or air express agency and the delivering operator or air express agency shall be liable for loss, damage, or unreasonable delay to them as well as the operator or air express agency in whose custody they were at the time of loss, damage, or unreasonable delay. This liability shall be joint and several. The initial operator or air express agency and the delivering operator or air express agency shall have a right to reimbursement for any damages paid from the operator or air express agency in whose custody the goods or baggage were when the loss, damage, or unreasonable delay occurred.

"(b) Where baggage or goods are shipped in whole or in part by an air express agency, such agency and not the operator shall be liable in accordance with subsection (a) to the person or persons entitled to sue under section 308.

"WHO MAY SUE

"SEC. 308 (a) Action may be brought by a passenger or his personal representative to recover under this act for loss of or damage to personal effects or for loss of, damage to, or unreasonable delay in delivering baggage.

"(b) Action may be brought by the consignor or consignee or the endorsee, assignee, or personal representative of either to recover under this act for loss of, damage to, or unreasonable delay in delivering goods shipped by air; but at the trial the plaintiff shall be required as part of his case to prove that he is the party entitled to recover damages.

"(c) Either the consignor or consignee or the endorsee, assignee, or personal representative of either may establish that he is the party entitled to recover damages, irrespective of the time of loss, damage, or unreasonable delay, by showing waiver by, assignment by, or settlement with the other party to the shipment.

"LIABILITY IMPOSED UPON OPERATOR AND AIR EXPRESS AGENCY EXCLUSIVE

"SEC. 309. Liability imposed upon an operator or an air express agency by this title shall be exclusive and shall abrogate common law and other statutory actions against the operator or air express agency.

"PERIOD OF LIMITATION

"SEC. 310. Any right of action under this title shall be barred unless suit is brought within two years of the date of loss or damage to baggage, personal effects, or goods, or if such date is unknown or if the action is for loss caused by delay, from the date on which the baggage, personal effects, or goods should have arrived at destination.

"TITLE IV
"MISCELLANEOUS

"LIABILITY TO SURVIVE

"SEC. 401. If an air express agency or operator of an aircraft upon whom liability is imposed by this act shall die prior to the rendition of a final judgment under this act, such liability shall survive and may be prosecuted against his executor or administrator, and recovery may be had as in the case of other claims against his estate."

SEC. 59. Section 201 of the Railway Labor Act (48 Stat. 1185; title 45, U. S. C., ch. 8, sec. 151) is hereby amended to read as follows:

"SEC. 201. All of the provisions of title I of this Act, except the provisions of section 3 thereof, are extended to, and shall cover, every air carrier, as that term is defined in the Civil Aeronautics Act of 1938 as amended, and every person (including, but not by way of limitation, corporations, joint-stock associations, partnerships, and unincorporated associations) which is directly or indirectly owned or controlled by one or more such carriers or under common control therewith, including any receiver, trustee, or other individual or body, judicial or otherwise, when in the possession of the property or operating all or any part of the business of such air carrier or other person, and every person who performs any work as an employee or surbordinate official of such carrier or such other person and is subject to its continuing authority to supervise and direct the manner of rendition of his service, whether or not such work is in connection

with air transportation. The definition of the term 'employee' set forth in section 1 of this Act shall not be applicable to this title."

SEC. 60. The provisions of this Act shall become effective sixty days after -enactment.

The CHAIRMAN. It has now been more than 4 years since the Civil Aeronautics Act was passed. Since that time the administrative agencies created by that act have had what we might call an intensive experience in their regulatory and administrative functions. It is also true that in the meantime the aviation industry has had a great practical experience—its greatest period of development and expansion, and service in transportation.

So now, after these 4 years of experience it seems to be the appropriate time to consider what, if any, legislation should take place for the improvement of the administration or the improvement of the situations of the carriers.

We, of course, recognize that we face a very important period in the history of our country. In the future the aviation industry, of course, must share its part.

We now may have some unusual reasons to look ahead in an endeavor to take constructive action for the betterment of aviation.

