JUNE 3 (legislative day, JUNE 1), 1948.-Ordered to be printed.

Mr. HAWKES (for Mr. BREWSTER), from the Committee on Interstate and Foreign Commerce, submitted the following

REPORT

[To accompany S. 26441

The Committee on Interstate and Foreign Commerce, to whom was referred the bill (S. 2644) to provide for the development of civil transport aircraft adaptable for auxiliary military service and for other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass.

The Interstate and Foreign Commerce Committee has been advised that the bill as amended has the approval of the Department of Commerce, the Department of the Air Force, the Department of the Navy, the National Advisory Committee for Aeronautics, and the Civil Aeronautics Board.

The bill sets forth as the policy of the United States that—

in the interest of national security the Federal Government should promote the employment in air commerce in as large numbers as possible of more efficient transport and cargo aircraft; and, to this end, sponsor the design, development, testing, tooling, construction, service testing, and modification of prototype transport and cargo aircraft, intended primarily for commercial use, but adaptable also for auxiliary military service.

The bill seeks to accomplish this objective through the creation within, of a Civil Transport Aircraft Evaluation and Development Board which will survey the national requirements for aircraft types designed to carry out the purposes of the act, prepare and recommend to the Secretary of the Air Force (hereinafter referred to as the Secretary) the operating and utility characteristics and specifications of such aircraft, and advise the Secretary as to the allotment of funds by him to carry out the purposes of the act.

The bill authorizes and directs the Secretary, if he concurs in the advice and recommendations of the Board referred to in section 2, to provide with appropriate safeguards and condition, out of funds

appropriated to carry out the purposes of the act, for the design, development, testing, tooling, construction, service testing, and modification of the prototype transport aircraft. Provision is also made for the recovery in whole or in part of such funds to the extent feasible and practicable.

NECESSITY FOR LEGISLATION

The necessity and urgency for legislation to provide for the development of civil transport aircraft adaptable for auxiliary military service arises primarily from the need for a substantial fleet in being of commercial transport aircraft which in time of emergency can be used as auxiliary military transports by the Air Forces and other branches of the Military Establishment. The existence of such a fleet of aircraft in being is in turn dependent upon the availability to the air lines and other air carriers of aircraft which are progressively more economical and efficient in operation than those now available. Evidence presented to your committee indicates that development work on new types of aircraft which might be expected to bring about substantial economies or efficiencies has been brought to a virtual halt owing to the heavy cost and high degree of risk involved in bringing new transport aircraft into production. Several manufacturers who appeared in support of the bill stated that the total cost of designing and developing a large transport aircraft was now in the range of 30 to 40 million dollars. In order to spread this cost over a sufficient number of production models, sales of at least 300 aircraft are necessary if the unit price per plane is not to be prohibitive. No postwar manufacturer has as yet achieved sales at this magnitude, with the result that substantial losses have been incurred by most transport manufacturers in the postwar period. In consequence, no single aircraft manufacturer is currently willing or able to bear the risk of providing the necessary funds for further transport development.

This situation was recognized by the Congressional Aviation Policy Board in its report entitled "National Aviation Policy" (S. Rept. No. 949, 80th Cong., 2d sess., Mar. 1, 1948). Recommendation 8 of that report reads as follows

The Federal Government should sponsor the design and development of prototype transport and cargo aircraft intended primarily for commercial use, but suitable for certain military purposes. Funds should be allocated to the Air Force and earmarked for this specific purpose.

A similar recommendation was made by the President's Air Policy Commission in its report, Survival in the Air Age.

The Department of the Air Forces in supporting the legislation testified as to the need which the armed services would have for greatly expanded air lift in the event of a national emergency. The capacity of military transports, plus that which could be commandeered from existing commercial fleets, falls far short of requirements. It is to meet this deficit in emergency air-lift capacity, particularly in the cargo field, that the bill is primarily aimed. By aiding in the development of transport aircraft which can be economically and efficiently operated in commercial service, the Federal Government will be providing the basis for a largely self-supporting air-transport reserve which otherwise will have to be maintained and wholly supported by the Military Establishment.

Your committee also believes that this legislation will be of material assistance to United States air carriers, both domestic and international, by providing them with aircraft better suited to particular operations and more efficient to operate. In the international field, particularly, our carriers within the next few years will face the competition of foreign carriers utilizing new flight equipment developed wholly through the financial support of foreign governments. This equipment includes jet transports now in development by the British and probably the Russians. If we are to maintain commercial, as well as military, air leadership, development work on advanced transport designs must be pushed forward vigorously. All the testimony heard by your committee was to the effect that virtually no such development would take place in the absence of this legislation. In view of the long period of time required to design and develop a new transport, it is a matter of some urgency that new development work in this field be started without delay.

COMMITTEE ACTION ON S. 2644

Your committee held hearings on S. 2644 on May 18 and 21, at which time it heard from representatives of the manufacturing industry, the air carriers, and the Government departments primarily concerned.

The recommended bill as amended by your committee differs from S. 2644 as originally drafted in the following principal respects:

Substantially more initiative and authority are given to the Civil Transport Aircraft Evaluation and Development Board in the amendment than in the original bill. In view of the fact that the objective of this legislation is to provide for the development of aircraft which will be suitable for commercial operation, the committee believes it desirable to give civil interests a major voice in determining the characteristics and specifications of the aircraft to be built. The Board, in conjunction with its Industrial Advisory Committee, should be in a position to bring to the program the most advanced and effective economic and technological knowledge of the aviation interests concerned. This change in the responsibilities of the Civil Transport Aircraft Evaluation and Development Board is in line with the recommendations of the Congressional Aviation Policy Board, which said at page 13 of its report:

A Civil Air Transport Evaluation and Development Board should be established by the Air Force, consisting of representatives of the Air Force, the Navy, and other Government agencies concerned with aeronautics, the aircraft manufacturing industry and the air transport industry. This Board should be charged with drawing the specifications and developing prototypes of such aircraft. In the determination of utility and operating characteristics, the needs of the airtransport industry should be the primary concern.

