(2) Voyage Patterns and Traffic.-In 1966 and 1967, Lykes provided a total of 27 sailings each year for an average of approximately one every 2 weeks. In 1958 Lykes transported some 103,000 tons to and from Puerto Rico. By 1964 its share of the trade amounted to 176,000 tons, representing an increase of 70 percent. Since 1964, however, Lykes' traffic has not kept pace with the growth of the Puerto Rican trade. Its tonnage declined from 176,000 tons in 1964 to 118,000 tons in 1967, representing a decline of approximately 66 percent during the past 3 years. Thus, Lykes' share of the trade, in terms of weight tons, dropped to 4.3 percent of all traffic moving by common carrier to and from Puerto Rico.

As previously indicated, Lykes is essentially a breakbulk carrier. In 1966, breakbulk dry cargo freight revenues represented 96 percent of the company's total earnings ($2.58 million) in the trade. Only 3.4 percent of its earnings were on containerized traffic. Most of Lykes' traffic to Puerto Rico may be classed as foodstuffs including flour, canned milk, and Louisiana rice. The principal commodities transported southbound by this carrier are listed in appendix C, table 2.

6. Unregulated Water Carrier Services

The analysis of water carrier services, as described in the foregoing pages, would not be complete without some consideration of the unregulated carriers who operate in the Puerto Rican trade. These consist of vessels offered to individual shippers on a private charter or space contract basis. This service, not being offered to all persons, is not common carriage subject to the jurisdiction of the FMC, and no published tariffs or rates are available.78 There are seven contract carriers which carry most of the bulk, nongeneral cargo, tonnage moving by this specialized type of service. This section analyzes the impact of these carriers in the U.S. mainland-Puerto Rican trade.

a. Present Carriers

(1) Indian Towing Co."-Indian Towing Co. is a barge and tug operator, operating primarily between Mobile, Ala. and Pensacola, Fla. and the Puerto Rican

78 Private vessels carrying the goods of the owner, or proprietary carriers, are relatively unimportant and not regulated. These carriers, therefore, are not discussed in this study.

The analysis of so-called contract carriers including Indian Towing Co. did not investigate the possibility that some of these carriers may be operating as common carriers. The examination focuses on the general structure and competitive effect of contract carriers in this trade.

ports of San Juan and Ponce. Its voyage begins when the contractors have a load ready, and a typical trip from Pensacola to San Juan and return might take 25 days for a round trip hauling approximately 2,000 to 2,500 tons. In 1967, the barges carried approximately 18,000 tons from Gulf ports to Puerto Rico. There was no return traffic. The commodities transported southbound were cast iron pipe, creosoted poles, and paper products.

(2) Gulf-Atlantic Towing Corp.-The Gulf-Atlantic Towing Corp. (Gulf-Atlantic) operates between Houston, New Orleans, Mobile, Pensacola, and Tampa on the one hand and San Juan, Ponce, and Guayanilla. This company, which operates four barges and four tugs, transported at least 50,000 tons southbound in 1967. The company anticipates 1968 traffic of about 100,000 short tons southbound and 150,000 tons northbound based on approximately 10 voyages per year, each averaging some 35 days. Typical souhbound cargo was grain, fertilizer, and paper products. Only raw sugar was moved northbound. The barges Manila and Caribe 81 have been in continuous service in the Puerto Rican trade while the remainder have been employed in other operations.

(3) Marine Transport Lines, Inc.-Marine Transport Lines, Inc. (Marine Transport) operates primarily between U.S. Gulf ports and San Juan and Guanica in Puerto Rico.82 This carrier operates three self-propelled vessels of 10,000 d.w.t.83 which were converted for carriage of bulk cargo. Sailings carry mostly grains and fertilizers southbound and sugar northbound. In 1967, Marine Transport carried approximately 350,000 tons, approximately 65 percent of which was southbound grains and fertilizers. This carrier makes one sailing every 2 weeks.

