REGULATION OF TRANSPORTATION OF PASSENGERS AND

PROPERTY BY AIRCRAFT

THURSDAY, MARCH 11, 1937

UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE COMMERCE, Washington, D. C.

The subcommittee met, pursuant to adjournment on Monday, March 8, 1937, at 2 p. m., in room 412, Senate Office Building, Senator Harry S. Truman presiding.

Present: Senators Truman (chairman of the (chairman of the subcommittee), Andrews, Schwartz, Davis, and Austin.

Present also: Senators McCarran of Nevada and McKellar of Tennessee.

I am

Senator TRUMAN (chairman of the subcommittee). The subcommittee will resume its hearing. Mr. Eastman, you may proceed. STATEMENT OF JOSEPH B. EASTMAN, MEMBER OF THE INTERSTATE COMMERCE COMMISSION, WASHINGTON, D. C. Commissioner EASTMAN. My name is Joseph B. Eastman. a member of the Interstate Commerce Commission, and appear here. as chairman of the legislative committee of that Commission. I shall discuss S. 2, being 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 commerce, and for other purposes.

Senator TRUMAN. There are two bills, S. 1760 and S. 2.

Commissioner EASTMAN. Yes, Mr. Chairman; I realize that there are two drafts of this bill.

Senator TRUMAN. And you will discuss the amendment, if you please.

Commissioner EASTMAN. Very well. In the beginning of my discussion of this subject I think I should say something about the limitations in the range of my own knowledge of this particular matter. As you know, I was Federal Coordinator of Transportation for 3 years, and under the act creating that office I was under the duty, among other things, of considering transportation conditions generally, and making recommendations with respect to any further legislation of a permanent character which I might think necessary in order to improve those conditions. In that connection I did go as thoroughly as I could into the motor-carrier situation and the water-carrier situation; and recommended bills providing for the regulation of those branches of the transportation industry. I did not, however, at that time go into the air-carrier industry because of the fact that in the

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Air Mail Act of 1934 Congress had created a special commission, called the Federal Aviation Commission, to go thoroughly into that particular subject. Therefore I did not undertake to duplicate their work.

Furthermore, since 1934 the Interstate Commerce Commission has had certain duties with respect to air carriers under the Air Mail Act of that year. And because of the fact that I was occupying the office of Federal Coordinator, I have not myself taken part in any action of the Commission under that bill, and am not well posted in regard to that action. However, Mr. Haley, who is the Director of the Bureau of Air Mail of the Interstate Commerce Commission, is here, and if there should be occasion to answer questions in regard to what the Commission has done under that act, he can reply to such questions.

As I have said, the deficiencies of my study of transportation conditions, so far as air carriers are concerned, were supplied by the Federal Aviation Commission. That was a body of distinguished men, headed by the late Clark Howell, of Atlanta, and they made a very thorough study of the entire situation with respect to air transport. As you know, their report was published as Senate Document No. 15, Seventy-fourth Congress, first session. In that report, after considering the entire situation, among other things they recommended legislation along the lines of the bill you have before you. They recommended a good deal more besides that, but I think the important provisions of S. 2, in both of the drafts, you will find covered by recommendations contained in the report of the Federal Aviation Commission.

However, that body reached the conclusion that while the regulatory functions should be entrusted to an independent and nonpartisan commission, temporarily at least those duties should be performed by a new commission created for the purpose and not by the Interstate Commerce Commission. Their reasons for that recommendation were quite understandable. They felt that air transportation was a new form of transportation, which was developing very rapidly, and which presented problems quite different from those of the railroads, and they feared that if this duty were entrusted to the Interstate Commerce Commission there would be too much tendency on the part of the Commission to be guided by its experience with the railroads and to apply rules or regulations which were more suited to that form of transportation than to air transportation. They felt that, particularly in view of the very rapid development which was taking place in the field of air transportation, it was desirable to have a separate body which could concentrate on that matter.

