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The Canadian Pacific air freight case, before the Air Transport Board and the Canadian Cabinet, 1953 McRae, Robert Wallace 1954

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NOTE As checked by list on pages 32-35 of the thesis, the following Exhibits of Appendix 3 are lacking from copy 1: 22, 29, 31, 34, 35, 33 12 enclosures for 39 Al, 42, 43, and 48. The only supplement with copy 2 is Appendix 3, Exhibit 18A. Library, U.B.C. May 26, 1954  THE CANADIAN PACIFIC AIR FREIGHT CASE Before the Air Transport Board and the Canadian Cabinet, 1953. by  Robert Wallace McRae.  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in the Department of Economies, P o l i t i c a l Science, and Sociology  We accept this thesis as conforming to -the stmdard required from candidates for the degree of MASTER OF ARTS  Member^ of the Department of Economics, P o l i t i c a l Science, and Sociology THE UNIVERSITY OF BRITISH COLUMBIA A p r i l , 1954.  ABSTRACT of thesis e n t i t l e d THE CAN API AIT PACIFIC AIR FREIGHT CASE Before the A i r Transport Board and the Canadian Cabinet, 1953. by Robert Wallace McRae.  A THESIS SUBMITTED IH PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in the Department of Economies, P o l i t i c a l Science, and Sociology  THE UHF1RSITY  OF  BRITISH COLUMBIA  A p r i l , 1954.  Air transportation^ as an industry, has progressed i n no country without substantial government support.  Most nations  have subsidized their commercial a i r services to such an extent that f u l l government control has f i n a l l y r e s u l t e d .  In the  national Interest, a i r l i n e s are deemed both desirable and e s s e n t i a l , despite t h e i r non-capability of f u l l self-support. Hence, with government aid mandatory, i t is l o g i c a l that l e g i s l a t i v e attempts should be made to keep such aid at the lowest possible l e v e l consistent with the provision of safe, e f f i c i e n t and reasonably modern a i r services. Where a single a i r l i n e must of necessity be paid a subsidy i t is manifestly uneconomic to permit the entrance of a competitor i n the same f i e l d .  By so  doing, the t o t a l subsidy required would undoubtedly increase inasmuch as each operator would move more than doubly distant from achievement of lowest possible unit costs. This concept guided the Hon. C D .  Howe i n the drafting of  the original Trans-Canada Air Dines Act i n 1937.  By that act,  Trans-Canada was given monopoly transcontinental p r i v i l e g e s . These privileges were not seriously challenged u n t i l 1941. that year, Canadian P a c i f i c A i r l i n e s was  formed.  In  This firm  to  proceeded  orogr essively^encroach upon the presumed domain of  the government a i r l i n e .  By 1952, Canadian P a c i f i e had  acquired  a patchwork coverage of the greater part of Canada, requiring only an east-west l i n k to create a composite operation. f a c i l i t a t e t h i s f i n a l step, CP.A.  applied i n November of  To 1952  for authority to operate an a l l - f r e i g h t service between Montreal and Vancouver,  The consequent A i r Transport Board hearing and  report to the Cabinet, and the ultimate Cabinet decision, provide the basic subject matter dealt with i n this thesis.  Before the Board, CP.A.  contended:  1.  that all-cargo carriers i n the U.S.A. had been most successful In their operations,  2.  that adequate Canadian a i r freight t r a f f i c potent i a l was readily available for diversion from such surface transport f a c i l i t i e s as r a i l express,  3.  that conditions i n Canada were even more favourable than i n the U.S. for a i r freight development,  4.  that T.CA. had knowingly neglected the a i r freight f i e l d , concentrating i t s efforts upon the more readily lucrative passenger and mail t r a f f i c ,  5.  that the pro-posed CP.A. service would create new air business, would not divert t r a f f i c from T.C.A. to an extent detrimental to the l a t t e r ' s finances.  Successive thesis chapters appraise, and i n the opinion of the writer, t o t a l l y negate these Canadian P a c i f i c contentions. In i t s report to the Cabinet, the Air Transport Board leaned heavily, upon the evidence submitted by CP.A.  In essence, the  Board report to the Cabinet recommended that the application be approved. was denied.  The Cabinet chose to do otherwise.  The application  Apparently, the ministers had listened with convic-  tion to the statements of T.C.A. President, Mr. McGregor and had given heed to the warnings of the economic witnesses, Professor Mhes and Dr. Currie, as to the d e s i r a b i l i t y of avoidance of the p i t f a l l s which have beset Canadian railway exxoerience. In the l i g h t of the data assembled within this t h e s i s , the writer contends that the Cabinet decision was f u l l y j u s t i f i e d . T.CA.'s slow approach to reduced rate a i r freight haulage was sound i n a l l respects.  Unfortunately, however, i t is noted that  the application, the hearing and the resultant p u b l i c i t y have pressured Trans-Canada into establishing presently uneconomic air freight services rather than further jeopardize the monopolistic status of the firm.  Vickers Viscount TurtinePropeller Aircraft  PREFACE Air transportation i s inherently expensive.  In no  •country has the air transport industry progressed without substantial government support.  The current govern-  ment subsidy f o r TF.S. a i r l i n e s i s approximately eighty m i l l i o n dollars annually, aside from the considerable f i n a n c i a l aid rendered through the furnishing of costly airway f a c i l i t i e s for a fraction of the true service value involved.  Aside from the U.S.A., most nations  have subsidized their i n t e r - c i t y a i r carriers to sueh has an extent that ultimate f u l l government control^resulted. Such was the case for B r i t i s h Overseas A i r l i n e s and B r i t i s h European A i r l i n e s .  These nationalized opera-  tions are not to be returned to private ownership by the Conservative regime.  The continuing annual subsidy  requirements preclude such a step, aside from consideration of the public funds already invested without return.  The concept would appear to be that i n the  national interest a i r l i n e s are desirable and essential, despite their non-capability of self-support. Hence, i f government support i s mandatory, then i t would seem reasonable that an attempt should be made to keep such support at the lowest possible point consistent with the provision of safe, e f f i c i e n t and reasonably modern a i r services. CD.  It was with that aim i n view that the Hon.  Howe piloted the o r i g i n a l Trans-Canada A i r lines  Act through the Commons i n 1937.  Trans-Canada was given  monopoly privileges i n the domestic trunk-line f i e l d as well as prior rights to such international route extensions as deemed desirable by the government . These T.C.A. monopoly privileges were not seriau s l y challenged u n t i l 1941. Air Lines was formed.  In that year, Canadian PadQEb This firm proceeded progressively  to encroach upon the presumed domain of the government airline.  By 1952, Canadian Pacific had acquired a patch-  work coverage of the greater part of Canada, predominantly on a north-south basis.  A l l thaT^t  was required was an  east -west l i n k to create a composite operation.  To  accomplish this f i n a l step required an open challenge of government policy at government l e v e l .  To make possible  the delivery of this challenge, CP.A.  applied i n Novem-  ber of 1952 for authority to operate an a l l - f r e i g h t service between Montreal and Vancouver.  The consequent  Air Transport Board Hearing and Report to the Cabinet, and the ultimate Cabinet decision have provided the subject matter with which this thesis is primarily concerned. It w i l l be noted from the Table of Contents that voluminous appendices accompany the Library copies of this thesis.  Essentially, they comprise documentary  data which the writer f e l t would be of use to students at some future time i n the appraisal of a subsequent and comparable enquiry such as the government w i l l undoubtedly be called upon to conduct.  Adequate excerpts are included  in the thesis proper to obviate the necessity of reference to the appendices unless a more detailed study of the topic i s desired.  The only exception  involves Appendix I I I , Exhibit 18A, the Douglas A i r c r a f t Company's submission to the Air Transport Board on the behalf of Canadian "Pacific A i r l i n e s . However, a copy of this Exhibit 18A accompanies each thesis volume.  Robert W. McRae.  Toronto, Ontario. March, 19 54.  ,,T'A3LE OF CONTENT'S Page -- Preface Chapter I Chapter II Chapter I I I Chapter IV  — Trans-Canada A i r Lines Canadian P a c i f i c A i r Lines -- The Canadian P a c i f i c Air Freight Application  Chapter YT Chapter VII Chapter VIII Chapter IS  Chapter 2  Chapter XI  9  21  -- The Canadian P a c i f i c A i r Freight Case: Part I - The CP.A. Evidence Part II - The T.CA. Evidence  Chapter V  1  31 59  — The A i r Transport Board Report and The Cabinet Decision  84  — A i r Cargo Development i n the U.S.A.  98  ->- Railway Express i n Canada and the U.S.A.  127  The Gruneau Research, Limited, Survey Conducted f o r CP.A.  146  — The Douglas A i r c r a f t Company's Survey of CP.A. 's Proposed Air Freight Route to do with Pot e n t i a l s .  153  Australian A i r Transport, Providing a Contemporary and P a r a l l e l Case History f o r Canadian Guidance.  183  — The Canadian P a c i f i c A i r Freight Case - Summation and Conclusions.  199  — Bibliography  216  APPENDICES I I ACCOMPANYING VOLUMES Appendix I  — Trans-Canada A i r Lines Annual Report f o r the year 1952.  Appendix II  — Further Particxilars of CP.A. Application as furnished to the P r i n c i p a l Intervener hy the A i r Transport Board.  Appendix I I I -- Air Freight Case Exhibits 1 to 48. Appendix IT  -- The A i r Transport Board Report to the Cabinet.  Appendix V  — The Cabinet Decision i n the Canadian P a c i f i c A i r Freight Case.  Appendix YI  C.A.3. Economic Decisions: (1) A i r Freight Rate Investigation.(1948) (2) Directional Rates. (1950) (3) Accumulation Rules. (1950) (4) A i r Freight Rate Investigation.(1952)  Appendix YI  S l i c k Airways, Incorporated Annual Reports for the years 1951.and 1952.  Appendix YII  Flying Tiger Line, Incorporated, Annual Reports for the years ending June 30th, 1952 and 1953.  Appendix YIII — Representative selection of f i f t y clippings from Vancouver, Montreal and Toronto newspapers indicating e d i t o r i a l and news treatment of the Canadian Pacific A i r Freight Case, the Board Report and the Cabinet Decision denying the application. Appendix LX  Transcript sections (255 pages) covering testimony of: Mr. S.f.Gr. McConachie, President, Canadian P a c i f i c A i r Lines, L t d . Mr. C R . McGregor, President, Trans-Canada A i r Lines. Mr. H.W. Seagrim, General Manager, Operations, Trans-Canada A i r Line s. Mr. T.H. Martin, General Manager, Canadian National Express.  TABLES  lo.  Page  1.  P r o f i t and. Loss Data - Canadian P a c i f i c A i r Lines - 1941 to 1952, i n c l u s i v e .  16  2.  Proposed CP.A. A i r Freight Tolls  20  3(a).  Route Segment Load Factors as Forecast "by Canadian P a c i f i c A i r Lines  37  3(b).  Route Segment load Factors as Forecast by Douglas A i r c r a f t Company, Inc.  4.  Costs and Revenues for Projected Service - Douglas Forecast.  47  49  5(a).  Operating costs - S l i c k and Flying Tigers 103  5(b).  P r o f i t and Loss Data - Slick and Flying Tigers - 1946 to 1951, inclusive. Ten Top Commodities Carried by A i r  107  Freight i n the U.S.A. - 1951.  121  7.  Ten Top Commodities Carried by T.C.A.  122  8.  Average Return Per Ton Mile for T.C.A., CP.A. and U.S. freight c a r r i e r s . Comparison of Cargo Ton Miles as Performed by U.S. Carrier Groups, 12 months ended June 30th, 1952.  6.  9.  10.  11. 12.  123 124  Relative Use of Composite and All-Cargo A i r c r a f t by the Domestic U.S. Scheduled Air Lines i n Cargo Work.  124  T.C.A.'s Average Return per A i r Cargo Ton Mile - 1947 to 1954.  125  T.C.A.'s Average Return per Express Ton Mile - 1947 to 1952.  125  13.  Equipment Performance Data  125  12(a).  U.S. A i r l i n e Revanue D&ta - 12 months ending September 30th, 1953. 1 9 5 £ Passenger Revenues - Ten Leading A i r l i n e s and Railroads.  126  12(b). 13.  Distribution of Passenger D e f i c i t Among Types of Passenger Train T r a f f i c .  126 130  14.  Railway Express Agency E f f i c i e n c y ana Cost S t a t i s t i c s - 1939 to 1951.  15.  Comparison Canada-United States R a i l Express Service f o r Selected Distances.  16.  Comparison 1st Class R a i l Express Rates at 100 l b . l e v e l - United States ana Canada 134  17.  Comparative R a i l Express and M r Cargo Shipments i n Canada and the United States.  18.  Extracts from Analysis of Canadian National Express less Than Carload R a i l Express T r a f f i c , Sample Analysis for May 16, 1951. 137  19.  C.l.R. Point to Point F i r s t Class I.O.I. T r a f f i c : October 16th, 1952.  138  20.  Comparative Ontario-Quebec versus B r i t i s h Columbia Fruit and Vegetable Output.  144  El.  Table of Shipping Charges Used by. Gruneau Research, limited During Survey.  147  22.  Relative Progress - U.S. and Canadian Air Cargo Services.  154  S3.  P r o f i t and loss Data - Trans-Australia and Australian National Airways, f o r the years 1949 to 1351.  188  Breakdown of Trans-Australia A i r l i n e s Revenue Bound as to Souree.  189  24.  13£ 133  134  MAPS, ILLUSTRATIONS AND CHARTS Vickers Tiscount Turbo-propeller A i r c r a f t  Frontispiece  Map Showing T.C.A. ana CP.A. Schedulea North American Services - 1952.  SO  Douglas A i r c r a f t Company Graphical Analysis of C.P.R. Freight T r a f f i c -January to June i n c l u s i v e , 195S .  46  Douglas DC-6A - I l l u s t r a t i n g Height of Cabin Floor Above Grouna Level.  43  Lockheed Superconstellation Depicted as Cargo A i r c r a f t ana I l l u s t r a t i o n of Cargo Pod Currently i n Cons t e l l a t i o n use by E.A.I, and T.W.A.  58  B r i s t o l 170 Cargo A i r c r a f t Currently Operated by Trans-Canada Air lines  70  Average Daily A i r Cargo flow Chart for T.C.A. Trans-continental Route - 195E.  75  Vancouver Sun Newspaper Cartoon by N orr i s Summating Public Reaction to lews Coverage of the A i r Freight Case.  97  A i r Freight Services of American A i r l i n e s , Inc. as Evidenced by T'ime-Table.  116  S l i c k Airways, Incorporated Curtiss C-46 War-surplus All-Cargo A i r c r a f t .  I l l  Douglas DC-6A All-Cargo A i r c r a f t I l l u s t r a t i n g Loading Problems Yielded by Cabin Floor 100 inches above Ground Level.  144(a)  Lockheed Constellation Cargo Pod  182  Population Chart for Canada and the U.S.A. I l l u s t r a t i n g Relative Remoteness and Paucity of Canadian Metropolitan Areas. Included to Further Bear Out the Logic of the Cabinet Decision to Prevent Unwarranted Duplication of Air Transport F a c i l i t i e s .  200(a)  Lockheed Supercon*ellation i n Flight  216  A i r Line Map of Canada and the United States Giving Key to Abbreviations Used Within the Thesis Text.  *** ***  Inoluded with Appendices i n the Accompanying Submission  -#—  -#  ***  Chapter I Trans-Canada A i r l i n e s Background Data  as to format ion ana  Selevant Government Policy.  U n t i l 1937, Canada lagged behind the United States of America and the countries of Europe i n the matter of scheduled air transport. Admittedly, Canadian a i r s e r vices between r a i l head and the norfhland mining areas had been developed to the point where they were carrying more freight each year than were those of any other country i n the w©rld.  In addition, these frontier opera-  tors had b u i l t up quite a sizeable mail and passenger business,  nevertheless, Canada was v i r t u a l l y the only  remaining c i v i l i z e d nation without an air service l i n k ing i t s main population centres on a competitive basis with p a r a l l e l i n g r a i l and highway c a r r i e r s .  Canadian  air mail and passenger t r a f f i c was being diverted to the transcontinental a i r lines of the United States. This diversion was f a c i l i t a t e d by U.S. operated trans-border links such as Vancouver-Seattle, Winnipeg-Pargo and Montreal-Alb any.  A number of major centres, such as  Toronto, Hamilton, Windsor and Halifax, were served by no air l i n e whatsoever.  This was the state of Canadian  air transport i n 1937. - In the spring of that year, the federal government enacted a measure setting up Trans-Canada A i r l i n e s .  - £ -  The crown corporation thus created was organized as a wholly owned subsidiary of the Canadian National Railway System, the government's existing transportation agency. As conceived hy those enacting the measure concerned, J.C.A. was to f l y only the main line, coast might1- he to coast routes plus such ©there asidesignated hy the federal government as he ing of national importance. owing  Canada had lagged behind the U.S.A. not^4*te to any lack of initiative on the part of private operators but more -fee to lack of airway f a c i l i t i e s .  Particularly  under the Hoover administration, federal funds had been available in lavish amounts to subsidize air line operators in the matter of airway f a c i l i t i e s and mail pay.  Expenditures for the latter culminated in the  alleged scandals revealed by the Roosevelt administration in 19 33-34. However, following the meting out of heavy penalties in this regard, the Democrats went on to spend even more liberally than their predecessors in the matter of airline subsidy. No such large scale expenditures on the development of scheduled air transport took place in Canada prior to the advent of Trans-Canada A i r Lines.  Until 1927, such  aid as was given was confined to rather conservative air mail contracts.  In that year, -the Department of National  Defence started work on some 92 airports along a proposed  trans-Canada route.  By the spring of 1930, the Winni-  peg-Calgary-Edmonton sector was ready for night or instrument operations.  Air mail service commenced in  March of that year, being provided by Canadian Airways under contract to the Post Office Department. A daylight mail service was next contracted for between Mono ton-Montreal-Toronto-Detro i t .  The link between  Detroit and Winnipeg was furnished by existing U.S. air lines.  The funds to finance purchase of the neces-  sary operating equipment used by Canadian Airways were furnished by the Dominion Government and the Canadian Pacific Railway Company. Each put up #250,000. The presidents of both the Canadian national and the Canadian Pacific, Mr. Hungerford and Mr. Beatty^ became vice-presidents of the air firm, which had been formed through a consolidation of a group of independent lines. The Duff Commission of 1931 noted that this apparent teamwork "may well prove to be the foundation of a proper co-ordination between the two agencies of transport." fl) A l l might have gone well hut for the depression. As i t was, the service lasted only two years.  The Con-  servatives replaced the liberals in Ottawa in 1930. The cancellation of the mail contract was but one plank (1) Report of the Royal Commission to Enquire into Railways and Transportation In Canada, 1931-32; King's Printer, Ottawa, 1 9 3 2 ; p. 57. (Duff)  in tiheir platform of financial retrenchment adopted in the recession's depth in 1932, Although actual inter-city mail flying was suspended at that time, planning for an ultimate all-Canadian route continued.  Under the Bennett regime, development  of intermediate landing fields was carried forward at intervals of ah out one hundred miles across the entire Dominion. The work done, however, was of a most unsatisfactory nature.  Primarily, the program was aimed at  keeping the single unemployed out of the c i t i e s .  The  basic rate of pay was 20c7 per day, an amount not conducive to efficient labour. By the time the l i b e r a l party, under Mackenzie King, was returned to power In 1935, seven millions had supposedly been invested in the airway project, lo specific plans had yet been laid for the flying of the route. With the liberals back in power, the situation changed rapidly.  The various governmental agencies for  the supervision and assistance of commercial aviation were consolidated into a unit of the newly formed Department of Transport.  Hon. C.D. Howe, of Port Arthur,  was named haad of this new department and assigned the task of supervising the equipping of the a i r route with modern instrument flying f a c i l i t i e s , from coast to coast. Beam navigational aids and visual beacons were i n stalled. Meteorological stations, linked together by  - 5 -  teletype, were provided a t a l l base points.  Federal  grants were made t o snob c i t i e s as already bad a i r ports f o r the purpose of providing lengthened, hard surfaced runways and adequate hangar f a c i l i t i e s for transport a i r c r a f t .  In some cases, such as at Toronto,  entirely new a i r f i e l d s had to be b u i l t .  Due i n large  measure to the industry and organizational a b i l i t i e s of Mr. Howe, the worlc was carried forward rapidly and at f a i r l y reasonable cost.  By the spring of 1937 the  Winnipeg-Vancouver leg was ready for inauguration of actial scheduled services. The next question to be answered was: ' "Who should operate the proposed services?"  Several alternative  plans were available for consideration. For one, the government could subsidize an existing operator such as Canadian Airways, with the line then being flown on a basis similar to that on which the U . S . network had been b u i l t .  For another, the government could operate  the a i r line i t s e l f , maintaining commission control as is done with Australia's national a i r l i n e .  In a c t u a l i t y ,  a middle road was followed, a crown corporation being set up to provide the desired services.  In the planning,  provision for p a r t i c i p a t i o n of the C.P.B. was made but with negative r e s u l t .  On March 31, 1937, Mr. Howe  stated i n parliament: . . . . we expected almost u n t i l the day when we introduced this b i l l that our two p r i n c i p a l railway companies would be shareholders i n the entarprise. We learned at the l a s t  moment that the directors of one large company decided not to take up the enterprise, and therefore we had to make a very quick change i n the h i l l . I have always been of the opinion that the r a i l ways were the proper bodies to lend stabi l i t y to this enterprise. (2) In the Senate, approximately a year later, the question of Canadian Pacific or other private p a r t i c i pation was again raised.  Senator Meighen gave his own  explanation of the situation with the following remarks: , . . although the other private companies did come forward, they did not produce cash . . . . What they were ready to give apparently . . . was some kind of stock. But the government decided to take the whole thing over, and a new situation now has arisen. The Canadian national Railways are now 100$ owners of Trans-Canada Air Lines. (5) In actuality, Canadian Airways and other independent operators would approach the enterprise only on a basis of offering bush type aircraft in exchange for  stock. It should,of course, be noted that Para.  3, Section 7 of the Trans-Canada Act precludes the Canadian National from disposing of more than 49$ of the Capital Stock without prior approval of parliament. It was, therefore, as reasonable that the CP.P.. stayed clear of the enterprise as i t was sound policy that the government should include such a restriction. (£) Parliament, Commons, Official report of debates, page £555. (March 31, 1937) (3) Parliament, Senate, Official report of debates, 1938, page 6£.  Despite sporadic outbursts from Conservative and O.O.W.  members, the great majority i n both Houses seemed  agreed that direct operation by the government would hinder, rather than help, the proposed air- l i n e .  As  Mr. Howe pointed outt ... an accident on the Canadian National at the present time would cost far less i n injury claims than would have a similar mishap on the Intercolonial during the days of direct government operation. (4) Further, the logic of placing the airway i n cont r o l of the C.N.E. was conceded by the majority of those taking part i n the discussions. Hence, with such genera l concurrence i n a project sponsored by the party with such a comfortable majority, the b i l l was passed with r e l a t i v e r a p i d i t y , receiving royal assent on the 10th of A p r i l , 1937.  (5) As Mr. Howe summated:  Under t h i s b i l l we shall get the best features of government osmership without the obligations of direct government operation . . . . (6) The extent to which Mr. Howe's contentions proved correct over time must remain a matter essentially of opinion.  However, the T.C.A. version of i t s own success  may be appraised from the testimony of Mr. McGregor, company president, as given during the course of the 1953 Air Freight Hearing before the Air Transport Board, as dealt with i n Chapter IT, Part I I , of this the-sis, as well as from the T.C.A. Annual Report for 1952 as submitted with this thesis as Appendix I . ( 4 ) Parliament, Commons, Debates, 1937, page 2217. (5) B i l l 74, Ch.43, St. of Canada, 1 George YI, 1937 (6) Parliament, Commons, Debates, 1937, page 2217.  Chapter II Canadian Pacific Air Lines  The Canadian Pacific Railway Company's interest in commercial aviation dates from 1950.  In that year, as  noted in the preceding chapter, the railway and the government put up matching contributions of $250,000 each to form Canadian Airways, Limited.  In addition to the joint  vice-presidency of Mr. Beatty with Mr. Hunger ford, an additional C.P.R. voice was added to the directorate in the person of Mr. James A. Richardson. A Canadian Pacific director, Mr. Richardson's basic business interests were the Winnipeg grain and investment firms which he headed. In the 1930 C.P.R. Annual Report, a holding is shown of 10,000 shares of Canadian Airways stock of no par value. As the depression deepened, however, the C.P.R.'s concern with i t s aviation investment steac&y lessened. With the railway's decision not to accept a subsidiary role under the Trans-Cam da Act of 1937 , Canadian Pacific management appeared to have been ruled out of the airline picture. The outbreak of war brought the C.P.R. back into aviation.  An Air Services Department was organized in  1940, in co-operation with the British Ministry of Aircraft Production. This department set up the original trans-Atlantic ferrying sendees, moving military craft to  - 10 Britain.  To the company's credit, the shareholders were  advised, in the 1940 Annual Report of the railroad's operations, that their firm was "being reimbursed only for the direct costs incurred in performing these services." (1) The ferrying duties were taken over by the Royal Air Force on July 15th, 1941, with the O.P.R. switching i t s wartime assistance to the operation of air observer schools the under^British Commonwealth Joint Air Training Plan.  In so  doing, the company acquired a number of existing operators whose restricted peacetime activities were seeking outlet in war work. Included amongst these concerns was Yukon Southern Air Transport, headed by Mr. Grant McConachie, a dynamic individual who stayed on with the consolidated venture as General Manager of Western lines.  A bush pilot  who had graduated to management, Mr. McConachie rapidly saw to i t that the operations of the new firm, Canadian Pacific Air lines, were not in any way restricted to the other training of air observers. At that point, the^firms acquired comprised:Arrow Airways, limited, Dominion Skyways, limited, of which the entire eapital stock was purchased* Prairie Airways, Limited; Canadian Airways, Limited; Wings, limited; firms in whieh^controiling interest was obtained.  The investment  of the parent company to that time was #3,400,000. (2) (1) Canadian Pacific Railway Annual Report, 1940, p. 15. (2) Canadian Pacific Railway Annual Report, 1941, p.12.  - 11By 1942, Canadian Pacific Air lines, Limited, had acquired direct control of five air observer schools, as well as controlling interest in Quebec Airways, limited, operator of two further such schools.  The company took  a most active part in the development of the Northwest Staging Route to the Orient, as well as in that of the Alaska highway and the Canol project.  During the year  1942 agreements were concluded for the purchase and transfer of the entire assets of those firms previously only controlled, together with the entire assets of a series of other operators, to the total of eleven in a l l .  By the  end of that year, the C.P.R. had invested #4,725,917 i n its ajfline undertakings, estimating in its yearly report that "90$ of i t s subsidiary's business handled is directly connected with the war effort." (3) During 1943, two more millions were invested. M r . McConaehie had become General Manager of Operations, and with a James J. H i l l approach, he was already laying plans for international operations despite the precluding provisions of the Trans-Canada Act.  The 1943 C.P.R. report  stated that: -^Detailed study has been made of the possibilities of.your company's air activities and a number of new routes and extensions of existing routes in the international as well as the domestic f i e l d will be made whenever this is (3) C.P.R. Annual Report, 1942, p. 13.  - 12 permitted "by the government policy. The i n terim policy announced by the government would exclude private operators from the field of international operations. Your directors feel that, i f Canada is to occupy a place in air transportation which i t s geographical situation and the abilities and experience of i t s citizens justify, there is urgent need of an air policy which w i l l afford Canadian industry an opportunity equal to that enjoyed by the citizens of other countries. (4) This government policy had been stated most specifically i n parliament on April 2nd, 1943, by the Eight Hon. W.L. Mackenzie King, Prime Minister, excerpts following: I should like to make a statement of the policy of the government on c i v i l air transport. Pirst with respect to domestic aviation: 4. Trans-Canada Air Lines w i l l continue to be the instrument of the government in maintaining a l l trans-continental air transport services and in operating services across international boundary lines and outside Canada. The government will encourage the company to obtain modern aircraft which w i l l keep present services up to modern standards and w i l l expand these services to the fullest extent that post-war conditions permit. The development of supplementary routes will continue to be left to private enterprise, unless considerations of public interest indicate that certain of these routes should be designated by the government as routes to be operated by T.C.A. The operations of T.C.A. will continue to be limited to important services of a mainline character, where the volume of passenger and mail t r a f f i c justify i t . Conclusion: 10. The policy of the Canadian government on air transport may be summed up as follows:  (4)  C.P.R. Annual Report, 1943, p. 13.  - 13 -  (a) The government sees no good reason for changing i t s policy that Trans-Canada Air lines is the sole Canadian agency which may operate international air services. (b) Within Canada, Trans-Canada Air Lines will continue to operate a l l trans-continental systems, and such other services of a mainline character as may from time to time be designated by the government. Competition between air services over the same route will not be "permitted whether between a publicly-owned service and a privatelyowned service or between two privately-owned services. There will remain a large field for the development of air transport in which private Canadian companies may participate, and, while preventing duplication of servloee, the government will continue to encourage private companies to develop services as traffic possibilities may indicate. (5) The Canadian Pacific management undoubtsLly found the foregoing statement of policy adequately clear. However, the investment in C.P.A.L. was furthered to a total of #7,400,000 by the end of 1944.  Obviously, the C.P.R.  was banking on a government change, or at least a modifioa tion of the Liberal government's policy.  The tone of the  1944 report to shareholders, however, was not too hopeful. At the last annual meeting reference was made to the policy announced by the government of Canada with respect to post war aviation. Since that time, legislation has been enacted giving effect to that policy. The act prohibits the issue of a licence for a commercial air service owned, leased or controlled or operated by a carrier engaged i n another form of transportation unless the Government-in-Councll is of the opinion that i t is in the public interest that such a licence should be issued. ( 6 ) (5) (6)  Parliament, Commons, Debates, 1943, Ho. 47, p.17 C.P.R. Annual Report, 1944, p. IS.  - 14 A further provision of the aot referred to in the 1944 C.P.R. report provided for the setting up of a three man Air Transport Board. This body was to supplant the administration of the Board of Transport Commissioners with respect to aviation. Under the act, the A.T.B. is to advise the Minister of Transport on c i v i l aviation; to license a l l forms of commercial air transport on the basis of public convenience and necessity; and to exercise economic control in the matter of financial responsibility, schedules, rates and charges, insurance and other matters. A l l existing licences at the time of its inception were to be reviewed by the A.T.B. , powers being provided in the act to cancel or suspend any such licence i t saw f i t . Provision was also made that such licences as were not so cancelled or suspended should cease to be valid one year after the termination of the war in Europe. Despite doubts as to the future, Canadian Pacific Air lines continued to expand. Trans-Canada was expanding rapidly, but not rapidly enough to cope with new route demands or slowlyenough to keep within a balanced budget. In consequence, CP.A. undertook to extend i t s services from Whitehorse in the Yukon to Fairbanks in Alaska, as agent under contract for T.C.A. Throughout 1945 and 1946, the Air Transport Board conducted its appraisal of the industry. By 1947 the survey was completed. Under the terms of the A.T.B. decision,  - 15 Oanadian Pacific relinquished almost a l l of the nonscheduled air charter licences previously held. On the other hand, certain new routes were assigned including the scheduled services between Vancouver and Prince Rupert, Vancouver ant Calgary via Penticton and Cranbrook, Winnipeg and Plin Plon via the Pas, and the Seven Islands Knob lake run.  In order to meet the requirements of the  new services, nine new twin engine aircraft were acquired and twenty-six of the smaller planes were disposed of. In 1948 further routes and route extensions were added, including Vancouver to Whitehorse via Sandspit, Dawson City to Aklavik, Montreal to Val d'Or.  1948  saw  the commencement of discussions between the C.P.R. and the government to do with C.P.A.L. being enabled to conduct two proposed international air routes, one to the Orient, the other to the Antipodes.  In this regard,  explanatory literature is simply not available. However, Trans-Canada was suffering heavy losses on i t s overseas runs despite subsidy provision.  Canadian Pacific was pre-  pared to take on the Pacific runs without subsidy, and, incidentally was prepared to purchase North Star aircraft for the purpose from the government sponsored Canadair plant. Canada, Australia and New Zealand had previously agreed that such Pacific runs between Commonwealth countries should be jointly operated by government sponsored flag lines such as Trans-Canada. The objections of Australia  - 16 were overcome in 1949, and the service to that country inaugurated in July of that year. Hew Zealand acceded to Canadian government requests, with service finally started in 1951.  The Pas run was extended to Churchill in 1949,  as was the operation out of Montreal to lor and a. also, the Orient run was established.  In 1949 ,  By the end of that  year Canadian Pacific Air Lines represented, at book values, an eleven million dollar enterprise. Financially, from a profit motive, the C.P.E. directorate must have been s t r i c t l y guided by an appraisal of future returns, as evidenced by the following tabulation of net profits and losses, after depreciation, as taken from the company's annual reports. Table 1  Profit  372,371  203,000 1,100,000 564,000 #2,059,371  Loss 1943* 1944 1945 1946 1947 1948 1949 1950 1951 1952  236,573 767,109 308,066 584,266 193,645 113,000  #2,202,659  *the 1943 figure i s a cumulated total shown in the report for that year and covering 1941-43, inclusive. Aviation i s an unusual business. Canadian Pacific, in the period reviewed above, had lost a Lockheed on a mountain top east of Chilliwack, a North Star in Tokyo Bay, a DC-4 which disappeared off the B.C. coast, a DC-3 which was blown up over Quebec and another DC-3 which crashed on final north  - 17 of Pontic ton. These losses, coupled with the paucity of annual returns indicated in the foregoing table, do l i t t l e to recommend aviation as a field for investment. However, airlines generally, and C.P.A.I, included, employ rapid write-off depreciation plans, amortizing over five to seven years. Hence, reserves for purchase, of new equipment quickly accrue, being available for expansion purposes long before the aircraft so depreciated have been retired from service, further, the aircraft obtained by the company at the war's end were acquired in a depressed market, glutted by war surplus machines. At today's prices, these aircraft have a market value of anywhere up to four times their price at acquisition. Whether this condition will persist with cessation of hostilities in Korea remains to be seen. Korea, incidentally, made possible the profits shown for 1950 to 1952, through the carriage of troops for the United States government. However, regardless of the cause, O.P.A. was making money at last, had recouped most of the previous losses, had evidenced a considerable potential capital gain on assets.  In consequence, the company was ready for further  expansion as evidenced by the following statement for the Parent company's annual report for 1952: Application has been made to the Air Transport Board for a licence to operate a scheduled commercial air cargo service from Montreal to Vancouver , via Toronto, The Pas and Edmonton. Plans  - 18 axe being made for an expansion of the transPacific services to provide for a through route between the Orient, Mexico and South America, f 7) Trans-Canada Air lines was fast losing its monopoly privileges.  Mr. Kings statement of policy, as enunciated  in 1943 and set out on pages IB and 13, had lost weight in the light of actual events. Mr. Howe, under whose guidance T.C.A. had been conceived and fostered, made periodic attempts to turn the tide.  One such, made in  the House of Commons on March 17th, 1944, is rather revealing: . . . . . i t is worth while stressing the fact at this times that the Canadian Pacific Railway Company and Canadian Airways were each offered one-third participation in the Trans-Canada Air lines enterprise, and that both refused to participate in a company with the identical financial arrangements that now apply to Trans-Canada Air Lines. It had been contemplated that Trans-Canada Air Lines would be a non-competitive, non-profit system of transportation by a i r , planned to avoid duplication of services that were the outgrowth of competitive building for profit in the f i e l d of surface transportation. The Trans-Canada Air Act contemplated that Trans-Canada would operate a l l the principal routes parallel to the international boundary, as well as Canada's interest in a l l international routes, and these on a noncompetitive basis. The field of routes into Canada's northland, as well as the field of air services in the settled areas complementary to the Trans-Canada operation, was left to private enterprise. The reason for this is not hard to explain. Trans-Canada was to be a high standard Operation, competitive with paralleling transcontinental air transport services in the United (7) C.P.R. Annual Report, 195£, p. 16.  -19States . Canada, having one-twelfth the population of the United States, oould support one service of this type, as against three similar parallel services in the United States, hut, obviously, to have a second coast to coast service in Canada would be wasteful and uniuetifiable. Service to the public must be the paramount consideration, and i t seemed obvious that the competitive type services would not offer the lowest cost to the public. An impartial analysis of the situation today leads to no other conclusion. However, the newly formed Canadian Pacific Air Lines has lost no time in challenging the noncompetitive position of Trans-Canada Air Lines, and i s reaching out for new franchises; this at a time when i t alone seems able to buy new and mod ern e qu ipment. To clarify the situation, the Prime Minister made a statement with respect to policy . . . in 1945. . . . . The policy then enunciated continues to be the policy of this government. This statement of policy, I regret to say, failed to bring about the desired effect in the development of privately owned air services within Canada, nor did i t end intervention of private interests in the international f i e l d . It i s becoming obvious that ownership of airways by our two competing railway systems implies extension of railway competition into transport by a i r , regardless of the government's desire to avoid competition between air services. In the old days, competitive railway building developed pressure methods for obtaining new franchises. Such methods must not have a place in the development of our airways. (8) However,  Government policy may not have changed, that fact seemed immaterial to C.P.R. management. Canadian Pacific Air Lines continued to nibble its way piecemeal into TransCanada's supposedly restricted economic larder. Government policy was not so much being changed as i t was being progressively undermined. (8) Parliament, Commons, Debates, 1944, Ho.33, p.1618.  .*  Chapter III  The: Canadian P a c i f i c Air Freight Application  As indicated i n the map  on the preceding page, by  1952  Canadian Pacific A i r l i n e s had a patchwork coverage of the greater part of Canada. A l l that was required was an eastwest l i n k to create a composite operation.  To  accomplish  this f i n a l step required more than the usual route segment skirmishing.  I t called for an open challenge of government  policy at government l e v e l .  Hence, CP.A.I. proceeded to  prepare for same, to the accompaniment of much publicity fanfare and with the apparent t a c i t blessing of certain members of the government i t s e l f . S p e c i f i c a l l y , Canadian Pacific applied to the A i r Transport Board for a licence to operate:  fon a cargo only basis)  Scheduled commercial a i r service between the t e r minals Montreal, P.O.. and Toronto, Ontario and the terminal Vancouver, B.C. serving the i n t e r mediate points of The Pas, Manitoba and Edmonton, Alberta. Traffic originating at Montreal destined Toronto or originating i n Toronto destined Montreal w i l l not be carried, (1) In subsequent testimony i t was learned that C.P.A.l. had been preparing for t h i s application since early 1951, a survey of the proposed route's potential having been made by the Douglas A i r c r a f t Company on the a i r l i n e ' s behalf i n A p r i l of that year.  However, i t was  a well kept secret, at  least from the public viewpoint, inasmuch as no press reference to the plan was made u n t i l November 10th,  1952.  (1) Application, as f i l e d with A i r Transport Board by C.P.A.l; Particulars of Application, 1.1, 1952.  - 22 Notice as to this application's receipt was  pre-  pared by the Board for mailing to a l l interested p a r t i e s . Said notice contained a supplementary rider that considerably widened the scope of the proposed hearing, stating that: The Board desires to obtain from as many interested persons and public bodies as possible views on the necessity or otherwise for the development of, domestic air cargo services. For this reason the Board invites representations from persons and public bodies i n the area affected. (£) Hence, i t was the Board's intent to endeavour to appraise both public and private opinion on the subject of Trans-Canada's monopoly p r i v i l e g e s . Assuming that every effort would be made to reveal a l l relevant facts', the broadened nature of the enquiry was well conceived. In any case, the Board would not have the f i n a l word i n the matter.  Under the provisions of the Aero-  naties Act, the Air Transport Board is simply a fact finding body when i t comes to decisions involving changes i n government policy to do with a i r lines owned by surface c a r r i e r s .  In such cases, the Board i s  charged with the responsibility of gathering i n a l l relevant data, assimilating same into an unbiased report, with or without recommendations," to be forwarded to the Cabinet for consideration and decision at that l e v e l . The Notice of Application was mailed from the Air Transport Board offices on November 10th, 1952. From the (2)  Notice of Application, C.P.A-^., A.T.B., l o / l l / 5 2 .  - 23 standpoint of helpful Canadian Pacific publicity timing, the date of mailing was well chosen. On that date, at Montebello before the Air Industries and Transport Association, Hon. Lionel Chevrier made a series of broad statements covering the application's receipt, the proposed general hearing plus comments indicative of impending changes in government policy relative to air transport. At one point in his address, Mr. Chevrier said:  . .there  are plenty of grounds for optimism, given initiative on the part of the operator . . . . in the air coach and air cargo markets there are great sources of new t r a f f i c . " (3) It should be noted that i t was in the furtherance of these two fields that Trans-Canada Air Lines had been accused, from time to time in the press, of being unduly tardy. Mr. Chevrier went on to deal with government policy in the regulation of competition, stating: In the domestic f i e l d , trans-continental air services of the type presently provided by T.C.A. will continue to be reserved for T.C.A. Canada does not enjoy the extremely high volume of trans-continental traffic that exists in the United States and the government's policy is soundly based on present economic considerations. However, with the substantial growth of traffic in Canada i t is no longer necessary to insist on monopoly conditions with regard to regional scheduled services. . . . . .The policy I have described does not represent any change in basic objectives but rather an adjustment to ensure that, as conditions change, we are providing a policy that will (3) Address by the Hon. L. Chevrier, Minister of Transport, Seigniory Club, Montebello, P.O.., November 10th, 1952, reprints issued by Department of Transport, Ottawa, p. 2.  - 24 assist in achieving those objectives. We intsnd to provide the best conditions for favorable development of Canadian commercial aviation. For example, Canada has been somewhat behind the United States in the development of regular all-cargo air routes but certain applications now before the Air Transport Board mean that we will have an opportunity for f u l l review of the policy we shoiald follow in this matter. (4) For Canadian Pacific Air Lines, Mr. Chevrier's words radiated a welcoming green light; to Trans-Canada Air Lines in there was  illUEiated  a rather bewildering intermingling of  amber and impending red.  Inasmuch as Trans-Canada's  directors had, in the months immediately preceding the Montebello speech, committed their firm to a thirty-teo million dollar expansion programme, they were naturally concerned. With the finalization of the Royal Commission on •fce do '.vitto Canadian Transportation in 1951, Trans-Canada had felt secure in going ahead with i t s long range plans for balanced development of passenger, mail and freight services.  Canadian Pacific had had i t s chance to contest  the nation's "chosen instrument" transport policy at the time of the Commission hearings. However, "no specific complaints were laid before the Commission with respect to air transportation." (5) Further, as to the state of competition in the f i e l d of Canadian Air Transport, the Commission commented: Under present conditions the policy followed with regard to competition over scheduled (4) Ibid., p. 8. (5) Innis*ningir§7*Turgeon; Royal Commission to do with. Canadian Transportation, King's Printer, Ottawa, 1951, p. 259.  on  - 25 routes appeared well conceived. In order that the public may continue to enjoy the advantage of regular air services, operators of such services must be assured of a l l the traffic offered "between the points which they serve. However, the Air Transport Board has made some exceptions to the established policy and has permitted competition when satisfied that such competition would not unduly prejudice the scheduled operator. (6) In consequence of the notice of Application's receipt, Trans-Canada Air lines by letter dated lovember 19th, 1952, requested the Air Transport Board to supply further particulars to do with the proposed service.  Such were requested  inasmuch as any person desiring to make representations had been advised in the Notice of Application to f i l e a complete submission with the Board by December 31st, 1952, and to send a copy concurrently to the Applicant in Vancouver, B.C. On December 11th, data of a primarily general nature went forward to T.C.A. This data indicated that two DC-4 aircraft with 16,000 pound capacity each were to be assigned to the route. A table of t o l l s , as set out below, together with a "statement of public interest" were included. Proposed Tolls Prom:  W)  Table 2.  To: Edmonton Montreal  4  #  4  j  The Pas Toronto  j  $  4  Vancouver  # _ 4_  _  I  Edmonton 2 Z26 21.80 S 6 . 6 0 23 20.35 § Oo" Montreal 26 21.3D - 18 15.20 31 27.45 The Pas 8 6.60 18 15.20 17 14.75 14 12.30 Toronto 23 20.35 - 17 14.75 30 25.05 Vancouver 9 7.95 31 27.45 14 12.30 30 25.05 4 - Cents per pound.  $ - Dollars per 100 lbs..  (6) Ibid., p. 261. ^ n. (7) Particulars of Application made by Canadian Pacific Air Dines, as supplied to T.C.A. by A.T.B., para. 7.1  To do with, the foregoing t a b l e , a footnote stated that rates i n d o l l a r s per 100 pounds were to be applicable to shipments weighing 100 pounds and over, and rates for less than 100 pounds i n cents.  Further, these  rates were to include pick-up and delivery from and to Canadian P a c i f i c warehouses i n c i t y centres.  The paragraph referred to concerning "evidence of public interest" follows:  The great growth of and development i n the transportation by a i r Of a i r cargo by a i r services designed for that purpose i n many other countries of the world i s a clear indication that a service of t h i s type would p e c u l i a r l y meet the needs of Canada as a whole where distances are so great and the transportation of goods even by the fastest surface means available so r e l a t i v e l y slow. (8) As to queries from Trans-Canada A i r l i n e s regarding data contained i n the submissions of other interested p a r t i e s , the Air Transport Board advised by l e t t e r of 9th January 1953  that " i t is not the practice of the  Board to provide copies of these submissions to interveners." (9)  This aspect of the Board's regulations  is dealt with i n more d e t a i l i n Chapter ZI of this t h e s i s . However, following further correspondence, much additional data from the C.P.A.l. application was tained.  ob-  This information i s contained i n the "Supple-  mentary Particulars of Application" transcribed i n Appendix II of t h i s t h e s i s . (8) (9)  It went forward to T.C.A. on December  I b i d . , page 1, para. 8. G.I. Younger for A.T.B., l e t t e r dated 9/l/53.  17th, together with notification of an extension of the time limitation for submission by interveners, as had been requested by T.C.A. The new deadline was set at January 15th, 1955. On the basis of Booed upon^the information contained in Appendix I I , Trans-Canada Air lines prepared the submission set out in Appendix III of this report.  It w i l l be noted that  Appendix III is comprised of the exhibits, or summations of same, as filed with the Board during the course of the hearing. Hence, the T.C.A. submission appears as Exhibit 30 in the appendix, having been so designated by the Board. On January 16th, 1953, the Air Transport Board formally announced that the Caaadian Pacific Air Freight Hearing would commence at 10 a.m. February 17th, 1953, in the Auditorium, Dominion Bureau of Statistics Building, Tunney's Pasture, Ottawa, Ontario. In retrospect, the period from November 10th, 1952 to February 17th, 1953, must have been spent in rather different fashions by the executives of the two corporations concerned.  With the submission of their application,  i t is reasonable to suppose that C&iadian Pacific A i r lines  1  preparation for the hearing was relatively complete.  Their executive attitude must have been one of joyously placid expectancy.  Members of Trans-Canada Air lines'  officialdom, on the other hand, presumably spent a very  - 28  -  busy three months endeavouring to outguess one another as to the evidence that might or might not be produced by Canadian Pacific Air lines.  Such evidence could  conceivably cause the Cabinet to modify i t s policy as regards Trans-Canada's monopoly privileges.  Trans-  Canada had made a slow approach to- the air freight industry.  Their reasons for so doing, as outlined in  the chapters that follow, were based upon their assessment of the economics: of this phase of the aviation industry in the world at large and in the United States of America in particular. consider public could moaour  However, the Board and the  this inaction as disinterest and  conclude that C.P.A.I. should have an opportunity to operate a parallel all-freight service across the Dominion. In consequence, following upon the announcement of the application, T.C.A. intensified i t s activities in relation to air cargo. Efforts were made to ensure that no cargo offered was either turned down or delayed, whether i t s carriage was economically justified or not. In this regard, the press recorded some rather negative results for Trans-Canada Air lines.  F i r s t , T.C.A.  attempted to set up a supplementary all-freight service between Montreal and Winnipeg using a leased C46 aircraft. The lessor was to have been Dorval Air Transport, Canadian subsidiary of a dominant U.S. all-cargo carrier, Slick Airways, Incorporated. This service was cancelled  by the Air Transport Board the day i t was to start. The relevant ruling was to the effect that Dorval's licence did not oover the proposed lease haulage. Simultaneously, a supplementary Trans-Atlantic freight service was attempted by T.C.A. For this route, a Tudor aircraft, leased complete with crew from Lome Airways of Toronto, was to be employed. The Department of Transport cancelled this service the day prior to its commencement, stating that the aircraft was not properly equipped with anti-icing f a c i l i t i e s . Admittedly, the  aircraft was not so equipped. However, i t had been  flying back and forth on Atlantic routes for Lome Airways on charter freight operations for some considerable time prior to the above mentionned grounding order. Thus prevented from augmenting its freight haulage f a c i l i t i e s , T.C.A. next proposed to meet the proposed rates of the CP.A. service as eovered by the application. The new t a r i f f was filed with the Board by Air cargo, Inc., T.C.A.'s general freight agent, giving February 15th as the effective date. This t a r i f f revision was suspended by the Board on January £0th, with the rider that further consideration would be given to i t after completion of the impending hearing. T.C.A. just could not win a point, and possibly, at that juncture, the government's airline would have been better advised not to have tried.  In theory at least,  Trans-Canada l i r l i n e s was about to go before the A i r Transport Board with i t s long term accomplishments subject to review.  Hence, government action to circum-  scribe Trans-Canada's last minute efforts to plug up any r e a l or hypothetical holes i n i t s dykes was to a great extent j u s t i f i e d , assuming, of course, that an impartial review of the evidence involved was to be conducted by the Air Transport Board.  Chapter IV The Air Freight Case Evidence Put Befor e the A i r Transport Board to do with the Canadian P a c i f i c Air Freight Application §§§Part I - The CP.A. Evidence Canadian P a c i f i c A i r l i n e s ' basic arguments to substantiate their application's j u s t i f i c a t i o n are set out in Appendix II of this r e p o r t , comprising the "Evidence of Public Convenience and Necessity" portion of their o r i g i n a l submission.  Hence, these should be f i r s t read  to give c l a r i t y to what follows. In this chapter the witnesses and their respective contributions are dealt with chronologically as they appeared before the Board. for  Inasmuch as the transcript  the hearing ran to a t o t a l of 1499 legal size pages  of typewriting, only those details considered salient have been included. As before the Board, the CP.A. case i s dealt with f i r s t , then th at for T.C.A. Actual appraisal of the evidence for either side, for the purpose of this report, is not attempted u n t i l succeeding chapters. At this point i t should be noted that the three key individuals taking part, aside from the witnesses, were the Hon. Philippe Brais, Q.C , counsel for CP.A., Mr. Hugh 0'Donne 11, Q.C , counsel for T.C.A. , and, of course, Mr. John Baldwin, Board Chairman.  Top l e v e l legal a s s i s t -  ance had been thus obtained, Mr. Brais being one of the 23 directors of the C.P.R. and Mr. O'Donnell a b r i l l i a n t Montreal corporation counsel with a record of achievement on the Canadian National's behalf to do with r a i l freight cases.  -SEAs a general guide to the d e t a i l that w i l l follow, a statement of exhibits f i l e d with the Board during the course of the hearing is set out below.  As noted pre-  v i o u s l y , these exhibits, i n f u l l or summated form, are gathered together i n Appendix III of this report. Exhibits f i l e d with Board Exhibit lumber.  Exhibit Title  Submitted By:  1  Details of Cargo Capacities  Mr. Cray  £  Statement of freight Ton Miles  Mr. Gray  3 4 5 .6  Statement, tr.S. freight and ' Express Revenues  Mr. Gray  Statement, Express Volume, C P . Express  Mr. Gray  Statement, Revenue per return trip  Mr. Gray  Ground Operation and Maintenance Chart Mr. Gray  7  B r i e f , Sherbrooke Chamber of Commerce  Mr. Rheaume  8  B r i e f , Kitchenper Chamber of Commerce  Mr. Rau  9  B r i e f , Woodstock Board of Trade  Mr. Magill  10  B r i e f , The Pas Board of Trade  Mr. CoX  11  B r i e f , f l i n f l o n Chamber of Com. Mrj. Hughes  12  B r i e f , Prince Albert Board of T. Mr. Cuelenaere  13  B r i e f , North Battleford Board of Trade  Mr. Chad wick  14  B r i e f , LloycLmins ter Board of T.  Mr. Short e l l  15  B r i e f , Edmonton purchasing Agents Association B r i e f , Edmonton Chanber of Com.  Mr. Walker Mr. McDonald  16  - 33 17  B r i e f , Alberta and northwest Chamber of Mines  Mr.  