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rate which the Government will pay for transporting mail, and it cught to be the same whether it is carried on the United, the Northwest, or whatever other line it may be.

It ought to be the same rate; otherwise there is bound to be criticism and charges of corruption and charges of everything else. You will have companies down here lobbying and making statements that they have to have more money to carry the mail than somebody else needs, and it is going to bring discredit not only upon the Commission but also upon the air lines themselves.

I think the Commission ought to be the first one to want that matter definitely settled, instead of neglecting it and having a lot of lobbyists come down here to appear before the Post Office Department to get a little advantage here and there. The Commission ought to adopt some definite, positive rule on it.

Senator MCCARRAN. I suggest that that can be brought about in the course of time, when the Commission has the rate-making factors in its control, and not until then.

The CHAIRMAN. Yes. Of course, in my judgment, the Commission should have the control of rate-making; it should not be left to the Post Office Department to make rates, because the Post Office Department is not a rate-making body. That matter should be controlled by the Interstate Commerce Commission or by some other commission that is a rate-making body.

If it is going to be left to the Post Office Department to fix rates at random, by contract, it is going to bring discredit upon the Post Office Department, or upon any other department handling it in that way.

If we cannot trust the Interstate Commerce Commission to do it, then we ought to get a new commission.

Mr. HALEY. I think that that will be possible when the other business of all the air lines grows sufficiently to enable them to carry all of the mail on a flat rate.

The CHAIRMAN. If the business of the air lines is such that they cannot carry the mail without subsidy, then the Congress itself ought to recognize that fact very definitely and very positively and should say so; but we should not put it up to either the Post Office Department or the Commission in such a way that they will be kicked around and denounced as being crooked and in the employ of the air lines, and so forth, as apparently Senator McKellar thinks you are at the present time.

Senator AUSTIN. I think that inadvertently the word "flat" was used by Mr. Haley; it should have been "uniform."

Senator MCKELLAR. At this point I should like to quote in the record subsection (e), to which Mr. Haley refers:

(e) In fixing and determining the fair and reasonable rates of compensation for air-mail transportation, the Commission shall give consideration to the amount of air mail so carried, the facilities supplied by the carrier, and its revenue and profits from all sources, and from a consideration of these and other material elements, shall fix and establish rates for each route which, in connection with the rates fixed by it for all other routes, shall be designed to keep the aggregate cost of the transportation of air mail on and after July 1, 1938, within the limits of the anticipated postal revenue therefrom. What have you done to date to bring that about?

Mr. HALEY. Of course, Senator, the limitation is effective on and after July 1, 1938. I have just explained that the Commission

instituted a proceeding on its own motion in December, in which it has taken voluminous evidence and testimony with respect to the methods for determining the anticipated postal revenues.

The Post Office Department cooperated with us in a very high degree by putting their technical men on the stand to explain their methods of determining the amount of air-mail postage revenue.

The CHAIRMAN. May I ask, Senator McKellar, who is the gentleman who was sitting back here, advising you a minute ago, and who is now sitting back in the room?

Senator MCKELLAR. Will you give your name?

Mr. O'BRIEN. William C. O'Brien.

The CHAIRMAN. What is your business, Mr. O'Brien?
Mr. O'BRIEN. Attorney, Post Office Department.

The CHAIRMAN. How long have you been there?

Mr. O'BRIEN. For 23 years.

Mr. HALEY. May I make just one more explanation of that? The cost ascertainment section of the Post Office Department each year makes an estimate of the revenue received separately from air-mail postage. It has not made any forecast, as I understand it, of what that revenue will be in the future, so this is a rather new problem. It feels that it can do it, however, and it has strongly recommended to the Commission that it ought to do it and that the Commission ought to take its figures.

On the other hand, the air lines generally believe I think perhaps they all do that no methods similar to the one used by the Department for determining revenues in the past can adequately be used for making the determinations in the future. That is to be decided and is pending before the Commission.

Senator MCKELLAR. Have you audited the books of each company? Mr. HALEY. Yes, sir.

Senator MCKELLAR. How many times?

Mr. HALEY. I will ask Mr. Freeland to state that.

The CHAIRMAN. Has Mr. Stough finished his statement?

Mr. STOUGH. Yes.

