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52 HELICOPTER AIR SERVICE PROGRAM the formal investigation referred to above-- or some voluntary consolidation by the carriers-- the stabilization and reduction of subsidy in this area may present continuing and difficult problems. Hawaiian service The 1965 subsidy requirement for the two certified carriers serving the State of Hawaii is estimated to be $995,000. This estimate assumes that third-carrier services authorized by the State Public Utilities Commission in 1963 but enjoined by the Federal District Court of Hawaii in mid-1963, will not be reinstituted. The Board has formally taken the position that the jurisdiction with regard to such services would represent "interstate commerce" over which the Board has been given exclusive jurisdiction. In this connection, the Board has made clear that, from an economic standpoint, the introduction of third-carrier services would seriously jeopardize the position of the existing two subsidized certificated carriers, which have expanded their operations to accommodate the public need, and could result in a huge increase in the subsidy need of the two carriers. Proceedings involving the third-carrier services are currently pending before both the State Commission and the U.S. District Court, the latter proceeding being the one instituted by the Board to enjoin the third-carrier services. Helicopter service Subsidy is currently paid for helicopter services in the Chicago, Los Angeles, and New York metropolitan areas. For the purposes of this report the subsidy estimated for these three services for fiscal 1965, as shown in appendix No. IV, is in the amount set forth in the appropriations legislation for the current fiscal year. Local service Subsidy for the 13 local service carriers, which provide air transportation to 467 cities, is estimated at $67 million for fiscal year 1965. This is $1,500,000 less than the estimated subsidy for fiscal 1964. This is due to a number of factors which have been improving the financial and economic position of these carriers, including: (1) the favorable trend in traffic, unit costs, and load factors; (2) the continuation, in refined form, of a class subsidy rate for this group of carriers, which class rate concept was first implemented on January 1, 1961; (3) the improvement of route structures through the award to these carriers of more profitable routes and more flexible operating authority; (4) the suspension or curtailment of services at the weakest traffic generating points in accordance with the Board's use-it-or-lose-it policy; and (5) the benefits of the more modern type aircraft currently in service, many of which were acquired by the carriers under the provisions of loan guaranty legislation. The maintenance of the currently favorable subsidy trend for this group of carriers requires continuous planning, revision and creative effort both on the part of the Board and the industry. Progress in all areas, along with continued upsurges in traffic, better load factors and reduced unit costs, are essential to the further stabilization and reduction of subsidy for local air service. Domestic trunklines No subsidy is required for any domestic trunkline services, the $3,326,000 of subsidy for one trunkline for 1965 (Northeast) being assigned wholly to its services in the New England area which are deemed substantially similar to those of the 13 local carriers. Although Eastern Air Lines has a formal petition on file for substantial sums of subsidy from fiscal 1963 forward, no subsidy is projected therefore since this case is not in process at this time, and, accordingly, its outcome is so conjectural as to render it inappropriate to warrant an administrative estimate of subsidy at this time. International services. No subsidy is projected for any U.S. air carrier providing international services, although Panagra and Braniff have formal subsidy claims pending involving substantial amounts of subsidy for their Latin American services. The status of these cases is such that, as with the Eastern Air Lines matter, it is not considered appropriate to predicate any subsidy estimate at this time for these services.
