Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

911.5200/5–152

The Secretary of State to the Chairman of the Civil Aeronautics Board (Nyrop)

confidential

[Washington,] May 1, 1952.

My Dear Mr. Nyrop: Reference is made to the Department’s letter of January 22, 1952¹ and subsequent correspondence concerning the foreign affairs aspects of the North Atlantic Certificate Renewal Case, Docket No. 5065, et al.,² now pending before the Civil Aeronautics Board. During the past several months the Department has taken the opportunity to consult with the representatives of the United States stationed abroad and has had the benefit of their practical first-hand observations on the international aspects of United States civil aviation. Aided by the comments of these representatives and by its own continuing study and evaluation from the viewpoint of foreign relations of the evidence and opinions presented to date, the Department now wishes to present some additional views and to elaborate on its earlier views. The Department continues to believe in the validity of the views expressed in its letter to the Board of January 22, 1952 and takes this opportunity to reaffirm its previous position.

It is noted that the recommendation of the Chief Examiner is for continuing a duplication of service by United States carriers to many traffic points and against a return to the area service concept. Without belaboring this point the Department wishes to record, for the reasons expressed in its letter of January 22, its adherence to its earlier-expressed conviction that the long-range interests of the United States would be best served by a return to an area service concept and the reduction of point-to-point competition between American carriers. It must be recognized that a return to the system of area competition would require, to some extent, changes of routes already being operated. It would seem that it would be relatively easy to make such changes now but that it would become increasingly difficult to do so as continued operations cause the carriers to become more and more firmly entrenched on the routes. There should also be taken into account the fact that a change now would be made voluntarily by the United States on its own initiative whereas, if the foreign reactions already observed continue, a change at a later date may be forced by the pressure of foreign objections to the growing competition by United States carriers, making it difficult to achieve the orderly and economically desirable arrangements that might now be made voluntarily.

The Department also reaffirms its previously expressed view that national interest requirements would be better served by the grant of certificates of limited duration rather than permanent certificates. Certificates of limited duration are important in helping to retain the flexibility necessary to enable the United States Government to adjust to changed conditions when they occur. The Department cannot regard the operating history of our trans-Atlantic services as being sufficiently extensive to enable the Government to make accurate and long-range appraisals of the problem. Despite knowledge gained in the past years of operation, the United States still cannot forecast with any degree of certainty the civil aviation needs of the future sufficiently accurately to justify shackling itself by granting permanent certificates. Moreover, the United States Government is confronted with a growing concern on the part of foreign governments over the competitive impact of operations by United States carriers and at the same time these foreign governments have developed strong protective attitudes toward their own growing carriers. This situation, pointing as it does to a fluid and uncertain aviation picture in the future, emphasizes the importance to the United States Government of retaining the flexibility of certificates of limited duration. Recent experiences in Mexico illustrate the desirability of retaining to the United States Government the ability to adjust outstanding certificates.³

In addition to providing flexibility in adjusting to changing international conditions the issuance of certificates of limited duration also provides the United States Government with an element of control over the actions of its carriers. When a carrier is obligated to give an account of its services and its methods of operation at specified intervals, and when the retention of the certificate under which the carrier is operating is dependent in part at least, upon a showing that the carrier’s operations and conduct are in the interest of the United States, that carrier is less likely to develop a history of unsatisfactory operations abroad than is the case when the carrier feels that by reason of possession of a permanent certificate it is beyond the control of the United States Government. The United States Government has unfortunately few means at its disposal for the control of the international operations of its carriers and it is considered essential therefore that it retain at least the degree of control represented by limiting the duration of certificates.

The Department’s position with respect to the duration of the certificates to be issued is modified only to the extent that the Department, being anxious to see the creation of relatively equal conditions of opportunity and stability for both PAA and TWA, would urge that permanent certificates necessary to create such substantial equality be issued. Accordingly, the Department urges that no additional permanent certificates be issued to PAA and that permanent certificates be granted to TWA only to the extent necessary to place it in a position substantially equal to that of its competitor. Care should be taken that this substantial equality be an equality in fact rather than merely a seeming equality.

Another point on which the Department wishes to comment is the question of whether the certificates should name the particular traffic points to be served or should use the form used in the 1945 Order and provide for intermediate points in specified countries.⁴ The record of past experience clearly indicates that freezing of the service pattern and the consequent loss of ability to adjust periodically the routes of our carriers can seriously handicap the CAB as well as the other United States agencies concerned with our international civil aviation. The Chief Examiner based his recommendation for extensive certification of individual points on a conclusion that relative stability has been attained and that there is no longer a need for flexible certification. As has been indicated above in comments on the undesirability of permanent certification the Department does not agree with the Chief Examiner on this point and considers the Chief Examiner’s conclusions to be contrary to the aviation experience of the United States throughout the world. It is considered that the present aviation situation is fluid and developing and that occasions will arise when the Board will find it necessary to adjust the route structure with a minimum of time and procedural difficulty. This can be accomplished more easily if the certificates issued delineate the routes in general terms as far as possible.

