of this difference is the four-engined DeMavilland DEC-7
which is currently undergoing flight tests and has been ordered by
a number of small airlines. This aircraft is designed to lift 50
passengers out of a 2,000 ft. semi-prepared strip. This type of
capability will cost about 30% more than a conventionally perform-
ing aircraft that may require twice the runway length to lift a
comparable load. Clearly, there are operational environments in
3-10
PAGENO="0199"
193
which such a capability would justify a premium price. However,
in Florida's current air service pattern, there is no need for
this type of performance. In the future, some situations nay
arise .in which city-center to city-center air service nay become
feasible but this will be deferred at least until a number of
feasibility projects currently underway have been evaluated and
proper airborne and ground-based navigation equipment is cornmer-
cially available.
Price Competition
Froina practical standpoint, the major factor in aircraft
selection, from the operator's viewpoint, is price. Because of
the stringent airworthiness regulations of the FAA aircraft
which have been used in airline service and have a current air-
worthiness certificate are perfectly feasible choices for service.
The -class&c example of this is the DC-3 which has seen almost 40
years of service and is still the only currently available air-
craft in the 21-40 seat category. A DC-3 with a current air
carrier license costs in the neighborhood of $lOO,000-$l25,000
($4,100 per seat). Its two turbine-powered competitors the
Nord 262 (Mohawk 298) and the Short Sb3-30 will be priced at
over $1.5 million ($50,000-$57,000 per seat). While it is true
that the DC-3 can't go on forever, a price differential factor
of 10 makes the operator think about hanging on a bit longer,
particularly when the direct operating costs of the DC-3 are
still lower than the competition.
As aircraft increase in size, the dollar difference between used
and new aircraft gets even greater in the Type 2 category (48
seats). The 50 seat DHC-7 will be priced at approximately $3.0
million ($60,000 per~ seat). A Convair 580, licensed for airline
service currently sells for approximately $700,000 ($14,000 per
seat). Both of these aircraft are turbine-powered with roughly
the same speed and carrying capacity. It must be noted that an
operator can buy a 50 seat Convair for less tha one-half the
price of a new 28 seat aircraft. Further, the used Convair 580
can be acquired for approximately the same price as a new 15-19
place turbine-powered aircraft.
At the small end of the aircraft size scale, there is much less
price difference to choose between in modern turbine-powered
aircraft. These prices range from something over $600,000 for
the 15 passenger Beech B-99 ($40,OdO per seat) and the 19-place
DHC-6 (Twin Otter) ($32,000 per seat) to over $850,000 for the
19-place Swearingen Metro ($45,000 per seat). The only piston-
powered modern aircraft in a similar capacity category is the
16-place Britten-Norman Trislander, a three engine aircraft
manufactured in England, certificated by the FAA, and currently
used by several airlines world wide. This aircraft is priced at
approximately $325,000 ($20,000 per seat).
3-11
PAGENO="0200"
194
Aircraft Used For Anslysis
For purposes of evaluating the financial results of the e'xamole
route systems, it was necessary to select a reoresentative aircraft
type for each size category. The Convair 580, Mohawk 298 and the
Beech 99A were selected as representative of Type 2, Type 3 and
Type 4 aircraft, respectively. The following sections relate these
aircraft to others in their class.
TApe 2
Specific operating environments racy require aircraft of non-standard
operating characteristics. However, there are no such circumstances
foreseen in providing an adequate level of intrastate air service
in Florida. The Convair 580 and the Fairchild F-227 have similar
operating characteristics and seating. There is no implication in
the use of the Convair 580 as an example in this study that an
operator should not consider use of an F-227 as an alternative,
particularly if the acquisition cost was advantageous. It should
be noted that both of these aircraft have had considerable service
and require continuous inspection and structural upgrading such
as a program currently unde~.iay on the CV-580 aircraft owned by
Allegheny Airlines. It must also be pointed out that CV-580 burns
a relatively large amount of fuel per mile and therefore will be
more subject to increases in direct operating costs as fuel prices
escalate.
The DeHavilland DHC-7 (Dash 7) is scheduled for introduction into
airline service early in 1977. This four-engine, turbine-powered
aircraft has been designed to carry 50 passengers and to operate
out of a 2,000 ft. air strip at gross loads. It uses 5-bladed
props which significantly reduce noise levels bothinside and
outside the aircraft. However, the high cost of the~aircraft,
in excess of $3.5 million, will probably make it unattractive
in a market where turbine-powered aircraft of similar capacity
and slightly higher speed are available for approximately 25% of
the cost, and where STOL capability is not essential.
Type3
Since both the Short SC3-30 and the Mohawk 2981" are foreign built
and have yet to be put into service in the U.S., a meaningful
comparison of their operational characteristics is impossible.
1/ The Mohawk 298 is the Nord 262 fitted with an American engine.
3-12
PAGENO="0201"
195
At this writing, Allegheny Airlines has announced an intention
to go ahead with integration of the Mohawk 298 into its service
pattern to serve small cities. Commercial availability to other
buyers in the near future is not yet certain. If it is put into
ppodüction with sales and support effort undertaken by a U.S.
firm it may have a competitive sales edge. This advantage might
be offset by the Short's slightly greater capacity which gives it
a similar seat-mile production capability. ` The Nord 262 is also
a foreign airframe, which has been re-engined to use the same
PT6A-45 engine used on' the Short SD3-30. If the Mohawk is pro-
duced the Nord will probably not be marketed in the U.S.
Thus the comparison ends up being primarily between the Mohawk
and the Short and as a practical matter it is difficult to identify
a quantitative difference between the two aircraft.
From a strictly present operating cost standpoint, the obvious
choice for the Type 3 aircraft is the DC-3. In addition to low
acquisition cost, it provides greater passenger comfort than the
smaller turbine-powered aircraft of similar seating capacity.
The increased speed of the turbine-powered aircraft makes it
possible for them to achieve approximately the same cost/available
seat-mile as the DC-3. However, on relatively low-density routes
where there are many empty seats, the relatively low hourly
direct operating cast of the DC-3 is very attractive. In spite
of the present economic advantages of the DC-3, it is felt that
commitment to that aircraft as a standard of service on a
majority of Florida's intrastate routes would be unacceptable to
the majority of the traveling public, would not contribute to a
modern and progressive image of the service, and would, eventually,
become the least economic alternative. From a practical standpoint,
it should be noted that the DC-3 is on an annual waiver status
with the FAA where the use of the aircraft commercially is
subject to annual review and revocation.
Z'spg 4
The various aircraft in the Type 4 category also offer their own
advantages~ The I3eech 99A has been used, with varying degrees
of success, by many commuters and several of the local service
carriers. The 5-99 is an outarowth of aircraft desiqrted for
business use and, initially, was subject to difficulties in
systems which were not dusigned for the continuous use to which
they were subjected in airline use. Effective manufacturer
support was also a problem at the outset. Most of these
problems seem to have been worked out. The aircraft i,s fast.
Os stage lengths of over 100 miles, this speed advantage is
significant. The load carrying capacity of the aircraft is
rDlatively limited and, at best, cannot exceed 15 passengers.
A full load of passengers limits the aircraft's IFR range to less
than 250 miles.
3-13
PAGENO="0202"
196
The DHC-6 (Twin Otter) has often been considered as the alternative
to the Beech 99A. The choice of the DHC-6 is generally based on
its greater load carrying capability (19 passengers with IFRrange
of tess than 100 miles). The aircraft also has a considerably
greater short-field capability than any other aircraft in its
class. This capability is, however, of negligible value in the
subject service. The Twin Otter is significantly.slower than
other turbine-powered aircraft in its class. This results in a
higher cost per available seat mile and a lower number of plane
miles per unit of time (i.e. more aircraft would be required to
produce the same amount of capacity per unit of. time).
Another aircraft which is finding considerable acceptance among
commuter operators is the turbine-powered 19 passenger
Swearingen Metro II. This aircraft is somewhat faster than
other aircraft in the class and therefore, is able to achieve
high seat mile productivity. A major deterrent to acquiring
the aircraft is the purchase price which is well over $800,000.
However, an operator contemplating upgrading a fleet of 9-13
place aircraft might well prefer to pay the extra $200,000 (over
a Beech 99A or Twin Otter) for the increase in speed and capacity
instead of having to pay over $1.5 million to get 7-11 more seats
and less speed in the 11-298 and the Short SD3-30 respectively.
Passenger accornnlodations in the Metro are roughly comparable to
those in the Beech 99A and Twin Otter but are not as comfortable
as those in the Type 3 aircraft.
The foregoing comparative descriptions are intended to present
a non-technical analysis of some of the pertinent characteristics
of representative aircraft which are candidates to be operated
over Florida's intrastate routes. Specific technical comparative
evaluations can only be made by operating personnel of airlines
in specific operating environments.
3-14
PAGENO="0203"
197
CHAPTER 4
COSTING OF AIR SERVICE
The cost of scheduled air service is usually stated as direct
and indirect expenses. Direct costs are those attributable to
the operation of the aircraft, including such items as crew
costs, fuel', maintenance and depreciation. Most of these costs
are developed and quoted in terms of either flight hour or block
hour.l/ Some direct costs -- such as depreciation and insurance --
tend Eo be fixed on an annual basis and, therefore, when stated
as a block hour unit will vary with the annual utilization of
the aircraft.
Indirect expenses are those related to the handling of aircraft
and traffic on the ground as well as in the air. In addition,
general overhead expense such as accounting and administration
are considered indirect expenses. These costs are not directly
attributable to the operation of an aircraft. While all costs
are usually broken down by individual function, indirect costs
are often expressed, particularly by commuter carriers, as a
percentage of direct costs. Experience indicates that a sig-
nificant correlation exists between direct and indirect costs.
The level of operating costs for similar aircraft can vary
considerably between carriers depending on the characteristics
of the service provided, particularly the average length of hop
be~~aen stops and the rate of utilization of the aircraft in
the fleet. Traffic density on the system can be another factor
contributing to the type of operation required and resulting
costs of providing service. Expenses also vary between classes
of carrier, i.e.,'certificated local service and trunkline
carriers have experienced higher cost levels than commuter air-
lines or intrastate carriers.
The costs used in this study for intrastate operations are all
of the costs incurred and assignable to a route. These are
`fully allocated costs" and are appropriate to this analysis.
Any discussion of the cost of air service becomes involved with
the priilosophy of costing and about the applicability of "fully
allocated" or "added costs." Such a discussion is appropriate
to certain operations in Florida.
1/ Block hour - the time interval from departure from the gate
(blocks) at one airport to the parked position (blocks) at
the next airport of landing.
* Flight time - the time interval from the start of the take-
off roll at one airport to the touchdown of the wheels on
the runway at the ne~:t airport of landing.
4-1
PAGENO="0204"
198
While this study adheres to a full cost philosophy, it would be
acceptable to apply the added costs theory to a great deal of the
present services of the interstate carriers in Florida. The latter
has been described by one airline economist as the "anyhow theory"
of costing, i.e., `Since the flight would go there anyhow it
doesn't cost anything." Fcr example, Eastern's service Miami-
Gainesville-Atlanta is operated solely to serve Gainesville (there
are many nonstop flights between Miami and Atlanta) so it is
obvious that the full cost of the flight is assignable to
Gainesville. On the other hand, a groat many flights are flown
between several Florida-cities and Miami in order to return -
flight crews to their base at Miami and to get aircraft in and
out of the maintenance bases at Miami -- the airplane would go
"anyhow" -- so any service it performs on the way is at very
little cost.
By the same token, it should be acceptable to hold that most of
the intrastate flight legs of interstate flights are not flown
for the local intrastate traffic they carry and would continue
to fly exactly the same routing if denied that intrastate traffic.
Therefore the intrastate revenue can be viewed as a bonus since
little cost can be allocated against it. For example, Braniff's
flight Ft. Lauderdale-Tampa-Dallas would not be terminated if it
were denied intrastate revenue between the Florida cities. The
cost of flying the flight between Ft. Lauderdale and Tampa must
properly be related to the revenue received at Ft. Lauderdale --
most of which is Ft. Lauderdale-Dallas revenue. -
The costs shown in Table 4-1 have been developed for this study
as representative of costs for operating type 2, 3 and 4 aircraft
in intrastate service. These are estimates prepared for this
study and do not represent any particular carrier's operation.
For the purposes used here the relative values of one aircraft
to the others nay be more important than the le~iel of the costs.
Aircraft Direct Operating Costs
A basic task in choosing an aircraft for a proposed service. -is
to select the lowest cost alternative from among those aircraft
offering sufficient capacity to accommodate the available traffic.
In othe~ words the aircraft which requires the smallest number
of passengers to cover operating costs.
It is a truism that small aircraft have lower operating cost
per mile than large aircraft. It is also true that large air-
craft generally have lower seat-mile costs than small aircraft.
However, when traffic is relatively low, the significant measure
of unit costs is the cost per aircraft-nile since on a large
aircraft most of the seats will be empty but the cost of moving -
the aircraft will not be greatly affected.
- 4-2
PAGENO="0205"
TAStE 4-1
ESTIMATED 1975 SLOCK TOUR COSTS FOR
Type- 2 2 2 3 3 3 4 4
Nord 262/ Short
Aircraft - F-27 CV-580 Dash 7 M-298 DC-3 SD3-30 B-99 Metro
Direct Operating Costa (DCC)
Crew $ 31 $ 31 $ 31 $ 28 $ 28 $ 28 $ 25 $ 25
reel 96 122 107 37 41 37 33 33
Insurance 10 11 48 24 1 24 10 14
Flying $137' $164 $186 $ 89 $ 70 S 89 $ 68 5 72
Isintonance 60 75 65 45 40 40 25 30
B~rdcn 24 30 26 18 16 16 10 12
Flying & Maintenance $221 $269 $277 $152 $128 $145 $103 $114
Deprcciaticn 49 17 166 58 11 58 25 33
Total DOC $270 $326 $393 $210 $137 $203 $128 $147
Indirect Operating Costs 99 121 125 68 57 65 46 51
Total Operating Coats (TOO). $369 $447 $518 $278 $194 $269 $174 $199
Miles Per Block Hour 224 228 215 192 138 182 211 222
S Per Tile - DCC $1.21 $1.43 $1.83 $1.09 $ .99 $1.12 $.6l $.66
- TOC 1.65 1.96 2.41 1.45 1.41 1.47 .82 .89
Available Passenger Se~ts 40 50 50 26 28 30 15 19
TOC Per Available Seat Mile 4.1$ 3.9$ 4.8$ 5.66 5.06 4.96 5.56 4.76
Cost ($000)/Life In Years! $600/S/ $70015! $3000/10! $l500/1O/ $75/3/ $1500/10/ $650/10/ $850/1O/
Residual Value (5) 10 10 15 15 0 15 15 15
Breakeven 9 156 Yield
Passengers 10.98 13.0 16.0 9.65 9.37 9.8 5.5 5.9
Load Factor 27.5 32.7 32.1 37.1 33.5 32.7 36.7 31.3
1/ See basis of cost by account on following page of this table.
PAGENO="0206"
200
TABLE 4-1. (Continued)
OPEFJ~TING COST ASSU~1PTIOES
Direct Cost
Crew - 2 man crew on all aircraft.
800 hours annual utilisation.
Typo 2 - $25,000 par crewannually -
$31 per block hour. S
rype 3 - $22., 500 nec crew annually -
$28 per block hour.
Type 4 - $20,000 per crew annually -
$25 per block hour. S
Fuel - experienced consumption levels at 37~/gal. 1
for turbine fuel and 60~/ga1. for gasoline.-
Insurance - 3.5% of aircraft cost.
Maintenance - experience of commuter operators where
available on aircraft currently being flown.
Additional input of local service cost levels
for similar equipment. From the more abun-
dant data for Type 4 equipment utilized by
commuter carriers, allowance was made for
the more complicated systems and increased
work required on the larger, heavier aircraft
S in Types 2 and 3.
Maintenance Burden - 40% of direct maintenance. Based on commuter
experience combined with local carrier results
for like aircraft.
Depreciation - estimated cost of aircraft in the present
market spread ovar a realistic useable life
with allowance for some residual value if
deemed appropriate.
Assumed Life- Residual
Type Purchase Years _________
S 2 Used 5 10
3 New 10 15
3 Used 3 0
4 New 10 15
1/ Cost of jet fuel to this class of carrier in Miami was reported
- in May 1975 to be about 32 cents per gallon.
4-4
PAGENO="0207"
201
TPBLE 4-1 (Continued)
Indirect Costs
Calculated at 45% of direct costs excluding depreciation.
Based on commuters experience adjusted for increased fuel prices.
()perstiflgj~CtOr5
Utilization - 2200 hours annually, based on about 7 hours
daily assuming a 6 day per week operation,
or 6 hours per day on a 7 day operation.
Block Speeds - derived from operating data for each
aircraft over a 150 mile stage length.
4-5
PAGENO="0208"
202
1/
The CAB has expressed this cost relationship well:-
"In the vast every new transvcrt aircraft has been larger
than one it rev laced and in rest instances it has been
faster. These two facts are associated with the expression
of airline econcry in terns of cost per seat nile or per
ton nile. By building larger end faster aircraft it has
always been possible to reduce tite cost of producing a seat
mile or a ton rile of capacity, and it seers that higher
speed has permitted larger sise without economic penai~
in su~conic aircraft. However, in decline with the short-
haul, low traffic routes we have a situation where high
speed cannot he realized because of the short distance
flown at cruising speed and where larger size is not
desirable because the capacity is seldom used. Indeed,
where only one or two daily round trip flights are
operated, the public will usually be better served with
added flights rather than added size of aircraft when
more capacity is needed. Far these reasons we are more
interested in the cost per plane mile than in the cost
per available seat mile or ton mile."
The type of operating entity is also an influence on operating
costs. In general, commuter carriers have experienced lower direct
and indirect operating costs than have local service carriers
operating the sane equipment over similar routes. Similarly,
local service carriers have experienced proportionally lower
indirect costs operating smaller equipment than when operating
large equipment.
Relationship Of Aircraft Size To Direct Operating Cost
Comparability in cost data is difficult to establish since commuter
and intrastate carriers are under no obligation to report financial
data in a manner comparable to that required of CAB-certificated
carriers. Nevertheless a detailed search of CAB Forts 41 reports,
formal pleadings before the Board, projections by aircraft manu-
facturers, proprietary information supplied to SARC by several
carriers and the trade press have provided an adequate data base
from which to draw reasonable cost estimates and conclusions.
It is obvious that smaller aircraft such as the Beech 99 and the
DeHavillandDHC-6 (Twin Otter) can be operated at significantly
lQwer direct aircraft-mile costs than can the larger turbo-prop
and turbo-fan equipment used by the certificated carriers. 2/
1/ Report to the President on the Airline Subsidy Reduôtion
Program, June 30, 1963. -
2/ See Table 4-1 for characteristics of these aircraft.
4-6
PAGENO="0209"
203
Typically (based on 1973 reported data), the cost,of operating
Convair 580 and Fairchild-Hiller F227 equipment over an average*
stage length of 120 miles was $1.60 per aircraft mile (exclusive
of depreciation) while the cost of operating a Beech 99 over thern
same stage length (with comparable utilization) could be expected
to be approximately $0.50 (again, exclusive of depreciation).
Most of the reasons for the lesser direct cost of the small aircraft
are apparent. Maintenance is less complex and fuel consumption is
approximately one-third as much. Speed and weight of the aircraft
can be shown to directly affect the crew cost. Wage rates of
airline crew members have historically been related to these two
aircraft characteristics. This difference in crew cost within a
single airline can amount to as much as 40% between crew cost for
the large turbo-prop and the smaller aircraft. The extent to
which this is a factor in direct cost is, of course, a function
of the type of employment contract an operator has with his
employees. -
Depreciation is a very important element of direct cost. The
capital required for aircraft is a paramount factor in most cônimuter
and intrastate airlines as it is with all airlines. The new cost
of the large turbo-prop aircraft being operated by the local service
carrier ranged from close to $1 million to well over $1.5 million.
~On today's market a used zero time Convair 580 can be purchased
- for approximately $700,000 and F-227's for as little as $400,000.
Similarly, low time (licensed for airline operation) DC-3's, while
relatively scarce, can be puchased for less than $100,000. New
Beech 99's and DHC-6's cost in the neighborhood of $600,000. New
generation medium-sized turbo-prop aircraft as exemplified by the
DeHavilland DHC-7 (48 seats), Short 3-30. (30 seats) and Nord
262/M298 (27 seats) are expected to cost $3 million, $1.5 million
and $1.5 million respectively.
It is clear that depreciation expense (i.e. initial investment)
becomes a major consideration in sele~tion of aircraft. For this
reason Table 4-1 is presented displaying direct operating costs
net of depreciation along with the incremental cost of depreciation
at current aircraft acquisition costs.1/
Relationships Of Cormuter Air2ine DCC and Certificated Carrier DOC
Experience has shown that the commuter carriers are able to operate
smaller aircraft at lower cost than are the certificated carriers.