Mr. HALEY. Mr. Freeland is our chief accountant. He has been with the Commission for 16 years. He handled the research work for the Black committee, investigating the ocean- and air-mail contracts. Six of the men that he had with him on that job are now with him in the Bureau of Air Mail, and those are some of the men whom we sent out to work on these audits.

The CHAIRMAN. They are not, then, on the pay rolls of any of the air-mail companies?

Mr. HALEY. They are employees of the Interstate Commerce Commission.

I will now ask Mr. Freeland to answer the question.

STATEMENT OF J. C. FREELAND, CHIEF ACCOUNTANT, BUREAU OF AIR MAIL, INTERSTATE COMMERCE COMMISSION, WASHINGTON, D. C.

Mr. FREELAND. We have audited most of the carriers twice and are now in process of auditing some of them the third time. The act provides that they shall be audited annually.

Senator MCKELLAR. You have not done that, or have you done it?

Mr. FREELAND. We have done it twice in all the companies, and are in the process of doing it for the third time at present.

Senator MCKELLAR. How many of the companies have not been. audited the third time?

Mr. FREELAND. None of them has been audited the third time as yet.

Mr. HALEY. That is in progress, Senator.

Senator MCKELLAR. But you have audited each company?
Mr. FREELAND. Twice.

Senator MCKELLAR. In making those audits, do you scrutinize all expenditures and purported expenditures of the holders of the contracts for goods, lands, commodities, and services, in order to determine whether or not such expenditures were fair and just?

Mr. FREELAND. No, sir; we do not. I might add that that is done by the Bureau of Air Mail as an adjunct, separate, and apart from the field work of an intensive audit of the books and accounts.

Senator MCKELLAR. The Air Mail Bureau in your department? Mr. FREELAND. No; not my department; as to the expenditures. Mr. HALEY. May I explain that Capt. J. E. Whitbeck, who is also here, has charge of that particular work. It is not done in direct connection with the field audit of the accounts.

Senator MCKELLAR. If he is going to explain, I will finish my question.

The CHAIRMAN. I want the witness to have an opportunity to finish his answer.

Senator MCKELLAR. And that such expenditures were not improper; excessive, or conclusive in the cases of the eight air-mail contracts which are allowed, by a previous report of the Commission, the rate of 3313 cents per mile, under the provisions of the act of June 12, 1934?

Mr. FREELAND. That was upon a special report made to the Congress in that connection.

Senator MCKELLAR. Was not the report of the examiners there that 33 cents was ample compensation?

Mr. FREELAND. The Commission recommended, or rather in answer to the mandate of the statute suggested, that the ceiling not be lifted on those eight routes.

Mr. HALEY. That was the report of the Commission and not of the examiner. I just want to make that correction in the record.

May I also say that the report has been printed as House Document No. 141, Seventy-fifth Congress?

Senator MCKELLAR. Does somebody else want to answer to the reports?

Mr. HALEY. Captain Whitbeck is our aerotransport engineer and has been for 20 years in aviation, about half of that time in commercial practice and about half in the Government service, including the Post Office Department.

The CHAIRMAN. It ought to be a recommendation for you, Captain Whitbeck, if you were in the Post Office Department.

STATEMENT OF CAPT. J. E. WHITBECK, BUREAU. OF AIR MAIL, INTERSTATE COMMERCE COMMISSION, WASHINGTON, D. C.

Captain WHITBECK. We have made examinations of the expenditures, for their fairness and reasonableness, of all carriers, and in

no case has there been any outstanding incident where it could be said they were not fair and reasonable."

The CHAIRMAN. The only pure departments of the Government now are those departments under the Post Office Department or the other executive departments.

Senator MCKELLAR. I do not think that, Mr. Chairman; I disagree with you about that.

Captain WHITBECK. I meant to say the air-mail carriers. If I did not, I will so state.

Senator MCKELLAR. You examined into each one?

Captain WHITBECK. Yes, sir.

Senator MCKELLAR. Did you make a report?

Captain WHITBECK. Yes, sir.

Senator MCKELLAR. Have you a copy of the report, and will you make it a part of your deposition?

Captain WHITBECK. Those reports are submitted to the director. I think he can arrange to furnish them for you.

Senator MCKELLAR. Mr. Director, can you arrange to furnish those reports?

