Mr. Clark will distribute a digest of the Poage committee recommendations and two other exhibits to which I shall make reference in a few moments.

Unless this committee so directs, I will not take time to discuss, in detail, the findings of the Poage committee. However, I do wish to draw the committee's attention to the classification of aeronautical surpluses into five basic categories, namely, tactical aircraft, transports, personal aircraft, aircraft equipment and components, and unabsorbed surplus. In other words, an airplane is a weapon of war, or a transport, or a personal vehicle, or a bunch of assorted spare parts, or a pile of scrap, and different procedures have to be followed in respect to each class.

Kindly refer to the second exhibit which has been distributed. It contains some additional illustrations of the types of aircraft which come within the three classes: (a) Tactical, (b) transport, (c) personal. You will note that the tactical category includes advanced trainers, fighters, light bombers, medium bombers, and heavy bombers. The transport category includes several different types of transports, some small, others large.

And the personal aircraft category includes light planes; liaison planes, used for communication, reconnaisance, and observation purposes; primary trainers, and the "utility cargo" planes which are mostly single-engined cabin planes.

Next, will you please refer to the chart which shows the manner in which surplus aircraft disposaris organized. It shows the relative positions of the Board, the owning agencies, the disposal agencies, and the Aviation Division of the Board, of which I am Director.

You will note that two disposal agencies have been designated to handle surplus aeronautical property, namely, the Reconstruction Finance Corporation and the Foreign Economic Administration. The Reconstruction Finance Corporation is responsible for aircraft disposal in the United States, its Territories, and possessions. The disposal responsibility in the Territories and possessions was transferred from Treasury Procurement to the Reconstruction Finance Corporation as recently as May 1. This transfer accounts for the obvious erasure of a box in the center of the chart.

The disposal responsibility in foreign territory will soon be transferred from the Foreign Economic Administration to the Army-Navy Liquidation Commission, which will then have the entire responsibility for disposal of all surpluses in foreign territory.

The Board functions by issuing regulations and orders, under the Surplus Property Act, which govern the operation of both owning and disposal agencies. These regulations and orders are represented by the jagged lightning-like lines at the top of the chart.

The Poage committee recommended that because of the mobility of aircraft and because of the impact of surplus aircraft sales on the development of United States commercial and military air powerboth national and international-a high degree of control, direction, and coordination of the aircraft disposal program should be vested in the Aviation Division of the Board.

Intragovernmental coordination is effected largely through the medium of the Inter-Departmental Working Committee on Surplus Aircraft Disposal which contains representation from the State, War, Navy, and Commerce Departments, the Civil Aeronautics Board,

the War Production Board, and the two disposal agencies. The Inter-Departmental Working Committee is represented in the box which appears on the chart at the right hand side of the Aviation Division.

Surplus property is not declared to the Board but, as you can see, is declared directly to the disposal agencies.

The boxes on the lower right- and left-hand sides of the chart, and the arrows pointing upward, show the procedures for purchasing various classes of aeronautical property. I shall not take the committee's time to go into this phase of the program. The purpose of this session is to explain the requirements of the Reconstruction Finance Corporation for funds to carry on its part of the dispossi program. I shall, therefore, give you a brief explanation of what the Reconstruction Finance Corporation is required to do, after which the R. F. C. representatives here today will be happy to explain the details of the expenses which they expect to incur.

I shall now refer to a series of charts showing surplus aircraft disposal procedure.

Because we have been engaged in war it necessarily follows that most of our surplus planes are built to meet specialized military requirements. They include combat planes-fighters and bombers. There will also be a large number of transports. There will be many trainer planes and a few light planes used for observation and communication. There will be large quantities of components and parts. Planes become surplus when they are worn out or obsolete to military requirements.

Many planes and parts can be sold for flight use.

(a) A few combat planes have special uses in industry, such as sky writing, forest patrol, and aerial survey.

(b) Almost all transport types will have some commercial application. However, this does not mean that all will be salable when newer types are put on the market.

(c) Some of the primary trainers and light planes are suitable for civilian training and private flying.

