Mr. BUSH. I'm sure we can provide the specifics. Senator LAUSCHE. Thank you very much. The next witness is Mr. Everett Hutchinson, president, National Association of Motor Bus Owners. STATEMENT OF EVERETT HUTCHINSON, PRESIDENT, NATIONAL ASSOCIATION OF MOTOR BUS OWNERS, ACCOMPANIED BY R. J. CORBER, COUNSEL Mr. HUTCHINSON. Mr. Chairman and members of the subcommittee, my name is Everett Hutchinson. I am president of the National Association of Motor Bus Owners, often referred to as NAMBO. Our offices are located at 839 17th Street NW., Washington, D.C. Before becoming president of NAMBO a little over a year ago, I had the privilege of serving for 10 years as a member of the Interstate Commerce Commission and served as its Chairman in 1961. I appear before your subcommittee to present the views of the bus industry on the bill, S. 2893. The National Association of Motor Bus Owners is the trade association for the intercity motor bus industry. It serves as spokesman for nearly 1,000 carriers which provide well over three-fourths of the intercity motor bus transportation in the United States. These include Greyhound Lines, companies affiliated with the National Trailways Bus System, and numerous carriers not affiliated with either system. In addition to furnishing the only means of transportation, other than by automobile, in thousands of communities, the industry provides extensive and expeditious package express and first-class pouch mail services closely coordinated with its regular passenger operations. The intercity bus industry earnestly supports S. 2893 which would amend section 208 (c) of the Interstate Commerce Act to eliminate the existing provision for automatic rights to transport charter parties as an incident to regular route certificates granted under the act for the transportation of passengers by motor vehicle. The effect of the proposed amendment would be to make proof of need a prerequisite to future authorizations of charter operations. At the same time it would not affect existing operating rights, under which a regular route common carrier of passengers by motor vehicle is permitted to transport special or charter parties from any point on its authorized routes to any place in the United States. The existence of widespread abuse of the present provision of section 208(c) of the act relating to charter operations has been widely recognized for more than a decade and was described by the Interstate Commerce Commission in its 72d Annual Report (1958), as follows: *** Carriers have frequently sought authority to perform passenger service over short regular routes solely for the purpose of obtaining the incidental charter rights. In addition, some carriers engage in the practice of conducting only token operations over their authorized routes in order to retain the right to perform such nationwide charter service. These and other abuses have resulted in a surplus of charter operators, all to the detriment of sound conditions in this segment of the motor carrier industry (p. 136). Recognition of these problems was reflected also in the fact that a bill, essentially identical to S. 2893, was passed by the Senate in the 85th Congress. Numerous recent specific cases make it evident that these conclusions of the Commission have lost none of their validity, a fact which is emphasized by the action of the Commission in recommending enactment of S. 2893 in this session of the Congress. Senator LAUSCHE. Let me interrupt at this point. It was passed by the Senate. What caused it to die? Mr. HUTCHINSON. No action on it in the House. It was passed by the Senate. Typical examples of abuses are summarized in appendix 1, attached to my statement, Mr. Chairman. Problems resulting from such abuses are becoming increasingly serious. Revenues from charter operations are of great importance to established carriers providing essential service over the somewhat shorter regular routes which typically keep thousands of communities from becoming entirely dependent on the private automobile for passenger transportation. A study conducted in Virginia in 1965 showed 313 identifiable communities with an aggregate population of 276,437 that have no public passenger service other than bus. Approximately a fourth of these communities have populations under 50. Similar studies for other States are not available but would undoubtedly make an equally strong showing of the extent to which bus service is available in remote places of the country. The Official Motor Bus Guide lists approximately 18,000 bus terminals in communities of all sizes, and there are thousands of intermediate points to which service is provided despite insufficient traffic volume to support even a small terminal. Difficulties facing these carriers result in large part from the fact that much scheduled service particularly over short routes tends to be unprofitable, and a very significant portion of it is actually provided at a loss to the carriers. Revenues from charter business have in many cases made it possible to avoid discontinuing or curtailing essential regular route services. For example, class I intercity carriers of passengers in the eastern district with annual revenues of less than $1 million, reported overall operating expenses for the year 1965, not including income taxes, averaging 50.5 cents per bus mile, or 94 percent of total revenues which averaged 53.8 cents per bus mile. Revenues from passenger fares on regular route schedules averaged 42.2 cents per bus mile operated on such routes, obviously insufficient to cover