800.796/11–2845: Telegram
The Ambassador in the United Kingdom (Winant) to the Secretary of State
[Received 8:05 p.m.]
12442. For Morgan and Civil Aeronautics Board from Ryan28 and Satterthwaite. The following is message we tried unsuccessfully to get to you in teletype conference this afternoon.
“Mr. Ryan: The Embassy and I have arranged this conference because we think that recent developments have made it highly desirable for prompt decisions to be taken on the interim agreement by the Board and the State Dept.
Satterthwaite and I had a talk with Hildred day before yesterday. Hildred said that he was very much confused by the attitude of the Civil Aeronautics Board toward the proposed interim arrangement, and particularly their attitude as reported to him on LATA. He said that in an effort to meet the American position the British Govt had offered to agree to accept automatically the findings of IATA on rates. Hildred asked us what our position is and what we would like the British to propose. At this point I would like to have Satterthwaite explain what he and the Ambassador believe to be the present position, after which we can discuss this with you.
Mr. Satterthwaite: 1. The British mean business in their limiting Pan American to two flights per week. As soon, however, as Trippe indicates that he is willing to discuss rates, we feel this attitude will change, although Pan American’s position has suffered.
2. We are convinced that Hildred is completely sincere in his statements that there is no quarrel with the rate as such. The British Govt, however, are in deadly earnest in their insistence on the establishment of some method of controlling rates to prevent subsidy and rate wars. We know that in the last few days the British have made a careful check of the views of nearly all or the European countries on this matter, and they are certain that they will all support the British view on rate control.
3. We believe if a satisfactory rate control method is arrived at the British in an interim agreement are prepared to abandon completely restrictions on frequencies involving third and fourth freedoms, including any restrictions on capacity and as far as an interim agreement is concerned, leave out the question of the fifth freedom pending a bilateral permanent agreement with the US, or alternatively a formula to be developed by PICAO (Provisional International [Civil] Aviation Organization) which will be acceptable multi-laterally. In practice in the interim period, while we do not think the British will specifically grant fifth freedom rights, we do believe they will not in fact raise any question about US airlines carrying fill up fifth freedom traffic.
4. As far as rate control methods are concerned, Hildred told Mr. Ryan that they look upon IATA as a searchlight to find out what the true costs of the operations are, and to detect questionable accounting. [Page 236] They insist they do not wish to hold up the rates artificially. They are perfectly willing that the CAB (Civil Aeronautics Board) have complete power to declare any IATA arrived at rate as contrary to the public interest as far as the US carriers are concerned. They agree the rates must be based on the most efficient operator. They will insist, however, that the rate first be arrived at through discussion under IATA, which will then make all the facts available to the CAB on which the rate is determined. The CAB or any other body would be perfectly free to arrive at a different finding. The British have complete confidence in both IATA and the CAB, and, therefore, feel that it would be highly unlikely IATA would set a rate the CAB would not find in the public interest. The Embassy repeats that the British fully believe their position on rates is the right one and they are convinced that they have the solid support of most of the European countries behind them. Hildred has told Satterthwaite that they will not permit Pan American to get around the two frequencies restriction via shuttle service from Ireland or Belgium. As you are aware the British will permit pending other arrangements, American Airlines to operate once a day, and Hildred has told both Satterthwaite and Slater29 that they will undoubtedly permit them to operate as many frequencies above seven a week as they can, on request, and in view of the need for transportation, Hildred has expressed the hope that American will increase its schedules from five to seven as quickly as possible.
The Department is, of course, aware that France and many of the European countries do not look upon aviation as a business, and unless a scheme is worked out under which rates cannot be controlled unilaterally by one operator or one country, the probabilities are great that the tourist associations, the hotel keepers and possibly the airline officials who are not under the compulsion of making money but only to enhance the prestige of their country, will reduce rates way below cost if there are no safeguards. The British also feel that IATA’s searchlight will detect non-commercial services which might have security implications.
In short, the Embassy feels that a very good interim arrangement can be made with the British if we accept IATA control of rates, subject to approval in the case of American carriers by the CAB. We think this interim agreement can be made involving no control on the third and fourth freedoms, but no mention of fifth freedom one way or the other. Hildred thinks that in the trial period during which the interim agreement operates, it is quite possible that the CAB will find that in practice IATA will not rig any rates above the cost of the most economic carrier, and perhaps they will find that the American lines operating under unlimited third and fourth freedom frequencies and tacitly carrying fifth freedom traffic, will not be as harmful to European transport as they once felt. At the end of a reasonable period, they will then build up experience on which we can judge the dangers or lack of them in IATA, and they can judge the dangers or lack of them in the third, fourth and fifth freedoms. During this period, we can then decide whether we wish a bilateral [Page 237] agreement or whether we will prolong the interim arrangement until PICAO has found a satisfactory solution in a multilateral basis. They most certainly do not want to start formal talks for a long term bilateral agreement at this time.
Railey30 has been here this week and wishes the Board and Department to know that the French position on IATA is the same as the British.”
- [Ryan and Satterthwaite]
- Winant
- Oswald Ryan, member of the Civil Aeronautics Board.↩
- John E. Slater, executive vice president of American Export Airlines, became chairman of the board, American Overseas Airlines, Inc., after the merger of American Export with American Airlines; see footnote 10, p. 227.↩
- Howard B. Railey, American Civil Air Attaché” in France.↩