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51 HELICOPTER AIR SERVICE PROGRAM equipment. In addition to assisting in the attainment of national defense considerations subsidy has been and will continue to be one of the most effective means of advancing the commerce of the United States and the postal service. Although the carriers receive the subsidy, it is, in effect, the smaller communities that are its direct beneficiaries through the operations of carriers such as the local service airlines. The Congress has chosen to develop modern and efficient air transportation for these communities by subsidy under section 406, and on of the Board's primary responsibilities in administering this program is to assure maximum public benefit for every subsidy dollar. Six groups of carriers are currently eligible for subsidy support. In fact, however, only four groups currently receive subsidy——those serving within Alaska and between Alaska and the Pacific Northwest; those serving the State of Hawaii; the helicopter operators; and the local service carriers, which currently account for about 80 percent of the subsidy. Trunkline services do not receive subsidy support, the subsidy entry in the trunkline column in the table on page 1 being attributable solely to the New England services of Northeast Airlines which are comparable to those of the local service carriers; and no subsidy is currently paid for the international services of U.S. carriers. Thus the subsidy estimated for fiscal year 1965 is required to support the following air services which would not otherwise be possible: (1) within, and to and from, Alaska; (2) within Hawaii; (3) helicopter services; and (4) local services within the 48 contiguous States, including Northeast's services in the New England area. These services have repeatedly been found to be required in the public interest. While the objectives which they serve differ from area to area, they have one common bond which explains why they are not sufficient on the whole to produce enough revenue——at reasonable fares and under prudent air carrier management——to cover the costs entailed in operating modern aircraft to and from those communities. In other words, subsidy is paid essentially to maintain needed air services at communities which would otherwise represent loss operations and would be without regular air transportation in the absence of subsidy support. The amount of such support in the various areas is set forth o the following pages. Alaskan Services Seven carriers are currently eligible for subsidy for services provided solely within the State of Alaska, of which six currently require subsidy. Four carriers provide service between the Pacific-Northwest and the State of Alaska, of which two currently require subsidy; and these two also provide some amount of intra-Alaska services. The level of subsidy estimated for all Alaskan services for fiscal 1965 is $9,524,000. This area, among others, highlights the role of subsidy in the national interest. Air service is essentially the only means of travel within, and to and from the State of Alaska. However, in large part, the number of passengers and the volume of mail and freight is not such as to permit regular airline service to be operated except at substantial losses. Accordingly, the provision of subsidy insures air transportation which is essential to commerce and the Postal Service and also makes a direct contribution to the national defense. As regards Pacific/Northwest-Alaska services, the Board has been convinced for a considerable period of time that the particular markets involved cannot economically support four-carrier services——the two subsidized and the two non-subsidized. The Board had, in earlier years, commenced proceedings looking toward an economical amalgamation or combination of the services in this area, which proceedings were terminated as the result of congressional action. Recognizing that, with the advent of the large jet aircraft currently operated by all four carriers in the hope that it could thereby encourage a consolidation of services with a consequent reduction in subsidy. Its efforts having failed, the Board then instituted a formal investigation for the same basic purposes, which was halted in 1962 by adversary court proceedings. The Board, nevertheless, has pressed forward with its investigation, within legal limits. Formal hearings have been concluded, the matter is now under consideration by the Board for final decision. While the Board continues to seek other avenues for tailoring the subsidy in this area, in the absence of successful conclusion of
