firms the wisdom of the Post Office Department in its administration for the past decade, and directs the Commission to adjust all rates as this particular business requires. NO PARALLEL TO OLD SHIPPING "DOLE" Moreover, the bill does not provide a subsidy in the sense mail subsidies were provided under the old system of ocean-mail contracts. Those contracts set up an arbitrary dole to be paid to the shipping companies solely on the basis of mileage sailed, even though virtually no mail was carried and even though the ocean-mail service was slower than other forms of transportation, as was true in cases. This dole increased year by year and bore no necessary relation to the mail service. The present bill makes no such provision. It does not set up an arbitrary mileage dole. Instead, it leaves the way open so that the Commission can apply the most suitable method as the facts warrant, with an effort to adjust the amount of pay to the service rendered from time to time as the public interest may dictate. RATE-MAKING FORMULA MAY BE IMPOSSIBLE As Commissioner Eastman stated to this committee, an element in all rate making for all classes of traffic is the need that the carrier shall be able to continue to do business. This, indeed, is the fundamental element in many respects. This element is explicitly recognized by the proposed bill. It is impossible always to say with certainty that passengers should contribute in revenue a share of the total directly in proportion to the space occupied by those passengers, and the same is true of the various classes of property, including mail, An arbitrary division of cost over the various classes of traffic, based on any single factor such as space, simply ignores the many other factors that enter into the value to the public and the national economy of the particular service. Obviously these factors in an important degree are altogether intangible, defying precise measurements. In this sense the function of rate making is legislative rather than judicial, when strictly viewed, and the function of the Commission is in reality one which involves determinations of social and economic policy rather than the automatically applying a definite rule to a prescribed state of facts. Thus, as Commissioner Eastman indicated, in fixing rates for certain classes of freight for the railroads, the Interstate Commerce Commission has to some extent necessarily taken into account the fact that one class of traffic can bear a higher proportionate cost than can another class, and that in order to produce an ultimate aggregate return to the carrier sufficient to maintain its total business, it may be necessary to prescribe rates that vary according to many factors beside the single factor of space occupied or any other single factor. RATES MUST NOT DISCRIMINATE AGAINST SPARSE-SETTLED REGIONS H. R. 5234, as I read it, recognizes this feature of rate making and recognizes that these considerations are relevant in fixing mail pay. The fact is that one might very well argue that with respect to mail the value to the public of simply having available an efficient, speedy system of mail transportation far outweighs the matter of the proportion of space on a particular plane which a particular item of mail may occupy. To put a sharp example: There are certain small lines which make it possible to deliver mail, sent between cities in remote regions of difficult terrain, within only a few hours, whereas other forms of transportation might consume a day or even longer. At the same time it is possible that, for many reasons, passenger or other traffic between those cities is comparatively light. It is bad national policy and quite out of the question to say categorically that the portion of the cost of transportation should in that case always be divided between mail and passengers according only to weight or only to space. Any such division would be absurd. And its absurdity might vary even from season to season. FACTORS WHICH DETERMINE AIR-MAIL RATES As I see the problem, then, it comes substantially to this: The end in view is, of course, a reasonable return to the carrier, under economical management, so that it can continue in service. That return is to be secured as a whole from various classes of traffic, including mail. The division of the burden between these classes must depend upon many factors, including the ability of each class to pay, the relative importance of each class, the constancy of demand, the facilities that have to be devoted because of the peculiar demands of each class, and so on. The determination of what that division should be can never be precise, nor can any inflexible rule be laid down to solve all cases. The best that can be done is to place the matter in the hands of a commission, of expert character, with a constantly increasing intimate experience, that is able and equipped to view the transportation problem as a whole. H. R. 5234 seems to me to accomplish this end. I also desire to insert in the record, with your permission, and for your convenience, the present forms of contract for domestic air-mail service, which has been referred to, so that where provisions of these contracts are referred to in your discussions you may readily ascertain what the contracts actually contain and provide. (The contract forms referred to are as follows:) Route no. CONTRACT FOR TEMPORARY AIR-MAIL SERVICE [Contractor's name and address] Route: Chicago, Ill., via certain designated points, to Dallas, Tex., and return. Rate of pay, twenty-two and one-half cents ($0.225) per airplane-mile for thirty-five (35) cubic feet of air-mail space, additional space to be furnished, if needed, at the same prorata of the rate of the bid for the basic space. This article of contract, made the day of 1934, between the United States of America (acting in this behalf by the Postmaster General) and contractor; Witnesseth, that whereas has been accepted according to law as a contractor for temporarily transporting the mails on air-mail route no. from Chicago, Ill., via Kansas City, Mo.; Wichita, Kans.; Panca City and Oklahoma City, Okla.; and Fort Worth, Tex.; to Dallas, Tex, and return, under an advertisement issued by the Postmaster General on March 30, 1934, for such service, which advertisement is hereby referred to and made by such reference a part of this contract, for a period of 3 months from the date of commencement of service hereunder, which may be extended for two 139173-37--21 periods of not more than 3 months each, or any portion thereof, at the option of the Postmaster General. Now, therefore, the said contractor undertakes, covenants, and agrees with the United States of America: 1. To carry the mails offered with due celerity, certainty, and security, and in safe and suitable aircraft on the route described and on the schedules set forth by the Postmaster General, the contractor to receive and deliver the mails at the designated fields and point on said fields as approved by the Postmaster General. 