911.5200/8–2853
The Secretary of State to the Chairman of the Civil Aeronautics Board (Ryan)
My Dear Mr. RYAN: The Department of State has reviewed the Trans-Pacific Certificate Renewal Case (CAB Docket 5031, et al.1) in the light of the existing foreign relations of the United States and has reached the following conclusions which may be of interest to the Civil Aeronautics Board. At such time as the President requests the views of the Department on this case, these conclusions will be re-examined and appropriate recommendations prepared.
With regard to the routes to be served and the certificates to be issued as a result of the Trans-Pacific Certificate Renewal Case, the Department believes it necessary to consider anew the basic issues of whether competition between the United States carriers on international routes should be on the basis of direct competition between points served or should be on the basis of “area competition.” In this regard it will be recalled that in the Department’s [Page 420] letters of January 22, 19522 and May 1, 19523 with regard to the North Atlantic Route Review Case strong support was given the concept of area competition. Although the geographic factors involved in the Trans-Pacific Case differ from those involved in the North Atlantic Case, the Department believes that its previously expressed views are generally applicable in this instance as well as in the North Atlantic Case and considers that the principle of area competition should be applied insofar as the geographic and economic conditions permit.
Consideration is also given to the fact that countries in this area are in many instances developing air transport services for which they feel that protection from competition is necessary. When the competition to which they are subjected includes that of more than one strong United States carrier, the fear of competition is multiplied, in some cases out of proportion to the actual or potential effect of the operations performed by United States carriers. The Department believes therefore that the continuation of area competition will more successfully protect United States operating rights and thus better serve the national interest.
The applications of United States carriers in this case request certification for operations affecting India, which is a particularly sensitive area at this time. As is well known to the Board, the Government of India and the Government of the United States have recently held extended consultations in which the Government of India strongly urged the drastic reduction of capacity of United States carriers operating into and through India. The negotiations have now been adjourned without any curtailment of current United States carrier operations into India, but the situation remains in very delicate balance.
The Department understands that the Board, in addition to its examination of the certification of routes which are presently operated by United States carriers in the Far East, also will give its attention to the linking up of Trans World Airlines and Northwest Airlines, thereby creating a second round-the-world service by United States carriers. The Department, after consideration of the foreign relations problems in this field and in view of the objective of maintaining conditions which will enable the United States to sustain an adequate level of air service in the Far East, free of local restrictions, does not believe that a second round-the-world service should be created at this time. The area in which it would be necessary to seek air rights to implement such a service is one which generates comparatively little traffic, and is one which is already [Page 421] being served by the major trunk operators of the world. Under these circumstances, the introduction of an additional United States carrier would be cause for general resentment compounding the difficulties of obtaining the air rights needed to conduct the services.
However, should it be deemed advisable for economic or military reasons to provide this second service, the manner in which this second service would be accomplished is of considerable importance to United States aviation relations with several foreign countries. First, in view of the extremely delicate state of United States-Indian aviation relations described in a foregoing paragraph, it would be deemed most unwise for the junction to be made in India. In addition, it is believed that the certification of either Trans World Airlines or Northwest Airlines, which would provide a second United States flag service through India on route 2(a) of the Annex to the United States–India Air Transport Agreement, would be of such concern to India that there would be serious danger of the bilateral agreement being denounced by India. On the other hand, it is thought that the use of route 2(b) of the Annex to the Agreement, providing for a junction point outside of India, although disturbing to the Indians, would lessen the possibility of such action. East of Ceylon a second service would also encounter air rights problems, although not of the same magnitude as is the case with India. Certification of service between Ceylon and Singapore would make it necessary to conclude arrangements with the United Kingdom, as such a route is not provided for in the Annex to the Bermuda Agreement. In so doing, it is likely that a quid pro quo would be required. If it should be decided to take advantage of route 2(b) in the Indian Agreement, it is assumed that consideration would be given to certification of service to one or more of the principal traffic points of Manila, Hong Kong and Tokyo as a point or points beyond Singapore. The United States–Philippine bilateral includes language which would permit service to and from Manila. Nevertheless, as a practical matter, the Department would anticipate a renewed demand on the part of the Philippine Government for the grant of the right of Philippine Air Lines to serve Tokyo as an intermediate point on its route to the United States, and unless this were granted the United States should expect further aggravation of current differences with the Philippines. Regarding Hong Kong, the Department believes that a quid pro quo would be required by the United Kingdom. The use of Tokyo as the junction point of TWA and NWA, i.e., the certification of United States flag carrier service to Tokyo as the end of an Atlantic route, would require an adjustment of the United States–Japan Civil Air Transport [Page 422] Agreement. It is not possible to forecast the difficulties involved in making such an adjustment.