Brochure, Douglas A i r c r a f t Corp.  Mr.  Appendix to the above  Mr.  19  Douglas DC-6A A i r Freight Study  Mr.  20  Statement, Air cargo Potentials Studies, Attitudes and Opinions  Mr.  re Aircargo Service  Mr.  Appendix to the above  Mr.  18 18A  EI E1A EE S3  McDonald Crilly Orilly O'Donnell Crilly Myl es Myles  Statement, Express S t a t i s t i c s , Myles C P . Express Mr. Statement, Indirect Cost Analysis Mr. McConachie  E4  Memorandum of Agreement Between C.P.A.l. and C P . Express  Mr. MeConachie  E5  Statement T.C.A. Aircargo and Air Express  Mr. Brais  25A  l e t t e r re Weight and Revenue of T.C.A. Air Freight and Air Express T r a f f i c  Mr. Brais  E6  Statement, T.C.A. Revenue Subject Mr. McConachie to Competition  S7  Freight Ton Miles of United States Trunk and l o c a l Service A i r l i n e s by Type of Equipment  Mr. O'Donnell  F i s h - Canadian national R a i l Express Rates per 100 pounds from The Pas to Winnipeg, etc.  Mr. O'Donnell  E9  Fresh F i s h , R a i l Express  Mr. Brais  30  T.C.A. Submission  Mr. O'Donnell  31  Aircargo and Express, T.C.A. 1948-52  Mr. Johnston  3E  l e t t e r , May 21, 195E, Air Transport Board to T.C.A. Mr. O'Donnell  33  Letter, June 3, 1952, T.C.A. to Air Transport Board  E8  Mr. O'Donnell  - 34 Statement, Fish Shipments  Mr. Brais  Statement, Time and Departures of Freight  Mr. Brais  l i s t of Bequests from T.C.A.  Mr. Brais  Submission of Prof. Waines, TJ. of Manitoba. U.S. v. Canadian R a i l Express  Mr. Martin  L e t t e r , March 1, 1953, T.C.A. to C.P.A.L. , with 12 enclosures:  Mr. Brais  A - lumber of firms on T.C.A. air cargo mailing l i s t . B.- Direct operating costs per available ton-mile (T.C.A.) 0 - Direct operating costs per mile. (T.C.A.) D - Question and answer re payload, route segment Toronto Winnipeg under average cond i t i o n s , with DC-3 and B r i s t o l 1V0 a i r c r a f t . E - Question and answer re payload of DC-3 and B r i s t o l 170 under average coalitions between Toronto and Winnipeg with any desired stop en route, e.g. Lakehead. F - Transcontinental scheduled time with one hour at each en route stop for both DC-3 and B r i s t o l type a i r c r a f t , G - l o r t h Star direct operating cost par available ton-mile. H. - l o r t h Star direct operating cost per mile. 1 - Operational weight figures of lorth Star passenger a i r c r a f t converted to all-car go use, as proposed by T.C.A. J - Details of shipments of f u r n i ture as requested by Mr. Brais from witness Seagrim.  -  35 -  E - Maximum permissible takeoff weight, maximum permissible landing weight, operat i o n a l weight empty, zero fuel and o i l weight, f l o o r loading, for DC-3 for 1952. 1 - T.C.A. average load on the Toronto-Winnipeg l e g , average for months March and September combined. l e t t e r , March 1 s t , 1953, T.C.A. to Mr. Hamilton, counsel for the Associated Airways of Edmonton.  Mr. O'Donnell  41  Exhibits lumber 41 to 43,  Mr. Dyment  42 43  i n c l u s i v e , comprised supporting T.C.A, contentions regarding data to do wlth^IIorth Star cargo c r a f t .  44  Submission of Dr. Currie, IT. of Toronto.  45  Statement of delivery dates of T.C.A. a i r c r a f t on order.  Mr. McGregor  46  Cost Analysis of B r i s t o l 170  Mr. McConachie  47  Statement of ton^miles carried, 1948 as compared with 1951, by districts.  Mr. McConachie  Analysis of Canadian Pacific proposed routes, prepared by Douglas A i r c r a f t Company, A p r i l , 1951.  Mr. McConachie  40  48  do. do.  - 35 -  Day  Date  Statement of Witnesses 1 1 ' TJranscript Witness Page  1  Tuesday Mr. Gray - CP.A. Diree17/2/53 tor of Engineering.  2  Wed. Board of Trade witnesses. 18/2/53  155  Mr. Andrews - CP.A. Director of Plight Dispatch.  273  3  Thurs. Mr. C r i l l y - D i r . Douglas 19/2/53 A i r c r a f t Market Research.  300  4  Friday Mr. C r i l l y 20/2/53  461  5  Monday Mr. C r i l l y 23/2/ 53  555  Mr. Myles - Market Analyst Gruneau Research, l i m i t e d . 6  Tuesday Mr. Myles 24/2/53 Mr. McConachie - President Canadian P a c i f i c A i r l i n e s .  7  572  Exhibits Filed. 1-5 7-17  18-20  21-22  621 632  23-29  7  Wed. Mr. McConachie 25/2/53  776  8  Thurs. Mr. Seagrim - General Mgr. 26/2/53 Operations, Trans-Canada.  789  9  Friday Mr. Johnston - Director, 935 27/2/53 T.C.A. Aircargo Department.  31-36  Monday 2/3/53  Prof. Waines - Dean of Arts 980-Fri. Faculty, U. of Manitoba. 997-Mon.  37  Mr. Martin - Gen. Manager, 1026 Canadian national Express.  38  10  Mr. Johnston - brief r e c a l l 1073 Mr. Wiley - T.C.A. T r a f f i c 1084 Dept. - b r i e f appearance on point of methodology.  30  - 36 Tuesday Hearing adjourned u n t i l Wednesday 3/3/53 i n deference to Canadian P a c i f i c Air l i n e s personnel, their Comet a i r c r a f t haying crashed at Karachi9 India, the night of March 2nd, 1953. 11  Wed. 4/3/53  Mr. Dyment - Director of Engineering, T.C.A.  1119  39-43  Dr. Currie - Professor, University of Toronto..  1154  44  Mr. McGregor - President, Trans-Canada A i r Lines.  1180  45  Mr. McConachie - President, Canadian P a c i f i c A i r Lines.  1224  46-48  Thurs. 5/3/53  Hearing adjourned u n t i l Friday to permit counsel time to prepare for f i n a l summating afgument.  IE  Friday 6/3/53  Mr. Brais - Attorney for Canadian P a c i f i c Air Lines,  1256  13  Sat. 7/3/53  Mr. O'Donnell - Attorney f o r Trans^Canada Air Lines.  1359  -  56 -  In addition to Mr. O'Donnell, counsel for the p r i n c i p a l intervener, T.C.A., there appeared throughout  other the hearing two^further lawyers representing interested companies.  These were.Mr. J.B. Hamilton, intervening  on behalf of Associated Airways, Limited of Edmonton, and Mr.' J.E. Wells, for Maritime Central Airways, whose operations l i n k with those of T.C.A. i n the Maritimes. Mr. Hamilton's firm sought to support the Canadian P a c i f i c application, with the acknowledged intent of seeking similar freight run rights p a r a l l e l to the e x i s t ing, scheduled passenger-mail-express-freight run o f C.P.A.L.'s from Edmonton north to the Yukon, should the l a t t e r firm be successful i n i t s application.  Mr.  Wells' supported T.C.A. 's opposition to the application with certain reservations.  Maritime Central saw a  threatened extension of the proposed G.P.A. freight run east into i t s own t e r r i t o r y as an ultimate prospect, hence their opposition to the application. Following preliminary skirmishing as to procedure, the hearing got under way on the morning of Tuesday, February 17th, 1953, with the c a l l i n g of CP.A. 's f i r s t witness, Mr. Gray, their Director of Engineering.  Of  the six exhibits f i l e d by Mr. Gray, only one i s of basic import, Humber f , wherein CP.A. outlines the manner i n which they derived their estimated potential a i r freight t r a f f i c for the route requested.  This potential had been  stated, but not c l a r i f i e d as to source, i n Appendix I I ,  - 37 Supplementary Particulars of Application," as follows: In the year 1950, the tonnage of goods transported hy a i r i n the United States hy domestic a i r c a r r i e r s , including a l l cargo c a r r i e r s , amounted to 252,880 tons, which was 15$ of the estimated t o t a l tonnage carried hy r a i l express i n that country. It i s not unreasonable to assume that a similar percentage would be carried by a i r in Canada i f comparable services were available. This thus gives an estimated potential volume of a i r cargo t r a f f i c over the route applied for of 4,093 tons or 8,186,000 pounds. In support of the claim that the proposed run would meet the test of "public convenience and necess i t y , " Mr. Cray outlined the manner i n which the eight m i l l i o n pound potential was derived.  F i r s t , his firm  had established the fact that the Canadian P a c i f i c Express Company handled 27 m i l l i o n pounds of shipments between Montreal and Vancouver i n 1951.  Assuming an  equal quantity handled by the C.H.R.. , a t o t a l t r a f f i c of 54 m i l l i o n pounds was arrived a t . Hence, on the basis of the above stated U.S. penetration, 15$ of the Canadian t o t a l yieBed the forecasted potential of 8 m i l l i o n pounds.  On the basis of this p o t e n t i a l , Mr.  Gray submitted that the following route segment load factors could reasonably be achieved: Table &. (a) Tancwer to Edmonton 80$ Montreal to Toronto 40$ Edmonton to The Pas 35$ Toronto to Vancouver 80$ The Pas to Toronto 80$ Toronto to Montreal 35$  - 38 -  A basic assumption of the evidence submitted by Mr. Gray was the concept that r a i l express business i n Canada and the United States was essentially comparable as to r a t e s , service and customer acceptance. Further, the load factors derived assumed a preponderance of manufactured goods westbound and of a g r i c u l t u r a l and other perishable products eastbound.  For example, f r u i t  and vegetables would be moved from B.C. eastward, with f i s h being the product moved out of The Pas. Based upon the given load fact 02s, Edmonton to The Pas of 35$ and  The Pas to Toronto of 80$, then 45$ of the available space per t r i p would be made up of f i s h shipments out of The Pas.  For a D06-A, such as the company contemplated  using on the run with a 30,000 pound payload, this would represent a movement of 10,800 pound8 of f i s h out of The Pas per t r i p scheduled.  eastbound  The witness agreed,  and his superior Mr. McConachie subsequently v e r i f i e d , that the Canadian P a c i f i c Air l i n e s sincerely believed that such movement would i n fact take place. Board of Trade Testimony Following upon Mr. Gray's introductory evidence on Canadian Pacific's behalf, evidence was heard on Wednesday, February 18th, from delegates sponsored by various Boards of Trade and Chambers of Commerce, as indicated in the l i s t of exhibits f i l e d set out on page 3 2 of this report.  A l l spoke i n favour of the application.  Their  - 29  -  testimony  can b e s t be  following  excerpts from t h e i r  Mr.  summated by  the  i n c l u s i o n of  the  statements.  Rheaume of S h e r b r o o k e : f l )  Due to the y a s t n e s s o f our c o u n t r y , any p r o b lems c o n c e r n i n g t r a n s p o r t a t i o n a r e of p r i m a r y i m p o r t a n c e and any s t e p s t a k e n t o s p e e d up and i n c r e a s e t r a n s p o r t a t i o n f a c i l i t i e s of goods r e c e i v e our f u l l s u p p o r t . Mr.  Cox  of The  Pas:  (2)  Y e s , we a r e j u s t w a i t i n g to e n l a r g e our market f o r f r e s h f i s h u n t i l we e a n get the p r o p e r transportation f a c i l i t i e s . At present the f i s h i n g i n d u s t r y of the n o r t h i s p r e t t y w e l l t h r o t t l e d by the l a c k o f money and p r o p e r transportation f a c i l i t i e s Mr. Or r a n g e o f V a n c o u v e r : (3) (Representing the P u r c h a s i n g Agents A s s o c i a t i o n of V a n c o u v e r ; no b r i e f f i l e d . ) Our i n d u s t r i a l development of the l a s t few y e a r s makes i t i m p o r t a n t f o r us t o b e a b l e to move goods f a s t and s a f e l y . We b e l i e v e a i r f r e i g h t i s t h e answer to t h i s p r o b l e m . Our c l i m a t e makes i t p o s s i b l e f o r us t o p r o d u c e v e g e t a b l e s , f r u i t s and f l o w e r s ahead of the P r a i r i e P r o v i n c e s and t h e s e p r o d u c t s s h o u l d move as f a s t as p o s s i b l e f r o m t h e i r p o i n t o f o r i g i n t o the consumer. We b e l i e v e a i r f r e i g h t i s the answer once a g a i n A s i d e from the numerous o t h e r  a c t u a l appearance o f  witnesses,  r e p r e s e n t a t i v e groups i n c l u d i n g  the  Vancouver B o a r d o f T r a d e , the- Toronto B o a r d of T r a d e submitted supporting l e t t e r s , and the M o n t r e a l B o a r d of T r a d e The g e n e r a l t e n o r A  was of  s i m p l y t h a t a l l were a n x i o u s  to a v a i l  the p r o p o s e d s e r v i c e so l o n g as no  firm  themselves commit/ment  (1) O f f i e i a l t r a n s c r i p t , A.T.B. A i r f r e i g h t H e a r i n g , page 157. (£) I b i d . , page 172. (3) I b i d . , page 260.  - 40 a8 to tne extent of i t s use was involved.  Most distinguished  contributor of supporting l e t t e r s or b r i e f s was Premier Douglas Campbell of Manitoba.  Premier Campbell wrote  to the A i r Transport Board on December 31st, 1952, that the proposed service be authorized.  urging  He said i n  part: As you w i l l appreciate, transpoitation i s of fundamental importance to the economic l i f e of any region and this i s p a r t i c u l a r l y true for the northern portions of western Canada. For that reason I would l i k e to take this opportunity of assuring your Board that the government of the Province of Manitoba is anxious to encourage the maximum and most economic development of the transportation f a c i l i t i e s of northern Manitoba. It would appear that the cargo service proposed by Canadian P a c i f i c A i r l i n e s Limited would peculiarly meet the needs of the northern areas of this province by providing a faster and more regular form of transportation to eastern and western Canada than i s presently available. It is f e l t that i t would also aid i n the further opening up and development of northern Manitoba, which is v i t a l to the economy of this province and Canada as a whole. For these reasons i t is the hope of the province of Manitoba that the A i r Transport Board w i l l give very favourable consideration to the application which has been submitted by the Canadian Pacific A i r l i n e s Limited. (4) The recording of testimony presented by the Board of Trade representatives occupied the greater part of Wednesday, February 18th.  Following completion of their  testimony, Mr. Andrews, C.P.A. Director of Flight Dispatch, appeared b r i e f l y to record the undisputable  facts  that a l l f a c i l i t i e s required for the service en route were both available and entirely adequate. (4) Ibid., pp. 1290-1291.  - 41 The Douglas A i r c r a f t Company's Survey on C.P.A.'s B e h a l f On Thursday, February 19th, 1953, A i r L i n e s r e v e a l e d two  Canadian P a c i f i c  impressive documents i n which,  t h e i r counsel assured the Board, t h e i r case f o r a p p l i c a t i o n approval was  firmly established.  were f i l e d as E x h i b i t s 18 and 18A.  These documents  Together  they r e p r e s -  ented a survey of the a i r f r e i g h t p o t e n t i a l over the proposed CP.A.  route.  18A  i s made up of s i x t y d e t a i l e d  pages, c o n t a i n i n g f i f t e e n f i g u r e s and f o r t y t a b l e s . E x h i b i t 18 i s simply a p i c t o r i a l summation of 18A, documents being so c r o s s - r e f e r e n c e d . had,  the  two  Douglas A i r c r a f t  r e v e a l e d i n testimony, been engaged, i n t h i s  i t was  type of survey f o r the f r e i g h t ran i n question s i n c e A p r i l of 1951  to do with the s a l e s engineering s e r v i c e s  of t h e a i r c r a f t manufacturer.  The  o r i g i n a l survey,  as  evidenced by E x h i b i t 48, planned on an operation v i a Winnipeg.  This was  p r o p o s a l v i a The  subsequently  changed to the  finalized  Pas.  To present the r e p o r t to the Board and to s u b s t a n t i a t e the claims contained t h e r e i n , Douglas A i r c r a f t had t h e i r Mr. William C r i l l y to Ottawa. tor  Mr.  C r i l l y i s Direc-  of the Douglas Department of Market Research.  holds a B.Sc.  sent  He  degree from the U n i v e r s i t y of North Dakota  and a B.B.Ad. degree from Stanford U n i v e r s i t y . E x h i b i t 18 i s e n t i t l e d " A i r f r e i g h t i n an Expanding Economy," and the f i r s t seven of i t s twenty-six pages are  - 42 the devoted to a portrayal ofAdynamic manner i n which the mineral and other resources of Canada have been revealed and developped i n recent years.  Following that comes  an outline of the economies of time and of money that w i l l he afforded by the proposed CP.A.  service.  On  page ten i t i s graphically portrayed how Canada had apparently slipped i n i t s aircargo development, having carried 19$ of the world's estimated ton-miles hauled in 1957 to barely 1$ i n 1951.  It is further i l l u s t r a t e d  that where aircargo rates i n Canada and the United States were equal at 60c7 per ton-mile i n 1940, by 1951  the  American rate average had f a l l e n to 21/ per ton-mile against more than double that figure for Canada.  It  should be noted that the Canadian figure used i n the substantiating tables set out i n Exhibit 18A has a footnote reference stating that i t covers revenue per tonmile for " f r e i g h t , express and excess baggage." (5) However, i n j u s t i f i c a t i o n , Mr. C r i l l y assured the Board that i t was the only figure available to his firm f o r comparison. A further page is devoted to the contention that airfreight growth i s v i t a l to Canadian development. "A d i f f i c u l t terrain requires a transportation system free of geographical barriers." (6) * In this regard a composite (5) (6)  Appendix 18A, page 16. Appendix 18, page 15.  - 43 -  - 44 r a i l and air mileage chart i s included f o r the route between Montreal and Vancouver via The Pas.  Total  r a i l mileage i s shown to he 3504 miles, against only 2550 miles v i a a i r .  Hence, r a i l mileage is shown to  he 37$ greater than a i r mileage over the proposed route with consequent benefit to the a i r operator rate-wise competitively. A footnote indicates that the average r a i l mileage i s only 17$ greater than that for a i r i n the United States. The brochure, Exhibit 18, goes on to i l l u s t r a t e how 71$ of Canada's manufacturing centres i n less than 1$ of i t s area.  "This places a geographic handicap on  the development of remote but important markets and increases the need for swift long range transportation. As noted i n the Report of the Royal Commission on Transportation  (states the Douglas Report)  '. . , the great difference i n fundamental conditions between Canada and the United States . . . ( i s that) . . . producers and consumers i n the United States with i t s large population have the advantage of a great number of widely distributed market and supply centres. The long haul i s less in evidence there than i n Canada. In this country, on the other hand, i t is noticeable to what extent Central Canada, that is the eastern portion of Ontario and the western portion of Quebec, has become both the market centre and the supply centre f o r the rest of the country.'" (7) The narrowing of the time gap between supply source (7).Appendix I I I , Exhibit 18, p. 14; quote from page 46 of 1951 Royal Commission Report.  - 45 and market w i l l be best achieved by a i r f r e i g h t , i s the Douglas contention.  The fact that Canadian shippers  endeavour to do so more consistently than those of the demonstrated by United States is^oont onde-d through a comparison of per capita railway express shipments and transportation charges for the two countries. For Canada, i t i s shown that per capita railway express shipments amount to 3.2 annually against only .5 i n the United States.  Per  capita national income accruing to the transportation industry i n Canada is shown at $103 against only $87 for the United States. Pour pages of Exhibit 18 and nine of Exhibit 18A are devoted to a portrayal of the tremendous t r a f f i c potential available through stimulation of trade with the Orient.  Inasmuch as Canadian Pacific already  operates services to the Par East, a through plane freight service between Tokyo and Montreal i s envisionned.  An  elaborate process for the derivation of specific potent i a l t r a f f i e figures i n this regard i s appraised i n the ninth chapter of this report. As to actual potential f o r the domestic route, Mr. C r i l l y ' s report was most s p e c i f i c .  Prom the graph repro-  duced on the following page, as taken from Figure 12, page 41 of Exhibit 18A, a price-demand relationship for Canadian airfreight was obtained.  From this relation-  * - 46 -  FIGURE ANALYSIS JANUARY  BILLIONS  OF  DOU  12 OF TO  CANADIAN JUNE  PACIFIC  FREIGHT  TRAFFIC  1952  TON - M I L E S  REVENUE  PER  TON-MILE  - m ship a series of steps lead mathematically to precise figures i n tons and dollars as to loads to he expected f o r each of the route segments, employing present voikame for r a i l express as the data source f o r airfreight penetration.  Mr. C r i l l y deleted reference to The Pas  in h i s calculations, stating that Mr. McConachie and his company, the C P . Air Lines, had knowledge of the fish potential out of that point which had been acquired through close association with the area and which was not possible for Douglas A i r c r a f t to appraise. Load factors for the r o u t e segments, as forecast by Mr. C r i l l y , and set out on page 22 of the Exhibit 18, are: Table 2(b). Vancouver to Edmonton to TordWo to Montreal' Tons/Year  1166 309 81  ±tt€r Totals —-(1,556) Load Factors*—(43$)  . . . .  309 81 104 12 (506) (14$)  Montreal  to  Toronto  to  Tons/Year  33S 804  . .  33E 804 675 1672  •  .  (1130) Totals —-(1,136) Load Factors*--(31$)  . '  .  81  . . . .  IS (93)  Edmonton  to  (3$) Vane ouver  804  *.  (3483)  1672 425 (2901)  .  (96$)  (80$)  * Annual load factor over route segment based on propos ed 5 day per week DC-6A service. It w i l l be noted that the C r i l l y report planned on f i v e trips per week as opposed to the three per week outlined i n the Canadian Pacific application.  It would, of course, be  - 48 -  reasonable to assume that the service would be stepped up to five times weekly as rapidly as traffic would justify the increased flights. Just how these forecasted load figures are in any way a sound derivation from the relationship plotted on page 46 requires further consideration* . However, i t would appear that the Canadian Pacific accepted the Douglas report at i t s face value and would have been gratified had the interveners seen f i t to do likewise. In this regard, Mr. Brais stated: I . . . refer the Board to Exhibit 18, page ££, which summarizes the data from the economic demand curve and applies i t to the various areas which are to be served. It bypasses The Pas completely because he has nothing in his (Mr. Crilly's) information based upon studies of equivalent areas to allow him to take this £ish market into consideration. . . . so far as the demand curve is concerned i t took me a long long time to understand i t . Towards the end I was beginning to make something out of i t , but I am afraid that i f I went into i t in too much detail I would f i r s t confuse myself and possibly in the process not confuse the Board but not help the Board. There is the method followed. It has been explained, in f u l l detail by Mr. C r i l l y . He has been examined at length on the basis of that method. He says that it proves i t s e l f . He has given the origin, his working papers. (8) More will be said to do with these working papers and origin of the method used in the chapters that follow.. However, at this point in fairness to the CP.A,  case,  the load factors w i l l be assumed as being soundly derived. (8) Official transcript, A.T.B. Airfreight Hearing, February, 1953; page 1£9£.  - 49 From tae load f a c t o r s , the actual revenues are easily arrived at for the route segments inasmuch as the rates per hundred pounds have already been given. Such a f i n a n c i a l analysis for the route culminated Mr. T  O r i l l y s appraisal.  Eastbound, an annual revenue of  #432,252 was determined, and #1,766,120 westbound. Direct operating costs based upon O.P.A. methods explained on page 51 of Exhibit 18A were then applied as follows: (#1.13/mile x 5100 miles/round t r i p x 260 round trips/year) This summation, appearing on psge 23 of Exhibit  18,  yields a direct annual operating cost of #1,498,38 0. In round f i g u r e s , the following net income is derived: Table 4. Posts & Revenues for Projected Service-Douglas Forecast Total Revenue Direct Operating Costs  #2,198,000 1,498,000  Annual operating p r o f i t  #  700,000  As Mr. C r i l l y phrased i t , this, amount is the: . . . balance to cover indirect expense and provide a p r o f i t . . . (However) . . . valid comparisons of costs with American aircargo carriers is d i f f i c u l t because of Canadian P a c i f i c Express participation i n this proposed operation. (9) Mr. C r i l l y and his report were the subject matter for more pages of transcript than any other witness or document.  Three days of the hearing were v i r t u a l l y en-  t i r e l y devoted to his evidence and examination. Detailed discussion of the methods and conclusions of Exhibit 18 and ISA i s contained i n the ninth chapter of this thesis. T9) Exhibit 18, page 23.  - 50 The Gruneau Research, Limited Survey 0ondueted for P.P.A. Mr. C r i l l y was followed on the stand by a Mr. Myles, an employee of Gruneau Research, Limited, Toronto.  This  firm conducts what might he termed economic Gallup.polls throughout Canada.  In addition, they have the Canadian  franchise for the handling of the American "Starch Surveys," an abbreviated method for attempting to determine the  efficacy of a given advertising campaign.  In this  regard, of course, t h e i r services are more known to the large advertising agencies than to the general public. Mr., Myles, prior to coming with Gruneau Research, Limited i n 1951, had acquired a B.A. and anM.Comm. degree from the University of Toronto. The eighty-two pages of figures and conclusions which comprised Mr. Myles' basic submission are to be found i n AppendixH I , Exhibit £1 and £1A of this report. As were Exhibits 18 and I8A, these reports were i n t r o duced at the hearing without prior knowledge on the part of the interveners.  Exhibit £1 i s e n t i t l e d , "A Study of  Attitudes and Opinions Concerning a Proposed Air Cargo Service."  Exhibit 21A simply supplies the working  papers for the r e s u l t s set out i n i t s companion exhibit. Based upon firm names obtained by random sampling of the Canadian Pacific Express Company's way-bills for September 19th, 1 9 5 £ , 1£50 contacts were attempted across the country by Gruneau f i e l d representatives.  Prom these  - 51 -  contacts, 1,000 completed interviews resulted.  In each  case some member of management consented to work through the  entire questionnaire, as set out in Exhibit SI A,  resulting i n the following summating appraisal beingmade by Gruneau Research, l i m i t e d : (page 13) 1. An A i r Cargo service could help with del i v e r y problems i n 68$ of the companies which are regularly engaged i n the shipment of merchandise between Montreal, Toronto, Edmonton, Vancouver v i c i n i t i e s . £. The chief reasons why these companies think the proposed air cargo service could help are: (a) The time taken to transport merchadise between the v i c i n i t i e s would be r e duced, (mentioned by 60$ of the firms) (b) Air Cargo f a c i l i t i e s would allow a more rapid movement of emergency shipments, (mentioned by £ 3 $ of the firms) (c) Prompt deliveries would result from the a i r eargo service. (mentioned by 19$ of the companies.) 3. The location and character of the companies which would obtain the maximum benefit from the proposed a i r cargo service are: (a) Companies i n Vancouver v i c i n i t y . (77$ stated an a i r cargo service could help) (b) Companies which reiail merchandise, and companies which wholesale merchandise. (7£$ and 71$, respectively,, stated an air cargo service could help.) (c) Companies which usually specify the shipping method and who have shipped by a i r . (79$ stated an a i r eargo service could help) (d) Companies handling optical and photographic supplies, jewelry, etc. . 81$; and companies handling perishable products. .77$. 4. Companies which do hot think an a i r cargo service could help with their delivery problems. . 3 £ $ .  - 52 Interviewing had commenced December 28th, 1952 had been completed on January 17th, 1953. the interviews were general i n nature. concerned was  and  Essentially,  The  executive  shown a tabulation giving present air  express and aircargo rates, present r a i l express r a t e s , the and^proposed, substantially reduced aircargo rates. The executives were told that "a firm" was to apply f o r permission to operate at the proposed rates and were queried as to what interest such would hold for the firm i n question.  interviewed  Canadian P a c i f i c was not s p e c i f i c a l l y  referred to i n any of the form questions asked.  In this  regard, Mr. Brais stated i n his summation: With regard to Mr. Myles, we have his conclusions on page 12 of Exhibit 21. I should l i k e to draw the Board's attention to those conclusions. . . I . . . ask the Board to bear in mind that i t was applied to a cold market, Nobody at the time had been apprised in any manner . . There was no advertising, no propaganda, and no communications to any of these people to t e l l them that a company such as Canadian P a c i f i c A i r l i n e s , a subsidiary of the Canadian P a c i f i c Railway, well known i n this country, was planning to develop an aircargo line. . . .This was a cold survey dealing with people who at the moment of the interview were told of an application for an aircargo line - - I do not think i t was even an a p p l i cation, a proposal, that, i s correct - - and they g&veotheir opinion. (10) In this statement, Mr. Brais was somewhat i n error. However, appraisal of his views and those of Mr. Myles is deferred to the following chapters. (See Ch.YII, p.146  (10) O f f i c i a l t r a n s c r i p t , Air Freight Hharing, page  et  seq.)  1293.  - 53 The Evidence Submitted by President Grant McConachie, 0. P. A i r l i n e s . Douglas A i r c r a f t Company and Gruneau Research, limited had each, i n a diffeamt way, appraised the p c posed Canadian P a c i f i c Air l i n e s Mont real-Vane ouver air freight service.  