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Mr. SHUSTER. I don't want to put words in your mouth, but what is your assessment, then, of the reliability of the Denver lift as applied to inter-city bus travel?
Mr. CURREY. My assessment is that both on the cost of maintenance and on the original cost of the lift, we have far under-estimated it in our low-cost estimate. We are much closer to our highcost estimate, but no need to argue the higher cost estimate, frankly, because the lower cost estimate is a bullet to the heart to us.
Mr. SHUSTER. Does that mean with adequate maintenance, with substantial maintenance, it has worked reliably for sustained periods of time?
Mr. CURREY. We don't know that it is, but I wouldn't say it is not. I am a believer in technology, either the MCI lift or the Hubmatic lift. The lift, there is no mystery about it. It can be made to work, it is only a matter of money and labor dollars to maintain it. I wouldn't argue for a second a lift couldn't be made to work, sir. It is all a matter of price.
Mr. SHUSTER. Let me turn to some of the smaller bus operators. Is it not reasonable for a small bus operator to look at the ADA Senate version, if it passes, and say to himself, “I am going to make a prudent business decision here which is, fundamentally, I am going to disinvest because the bill doesn't take effect for-what is it-seven or eight years, six years.” The smaller operators, because you have some years, why wouldn't the prudent businessman say, "I will simply run my fleet into the ground, in fact increase my profitability or increase my cash flow in the short run over a period of five, six, seven years and get out of the business or sell off what I have left to whoever wants to stay in the business," maybe to Greyhound or to somebody else, why wouldn't that be almost a classic kind of a prudent business decisions that a small businessman would make?
Mr. BUSSKOHL. I would think that some people would do that, you bet, and one of the things that would maybe force you to that is your banker that says you will pay the rent. If you are going to stay in the business, there isn't a prudent banker in the world that is going to give you a loan, which we always have to have on a $225,000 piece of equipment, that would in his right mind give you a loan on that thing.
Mr. SHUSTER. Is it reasonable, or am I going too far when I say, that in addition to the problems that Greyhound has outlined and your profitability problems of a small bus owner-is it reasonable to assume that there will be an acceleration of disinvestment and getting out of the business by the smaller owners as a result of the ADA bill if it becomes law?
Mr. HENRY. Congressman, I think that there is a very definite issue there. A family corporation like we have, we are now in the fourth generation; my son, this same thing came up, he said, "How do you see the future of this industry?" He doesn't care whether it is buses or planes or boats, he has to make a living for his family. I said we would sit down and see what our ROI was in this industry.
Quite frankly, with what we are talking about today, he wouldn't be in this industry. That is a business decision.
Mr. SHUSTER. That is in addition to the ones we have been talking about here today, isn't it? All right. Thank you.
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One final point, Mr. Currey. When you talk about serving 10,000 towns down to 5,000 towns, I presume you have calculated--if you have 10,000 towns and if 32 percent of your miles are at a loss today, and if that is going to go up to 51 percent, that means that you have a base that you are serving today which includes 32 percent.
If ADA passes, the base is reduced.
Mr. SHUSTER. And so you don't have the same percentage of profitability to spread over even a smaller 32 percent base?
Mr. CURREY. That is exactly correct.
Mr. SHUSTER. So the implication is an accelerated leverage to reduce the communities you serve, and I presume that kind of calculation is built into your reduction from 10,000 to 5,000?
Mr. CURREY. Exactly, and that is why we would have to begin almost immediately to rationalize these routes—that is the euphe mism for eliminating small towns—to rationalize these routes into a different kind of route structure, because we couldn't do it overnight because we would stand the risk of collapsing the whole system.
Mr. SHUSTER. Let me ask you one final question. As a businessman running a company to make a profit, why do you serve 32 percent of your mileage today when
it is operating at a loss? What does your Board of Directors say? Don't they ask you that kind of a question?
Mr. CURREY. Often.
Mr. CURREY. It is a balance between the feed that you get from the lost routes and the miles on the profitable routes that that feed runs. It is that balance. Those of you that dealt with matters of air transport during the days of regulation will remember that balance.
Well, that balance is obviously quite precarious for us because last year we lost $17 million on that balance, and don't think that I didn't get interrogated by the Board of Directors about it, because I sure as heck did for a long time. But I have been convinced that that field would be our life blood for the future if we could sustain that, and this year that is proving to be correct.
If I sound desperate about not wanting to reinstitute the divestment program, then that is a true representation of my understanding of the matters. I think it would be a desperately bad thing in the public interest, in our customers' interest, in my own share holders' interest, and I know in our employees' interest, because we are going to have to get them out of there by large groups.
Mr. SHUSTER. Does part of your thinking in terms of your longterm strategic thinking include the thought with further concentration in the airline industry prices will be going up in the airline industry, and, therefore, you stand to benefit from that in the long run?
Mr. CURREY. Yes, sir.
But I would urge consideration of our actual results. For instance, in the month of August this year we handled 837 million passenger miles versus 785 million passenger miles last year, an increase about which we are quite proud. But I would like to note that we handled that as a result of a decrease in yield, that is revenue per passenger mile, from 917 to 907.
Mr. SHUSTER. Is that fixed route only you are describing?
Mr. CURREY. Yes, that is fixed route only I was describing. So it is further proof of the fact that demand for inter-city bus travel is closely tied to price, and I would also like to point out that an interesting phenomenon, extremely interesting phenomenon in our business, this route that originates in New York and goes across country through Cleveland and Toledo and Chicago becomes unprofitable west of Chicago going to San Francisco, so you might say that doesn't make any sense.
