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total revenue of all the carriers has dropped in on comparatively short time from about 60 or 70 percent to about 30 percent, mais revenue still bears a very large relationship to total revenue in many particular cases, amounting to as high as 60 or 70 percent, even now, among many of the smaller lines. Indeed, so long as the mail revenue is as high as 30 percent of the total revenue of the entire industry, it must be said that even from the standpoint of the industry as a whole mail traffic remains a vitally important factor, and there is no prospect that in the near future its importance can be ignored. In other words, contrary to the condition in any other form of transportation, the Government of the United States is and for a long time will be overwhelmingly the largest single customer of the air carriers and, in particular cases, among the smaller lines, this patronage on the part of the Government will exceed the total patronage of all other customers. Thus it is evident that, in making a transition from a system of contracts for the carriage of mail to a system where mail will be carried by virtue of ordinary certificates of convenience and necessity, the provisions relating to the mail service become of primary importance to the smaller lines and of almost as great importance to the larger and stronger lines.

The subject of the Air Mail Service can be divided into three parts. In the first place, there is the question of which carriers shall carry the mail. In the second place, there is the question of the extent of the Postmaster General's power over the service rendered by those carriers. And, finally, there is the question of compensation for carriage of the mail. I shall deal with these subjects in the order named.

AUTHORIZED MAIL CARRIERS

If the contract system is to be abandoned, there are, I suppose, three possible alternatives for determining who shall be authorized to carry air mail.

The first alternative is that every carrier who receives a certificate for any purpose shall automatically be authorized likewise to carry the mail.

Incidentally, there is a bill in the Senate, which has that provision in it.

The second alternative is that existing mail carriers shall receive authority to carry the mail by virtue of a “grandfather” clause, and that additional mail service shall be authorized only upon the initiative of the Postmaster General.

The third alternative is that existing mail carriers shall receive authorization to carry the mail under a "grandfather” clause, and that additional authority to carry the mail shall be granted by the Commission upon application of a carrier whenever the Commission deems it wise.

The second alternative seems to be that which has been adopted in the proposed bill. I gather from Commissioner Eastman's letter to this committee that he would be inclined to favor the third alternative.

In any event, it seems agreed that the first altrnative would be undesirable.

However, in order to make clear to the committee some of the problems involved in determining who shall render the mail service,

I should like briefly to consider the first of the three alternatives which I suggested; and, since I am of the impression that on occasion there has been some feeling that this would be the wisest course, and since it is the method adopted in the case of the railroads, I believe some examination of the wisdom of such a method as applied to air carriers is entirely in order. This course, as I say, would be that every carrier receiving a certificate for any purpose should automatically be authorized to carry the mail. In other words, although with respect to applications for certificates to operate a service between any particular places the Commission would be free to determine whether a certificate should be granted for passengers, or for express, or for freight, or for all of such classes of service, the Commission would not be free to grant a certificate which would exclude authority to carry mail; every certificate, no matter for what class of traffic, would carry with it the authorization to carry the mail whenever the Postmaster General desired to place mail upon the craft of that carrier between the points in question. This method of dealing with the problem is, as I have said, substantially the method adopted in the case of the railroads. That is, every railroad is under an obligation to carry the mail if the Postmaster General desires to place mail upon its trains.

There are several vital differences between the situation of the air carriers and the situation of the railroads. One of the most notable differences is one which we are only beginning to appreciate and that is that between particular points it may be entirely in order for an air carrier to be authorized to transport only freight or only express. In other words, between two given points it may be that one air carrier is already engaged in the transportation of mail and passengers and, to some extent, property, and that another air carrier might well undertake to transport property exclusively. The fact is that, even today, in certain parts of Canada the transportation of property far outweighs in importance the transportation of passengers between particular points; and there is every possibility that in certain regions in this country the same condition may obtain in the future, and that a considerable share of the air-carrier industry may be devoted exclusively to the transportation of a single class of traffic. This possibility makes it of some importance that in looking forward to a scheme of certificates of convenience and necessity we must realize that each particular class of traffic should be dealt with as a particular problem, and that authorization to engage in the business should be granted only upon a consideration of the economic problems which each class of traffic presents.