There are only lir~ited examples available for the comparison of
operating costs between commuter type carriers and certificated
1,' When aircraft are leased rather than owned this cost will
appear as lease expense.
4-7
28-911 0 - 78 - 14
PAGENO="0210"
204
carriers using the same equipment. The most recent example is
that of the DHC-6 Twin Otter. In their 1973 report to the CAB,
Frontier reported a DOC of $1.21 per aircraft mile. Although the
1974 figures are not yet published, it is likely that this cost
will have increased. Pilgrim Airlines, in the trade press, indi-
cates that their total hourly direct cost for 1974 was $89.42.
This translates to a cost per aircraft mile of $.64.
The CAB in its~1972 study, "Service to Small Communities" has the
following to say on the subject of variations in cost levels
between commuter operation and certificated carriers. -
"Apart from the Allegheny Commuter arperience, all other
sources report direct orerating costs for ccmm~ter
carriers usina 3-99 equi~menv in the narrow rance of
74-87 cents per aircraft mile...
In conrrarison with the cast rsroes of 45 cents
to 65 cents par aircraft mileS which would appear
to include the mc~Jority of the commuter carriers3
the certificated carriers could be expected to
experience costs ranging from 25% to 100% greater.
Crew Cost
The greatest variance in costs between local service carriers and
commuter carriers is in the area of crew costs. In general, crew
costs account for roughly 25% to 30% of total direct aircraft
operating cost. In 1973, the last full year available for which
certificated carrier costs have been published, crew cost for the
certificated carriers on turbo-prop aircraft averaged approximately
30% of total direct cost. The comparable figure for turbo-fan
equipment was approximately 25%. If depreciation is taken out of
DOC these percentages become approximately 36% for both turbo-fan
and turbo-prop. Trunkline carriers' block hour crew costs tend to
run about 20% higher than for local service carriers. In the case
of the Boeing 737 the cost is more than 50% higher. (See Table
4-3). As a percent of DOC (ex depreciation) the trunks' crew costs
tend to run 6% to 7% higher than do local service carriers' crew
costs. Interviews with several commuter carriers indicate that
their crew costs tended to run between 20% and 22% of total DOC
(less depreciation)1/ and are less than one-half the crew costs
of the local service carriers operating similar equipment.
The primary reason f or the difference in crew cost between the
certificated carriers and the commuter carriers is the fact that
1/ The ratios used here are based on costs before the advent of
the fuel price increases now in effect. As seen in Table .4-6
- the percent crew cost is of total has been greatly reduced by
the increase in fuel cost. Crew costs have not declined.
4-8
PAGENO="0211"
205
commuter airline crews are relatively free from unionization. The
strength of the uniont s influence on crew costs is attributable to
a number of characteristics of certificated carriers which are not
generally found in commuter-type carriers. The most obvious of
these is the fact that the unions have had much longer to organize
the flight crews on certificated carriers. Other important in-
fluences include the CAB certificate which assures the permanency
of the company which in turn supports a greater conpany career-
orientation in the certificated carriers; relative freedom from
the threat of job loss from company failure (such a failure has
happened seldom and labor protective contract provisions have been
imposed in the resultant merger or acquisition); and the impossible
taskof obtaining substitute or replacement qualified pilots with
which to combat a work stoppage.
Union strength in the certificated carriers and its influences on
operating cost in two areas in particular have caused abandonment
of at least two experiments by local service carriers to operate
small aircraft on low density routes. It has also been a direct
influence on the decision by other companies not to experiment
with small aircraft at all. Several of the local carriers' labor
contracts have so called "scope Clauses" which guarantee to the
pilots that their jobs will not be jeopardized by management trans-
ferring some of a carrier's routes to another operator. ~nother
major influence of a union pilot contract is the requirement for
certain minimum salaries for captains regardless of aircraft type.
In practice, this provision means that a crew on a Beech 99 will
have to be paid at rates considerably higher jn proportion to
available revenue seat miles than is the crew for larger aircraft.
On the other hand, the commuter carriers, in general, do not hold
a certificate and they can be and have been put out of business
by the lack of sufficient business or by more efficient (lower
cost) competition (land or air). Therefore, the smaller operator
cannot economically tolerate the institutionalizing that is
possible in a more permanent, mature regulated environment.
However, for the very reasons stated above, as a carrier (or
industry) natures and achieves route protection and, to a lesser
degree, rate protection, it is likely that wages and other costs
will rise correspondingly.
The commuter carriers jr Florida have enjoyed a situation which
night be envied by operators in some other states. A great many
of the senior crew members in Florida commuters airlines are
retired Air Force or Navy pilots who, because of age or their own
disposition, are not employable by the certificated carriers. They
want to live in Florida, own homes in Florida, are often part of
the community and -- they want to fly. Employment by a commuter
airline at a "reasonable" wage in addition to service related
retirement benefits provides a very acceptable income where they
want to live. The arrangement is good for both the employer and
the employee.
4-9
PAGENO="0212"
206
A. similar situation has provided maintenance personnel in some
communities in Florida while they are scarce in others.
Fuel And Oi?~ Costs
Through the early part of 1973 fuel costs represented approximately
30%, 13%, 17% and 10% respectively of IYOC (less depreciation) for
2-~engine turbo-fan, large turbo-prop, 2-engine piston and small
turbo-prop aircraft. Since that time, howeverr fuel costs have
risen dramatically. During the 19-month period from July 1973
through February 1975 fuel costs for the trunklines increased more
than 115%. These carriers paid an average of 12.291 cents per
gallon in July 1973 compared to 26.431 cents in February 1975.
The comparative increase for local service carriers was approxi-
mately l05%.1/ In terms of aircraft operating cost this increase
translates to approximately $120, $46, $40, and $14 per hour each
for 2-engine turbo-fan, 2-engine large turbo-prop, 2-engine large
piston and 2-engine small turbo-prop respectively.
In spite of the great increases, across the board, in.fuel prices,.
the fact remains that the large carrier, being able to provide the
promise of large volume purchases, is able to negotiate more ad-
vantageous prices. For instance, the Allegheny Commuter system
which operates in an otherwise high cost environment, is able to
enjoy a comparatively low fuel cost because of being able to take
advantage of cooperative buying with the affiliated airline.
According to commuter carrier reports in Hay, 1975 the cost of
jet fuel in Florida was approximately 32~/gallon.
Maintenance Costs
Historically aircraft maintenance costs represent roughly the sane
proportion of total direct operating costs as have crew costs.
Table 4-2 displays the reported maintenance costs of certificated
carriers using some of the types of aircraft appropriate for
service on Florida's intrastate pattern.
About the only relatively firm conclusion that can be drawn from
the data in Table 4-2 is that maintenance costs for turbo-fan
equipment represent .a significantly lower proportion of total DOC
than do maintenance costs on turbo-prop or piston-engine equipment.
1/ A few of these carriers were on long tern contracts which
assured a lower fuel price. These contracts have now expired
and new contracts carry escalation clauses to pass on price
increases.
4-10
PAGENO="0213"
207
TABLE 4-2
BLOCK HOUR MAINTENANCE COST COMPARISON (1973)
* Type of Maintenance
Aircraft Trunk Local
Burden
Trunk Local
85.23
63.58
57.83
84.06
72.99
69.21
99.02
94.59
98.05
87.40
83.86
77.55
104.13
81.93
38.09
34.00
42.27
39.25
65.44
40.61
44.92
46.75
42.73
15.52
DC-9-l0
DC-9-30
Boeing .737
CV- 580
F- 27
F-227
CV- 600
M-~ 404
DHC-6
DC-9-10
DC-9-30
Boeing 737
CV- 580
CV- 600
F- 27
F-227
N- 404
DHC-6
Total
Trunk Local
169.29 133.02
136.57 136.86
127.03 137.30
- 152.84
- 124.47
- 122.47
- 150.88
- . 124.66
- 53.91
- Ratio
1.19
1.14
1.57
TABLE 4-3
SLOCK HOUR CREW COST COMPARISON (1973)
Trunk'
153.07
160. 69
209.24
Local
128.26
141.41
132.82
111.05
88.51
110.29
89.74
67.67
64.69
Source: Aircraft Operating Cost and Performance Report,
Civil Aeronautics Board, June 1974.
4-11
PAGENO="0214"
208
It is difficult, on the basis of sparse available data, to draw
a firm quantitative conclusion as to the relative economy of
certificated carrier maintenance costs and those incurred by
commuter carriers. However, it can be concluded reasonably that
the costs of a commuter carriet are lower to some degree.1/
This conclusion is based on recognition of the following:
1. The certificated carriers, under Part 121 of
the Federal Air Regulations, (FAR) are subject
to more stringunt F~ rcc~uiations with regard
to maintenance than are those commuters under
FAR Part 135.
2. ~Thewage levels are generally higher for the
certificated carriers due primarily to
unionization.
3. Maintenance burden - that cost category which
includes costs of hangar space, parts inventory
and the maintenance department overhead directly
attributable to aircraft maintenance - is likely
to be higher for the facilities and complicated
specialized equipment of the certificated
carriers than for commuter operations.
4. There is relatively lower efficiency, in terms
of productivity, of maintenance of small air-
craft by a certificated carrier whose primary
profit incentive requires concentration on
`~"th~intenance of larger equipment operated over
longer-haul higher-density routes. An example
of this type of problem is the following quote
from a shop supervisor report on the costly
operation of Beech 99 aircraft by Texas
International.
" Because of our relatively large size when ccrpared with
a conmuter airline and the fact that we c~erate a number
of larger equipnent, the DC-9 and Convair 600, cur
maintenance personnel do not hove the close supervision
required for the maintenance of the Beech 99 aircraft.
In other words, our personneldo not specialize in the
repair of the Beech 99 cc do the conmuter airlines dae
to the small number of Beech 99 aircraft as compared
to our Convair 600 and DC-9 equipment...
1/ Considerable variations can be expected in different parts of
- the U.S. The local labor supply, local wage levels and al-~
ternative employment are big factors in this cost.
4-12
PAGENO="0215"
209
"Beech 99 operation from a maintenance standpoint has
been one of many frustrations to this depar~nent.
The aircraft and its systems are definitely not com-
plex compared to our DC-9 and CV-600 equipment. They
are, however, different in design and regarding quick
maintainability, for instance, instruments in the DC-9
and the CV-600 that can be replaced in ten minutes
require from one hour to one and one-half hours on
the Beech aircraft because of design accessability.
This is many oases causes lengthy delays...
"Our maintenance problems in the past have been due in
part to limited experience with the repairs in the Beech 99
by our mechanics and due to the fact that the Beech 99
receives less attention or a lower priority when main-
tenance on other types of equipment is needed. Our
mechanics never seem to become specialized in the
repair of the Beech 99 simply for reason that they
repair a Beech 99 on a given day and may not repair another
Beech 99 for two or three weeks. In this manner, they
never become completely fcuniliar with the repair of the
Beech 99 and certainly cannot be expected to repair the
aircraft with the least amount of effort and time."
Depreciation and Lease Costs
The cost comparison used in this section has, for the most part,
excluded depreciation. Depreciation varies considerably from
ooerator to operator. The table below indicates the amount and
share of direct operating costs per aircraft mile represented by
depreciation and lease costs (1973) for the certificated carriers
operating DC-9 equipment.
Depreciation
As Percent Of
DC- 9-10 Direct Costs
Delta 0*
Eastern * 24.6
Trans World 22.6
Hughes Airwest 17.3
Sout~hern 19.3
Texas International 19.3
* Fully depreciated
4-13
PAGENO="0216"
210
Depreciation costs varied from zero to as much as 25% of direct
operating costs. A number of factors enter into this variation.
Aircraft are depreciated over time, usually 3 to 15 years. For
rate-making purposes depreciable life is prescribed by the CAB
for the certificated carriers and is, therefore a constant between
carriers for a particular type of equipment. However, depreciation
period~. and residual values vary between types of equipment.
The primary determinent of depreciation or lease cost is the -
acquisition price of the aircraft. Table 4-4 displays a range
of estimated current acquisition costs for a representative list
of aircraft which could serve Florida's intrastate air routes.
The table also shows the extremely varied effect of depreciation
on cost per aircraft mile and per revenue passenger mile - a basic
reason why new aircraft will be slow in coning to the commuter
airlines. The table is useful to see the different amounts of
revenue each aircraft must earn just to pay for itself (ex interest
expense). The DC-3, for example, requires about 7~ per mile or
half the revenue from one passenger (at l5~ per RPM) while the Dash
7 will require the revenue from 2.6 passengers. While the table
compares the aircraft equally at 2,500 hours annual utilization
that is not a comparison that can be applied to a practical small
- carrier operation. Table 4-5 shows more accurately what could be
expected in Florida.
TABLE 4-4
ANALYSIS OF DEPRECIATION COSTS PER AIRCRAFT MILE
D~preciation Cost
Per
Acquisition Aircraft
Source Price Mile 1/ RPM 2/
Douglas DC-3 used $75,000 $.074 $.004
Douglas DC-9-lO used $2.8 million .300 .007
Mohawk 298 new $1.5 million .265 .019
Short SD3-30 new $1.5 million .265 .016
Fairchild F27/227 used $600,000 .193 .009
Convair 580 used $700,000 .221 .008
Lockheed Electra used $600,000
Beech 99 Airliner new $650,000 .105 .013
DeHavilland Dash 7 new $3.0 million .395 .014
DeHavilland DHC-6 new $600,000 .130 .012
Pokker F28 new $5.0 million
Swearingeh Metro II new $850,000 .130 .012
1/ Based on 2,500 hours/year, ISO mile stage length. Depreciation
rates for each type of aircraft are shown on Table 4-1.
2/ Cost per revenue passenger mile with assumed 55% load factor.
4-14
PAGENO="0217"
211
Table 4-5 shows the depreciation cost to be considered by a DC-3
operator who might upgrade to a new Dash 7 or a used Convair 580.
The assumptions are that the same number of schedules will be
flown over the same routes with each aircraft and that the passen-
gers carried will be the same for each aircraft. Also shown is
t:he effect of assuming that the load factor would be the same on
the large plane as on the DC-3.1/
Under these assumptions the annual aircraft miles flown remains
constant and the annual hours flown (utilization) decreases
because of the higher speed of the two aircraft. The depreciation
cost per revenue passenger mile for the Dash 7 is 10 times that of
the DC-3 and the Convair is one-half the Dash 7. Cost per aircraft
mile is the same ratio as per RPM. The average passenger load at
a 55 percent load factor is 15.4 on the 28 seat DC-3 and 27.5 on
the two 50 seat aircraft. On the other hand, the 55 percent load
e~p the DC-3 will be 31 percent on the larger aircraft.
It will require a fare increase of 4.3 cent per mile or $7.64 per
average passenger to pay for the Dash 7 and 2.4 cents or $3.56 to
pay for a Convair 580 on a base fare of $26.50. These values
should be 4oubled to include interest on the capital and increased
at least 25 percent to pay for increased insurance cost.
Finally, to pay for just the increase in depreciation to change from
a DC-3 to a Dash 7 will require a fare increase of 29.5 percent or
an increase of 4.44 passengers per mile or a combination of these.
The full cost of the aircraft change, not including any increased
operating cost or facilities will be about 2.25 times these figures
to cover interest and insurance.
The above illustration is a worst case study. It gam be improved
if utilization can be increased or load factor can be increased.
However,, on any minimum service route or combination of routes
where the present loads are being accommodated, i.e. more seats
are not needed, these factors are not readily sUbject to much
change and these estimates will be valid.
Ozher Costs
T.~ie only other direct cost under normal airline accounting
procedures is hull and property damage insurance. Larger carriers
can be expected to negotiate somewhat lower rates than can the
small operator. However, insurance normally accounts for under
5-6 cents per aircraft mile and is not a controlling factor in
1/. This is an illogical assumption in this application but one
that is often made in aircraft analysis, especially in
manufacturers' presentations.
4-15
PAGENO="0218"
212
TABLE 4-5
COST OF DEPRECIATION INCURRED
IN CHANGE FROM DC-S TO DASH 7 OR CONVAIR 580
DeprecIation Per Year
Annual Miles
Annual Hours
RPM's @ 55% Load Factor (000)
Cost Per RPM @ DC-3
RPM Level
Cost Per Aircraft Mile -
Equal Miles
Greater Than DC-3
Revenue Passengers Per
Mile 8 55% Load Factor
Load Factor DC-3 Load (15.4)
Increased Revenue Per RPM
Required To Meet Added Cost
Fare Increase Required 8 150 Miles
Percent Increase In Fare
Passengers Required To Offset
Added Cost Per Mile @ .15 Yield
Percent Increase in Passengers
Passenger Increase Required
to Provide 559a Load Factor
Percent Increase in Passengers
$25,000
$255,000
$126,000
345,000
345,000
345,000
2,500
1,605
1,513
5,313
9,487
9,487
0.47~
4.80'~
2.37~
7.25~
73.91~
36.52~
-
66.65'~
29.25~
15.4
27.5
27.5
- 4.33'~
- $7.64
- 29.5%
- 4.44
- 28.8%
- . 12.1
- 78%
2.37~
$3.56
13.7%
1.95
12.7%
12.1
78%
4-16
PAGENO="0219"
213
ccmparing cost levels. A typical rate being paid by commuter
carriers is approximately $2.25/l,000 revenue passenger miles for
liability and $9.0O/l,000 of value for hull insurance. These
rates could vary as much as 25 percent depending on experience
and type of operation.
Summary Of Direct Operating Cost ConsideratiO~
This section has discussed the five major elements of aircraft
direct operating cost.
1. Crew salary and Expense;
2. Fuel;
3. Maintenance and Maintenance Burden;
4. Depreciation and Lease Costs; and,
5. Hull and Property Damage Insurance.
It shows that these costs not only vary by aircraft type but also
considerably from operator to operator. With the exception of
possible advantages in the overall area of bargaining power, the
larger carriers can be expected to experience higher costs in
operating small aircraft on comparatively low density short-haul
routes than will small operators.
Table 4-6 indicates estimated hourly direct aircraft operating
costs for type classifications (exclusive of depreciation which
is more meaningfully handled as an indirect cost in this type of
comparative study) as of year end 1975.
TABLE 4-6
ESTIMATED 1975 COMPOSITE UNIT COSTS
OF CERTIFICATED LOCAL SERVICE cARRIERS
Total
Crew % of Mainte- % of Fuel % of Other % of DOC (ex
Cost DOC r~ance DOC &Oil DOC Direct DOC ~yr.)
DC-9 $148.78 27 $154.30 28 $236.12 43 $12.00 2 $551.20
CV-580 128.82 32 177.29 43. 98.82 24 4.00 1 408.93.
F-227 104.10 32 142.07 44 76.08 23 4.00 1 326.25
M-404 78.50 26 144.61 48 77.88 25 2.00 1 302.99
4-17
PAGENO="0220"
214
Table 4-7 indicates DOC estimates of commuter carrier costs for
aircraft operatod in the present certificated local service en-
vironment. Since there is no available recorted commuter operator
information, it is necessary to make certain assumptions, based on
the foregoing. disc~ission of relative cost characteristics as to
their cost levels.
TABLE 4-7
ESTIMATED 1975 COMPOSITE UNIT COSTS
OF COMMUTER CARRIERS IN FLORIDA . -
Total
Fuel Other DOC (ex
______ &Oil Direct depr.)
Crew Mainte-
Cost nance
DC-9
N/A
N/A
N/A
N/A
N/A
CV-580
$31.00
$105.00
. $122.00
$11.00
$269.00
F-227
31.00
84.00
96.00
10.00
221.00
M-404
31.00
96.00
83.00
10.00
220.00
4-18
PAGENO="0221"
215
CHAPTER 5
FLORIDA INTRASTATE AIR FARES
It is customary to consider air fares from two viewpoints -- fare
levels and fare structure. The level of air fares is self-
explanatory, referring to the actual prices of tickets. Fare
structure involves the more detailed considerations of such factors
as class of service, joint fares, discount fares and the inter-
relationship of fares for trips of different lengths. Both the
level and structure of air fares are appropriate topics for review
insofar as they are applicable to the intra-Florida air transport
system.
The public interest requires that air fares in Florida be maintained
at the lowest reasonable levels consistent with the provision of
adequate, economical service. Low fares will bring the speed and
conveniende advantages of air transportation to the greatest number
of travellers, relieving the state's highways of some congestion
and enhancing overall economic development. As provided by
privately owned non-subsidized carriers, however, air services
must be priced at levels which will produce sufficient revenues
to cover all costs plus an adequate return on investment.
The structure of fares charged for intra-Floridà air transportation
should be kept as simple as possible. With regard to class of
service, a proliferation of distinctions based on in-flight cabin
service, seating configuration, or type of aircraft has no place
in relatively short-haiil intrastate schedules. One standard class
of service will do. Joint fares for interstate or international
travel will be necessary, although these are largely in the domain
of the individual carrier managements, the CAB, and I.A.T.A.1/
and not within the jurisdiction of the State. Discounted or
promotional fares should be restricted, at least initially, to
specific categories of travelers that have well-established claims
for such special treatment. The relationship of fares to mileage
flown is also a matter of CAB jurisdiction, as discussed inunediately
below.