2. To carry said mails in a safe and secure manner, free from wet or injury. The contractor shall furnish, without additional cost, sufficient space at each airport on the route for the mails to be properly separated and safeguarded. 3. To be accountable and answerable in damages for the acts of the person to whom the contractor shall commit the care and transportation of the mails and his faithful performance of the obligations assumed herein and those imposed by law; not to commit the care or transportation of the mails to any person under 16 years of age, nor to any person undergoing a sentence of imprisonment at hard labor imposed by a court having criminal jurisdiction, nor to any person not authorized by law to be concerned in contracts for carrying the mails. 4. For which service when performed and evidence thereof shall have been filed with the Postmaster General, the said contractor is to be paid by the United States at the rate of 222 cents airplane-mile for the initial unit of 35 cubic feet of air-mail space. Additional space may be required as often as necessary by the Postmaster General; and the contractor agrees to furnish such additional space on such demand at the rate of 0.6429 cent per cubic foot of air-mail space; provided that in no case will the rate be paid in excess of 45 cents per airplane-mile as stated in the advertisement. It is agreed that the determination of the amount of space used in excess of the authorized initial unit shall be based upon the average mail load carried per mile over the entire route during each calendar month for which settlement is made. Payments to be made monthly and as soon after the close of each month as accounts can be adjusted and settled, said pay to be subject, however, to be reduced or discontinued by the Postmaster General as hereinafter stipulated, or to be suspended in case of delinquency. 5. It is hereby also stipulated and agreed that deductions in pay will be made for suffering the mails to become wet, injured, or destroyed, or when a grade of service is rendered inferior to that stipulated in the contract, or for the loss of or depredation upon the mails in the custody of the contractor or his agents, provided the loss is occasioned by the fault of any of them. 6. It is hereby further stipulated and agreed by the contractor that the Postmaster General may annul the contract or impose forfeitures, in his discretion, for repeated failures or for failure to perform service according to contract; for violating the Postal Laws and Regulations; for subletting the contract or the service without the consent of the Postmaster General, or assigning or transferring the contract; for combining to prevent others from bidding for the performance of postal service, and such annulment shall not impair the right of the Department to claim damages from the contractor and his sureties. 7. That at any time during continuance of this contract, the Postmaster General may require new or additional sureties upon the bond hereto annexed, if, in his opinion, such sureties are necessary for the proper protection of the interests of the United States; and that the contractor shall furnish such sureties to the satisfaction of the Postmaster General within 10 days after notice so to do; and in default thereof this contract may be annulled, at the option of the Postmaster General. 8. The contractor expressly warrants that he has employed no third person to solicit or obtain this contract in his behalf, or to cause or procure the same to be obtained upon compensation in any way contingent, in whole or in part, upon such procurement; and that he has not paid, or promised or agreed to pay to any third person, in consideration of such procurement, or in compensation for services in connection therewith, any brokerage, commission, or percentage upon the amount receivable by him hereunder, and that he has not, in estimating the contract price demanded by him, included any sum by reason of any such brokerage, commission, or percentage, and that all money payable to him hereunder is free from obligation to any person for services rendered, or supposed to have been rendered, in the procurement of this contract. He further agrees that any breach of this warranty shall constitute adequate cause for the annulment of this contract by the United States, and that the United States may retain to its own use from any sums due or to become due thereunder an amount equal to any brokerage, commission, or percentage so paid, or agreed to be paid. 82. It is hereby further stipulated and agreed that no Member of or Delegate to Congress shall be admitted to any share or part of this contract or agreement, or any benefit to arise therefrom. 9. The determination of the mileage and space involved and the compensation for excess poundage carried upon emergency authorizations, and such matters as are pertinent thereto, is reserved to the Postmaster General. 10. The character of equipment to be employed and maintained on this route, with reference to speed, load capacity, safety features, and safety devices, shall be such as shall be approved by the Postmaster General and as is specified in the advertisement for this route. The design and capacity of the mail compartments in airplanes used over this route shall be subject to the approval of the Postmaster General. 