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As your committee knows, despite the Board's disapproval of the reduction of the round trip discount, the governments of several Eum lo: pean countries insisted that the increased fares be placed in effect to fu United States and other carriers. If provisions similar to those in H.R. 6400 had been in effect

, as if as a consequence paragraph (e) of the rate article had been op tio erative, the Board would have had the power to require the U.S.fag carriers to charge the lower pre-Chandler fares and the foreign goxernments would have been unable unilaterally to prevent them from of doing so.

The sole recourse of the foreign countries under these circumstances would be the consultation and arbitration provisions of the bilaterak. thi Moreover, for competitive reasons the foreign air carriers would have adi been compelled to follow suit and charge the lower fares charged by the the U.S. carriers. Thus, the rate authority would have operated for the protection of the American traveling public, and I might add parenthetically, for the entire traveling public.

po Although our objective of lower rates in the North Atlantic has in a large measure been realized for the current season, this does not mean that the legislation is not needed or that we will be equally successful the next time.

To say that "it was not easy to do” is probably the understatement of the year-in fact a major crisis occurred and a lot of hard work and cooperation by governments and carriers were necessary,

Fortunately, we already know that traffic across the North Atlantic has been up sharply since the new fares became effective on April 1, and we are confident that the lower fares are at least partially responsible.

As I have pointed out, the United States would lose the theoretical str right to suspend the rates of foreign air carriers if H.R. 6100 is adopted and the provisions of paragraph (e) come into effect.

In our judgment, however, the loss is relatively unimportant. The power to suspend is of value primarily in cases where a foreign carrier

im proposes a rate which is uneconomically low, because in the absence

lat of the power to suspend the rate our carriers must meet it or suffer severe diversion.

th While this may liave been a major problem a few years ago

the threat of cutrate competition appears to have diminished Moreover, it is important to note that rate cutting has been confined

th primarily to a few non-IATA carriers, and that the governments of most of these carriers either do not have bilateral agreements with the United States, or have agreements which do not contain provisions le similar to those of paragraph (e). Thus in these cases there is no paragraph (e) prohibiting suspensions, and the Board could suspend

th and fix rates of such carriers, whether they are too high or too low. In addition, if it develops, after experience under the legislation

, that the provisions of paragraph (e) do not sufficiently protect the overall public interest of the United States, the agreements containing the provisions of paragraph (e) could be renegotiated.

I One objection irhich has been advanced agninst giving the Board rate control authority is that it would deprive U.S. carriers of the flexibility necessary to participate in IATA rate conferences,

and that the IATA procedures for establishing a fair and sound rate structure for international air services would be impaired.







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e Berlin The Board does not believe that this is a sound objection. From gente long experience in rate and other international matters, the Board is I for a fully aware of the problem of negotiating flexibility, and has no in

tention of using its rate power in a manner inconsistent with the Gulate continuance of IATA as the basic mechanism for determinig internaenertional rates and fares in the first instance.

For a number of years the Board has followed the practice of conforse's sulting with our carriers prior to IATA conferences and advising them ally out of the Board's views concerning changes in the IATA rate structure.

In establishing these guidelines the Board has been aware of the bow need to permit negotiating flexibility on the part of our carriers, and Poisten this would obviously continue to be necessary if rate legislation is mais adopted. Indeed, enactment of H.R. 6400 would probably improve elce the negotiating position of our carriers, since it would be backed by pa greater power in the Board.

It has also been urged that if the United States were given unilateral

power to fix rates, this could lead to widespread adoption of the same - practice by other countries, to frozen rates, and to loss of negotiating

flexibility on the part of all carriers participating in the IATĂ conference.

The short answer to this is, of course, that virtually all other countries do have authority to fix the rates of their and our carriers, and will use that power when they deem it necessary, as the recent controversy with the British and other countries regarding the Chandler fares demonstrated.

This authority is derived from many sources other than direct statutory rate authority, such as decrees, regulations, direct power derived from the air sovereignty of the country according to the constitutional structure of that government, and provisions in bilateral agreements which have the effect of law without implementing legislation.

A further contention has been made that the fixing of international rates is a multilateral problem, that no one government can expect to impose its will on other governments, that even two governments bilaterally cannot solve a multilateral rate problem effectively and successfully, and that the problem can best be handled by the carriers througli the IATA machinery.

