ment on the policies and merits of the proposed legislation. There is, however, a technical comment which the Department would like to call to the attention of your committee. Section 22 of the bill would amend section 406 of the Civil Aeronautics Act of 1938 to require repayments of subsidies under certain conditions. It is suggested that the sentence beginning on line 24, page 19, of the bill and the sentence beginning on line 7, page 21, of the bill be amended to read as follows: "Any such repayment by an air carrier shall be deposited in the Treasury by the Board, and shall be credited to the appropriation from which the payment was made.' This change is recommended (1) to provide that the Civil Aeronautics Board, as the administrative office, account for repayments by air carriers under the program, and (2) to identify clearly the appropriations which would be credited with such repayments. The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your committee. Very truly yours, Hon. WARREN G. MAGNUSON, W. RANDOLPH BURGESS, Acting Secretary of the Treasury. Chairman, Committee on Interstate and Foreign Commerce, United States Senate, Washington, D. C. APRIL 25, 1955. MY DEAR MR. CHAIRMAN: Reference is made to your letters of February 21, 1955, and March 24, 1955, requesting a statement of this Department's views on S. 1119, "To amend the Civil Aeronautics Act of 1938, as amended, and for other purposes," and amendments to S. 1119. The proposed legislation involves matters primarily within the jurisdiction of other agencies, and the Treasury Department, therefore, does not wish to comment on the policies and merits of the proposed legislation. There is, however, a technical comment which the Department would like to call to the attention of your committee. Section 19 of the bill would amend section 406 of the Civil Aeronautics Act of 1938 to require repayments of subsidies under certain conditions. It is suggested that the sentence beginning on line 16, page 17, of the bill be amended to read as follows: "Any such repayment by an air carrier shall be deposited in the Treasury by the Board, and shall be credited to the appropriation from which the payment was made." This change is recommended (1) to provide that the Civil Aeronautics Board, as the administrative office, account for repayments by air carriers under the program, and (2) to identify clearly the appropriations which would be credited with such repayments. The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your Committee. Very truly yours, W. RANDOLPH BURGESS, Acting Secretary of the Treasury. Hon. A. S. MONRONEY, AEROVIAS SUD AMERICANA, INC., Chairman, Aviation Subcommittee Senate Committee on Interstate and Foreign Commerce, Washington, D. C. DEAR MR. CHAIRMAN: On May 3, 1955, Mr. Ramsey Potts, Jr., presented before your subcommittee a prepared statement purportedly on behalf of the members of the Independent Military Air Transport Association. This is to advise that Aerovias Sud Americana, Inc., is a member of said association for the sole purpose of doing military business with the United States Government, and that said association was never authorized to appear before your committee, or any other committee, to represent the views of Aerovias Sud Americana, Inc., with respect to pending legislation. As a matter of fact, this company is unalterably opposed to certain proposals contained in Mr. Potts' statement. As the only United States certificated all-cargo carrier in the international field, this company does a substantial charter business. We cannot concur in Mr. Potts' theory that legislation should be enacted which might result in this company having to turn over to nonscheduled carriers business which it has pioneered and developed. Under present legislation the Civil Aeronautics Board has adequate authority to regulate, in the public interest, the extent and character of charter business performed by certificated carriers. Also, we believe that your committee should seriously consider the problems involved in the proposal that the Civil Aeronautics Board be empowered to regulate rates for foreign transportation of cargo. Unless strictly enforced, which undoubtedly would require a substantial staff, rate regulation in this field could result in considerable competitive advantage to foreign carriers. Unless such legislation is accompanied by provision for adequate enforcement, this company would be strongly opposed to it. It would be appreciated if the records of your subcommittee could be amended to reflect the above comments. Your consideration would be greatly appreciated. VICTOR V. CARMICHAEL, President. BRONX, N. Y., June 3, 1955. Hon. WARREN G. MAGNUSON, United States Senator, Senate Office Building, Washington, D. C. DEAR SENATOR MAGNUSON: I realize that I am writing after the May 27 deadline, but I feel that there is a chance that you may be able to advise the members of the committee of the following. On page 8 of my statement I pointed out that the carriers were attempting to reduce the training of international flight attendants. The Atlantic region of Trans World Airlines, Inc., has formally announced that effective immediately, cabin attendants will attend wet ditching drills every 3 years instead of annually as has been the practice. This was undoubtedly the result of the recent CAB draft release tightening safety training of cabin attendants. I sincerely hope that Mr. Rizley will be requested not to tighten other air safety measures. If the senior Senator from Washington was in attendance at the recent hearings concerning the flow of narcotics into the port of New York, he would have heard the following information quoted by the Bureau of Customs. I hesitate to use figures which are taken from verbal testimony, but I am sure that the committee may obtain immediate verification from the Bureau of Customs, Enforcement Division. To those of us engaged in the air transportation industry, these figures came as no surprise. In my opinion, international arrivals by air will exceed surface vessel arrivals by at least 40 percent in fiscal 1956. There is but one question. When are air passengers going to be given adequate protection by the rigid training and impartial examination of cabin attendants? Sincerely, DANIEL J. SAVAGE. CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA, Hon. A. S. MIKE MONRONEY, Chairman, Subcommittee on Aviation, Committee on Interstate and Foreign Commerce, United States Senate, Washington 25, D. C. DEAR SENATOR MONRONEY: The Chamber of Commerce of the United States wishes to express the views of its members on certain