The applications now before the Board in this case request certification for service to points on the China Mainland. The impossibility of serving the China Mainland at the present time is a matter of common knowledge. Nevertheless, this Department believes that the certificates issued to United States carriers should include appropriate points on the China Mainland notwithstanding the fact that it may not be possible to operate to them for a considerable period of time.
The Department makes a distinction between the service in the area which is covered by the Trans-Pacific Certificate Renewal Case considered as a whole and that portion of the area in the vicinity of the China Mainland, where political conditions now permit service by the United States carriers. In this more limited area, where operations are restricted to a relatively narrow corridor determined by the combination of political, economic and geographic considerations, there may be some justification from a foreign relations standpoint, at least on a temporary basis, for expansion of existing operations. It is believed that action on this case should not foreclose such a possibility.
The recent cessation of hostilities in Korea may soon make possible a renewal of operations by civilian carriers to Seoul. It is too early to evaluate the eventual relative value of services to Seoul and Pusan. However, it is believed that since Seoul is the capital, it would be desirable to provide for service to that city at least.
The Department would be reluctant to see two-carrier service from the West Coast to the Orient discontinued as both carriers are now well established and the withdrawal of either might be considered by the Asiatic nations as an indication of declining United States interest in the area. The Department prefers continuance of operations over the North Pacific route instead of the introduction of parallel competition by two United States carriers over the central Pacific route. Although the Department does not believe that the North Pacific route can be justified solely on the basis of the political requirements of the United States, it assumes that the overall interests support its continuance. A routing of Northwest Airlines from the West Coast via Honolulu to Tokyo and Manila would make it exceedingly difficult for the United States to continue to deny the Philippines access to Tokyo as an intermediate point on the Philippine Air Lines route to the West Coast.
The Department, bearing in mind its earlier comment concerning Korea, believes that the certificates to be issued in this case should provide for service to all points now being served by United [Page 423] States airlines, including Taipei which is a point of considerable importance due to conditions now existing on the China Mainland.
Finally, the following points, in addition to those on the China Mainland and Seoul, have been certificated but are not now served: Mandalay, Hanoi, Palembang, Djakarta, Penang, Kurile Islands, Iwo Jima, Okinawa, Noumea and Melbourne. The Department perceives no foreign relations requirement for service to Mandalay, Hanoi, Palembang, Penang, Kurile Islands, Noumea and Melbourne. It does believe that Djakarta, as the capital city of Indonesia, should be retained as a certificated point. The Department has no interest in certification of service to Iwo Jima but it does consider that Okinawa should be included on a certificated route.
Sincerely yours,
Acting Assistant Secretary for Economic Affairs
- The Trans-Pacific Certificate Renewal Case involved CAB consideration of the applications of Pan American World Airways and Northwest Airlines for certificates reauthorizing or modifying their services in the Pacific area. The previous certificates expired on varying dates from July 4, 1952, to Dec. 14, 1953. The case also included CAB consideration of Trans World Airlines’ application for round-the-world service.↩
- See footnote 1, p. 395.↩
- Ante, ibid.↩