Federal And State Guidelines
In 1974, the Civil Aeronautics Board completed a massive 4-year
investigation of domestic air fares. The Board reviewed the basic
issues of fare structure, fare levels, joint fares, discount fares,
and load factors. Altnough this was a nationwide investigation
1/ The International Air Transport Association functions as an
- international rate-making authority.
5- 1
PAGENO="0222"
216
concerning the trurikline and local service carriers, the Board's.
findings can be used as a benchmark in considering Florida's
intrastate air fares.
One leading policy that guided the Board's eventual decision
was that air fares should be closely related to the actual cost
of providing the service. hhat emerged from the proceeding was
a fare formula based on a fiked terminal charge plus a variable
charge per mile.
1/
Line-Haul Charge- -~
Mile~9f. Cents Per Mile
$13.85 0 - 500 7.79~
501 - 1500 5.94~
1501 and Over 5.71'~
This formula is used to determine the normal daycoach fare in all
domestic markets. All other fare categories are then derived from
the basic local daycoach fare.~ -
In explaining its conclusions, the Board conceded that no one fare
formula could hope to compute fares that would exactly meet each
carrier's revenue needs in every market. It was also recognized
that, in the very shortest markets, there was a practical upper
limit to the level of air fares. Although the shortest trips cost
the most per mile for the carriers to operate, there are usually
alternative means of surface transportation which the public can
use if air fares are set too high. The CAB's response to these
difficulties was to allow the overall level of fares to be high
enough to compensate for the differences between the individual
trunkline carriers, while acknowledging that fares in the shortest
markets would still tend to be below costs.~/
There are no apparent circumstances under which the local intrastate
air fares in Florida should exceed the CAB formula. The type.of
flying operations envisioned in this study are not expected to
1/ These charges are cumulative above 500 miles, i.e. a 550 mile
trip is $13.85 plus $41.92 (500 x .0779 + 50 x .0594) ~r
$55.80 total.
2/ These categories include first class, nightcoach and the
various discount fares.
3/ Local service carriers were allowed to charge up to 110% of
- the basic formula in recognition of their role as short-haul
specialists.
5-2
PAGENO="0223"
217
equal the higher cost characteristics of the trunkline operations
on which the CAB formula is based. Chart 5-1 compares the curre~
local Florida fares of both commuter operators and CAB carriers,
It is clear that the imposition of the CAB formula ceiling would
not do great violence to most of these commuter fares, particularl',
if the slightly lower fares were accompanied by some form of rout~
protection in these markets to assure maintenance of higher load
factors.
The lowest attainable level of air fares in Florida can be estimated
by comparison with analogous situations in Texas and California.
Chart 5-2 indicates that the intrastate carriers in those states
charge substantially less than the CAB formula. In both cases, the
intrastate carriers are providing good service with contemporary
jet aircraft. Commuter type operations in California are also less
expensive than CAB formula fares. Texas commuters charge, on the
average, slightly higher than the CAB formula, but the intrastate
Texas carrier, Southwest Airlines, prices its services well below
its CAB-regulated competitors.
Joint Fares
Up to this point, fares have been discussed only from the point
of view of passengers making local intra-Florida trips. It is a
fact, however, that in several intra-Florida city-pair markets,
substantial numbers of air travelers are moving only as part of
a longer journey, either interstate domestically or internationally.
Ft. Myers-Tampa is an example of an intra-Florida market with a
high percentage of travelers making interstate connections.
Orlando-Miami is an example of a market with many travelers making
connections to Bahamas, Caribbean, and South American destinations.
These connections may be either to another flight of the same
(on-line) or a different (interline) carrier.
When air travel calls for routings that involve more than one
carrier, it is often the case that a joint fare will be offered
between the actual point of origin and the final destination.
Otherwise, the traveler must pay local fares for each stage of his
journey. The nature of these joint fares is to be lower than the
sum of the individual local fares. It is less costly for the
carriers involved to carry one interline traveler over a connecting
routing than it is for each carrier to carry two different loccl
travelers, on each of their respective segments. In competing for
this interline traffic, the interested carriers will make agree-
ments among themselves to offer connecting transportation at pr1C~
which reflect, to some degree, these inherent savings in operat~~
costs.
In the past, joint fares were established at the initiative and -
discretion of the trunklines arid local air carriers. Typically
two carriers weuld get together to offer connecting service via
5-3
PAGENO="0224"
218
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PAGENO="0225"
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PAGENO="0226"
220
some well-located intermediate point on a route that was served
directly by another carrier. To be competitive with the direct
carrier, the joint connecting services would be offered at the
same fare as the direct carrier's fare. In markets where the
competitive spur was not quite. as sharp or where no other service
was available at all, joint fares would be established at somewhat
higher levels but lower tham the sum of the two individual fares.
In many smaller markets, no joint fares wore available at all,
and travellers were obliged to pay the sum of each individual fare
for each segment flown.
Custom, tradition, and public pressure also played a part in the
availability and level of joint air fares. In fact, some of the
carriers' joint fare pricing policies were carry-overs from rate-
making practices of the railroads. Civic and business groups were
often quite active in making their views kiiown to the carriers and
to the CAB. Since much of their air service required connections
at large hubs, cities and town off the main routes hada special
interest in joint fares. In all, the domestic joint fare situation
prior to 1974 could be described as highly diversified, if not
indeterminant.
In the recently completed Domestic Passenger Fare Investigation
(1974), the CAB ruled that joint fares must be published on a
üiiiform basis for nearly all domestic air travel markets. The
maximum level of such fares was to be the sum of the local fares
over the shortest possible routing, less $13.89 for each interline
connection. This formula is an attempt to bring a nondiscrimi-
natory, systematic approach to the pricing of interline air
transportation. Although the Board's decision establishes the
maximum level of joint fares, in many cases the participating
carriers will publish joint fares at lover levels, particularly
in competition situations.
The CAB's joint fare ruling applies only to domestic markets served
by a combination of the trunklines or the local service carriers.
It does not establish joint fares for services involving commuter
carriers, suchas Naples Airlines between Naples and Miami or
Tampa. In that instance, the commuter carrier and the trunklines
serving Miami and Tampa have evolved joint fares at their.own
discretion. Nor does the CAB's ruling apply to markets which
involve international service. Joint fares in the Orlando-Jamaica
market, for example, are established by the carriers who desire to
participate in this traffic via connections at Miami.
As mentioned, joint fares between commuter airlines and the CAB-
regulated carriers are within the Board's jurisdiction but not the
subject of active concern. In a recent decision involving a joint
faredispute between Naples Airlines and National Airlines, the
Board declined involvement with the following statement:
5-6
PAGENO="0227"
221
"While the Board has encouraged joint fares beti,een
cormzuter/certificated air carriers, any such
arrangements have been on a voluntary basis. ~r
decision in Phase 4 of the Domestic Passenger Fare
Investigation (Docket 22866-4) prescribing maximum
joint fares for certificated carriers has no appli-
cation to third-level carriers." 1/
This is just another manifestation of the Boards reluctance to
undertake economic regulation of the third-level or commuter-sized
carriers.
In Florida, however, there are a sizeable number of just such
arrangements. Ft. Myers-Tampa was mentioned as one market where
joint fares were available to travellers using cornmuter/
certificated carrier connections. The same situation exists in
Key West-Miami, Naples-Miami, Marco Island-Miami, Naples-Tampa,
and in other markets. Indeed, the very existence of a commuter
operation i~ often based on serving interstate connecting passen-
gers, as opposed to those who are merely travelling from an
outlying point to a larger hub city.
From the commuter carriers standpoint the joint fare is a sales
tool as well as a pricing device. Far more interline connecting
sales are made by airline and travel agencies outside Florida
than are made by the commute.r airline itself. A major problem for
the commuter is to get his services included in the sale in prefer-
ence to a rental car or other alternate means. Joint fares help
fulfill this need.
In publication at this writing and soon to be distributed is a
tariff which will contain all of the agreed joint fares between
the interstate carriers and the commuter airlines. Prior to now
there has been no common source of information about these fares.
The tariff will be published by Airline Tariff Publishers, Inc.
The availability of commuter/certificated carrier joint fares
depends on the motives and initiative of the participating carriers.
For example, Naples Airlines maintains joint fares with Braniff,
Delta, Eastern, Northwest, and United tot connecting passengers
at Tampa cr Miami. These fares are available between Naples and
75 other U.S. cities which are served by the trunklino carriers
mentioned. On the other hand, there are no joint fares between
Naples Airlines and Continental, National, or TWA although all
of those carriers have routes to both Tampa and Miami.
These joint fares are bared on the mutual agreement of both the
commuter and the trunkline and either carrier may contact the
1/ Civil Aeronautics Board Order No. 74-2-127, page 2.
.5 5-7
PAGENO="0228"
222
other to suggest that a joint fare be established in any particular
market. Joint fares are important to commuters for reasons
mentioned previously. Trunklines compote with each other for this
connecting traffic and it is also to their advantage to be able to
offer attractive fares. Eastern and Delta, for ex~rnple, have joint
fares with Naples Airlines between Naples and New York over Miami
and Tampa but National does not. Because of this, National is not
in as favorable a position to -carry Naples-New York traffic.
Due to the voluntary and independent mothod of creating joint fares,
it is very difficult to discern any general pattern of availability,
either in terms of markets or carriers. Northwest has joint fares
with Naples Airlines from Minneapolis, Milwaukee, and Chicago but.
not from Madison or Fargo, which are also on Northwest's route
to Miami/Tampa. Eastern and Delta have Birmingham-Miami/Tampa
route authority but only Delta has a joint fare. Other cities,
such as Salt Lake City, Albany or Peoria have no possibility of
joint fares to Naples because they have no direct routes to Miami!
Tampa. -
Where joint fares do exist, however, they offer the traveller a
savings compared to the sun of both the trunkline and commuters'
separate fares. The joint Naples-Boston coach fare is $115 as
compared to $131 for separate Naples-l-liami ($21.00) and Miami-
Boston ($110.00) tickets, a savings of $16. In the Naples-St.
Louis market, ~he saving is a full $21. In this instance, the
Naples-St. Louis joint fare via Miami is the same as the local
Miami-St. Louis fare. Again, there is no discernable pattern in
terms of the levels of the joint fares. It goes back to the fact
-that each market situation is dealt with on an individual basis by
the carriers concerned.
One additional feature of commuter/certificated carrier joint fares
should be mentioned. It involves the division of joint fare re-
venues between the two carriers.
The division of revenues is also negotiated by the carriers when
they sit down to establish joint fares. Various systems are used.
In some cases, the commuter gets a fixed dollar amount for each
passenger. Another method is to give the commuter his full local
fare less some fixed amount. One system of long-standing use is
for the revenue to be pro-rated, based on the percentage of each
- carrier's local fare to the total. Whatever the method, the -
certificated carrier generally absorbs much of the dilution in
revenues de~ived from joint fares. In the Naples-St. Louis exaxn~le
above, the total joint fare is equal to the Miami-St. Louis fare,
and the division of that joint fare necessarily leaves the trunk-
-lines with only $80, using the local fare pro-rate system.
Although the resulting joint fares are of course public information,
the negotiation of fare levels and the pro-rate of revenues is
confidential between the carriers. SARC has been able to obtain
- 5-8
PAGENO="0229"
223
general information which confirms that previous experience by
SARC employees in handling such agreements, as described above,
is still valid.
In summary, the CA.B directly regulates the applicability, *the
level, and the pro-rate of joint fares between certificated air
carriers. The Board also retains inactive control over commuter!
certificated carriers' joint fares to the extent that interstate
transportation is involved. The State of Florida, however, has
its own interest in commuter/certificated carrier joint fares in
that they have a direct bearing on the provision of service as
well as the level of local intrastate fares, particularly in
markets where interstate connecting traffic is dominant.
Discount And Promotional Fares
In any general discussion of air fares, the promotional or discount
fares must also be considered. These are special reduced-rate
fares which are intended to make air transport affordable to
specifically identified categories of travellers. These are people
who supposedly are price-conscious and time-f lex~ble, and who either
wbuld use surface transportation or would not travel at all, if not
for the discount. Some of the more familiar reduced-rate fares are
the children's discount, the military discount, nightcoach fares,
and group travel rates.
Over the years, a very wide variety of other reduced-rate fares
have been offered by the trunklines and local service carriers.
In their abundance and diversity, these fares defy brief descrip-
tion. They cone tumbling out of the carriers' marketing departments
in a never ending attempt to capture certain discrete elements of
the overall air travel market. Many are influenced by highly
transitory competitive circumstances and have a very brief life
span.
From a calmer viewpoint, the State of Florida can eschew most of
these schemes and concentrate on pricing policies which will
clearly serve the public interest and strengthen the intrastate
a~r trandportation system. If intrastate fares are established
or carefully considered economic evidence, there will be little
reason to allow exceot ions to the rule.
As mentioned previously, normal fares should he provided at the
lowest level possible, censistent wibh the provision of reliable
service. Such long-standing public interest fixtures as the
children's discount and the military discount should probably be
bsilt into the structure of intra-Florida air fares. These
categories are composed of potential air travellers with some
discernable limitations on their ability to pay. Otherwise, for
simplicity, efficiency, and administrative control, discount and
promotional fares for intra-Flerida markets should be subject to
very rigid analysis prier to approval.
5-9
PAGENO="0230"
224
Fare Assumptions Of This St~4y
For purposes of estimating revenue in this study fares are assumed
to be at the level of the CAB rate order for interstate carriers. 1/
The fare for each city-pair was computed arid used in each estimate.-
On this formula the fare for a 150 mile trip is $25.53 or l7~ per
passenger mile. The yield, with dilution of 15 percent,~ is about
l5~ per mile.
The CAB formula was also used for the intrastate portion of inter-
line revenue. It is impossible to attempt to fix exactly the
prorate of joint fares. As reported above it is difficult to
determine what prorates have been agreed to by the carriers.
Tests were made using the CAB prorating formula for this purpose.
It appears that the short-haul portion of these divisions will
frequently exceed the local fare in the short-haul market. Since
the intrastate carriers are not under this CAB rate order, it is
more conservative to assume that, at most, the trunks will agree
to prorate giving the intrastate the equivalent of his published
local fare. ~
1/ See Page 5-2.
5-10
PAGENO="0231"
225
CHAPTER 6
A FLORIDA INTRASTATE AIR ROUTE SYSTEM
This chapter provides a description of the manner in which the
proposed routes are structured and aircraft selected for each
route. The evaluation and analysis of aircraft considered for
possible intrastate operation are given in full in Chapter 3.
The development of operating costs and comparison of costs; of
the types of carriers is provided in Chapter 4. An explanation
of the types and levels of air fares (revenue) is found in
Chapter 5.
The intrastate system proposed here is made up of 17 routes.
This chapter describes the method used to structure the routes,
determine the aircraft to be used and estimate the economic
result of operating the routes. The system is operationally
feasible and will provide adequate air service between each
of the city-pairs on each route.
The system complies with or exceeds the ~Iinimuin Service Standards
(Standards) in every case in that a maximum of one intermediate
stop is used whenever feasible rather than two as accepted by
the Standards.
No specific effort was made to make the route configuration
consistent with the existing routes of the intrastate carriers.
One or more CAB-certificated carriers and/or intrastate carrier
are currently operating over many of the segments. However,
much of this service is not within the Standards.
The system is not an `optimized' solution. It is a network which
can provide adequate service to those points currently under-
served. It has been constructed by applying normal routing
considerations including:
* Available types of aircraft;
~ Peak segmcnt and route load factors;
* Maximization of frequency ~`hen consistent
with the mix of the available traffic
(local or connecting);
* Overflight service when warranted by
traffic imbalances on a route; and
* Minimizing enroute stops and circuity.
6-1
PAGENO="0232"
226
Obviously other route systems could be designed to provide
adequate service to these points. Several other patterns were
developed which were inferior. To be an economic "imoroverrtent"
on the solution presented here, another solution would have to
result in higher achievable route load factors and higher utili-
zation of aircraft without reducing the quality of service in
terms of enroute stoms and frequency. The solution oresented
here achieves a satisfactor" balance between standards of service
and economic feasibility and can therefore be considered an
economic benchmark' to estimate what adequate service to these
markets would cost. The coraDuted financial results of operating
the systen are presented on each of the route charts.
Development Of Route System
The approach taken to this task involved the classification of
the included intrastate markets into two groups; those markets
justifying air service, which are currently beinq adequately
served; and those that are not being adequately served. The
Standards were applied to air service in each market as of
March 15, 1975 to establish the list of adequately served
markets.l/ A number of markets satisfied one or more of the
criteria. However, unless all criteria for Minimum Standards of
Service were met, the market was considered to be served inade-
quately.
Markets in which service was determined to be inadequate were then
assessed individually as to the type (in terms of capacity)~/
of aircraft which could most economically provide minimum adequate
single-plane, nonstop air service in that market. The algorithm
inputs included:
* Number of local passengers;
* Number of connecting pass~nqers;
* Percent of local passengers moving on prime-time
flights;
* Percent of connecting passengers moving on prime-
time flights;
* Maximum average annual acceptable segment load
factor on prime-time flights;
1/ This schedule was used as it was at the annual peak period
and was timely to the work.
2/ Characterized as Type 1 (80 seats); Type 2 (48 seats); Tyoe
3 (28 seats); Type 4 (16 seats). See Chapter 3.
6-2
PAGENO="0233"
227
* al seat generating capacity of the
ilest aircraft being considered for
~rvice; and,
":r.imum load factor required to require
*.i~re-time service.
* explanation of the algorithm logic is provided in
diagram.
compute Prime-Time Load
Factor For Selected Type
Of Aircraft
:~:t" !~ber I Subtract Passengers Travelin~
~tr-~ricie- On Prime-Time Flights From
~1ssengers Total Passengers And compute
Load Factor For Off-Prime-Time Flights
* :~le of this algorithm was that the same type of aircraft
* - msed for both the prime-time and off-prime-time service.
~ation is based on the probability that, in most intra-
~::~cts, the traffic will not justify conpeting carriers and
:tkeiy that a relatively small intrastate carrier would
* ~ronomical to operate more than one type of aircraft in
- above analysis had been completed for each of the forecast
* all those which produced a load factor of less than 25% on
* ast (Type 4) aircraft were deemed to have too low a traffic
justify scheduled service of a type described by the
* *: ~:andards of Service. The remaining markets were aggregated
of aircraft (Type 1, 2, 3 or 4) selected to serve the
with the Type 4 markets, the markets were combined into
* :~- routes which incorporated a circuity restriction (20
* any market) and an additional restriction of not more
~~mber
Yes
i~::~rI1igher ~a~-No~ F~Sele~ted~rcraftTJ1
6-3
PAGENO="0234"
228
than one enroute stop (two are acceptable in the Standards). This
aggregation resulted in some route segments over which the load
factor rose beyond an acceptable standard. When this occurred,
the equipment was upgraded to the size which produced an acceptable
load factor both for the route and for the peak segment. The
effect of this approach to aggregating markets at the low end of
the traffic spectrum, tended to ueqrade the typo of equipment at
the expense of tending to restrict the number of frequencies to
two round trips per day.
The same process was applied to the markets in the Type 3, 2 and
1 categories. An analysis of the routes which could be economi-
cally served by Type 1 aircraft showed that the majority would
produce marginal load factors at minimum frequencies. Therefore,
it was decided to opt for higher frequency service in these
somewhat higher density intrastate markets and limit the aircraft
sizes to Type 2 (48 seat) and smaller.
In some cases, the route aggregation process resulted in loads,
between either intermediate or terminal points, high enough to
justify nonstop service. In these cases the routing analysis
includes these overflight operations on some flights.
Algorithm Constraints
There were two basic areas in which assumptions had to be made on
the basis of experienced judgment of a limited sample of actual
data. These were (1) the estimates of the percentage of local
and connecting passengers who could be expected to prefer to
travel on flights scheduled in prime times and (2) the maximum
segment load factor. which could be sustained without necessitating
the addition of a frequency or using a larger aircraft over the
route. To our knowledge, there are no specific non~proprietary
studies on either of these subjects. Nonetheless, recognition
must be given to the fact that there is a high sensitivity of
traffic flow to schedule timing based on different mixes of local
and connecting traffic.
It is logical to assume that there is a difference between the
inclinations of local short-haul and connecting long-haul passen-
gers with regard to traveling on morning and evening flights as
opposed to mid-day flights. The local passenger is more likely
traveling on business and wants to get to his destination in time
for a morning appointment and to return home with a minimum of
delay in the evening. On the other hand, the connecting passenger
wants to arrive at his first destination in time to make his
connection. Since the vast majority of Florida's connecting
passengers are connecting with interstate flights, it is less
likely that a round trip will be made that day or that the day
will be used for other than travel. Thus, there is less compulsion
to leave early in the morning or arrive with "rush hours" in~ the
6-4
PAGENO="0235"
229
evening. Conversations with several airline industry traffic
people indicated that figures of approximately 75% of the local
traffic and 40% of the connecting traffic would not be unreason-
able as to the share of the traffic which might be expected to
prefer to travel on morning and evening prime hour schedules,
if other frequencies, making connections, were available.