(4) Other Contract Carriers.-Caribbean Barge Lines, Inc., a subsidiary of the New York based Moran

So The Indian Towing Co., incorporated in Louisiana in 1949, maintains a yard and office as a home base for its barges and tugs at New Orleans. Its vessels are loaded at the plant or terminal designated by shippers contracting for its service, and for this reason, it does not have its own regularly established terminal. Indian Towing has nine barges and five tugs in its fleet including the barges Gret and Chen, each 154 feet long and 40 feet wide; barges ITCO 3378 and ITCO 3380, each 220 feet long; Mohawk with eight holds, which the company plans to use in any common carriage which many develop. The five tugs, most of which weigh approximately 190 gross tons, are the MV Winnie, Delacroix, Chesapeake, Breton, and Timbaluer.

81 Gulf-Atlantic operates four barges, each of approximately 4,300 gross tons including the Manila, Caribe, Gatco 3001, and Gatco 383. Its tugs, most of which weigh less than 200 gross tons, are the H. Williams, Gatco Alabama, Margaret C, and Sharon Lee.

82 In addition to their own operations, Marine Transport also has subsidiaries engaged in the carriage of bulk chemicals and acts as agent for Marine Navigation Lines whose vessels call at Puerto Rico.

8 The company's vessels, each of 10,700 d.w.t. and 15-knot speed, are the SS Denison Victory, Elko Victory, and Harvard Victory.

Towing Corp., owns a 17,779 d.w.t. barge named the Caribbean. This barge, which carries bulk cargo only, operates between the U.S. Atlantic Coast and Puerto Rico. The Caribbean carries some 150,000 long tons of grain and related products annually from Baltimore to San Juan, and some 90,000 long tons of raw sugar northbound from Guanica to North Atlantic ports. S. C. Loveland Co., Inc. operates three oceangoing barges, two of 1,100 and one of 2,200 tons. This carrier has served Puerto Rico infrequently. The company has its offices in Philadelphia and has carried creosoted piling and heavy machinery from U.S. Atlantic ports to Puerto Rico. In late 1968, John Luengo Co. began operations between Savannah, Ga., and Puerto Rico on a once-a-month basis. The carrier operates a covered hopper-type barge, S & E No. 88, with eight hatches and four holds. This barge of 3,100 d.w.t. is 260 feet long with a draft of 19 feet.

Finally, Port San Juan Towing Co., a subsidiary of McAllister Brothers, Inc., which has extensive towing interests in the New York area, operates as a contract carrier in the Puerto Rican trade. However, due to a recent change in ownership, little meaningful information is available on this company.

b. The Impact of Contract Carriers

Historically, there has been little direct competition between common and contract carriers in the Puerto Rican trade. In 1966, seven small contract carriers, which are primarily barge operators, transported approximately 540,000 tons of cargo between the U.S. mainland and Puerto Rico. This cargo consisted largely of bulk fertilizer, grain, and sugar.

The use of contract carriers in this trade has been restricted in great measure by the fact that the fertilizer, grain, and construction materials trade has been essentially a one-way operation-southbound. At present, the only substantial northbound cargo carried by contract carriers is sugar; and this traffic has continually declined over the past 20 years (ch. II). The predominant cargoes carried by contract carriers is precisely that cargo which the common carriers in the trade have generally attempted to avoid in recent years (i.e., fertilizer, grain, and sugar).8+

Although the possibility of competition exists between common and contract carriers, there has been no complaints regarding destructive competition in this

84 The only domestic offshore carrier (Matson Navigation Co.) showing any interest in the carriage of sugar in recent years operates in the Hawaiian trade.