Ever since this act was passed, it has been the attitude of the chairman of the committee-and I am sure of the committee itselfthat inasmuch as this legislation came from this committee, we are anxious for it to be successful in carrying out the purposes for which it was designed. So the constant attitude has been to invite information and suggestions from the administrative agencies and also from the industry as to any changes which experience shows might be brought about for the betterment of the administration of the aviation industry.

The bill before us is a result of suggestions and information that have been developed over the last 4 years, based upon experience. In part, it takes up matters that were considered when the original act was passed, but which at that time it was desired should be deferred until the industry was developed, and with more experience, when it could be better determined what action should be taken as to those particular measures.

In part, the bill before us is based upon recommendations of the Civil Aeronautics Board. However, this bill was compiled by me not with the idea of committing even myself or the committee to its provisions, but it includes those things that appeared to me in compiling the bill should be considered at this time. In no sense is it intended to be exclusive of any other suggestions that may be made for the benefit of the administration or of the air industry. On the contrary, the committee will welcome any suggestions from responsible sources as to any phase of the industry or any suggestions that might improve legislation to take care of it.

As to the procedure to be followed, the hearing will be before the full committee. It is the intention that after the hearings are completed, the detailed consideration of the bill will be assigned to the standing Aviation Committee of this committee for that purpose.

So now this morning we have with us the Chairman of the Civil Aeronautics Board. He has been with the Board practically since this act was passed, and now for more than a year has been its chair

man. He has had a background of experience and has taken a studious, diligent interest in the industry. So, I think we will be helped by hearing his recital of something of the experience that has developed in the administration of the act from the Board that has primary charge of its administration.

Mr. Pogue, we will be glad to hear from you.

At this time it is suggested that the members withhold questions until the witnesses, especially the witnesses who will discuss these problems generally, have completed their statement, and then every one will be given an opportunity to ask any questions that he may deem pertinent to the problems presented.

Mr. Pogue, we will be glad to hear from you.

STATEMENT OF L. WELCH POGUE, CHAIRMAN, CIVIL
AERONAUTICS BOARD

Mr. POGUE. Mr. Chairman and members of the committee, my name is L. Welch Pogue, Chairman of the Civil Aeronautics Board.

I. INTRODUCION

I want to say first, that it is a great privilege to have this opportunity to appear in person before this committee. before this committee. We are creatures of Congress, by virtue of the act which came out of this committee several years ago, and, although we report to the Congress in annual reports and at various times in other written forms, it is a real privilege to have the opportunity to come here before you personally and, in a sense, come to grips across the table about the many problems arising in this complicated industry.

In what I shall say this morning, there will be no Civil Aeronautics Board recommendations on the detailed provisions of this bill which is before the committee, because you have asked for our formal comments on that phase of the matter. Those comments are being prepared and will come before you in due course. My remarks this morning will be rather in the nature of various general comments which it seemed to me might be of interest to you.

The Civil Aeronautics Act is a very comprehensive act and the industry, as I have just indicated, is a complicated one, and it has been some time since any legislative action has been before you. For that reason, it has seemed to me that it might be profitable to outline in a general way the functions that are established by the Civil Aeronautics Act and then discuss in general who exercises them, so that you will see how the act is administered. I will be glad, of course, to answer any question and if I do not have the answers I will try to get them.

In that connection, it will be necessary for me, of course, to describe the functions and also to indicate who exercise them, even though some of those functions are vested in the Administrator of Civil Aeronautics and are exercised by him.

II. THE CIVIL AERONAUTICS ACT

Five years ago the Congress was nearing the completion of its work on the McCarran-Lea bill, which was enacted into law as the Civil

Aeronautics Act of 1938. That act provided civil aviation for the first time with a code of law which recognized its capacity to play a major roll in the Nation's commerce and defense. It constituted an exercise of Federal regulatory powers beyond any previously attempted with respect to air transportation.

When the act first became effective, the Civil Aeronautics Authority, the agency then charged with the administration of the act, found the American air transport industry in a state described by this committee as "chaotic." Half of the private capital which had been invested in the industry had been irretrievably lost. The result of shaken faith on the part of the investing public in the financial stability of the air lines was preventing the flow of greatly needed funds into the industry.