To attempt to verify these opinions, which we shared, the interstate
schedule patterns at Tampa, Orlando and Jacksonville were analyzed.
This evaluation found that one-third of the interstate flights
departing these cities leave between 11:00 a.m. and 5:00 p.m. and
one-half of the arriving interstate flights are scheduled in these
hours. This indicates that connecting schedules are available to
permit a high volume of travel during the off-peak period thus
supporting the opinion of the operators that actual travel occurs
in significant volume.
The matter of maximum segment density is another area in which there
is little, if anything, in the way of formal empirical analysis.
This type of work is ordinarily done on a relatively informal
basis by the individual operator with variable standards applying,
depending on specific circumstances. Previous SARC scheduling
studies and work with scheduling departments of client airlines
indicates that when an intermediate segment load factor begins to
corsistently approach 80%, consideration is given to increasing
capacity by changing frequencies or equipment. This decision is
influenced by the length of the segment and its location on the
routing. A similar judgmental approach is used in designing,
Florida routes.
Judgmental_Modifications Of Route Structure
Subsequent to the quantitative structuring of the route system, it
was apparent that for some of the lower density markets, particularly
those in which connecting passengers represent a majority of the
traffic, arbitrary division of schedules betwe~en prime time and
off-prime time periods was impractical from both an analytical
and operating standpoint. In these cases, the total traffic was
used as the determinant of the level of service and the determina-
tion of the timing of the schedules left optional depending on
smecific market requirements. While this modification represents
a theoretical violation of the timing requircsients of the Standards,
it represents a practical reflection of the differing scheduling
requirements of markets which are primarily connecting in nature
and those which are mainly composed of local traffic.
The most cost-effective route pattern for intrastate air service
in Florida is an in-line system, as contrasted with a hub-and-
spoke structure. Therefore, the economic feasibility of many of
the route segments is largely dependent on through traffic (e.g.
that traffic which is either on-board prior to arriving at point ~
6-5
PAGENO="0236"
230
of segment B-C or which gets on at 13 destined for a point beyond
C). This means that the value of a segment to on operator is
dependent on whether or not ho has immediate access to all the
traffic forecasted to flow over the segment (e.g. B-C). The
routes are designed with no inter-route traffic flow. If, as
regards the benchmark route complex, each of the routes indi-
cated was allocated to a single carricr, that carrier could
expect to achieve the benchmark results to the extent he provided
the service indicated as recuired. However, if the service over
the individual route is provided by a number of carriers, each
having access to a different set of connecting segments, it is
clear that the results will differ considerably from carrier to
carrier. -
It is unrealistic to expect an operator to enter a relatively
low-density market which already receives service from another -
carrier -- with the sole expectation of making a profit from
providing an add-on service. Approximately half of the 31
intrastate markets now receiving inadequate service receive an
adequate number of frequencies (for the most part by CAB-
certificated carriers with a strong local and national image) in
both directions and are underserved only with respect to the
timing of these frequencies and/er the number of intermediate
stops. It is unlikely that any intrastate cperator would be
successful in these markets unless he had some substantial
protection against competition, an assurance of tenure on the
route and a protected route structure to give him appropriate
access to beyond traffic in both directions.
Routes developed as a result of the analysis undertaken in this
project are as follows:
Pensacola-Tampa-Orlando-West Palm Beach
Pensacola-St. Petersburg-Miami -
Tallahassee-Gainesville-Daytona Beach-Miami
Tampa-Ft. Lauderdale
Tallahassee-West Palm Beach-Ft. Lauderdale
Tallahassee-Sarasota-Ft. Myers-Miami -
Jacksonville-Daytona Beach-Ft. Lauderdale
Jacksonville-West Palm Beach
Ft. Walton Beach-Panama City-Tallahassee-JacksOnVilleMelbOUrne
Tampa-Melbourne-Vero Beach-Miami
Pensacola-Tallahas see-Jacksonville
Lakeland-West Palm Beach-Miami
Key West-Naples-Tampa-Orlando-Daytona Beach
Ft. Walton Beach-Panatna City-Tampa
Jacksonville-Orlando-LakelandSaraSota
Ft. Myers-Orlando-Jacksonville -
Gainesville-West Palm Beach-Ft. Lauderdale
6~6
PAGENO="0237"
231
This benchmark route structure incorporated individual routes,
any one or combination which, if awarded to a qualified
operator, should provide the traffic base for an economical
operation if operated as indicated.
Route Segments Excluded From Roti Analysis
Table 6-1 gives the schedule analysis of city-pairs which have
adequate service where a single carrier meets the Standards.
These markets are excluded from the route analysis because it
is expected that they will continue to have adequate service
from one or more of the incumbent carriers. Specific provision
for intrastate authority to assure continued adequate service
in these markets is made in the recommended plan for obtaining
service. Thus routes such as Miami-Tampa and Orlando-Ft. Walton
beach are not "priced out" and it is assumed that the incumbent
carrier(s) are satisfied with their results on the route.
~~~tionS' And Comments On Route Ana~y~f~
The economic results indicated in the analysis of each of the 17
routes are surprising if viewed as conventional analysis of
routes under commonly used assumptions. In fact, the finding
that 17 routes within Florida can possibly be profitable without
large subsidies appears contrary to the commonly held wisdom
about short-haul air transportation. There are however very
significant differences in the underlying assumptions created
by the recommendations of this study.
The following ~omments highlight the assumptiOnS and the effect
they have on the outcome of the analysis. Each of these items
is further amplified in the appropriate appendix or elsewhere
in the text of this study.
1. Fares - The current CAB formula.
o The overall revenue yield produced is 13.9 cents
per revenue passenger mile, ranging from 11 to
* 18 cents on various routes.
* The fares used arc less than the reported yields
of intrastate carriers in Florida at present and
equal to the fares of the CI~E-certifiCated carriers.
2. Cargo, t~'~Ai And "Otkeeyc~fl~f..
* None has been applied. Based on experience mail
- revenue will be negligible. Cargo revenue can be
significant in a few markets (Key West primarily)
t;-7
PAGENO="0238"
TANLE 6-1
MAR1~ETS ADEQUATELY
SERVED - SER~CE AND SCHEDULES
Mares 15, 1975
Miami -Tampa
Miami -Orlando DL,EA,NA, Qtl
SO
Miami -Tallahassee EA,SO QH
Tampa -Jacksonville
`-3
Tampa -Tallahassee EA
Orlando-Tsllahacsee EA,SO
Otiando-Ft. Lawierdalo DL.,EA,NA, ES
SO
M~ami -Fey West
Tampa -Ft. Myers
Tampa -Gainesville
Miami -Marathon
Miami -Haplem
Miami -Marco Inland -
Miami -Ft. Walton Deach SO - SO
Miami -Panama City SO - SO
Orlando-Ft. Walton Beach SO - So
Orlando-Panama City SO - so
DL,EA, NA,QH, EA,NA, Lh,Q~, DL,LA, C~,S3 21 20
NA,QR, SO SO SO :;;~,
so so
DL,8A, NA DL,HA CL, NA a ii
NA
LE 4/ LS L; NE NE IS
- EQ EO~" SO SO-I SO 50
- SO SO 50 50 SO 30
- SQ SO~" SO EC~-" ~0 SO
- SO~~' SO 5Q2' so
1/ 5/ 5/ T~tal
Carriers_Authorized Service- Ton -- Frcn~ -
CAD PEC CAN I'SC 1 2 `3~~ 3 To F:~;s
RN,DL,LA, QH(A) ,FE DL,EA,NA, QH,rE DL,EA, Dr,i:a, DL,NA, DL,1\. ~;L,rA, NL,NA 23 23
NA,NW,TW, NW,TW NA,WW, Nf,QIf 43
LA
Miami -Jacksonville DL,EA,NA, QI1(X) DL,EA,NA None
VA
DL,EA,NA, OH
SO
DL,EA,NA, FE
VA
EA,SO OH EA,SO EA,SO QU,S0 EA,SO ~ 8
NA FE FE,NA FE,NA FE,NA Fl. NI:;, F:,:L\ 8 8
OH (7,) ,YX EA EA ON (A) 0\ FA 411 (A) 3 3
-, SO SO SO DO 50 50 4 4
SS DL,SS - 555 - 5 4
QH(A),YX EA
- SO
DL,EA 55
- AG,SL - AG,LI AG,SL AC,Si, AG,~L AC,St, AS ;/3,S:, 7
NA F1 NA FE FE FE,NA FE,NA lN,NA r :,HA YE,5\ 12 13
EA FE None FE FE FE FE ii. ~. iL 5 4
- AG(A),SL - AG(7),SL AG(A), EL EL SI, ;C(A), EL 4 4
EL DL
- PT - PT PT PT I'S ~`T IT ST S~ 4
7 6
3 3
2 ,2
3 3
2 2
PAGENO="0239"
TABLE 61 (Continued)
MARKETS ADEQUATELY
SERVED - SERVOCE AND SCHEDULES
Airline cod'n were a reviated as follows: AG - Air Sunehine, ON - Braniff International, DL - Delta Air Lines, Inc.,
- Eastern Air Lie.'; Inc., FE - Florida Airlines, LS - MarCo Island Airways, NA - National Airlines, Inc.,
- :Psrthwcat Airii:ea, inc., IT - Maples Airlirca, Qil - Al: Florida, SE - Southeast Airlines, SS - Shawnee Airlines, .tnc.,
- Tr~r; World iir~iree, Icc., WA - Urit~d Air Lines, ~nd "X - Sun Airlines, Inc.
(A) Public Lervice Ca:na;csion 00 mile ruling authorize-i servi:e.
(X) Guupcnd~d.
1/ At. lea3t eric' tli'~. .bat. netS mjnis.iisl standard of service. March 15, 1975 schedules.
2J `To' and "Pros" - Direct;onal flight movencnts.
For Miami-Tiepa read: M;.::.i "iC' Tin-a under "To" and
Ti-as "Frcnr" ti-tiSt under "Fro~ri".
Two I -t:tcr codes s)iow the carrier -
eh iligecs in the tine periods.
1 7:00am -
2 2: 00ni - 8:OOp:r.
3 - 11:00am - 3:0(rm
Toils ` all flights in and out of :;tandards.
A carrier under 1 and 2 ii. Leth "To" and "Free:" has adgua.e service.
Codes idc-r.tify carrier with at least one flight en time peniod.
3/ `.1,;urcet error in 1ublesi.ecj cch.dule whech in not directionally balanced.
~/ Service to rivatr- airport - sonvice accepted as adequate.
5/ One stop mar' then standard.
6/ Plight departs Kia.ni 7:40pm accepted as meeting standards throughout route.
7/ Flight one hour early on Easterr T~no but accepted as necting standards.
8/ All flights are dedicated `to intra-Florida service. Assumed will be adjusted to meet standards rathern than accept replace-
ment carrier.
PAGENO="0240"
234
but overall probably less than 5 percent of
total. Charter revenue can be significant
but has not been evaluated in this study.
3. Share Of Market.
* The action steps recommended horein will assure
the carrier on each route of all the local
intrastate 0&D traffic. This is a key action
and assumption. Absence of this assurance has
resulted in repeated failure of operators in
the past and in poor service on the route
segments.
* The intrastate operator is allocated a share of
the interstate connecting traffic in each city-
pair. This varies from 10 percent to 100 percent
recognizing the presence of other carriers, amount
of such traffic and historical traffic flows. An
action is recommended to assure this revenue to
all intrastate operators.
4. Aircraft Selection.
* The method used has fitted the right" aircraft
to each route. This is unusual since ordinarily
aircraft must be selected for a sue tern of ro.ttes
which requires more compromise. This advantage
should be protected in the awarding of routes to
carriers to prevent undue mixing of equipment,
which is costly.
5. Flight Frequencies.
* The method assures minimum standard frequencies
and favors frequency increases ov~r larger air-
craft on denser routes. The bias is in favor of
public service as a tradeoff for profitability
in this respect.
6. Load Factors.
* The method used assures that load factors tend
to be relatively high. This contributes toward
* profitability.
* The load factors are average annual factors. It
is expected that the routes having very high
connecting traffic will operate less frequency
in the off season periods and lease added air-
craft in the peak season to provide for available
traffic. In all seasons at least minimum standard-
frequencies will be operated.
6-10
PAGENO="0241"
235
7. Direct Costs.
* The estimated costs recognize the proven ability
of commuter and intrastate carriers to operate
at lower cost levels than the CAB-certificated
carriers, at least in the short term. In the
long term, with assurance of a profitable opera-
tion, these costs will be higher.
8. Indirect Costs.
* A standard ratio to direct cost is used which
is in agreement with the historical pattern
of costs. Changes in equipment type or
management philosophy will result in different
resulting ratios. Costs used here are judged
to apply to "start up" and continuing opera-
tions.
9. Depreciation And Interest. -
* Assumed depreciation policy is similar to that
used by the CAB for ratemaking. Actual time
and residual levels are different for each
aircraft and related to expected useful life
of the aircraft.
* Interest is at a rate of 11 percent per year
on a schedule of equal annual payments over
the depreciable time period. This rate is
advised by persons active in financing of
aircraft and is applicable to any method of
purchase or leasing. -
`rho analysis ~f each route is given on a separate chart with a map
of the route. Each line on the map represents a round trip flight
as included in the analysis.
6-il -
28-911 0 - - 16
PAGENO="0242"
236
A summary total of the 17 routes is not appropriate as each is
designed to stand alone and in combinations into carrier systems.
It is not intended that a single carrier should oserate all as a
system. Also, the sum of these routes is not the total of all
intra-Florida service or traffic - 17 major city-pairs with
adequate service are not included. However, the sums of-the
e~timated revenue, expanse and potential profits of the combined
routes serving the city-pairs which now have inadequate service
are interesting:
Revenue $29,257,000
Expense 18,653,000
Profit (before taxes) S 9,604,000
The service would require at least 9 Type 2, 11 Type 3 and 3
Type 4 aircraft.
6-12
PAGENO="0243"
Ft. I.oodtFdAIo
Ft.
Ft. (0.11cc
CAitciOl iSA
J,lckloctilio
icicoil
1,:1b0oorcA
Fic,1Ni City
Ftjtiocclio
Sarc~otA
Ct. Pctcriol-otg
Ittrx 7(0 (((7137: CIIAI~1S
Fy-.PA( 1 So, th `tot' Chc~t Isdioctod
I(usbcr At It tec~cc tioc Of Ilorizootiol Aisi Vortical totries
A) City-Pairs 106th Ado~uctc ((croico fly At Lcoist Onc Carficir Which
00 F.cpcctcd To Ccntinuc. (Oct Ioc]odcd In This flootco Itsign.
.~ ~
.2.
.
..i~
21.
-
- ...1
~fl
fl. - - - -
17
~7
7
A
Ic
4
16
6
16
6
6
Ii
-
- -
.1 A
~A. - - - .21 - -
3 Ii 07
15 9
17
j
3
7
071
9
1
15 .~_
9 10
16
9
11
15
- 11
A
8
.
70
13
13
13
(6
-
-
9 9
6 (6 3. c
- - - -
15
16 (6 16
- 22.
- - - 2.
6 15
A
~
~
13
4. Iilo ((ado
PAGENO="0244"
238
072077c!.-2$ . 7 c~::,:~o-a! ~r 0.7171 3757$ 5
(ac:: Lure, la.pr:ser.t.; Ccc ...:1~ C ..outr:; I :.;fut $`rusc-0 1;: .oys Pcr hiori
019CRIFT Type 2
0TdCKA~ UT ..17' .4.72 Iced 17
15. 0 Dci 1,' 1. it !:o.r4
$4,356
Dercet Or~tue~ Ccc.. 21,257
lr,dur:et Duets $ ~
Tctal 72,226
ProCet loss) 2,131
$::S5t,.eule `R-FF:C
~.2S22~ ~PP.0~1501a
Peacol.c,a 17,362 LICO
Ie~cacola-uriado 06,110,, 3,090
Tuo/a-Orlccdo 6,321~. $2,470
,Drlando-.eet Pc.o Sod: 14320 7,995
Tanpa-dest Palo $,acn 43,713 20632
Total 97,181 47,670
LOAD FACTORS
Co-Soard Load 7c~,.ccet
~$ct.:crS Factor _______
Tanpa-lest Fain leach 42,048 60% 274
Pecuacola-Taspa 39,048 571 330
Tac~a-Oriaodo 61,305 16% 81
Orlandu-$eet Palo bad 44.8CR 64% $42
59%
1/ Seventy percent of Tac:~a-Oriundc forecast. See also Pocuto 13.
P$.:1ACC:J.-S7. :ETLOSIUP.$-$111:1
tacO tune Represents One Daily Roundtr: p FlIght Operated Se':ne loys Per Week
AIRCRAFT Type 2
AIRCRIFT OTILIZ1ITICS 4,186 Annual Flight buys
11.0 Daily Flight lOOtS
FINANCIAL RESULTS 000)
Revenue $3,663
Direct Operating Costs 01.126
Depreciation ar,d interest $ 306
Indirect Coats $ 563
Total 91.995
Profit (Loss)
PASSENGER TeIAFFIC
Local Conncctiou
Pensacola-St. Petersburg 7,4401' 1.096
Pensacola-Sliaej 20,207 , 6,440
St. Petersburg-Oiaoi 34,914o' 25,276
Total 62,554 35,812
Iu.IAD FACT$P.S
* OrcIloord 2,ond
Pas~n:.rs F..ctor ___
Pensacola-St. Petersburg 35,176 550
St. Petersbdrg-Z:iani 00,630 (.4%
58%
1,' Thirty percect of Per.sacola-Tanpn Corerant.
2/ Fifteco percent of Tanpa-Moaecu forecast.
0
20. 64)
$9,422
18, 791
22,355
64.612
149.556
:44
1:13
:25
:38
Total
0,536
26,640
63190
96,390
$egFcst Srlcduied
330 1,13
204 :50
6-14
PAGENO="0245"
AI8C),C Tyye 2
FT. 1.LLR 1:-TAli: 4
Each Lire .5c.;r~i-ss.u 3cc La, 1; cccc.~t.rip F',.;ct )..ccat"C Si:. is's `cc .ccs
AIRCR..FT cTSLI::.TrD:. 2,526 Ar.ui.al Fli,;ht Houru
8.1 Doil~ FIccJht hcUr
FI6ATCICL ccc LTS 106)
Direct Sycru c. Cauts S84O
leyreCSeSiOh aid I~tcre'ut 0184
Isdc:ees. Cucts 3340
Total
Pro6ut
~t. Ii erSale-Tccya
FE. Laoder.Oals-Ta.'c,a
$2,287
01,224
~cLa~t C:.:'t~a3
66.393 12,128 70,318
cr-ici cd Zc,d Scy'.ect ScL ic
a ri a air US
73,318 128 137
239
`cc 3
c.rcscts os. 3.s:l~ Rcordtr:: 1i1~ .:`r~' .1 5.5 Dcc. Par
~IaCi'.AFT Type 3
;,IHC$J.FT LTILOATIOU 3,930 ,\ncual Fls5ht Hours
19.5 Daily Fii~5t Hours
NCIALSFSTLTSjQ~~
Revasue $2,304
Direct Operatus; Consa $902
Depreciation aid Istorest $540
Indirect Costs $431
Total $1,893
$ 416
Profit Loss)
PP,SSENGER TRAFFIC
TailalSasSee.Ccinesviile
Gas ness's lIe-Ticcu.
Daytona Beacis:iia,sL
Total
LOAD FACTO$S
Gaonezvo Ile-Tioci
Tallalsassec-Sui500Vi lie
Gainesvi llu-Daysor.a Scach
Daytoua Ic )C5ciii15i.
