Memorandum by the Assistant Secretary of State (White)

To: The Under Secretary.
The Secretary.
Re: Policy of the Department regarding Aviation Companies.

These telegrams1 present an important question of policy and if they are approved will constitute a change in the policy the Department has heretofore pursued.

The Post Office Department asks that diplomatic support be given to aviation companies which have been awarded air mail contracts by the Post Office Department in preference to companies not having such contracts. The Department’s policy in the past has been not to discriminate between two or more American firms competing abroad. If there was only one American firm and it was in competition with foreign interests, our diplomatic Missions of course always supported the American company, but when there were more than one American firm involved, they limited themselves to putting all Americans in contact with the proper authorities and asking that they be given an equal opportunity to compete in the business.

In support of the proposed change, it may be said:

It is most important that American mails be carried to the Latin American countries. Mails now get to Managua, for instance, in four days. Formerly it took anywhere from three weeks to a month. There will be vast savings in time, varying with each country and the special communication problems thereof, of from four or five days to three weeks. This is an immense advantage to American business and industry in filling orders quickly and also to our banking interests and merchants in saving several days’ interest on drafts exchanged with those countries.
It is important that American mails be carried in American planes by American companies. The strategic importance of having most of the flying in the Caribbean area and especially near the Panama Canal Zone in the hands of Americans is obvious. There [Page 543] is a further advantage to American commerce in having our own service and not being dependent upon foreign facilities.
European competition in South America is very keen. The Germans have the upper hand in aviation in Colombia and in Bolivia and these companies, whatever their local affiliation and registration, are controlled by the German Lufthansa. The French Latecoère Company is also very active, and a telegram dated July 4, 8 p.m. from the Legation at Caracas2 states that a contract has been signed with this company for air mail service between Venezuela, the rest of South America and Europe. The French company also has contracts already in Argentina, Brazil, Uruguay and Chile.
The French Government is backing the French Latecoère Company and no other in South America. The German Government seems to be following the same policy with the Lufthansa, backing the German companies in Colombia and Bolivia and trying to connect them up. If the United States Government keeps hands off and lets American companies indiscriminately fight one another for concessions in Latin America, all Americans are apt to lose out. I understand that American interests have suffered in this respect in the Far East in the past.
The Administration is apt to be very severely criticized for taking such action. The disappointed companies and their backers will probably charge discrimination and that this Government is creating and supporting a monopoly. In reply to this it may be said that the Post Office Department called for public bids and as the result of public bidding picked out what it considered the strongest company and the one best able to perform this most important work, and the contract was awarded to it. No other American company for the period of the contract (10 years) can carry the United States mails over the routes covered in the contracts. Monopolies of air routes inside this country have been recognized for some time. It is more difficult to establish an air mail route abroad where various jurisdictions are entered into and the aviation companies asked that exclusive contracts be given for a reasonable period as this is pioneering work. No company wanted to go in and make the financial outlay and run the risk and, after that work had been done, have other companies get the contracts and the cream of the business after they had done the unprofitable pioneering work.
There is a distinct strategic element entering into it as stated above, and it is certainly desirable and perhaps essential that the United States should, in so far as possible, control aviation in the Caribbean region.
Once the American firm having a contract with the Post Office Department for the carrying of mails to a given Latin American country has obtained operating rights in that country so it can perform effectively its duties under its contract, there is no reason why the Department should not assist any other American companies to get operating rights there provided that those rights in no wise conflict or infringe upon the rights of the American company in question. That is, there is no reason why this should not be done for any company wanting to go in for the carriage of passengers, express matter or the mails of foreign countries, providing that the latter does not conflict with the arrangement made with our Post Office Department.
The French and German companies are fully subsidized and hence are in position to put up very strong competition. We are much more likely to be able to overcome their competition by having one strong American company with the Post Office subsidy behind it than several smaller American companies without unified control who are competing not only against the Germans and the French but against one another. It is one of those cases where vital national interests have to be considered and given preference over the particular interests of individual companies.

As stated above, however, there is apt to be very considerable criticism against this policy and opposition to it, and it should be adopted only after most careful consideration and after taking into full account the attacks against this policy which are bound to ensue.

F[ranges] W[hite]
  1. See telegram No. 51, July 12, 6 p.m., to the Minister in Honduras, p. 545.
  2. Not printed.