issues involved in S. 1119 and S. 308, the omnibus aviation bills pending before your subcommittee. The Chamber agrees with the requirement for a showing of public need before authorization of air transportation, the need for regulation of contract air carriers, and the gradual withdrawal of air-transport subsidy. It opposes the extension of rate regulation to the international field. Specifically, our membership believes that: (1) The policy of the Civil Aeronautics Act establishing regulated competition in air transportation is sound, and the exemption authority contained in the act should be used only in limited and exceptional circumstances. To the extent that there is a public need for air-transport service now being offered under the irregular carrier exemption, this need may be met by the issuance of certificates authorizing such service upon proof of public convenience and necessity and the fitness of the applicant. This burden of proof should be upon the applicant and not upon the Civil Aeronautics Board, as advocated in proposed amendment C to S. 1119. The enactment of this amendment would completely reverse the basic principles of the Civil Aeronautics Act, and all other similar acts passed by Congress to regulate carriers and public utilities. (2) The rates and service of contract carriers by air should be regulated under the Civil Aeronautics Act, in order that there may be a determination in each case as to whether the operation is a bona fide contract service or in reality that of a common carrier. Enforcement of the act is deficient without this information. (3) Government financial aid to domestic air transportation should be limited to a reasonable development period and should be gradually withdrawn as the industry becomes established. Further, the existence of a route certificate should not in itself obligate the Government to continue subsidizing a service if it is determined that the cost has become disproportionate to the public benefit. It is recognized that great strides have been made in the past few years toward self-sufficiency of air transport, with subsidy becoming an increasingly less important part of carrier revenues. We believe that this trend should be encouraged in every possible way. (4) Authority should not be granted to the Civil Aeronautics Board to regulate rates in international air transportation. No valid need has been shown for the substitution of governmental ratemaking for the flexible conference-type of ratemaking now in existence through the International Air Transport Association. The grant of this authority would be especially objectionable since, under a provision in most of our bilateral air-transport agreements, the United States Government has contracted with other governments to submit any contested rate of American international air carriers to the International Civil Aviation Organization for an advisory report, and to use its best efforts under the powers available to it to put into effect the opinion expressed in such a report. The International Civil Aviation Organization, as you know, is an international body composed of government representatives. Under existing law, the powers available to our government over international air rates are not extensive but if the authority to fix minimum rates proposed in these bills were granted, the Civil Aeronautics Board would be obligated to put into effect the rate agreed upon in ICAO, where the American air carriers concerned have no direct voice. We do not believe that American-flag carriers should be subjected to the authority of an international governmental body. We would appreciate it if you would make this letter a part of the record of your hearings. Cordially yours, CLARENCE R. MILES, Manager, Legislative Department. Hon. Ross RIZLEY, Chairman, Civil Aeronautics Board, Department of Commerce, Washington, D. C. DEAR MR. CHAIRMAN: In a statement of the views of the Chamber of Commerce of the United States on certain issues involved in S. 1119 and S. 308 submitted by letter to me from Clarence R. Miles, manager, legislative department, under date of May 16, a number of reasons are presented in opposition to granting to the Civil Aeronautics Board authority to regulate rates in international air transportation. The following are the reasons presented by Mr. Miles on behalf of the chamber: "Authority should not be granted to the Civil Aeronautics Board to regulate rates in international air transportation. No valid need has been shown for the substitution of governmental ratemaking for the flexible conference-type of ratemaking now in existence through the International Air Transport Association. "The grant of this authority would be especially objectionable since, under a provision in most of our bilateral air-transport agreements, the United States Government has contracted with other governments to submit any contested rate of American international air carriers to the International Civil Aviation Organization for an advisory report, and to use its best efforts under the powers available to it to put into effect the opinion expressed in such a report. The International Civil Aviation Organization, as you know, is an international body composed of government representatives. "Under existing law, the powers available to our Government over international air rates are not extensive but if the authority to fix minimum rates proposed in these bills were granted, the Civil Aeronautics Board would be obligated to put into effect the rate agreed upon in ICAO, where the American air carriers concerned have no direct voice. We do not believe that Americanflag carriers should be subjected to the authority of an international governmental body." I shall appreciate it if the Board would review the issues presented by the chamber and give me your comments thereon for inclusion in the record. Sincerely, MIKE MONRONEY, Chairman, Aviation Subcommittee, Senate Committee on Interstate and Hon. A. S. MIKE MONRONEY, Chairman, Aviation Subcommittee, CIVIL AERONAUTICS Board, Washington 25, D. C., May 27, 1955. Committee on Interstate and Foreign Commerce, United States Senate, Washington 25, D. C. DEAR MIKE: The Board is pleased to have this opportunity to express its views concerning the comments of Mr. Clarence R. Miles, manager, legislative department, of the Chamber of Commerce of the United States relating to legislation granting Board authority over rates in foreign air transportation of United States air carriers. In the Board's opinion, the views expressed by Mr. Miles are not well founded. The gist of Mr. Miles' argument appears to be (a) that passage