Mr. KENNEY. When can we get that report, the fiftieth annual report, just referred to? Is that available and where can we get it? Commissioner EASTMAN. Yes; that has been transmitted to Congress. It is a public document. I will be glad to send you a copy of it.

Mr. HOLMES. What is the date of that, Commissioner?
Commissioner EASTMAN. Of the annual report?

Mr. KENNEY. I have been trying to get one for a week.
Commissioner EASTMAN. It is dated November 1, 1936.

The CHAIRMAN. The report has been available for some time. Mr. KENNEY. I called the Interstate Commerce Commission for one, and I did not get it.

The CHAIRMAN. The clerk of the committee can give you one. Mr. BULWINKLE. I think in all cases those are mailed out to Members.

Commissioner EASTMAN. I shall be very glad to see that you get a copy of this report.

Now, the third thing indicating the need for this manner of regulation has been the very rapid growth in the air service and the change in its general character.

As I have indicated, it started as purely an air-mail service; it was operated by the Government for some years until it was taken over by private operators.

Only a few years ago the air-mail revenue constituted 70 percent of the entire revenue of the air carriers in scheduled service. It now constitutes about one-third of that revenue.

To indicate the growth, in 1926, taking the domestic scheduled air lines, the miles flown were 4,250,000. In 1934 that had gone up to 41,000,000, and in 1936 to 63,000,000.

Passengers carried, in 1926, 5,782; in 1934, 460,000; in 1936, 1,021,000.

Express and freight carried (pounds) in 1926, 3,500 pounds; 1934, 2,130,000 pounds; in 1936, 6,960,000 pounds.

in

Mail carried (pounds) in 1926, 703,300; in 1934, 7,400,000; in 1936, 17,700,000 pounds.

And, in addition to the mileage flown by these domestic scheduled air lines, non-scheduled commercial operators flew about the same number of passengers, a total of 88,480,000 miles, or a mileage about 38 percent greater than the mileage flown by the scheduled air lines. Also, as you know, very important services have been established between the United States and its possessions and territories, such as Puerto Rico and Hawaii, and also between this country and other countries, such as all parts of South America.

And quoting again from the report which you have made a part of this record

Mr. MAPES. May I ask a question?

The CHAIRMAN. Mr. Mapes.

Mr. MAPES. What is a nonscheduled carrier?

Commissioner Eastman: A nonscheduled operator is an operator who has no special route or regular schedule. They fly passengers as the need develops.

Mr. MAPES. You say the nonscheduled operators carry about as many as the scheduled operators carry?

Commissioner EASTMAN. That is true. And I understand that there are about 1,200 such unscheduled operators.

Have I explained that properly, Mr. Haley?

Mr. Haley is our director of air mail.

Mr. HALEY. Yes, Mr. Eastman. You might perhaps at this point say that most of these nonscheduled operators are fixed-base operators. They have no particular route and are generally nonscheduled.

Mr. KENNEY. Mr. Chairman.

The CHAIRMAN. Mr. Kenney.

Mr. KENNEY. Mr. Eastman, did the Interstate Commerce Committee recently submit a report or further studies of air-mail lines? Commissioner EASTMAN. Well, last year we submitted a report on wages and working conditions.

Mr. KENNEY. I mean within the last 3 weeks.

Commissioner EASTMAN. No; the only reports are the reports which I have submitted, either to the Senate committee or to this committee, in regard to this pending legislation.

Mr. KENNEY. Well, you have submitted one copy to this committee; are there additional copies available?

Commissioner EASTMAN. Yes, sir. The report on H. R. 5234 did not come up until yesterday. Mr. Layton has sent for additional copies, and they will be available.

Mr. REECE. Mr. Chairman.

The CHAIRMAN. Mr. Reece.

Mr. REECE. You gave the number of passengers and the amount of freight carried by the air carriers; the average distance which the air carriers carry the passengers and the freight is greater than the average distance carried by other forms of transportation, particularly the rail carriers, or at least I should think so.

Commissioner EASTMAN. I have no doubt that it is. I do not have the figures here. They could be made available.