trade. The common carriers in the Puerto Rican trade themselves have had little to say regarding contract carriers. As long as the eight common carriers serving the Puerto Rican trade make available, adequate, frequent, and fast service, it is very doubtful that much common carrier-type general cargo will move to Puerto Rico from the Mainland by contract carriers. Puerto Rico's industry and retail merchants not only rely on the frequency and regularity in service now provided by Sea-Land, Seatrain, TMT, and other domestic carriers, but also seek fast containerized services to meet the intensified demands of the economy. This limits the cargo that is potentially available to contract carriers southbound and the competition that these carriers can actually offer in this trade. The potential northbound common carrier cargo is also limited but for different reasons. Assuming that some finished Puerto Rican products became suitable for contract carriage, as long as the faster vessels sail regularly and frequently from the Island to the Mainland, common carriers will probably continue to carry virtually all of Puerto Rican northbound general cargo, particularly due to the excess shipping space generally available northbound by common carriers. Moreover, Puerto Rican factories must have fairly fast and frequent containerized service at any time of the year on relatively short notice to compete in U.S. mainland markets. In contrast, contract carrier operations are not only generally slower and more infrequent but also cannot meet the requirements of Puerto Rico's industry for specialized container services and capacity loads. However, the possibility always exists that some contract carrier may be operating as a common carrier and, for this reason, subject to regulation on that basis. It is, therefore, necessary that the FMC maintain surveillance over so-called contract carriers in this trade.

C. ROAD SYSTEM OF PUERTO RICO 1. General

Because Puerto Rico has virtually no railroads, all freight moves to and from the port areas in motor trucks. For this reason, the highway network of Puerto Rico and the traffic patterns are of especially critical importance to the steamship industry and to shippers and consignees in the U.S. mainland-Puerto Rican trade.

In 1966, Puerto Rico had some 5,875 miles of highways of which 3,760 miles were designated as part of

the Commonwealth highway system; 85 and the remainder were classed as part of the municipal system controlled and maintained by local governmental units.s 86

Studies undertaken on behalf of the Commonwealth government 87 show that the highway system has serious deficiencies both for movement within the metropolitan areas and for travel outside these areas as is necessary under the industrial decentralization plan promoted by the Commonwealth government. The principal defects may be summarized as follows: (1) many roads and highways have surfaces, bases, and sub-bases which are entirely inadequate to carry the heavy loads now being hauled over them in 35-foot and 40-foot trailers and containers; (2) much of the rural highway system has lanes and bridges too narrow or of inadequate clearance, and curves of too short a radius to be adequate for semitrailer trucks and other large vehicles; (3) many of the major traffic arteries servicing metropolitan areas have a traffic volume significantly in excess of their effective capacity. Conditions are especially critical in San Juan, where it was found that the five major traffic corridors 88 identified by the study were carrying traffic averaging 150 percent of their effective capacity.89 Major bottlenecks are at the bridges into Old San Juan, where many foreign and some domestic vessels still dock, and at all the bridges across the Martin Pena channel which bisects San Juan east to west.

2. San Juan

Wilbur Smith's recent study, entitled San Juan Metropolitan Area Transportation Study, sampled vehicular traffic to and from the three regions comprising the San Juan Port District (Old San Juan, Isla Grande, and Puerto Nuevo). Of 9,714 vehicles over all, 58 percent were trucks. In Old San Juan the survey showed 76 percent of all trips were trucks, Isla Grande revealed

85 In 1871, there were 30 miles of highways in Puerto Rico; by 1940, the highway system had increased to 1,212 miles. During the past 20 years, almost 1,360 miles of highways have been constructed, 460 miles of which were in the primary and secondary system.

80 Sources: (a) Wilbur Smith & Associates, Interim Report, Needs and Finances for the Commonwealth Highway System, Puerto Rico (Columbia, S.C.: June 1967), pp. various pages; and (b) Wilbur Smith & Associates, Padilla and Gracia, San Juan Metropolitan Area Transportation Study Transportation Plan (Hato Rey, Puerto Rico: June, 1967), p. 12.

Wilbur Smith & Associates, Padilla and Gracia, op. cit., pp. various pages. 88 These routes were: (1) Fernandez Juncos, Munoz Rivera and Ponce de Leon Avenues; (2) Puerto Rico Route No. 1; (3) Puerto Rico Route No. 2; (4) Franklin D. Roosevelt Avenue; and (5) 65th Infantry Avenue.

