twice on it to see how soon it would be before us for extensive consideration on the technical staffs' reports.

Mr. HINSHAW. I merely brought the matter up to demonstrate to the committee that the Civil Aeronautics Board does exercise control over design of aircraft, both in domestic and foreign commerce.

Mr. POGUE. That is true. The approach to it under the law is from the safety angle, but we do not endeavor to do anything except what is required to make an airplane safe.

Mr. HINSHAW. How long has regulation No. 56 been in existence? Mr. POGUE. About a year and a half or 2 years. I do not know the exact date of it. I will be glad to supply it if you want it. About that time, a year and a half or 2 years.

Mr. HARRIS. Mr. Chairman.

The CHAIRMAN. Mr. Harris.

Mr. HARRIS. Due to the fact that the Board does regulate and has control over design, and in the development of planes, are you in a position to state whether or not the control has caused delays, or been detrimental to the progress of new designs or more or less retarded development by the manufacturing companies?

Mr. POGUE. Well, I certainly have no information that it has. I would not say that there are not people who might say so; but somebody-and under this law it is the Board-has got to exercise the judgment of what can be done and still make the airplane safe from the point of view of the traveling public. When the plans are submitted to us, our approach is to do everything we can to clear designs which do meet what in our judgment are safe.

Mr. HARRIS. So far as you know; that is, so far as your Board knows, the manufacturing companies are proceeding to develop the airplane industry as much as possible.

Mr. POGUE. Yes.

Mr. HARRIS. In other words, they have wide latitude.

Mr. POGUE. Oh, yes, sir. And, of course, at the present time the manufacturing capacity is so concentrated on military types-that includes transports as well as combat planes-and their engineering staffs have been so increased, that as I indicated yesterday, I anticipate a tremendous surge forward as soon as the pressure for present production is off; a surge forward in the commercial transport and private flying fields.

Mr. HARRIS. Do you know whether or not, due to the war effort, or the War Department or Navy Department, or Civil Aeronautics Board, any manufacturing company has been advised to give most of their time, or practically all of their time and efforts toward the present conflict in supplying the needs under particular designs that they already have and therefore not to give much attention to new designs?

Mr. POGUE. Well, I wish I knew the answer to that. I think the services that have to make these contracts with the contractors would be the only ones who do know that. I do not know.

Mr. BOREN. Mr. Chairman.

The CHAIRMAN. Mr. Boren.

Mr. BOREN. It would be erroneous to assume, Mr. Pogue, that there is any disposition on the part of the Board to influence designing beyond the safety factor involved, would it not?

Mr. POGUE. That is correct. Up to now, that is correct.

Mr. BOREN. And apparently the extent to which you do influence design is no different than the regulation of the city commissions or State governments, or thousands of other public bodies which say how their regulations might affect the design of a gas jet, or something else, where safety is concerned.

Mr. POGUE. That is correct.

Mr. BOREN. Whether they use a rubber connection to a stove, or a steel connection, or something else.

Mr. POGUE. That is correct.

Mr. BOREN. The thing that I wanted to make quite clear here is that designing, as with the designing on the part of the structural processes of the building of airplanes, in an architectural sense, as applied to buildings, is affected only in the same sense that everything else that has a public interest is affected.

Mr. POGUE. That is true.

Mr. BOREN. By civil regulations.

Mr. POGUE. That is true, Congressman.

The competitive field in the designing and manufacturing of aircraft is entirely in private hands and is wide open except that when it comes to the safety angle, the Government has said:

We cannot permit anything but safe planes to be built, and you can come ing with any design you want to, and if it is safe we will okay it.

Mr. BOREN. They could have anywhere from 1 to 10 wings if they wanted them, provided they could get off with a certain load under certain conditions, within certain space, and met your other requirements, that would be satisfactory.

Mr. POGUE. That is correct.

The CHAIRMAN. I would like to ask you a few questions.

Has there been any substantial contention on the part of airplane manufacturers that the regulations imposed by the Board from the safety standpoint have restricted the progress and development in aviation?