Changes dealing with the responsibilities of the Board appear in sections 2 and 3 of the amendment.

A new section has been inserted to provide for contract or other provisions dealing with the issuance and use of patents or inventions which may result from development contracts under this legislation. Section 8 of the recommended bill provides specific authority for the Secretary to recover, in whole or in part, sums expended by the Government pursuant to this act insofar as expedient or practicable. The original draft of S. 2644 provided simply for the study of this question and the transmittal to the Congress of a report.

S. Repts., 80-2, vol. 4

Section 9 was added by your committee in order to provide, under the sponsorship of the Department of the Navy, for seaplanes and other specialized over-ocean aircraft.

Other changes of a drafting nature were made as set forth in detail in the following section of this report.

SECTION-BY-SECTION EXPLANATION OF S. 2644 AS AMENDED

Section 1 sets forth the general policy of the act.

Section 2 establishes a Civil Transport Aircraft Evaluation and Development Board and sets forth, in part, its responsibilities, which

are

(a) to survey the national requirements for aircraft of the types contemplated;

(b) to prepare and recommend to the Secretary the characteristics and specifications of such aircraft, consistent with the Civil Air Regulations;

(c) to advise the Secretary of the Board's findings and recommendations and to recommend the allotment by the Secretary of funds to carry out the Board's recommendations and the purposes of the act.

The effect of this section is to vest the Board with considerable initiative and responsibility in carrying out this program. In light of the purpose of the act, which is to develop suitable commercial aircraft, this degree of initiative and responsibility appears to be required.

Section 3 deals with the establishment and organization of the Board. Its initial membership shall be composed of one representative designated by each of the following agencies: The United States Air Force, the United States Navy, the National Advisory Committee for Aeronautics, the Civil Aeronautics Administration, and the Civil Aeronautics Board. The Board may from time to time expand its membership as it may determine. Subsection (b) provides for the establishment of an Industrial Advisory Committee to assist the Board. The Advisory Committee shall be composed of not less than six members, appointed by the Board with the approval of the Secretary. Provision is made in this section for terms of office of the members of the committee and for their compensation at rates not in excess of $50 a day plus $10 a day per diem while engaged in the performance of duties of the committee. It is anticipated that the Industrial Advisory Committee will be composed of non-Government representatives of the air-transport industry, the manufacturing industry, and of scientific and research organizations. Subsection (c) of section 3 indicates that the Chairman of the Board shall be designated by the Secretary and that the Board may establish its own regulations and rules. Aside from the $10 per diem allowance, members of the Board shall serve without additional compensation. Subsection (d) provides for the appointment by the Board and the Secretary of personnel to carry out the purposes of this act, provided that to the extent practicable personnel of member agencies of the Board shall be used to carry out the duties of the Board. The proviso is intended to avoid duplication of staff and to insure that the specialized knowledge of existing Government agencies is brought to bear on the program.

Section 4 outlines the duties and responsibilities of the Secretary and also specifies certain conditions and limitations for the development contracts which he is authorized to execute in carrying out his duties under the act. If the Secretary concurs in the advice and recommendations of the Board, he may provide funds for the contract for the design, development, testing, tooling, construction, service testing, and modification of prototype aircraft of the characteristics and specifications recommended by the Board. The section does not give the Secretary authority to use funds appropriated under this act to develop aircraft other than those recommended by the Board. Under other statutes and out of other funds, the Secretary, of course, has authority to provide for the development of essentially military transports. Since this legislation is designed primarily for the development of aircraft which will be useful for commercial operation, it was not believed appropriate or desirable to authorize the Secretary to pursue a course of action independent from the recommendations of the air transport and manufacturing industries and the Government departments primarily concerned with commercial aviation.

Although, under this section, the Secretary could not pursue a course of action independent from the Board, he would not be under any obligation to expend funds to carry out the recommendations of the Board, if in his opinion it was not prudent or desirable to do so, or if the aircraft recommended would be of little or no significance as military transport in the event of an emergency.

Section 4 sets forth three provisions which must appear in the development or other contracts entered into by the Government. These contract provisions would specify

(1) a selling price for aircraft subsequently manufactured for commercial use which will allow no more than a reasonable profit to the manufacturer to be prescribed by the Secretary;

(2) the exclusion from such selling price of any of the manufacturer's costs which have been reimbursed by the Government, except to the extent that the Secretary may require such inclusion for purposes of recovery by the Government, as discussed below in section 8;

(3) an agreement by the manufacturer to sell production models of these aircraft only to purchasers who by contract with the Secretary have agreed to make no changes in the design or standard equipment of the aircraft, unless required to do so by the Civil Air Regulations, without the permission of the Secretary, and who further agree to make changes in the aircraft for an agreed sum as prescribed by the Secretary.

The purpose of the first two contract provisions is to preclude unreasonable profits for the manufacturers or the passing on by them to the air lines of funds paid out and not recovered or to be recovered by the Government. To the extent that the manufacturers are able to provide their own development funds (and they should be encouraged to do so), such funds could, of course, be included in the selling price of the aircraft. The third contract provision is designed to make, and keep, the resulting commercial aircraft as standardized and otherWise as useful as possible for emergency military service. Subsection (3) (b) of section 4 is designed to permit the Secretary to prescribe changes or modifications to the aircraft desirable from a military standpoint but which would not be inconsistent with the Civil Air Regula