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Thus the higher cost of operating DC-3 aircraft is passed on to the Federal Government in mail pay. On the volume of DC-3 flying done last year a decrease of 1 cent per mile in operating cost amounts to $1,608,130 per year.

It is difficult to predict accurately the exact improvement in operating costs that can be accomplished with a newly designed DC-3 replacement. Exhibit A, attached hereto, shows a probable decrease of 11 cents per mile. This would mean that nearly 18,000,000 dollars in direct operating expense were wasted last year because the airlines were flying an obsolete aircraft.

Direct expense is not the only saving that can be realized from a new design. The DC-3 has been notoriously poor for loading and balance. An aircraft with its fuselage near the ground and with accessible convenient loading doors could lower ground costs an additional 1 or 2 cents per mile.

In addition, it is reasonable to expect that a new aircraft will have more sales appeal and in itself will attract more customers. Also, •the faster schedules and better service that can be provided would result in more patronage and higher load factors. These factors, added to the 18,000,000 dollars in direct flying costs, brought the amount of mail pay for the operation of this obsolete airplane to well above 20,000,000 dollars last year.

These data in exhibit A are taken from design and performance information released by the Boeing and the Douglas aircraft companies. The DC-3 information is read from performance curves appearing in a brochure published by the Douglas Co. on August 1, 1947, a copy of which will be submitted to your committee.

Most of the aircraft manufacturers have at one time or another projected designs for a DC-3 replacement aircraft. In the latter part of 1946 the Boeing Co. designed an aircraft known as the Boeing 417. This aircraft was designed to carry almost exactly the same pay load as the DC-3. Also, it would operate from as small fields and in general would have made a very satisfactory DC-3 replacement.

Early in 1947 a brochure of the 417 was released by the Boeing Co. which predicted performance and operating cost in considerable detail. For these reasons this design has been selected for comparison with the DC-3 to show what can be expected by applying the adyancements in the art of aircraft design made since the DC-3 was first built. The data in exhibit A were taken from this brochure, a copy of which also will be submitted.

The items of comparison shown in exhibit A have been selected to highlight the basic design improvements. It will be seen that the gross landing weight is some 4,700 pounds less on the 417 which shown the economies that can be made in aircraft structures.

Also, the power required is only two-thirds of the DC-3's power, yet the 417 flies faster, carrying approximately the same pay load from the same size airports. This shows the progress that has been made in aerodynamics. It should be realized that the 417 was never built and that the performances shown are only predictions.

However, performance predictions are usually quite accurate, this accuracy being a part of the progress that has been made in the art of aircraft design. Also, it should be remembered that the 417 design itself is nearly 4 years old and I have no doubt a better one can be made today because of additional progress in the last 4 years.

· You may well ask why the 417 or some similar aircraft has never been built. I certainly do not know the answer. Some influencing factors are fairly obvious. The short term of the feeder certificates, the difficulties experienced by the smaller carriers in obtaining equity financing, the abundance of war surplus DC-3's and the interest of the larger carriers in larger aircraft might be cited.

Whatever the reason, the fact remains that the DC-3 replacement has not been built. I have contacted six of the largest aircraft manufacturers in the last several months and as far as I can determine there is no such design presently being considered.

In other words, there is no plug in sight for this rat hole down which between 20 and 30 million dollars of mail pay ran last year. The question is whether S. 3504 offers sufficient inducement to get a DC-3 replacement quickly or should stronger measures be taken.

I have no desire to see the Federal Government do anything that can be done by private enterprise. Personally I would rather see this aircraft developed as a private business venture. But after 6 years of effort on the part of the local service air carriers there still is no suitable replacement aircraft in sight. So the Federal Government is faced with the question of whether it will continue to pay this costly obsolescence bill. Its alternative is to invest a much lesser amount in the design of a prototype DC-3 replacement aircraft now.

