(The letter referred to follows:)

Hon. BURTON K. WHEELER,

Chairman Committee on Transportation,

Interstate and Foreign Commerce,

THE ATLANTA CONSTITUTION,
Atlanta, Ga., February 25, 1935.

House of Representatives, Washington, D. C.

DEAR MR. CHAIRMAN: I have been asked to appear before your committee to give it the benefit of my views as regards the regulation of transportation generally.

Having spent most of my time in Washington for the past several months in the service of the Federal Aviation Commission, it is impossible for me to leave here at this time as I am in the midst of the efforts to catch up with business matters which have accumulated during my absence and which now require my attention.

Permit me, however, to take this opportunity to put myself on record as being in favor of the complete regulation of all forms of transportation by the Federal Interstate Commerce Commission-water, air, highway, and railroad.

The lack of such uniform regulation has put many, if not most, of the railroad systems of the country in bankruptcy.

It is unreasonable and unjust that different forms of transportation, all serving the public, should not be subject to the same regulation as to rates and operative conditions.

The broadest measure of control as regards each of these forms of transportation should be placed in the hands of the Interstate Commerce Commission, and the sooner this is done the better it will be, not only for each of these transportation systems but for the country at large.

Very truly yours,

CLARK HOWELL.

Senator DONAHEY. Anything else, Senator McCarran?

Senator MCCARRAN. That is all, except that I wish again to thank Mr. Branch for his encouraging remarks in furtherance of the bill. (Thereupon Mr. Branch left the committee table.) Senator DONAHEY. We will now hear Mr. Crowley.

STATEMENT OF KARL A. CROWLEY, SOLICITOR, POST OFFICE DEPARTMENT, WASHINGTON, D. C.

Mr. CROWLEY. I think it might be well to briefly state the provisions of the present law that air lines are operating under which have air-mail contracts. Without going into too much detail I will say that

Senator DONAHEY (interposing). Be as brief as possible.

Mr. CROWLEY. The law provides that these present contracts may be continued indefinitely by the Postmaster General, subject to the rules, regulations, and orders of the Interstate Commerce Commission. Under the present law the Interstate Commerce Commission is directed to review rates being paid to contractors, to audit their books, accounts, and records, and to revise rates downward from the amount of their original bids.

Some contracts are let at low prices, ranging from 8 cents to 39/2 cents I believe it is. These rates have all been reviewed, and the Interstate Commerce Commission has fixed what they call fair and reasonable rates on every air line. Some rates that they have fixed are in excess of the contract rate or the bid rate.

The Post Office Department undertook to assist in the passage of legislation, working with committees of the House and Senate, that would enable the Interstate Commerce Commission to readjust these

rates, to revise these rates upward as well as downward, to regulate them in every detail. And a bill was offered in the House, and also in the Senate, for that purpose. The bill passed the House, and a bill in a different form passed the Senate, and then they went to conference, and in conference they have been agreed upon, and the bill is now up for consideration, in the Senate today.

Under this bill the rates of contractors are assured as of March 1, in accordance with the rates of the companies at that time found by the Interstate Commerce Commission. The Post Office Department did not resist that at all, because that had been determined to be fair and reasonable rates for the lines as reported by the Interstate Commerce Commission.

That will result in the contractors receiving about $1,700,000 more for carrying the mail in the present order of the Interstate Commerce Commission than the bids for carrying the mail. It will increase the total rate of pay to ten million some hundred thousand dollars, and will afford relief to those contractors who have been carrying the mail at low rates.

The views of all, I think, who have been working on this problem are that the aviation industry, the air lines, must have Government aid, call it a subsidy if you will, but that they must have more for carrying the mail than they have for carrying passengers and express. It is anywhere from about four times as much from the Government per pound per mile for carrying the mail than they receive for carrying passengers and express. That is, on the heaviest mail-carrying lines.

And that ranges up to 20 times as much cost to the Government on some of the weaker lines than they charge for carrying express, and, too, in connection with competition with the Post Office Department in the case of parcel post.

The necessity for an increase has been recognized. Under the present law the lines have been well located and established. The Interstate Commerce Commission is authorized to fix rates, to reduce or increase rates as conditions change. It follows the same principle, I am sure, that Senator McCarran has in his bill, whether definitely stated or not, that the Interstate Commerce Commission can, after studying the conditions, investigating each carrier, determine fair and reasonable rates.

