Further, on page 31, in line 23, the word "airport operators" is used in the sentence pertaining to the "handling of the mail." We respectfully call your attention to the fact that airport operators or their employees do not have anything to do with the handling of mail since the air carrier is charged with the responsibility of the mails and all handling thereof is done by employees under the supervision and control of the air carrier.

On page 33, commencing with line 3, referring to the matter of consolidations, mergers, purchases, and so forth, we respectfully call your attention to the requirement that the air carrier shall submit an application to the Commission prior to the execution of any purchase, lease, and/or operating contract. We feel that this clause is ambiguous but agree that the provisions thereof are satisfactory insofar as they pertain to mergers, consolidations and the acquisition of control of other air carriers or airport operators; but it seems unnecessarily expensive and impractical to submit every lease, operating contract, or purchase agreement, many of which are of a routine nature, to the Commission before the consummation of such contracts or agreements. As an example, in the sale of obsolete equipment, the terms of the sale might be mutually agreeable to the parties to the contract but of a confidential nature between them, and in our reading of this section we understand that before the completion of any such sale it will be necessary to submit the details thereof to the Commission for approval.

I merely cite that point for your consideration. It may be, as I stated at the outset, that my conception of it is incorrect.

On page 36, commencing at line 12, the bill provides that

it shall be unlawful for any person to hold the position of officer or director of more than one air mail carrier or airport operator subject to this part unless such holding shall have been authorized by order of the Commission.

Provision is made in other parts of the bill for an air carrier to own landing fields and other ground facilities and we respectfully submit that if such properties are owned by the air carrier he should have the right to control those properties as an officer or director thereof. It is agreeable to us to submit such information to the Commission but no assurance is given that such authority shall be granted.

On page 36, commencing with line 19 and through line 23, we suggest that the meaning is not clear where it says:

It shall be unlawful for any officer or director of any such air carrier or airport operator to receive for his own benefit, directly or indirectly, any money, or thing of value in respect of negotiation, hypothecation, or sale of any securities, issued or to be issued by such air carrier or airport operator.

Does this mean that no officer or director can buy or sell for his own account stock in his own company?

Senator MCCARRAN. That language is taken from the Interstate Commerce Act.

Senator TRUMAN. That is what it is intended for, to keep the officers of the company from speculating in the stock of their own

company.

Mr. WRIGHT. That is the point I wanted to bring out. It is conceivable, however, that a man sufficiently interested in a company to be a director of it, and a man who spends his life in the company, being an officer and directing the affairs of it, might wish for his own

6310-35- 4

account to purchase securities issued by that company. normal thing, I should think.

It is a most Senator MCCARRAN. That is what caused the difficulty with the railroad organizations.

Mr. WRIGHT. Then may I suggest that some amended provision might be put in there to cover the question of speculation, but for legitimate investment give proper protection to the officers and directors. I merely lay that thought before you for your consideration. Senator MCCARRAN. You are giving us a hard problem.

Mr. WRIGHT. We respectfully point out that the stockholdings of all officers and directors of air carriers are now a matter of record with the Securities and Exchange Commission and such holdings are regularly reported to that body.

Further, on page 36, commencing with line 24:

or to share in any of the proceeds thereof or to participate in the making or paying of any dividends of such air carrier or airport operator from any funds properly included in capital account.

We submit that in line 19 the word "director" is used and it is not clear to us as to how a dividend may be disclosed without a vote of the board of directors. Dividends are payable out of surplus which is part of capital account and are properly payable only from surplus.

Gentlemen, these remarks are made as constructive suggestions. This bill contains many commendable features, but our testimony hereto today is the result of a careful but preliminary reading of the bill rather than an analytical study of it. Before the ultimate can be achieved in the drawing of the measure, we feel that factual information resulting from audit of the books of all air carriers should first be obtained. This is a complicated type of industry, and it is our feeling that this bill be given careful study and analysis not only by this committee and the air carriers but also by the various departments of the Government who are involved in its provisions, before the final draft is drawn. After a further analysis by the officers of our company, I should like to have the privilege, with your permission, to amplify these remarks at some future date.