An illustration of a country where events may require service pattern adjustments is the Federal Republic of Germany. The Department anticipates the negotiation of an air transport agreement with the Federal Government in the near future To follow the Examiner’s recommendation would result in the authorization of service to seven specific points in Germany whereas there is some question as to whether the United States would consider it desirable to include that many traffic points in its agreement with Germany. It would be desirable in any event to be able to adjust the pattern of United States carrier service to Germany following the negotiation of an air transport agreement and the establishment of a pattern of service by German carriers. The situation in Iraq is equally well known to the Civil Aeronautics Board and is also indicative of the advantage of retaining maximum flexibility through certification of service to a country rather than certification of service to a particular traffic point.⁵ The difficulty that has arisen in Mexico in part as a result of the certification of United States carriers to serve specified points to and through that country is a further example of the need for preserving freedom of action for the United States Government.

In recommending that the certificates be limited in duration and that insofar as possible the certificates should delineate the routes in general terms, the Department believes the considerations underlying these recommendations apply with equal force to the United States civil aviation situation throughout the world and are not confined to the problems presented in this particular case.

With regard to the situation east of Cairo the Department wishes to express its wholehearted concurrence in the Chief Examiner’s recommendation for the continuance of the present routes into and through this area and for the continuance of operations by two United States air carriers in the Middle East and South Asia. The growing importance of the Middle East and South Asia to the United States and the importance of the activities of United States air carriers in terms of our foreign relations in that area, make it highly desirable that the existing route structure be maintained without substantial modification, and that there be no substantial reduction of United States airline activity in the region.

The United States Government has frequently reiterated the view that international air services should be performed over reasonably direct routes from the points of origin to the points of destination. This position has been taken by the United States in a number of instances when foreign air carriers seeking to establish new routes to the United States have been advised that this Government could not agree to the establishment of routes which approached the United States in such an indirect manner as to cause doubt whether their purpose was to effect service from the country of origin to the point of destination or was primarily to effect service from some intermediate point to the United States. In view of the position which the United States has taken in this respect it is necessary that the United States avoid establishing routes for its carriers which would themselves be open to the criticism that their main purpose is that of providing service between two foreign points rather than that of providing service from a point in the United States to the point of ultimate destination.

The establishment of indirect routes for United States carriers becomes of even more concern when it appears from the United States Government’s own documents that such indirect routes may be established for the primary purpose of carrying fifth freedom traffic.⁶ In the Chief Examiner’s report there have been several references to the fifth freedom traffic which may be generated along the routes recommended. This Department, in common with other Government agencies concerned with international operation of United States airlines, is anxious to insure the full participation of United States air carriers in the traffic which may be generated along their routes. However, it may redound to the disadvantage of the United States if certain routes are justified in the Board’s opinion on the ground that they can be supported by fifth freedom traffic. The Department therefore urges that the Board avoid placing undue emphasis on the dependence of United States carriers on fifth freedom traffic over certain routes. Care should be taken especially in cases where the route segments over which an unusually large percentage of fifth freedom traffic might be carried are served by United States carriers only as the result of substantial deviations from a reasonably direct route. Undoubtedly the Board will be able to justify its decisions without making statements which might be used by other countries as evidence that the routes, or segments thereof, rely on fifth freedom traffic to such an extent that they could not be justified in the absence of fifth freedom traffic. The Board’s cooperation in this matter will, it is believed, help to prevent the creation of unfavorable attitudes abroad and the establishment of arguments which might be used against the United States in future route negotiations.

There remain several specific route questions on which the Department has the following comments.

Afghanistan—Although the certification of service to Afghanistan is not recommended in the Chief Examiner’s report, the Department believes it would be in the national interest of the United States to continue certification of service to this country.

Kuwait—The Department recommends the certification of a United States carrier to serve Kuwait. It is considered that certification of a United States carrier to serve Kuwait could beneficially influence the current difficult situation in Iraq as Kuwait could serve as a potential alternative to a traffic point in Iraq. Since Basra is served by both carriers, the need for service in Kuwait is perhaps debatable. However, it would appear undesirable to create a rigid situation so as to preclude the possibility of an American flag service to this state. Past experience has shown that from a practical point of view the United States Government is in a much stronger position in arranging service to a country named in a certificate than in cases where the country involved has not been so named.

