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“(22) The time is too short to enable us to state with any degree of accuracy what unemployment, if any, has resulted because of the increased speed, without any limitation of mileage flown per month. To counteract the unemployment which theoretically would result, there should be taken into consideration the increased popularity of faster service that in the past has attracted enough additional passengers to require additional schedules.”

There was also before the National Labor Board at this juncture a brief, submitted December 13, 1933, by the Air Line Pilots' Association, International, which discussed the report of the fact-finding committee. Points 1 and 2 of this brief dealt, respectively, with “Limitation of the Hours of Flying” and "Limitation of the Mileage Flown." The argument with respect to the limiting of hours (brief, pp. 11, 14, 15) was based solely on considerations of safety of operation. In the interest of preventing unemployment, as well as of fostering the safety of the pilots themselves, other portions of the brief (pp. 15, 16, thereof) recommended the limiting of mileage to be flown. In other words, such economic limitations as they urged were asked solely in terms of miles and in no case in terms of hours.

Thereupon, the Pilots' Association introduced a new witness, Dr. Ralph Green, a medical examiner, whose testimony was directed altogether to the matter of limiting flight-hours, and who discussed that subject solely in terms of safety.

At the session of December 14, 1933, the second and last day of public hearing devoted by the National Labor Board to the pilots' pay case, most of the hearing was consumed in résumé of (1) the proceedings which had been held before the fact-finding committee, (2) the report of that committee, and (3) the Pilots Association's brief. In such of their statements and arguments as related to flight-hour limitation, neither the spokesman for the Pilots' Association nor any of the several speakers for the five airlines parties to the case dealt with any subject but safety. The last of the latter speakers, Mr. C. W. Cuthell, representing United Air Lines, made, concerning the limitation of hours, the flat statement that “this is a matter that affects safety” (transcript, p. 84).

The conclusion irresistibly follows that, being based on a record confined to considerations of safety, the part of the National Labor Board's "decision” of May 10, 1934, in which the Board (to use its own words) “set forth its views" that "85 hours of flying shall constitute the monthly maximum for air pilots”, was advanced as a safety limitation. In effect, in this part of its “decision”, the National Labor Board was attempting, in the interest of safety, to revise downward the 110-hour limit imposed by the Department of Commerce.

In its attempt to limit flight-hours the Board could have had no other purpose consistent with the record on which its decision was based. If the Board had desired to limit pilots' monthly services for any other purpose, such as the proposals advanced in the name of the Pilots' Association for preventing unemployment and redistributing pilots' income, it was unmistakably advised, of record, that the limitation must be applied to pilots' individual monthly mileage. It is obvious that the Board took cognizance of these proposals, and that, in point 2 of its decision (wherein it said, “Experience has not crystallized sufficiently to put a maximum on the monthly mileage of air pilots”), it declined to act upon them.

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1 The argument presented was as follows:

"The foregoing report of the fact-finding committee, we believe, gives a clear picture of the pilot-operator hours and wage controversy now before the National Labor Board. We submit herewith a few additional facts, together with our interpretation of the findings of your committee. "Tact 14 of the report

states that the 110 hours per month limitation perscribed by the Department of Commerce is admittedly too high, and that the Aero Medical Association of the United States has recently recommended a reduction to 85 hours.

“Attention is called to the fact that in July 1933 certain of the operators required their pilots to fly beyond the 110-hour limit.

This is evidence of the direct need for stringent safety limitations, and a strict enforcement of same, both in miles and hours. The reason for this is obvious, because it is an accepted fact that an over-fatigued pilot is an unsafe pilot. A pilot who flies too many hours per month will become apprehensive and nervous, lose his flying judgment, and become less keen and show distress on slight exertion. A pilot flying too much will become inattentive and careless, and his liability to accident will markedly increase. Unquestionably the Aero Medical Association took all this into consideration, together with added strain and increased fatigue caused by faster equipment, when they recommended a drastic reduction in the present 110-hour maximum Department of Commerce flight limitation, and recommended 85 hours maximum.

*The air-line pilots are of the opinion that the issues involved in the limitation of hours and miles of flying are clear cut, because they have a direct and definite bearing on public safety, and should be dealt with in such a way as to leave no room for violations when such violations may result in loss of human life.”