of the legislation would substitute a governmental rate machinery for the conference-type of ratemaking in the International Air Transport Association (IATA), and (b) that the executive branch of the Government, by means of bilateral air-transport agreements, has contracted away certain rights of its air carriers regarding the fixing of rates which the passage of legislation granting rate power to the Board in this field would fully implement and subject United States air carriers to rate control by an international body. The Board believes on the contrary that passage of the legislation would strengthen our carriers' position in IATA, whose ratemaking machinery the Board continues to endorse. With respect to the second and principal point raised by Mr. Miles the Board believes that, under present law, United States air carriers, far from being independent to fix whatever rate they choose, are subject to almost complete rate control by the foreign countries to which they operate, without this Government having any effective power to back up our carriers in their contentions. The enactment of rate-control legislation would bring into force provisions in these agreements divesting foreign countries of this power and placing it in major part in the hands of the Civil Aeronautics Board. In effect, passage of this legislation would give the United States control over the rates of our carriers which now is in foreign hands. The fallacy in Mr. Miles' argument lies in the unexpressed assumption that air carriers, in the absence of international agreement, are free to charge any rate they may decide upon. His logic, which might have certain application in the maritime field where the doctrine of freedom of the seas prevails, has precisely the reverse application in the aeronautical field. In aviation, there is no freedom of the air. National sovereignty in airspace is reaffirmed by the Chicago Convention and is a matter of fundamental policy not only of this country, but of all the other sixty-odd parties to the Chicago Convention. There is consequently no natural right on the part of an air carrier of any country to serve ports within the territory of another country. Article 6 of the Chicago Convention expresses this principle in the following language: "ARTICLE 6 "No scheduled international air service may be operated over or into the territory of a contracting state, except with the special permission or other authorization of that state, and in accordance with the terms of such permission or authorization." [Italics supplied.] The bilateral air-transport agreements constitute the groundwork for obtaining this special permission or other authorization. Thus, they are the mechanism whereby rights are obtained for air carriers rather than agreements which curtail such rights. It has not been possible to obtain these rights completely free of conditions. In particular, one of the matters over which foreign countries have consistently refused to relinquish control in granting bilateral operating rights to United States carriers has been the veto power over the rates charged by our carriers in the absence of effective rate control in the aeronautical authorities of the United States. The agreements, therefore, provide for a certain veto power in the government of each country admitting carriers foreign to it, as a condition on the right of entry of such carriers to its territory. This veto power takes the form, in the case of an IATA rate, of the requirement that all countries must approve any rate agreed to by their carriers before it can be put into effect. This is a veto power pure and simple, since any one government may prevent the rate from going into effect. When veto action is taken, or for other reason there is no agreed IATA rate, an "open rate" situation is said to exist. Under such circumstances, with the present law in effect, the foreign country retains almost absolute veto power under the bilateral agreements over rates charged by a United States air carrier. There is, it is true, a clause in our bilateral agreements providing that the rates shall be fair and reasonable. Thus, if the United States believes that the rates charged by its carriers in fact are fair and reasonable, it may challenge the foreign country's determination to prevent the rate from becoming effective, hold discussions with the foreign government and attempt to convince it of its error, and if this fails, go to international arbitration. But it should be emphasized that under the present system, the carrier may not put the challenged rate into effect pending its final settlement. Bilateral agreements, however, are so worded that if the Civil Aeronautics Board obtains rate control power over its own air carriers, a new rate, which has been approved by the Board, may be placed in effect notwithstanding any objection by the foreign country concerned. This rate, again, is subject to international conference and settlement by international arbitration in case of continued disagreement between the governments. However, the major difference between this and the present situation is that, pending the settlement of the case on international arbitration, the rate is in effect. In the Board's opinion, this fact alone is all important, since international arbitration may last a considerable period of time, and during this period the new rate can be tested in practice to see whether it is a sound and economic rate, or whether it has the catastrophic results anticipated by the foreign country. Moreover, it is the opinion of the Board that the burden of proof in the international arbitration would be on the foreign country in the event that the Board has rate control and has found the challenged rate to be fair and reasonable. As a necessary corollary to the foregoing, we believe that the grant of rate power to the Board would, under the Air Transport Agreements, give United States air carriers additional bargaining power and greater flexibility in negotiating a rate within IATA than they now possess. At the present time our air carriers are not completely free agents to bargain within IATA as to the proper level of the conference rates. Every rate IATA sets must be without objection of any member carrier and must be designed to overcome potential objections of all governments, foreign as well as the United States. Because of the lack of direct Board power over rates in foreign air transportation, and under the bilateral agreements as now written, there is no practical governmental power to back up United States carriers in supporting rates which they might urge within IATA. |