(Thereupon the witness left the committee table.) Senator DONAHEY. Who is your next witness?

Senator MCCARRAN. I will call Mr. Thompson, of the United.

STATEMENT OF C. C. THOMPSON, REPRESENTING THE UNITED AIRLINES TRANSPORT CORPORATION

Senator MCCARRAN. Will you kindly state your name, Mr. Thompson, and the concern with which you are associated?

Mr. THOMPSON. My name is C. C. Thompson. I am associated with the United Airlines Transport Corporation.

Senator McCARRAN. With reference to the bill before this committee, the author of the bill and the committee would like to have your views or criticisms or observations.

Mr. THOMPSON. Well, I am in accord with the statement made by Mr. Wright. I feel that covers fully the attitude of our company. I do not believe there is anything I can add at this time.

Senator MCCARRAN. Generally speaking, and in keeping with Mr. Wright's observations, is it your view as it has been expressed here this morning, that this is a progressive measure and essential to the welfare of the industry?

Mr. THOMPSON. I think this is a very constructive measure, and I feel that it is going in the direction in which we must go for an ultimate solution of the problem of regulation among the airlines.

Senator MCCARRAN. Very well; thank you, Mr. Thompson, if that

is all you wish to say.

(Thereupon the witness left the committee table.)

Senator MCCARRAN. Is Mr. C. R. Smith, of the American, here? Mr. SMITH. Yes.

STATEMENT OF C. R. SMITH, PRESIDENT OF THE AMERICAN AIRLINES, INC.

Senator MCCARRAN. State your name and the concern with which you are associated.

Mr. SMITH. My name is C. R. Smith. I am president of the American Airlines, Inc.

Senator MCCARRAN. Operating between what points and in what territory, Mr. Smith?

Mr. SMITH. We operate from Los Angeles to New York, New York to Boston, Chicago to New York, Dallas and Fort Worth, Tex., to Chicago; from Nashville, Tenn., to Boston, and from Chicago to Washington.

Senator MCCARRAN. I would like to have you state for the benefit of the committee what your observations are in keeping with your experience with reference to this bill before the committee.

Mr. SMITH. Senator, I think that this bill fulfills one of the objects for which we are all working. I think it is constructive and can be made into very good, permanent legislation.

With your permission now or later, I would like to say there is probably some relief legislation which should be passed along with this measure. In other words, I think it will take some relief legislation and permanent legislation both to keep the business going. I have some information about the financial condition of our own company which I can give you if that is pertinent. But I would like to tell you that the air lines are in a very poor condition and they are rapidly getting no better, and we are very hopeful that you gentlemen of the Senate would expedite the passage of relief legislation permitting us to work with you with a constructive program of this kind toward permanent legislation.

Our company is one of the larger companies and we have operated the best we could, as economically as possible, but we find it quite impossible to make ends meet, as they say.

For instance, in the month of June, which is the best passenger month the company has ever had, and I think perhaps the best passenger month the industry has had, our company lost $56,000. During the period from the time the mail contracts were put into effect our company has lost approximately $2,000,000. We started. out with a capital of $2,000,000 and we lost $2,000,000. So you can see we are not in the best of financial condition. We very badly need some relief legislation and I think that perhaps this job could be divided into two parts, if you will permit my suggestion. First, the passage of relief legislation, and, second, the passage of a bill which we hope will be permanent, and for many years.

Senator TRUMAN. What do you mean by "relief legislation", increased rates for mail contracts?

Mr. SMITH. Yes, sir; as speedily as possible.

Senator MCCARRAN. If this bill were passed now, Mr. Smith, or reasonably promptly, would it not afford a large measure of the relief you have in mind?

Mr. SMITH. It would afford some relief. We have been sort of living from hand to mouth during the summer and getting funds where we could. Now, there is a bill pending before the House and the Senate, which has been passed by both the House and the Senate, and it is in conference now, which permits not only immediate relief but makes the relief retroactive to March 1. And if that bill should be passed by the Senate and the House, it would give us some very much needed funds to carry on our business. But then it is quite a hard job to stay in the business and conduct the type of operation we would like to conduct.