It remained for Mr. MdConachie  to summate their views together with his own i n support of his company's application to the A i r Transport Board.  Mr. McConachie was the f i n a l CP.A. witness,  his testimony being completed on the morning of Thursday, February 26th, 1953.  Note has already been made  on pages 10 and 11 of t h i s report of Mr. McConachie's close association over the years with Canadian aviat i o n and with Canadian Pacific Air l i n e s i n particular since i t s formation i n 1941. Mr. McConachie informed the Board that he had personally made a study of the a i r eargo operators i n the United States, such as Slick and Plying Tigers. In t h i s regard, he had travelled extensively surveying their operations and discussing relevant problems with their management personnel. As to potential load factors, Mr. McConachie noted that westbound he f e l t there would be no problem.  Prom  Yancouver to Edmonton, eastbound<, loads would also be adequate.  However, he had been concerned over loads  to be offered from Edmonton east.  Hence, he contended,  - 54 the routing had been diverted from Winnipeg to The Pas. By so doing, i t was planned to tap the f i s h market in on a r r i v a l at destination the East with a quality product s t i l l c l a s s i f i e d A a s fresh.  Mr. McConachie stated:  With t h i s i n view we approached the f i s h companies. We approached our agents. We discussed i t with our d i s t r i c t men to find out as to whether there would he a steady flow of t h i s product from this area and we determined there would he. This flow of t r a f f i c from The Pas was heavier than any other point i n Canada could generate for the east. (11) further, i t was f e l t that fresh vegetables and f r u i t s i n season would flow from the coastal areas to The Pas.  It should be noted that the population for  The Pas and surrounding country is approximately 14,000. As to the possible harmful effect h i s proposed service would have on T.C.A., Mr. McConachie was most reassuring.  He pointed out that the total air f r e i g h t  revenue for T.C.A. North American services represented less than 5.5$ of their total revenue.  Hence, to get  any business at a l l , the proposed service would have to create new business, not take i t from Trans-Canada. The fact that air f r e i g h t service must be an overnight service was pointed out, the proposed service giving overnight service between a l l terminal p a i r s . At t h i s point, Mr. McConachie f i l e d Exhibit 25, providing an estimate of indirect costs for the proposed service, inasmuch as t h i s had been neglected i n (11)  O f f i c i a l transcript. Air Freight Hearing, p. 644.  -  55 -  the Douglas A i r c r a f t ( C r i l l y ) report.  This exhibit  i l l u s t r a t e d the fact that U.S. a i r l i n e s generally, have indirect costs approximately equal to 45$ of their t o t a l operating costs.  CP.A.  however, i n i t s  submission contended that their indirect costs f o r the proposed run would amount to only 25$, inasmuch as the existing f a c i l i t i e s of Canadian Pacific Express would be so extensively employed.  On this  basis, the- C r i l l y operating p r o f i t for the year of $700,000 drops to 300,000, a net quite adequate insofar as Mr. McConachie was concerned. In the matter of the agreement with Canadian P a c i f i c Express, whereby these f a c i l i t i e s and services were to be made a v a i l a b l e , Mr. McConachie f i l e d Exhibit 24, "Memorandum of Agreement with CP*  Express."  This  agreement provides that C P . Express s h a l l "perform a l l s o l i c i t a t i o n of t r a f f i c , b i l l i n g , collection and c a r t age frbm and to i t s terminal and between airports and shippers and consignees as required."  For these ser-  vices, the express company had set a charge of 35/ per hundred pounds, with a minimum charge of 60c7. As might be expected, Mr. McConachie pointed up the wartime uses of the DC-6A a l l - f r e i g h t a i r c r a f t , for  either equipment or l i t t e r movement. Again, i t was  noted that the proposed stimulation of the Orient trade would be i n Canada's general interest, aside from the benefits to  CP.A.  Considerable emphasis was laid, by Mr. McConachie on the contention that the D0-6A was  specifically  b u i l t for a i r cargo service as opposed to combined passenger, mail, express and cargo service.  Consider-  able reduction in per ton mile operating costs were forecast for the CP.A.  operation r e l a t i v e to those  experienced by U.S. operators employing converted passenger a i r c r a f t f o r freight haulage or by those trunk carriers who  combined freight handling with pass-  enger carriage. At this juncture, Canadian P a c i f i c f i l e d Exhibit £ 5 , "Statement of T.C.A. Air Cargo and Air Express." This statement, provided Mr. Brais by Mr. O'Donnell, and express shows the freight^poundage carried direct!onally and for individual route segments between Vancouver and Montreal for 1951 and 195E.  The statement so f i l e d had  provided the data for the CP.A. table, f i l e d as Exhibit E6.  staff to work out a  By route segments, this  table determined an approximation of the t o t a l revenues received by Trans-Canada for haulage of freight and  ex-  press hetween the terminals and intervening stops. This arbitrary figure amounted to $£48,000 and was set against the 1951 CO.A,  t o t a l revenue of #48,010,501 to  y i e l d the contention that only l/2% of T.C.A.'s income could be affected by the i n s t i t u t i o n of the new  service.  Summating his views i n the matter, Mr. McConachie stated:  - 57 -  In my opinion . . . the route i s not designed to take away or i t i s not designed to encroach on some t r a f f i c that i s already there. We are going . . . to develop an e n t i r e l y new f i e l d because i t i s obvious that there i s not s u f f i c i e n t revenue from what i s being c a r r i e d at the present time to even support a s e r v i c e .  . . . We would have what we would draw from other c a r r i e r s , such as the express company. . . , and we w i l l generate some business that i s not being c a r r i e d on any form of transport at -Hiepresent time because of the remoteness of the areas that are being served. I t also serves p u b l i c convenience and necessity at the points along the route. There must be a necessity f o r t h i s service or we would not have the r e s u l t s that we got from the Gruneau Research and the i n q u i r i e s from the Boards of Trade . . . . (IE)  (12)  O f f i c i a l t r a n s c r i p t , A.T.B. A i r f r e i g h t Hearing, 1953, page 684.  Lockheed Super Constellation Depicted i n Cargo Version. T.C.A. i s currently taking delivery of eight Super Constellations f o r combination carriage of passengers, mail and f r e i g h t . Constellation cargo pod currently used by Eastern and Trans-World A i r Lines i s shown i n photo below.  The Air Freight Case Part II The T.C.A. Evidence. As previously noted, Trans-Canada A i r Lines had submitted a 30 page statement of intervention, to do with the application of Canadian P a c i f i c Air Lines, prior to the commencement of the hearing. This statement accompanies t h i s report, being found i n Appendix I I , Exhibit 30.  The  f i r s t nine pages of t h i s exhibit cover Trans-Canada's views i n the matter, with the remaining pages supplying substantiating data i n tabular form. B r i e f l y , Exhibit 30 advises that T.C.A. commenced eargo carriage i n 1948, t h i s being aside from prior and continuing carriage of air express.  In 1948, 1,800,000  pounds of a i r cargo were moved; i n 1952, 10,600,000 pounds.  In 1948 700,000 ton-miles of a i r cargo were  flown by T.C.A.; i n 1952, 3,500,000. This last mentioned figure was i n addition to 1,400,000 ton-miles of express moved i n 1952.  Ratewise, the levies assessed on a i r cargo  progressively were dropped a t o t a l of 46$ year period.  during the f i v e  A further drop, noted on page 29 of this wh ich  report, was then before the Board for approval)/xwould bring the rates down an added 25$.  These rate cuts were  based on a long term policy which^had been outlined to the Board i n a l e t t e r dated June 3, 1952 and f i l e d as Exhibit 33.  In part this letter states:  - 60 The rapid growth i n passenger t r a f f i c during the post-war years has brought about very subs t a n t i a l increases i n both the size of TCA equipment i n use and i n the f l i g h t frequency on p r a c t i c a l l y a l l routes. Since a l l TOA passenger a i r c r a f t automatically provide a considerable payload capacity i n excess of the passenger accommodation, the effect has naturally been that i n meeting the passenger t r a f f i c demand, non-passenger payload capacity has been provided f a r i n excess of the nonpassenger t r a f f i c requirements. This has been most apparent on the transcontinental route. Intense sales stimulation and advertising alone have f a i l e d to bring about the condition under which this capacity for the transportation of mail and goods was u t i l i z e d to anything approaching a satisfactory degree. The only other stimulative action open to the company at this time i s a rate reduction, which i s obviously desirable both from the economic standpoint of the a i r l i n e , and public interest. The overall reductions proposed at this time are deliberately conservative, the intention being to by this means measure the s e n s i t i v i t y of the market to downward adjustments i n aircargo rates. It i s the intention to make a further overall rate reduction at a later date, and i f necessary, to repeat this procedure to a point at which the additional t r a f f i c r e s u l t ing from rate deereases begins to adequately use the weight space available. (13) This letter had gone forward to the Board, as noted, on June 3rd, 1952,  The application notice to do with  Canadian P a c i f i c ' s proposal had been f i r s t publicized on November 10, 1952.  Hence, the rate reduction then before  the Board, at the time of the hearing,, was i n line with predetermined p o l i c y .  The proposed rates equalled or  undercut those proposed f o r the CP.A, freight service. (13)  T.C.A. Director of T r a f f i c Planning to Chief Traffic O f f i c e r , A.T.B., Exhibit 33.  - 61 Evidence of Mr. H.W. Seagrim, General Manager, Operations, for Trans-Panada Air Lines In an aviation career closely paralleling  that of  Mr. McPonaohie, Trans-Canada's General Manager had been successively, combined hush p i l o t and air engineer, airline captain, superintendent  of f l i g h t operations,  director of f l i g h t operations, f i n a l l y achieving his present status i n 1950. CP.A.  Mr. MeConachie had been with  since i t s formation i n 1941.  Mr. Seagrim had  been with T.C.A. since i t s formation i n 1937. Mr. Seagrim outlined the makeup of the present T.C.A. operating f l e e t , noting the a v a i l a b i l i t y of space for cargo carriage i n that regard.  The f l e e t , at the  time of the hearing, was-made up of 23 North Star a i r craft and 27 DC-3  aircraft.  out as an all-cargo c a r r i e r .  One of the l a t t e r was  fitted  Space for cargo, mail and  passenger baggage on the lorth Stars was stated as being capable of accommodating 6,692 pounds.  With seats out,  the North Star has a payload of 16,755 pounds. possible cabin conversion on short notice was  Such  evidenced  by Mr. Seagrim with reference to the carriage of 500,000 pounds of Winnipeg flood r e l i e f supplies by T.C.A. i n 1950 i n a one week period without affecting normal schedules.  The North Star main cargo compartment door was  given as being 2 l / 2 x 5 feet and that of the DC-3 l i n e r as 5 l/2 x 7 f e e t .  cargo-  The l a t t e r a i r c r a f t had had a  variety of assignments including the carriage of a race-  - 62 horse between Montreal and Toronto and the movement of 4,620 pounds of household effects from Toronto to Winnipeg for a Toronto moving firm. by Mr. Brais as to why this DO-3  (See Exhibit 36) Queried cargo a i r c r a f t was  not  occupied more f u l l y i n cargo carriage, Mr. Seagrim replied that i t was "due to lack of demand, frankly." (14) It was Mr. Seagrim's contention that what cargo was offered was handled e f f i c i e n t l y i n combination with the passenger, mail and express t r a f f i c .  By way  of example,  he noted that i n 1951, from March to June, T.O.A. carried approximately 900,000 turkey poults and baby chicks between Toronto and Montreal to Winnipeg, plus a further considerable volume of the same nature from Yancouver to p r a i r i e points during the same period. rate amounted to l/3 of ifo,  The mortality  confirming that no undue  delays were experienced inasmuch as poults and chicks must be delivered within 72 hours after hatching to survive without en route feeding. Trans-Canada's long term plans had indicated that i t was the intention to convert certain of the North Star a i r c r a f t to f u l l cargo use as the demand arose.  In this  regard, Mr. Seagrim t e s t i f i e d that such an a i r c r a f t so converted could carry a payload of 20,000 pounds. cost of conversion would be $175,000.  The  This amount would  provide f o r the required additional stressing of the (14)  O f f i c i a l transcript, A i r Freight Hearing, A.T.B., 1953, page 797.  - 63 -  fuselage, provision of a cargo f l o o r , and of a f u l l size cargo door similar to that f i t t e d to CP.A.'s newly acquired DO-6A a i r c r a f t . Mr. Seagrim  However, for the immediate  future f e l t that the three B r i s t o l Freighters ordered by his firm i n December 1952 would be more than adequate to handle outsize shipments offered, plus coverage for such bottlenecks as could conceivably develop with the progressive dropping of the air freight rates by TransCanada.  The B r i s t o l s , carrying six tons of f r e i g h t ,  would have access doers to their cargo compartments measuring 7 x 7 l/2 f e e t , enabling the routine carriage of two standard American automobiles per f l i g h t i f so required. As to the possibilities of releasing North Stars f o r cargo carriage, Mr. Seagrim noted that his firm was to take delivery of eight Lockheed Superl3onstellatlons and f i f t e e n Tickers Viscount a i r c r a f t i n 1954, at which time, depending upon the need, North Star a i r c r a f t would be converted to f u l l time cargo use. Evidence of Mr. Hugh Johnston Director T.C.A. Aircargo Dept. Needless to say, Mr. Johnston provided a prime t a r get towards which CP.A. searching questions.  counsel directed a barrage of  Mr.. Johnston headed the department  with which the whole enquiry was concerned. the CP.A.  Essentially,  case rested on whether or not i t could be  - 64 established before the Board that Mr. Johnston's department had been d e r e l i c t i n i t s duty to the p u b l i c , either through i t s own  or company p o l i c y .  A series of requests  were made of Mr. Johnston by Mr. Brais concerning operations of the cargo department.  the  These were dealt  with by T.C.A. i n the furnishing of Exhibits SI, 32, 33, and 39.  Reference to page 34 of t h i s report indicates  the d e t a i l requested, set out under Exhibit 39.  This  data was requested on the afternoon of Friday, February 27th, for delivery to CP.A. of March.  counsel by Monday, the 2nd  Unfortunately for CP.A., the requested data  simply substantiated Mr. Johnston's contentions that his department was operating e f f i c i e n t l y and aggressively insofar as stimulation of interest i n air cargo shipments. For example, Exhibit 39 shows that £4,766 firms regularly receive T.C.A. air cargo promotional releases.  Two  thirds of these firms are i n Canada, the remahder i n the U.S.A. Further, no matter which formula was used, and several variants did appear, there was s t i l l much unused cargo space available on the regular passenger f l i g h t s operated by Trans-Canada A i r Lines. Evidence of Prof. ¥ . J . Waines University of Manitoba The appearance of Professor Waines ,  from the stand-  point of keeping the hearing i n r e a l i s t i c perspective, was most b e n e f i c i a l .  Professor Waines, Dean of the University  - 65 of Manitoba's Faculty of A r t s , had been actively associated on  with the Royal Commission ^-^9 Canada of 1951.  with Transportation in  Hence, his interest i n the proposed  CP.A.  service lay i n i t s broad implications i n relation to the whole Canadian economy i n the light of prior transport h i s t o r y i n this country.  Certain basic principles underlie  the orderly development of transportation i n Canada, asserted Professor Waines, one being that i n this country the emphasis must be on cost rather than on speed. , . . Abundance of space i s one of Canada's chief characteristics. While from certain points of view space may be an asset, from the standpoint of transportation i t is not. It underlines the necessity for e f f i c i e n t transportation merely to overcome the great distances which people and goods must be moved to effectively develop our resources and produce a high standard of l i v i n g . Add to the factor of space the facts that there are long distances which are r e l a t i v e l y unproductive of t r a f f i e and that population is sparsely scattered over the country and that i n d u s t r i a l concentrations are widely separated and i t becomes apparent that dost is our v i t a l transportation concern. (IF) ' To obtain this cheap transportation, i t follows that high u t i l i z a t i o n of equipment and f a c i l i t i e s i s essential to obtain the lowest unit costs. The multiplication of services which have the effect of dividing t r a f f i c , rather than i n creasing i t , the diversion of more and more of our resources into the business of transportation when existing f a c i l i t i e s are adequate or nearly adequate to handle the t r a f f i c w i l l raise costs, not lower them,* and w i l l have (15)  O f f i c i a l Transcript, Air Freight Hearing, A.T.B. 1953, Prof. W.J. Waines, page 1003.  - 66 either or both of two further consequences: fl)  It w i l l drive up transportation charges at the expense of shippers and to the detriment of the whole economy, or  (2)  i t w i l l create d e f i c i t s which i n the case of a publicly-owned transportation system w i l l f a l l on the p u b l i c . In either case over-investment i n , or over-expansion of, the transportation . system w i l l impose f i n a n c i a l burdens on the economy which w i l l hamper i t s development, p a r t i c u l a r l y i n a country where foreign trade i s s t i l l of very substantial importance to the l e v e l of economic a c t i v i t y . (16)  Professor Waines went on to i l l u s t r a t e from the history of Canadian railway development the i l l s accruing from competitive over-expansion as appraised by the 1931-1932 Duff Commission.  Government policy  had clearly been formulated relative to aviation to avoid duplication of these i l l s as evidenced by Mr. Howe's statements to parliament, as previously quoted in this report i n the two i n i t i a l chapters. Mr. Waines noted: Competition i s only useful for what i t achieves. If i t achieves greater efficiency lower costs and charges and better service, i t i s an admirable principle to i n s i s t upon; but i f i t achieves over-expansion of expensive f a c i l i t i e s with d i v i s i o n of the market amongst competing c a r r i e r s , i t w i l l lead to heavy burdens on c a r r i e r s , shippers and taxpayers a l i k e . (17) The foregoing- comprised the main submission made by Professor Waines.  However, i n summing up he added two  relevant observations of a more particular nature. (16) (17)  O f f i c i a l Transcript, A.T.B. A i r Freight Hearing, 1955, page 1018. I b i d . , page 1020.  The  f i r s t was a suggestion to the effect that certain of the T.C.A. services such as to Brandon, Swift Current, and Medicine Hat, together with the trans-Atlantic service i t s e l f , were operated i n part at a loss hut in the national i n t e r e s t .  Such services would he eliminated  as of necessity should t o t a l revenues f a l l to a point inadequate to care for the non-paying routes. The other of the two points mentioned concerned the drawing of business from r a i l express and i t s consequent effect upon the income structure of the parent company, the  C.P.R.  It would involve simply adding to  "other income" and subtracting from " r a i l income."  By  so doing the impact would f a l l upon the users of r a i l f r e i g h t , inasmuch as the C.P.R. i s the "yardstick" isil  operation for the two prime^operators.  More s p e c i f i c a l l y ,  the burden would f a l l mainly on the p r a i r i e region and the Maritimes, a r e s u l t which the Air Transport Board should seek to avoid. Evidence of Mr. T.H. Martin General Manager , Canadian National Express Company. Mr. Martin t e s t i f i e d that he had been i n the express business for 58 years, starting with the Dominion Express Company i n 1915, then moving to the Canadian northern in 1917 which later became the Cans.dlan national. The witness noted at the outset that his firm was a department of the Canadian national rather than being a separate corporate entity as i n the case of Canadian P a c i f i c Express.  - 68 As for the Canadian P a c i f i c , Mr. Martin t e s t i f i e d that his firm makes a semi-annual twenty-four hour sample analysis of express business.  Prom these analyses  i t has been found that the average C.2T. shipment weighs 37 pounds and that for the C.P.R. , 48 pounds.  The higher  figure i s due to the carriage of freight as express by the C.P.R. i n certain p r a i r i e areas to -compete with trucking firms.  Further, 59$ of the C.H.R. shipments were found  to. be 25 pounds or less i n weight, with 13$ of the t o t a l weight i n that grouping. For shipments over 100 pounds, numerical volume was 4$ of the t o t a l and 14$ of the weight. In the matter of comparison, Canadian versus U.S. express service, Mr. Martin asserted that the Canadian shipper receives faster delivery at lower rates i n Canada. Mr. Martin further noted that only once i n t h i r t y years had the Canadian Express companies had to defend their application for a rate increase before the Board of Transport Commissioners.  This was i n 1951 to do  with the transportation of f i s h .  Evidence was brought  in by shippers that the f i s h t r a f f i c could not afford to pay the proposed higher r a t e s .  Representation against  the increase included protest from Booth Fisheries and Keystone F i s h e r i e s , the prime shippers of Manitoba lake fish.  The Board approved the rate increase requested by  the express companies despite the protesting shippers. In consequence, C.I. express shipments of f i s h from The Pas f e l l from 2,5000,000 pounds a year prior to the i n -  crease to 500,000 pounds a year thereafter.  Considera-  tion was not given to restoring the old rates as they had been d e f i n i t e l y uneconomic to the r a i l r o a d s .  It  was suggested to the fishing companies that they ship direct from the source area, from The Pas to Toronto and Montreal.  They were advised that this was not pos-  sible inasmuch as the f i s h f i r s t proceeds to Winnipeg for d i s t r i b u t i o n , that being where the captal investment in storage and distribution f a c i l i t i e s has been made. The Canadian National handles approximately  75  #111ion pounds of f i s h each year plus 4 m i l l i o n pounds of lobsters.  These latter are, of course, transported  l i v e and are mainly moved from the Maritimes to Boston and v i e i n i t y .  Attempts at air carriage of lobsters were rate  unsuccessful due to the high mortality A against a r a i l mortaliiy^f'or the t r a f f i c of approximately ifo only. Mr. Martin f i l e d Exhibit 38 to substantiate his statement to the effect that r a i l express i n this country i s considerably cheaper than i n the United States. This exhibit evidenced that for the average weight shipment of 37 pounds experienced by the Canadian National, i t would cost $7.40 to move i t New York to San Francisco, as opposed to only $5.18 to Vancouver.  for the same shipment, Montreal  *  B r i s t o l 170 Freight er A i r c r a f t as Operated hy Trans-Canada A i r Lines .  - 71 Evidenoe of Mr. J. T. Dyment, T.C.A. Pireotor of Engineering. Mr. Dyment was called at the request of Canadian P a c i f i c Air Lines to enlarge on Mr. Seagrim1 s contention that the engineering involved i n converting a lorth. Star to a suitable a i r cargo a i r c r a f t was both economic and feasible.  In this regard, Mr. Dyment outlined for the  Board a series of major modifications carried out at minimum cost by Trans-Canada's own personnel in i t s own shops over a period of several years on Lockheed, Douglas and Canadair products.  In p a r t i c u l a r , M-l 40 passenger  ITorth Star air emit were converted to a basically cargo type f o r the E.G.A.P. i n the Winnipeg plant of T.C.A. This job was completed within specified time l i m i t s at a cost of $36,000 per a i r c r a f t , an amount representing less than one-third of the cost estimated for the job by an outside contractor. As for the conversion of the present T.C.A. ITorth Stars to cargo use, a l l engineering problems had already a t been evalued.  Eeinforcing the fuselage would cost $10,000  i n s t a l l a t i o n of a pressurized cargo door, $25,000; removal of present equipment associated with passenger carriage, $20,000; $6,000 for i n s t a l l i n g a cargo type interior insullating blanket; $5,000 for the suess analysis work involved; $70,000 f o r replacement of the present floor structure with that of a cargo f l o o r .  A l l other items  would be minor i n nature and amount, making up the previously stated t o t a l of $175,000 per a i r e r a f t .  The a i r -  - 72 craft would have identical door size and floor loading restrictions as those for the DC-6A proposed for the Canadian Pacific transcontinental operation. Evidence of Dr. A.W. Currie University of Toronto Like that of Professor Waines, the evidence of Dr. Currie dealt s t r i c t l y with economic fundamentals, a refreshing recess being provided i n each case from the commercial sparring of the two r i v a l corporations i n volved i n the dispute before the Board. Dr. Currie is presently an Associate Professor of Commerce, with special responsibility for transportation and business Binanee, on the staff of the University of Toronto.  He acted as Trarsportation Economist for the  Province of Saskatchewan i n various freight cases i n 1946-1948 and for the Royal Commission on Transportation, 1948-1950. He i s author of "Canadian Economic Development, " and of "Economic Geography of Canada."  In  addition, his text, "Economics of Canadian Transportation" is currently i n process of publication. The witness stated that he had read the testimony of Professor Waiie s and was thoughts expressed.  In entire agreement with the  Supplementing*© Prof. Waines1  remarks, Dr. Currie had prepared a submission of his own, which was f i l e d as Exhibit 4 4 . Exhibit 44 is divided into two parts; "A. of C i v i l Aviation within Cam da, " and "B.  The Pattern  Differences i n  - 73 Economic Conditions i n Canada and the United States." In the matter of government policy to the time of the hearing then in progress, Dr. Currie endorsed the overall plan to prevent duplication of transcontinental services, reasoning that: (1) Earnings should be maximized i n order to provide the best possible equipment. Seasonable earnings would permit ample write-off of a i r c r a f t , thus reducing capit a l requirements and allowing operators to have the most mddern equipment. (2) The non-duplication of services reduces the p o s s i b i l i t y of d e f i c i t s which, i n a publicly-owned company, must be borne by the public and i n a privately-owned company by investors. . . . (3) . . . i t i s essential to realize that Canada i s in a period of boom associated not rarely with the general c y c l i c a l r i s e but also with a tremendous investment in capital goods. Although everyone hopes a depression w i l l be avoided, i t is very essential that decisions regarding new a i r l i n e services be not based on the assumption that high properity w i l l continue i n d e f i n i t e l y . (18) Dr. Currie noted the following relevant differences in economic conditions i n Canada and the United States: that (diffesaces making i t impracticable to expect^the a i r carriers would draw the same r e l a t i v e percentage of t r a f f i c from r a i l express i n Canada as they have done in the (1)  The per capita gross national product i n .the United States i n 1951 was $2,123 or about 47$ more than the" Canadian gross national product per capita. . . . Moreover, the United States has a higher pro-  d s ) I b i d . , page 1156.  U.S.)  - 74 portion of people i n the high income brackets than i s the case i n Canada. The range of incomes i s quite important because a i r cargo for the most part i s luxury t r a f f i c . , . . (2)  The i n d u s t r i a l i z e d area i n the United States i s larger than i n Canada and has longer distances between c i t i e s and because of these longer distances a i r cargo t r a f f i c moves within i t s borders. In Canada because the distances i n the industrialized area are shorter, no comparable a i r cargo t r a f f i c can develop. Further, over the heavily indust r i a l i z e d area of the l o r t h Eastern United States, r a i l express i s r e l a t i v e l y slow. In contrast, r a i l express service within the boundaries of the industrialized areas of Canada i s s u f f i c i e n t l y fast to discourage a i r cargo, except i n case of emergency. (19)  As i n the case of Professor Waines, the crossexamination of Doctor Currie was uneventful.  