Again, among the various classes of traffic, mail itself is a highly important item. As I have said, it may well amount even now to 60 or 70 percent of the total revenue of certain of the smaller lines; and between particular points, or in particular systems, the mail traffic of a carrier may be a much greater proportion of other traffic than in the air-line industry as a whole. In other words, quite contrary to the condition obtaining among the railroads, the mail traffic itself may be the chief prop which sustains an air carrier.

Furthermore, the mail traffic available to air carriers is not as yet comparable in amount to the mail traffic which is available to the railroads. That is, the railroads can carry all mail; even, on occa

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sion, some air mail. The air carrier, however, can carry only air mail prepaid at a special rate, the volume of which is infinitely less than the volume available for railroad transportation.

It is true that in some parts of the world governments have determined to place upon air carriers all types of mail whenever delivery will be speeded thereby, and we have begun to hear discussions of the wisdom of such a measure in our own country.

Because of the comparatively great distances in this country, and because of the extraordinary development of our air-carrier industry, the advantages of adopting such a measure here are patent, and we may well look forward to the accomplishment of that end some day in the future.

However, there seems to be no immediate likelihood that any such course will be taken, and we must face the problem of mail transportation on the assumption that, for a considerable time, at least, the air-mail traffic will continue to be comparatively limited in amount.

These conditions make it vital that the mail traffic should not be spread over so many carriers that there will be an insufficient amount left for particular carriers to enable them to continue in business.

When a prospective carrier is required to get a certificate of convenience and necessity prior to its inauguration of a passenger service, it must show, first, that it is able to meet the obligations of such a service, and second, that there is a need for an additional service of the kind it proposes; and the same thing is true of a prospective carrier who desires to carry express or freight.

Obviously, if the interests of the Postal Service are to be protected—by authorizing persons to carry mail only when they are able to furnish adequate service, and if the interests of the industry and the public are to be protected by authorizing persons to carry mail only when there is sufficient mais traffic to justify an additional service, a most unfortunate situation would arise were every carrier who receives a certificate for any purpose to be automatically authorized to carry the mail.

For this would mean that no certificate could ever be issued unless the carrier showed that it had the facilities and equipment necessary to a mail service, and also that the mail traffic was such as to justify another mail carrier entering the field.

In other words, to apply to the air carriers the same principle applicable to the railroads would mean that the entire future development of the transportation of passengers and property would be geared to and limited by the development of mail traffic.

As I have said, the method adopted in the case of the railroads is perfectly appropriate because of the relatively minor part that the mail traffic plays. Every railroad, if it is able to enter business at all, is able to carry the mail, and, if there is enough traffic generally to justify a new service, the presumption is that another railroad mail carrier will not seriously affect the position of other mail carriers.

Among air carriers, however, this situation does not obtain.

An example will serve to sharpen the point suggested. As Commissioner Eastman stated at the outset of his testimony, there are today several interests proposing to enter the business of transportation of passengers and property by air, and those interests propose to enter that business without mail contracts.

Presumably, in these cases, and certainly in many possible cases in the future, and, indeed, in many cases of existing services, there is every economic justification for a passenger business or an express business between particular points.

If, in each such case, the Commission had to determine, prior to authorizing such a service, that a mail service between those points would also be justified, this would place a serious brake upon the industry's development, and might very well result in monopoly.

The example I might suggest is that of a situation which is quite possible between points in an area where population is not heavy but where the needs of a particular industry might be such as to call for a large amount of freight or express service. This might be notably true in certain mining regions.