89 Wilbur Smith & Associates, Padilla and Gracia, San Juan Metropolitan Area Transportation Study., op. cit., p. 12.

Wilbur Smith's study, entitled Ponce Metropolitan Area Transportation Study, revealed various defects in Ponce's highway and road system. This study's survey of important intersections showed that four intersections operated beyond their effective capacity during most of the day while five others operated in excess of their capacity during the rush hours.91 The port of Ponce traffic sample revealed that of 2,308 vehicle trips, 33 percent were trucks. Manufacturing plants within the port are attracted a relatively large number of automobiles; 92 and, overland trucking from San Juan accounted for a substantial amount of the trips made by trucks. The study also considered the relationship between maritime traffic and highway development, and stated:

"In 1964 the port handled 715,817 short tons of cargo of 14.3 percent of total dry cargo of Puerto Rico. The expected annual tonnage in 1980 was estimated to be over 1 million tons. However, there are emerging factors that tend to dampen this projection; for example, improvement of PR-1 to an expressway category will drastically reduce the time and cost of transferring water-borne cargo from the port of San Juan to Ponce; the advent of super-jumbo trailerships stopping only at San Juan in order to shorten turnaround time. It is estimated that in 1985 the port of Ponce will be handling around 850,000 tons of dry cargo annually” »

03

4. Mayagüez

of

The Mayagüez port area attracted 310 vehicle trips per day, 18 percent of which were trucks.9* A survey those utilizing pickup and delivery services in Puerto Rico revealed various road defects. Specifically men

90 Wilbur Smith & Associates, Padilla and Gracia, op. cit., p. 47.

01 Wilbur Smith & Associates, Padilla and Gracia, Transportation Plan Ponce Metropolitan Area Transportation Study (Hato Rey, Puerto Rico: March 1968), p. 15.

93 Wilbur Smith & Associates, Padilla and Gracia, op. cit., p. 64. 93 Ibid.

94 Wilbur Smith & Associates, Padilla and Gracia, Mayagüez Metropolitan Area Transportation Study (Hato Rey, Puerto Rico: April 1968), p. 62.

tioned were the poor condition of roads and poor maintenance, in adequate bridges, too few and too narrow roads, unlimited access to principal highways, congestion on highway 2 (Puerto Rico No. 2 in the Puerto Nuevo area), and extremely poor condition of access road (Puerto Nuevo-Navy Road).

5. Highway Development

The Commonwealth is developing a specific plan for meeting these deficiencies in the highway system. The cost of eliminating this backlog of deficiences is estimated to be some $735.3 million.95 A four-stage construction program running from 1968 to 1985 has been recommended for the San Juan area.96 In addition, the Commonwealth has launched a program intended to correct the deficiencies noted in the bridge structures of the Island. This work is now in progress. Work is also in progress on the San Juan-Ponce intercity link.97 The San Juan to Caguas section of this link has been completed and the remaining sections are expected to be completed by 1975. Such a link is also under construction between Ponce and Mayagüez and between San Juan and Mayagüez. The Mayagüez-Ponce link as well as the San Juan-Mayagüez link will be completed by 1975. These roads are expected to be adequate through 1985.

The Highway Needs and Finances Study and other transportation studies recently completed show that present highway needs of the Island will require an approximate investment of $2 billion which will call for a substantially revised plan and greater effort on the part of the Puerto Rico Highway Authority. As of December 31, 1967, the Authority's plans consisted of a program of 1,708 miles costing $164 million, a Municipal Highway Program project covering 255 miles costing $28 million, and a Reconstruction Program project covering 700 miles costing $26 million.

D. PUERTO RICO AIR TRAFFIC 1. General

Air freight is the only alternative transportation between Puerto Rico and the U.S. mainland. Air freight,

95 Excluding the access roads to Old San Juan and Isla Grande.

Wilbur Smith & Associates, Interim Report of Needs and Finances for the Commonwealth Highway System Puerto Rico, op. cit., p. 7-4. The construction program initially proposed by the Highway Authority of Puerto Rico for the first 10 years of its 20-year plan comprised 2,875 miles of highway only half of which was built.