Mr. REECE. That is, I should think that the passenger or freight miles units would be even more startling than the mere quantities. Commissioner EASTMAN. Yes; just as a matter of general knowledge, I should say that the average journey of passengers or property by air was considerably longer than the average journey by rail, and certainly longer than the average journey by motor carriers. Now, in this report which has been made a part of the record, we had this to say about the present situation:

From inquiries to our Bureau of Air Mail it appears that several individuals and firms are contemplating the institution of new air-transport services. These interests seem to be concerned only with the transportation of passengers and express. The present, air-mail laws apply only to those air transport operators holding mail contracts. New non-air-mail carriers entering the competitive field of passenger and express transportation thus would not be subject to any of the provisions of those laws and serious competitive situations might arise from their operations.

Recently there has been a sharp reduction in passenger fares by at least five scheduled air-transport companies in a competitive race for more business, and another company has inaugurated an air freight service at rates substantially lower than air express rates.

It appears, therefore, that without some governmental supervision over rates, fares, charges, and practices for the transportation by air of both persons and property, as well as mail, a situation may be created which will endanger the stability of commercial air transport in the United States. At present our jurisdiction over rates is limited to establishing fair and reasonable rates of

compensation for the transportation of air mail under contracts between the Post Office Department and the carriers. The Air Mail Act specifically directs that in making determination of such rates we shall take into consideration the revenues and profits from all sources. While passenger and express revenues, therefore, are now important factors considered in fixing mail-pay rates, there is no regulatory control over the rates from which such revenues are derived, and nothing to prevent destructive competition in such rates, possibly at the expense of the Government.

Mr. MARTIN. Mr. Chairman.
The CHAIRMAN. Mr. Martin.

Mr. MARTIN. Pardon me, but did I understand you to say, Mr. Eastman, that the Commission now has some authority over air-mail rates?

Commissioner EASTMAN. Yes, sir. It has authority to fix the airmail rates which shall be paid by the Government to the carriers who have contracts with the Post Office Department for such carriage of the mails.

Mr. MARTIN. That does not involve postage rates.

Commissioner EASTMAN. No.

Mr. MARTIN. Freight and express?

Commissioner EASTMAN. No, it involves the payment by the Government to the air carriers for the carriage of the mails. There is no regulation of air freight express and passenger rates at the present time.

The CHAIRMAN. Would you mind explaining a little further, Mr. Eastman, showing under what circumstances the Commission exercises that authority?

Commissioner EASTMAN. The act is a rather complicated one, and in order to be fully accurate I think that I will ask Mr. Haley to explain those circumstances.

The CHAIRMAN. Mr. Haley, would you mind giving your name for the record?

Mr. HALEY. Norman B. Haley, Director, Bureau of Air Mail, Interstate Commerce Commission.

The present Air Mail Act, under which the Commission functions, was passed in June 1934. It provided for the extension of temporary contracts, which the Postmaster General had theretofore let, for the transportation of air mail over the various routes, following the cancelation of the previous contracts in February 1934.

The act provided for 3 months' extension of those contracts and also gave the Interstate Commerce Commission authority and direction to fix fair and reasonable rates for the transportation of the mails over each of the routes.

In August 1935 the act was extensively amended, and one of the amendments provided that the rates, which the Commission had fixed for the various routes and which were theretofore applicable only in cases where they were less than the contract rates, should be made applicable to all routes retroactively to March 1, 1935.

The Commission, in October 1934, instituted a proceeding of general investigation into the need for rates on the various routes and that decision covered all of the routes that were then in operation. Subsequently there were two additional routes let under contract, and the Commission fixed the rates for those additional routes by separate proceedings.

Since its fixation of rates initially on the routes, the Commission has changed the rates only in one case involving two routes.

The Air Mail Act as amended contains directions and limitations which the Commission has literally followed in the determination of the rates that it has announced or published.

Mr. MAPES. May I ask a question?

The CHAIRMAN. Mr. Mapes.

Mr. MAPES. May I ask, when the Post Office Department wants to establish an air-mail route, how the Interstate Commerce Commission functions; what it would have to do with it?

Mr. HALEY. If the Postmaster General has the need or desire to establish an air-mail route, he advertises for bids and accepts the lowest responsible bid that is made for the transportation of the mail. Then, the Commission, after the preliminary period of that contract, would be required to fix a fair and reasonable rate to take the place of the contract rate.

Ultimately the Commission fixes the rate for the transportation of the mails.