Lisbon—The Department is concerned over the Examiner’s recommendation that Pan American be certificated to serve Lisbon as an intermediate point between The Azores and Dakar on the South African route. There are a number of factors which give rise to this concern. First, there is the matter of the circuity involved. As pointed out by the Chief Examiner the direct route The Azores–Dakar is 1608 miles whereas the route The Azores–Lisbon–Dakar is 2624 miles, an increase of 1016 miles. Secondly, there is the question of the justification for the service of Lisbon on this route. The Chief Examiner, in discussing the routing via Lisbon, refers to the revenue received by Pan American for traffic carried between Lisbon and other points on the route, inferentially points in Africa. His analysis emphasizes that the prime motivation in directing the South African route through Lisbon is to improve the economy of the operation through the added revenue gained from carrying fifth freedom traffic into and out of Lisbon from points in Africa. In no other way is there offered justification for service of Lisbon on this route. In the face of the foregoing facts, the certification of a carrier to serve Lisbon on the South African route would seem to place the United States Government on record as subscribing to the precept that, in the interest of improving the economy of a route, it is proper and acceptable to deviate substantially from the reasonably direct course in order to gain revenue from fifth freedom traffic thereby. The certification of service on such an indirect route, although it might produce temporary and limited benefits, would be inconsistent with the position of the United States that routes should be reasonably direct. The Department has considered this problem in relation to the problem with the Philippines and has been unable to escape the conclusion that the certification of a carrier to serve Lisbon on this route would present the Philippines with a very strong argument in support of their request for a stop at Tokyo on the Manila–San Francisco route.

There is, moreover, a third factor which causes the Department some concern. As the Board knows, the United States-Portuguese Air Transport Agreement does not provide for a United States route beyond Lisbon to points in West Africa. Pan American’s operation of this service in the past has been on the basis of a special and temporary arrangement with the Portuguese Government, which has consented to this service by Pan American until such time as a Portuguese carrier commences operations between Lisbon and points in West Africa. Statements made by the Portuguese from time to time cause the Department to believe that they would refuse to permit PAA to continue this service when a Portuguese carrier commences a similar service. It is unlikely, indeed, that the Portuguese would consent to a revision of the Agreement so as to establish this service on a permanent basis. Therefore, the Department believes that if the service to Lisbon is to be continued, it should be continued by the use of exemption orders as is now the case.

Casablanca—The report of the Chief Examiner recommends that there be granted a certificate for service to Casablanca on the route through Lisbon to South Africa. This Department does not wish to interpose any objection to the certification of a United States carrier to serve Casablanca if service to that point is considered desirable. However, it does wish to bring to the Board’s attention the fact that service to Casablanca cannot be established without the consent of the French Government. Political factors may make it difficult to obtain such consent. The Department also believes that the Board should take into consideration the fact that if PAA were not granted a certificate to serve Lisbon on the route to South Africa or if the Portuguese Government should reach the conclusion that continued operations at Lisbon on this route were no longer permissible, a service to Casablanca might be as effectively offered on a route across North Africa. It is therefore suggested that the Board give consideration to the relative value of a service to Casablanca (a) on a route to South Africa without a traffic stop at Lisbon, and (b) on a route across North Africa.

In the past there have occurred instances when the publication of United States Government decisions relating to air transport operations has brought proposed route changes to the attention of certain foreign governments without those governments’ having been previously advised of the matter through inter-governmental channels, either formal or informal. In such cases the manner in which the foreign governments became aware of the decisions created difficulties magnified beyond their reasonable import and needlessly complicated the international discussions required to implement the decisions. Therefore, the Department requests the cooperation of the CAB in presenting the conclusions and results of the Board’s work in the North Atlantic Route Review Case to foreign governments in the best possible manner. It is recalled that in the PAA–AOA Merger Case⁷ the Department and the CAB cooperated in bringing certain aspects of the decision to the attention of interested governments in advance of publication with excellent results. It is therefore suggested that the Department and the CAB cooperate similarly in this case in bringing to the attention of interested governments, in advance of publication or at least simultaneously therewith, aspects of the decision which will affect service to those countries, particularly in cases where modification of the air transport agreements may be required. Sincerely yours,

For the Secretary of State:

J. Paul Barringer
Acting Director
Office of Transport and Communications Policy

1. Not found in Department of State files, but Department records indicate the reference letter bears file number 911.5200/11–1651.
2. Reference is to the applications by Pan American World Airways and Trans-World Airlines for extensions of their transatlantic routes.
3. For documentation concerning U.S. efforts to conclude a bilateral aviation agreement with Mexico, see vol. iv, pp. 1324 ff.
4. Reference is to the 1945 CAB order certifying transatlantic service for Pan American Airways, Inc., American Export Airlines, Inc., and Transcontinental and Western Air (TWA).
5. Reference is to the limitations placed by the Iraqi Government on PAA service into Baghdad. These limitations led to the withdrawal of U.S. flag carrier service to Baghdad. U.S. service to Basra, in Iraq, was able to continue. Documentation on this subject is in Department of State file 987.52.
6. Fifth freedom traffic refers to the right to carry air traffic from a point of origin in one foreign country to a point of destination in another foreign country.
7. Reference is to the merger of Pan American World Airways and American Overseas Airlines in 1950.