I have no doubt whatever that with the development of transportation of property by air there may be many cases where it would be not only possible, but highly desisirable, that an existing carrier, which had built up a modest passenger service, as well as a considerable express and freight service, would be subjected to competition of another carrier in the transportation of property.

However, in such a region it is obvious that the mail traffic would not be a large item, and if it were spread between two carriers a serious crippling of the first might result.

In that event, if the first of the three alternatives which I have suggested were to be adopted, the Commission could not authorize the additional carrier to inaugurate a property service despite the justification of such a service, because the insufficiency of the mail traffic would not justify an additional mail carrier and would result either in a serious dilution of the mail appropriation or necessitate its increase.

In short, it seems quite evident from every point of view-from the point of view of the Postal Service as well as of the industrythat carriers should be permitted in certain cases to carry passengers or express, even where the amount of available mail traffic would not justify an additional mail carrier.

In order to attain this end, the problem of authorizing mail service must, of course, be separated from the problem of authorizing other classes of service.

Provision should be made for the development of the industry in each class of service as each class of traffic may justify that develop. ment. We should be careful to avoid gearing the entire industry to any particular class of traffic.

So long as mail bears its present relationship to other classes of traffic, the authority to carry mail must depend upon a consideration of mail needs, and the authority to carry passengers or property, as the case may be, must depend upon consideration of the needs for such classes of service, and such classes alone.

The second method for determining who shall be authorized to carry the mail is (a) that existing carriers shall be granted authority under a "grandfather" clause, and (6) when any additional seryice is needed the Postmaster General shall certify the fact, and then it shall be authorized.

This is the method which is adopted in the proposed bill, as an examination of section 305 (d), (f), (j), and (m) will disclose.

Paragraph (d) of this section 305 contains the "grandfather" clause which I shall discuss in more detail a little later. For the moment, it is enough to point out that every air line authorized to carry mail when the act is adopted would receive in its certificate, by virtue of this clause, authority to carry mail.

In this way there would be turned over to the new regime the airmail system exactly as it stands. As I understand the bill, any authorization of new mail service, beyond that given by virtue of the grandfather clause in paragraph (d), will be made by the Commission pursuant to paragraph (m) of the section 305.

This section provides that whenever the Postmaster General finds that mail service is required in addition to service already authorized, he may certify that fact to the Commission. This, of course, refers not only to service to new points but also to service by additional carriers between points already served.

When the Postmaster General makes his certification, he files a statement showing the service required and the facilities necessary therefor.

The Commission is then directed to issue a certificate authorizing the service requested, either by amending a certificate already outstanding so as to include in it authority to transport mail, or by granting the authority in some new certificate which may be applied for either by an entirely new carrier, not theretofore engaged in business, or by a carrier already in business, but not theretofore serving the points in question.

The Commission is not given the power in any sense to review the determination of the Postmaster General, All it may do upon receiving the Postmaster General's certification is to inquire into the purely economic phase of the matter in order to determine whether the authorization of the new service would endanger the ability of an existing carrier to continue to engage in business.

This, of course, means that in any case where the Postmaster General had certified the need of a service between points not theretofore served, the Commission would be required to grant the authorization.

Only when a new service was proposed under circumstances which might spread the mail traffic too thin among two or more carriers, would the Commission have the power to refuse to issue the authorization.

Thus, mail is treated as a problem in itself. The transportation of other củasses of traffic may develop quite independently of the development of the mail service; and the difficulties I have suggested heretofore would be avoided.

Full initiative is given the Postmaster General in securing additional service. He, of course, is the customer, and he is best equipped to consider the problem from the standpoint of the Postal Service itself.

At the same time, provision is made for a consideration by the Commission of the economic effects upon existing carriers which might ensue from authorizing a new mail carrier.

In this way, each problem is met by the agency suited to deal with it, full initiative in the Postmaster Ġeneral is recognized, provision is made for the indefinite expansion of the Postal Service as mail traffic grows, and an orderly scheme for dealing with the question from every angle is provided.

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