Mr. MAPES. For how long a time can the Post Office Department contract with the carrier to carry the mail and in that way fix the rates?

Mr. HALEY. In the present act it is a period of 3 years. Then, those contracts, upon satisfactory performance, become indefinitely continued, subject to the Commission's rates.

Mr. MAPES. How do your rates, as a rule, compare with the rates provided by the Post Office Department in the contracts?

Mr. HALEY. Well, there are necessarily some variations. The contract rates were flat rates for so much per airplane-mile.

The Commission's rates are related to definite average monthly mileages and are scaled in a way so that they will fluctuate with the increase or decrease in the frequency of service required from time to time by the Postmaster General.

Mr. MAPES. What consideration do you give to the revenue received from the carriage of the mails?

Mr. HALEY. There is a provision in the present act that requires the Commission to so fix its rates on all routes that, by July 1, 1938, the compensation under those rates shall be within the anticipated postal revenues from air mail. That is one of the limitations of the present Air Mail Act. It is as yet a little early to make a definitive finding as to what the anticipated postal revenues will likely be in the year beginning July 1, 1938, although the Commission, in December, instituted a proceeding for that purpose at which the representatives of all of the air carriers and the Postmaster General aupeared and presented their views. That proceeding is pending before the Commission, and no decision has been reached.

Mr. MAPES. Do you have any authority over the fixing of the postage rates?

Mr. HALEY. No, sir. That is fixed by the present Air Mail Act. Section 2 of the present act fixes the postage rate at 6 cents per ounce. That is fixed by Congress.

Commissioner EASTMAN. Mr. Chairman

Mr. BULWINKLE. Mr. Chairman, in order to get it before the committee: The Interstate Commerce Commission fixes the contract rates with the rail carriers for the carriage of mail, do they not?

Commissioner EASTMAN. They do, for the carriage of railway

mails.

Mr. BULWINKLE. How long has the Commission done that? Commissioner EASTMAN. I could not tell you, offhand. It has been doing it ever since I have been a member of the Commission. Mr. HALEY. Since 1916, Mr. Chairman.

Mr. BULWINKLE. 1916?

Mr. HALEY. Yes, sir.

Mr. MARTIN. May I ask one more question?
The CHAIRMAN. Mr. Martin.

Mr. MARTIN. In your opinion, would this bill, if enacted, create any conflict between the Commission and the Post Office Department in the matter of handling the air mails?

Commissioner EASTMAN. I do not see why it should create any conflict as far as fixing the compensation for the carriage of the mail is concerned, any more than a conflict would arise in connection with the fixing of the rates for the carriage of the railway mails.

Of course, there may be differences of opinion as to what those rates should be. In fixing the railway-mail-pay compensation, for example, the Postmaster General has always presented his case at great length before the Commission, as have the railroads.

The only other thing is that as this bill is drawn, the question of determining what carriers, other than those who are now carrying the air mail, shall be employed to carry it in the future is left to the determination, final determination, of the Commission.

There, again, there might be a difference of opinion between the two departments as to what ought to be done.

Mr. MARTIN. Not having had any opportunity to study these different bills, I was just wondering what powers, roughly speaking, are now exercised by the Post Office Department over the air-mail system which would be transferred to the Interstate Commerce Commission.

Commissioner EASTMAN. Well, of course, this act, to answer your question, goes much further than the present powers which are possessed by the Post Office Department or by the Commission itself. It provides for regulation over the rates and charges of the air carriers for passenger, express, and freight service, such as the Commission has over the rates and charges of the railroads and motor carriers. It provides for control over the issue of securities, for example; over the unification of air carriers, and all that sort of thing, which is not provided for by the present law at all.

Now, so far as the present law is concerned, the Postmaster General has the initial right to make contracts, but the duty is in the Commission to determine what the compensation under those contracts shall be. This bill would leave that situation just as it is at present.

Mr. WADSWORTH. This bill, then, does not take away from the Postmaster General any power that he now possesses, except perhaps the final decision as to which route shall carry the mail.

Commissioner EASTMAN. I think that is the chief thing, the final decision as to which carriers, in addition to those which now have contracts and are given by this bill the right to continue the carriage of the mails, shall have the right to carry the mails for the future.

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