Now, Mr. Chairman, I respectfully offer for the consideration of the committee, and ask that it be inserted in the record, letter of July 26, 1935, over the signature of Frank McManamy, chairman of the legislative committee, Interstate Commerce Commission, and also letter of July 19, 1935, from the same party, bearing on and having to do with this bill and showing the study and analysis made by the author of the letters for and on behalf of the Interstate Commerce Commission.

Senator DONAHEY. Without objection it is so ordered.

(Letter of July 26, 1935, from Frank McManamy, chairman of the legislative committee, to Senator Wheeler, and letter of July 19, 1935, from Frank McManamy to Senator Wheeler, are here printed in full as follows:)

Hon. BURTON K. WHEELER,

INTERSTATE COMMERCE COMMISSION,
Washington, July 26, 1935.

Chairman Committee on Interstate Commerce,

United States Senate, Washington, D. C.

MY DEAR MR. CHAIRMAN: We have your letter of July 25 advising that the subcommittee appointed to consider S. 3027 will begin public hearings on that measure on Monday morning, July 29, at 10:30 a. m., in room 412, Senate Office Building.

Under date of July 19 we submitted a report on S. 3027, as amended by the substitute bill offered by Senator Reynolds, in which we suggested certain corrections and stated that:

Subject to the above corrections it is believed that the amended bill will promote the orderly and safe development of air transportation with due regard for the interests of the Government, the public, and the operators.

We have no further suggestions to make. I am attaching copy of this report which may be incorporated in the record as expressing the views of the commission.

Yours very truly,

Hon. BURTON K. WHEELER,

FRANK MCMANAMY, Chairman of Legislative Committee.

Chairman Committee on Interstate Commerce,

JULY 19, 1935.

United States Senate, Washington, D. C. MY DEAR MR. CHAIRMAN: The Chairman of the Commission has referred to our legislative committee your request for our comments on S. 3027, introduced by Senator McCarran, and entitled "A bill to amend the Interstate Commerce Act, as amended, by providing for the regulation of the transportation of passengers and property by aircraft in interstate and foreign commerce, and for other purposes. In compliance with your request of July 13, our comments are directed to the amended bill introduced by Senator Reynolds on July 10.

The bill and the amendment are similar in nature and text, but the amendment does not include certain provisions of the bill which seemingly are not within the purview of the proposed legislation. On the other hand, the amendment contains several provisions not in the bill which are desirable, if regulation of the nature proposed is to be provided. In addition, the amendment clarifies and strengthens many provisions of the bill. For convenience, there is attached hereto a table showing the sections of the bill which have been dropped by the amendment, the sections of the amendment which are new, and corresponding sections of the bill and the amendment, considering substance as well as text. The amendment follows the form of similar amendments to the Interstate Commerce Act carried in pending bills (S. 1629 and S. 1632) to provide for regulation of highway and waterway transportation, and in detail, follows very closely the provisions of those bills. Like them, it is similar in scope to existing law for the regulation of railroads, the Commission being vested with full jurisdiction over the services and charges of air transport carriers and airport operators engaging in interstate or foreign commerce.

Domestic air transport had its origin in a desire of the Federal Government to create a superior means of handling the mails and the development of the service

is the direct outgrowth of pioneering efforts on the part of the Government itself in originating night-flying and ground aids to navigation which made possible the first transcontinental air-mail route in this country.

When the Government had accomplished its original purpose of demonstrating the practicability of commercial flying, it turned over the air-mail transportation to private contractors. As a further means of perfecting the service, the Government later encouraged these contractors to provide passenger and express transportation with the expectation that eventually the cost to the Government of transporting the mails could be reduced to a nominal figure. Incidentally, it was thought the establishment of a network of air lines staffed with experienced personnel would serve as an adjunct to national defense.

Under this policy, the services of these contractors have gradually expanded until now they have in fact acquired the status of carriers, rather than primarily that of mere contractors for air mail. They now transport passengers and express under published tariff rates, have entered into interline agreements, both between themselves and with other forms of transport, have established consolidated ticket offices, and, in one instance 1, three railroads are actively participating in the development of air transportation service for passengers and express.

Today, practically all domestic transport service is rendered by mail contractors. The extent and phenomenal growth of the entire air carrier service of the United States is indicated by the following table:

The growing importance of passenger revenues to the air-mail contractors is apparent from the table attached hereto.

Although there has been a transition in the nature of the services rendered by air carriers, their services are still controlled by contract. The Air Mail Act of 1934 provides some degree of regulatory control over the services and charges, not only for mail, but indirectly to some extent over passenger and express traffic as well. There is thus the anomaly of carrier services being performed, and regulated to a certain extent, under contract. The pending amendments to the Air Mail Act of 1934 would amplify somewhat the present form of regulation, but would not change the method under which the service is being conducted, and would perpetuate the contract basis of mail payments.

