ICC 90 percent was not a valid absorption figure; that it would vary from 65 to 70, and 75

Mr. TAYLOR. I have consulted with the gentlemen who wrote that statement, and he says the best proof of it is we were told we were wrong. We had to use 90. The theory we used was that we had considerable excess plants. The ICC, not only there, but in other matters, has said that you don't control the input at the excess points-perhaps in a special situation, if you were putting input in, and you could control the input, you would have that type of result, but both with the motor carrier industry, and with us, and we think with the Post Office 90 percent is the best any cost expert has ever agreed to. Mr. MORRISON. Mr. Daniels.

Mr. DANIELS. Mr. Johnson, in 1951 what was the minimum cost of a single piece parcel?

Mr. JOHNSON. I don't know, Congressman, and apparently our marketing people don't have it at their fingertips. I would be glad to supply it, if you

Mr. DANIELS. The last thing you did supply for the ICC required a minimum of $4.

Mr. JOHNSON. Only on first class. See, a percentage of our business is not first class today, and we have minimums that range well below $4. The all commodity tariffs, and a number of others, but the minimum

Mr. DANIELS. On your first class it is $4, even today.

Mr. JOHNSON. Yes.

Mr. DANIELS. That is substantially higher than in 1951

Mr. JOHNSON. Yes, and that is the most costly business handled. That is the type it is.

Mr. DANIELS. Is that the type of business you want?

Mr. JOHNSON. Yes, sir. We want all business, as long as we can price it fairly under the rules of the ICC. We have never tried to deliberately exclude our service for anything, but we must have rates according to the price.

Mr. DANIELS. Do you find that business profitable?

Mr. JOHNSON. At our prices, we can handle more of it, but it is the most costly per unit, and no matter what the unit is, balloon freight has got to be priced as balloon freight, and the Post Office does not. Mr. DANIELS. What about first class? Do you find that profitable? Mr. JOHNSON. Yes, sir. It is the most costly and difficult to handle, but we charge a good bit for it.

Mr. MORRISON. I want to take this opportunity, and I am sure the committee shares this opinion with me, to compliment you gentlemen for your very forthright, cooperative, and excellent representations, both in the previous meeting and today. You certainly have shown that REA Express Co. is fortunate in having men of such outstanding ability as you.

Mr. JOHNSON. Mr. Chairman, may I thank you and your colleagues for the most fair hearing that anybody could want. You have been most attentive, and I am very grateful, because of the importance of this matter to us.

(Whereupon, the Subcommittee on Postal Rates was adjourned at 12:05 p.m.)

PARCEL POST

FRIDAY, MARCH 25, 1966

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON POSTAL RATES OF THE

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C.

The subcommittee met, pursuant to recess, at 10:30 a.m., in room 346, Cannon House Office Building, Hon. James H. Morrison (chairman of the subcommittee) presiding.

Mr. MORRISON. The committee will come to order. The first witness that we have the privilege of hearing today is Mr. W. E. Hastings, vice president of traffic, Greyhound Lines, Inc.

Mr. Hastings.

STATEMENT OF WILLIAM E. HASTINGS, VICE PRESIDENT OF TRAFFIC, GREYHOUND LINES, INC.

Mr. HASTINGS. Thank you, Mr. Chairman. I have a prepared statement which I will read to the committee, with your permission. Mr. MORRISON. You may proceed, sir.

Mr. HASTINGS. Mr. Chairman and members of the subcommitte, my name is William E. Hastings.

Mr. MORRISON. Could I interrupt you a second? Do you likewise represent Trailways Bus Lines, or is it only limited to Greyhound

Lines?

Mr. HASTINGS. I am here as a representative of the industry, Trailways and the other intercity bus carriers.

Mr. MORRISON. Then that covers practically all of the bus transportation in this country, both large and small; is that right?