It did,  however, provide an opportunity •&>? the further emphasizing of points already made. For example, when queried by Mr. Hamilton as to whether or not a time would not arrive when competition would be desirable, Dr. Currie repliedt . . . . that point was covered by Professor Waines, and 1 agree with him. Competition i s to be judged by what i t accomplishes. I f we get e f f i c i e n t transportation through nonduplication of services, I think there would be very many advantages because we would be enabled to maintain quality of equipment and quality of service. (20)  (19) Ibid., pp. 1157-8. (20 Ibid., pp. 1164-5.  T  R  A  N  A V E R A G E  S  -  C  A  N  D A I L Y  A  D  A  A I R  A I R  L I N E S  C A R G O  F  L  O  W  1952 T R A N S - C O N T I N E N T A L  R O U T E  FROM CONNECTING SERVICES  THRU  MONTREAL  FROM OTHER CONNECTING SERVICES THRU TORONTO  VANCOUVER VICTORIA S.  CALGARY  EDMONTON  SASKATOON  WINNIPEG  TORONTO  MONTREAL  SEATTLE  TO OTHER C O N N E C T I N G SERVICES THRU TORONTO  TO C O N N E C T I N G MONTREAL  SCALE TCA  FEB  12 1953.  SERVICES  -  -  c  IN WIDTH EQUALS 1000 LBS A RCARGO  - 76 Evidenoe of Trans-Canada's President G.R. McGregor" The President of Trans-Canada A i r Lines has been actively connected with aviation since 1932, acquiring a private p i l o t ' s licence i n the year following.  Mr.  McGregor was a pre-war winner of the Annual Webster Memorial precision f l y i n g competition. Prom 1938 to 1945 he was engaged on active f l y i n g duties with the Boyal Canadian A i r Force, f i r s t i n the auxiliary and subsequently, with the outbreak of h o s t i l i t i e s , with the overseas, fighter forces.  Prior to entering upon  active m i l i t a r y service, Mr. McGregor had been for f i f t e e n years an executive of the B e l l Telephone Company, having been d i s t r i c t manager i n Kingston and Montreal during the l a t t e r period of his c i v i l employment . Mr. McGregor was appointed a special representative of Trans-Canada A i r Lines on December 1st, 1945 and General Traffic Manager on February 1st, 1946.  Sub-  sequently, on February 1st, 1948, he was eleeted to the presidency of the firm.  Mr. McGregor was appointed  to the Executive Committee of the Air Transport Association i n 1950.  In 1952 he became President-elect  of that body. For the purpose of the record, T.C.A.'s counsel Mr. O'Donnell was primarily concerned with having Mr.  McGregor adduce evidence as to his firm's attitude towards the a i r freight business and as to what positive steps had been taken at the planning l e v e l to foster i t .  Insofar as attitude was concerned,  Mr. McGregor assured the Board that h i s organization had been both interested and active i n the development of transportation of goods by air since the inception of Trans-Canada's services i n 1937.  As  to the adequacy of his firm's air cargo f a c i l i t i e s , Mr. McGregor pointed out that: T.C.A. has invariably required of the design of i t s passenger a i r c r a f t the provision of cargo capacity. That capacity as provided, i n my opinion, has proved to be adequate. The reason that capacity has remained adequate during a period of some considerable growth i n aircargo t r a f f i c has been the fact that passenger t r a f f i c has also grown at perhaps, an even faster rate . . . and the result has been.that the meeting of the demand for passenger t r a f f i c has automatically provided substantial annual increases i n the capacity of the cargo space made available. It i s furthermore the fact that from the f i g ures we maintain, the u t l i z a t i o n of that cargo capacity has appeared to us to be under no s t r a i n , (21) As to what positive steps management has taken to stimulate a i r cargo development since i t s 1948 T.C.A,  (21)  O f f i c i a l transcript, A.T.B. A i r Freight Hearing, 1953, page 1182. Included i n Appendix IX.  - 77 commencement, Mr. McGregor touched on Trans-Canada's full-time aircargo sales staff, the successive publ i c i t y campaigns and the several cargo rate reductions. In consequence, i t was pointed out, that T.C.A.'s air cargo business was steadily increasing on an economic basis with both short and long term plans finalized to cope with the growth trend. For the short term, Mr, McGregor noted that transcontinental passenger flight frequency was to be stepped up 50$ in the present year, yielding a corresponding increase in freight forwarding facilities.  This added cargo Space, plus that afforded  by the three Bristol freighters dealt with by preceding witnesses, would more than cope with any conceivable aircargo carriage demand in the immediate future. long term planning called for conversion of such passenger-type aircraft as now operated by T.C.A. into freight carriers as they approached obsolescence from the standpoint of appeal to the travelling public. As the witness noted, this plan was identical to that previously instituted by American scheduled operators and which had proven so successful.  In this regard,  i t was entered in the record that by May of 1953, the North Star aircraft operated by T.C.A. would be depreciated to a residual value of #30,000 each. This, plus the relatively nominal conversion costs would yield a freight carrier with minimum depreciation costs, these  ,  - 78 -  normally being a major item of aircraft operation. The release of lorth Stars to freight operation as required was to have been made possible by the delivery of the eight Super Constellations and fifteen Tickers Tiscounts ordered by the company in 1951 and 1952.  As evidenced  by Exhibit 45, these aircraft are to become available for use during 1954.  Their purchase involves an outlay  of #32,000,000 and a doubling of T.C.A.'s four enginea f l e e t , from 23 to 46 aircraft.  Unfortunately, contended  Mr. McGregor, the Constellations were originally planned for delivery in 1953 for Atlantic and Caribbean use. Had they been so delivered, the Bristol freighters would not have been ordered.  The Constellations would  simply have displaced lorth Stars, with the latter thus becoming available for conversion to coach or freight. Strikes and the Korean war situation pushed back the Constellation delivery dates to a point that the T.C.A. t r a f f i c department foresaw a nine to twelve month gap in their equipment program whereby, for that period only, they would be unable to fully cope with air cargo traffic offered.  Hence, in December 1952, the three  Bristol Freighters were ordered for delivery in the f a l l of 1953.  This data to do with the Bristols was,  of course, being introduced into the evidence in an attempt to refute CP.A,  suggestions that they had  been purchased because of rather than in spite of the CP.A.  airfreight application.  - 79 Queried as to the possible effect on Trans-Canada Air lines i f the lieence applied for by CP.A. were to be granted, Mr. McGregor replied: Well, Mr. Chairman, in spite of what has been said at this hearing, I with the greatest honesty feel that the possibility of the division of revenue which would result from the granting of this application would have nothing but the most serious consequences with respect to T.C.A. . . . T.C.A., as I think is usual with air lines, operates on an exceedingly small margin of profit. The 195E figures indicate that T.C.A.'s gross revenue w i l l be something considerably larger than #50,000,000; after taxes and other charges, the net operating surplus w i l l be in the order of f800,000, or something like . . . one and a half per cent. It would obviously take a very small deletion from T. CA. aircargo revenue to create the unhappy situation in which T.C.A. would be operating in the red. It is perhaps unnecessary to note the fact that when T.C.A. operates in the red i t has no recourse but to the publie purse to make good that deficit. (2) Mr. McGregor went on to outline the extent of the Canadian government's outlay and current equity with relation to Trans-Canada Air Lines. The authorized capitalization, funded by the Canadian national, is $25,000,000. The last time monies were so drawn for capital account was five years previous. Since that time T.C.A. has been meeting capital ehages from depreciation accruals.  In addition, an additional $6,000,000  fund has been built up in the form of reserve upon overhaul and insurance.  In consequence, the Canadian people have  a current equity of better than $31,000,000 in their (2)  Transcript CP.A. Airfreight Hearing, p. 1198.  - 80 -  national a i r l i n e .  In concluding his testimony, the  witness reiterated his contention that this large publie investment would be jeopardized i f the proposed duplication of services was permitted, the more so i n view of the fact that #52,000,000 were presently being paid out i n equipment purchases on a basis of reinvestment of accrued reserves, accrued and invested on behalf of the Canadian taxpayer.  Examination by Mr. Brais. In his i n i t i a l questioning, Mr. Brais dwelt at length on the purchase of the Bristol freighters. He produced, at this juncture, a Bristol cost analysis with which T.C.A. was not apparently familiar, f i l i n g same as Exhibit 46. In the process of his examination he elicited the following data: 1. T.C.A. planned to operate i t s all-cargo Bristol aircraft between Montreal, Toronto and Winnipeg and on some of the heavier transborder routes. 2.  T.C.A. depreciated i t s war asset DC-3 aircraft on a four-year straight-line basis and the lorth Stars on a six-year basis.  5. At the time the lorth Stars were converted from 40 to 48 seats, provision was structurally provided for ultimate conversion to 57 seats. Thus f l e x i b i l i t y was provided to facilitate entry into the coach service field when deemed justifiable.  - 81 4.  Mr. Brais insisted that T.C.A. could hare and C-54  obtained war surplus C-46Aaircraft from the U.S.A., such as used hy Slick and Flying Tigers, had they wished to enter the all-cargo carriage field at an earlier date. Mr. MeGregor assured the Board that T.C.A. considered the 0-46 out of the Tquestion from the standpoint of  T.C.A. standards. Sueh surplus C-54sas were available had been priced out of economic usefulness to T.C.A. Examination by Mr. Hamilton. Essentially, Mr. Hamilton dealt with but two pointst 1. When an aircraft is written down through revenue operations in passenger service, should not the benefits of early write-off but continued use b© passed on to the passenger traffic which made the early write-off possible?  His suggestion, of  course, was that the benefits of the early depreciation should not accrue to shippers of freight using the craft in its later years of service, but rather should be passed on to passengers i n the form of reduced fares. 2.  If the combination carriers in the U.S.A. were doing such a good job as regards joint carriage of airfreight and passengers, then "how do we explain the tremendous ton-mile increase of the  - 82 straight freight carriers in the United States? Where did they get their business?" (&) This query was answered by Mr. McGregor as follows; . . . a great deal of i t i s associated with the fact that i t is a policy of the United States Government, as I understand i t , not to require i t s armed services to transport goods of a military character within the boundaries of the United States. A.T.S., for instance, the military transport service, confined i t s activities to beyond the shores of the United States. Such a policy . . . must tremendously increase the internal demand for air transportation of traffic of a military character. Contrary to that, in Canada, the B.C.A.IF. is required and does provide a quite substantial service beyond, transcontinental and otherwise. (4)  Notes  Mr. Wells did not examine Mr. McGregor, nor did the Counsel for the Air Transport Board, Mr. Younger.  (3) (4)  Transcript C.P.A. Hearing, Mr. Hamilton, p. 1219. Ibid., Mr. McGregor, p. 1220.  - 83 P.P.A, President Grant McConachie Recalled" With the completion of the examination of TransCanada A i r l i n e s President G.R. McGregor, i t was announced by Mr. O'Donnell that the T.C.A. case was complete, no further witnesses would be c a l l e d .  Mr.  Brais responded t o the effect that the CP.A. ease was also complete with the exception of one rebuttal witness, Mr. McConachie. E s s e n t i a l l y , the r e c a l l was to enable CP.A. to complete the f i l i n g process of Exhibit 46, the Cost Analysis of the B r i s t o l 170 f r e i g h t e r , previously referred to on page 80 and on the basis of which i t would appear that operations of the B r i s t o l would be unprofitable. Exhibit 47 was also f i l e d at this time at CP.A. 's request i n order that the matter of freight carriage by their northern routes might be c l a r i f i e d i n their favour. Countering the data contained i n T.C.A. Exhibit 30, this new report compared freight ton-mile returns by d i s t r i c t s for 1948 and 1951, evidencing gains of considerable proportions.  These revisions were quite j u s t i f i e d , inasmuch  as they allowed f o r a number of "ceased operations" runs to be deleted from consideration. The f i n a l exhibit, number 48, was also f i l e d at Mr. O'Donnell's request, i t being a map of a proposed route for CP.A.'s freight run v i a Winnipeg, omitting The Pas, and drafted by the Douglas Company i n A p r i l of 1951.  - 85 -  Air Transport Board were most favorable to the cause of Canadian Pacific Air Lines, in essence making an oblique recommendation that the application be granted. However, for reasons that will become apparent in the course of the succeeding chapters, the Cabinet did not aet in accordance with the Board's implied urging.  The  application of Canadian Pacific Air Lines to operate a Yancouver-Montreal a i r freight service was denied, for the reasons set out in P.O. 1953-1755 as appended. The Board report was divided into three parts: (1)  The need for scheduled all-cargo services in Canada. (2) The evidence presented to the Board at a public hearing on February 17th f and following days) into the application to operate such a service, and (3) Board Comments. (1) The two pages that constitute Part (1) have the following statements as an introductory pieiLude: At the present time Canada, although i t is a country i n which a great quantity of air cargo is being transported in non-scheduled services, is one of the few countries of importance in aviation which does not have any scheduled all-cargo services. A certain amount of cargo is carried by Trans-Canada Air Lines in its passenger services but this is carried on a "space available" basis after passengers, mall, baggage and air express have been served and there is therefore no guarantee of delivery at a specified time. (2j In its comments to do with, the need for scheduled all-cargo services in Canada, the Board leaned heavily (1) Air Transport Board's Report to the Cabinet to do with the CP.A. Application, page 1 . (2) Loc. c i t .  - 86 upon the brochure produced by the Douglas Aircraft Company, Exhibit 18.  l o r example, paragraph 2, page 2  of the Board report sumraates pages 14 and 15 of Exhibit 18; paragraph 3 quotes the data set out on page 15 of Exhibit 18; while paragraph 4' paraphrases the subject matter set out on page 12 of Exhibit 18.  These three  examples of data source are dealt with more fully In the comparative illustrations that follow. In the f i r s t instance noted above, paragraph 2 of the Board report states that: 90$ of the production of high unit value merchandise is centred in Ontario and Quebec. This is the type of merchandise which would benefit by . . . scheduled all-cargo service. (3) The related source is to be found on pages 14-15 of Exhibit 18 where i t i s noted that: Concentrated production demands rapid d i s t r i * butlon. 71$ of Canada's manufacturing (is) centred i n less than 1$ of i t s area. . . production of high unit value merchandise (is) even more concentrated. (4) A table then follows showing the percentage production of high unit value merchandise for Ontario and Quebec combined, as related to the rest of the country, with upwards of 90$ constituting their basic share of production for the commodities listed. As regards the second example cited, the following excerpt from paragraph 3, page 2 of the Board report stat (3) Ibid., page 2. (4) Exhibit 18, Appendix III to this report, pp. 14-15.  - 87 Per capita railway express shipments in Canada are far higher than in the United States and amount to 3.2 percent in Canada as compared to 0,5 percent in the United States. Moreover the percentage of national income per capita accruing to the transportation i n dustry in Canada i s substantially greater than in the United States. These facts are strong evidence of a substantial Canadian potential for the development of scheduled all-cargo air servioes . . . (5) The figures "3.2" and "0.5" should, of course, be followed by the words "per capita" rather than "percent." An error in transcription was apparently made in taking this data from page 15 of the Douglas Company's Exhibit 18.  Illustrating their contentions with graphical pa-tray-  als, the Douglas report goes on to state that. (These) comparisons of per capita railway express shipments and transportation charges between Canada and the United States is ample evidence that the Canadian merchant recognizes the advantages of swift transport. , .(6) The third example, as noted at tae outset, to do with paragraph 4, page 2 of the Board report states: In an expanding economy where there is a high demand for capital particularly for use in th© development of natural resources, f l e x i b i l i t y and speed in transportation are of great importance. . . . air lines require less in the way of tied up capital as compared to other forms of transportation . . . (7) The paralleling source i s to be found on page 12 of the Douglas broehure, Exhibit 18: An expanding economy demands a flexible transportation system. During periods of industrial expansion funds available for capital expenditure are in great demand . . , When much of the economy is based on the tapping of unknown (5) Board report, loc. c i t . (6) Exhibit 18, op.cit.,p.15. (7) Board report, loo. c i t .  - 88 quantities of resources . . . i t is highly desirable to have a flexible transportation system. . . . In view of the above factors and the comparison of r a i l and air investment in fixed f a c i l i t i e s , there is l i t t l e wonder that air transportation has played such an important role in Canada's development to date. (8) Passing oh to Part (Z) of the Board report, we come to the A.T.B.'s appraisal of the evidence presented at the hearing. Here again the Board appears to have placed high value on the Douglas survey contained in Exhibit 18 and 18A, the i n i t i a l statement being: In order to arrive at an estimate of potential cargo available on the all-cargo air service applied for, a study was submitted on behalf of Canadian Pacific Air lines limited based upon a price-demand curve prepared from Canadian railway data and application of this curve to less than carload r a i l express shipments between areas served by the proposed route. This study indicated sufficient volume to support a five times weekly service with DC6A aircraft and gross revenues better than $2 millions annually. (9) the lo Board comment was included as to^economic or statistical soundness of the price-demand curve to which reference was thus made and upon which the presumed validity of the traffie and revenue appraisal rests. This matter w i l l be dealt with further in the succeeding chapters. (In particular, see page 159 et sea..) The, Board report further dealt with the Douglas findings with relation to the stimulation of airborne cargo trade between Canada and the Orient through the inauguration of the proposed C.P.A.l. Montreal-Yancouver (8) Exhibit 18, op. o i t . , p. 12. (9) Board report, op. c i t . , p. 3.  - 89 air service.  However, no Board comment was made as to  the extent in probable ton-miles of the potential Orient traffic available to CP.A.  in the foreseeable future.  As in the Douglas report, Exhibit 18, only percentages were noted; no mention was made of the base figures employed. This matter of potential Orient trade with respect to air cargo is dealt with further in a subsequent chapter of this thesis. (See page 173 et seq.) The next matter dealt with by the Board in i t s report to the Cabinet had to do with the market research survey conducted by Gruneau Research, Limited, of Toronto and as summated on pages 50-52 of this thesis.  The Air  Transport Board accepted the methods and results of this survey at their face value, stating that: Established sampling techniques were used in selecting a cross-section of business organizations using express services in Montreal, Toronto, Edmonton and Vancouver areas . . . . This study . . . was designed to show that a substantial majority of these business organizations agreed that a scheduled all-cargo service as proposed by CP.A. was desirable and that i t would result in speedier transportation and deliveries of high unit value goods. (10) Canadian Pacific's appraisal of the fresh fish traffic potential out of The Pas was also put forth for the Cabinet's information without Board comment as to i t s validity.  However, note was made that T.C.A. had queried  this claim as to fish t r a f f i o , having contended that the possibility of generating fish or other traffic out of fhe Pas was fantastically remote. (10) Loc. c i t .  - 90 The eight page Board report was roughly divided into five pages dealing with C.P.A.'s arguments why they should have their application granted, two pages outlining T.C.A.'s opposition, and a final page of Board comment. As for the arguments i n opposition by Trans-Canada Air lines, these were set out briefly and in most cases coupled with the CP.A. refutations put forth at the hearing.  For example, where T.C.A. pointed out that  they planned on converting North Star aircraft to freight carriage as required and as made available by acquisition of new airplanes now on order, CP.A. countered that depreciated fleet units should not be used to make possible reduced freight haulage rates. T.C.A. had shown, as noted on page 77 of this report, that the H 0 rth Stars are currently carried on the books at their residual value of #30,000 each. This amount, plus $175,000 per aircraft conversion costs for freight use, yielded an airplane in virtually the same class as the CP.A. DCC-A's, purchased at a cost of $1,600,000 each.  CP.A.  contended, and the Board reported without comment, that the benefits derived from the continued use, of these fully depreciated craft should be passed on to the passengers, rather than to the freight shippers. Note was made of T.C.A.'s progressive stepping down of i t s cargo rates over the years. However, as for the most recently proposed drop, the Board commented that  - 91 -  "The evidence raised some doubt, however, as to whether or not these proposed T.C.A. rates would actually cover allocated costs of operation for its present type of service." ( l l ) The T.C.A. claim that i t s revenue position would he seriously affected hy the CP.A. service was alined with the applicant's rebuttal to the effect that the revenues affected would represent only a small part of T.C.A.'s domestic commodity revenues which in their entirety represented but 3.8$ of T.C.A.'s total income. As for Professor Waines and Br. Currie, the Board allotted one paragraph to their contributions, briefly noting Professor Waines' contentions relative to our need of economy rather than speed in transport in Canada plus high equipment utilization to keep down unit costs. With further reference to Professor Waines, the Board commented: "He expressed the opinion that because of these principles the application of CP.A. should not be granted but admitted that he had made no special study of air cargo in Canada and that his conclusions were based on information supplied to him by T.C.A." (12) The Board Comments then followed.  The Board stated  that i t was "satisfied . . . that . . . a substantial potential for scheduled air cargo service exists in Canada; and that scheduled all-cargo services should be set up to develop this potential." (13) (ll) Op. c i t . , p. 7. (12) loc. c i t .  (13) Op. cit.,  - 92 The Board admitted that "there will always he a large volume of air cargo which will continue to move in aircraft primarily used for the transportation of passengers ana mail . . . " (14)  However, the Board  felt there is both room and need for the operation of scheduled all-cargo flights in aircraft specifically designed for that purpose. In the estimation of the Board, "Canada has already fallen behind other countries i n this f i e l d .  In the United States sched-  uled all-cargo transcontinental air services are already numerous and continue to grow." (15)  As to  the rather dubious success of the all-cargo operators in the United States, an entire chapter is reserved for discussion of the matter subsequently in this report. Ho mention was made in the Board report to the Cabinet of the succession of mergers and liquidations of U.S. air cargo firms, as will be dealt with in the above mentionned succeeding chapter. Efor was mention made of T.C.A. Ts plans for supplementary a l l cargo service i n the Board's concluding comments. As noted on page 85, the Board appeared to obliquely urge the Cabinet to grant the CP.A.  application throughout  its report, contending in f i n a l summation that: Although during the development stage such a service may result in an operational loss, i t is considered that with proper promotional backing i t should be self-sustaining within a reasonable time and eventually profitable. (16) (14) (15) (16) l o c . c i t .  - 93 The Cabinet Decision The Committee of the Privy Council did not come to its final decision with respect to the Canadian Pacific application with any great expedition. "been concluded March 7th, 1953.  The hearing had  The Board report was  submitted to the Cabinet by June 1st, inasmuch as the Globe & Mail of Toronto editorially commented on June £Oth as follows: On June 11 i t was reported from Ottawa that among other business waiting the return of Ministers from the Coronation were two transport items: Consideration of the protest . . against the award of a 7$ increase i n freight rates to the railways, and a decision upon a secret report sent to the Cabinet by the Air Transport Board concerning the Trans-Canada Airlines monopoly in i t s f i e l d . (17) The return of the Ministers did not bring the decision indicated, i t being announced subsequent to their return that the matter of the CP.A.  application wcdLd  not be finalized until after the federal election then set for the summer's end.  lor was a decision rendered  immediately following the Liberals' successful return to office.  It would appear that the Cabinet itself was not  at a l l of one opinion as to whether or not the licence should be granted CP.A.  Hence, i t was announced that  a further submission would be required of the applicant and principal intervener, said submission to be made to the members of the Cabinet i t s e l f .  This Cabinet hear-  ing was set for Friday and Saturday, October 30thf;and 31st. As before the Board, CP.A. (17)  was represented by Mr. Brais  Globe & Mail, editorial entitled "transport Back in politics," June 20th, 1953.  7hm Ccsalt-tee « f th* ^ J y y B w i n s i l «tft not <wr* to l t » final &mi®tm  sith r « r « # t to t>* Ocnediaen  «^pll».5itt«D wttti «By  greet  l»«oa cor.«ltal«r« ;s«ma& 7*b+  eacpeAltion.  1W^,  aoifte  Tn# turo?toph^A  fhm 3© a * r«f«art wan  imiaslttoA to tb« cabinet by Jane 1 s t . inaentieH ar- the Slofc* & k a i l of ?or mt© «0lt tar t a l l y ct-zmmteA  <;ta ,7*m®  Mm 11 I t  reperte-;:. fror.- - ta«ra t.V.t refetrn of 'llnistara f r a n t * » aerostation «asr« two trs»fc~  er?er.g cf^er ^aosneae m i l l e t port  itmmz  C^n&tft«retlon ol th» protect . *  r«*t«€* t o tHr? r a t i wage* *# * f#$lsS0R upca"* ewrrt rewwt e«et to t * » ca»J**t hf the A i r A l r l i r * © :«>"<Rxrty In i t s f l @ l S »  117)  Th« * * t « r of t f » nnist<ar* 658 not fertrvy th© S@* •teloit M i M t i d , i t  swocotwod mhmmmt  T©tam that th# r - i t l * of tha C . m  to tfttf?  pltervtlm trtna  not fc« fi»«aijt0& tastil « f t « ' *h» i'«fl'-r«3 oloctlon t&ui #tfc ftw tb» mmmm*e e a i . Ear ws» a AaeMeft r « N M r « i  offle*.  It veolft «3Sf*ar t2»t th* SaMsnt I t s e l f ^a* not  * t a l l of ca* <^>tttl<H5 m to t.-f-atJw or not the liees-«* etoulft b« graft tofi C.?.A. H « e * , i t wan «i§s«imi45& tf&t * Sterthor OTtatl»*ltt» woolA be ?&<gulr«ft of th» sp^tisaef  «M %  t:rtr<<rtj>al latarvanar, @ai8 enib&lc f?io» to b» tsaft*  ttm a ^ f e t i * ef th» er.lMt 5 t s « l f .  rrtffcp to toft** th* 'feoxA, tssg mm s*t fey  llfl  fhJe Calinot h*sr-  *t£ f aturdsg-. "et: bar ir-th 5*:.*A. «M  Ti?3gt««mi## tsy  rod am** Ix-ai*  Clfl*» S mil* oastc*!*! « t t ! t l « « "Transport Back in -olitlos'; June 20th, 195S.  - 94 and T.C.A. by Mr. O'Donnell. On the night of October 28th, two days before the Cabinet hearing, Prime Minister St. L-aurent spoke at length on the subject of the CP.A. application in an address before the Air Industries and Transport Association i n Ottawa. Mr. St. lanrent was quoted in the Montreal Herald of October 29th, 1953 as follows: When Trans-Canada Air Lines was established in 1937 i t was conceived as a mainline operator on an east-west basis. On the other hand, private operators working on a north-south basis were considered feeder lines. Well, development has been so great that the concept is no longer adequate. Many of the lines operated by private concerns are now so active that they too must be regarded as main lines. And conversely, some of the lines operated by T.C.A. have become i n fact, feeder lines. Thus, the original idea of retaining the mainline type for T.C.A. only and the feeder-line type for private operators only has to be reconsidered. . . . If we are oonvineed that both the industry and the nation would be better served by granting another license now, then of cotese we will make that recommendation.  