Now, when the President submitted the report of the Federal Aviation Commission to Congress, he took a somewhat different view of the matter. I will quote one or two passages from his message of that time. He said [reading]:

As I have suggested on many occasions, it becomes more and more apparent that the Government of the United States should bring about a consolidation of its methods of supervision over all forms of transportation. When the Interstate Commerce Commission was created in 1887 the railroad was practically the principal method of rapid interstate transportation. Since that time this monopoly of transportation enjoyed by the railroad, to a very important degree, has been limited by the development of the automobile and good interstate roads.

Recently water transportation by lake, by river, by canal, and by oceans has, largely through the construction of the Panama Canal and our inland waterways, definitely brought ships and shipping into the general interstate field.

More recently still air transportation has become an element. All of these developments have changed the general problem of transportation and the concern of the Government with them.

A number of valuable reports have been prepared on these related questions. The report of the Federal Coordinator of Transportation has already been submitted to the Congress by the Interstate Commerce Commission. The report deals with the many problems relating to busses, trucks, water carriers, and railroads. Other reports of departmental committees on ocean mail subsidies have been completed.

This present report on aviation is a similar source of information and advice concerning transportation by air. I earnestly suggest that the Congress consider these various reports together in the light of the necessity for the development of interrelated planning of our national transportation. At a later date I shall ask

the Congress for general legislation centralizing the supervision of air and water and highway transportation with adjustments of our present methods of organization in order to meet new and additional responsibilities.

Then, in the last paragraph of his message, the President said: The Commission further recommends the creation of a temporary_air-commerce commission. In this recommendation I am unable to concur. I believe that we should avoid the multiplication of separate regulatory agencies in the field of transportation. Therefore in the interim before a permanent consolidated agency is created or designated over transportation as a whole, a division of the Interstate Commerce Commission can well serve the needs of air transportation.

That was the President's conclusion. Now, so far as the fears. which were entertained by the Federal Aviation Commission are concerned and, as I have said, those were perfectly understandable fears-there has been some opportunity, at least, to form a judgment on the matter because of the fact that since then the Commission has created, under the Air Mail Act, a Bureau of Air Mail, and has been dealing with certain air-transportation matters; and it is also now dealing with motor-carrier transportation. Those interested have an opportunity to judge, by that experience, whether or not the Interstate Commerce Commission is likely to be guided too much by its experience in the field of railroad transportation in administering regulation of these other forms of transportation.

I won't express an opinion on that myself, except to say that in the motor-carrier department, which I have had a good deal to do with, we knew before, and have discovered even more fully since, that motor carriers are very different from railroads in almost every respect.

Senator TRUMAN. And airplane transportation would be different from either one of them.

Commissioner EASTMAN. Yes; very different. Now, I might say also that as Coordinator my general conclusions as to transportation regulation were these: I think there can be no question that important forms of public transportation must be regulated by the Government That has been accepted as a sound principle in this country and, so far as I know, in practically every country in the world of any importance. Transportation is of such vital importance to the public welfare and the business is so affected with a public interest that some measure of Government regulation is conceded to be necessary. And it seems to me that the present competition between the several forms of transportation has increased that need, because as a matter of fact when the Interstate Commerce Commission was created, one of the chief and perhaps main reasons for creating it at the time was the disturbance of business conditions and the peril to the stability and financial prosperity of the railroads themselves brought about by uncontrolled competition.

Therefore, I think the present competition instead of decreasing the need for Government regulation, has increased it.

I was also convinced by my studies as Coordinator that transportation is one problem and not a series of separate problems; that all forms of transportation are interrelated in one way or another. They are interrelated by competition. They are also interrelated by the opportunity which exists, if it is utilized, for cooperation between them, for coordinated service, for supplementing each form of transportation by proper use of another.

I was further convinced that it is highly desirable that the control should be centralized in a single commission, if there is to be proper control of transportation as a whole and fair and impartial regulation of each and every form thereof.

Senator DAVIS. Mr. Chairman, might I ask Mr. Eastman a question right there?

Senator TRUMAN (presiding). Certainly, Senator Davis.

Senator DAVIS. Would you suggest that that would include water transportation?

Commissioner EASTMAN. Yes, I would say so. That is, so far as the regulatory functions of the Government are concerned.