Mr. HASTINGS. That is correct. I am speaking for the two bus associations. I am today speaking for all of the intercity bus carriers in the United States, the National Association of Motor Bus Owners, Inc. The views I will express are also those of the National Bus Traffic Association, Inc., with offices in Chicago, Ill. Greyhound is a member of both of these associations which are commonly known as NAMBO and NBTA.

NAMBO is the national trade association for the intercity bus industry. It serves as spokesman for nearly 1,000 carriers which account for about three-fourths of the total volume of intercity motor bus transportation in the United States.

The National Bus Traffic Association, Inc., is a nonprofit corporation, membership in which is limited, under its articles of incorporation and bylaws, to "Intercity regular-route common carriers of passengers by motor vehicle." Its membership at this time is composed

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of approximately 430 such carriers. NBTA is the tariff publishing agent for these carriers.

The members of these two associations include Greyhound Lines, carriers affiliated with the National Trailways bus system as well as many carriers independent of both systems.

For over 30 years the intercity bus industry has been supplying a steadily increasing volume of expedited package express service, which currently accounts for about 10 percent of the total revenues of the carriers.

The intercity bus industry furnishes the only means of public linehaul transport for hundreds of communities which, for economic reasons, the railroads and airlines do not serve. The increasing importance of our service is apparent from the steadily declining number of rail passenger trains. The Interstate Commerce Commission reports that it authorized the discontinuance of 286 passenger trains in 1965. The current investigation of the adequacy of local airline service being conducted by the Senate Aviation Subcommittee is also evidence of serious concern with this problem.

Much of this essential service provided by buslines particularly that for smaller communities, is noncompensatory and could not possibly be continued were it not for supplementary revenues derived from such services as package express.

Referring to the proposed reformation of sizes and weights, section 3 of H.R. 12367 would increase the maximum sizes and weights of parcels that may be transported between first-class post offices more than 150 miles apart, from 72 to 100 inches, and 20 to 40 pounds, respectively. This would, in our view, result in substantial diversion of package express handled by the bus companies and, consequently, would have a serious impact on the revenues therefrom on which we must depend for maintaining essential passenger services.

During his appearance before your subcommittee, the Assistant Postmaster General conceded that this proposed reformation of sizes and weights would cause some diversion from bus package express service. However, he contended that it would be minimal because of: (1) the special expedited service which is provided by the bus carriers; and (2) the fact that the bus rates for small packages are much higher than those for parcel post.

It is true that the bus companies enjoy a service advantage by virtue of the fact that packages are transported on regular schedules which permits rapid point-to-point transportation. This advantage is offset in part, however, in that pickup and delivery service is not provided except at additional cost.

It must be noted, however, that there has been a significant change in recent years in the character of the package express service provided by the bus companies. While the expedited or emergency service mentioned above continues to be an important one, there has been a very substantial increase during recent years in the handling of package express requiring overnight delivery as distinguished from emergency transportation. This is obvious from the fact that 60 percent of the outbound packages delivered to Greyhound terminals are received between 3 and 11 p.m., and that the same proportion of incoming shipments are picked up by consignees between 7 and 10

in the morning. This type of traffic is precisely that which would be subject to diversion by the enactment of this bill.

We are unable to agree with the second reason for the conclusion that the diversion would be minimal. It is true that bus express rates for small packages, that is, 20 pounds and under, are generally above those proposed in H.R. 12367 for most distance brackets. But the same is generally true with respect to the rates for packages weighing between 21 and 40 pounds transported more than 150 miles; these are the shipments which would be affected by the proposed increases in mailable sizes and weights.

It has not been possible within the time available to conduct an exhaustive survey, but sample studies of Greyhound package express operations, which are believed to be generally typical, do throw light on this phase of the subject. One of these surveys shows that 24.9 percent of the packages transported from five large cities, that is, firstclass post office locations, weighed between 21 and 40 pounds and 15.6 percent were between 73 and 100 inches in combined measurements. Similar studies made by Trailways carriers at three large cities show that 21.6 percent of packages transported between first-class post offices weighed between 21 and 40 pounds, and 20.9 percent were between 73 and 100 inches in length and girth combined.