The bill as reported out by the conference gives considerable further latitude in another direction. It has been the view of the Post Office Department that so long as these lines were on subsidy, were being supported by the Government, that their operation should in a measure be controlled, that they should not be allowed to wander out across different parts of the country and put out new and competing lines unless they were required by the public interest and it could be so shown.

The bill as reported out, and which will be voted on in the Senate today, provides that the carriers so receiving this Government aid shall operate only on their air-mail routes, or on such service as they had inaugurated prior to July 1, 1935, with this proviso, that extra services might be effected or services might be diminished, or the frequency even increased by the Interstate Commerce Commission. To give you a practical illustration: We have an air-mail line that runs from Washington to Detroit, known as Central Airlines, Inc.

There is another line that runs from Detroit to Milwaukee, known as Pennsylvania Airlines & Transport Co. The Pennsylvania Airlines & Transport Co., in addition to its mail schedule between Milwaukee and Detroit, operates six passenger schedules between Washington and Detroit, and then going on into Milwaukee.

Under this provision the six schedules of the Pennsylvania Airlines & Transport Co. might be continued, or they may even be increased, if after a study of the situation by the Interstate Commerce Commission it is of opinion that those lines are required in the public interest.

Now, the present air-mail law has a great many safeguards that absolutely must in the public interest in my judgment be continued. We are limited as to the amount of mileage that may be covered. I think it is 32,000 route-miles. That is further limited by the number of miles which may be flown per year, under the new law 45,000,000 miles.

Senator MCCARRAN. Who fixes that?

Mr. CROWLEY. That is the total for all the lines.

Senator MCCARRAN. But who fixes that regulation?

Mr. CROWLEY. The contracts are awarded for a certain number of trips between each point, that being done by the Post Office Department.

Senator MCCARRAN. But there is somebody who fixes that.
Mr. CROWLEY. I am trying to explain it to you.

Senator MCCARRAN. All right.

Mr. CROWLEY. We will say we have two trips from here to New York per day for one line. The Postmaster General may allot an additional or extra schedule to the carrier if the services warrant it, if the mail service warrants it, but he is limited to the extent of providing service of not more than 45,000,000 airplane miles per year, or for routes not for an excess of 32,000 miles, and that service is almost being flown today.

There is another limit placed in here. The Interstate Commerce Commission

Senator MCCARRAN (interposing). Before you go into that will you kindly get back to my question? Who fixes that regulation?

Mr. CROWLEY. I tried to explain that, the Postmaster General. Senator MCCARRAN. Who fixes that regulation now?

Mr. CROWLEY. The Postmaster General can increase or decrease the frequency of the schedules, and he does. There is no particular regulation that serves except in special cases. Mr. Cisler is here, and he will, as he naturally can, explain that to you better than Í

can.

Senator MCCARRAN. But you know the law. tions as to the limit of miles?

Who fixes the regula

Mr. CROWLEY. Oh! The Congress has fixed that limitation itself. The Post Office Department has nothing to do with that. That is in the act of Congress. That is why I say the present air-mail law is superior to the proposal that you make.

Senator DONAHEY. And the Postmaster General is held to that limitation?

Mr. CROWLEY. Yes, sir. And following that on up, as to limitations on the Interstate Commerce Commission, the Congress said to the Commission: You examine into the affairs, the books and records

of these companies and see how they are getting along. You can raise or reduce the pay of these lines, but you cannot raise it in excess of 33% cents for carrying 300 pounds of mail 1 mile, and 40 cents as a maximum for any mail load in excess of 300 pounds. That is the limitation fixed by Congress. As it is there is no knowing how far the mail pay may be increased. We have reduced it under the present system of pay from about 20 or 21 million dollars, under the former administration, down to approximately 10 million dollars now. And of course Mr. Branch has related the increase in the service.

Now, the arrangement is flexible here. The authority is in the Interstate Commerce Commission. It is not in the hands of the Postmaster General. There is a definite plan fixed up whereby these folks are controlled. The air-mail contractor who is receiving money as Government aid is directed not to take this Government aid and expend it in off-line operations. If it is not controlled in some manner, and it should be controlled specifically by Congress, there would be applications filed before the Interstate Commerce Commission constantly for increase in service by stronger lines who have built up or who would establish monopolies.