We can largely agree with this point. One need become only generally familiar with the complexity of international rates to appreciate the tremendous difficulty of reconciling different viewpoints, and the need for an organization such as IATA.

Indeed, the international air transport policy study recently released recognizes this quite clearly when it states that this multilateral mechanism (IATẢ), though it has some drawbacks, seems to be the most practical one we can achieve, and it should be maintained.”

The fact is, however, that legislation is needed in addition to and as a supplement to the IATA machinery. The knowledge by the IATA carriers that the Board lacks effective power to back up its positions with regulatory action obviously diminishes the Board's influence over IATA actions.

Thus, power to suspend and fix rates would be a powerful force for reasonable rates even if that power were never exercised.

Morever, this lack of effective power in the Board becomes an important factor which inhibits and restricts our final action upon IATA resolutions after the carriers have reached agreement.

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Clearly, the Board must think twice before disapproring an LATA resolution when the consequences of our disapproval are such as i throw all power into the hands of other governments while the Bord must stand helpless with respect to either the suspending or the fina of rates.

Furthermore, the IATA mechanism does not always solve the di ficult problem with which it is set up to grapple. The carriers therselves may sometimes be unable to reach agreement, and an open-fali situation comes into being.

Or some government may disapprove the rates established by IATA and for this reason an open-rate situation is brought about, the very situation which recently existed on the North Atlantic.

Finally, there are some important operations by carriers who are not participants in IATA. In all of these situations it seems abundant clear to us that this Government should not be deprived of the toob necessary to take effective action in the fixing of rates.

On balance, therefore, the Board firmly believes that from the vierpoint of the public interest, especially the traveling and shipping putlic, Congress should enact H.R. 6400, and that loss of the right to suspend the rates of the foreign air carriers which are subject to the Bermuda rate provisions will be a small price to pay.


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H.R. 1716

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H.R. 1716, which is sponsored by the Air Transport Association would amend the act so as to empower the Board to suspend propre tarifss of air carriers and foreign air carriers relating to foreign air transportation, as well as existing tariffs of foreign air carriers

, for a period or periods not exceeding 365 days.

In the case of suspension of a proposed tariff, the tariff, in effect immediately prior to the filing of the new tariff would be maintained

In the case of suspension of existing tariffs, the foreign air carriers could use the lowest or most advantageous tariff currently in effect for air carriers engaged in the same foreign air transportation,

Certain criteria would have to be taken into consideration by the Board in exercising its suspension power. The Board wonld also be given the same power to prescribe rates and practices for air carriers in oversea transportation that it now has with respect to interstate air transportation.

It is clear that the ATA bill provides the Board only with the power to suspend rates, and does not give it the power to fix rates of either United States or foreign air carriers engaged in international air transportation.

It is equally clear that the bill does not bring into force the provisions of paragraph (e) of the rate article of the Bermuda-type bilaterals under which a proposed rate in dispute goes into effect unless the coun: try of the carrier proposing the rate sees fit to suspend.

On the contrary, it leaves in effect the provisions of paragraph (f), under which a country objecting to a proposed rate may take such steps as are necessary to prevent the rate from going into effect. The bill must, therefore, be reviewed in light of this background in deter mining whether or not it gives the Board the necessary power to protect the American public from unreasonably high rates imposed by foreign air carriers acting through IATA in concert with their governments


x before be There is only one area in which the ATA bill would be advantageous, Our di*and that is in the situation where a foreign carrier files a rate which is er gorenez uneconomically low.

In such a case the Board would be able to suspend the rate-some

thing it cannot do now, nor could do in the case of carriers subject to des melk the Bermuda rate provisions if H.R. 6400 is enacted. 3 GTAPE 2. As I have previously stated, however, the problem of rate-cutting in 1 green international air transportation is now minor, and has been confined

primarily to a few non-IATA carriers. hentes

I also indicated that carriers accounting for the vast preponderance nisk of international air traffic belong to IATĂ, and that these foreign carthe riers and their governments have, in general, pursued a high rate polmakes icy. On the other hand, we believe the U.S. carriers are generally the aine low-cost carriers and the most efficient.

The ATA bill is deficient in a number of respects from the standpoint ose of giving the Board the necessary power to protect the American pub

lic against unreasonably high rates. Its most basic defect is the fact that no power whatsoever would be conferred upon the Board after the expiration of the 365-day suspension period.