~11Ed~ ç~y~yctin.~
5,210 210
36,460 3,860
25,330 2,700
61,000 6,773
5,420
34,320
28,030
67,770
Os-board
26,024
1,420
10,296
41,326
Load
60%
16%
38%
59'
52%
Segocflt
295
134
84
238
Sc)ealc led
1 69
:43
.30
1 07
6-15
PAGENO="0246"
;.1SCRAP-F Type 3
:11.2.; 3 1C7)
Derct Oyerutctg Cc.:to 57:1
Dt'prCSc.tfOfl ccci Iters-ss 5425
Indirect Costs $356
Pro~~Loso)
Tallahzesscc-
jest Palo Beach
Tcllacattcc
Ft. L.celerdale
Total
1050 IACTOSS
AIi4CPJiFT Type 3
511050151. IES7T$ (ICC)
Excesses
Direct Operet Costs $701
Depreciatios ard Interest $420
Icolicoct Costs $350
Total
Profit (Loss)
PASSOISGEP 7RAFFIC
Tcllahxroer-SxrHsOta
Tallahassee-Ft. i~C5S
Sarasota-f t. flyers
larasota-,cati
Ft. ?iyers-flcari
LOAD FACTORS
Cosg~ctlre
220
4.25$
6,940
6,125
18,451
240
:A:.i3.ft~Al2-6:-.S7 F7.2.IC $sA1H-F7. c.-u:rs:~:.:: e. ::t
Cccl Lure cocronctIs One La. ..~.s..tr:$. a 1. c~:rute2 b~x Lays 5cr fireS
ASC10FT U7'ILSZATICN 4,~75 Actual Flight Hoses
11.0 ).:cly Fisc$ct louis
$1,176
$1,492
$ 84
T$.'FFIC 1c25261 ~gy~i~~g
15,640
71$ 16,390
10,970 (.11 19,070
34,610 1.65$ 36,260
Ic ilehas see-
first Lalas Beach
Lest Palo Beach-
Ft. Lauderdale
Cs-i~ard Load Sogrrert Scheduled
Pac~erccrs Factsr c Ic's Store
36,260 02% 364 1:32
19,870 299 43 :20
49%
T2.L10HASSEC-1310t0T5-FT. N: 5:002.2.71 F)UTC 6
lao): Line leprescots Ore Locly Resect rcp 0 lcgot e~ crated Soc lays Per Week
1.5511051 UTLIZATIOI 4,612 Arcual Floght flours
14.8.Cacly Flight floors
$2,220
$1,472
$ 557
6.21$
4. OCI
5,150
33.340
24.155
76,355
Local
7,640
4,660
1,270
26.400
17,731
07,903
Oo-Ssccrd
22 .024
12,910
22,726
36,871
Sarasota-tic ccc
Tallahassee- Saraseta
Sarasota-Ft. Myers
at. flyers-fluxes
Load Srgoer.t Scheduled
Factor Miles Slock Tire
604 179 :53
27% 233 1:31
618 70 :27
53% 112 :38
54%
6-16
PAGENO="0247"
AIRCRAFT Type 2
AIRCRAFT UTILIZATION 1,704 Annual Fliht (iou:s
5.5 Daily Flight (l3urs
FINA1CIAL RESULTS (000)
Profit (Loss)
PPSSEIIGEO TRAFFIC
Jacksonville-Daytona Beach 1,330
Jacksonville-Ft. Lauderdale 21,310
Daytona Beach-Ft. Lauderdale 4,013
Total 27,450
WhO FACTORS
Jacksonville-DaytOna Beach
Daytona Beack-Ft. Lauderdale
Type 2
$ 370
AIdCNAFT `JTILTZATION 1,328 Acrid Floylt Soars
4.3 Daily Fin~0t Hears
FINANCIAL RESULTS (000)
Esee ONeS
Direct O~cratiflg Coats $357
DrprecaatiOcafld1CtCrd~t $97
Indirect Cauts $170
Segnent
Ii los
98
221
241
J,sCY500VILLE-DA5 7015 81571-FT.__LVJDE510LE ROUTE 7
Each Line Reyresents One Daily Roundirip Flight Operated Six Days Per Week
Direct Operating Costa $458
Depreciation and Intereot $124
Indirect Costs $229
Total
$1,189
$ 811
~I9$9I Conne~$fl5
3,440
2. 776
520
6,736
Total
4,770
24,006
U , 330
34,186
On-Scard
28,856
29,416
Load
Factor
48%
49%
48%
Scleduled
Slock Ts;c'
:48
1:28
JS7USILVILLE-WEST 5111 BF.ACH ICITU H
Each Lose Rc$'rCaet.O One Daily Roundtrij~ Fls~ht C:'era:d Sic Dayc Per Week
$1,263
S 632
0 631
Total
Crofot
r i.
~23L~l~
31,n73 3.795 3,421
I Soetor
35,475 59% Sal 104
6-17
PAGENO="0248"
Profit (Lcsa)
?ASSINGF.R TRAFFIC
ft. Walton Beach-
Tallahassee
Ft. Walton Brad-
Jacksonville
Panama CRty-2acscoa lie
Tailahassen-Mrlbooroe
2aeksonvi1ic-.dllo~rne
laliahans ee-.Iacasca'.ele
Total
LOAD FACTORS
Ft. Walton Beach-
Panama City
Panama City-Tallahassee
Tallahassee-,3aci~nonvi lie
Jarksonville-Ralboarne
10,350 29% 45
18.9CR 54% 82
28.426 54* 159
15,600 !~!. 175
49%
1/ Thirty peracot of Tallshassce-JarRsda' aSic fcrecast. Ste alva, Rcatc Ii.
~!E~! Type 2
PISANC1AL RES311S (COO)
Revenue
Eampesses
Direct Operating Costs $419
Depreciation cad lr.trrost $125
Indirect Coats 1230
Total
Profit (Loss)
PASSEIGER TRAFFIC
Local
5,300
5,060
18,7s0
6,407
39,010
$ 814
$ 49
7.011
6,293
5,345
1,770
20. 419
242
AORCP'.F Ty~ 3 ç_--~---\~ ~
AIRCRAFT TJTILIIETI3N 3,699 lanual Fl~qht (curs ~ Fr
21.5 lady liaght louts
FlitAt.2IJL SESC1Ja `0200
Revenue 31,223
DlrectC~oeata:l 21.56 1502
Dcprec:ut:ar Iotrreut $337
Indirect Ccntr $242
Totel 01.141
_________ $ 02
L~Co, Corccna~$
3,160 1.290 4.443
Total
5.640
7.700
7.710
6,407
4.434Y
35,C44
271 5.910
050 0.510
1.373 9.080
120 6.523
452 4,806
4.342 39,386
On-Board bed Orgoert Scheduled
Pasaeooers Factor I:: Irs Block Tare
:31
:49
:53
I:.0l1-OIELSEOFSE-VFRO 961CR- A0 ;57F Il
Each Lce Aeprcnaats Oce Sully Rousitcap OlgEt lyrattO So lays Per ccci
AICCàSAFT OTILIZ.5TiON 1,707 Aenual Flight Houra
5.5 Daily Flight Roars
$1,462
Tampa-Melbourne
Taupa-Vero Beach.
lelbourne-Fliani
Veto Beach-Miami
Total
tOAD FACTORS
15.344
11,550
24, f 90
8, l7C
59,459
On-Igard
Par5r~acr5
Load
Factcr
Tarya-Melbourne
Mnlbourne-Vero Beach
Vera Beach-Haani
27,164
35,940
32, 261
45%
608
a~
.
51%
Or;mant Scheduled
cc slack T:ve
117 :23
34 :14
128 635
6-18
PAGENO="0249"
T Typa 2
01000AFT 0JTILlZ~~O0 1,757 Annual Flight Hours
5.6 Daily Flight Hours
FINASCIAL RESCL~S (000)
PASSENGEk TOAFFIC
LOAD FACTOIS
~2~$A Connect~
6,700 S02
1.3,580 2,235
1il~.l41~°' .,,i.,~.i6
30,626 1,793
AIRCIOAFT Type 2
LA0~ I h~C-kEhT PALM BE.AC-i10?.i1 PPE 12
Each Line ke..rese,tS C:.c Daily Rcandtr~p Flight Cy~tated Six Says Per hoer.
Ai.cpfT.~ILI:~:o5 1,465 Annual Plight Soars
4.7 Daily Flignt P.cars
81 i.1NCIAI 0151120 (030)
Direct Operating Ccsts $394
Deproc,atnor. and Intiocet $107
Indirect Casts 5107
Total
Profit (loin 0 618
Liral Ch..ntStSnl
9,429
44,CA 9,429
On- P arc Load
3, ItO 502
47,441 ~!
56%
243
Each Line Represents0 One Daily RoundtrnpFhight Operatcd dix Days Per Week
Direct Operating Coatu $473
Depreciation end Interest $128
Indirect Costs $236
Total
Profit (Loss)
$1,117
$ 837
$ 280
Pass aro la-Ta Ilakoos one
Pensacnl.9-JaS'isSnV_lle
Ta1lahsssce-JaSk4Cfl~fl.lte
Total
7,202
11,815
15,422
34,419
Pensaco la-Tel Lainno ace
TaO lahansae-JsCksooVil to
On-Board
23,017
27,217
Load Seghent
Factor $1, len
38% 169
159
42%
ScI-iSooled
Elocn To
:41
j.' Seventy percent of Tollahassee",jaCkuOnvLtlC forerasn. Sea also Route 9.
$1,316
$ 698
lion-i y., li
L.n-.. o:..o-P. s-i.
Lakr.icn.:-..oit PaLo beach
La~elar.J'4.a...
5,990
201,1020
12, 49
143
62
Sch- Ii
SOon I .rc
6-19
PAGENO="0250"
(is STST-1.iLEO- r~M?.;-OP ,M'~ 351.33 RLSC4 P~L'E 13
Cat L~:~c I rnuer.ts One Dasy :Ro dt.r:; Fl: ;~.`. erat.d :;,.n Days (or Uoeh
AITCR8F Type
AlRCR.~FT tTILIZATOCA 5,144 Annual Flight tourS
14.1 Daily Flight (icurs
S'TOAICIAL HE.) `J.li (005)
Rrvesne $1,275
~es
Direct 1,'ratnn; C.,n'. 0530
Deprcciat~nr. ar.u 1~tnr~st $206
mOored Custs 0265
Total $1,001
Profit (Loss) $274
?AOSENO1R TRAFFIC
~odi Cornrcti~ ia~s~
7,610 - 7,610
3,760 - 3.760
2,370. 21,570 23,940
2,709~.' 0,344 6,053
5.63$ 875 6.505
22,079 27,759 49,866
#IRIRAFT Type.3
AIRCRAFT UTILIZATION 1,687 Annual F1(ght flours
6.0 Daily Flight flours
FINMICIAL RESULTS (000)
Resence $904
Expenses
Direct Opcrating Costs $287
Depreciation and Interest $372
Irdirect Costs $144
Total $603
Profit (Loss) $331
PASSENGER TiAFFOC
LOAD FACTORS
On-toard Load
Passcr.rrs Factor
244
C-
Key West-Tc.rpa
Key West-Orlando
Saples-Tarpa
Tampa-Orlando
Tampa-Daytona Reach
Total
LOAD FACTORS
On-Snard Load Segrert Scheduled
Pansensers Factor :iiles Blocr. T.'ne
Key Nest-Naples 11,370 49% 112 :34
Naples-Tampa 35,310 51% 134 :39
Tampa-Orlando 18,318 53% 81 :27
Oraando-Doytosa Brad 6,505 26% . $0 :20
49%
1/ Thirty percent of Tape-Orlando forecast. Lee also Route 1.
FT. (IALTON SE3c:)-PAon.~ts CITY-CANtO 14
Each Lane Represents One Daily Roundtrsp Fl:ght C~nrated Six 1ays Per Wen~
West
City
Ft. Walton Beach-Tampa
Panama Cit~-Tarpa
Total
Local Connrctin~ Total
10,245 170 10,410
4,050 1.338 11,304
24,290 1,508 25,798
Ft. Walton Brach-
Panama City
Panama City-Tampa
10,410 30% 49
21,799 74% 251
62%
S~rcnt Scheduled
:4oles filets Tire
:27
1:09
6-20
PAGENO="0251"
245
AIRCRAFT Type 3-
FINANCIAL RESULTS (000)
Revenue
Exper.sc
Direct Operatis4 Couts $352
Deprecoatior. and Ioterc5l $217
Indirect Coats $161
Total
Profit (Loss)
PASSEOGER TRAFFIC
LOAD FACTORS
.Oackeosviile-3r1-ssdo
Urlando-I-akeiand
Lakeland-Sarasotu
5,840 1,362
6,9.0 -
7,215!' 4;609
6.220 2,872
26,210 9,043
1/ Fifty percent of Jacksoeviile-Crlanoo Is recast. See also Scute 16.
AIP.TRAFT Type 3
Fr. 3; ~.U~-3;:~s: :. ILLS 801)1 06
Each lose huprc:or.su 3r.:- .; ly R3st3tr;p Fl; sOt 01'srated S.c lays Per Week
AIRCRAFT L'TLIZATIO() 1,847 Soossi Fiogot Sours
5.9 Daily FlugIt hours
FINANCIOL RESULTS (000)
Rovesee
Portal Op crator.7 C::;; $ I
Dsp recoatic:. asi Ir.o»=:c;t I
Ir.dnract C:~tu
Pro±:t (los:)
635SEt3~ 1.33)01'
It. Rter~t~'0 1
lIe
1.05$ FA1'T1-IS
I. ~ ... .-10F.SS ro yr) OS
taco Lone SopreSe One Us; Op Scuosir op Florso uperstod So lays Per (deco
AIRCRAFT ITILIZSTION 2,382 innoal FloçhI Hours
7,6 taily Flu hours
$913
$760
$153
.Tacksonvi lie-Sarasota
.Iacksonvi$ 1e-Lakelacd
Jacksonville-Orlando
Orlando-Sarasooa
Total
6.222
6,737
12,114
3;, 258
Oc-Scard Load
__________ 6 actor
~6.166 50%
23,244 664
16.294 j~
52%
Seo.r.ent
4; len
144
57
53
Scheduled
B).ck Toce
o46
:24
:23
-.3
3.
lb. 21'.
0:.-:
III
Ft. Mysru-Orlasdo
Oclando-Ja:isonV0l 13
rot
lOt :4)
4;
1/ Fifty pcrcnst of j.,r'.:-.0~ .l~': I: .3 - fr- .aat. rC In.; heute 11.
6-21
PAGENO="0252"
i;v.1t-~t1~ `7L( ii;C$-F~. ~171~L 17
Each 1,~c o'~t.s lr~c ~at1~ Four.)trap ~~ght o~'ra~'~ Per Seek
610C(AFT Type 4
nIRCR\FT It) ZATI0N
FI11'~C1AL LLSLITS (020)
Dsrcct Oerotar~ Cc.t. 1257
Drecsatice se~1 lot.::sl 1110
Indirct Ccsts
~ota1
Profit (Loo~(
P5010110? T1?hC
Gai scan lie-
West PAIJI (rack
Ft. Lsuderdale
Total
Gainesville-
West Palo Beach
West Pa]a Beech-
Ft. Lauderdale
246
8.0 laity fli5kt (cars
214
0129
$466
0 61
101-al C.,c. ct
On-Oserd lead Sc~,~c'ot Icteduled
Passeencrs Factor ((:lcs Block
6,710
8, 800
15,510
LOAD h1'CTIi.S
200 6,911
101 8,905
305 15, 115
15,815 53% 246 1:02
8,905 30% 43 :18
50%
G-22
PAGENO="0253"
247
SENSITIVITY OF COSTS TO MIX OF AIRCRAFT TYPES
Two alternative assignments of aircraft to the routes are analyzed
in Table 6-2. The table compares aircraft hours and operating
costs under three assumptions.
1. The aircraft assignments generated by the model
and used in the separate route analyses (i.e.,
free choice among Types 2, 3 or 4).
2. Using the flight frequencies of 1. above, Type
* 2 aircraft are substituted for Type 3 aircraft.
The result is a `maximum cost" presentation of
the routes.
3. The routes are evaluated using the model route
structure, but aircraft choice is restricted to
* Type 2 and 4. The result is less frequencies on
some Type 3 routes but in no case do the routes
go below Minimum Standard Service.
The table shows that a straight flight-for-flight substitution of
Type 2 for Type 3 aircraft will cost about $2 million more than
planned' or about a 10 percent increase statewide. In the third
case, total direct cost changes vary little from that planned
because frequencies are allowed to decrease to the minimum. Total
flight hours decreased about 18 percent, partially because of the
higher speed of the Type 2 aircraft, and partially because of
reduced frequencies.
The comparison shows that on several routes the model selected
public service, as expressed in frequency of flights, over
profitability which may be favored by the method of the third
case.
6-23
PAGENO="0254"
Case 1 Cas- 2 Caic 3
Type 3 Frequencies A~;st1rne3 Ocly Type ~
Proposed Route System- Wj~j~Tre 2 Aircreft Aol Type 4 Avai1ai~o
Annual Total Arru~il Total itouual Totai
Aircraft Block Operating Aircraft Clock Oper~ttinq Aircraft Olock Oporating
Type Flours Cost Type Hour. (o~;t _~yj~ hours Co:;t
2 4,672 $ 2,226 2 4,672 2,220 2 4,672 $ 2,226
2 4,186 1,995 2 4,186 1,9a5 2 4,296 1,995
3 5,935 1,893 2 5,015 2,389 2 3,246 1,452
2 2,526 1,204 2 2,526 1,20.1 2 2,526 1,204
3 4,675 1,492 2 3,9~1 1,083 2 1.75 941
3 4,612 1,471 2 3,353 1,693 2 3,223 1,536
2 1,704 811 2 1,704 811 2 1,704 811
2 1,328 632 2 1,328 632 2 1,326 632
elbournn
3 3,699 1,141. 2 3,110 1,402 2 2,6110 1,277
TABLE 6-2
PNALYSIS OF COST SENSITTVITY OF MiX OF AIRCRAFT TYPES
Route
~;o.
1 Pensaco1e~~~pa-Or1ando-West Palm Beach
2 Pensacola-St. Petersburg-Miami
3 Taliahassee-Caineiville-Daytona Beach-Miami
`7,
a. 4 Ft. Lauderdalc-Tampa
5 Tallahassee-West Palm Beach-Ft. Lauderdale
6 Tallahis;ce-Sarasota/flratlenton-Ft. Mycrs-Miaei
7 Jacksonville-Daytona Reach-Ft. Lauderdale
0 Jacksonville-West Palm Reach
9 Ft. Walton Beach-Panama Clty-Tallahessee-Jacksonville
PAGENO="0255"
Ruc
10 ~
11 Pen icc1a-T311h~.e-.~c)flJ~'J'i
12 Lakeland-Wo~,t P315 1~Oich-Mi3mi
13 ~
14 Ft. ~31ton Beach-Par~s..~ C:ty~~r~
15 ~`acksowx lie-Or !an0o-~~1--Orisota/Sraderiton
16 Ft. Myer~-Or1.ando-Jack~:onvtU~
17 Gaincsv111e-~ect Pnle Peach-Ft. Lauclericle
TA}31E 6-2 (Continued)
JiNJ\LYSIS OF COST SEIISITIVITY OF MIX OP AIRCRAFT TYPES
Case 1 Case 2 Case 3
1/ Type 3 Frequencies Assumes Only Type 2
Projosecl Route System- With Type 2 Aircraft Axsd Ty1e4Availahle
Annuni Total Annual Total Annual Total
Aircraft Block Operating Aircraft Block operating Airccaf I Block Operating
_______ Hours Cost Type flours Cost ~ Hours Cost
2 1,707 $ 814 2 1,707 $ 814 2 1,707 $ 814
2 1,747 837 2 1,747 837 2 1,747 837
2 1,465 698 2 1,465 698 2 1,465 698
4 5,144 1,001 4 5,144 1,001 4 5,144 1,001
3 1,887 603 2 1,590 758 2 1,590 758
3 2,382 760 2 1,997 951 2 1,598 762
3 1,847 589 2 1,556 741 2 1,556 74)
4 2,491 485 4 2,491 485 4 2,491 485
52.007 $18,652 47,552 $20,600 42,648 $18,170
TOTAL
1/ Aircraft assigned by model.
PAGENO="0256"
250
* CHAPTER 7
A PROPOSED PLAN FOR FLORIDA INTRASTATE AIR SERVICE
This plan uses three types of carriers as the tools for obtaining
service.
1. CAB-certificated interstate carriers,
2. Communter airlines, and
3. Intrastate carriers.
The Federally (CAB) Certificated Carriers
The services of the CAB-certificated carriers are considered as
basic in the State plan. Nine interstate carriers are currently
authorized and providing service in 55 of the 76 markets included
in the plan. The quality of their service ranges from being totally
inadequate to excessive.
Service by these carriers offers several advantages: the companies
are large and stable financially; they have a high degree of public
acceptance; and the types of aircraft which they operate are modern
and comfortable. Given the high technical quality of their opera-
tion, and their substantial contribution to the total State plan,
*~j~ is essential to consider the services of interstate carriers as
the basic system.
While these carriers are a great asset in the plan they are also a
liability where their services are not adequate. The plan proposes
that where their service is not adequate and they are unwilling to
make it comply with standards, restraints will be applied to these
carriers to assure a willing commuter or intrastate carrier suff i-
cient revenue to support his service.
The Commuter Carriers
Commuter carriers have a dual identity as both intrastate and
interstate carriers. They are required to use aircraft with not
more than 30 seats or they lose the privilege of carrying inter-
state connecting traffic.. This traffic is vital to much of their
operation. The State is receiving significant intrastate service
from commuter carriers and the proposed plan relies more heavily
on them and provides revenue protection for them in markets where
they cannot effectively compete with interstate carriers.