Senator MCCARRAN. It is in fact the view of the author that this bill, if enacted, would give practically the same relief as the bill now in conference. This bill would be retroactive. That is the view of the author. At least, it is the intent and, of course, it would give further relief by the regulation that your industry has sought for a long time.

Mr. SMITH. I do not believe it is stated, is it, Senator, that any provision in this bill is retroactive?

Senator MCCARRAN. Yes.

Mr. PUTNAM. On page 29, line 20, beginning at line 15, there is a proviso down through that page.

Mr. SMITH. Well, I am not sure, Senator, that that would be effective from the date of an order subsequent to the passage of this bill.

Senator MCCARRAN. That provision definitely says

Mr. SMITH. That would be very helpful. There is a

Senator MCCARRAN (interposing). Did you read the proviso on page 29, from line 15 on down?

Mr. SMITH. I read that, Senator, but I did not understand it that way. This bill if passed would place a great deal of responsibility on the Interstate Commerce Commission for the reason that most of you gentlemen are quite familiar with air transportation and know that conditions change in air transportation perhaps more rapidly than in any other form of transportation. And if under the operation of this bill we should have to spend a lot of time making minor changes, it would seriously hinder the progress of the industry and would probably be rather expensive, and I am sure that it is your thought in drafting this bill that the bureau set up under this bill would do everything it could to expedite speedy decisions on matters, you might say relatively unimportant routine matters.

Senator MCCARRAN. I will say in answer to that, you were familiar with my first bill in the Seventy-third Congress, were you?

Mr. SMITH. Yes, sir.

Senator MCCARRAN. Which provided for a separate and distinct commission?

Mr. SMITH. Yes, sir.

Senator MCCARRAN. I have never lost sight of that view, but it seems to me that under existing conditions, with the President's recommendation for coordination, that this was the best we could do with a separate commission, and we hoped that this bureau if set up

would accomplish the same general results that the independent commission would accomplish and at the same time conform to rapidly changing conditions.

Mr. SMITH. There is another thing which was not covered in this bill and perhaps should not be covered in this bill. But the aviation industry is not an important industry measured in dollars and cents. Measured in that way, it is a small industry compared to its competitors, but it has shown some promise of developing into a great industry some day. The legislation that is in progress will help assure that. But there will be perhaps a time when the Interstate Commerce Commission will be divided, as has been proposed before, and when that time comes we are hopeful that you gentlemen will see that the aviation industry is properly represented in this division, because if a man learns one form of transportation, why, he is not going to so readily see the problems of another form of transportation.

Although there might be some argument about it, aviation is a specialized business, and we should have on the Commission at some time people who know that business, and I am sure you want to do all you can to see that that is done.

I have a few comments I would like to make about some provisions. Senator MCCARRAN. We would be very glad to have them.

Mr. SMITH. Mr. Wright brought up one question about the inclusion of airports in this bill. It seems to me that the inclusion of airports in a bill complicates it to a certain extent.

I am sure there is a good reason for it, but it does look like there are going to be a lot of difficulties in trying to regulate airports and air carriers under the same bill for the reason that very few of the airports are owned by private companies. Most of them are owned by municipalities.

But I do not think that that will keep the bill from being a good bill. Perhaps, it would be a bit clearer if airports were regulated under another bill so as to keep the two things separate. But I do not think that that is fatal at all.

I am sure that you agree with me that the companies who have been in business for a long time should be entitled to certificates of convenience and necessity. For the reason we have been in business 7 or 8 years, we have experience, we have had the satisfaction of the public and the Government with our service, I think that we, who have shown a good record of operation, should automatically be entitled to a certificate of convenience and necessity.

On page 10 it says:

That if any air carrier or airport operator or any predecessor in interest, has been operating during the year 1934, or any part thereof,

it may continue such operation until

such time as the Commission shall pass upon the application for a certificate as provided for herein, which application must be filed within 120 days after this section takes effect.

My thought on that was that we should not encourage a lot of people to start airlines in the latter part of the year just in order to get certificates from the I. C. C., which they might later try to sell to others in the business. I was in the bus business at one time, and that was a common practice. A fellow would go out the last day of the week, on Saturday, and secure a certificate and then sell it to another