Senator TRUMAN (presiding). You may continue your statement. Commissioner EASTMAN. As I have stated, if we are to have fair and impartial regulation, we are much more likely to get it, and we are much more likely to have efficient and economical administration, if it is centralized in one place, where there will be the same responsibility for all forms of transportation, than to have separate bodies or commissions, each of which might be partisan for its own particular form of transportation.

Now, I think I might at this point also say something in regard to the general character of the Interstate Commerce Commission: As we understand the duties of the Commission, they are very largely legislative duties, and they have been so found by the Court. In other words, the Interstate Commerce Commission is very largely the agent of Congress. The need for such an arrangement arises because of the fact that in dealing with a very complex question, like the regulation of transportation, it is impossible for the Congress to undertake to deal personally or as a body with all the details of such regulations. All that the Congress can do is to lay down the policy or the rule, and then create a body to apply that policy or rule to particular situations. And wishing to have that done with scrupulous fairness and impartiality, it has been the policy of the Congress to make the Interstate Commerce Commission, and other similar bodies, nonpartisan, by making them bipartisan in their make-up, and nonpolitical, and to require them to employ judicial procedure in the administration of their duties. That does not make their duties judicial in law, but it means that in their legislative duties they employ judicial procedure.

Senator TRUMAN. In other words, what lawyers call quasi judicial. Commissioner EASTMAN. Yes, Mr. Chairman. Hearings are required, and the Commission is obliged to base its conclusions and decisions on a record openly and publicly made. That has been the record of the Interstate Commerce Commission for 50 years, and that is the record we hope we may maintain in the future.

And so far as this particular matter is concerned, as in any other similar matter, the Commission must not be understood as grasping for power. We are very glad to give the Congress our opinion as to what ought to be done, and we endeavor to do that whenever called upon; but we have no quarrel whatever with any other department of the Government. Whatever you may see fit to do will be satisfactory to us in that respect. I might add, we have plenty of work on our hands, and always have had.

Now, if I might say a word about the attitude of the Interstate Commerce Commission in regard to this matter: Since 1934, as I have already stated, the Commission has had certain duties with respect to air carriers. That matter is touched upon in the report on S. 2 which I sent to your committee in my capacity as chairman of the legislative committee of the Commission.

Senator TRUMAN (presiding). And which has been made a part of our record.

Commissioner EASTMAN. Yes; which I understand is now a part of your record. In that report it was pointed out that

Present Federal regulation of aircraft is provided by three acts: The Air Commerce Act, 1926, as amended, the Air Mail Act, 1934, as amended, and the Foreign Air Mail Act, 1929.

The first of these has to do with safety standards and aids to air navigation, and is administered by the Department of Commerce. The second has chiefly to do, directly or indirectly, with the carriage of air mail, and in that connection is administered partly by the Post Office Department and partly by this Commission. The third is administered by the Post Office Department. In various respects there is a somewhat confusing division of authority, and over certain important matters there is an entire absence of authority.

Then in this report I quoted at length from the comments on that matter in the recent annual report of the Interstate Commerce Commission, at pages 30-32.

Senator TRUMAN. We have that in the record too.

Commissioner EASTMAN. Yes, Mr. Chairman; and I will not read that, except to say that it led up to this conclusion:

Many provisions of the present law are so worded, and their requirements interlocked with other provisions in such a manner that interpretation and administration are exceedingly difficult. As an alternative to further amendment of the existing acts, the drafting of an entirely new law for comprehensive regulation of interstate air transportation, similar in scope to parts I and II of the Interstate Commerce Act governing the regulation of interstate railway and highway carriers, appears therefore to be preferable.

This bill which you have before you is along those very lines. In other words, it carries out the conclusion which the Commission reached as a result of the experience it has so far had under the Air Mail Act of 1934.

In this report, which has been made a part of your record, attention was called to the fact that air transportation is growing very rapidly. At the start, as you know, it was established for the purpose of carrying mail. That was the primary and only function at the beginning. I think that when this matter of regulation was discussed before this committee 2 years ago, air carriers were getting 70 percent of their revenue from the mail

Senator TRUMAN (interposing). And what is the percentage now? Commissioner EASTMAN. At the present time I understand it is about one-third, that they are getting about one-third of their revenue