we could not make the changes. And we should like to have the privilege, if necessary, of notifying the Commission and withdrawing the schedules to take care of the emergency within a less period of time than 30 days.

Senator MCCARRAN. Under the Interstate Commerce Commission regulations now in force in the railroad business, they have the emergency clause, where the change of schedules might be effective within 24 hours. I think that is in the same section. I draw your attention to the bottom of page 23 and the top of page 24. I think you do not mind the interruption.

Mr. WRIGHT. Certainly not, sir. The word "schedule", however, does not appear in any part of the clause. As I read it, the Commission may

in its discretion and for good cause shown, allow such change upon notice less than that herein specified, or modify the requirements of this section with respect to filing and posting of tariffs, either in particular instances or by general order applicable to special or peculiar circumstances or conditions.

In other words, the question of schedules is the point.
Senator MCCARRAN. The idea was to carry out-

Mr. WRIGHT. The intent of the present act?

Senator MCCARRAN. Yes.

Mr. WRIGHT. On page 29, subsection (g) of section 410, we respectfully call your attention to lines 12, 13, 14, and 15, where it says

and the rates so fixed and determined shall be paid by the Postmaster General during the continuance of the order from appropriations for the transportation of mail by air.

Senator MCCARRAN. That language was taken from the Railway Mail Act.

Senator TRUMAN. Nobody can be sure of the adequacy of appropriations. That is the reason we have the deficiency bills.

Mr. WRIGHT. May I propound the thought set down here? We respectfully submit that we find no assurance in this section as to the adequacy of such appropriations. We feel that inasmuch as the Commission is charged with the responsibility of, and is empowered to fix fair and reasonable rates of payment for the transportation of air mail and the services connected therewith, that there should be a direct obligation written into this clause, by the terms of which the rates so fixed by the Commission must be paid by the Government The Post Office Department from their records will be able to point out to this committee instances where an insufficiency of available appropriations caused the air carriers of this country to be required to accept a small percentage of the revenue earned under the then established rates. If the Commission establishes fair and reasonable rates predicated upon a given type and standard of service enumerated in the rules and regulations laid down by the Commission in prescribing such service, then we feel that a mutual obligation exists between the Government and the air carriers whereby the Government should assume as definite an obligation to pay these rates as the air carrier assumes in equipping himself and performing the service so prescribed.

That is the thought I should like to leave with the committee and the author for further development along that line.

On page 30, subsection (h), commencing with line 9, the Commission is empowered to fix and determine rates for mail service in accordance

with certain provisions set forth in that section. And yet in line 24 on page 30 there appear the words "different classes of airport operators" with reference to such mail service. We do not feel that an airport operator has anything to do with the establishment of mail rates, especially in view of the fact that other sections of the bill regulate all rates of airport operators. It is not clear to us why "airport operators" should be injected into the question of mail rates.

On page 31, commencing at line 15, it is provided that the Postmaster General is empowered to make certain computations with respect to air-mail routes for statistical and other purposes and "the expenses thereof shall be paid out of the appropriation for the transportation of air mail." We respectfully call your attention to the fact that there is no limitation in the amount of said appropriation which may be thus expended.

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 aircarrier 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 this 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 account to purchase securities issued by that company. It is a most normal thing, I should think.

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 gentle

men 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 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