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CHAPTER III

SUBSEQUENT DECISION AND TESTIMONY

A

On page 710, beginning at line 23, of Air Mail Docket No. 1 as printed (206 I. C. C. 675, Mar. 11, 1935), the basic decision of the Interstate Commerce Commission in air-mail matters clearly indicates that the Commission regards the Department of Commerce (not the Labor Board) as the authority lawfully authorized and directed to prescribe maximum flying hours. The decisions says:

“Section 12 of the act authorizes and directs the Secretary of Commerce, among other things, 'to prescribe the maximum flying hours of pilots on airmail lines.'"

B

Testifying before the subcommittee of the Committee on Interstate Commerce, United States Senate, Seventy-fourth Congress, first session, on S. 2496, a bill to amend the Railway Labor Act, on May 20, 1935, Mr. Edward G. Hamilton, representing the Airline Pilots Association, International, stated as follows:

Page 4 of the hearings-
(a) “the air lines sought to change to an hourly system of pay."

(b) “after a long-drawn-out controversy before the National Labor Board, a compromise was proposed wherein a very complicated system of pay was adopted."

Page 5 of the hearings

“The pay recommendations of the Labor Board were made a condition on the holding of an air-mail contract."

Page 7 of the hearings

“The number of hours permitted by the Department of Commerce is 1,000 a year, which averages about 83 per month, but they (the air lines) may employ them (the pilots) as much as 100 hours in any one month.

And copilots are allowed 100 hours per month right straight through, or 1,200 hours a year.”

It will thus be noted that the Air Line Pilots Association, International, even as late as the testimony of May 20, 1935, and while decision no. 83, rendered by the National Labor Board on May 10, 1934, was fresh in their minds, testified that the decision was a pay decision, and that, as to pilots' flight-hours, the air lines were free to permit service up to the limitation prescribed by the Secretary of Commerce.

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OPPOSITION TO AMENDMENT SUGGESTED BY MR. EASTMAN Mr. GORRELL. I understand that Mr. Eastman has suggested incorporating in H. R. 5234 a prohibition providing that, after the law takes effect, it shall be unlawful for any officer or director of an air carrier “to participate in the making or paying of any dividend of any operating carrier from any funds properly included in capital account.

In order to illustrate the dilemma in which such a prohibition might place an air line, I shall discuss a hypothetical case.

Assume that an air line has a net income in a taxable year of $1,000,000, derived entirely from operating profit. The normal income tax on that profit would be $148,840. If no dividends were declared by the corporation, the surtax on undistributed profits imposed by section 14 of the 1936 Revenue Act would amount to $174,487, according to my computation. If this corporation happened to have a surplus deficit, it would not be possible for it to declare a dividend under the proposed prohibition suggested for the Air Carrier Act. It therefore would have to pay a total normal and surtax of approximately $323,000, notwithstanding the fact that the declaration of a dividend would be perfectly proper and legal under the law of the State of its incorporation.

I think it is manifestly unfair to place a corporation between two statutes, one of which is designed to encourage the distribution of earnings in the form of dividends and the other of which would prohibit the payment of dividends if the corporation had a surplus deficit.

The situation I am discussing actually arose in the case of one air line for the year 1936. The corporation had a surplus deficit and also a substantial net income. A dividend was declared in order to minimize the tax on undistributed profits, but, if the proposed prohibition in the Air Carrier Act had been in effect, the corporation would have been compelled to pay the entire tax on undistributed profit.

No such prohibition appears in the Motor Carrier Act, which throughout seems to have served as a model for this proposed legislation.

COMMENTS ON AMENDMENTS PROPOSED BY JOHN E. BENTON, OF THE NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS

Mr. Benton proposed three amendments which I shall briefly consider in the order presented by him.

The first amendment, which he proposed to section 302, would add a general paragraph preserving the powers of the States. Insofar as this amendment is not directed to the purposes sought by the second amendment, which I shall consider in a moment, it is unnecessary. It seems undesirable to insert any redundant words.