(d) There is a demand for components and parts for salable aircraft. B. On the other hand, most surplus planes and the component parts cannot be disposed of for flight use. The aeronautical surpluses which are generally unsalable are:

(a) Models which cannot be licensed for civil flight purposes by the Civil Aeronautics Administration. This includes almost all combat planes.

(b) Transport planes unsuitable for commercial operation.

(c) The majority of trainers which are too expensive to operate for commercial or personal use.

(d) Components and parts peculiar to combat aircraft.

At this point, in order to illustrate the channels through which surplus aircraft becomes surplus and are disposed of, I shall ask Mr. Clark to distribute two pictorial charts. Will you please refer to the chart marked "Disposal of usable planes."

When an airplane is no longer needed by the Army or Navy it is referred to the Munitions Assignment Board for possible redistriba tion among the United Nations. This is largely a formality s: present, inasmuch as our allies cannot use worn out or obsolete equipment. Once released by M. A. B. the aircraft are declared

excess to "the combined military requirement", after which the Army and Navy declare them surplus to the Reconstruction Finance Corporation and the flyable aircraft are delivered to R. F. C. fields.

The salable models, mostly transports, primary trainers and the "light liaison" type aircraft, are maintained in operational condition on the Reconstruction Finance Corporation's fields, of which there are 57. I have a map of them to which the R. F. C. representatives will make reference later on in this presentation, showing how they are distributed. The red dots are the sales fields chosen because of their proximity to the market for aircraft. They do not belong to the Government and planes are placed there under agency arrangements with the operators of the fields. The blue dots show the fields which are used largely for storage, although sales are made from these fields also. These fields are themselves surplus in many instances. They were built originally for military training purposes and were purposely placed away from centers of population, and therefore are not generally good sales points, but they are satisfactory storage fields.

Transports are sold on a fixed-price basis. Those types which are in short supply are referred to the Director, Aviation Division, of the Surplus Property Board, for allocation among applicants.

Primary-training aircraft are in long supply and we doubt that we can sell them all at any price. The best ones are graded according to condition and sold at prices ranging from $875 to $2,400. Those in very poor condition are not offered for sale.

Light planes and the smaller aircraft designed for personal transportation are in extremely short supply. They are sold on a competitive-bid basis. The ultimate purchaser in each case is protected by a ceiling price established by the Office of Price Administration. Now may I call your attention to the second chart "Disposition of unusable aircraft."

The unsalable planes those which were built for combat; those unlicensable for civilian use; those beyond economic repair-are set aside without maintenance. When manpower becomes available they will be scrapped. However, they are first stripped of usable components, some of which are added to components and parts inventory, if salable for aeronautical purposes.

Some can be distributed for nonaeronautical uses; for example, it is possible that engines can be used to develop power on remote farms, or for the reconstruction of Europe.

The residual is prepared for sale as scrap. A great deal of attention is being given to devising the most efficient scrapping methods.

On the other hand, items suitable for educational use will be disassembled and packed for disposition to schools and colleges for nonflight educational purposes. It is understood that some 30,000 schools and colleges throughout the United States will want some of this material.

DISPOSAL OF COMPONENTS AND PARTS

By far the most difficult problem facing the disposal agencies is the handling of components and parts. That is because of the vast number of items that exist. There are more than 500,000 classifications of items in Army catalogs alone, and the Navy has many others. The individual items are scattered all over the country and all over the world.

When we speak of components we mean major assemblies, such as engines, propellers, generators, magnetos, and the like, which are not necessarily peculiar to particular aircraft.

When we speak of parts, we mean spare parts for airplanes and components. These are the special assemblies built for a particular air frame, or a particular component. A part might be any thing from a wing to a cylinder barrel.

Then there is still another category of parts which we call aircraft hardware. This category includes standard items and minor assemblies which are widely interchangeable, such as nuts, bolts, gaskets. cotterpins, and the like.

The Government could never, within a reasonable period of time, organize a staff capable of disposing of this type of material on a retail basis, except through the armed forces, and the Surplus Property Board looks upon it as its responsibility to take over the job of surplus disposal from the armed forces so men will not have to remain in uniform to handle it. The only practical answer to the problem of disposing of the multitude of components and parts is the widespread use of agents, and the best agents for this type of property are those who made it because they are familiar with the items and are equipped to inspect them. Where safety is of such vital concern, as in aviation, proper inspection is essential.