Well, it isn't because the loads are not on that route. Our average loads on that route are high, 23, 24 passengers. It is because the yield on these miles out here has to be very, very low to get any traffic at all, and we are operating that route, second, because we are cost subsidizing it with the setting between New York and Chicago where population is more dense, the miles are much shorter, so people will ride the bus at a higher rate per mile. But out here we are hauling people from Chicago to San Francisco at five and six cents a mile.
Now, what that means in conjunction with your airline comment is that we are not-I mean, the airlines can triple their price from San Francisco to Chicago, but there is an absolute maximum that a bus passenger can pay that isn't related to air fares, and so we bump up against that price, and that is what we call the stay-athome phenomenon. We say to our people all the time, “Look, we have got three competitors, the airlines, the automobile when it is used against the incremental price of a tank of gas, and "stay at home”, and our biggest competitor is "stay at home". We compete against "stay at home" when our service is lousy or our price is too high, and so we have got to keep our service up and our prices down if we expect to survive.
Mr. SHUSTER. Thank you very much. Thank you, Mr. Chairman. Mr. MINETA. Mr. McEwen. Mr. McEwEN. Thank you, Mr. Chairman. I have appreciated the testimony very much. Just a couple of questions from the testimony we will receive shortly after you leave, and if you could respond to them, I would be appreciative. We have a general support for a regional transportation district which, as you know, operates with certain flexibilities that those in the private sector do not enjoy, but he is able to make observations such as this, that he provides the accessible wheelchair service without an increase in schedules, safely, reliably and cheaper.
He further points out that-would any of you have any comment on that as to how one can do that?
Mr. CURREY. Does he want to buy a bus company?
Mr. McEwEN. I am asking for some figures as to how much those in the rest of the country get to contribute to his ability to operate more cheaply, but we don't have those numbers as yet.
The same testimony goes on to point out that Denver has lost some four seats in the application of their lift, and then we have further testimony coming right afterwards, that the same manufacturer that Denver uses, when applied to a bus occupies zero baggage space, will remove only one seat, adds $11,000 to the cost, and this price can be expected to fall.
Your testimony is such that it takes more than one seat. In fact, Denver says their experience has been they have taken four. Can you reconcile this for us?
Mr. PICKNELLY. In the bus that we have in our fleet, for one wheelchair position, it would replace four conventional seats. I am not familiar with the Denver lift. The buses that we have and I see every day is a replacement of four conventional seats for one wheelchair.
Mr. McEwEN. Like I say, when we receive testimony, we build a record that says certain things. If they are left unchallenged, then the presumption is that somehow or other they are valid. Every experience we have testimony on has been four seats have been re moved; yet we are about to receive testimony saying that is not the case, notwithstanding your experience, that a lift would not do that. Your experience is a lift that you deal with would have to remove a minimum of four seats in order to have them installed in your vehicles?
Mr. PICKNELLY. Yes, that is right.
The way I got involved in this, is that 51 disabled Americans living in Chillicothe, Ohio, came to me in the spring of 1981, pointing out that the bus service in Chillicothe was about to receive the new buses under the new Transit Act, and the regulation they had previously was about to go into effect that would require all these vehicles to have lifts.
They suggested that they would prefer to have personal door-todoor service which was currently provided by a series of charitable organizations rather than having that happen.
Of course, when we checked the regulations we found out that was universal. We went to the Secretary of Transportation, explained the dilemma to him and asked that if somehow or other we could provide superior service, could we receive an exemption from the four buses that were currently in the process of being built in North Carolina to be delivered to Chillicothe, Ohio?
The Secretary or Transportation agreed. The regulation was implemented, and I remember the day that it took effect. As it came across on the news broadcast I was out in Ohio, and the first person they interviewed was the Mayor of New York, in which he said he was going to save a billion dollars because of this common sense application of not requiring across-the-board institution, but allowing local policy-makers to decide how they can serve people the best.
I see we are back to square one, and as the questions from our colleague from Pennsylvania reflect, sometimes it appears to the point that government does not know how to create jobs or provide service. They are not in the business of purchasing vehicles cost effectively and providing small towns with service, but an entrepreneur provides the risk and muscle and the blood and sweat to provide that service, then the government comes sashaying up along, side and says, "Now that you are doing this, here is how you will do it,” to which the proper response might sometimes be, "If you knew how to do this, why didn't you do it yourself?”
And that is kind of where we are in our desire to do what is right and what is good without recognizing that there is a tremendous service that is being provided to those of us in the rural area that needs to be preserved in a manner that is not only compassionate but cost effective.
I think they can be reconciled much better on a limited application basis as opposed to a universal one-swat hammer Federal law.
Thank you, Mr. Chairman. Mr. MINETA. Thank you very much, Mr. McEwen. Let me thank all of you for taking time from your own busy schedules to be here and giving us the benefit of your experience and background. This is a very important piece of legislation. It passed the Senate, as all of you know, with eight no votes. It has got the strong endorsement of the President, and this legislation is going to be law.
The question is how is it going to be law? Your input into this legislative process today has been very, very helpful in our deliberations as we come to the head of putting something together. So I really appreciate your taking the time from your own schedules to come here and enlighten us as to what the ramifications are of this bill. I would like to thank you very, very much.
The subcommittee stands in recess until 2:30.
(Whereupon, at 1:25 p.m., the subcommittee was recessed until 2:30 p.m. the same day.)
[The statements of Frank M. Henry, C.D. Busskohl, Dan Dipert, and Fred G. Currey follow:]