The actual amount of this investment, that is, the cost of designing and building the replacement aircraft, is difficult to predict. None of the six leading aircraft manufacturers I have talked to had made any recent studies and consequently did not have a developed figure for this cost. However, I got estimates from most of them covering development, design and manufacture up to flight testing. All of these estimates ran between five and eight million dollars.

I would like to emphasize that these estimates cannot be considered official estimates of these companies. To make such an estimate the company would have to be given a definite specification and a considerable amount of study and investigation would be necessary. The estimates I obtained were not of this caliber but instead were more or less free "guestimates” of the company representatives to whom I talked.

Also, I have consulted the CAA on this matter of probable prototype cost. The CAA, of course, is not in the business of designing aircraft or of estimating the cost of such designs. But certain people in the CAA work closely with the aircraft manufacturing industry and are very informed on the present status of the art. I have been able to obtain personal estimates from Mr. George Haldeman, Chief of the Aircraft Division, and Mr. Ray Maloy, Chief of the Engineering Flight Test Branch of the CAA. These men agree that the above estimates are reasonable.

After a general study of this problem during the last several months, it is my belief that the amount of money required will be around 7 to 772 million dollars. This is less than one-third the amount of money the Federal Government is spending now each year because a suitable DC-3 replacement aircraft has not been developed.

It would seem to me that the most qualified agency of the Government to superintend the expenditure of this money would be the CAA. If the money were made available to them, probably their first move should be to make a study of the requirements of the various carriers as to load, performances, and so forth. From this study a specification would be developed embodying the basic characteristics of the new aircraft.

This specification would be sent to the various aircraft manufacturers who would study it and prepare a proposal which would include both design and cost projections. After a careful study of the designs submitted the CAA would select a design and a manufacturer with whom a working agreement would be developed.

I feel certain that most of the aircraft manufacturers would be interested in this project on this basis. All of the six I have talked to have indicated they probably would participate.

I am somewhat familiar with the many problems that arise when the Federal Government develops new equipment to be manufactured and sold commercially. There is a matter of recouping some of the developmental costs, of sharing in the profits, and so forth. It would seem to me that none of these things apply in this instance. Air service without mail pay to our smaller cities and towns will not be profitable for any air carrier for some time to come. The carrier's profit will be limited to the return on its investment usually allowed by the CAB in setting mail rates. Thus, there will be no reason for the Government to participate in profits. Its return will be in the form of lower mail rates to the carriers whose needs will be less with the new equipment.

Basically, we will always need a smaller aircraft with which to serve the smaller cities and towns. Even the larger trunk airlines will continue to need smaller aircraft if they continue servicing smaller points. It is not practical to land a large aircraft at these smaller places for the number of passengers that can be expected. Nor is it practical to expect the towns or the Federal Government to increase the size of the present small-town airports to accommodate larger aircraft. If the towns are to have air service at all, the DC-3 replacement type of aircraft will be needed to serve them.

Our air-transport system should continue to provide service to smaller cities and towns. Some one-third of our national population live in them. Experience already has shown that these people use air service to a greater extent than do the one-third of our people who live in the largest cities. This indicates that the resident of the smaller town has a greater need for air service. This should be so because he is more isolated from his sources of both service and supply than is the resident of the larger city.

Thus, we see no decrease in the need for an aircraft of the general size of the DC–3. We will have to continue to use the DC-3 until a replacement is available. If we start now it will still be a matter of 3 or 4 years before the replacement aircraft is ready.

The other aircraft included in S. 3504 are strictly developmental projects. New horizons are being opened up by new research. In this respect, the feeder prototype is different. It is merely the application of presently known design practices to the operational requirements.

Because there is nothing new or experimental about this prototype its flight-testing costs should not be great. The best estimates that I have been able to obtain are on the order of $150,000 to $250,000. It would seem doubtful that the expenditure of this small sum, about one-thirty-fifth of the construction cost, is the reason the DC-3 replacement has not been built to date.

