Section 405 (e) contains the following proviso: "Provided, That in any certificate issued to an air carrier engaged in the transportation of passengers or property in foreign commerce, the requirement as to service shall cover only service to be rendered in territory subject to the jurisdiction of the United States." Section 410 (a) contains a proviso which reads: "Provided, That rates, fares, charges, classifications, rules, regulations, and practices prescribed, and through routes established, by the Commission for transportation of passengers or property by air carriers in foreign commerce shall cover only such service as is rendered in territory subject to the jurisdiction of the United States." While the principles stated in the provisos quoted, restricting the application of the provisions therein to United States territory, are considered to be sound, it is suggested that in order to obviate the danger that they might be given an interpretation that would be too restrictive, your committee may desire to add the following to the proviso quoted from section 405 (e): "Provided further, That nothing in this act shall be construed to prevent the negotiation of an agreement between the United States and a foreign country concerning the operation of air-transport lines whenever such negotiations are deemed by the governments of the two countries to be necessary." The proviso quoted from section 410 (a) contains a reference to through routes established by the Commission. Your committee may desire to substitute the word "approved" for the word "established" in this connection, in view of the language of section 403 (h), which contemplates that air routes shall be designated by the Secretary of Commerce with the approval of the Commission. You ask for my comment on certain amendments to the pending bill suggested by this Department and introduced in the last Congress. These amendments were drafted as the result of an informal conference between a representative of your committee and officials of this Department after the Department's letter of August 19, 1935, was sent to Senator Wheeler. With reference to these amendments I desire to make the following comment. The amendments referred to provide for observance by the Interstate Commerce Commission of the provisions of any treaty, convention, or agreement to which the United States is or may be a party; consultation with the Secretary of State in respect of the international policy involved before approval is given by the Commission to the establishment of any air-transport line to be operated to or from United States territory, and the conduct by the Secretary of State of such negotiations with foreign governments as may be necessary to enable the Commission to pass upon applications for permission to establish and operate any air-transport service to or from any foreign country. As explained in the Department's letter of August 19, 1935, to Senator Wheeler, and in the present letter, the United States has become a party to international conventions and agreements containing provisions of importance relating to air navigation. It is expected that the negotiation of further international conventions and agreements on the subject will be found necessary. Your committee will doubtless realize the importance of the observance of the provisions of such agreements, in view of the fact that any action taken by the Interstate Commerce Commission in conflict with these agreements might result in complaints being received from the governments with which they have been entered into. The matter of the establishment of an air-transport line of one country in territory of another country is frequently interwoven with questions of foreign policy, and not infrequently requires negotiations between the government of the country whose nationality the air-transport line possesses and the government of the country in which the line seeks permission to operate. It is believed to be important, therefore, that the Department of State be consulted before approval is given by the Interstate Commerce Commission for the establishment of any air-transport line to be operated to or from United States territory. Applications of air transport lines of one country for authority to operate in territory of other countries are, as indicated above, usually the subject of negotiations conducted through diplomatic channels. As the Department of State is the agency of the Government which is charged with the conduct of foreign affairs, it is believed to be desirable that it be made clear that such negotiations shall, whenever necessary, be conducted by the Secretary of State. It is believed that the amendments to Senate bill 3420, enclosed with your letter, with other amendments suggested herein, would satisfactorily take into consideration the interest which the Department of State has in the establishment of international air transport lines. Sincerely yours, R. WALTON MOORE, Acting Secretary. NATIONAL ADVISORY COMMITTEE FOR AERONAUTICS, Senator PATRICK MCCARRAN, DEAR SENATOR MCCARRAN: Your letter of October 21 and your bill S. 3420 to amend the Interstate Commerce Act by providing for the regulation of the transportation of passengers and property by aircraft were considered at a meeting of the National Advisory Committee for Aeronautics held on December 17. After consideration, I was, by resolution adopted at said meeting, authorized to express to you the comment of this Committee in the following terms: (a) The functions of the National Advisory Committee for Aeronautics under the law relate to scientific research in aeronautics. This Committee does not have such broad advisory functions as its name may seem to imply. It therefore feels that it is not within its jurisdiction to offer criticism on the many details of this bill. (b) Only one provision in the bill appears to have a direct bearing on the work of the National Advisory Committee for Aeronautics, and that is section 404 (a) (2). The Congress entrusted to this Committee the exercise of discretion in the determination of its research programs and the fundamental problems to be investigated in its laboratories. This Committee makes every practical effort to broaden its researches to serve fully the needs of both military and civil aviation. The War, Navy, and Commerce Departments now directly concerned with aircraft development do not have and have never sought similar authority to that proposed to be given to the Interstate Commerce Commission with respect to directing the conduct of researches by this Committee. It would be unfortunate, and is considered to be unnecessary, to give to the Interstate Commerce Commission a function empowering it to direct the National Advisory Committee for Aeronautics in any respect. The merit of this section can be retained and our objections met by striking out on page 6, lines 6 to 9, the following: "which are hereby authorized and directed to conduct such scientific and technical researches, investigations, and tests as may be necessary." Very respectfully, NATIONAL ADVISORY COMMITTEE FOR AERONAUTICS, Senator AUSTIN. Will the Senator permit a question? Senator AUSTIN. In your opinion, is there anything fraudulent or unethical in your consulting air-mail contractors and others who are in the air-transportation business and industry, in the drafting of legislation that is going to bear particularly upon their endeavors! Senator MCCARRAN. Certainly not, Senator. I have gone to those parties and concerns, asking them for suggestions. I am not interested in that line of business. I have had no personal experience in it. From whom would I get the best suggestions, except from those who have had practical experience? We must get suggestions from those sources, and we have to go to them for suggestions, as well as to our own departments of government. I have gone to both agencies, both the operators and the departments, and asked for constructive criticism. There is nothing unethical about it. It is done every day, and it should be done. Senator SCHWARTZ. As a matter of fact, you could not draft an intelligent bill without that, could you? Senator MCCARRAN. I do not know of a Member of Congress who could do it; I know I could not. I would not attempt to do it. That is all. Thank you, Mr. Chairman. STATEMENT OF JOHN E. BENTON, GENERAL SOLICITOR, NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS Senator TRUMAN. Mr. Benton, please state your name and address to the committee. Mr. BENTON. Mr. Chairman, my name is John E. Benton. My office is in the Earle Building, in this city. I am general solicitor of the National Association of Railroad and Utilities Commissioners, and appear hereby direction of the executive committee and the legis lative committee of that association. The national association reflects in its membership the commissions of the several States in the United States, except Delaware, which has no commission, and New York, the commissions of which are not actively affiliated with the association. The membership of the association also includes the members of the Federal regulatory commissions. In matters of legislation, however, the association is recognized as an agency of the State commissions for the presentation of their views to Congress, and no attempt is made in any presentation made before any congressional committee to represent or in any way to reflect the views of any Federal commission. On March 26, 1937, a joint meeting was held in Washington, D. C., by the members of the executive committee and the committee on legislation of this association to consider various legislative matters. Among the matters considered was aviation legislation. A resolution favoring the enactment of legislation to provide for the regulation of air carriers was unanimously adopted. I will read it: Resolved, That the National Association of Railroad and Utilities Commissioners favors the enactment of Federal legislation vesting jurisdiction in the Interstate Commerce Commission to regulate transportation of passengers and property by aircraft in interstate and foreign commerce, including the granting of certificates of convenience and necessity to carriers engaged in such transportation, and the regulation of their accounts, rates, service, and issuance of securities. Resolved further, That said association endorses H. R. 5234 provided that the same be so amended that the powers of the States to regulate intrastate transportation of passengers and property by aircraft, whenever such regulation shall be necessary in the public interest, shall not be impaired. Let me say at this point, in order to guard against any misconstruction of that resolution, that the association did not consider the matter of transportation of the mails, and would not consider that it had any business, as representing the State commissions, to make recommendations to Congress touching that matter. The resolution should not be so construed. Neither is it desired to have that resolution construed as indicating a view that jurisdiction over matters of safety should not be vested in the Interstate Commerce Commission. That aspect of it was not considered. In endorsing the Lea bill, so called, the committees had before them. knowledge of the fact that that bill had been drawn by Commissioner Eastman at the request of Judge Lea-the information which Commissioner Eastman gave you this morning. The committees desired to indicate confidence in the bill having been well drawn. The first paragraph of the resolution is the important paragraph, pointing out the respects in which the State commissioners believed it desirable that there should be legislation at this time. Amendments have been drawn designed to avoid impairment of the regulatory powers of the State. I will comment upon these amendments severally a little later. I present them now and ask that they be inserted in the record at this point. Amend section 302, page 