7-1
PAGENO="0257"
251
The Intrastate Carriers
These carriers are different from conirnuter carriers in that they
use aircraft with more than 30.seats and therefore are not allowed
to carry any interstate traffic. These two restraints effectively
limit them to the few largest markets of the State where the
strictly local, intrastate traffic may be great enough to support
their large aircraft. At present Air Florida is the only carrier
in this class.
Intrastate carriers can expect to confront formidable, if not
insurmountable, competition from interstate carriers in these
larger markets.
7-2
28-911 0 - 78 - 17
PAGENO="0258"
252
Action Tasks of Proposed Plan
It will be necessary that the following legislative and regulatory
actions be taken by Florida authorities, in order to implement the
planned route structure.
1. Amend Florida legislation titled An Act Relating To The
Air Carriers of Florida to make the interstate, carriers
d~irating between points within the State subject to
State regulation in the same manner as intrastate carriers
now certificated by the Public Service Commission. The
amending legislation should provide a date on which the
present privilege of carrying intrastate traffic will
terminate if not specifically authorized by the State
before that date.
* This action will permit the carriage of
intrastate traffic by only those carriers
authorized by the State and will not affect
interstate operations or the carriage of
interstate traffic.
2. Adopt Standards of Minimum Service applicable to aZ,~
carriers serving intrastate passengers.
* This action will bring the intrastate traffic
of the interstate carriers under State control.
3. Award intrastate certificates to all interstate carriers
operating in the following markets and meeting Standards
of Minimum Service:
Miami-Tampa Miami-Tallahassee
Miami-Orlando Orlando-Tallahassee
* These major markets (except Orlando-Tallahassee) are
each receiving more than adequate service from two
interstate carriers. The history of service and the
route structure of the carriers indicate that the
services will continue at this level indefinitely.
4. 7~.ward intrastate certificates to interstate carriers in
any market not listed in 3. above, in which the carrier
requests certification.
* It is understood that such a request constitutes
* agreement to operate in compliance with the Stan-
dards and `failure to do so will result in termination
of the authority in the matket. Further, failure to
request authorization results in forfeiture of all
rights to any ~ntraetate traffic in the market.
7-3
PAGENO="0259"
253
* This action will permit the interstate carriers
to determine the routes over which they do not
intend to provide adequate service.
5. Award lirnited certificates to interstate carriers in
markets where their CAB authority relies primarily on
intrastate traffic but where they do not meet the
Standards of Minimum Service.
* Such awards should be made only where it is
demonstrated that an intrastate carrier can
expect to supply profitably the remainder of
the standard service.
* The certificate will limit the interstate
carrier to the service performed at the time
of certification. Abandonment of that service
will result in permanent loss of authority in
the market.
* Gainesville~Miami is an illustration of such a
route.
6. Award remaining routes to intrastate carriers.
* The State should announce the routes available
to be awarded and receive applications for those
routes. Action on applications filed at random
may result in failure to provide for some essen-
tial services on routes expected to be economically
viable as presented in the plan.
7. Request from the CAB appropriate exemptions for carriers
holding Florida intrastate certificates to enter into
interline ticketing baggage agreements with interstate
and international carriers.
o Intrastate carriers who also qualify as
commuter airlines under Part 298 of the
CAB Economic Regulations now enjoy this
privilege, which would be lost if they
acquire larger than 30 passenger aircraft.
o The probability is that new aircraft, even
under 30 passengers, will not otherwise be
used in many markets because they will be
(1) not available; (2) too expensive; or (3)
not large enough. Under these circumstances
use of Convair 580 or Fairchild F-27/227 through-
out the State can be expected and this exemption
needed.
7-4
PAGENO="0260"
254
8. Undertake collaboration with the CAB to develop means
of making all cities in Florida equal in the application
of State as well as Federal regulations.
* The definitions of "interstate commerce" and
"interstate transportation" as stated in the
Federal Aviation Act make air routes between
many Florida cities interstate rather than
intrastate because the routes lie over the
high seas. Thus, the unique geography of
Florida and the wording of the Act appear to
* impose unequal treatment or benefits on certain
* cities.
* This overwater operations problem can frustrate
effective State regulation intended to obtain
better air service throughout the State.
* This problem appears to be complex and its
solution may require amendment of the
Federal Aviation Act.
7-5
PAGENO="0261"
255
Coordination With The Civil :\erOfl:iut i Cs Board
The primary goal of obtaining adequate air service in the essential
markets of the State will require cooperation between the State and
the Federal Civil Aeronautics Board.
The discussion that has preceded the steps of this proposed plan
for service show that the State and the CAB each have certain re-
sponsibilities and prohibitions. Where some of these conflict
they can be contested, argugd and even litigated, but most can
probably be resolved within available processes.
Coordination with the CAB will take two forms and if successfully
executed should prevent or certainly reduce the possibility of
confrontation. First, the State will need the pernission of the
CAB for some new authority related to interstate carriers and for
exemptions for ticketing and baggage agreements. Second, some of
the proposed actions by the State will be restrictive of the inter-
state carriers and an advice and consent relationship with the CAB
should be helpful in obtaining support for or acquiescence to these
actions.
As soon as a Florida plan is approve4 within the State, a request
should be made to the CAB for a meeting with the Board at which
the full plan will be presented. It will demonstrate that the
specific requests to be made subsequently are needed to fulfill
a well-conceived intrastate plan which will be adversely affected
without the assistance of the Board in each instance. Also, it
will assure the assistance of the Board's staff in framing the
actions, or inactions, to be sought both formally and informally.
PAGENO="0262"
256
CHAPTER 8
SUBSIDY - NEEDS AND PRACTICES
One element for consideration in this study is the degree of public
support, or subsidy, which may be required for the necessary services,
and the neans of providing such support. The study finds that no
subsidy will be required i-f the recommended actions -- to protect
the intrastate carriers from competition and assure them of ample
traffic -- are implemented. Nevertheless, this chapter reviews
generally the subsidy policy and practices of the Federal government
and offers some suggestions foL Florida.
Federal Subsidy Payments
Historically, the matter of subsidy has been closely related to air
transportation. Subsidy was first used to assist in the development
of air traffic by underwriting a portion of carrier costs, which in
turn permitted fares reasonable enough to stimulate traffic. More
recently, subsidy has been used to insure a-prof it for those carriers
serving low-traffic, isolated communities, with less emphasis on
"pump-priming". Airlines certificated by the Civil Aeronautics -
Board have received substantial subsidies over the years, beginning
prior to the enactment of the Civil Aeronautics Act of 1938.
At the present tine only two groups of carriers receive subsidy
payments, primarily for services to small or isolated communities --
the local service car~iers, and carriers performing service within
Alaska. In recent years the CAB has authorized many routes, now a
major part of the local service systems, designated as ineligible
for subsidy. The amount of subsidy now covers only those operations
not specifically designated by the CAB as subsidy-ineligible.
The trunklines (with the exception of Northeast Airlines~1) became
free of direct subsidy support in 1952, and since 1957 international
operations have been unsubsidired. Originally, subsidy was not
separately identified, but was part of the compensation for the
carriage of mail. However, in 1954 subsidy was administratively
separated frcm service mail payments. The amount of direct subsidy
support reported natiorn%ide since 1954 ~as fluctuated rather widely.
The iowezt amount was $39.7 million, paid in 1955. Subsidy was
greatest in 1963, when $82.7 millionwas paid. Current subsidy is
under $70.0 million annually. No subsidy has been paid for air
service within Florida since 1950.
1/- Subsidy for Northeast was ended in 1967. The carrier merged
with Delta Airlines in 1972.
8-1
PAGENO="0263"
257
The Basis for Federa lSubsid3.
The provision of subsidy for interstate air transportation is
contained in Section 406 of the Federal Aviation Act of 1958 (and
the predecessor Civil Aeronautics Act of 1933). Under that Act
the CAB is directed to administer subsidy for service ". . .under
honest economical and efficient management, [needed) to maintain
and continua the development of air tranaportation to the extent
and of the character and quality required for the commerce of the
United States, the Postal Service, and the national defense." Thus
the determination of both the justifications and level of subsidies
was delegated to the Civil Aeronautics Board.
The Act also provides (Section 406(a) that the Board shall fix fair
and reasonable rates for the transportation of mail by aircraft,
and (Section 406(c) that compensation f or this service shall be paid
by the Postmaster General in accordance with such rates (unrelated
to the need for subsidy).
Neither the Act nor the Board guarantees that each carrier will earn
a profit at the prescribed-subsidy rate, but rates are established
so as to provide reasonable opportunity to do so under conditions
or honest, economical and efficient management. In other words,
the Board has adhered to a public utility rate theory under which
losses, incurred by carriers in past years while on closed rates,
cannot be made up with subsidy in fixing future rates; and at the
same time, rates once established remain final and closed until
reopened. -
How The Federal Subs idp Program Op_ç~ates
In implementing the subsidy provisions of the Qrigin~l legislation
in 1938, a system of individual ratemaking was established which in
effect amounted to negotiations between each carrier and the Board
(known in 1938 as the "Authority") as to the amount of subsidy to
be paid. The carrier representatives and Board's staff adjudicated
the subsidy to be paid, after comprehensive and detailed examination
of carrier expenditures and revenues. The results were expressed
in an involved formula which produced a rate acceptable to both
parties.
This case-by-case approach continued until 1961. During that tine
subsidy ratemaking became increasingly cumbersome. It also became
more and more difficult to reach agreement. Route systems were
changing rather often, and so were the subsidy requirements. Thus,
the airlines were frequently in an "open" or undetermined rate
-situation rather than on a definite final or "closed" rate. In
this situation the single carrier subsidy determination process
did not create good climate for long-range carrier planning nor
maximum incentive for efficient operations. In 1961 the Board
found that-the then 13 local service carriers, despite various
8-2
PAGENO="0264"
258
difference~, represented a homogeneous group which could be
encompassed by a. single rate, and established a class rate system
for all 13 carriers. The class rate was based on the carrier's
operating results for the year ended June 30, 1960, adjusted to
exclude costs not recognizable under established Board policy.
In the computation of the subsidy need the average costs of the
group were used, placing a premium on efficient operations. The
class rate system has been operating ever since with periodic
adjustments.
Regardless of the system used, the subsidy rates are determined
pursuant to the Act only after notice and opportunity for hearing,
and are subject to judicial review. Most subsidy cases are pro-
cessed by informal conference procedures between representatives
of the carriers and the Board, although cases may be tried for-
mally before the Board and its Administrative Law Judges. The
conference procedure, which is detailed in the Board's published
Rules of Practice, has proven to be an efficient method of narrowing
areas of conflict and expediting the necessary Board determinations.
Under formal or informal procedures, no subsidy rate is finalized
without opportunity for objection by interested parties, including
the Postmaster General, and the observance oF all statutory, pro-
cedural and substantive requirements.
Once a subsidy rate is established the Board maintains a continuing
review. Pursuant to its power under the Act, the Board has on its
own initiative reopened numerous rates for reduction.
~ Subridg
ifl an unusual recent development, the CAB attempted to provide
subsidy support to a commuter airline which, because it is not a
certificated airline, cannot receive subsidy payments directly.
in 1968 and 1970 Frontier Airlines recuested permission to suspend
o::~ratjons at three cities in Kansas (one in 1968, two in 1970).
CAB approved the suspensions on condition that substitute
~rvice be provided by Air Midwest, a commuter airline. Frontier's
~i5zidy was adjusted downward to reflect this suspension of sub-
:iljzed service.
Midwest sustained losses in the operation and in 1973 applied
~ the CAB for subsidy support. The Board approved the subsidy, 1/
since AirMidwest was not eligible for direct subsidy payment~,
- yes arranged that the funds be paid initially to Frontier, which
~; the entity responsible for keeping the service in operation.
Order 74-4-77, dated April 12, 1974 made final the tentative
ding of the Board, issued on January 14, 1974.
8-3
PAGENO="0265"
259
Under this arrangement, termed a `flow-through" subsidy, the
money was passed on by Frontier to Air Midwest.
The "flow-through' concept was challenged in the courts, and
the Board's action was found to be illegal 1/ because it lacks
the power to pay subsidy to a carrier which does not hold a
certificate. yhis was the single instance in which the Board
attempted to use the flow-through" method. Only one other
commuter filed for a similar arrangement but the application
was not processed, possibly because the court decision was
imminent.
Subsidy and Florida's Intrast~_e Routes
Under the recommendations of this report, especially that which
guarantees intrastate protection from excess competition, the
question of subsidy for purposes of this study is largely academic.
All routes are estimated to be operated at a profit. Given this
situation it would be difficult indeed to establish a program for
subsidy, without any knowledge of specific needs which may evolve.
In developing the intrastate route system, the objective was to
make certain that service provided would meet prescribed standards
and criteria; no consideration was given to the subsidy requirement
which might result. As it turned out, the routes will be profitable
and subsidy will not be required if the plan is implemented as
recommended. It is recognized that in all projections there is
some degree of error. However, f or the routes as developed, the
margin for error seems sufficiently adequate to sustain the finding
that operations can be profitable.
The establishment by any unit of Government of air service which
cannot support itself is primarily a political or social rather
than an economic decision. While such services have usually been
established to "develop" a market to the level where it will not
require support, it is very difficult to actually demonstrate
with specific markets where this has really occurred with modern
aircraft.
Subsidy reduction, where it has occurred, has usually resulted
from adding profitable routes to a subsidized carrier's system,
providing a form of internal subsidy. Such an approach must be
very limited within a single State because the highly profitable
routes are probably interstate routes.
Subsidy for intrastate services in Florida may be required if service
is extended to markets which, under minimum traffic and geographic
requirements established for this study, do not qualify. If the
1/ U.S. DC Circuit Court of Appeals. Decided July 11, 1975.
8-4
PAGENO="0266"
260
State provides service at these levels the need for financial
support is practically certain. Subsidy payments may also be
required if the State does not provide the protection from com-
petition, and the traffic participation needed by the carrier
to meet the standards of service which have been specified.
The history of commuter service in Florida, as highlighted in
this report, makes it clear that without guarantees of this
nature the service can only be provided with large losses which
can be offset by substantial subsidy support.
Aside from the Federal Government's activity, there is no con-
sistent history of subsidy programs for air service. There have
been community projects to support airlines, and methods of
subsidy considered but not tried. The State may wish to consider
one or more of these, depending on the amount involved and the
degree of support which the State is willing to furnish.
Community projects to support an operation considered essential
can take the form of tax preferences, guarantees of a minimum
number of tickets, or guarantees of loans. The tax preferences
represent an indirect subsidy, which may or may not be adequate
to provide the full subsidy which a municipality (or state) may
deem to be required. The waiver of airport landing fees might
be considered as a tax preference.
The purchase of a guaranteed number of tickets by a municipality
is one method of direct subsidy which generally has been considered
to be unsatisfactory because of administrative problems in dis-
posing of the tickets in an acceptable manner.
Loan guarantees are a form of subsidy utilized rather widely in
a number of fields. It is an indirect subsidy which is generally
applicable to the purchase of capital items.. In Florida's case,
the use of small and relatively inexpensive aircraft is recommended.
Thus the loan guarantee possibly would not be adequate for the
State's purpose.
A subsidy tool considered by Federal authorities, but not used,
is the purchase of aircraft by the Government unit to perform
the desired service.
A significant factor in the favorable showing exhibited in the
route financial results is the type of e*-~uioment which is assumed.
For the CAB-certificated carriers, one of the large elements of
cost -- and of subsidy -- is tho depreciation of large and very
expensive jet aircraft. For intrastate services such aircraft are
-iot necessary to meet the standards nor desirable from a fiscal
?oint of view.
Subsidy oaid by the CAB is determined by recognition of all costs
incurred under honest, economical and efficient management plus a
profit (return on investment olus taxes) . A large part of this
subsidy represents the costs attributable to the ownership of
aircraft.
8-5
PAGENO="0267"
261
A possible method for providing subsidy and reducing the amount
required, would be for the State to purchase aircraft which would
then be leased to an operator at an appropriate lease rate. The
lease rate would determine the desired subsidy level. The re-
sidual value of the aircraft could remain with the State, and it
could be substantial, or the lease could provide for ownership
to go to the operator after several years. Either way the State
would own the equipment, and could recover and transfer it to
other operators if necessary to assure continued service on a
route.
Safety maintenance of the aircraft is controlled by the FAA and
adequate care of non-safety maintenance can be provided by bond,
an escrow fund or similar addendum to the lease contract.
Leasing and supervision of the contracts could be handled by an
appropriate agency of the State or a State owned corporation
established for the purpose.
Frequently the CAB and the States are urged by a community and
their elected representatives to provide first air service to the
community or air service over an additional route to the community.
More often than not the service will require subsidy either directly
from the government or as a loss operation added to an otherwise
profitable airline. Can this happen in Florida? It can, but when
all recommended services are provided the community will be one
less than 100 miles from an airline airport or less than 50,000
population by 1990 -- the criteria for selecting cities to be
served. If it is nevertheless desired to test service at the city
the foregoing approach is one possibility, with aircraft being pro-
vided to the city instead of the operator with the agreement that
the city provide for its scheduling and operation, within the
Standards of Service, for service to and from not more than two
other cities where connecting interstate service is available.
The State would retain ownership `of the aircraft, with all other
costs borne by the city it served and the operator hired or selected
by the city.
The foregoing discussion describes a number of the options which
may be available should the State decide upon a subsidy program.
It should be emphasized, as was stated earlier, that it is not
logical to attempt to establish a program for subsidy without
knowledge of specific needs.
It is believed that the approach recommended in this report will
provide the State of Florida with the intrastate service which it
needs, without the payment of any subsidy. A subsidy program should
not be considered by the State unless for some reason not yet apparent
the proposed services will not be forthcoming.
8-6
PAGENO="0268"
262
APPENDIX A
AIR SERVICE AUTHORIZATION IN FLORIDA
The tables and naps appearing herein detail the authority currently
held by all air carriers serving intrastate markets in Florida.
Civil Aeronautics Board Certificates
The charts show the routes held by each interstate carrier as
authorized by the Civil Aeronautics Board. The explanatory notes
indicate any restrictions on the authority. Eight carriers can
serve various city-pairs in Florida but by far the most extensive
authority is held by Eastern and National with 11 and 14 points
respectively.
The authority of Eastern is virtually without restriction.
National's certificates have some restrictions which apply mostly
to Ft. Lauderdale service. A great many city-pairs can be served
by National only through an intermediate point usually a route
segment junction point. Delta and United have extensive restric-
tions against intrastate flights. The restrictions on Delta require
that many markets can be served only on flights which originate or
terminate out of the State of Florida. United's restrictions
prohibit "turnaround" flights in several markets which is virtually
the same as the Delta restrictions. Southern's certificate has
no restriction. Braniff, Northwest and TNA have very little
intra-Florida authority and no restrictions.
None of the restricted carriers have asked for removal of the
restrictions and it is doubtful that removal of the restraints
would result in any added or improved service.
A-i
PAGENO="0269"
263
CURRENT AIR SERVICE
AUTHORIZATIONS_IN FLORIDA
Explanatory Notes
LI Unrestricted nonstop.
Nonstop authority - turnaround service prohibited.
Single plane service prohibited.
Best possible routing is too roundabout*.
etc. Nuither of intermediate stops required.
Closed door restriction - no local traffic.
Nonstop authority with long-haul requirement -
flight must originate or terminate out-of-state.
L~I1 Service suspended.
* In the 0 - 750 mile range, 20% is used as the maximum allowable
circu ity.
A-2
28.911 0 - 78 - 18
PAGENO="0270"
lISA;: I 1' r i N'1114:1A'r! ONAL
I UTRA-FIOIU DA I1OLJTC IWTIIOR1TY OF
CIVJ I A1:I6ONAU'rlcs BOARD B? CM1RIER
EASTERN AIR LINES, INC.
,,`
:4.,,
`i
-i
1'
~
. *`,)"
:.
C:.
4
.1 ()
Ii
I (I
C
~f. .1
,.,
0'
s-'
.o~
ci
0
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~
(C)84.5
t~
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4J))
4 5).-)
C). `.,44
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C) C)
~ 6' 6
g
*g
4) 44
i 10
C) `,
`4 (4
44 -44
0 0
C) C)
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.`4 84
C) (44
4 (0
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44 `44
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0. 0
4)
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ci LI
(4 .-i
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4~
"4 V
`-8 `-4
`4 "4
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,~ 4:
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`44 44
4') (5
4)
.;4
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C)
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.44
.a
.
.4.8
1.4.
Daytona
Beach
i
a
Ft. Laud
erclale
0
JacksonvIlle 0
0
Melbourne
0
Orlando
0
0
00
`ra liahamsee
Miami/Ft. Laudcrdaic-'rampa/St. Petershurg/C1earwater~~'
L)fll,'i'A AIR LIIJEU, RIIC.