97 Wilbur Smith & Associates, Padilla and Gracia, op. cit., 5-2.

however, is by nature a relatively high-cost mode of transport and can be considered an alternative to ocean carriage only over a rather narrow range, generally that of high value or perishable commodities such as bread, vegetables, and frozen foods where delivery time is an important factor.98 This range, however, may widen when the Boeing 747 jumbo jet is introduced into the trade 99 and as time becomes a critical factor in more and more operations.1 In 1967, therefore, air cargo amounted to only 1.4 percent of the total dry cargo moving between the U.S. mainland and Puerto Rico.

2. Traffic

In 1969, six air cargo operators were in service between Puerto Rico and the U.S. mainland. These were Pan American World Airways, Eastern Airlines, Airlift International, Inc. (formerly Riddle Airlines), Delta Airlines, Transcaribbean Airways, and Southern Air Transport. The major air routes are between New York and San Juan, and between Miami and San Juan. The New York-San Juan air route is one of the most densely traveled in the world. (Its fare per passenger mile is the lowest of any air route, except perhaps the shuttle between Moscow and Leningrad.) 3

Air cargo has grown rapidly over the last decade. As shown in table III-3 below, the total growth in cargo weight for the scheduled domestic air carriers was approximately 284 percent for the past 10-year period. This growth involved an increase from 14,370 tons in 1958 to 55,146 tons in 1967.

During this decade, the dominance of Airlift International, Inc. and Pan American has gradually been eroded. Although they still account for nearly 70 percent of air cargo by weight, there are now other carriers with a substantial part of the market. Table III—4 below shows the relative share of the market enjoyed by these scheduled air carriers in 1958 and 1967. respectively.

95 On a trip from Europe to the Caribbean, air shipment of a machine can gain from 2 to 4 weeks of production on the equipment involved.

99 A 115-passenger Super DC-9 can carry 12,000 pounds in its holds. By com. parison, the capacity of the Boeing 747 jet freighter is over 200,000 pounds. 1 During a recent strike of east coast longshoremen, Pueblo and Grand Union supermarkets arranged to have some items that normally move by water carrier flown in instead.

2 Except for Southern Air Transport, which operated as a supplemental air carrier only, all other carriers were regularly scheduled lines. On May 1, 1969, Caribbean-Atlantic Airline, Inc. began operating between San Juan and Miami, transporting small amounts of air freight between these points.

3 H. C. Barton, External Economic and Social Linkages (Washington: Howard University Law School, Mar. 8-9, 1968), pp. 2-3.

TABLE III-3

Puerto Rico International Airport in San Juan, which handles the bulk of cargo and passenger traffic, is only 13 years old. Lying at an average altitude of 9 feet above sea level, its runway is some 10,000 feet long.* About 3.4 million passengers a year arrive or depart from this airport. A second runway is being constructed south of the one now in use. This one will be 8,000 feet long and will be completed by 1970.5 This facility represents an investment of over $36 million. New construction, including the new runway, is planned for the next 12-15 years at an estimated cost of some $30 million. These new projects include a $450,000 expansion of the main cargo area, a new access road to the cargo

4 Local aeronautical chart: San Juan local. U.S. Department of Commerce, Environmental Science Services Administration. Coast and Geodetic Survey. Revised October, 1966.

5 San Juan Star, Sept. 6, 1968, pp. 38-39.

area, and 40,000 square feet of new floor space in the cargo building. The improvements to cargo-handling facilities total over $1,640,000.

The Puerto Rico Ports Authority also plans another international airport to be built later in the Lajas Valley area of southwest Puerto Rico.

In addition, airports in Ponce, Mayagüez, and Vieques also handled air cargo in July 1968. It is not known how much of this cargo represented traffic with the Mainland.

4. Competition

Air cargo, for the foreseeable future, will be generally restricted to high-value cargo or cargo with critical

6 San Juan Star, op. cit., p. 6.

7 Office of Economic Research, Statistical Report, July 1968 (San Juan: Puerto Rico Ports Authority, 1968), pp. 6-9.