The CHAIRMAN. In other words, using as an example-the United Kingdom could stop its own but it couldn't stop American air carriers?

Mr. BOYD. That is right, sir.

The CHAIRMAN. I get that difference. I am sorry to be taking so much time in getting this out at this point.

Do you have any questions, Mr. Staggers?
Mr. STAGGERS. I have no questions.

The CHAIRMAN. Mr. Younger?

Mr. YOUNGER. Thank you, Mr. Chairman.

That this is complicated is the understatement of the year. Do I understand now that a foreign country can exercise its rights to control the traffic, planes, and rates from this country landing in their country?

Mr. BOYD. Yes, sir.

Mr. YOUNGER. Your statement on page 19:

Since no one government can expect to impose its will on other governments

Isn't that contrary to that statement?

Mr. BOYD. Well, obviously, Mr. Younger, sooner or later you have to reach agreement and either we live with other countries or we go to war, and they are in the same shape with us.

The problem is this: That we can reach agreement-let me go back. They can impose their will on us as was done last year and ultimately we do reach agreement. But the agreement has to be influenced to some extent by who has the ultimate power because, if we don't reach agreement, we go back to what they want to do.

Now, we are always in a position where we can say no more of this, we denounce the agreement, but this is not the answer. The answer, as we see it, is that we have comparable power with the other countries.

Mr. YOUNGER. I am just trying to reconcile that with your statement "Since no one government can expect to impose its will on other governments" that is actually being done now. That is the situation now, isn't it?

Mr. BOYD. From time to time; yes, sir.

Mr. YOUNGER. Yes. And that is what was done last year with the rates?

Mr. BOYD. Yes, sir.

Mr. YOUNGER. So that you can expect one government to impose its will on other governments?

Mr. BoYD. Yes, sir. If I may say in that context, the meaning in my statement was that we didn't-we don't want to give the impression in our testimony or develop a record for this legislation which will give any impression that we think we can go around with a baseball bat and hit people over the head and make them do what we, the United States, want them to do, because we don't have that philosophy, and we wouldn't have it, if we when we get the legislation, but we don't want to be in the position where we are now where our friends across the water have the baseball bats and we have our hands tied behind our back.

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Mr. YOUNGER. That is what is rather disturbing to me; that you don't even want the same rights that the other countries have. You

don't want to even intimate that you want the same powers that they now possess.

Mr. BOYD. Well, of course, when we talk about the same powers other countries possess, Mr. Younger, we run immediately into a completely different form of constitutional government in most of these other countries and they possess the power that they seem to feel they want at the moment in many cases by issuing decrees or fiats or whatever because they don't operate under the same legal systems we do.

They can get a law or a regulation that has the effect of law in many countries in the length of time it takes to write it out on a sheet of paper and have somebody sign it. We can't do that and there is no way we can do that under our constitutional system.

So, what we want is power which will enable us to permit our carriers who are the most efficient, and there is certainly no question about that, to put in and maintain rates that are fair and reasonable without regard to what the foreign competition wants to do.

Now, our carriers have for a long time

Mr. YOUNGER. Just a minute there.

Mr. BOYD. Sir?

Mr. YOUNGER. Again I don't reconcile it. You say you want the power to have our carriers establish rates regardless of what the other country wants done.

Mr. BOYD. Well

Mr. YOUNGER. Is that what you just said?

Mr. BOYD. Yes, sir; that is right.

Mr. YOUNGER. Aren't we then in a position to impose our will on the other government?

Mr. BOYD. No, sir; no, sir. Because the bilateral agreement specifically provides that where we have a dispute, whether or not we have rate legislation, the next step is arbitration. But, with rate legislation, then our rates go into effect pending arbitration.

Without rate legislation, their rates go into effect pending arbitration. So there is a next step all the way down the line. Mr. YOUNGER. That is all, Mr. Chairman.

The CHAIRMAN. Well, now, did you distinguish between-just to carry that forward a little bit, and as I said earlier this is a very complicated thing and I think we will probably have to get into it-did you distinguish the difference between the powers of the Civil Aeronautics Board when you talk about the authority which Mr. Younger asked you about, and the authority of the U.S. Government, which the Board doesn't have?