I,
Gainesville a
Miami 0
On a (1)1(4
I'1m:1.7st . Ia't''r sburg/1
Cl'.,uw,tl'r 1/ ,_J
14 / 1)1 44' r~'&'d t)U'44.44411 `/(iu~~5 1; . `eternI)urg or bOtil
Tim' carrier IL4:; 04 lI4:t I. ictId o~c'ratiny authority be tween
each ci ty-)ai r cooL i 1:11100 except Lor the coded rc'ct:rietionn
(41414:)) `41.0 cx,.(la) )~4:)) 0)8 48444: 14-2.
Sarasoi'i/Bradcn ton
ru(n((a/ i . i'1tersDlLryJ
Clearwator 0/
PAGENO="0271"
NATIONAL AIRLINES. iNC.
INTRA-FLORIDI1 ROUTE AUTHORITY OF
CIVIl AERONAUTICS BOARD BY CANDIED
Day
toma leach
1 -~ 1 1
0
;~:
0 S -
Ft.
lauderdale
I
5 1
X I
- I
C 0
0 S
I
1].
0
Ja~k~onvi1le
S
S S
L:ikclamd *
I *~
Miami 1
l'anama City
1
Sarasota/dradenton
Tollahassee 1
1
TarVa/SL.PeterSl?i)rY/ -
* Served throuqh Tampa International.
1/ lay be served throu.jh Tampa or St. Petersburg or both.
RaCe: The carrier hax unrestricted ojserating authority between
each c1ty-pair combination except for the coded restrictions
uhich are explained on page A-2.
Ft. Myers
EOilTl!WE1T AcHIlLES, TIC.
Ft. Lauderdale-Miami L~I]
Ft. Lauderdale-Tampa/St. Petersbur~/C1carwatcr~" LII
Miami-Tampa/St. Pctersburg/C1earwater~" [III
SOUThERN AIRWAYS, INC.
icy last
I SI
lbournm
S
S
S
Orlando
1 0
Pensacola
11
Hi
Eglin
(Ft.iialtoshheachh - -
Jacksonesile - - --
- --- - -~
.~ l~_
Miami/Ft. Lauderdale
Orlando
Panama City
PAGENO="0272"
266
INTRA-FLORIDA ROUTE AUTHORITY
OF CIVIL AERONAUTICS BOARD
BY CARRiER
TRANS WORLD AIRLINES, INC.
Ft. Lauderdale~~'-Miami
Ft. Lauderdale~"-Tampa/St. Petersburg/Clearwater~"
Miami-Tampa/St. Petersburg/Clearwater~1
UNITED AIR LINES, INC.
.c
C)
5
S
m
~4u*
C)C)
~).iJ
00
a~p
C)
C)
.-4
~-,
.
B
~
S
0~
.~
4)0
CI)'-4
*~~SO
c
C~
5
cC
*~4
~
S
0
n
.)4
0
Cl
--~
B
0
`~
4~
tn
C)
F
E-~
Z
Ft.
Lauderdale
X
C
Jacksonville
NT
NT
NT
Miami
Tampa/St. Petersburg/
Clearwater 21
NT NT
NT
1/ Service not inaugurated.
2/ May be served through Tampa or St. Petersburg or both.
Note: The carrier has, unrestricted operating authority between
each city-pair corC)bination except for the coded restrjctjons
which are explained on page A-2.
PAGENO="0273"
267
FLORIDA PUBLIC SERVICE CO~IISSION CERTIFICATES
Authority held by each intrastate carrier is shown on route maps.
With each map is a table identifying the PSC dockets and orders
in which each route is recorded.
Two observations result from the review of these certificates.
1. It is not clear whether Florida carriers have
authority to overfly or skip intermediate points
on some of their schedules. In some instances, -
such as Shawnee, specific permission to operate
nonstop is written in the authority. In others,
such as Florida Airlines' Tampa-Ocala--Gainesville-
Jacksonville route, the carrier operates nonstop
between Tampa and Jacksonville although such
authority is not mentioned.
2. The interpretation of Sun Airlines' authority in
PSC Order 11366 has set a precedent for any
carrier to serve any city within a 50 nile radius
of a named city. There are enough possible pairings
of such cities within the State to cause undesirable
predatory scheduling if this precedent is expanded.
It should be determined if such a liberal reading of
the Florida atatute is justified on a statewide basis.
These maps were first prepared for service as authorized on April
1, 1975. *They have been subsequently revised to show actual service
performed as of February 17, 1976. There is a great deal of change
in this 10 1/2 month period. Several certificates were never
activated. Southeast. Airlines has ceased to operate, as it was
the loser in the competitive struggle between `Miami and Key West;
Florida Airlines has expanded and operates unbalanced schedules
on many routes in its efforts to avoid direct competition w~ith
CAB carriers. Shawnee is also expanded and entered a contractual
relationship with F1or~da Airlines.
Current service is shown with solid lines on all maps.
A-6
PAGENO="0274"
Docket 73134 - ACC
Order 11237 February 14, 1974
Cert. No. 9 (Extended)s.°'
Docket 74550 - ACC
Order 11909 February 5, 1975
TallanaSSee - Orlando deleted -
was flown twice weekly in Apral 1974
Docket 74293 - ACC (AP)
Order 11964 February 20, 1975
Route Extended
Start-Up Date 45 Days
268
MAP A-i
AIR FLORIDA
TallahasocO
Jacksonville
Docket 72684 -` ACC
Order 10795 June 20, 1973
Certificate No. 9 - ACC
Grandfather
Class 9 Aircraft
Operated February 17, 1976 ~5~4i~a
A-7
PAGENO="0275"
269
IIAP A-2
AIR SUNSHINE
(AAT Airlines, Inc.)
Docket 73788 - ACC
Order 11480 June 5, 1974
Extended Certificate w~'~'
Pisaco1~i -
Jac~:sonvi1le
St.
Docket 73010 - ACC
Order l0~94 June 20, 1973
Certificate No. 7 - ACC
Grandfather i.uusm
Class 3 Aircraft
Operated February 17, 1976 ~
Kay Marathon
West
A-S
PAGENO="0276"
270
MAP A-3
ATLANTIC SOUTHEAST AIRLINES, INC.
Class 2 Aircraft at.
Expired if not activated I'eterskurg!
90 days
Order 11237 - A Sept. 12, 1974
Amended to make ASA a class 3
carrier
Order 11421 May 10, 1974
Start-Up Date Extending 90 Days
Tallahassee
Jacksonville
Docket 73201 - ACC
Order 11237 February 14, 1974
Certificate Ho. 11.- ACC
Punta
Ourda
Ft.
Certificate lapsed by Order 11965
March 3, 1975 after hearing
Island
Z~arathon
A-9
PAGENO="0277"
Certificate No. 6 - ACC
Grandfather
Class 3 Aircraft
271
MAP A-4
F.I.T. AVIATION
Ta 1 lahas see
Jacksonvi 1 le
Docket 73013 - ACC
Order 10700 May 8, 1973
Punta
Gorda
Ft.
Authority LapsCd
island
A-b
PAGENO="0278"
272
MAP A-5
FLORIDA AIRLINES
Docket 73737 - ACC
Order 11431 May 14, 1974
Rotite Extended ~
Docket 750029 -~ ACC CAB)
Order 11929 February 13, 1975
Tallahassee - Jacksonville
Tallahassee - Gainesville
Suspended For 6 Months
Tallahassee
Jacksonville
Docket 73005 - ACC
Order 10688 May 7, 1973
Certificate No. 3 - ACC
Grandfather muuim.r
Class 3 Aircraft
Veto
Punta
Gorda
Ft.
Operated February 17, 1976 ~ Key Marathon
Nest ~
A-il
PAGENO="0279"
273
NAP A-6
JET FLORIDA AIRLINES
Jacksonville
St.
Punta
Gorda
Ft.
Docket 73130 - ACC
Order 11237 February 14, 1974
Certificate No. 10 - ACC
Class 2 Aircraft
Expired if not activated 180 days
Marathon
A-12
PAGENO="0280"
* Docket 73608 - ACC
Order 11431 May 14, 1974
Route Exter~ded ~
Start-Up Date 90 Days
Authority Lapsed
274
MAP A-7
MARCO ISLAND AIRWAYS
Tallahassee
.Jacksonv ille
~;t.
Docket 72705 - ACC
Order 10698 May 8, 1973
Certificate No. 4 - ACC
Grandfather
Class 3 Aircraft
Sarasota~
Gorda
t.
Operated February 17, 1976 ~
Niani
A-13
PAGENO="0281"
275
lAP A-B
NAPLES AIRLINES
(Provincetown-Boston Airline, Inc.)
Docket 73002 - ACC
Order 10647 April 19, 1973
Certificate No. 1 ACC
Grandfather
Class 3 Aircraft
Op~ra\ted February 17, 1976
Ta 1 laha S see
Jacksonville
St.
Sarasota
Pasta
Gorda
Ft.
A-14
PAGENO="0282"
276
MAP A-9
SHAWNEE AIRLINES, INC.
Docket 73585 - ACC
Order 11494 June 14, 1974
Certificate No. 12 - ACC
Class 3 Aircraft
May operate non-stop between
any city-pair on route.
(ORL-PBI-FLL operated since
April 1, 1973 as part of
international route to Freeport
and Nassau.)
`."~saco13
Tallahasscc
Jacksonville
St.
Sarasota~
Punts
Cords
Ft.
Islond
Operated February 17, 1976 I1~
Miani
PAGENO="0283"
277
HAP A-b
SOUTHEAST AIRLINES
Tal1ah~~sce
Tacksonvi 1 1~
Punta
Garde
- Docket 73003 - ACC
Order 10648 April 20, 1973
C6rtificate No. 2 - ACC
Grandfather
Class 3 Aircraft
Ceased Operation January 1976
Miami
Key
West
A-16
PAGENO="0284"
Order 11325
Amended To Delete Routes
Marked ~
Authority Lapsed
Docket 74221 - ACC
Order 11366
Found that Sarasota is within 50
"Area" of Ta~~a and is included in
certificate.
278
ZIAP A-il
SUN AIRLINES, INC.
Tallahassee
Jackson',rilIe
Docket 73006 - ACC
Order 10829 July 3, 1973
Certificate No. 8 - ACC
Grandfather
Class 3 Aircraft
Operated February 17, 1976 ~
A- 17
PAGENO="0285"
279
~1AP A-12
VERa I1O~OUTH AIRLINES
Ceased operation May , 1975
J*Lcksorivj lie
Fetersbur~~
Docket 73009 - ACC
Order 10701 Nay 8, 1973
Certificate No. 5 - ACC
Grandfather
Class 3 Aircraft
Gorda
Ft.
Island
A-i 8
28-911 0 - 70 - 19
PAGENO="0286"
March 15, 1975
Carriers
Authorized Actual Service
CALl I'SC CAB PSC
NA
NA
IJN,DL, NA,
NA NW,TW,
BA
____________ 13N,D1, NA, SB
NW, TM, UA
5. Tallahasse-W. l'~lri Bench-Ft._Lauderdale
* Tallahassee -N. Palm l3e~ch E1\
~Ft. Lauthrdnle NA
* B. Palm Beach -FL. Lnuderdnle NA
Schedule AnalysisY
To From Totals
1 2 3 1 2 3 To From
Route
TABLE B-i
CAR~<1CR MJTUOIYTTY, SERVICE AND SC!IEDULCS BY CITY PAIRS OF PROPOSED ROUTCS
1. Lensacoln-Tam~-Orlndo~w.pam~ea~
Pensacola NA
-Oridedo NA
-N. ni-n Leach NA
-Or 1 endo DL, NA, lA
-N. Palm Beach DL,EA,NA,
Orlando -N. Palm Beach
2.
Pensacola -st. leLcrubur~j
-~1mar.mi
St. Petersburrj -~jj~~
- NA
- None
- None
QU(A), NA,NA,
SS QII(A),SS
SB DL,EA,DA
NA BA 1 2
SB DL, DL
NA,
BA,
I * *
DL,
NA
DL,EA,NA SS DL,BA SS SB SS, DL SS, DL
DL NA
FE(A)
None
Bone
None
3. Tallahascce-Gainvill~-~y~aDeac~Miami
Ta 1 lahascee
Gainesville
Daytona Bench
-Ca~nesv~1le
-Daytona
-~inr.~
Beach
NA
EA,NA
NA,SO *
FE(X)
-
Qil
None
None
EA,SO
-Daytona
-Iliomi
!meaeh
NA
NA
-
FYI
None
NA
-Miami
None
None
On
FE
4. ra~a-Ft. Laudnrmlnln
0/3
7 6
.5
`mm
ml
-4
S 4~
w
1
0 7
1 1
3 3
6 6
NA, NA, 50 EA, NA, SO
SO SO SO SO
NA NA
NA NA NA
BN,DL,EA SB * Cl, ON, SS SS NA * NA,
NA NA YIN
- None
QIl(A) None
55 NA
None
SB
PAGENO="0287"
Schcdulc»= Ana1ysis~'
To From ________
____ 1 2 3 1 2 3
6. fa11ahassee-SarasOta-F~j,~rS-Miami
Tallahassee -Sarasota
-Ft. Myers
-Miami
Sarasota -Ft. Myers
-Miami
Ft. Myers -Miami
- EA,NA
- DL
- None
_______________ DL,EA,NA, - DL,NA
- * * * * * * * *
- SO SO. SO SO 2 2
- * * * * * * * *
- NA NA 1 1
- NA 1
None NA NA NA NA 2 2
- BA BA 1 1
Routu
No.
TABLE B-i (Continued)
CARRIER AUTUORITY, SERVICE AND SChEDULES BY CITY PAIRS OF. PROPOSED ROUTES
March 15, 1975
Carriers
Authorized Actual Service-
- CAB PSC CAD PSC_
BA YX None XY
EA,SO QI! EA,SO QH
NA FE NA, FE
EA,NA FE EA,NA FE
NA
7. Jacksonvi1ieDa~Og~i Beach-~ Lauderda~
Jacksonville -Daytona Beach EA,NA
-Ft. Lauderdale DL,EA,UA
Daytona Beach -Ft. Lauderdale EA,NA
BA, BA, B~)
SO SO
FE FE,
F~ NA
FE NA FE FE FE,
NA
To to 1 s_
To From
7 6
6 7
5 6
8. ~ Palm Beach
BA,
So
BA,
NA
NA
EA, SO
SO
FE, FE
NA
FE, FE
NA
DL
9. Ft. Walton Beach-Panama City-Taliahassee-JacksonVil1eMelbOurn~
DL 2 2
NA NA DL 1 3
Ft. Walton
Beach-Panama City
SO
SO
-Tallahassee
SO
-
-Jacksonville
SO
-
None
Panama City
T~illahassee
-Tallahassee
-Jacksonville
-Melbourne
-Jacksonville
-Melbourne
NA,SO
NA,SO
NA
NA,SO
EA
BA
-
-
-
FE(X)
-
-
NA,SO
NA,SO
NA
NA
None
BA
Jacksonville
-Melbourne
PAGENO="0288"
TJWLE 13-1 (Continued)
CARRIER AUTIIORITY, sr:nvicri AND SChEDULES DY CITY PAIRS OF PROPOSED ROUTES
March 15, 1975
Route
Mo.
11. Iensacola-Tallahl;e-Jacksonvjlle
Pensacola -Tallahassee
-J ocksonville
Tallahassee -Jacksonville
12. Lakeland-W.__Pa irs Beach-Miami.
Lakeland -N. PuMa Beach
-Miariri
K. Palm Beach -Miami
13. ~
Key West -Naples -
-TOmps -
-Orlando -
Naples -Ttmpa -
-Orlando -
Tampa -Or lando DL, CA, NA
-Daytona [leach EA,NA
14. Ft. Walton Beach-Panamrçj~-Tama
Ft. Walton Beach-Panama City SO
-Tampa -
Panama City -Tampa NA
Carriers
Authorized Actual Service
CAB PSC CAll PSC -
- None
- None
SS(A) DL,EA,NA None
Schedule Ana1ysisa~'
To From Tota is
1 2 3 1 2 3 To From
NA EA,NA 2 4
NA
See Route 6
NA WA 1 1
NA NA NA NA 2 2
DL, ElI, NA NA 0 13
NA DL,
NA
PT
PT
.
PT PT
3
3
A
A
A
A
A
A
A
A
NA
NA
NA
*
2
1
A
A
*
A
A
*
**
A
10. Tampa-l.iolhourne-Vcre beach-lhiami
Tampa -Melbourne
-Vero leach
Melbourne -Vero Beach
-Mi smi
Vero leach -Mrami.
EA,NA - EA,NA
EA,NA - EA,NA
- See Route 6 -
NA
FE(X) NA None
CA EA EA,NA 2 5
NA
NA
NA
NA
NA
NA
DL, EA,NA,
UA
AG
PT
QIL (A),
511
EA,NA
NA
AG
PT
Qh1(A) ,SS
See Route 9
NA
PAGENO="0289"
TABLE ~ (Contirtued)
CARRIER AUTHORITY, SERVICE AND S~BEDtJLES BY CITY PAIRS OF
March 15, 1975
Carriers Schedule Ana1ysis~
Route Authorized Actual Service~" To - -- From Totals
CAB PSC CAB PSC 1 2~1 1 2 1 ~o F~W5I
15. Jacksonville-OrlandO-LakelandSarasOta
Jacksonville -Orlando DL,EA,NA - DL,NA - DL, NA DL, NA NA 5
NA NA
-Lakeland NA - None -
-Sarasota EA,NA FE EA None LA IA - 2
Orlando -Lakeland NA - None -
-Sarasota EA,NA - EA,NA - IA NA 1 2
Lakeland -Sarasota NA YX None YX
16. Ft. Myers-Orlando-Jacksonville
Ft. Myers -Orlando NA - NA - NA NA NA 2
-Jacksonville NA FE NA None
Orlando -Jacksonville DL,EA,NA - See Route 15 See Route 15
17. Gainesville-N. Palm Beach-Ft. Lauderdale
Gainesville -51. Palia Bear!: IA - None -
-Ft. Lauderdale EA FE(A) None None
N. Palm Beach -Ft. Lauderdale EA 05 EA SS S S
Airline codes were abbreviated as follows: AG - Air Sunshine, SN - Sraniff International, DL - Delta Air Lines, Inc
IA - Eastern Air Lines, Inc. , FE - Florida Airlines, LS - Marco Island Airways, NA - National Airlines, Inc.,
NW - Northwest Airlines, Inc., PT - Naples Airlines, QN - Air Florida, SL - Southeast Airlines, SS - Shawnee Anrlinca,
Inc., TN - Trans World Airlines, Inc., UA - United Air Lines, and TX - Sun Airlines, Inc.
(A) PSC 50 mile ruling authorizes service..
(X) Suspended.
Less than minimum standard miles between cities.
1/ At least one daily flight in either direction. Service and schedules March 15, 1975.
2/ "To" and "From" - Directional flight movements.
For Route 1 read: Pensacola "To" Tampa under "To" and
Pensacola "Frou" Tampa under "From". Two letter codes show
what carrier schedules flights in time periods.
7:00 - 11:00am
2 3:00 - 8:00pm
3 "11:00am - 3:00pm
Totals = all flights in and out of Standard-s.
1. `-erri'-r on,l'~r 1 and 2 in both "To" a,,d "From" his adei~u.,te aervice.
PAGENO="0290"
284
~
The three forecast 1975, 1930 and 1985 which appear
as separate tu1ac~. forecasts are of three types of
passengers who will travel ~:etween points within the State of
Florida.
* Local Oricin and rentination (O&D) - Those
passengers ~ entire trip is between the
cities as sho~m.
* Connecting - Paasenrers who change flights
at a point in Fiori~a for either of two
out-of-state destinations:
** Interstate - To or fron a point in -
another state, or,
*. International - To or fron a point
- outside the United States.
All forecasts are of passengers in both directions between the
points. City-pairs are listed under the city which cones first
alphabetically.
The forecasts f~r four ccrtnunities are prepared and used differently
than the others. Ft. Pierce, Lakeland, Punta Gorda and St.
Petersburg have forr:casts only of local passengers and are not
included in the state totals. These points have no history of
air service ani th~ forecast research determined that service
at local airports ~c)J1d pririarily capture passengers who would
otherwise use air rr?ice through other airports. Therefore,
studies concera~t~; tt~iSC i~oir.ts will reduce traffic from the
nearby airports in r~co~n2t1on of this assumption. It is
assumed that all in:-rstato and international passengers for the
points are incli~i~~ ~n t~.e forecasts of other points.
The full de:e1c~..:tt of these forecasts was reported as
Phase I c-I t:~ ~.tu~v transmitted to the Florida Department
of Transportat~Cn,!n October, l97~.