The second amendment is a proposed proviso to the section giving the Commission power to fix rates which would prohibit the Commission from exercising power over intrastate rates for the purpose of removing discriminations against interstate commerce. As Mr. Benton admits, this is designed to bar the exercise of power over intrastate rates comparable to the power exercised in the case of railroads. While such a provision was incorporated in the Motor Carrier Act, it seems of doubtful wisdom. In no industry is it so apparent, as in the case of air carriers, that the interest of the Federal Government is and should be paramount. Because of the speed of air carriers, intrastate business on interstate air lines will always be incidental. This is much more true of the air carriers than of the motor carriers. To open the door so as to permit a State to require the transportation of intrastate traffic at cut rates on the same ship that carries interstate traffic would be a most serious eventuality. If State regulation prevents intrastate traffic from bearing its due share of the costs of transportation, to the detriment of interstate traffic, it seems perfectly clear that the Federal agency should be enabled to correct the situation. In any event there should not be a provision barring the Commission from taking such action. Interstate considerations should always be supreme in this industry and there should be no restriction upon the Commission's power to carry out whatever measures are necessary to the effectual protection and promotion of that traffic.

As to the third amendment proposed by Mr. Benton, which would permit the Commission to confer with and hold joint hearings with State authorities, there seems no objection. Indeed, this seems desirable. In the event the Commission ever finds it necessary to remove intrastate discriminations against interstate commerce, the suggested

provision would facilitate cooperative action. Anything to promote uniformity is eminently desirable.

Mr. GORRELL. Mr. Chairman, following your suggestion, I offer for your consideration the following amendments.

(The matter referred to is as follows:)

PROPOSED AMENDMENTS TO H. R. 5234

Page 4: Add at the end of line 7: "or between any place in the Philippine Islands and any place in a foreign country".

Page 5, line 2: Change the period to a semicolon and add “but shall not include commerce between places in the Philippine Islands".

Page 5, line 15: After the words "United States” add the words "or the Philippine Islands”.

Comment.—The purpose of the foregoing three amendments is to exclude from the proposed Federal regulation the internal air commerce of the Philippine Islands, while retaining within the jurisdiction of the bill the regulation of commerce conducted to and from the Philippines by any citizen air carrier.

In section 303 (1), on pages 5-6, it would seem desirable that the second sentence of the paragraph should be a separate paragraph and that quotation marks should be placed around the phrase “possessions of the United States”.

On page 9, subsequent to the semicolon in line 8, strike out the remainder of the line, all of line 9, and through the semicolon on line 10, and in lieu thereof insert the following: "To such standards and requirements respecting the service to be rendered in air transportation as may be imposed by law;".

Comment.--The foregoing amendment is necessitated by the consideration that the Department of Commerce and the Post Office Department, as well as the Interstate Commerce Commission, are authorized to impose standards and requirements which must govern air-line operation and will affect operating costs and air-line rates, fares, and charges.

In section 305 (c), page 10, line 16, after the word "General", insert a semicolon.

Comment.--The semicolon is inserted in order to make it clear that the notice posted in the office of the secretary of the Interstate Commerce Commission serves the function only of notifying the public. Thus the Postmaster General will have to be given due notice by special action of the Commission, sending notice to him particularly.

On page 11, immediately preceding the semicolon on line 13, insert the following: "and will not materially impair the earnings of any air carrier from any activity in which it is authorized to engage under a certificate then held by it pursuant to this section."

Comment.--The foregoing amendment is requested by certain of the smaller and financially weaker air lines for the protection of their future position in possible competition with larger and stronger air carriers. The other air lines, though not urging it, offer no objection to its inclusion.

In order to remove any doubt that the Interstate Commerce Commission would be empowered to control schedules under H. R. 5234, and thus to interfere with the power of the Postmaster General to prescribe schedules for mail carriage, it is suggested that section 305 (e) of the bill be amended by striking out the words "the service which may be rendered" on page 12, lines 23–24, and inserting in lieu thereof the following: "the classes of traffic which may be transported.”

This will unequivocally confine the certificate to specifying the nature of the traffic and by no remote construction could there be power in the Commission to specify the schedules. Thus the Postmaster General, under section 305 (g), which is broader than the Railway Mail Act (under which he exercises power over railroad schedules when necessary), will be unfettered by the Commission.