Let me assure you that whichever way the decision goes now i t will not i n the long run be a decision in favor of the perpetuation of monopoly conditions. I have stated many times that the government to which I belong believes as a general rule the public can be best served under competitive conditions . , . (18) The foregoing wrlteup was captioned, "T.C.A. Air Monopoly Believed lear End," The address was similarly interpreted by the Toronto Star and by the Toronto Globe (18) Frank Swanson, Herald Resident Correspondent, Ottawa, reporting in Montreal Herald, October 29th, 1953.  - 95 and Mail.  The former captioned i t s report on Mr, St.  Laurent's remarks with the statement, "Airline Monopoly to End," and the latter with, "St. Laurent Promises Ottawa Won't Keep Monopoly on Airlines." (19) The Cabinet hearing was, of course, a very restricted affair insofar as attendance of interested parties was concerned. As noted in the Globe and Mail of November 2nd, 1953, "It has been known that there have been two points of view on the question among ministers. Mr. St. Laurent said he expects that eventually the cabinet will reach unanimity."  In this regard, even the oral plead-  ings of the applicant and intervener were apparently not conclusive i n their effect upon the ministers' conclusions. It was decided that the Cabinet would receive written memoranda to supplement the oral presentations they had heard. These written memoranda were to be in the hands of the cabinet ministers during the week following the hearing i t s e l f .  Neither the Prime Minister nor the spokes-  men for the competing airlines made public details of the presentation to the Cabinet. However, as noted on page 85, the Cabinet made public i t s decision and reasons for same on November 10th, 1953.  The application of CP.A. was denied. News-  paper comment is best summated by the following editorial and news story headings taken from papers across the land:  (19)  Toronto Star and Toronto Globe and Mail for October 29th, 1953.  - 96 (1)  "Cabinet Repudiates Air Transport Board" Vaneouver Sun Newspaper November 17th, 1952. Editorial,  (2)  "Government Confirms T.C.A. freight Monopoly" Toronto Telegram Newspaper November 12th, 1953. News story - Norman Campbell.  (3)  "Enterprise in Chains" Toronto Telegram Newspaper November 18th, 1953. Editorial.  (4)  "Socialism Label Applied by Drew to Government" Globe and Mail Newspaper. November 17th, 1953. New story - Harvey Hiekey.  (5)  "Ottawa Continues Spoon-fed Air Monopoly" Vancouver Daily Province November 13th, 1953, Editorial. The Cabinet had continued the T.C.A. monopoly in the  face of quite positive opposition from both the Liberal and Conservative press and despite the urging of i t s own Air Transport Board to do otherwise. The popular eoncept of the situation involved is best portrayed by the Norris cartoon appearing on the following page, which had been published in the Vancouver Sun for November 6th, 1953. Essentially, the Air Transport Board had sought to obtain competition in the transcontinental f i e l d of air t r a f f i c , employing the arguments set out in the Douglas Aircraft Company's report to support their case before the Cabinet. The Cabinet, on the other hand, listened with apparent  - 97 -  conviction to the refutation of the data contained in the Douglas report, as made by Mr. O'Donnell, the T.C.A. counsel.  They listened with similar conviction to the  statements of Mr. McGregor as to the activities of his orown corporation to date and to his plans for its future.  As opposed to the Air Transport Board, they,  the cabinet ministers gave heed to the warnings of Prof. Waines and Dr. Currie as to the desirability of avoiding the pitfalls of past railway experience, as by them outlined^in the A.T.B. hearing transcript and as recapitulated at the cabinet hearing by Mr. O'Donnell.  The  immediately following chapters of this report constitute an expansion upon the evidence upon which, presumably,  Chapter T l Air Cargo Development in the U.S.A. The commercial development of air cargo t r a f f i c , as distinct from the carriage of mail and express, was strictly a post World Wc II phenomenon, insofar as i t s transfer between metropolitan terminalspairs was concerned.  The military air l i f t s of World War II had  pointed up the feasibility of freight carriage in plane-load l o t s , and had enabled large scale underwhen  takings in this regard at a time_*ksrt unit costs were a minor consideration. This chapter is divided three sections: 1. Covering development of air freight carriage up to the time of the C.A.B. Air Freight Decision, decided July 29th, 1949. (010 et al.) 2.  Covering U.S. air freight experience up to the end of the A.T.B. Hearing in Ottawa, March 7th, 1953.  3.  Covering developments in the a i r freight industry in the U.S. between March 7th, 1953 and November 10th, 1953, the date of the Cabinet decision, hence encompassing such data as would have presumably been available to the ministers prior to reaching their decision.  U.S. Air Freight Experience - 1945-1949. As noted in the i n i t i a l paragraph above, the war provided the proving grounds for air cargo development. For example, in June of 1942, American Airlines provided 12 aircraft to haul coal, TNT, nails, lumber and other materials between Edmonton and Alaska. The same firm conducted 9,440 Atlantic crossings with army freight. Commercial application of the experience thus acquired  - 99 was facilitated at the war's end by the availability of surplus transport aircraft and trained orews. The former were available from the military at prices representing but a fraction of their original oost, while the latter sought, i n considerable numbers, to remain actively engaged in the f i e l d of aviation no matter what the obstaeles. In consequence, a steady succession of air cargo carriers were incorporated following the cessation of h o s t i l i t i e s , including the Hying Tiger Line whioh commenced operations in 1945 and Slick Airways, which started haulage in 1946.  naturally, considerable opposi-  tion was raised by the certificated scheduled carriers. In consequence, th© C i v i l Aeronautics Board prepared to bring the matter of this new competition to a hearing. To provide for interim operations prior to the hearing, Section 292.5 of the Board's Economic Regulations was promulgated to give tempxary exemption from certification. The Air Freight Case (Docket 810 et a l . E-3085) actually got under way late in 1946, but did not reach a final conclusion until July 29th, 1949.  This initial  air freight ease involved 14 applications seeking certificates and amendments of certificates of public convenience and necessity under section 401 of the C i v i l Aeronautics Act of 1938, as amended,. The proposals were limited to carriage of property between points within continental United States.  - 100 In the docket, "freight" i s distinguished as property moved i n equipment devoted primarily to property; "Express" to property transported i n equipment scheduled primarily for passenger transportation. Of the multitude of prospective operators i n 1945, the number of continuing all-cargo carriers had dwindled to 14 by the time of the hearing's commencement. By the f a l l of 1948 f i v e of these had become bankrupt, and a further three had ceased operations v o l u n t a r i l y .  By the  time of the Board's decision i n 1949 only four were solvent, and these only technically so.  By a three to  two decision, however, the C i v i l Aeronautics Board granted five-year temporary c e r t i f i c a t e s to these remaining firms. These c e r t i f i c a t e s provided for the following services: The f l y i n g Tiger Line, Inc, - granted blanket area, rather than point to point, coverage of that portion of the U.S.A. served by United Air Line- s and Northwest Air Lines. S l i c k Airways, Inc. - granted similar area coverage of that portion of the U.S.A. served by Trans-World A i r l i n e s and American Air Lines, Inc. U.S . A i r l i n e s , Inc. - granted similar area coverage of that portion of the U.S.A. served by Eastern Air Lines, National Air Lines, B r a n i f f , etc., hence a north-south operation as opposed to the basically eastwest make up of the two foregoing c a r r i e r s . Airnews. Inc. - granted rights to " > continue i t s experimental operation using combined truck-air services i n the short haul f i e l d . Limited to San AntonioBrownsville area. (1) fl)  Air Freight Case, C.A.B. Reports, Yol. 10, Economic Cases, Jan.-Nov. 1949, page 572 .  - 101 smallest  Airnews, Incorporated was the ^minority operator. The wholly owned subsidiary of a newspaper, i t conducted i t s experiments for a period, then voluntarily ceased operations,  U,S. A i r l i n e s , Incorporated, was the third  smallest i n i t s proposed scope of operations*  However,  i t managed to incur t o t a l expenses of approximately 80$^ per ton mile for every ton mile of freight c a r r i e d , with a gross revenue per ton mile of approximately 20^* During i t s i n i t i a l two and one half years of operation, U.S. A i r l i n e s exhausted 5/6 of i t s entire o r i g i n a l capit a l i z a t i o n of over three m i l l i o n d o l l a r s .  The t o t a l  loss for this period was $2,557,938.  U.S. A i r l i n e s  (2)  has been through three receivership and reorganization proceddings.  Its creditors are currently i n process of  f i n a l l y winding up i t s a f f a i r e . S l i c k Airways, during the two and three quarter years preceding the GAB A i r Freight Case deoisioh, exhausted e/7ths of i t s c a p i t a l i z a t i o n , a t o t a l loss of $1,931,242. Flying Tigers, during three and one half years of exempted operation, exhausted l/2 of i t s c a p i t a l i z a t i o n , for a t o t a l loss of $1,350,000. During the process of registering these losses, the all-cargo operators had accomplished l i t t l e more than diverting t r a f f i c from the existing, c e r t i f i c a t e d scheduled operators.  Forecasted new t r a f f i c sources^such as in the (2)  loss figures on this page from E. Smythe Gambrell, 'Position of the Certificated A i r Carriers i n the CAB Freight Proceedings," law and Contemporary Problems, Duke University, Y o l . 15, No. 1, p. 11.  - 102 fields of fresh f r u i t , vegetables and sea foods, had simply not materialized up to the time the CAB- made i t s decision in 1949 to grant five year temporary certificates to the four aforementioned carriers. Uor were the certificated passenger carriers dormant in their approach to air freight up to the time of the 1949 decision. American Airlines had filed i t s f i r s t air freight t a r i f f on October 1st, 1944, with an average yield of 40^ per ton mile against then current 70$/ per ton mile air express rates. suit in 1945.  T.W.A. and United followed  American Airlines, and its predecessor  companies, Robinson Aircraft, Colonial Air Transport and Embry-Riddle, had pioneered each step in the a i r freight f i e l d , commencing with their Initial efforts in 1927. A continuing research program on American's part culminated in the formation of Aire ar go, Incorporated in 1941, i n i t i a l l y a planning group composed of the "big four" U.S. trunk line operators, having as i t s objective the co-ordinating of the orderly development of a i r freight haulage by i t s member operators. With the outbreak of war a l l firms became contract carriers of a i r freight and passengers for the military, deferring commercial air freight development within the United States until the war's end.  The war over, equipment and crew availa-  b i l i t y enabled a general reduction of a i r express rates in 1946 to 59$z/ per ton mile, together with a cut in the air freight rates by U.A.I., T.W.A. and American to a  - 103 -  scaled rate structure, varying from 15 to 26.5</ per ton mile. As noted on page 99, S l i c k Airways commenced "business i n 1946, f i l i n g rates based on an 18/ per ton mile By July of 1947, by a series of rate cuts,  return.  a l l caniers were receiving approximately 13$/ per ton mile.  In September of that year, A.A.L., P.O.A., T.W.A.  and TJ.A.I. f i l e d specific commodity t a r i f f s y i e l d i n g a basic 13$/ per ton mile.  The non-certificated all-cargo  carriers f i l e d for suspension of these t a r i f f s .  Their  petition was denied, but a general rate investigation was  ordered by the CAB.  This general investigation was  to be spread over the next three years and involve three d i s t i n c t hearings, the f i r s t to do with specific commodity rates, the second to do with d i r e c t i o n a l rates and the t h i r d to do with accumulation, assembly and distribution rules.  These comprise Docket 1705 et a l .  The l a t t e r two are included with the report i n hand as Appendix YI. The need for the investigation is best i l l u s t r a t e d by the following figures, bearing i n mind that the rate of return had sunk to 13c7 per ton mile. Table  S l i c k - 1948  5(a).  A i r c r a f t op. expense  Other op. expenses  9.28$zf  7.66c/  Plying Tiger - 1948 1^.52$/ (*Per ton-mile.)  7.05c/  (3)  Total* qper 16.94^  20.57?7 (3 J  / r 7 S  C.A.B. Eeports, Yol. 11, Uo. 21, A i r Freight Rate Investigation, Directional Rates, p. 235.  - 104 Hence, Slick and flying Tigers were s t i l l losing money on their cargo eperations at an alarming rate, further, the government subsidized lines comprising the nation's 16 trunk line operators were also losing money. A l l save one reported a loss for 1948.  Only in the  United States could such a prolonged dissipation of capital, in the process of a rate war, continue for so long a period. As Adam Smith stated, "In public, as well as i n private expenses, great wealth may, perhaps, frequently he admitted as an apology for great folly."(4) However, the 0.A.B. finally issued i t s freight Rate Decision (Order E-1639) placing a floor beneath the general rate structure.  The minimumcharge per ton mile i  was set at 16/, with a drop to 13/ permitted for hauls over 1000 miles in length. By 1949, the average return for Slick and flying Tigers had risen to approximately 17/ per ton mile, and that for the principal scheduled carriers to 19/. Directional imbalance in traffic flow brought about the second phase of Docket 1705 et a l . , concerning directional flow rates.  Principally to foster back hauls  from the west coast of agricultural produce, the Board authorized directional rates of not less than 60$ of the minimums set in Order E-1639 above. Aside from the profits or lesses involved, these developments stimulated air cargo carriage.  U.S. domesti  (4) Adam Smith, The Wealth of Nations. 1776, J.M. Dent & Sons, London, Book IV, Vol. 2, p.22  - 105 air freight  c a r r i a g e amounted t o o n l y 22 m i l l i o n  m i l e s i n 1945. 1946;  128  I t jumped to 83 m i l l i o n t o n - m i l e s  million  ton-miles  i n 1947.  The  b r o u g h t f u r t h e r demands f o r r a p i d c a r g o  ton-miles.  During  temporary c e r t i f i c a t e s  would f i n a l l y become  No  i t was  had sure  the g r a n t i n g of  t o the f o u r  remaining  presumed t h a t the  industry  stabHized.  A i r F r e i g h t Experience  - - 1949  An  a i r f r e i g h t s i t u a t i o n i s , of  anomaly o f the  U.S.  - March,  c o u r s e , the f a c t t h a t the t r u n k l i n e , are s u b s i d i z e d by vency with  no  246  c a r r i e r was  However, w i t h  a l l - c a r g o f i r m s i n 1949,  while  of  the A i r F r e i g h t Rate Case  concurrently.  of i t s ultimate status.  U.S.  war  the exempted p e r i o d of a l l - . c a r g o o p e r a t i o n s ,  slowly forward  f i v e year  Korean  (4)  the A i r F r e i g h t Case and gone  in  shipments,  y i e l d i n g a t o t a l d o m e s t i c movement i n 1951 million  ton-  scheduled  carriers  t h e C.A.B. to m a i n t a i n r e a s o n a b l e  the payments b e i n g made t h r o u g h  the a l l - c a r g o c a r r i e r s  subsidy whatsoever.  Losses  o f t h e f o r m e r come f r o m the  the P o s t  as c e r t i f i c a t e d I n 1949  solOffice, get  on the p a r t o f t h e l a t t e r  d i r e c t f r o m the s h a r e h o l d e r s p o c k e t ; taxpayer.  n o t be c o r r e c t to corclude t h a t t h e  (4)  1955.  l o s s e s on the  are  part  However, i t would  scheduled,  S t a f f S t u d y , Domestic A i r Cargo F o r e c a s t , C.A.A., U.S. D e p t . o f Commerce, W a s h i n g t o n , O c t o b e r 1952. page 7.  - 106 - (a) passenger c a r r y i n g o p e r a t o r s had been l o s i n g money t o the e x t e n t experienced by t h e a l l - c a r g o f i r m s d u r i n g the p r o c e s s o f the f r e i g h t war.  A d m i t t e d l y , on a f u l l  freight  c o s t b a s i s , A r e v e n u e s were l e s s than e x p e n d i t u r e s . F o r example, U n i t e d A i r l i n e s l o s t two m i l l i o n d o l l a r s on a i r cargo i n 1949 on an a l l o c a t e d c o s t b a s i s although the c a r r i e r p i c k e d up $200,000 based on s t r a i g h t o u t - o f pocket c o s t . (5) S i n c e t h e scheduled a i r l i n e s a r e p r i m a r i l y passenger c a r r i e r s , much of t h e i r eargo volume i s h a u l e d i n space t h a t would otherwise be empty.  Hence,  d u r i n g t h e development p e r i o d a t l e a s t , i t i s not n e c essary f o r them t o r e c o v e r t o t a l c o s t s .  However, as t h e  volume i n c r e a s e s , i t becomes necessary f o r t h e a i r l i n e s to p l a c e a d d i t i o n a l a l l - c a r g o f l i g h t s i n o p e r a t i o n .  By  so d o i n g , t o n - m i l e c o s t s w i l l i n c r e a s e u n t i l the f r e i g h t s e r v i c e i s absorbing i t s f u l l share of t h e t o t a l common costs. As f o r subsidy support o f scheduled c a r r i e r s , i t c e r t a i n l y p r o v i d e d a b a s i s f o r complaint on the p a r t o f the u n s u b s i d i z e d a l l - c a r g o o p e r a t o r s .  However, s a i d  b a s i s i s s u p e r f i c i a l and unsound i n a c t u a l i t y . The c u r r e n t U.S. budget f o r a i r l i n e subsidy (1954) amounts to 80 m i l l i o n d o l l a r s .  The m a i n l i n e o p e r a t o r s , such as  American, r e c e i v e o n l y a m i l l i o n d o l l a r s each approximately ton of t h i s sum, over and above t h e i r 45/ p e r ^ m i l e m a i l p a y . (5)  U.S. lews and World R e p o r t , I n t e r v i e w w i t h W.A. P a t t e r s o n , i s s u e f o r October 6 , 1950, page 16.  - 106 - (b.) This 45^ per ton-mile mail pay is considered compensatory Only for services rendered, not as subsidy.  Shv.»,  ^four  million dollars i n subsidy go to then b i g four" scheduled operators, the remaining 76 m i l l i o n being divided, 50 million to the overseas, international operations and 26 Therefo re, million to the local-service domestic l i n e s ,  Thac^the  all-cargo operator's contention that his paralleling competitor was undercutting his services through subsidy advantage is not j u s t i f i e d inasmuch as the all-cargo firms operate primarily  into metropolitan centres,  offering v i r t u a l l y no l o c a l service f a c i l i t i e s t o o f f line points insofar as common carriage is concerned. The all-cargo  carriers continued to lose money on  their domestic freight operations despite the supposed s t a b i l i t y imparted by the granting of temporary c e r t i f i cates i n July of 1949.  The Korean war, however, enabled  the two prime operators, S l i c k and Plying Tigers to p a r t i a l l y recoup their domestic common carriage losses with a landslide of m i l i t a r y revenue. 1951,  For example, i n  Flying Tigers, for the year ending June 2Oth,  reported a net  overall p r o f i t of one m i l l i o n dollars.  Revenues had totalled 15.5 million d o l l a r s , composed of 3.5 m i l l i o n from common carriage of f r e i g h t , 4.5 from rentals,, charters and service sales, and 7.5 m i l l i o n  - 107 dollars from Pacific a i r l i f t for the military.  Domestic  freight was s t i l l being hauled at less than cost, but operations other than common carriage of freight were making up the deficiency. (7) Slick Airways also made money i n 1950 and 1951 as a direct consequence of the Korean war.  A tabulation from  their 1951 Annual Report is reproduced as follows: (8) Table 5(b) 1946 1947 1948 1949 1950 1951  Profit  #506,608 352.979  lose #861,259 444,475 144,019 343,352  loss Balance |  861,259 1,305,754 1,449,753 1,793,105 1,286,497  933,518  The 1951 Slick Report noted that six DC-6A aircraft for cargo carriage had been provided for, at an outlay of over seven million dollars.  Three had been delivered,  with the remaining three scheduled for acceptance i n 1953. The company had carried 67,890,612 ton-miles of domestic air freight i n the year covered by the above noted report, equalling one-fourth of the total domestic freight hauled by a l l carriers combined. A copy of this 1951 Slick Airway Annual Seport accompanies the library copies of this thesis as Appendix 711. Copies of the 1952 reports for Slick and Plying Tigers are included as Appendix T i l l and Appendix 12. For 1952, despite revenues from transportation services of 11 million dollars, Slick lost #3,749 operationally. (7) Plying Tigers Annual Report, Year ended June 30, 1951, Statement of Income and Expense, page 24. (8) Slick Annual Report for 1951, Appendix VII, p.15.  - 108 During that year Slick had transported goods to a domestic total of 67.7 million ton-miles.  However, a l l of Its D06  aircraft were devoted to overseas work, not assigned to domestic haulage where rates continued to bring returns below cost of service rendered.  In A p r i l , 1952, the O.A.B.  had authorized a 10$ Increase in freight rates in the domeistio f i e l d , the f i r s t upward movement since the beginning of the rate war.  Further, application was  made i n that year to the C.A.B. for authorization to carry mail and express, indicative of the trend towards the combination carriage principles of the established, passenger carrying operators. Fortunately for Slick and Flying Tigers, the Korean war had placed a premium upon the sale of used aircraft or aircraft ordered but not yet delivered.  In conseouencS,  Slick profitably disposed of one C-46 aircraft and one D0-6A during the year.  Quoting from their report:  For the year 1952 the Company earned $454,328 after taxes, equivalent to $1.03 per common share. These earning were derived solely from the sale of one C-46 aircraft and the prototype DC-6A aireraft. A loss of #3,749 was incaured from the operations of the Company. In addition to selling the aireraft mentioned above, the Company contracted to sell another DC-6A early i n 1953 for a profit of approximately $650,000 before taxes. In deciding to sell these aircraft your management realized that the fleet capacity would be reduced and the profit from operations thereby reduced. However, the advantages of a capital gains tax as compared to ordinary income taxes clearly indicated the advantage of these sales . , .  - 109 The operating lose in 1952 is not, in the opinion of your management, indicative of any "basic trends nor of the profit potential of the Company. It does, however, point to the necessity of obtaining a more favorable relationship between air freight rates and costs . . . . During 1952, your Company operated close to the limits of practical capacity. As a result, cost increases f e l l directly on profitability . . . . (9) In assessing the merits of the CP.A.  application,  i t i s to be presumed that the Air Transport Board had these various Annual Reports available for review. In this regard, the Annual Report for the Plying Tiger line for the year ended June 30th, 1952, must have been the subject of some contemplation.  Canadian Pacific  Air Lines had contended in i t s testimony that the a l l cargo operators were prospering in oonseqtsiee of their domestic freight operations alone. CP.A. proposed to offer a similar common carriage of freight-only traffic between Montreal and Vancouver, and seriously contended that the venture would be profitable and would stand alone. The 1952 Plying Tiger Report referred to above indicates that only 20$ of the firm's revenues could be accounted for by the common carriage of freight for the year under review.  As for Slick, a l l four-engined  equipment was assigned for overseas service, primarily connected with the military.  To do with the Pacific  a i r l i f t alone, the company carried 20,400 passengers (9)  Annual Report, Slick Airways, Appendix VIII, (1952), page 2.  -  110  and 7 , 6 0 0 , 0 0 0 pounds of material across the ocean to the Orient or return.  Quoting from the 1952 report:  In the coming year the Company is undertaking a contract with the lavy to provide a daily transcontinental trip for lavy cargo to parallel the Company's Route 1 0 0 . The lavy has found that suoh transportation provides i t with fast service at rates competitive with surface carriage because of the volume movement entailed. It i s expected that this operation w i l l increase the domestic airfreight volume carried by the Company by approximately 60$.  In addition the authority requested for carriage of air mail and air parcel post, i f granted will add materially to volume. Today the Company i s one of the largest, i f not the largest, single civilian contributor of a i r l i f t to the Armed forces. It is looking forward to being able to report that i t is also the largest airfreight carrier. (10) During the year flying Tigers had made a profit before taxes of $ 1 , 4 4 6 , 6 5 5 on their combined military and civilian operations.  In addition, they had made  a profit before taxes of $ 1 , 2 0 4 , 0 4 0 on the sale of equipment and from miscellaneous income such as derived from overhaul contracts obtained from the army and navy. The instability of dependence upon war profits is recognized in the following quotation from the report: The Company's net income in the fiscal year ended June 30th, 1952 was $ 1 , 5 5 6 , 9 6 8 . While this amount exceeds that of any other year in the history of the Company, i t must be remembered that we are operating in a "war economy" (10)  Annual Report, flying Tigers, 1 9 5 2 , Appendix IX, pages 2 and 3.  -  I l l -  and we must prepare for adjustments in the future as the country is able to return to a peace economy. Intensive development of civilian airfreight and contract operations is necessary to replace the military work as i t may phase out. (11)  C-46 Flying Tiger Freighter U.S. Air Freight Developments Subsequent to the A.T.'B. Hearing but Prior to the Cabinet Decision. As indicated i n the paragraph above, the military work was commencing to phase out. C.P.A. had had i t s best year financially in 1951, with a net of $1,100,000. Results for 1952 showed a net of #364,000. (See page 16)  These profits were, of course, a direct result of  the Korean war and the C.P.A. Pacific military a i r l i f t . Such bonus operations commenced to disappear in the latter part of 1952 and completely departed from the aviation scene in 1953. (11) Ibid., page 15.  - 112 Reviewing the Annual Report for the flying Tiger line for the year ended June 30th, 1953, as issued in October of that year, the following points are noted. Transportation revenues amounted to 25 million dollars, covering both domestic and overseas military and civilian transportation without specific breakdown. On this revenue, a net op/er ating income of $700,000 was realized.  The operating revenues included approxi-  mately three million dollars from the Havy contraot noted on page 110.  This transcontinental freight oper-  ation had been taken from Slick through an undercut bid of 73.9$/ per 0-46 aircraft mile.  As forecast in  the quotation on page 110, this contract had increased flying Tigers* air freight business by nearly 60$ in total volume. However, i t i s noted in AY1ATI0I WEEK that the firm's domestic freight on a non-military basis actually f e l l off appreciably during the year under review. (12) Maintenance and rental services showed up as an increasing revenue source, one Air force contract alone for maintenance of 100 0-46 aircraft amounting to more than $2,500,000 gross. (13) Long term lease of four D0-6A aircraft to northwest Airlines for seven years, with option of a further three year extension, was announced. (14) (12) (13) (14)  This seven year  Aviation Week, McGraw-Hill, ETewTork, March 2nd, 1953, page 32. flying Tigers* Annual Report, 1953, Appendix IX. Ibid., p. 18.  - 113 period represents a gross to Flying Tigers of nearly nine million dollars. During the year most profitable operations -wore c one e rne d •engagod in to de^wi4;hKthe sale of equipment.  The  following resume i s quoted from the Statement of Income Profit on sale of operating aircraft #192,871 Profit on sale of purchase contract rights for 2 DC-61 aircraft to C.Itoh & Co. for use hy Japan Air lines on their proposed trans-Pacific service $1,100,000 A further #286,651 was acquired as non-operating profit, representing the excess of insurance proceeds over hook value of an aircraft destroyed in a crash. Despite these profits, the Annual Report indicates was  at several points that the management^ie- most ooncerned about  £o de, with^the future, for example, the President's report states: With the cessation of hostilities in Korea we are moving out of a "war economy." We can anticipate a phase out of the air support we have been supplying to the fighting forces. . . The transition may well not be smooth and the Company must be preapred for costly readjustments.. . . The future poses many important and vital problems. Most immediately is the necessity for an increase in airfreight t a r i f f s . . . To compel non-discriminatory airfreight competition, Slick Airways, Inc., and the Plying Tigers have since the elose of the fiscal year petitioned the Civil Aeronautics Board to amend i t s Minimum Rate Order to increase minimum rates 25$, Of major importance, the Temporary C e r t i f i cates of Public Convenience and Necessity held by both the Plying Tigers and Slick will expire by their terms on August 12, 1954.