Mr. POGUE. I know of none, Mr. Chairman. There have been individual companies who through their representatives have said, "We think this could be a little different," or "that could be a little different;" but the companies have been consulted before any change in these manufacturing requirements have been established, and the consensus of opinion has been distinctly in favor of the action the Board has taken, and I know of no concerted criticism in that direction.

The CHAIRMAN. When the Civil Aeronautics Act was passed, the air lines were in more or less difficulty in securing insurance. That was one of the problems, the specific treatment of which we omitted from the bill, or the act.

Now, what is the present situation? Where is insurance placed and who is doing the insurance and how about the reasonableness of the rates. If you could give us the substance of that situation, I think it would be helpful.

Mr. POGUE. I will certainly be glad to. It is a very important field and I am glad you mentioned it.

The commercial air lines purchase their insurance from the United States Aviation Underwriters and the Associated Aviation Under

writers. These two groups were formed in 1928 and 1929 and they consist of approximately 37 and 39 insurance companies, respectively, associated together. In the case of the United States Aviation Underwriters they have a central organization doing nothing but aviation business, which I believe is a corporation; but these 37 companies I speak of control it, and in the case of the Associated, the 39 companies are associated in some form or organization that is not a corporation, but assomplishes the same organizational results.

The air lines buy hull insurance, and that includes fire, crash, tornado, land damage and theft, and they buy public liability, passenger liability, airport liability, and workmen's compensation insurance from these two organizations, except that three of the large air lines maintain self-insurance for their crash risks; not for the liability of persons but for their crash risks.

A very rough estimate of the premiums presently payable by all the other lines to cover these items of insurance which I have mentioned is about $3,000,000 a year.

The CHAIRMAN. That is, the air lines are paying $3,000,000 a year for insurance.

Mr. POGUE. Yes; for the premiums. So, it is an important field of financial interest.

The Civil Aeronautics Board has been following aviation insurance problems for some time. In 1938 the Board's staff undertook a broad study of aviation liability insurance and aviation liability legislation. In 1940 and 1941 the Board's staff made a study of the cost of liability insurance to the air lines. In 1941 the Board's staff made a study of the provisions in life-insurance policies dealing with air-line passengers.

In October 1942, the Board retained the services of Mr. Paul J. Molnar, rating examiner of the New York insurance department, to make an investigation of the aviation underwriters and their insurance practices. That investigation is nearing completion and the Board expects a report from Mr. Molnar and our people who are working with him in the very near future. That study has so far revealed that the aviation underwriters themselves, these two groups, deserve high praise for pioneering aviation insurance during the early days-in 1928 and 1929-and from then on when aviation was young and more hazardous. The rapid growth in commercial aviation has raised new problems for aviation insurance underwriters, and the Board is now making an investigation of a variety of problems related to insurance. Has the American insurance market kept pace with the aviation industry? Are aviation insurance premium rates too high? Is there a need for supervision of aviation insurance underwriters? State insurance departments have hesitated to inquire into aviation rates because of some question in their mind as to their jurisdiction over interstate air lines in this field of insurance.

In connection with aviation insurance this committee has introduced legislation in H. R. 1012 which would require each air line to carry certain liability insurance.

I might say that the Board's staff, under the direction of Mr. Sweeney, prepared a study of aviation liability legislation, a copy of which I have here with me. It is quite a comprehensive report and I believe the only one which has been made in this field. The Board

became interested in the problem when the commissioners on uniform State laws proposed uniform State legislation to deal with aviation liability, so that you would have to depend upon what the law of the State happened to be when the accident occurred or where the crash occurred or whatever liability might arise occurred. The Board's staff is now studying the legislation proposed in H. R. 1012, and we will make our comments on that in due course. If it is agreeable to the committee I would prefer to postpone the detailed comments upon that provision until we get before you with a formal presentation.

The CHAIRMAN. Just one or two questions. So far as the study involved the question of the cost of carrying insurance as compared with the prices paid for the carrying of the insurance?

Mr. POGUE. Yes, sir. That study we felt became necessary in order to be in a position to ascertain what really ought to be done, because that is, as you have indicated, the foundation stone of the problem. So, it was for that reason that we secured the services of Mr. Molnar, one of the experts in the New York State Insurance Department. He has been working with us on that very problem since October of last year and his report is nearing completion. When we get that report we expect to be in a position to know what that relationship is and whether it seems proper, and what constructively can be done or should be done.