The act established a new and comprehensive plan for the unified and systematic regulation of civil aeronautics for the declared purpose of promoting the development of an air transportation system properly adapted to the present and future needs of the foreign and domestic commerce of the United States, of the Postal Service, and of the national defense, and of fostering sound, economic conditions therein.

By the provisions of the act, American air carriers and the public for the first time were safeguarded against uneconomic, destructive competition, and wasteful duplication of services; for the first time the Government compensation to airlines for carrying the mails was determined by judicial procedure on the basis of sound economic considerations instead of competitive contract bidding; and for the first time the airlines and the traveling public were protected against unreasonable and discriminatory passenger and express rates and unfair trade practices.

The provisions of the Civil Aeronautics Act may be divided into two categories: Functions relating to the development and economic stability of airlines and functions relating to the safety of civil aircraft operations generally in the whole field of civil aviation.

A. ECONOMIC CERTIFICATES AND PERMITS

In the economic field the act controls the institution of new operations by prohibiting any person from engaging in air transportation without a certificate of public convenience and necessity, or, in the case of foreign air carriers, a permit. Such certificates and permits are to be issued only if it is found that the service is required in the public interest, after notice and hearing, and that the applicant is fit, willing, and able to perform the service properly. This control of entry into the air transport business is also extended by the act to the field of international air transportation whether by domestic or foreign carriers.

A large number of applications for certificates and permits has been filed since the enactment of the act.

On August 22, 1938-that was the effective date of the act-the domestic air transportation system was composed of 38,564 routemiles serving 237 separate cities in the United States. By the issuance of certificates for new services the route mile miles in the domestic air transportation system have been increased to approximately 46,000 and around 350 individual places are now named as

certificated points. Also, 67 new services have been added to 48 cities which already had air service at the time of the passage of

the act.

I will have more to say later on about the improvement of air transportation under the Civil Aeronautics Act.

In the field of international air transportation the systems operated by American flag carriers have increased from 30,781 route-miles on August 22, 1938, to 84,928 route-miles, an increase of 54,147. It was under the provision of the Civil Aeronautics Act that transAtlantic air services were established between the United States and Europe, and trans-Pacific services between Hawaii and New Zealand.

B. RATES

The act provides for the fixing of fair and reasonable rates of compensation to be paid the airlines for the transportation of mail. It expressly defines broad objectives to be accomplished through the medium of mail payments by directing that mail rates be fixed which will be sufficient "together with all other revenue of an air carrier, to enable the carrier under honest, economical, and efficient management, to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the Postal Service, and the national defense." It is apparent that this general objective contemplates that, so long as a carrier's revenues from commercial sources are not sufficient to enable it to operate at a reasonable profit, the deficiency shall be made up through mail payments to the extent that this is in the interest of the development of a sound air transport system. The act, therefore, provides for the extension to the airlines of Government financial aid through the medium of payments for the transportation of mail where necessary.

With respect to rates for the transportation of passengers and cargo, other than mail, the act requires every airline to file tariffs setting forth its rates and to adhere to tariffs so filed. A statutory duty is imposed upon the carriers to charge fair and reasonable rates without unreasonable discrimination or preference, and the agency vested with jurisdiction under the act is authorized to prescribe passenger and property rates if it finds that existing rates or new rates proposed by the carriers are unreasonable or discriminatory.

Up to this time, interest and activity in the air transport rate field has been concentrated upon mail rates. For example, the Board's rate proceedings, with one exception which involved a question of discrimination, have been confined to the fixing of mail rates.

Mail rates have been fixed under the act for all carriers at least once, and in the case of most carriers mail rates have been fixed on more than one occasion since 1938.

Until 6 months ago, the Board's mail rate fixing problems were confined entirely to carriers who were experiencing substantial operating deficits before mail pay. Under these circumstances, the Board in its decision in each case has been concened primarily with two things: Determining the amount of the carrier's legitimate deficit which should be covered by mail payments, and deciding upon the amount of profit above the break-even level to be provided in the