(15) (15) Ibid., page 3.  - 114 Tile requested 25$ freight rate increase was authorized by the Board on November 20th, 1953. Inasmuch as many of the carriers* rates were above the old minimums anyway, i t was calculated that this increase would average out to about 12$.  The rate  rise was made to save the all-cargo carriers from insolvency and made in spite of the protests of the largest combination carrier, American Airlines.  This  firm contended that: Airfreight is in a c r i t i c a l developmental stage with a c r i t i c a l need for volume growth, that volume was developed to a lesser extent than anticipated at the time of themimimum rate order, that American i s adding substant i a l l y to its a l l cargo fleet and that the increase in minimum rates proposed by Sliok would not be consistent with the objective of developing the airfreight volume required by the new capacity. (16) American's mixed cargo-passenger operations yieldy' lower costs and higher revenues. This enables the carrier to hold rates at the lowest possible level, simultaneously boosting volume to f i l l excess plane capacity.  This was the plan T.O.A. was methodically  pursuing by paqgressively dropping its rates over time as capacity became available.  Such an operation as  that proposed by O.P.A. would provide the same service but at higher cost i f the following statement of the Oivil Aeronautics Board is accepted:  (16)  American Aviation, American Blocks Airfreight Tariff Boost, McGraw-Hill, lew York, October 5th, 1953, page 79.  - 115 -  The Board's show-cause order and tentative opinion i n i t s previous minimum rate order 'determined that the proper development of air freight required that minimum rates be based on attainable costs in all-cargo planes, . . This decision obviously must have been among the important considerations i n c e r t i f i c a t i n g several all-cargo carriers . . . for without such a rate basis there would be serious doubt that all-cargo carriers could survive i n comp e t i t i o n with carriers handling a l l or part of their freight in combination planes . . . . The f i n a n c i a l reports of the two major a l l cargo carriers indicate that Flying Tigers are barely breaking even on their scheduled freight operations, while Slick is suffering substantial losses. In the case of S l i c k , at least, It appears that the need for prompt rate r e l i e f is urgent.' (17)  The Canadian Air Transport Board had reported to the Cabinet that "In the United States scheduled a l l cargo transcontinental air services are already numerous and continue to grow." dissertation)  (See page 92 of this  Such was very d e f i n i t e l y not the case.  Admittedly, the volume of U.S. a i r freight t r a f f i c steadily increasing.  was  However, through bankruptcies,  mergers and voluntary suspensions of service, the number of all-cargo firms was steadily dwindling. By 1952, only two of the original fourteen U.S. a l l cargo firms remained.  In that year, as a result of  continuing f i n a n c i a l d i f f i c u l t i e s , these two remaining firms f i n a l i z e d plans for their amalgamation. The proposed merger was approved by the share(17) Loc. c i t .  D  gRING  116  -  THE WASHINGTON'S BIRTHDAY WEEKEND CERTAIN FLIGHTS WILL NOT  C A R G O Zn addition,  AMERICAN AIRLINES  all American  Airlines  OPERATE; Consult American Airlines For Details.  S E R V I C E flights  shown  EAST - MIDWEST  in other  tables carry  cargo  Boston - Hartford - Bridgeport - New York - Philadelphia - Baltimore - Buffalo - Cleveland - Cincinnati - Detroit - Indianapolis - Chicago - St. Louis  •  •  ALL FLIGHTS DAILY A A Unless Otherwise Indicated 856 802 , 8 5 2 190 192 Ex Sa| ExSa ExSa ExSa Ex Su ExSa Westbound Eastbound Ex Sa| Ex Sa Ex Su &Su Ex Sal &Su &Su &Su &Su &Mo Read Down Read Up &Su ;&Mo &Mo| &Su &Su &Su AM AM PH PM PM AM ~AT AM AM AM PM PM 7.40 Lv BOSTON (EST) An 10 - 301 PH Lv HARTFORD " An 6.251 12.01 Lv BRIDGEPORT " An 9.01 10-30 6.00| 1.45| 3.50 5.35 11.00 9.35 Lv NEW YORK(LaGuardla) " An 3.55 1.30 1 2 . 4 5 1.45 q 8 3 0 3-30 1.30 t .00 12.05 4. > PHILADELPHIA " An 3.191 t iLv BALTIMORE " An 4.25 t ; '.. " Lv 11.05 AR BUFFALO 2.00 2.30 " Lv 12.35 An CLEVELAND 1.05 An CINCINNATI " Lv o Y 2 . 2 5 1 3.30 An DETROIT (EST)Lv 4.25 3.41 12 00! -7-001 I 10.45 An INDIANAPOLIS (CST)Lv I10.35I Y Y Y Y 5.42 Y |11.00 12.45 9 OOllo'oOl 9.00 An CHICAGO " Lv 4.521 1-OOgH.45 6.00 11.00; 6.201 3.55 2 451 (CST)Lv 7.55| 10.251 1 25! 2.25 An ST. LOUIS PM AM PM PM AM AM PM AM PM PM PM PM A M AM  203 8 0 3 ,|ExSu ExSu ! Ex  A  8 5 5 801 , 129 241 ExSa Sa|Ex Sa|  153  li-ooj  100 .01  TRANSCONTINENTAL Boston - New York - Philadelphia - Washington - Buffalo - Cleveland - Detroit - Nashville T Memphis - Chicago - St Louis - Tulaa - Oklahoma City Dallas - Ft. Worth - El Paso - Tucson - Phoenix - San Diego - Los Angeles - San Francisco  841 , 801 ,  A223 A A903 117  249  ExSu |ExSa| &Mo &Su  |12.45  2I0O  A  A  43  231  ALL FLIGHTS DAILY Unless.Otherwise Indicated  6-55  r3.05  8.20|  7.10|  AM  AM  • • 842•  8 0 0 ,, 842 842  248  Ex Sa Ex Fr Fri. Sun &Su Sa& only Only Sun PM AM AM  Eastbound Read Up  PM  -  " V  11-50 2.55 4.00  PM  A*  87  IS , AM PH AM AM AM AM "AM" AM PM (EST) An | 7.30 uv BOSTON. 10-50 11.45 1 . 5 5 1 10.40 An 12.41 3-41 Lv NEW YORK (LaGuardla) 10.35 10.35 12 40| b 2 . 0 0 1.45 - - L910 8.00 -- Lv NEW YORK (N. Y. Int'l.) 12.151 7.25 -- - 11.30 Lv PHILADELPHIA 11.45 An' 42. - Lv WASHINGTON 10.35 An! 1- 3-25 - 12.35 _ - 9:50 - Lv BUFFALO AR; SV.40 AR' - Lv CLEVELAND - 2.45 - 11.30 10.05 (EST) AR; Lv DETROIT 710 (CST) AR Lv NASHVILLE 10.05 - 5.25 As Lv MEMPHIS - 6.55 6-20 - - Lv CHICAGO 3.20 - 1020 An 1.55 _ 430 6.45 3 15| 4.50 1 2 . 1 5 An ST. LOUIS Lv 5 05 4.10 _ _ 11.15 11.15 .1045 Lv TULSA " AR 7.40) 10.00 10.00 Lv OKLAHOMA CITY " An 6.40 _ _ _ 7,55 6.30 7.55 6.30 Lv DALLAS " An 4 0 0 : 1.40 9 2 0 9-10 40ffl FT. WORTH (CST) An - Lv r 8 . 2 6 -- 6-10 EL PASO (MST) Lv 12:50 - - An 10.50 2.20 TUCSON " Lv - 8-40 - 5-25 An 1.20 An PHOENIX (MST) Lv 11.00 - 6.20 An SAN DIEGO 9-35 (PST) Lv _ _ 1.05 - An LOS ANGELES 10.25 -I.45I 9..15I|10 35| 1 1 . 4 5 11.45 8.05 " Lv 2.00 10 25|11.551(12.05 9 . 3 0 11.20 2.35 7-25 AR SAN FRANCISCO S.35 8 3 5 (PST) Lv 5.00 AM PM PM AM PM PM PM AM AM PM PM PM PM PM PM PM  PM  9 3 0 9 : 1 0 8.15| 9-10 I10.50 1 0 1 5  105 4.15  A  207  Westbound Read Down  PM  8.05  A  141  I  : :  EXPLANATION OF REFERENCE MARKS EQUIPMENT: «—DC-4 Airfreighter. +—Convair Airfreighter. B—DC-6 or D M A Airfreighter. A—DC-6 or DC-6B Flagship. A—DC-7 Flagship. b—Eff. 2/28 departs 3.00 p.m. from N.Y. Infl/Airport  (PST)—Pacific Standard Time.  q—Departure time, r—Arrival time.  Light figures (10.40) indicates AM times;  (CST)—Central Standard Time.  Dark figures  (EST)—Eastern Standard Time.  Times shown In italics connecting flights.  (MST)—Mountain Standard Time.  SAMPLE AIRFREIGHT RATES TO:  FROM Boston  I 20  Boston.: Buffalo Chicago. Dallas/Ft Worth . Detroit Los Angeles New York Philadelphia -.. SL Louis San Francisco Washington  Buffalo  $ 8.70 6.45 26.00 11.20 27.00  Chicago  Dallas/ FL Worth  Detroit  70  $ 9.50  $ 6.45  8 95 $22.0  17 75 7 50 7 10 18 80 6 00  '6.'20 6 70 12.40 8.40 8.00 5.60 17.51 7.20  20.00 • 5.90 5.90  Los Angeles S26.00 22.00 17.75 20.00 24.55 23.95 16.55  23:66  (PER  (10.40) Indicale PM limes. (10.40.  10.40)  i  100 POUNDS)  New York  Philadelphia  $ 7.50 14.03 5.90 24.55  S 7.10 13.95 5.90 23.95  SL Louis $11.20  8.75 25.75  25\25  7.10 16.55 8.75 8.15 18.45  San Francisco 127.00 23.00 18.80 20.95  aire  25.25 .18.45 24:45  £—Applicable on certain commodities. Sample rates shown are subject to a minimum weight of 100 lbs. Consult your nearest American Airlines office for full information. Bates are for information only and are subject to change without not-iee.  Prom American A i r l i n e s , Inc. Time Table, effective feb. 14, 1954. lote preponderance of combination f l i g h t s with supplementary all-cargo services, long term plans of T.C.A. contemplate this type integrated service.  Washington  - 117 -  holders prior to the rendering of the Cabinet decision, to do with the CP.A. applioation.  It was further  finalized by the granting of C.A.3. approval i n January of 1954 and is presently i n the process of taking place. Under the merged operations, this last remaining a l l cargo company estimates i t s 1954 gross at 45 million dollars.  The merged firm w i l l have assets of 25 million  dollars. Annual traffic should exceed 100 million tonmiles, or approximately one half of the nation's total* Whether or not this last survival will be profitable remains to be seen. However, the reasons for merger, as outlined in the Proxy Statement sent to a l l shareholders of the two firms to do with the merger plans stated: It has been found that in the development of airfreight traffic both Hying Tigers and Slick have developed the bulk of their volumes at points where they largely duplicate eaoh other. The elimination of presently duplicated functions at points now commonly served by both companies . . . should result in substantial savings * . .The consolidation of the administration activities of the two carriers should quickly result in substantial savings. Further savings will be effected by the elimination of uneconomic and unnecessary duplication of flight schedules between many of these important traffic centres without in any way reducing essential service between these points. The total volume of airfreight which w i l l be generated at various important traffic centers by the merged companies will justify the use or large new equipment and in every instance the quality in character and quality in service w i l l be greatly improved.  - 118 The gross revenues of the consolidated system should he materially greater than the combined gross revenues of the two companies as separate units, lew and improved service to the public with integration of the route structures of the two carriers serviced by the new equipment which both carriers have or are acquiring will enable the merged company to generate more traffic and provide better service to the public by.improved scheduling. Increased utilization of equipment, f a c i l i t i e s and personnel and elimination of duplicate functions, services, capital outlays and invent oris should ultimately result in substantial savings and lower unit costs. (18) The foregoing is quoted in detail inasmuch as i t amounts to a recapitulation of T.C.A.'s entire case before the Air Transport Board. It summates the contentions of Prof. Waines, Dr. Currie and Mr. McGregor, T.C.A. ! s President. such as that  a  Air cargo carriage on ^  K  basis •  ^proposed by C.P.A. had proven a oostly exper lament in the U.S.A. Investment in the all-cargo carrying f i e l d could be likened to John Stuart Mill's appraisal of the Canadian lumber trade of 1848, constituting: . . . an employment of capital partaking so much the nature of a lottery . . . that taking the adventures in the aggregate, there is more money lost by the trade than gained by i t . . . the average rate of profit is less than nothing. (19) M i l l would doubtless have concurred with C.A.B. member Josh lee's dissenting comments to do with the (18) Proxy Statement, Slick-Plying Tiger Merger, June 15, 1953, page 5. (Statement and other data obtained through purchase of a share in each firm) (19) John Stuart M i l l , Principles of Political Economy, 1848, Ashley ed. 19£6, Longmans Green, London, page 415.  - 119 Air freight decision which i n i t i a l l y created the situation in the United States that the Canadian Cabinet has seen f i t not to condone Ato repetition in this country. Mr. lee stated in part: The fact that a substantial volume of traffic has been moved by the nonscheduled carriers i s not impressive since i t was moved at so great a loss.  (SO)  The majority opinion in the 3-2 C i v i l Aeronautics Board 1949 Air freight Decision had insisted that new business would be created by the all-cargo carriers, this having been one of their main arguments for the certification of the original four all-cargo firms on a five year experimental basis. lo such new business was generated.  Aside from  losing many millions of dollars in the process, the a l l cargo carriers simply drew from the identical pool as their combination competitors,  i.e. from r a i l express,  no true penetration was made of any other surface type traffic such as r a i l and highway freight.  Any appre-  ciable quantity of fresh food, fish and the like was being carried by the combination carriers alone, and then In only negligible quantities in relation to the forecasted potential.  The nation's domestic trunk  lines, which as has been noted are virtually free from subsidization, were carrying increasing quantities of air cargo, picked up and delivered in an orderly fashion by their eomaon agent, Airoargo, Incorporated. What (20) C.A.B. Reports, Volume 10, Economic Cases, Air freight Case, 810 et a l . , page 611. (1949)  - 120 was more important, these trunk lines were making money. For example, i n 195E these trunk operators made a total profit before taxes of 95 million dollars, and in 1953 of 9£ million dollars. (El) Both United and American Airlines paid 4 l/E million dollars in dividends in 1952.  For that year United had total revenues of 153  million dollars; American, 187 million dollars. (22) An indication of the amount of cargo handled by these trunk line operators i n conjunction with their passenger services is indicated i n the tables that follow. Within the same tables will be found confirmation as to the common pool of traffic drawn upon by a l l carriers, both more  all-cargo and combination.  Further^, tables are included  to show the make-up of Trans-Canada Air lines' cargo t r a f f i c , indicating that the development In Canada has followed the same source pattern but without the wastage of capital resources through duplication of services. It was also considered an appropriate place to Insert tables to do with U.S. trunk line operating and profit results i n order that the industry be set in proper perspective in relation to the data contained i n the Annual Reports for Slick and Flying Tigers, as appended.  (El) Aviation Week, U.S. Airline Profits, quoting Air Transport Association data, McGraw-Hill, lew York, January 4, 1954, page 68. (22) Aviation Week, Report on U.S. Scheduled Transport Industry, March 2nd, 1953, page 211  - 121 Table 6 Ten Top Commodities Carried by Air Freight in the U.S.A. 1.  2. 3.  Slick Airways 195D.  Major Airlines 1951.  Metal products, including auto parts, aircraft parts and machinery and parts .  26.2  28.8  Wearing apparel, dry goods and textiles.  16.9  12.1  Electric and electronic equipment and parts.  14.2  14.3  4.  Cut flowers, plants, etc.  9.1  9.3  5.  Advertising, printed matter, paper products.  3.6  9.2  6.  Drugs and biologicals  6.2  4.9  7.  luggage and personal effects  3.5  8.  Livestock, chicks, fish  3.4  9.  Fresh food  3.1  Cameras, film, photo equipment.  2.9  10.  A l l other - Uo single item of which comprising more than 2$ of the total for either Combination Carriers or Slick  23.8  8.5  100.01  100.0$  From Staff Study, Domestic Air Cargo Forecast, U.S. C i v i l Aeronautics Authority, W&Bhington, 1952. Their source: U.S. C i v i l Aernnautics Soard, Docket 1705 et a l . Slick Airways, Incorporated, Annual Report, 1950. Preliminary Survey on Air Cargo Volume, Air Cargo Task Committee-Subcommittee Ho. 4, national Security Industrial Association.  - 122 Table 7 Top Ten Commodities Carried in T.C.I. Aircargo Korth American Division During 1952  lbs.  Percent. of total.  1. Textiles  1,802,147  17.3  2. Flowers and plants  1,549,717  14.9  3. newspapers and magazines  631,434  6.0  4. Wearing apparel  536,790  5.2  5. Industiial and manufacturing machinery and parts. 6. Aircraft parts  532,763 469,333  5.1 4.5  7. Surface vehicles and parts, including motor cars, trucks, bicycles, baby carriages, etc. 452,302  4.4  8. Furs, raw, unmanufactured.  440,443  4.2  9. Electrical equipement/parts  359,893  3.5  328,257  3.2  10.  Hardware Total lote:  7,103,059  68.3$  Total lorth American poundage for 1952: 10,394,178 lbs.  Source:  Trans-Canada Air Dines Air Cargo Department.  - 123 Table 8 The Average Return Per freight Ton Mile for T.C.A. and U.S. Domestic lines Carrier  Average Return  (1)  T.C.A. (12 months ended 30/12/52)  (2) (3) (4) (5) (6) (7)  American Airlines United Airlines T.W.A. Eastern lorthwest Colonial  (8) (9)  Slick 15.14/ Plying Tigers 16.14/ lote: U.S. data for 12 months ended Si/9/52. Source: U.S. Data from C.A.B. Recurrent Reports.  (10)  T.C.A. (planned yield for new rates) (applied for December, 1952;) (finally approved by A.T.B .) (following Cabinet decision ) (re CP.A. in lovember ,1953.)  32.6/ 21.07/ 20.44/ 20.75/ 19.48/ 29 .98/ 36.30/  19.8/ to 20.8/  These rates were derived from a base of 24/ per ton-mile for 100 mile distances, decreasing to 19.4/ at 2500 miles, then horizontal to 3100 miles. At that point a ceiling charge of #29.50 was established, yielding a possible minimum return of 14.9/ per ton-mile for cargo hauled. Source: T.C.A. Rates and Tariffs Department. (11)  CP.A. - average returns not obtainable, but the following point-to-point rates from their tariffs show the company approach to air cargo. HP consistent structure is evidence!, rates varying from 26/ to #1.33 per ton-mile at the 100 pound level. CP.A. has, of course, a monopoly on most of its routes. Calgary-Cranbrook 57.8/(per ton-mile atlhe) Penticton 52.9/ (100 pound level .) Yancouver-Eamloops 43.1/ Port Hardy 47.7/ Edmonton-Peace River 65.2/ Hay River 52.3/ Yellowknife 4?.2/ Montreal-Quebec 48.3/ Seven Islands 48.4/ Souree: Above rates from tariffs in effect 4th December, 1952, as furnished by Camdian Pacific.  - 124 Table 9 Comparison of Cargo Ton-Miles as Performed by U.S. Carrier Croups (12 months ended June 50th, 1952) Cargo Ton Miles Trunk lines Local service carriers All-cargo carriers Total  104,507,000 1,010,000 86,325,000 191,842,000  Souroe:  Per Cent, of Total  100$  C.A.B. Recurrent report of mileage and traffic data. Table 10.  Relative Use of Composite and A l l Cargo Aircraft by the Domestic U.S. Sched-uled Airlines i n Cargo Work.  American T.W.A. U.A.L. B.A.L. . (5) I.W.A.  (1) (2) (3) U)  Source:  Per Cent, of Total* Ton Miles Performed  Per Cent. Performed by Composite Aircraft.  37$ 13$ 23$ 6$ 3$  70$ 58$ 100$ 98$  Air Transport Association of America; Comparative Statement of Flight and Traffic Statistics for 9 months ending September 30th, 1952, thus presumably the latest data available to the Board. *The percentages in this column relate to the total miles performed by the scheduled passenger carriers only .  - 125 Table 11. T.C.A.Ts Average Return Per Air Cargo Ton-Mile Airoargo Toa-Miles  Year 1947 1948 1949 1950 1951 1952  55,879 701,387 1,049,784 2,083,998 2,377,260 3,519,370  A lie ar go Revenue  Return per Ton#Mile  26,695.28 221,537.90 352,090.78 • 730,393.82 811,140.81 1,135,322.98  47.8/ 31.6/ 33.5/ 35.0/ 34.1/ 32.3/  lew rates as f i n a l l y approved by tbe Board fallowing Cabinet decision re O.P.A. application planned to yield between 19.8 and 20.8/per ton-mile average .  1954  T Q O . A . ' S Average Return Per Express Ton-Mile Express Ton-Miles  Year 1947 1948 1949 1950 1951 1952  543,307 708,151 884,112 998,479 1,1749096 1,398,508 Source?  Express Revenue  Return rn per p< Ton  420,948.39 537,755.97 648,982.11 738,397.97 869,997.77 1,048,876.00  77.5/ 75.9/ 73.4/ 73.9/ 74.1/ 75.0/  T.C.A. Statistics for lorth American Services, 1947 to 1952. Table 12. Equipment  Aircraft Type C-46 DG-4 DC-6A 1049B  Payload(Tons) 6.25 10,50 14.20 19.3  Block Speed 180'MPH 200 MPH 285 MPH 305 MPH  Data. Ton-Miles Per Day * 9,000 16,800 32,376 47,096  l o . Required to Equal One 1049B 5.23 2.80 1.45 1.00  *Ton«miles per day of 8 hours utilization. (-M DC-61 is type of aircraft purchased by C.P.A. for use on i t s proposed Montreal-Vancouver cargo run. (2) IiOckheed 1049B i s type of aireraft now being delivered to T.C.A. (8 units) for passenger use with ultimate employment as cargo carrier thus illustrated. (3) Source: Lockheed Aircraft Corp., Air Cargo Trends, ; issued September, 1952.  - 126 Table 12/a) TJ.S. Airline Revenue Data (12 months ending September 30th, 1953) (1)  American Airlines: Revenues Operating Profit MT PROFIT  (2)  United Airlines: Revenues Operating Profit BET PROFIT  (3)  Trans World Airlines: Revenues Operating Profit EST PROFIT  185,076,000 16,158,000 7,144,000  (4) Eastern Airlines: Revenues Operating Profit SET PROFIT  141,481,000 20,733,000 9,820,000  (5) Sorthwest Airlines: Revenues Operating Profit SET PROFIT  61,736,000 4,473,000 2,681,000  f204,9 88,000 29,078,000 13,739,000 -  166,933,000 21,065,000 10,445,000  (6) Pan American Airlines: Revenues 206 ,475,000 Operating Profit 17,950,000 SET PROFIT 10,816,000 Source: Carriers' Form 41 reported to C.A.B. as quoted i n AYIATIOS WEEK, December 28th, 1953, McGraw-Hill, lew York.-p. 53 Table l£Tb) 1952 Passenger Revenues Ten leading Airlines and Railroads (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)  AMERICAS AIRII1BS $158,000,000 Pennsylvania Railroad 156,000,000 tniTED AIR IIHES 126,000,000 Hew York Central 124,000,000 EASTER! AIR HIES 105,000,000 TRASS YfORLD AIR1ISES ' 100,000,000 S&nta Fe Railroad 58,000,000 Southern Pacific Railroad 53,000,000 Sew Haven Railroad 52,000,000 Long Island Railroad 37,000,000 Source: Robert H. Wood, editorial, Dollars Take to the Air, AVIATION WEEK, July 20,1953 page 90.  Chapter 711 Railway Express in Canada and the TJ.S,A. It w i l l he recalled that the submissions of C.P.A.L. and of the Douglas Company, and the final submission of the Air Transport Board to the Cabinet, a l l assumed without question that railway express statistics for the United States and Canada were strictly comparable.  The  applicant, Canadian Pacific, as noted on page 37 of this thesis, derived a forecasted potential for the proposed Montreal-Vancouver service by f i r s t establishing that current TJ.S. aire ar go tonnage amounted to a total equal to 15$ of the annual U.S. r a i l express tonnage.  Then,  by simply taking 15$ of the known annual Canadian r a i l express tanage, an estimated yearly tonnage for their air service of 4,093 tons was derived. At page 15 of Exhibit 18, the Douglas Company set out a comparison of Canadian and U.S. r a i l express shipments, showing that Canadians^avail themselves of such service on an average of 3.2 times per capita annually, against only 0.5 per capita usage in the U.S. "Comparison of per capita railway express shipments and transportation charges between Canada and the United States is ample evidence that Canadian merchants already recognize the advantages of swift transport in shrinking long supply lines. . . . " (l) As noted on page 87 of this thesis, fl)  Exhibit 18, Appendix III, page 15.  - 128 -  the Board  ^accepted this concept without comment, reporting the figures and argument to the Cabinet i n f u l l detail. The evidence presented at the hearing hy Mr. Martin, General Manager of Canadian national Express, rized as summa*e4Aon pages 68 and 69 of this report, constitutes a preamble to the contentions set out i n this chapter. As with Mr. Martin's evidence, the subject matter naturally divides into two phases.  The f i r s t  is to do with r a i l express service generally in the two countries; the second, to do with the movement of particular commodities such as fish and other food products. Space is devoted to the latter commodity movements inasmuch as C.P.A. placed such emphasis on this type t r a f f i c during the course of its submission to the Board, Hail Express in Canada and the United States Railway express in the United States i a handled by a single agency, independently incorporated, but with its shares wholly owned on a Joint basis by a l l U.S. railroads.  This express firm, Eailway Express Agency, Inc.  was formed in 1919 through the amalgamation of the remaining four of an original multitude of operators the who had entered the f i e l d sinee A traffie type's conception in 1839. Eailway express in Canada i s handled by the two transcontinental railway systems independently, the one from the other. With the Canadian lational, an express  - 129 -  department incurs expenses and receives revenues in the name of the parent company, yielding a profit or loss evidenced in the revenue statement for operations of the railway. With the Canadian Pacific, a separately incorporated subsidiary wholly owned hy the parent corporation, carries on the express business. This Canadian Pacific Spress Company: .....owns over 23,000 shares of the common stock of i t s parent. It receives dividend^ on these holdings like any other shareholder. It gets rent from the tenants of the buildings which i t owns. It even collects rent from the Canadian Pacific when its parent occupies space in a building owned by the Express Company and i t does this notwithstanding that i t is not charged rent on the space used by Express in railway-owned buildings. (2) With neither the CIT. nor the C P . is provision made for true allocation of costs relative to the handling of express t r a f f i c .  It is generally con-  ceded that, as for passenger haulage, the express business is a necessary, but non-paying, phase of Canadian railway service.  The same can be said for  the operations of the Eailway ipress Agency in the United States, as evidenced by the following comment: That there is a railway passenger deficit is unquestioned; the difference of opinion relates to i t s size. Application of the I.C.C formula^for determination of direct and fully allocated costs for railway passenger operations in 1951 yields a deficit (2) Dr. A.W. Currie, Canadian Transportation, currently in process of publication, quote from page 2 of Express Chapter.  - 130 of 681 million d o l l a r s . This d e f i c i t i s largely accumulated from head end business and unprofitable l o c a l and branch l i n e s . (3) In round figures, the data substantiating the foregoing statement are set out below.  I t should be  noted that no allowance has been made for investment chages.  Had this been done, an I.0.0. footnote states  that the 1951 loss would have exceeded one b i l l i o n dollars on the basis of t h e i r computations. (4) Table 13. 19*51 Distribution of Passenger D e f i c i t Among Types of Passenger Train T r a f f i c Based on Total Operating Expenses and Taxes. Passenger Revenues, (millions) Head end t r a f f i c Mall EXPRESS Baggage*  Passenger Operating Expenses.  Passen- Distribuger t i on of Deficit Deficit  #335 84 12  $339 232 ~7T  # 4 148 ~62~  .6$ 21. 8% 9.1$  $ 431  # 645  #214  31.5$  $1484  #466  68.5$  #2129  #680  100.0$  Passenger Carriage» $1018 #1449 *Baggage includes milk.  By t h e i r own calculations, the TJ.S. railroads estimated their 1950 loss on express business at 96 m i l l i o n d o l l a r s , without allowance for return on investment i n operating facilities.  Even allowing for the substantial rate i n -  creases granted i n 1951, these railways contend that the future express d e f i c i t s w i l l range from 13 to 30 millions (4) ((5)  I.E. Sill&ox, address, Wheels or Wings, presented at Salzberg Transport Conference, Syracuse Univers i t y , A p r i l 29, 1953; page 25. loc. c i t .  - 131-  annually.(6) *e*Mr. Martin, General Manager of Canadian national Express, contended in Ms testimony at the air freight hearing, (page 68) , Canadian shippers receive faster service at lower rates in this country than do their counterparts in the United States. Canadian express "business is in a healthy and growing state; American express business i s relatively decadent and steadily declining in volume handled. The basic reasons for this variance l i e in the respective policies involved. In the United States, express rates cannot be less than without I.C.C. approval, twice the f i r s t class r a i l rates, ^ In Canada, many express rates are less than actual r a i l freight rates. In Canada i t is a matter of government authorized policy for the r a i l s to use r a i l express in their competition with truck carriage and parcel post services. United States law precludes such competitive rate cutting. The comparative figures to do with r a i l express quoted by Douglas, C.P.A. and the Board to the Cabinet are thus inflated insofar as Canada is concerned by the carriage of what amounts to freight at freight rates, but under the classification of express. there is Further, in the Canadian westtfKextensive haulage of l . c . l . freight in passenger trains where traffic does not justify operation of way freight trains. For the C.P.R. this traffic is called express, for the C J . L , (6) l o c . c i t .  - 132 freight. The decline in express volume handled in the U.S. is clearly evldenoed hy the following table: (7) Table 14. Eailway Express Agency Efficiency and Oost Statistics. Year.  no. of Shipments. (Millions)  1951 1950 1949 1948 1947 1946 1945 1944 1943 1942 1941 1940 1939  82.0 91.4 109.7 145.8 193.1 234.7 209.2 200.3 179.2 165.0 172.6 160.8 148.9  Ho. of Hrs. Worked (Millions) 91.0 99.3 119.5 148.7 168.4 185.9 175.7 161.6 140.5 114.3 109.6 104.0 99.3  Shipment s per man hour. .91 .92 .92 .98 1.15 1.26 1.19 1.24 1.28 1.44 1.57 1.55 1.50  Shipments handled have thus dropped from 161 million in 1940 to 82 million in 1951, aside from the war time peaks in excess of the 1940 figure.  During the  same period, the number of shipments handled per man hour have fallen from 1.5 to less than 1, with the average labour cost per shipment having risen from 52/ to $1.99. Where in Canada, r a i l express is a dynamic part of the transportation industry, in the U.S. i t is steadily being relegated towards ultimate disuse. freight  The U.S. roads  have steadily improved their l.cl.