For the same purpose there should be inserted at the end of paragraph (g) of section 305, on page 14, the following: “Provided, That in specifying schedules the Postmaster General shall give due regard to the requirements of classes of traffic other than mail."

The present language of the bill gives the Postmaster General much broader authority to regulate the schedules of aircraft than is contained in the provisions of the Railway Mail Service Act with respect to railroad schedules. The Solicitor of the Post Office Department has testified to successful experience under the provisions of the latter statute. In view of the testimony, the power given him by H. R. 5234, as now drawn, appears too broad, and I propose the

foregoing amendment for the purpose of limiting such power to its appropriate sphere.

In section 305 (e), page 13, line 9, insert between the words "to" and "change" the words “add to or."

Comment.--It is, of course, desirable, especially where an industry is developing as rapidly as the air-carrier industry, that there should be freedom to add to as well as to change equipment, etc. The comparable provision of the Motor Carrier Act gives the right to add to equipment, etc. Such a provision was inserted in the Motor Carrier Act after careful consideration, and the reasons are even more applicable here. Everyone, admittedly, is concerned that the management should not be discouraged in going forward with improvements, and the Commission under comparable regulation has not sought to assume the functions of management in this respect, and certainly in this new industry no such desire on the part of the Commission has been manifested. The provision in question places improvements and adjustments to new business needs squarely up to the managers themselves.

In section 305 (f), on page 14, line 2: Strike out the line and insert in lieu thereof the following: "as set forth in the first two provisos of paragraph (d) and in paragraph (m) of this section;".

Likewise, in section 305 (d), on page 12, line 20: Strike out the letter "j" between the parentheses and insert in lieu thereof the letter “m.”

Comment.—These amendments are necessary, particularly the first one, in order to make certain that, aside from the “grandfather" clause, there will be no power in the Commission to authorize the transportation of mail except upon the initiative and request of the Postmaster General. Were the first amendment not included, there is a possibility that paragraph (f) of section 305 might be construed to authorize the Commisison to give an authorization to carry mail in any certificate applied for and issued under paragraph (d), whether it was a "grandfather" certificate or otherwise; this would mean that the power of the Postmaster General under paragraph (m) of the section 305 would not be an exclusive power, and applications for mail service could be made and granted even though the Postmaster General had not wanted such mail service to be authorized and had not asked for it. It is obviously of importance that the power of the Post Office Department to keep the initiative in an orderly expansion of the mail service should be preserved to the Post Office Department.

On page 17, strike out all of lines 7 and 8 subsequent to the word "not" on line 7, and insert the following: "materially impair the earnings of any air carrier from any activity in which it is authorized to engage."

Comment. This is a companion amendment to that proposed, supra, to page 11, line 13, and is offered for the same reason.

On page 22, line 22, after the word "issuing” insert "or interchanging."

Comment.--The effect of this amendment would be to permit one air line to give free or reduced-rate transportation to the directors, officers, employees, etc., of other air carriers. The reasons for this are obvious. Under the bill as drafted such transportation would be confined to the personnel of the issuing line.

On page 23, at the end of line 15, insert a comma and add the following: “in all commerce,”.

Comment.-Because the proviso relative to the availability of air transportation for Government officials and employees is a part of a paragraph the main substance of which relates only to interstate air commerce, there may be doubt whether the bill as drawn would make such transportation available in overseas or foreign commerce. The foregoing amendment is proposed as a means of curing the defect.

In section 310 (a), at page 29, line 14, strike out the period, insert a comma, and add the following: “not inconsistent with the provisions of this part.”

In section 310 (b), on page 30, line 9, strike out the period, insert a comma, and add : "not inconsistent with the provisions of this part.”

Comment. This amendment is designed merely to relate these two paragraphs to, and to make them consistent with, section 305 (g), on page 14.

In order that section 310 (b) shall be made consistent with the proviso in section 305 (e) that certificates to engage in foreign air transportation shall designate only a general trade route except so far as concerns points within the jurisdiction of the United States, the following amendment is suggested :

Page 30 : At the end of line 5, after the word "points", add the words "or over the trade route or trade routes."

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