The losses to the Federal Government each year are sufficiently large to make it imperative that something be done to get a prototype DC-3 replacement underway. Certainly S. 3504 should continue to carry the provision for testing this feeder aircraft. But in addition it seems necessary to take more positive means of getting this replacement into operation to lessen the burden on the Federal Government.

I am not acquainted with legislative matters and do not propose to offer a method of accomplishing this purpose. All I can hope to do is accent its need. The prospects of anyone building this prototype without help on the risk money are very dim.

I am very appreciative of the opportunity to bring this matter to your attention.

Exhibit A.-Comparative characteristics

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Source: Equipment of the Foreign-Scheduled Common-Carrier Airlines, Foreign Air Transport Divi. sion, Civil Aeronautics Board, March 1, 1950. United States Airline Fleet. American Aviation Magazine, April 1950,

Senator CAPEHART. In your opinion, how many planes would be purchased of this particular design you are talking about?

Mr. Ray. In. exhibit B we have analyzed the number of aircraft that are flying in passenger service throughout the world.

There is a potential of 461 aircraft as replacement in the United States. There are 903 potential replacements in other parts of the country. Also some of the snialler, 463—some of the 463 smaller than DC-3 aircraft shown on this exhibit might be replaced through this new aircraft. These figures do not include the larger number of aircraft that are flown by the regular air carriers, freight and cargo carriers, executive-type aircraft, et cetera,

Senator CAPEHART. How many DC-3's have been manufactured and sold?

Mr. Ray. The number manufactured is between 10,000 and 12,000, as I remember. There have been over 4,000 sold commercially.

Senator CAPEHART. And 8,000 went to the Government? Mr. Ray. Four thousand, in general, went to the Government first, and then were resold by War Assets for commercial purposes.

Senator CAPEHART. There have been a lot sold directly to commercial airlines?

Mr. Ray. Yes, sir. Senator CAPEHART. What is the selling price of a DC-3? Mr. Ray. The average price to the feeder airlines was around $50,000 to $65,000. That includes about $20,000 to $25,000 that was paid for the C-47 and the cost of converting it to airline specifications in the airline use.

Senator CAPEHART. I am thinking in terms of the new planes that were manufactured by the manufacturer and sold originally. I am not particularly interested in what the surplus-property agency sold.

Mr. Ray. You mean the cost of a DC-3 originally?
Senator CAPEHART. What was the cost of a new DC-3?

Mr. Ray. That ran between $125,000 and $150,000. It got down to slightly below $100,000 when they were building them in quantities for the Government during the war, during the early part of the war.

Senator CAPEHART. Do we understand by your testimony that none of the manufacturers at the moment are developing a comparable plane to the DC-3?

Mr. Ray. I haven't been able to find any information that would indicate that they are. I have talked to the six largest manufacturers.

Senator CAPEHART. Why are they not? Do they feel that that particular type plane is obsolete and that there would not be any market for it?

Mr. Ray. I do not know. I have not a good answer to that one. I disagree with their reasoning that there is not a market for that airplane. I think there is. But I suppose that as a result of tests and surveys that they have made, they have decided that they could not make a success of building that particular aircraft.

Senator CAPEHART. Have they been before this committee?

Mr. Davis. Admiral Ramsey appeared for the Aircraft Industry Association. However, they were for 3504. They are not in favor of any of the other bills because they are afraid it will lead to nationalization of the industry. Consequently, they opposed all bills except 3504.

Senator CAPEHART. This gentleman maintains there is a big market and a need for new, improved DC-3's; is that correct?

Mr. Ray. Yes, sir.

Senator CAPEHART. We know in the past that there has been a big sale of DC-3's, both to private industry, commercial airlines, and to the Government.

You say they are not developing a new comparable plane to the DC-3? . Mr. Ray. That is correct. Senator CAPEHART. I would like to know why, Mr. Ray. I would, too.

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