Current Economic Developments, lot 70 D 467
Current Economic Developments
[Extract]
Issue No. 364
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North Atlantic Route Decision
The Civil Aeronautics Board’s North Atlantic Certificate Renewal Decision approved by President Truman on June 28 will permit PanAm and TWA to continue their transatlantic operations with certain modifications until July 4, 1959. The decision continues to permit competitive service between our international carriers to major European cities and adheres generally to the basic route pattern which has been followed since 1950. Certificates will be issued to the carriers for a seven year period except for the grant of several permanent points to TWA, thereby substantially equalizing its competitive position with that of PanAm. In general, the certificates [Page 403] will designate countries or areas to be served and will be supplemented by a separate document specifying individual points of service. With a few exceptions, the Department concurred in and supported the Board’s conclusions.
Background. In 1945 when North Atlantic air service was established by US international air carriers it was planned that a review of the North Atlantic route pattern would be made in 1952 based upon experience gained during the seven years’ trial period. In 1950 when PanAm acquired the property, assets and business of American Overseas Airways and the authority to fly its routes, President Truman decided that both PanAm and TWA 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 of point-to-point service. (See page 3, February 18, 1952 issue.)1 The recent CAB decision adheres closely to the findings of the North Atlantic Route Transfer Case.
Routes and Certificates. In the new decision the Board ruled that, in general, routes would be awarded to the two international carriers on a temporary basis so as to permit more time and flexibility in determining a permanent trans-Atlantic route pattern. However, since PanAm had previously been accorded permanent authority to serve London, Lisbon and Marseilles, TWA was granted permanent status to serve the New York–Paris–Rome route via intermediate points in Newfoundland and Ireland. In addition, TWA is authorized to serve Kuwait on its flights between Basra and Dhahran, thus linking the major oil centers of the Middle East to the US with a single-carrier service. TWA is authorized to serve the Azores on the route between the US and Portugal, and Italy will be added between Tunisia and Egypt. According to the new decision, TWA will continue operations to India, specifically Bombay, but not to points further east. The Board is deferring decision on TWA’s application to serve points east of India until this question can be considered with Northwest Airlines’ application for extension of its trans-Pacific system to India.
PanAm will be certified to serve Nice on its route to Marseilles and its Lisbon–Foynes route has been eliminated. The latter was started during World War II as an emergency measure and has not been used since 1946. For the present PanAm will continue to serve Basra on its Middle East route. PanAm was originally authorized [Page 404] to operate to Baghdad rather than Basra, but because of inadequate airport facilities at Baghdad, PanAm has been serving Basra instead. Under the new decision, PanAm will continue to serve Iraq with the provision that its service to Basra shall terminate sixty days after the conclusion of mutually satisfactory arrangements between Iraq and the US providing for service to Baghdad. Consistent with the Board’s decision regarding TWA’s application to serve points east of India, PanAm will continue to operate its route to Calcutta but consideration of its request for route renewals east of that point is being deferred.
On its South Atlantic route, PanAm will be permitted to serve Lisbon and Casablanca as intermediate points between the Azores and Dakar. PanAm’s South Atlantic route operation to Lisbon has until now been covered by an exemption order. PanAm’s certification to operate the South Atlantic route will terminate August 14, 1952 at which time this portion of PanAm’s operations will be reviewed.
New York will be the terminal point for both carriers, with Chicago, Detroit, Boston and Philadelphia designated co-terminals. The Board decided that continuation of Washington and Baltimore as transatlantic co-terminals was unwarranted and eliminated them.
Department’s Views. When the case was under review the CAB adopted some recommendations made by the Department. These included recommendations that: certificates be issued to the carriers on a temporary basis; the competitive positions of TWA and PanAm be more nearly equalized by according TWA permanent points of service; the status quo be maintained in the Near East; and certificates include service to satellite areas despite our inability to serve those areas at this time.
Although the Department considered the Board’s decision in general a satisfactory solution of the complex issues involved in the case, it recommended certain changes to the Bureau of the Budget prior to submission of the decision to President Truman for approval. These recommendations were over-ridden, however. Among other things, we felt that a period of from three to five years would be more satisfactory than seven for the duration of the certificates, believing the experience gained during the next three to five years added to that obtained since the decision of the North Atlantic Route Transfer Case in 1950 should provide an adequate basis for evaluating the performance of the two US carriers. We felt that other countries might be less restrictive toward the activities of our carriers if they were made aware of the fact that the routes were subject to continuing review and possible change.
[Page 405]Also, we urged against statements in the Board’s opinion indicating that US carriers rely heavily on the carriage of traffic between the territories of other states along international trunk routes (fifth freedom traffic), particularly where such traffic would be gained as a result of substantial deviation from a reasonably direct route. We particularly wanted to avoid this situation with respect to awarding PanAm service to Lisbon and Casablanca on the South Atlantic route because of the possibility of its bringing about complex aviation negotiations with France and Portugal. We would have much preferred in these instances that short-term exemption orders be issued.
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