11. The contractor shall keep and maintain an accurate system of accounting, in accordance with regulations prescribed by the Postmaster General. These accounts shall include a record of all obligations, investments, expenditures, receipts, and earnings from any source whatsoever, and shall be subject at all reasonable times to inspection and audit by the Post Office Department. The contractor shall furnish to the Postmaster General such information regarding its accounts and operations as he may from time to time require. 12. The contractor shall comply with each approved code of fair competition to which he or it is subject, and if engaged in any trade or industry for which there is no approved code of fair competition, then as to such trade or industry, with an agreement with the President under section 4 (a) of the National Industrial Recovery Act. The United States shall have the right to cancel this contract for failure of the contractor to comply with this provision, in which event the United States shall have the right to have the services required by this contract otherwise performed, at the expense of the contractor. 13. It is hereby further stipulated and agreed by the contractor that this contract is subject to all the conditions imposed by law, and by the several acts of Congress relating to post offices and post roads, and the conditions stated in the advertisement pursuant to which this contract is made. In winess whereof, the parties hereto have executed this contract as of the date herein first written and the Postmaster General has executed the same on behalf of the United States of America and caused the seal of the Post Office Department to be affixed thereto. The typewritten changes and additions were made before this contract was signed. UNITED STATES OF AMERICA, (Signed) By JAMES A. FARLEY, Postmaster General. Witness to signature of Postmaster General: (Witnesses to signature of contractor) CERTIFICATE OF OATH OF THE CONTRACTOR I, the undersigned, being employed in the care, custody, and conveyance of the mail as contractor on the route named in the foregoing contract, do solemnly swear that I will faithfully perform all duties required by me, and abstain from everything forbidden by the laws in relation to the establishment of post offices and post roads within the United States; and that I will honestly and truly account for and pay over money belonging to the said United States which may come into my possession or control. And I also further swear stitution of the United States: So help me God. this day of (Signed) that I will support the Con Subscribed and sworn to before me a notary public, in the State of 1934, and I also certify that the person named is not a postmaster, assistant postmaster, or a clerk employed in a post office, nor a member of the immediate family of a postmaster or assistant postmaster, and is, to the best of my knowledge and belief, above the age of 21 years. Approved as to fact: (Signed) (Signed) Approved as to form: I, Second Assistant Postmaster General. (Signed) Acting Solicitor. [To be executed if contractor is a corporation] certify that I am the secretary of the corporation named as contractor herein; that who signed this contract on behalf of the contractor, was then President of said corporation; that said contract was duly signed for and in behalf of said corporation by authority of its governing body, and is within the scope of its corporate powers. (Signed) [CORPORATE SEAL] I hereby certify that, to the best of my knowledge and belief, based upon observation and inquiry who signed this contract for the had authority to execute the same, and is the individual who signs similar contracts on behalf of this corporation with the public generally. Witnesseth, that whereas, the aforesaid 1934, by and hereinafter called the "contractor" and the United States of America (acting in this behalf by the Postmaster General). of entered into a contract with the United States of America under the date of 1934 for the transportation of mail by aircraft on route no. from Chicago, Ill., via Kansas City, Mo., Wichita, Kansas, Ponca City, and Oklahoma City, Okla., and Fort Worth, Tex., to Dallas, Tex., and return, under an advertisement issued by the Postmaster General on March 30, 1934, And whereas, under an act of Congress approved June 12, 1934, it is provided that existing contracts for the transportation of mail by aircraft may. by the written consent of the contractor and the Postmaster General, be extended as provided in that act; Now, therefore, it is hereby agreed by and between the parties hereto, that the aforesaid contract between the said parties with all its conditions is hereby extended, in accordance with the terms applicable thereto, as provided in said act, until May 16, 1935, at the rates of pay prescribed therein, subject further to the following agreement on the part of the undersigned contractor, to wit: 1. That said contract or any interest therein will not be sold, assigned, or transferred by the undersigned contractor to another person without the approval of the Postmaster General. 2. That after December 31, 1934, the undersigned contractor will not buy, acquire, hold, own, or control, directly or indirectly, any shares of stock or other interest in any other partnership, association, or corporation engaged directly or indirectly in any phase of the aviation industry, whether so engaged through air transportation of passengers express, or mail, through the holding of an air-mail contract, or through the manufacture or sale of airplanes, airplane parts, or other materials or accessories generally used in air transportation, and regardless of whether such buying, acquisition, holding, ownership, or control is done directly, or is accomplished indirectly, through an agent, subsidiary, associate, affiliate, or by any other device whatsoever. This shall not extend to interests in landing fields, hangars, or other ground facilities necessarily incidental to the performance of the transportation service of such air-mail contractor, nor to shares of stock in corporations whose principal business is the maintenance or operation of such landing fields, I hangars, or other ground facilities. |