C-i
PAGENO="0291"
285
TAIILE C-i
COMI3INED_FORECAST OF FLORIr)7~ ITITRASTATE TRAFFIC
Daytona Beach -Ft. Lauderdale
-J-scksonville
-m cmi
-Pensacola
-Tampa
Ft. Lauderdale -Gair.osville
-Jacksonville
-Orlando
-Tallahassee
-Tampa
Ft. Myers -Jacksonville
-Miami
-Orlando
-Pensacola
-Sarasota
-Tallahassee
-Tampa
Ft. Pierce -Jacksonville
-Miami
-Orlando
-Tampa
Ft. Walton Beach-Jacksonville
-Miami
-Orlando
-Tallahassee
-Tampa
Gainesville -Miami
-Orlando
-Tallahassee
-Tampa
-W. Palm Beach
Jacksonville -Key West
-Lakoland
-Melbourne
-Miami
-Ocala
-Orlando
-Panama City
-Pensacola
-Punta Gorda
-Sara sota
-St. Petersburg
-Tallahassee
-Tampa
-W. Palm Beach
Key West -Miami
-Orlando
-Tampa
Lakeland -Iiia.ni
-Tel lahassee
-W. Palm Beach
1ntur~tate In'arnataoral Total
520 - 5,330
22,c~3O - 24,260
5,060 3,940 34,330
700 - 2,490
5,610 220 11,470
210 - 9,010
3,470 - 24,780
19,870 - 50,390
900 - 19,870
32,510 1,560 100,360
3,450 - 6,430
9,810 3,840 31,380
4,250 - 8,810
- - 1,430
4,280 - 5,550
200 - 4,860
106,690 2,630 126,890
270 - 5,910
2,360 1,080 11,360
3,910 - 10,680
1,280 - 4,440
170 - 10,410
1,520 2,340 34.320
290 - 4,530
210 5,420
810 150 13,620
200 - 6,910
- - 3,530
120 - 6,520
25,740 23,540 163,290
2,660 - * 4,070
32,060 - 46,470
1,700 - 9,400
4,470 - 18,050
4,540 - 10,380
3,770 - 18,550
29,000 550 92,6&O
5,060 - 36,690
32,790 270 111,410
- - 3;76o
- - 7,610
1975
Local
oco
4,810
1 ,330
25,330
1,790
5,640
8,800
21, 310
30,520
18,970
66,290
2,980
17,730
4,560
1,430
1,270
4,660
17,570
1,130*
4,860*
2,100*
2,490*
5,640
8,420
6,770
3,160
10,240
30,460
4,240
5,210
12,660
6,710
3,530
6, 950*
6,400
114,010
1,410
14,410
7,700
13,580
730*
5,840
18,940*
14,780
63,130
31.630
28,350
3,760
7,610
27,460*
6, 590*
5, 980*
C-'
PAGENO="0292"
286
TABLE C-i (Continued)
coOBINED FORECAST OF FLORIDA I0~PJ~ST?~TE TPAFFIC
1975
Local Connecting
O&D Interstate International Total
Marathon -Miami 5,230 12,910 140 10,2R0
Marco Island -Miami 4,860 38,440 150 43,450
-Tampa 2,930 160 - 3,090
~Me1bourne -Miami 18,750 6,270 4,420 29,440
-Pensacola 2,880 280 - 3,160
-Tallahassee .7,710 1,370 - 9,080
-Tampa 8,300 17,200 410 25,910
Miami -Naples 4,860 37,730 50 42,640
-Orlando 150,990 135,620 90,000 376,610
- -Panama City 11,500 1,400 1,140 14,040
-Pensacola 20,200 6,000 2,050 28,250
-Punta Corda 3,090* - - -
-Sarasota 26,400 6,300 7,580 40,280
-St. Petersburg 69,830* - . - -
-Tallahassee 78,930 3,950 5,490 88,370
-Tampa 232,760 55,970 85,410 374,140
-Tico 4,410 100 250 4,760
-Vero Beach 6,400 1,500 270 8,170
-N. Palm Beach 8,920. 23,390 10,740 43,050
Naples -Tampa 2,370 21,360 210 23,940
Orlando -Panama City 9,170 810 - 9,960
-Penc~cola 16,110 3,093 - 19,200
-Punta G~rd.~ 1,350' - - -
-Saratota 6,220 3,590 - 9,810
37,030 2,163 - 39,193
-Tampa 9,033 32,693 2,940 44,660
-W. Palm E~ach 14,310 10,660 - 24,970
Panama City -Ta~pa 14.050 2,140 90 16,290
percacoic -Sar~.sOt3 1,400 210 - 1,610
-Tel) ~ £700 670 - 7,370
21500 5,400 03 30,250
Punta Gorcia ~ a - i,~~o' - -
-N. 1.1:. 730' - - -
Saracota -T.~ .:. .: 7,~4) 210 - 8,C53
65,-70 1,910 93,703
St. Peter;r.Urg -. .: . - -
Ta1leh:,OtC~ -: .~ ~ 3,310 110 60,36)
2,110 80) - 2,950
0 11,tlO 710 - 16,390
Tampa ..V& 1. -~ , ¶63 6,240 50 11,853
1.-. .1: _.._~_L~~! 30,1.9 4.7J0 76,50)
1.119,7)0 991,910 21o,)10 2,760,050
Not inclu.~0_l in . 9-.
C- 3
PAGENO="0293"
Daytona Boach -Ft. Lauderdale
-Jacl.icnvlllC
-Pen~.acola
-Gainesville
-Jic}eonville
-Orlando
-Tallahassee
-Tampa
Ft. Myers -Jacksonville
-Miami
-Orlando
-Pen sacola
-Sarasota
-Tallahassee
-Tampa
Ft. Pierce -Jacksonville
-Miami
-Orlando
-Tampa
Ft. Walton Beach-Jacksonville
-Miami
-Orlando
-Tallahassee
-Tampa
Gainesville -Miami
-Orlando
-Tallahassee
-Tampa
-W. Palm Beach
Jacksonville -Key West
-Lakel and
-Melbourne
-Miami
-Ocala
-Orlando
-Panama City
-Pensacola
-Punta Gorda
-Sarasota
-St. Petersburg
-Tallahassee
-Tampa
-W. Palm Beach
Key West -Miami
-Orlando
-Tampa
Lakeland -Miami
-Tallahassee
-W. Palm Beach
Inter nate Internet inn I
940 -
29,270 -
7,260 5,050
1,000 -
9,030 320
470 -
5,590 -
44,500 -
2,000 -
65,390 2,250
4,950 -
15,800 5,500
8,550 -
8,610 -
390 -
192,250 3,780
340 -
3,390 1,550
7,050 -
2,310 -
270 -
2,740 3,360
650 -
470 -
1,630 2213
390 -
150 -
32,850 33,790
3,390 -
51,630 -
2,440 -
5,700 -
7,310 -
6,070 -
41,630 790
7,260 -
118,850 390
287
TABLE C-2
COMrtim2D FOREC,\ST OF FLORIDA IflTPJ~ST1tTK TRAFFIC
Ft. Lauderdale
1980
Lecal
01.0
13,850
2,170
46,330
2,760
10,330
16,280
36,910
52,220
35,170
128,070
5,340
35, 300
8,050
2,400
2,690
8,920
35,030
1,440*
8, 550*
3, 280*
4, 390*
9,830
14,820
10,570
5,350
18,050
56,050
6,920
9,210
23,330
11,880
5,590
11,460*
10,620
196,780
2,230
22,060
12,190
19,750
1,120*
10,720
32, 750*
24,520
109,150
52,570
49,900
5,870
13,420
50,350*
11,430*
10,550*
Total
9,790
31,460
59,240
3,760
19,6130
16,750
42,500
96,720
37,170
195,710
10,290
56,600
16,600
2,400
11,300
9,310
231,060
10,170
19,760
17,620
7,660
18,320
62,150
7,570
9,680
25,180
12,270
5,590
10,770
263,420
5.620
73,690
14,630
25,450
18,030
30,590
151. 570
59,830
-. 169,140
5,870
13,420
C-4
PAGENO="0294"
288
TABLE C-2 (Continued)
COMBINED FORECAST OF FLORIDA INTRASTATE TRAFFIC
Connecting
Marathon -Miami
Marco Island -Miami
-Tampa
Melbourne -Miami
-Penaacola
-Tallahassee
-Tampa
Miami -Naples
-Orlando
-Panama City
-Pensacola
-Punta Gorda
-Sarasota
-St. Petersburg
-Tallahassee
-Tampa
-Tico
-Vero Beach
-N. Palm Beach
Naples -Tampa
Orlando -Panama City
-Pensacola
-Purita Gorda
-Sar~sota
-Tallahassee
-Tampa
-W. Palm Beach
Panama City -Tampa
Pensacola -Sarasota
-Tallahassee
-Tampa
Punta Gatda -T~m~a
-N. Palm Beach
Sarasota -Tallahasaec
-Tampa
St. Pctershurg -T~~lla:~assee
-P. Pairs Peach
Tallahassee -T~api
-Thea
-P. Pairs Beach
1980
Local
080
9,200
8,550
5,170
34,580
4,470
13,660
15,330
8,550
256,980
20,240
32,640
5,430*
53,880
134,140'
145,360
447,130
8,130
11,260
16,480
4,180
14,330
23,100
2,110*
11,260
60,580
15,400
23,450
24,770
2,410
10,410
40,150
1, 240*
15,380
12,280
31,550'
24, 300'
105,170
3,810
27,700
InterstaSe
International
Total
18,530
200
~27;TlT~
61,910
200
220
-
70,680
5,370
9,000
400
2,470
27,700
6,350
-
-
590
49,930
4,870
16,130
43,620
60,760
244,190
2,250
8,610
70
129,200
1,640
2,940
69,380
630,570
24,130
44,190
11,350
10,880
76,110
7,120
90,140
130
2,150
29,850
7,880
122,650
360
400
15,420
*
160,360
659,920
8,620
13,810
61,750
*
34,400
300
38,880
1,460
5,570
- -
-
15,790
28,670
8,040
4,840
46,930
17,170
-
-
4,220
-
19,300
65,420
66,550
40,620
3,860
130
28,760
380
1,210
8,700
-
-
120
2,790
11,620
48,970
2,400*
470
138,293
6,660
1,150
1,510
- 15,850
2,740 153,310
160 111,993
- 4,960
- 29,200
Tampa
-Vero Beach
-P. Palm Beach
9,800
80,990
10,050
54,100
70
6,750
19,920
141,840
TOTALS
2,715,080
1,614,270
370,890
4,700,240
* Not jncledcd ln t~tuls.
PAGENO="0295"
289
TABLE C-3
FORECAST OF FLORIDA INTRASTATE TRAFFIC
1985
Local Connct i eq
OsD Irtst:ate Jnternjt1~nal Total
Daytona Beach -Ft.. Lauderdale 13,830 1,510 - 15,340
-Jacksonville 3,260 37,360 - 40,620
-?-jiami 71,350 9,270 8,120 89,740
-Pensacola 4,030 1,280 - 5,310
-Tampa 15,720 14,540 460 30,720
Ft. Lauderdale -Gainesville 26,480 950 - 27,430
-Jacksonville 58,760 8,030 - 66,790
-Orlando 84,650 89,510 - 174,160
-Tallahassee 58,350 4,050 - 62,400
-Tampa 208,500 117,830 3,230 329,560
Ft. Myers -Jacksonville 8,670 6,320 - 14,990
-Miami 59,300 22,680 7,900 89,860
-Orlando 13,310 15,410 - 28,720
P-Pensacola . 3,820 - - 3,820
-Sarasota 4,700 15,820 - 20,220
-Tallahassee 14,090 700 - 14,790
-Tampa 58,150 309,630 5,430 373,200
Ft. Pierce -Jacksonville 2,710* - - -
-Miami 13,350* - - -
-Orlando 5,030* - -
-Tampa 6,780* - - -
Ft. Walton Beach-JacksonVille 14,830 430 - 15,260
-Miami 23,150 4,330 2,230 29,710
-Orlando 16,250 11,350 - 27,600
-TallahasSee 8,420 3,720 - 12,140
-Tampa 27,950 390 - 28,340
Gainesville -Miami 89,850 4,410 4,820 99,080
-Orlando 10,910 1,310 - 12,220
-Tallahassee 14,870 950 - 15,820
-Tampa 36,950 2,940 310 40,200
-W. Palm Beach 18,560 700 - 19,260
Jacksonville -Key West 8,440 - - 8,440
-Lakelafld 17,370* -. - -
-Melbourne 16,660 190 - 16,850
-Miami 308,550 41,930 48,520 399,000
-Ocala 3,370 4,330 - 7,700
-Orlando 34,050 ~l4,lOO - 108,150
-Panama City 18,390 3,110 - 21,500
-pensacola 29,370 7,270 - 36,640
-Punta Gorda 1,690* - -
-Sarasota 17,510 10,490 - 28,000
-st. Petersburg 50,750* - -
-TallahaSsee 38,740 8,710 - 47,450
-Tampa 169,180 53,130 1,130 223,440 -
-W. Palm Beach 80,380 9,270 - 89,650
Key West -Miami 77,940 151,690 560 230,190
-Orlando 9,020 - - 9,020
-Tampa 20,710 - - 20,7)0
Lakelend -Miami 7tt,950* - - -
-Tallahass"e 18,050!- - - -
-W. Palm Beach l6,l3O~ - - -
C-6
PAGENO="0296"
290
TABLE C-3 (Continued)
COMBINED FORCC~ST OF FLORIDA INTR%STATE TP,'~FIC
1985
Local - ¼.~
O&D Intcrstat e Intarnatlor.zl Total
Marathon -Miami 14,370 23,660 290 38,320
Marco Island -Miami 12,350 08,880 310 101,540
-Tampa 7,980 260 - 8,240
Melbourne -Miami 56,160 11,490 9,110 76,760
-Pensacola 6,880 510 - 7,300
-Tallahassee 22,330 3,970 - 26,300
-Tampa 23,610 39,770 850 64,230
Miami -Naples - 13,350 87,230 100 100,680
-Orlando 410,349 39~,590 185,500 989,430
-Panama City 31,620 3,230 2,350 37,200
-Pensacola 50,230 10,990 4,220 65,440
-Punta Gorda 8,480* - -
-Sarasota 91,060 18,280 15,620 124,910
-St. Petersburg 215,160* - . -
-Tallahassee 237,660 11,470 11,310. 260,440
-Tampa 717,200 129,410 176,120 1,022,739
-Tico 13,209 170 520 13,890
-Vero Beach 17,580 2,740 560 20,830
-W. Palm Beach 26,070 38,100 22,130 86,300
Niples -Tampa 6,450 49,390 430 56,270
Orlando -Panama City 22,030 2,350 - 24,380
-Pensacola 34,990 8,970 - 43,960
-Punta Garde 3,250* - -
-Sarasota 18,730 16,170 - 34,900
-Tallahassee 07,470 9,730 - 107,200
-Tampa 24,300 59,900 6,060 90,260
-B. Palm Beach 36,520 24,650 - 61,170
Panama City -Tampa 38, 220 6,220 190 44,630
Pens~cola -Sarasota 3,660 610 - 4,470
-Tallahassee 16,140 1,950 - 18,090
-Tampa 61,070 12,400 160 73,720
Punta Gorda -Tampa - 3,060* -
-W. Pain Beach 1,990* - - -
Sarasota -Tallahassee 26,353 950 - 27.130
-~~c~a 20,510 139,530 3,940 222,960
St. Petersburg -Tal]nlassee 50,9b0* - - -
-B. loin Beach 38,000* - - -
Taliahassee -Tampa 119,050 12,000 . 230 182,180
-Tico 6,230 1,4(0 - 7,690
-B. Pain beach 44,280 2,720 - 47,000
Tampa -Vcro Peach 15,120 14,430 100 29,650
-B. Palm Beach 126(70 87.130 9,193 223,48(1
TOT\LS 4,321,733 2,422,730 532,523 7,276,900
* Not included in totals.
C-7
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291
TABLE C-4
SUMMARY
FORECAST OF H~TPJ\STATE 1~~\SSENGERE
ET1'LA~ED BY CITY
l9~3O
1935
Daytofi~ Beach
38,940
61,965
90,365
Ft. Lauderdale
104,870
199,320
337,840
*
Ft. Myers
02,675
163,780
272,810
Ft. Pierce
5,290*
8,830*
13,935*
Ft. Walton Beach
21,650
36,765
56,525
Gainesville
36,905
66,800
107,005
Jacksonville
235,505
376,805
*
562,240
Key West
63,155
97,010
134,180
Lakeland
23,500*
41,895*
65,250*
Marathon
9,140
13,965
19,160
Marco Island
23,270
38,025
54,890
Melbourne
37,055
62,660
95,765
Miami
749,035
1,263,845
l,937;585
Naples
33,290
54,130
78,475
Ocala
2,035
2,310
3,850
Orlando
324,530
542,495
855,585
Panama city
24,850
41,655
63,855
Pensacola
55,920
86,360
,
129,420
Punta Gorda
3,825*
6,150*
9,185*
Sarasota
84,735
148,345
231,330
St. Petersburg
59,490*
11,370*
177,445*
Tallahassee
142,450
255,015
414,315
Tampa
562,920
987,035
1,532,270
Tico
3,855
6,790
10,790
Vero Beach
10,010
16,865
25,265
.W. Palm Beach
103,255
- 172,800
263,430
TOTAL
2,760,050
4,700,240
7,276,960
* Not included in tot:als.
c-.8
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292
APPENDIX D
BIBLIOGRAPHY OF RESEARCH ON THE CIVIL
AERONAUTICS BOARD'S REGULATIONS OF AIR
SERVICE STANDARDS
BOOKS
Air Transport and Its Regulators, Richard E. Caves, Harvard
University Press, 1962.
Regulation and ComDetition in Air Transportation, Samuel B.
Richmond, Columbia University Press, 1961.
REPORTS AND STUDIES
Annual Report to Congress, Civil Aeronautics Board, FY 1965-1972.
National Transportation Policy, Special Study Group on Trans-
portation Policies in the United States, Committee on
Commerce, United States Senate, June 26, 1961.
Report of the Task Force om National Aviation Goals, "Project
Horizon~, Federal Aviation Agency, September, 1961.
Service to Small Communities, Bureau of Operating Rights,
~~Bureau of Operating Rights, Civil Aeronautics Board, March,
1972.
HEARINGS
"Adequacy of Air Service," Hearing before the Subcommittee of
the Committee on Interstate and Foreign Commerce, House
of Representatives. March 5, 1969.
"Adequacy of Trunkline Air Service to Medium-Sized Intermediate
Cities," Hearings bofore the Aviation Subcommittee of the
Committee on Commerce, United States Senate. July 6, 7,
8, and 9, 1965.
"Review of the Local Air Carrier Industry," Hearings before
the Aviation Subcommittee of the Committee on Commerce,
United States Senate. February 28, March 1, 3, and 4,
196~.
D-i
PAGENO="0299"
293
BIBLIOGRAPHY OF RESEARCH ON THE CIVIL
AERONAUTICS BOARD'S REGULATION OF AIR
SERVICE STANDARDS
ARTICLES
"Adequacy of Domestic Airline Service: The Community"s Role
in a Changing Industry," Yale Law Journal, Volume 68,
1959.
"Airline Service Abandonment and Csclidation ~\ C~tc~
in the 3~tt~e A~ainst Subsidi:aticn," Ronald D. Dockser,
Journal of Air Law and Commerce, Volume 3~, No. 4, .nutum~
1966. Page 496.
"CAB Moves on Adequacy Problems," Aviation Daily, May 22, 1961.
Page 141.
"Certificated Air Service at Smaller Communities: The Need
for Service as a Determinant of Regulatory Policy,"
Craig Mathews, Journal of Air Law and Commerce, Volume 34,
No. 1, Winter, 1968. Page 27.
"The Civil Aeronautics Board Policy Favoring $ubsidy Reduction
to Local Service Corners: Its Role and Implementation in
the Decisional Process," Barre Hall, Journal of Air Law
and Commerce, Volume 34, No. 4, Autumn, 1968. Page 566.
C.A.B. DOCKETS
Texas-Oklahoma Case, Docket 337 et al. Decided: November 14,
l946~ --
Ft. Worth Investigation, Docket 7382. Decided: September 23,
1958.
Seven States Area Investigation, Docket 7454 et al. Decided:
December 8, 1958.
Toledo Adequacy-of-Service Investigation, Docket 8851. Decided:
November 10, 1959.
Flint-Gra~~pids Adequacy-of-Service Investigation, Docket
* 9177. Decide~ April 29, 1960.
Washington-Baltimore Adequacy-of-Service Investigation, Docket
- 8148. Decided: April29, 1960.
Gulf States-Midwest Points Service Investigation, Docket 17726.
Decided: ~ay 7, 1969.
Central Route 81 Case, Docket 16196 et al. Decided: May 8, 1969.
Southern Tier Competitive Nonstop Investigation, Docket 18257.
- Decided: July 24, 1969.
D-2
PAGENO="0300"
294
BIBLIOGP~PH~' OF RESEARCH ON THE CIVIL
AERONAUTICS BOARDS REGULATION OF AIR
SERVICE STANDARDS
OTHER
"Conference on Air Service to Smaller Communities,'1 Aviation
Advisory Commission, Transcript of Proceedings, January 5,
6, and 7, 1972.
Federal Aviation Act of 1958.
0
D-3