Current Economic Developments, Lot 70D467

Extract From Bulletin No. 22


. . . . . . .

US–UK Consultation on Aviation Issues. Although the UK reaffirmed its support of the Bermuda principles during recent aviation talks in London,1 we feel that future Commonwealth aviation developments bear close watching for any possible further weakening of the British position in the face of a distinct trend away from these principles. It is obvious that there are Strong differences of views within the British Ministry of Civil Aviation and that the strength of original proponents of Bermuda has been dissipated by shifts of assignments. Other factors also came to light—such as technical aviation developments—which, by elminating the economic dependence of British carriers upon fifth freedom “pickup” as well as “fill-up” traffic, may affect their concern for retaining the full five freedoms. Whereas full fifth freedom traffic is basically important to economic operations by US carriers on international trunk routes, the British claim they can operate successful services into the Commonwealth countries based upon third and fourth freedom traffic and some “pickup” fifth freedom.

UK-Indian Interim Air Arrangements. These talks were held principally in the hope that some means could be found to bolster British resistance to Indian pressure for conclusion of a restrictive air transport agreement, providing for 50–50 capacity split and reserving India-Pakistan traffic for carriers of those countries. (See page 1, June 27 and page 13, July 5, 1949 issues of Current Economic Developments.2) The British frankly acknowledge that it would be politically impossible for them to run the risk of having to give up their services to India, which for some time have rested upon precarious extensions of operating permission to BOAC. In consequence, when the British were unable to conclude a satisfactory Bermuda-type agreement with India, they felt compelled to enter into an interim arrangement which would provide for BOAC’s operations. The British maintain that this is a modus vivendi accepted only as the result of failure to achieve a permanent agreement and that it is purely temporary and without prejudice to the terms of the bilateral agreement to be concluded later. We contend that such an arrangement simply transferred the [Page 792]previous operating arrangements from a unilateral airline level to a governmental level and consequently could scarcely fail to prejudice the final agreement. The British have placed us in a most awkward position by accepting an Indian clause providing that if during the interim India secures any restriction on the carriage of traffic between India and Pakistan by US carriers, the UK will accept similar restriction for its airline operations.

The British will try to eliminate this clause from the interim agreement and will make every effort short of terminating BOAC service to and through India to obtain the desired type bilateral. A public statement will be made that the interim arrangement results from a difference of views with India concerning basic principles involved in order to leave the way clear toward further efforts to obtain a Bermuda agreement. If they are unable to achieve this objective during the twelve-month period, we would consider the continuation of the interim arrangement as a lesser evil than conclusion of a non-Bermuda agreement.

Multilateral Air Transport Convention. The British think that it might be possible to secure a multilateral agreement if we are willing to modify the Geneva draft3 of the capacity clause to eliminate the additional or “pickup” fifth freedom language. We are convinced it will not be possible at any time in the near future to secure a multilateral agreement on terms even as favorable as those suggested by the British. This view is more firmly supported by such recent developments as the Australian-Indian bilateral and the French agreement with Spain which reserves traffic between the two countries as a monopoly for French and Spanish carriers. Therefore, reopening the issue at this inauspicious time would be likely to produce undesirable results by informing and coalescing the opposition to Bermuda as occurred during the Geneva conference in 1948. We did agree to exchange our proposed comments to ICAO on the subject of a multilateral agreement, which will be submitted before October 31 to the ICAO Assembly.

[Here follows brief discussion of certain technical problems, and projected arrangements on the part of aviation specialists of the United States and the United Kingdom for addressing themselves to these problems within the framework of the U.S.–U.K. (Bermuda) Air Transport Agreement.]

  1. These informal talks were arranged at the request of the Department of State, which was “convinced UK–India bilateral negotiations raised fundamental policy issues requiring full and immediate exchange of views. …” (Department’s telegram 2818, to London, August 9, 1949, 741.0027/8–249) The talks took place in London in mid-August. There seems to have been no reporting about these talks by cable traffic from London.
  2. No extracts are printed from the July 5 issue.
  3. This refers to a meeting of the Council of the International Civil Aviation Organization (ICAO) at Geneva in 1947, which “failed in its efforts to achieve a multilateral but did serve as an exceedingly useful forum for the discussion of major issues at stake.” (Current Economic Developments, Bulletin No. 233, Dec. 12, 1949)