180. Letter From the Secretary of State to the Chairman of the House Committee on Interstate and Foreign Commerce (Harris)1

Dear Mr. Harris: Reference is made to your letter of July 9, 19572 requesting the comments of this Department on H.R. 8538 “A bill to amend section 402 of the Civil Aeronautics Act of 1938.”

The bill would, if enacted, insert into section 402 of the Civil Aeronautics Act certain principles governing foreign air transportation by any foreign air carrier. Further, section 2 of the bill would require the Civil Aeronautics Board to review at least annually the operations of foreign air carriers to and from United States territory to ascertain whether those operations were being conducted in accordance with the stated principles, and to report annually to the President and the Congress the conclusions reached by it and the action taken or proposed to be taken in consequence thereof. The Department of State strongly recommends against the enactment of provisions of this nature since they would establish a precedent for restrictive measures by other countries to the irreparable detriment of the international air transport system of the United States.

The air transport agreements under which the United States obtains, and grants, rights for the operation of international air services provide that air transport services offered thereunder:

(1)
shall relate closely to the requirements of the public for such services;
(2)
shall have as their primary objective the provision of capacity adequate to the demands of traffic originating or terminating in the country of which the carrier is a national; and
(3)
shall, in the carriage of traffic not originating or terminating in the country of which the carrier is a national, be governed by the general principle that capacity should be related to (a) traffic requirements between the country of origin and the countries of ultimate destination of the traffic; (b) the requirements of through airline operation; and (c) the traffic requirements of the area through which the carrier passes, after taking account of local and regional services.

Thus the principles proposed in section 1 of H.R. 8538 reproduce principles expressed in the air transport agreements of the United States but with two fundamental and decisive differences. In the first place the air transport agreements provide that the above [Page 485]principles shall be the basis for bilateral consultations to review past operations. Secondly, as used in air transport agreements the above principles are equally applicable to foreign air carriers and to United States air carriers.

One of the major obstacles which the United States airlines operating abroad have encountered has been the frequent attempts of other countries to determine unilaterally whether United States air carriers meet the principles set forth above and to enforce those principles by unilateral action, such as limitation on frequencies and capacity of United States airlines. Accordingly, the United States Government has been repeatedly obliged to take either formal or informal action to prevent or minimize such unilateral action on the part of other countries. The success it has had in this regard is amply attested by the outstanding progress of United States airlines in international services.

Enactment of legislation such as that proposed in H.R. 8538 would make continued protection of United States airlines against unilateral action by other countries virtually impossible. Other countries seeking a justification for unilateral action against United States air carriers would interpret the enactment of section 1 of H.R. 8538 as showing indisputably that the United States Civil Aeronautics Board was to apply unilaterally the principles set forth in connection with the issuance of an initial permit for operation over a route described in an air transport agreement. Section 2 of the bill, requiring an annual review by the Civil Aeronautics Board, would make it clear that any permit issued by the Board would be, in practical effect, a temporary permit good for one year only and subject to unilateral termination upon determination by the Board, without any bilateral consultation, that those principles were breached.

Moreover, the extensive through airline operations conducted by United States air carriers, with their resultant high percentage of passengers who neither originate nor terminate their trips in the United States, render the United States carriers, like other long-trunk operators, particularly vulnerable to unilateral limitations. The transportation of short-haul passengers between foreign countries is essential to the continuation of long-trunk services and round-the-world operations. In many countries the desire to limit the carriage of such fifth freedom traffic by United States carriers is already extremely strong due to the fact that the carriage of fifth freedom traffic is in direct competition with local and regional services offered by airlines of those countries. (Forty-eight of the sixty countries to which United States carriers operate have carriers offering service over routes identical or similar to routes flown by United States carriers.)

[Page 486]

Thirty-two of the countries to which United States carriers operate do not have airlines operating to the United States at all, thus the provisions of H.R. 8538 would not have any direct effect on these countries at present. Twenty of these thirty-two countries do, however, have airlines operating over international routes identical or similar to routes over which United States carriers transport fifth freedom passengers. For these twenty countries H.R. 8538 would be meaningful only as a precedent on which to base restrictive actions against United States airlines and as a strong defense against efforts of the United States Government to protect United States airlines from such restrictions. If the United States established a precedent of restrictionism, these countries would undoubtedly take similar steps.

The precedent of H.R. 8538 would, similarly, encourage the twenty-eight countries which have airlines operating to the United States to adopt a policy of unilateral restrictionism. On the basis of the best information available to the Department, the airlines of at least nineteen of these twenty-eight countries would meet the tests of H.R. 8538. On the other hand, the lack of uniformity as to statistical methods for analyzing airline operations (for example, whether to base the analysis on number of passengers, on passenger miles, or on revenue; whether to base the analysis on true origin and destination or on manifest origin and destination; whether to base the analysis on only passengers or to include cargo and mail) would enable the majority of these countries to find unilaterally a statistical basis sufficient in their view to justify restricting the operations of United States airlines.

One of the principal advantages of the theory of bilateral consultations expressed in the air transport agreements of the United States is that the United States Government is able to discuss its views with the other country involved before that country has publicly announced a restrictive ruling. If a policy of unilateral restrictions is adopted, the United States Government would be in the undesirable position of seeking the reversal of restrictive orders after they had been made public. This position would be even more difficult if any other country wishing to issue permits on a year to year basis, or to enforce unilaterally compliance with principles similar to those in section 1 of H.R. 8538 through limitation of frequencies or other means, could cite United States law as proof that its action was no more restrictive than that permissible under United States legislation.

So long as the United States can maintain a system in which unilateral controls are not placed on United States airlines operations by foreign countries, there is an opportunity for the relatively favorable economic position of the United States international air carriers to continue to exist. It would, however, be exceedingly dangerous for the United States to set a precedent that could result [Page 487]in widespread unilateral action to limit the carriage of so-called fifth freedom traffic by United States airlines. The risk of such reciprocal unilateral action would be increased by the fact that H.R. 8538 would not require the Civil Aeronautics Board itself to apply the same tests to the operations of United States carriers as would be applied to foreign air carriers.

For all of the above reasons the Department believes the enactment of H.R. 8538 would hamper rather than help the interests of the United States as a whole and the ability of the Government to strengthen and protect United States airlines operating internationally. Accordingly, the Department is opposed to the enactment of that bill. The Department would welcome the opportunity to discuss in further detail its views on H.R. 8538 with members of the Committee.

The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report and that the enactment of H.R. 8538 would not be in accord with the legislative program of the President.

Sincerely yours,

For the Secretary of State:
John S. Hoghland II3
Acting Assistant Secretary for Congressional Relations
  1. Source: Department of State, Central Files, 911.721/7–957. A similar letter was sent to Senator Magnuson on September 9. (Ibid.)
  2. Not printed. (Ibid.)
  3. Printed from a copy which bears this typed signature.