Another study of packages tendered at 10 large city bus stations showed that 55.1 percent of the total were destined to points more than 150 miles distant. It appears obvious, on the basis of these data, that the diversion to parcel post of a substantial proportion of shipments in these categories would result.

The mere numbers of packages which would be diverted is not an accurate index of the probable financial impact. The principal cost of handling package express by bus is terminal handling cost. While this aspect of cost per shipment increases slightly with the weight, this increase is much less proportionately than the increase in transportation costs. Consequently, the net revenue to the bus companies for handling heavier shipments is greater than for lighter packages. As already pointed out, the diversion would occur in the 21- to 40-pound category rather than in the small-package brackets with a consequent disproportionate effect on net revenues.

Exhibit 1 attached to my statement shows an approximate comparison of bus package express rates with the revised parcel post rates proposed in H.R. 12367. For purposes of this comparison, the rates for packages in the 20-, 30-, and 40-pound brackets destined to points more than 150 miles distant are considered since these are the categories that would be affected by the provisions of section 3 of the bill. There are 33 weight-distance brackets involved in this comparison. In 24 of these, the bus rates are higher than those proposed for parcel post, lower in 8 and the same in 1. These figures do not support the conclusion that a mere minimal diversion of bus package express would result from the legislation.

It should be noted that the foregoing comparison understates the extent of the difference between bus and parcel post rates. This is so because the bus rates are determined on the basis of highway rather than air miles. In individual cases, therefore, a bus shipment may be assigned to a higher mileage bracket than a parcel post shipment

between the same two points since highway miles normally exceed air miles.

The proposed average increase in parcel post rates of about 8 cents per package is estimated to increase annual revenues by about $60 million or approximately three-fifths of the current deficit. The deficit could be further substantially reduced if parcel post rates were increased by an average of 10 or 12 cents per package. If increased as much as 12 cents, the parcel post rates would still be below the bus rates in the entire 24 weight-distance brackets discussed above. In our view, this would constitute an approach that is far more sound from the point of view of national transportation policy than one which is certain to confront private industry with substantially increased taxpayer subsidized competition. Furthermore, such an approach would be consistent with the statement of President Johnson in his transportation message of March 2, 1966, in which he said: The United States is the only major nation in the world that relies primarily upon privately owned and operated transportation. That national policy has served us well. It must be continued.

With regard to the congressional policy, we point out the original purpose of the parcel post or fourth-class mail service was to provide small-package transportation to areas which did not have commercial services available. This was recognized by this committee in 1951 when it approved legislation establishing the maximum size and weight limits as set forth in Public Law 199 (39 U.S.C. 4552). The committee said:

Parcel post was originally authorized by Public Law 336, 62d Congress, approved August 24, 1912. It was intended primarily to provide a transportation service for small parcels to areas which did not have adequate facilities for such package distribution. It was also intended to give the farmer opportunity to sell his products directly to the consumer through the mail. This is in House Report 1006, 82d Congress, September 24, 1951, page 2.

It was this consideration that caused Congress to establish larger sizes and weights for packages handled in smaller communities.

The Senate Post Office Committee, which approved legislation leading to Public Law 199, explained to 70-pound weight limit and 100inch size limit as designed to assure service to less populous areas, saying:

The effect of this would be to assure persons served by offices of the third or fourth class or living on rural or star routes, of the continued use of the 70-pound maximum weight limit and the maximum size limit of 100 inches, length and girth combined.

That appears in Senate Report 695, 82d Congress, August 21, 1951. Because commercial package service was available to users of firstclass post offices, Congress reduced weights to 20 pounds in all zones except the first two for which the maximum was 40 pounds and size was limited to 72 inches. This committee explained these provisions with the statement that:

It was testified before the committee that approximately 93 percent of parcels moving through the mail are sent to patrons of first-class post offices. There are approximately 2,500 first-class post offices, which post offices each have gross