FINANCIAL CONDITION OF THE INTERCITY MOTOR BUS INDUSTRY THURSDAY, JUNE 16, 1977 U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, D.C. The subcommittee met at 10 a.m., in room 235, Russell Senate Office Building, Hon. Russell B. Long (chairman of the subcommittee) presiding. OPENING STATEMENT BY SENATOR LONG Senator LONG. I would like to suggest at this morning's hearing that each witness summarize his submitted statement in order that we can make all the information available and at the same time concentrate on the essential points in this hearing. That is the procedure we use in the Finance Committee, and I would like to urge you to try to limit your presentation to 10 minutes. We will make all the information available, and I will read each one of these statements, but I want to move as efficiently as we can. There is a tremendous potential for better service and for fuel savings if we make better use of our bus services in this country and help them to improve on their service. Unfortunately, at this moment the buses are not making the kind of profit that they made in earlier years, which we tried to do something about. I will ask that the full statement be printed and that the fact sheet: provided to me setting forth a summary of what the situation seems to be with regard to the intercity bus industry be printed in the record. Today's hearing on the financial condition of the intercity motor bus industry assumes added importance in light of our Nation's critical energy situation. In order to begin achieving meaningful reductions in the amount of oil we consume, we should be searching for ways to get people out of private automobiles and into buses and other fuel efficient modes. Intercity motor buses are ideally suited for passenger transportation because they serve 16,000 cities, towns, and communities. They' are convenient and accessible and they are fuel efficient. All of these factors ideally suit buses to make a significant contribution toward the conservation of energy in passenger travel. Unfortunately, during the past few years we have seen a deterioration in the earnings pictures for the bus industry. Six years ago the industry earned about 11 cents per bus mile operated, but last year Staff members assigned to this hearing: Douglas Svendson and Matthew Scocozza. the figure dropped to a little over 5 cents per mile. I hope we can examine some of these problems at today's hearing. Intercity motor buses carried 340,000,000 passengers last year. Significantly one-third of the total are persons in the lowest income group, earning under $5,000 per year. Over 40 percent of them are in upper age brackets and live outside metropolitan areas. These, along with the Nation's youth, are groups who stand to be hardest hit by escalating energy costs, especially transportation costs. Intercity buses provide a low-cost, dependable means of transportation and we need to be sure that the industry is healthy and up to the task that lies ahead. Senator LONG. I will now call the first witness, Hon. A. Daniel O'Neal, chairman of the Interstate Commerce Commission (ICC). Mr. O'Neal, we are very happy to have you before the committee this morning. STATEMENT OF HON. A. DANIEL O'NEAL, CHAIRMAN, INTERSTATE COMMERCE COMMISSION Mr. O'NEAL. We have a rather long statement which we will submit for the record, as you suggested. Basically, I will talk briefly about the condition of the industry as we see it at the present time, a little about the legislation which was drafted up which has subsequently been changed, and also just some general comments about whether we think the subsidy makes some sense. I haven't really prepared this in a summary fashion, but I will try to go through and pick out the essence of it for you. We think it is pretty clear that at least in the period 1971 through 1976, that the Nation's class 1 bus carriers, those with operating revenues in excess of $1 million, experienced an operating expense increase of 43 percent and a revenue increase of only 30 percent, which indicates that the situation is not as good as it once was. Their operating ratio was up-that is, the ratio between expenses and revenues-meaning that expenses have increased proportionately in relation to revenues. And we think the trend as it has developed and evolved over the last 5 years is not a health one and cannot be sustained by this industry. There are some interesting statistics which we have in the appendices, some of them indicating, for example, that there seems to be a difference between the condition of the two major carriers-Trailways and Greyhound-as opposed to some of the other carriers. Some of the others don't seem to be doing quite as poorly. The Commission believes that the financial strength of the intercity bus industry has declined in recent years. We don't consider the industry's financial position to be critical at this time, but it is evident that if these trends continue-certain financial indicators continue a critical point would eventually be reached, absent any increase in the carriers' fares or reductions in their costs. In this regard, it is essential that financial conditions in the industry be carefully monitored, especially in light of the recently approved 11-percent general fare increase. We have developed procedures for obtaining better information about the condition of the industry. At this time we don't feel that conditions are such that they would justify a subsidy. We feel that the Congress generally has not provided direct subsidy assistance to the transportation industry absent a clear showing of necessity, and then only to the extent necessary. This policy reflects a commitment, we feel, to the private enterprise system in the transportation industry. The Commission shares that commitment. Governmental financial assistance through subsidy usually creates a greater demand for government influences over the operations of the enterprises receiving assistance, and the Commission does not believe that the necessity now exists for this proposed Federal intervention in the motor bus industry. Senator LONG. Could I just interrupt you to ask you this question, Mr. Chairman. Do I take it that you would propose that nothing be done at this time that is not already being done? Mr. O'NEAL. I'm going to get to that point. Let me point out that the Commission did authorize an 11-percent increase for the motor bus companies just last month. Senator LONG. But you're talking about a rate increase. What we need to do is to get more people out of their automobiles and into these buses. It would be a tremendous energy savings if we could persuade people to make greater use of buses, both intercity and on the streets within the cities. Now, will you tell me, for Pete's sake, how it's going to help that situation to raise the fare? Mr. O'NEAL. It isn't going to help very much. Senator LONG. Well, it has to hurt, doesn't it? Mr. O'NEAL. I think it is bound to have some effect. We feel it will reduce their operating ratio, meaning the relationship of expenses to revenues, but it could also result in some diversion of traffic. But we feel that there are substantial questions here because, some segments of the industry seem to be doing a lot better than others. Senator LONG. We passed a tax law last year, and while we are hitting some people harder than before, we gave some relief where the railroad industry was concerned because we felt that the industry needed some help, and we gave them more assistance with regard to investment tax credits, for example, than we did the average-for other industries. Now, why shouldn't we follow that precedent with regard to the bus industry? Mr. O'NEAL. One of the reasons that the Congress, I think, decided to support the rail industry-at least some segments of the rail industry-was because in many respects there was no possible replacement for the kind of service that the railroads were providing. In the bus industry, however, we have at the present time a number of applications from motor bus companies who feel they can provide services, and so we are not sure whether maybe we should loosen up entry a little bit and let some other carriers in. I'm not saying that is the answer we are heading for, but we feel that may be a possible consideration in determining whether to provide a subsidy. Senator LONG. Well, let me say this, Mr. Chairman. Anything you can do over at that Commission to encourage people to make better use of the buses, I certainly want to encourage you to do it. But I |