Colonel GORRELL. There has been a small amount of money secured on preferred stock with interest in the vicinity of four and a fraction percent. There has been a small amount raised on common stock. There have been bank loans in the form of indentures wherein the interest rates were very, very low. I forget for the moment just what it was. But really there was competition between banks to loan to the industry, and it forced one bank to offer money at a lower rate than another. That made the rates quite low.

There was a small amount borrowed from the R. F. C. right after the act went through, but it was paid back or replaced by private capital.

The CHAIRMAN. Well, we thank you, Colonel, for your contribution to the record.

RATES IN FOREIGN AIR TRANSPORTATION

Colonel GORRELL. If I may now proceed, sir, there is another provision of the bill, section 22, appearing on page 26, to which we wish to address a few remarks. This section has the effect of applying to all of our foreign air transportation the same regulation of rates and of service now applied to domestic air transportation. It, and related provisions appearing later in the bill, would not only require reasonable rates and service both by American flag and foreign flag air lines engaged in foreign air transportation from or to this country, but would also give to the Civil Aeronautics Board the power to fix such rates.

Our industry neither favors nor opposes such provisions. The question is one which is so complicated, and so deeply involves important issues of Government policy, affecting our international relationships, that we feel that it would be out of place at this time for us to attempt to advise the committee on this subject. The State Department and other agencies of the Government will, no doubt, . acquaint the committee with all that is involved.

It may be stated, however, that, as the committee of course realizes, no such extensive regulation has been attempted in the field of shipping. Similar proposals made in the course of considering the Civil Aeronautics bill in 1938 were rejected. The proposal involves very serious issues of policy and certainly ought not to be adopted without the most careful consideration and appraisal of the possible international consequences. Be careful lest you tie the hands of those who must negotiate your after-war international agreements.

DECLARATORY ORDERS

Turning to section 25 of the bill, at pages 28 to 29, we find a proposal to add a new section 417 to the Civil Aeronautics Act which is in two parts. The first would authorize the Civil Aeronautics. Board to enter declaratory orders even though there had been no actual or alleged violation of the act. This proposal is novel and interesting, providing, as it does, for an administrative agency, a procedure not dissimilar to the declaratory judgment procedure which the Congress adopted for our court system some time ago. There is one word of caution, however, to be noted. The language of this proposal should be carefully reviewed in order to make sure

that such declaratory orders are to be authorized only in circumstances where they could be reviewed by the courts under the constitution. In other words, just as declaratory judgments can be entered by the courts, only where there is an actual controversy in the constitutional sense, so it would seem that declaratory orders should be rendered by the Civil Aeronautics Board, only in cases where there is an actual controversy of a nature which would permit judicial review of the order once it had been entered.

VOLUNTARY ARBITRATION

The second portion of the proposed section would authorize the Civil Aeronautics Board to provide a system of voluntary arbitration for persons, subject to the Civil Aeronautics Act. This section. likewise should be carefully studied in order to make sure that it accomplishes the objective, which our industry heartily commends. There is already a Federal arbitration act, which was adopted in 1925. There is, however, some question concerning the adequacy of that act to deal entirely satisfactorily with the problems of this industry, and it would appear wholly desirable to adopt a provision along the lines of the proposal set forth in the present bill.

FILING AGREEMENTS

There is one small matter, not included in H. R. 1012, to which the committee's attention is invited. Section 412 of the present Civil Aeronautics Act makes it mandatory that air carriers file with the Civil Aeronautics Board copies of agreements affecting air transportation. The scope of this section is, of course, quite broad, and its exact extent is somewhat ambiguous. In order to avoid a situation where a carrier, by innocently misconstruing the somewhat ambiguous provisions of the law, might fail to file an agreement and then later find that it had violated the law, it is suggested that the paragraph be changed so as to make such filing permissive, except in instances where the Civil Aeronautics Board requires filing. accomplish this objective, it is suggested that the first five words of the present section 412 (a), which read "Every air carrier shall file * * *" be amended to read "Every air carrier may, and, to the extent required by the Authority, shall, file

CONTRACT CARRIERS

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Section 26 of the bill, beginning at page 30, would add a new title to the Civil Aeronautics Act which is designed, as we understand it, to provide economic regulation of contract carriers by air.

