Current Economic Developments, lot 70 D 467
Current Economic Developments1
[Extract]
Issue No. 344
. . . . . . .
Assessment of North Atlantic Route Pattern by Department
In a letter2 to the Civil Aeronautics Board the Department gave its tentative views on the study of US civil aviation operations via the North Atlantic which is pending before the Board and which must be completed by July 1952, when the certificates now held by PanAm and TWA are due to expire. We stressed that our views are tentative and subject to revision as the proceeding unfolds, but we are at this time of the opinion that: 1) a return to the area service concept is advisable rather than a continuance of point-to-point competition; 2) the national interest requires continued certification of carriers to serve points for which carriers are now certificated and to which service is provided; and 3) that limited certificates rather than those of permanent duration have definite advantages from the national interest standpoint. We feel also that service should continue to be certificated to points behind the Iron Curtain even though they may not be served at this time since they compose a part of a comprehensive route pattern for Europe.
Background. In July, 1952 the two international carriers flying the North Atlantic routes to points in Europe, North Africa, and the Near and Middle East will require new certifications to continue their operations on these routes. It was planned in 1945 when service was established that a complete review of the North Atlantic route pattern would be made in 1952, based upon experience gained during the seven years’ trial period. This procedure was decided upon to allow flexibility in crystallizing permanent route patterns [Page 386] for a rapidly developing infant industry. It also took cognizance of the possibilities of political and economic change and the prospect that our objectives as to traffic development could not be reached in the immediate post-war period. In 1945 three US international carriers, Pan American, American Overseas Airways, and Trans-World Airways, were authorized to operate over the North Atlantic. Then in July, 1950, PanAm was granted the right to acquire the property, assets and business of AOA and the authority to fly its routes. At that time, President Truman expressed the desire that a route pattern be established whereby the US international carriers (PanAm and TWA) might have the benefit of competition to the principal traffic points in Europe and avoid a monopoly on the part of either of the US carriers. He decided both carriers should be authorized to serve the four European cities which he considered to be the most important—London, Paris, Rome and Frankfort. This became known as the North Atlantic Route Transfer decision and constituted a change in practice from the area service concept whereby our international carriers were generally not permitted to serve identical transfer points to the concept permitting them point-to-point service.
In November, 1951 the CAB informed the Department that applications had been filed by PanAm and TWA requesting the extension, with certain modifications of their respective authorizations to engage in foreign air transportation across the North Atlantic which expire July 4, 1952. In order that the Board might assess thoroughly the entire question of the North Atlantic route pattern, and in view of the increasingly important part international civil aviation is taking in regard to our foreign relations as a whole, the Department’s comments were requested.
Department Views. Our views are predicated on the assumption that: 1) US international air services should continue to be extensive and should touch most of the countries of the world into which we can gain access on an acceptable basis; and 2) the US should continue its present efforts to maintain a system of maximum competitive freedom in international civil aviation.
It is becoming increasingly evident that the favorable position enjoyed by the US in the field of international civil aviation in the years immediately following World War II has considerably altered with the establishment of trunk and, more important, extensive regional services by foreign carriers. Not only is there evidence that we would have great difficulty in expanding our present operating rights abroad, but it is also increasingly apparent that the maintenance of what we now have will be more and more difficult in the period immediately ahead. Therefore, we feel that our present and future negotiating position in civil aviation matters should be thoroughly [Page 387] considered in the CAB’s decision regarding the North Atlantic route pattern.
As for specific issues, we recommend a return to the system of area services as the best means of serving US long-range aviation interests. We feel that most of the basic advantages of competition can be obtained through the competition between US carriers and foreign flag carriers. Therefore, it was argued that the public interest would be served most effectively through a system which recognizes the direct competition that exists between US and foreign air carriers but which, at the same time, provides a means for judging the standard of performance of the US carrier through the existence of another such carrier performing comparable services under similar conditions in another area. In addition, the US stands to gain numerous economic advantages from the existence of viable civil air transport enterprises in friendly countries. A return to the area concept should contemplate a fair and equitable allocation of the routes in Europe and the Near and Middle East for the US carriers serving those areas in such a manner as to establish relatively equivalent opportunities for them. It is felt that since we have consistently opposed the “chosen instrument” idea and favored the pattern of several US carriers competing in international air transportation, it is desirable to conduct such competition within reasonable bounds for much of the force of foreign opposition would be diluted by such self-imposed restraint.
In general, the Department believes the national interest requires continued certification of carriers to serve points for which carriers are now certified and to which service is provided. Not as yet having had an opportunity to measure suggested solutions to this problem by the criterion of the economic costs of operations, the Department has sought a solution by distinguishing between: 1) points to which the national interest indisputably required certification of US carriers and service by them; and 2) points where such requirement cannot be clearly shown but to which certification of a US carrier is desirable.
In considering the route pattern and carrier participation for service through the Middle East, account should be taken of the services now being operated by US carriers in that region, the local arrangements and obligations assumed by those carriers, and the political relations between the US and the countries in the region. Requesting that the Department have an opportunity for consideration of any proposal for elimination of service to any points currently served in that area, or a reallocation of existing route patterns which might affect services presently operated in that area, we recommended that two carrier services be continued at least as far east as India.
[Page 388]We have recommended that the certificates to be issued in July should be of limited duration rather than permanent, because we believe that international air transport is still in the process of development and freezing the present route pattern is undesirable. Furthermore, rapidly changing political conditions in the entire world require some flexibility, and the ability of the US Government to review the situation periodically serves as a reminder to the carriers that their conduct of business in the national interest would be one of the factors considered in renewing their certificates from time to time. This recommendation was made on the assumption that it will be possible to treat both carriers operating over the North Atlantic in the same manner. Therefore, since it is understood that PanAm enjoys permanent certification over a portion of its routes, the recommendation that certificates of limited duration be issued would be modified should the Board not find it possible to change these certificates by limiting them to specific terms. In this case, it would be recommended that TWA be given permanent certifications of comparable importance and that all other certifications be of a limited nature.
With respect to the Board’s inquiry as to the advisability of certificating presently authorized points which are not now served, we believe it desirable to include points necessary for a comprehensive pattern for service to all the areas reached by way of the North Atlantic even though service to those points may not be possible at the present time. On this assumption, the Department believes that it would be appropriate from the standpoint of foreign relations to include points in the Soviet orbit necessary to form a comprehensive air transport service pattern. However, it is emphasized that in view of the fluidity of US-Soviet relations, requiring continuous reappraisal of all aspects of these relations, the Department may wish to make additional comments on this particular issue in the light of developments during the progress in the case.
The problems of providing air service into and through Germany are unique and will remain so as long as Germany is divided and Berlin must be treated as a special circumstance. These problems emphasize the desirability of temporary rather than permanent certification. For the present it is believed sufficient to either: 1) certificate both US carriers on a temporary basis to serve Berlin; 2) enable both to provide service under temporary, extendable exemption orders; or 3) insure adequate service through a combination of these methods. We feel that both carriers should also, for the foreseeable future, be authorized to continue their Frankfort services. At the present time it appears necessary that service to Munich, Cologne–Dusseldorf, Hamburg and Bremen be authorized, with one-carrier service to each of these points being adequate. No service [Page 389] need be provided to Stuttgart at this time. The majority of points presently authorized for service and served required no additional comment.
. . . . . . .