And there are so many fine provisions of the present law that are repealed by this bill that I think this subcommittee would want to carefully scrutinize the provisions of the bill, and the provisions of the present law before you recommend that they be repealed. There will be a time, of course, when the Interstate Commerce Commission may control every phase of it, but as long as the lines are under Government subsidy there should be a limit even as to the authority of the Interstate Commerce Commission to establish additional services and to allow unreasonable competition. They have not reached that point yet.

Senator DONAHEY. Would you be willing to furnish for the record any amendments you may suggest to the bill?

Mr. CROWLEY. Well, I think, Senator Donahey, if you will permit me to say so, we have good provisions of law already on the statute books, that have been carefully considered by both Republicans and Democrats, both in the House and the Senate. I think the good things of the bill, the most of them at least, are already here, already on the statute books. They are already in the law.

Senator DONAHEY. Then you feel there is no necessity for this measure, is that correct?

Mr. CROWLEY. Yes, sir; that is right.

Senator MCCARRAN. When did you change your mind on that? Mr. CROWLEY. I have not changed my mind on it.

Senator MCCARRAN. Did not you say to me the other day that eventually this bill should become a law?

Mr. CROWLEY. I agreed that eventually the Interstate Commerce Commission should have full and complete control.

Senator MCCARRAN. You stated that eventually the principles of this bill should become law.

Mr. CROWLEY. Yes; that is right.

Senator MCCARRAN. And I wanted to know when you changed. your mind.

Mr. CROWLEY. But you are looking ahead years hence in my opinion.

Senator MCCARRAN. Well, perhaps I am far ahead of the Post Office Department. I take great credit on that.

Mr. CROWLEY. Well, you are a good traveling companion anyhow. I should now like to show you, Mr. Chairman, what is repealed by this bill.

Senator DONAHEY. All right.

Mr. CROWLEY. Section 3 (b) of the Air Mail Act of 1934 is repealed, which provides that—

no contract or interest therein shall be sold, assigned, or transferred by the person to whom such contract is awarded, to any other person without the approval of the Postmaster General; and upon any such transfer without such approval, the original contract, as well as such transfer, shall at the option of the Postmaster General become null and void.

That would allow a transfer and would authorize a merger of two or more companies, so that there would be built up monopolies. Mr. BRANCH. You mean it would prevent it.

Mr. CROWLEY. Yes; that section 3 (b) prevents it, or to repeal it would then permit it to be done. It also allows the Post Office Department to determine the character of the contractor it employs. Senator MCCARRAN. Is not that in the proposed bill carried to the jurisdiction of the Interstate Commerce Commission by means of transferring the issuance of certificates under and with the consent and approval of the Interstate Commerce Commission?

Mr. CROWLEY. I think the bill specifically authorizes the merger of these lines.

Senator MCCARRAN. You probably have not read the bill.

Mr. CROWLEY. Well, of course that is to be submitted to the Interstate Commerce Commission.

Senator MCCARRAN. Yes.

Mr. CROWLEY. Section 3 is repealed. That pertains to the awarding of contracts by competitive bidding.

Section 4 in reference to advertising, is repealed.

Section 5 relates to the awarding of a contract by advertising. Section 6 is repealed. It directs the Interstate Commerce Commission to grant hearings from time to time and determine fair and reasonable rates of compensation for the transportation of air mail by airplane and the service connected therewith. That has been substituted by another provision in Senator McCarran's bill.

It provides here that there is also repealed the provision with reference to getting a continuance of these present contracts that have been satisfactorily performed. In lieu of that these contracts are continued until application for a certificate of public convenience and necessity may be acted upon, and it would mean this: That any line, wherever located, might go into other territory, where service is being reasonably well performed and the line is trying to get on its feet and become established, and make application for a certificate of public convenience and necessity.

Senator MCCARRAN. Mr. Crowley, I beg pardon, because I do not want you to get into the record an absurd condition. Please do not do that.

Mr. CROWLEY. What do you mean?

Senator MCCARRAN. You know that under certificates of public convenience and necessity, the present lines would fly until the Commission had a chance to consider the issuance of certificates of convenience and necessity.