There is no doubt that mail compensation still has an important bearing upon air transportation in this country, and that nevertheless many of the carriers are still operating at deficits. Neither of these facts, of course, alters their status as carriers, but the fact that their operations are authorized and conducted largelyin some cases, entirely-with reference to the mail service, precludes full application of the principles usually attending regulation of carrier services. At present the service is regulated solely with regard to the dispatch of the mail, rather than the public convenience and necessity. Termini of, intermediate stops on, and the frequency of schedules over the routes are decided largely with reference to the desire for mail service, and not with relation to natural traffic flows. Mail loads bear no relation to passenger or express loads, notwithstanding the inflexible limits of the maximum load capacity of airplanes, with the result that in some instances there is serious interference with the development of passenger and express business. The present method of conducting the service makes difficult the task of administering what little regulation thereof as a carrier is provided in the present law. The situation cannot be otherwise so long as mail transportation constitutes the predominating and controlling motive and influence of the service.

Considering the large sums of money and extensive time and effort which the Government has already contributed to the development and safe operation of

1 Route no. 27, in New England-Boston & Maine Railroad, Maine Central Railroad Co., and Central Vermont Railway.

air transportation, together with the encouragement it has given private enterprise to enter the field of carrier service by air, it would seem logical that if further development of the service is desired, such development should be carried forward under such regulation as it would eventually receive and which at the same time would give adequate consideration to all phases of the business, instead of exclusively to one. Development in this manner would be more orderly and more in harmony with that of other forms of transportation.

Assuming that it is the intention to give recognition to the carrier status of the air-transport industry, the amendment seems well designed and suited to meet its objectives, except that minor corrections should be made in sections 405 (a), 405 (m), 410 (e), 311 (g), and 417. These are pointed out specifically in the following resume of the amendment:

Section 402 contains the declaration of policy and the delegation of jurisdiction vesting the Commission with regulatory powers over transportation of passengers and property by air in interstate or foreign commerce.

Section 403 defines the terms used throughout the bill and provides for a public right of freedom of interstate or foreign air navigation in the navigable air space. Section 404 states the general duties and powers of the Commission, and provides for general supervision and study of the industry by the Commission so that development of air transportation will proceed along safe, efficient, and economical lines.

Section 405 prohibits air carriers and airport operators from engaging in interstate or foreign transportation or service connected therewith without a certificate of public convenience and necessity which the Commission is authorized to issue in accordance with the procedure prescribed in the section. Present operations are authorized to be continued until the Commission passes upon the application for a certificate. The Commission is authorized in issuing such certificate to specify the service to be rendered thereunder and to prescribe terms, conditions, and limitations which may be changed from time to time. No certificate shall be issued unless the applicant undertakes to provide for the handling of the mail, and, as is provided by the Air Mail Act of 1934, does not engage in the manufacture or sale of aircraft or engines or other aeronautical supplies, or does not pay compensation to any officer, director, or employee more than $17,500 per annum; and, if the applicant be a carrier, that it will not land or take off except in an emergency at an airport operated by an airport operator which does not have a certificate.

The last proviso of paragraph (a) of page 10, lines 12-15, purports to exempt intrastate operations from the scope of the bill. As now drafted, it may result in unintentionally exempting interstate or foreign operations when performed in part by a carrier or airport operator "engaged in operation solely within any State." To remove any doubt there may be, it is suggested that the provision should be made to read:

“And provided further, That this paragraph shall not be so construed as to require any air carrier or airport operator to obtain such certificate from the Commission to engage in transportation, or any service connected therewith, which is not subject to the provisions of this part.'

In paragraph (m) page 16, line 7, the word "persons" should be changed to "person".

Section 406 provides for a valuation of the property of air carriers.

Section 407 requires the filing of periodical and special reports and authorizes the Commission to prescribe the forms of accounts, records, and memoranda, including rules relating to depreciation charges. The Commission is given full access to these record, and to correspondence files.

Section 408 makes it the duty of air carriers and airport operators to furnish the required service and to establish reasonable charges, regulations, and practices therefor without unjust discrimination or undue prejudice.

Section 409 requires the filing and posting of tariffs and makes it unlawful to depart from the provisions thereof or to engage in service without having tariffs in effect, except that a limited amount of free or reduced rate transportation, patterned largely after sections 1 (7) and 22 (1) of the Interstate Commerce Act, is permitted. Simultaneous filing of divisions of joint rates is also required.

