It is significant to note that under the existing fare structure, a common fare exists between each gateway on the west coast and Honolulu, in spite of substantial differences in the mileages involved. Thus, the principle of the common fare has already been applied to the major segment of Hawaii/west coast transportation. The remaining inequity would be eliminated if a common fare were established between any gateway on the west coast of the United States and any island within the State of Hawaii. BENEFIT TO THE STATE OF HAWAII In spite of improvement in recent years in the general economy of the State of Hawaii as a whole, the economy of the islands other than the Island of Oahu has seen no progress over the past 10 years. There has, in fact, been a decline in population on the neighbor islands (see appendix A) and a lag in the per capita income of neighbor island residents as against residents of Oahu (see appendix B). This serious problem is well summarized in appendix B, an article published recently in the Honolulu Advertiser, discussing the economic plight of the neighbor islands. Opportunities for establishment of additional industry on the neighbor islands are seriously limited because of shipping costs, etc. The one strongest prospect for improvement in the economy of the neighbor islands is the tourist industry. No single step could be taken at this time that would have a greater stimulating effect on neighbor island tourist industry development than establishment of a common fare between west coast points and each island in Hawaii. A high percentage of mainland visitors limit their Hawaii visit to the Island of Oahu because of their reluctance to spend the additional amount necessary to fly to a neighbor island. If the common fare were instituted, not only would the low load factors of neighbor island hotels be improved, but also new hotel construction would be an immediate result. BENEFIT TO THE TRAVELING PUBLIC The common fare would also be of great benefit to the neighbor island residents. As indicated in appendix B, residents of neighbor islands, because of their lower per capita income, are less able to bear the cost of air transportation between their island and the United States than are Oahu residents. Yet, solely because of the absence of direct nonstop transportation between neighbor islands and the west coast of Hawaii, neighbor island residents are required to pay a higher fare in order to travel to the continental United States. Establishment of the common fare would thus enable neighbor island residents to make trips to the continental United States at lower cost than at present, resulting in the generation of additional business for the carriers involved. BENEFIT TO THE FEDERAL TAXPAYER AND INTERLAND AIR CARRIERS Appendix C sets forth the basic problem which has caused the two interisland carriers to suffer operating losses over the past 10 years and has made them both dependent on Federal subsidy payments aggregating $3,295,000. As this table shows, the interisland air carriers have realized an annual rate of growth in their business of 3 to 9 percent in the past 10 years, while mainland carriers have enjoyed an annual growth rate ranging between 15 and 30 percent. Two factors have caused this lag in growth for interisland carriers. One is the declining population on the neighbor islands of the State of Hawaii. As a result, there has been no growth in island resident travel (see appendix F). It will be noted from this table that the total resident passengers traveling in the years 1952 and 1953 were 427,000 and 431,000, respectively, while in 1957 430,000 were carried. In 1958, because of a severe depression in the neighbor islands' economies caused by a 5-month sugar strike, interisland resident travel dropped to 388,000. Although there has since been some improvement, there is no indication that resident travel between the islands will materially increase over the next several years. The forecasts have island economists predict a continuing decline in neighbor island civilian population. The second factor causing the slow rate of growth of interisland travel is the absence of surface transportation carriers from whom traffic can be diverted. A large part of the growth in mainland air travel has come from diversion of passengers from the automobile, rail, and bus. Since the two interisland air carriers provide the only means of travel between the islands by passengers, there is no surface means of travel from which to draw additional business. Because of this lack of growth in the interisland travel market, both carriers have relied on Federal subsidy payments over the past 10 years-payments which have aggregated from the year 1949 to 1958 $3,295,000. And, as is clearly evident on appendix D, these payments have been far from adequate, since neither carrier has realized a profit from operations, even after subsidy payments. Thus, any step that can be taken that would have the effect of increasing the commercial revenues of the two carriers will be very much in the interest of the carriers and the Federal taxpayer, through reduction of the subsidy requirements. It is essential that any increases in commercial revenues be derived by means other than increases in air fares. The level of air fares within Hawaii is already near the point of diminishing returns. As shown on appendix E, the fares of the interisland carriers have been increased several times in the past 5 years. Currently, the average fare per passenger mile charged by interisland airlines is 8.56 cents. This compares with an average for local service carriers in the continental United States of 6.88 cents. Considering the fact that interisland residents have no alternative but to travel by air, every possible step must be taken to gain commercial revenue increases from sources other than passenger fare increases. POTENTIAL INCREASES IN REVENUES OBTAINABLE THROUGH COMMON FARES Appendix G carries a calculation of the potential total dollars of additional passenger revenue that could be netted by the two interisland carriers if the common fare were adopted. This calculation shows that the maximum potential gain annually in commercial revenues is $1,621,000, if we assume that by establishing the common fare all mainland visitors will fly to the neighbor islands. Needless to say, it would be unrealistic to comtemplate this result, but the assumption shows it indicates the magnitude of the gain that will flow from adoption of the common fare. It certainly can be expected that a high percentage of the mainland visitors to Hawaii who now visit only Oahu would take advantage of the common fare and make a neighbor island trip during their stay in Hawaii. The total passenger revenues of the two carrier combined is annually $8,600,000. Their annual passenger load factors are approximately 55 percent. Thus, the common fare affords the two carriers the prospect of a substantial increase in passenger revenues, much of which can be accommodated within their present operating capacity. NOTE.