In the disposal of components and parts the Reconstruction Finance Corporation's functions will be to direct and police its agents. An agency contract, approved by the Surplus Property Board and the Department of Justice, is currently being negotiated with a number of agents throughout the country. The big job initially will be to sort the wheat from the chaff; to determine what is salable and what is not; to conduct physical inspections to determine what is in serviceable condition and what is not.

Ultimate distribution will be made, in accordance with the objectives of the Surplus Property Act, through normal channels of trade. under accepted trade practices. That means that the agent manufacturer will dispose of these surpluses through regular distributors and dealers.

The Reconstruction Finance Corporation identifies, classifies, and segregates parts and components listed in surplus declarations. The Army and Navy are instructed to consign salable items to agents or to warehouses. The agent overhauls, stores, and/or distributes for the account of the Reconstruction Finance Corporation. The R. F. C. of course, exercises constant supervision over the activities of the agents.

The Army and Navy identifies such items by marking on the surplus declaration "Items peculiar to combat aircraft." The Reconstruction Finance Corporation inspects sample items in this category at the point of origin and makes determination as to the possibilites of their sale for nonaviation purposes. Those items which have no commercial value are segregated and classified as scrap to be sold by the owning agency, or they are distributed to local governments and nonprofit institutions for experimental and educational purposes.

In the case of those which have a possible commercial use other than in aviation, the Reconstruction Finance Corporation instructs the owning agency to ship to a Reconstruction Finance Corporation

storage depot and the R. F. C. catalogs, inspects, and stores, pending sale.

The surplus aircraft inventory of R. F. C., as of a recent date, is shown on the chart now before you.

NUMBER OF SURPLUS AIRCRAFT

The figures change every day, and these are not the latest figures. The R. F. C. representatives here today have the last word and will submit it for the record. However, these figures are sufficient for purposes of illustrating the typical distribution of surplus aircraft.

Of the 23,628 aircraft in surplus as of the date of this chart, approximately April 1, representing a total cost of $943,000,000, only 9,672, or 41 percent, were considered salable. The salable planes cost $191,000,000, or only 20 percent of the total cost.

Of the salable aircraft, 591, or 6 percent, were light aircraft; 6,541, or 68 percent, were trainers; 2,540, or 26 percent, were transports. From the standpoint of value, transports have always been and will continue to be the most important class of surplus aeronautical property. The salable transports cost $118,000,000, or 62 percent of the salable total. The trainers cost $71,000,000, or 37 percent. The light airplanes cost $1,700,000, or less than 1 percent of the salable total.

If any member of this committee has any questions about the salability of combat aircraft, they should be answered by a facetious handbill which was prepared to illustrate the worthlessness of surplus combat aircraft, by an imaginative employee of the Aeronautical Chamber of Commerce, a trade association maintained by the aircraft manufacturing companies. I shall ask Mr. Clark to pass. copies of it to you. It points out how absurd it is to suppose that combat aircraft could be converted to economical civilian use.

VOLUME OF AERONAUTICAL SUPLUSES

Now, Mr. Chairman, I am going to indulge in some very wild speculations and attempt to estimate the volume of aeronautical surpluses which the R. F. Ĉ. will be called upon to handle during the coming fiscal year. May I request that these be off the record?

(Off-the-record discussion.)

In closing this explanation I must state emphatically that any accurate estimate of the volume of surplus aeronautical property to be declared next year is out of the question. That is why I asked that these estimates be off the record.

First, we do not know how long the war is going to last. The estimates which I have shown you assume the end of the war about the middle of the fiscal year. If VJ-day should come later, the figures should be reduced. If earlier, they should be larger.

Secondly, we do not really know how many planes are going to be declared surplus. That depends upon the size of our post-war air forces, and we can only guess at that.

Thirdly, we do not know what portion of the surplus aircraft will be declared surplus to R. F. C. and what proportion will be declared to the foreign disposal agency. Again, we can only guess.