Mr. HALEY. If the committee wants them, we shall be very glad to furnish them.

Captain WHITBECK. I might just mention, for your information, that on one of the major lines there were 122,000 items-separate invoices and for some 17 companies it runs into a substantial amount of detail. The reports would cover this table to quite a height. [Illustrating.]

Mr. HALEY. Of course, Mr. Chairman, we are perfectly willing to furnish and want to furnish anything that you or any member of the committee desires. Those reports are inter-office reports. They are not reports of the Commission but are merely reports of our section in the Bureau, but we shall be very glad to furnish them to

you.

The CHAIRMAN. Have they been passed upon by the Commission itself?

Mr. HALEY. They will ultimately be. They are informal reports underlying the formal reports under section 6 (b), which we have not yet rendered.

The CHAIRMAN. If it is just in the form of informal reports
Mr. HALEY. It is an informal intra-bureau report.

The CHAIRMAN. I should like to ask the Commissioner whether or not the Commission would care to furnish those before the Commission has passed on them.

Commissioner McMANAMY. It would be contrary to our custom; but as far as I know now, I think there would be no objection.

The CHAIRMAN. The only objection I can see to that is that it might be taken as the Commission's report when the Commission has not finally passed on it.

Commissioner McMANAMY. I think we can clear that up in a statement to be furnished with it. We want to furnish this committee with everything it wants.

Senator MCKELLAR. Why would it not be proper for him to furnish that with such statement as he would care to make?

The CHAIRMAN. What kind of report would you want?

Senator MCKELLAR. It is just their report, just as they have it. The reason why it is important is that the act says that in arriving at such determination of rates, the Commission must consider those various things as stated in section 6 (e).

Mr. Haley, what is the average pay of the United under the 3313and 40-cent rates that they now operate on?

Mr. HALEY. Do you mean under the air-mail act? Under those limitations?

Senator MCKELLAR. Yes; under those limitations what is the average rate that is paid United?

Mr. HALEY. What average compensation is paid?

Senator MCKELLAR. Yes; if they carry so many thousand or million pounds of mail a year, I want to know what rate is paid.

Mr. FREELAND. Forty cents a mile. Each airplane mile flown by them is compensated at the rate of 40 cents a mile.

Senator MCKELLAR. How does that happen? They never carry a load as light as 300 pounds, do they?

Mr. HALEY. It has always been over that. I have already read into the record the average load on that route, which is 586 pounds.

Senator MCKELLAR. Is that sufficient to give them the 40-cent rate? Mr. HALEY. It works that way, Senator?

Senator MCKELLAR. Why do you give them under those circumstances the rate of 31 cents, when you give one of the other transcontinental lines 26 cents and the other one 24?

Mr. HALEY. I have explained earlier, as you will recall, that while the compensation differs here, and the compensation is the product of not only the rate but the mail-pay miles and poundage, that reduced to mills per pound-mile the compensation is exactly the same on routes 1 and 2-67 miles.

Senator MCKELLAR. But on that basis of calculation one gets from the Government $2,400,000 and the other gets $2,600,000.

Mr. HALEY. It renders a great deal more service, Senator.

Senator MCKELLAR. Absolutely, but why should one have a greater rate? You do not give the TWA the maximum rate of 40 cents, do you?

Mr. HALEY. No; I have already explained why, Senator.

Senator MCKELLAR. What does it get?

The CHAIRMAN. Do they have a basic rate?

Mr. HALEY. They have a base rate.

The CHAIRMAN. Does TWA?

Senator MCKELLAR. TWA has 24, and the United has 31.

Mr. HALEY. But I explained those base rates of compensation. I explained that earlier in my testimony.

The CHAIRMAN. Why should they not have the same base rate? Mr. HALEY. You have a different frequency and volume of service? The CHAIRMAN. I know; but does the TWA have more frequent or greater volume of service?

Mr. HALEY. No; it does not; it has less.

The CHAIRMAN. It gets a lower rate, then?

Mr. HALEY. Mr. Freeland will tell you the present rate.

Mr. FREELAND. A little over 32 cents for the

year 1936.

Senator MCKELLAR. Is that the next highest company?
Mr. HALEY. We have several at the top, you know, Senator.
Senator MCKELLAR. Which ones get the 40-cent rate?

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