expenses. Even including revenues from transportation of package express and the other nonpassenger services, the average per mile for this important segment of passenger transportation was only 48.5 cents, or still well under the cost (50.5 cents per mile as noted above) of providing the service. It was the operation of charter service which made possible the small but highly essential margin of net revenue. In addition to providing frequent and reliable service, around the clock, day in and day out, on routes throughout the country, the carriers operating scheduled service must and do maintain the capability for operating varying numbers of extra buses to handle greater volumes of travel on weekends and holidays. At times, such additional requirements reach enormous proportions. For instance, regularly scheduled service operated by the Greyhound and Trailways systems between Washington, D.Č., and New York City during 1965 provided about 4,000 passenger seats daily in each direction, but travel volume on 1 peak day during the year, January 3, required 9,000 passenger seats in each direction, or well over double the regular daily service. The flexibility necessary for handling such large variations in demand is achieved largely because of the ability to use substantial numbers of buses interchangeably in regular route service and charter operations. It is obvious from the foregoing that loss to established carriers of any substantial proportion of charter revenues is certain to jeopardize regular route services on many routes and to many communities. Enactment of S. 2893 will go a long way toward correcting this situation by preventing the destructive competition for charter business by carriers who do not operate, or even intend to operate, the regular route service for which they apply merely as a means of securing charter rights. Charter services were only a small part of common carrier passenger operations at the time section 208(c) of the act was passed. They were then truly incidental to regular route operations. Accordingly, proof of need for regular route authority was a sufficient safeguard to protect the public from the destructive consequences of overcrowding in the charter field. For that reason, the provisions of section 208 (c) granting charter rights as an incident to regular route authority were sufficient to assure the integrity of the principles contained in the national transportation policy for orderly development of an adequate transportation system. However, the situation has undergone a radical change since that time. The demand for charter service has increased very substantially and revenue from charter service has become essential as a support for regular route operations. Charter service has become such an important part of our transportation system that it is no longer merely incidental to regular route services. Despite the importance of charter services, there has not been orderly development in charter operations such as we have had for regular route operations. The result is that the field is tremendously overcrowded. A wasteful duplication of charter facilities exists which has led to destructive competition for charter business contrary to the basic purposes of the Interstate Commerce Act. We believe the proposed amendment of section 208(c) would close a loophole in the act and tend to correct this situation. In view of the present importance of charter services, they should not be authorized except upon proof of need in the same way that a need must be shown for regular route authority. The proposed amendment would accomplish this objective. It is timely, constructive legislation. It is in the public interest. The amendment would reduce the existing effects of overcrowding in the field without affecting existing operating rights and would not hamper bonafide future applicants for charter service operating rights. S. 2893 is identical, Mr. Chairman, to S. 1459 which passed the Senate in the 85th Congress except for revision of the effective date and inclusion of language in the current proposal intended to make it clear that "grandfather" charter rights under section 208 (c) would be retained in reissued or amended certificates authorizing regular route operations, without change from corresponding charter rights provided under certificates issued prior to the date specified in the bill. 67-566-66- -2 This added phrase, which reads, or under any reissuance of the operating rights contained in such certificate ***" is, in our opinion, highly desirable and would leave no doubt regarding the intent of the bill not to affect existing charter rights when the regular route certificate upon which such "incidental" rights are based is reissued, amended, or transferred. We respectfully urge early enactment of the amendment embodied in S. 2893. Mr. Chairman, I appreciate the opportunity to appear before the subcommittee to present the views of the bus industry on this measure and I will be glad to answer any questions you may have concerning the bill. ABUSES OF AUTOMATIC CHARTER RIGHTS UNDER PRESENT LAW Summarized below are representative cases involving abuses of automatic charter rights occuring under Section 208 (c) of the Interstate Commerce Act. In some instances the real motive of the applicant to obtain charter rights through token regular authority is cleverly concealed; in others it is ingenuously conceded. In the latter category are the proceedings in Tri State Tours, MC12655 (Sub No. 1) where the applicant was operating a stationwagon between Platteville, Wisconsin