The CHAIRMAN. You have already reached the conclusion that the rates are too high, I understood you to say.

Mr. POGUE. Well, the rates in this field have been higher than many other rates, it is true.

The CHAIRMAN. Do the primary insurance companies carry the liability alone, or are they reinsuring?

Mr. POGUE. I think there has been a substantial amount of reinsuring. The exact amount of that reinsuring is something I do not have in my mind at the moment.

The CHAIRMAN. Is the reinsurance carried in this country or abroad?

Mr. POGUE. I believe that a substantial amount of it is carried abroad.

The CHAIRMAN. Well, the rates of the original insurer are determined largely by the cost of reinsurance, are they not, as they stand today?

Mr. POGUE. They are very closely related; yes.

The CHAIRMAN. The American insurers cannot evade the foreign rates if they are going to get the reinsurance.

Mr. POGUE. That may be right. Perhaps the American insurance companies could buy the reinsurance in the American market. If you are right in your statement that American insurance companies must go abroad then they have to accept the rates that foreigners fix. The CHAIRMAN. Anyway you will shortly be able to report on that phase of the matter?

Mr. POGUE. That is correct; yes, sir.

The CHAIRMAN. One other question about the effort made by your Board to eliminate the Axis or unfriendly alien carriers in South America.

I would like briefly for you to tell us what the Board did about that matter; when you took an interest in it, and what developed, and under what authority.

Mr. POGUE. The so-called de-Germanization program has been a cooperative effort between the Board, the State Department, and the Defense Supplies Corporation.

The Defense Supplies Corporation—I am not fully informed as to all of the procedural formalities of its development, but the Defense Supplies Corporation was asked to purchase certain airplanes that were required and make them available in certain places, and I will mention these places in a minute, and they performed that function in this picture.

The first place I will mention is Colombia, where a line known as SCADTA was eliminated from the picture, and I think in that connection a considerable credit is also due to the War Department which early took an active interest in that case. In that particular instance no action was required by D. S. C. or the Board. The ultimate arrangement was made by Pan American which accomplished the desired result by entering into an agreement with the new Colombian National Co. which, among other things, provided for the discharging of German pilots and other personnel formerly on the pay roll of SCADTA. In Ecuador, the de-Germinization problem was presented to the Board and we acted immediately, authorizing Panagra to render certain services, paralleling SEDTA, the Axis-dominated air line in that country. Panagra undertook the services promptly and the Government of Ecuador, having had the services established as required, later took the necessary action to cancel SEDTA's franchise.

In addition to giving the necessary authorization, the Board took collateral action to insure Panagra that the expenses of handling that particular Ecuadoran operation would be taken care of under honest, economic and efficient management.

In the spring of 1941, Bolivia, canceled the operating rights of Lloyd Aero Boliviano, its local air service. After some negotiation, Defense Supplies reached an agreement with the Bolivian Government for the establishment of a new LAB which would be under Bolivian control. In connection with these changes, it became apparent that Panagra's service which formerly passed through La Paz enroute to Buenos Aires should be extended from La Paz eastward to Corumba in Brazil where it would connect with Panair do Brazil and thus provide a second transcontinental service across South America. Due to the urgency of the need for this extension, the Board took the expeditious saction permitted by the Civil Aeronautics Act and granted its authorization in the form of an exemption order without requiring the usual hearing and other procedural steps.

In the case of Brazil, the Board authorized a Pan American subsidiary-I should say, rather, that the Board assured Pan American that, if its subsidiary Panair do Brazil would establish certain services paralleling those of Syndicato Condor, the German line in that country, the Board would take into consideration, as proper expense items, the extra cost of running those services.

After the additional Panair services were inaugurated, Condor abandoned certain routes and segments of others. Within the very recent past the final de-Germanization of Condor has been completed and after its name was changed to Cruziero do Sul, the State Department removed it from the blacklist.

There was one other important Axis service which was eliminated after prompt action by the Board. If you care to have the details