-Civilian population (includes military dependents but excludes military personnel). APPENDIX B. HAWAIIAN AIRLINES, LIMITED [Copy of article published in Honolulu Advertiser in November 1958 re economy of neighbor islands] ONE BIG HEALTHY FAMILY? (By Roy E. Brown, Director, Tax Foundation of Hawaii) Residents of the city and county of Honolulu are well aware of the considerable growth in the territorial economy during recent years. Population has increased considerably; job opportunities are relatively high; total personal income has risen to over $1 billion, and other economic indicators seem to substantiate the assumption that the territory is enjoying a high level of prosperity. Yet, too often, the plight of our neighbor islands is overlooked. While various statistics indicate that the territory presently is enjoying a high economy, a closer look shows that this high prosperity is limited to the island of Oahu. The economy of the three neighboring countries in recent years has been moving backward. A study of population trends show that while the territorial population increased by nearly 85,000 or 17 percent in the past 10 years, this was due to a 97,000 or 28 percent increase in Oahu's population. The total population of the other three counties dropped by over 12,000-Maui 11 percent, Hawaii 9 percent and Kauai 4 percent. As measured by per capita personal income, the people on the neighboring islands collectively are not as well off as residents of Oahu. The latest county data compiled by the United States Commerce Department is for 1950 when the per capita income of the territory as a whole was 1,403. Oahu's per capita income for that year was $1,534-9 percent higher than the territorial average, but for the neighbor counties it was from one-fourth to one-third lower than for Oahu-Maui $1,131, Hawaii $1,031, and Kauai $1,142. There is little reason to believe that this relative position has changed greatly since 1950. The Bank of Hawaii has estimated that Oahu's per capita income in 1956 was $1,947, or 9 percent higher than the $1,787 average for the territory. Although the ability of neighbor islands to support government as measured by per capita income is lower than that of Oahu, the relative burden is higher. Per capita county government expenditures for calendar 1957 amounted to $68 for Oahu, as compared to $111 for Maui, $100 for Hawaii and $97 for Kauai. County tax revenues, which include collections from the taxes on real property, fuel, vehicle weight, and utilities franchise, a share of the general excise tax, and various licenses and permits, amounted to about $65 for Honolulu. In comparison, the per capita county tax receipts for Maui were $96, for Hawaii $80, and for Kauai $95. Territorial labor department statistics for the past 3-year period, ending October 1958, shows that while Oahu's labor force increased by over 6 percent, there was a decline of over 8 percent on Maui, nearly 6 percent on Hawaii, and almost 14 percent on Kauai. The same relative situation exists in the number of employed, with Oahu showing a gain of 72 percent, while the other three counties showed declines ranging from about 42 percent to 131⁄2 percent. While employment in the territory is presently at a high level, unemployment as a percentage of labor force in the other islands was higher than for Oahu during the past month-2.9 percent on Oahu as compared to 4.7 percent on Maui, 3.4 percent on Hawaii and 3.7 percent on Kauai. The decline in population and economic opportunity in the neighbor islands is partly due to fewer employees in the sugar and pineapple industries, which continue to be their most important economic base. With the decline of employment in these industries, there is a lesser need for other businesses and professional services. Thus, with the loss of job opportunities in these basic industries, there results a loss in other job opportunities, which in turn results in an outmigration of the younger people. This constant draining away of the young, energetic and usually better-trained population will, in time, create serious difficulties on the neighbor islands. It is hoped that the 1959 session of the legislature will devote considerable attention to ways and means of improving the economic condition of the neighbor islands. In these islands, local citizens have taken a long hard look at their own problems and in some instances have taken some action toward seeking means to improve their economic position. At the same time, however, Maui, Hawaii or Kauai's problems are the concern of all of the people in the territory. It cannot be expected that because there is economic growth in one portion of the territory that all of the territory is one healthy, prosperous community. The neighbor counties' economic difficulties cannot be answered by temporary loans or grants by the territory to the county governments. The need is for the further development of their economic base. It is only by providing the necessary opportunities that will result in population and economic growth that the long-range solution can be found. APPENDIX C. HAWAIIAN AIRLINES, LTD. Comparison of annual rate of growth in passenger traffic interisland airlines versus domestic carriers, years 1946–58 1 Scheduled operations only. NOTE.-Parentheses denote decrease. Local serv- Domestic Interisland Local serv- Domestic Interisland Local serv- Domestic trunk Interisland Millions Millions Millions 6.8 5,903. 1 35. 0 46. 4 6, 016. 3 42.6 582.4 1.9 21.7 Source: Interisland airlines-CAB form 41's; domestic trunks-docket No. 8008, APPENDIX D. HAWAIIAN AIRLINES, LTD. Summary of net operating income (loss), before and after Federal subsidy payments HAL and TPA, years 1949-58 [Dollar amounts to nearest thousand] Year Net operating income (loss) before Federal subsidy payments actually Net operating income (loss) after 1 As reported by each carrier on CAB form 41, with adjustment to reflect retroactive 2 Effective Apr. 1, 1957, both HAL and TPA accepted a service (subsidy-free) mail rate, 3 In the spring of 1958 (Aloha effective Mar. 3, 1958; Hawaiian effective May 5, 1958), the 2 interisland airlines opened their respective mail rates, by petition to the CAB on the |