At the present time there is no economic regulation of persons other than common carriers by air. The safety regulation in the Civil Aeronautics Act of course reaches all classes of commercial operation as well as ordinary pleasure flying.

In general, the pattern of regulation which is contained in the present proposal is of the same type as the economic regulation of contract carriers by motor vehicle included in the Motor Carrier Act. A step such as that proposed should, of course, be very carefully considered. The subject, as this committee knows well, is a

complicated one, and, as yet, we have not had an opportunity to study the proposal as thoroughly as we hope to do. We shall, if you desire, work out as rapidly as possible detailed suggestions for the committee's consideration.

There are, however, certain general considerations which the committee may wish to have in mind in its further study of this matter. With no adequate regulation of the subject, great harm can be done to the Nation's commerce and to its defensive strength. The unbridled growth of contract carriers, with uneconomic and even cutthroat practices beyond governmental control, can cause a serious dissipation of our aeronautical resources. Although not generally appreciated, this committee knows that the business of carrying persons by air on a contract basis had, before the war, already developed into a very substantial extent. Perhaps not so extensively developed, but still markedly so, there had been transportation of property on a contract basis. If experience in other fields is to be a guide, it would most certainly be wise for the Congress to take the proper steps before the problems of contract carriage become acute.

So far as rail transportation is concerned, there is, of course, no distinction of any consequence between contract and common carriage. All transportation by railroad, as a practical matter, is treated as on a common carrier basis. Similarly, substantially all pipe line transportation is held to the obligations of the common carrier. In the case of air transportation, while we may no doubt draw upon regulatory experience in the field of contract carriage by motor and by water, there are certain peculiar problems of which we must not lose sight. Notably, we should keep in mind the peculiar values of our common carrier system to the national defense, the need for tremendous growth in that system on an economic basis as sound as possible, if it is to provide the adequate auxiliary to our armed forces, which our national policy demands, and the possibilities of providing, through the proper and rapid development of that tem to new points, regular, low-cost, safe air transportation, with the highest standards of service for communities which are now remote from air line stops.

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Considerations such as these might well lead to a determination that, in the air, Congress should follow the same policy which it has followed with respect to rail and pipe-line carriers. If, however, an approach more akin to that followed in the motor field is to be adopted, it is essential that there be carefully formulated provisions in connection with the powers of regulation, and in connection with the legislative standards to which that regulation is to apply, which will assure full realization of the potential benefits of a vastly expanded common carrier network.

In the Civil Aeronautics Board opinion in the Northwestern Airlines case granting additional service, docket No. 463, the Board states on page 13:

the air transport industry has been and is financially able to undertake expansion far beyond the present extent. * *

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There should most certainly be proper safeguards which would prevent the inauguration of contract operations, often transitory in character and restricted in the public service they can perform, which would

impair the development of a regular and dependable common carrier operation permanently serving all the public without favor.

Provisions wisely framed today will result in tremendous progress tomorrow. Inaction, or wrongly defined regulation, could do incal

culable harm.

With these thoughts in mind, the committee will doubtless want to consider at least revisions in the language of section 4100 (a) and (b) of the proposed new title IV-A, pages 30 to 31 of the bill, and in section 4101 (d) and (e), at pages 32 to 33 of the bill.

MULTIPLE TAXATION

The next important section of the bill is section 34 appearing on pages 42 to 44. This section would add a new section 802 to the Civil Aeronautics Act. Section 802 (b) relates to multiple taxation. It provides that the States, Territories, and subdivisions thereof shall not tax air carriers in a manner resulting in multiple taxation or in payments of an amount more than fairly allocable to the particular State or Territory.