2, by adding thereto a new paragraph, as follows: (c) Nothing in this part shall be construed to affect the powers of taxation of the several States, or to authorize any air carrier to engage in the transportation of persons or property in intrastate commerce in any State in contravention of the laws of such State, nor to give to the Commission any jurisdiction to control such transportation, or the rates applicable thereto. This paragraph corresponds to paragraph (c) of section 202 of the Motor Carrier Act, 1935. Amend section 304, at page 9, by adding thereto, following line 16, a new paragraph, as follows: (f) The Commission is authorized to confer with or to hold joint hearings with any authorities of any State in connection with any matter arising in any proceedings under this part. The Commission is also authorized to avail itself of the cooperation, services, records, and facilities of such State authorities as fully as may be practicable, in the enforcement or administration of any provision of this part. This language is taken without change from section 205 (g) of the Motor Carriers Act, 1935. Amend section 310 (a), page 25, by inserting, after the word "effective", in line 16, the following words: Provided, however, That nothing in this part shall empower the Commission to prescribe, or in any manner regulate, the rate, fare, or charge for intrastate transportation, or for any service connected therewith, for the purpose of removing discrimination against interstate commerce or for any other purpose whatever. This language is taken from section 216 (e) of the Motor Carriers Act, 1935, without change. Before discussing these amendments, let me say that some of the State commissions are now vested with power to regulate air carriers, which engage in general transportation for compensation, as common carriers. Others have been given jurisdiction to grant certificates or licenses, or to inspect equipment. Up to the present time, however, the development of intrastate transportation by aircraft has not been such that much has been done by way of State regulation. The view which we present to you, however, is this: That the aviation industry is plainly destined to have a large development. Every important public-utility industry requires governmental regulation in the public interest. Regulation of the aviation industry will be recognized as necessary sooner or later, and provided for by act of Congress. It is our view that the sooner such regulation shall be provided, the more fully the interest of the public will be served. It is not now a matter of rates for service. It is rather a question of providing for the development of the aviation industry in such manner that the public may receive air transportation as quickly as may be, in all parts of the country where traffic will support air service. It is a question of enabling people to invest in air-carrier securities with the largest measure of safety, consistent with the newness of the industry. It is a question of providing that the accounts of carriers shall be so kept, and so supervised, that the money actually invested in the establishment of the industry may be known. It is also a question of preventing the great wastes and losses which will be suffered if the industry is left to establish itself under existing conditions of wide-open competition. This is of prime importance, for all of these wastes and losses will finally be translated into stocks and bonds of consolidated companies, when consolidations finally come about, unless the Congress shall guard against that by establishing governmental control of the institution of air lines, of their capitalization, and of their consolidation, so as to prevent the establishment of lines which cannot live, and thus prevent the occurrence of the wastes and losses which will otherwise be made; and unless the Government shall provide for the regulation of capitalization and consolidations of lines. It is, of course, perfectly obvious that if more lines undertake operation than can live, the length of time that they continue to operate will be limited. They will ultimately come together in a consolidation. The owners of the respective lines will, all of them, wish to recoup their losses, if it be possible. They will properly wish to do that, and the agreement for consolidation, if unregulated, will preserve for them the opportunity to do it by giving to each holder of securities in the consolidated lines some form of security-a bond or a preferred stock, or a common stock, or a class A stock, or a class B stock-which will represent the amount which has originally been invested in these enterprises which have met with failure, and may represent very much more, which is pure water. All these securities then would be permitted to be issued, because of lack of regulation, and got out into the hands of the public, under talk of the future great profitableness of the aviation industry, and they would represent a mortgage on the industry for the future. The public of the United States, as the volume of air transportation grows, will be asked to pay a return upon these securities in the form of interest or dividends. I enlarge upon that a little to show that the idea that the time for regulation of the air industry is somewhat in the future, after it has grown up, loses sight of the fact that the only regulation which will protect the public is the regulation which exists from the inception of the industry, which will give an opportunity for its establishment under conditions offering as much opportunity as may be possible for profitable operation; under conditions which will require proper accounting; and under conditions which will prevent the capitalization of wind and water; and under conditions which will prevent losses and wastes incident to a period of cutthroat competition, while different concerns are attempting to establish themselves and to run other competing concerns out of business. |