Although it is contemplated that settlement of a disputed rate would be negotiated during the suspension period, the inability of the Board to control the rate at the end of the period would tend to weaken this Government's hand in any such negotiations.

Moreover, even where negotiations would not be a factor, i.e., where the Board was dissatisfied with the rate of U.S.-flag carriers, the power to suspend would be futile since the carrier would be able to put the rate into effect at the end of the 365-day period regardless of the Board's wishes.

One of the most glaring inadequacies of the bill is the fact that the right of a foreign country to suspend rates filed by U.S. carriers would not be terminated by its enactment, since paragraph (f) of the Bermuda-type bilaterals would be left in effect.

Let us suppose, for example, that both the U.S. Government and the U.S. carriers desire to put into effect lower fares at the next IATA traffic conference, but that the conference fails to reach agreement on the fares because one or more carriers, under the unanimity rule, veto a fare reduction.

In this case, despite the wishes of our Government and our carriers, the foreign governments would be free, under paragraph (f), tó suspend any reduced rates proposed by our carriers following the breakdown of the IATA procedures.

In fact, the Board may be confronted with this precise situation in the transpacific area within the next 6 to 9 months. It is not know to what extent U.S. carriers will advocate lower rates for this area. However, even if they do, they as well as the Board could be prevented from putting such rates into effect because of the opposition of foreign governments.

Moreover, the power to suspend foreign rates would result in minimal advantages or be illusory in most instances. There would appear to be little necessity for suspending unduly high rates of foreign carriers since they would not result in injury to U.S. carriers.

Also, the power to suspend an existing rate of a foreign air carrier could probably be used in very few instances because the foreign air carrier would be entitled to charge "the lowest, or the most advanta

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geous to it, of such rates” as may be currently in effect for air carrier engaged in the same foreign air transportation.

In a great many cases the U.S. carrier would be charging the se rate (due to IATA, competitive forces, or by order of a foreign coun: try) as the rate of the foreign air carrier which would be suspendel The suspension would, therefore, have no practical effect. Where u duly low rates are filed by carriers of countries not having Bermuistype bilaterals, as is likely to be the case, the Board should not be limited to mere suspension of the rate, but should also be able to pre scribe a correct rate.

Finally, the ATA bill is deficient because it does not give the Board power to regulate the rates of our own carriers. While we can hope that it would rarely be necessary to require our carriers to increase a decrease their rates, such occasions may arise.

Whenever foreign carriers, governments and our own carriers favor high rates, the traveling and shipping public can be protected by the Board only if it has power to regulate the rates of the carriers.

This would conclude my discussion of the ATA bill except for the fact that ATA contended at the hearings on S. 1540 and no doubt will repeat such contentions here, that only suspension power is necessary because the Board has power under section 402 of the act to insert conditions dealing with rate matters in the permits of foreign ar carriers.

The Board is unable to agree that any effective control orer the suspension and fixing of rates could be achieved under this section. Section 402 of the act is the licensing provision which requires that a foreign air carrier must obtain a permit from the Board before it may engage in foreign air transportation to and from the United States.

Section 402(e) provides that the Board may attach to a foreign air carrier permit "such reasonable terms, conditions, or limitations as, in its judgment, the public interest may require.”

Although section 402 constitutes a broad grant of authority, it does not give the Board the power to regulate the level of the rates of foreign air carriers.

This view is further supported by the fact that the rate and tarif powers which the Board does possess both with respect to foreign and U.S. carriers are spelled out in precise and definite terms in the act,

The Board has full power in interstate air transportation to suspend and determine the level of rates in such transportation, and to ente discrimination in rates or practices. Similar powers are also spelled out precisely with respect to the Board's authority over rates in over sea air transportation, that is, transportation between the United States and its possessions, such as Puerto Rico.

In the field of foreign air transportation, the Board is given the same nower hy section 404 to cure discriminations with respect to foreign air carriers as it has with respect to U.S. air carriers.

Both foreign and domestic carriers are covered equally with respect to the content, filing, and observance of tariffs; and procedures, time limits, and statutory standards are spelled ont in detail. There is not, however in this long and detailed enumeration of specific mowers any grant of nower to suspend or fix the level of rates of either U.S. or foreign air carriers in foreign air transportation,

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