This proposal represents a constructive step toward dealing with a problem which, unless it is anticipated, can become a serious, and wholly unnecessary, barrier to sound development of our air transport facilities. A case recently decided by the courts of one of the States will illustrate how grave the problem can become. In that case, it was held that one State might impose a property tax on the entire value of the entire aircraft fleet of an air line despite the fact that the air line operated that fleet regularly through seven or eight States. The air line was incorporated in the taxing State but the court did not base its decision on that ground. Rather, it emphasized the fact that the units of the fleet regularly came into the State for overhaul.

An extension of any such principle would have the most serious consequences. Indeed it is widely recognized that multiple taxation by various taxing subdivisions can be one of the most serious of all barriers to sound interstate development.

Even where some basis of allocation is applied by different States, multiple taxation can readily develop due to variations in the basis. Consequently even were the State court decision, to which I have just referred, to be reversed, there would remain the very substantial threat of crippling multiple taxation unless corrective steps are taken.

There is no question about the unfairness of a situation where different States are imposing taxes upon the same object, in a manner, resulting in the payment on account of that object, of a total tax which would be more than would be paid were there a single over-all taxing authority. The air transport industry, because of its mobility and the necessarily broad extent of its activities through many States, is peculiarly susceptible to the dangers of multiple taxation. The courts, I understand, in recent years have tended more and more to relax constitutional restraints upon multiple taxation, thus leaving the matter for correction by Congress, if it is to be corrected at all.

After the war is over it will be essential, as we will appreciate, that there be a very rapid development and growth in the air transport industry. It is equally essential that that development occur on the

soundest possible basis, with unfair and unnecessary artificial barriers eliminated. It would seem, therefore, entirely appropriate that the Congress should take the necessary action, preventing the imposition of State taxation, in a manner which would require an airplane to pay more than an amount fairly allocable to the taxing State.

A similar difficulty, as between the various taxing subdivisions. within a single State, has been corrected in some States by provisions to the effect that taxes are collected by one authority and then allocated among the various subdivisions concerned. Because of our Federal system, that particular solution to the problem of interstate multiple taxation may not be feasible. However, because of the complexity of State tax laws, and the difficulty of adjusting general language in a statute, to the requirements of a particular situation, it is suggested, that, the committee might well consider the advisability of conferring upon an administrative agency, such as the Civil Aeronautics Board, power to adopt regulations which would carry out in particular cases the very wise statutory standard set forth in the proposed new section 802 (b). The Civil Aeronautics Board has for some time past evidenced considerable interest in the problems involved in State taxation of the air transport industry.

Like so many other problems affecting civil aeronautics, anticipatory steps taken now will make the solution much easier than if we delay until the problems themselves become unwieldy.

WEATHER BUREAU PERSONNEL TRAINING

Section 35 of the bill on page 44 would amend section 803 of the Civil Aeronautics Act so as to provide that the Weather Bureau should each year detail at least 50 of its personnel for training in advanced methods of meteorological science. The present act limits authorization for such training to not to exceed 10 members of the Weather Bureau personnel.

The war has shown that the Weather Bureau is one of our most important national defense agencies. We are all familiar, of course, with its great work in the promotion of agriculture and commerce. America has the finest Weather Bureau in the world. Its officials, who have administered its work with such unstinted devotion to the public service, should receive the gratitude of every American citizen.

It is of supreme importance that the Weather Bureau personnel be enabled to keep abreast of the most advanced developments in the science. The science itself is rapidly opening up new frontiers of experience and of knowledge. The science is highly technical and requires extensive training. It was a distinct step forward to include in the Civil Aeronautics Act a provision whereby a limited number of Weather Bureau personnel could receive advanced training but the restriction of that number to not more than 10 is no longer appropriate. It should by all means be increased to at least 50. After the war there will be world-wide demands upon our Weather Bureau such as we have never dreamed of and it is essential, if our country is to maintain its position, that the Weather Bureau be ready and that it be kept at all times fully abreast of the very latest developments in this field.