Mr. BOYD. No, sir; I didn't make that distinction.

The CHAIRMAN. Well, there is a distinction, isn't there?

Mr. BOYD. Yes, sir. So far as we know, the State Department will be in here to testify shortly and probably answer better than I can but, so far as we know, the CAB, Civil Aeronautics Board, does not have power to effect control of rates with the existing legislation in the Federal Aviation Act.

Now, I think we assume that within the sovereign power of the U.S. Government there is power to take pretty much whatever kind of action one desires. Whether or not it is consonant with an existing agreement is something else again, but I am frankly not competent to discuss this. This is a matter of constitutional power.

The CHAIRMAN. Yes. But what I was trying to make clear on the record is what you are talking about here is the power of or authority within your own organization.

Mr. BOYD. Yes, sir; I am limiting myself to that.

The CHAIRMAN. Yes. Well, I think maybe some could get the impression you are talking about the overall authority of this country, including the Board, and I think we should probably get that distinction as it will be developed as we go along.

Mr. BOYD. No, sir; I am limiting myself.

The CHAIRMAN. Mr. Macdonald?

Mr. MACDONALD. Mr. Boyd, along that same line, I am happy for once to agree with you as far as I understand this proposed bill. However, how, if the rate section (e) becomes law-how would that change the action, say, whatever government it was, that boarded the Pan American plane and demanded $25 more which was a lower rate than Pan American wanted-how would this rate section affect that government?

Mr. BOYD. That government would have had no right to interfere in any way with Pan American or its passengers without-unless it were willing to violate the bilateral because the bilateral provides that when the United States has rate legislation the rate that the United States approves will be, in effect, pending arbitration.

Therefore, we do not assume that any country is going to deal in bad faith so they would have no right to interfere; or put it another way, if they did interfere it would be without right or without color of right.

Mr. MACDONALD. They wouldn't have to agree to this. They have already agreed to it.

Mr. BOYD. That is right, sir.

Mr. MACDONALD. If there is rate legislation then they will arbitrate before they take any action?

Mr. BOYD. That is correct.

Mr. MACDONALD. My last question: If they did this to Pan Am or TWA last year, were you powerless to reciprocate?

Mr. BOYD. Yes, sir, the CAB had no power. We have no retaliatory power.

Mr. MACDONALD. You couldn't tell them that as long as they were confiscating planes or holding them up by armed guards-if you want to be dramatic, getting ransom out of them-therefore, they were abrogating their agreement and they could no longer, say, fly to New York?

Mr. BOYD. Unfortunately, this is the basic problem, Mr. Macdonald. These other governments have the power to do what they did in the light of the agreement, by virtue of their own domestic laws. I say the power. I don't know that they had the power or the right to put a soldier out at the steps and say to each person who got off, "Give me $25, American."

Mr. YOUNGER. Will the gentleman yield for just one question on that point?

Mr. MACDONALD. Yes.

Mr. YOUNGER. Isn't there also a difference in that the foreign government itself owns the plane rather than our position where we have companies who are independent of the Government?

Mr. BOYD. Generally speaking, Mr. Younger, the major air carriers are owned either totally or almost totally by governments. Mr. YOUNGER. That is what I mean.

Mr. BOYD. There are private interests, I believe to some extent, in Alitalia, Air India.

Swissair, though, as far as I know is pretty much of a privately owned company. KLM stock is traded on the New York Stock Exchange. But there is a major government interest in KLM also, and, I think, Canadian Pacific is privately owned. It is owned by the Canadian Pacific Railroad, but most of them are either totally or for the most part government owned.

Excuse me, sir, I don't know whether I answered your question. Mr. MACDONALD. I actually-this last question, because it is in a vague area, but if you say you don't have the power to retaliate? Mr. BOYD. Yes, sir.

Mr. MACDONALD. For a government who does this rather highhanded thing that you pointed out was done with Pan Am. Don't you think you should have the power or some agency should have it? Mr. BOYD. Well, let me put it this way, Mr. Macdonald.