Section 410 authorizes the filing of complaints with the Commission against rates, regulations, and practices, and empowers the Commission either upon such complaint or in an investigation upon its own initiative to prescribe the lawful rate, regulation, or practice for the future. Like provision is made for divisions of joint rates. Suspension by the Commission of proposed tariffs is authorized. In prescribing just and reasonable rates, the Commission is precluded from

giving consideration to "goodwill”, but shall take into consideration the need of adequate and efficient transportation service at the lowest cost consistent therewith and of revenues sufficient to provide such service under honest, economical, and efficient management.

The Commission is empowered and directed to fix, and the Postmaster General is directed to pay, fair and reasonable rates of compensation for the transportation of air mail upon the basis of pound mile, weight, space, or any combination thereof, or otherwise. Certain factors to be considered by the Commission in fixing such rates are specified, and the Commission is vested with all the powers usually pertaining to its determination of reasonable rates for other forms of transport and services. The Postmaster General is authorized to take the weights of mail on air-mail routes and to make other computations for statistical and administrative purposes. Pending action by the Commission under these provisions, the Postmaster General is directed to pay to air carriers either the rates heretofore fixed by the Commission or, where no such rates are applicable, the rates provided by the contract between the Postmaster General and the air carriers under which the service is now being performed, except that the Postmaster General may negotiate for the reduction of any contract rate so paid. The Commission is directed to give precedence to the determination of fair and reasonable rates for the transportation of air mail where the Postmaster General continues payment under the former contract rate. These provisions are based upon the Air Mail Act of 1934 and the Railway Mail Pay Act of July 28, 1916.

In paragraph (e), page 28, line 19, the word "of" should be changed to "by." Section 411 gives to the Commission similar powers respecting consolidation, merger, and acquisition of control as are found in the Interstate Commerce Act relating to railroads, and as are proposed in the bills providing regulation for motor and water carriers. In addition, the prohibitions of section 7 of the Air Mail Act of 1934 against the interrelation of persons manufacturing or selling aircraft, engines, or aeronautical supplies and those engaged in transportation services is preserved, and a provision practically the same as that of section 20a (12) of the Interstate Commerce Act relating to interlocking directorates is incorporated. In paragraph (g) page 38, line 18, the word "operations" should be changed to "operators".

Section 412 makes the issuance of securities and assumption of obligations by air carriers and airport operators subject to the provisions of section 20a of the Interstate Commerce Act.

Section 413 requires air carriers and airport operators to designate an agent in Washington for the service of the Commission's orders and provides for the effective date and period of such orders.

Section 414 makes applicable the provisions of the Interstate Commerce Act relating to the general investigating power of the Commission, to the printing and publication of its reports, to rehearings, to the prescription of rules of practice and assignment of work, to the public nature of the tariffs, reports, etc., filed with the Commission by the air carriers and the airport operators, and, together with the Compulsory Testimony Act, the Immunity of Witnesses Acts, and the Urgent Deficiency Appropriations Act of October 22, 1913, to proceedings in court looking to review or enforcement of orders of the Commission.

Section 415 provides the criminal penalties for violations of this part, including the granting or soliciting of rebates, and of the Commission's orders. Failure to file reports or falsification or destruction of records, or the giving of information concerning the business of an air carrier or airport operator or a shipper are made punishable.

Section 416 authorizes the Commission to establish a Bureau of Air Transport through which it shall execute and administer the provisions relating to air transportation, and to employ the necessary personnel therefor, including a provision similar to that of section 16 (11) of the Interstate Commerce Act for employment on a professional basis and outside of the laws and regulations applicable to civilservice employees such qualified aviation experts or engineers as it finds necessary for proper administration. No member or examiner of the Commission shall have any pecuniary interest in air carriers or airport operators.

Section 417 repeals the prior acts for the establishment of mail service and fixation and payment of rates of compensation therefor, but authorizes and directs the Postmaster General to continue transportation of mail over the prior contract routes until such time as the Commission issues certificates of convenience and necessity, and to continue arrangements for transportation of mail of other countries or of United States mail by foreign carriers operating in foreign countries.

On page 47, lines 13-15, the words "in foreign countries for transportation by their service" are duplicated and appropriate correction should be made.

Sections 418 and 419 are the usual separability and effective date provisions. Subject to the above corrections it is believed that the amended bill will promote the orderly and safe development of air transportation with due regard for the interests of the Government, the public, and the operators. Respectfully submitted.

FRANK MCMANAMY, Chairman of Legislative Committee.

Table showing passenger traffic statistics for air-mail contractors