and the Savanna Ordnance Depot Proving Ground at Savanna, Illinois pursuant to authority granted in MC-112711 (Sub No. 1). The following colloquy occurred between applicant's witness and counsel for a protestant: "Q. And how many passengers would you say you handle a day in that operation? A. Around five. It varies. It goes up and down very little. Q. Why did you want to keep that alive? A. Because of the charter rights involved. Q. So, on the basis of handling five passengers a day you want to be in a position to perform charter operations from Joe Daviess County and other Wisconsin points to the entire United States? A. That is correct." [Emphasis added, Tr. pp. 80-81, Tri State Tours, MC12655 (Sub 1).] Examples of cases in which authority for short regular routes were sought with the effect of gaining nationwide charter rights are Sheridan-Indianapolis Bus Line, Inc., MC-113105 (Sub Nos. 1, 2 and 3), and Franklin Interurban Company, MC-113062. In the former interstate authority was requested between Sheridan and Indianapolis, a distance less than 30 miles, to add to intrastate authority between the same points and in the latter the applicant requested reinstatement of a certificate revoked for dormancy which covered regular route authority in the Nashville, Tennessee area. In both cases applicants admitted directly or indirectly that the real objective was nationwide charter authority. In both cases strong protests were filed by competing regular route carriers because of the charter rights involved. In some cases the situation is reversed-competing carriers object to the regular route sought by the applicant as a basis for charter authority and would have no objection to charter rights limited to the actual need the carrier seeks to serve. Thus, in Gary Intercity Lines, Inc., MC-8159 (Sub No. 6), the applicant applied for regular route authority between Gary, Indiana and Chicago, Illinois when its real objective was to obtain charter rights between the Bethichem Steel Plant on the regular route described in the application and points in Illinois and Wisconsin. When all the parties were advised of the true interests of each, applicant amended its application to eliminate all authority except charter rights between the Bethlehem Steel Plant and points in the states of Illinois and Wisconsin, and the protesting carriers who had no objection to these limited charter rights withdrew their protests. In this case the time and trouble of the protests would have been saved had the applicant limited its original request to the charter authority truly desired. Such a saving of Commission time and energies, not to mention the carriers, would be a realistic probability if automatic charter rights were eliminated for the future. Senator LAUSCHE. I just want to analyze your statement which begins with these words: For example, Class I intercity carriers of passengers in the Eastern District with annual revenues of less than $1,000,000, reported over-all operating expenses for the year 1965, not including income taxes, averaging 50.5 cents per bus mile. Mr. HUTCHINSON. Yes, sir. Senator LAUSCHE. That is the cost of operating for 1 bus mile; it costs 50.5 cents? Mr. HUTCHINSON. That is correct, Mr. Chairman. * or 94 percent of total revenues which averaged 53.8 cents per bus mile." Mr. HUTCHINSON. That is correct. Senator LA USCHE. You then pass into a discussion of the subject of revenues, is that correct? Mr. HUTCHINSON. That is correct, Mr. Chairman. Revenues from passenger fares on regular route schedules averaged 42.2 cents per bus mile operated on such routes, obviously insufficient to cover expenses. Am I correct in my understanding that by that statement you mean it costs you 50.5 cents on an average to operate the bus, but on your passenger service, you only had a revenue of 42.2 cents per bus mile? Mr. HUTCHINSON. You are correct, Mr. Chairman. Senator LAUSCHE. That would mean that on that mandatory passenger service, you were losing 8.3 cents per mile, the difference between 50.5 and 42.2. You are losing 8.3 cents per mile? Mr. HUTCHINSON. That is correct. Senator LAUSCHE. Then you pass into your revenues derived from passenger service and from transportation of package express and the other nonpassenger services? Mr. HUTCHINSON. That is correct. Senator LAUSCHE. The average per mile for this important segment of passenger transportation was only 48.5 cents. That would mean that taking your passenger revenues and your package express revenues, you would be losing 2 cents a mile, the difference between 50.5 and 48.5? Mr. HUTCHINSON. That is correct. Senator LAUSCHE. How do you exist? Mr. HUTCHINSON. The revenues from charter operations make up. the difference and mean the difference between a loss of 2 cents per bus mile and a small profit for this class of carrier. Senator LAUSCHE. Mr. Sender. Mr. SENDER. Mr. Hutchinson, for the record, so the legislative intent will be clear, what does the phrase "issued under this part on or before January 1, 1967" mean? At what stage of the Commission proceedings would the word "issued" mean? Mr. HUTCHINSON. Any certificate issued, if I understand your question correctly, on or prior to that date, January 1, 1967. Mr. SENDER. That would mean that the applicant would have had to comply with the tariff filing and other necessary requirements following the Commission's decision and order? Mr. HUTCHINSON. Yes, he would have to show a need for the service and meet all of the formal requirements of the Commission in order to render charter service. |