If we have rate legislation then this sort of stuff would never arise, and one of the things that frankly has concerned me about the whole development last year was that aviation is a very important matter, certainly it is my livelihood and that of many other people, but it is not the whole world, and if we had had rate legislation we could have kept this in the aviation area, and solved it as an aviation problem.

Instead of that what happened was that we got right to the brink of an international crisis with some of our best international allies and friends. It escalated completely out of the field of aviation, and it should never have gotten out of that.

Mr. MACDONALD. So you don't feel you need that kind of a problem or want it?

Mr. BOYD. I don't think so. If we get the rate legislation the problem is resolved. It won't exist.

Mr. MACDONALD. Thank you, Mr. Chairman.

Mr. HULL. I just wondered, Mr. Chairman, does IATA have anything to do with ratemaking when you have those meetings?

Mr. BOYD. Yes, sir; that is the main function of IATA. If I may take a minute for some background on the Chandler conference, IATĂ operates in the rate area through traffic conferences, and for some reason they give the conference the name of the community where the conference is held so you hear of the Salzburg conference, the Chandler conference, and so forth.

At Chandler, Ariz., in September of 1962, there was a traffic conference meeting of the IATA carriers. There must be unanimous vote, incidentally, for any agreement to be reached. As is the practice of the Board, as I mentioned earlier, prior to any traffic conference we ask our carriers, the U.S.-flag carriers to come in and tell us what they understand is going to come up, and what they expect to propose themselves to the conference, and then we write a letter which is fairly general saying, "We are in agreement in these areas and that area and this is what we think you ought to do generally," so they have got plenty of flexibility, we don't try to tie them down.

At the time of the meeting with the carriers, there were two meetings in fact, prior to the Chandler conference, the Board was given the dis

tinct impression by our carriers that the status quo would remain. There would be no effort to increase fares but it was doubted that there would be any opportunity to decrease fares, although our carriers have historically sought normally to lower the fares.

So, we said, "OK, status quo looks all right."

After all 1961 had been a bad year, jet transition, and traffic hadn't grown and they were all in pretty poor shape financially.

So lo and behold they have the conference at Chandler and come out without a fare increase as such. What they did was to take the 10-percent round trip discount and reduce it to a 5-percent round trip discount, which had the effect of increasing the fare, and we said. "Hold the phone" when we found out about this.

It had already been agreed and by our carriers, too. So we called our carriers in and said, "What is all this about?"

And they said, "Well, we tried," and I am certainly making no allegations here that they didn't.

"We tried to get a better deal and we couldn't. So this being the best deal we could get we agreed to it."

And our position was: We are the U.S. Government, we are not the air carriers and this deal is not god enough for the U.S. Government, because there was no justification for increasing the fares, and we asked our carriers to provide us with something in writing for justification and they came back with letters and said, "This was the best we could do," which we didn't construe as being very good justification.

So, then, we issued a tentative disapproval of the fares, of the agree ment, which had the fares in it, and said, "We propose to disapprove these fares because this increase is not justified."

So then the organization itself, the association, IATA, petitioned the Board for opportunty to present some material in the hope of persuading us that we should permit the agreement to be approved.

We said all right. So they came in with a petition signed, I think by 28 carriers, members of IATA, and the gist of their petition was, "If you don't approve this fare agreement there will be utter chaos." And we didn't think that was justification either, so we looked at it and we said, "No, we disagree and therefore we disapprove."

Well, the disapproval really means that the carriers who file the tariff's with the Board are then subject to antitrust action, if they act in concert.

Mr. HULL. That would be in our country, not in foreign countries, Mr. BOYD. Yes, sir.

So, the United Kingdom asked if they could have some informal talks with us, and we said, sure, and we talked with a representative of the United Kingdom for 3 days and we got nowhere, and the gist of the conversation was that "you can't do this to us." And they made it stick later on but we didn't appreciate it at the moment.

Mr. HULL. I was wondering where his $25 lug came in if there is anything to the agreement they make with the IATA.

Mr. BOYD. The what?

Mr. HULL. The $25 or whatever it was.

Mr. BOYD. This is what happened.

We told our carriers, "You keep charging the old fare," which they did. The European governments told their carriers, "You charge the