^services to the point (7)  Ibid. , page 20.  - 133 where express service is virtually duplicated.  As  opposed to the CaraLian plan, the Americans have used l . c . l . as their competitive weapon in dealing with the highway carriers.  In Canada, as previously noted,  we have what are specifically termed, "truck competitive" express rates. Either plan achieves the same objective. However, in so doing the Canadian express volume figures are obviously inflated, rendering the Air Transport Board's submission to the Cabinet in somewhat  this regard £otally^misleading. As to the comparative speed of service rendered in the r a i l express businesses of Canada and the United States, the following table is set out: Table 15. Comparison Canada-United States Rail Express Service for Selected Distances. Miles 250 500 1000 1500 2000 3000  Canada* 1st 1st 2nd 2nd 3rd 4th  mrning afternoon morning afternoon morning morning  U.S.A.e 1st 2nd 2nd 3rd 4th 6th  morning morning or 3rd morn. or 4th " or 5th " or 7th "  *Railway schedules plus attestation of management personnel. •From Air Cargo Trends, 1951, Lockheed Aircraft Corp. and C.A.A. Domestic Air Cargo Forecastl952; see Bibliography. The shipper of r a i l express in Canada thus gets much faster delivery for the longer hauls, plus considerably lower per mile charges as evidenced by the table set out on the following page.  - 134 Table 16.  Comparison 1st Class B a i l Express Rates at 100 l b . Level - United States and Canada. Miles A 250 500 1000 1500 2000 2500 BPte:  #2.15 3.50 6.20 7.85 8.90  Canada B  C  United States  2.50 4.20 7.55 9.90 11.60  2.85 4.12 4.85 5.69 8.90 8.11 11.90 10,53 14.00 12.95 14.00 15.37 The U.S. t a r i f f maximizes at $20.45 f o r 3900 miles. Zone A - East of Windsor, Sudbury],: Hornepayne. Zone B - West of Sudbury, Hornepayne to Canmore, Edson, and between A and B. Zone C - West of Canmore, Edson and between A or B and C. ($14.00 i s Canadian maximum.) Source: U.S. and Canadian Railway Express T a r i f f s . Thus, i n the United States, r a i l express i s both slower and more expensive than comparable service i n Canada.  The taolt ^facing A i r cargo penetration of r a i l  express t r a f f i c i n Canada ao oppoood to tho Unitod Otatos i s , therefore, just that much more d i f f i c u l t to accomplish 4e-v  Air cargo rates in the U.S. are closer to parity  with r a i l express l e v i e s ; are actually lower i n some instances. Assuming a 20/ per ton mile rate for a i r cargo for both countries, the following tabulation results: Table 17 Rate/100 l b s . R a i l Ex. A i r Cargo Rate Montreal to Winnipeg $2.70 $13.30 Edmonton 12.30 20.93 Vancouver 14.00 25.64 lew York to Washington 4.12 2.15 Chicago 7.63 7.24 Dallas 11.50 13,78 Los Angeles 17.36 24.60 Hote: See next page for notes and source.  - 155 The a i r rates quoted on the previous pege i n Table 17 are for airport to airport, and are based upon mileages contained i n T.C.A, O f f i c i a l Distance Table A.T.B. Ho. 9 and C.A.B. Mileage Book Ho. 1. Pick-up and delivery at each end averages 40/ per hundred pounds, with a minimum charge of 85/ per shipment. Admittedly, the Canadian r a i l expess business has suffered from truck competition, but only to a fraction of the extent trucks have diverted r a i l express t r a f f i c i n the U.S.  The number of Class I  interstate highway truck organizations i n the United States stood at 2,361 i n 1953, representing those with more than #200,000 gross operating revenues annually. (8) These carriers reported average revenues f o r 1952 of 5.572 cents per ton-mile, against 1.43 cents per tonmile f o r the Glass I railxads.  However, the l a t t e r  figure i s for freight while the former amounts to a t r a f f i c comparable to express.  (9) Por Oanada, no  such drain to independent truck carriers has taken plaee,  The Zone A truck competitive rates have made  possible continued successful r a i l express haulage i n the Windsor-Toronto-Montreal section.  In the western  provinces, considerable trucking i s either owned or controlled by the railways.  In consequence, a co-  ordinated rail-highway program i s f a c i l i t a t e d i n a (8) (9)  Competitive Transportation Review, December 1953, page 10. Ibid, page 6.  - 136 manner not possible in the united States. For example, O.K. Freight lines operating between Vancouver and Penticton over the Hope-Princeton highway is the Trolly owned subsidiary of the C.P.P,., as is Dench of Canada, whose common carriage truck network covers the Province of Alberta. As the Douglas Exhibit 18 stated, per capita railway express shipments for Canada amount to 3.2 annually, against 0.5 for the United States.  The  Air Transport Board, as quoted on page 87 of this report, advised the Cabinet that this fact was "strong evidence of a substantial Canadian potential for the development of scheduled all-cargo air services . . . " (10)  However, as outlined in the  preceding pages, the variation in per capita shipments is readily understandable. Aside from more intensive penetration by highway carriers, the U.S. r a i l express business is both slower and more expensive from the standpoint of the shipping public than is the case in Canada. Douglas, C.P.A. and the Air Transport Board simply were not comparing like with like. Hature of Expected Diversion from Rail Express to Air Cargo As noted on page 135, goods are carried by U.S. ton interstate trucks at 5.6/ per^mile and by r a i l freight (10) Board Report to the Cabinet, page 2, see App.III.  - 137 at 1,4/ per ton-mile.  At 20/ per ton-mile, the basic  T.C.A. air cargo rate at the present time and approximately that proposed by the C.P.A. application, the industry offers no competitive threat to r a i l , highway or water t r a f f i c .  The prime field for penetration  l i e s i n r a i l express t r a f f i c , and then in only the 100 pounds and over level for goods shipments originating in clffiee proximity to the air terminal.  In this  regard T.C.A. experience has been that only 8$ of air express shipments come from off airline points, and only 4$ are destined to off airline points, (11) Yet rail the Douglas survey includes all A express originating air within a one hundred mile radius of each terminal as IS  pdbentlal air cargo. As to the extent of t r a f f i c moving at the 100 pound level and above via r a i l express, the following table is included: Table 18 Extracts from Analysis of Canadian national Express less Than Carload Rail Express Traffic, Sample for May 16,193. % of $ of Average Average Average Total Total Wt. per Revenue Revenue (lbs) I.C.L. I.C.L. Shipment per per 100 Weight Shipments Weight (lbs) Shipment pounds 1 -SB* Wo 0$ -TJi # 753 #11.25 1-25 23$ 9.0$ 14.5 .83 5.75 25-100 14$ 18.0$ 47.0$ 1.80 3.82 100 plus 4.3$ 14.0$ 118.16 4.59 3.88 *Pareel post competitive rates f o r r a i l express. A l l other rates for f i r s t class r a i l express. (12) (11) O.B. Tompkins, Plight Operations Planning Dept., T.C, (12) Canadian national Express Dept., B&is May 16, 1951.  - 138 from the foregoing table i t w i l l he seen that Canadian r a i l express i s essentially package t r a f f i c that moves hut short distances.  With the average  revenue per shipment less than $2.00 for a l l save the 100 pounds and over category, no large volume diversion can he expected to air cargo i n other than that top weight l e v e l ,  The actual volume now moving  by r a i l express i n that weight l e v e l i s indicated by the following tabulation: Table 19. C.N.P.. Point to Point f i r s t Class L.C.I. T r a f f i c : Oct.16,1952. Over 100 l b s . Montreal to Edmonton Montreal to Vancouver Toronto to Edmonton Toronto to Vancouver  2110 2196 3696 1847 9849  Sour Of?:  Canadian National -Railways : Express Dept.  A l l concerned concede that westbound loads w i l l be the heaviest as evidenced by U.S. a i r cargo experience and Canadian transportation experience generally. Thus, assuming equal t r a f f i c on the part of the Canadian P a c i f i c Railway, a daily potential is available f o r possible diversion to a i r of 20,000 pounds at the most, a 66 2/3$ load for a DC-6A. Yet Canadian Pacific A i r Lines seriously contended they would carry 80$ loads between Toronto and Vancouver.  Of course, CP.A,  con-  tended they would also develop new business other than  - 139 that now moving by r a i l express.  However, had they  managed to do so their achievement would have been unique on this continent, inasmuch as no appreciable quantity of a i r cargo has been generated i n the  U.S.  other than what has been diverted from f i r s t class r a i l express.  This fact has already been enlarged  upon i n Chapter VI, dealing with A i r Cargo Development i n the U.S.A. Movement of Perishables by Air Cargo Canadian P a c i f i c Air Lines contended that mueh of their t r a f f i c would comprise fresh f r u i t and vegetables from B.C. to the north and east, plus quantities of lakefish from The Pas to Toronto and Montreal. The Board passed these contentions along to the Cabinet without c r i t i c a l comment, apparently accepting their validity.  At page 1319 of the o f f i c i a l t r a n s c r i p t ,  Mr. B r a i s , the C.P.A. counsel stated: Any loss through not going through Winnipeg i s f u l l y made up by the f i s h eastbound. This f i s h business, Mr. Chairman, laughed at at the inception, has been f u l l y and amply proven beyond a l l my own expectations •  »  • »  The demam for fresh f i s h products i s insatiable. fresh f i s h from The Pas has p r a c t i c a l l y unlimited p o s s i b i l i t i e s . The projection would indicate 3,200,000 pounds every year . . . . Yet a l l evidence pointed to the total unsoundness of the proposition.  Mr. O'Donnell had queried the C.P.A.  contention i n h i s summation with the following quotation:  - 140 The transport of fishery products by a i r is not of great commercial significance and i s not l i k e l y to become so for some time, numerous parcels of fishery products' of a specialty nature such as l i v e lobsters have been and are being carried by a i r but they do not coiefcitute an important portion of the volume shipped and therefore are regarded as experiments. It i s probably needless to observe that cost i s the main i n h i b i t i n g factor to great expansion of air cargo t r a f f i c . . . airborne f i s h cannot compete on a price basis with that hauled by surface c a r r i e r s . (13) During the four years preceding the O.P.A. A i r freight Application, T.C.A. had gone to great pains to develop f i s h and lobster t r a f f i c , without permanent avail.  At one time T.C.A. carried 20 to 25,000 l b s .  per month of fishery products between Yarmouth and Boston.  This movement dried up because of lower cost  trucking services.  Stenuous efforts were made to  develop f i s h t r a f f i c - salmon and halibut - from the Pacific Coast,  Prioe resistance precluded sxiccesss in  spite of the fact that a i r cargo rates based on 22/ per-ton mile were f i l e d .  The Department of f i s h e r i e s  at Ottawa further advises that: . . . fresh lake f i s h i s eaten by an i n come group i n Toronto and Montreal which could not absorb a i r oosts. . . this holds for most groups consuming f i s h of either sea or lake origin . . , f i s h i s consumed primarily by certain ethnic groups of consumers, primarily those of•Jewish origin although there are a large number of consumers among the Chinese, Italians and other Europeans. . . (14) (13) (14)  A.T.B. A i r freight Transcript, 1953, p. 1449. J.jr.lewis, Chief Markets Branch, l e t t e r to author, feb. 15, 1954.  - 141 set Inasmuch as C.P.A. haoed^so great a store on f i s h t r a f f i o out The Pas, the following extracts from a Transport Commissioners of Canada judgment make illuminating reading.  The judgment concerned was  handed down on June 15, 1951  and was to do with the  protests raised hy the f i s h i n g Interests i n the p r a i r i e provinces over the proposed rate r i s e for the r a i l express companies. The Companies contended that: (1) . . . i n the early history of the Dominion Express Company the express t r a f f i c was almost entirely westbound, and i n order to provide some t r a f f i c for what otherwise would he returning empty ears . . . the Company established very low rates on f i s h from Vancouver, lake Winnipeg, lake of the Woods and lake Superior to Eastern Canada, and with the exception of the general increase of 20$ for the year 1921, the rates were s t i l l i n effect i n Western Canada. (2 ) . . . the cost of providing service had Increased to a very considerable degree and a study of the entire t r a f f i c structure as relating to the movement of f i s h under present day conditions . . . c l e a r l y indicated the need for an almost complete r e v i s i o n of the rates . . . . (15) In addition to the protests of the fishery companies, there was also read into the record a submission from the Government of Saskatchewan i n which i t was contended that f i s h from that province was meeting great d i f f i c u l t y i n competing i n the lew York, Chicago and Delrolt markets. It was further contended that no rate increase could be absorbed; subsidization would be the only recourse i f the industry were to be maintained. (15)  B.T.C. Judgment, 15 June 1951, P i l e 45757, p.115.  - 142 -  The Board of Transport Commissioners agreed with the stand taken hy the railways and ruled that the proposed increase in rates should stand. They thus concurred with the railway contention that fish, being a highly perishable product, requires special treatment, involving careful and expeditious handling as compared with the handling of other goods shipped by express, necessitating such extra costs as cleaning express cars and premises plus allocating special cars to the t r a f f i c . Yet C.P.A. proposed to haul fresh f i s h in quantity from The Pas to Toronto and Montreal at rates of $14.75 per 100 pounds to the former, and $15.20 to the latter. In view of the fact that I.C.I, rate on r a i l express i s $5.25 per 100 pounds to the one and $5.50 to the  other for refrigerated fish carriage, i t is d i f f i c u l t to comprehend C.P.A.1 s contentions as being serious. The carload express rate to Toronto via r a i l express is f3.75 per 100 pounds from Winnipeg, and to Montreal, $4.00. The C.P.A. fish would be admittedly more fresh. However, ^he Department of Fisheries states that those in the fresh fish market in Toronto and Montreal cannot absorb the added air costs.  They state this without qualifi-  cation. Yet the Air Transport Board advised the Cabinet of C.P.A.'s fish haulage plans without c r i t i c a l comment on the part of the Board membership.  - 143 As for the diversion of fresh f r u i t s and vegetables from r a i l express t r a f f i c , hope of -a oh^oA^o^|1^ofb the load forecasted by C P s A . G.P.A. contentiona A is equally remote as for f i s h haulage.  What small amount of such t r a f f i c as exists  i n the U.S. coisbitutes the handling of produce peculiar to a given region.x  f o r example, oranges are flown from  C a l i f o r n i a or F l o r i d a to lew York and Chicago.  It i s  u n r e a l i s t i c to suggest that similar t r a f f i c potential exists i n Canada.  Inasmuch as Ontario and Quebec pro-  duce a l l of the f r u i t and vegetable items suggested by C.P.A. for transfer by a i r from B.C., such t r a f f i c as does move w i l l be s t r i c t l y of the "beat the market" variety.  In this regard, the Department of Agriculture  advises that: . , . caution as to the development of agricultural east-west a i r freight beyond daffodils and such would appear warranted. B.C. produce for distribution east comes mainly from the Okanagan and to some extent from the Fraser Valley. Early products from the l a t t e r are potatoes and berries . . . Inasmuch as the margin of earliness over Ontario might be a week at most, the scope M r a i r f r e i g h t i s very limited. . . Okanagan produce actually moves to Ontario and Quebee. Crops are mainly apples, pears and cherries, which are not much earlier i n B.C. than Ontario. B.C. early apples are anything but showy, and the main crop which does flow east i s well handled i n r a i l service. The C.P.A. submission i n the a i r f r e i g h t case a year ago was that they r e a l l y intended to s e l l their service, and that they expected  - 144 to show that the kinds of commodities already moving might he an inadequate guide to the true p o t e n t i a l . While i t i s always possible that such optimism might be borne out, i t s t i l l most be remembered that r a i l freight delivers most produce transcontinentally i n good condition and d i s t i n c t l y more cheaply than would a i r s e r v i c e . (16) The following table i s included to further i l l u s trate the independence of the various sections of our having i t s country, each^tfc-efcr own f r u i t and vegete,ble resources. Table 20 Table Showing Comparative Ontario-Quebec vs. B.O. . A l l of Canada Ontario-Quebec  Output i960. B.C.  (1) Vegetables (millions of) (dollars. )  22.0  17.0  2.5  (2) Apples (millions of) (trees. )  5.5  3.0  1.25  (3) Small f r u i t s (millions of) (dollars. )  ^ 11.0  7.0  3.33  (4) Strawberries 16.0 9.75 4.0 (thousands ) (of acres. ) Source: Precise figures set out on pages land 2 of Agriculture B u l l e t i n 6-6, D.B.S., 17-12-52. The most extensive studies i n relation to the a i r movement of fresh f r u i t s and vegetables have been conducted by the Wayne University School of Business Administration.  In perusing these published studies, how-  ever i t i s noted that rates of 5 to 6/ per ton-mile  are  assumed prior to any extensive penetration of r a i l ex(16)  B.P. Eeid, P r i n c i p a l Economist, Dept. of A g r i culture, Ottawa, l e t t e r to author,"22 Jan. 1954.  - 144(a) -  Douglas DC-6A All-Cargo Aircraft Further I l l u s t r a t i n g Loading Problems Yielded by Cabin Floor 100 inches or more above ground l e v e l .  ,  - 145 -  .press t r a f f i c i n these commodities.  Such rates  are well "below the direct operating costs per ton-mile f o r either the l o r t h Star of the D0-6A and hence negate the p o s s i b i l i t y of such t r a f f i c being generated i n the immediate future.  Such  t r a f f i c must await the a r r i v a l o f a t r u l y freight aircraft.  Despite C.P.A.'s contentions regarding  i t s Douglas f r e i g h t e r s , the following statement i s t o t a l l y true: . . . these a i r c r a f t are not cargo a i r craft but converted passenger planes. . . . the DC-6A i s merely a DC-6 with a few concessions made to cargo, but s t i l l retains the round h u l l and s t i l l poses a considerable problem by having the cargo doors 100 or more inches from the ground. (17) Despite a l l the efforts made, with reduced backhaulauge rates and surveys and promotion campaigns, no appreciable t r a f f i c i n perishables of an edible nature has been generated i n the United States. With an available express service from the C.l.R. and C.P.R. far  superior to that existing i n the U.S. i t i s con-  sidered that the likelihood of stimulating such business for a i r cargo i n Canada i s even more remote.  (17)  R.P. Reese, Regional Cargo Sales Manager, P h i l l i p i n e Air l i n e s , l e t t e r to author, 19/l/54.  Chapter VIII The Gruneau Research. Limited l a r v e y conducted f o r O.P.iL  On pages 50 to 52 inclusive of this thesis the Gruneau Survey has been summarizes, as i t was presented i n evidence, with appraisal deferred for treatment i n this present chapter.  The f u l l suvey report as pre-  pared by the Gruneau firm i s to be found i n Appendix I I I , Exhibits 21 and 21A, comprising 82 pages of data and conclusions. The study was intended to evaluate the attitudes of regular shippers and receivers i n each of the centres on the proposed C.P.A. route, excluding The Pas.  Inasmuch as express shippers constitute the  basic pool of potential air cargo users, i t was decided to r e s t r i c t the survey to express-using firms The Canadian Pacific Express Company made available to the Gruneau firm i t s waybill analysis for May 16th 1951, yielding firm names, origins and destinations for the express shipments involved. The May 16th data we© used to plan the survey, while the actual sample used was drawn at random from the September 19th, 1952 waybill analysis.  The f i e l d work was con-  ducted by trained and experienced f i e l d representatives of Gruneau Research Limited under the personal direction of the analyst i n charge of the study.  - 147 One thousand two hundred and t h i r t y contacts were attempted, with one thousand completed personal interviews r e s u l t i n g . The questionnaire employed was composed of ten multiple choice queries, a general f i n a l request for suggestions as to the usage of the proposed service, with a statement of schedule and rates supplied for review hy the executive questioned.  The rates section  included a comparative "breakdown for each route segment such as i l l u s t r a t e d below: (1) Table 21 Between: TOROHTO and  BPMOITOIT Over "Under IOO 100 lbs. lbs. 100 l b s . lb.  YMCOTJYER Over Under 100 100 lbs. lbs. 100 l b s . lb.  •Proposed A i r Cargo (City centre to City centre)  $20.35  23/  #25.05  Present A i r Cargo (Airport to airport)  23.80  27  30.10  34  R a i l Express  11.90  *12.5  14.00  *15  Air Express (TCA)  72.00  °72  92.00  °92  30/  *Rate per pound - 50 pound shipments. °Rate per pound - for shipments over 25 l b s , and under 100. It w i l l be noted that the only rates s p e c i f i c a l l y credited to Trans-Canada Air lines are those for the r e l atively expensive a i r express.  Ho mention i s made, of  course, of the revised rate structure f i l e d by T.C.A. prior (1) Exhibit 21A, Appendix I I I , page 67.  - 148 to the commencement of the survey interviewing, and which offered rates further reduced to those proposed by C.P.A. In t h i s regard Mr. O'Donnell commented i n summation: Who would not say i n the l i g h t of that kind of submission that he would not l i k e something cheaper? . . . i f the T.C.A. rates had been put to the people who answered t h i s way for Gruneau, they would have answered much more quiekly that they preferred the lower rates which T.C.A. proposed. (2) The ten multiple choice questions were most general i n nature, the central theme being embodied i n question (8): "Would suoh an Air Cargo Service help you i n any way with delivery problems in your p a r t i c ular business?" (3)  Ho firm commitments as to usage  of the proposed service were requested.  In essence,  those interviewed were being asked i f they had any objections to C.P.A. inaugurating i t s Montreal to Vancouver a i r freight service.  As Mr. Wells summated:  I am unable to accept the Gruneau report as having any v a l i d i t y . . . . We would a l l like to have limousines, yachts and a butler, but the question comes up, do we need them, and i f we do, can we afford them? . . . To my mind I find i t d i f f i c u l t to understand that, with as complete and extensive and caref u l a review as this one was, and with the time and money that there was put and spent into the Gruneau report, at no point did they ever say to these people f i n a l l y : I f you have an air cargo service at these rates, how many pounds are you going-to put aboard? (4) Under the circumstances, i t is surprising that only 68$ answered Question 8 i n the affirmative. (2) (3) (4)  Even that  H. O'Donnell, A.T.B. Transcript, page 1438. Exhibit 21A, Appendix I I I , page 67. J.E. Wells, A.T.B. Transcript, page 1347  - 149 68$ i s based upon an adjusted base.  As noted at the  outset, 1000 interviews were completed after 1230  tries.  At various points i n the survey t h i s i n i t i a l base of 1000 i s altered to suit the question involved.  In  the case of question 8, only those firms shipping v i a r a i l express once per month or ofterher were included, yielding a base t o t a l of only 779.  A t o t a l of nine  different such bases were used i n the report summation, ranging from the i n i t i a l 1,000  down to a low of 473,  the l a t t e r including only those now  shipping by a i r .  At one point, 79 respondents are delated from consideration inasmuch as they could not make up their minds on a given point.  As regards Question 8, only 53$ of  the t o t a l number actually interviewed said the service would help.  Aside from departing from valid s t a t i s t i c -  a l practice, the continual changing of the base yields a report lacking i n c l a r i t y . As to whether or not the sample was random i s open to question inasmuch as interviews were confined to C.P.E. customers, with one third of the interviews being conducted i n the Vancouver area, home of C.P.A. In reply to a query i n this regard, Mr. Gruneau states Your categorical statement that respondents in Vancouver were prejudiced i n favor of C. P.A. because their head office i s i n Vancouver is entirely unfounded and represents only your personal opinion without reference to the data i n the report. The results show greater 'in favor' percentages for the Vancouver area. However, they also show that  **  - 150 -  respondents i n the Vancouver are already reat er users of a i r transportation i n erms of hoth number and frequency of shipments than respondents i n other areas, they show that shippers of perishable produots, r e t a i l , agency and wholesale operations and small firms are more ' i n favor" of air-express.,.f5)  t  Granted, they are i n favour of such a servioe, but whether or not they would supply adequate loads to j u s t i f y i t s operation i s the basic question. If the survey indicated that Vancouver shippers provide the major volume of a i r cargo and a i r express shipments i n Canada, either out or inbound, then i t i s quite i n error as evidenced by the flow chart included i n Chapter IV, Part I I , of this report. As for p o t e n t i a l , there i s not s u f f i c i e n t r a i l express i n the f i r s t c l a s s , 100 l b s . and over category, moving in either direction between Vancouver and Edmonton to even approximate the forecasted daily DC-6A load factors Set out by C.P.A. i n i t s submission, even assuming that every pound was diverted to a i r transfer, a t o t a l l y unlikely p o s s i b i l i t y i n view of the rate d i f f e r e n t i a l involved. As to the suggestion that the questions and i n t e r viewing methods were slanted i n C.P.A.'s favour, Mr. Gruneau stated: Whether or not the results of the study would be favorable to C.P.A. was not a factor In determining either the sampling or the tabul a t i o n methods. Our directions from Canadian (5)  V.C. Gruneau, Gruneau Research Ltd., l e t t e r to author, (5 pages), 20 Jan. 1954, page 3.  - 151 Pacific A i r l i n e s specified that the work was to be done i n an unbiased manner. Had they been otherwise, we would not have accepted the assignment. (6) Further i n t h i s regard, Mr. Brais made the statements, subsequently somewhat modified when challenged; I . . . ask the Board to bear i n mind that i t (the survey) was applied to a cold market. Hobody at the time had been apprised i n any manner . . . !Fhere was no advertising, no propaganda, and no communications to any of these people to t e l l them that a company such as Canadian P a c i f i c A i r Lines . . . was planning to develop an air cargo l i n e . (7) It should be noted, of course, that the Canadian P a c i f i c A i r Freight Application had been prominently i n the news since i t s announcement on November 10th, 195E.  The interviewing for the Gruneau survey com-  menced December S8th, 1952 and was completed January 17th, 1953.  In addition, the Boards of Trade had been  invited by the Board and by C.P.A. to make representations to do with the proposed service at the hsaring. Further, as evidenced by page 65 of Exhibit 21A, the rate and schedule sheet handed to each correspondent by the Gruneau f i e l d workers was headed with the caption:  "CANADIAN PACIFIC AIELIHES, LIMITED. PROPOSED  AIR CARGO SERVICE."  It could hardly have been correctly  termed a "cold market."  In essence, whether intention-  a l l y or not, the Gruneau report,constituted a product of promotional market research whose findings simply (6) (7)  Ibid., page 1. Refer to page 52 of this report for further details and source.  - 152 aided i n the f i l l i n g out of a sales package under the guise of economics.  As Mr. O'Donnell concluded:  Gruneau was given a set of questions, according to the instructions, and they were to discuss them . . . I submit that i t i s not a r e l i a b l e guide. It i s not valid at a l l . The questions were slanted. It is a l l hearsay. (8) However, the A i r Transport Board saw f i t to advise the Cabinet that, insofar as the Gruneau report was concerned:  (see also page 89 of this thesis)  Established sampling techniques were used in selecting a cross-section of business organizations using express services . . . This study . . . was designed to show that a substantial majority of these business organizations agreed that a scheduled a l l cargo service as proposed by C.P.A. was desirable. (9) The A i r Transport Board's report did not advise the Cabinet of the objections raised by the i n t e r veners as to the questionable methodology involved i n the Gruneau survey,  l o r was the Cabinet apprised  of just what was implied by the words "substantial majority" as used i n the foregoing quotation.  As  noted on page 149 of this t h e s i s , only 53$ of those firms interviewed stated that the proposed service would be "desirable."  This admittedly constituted  a majority, but hardly one to be labelled by the Board as being substantial.  (8) (9)  A.T.B. Transcript, Air P r t . Hearing, page 1438. Board Eeport to the Cabinet, page 3, App. 17.  Chapter IS T h R Txmo-Tas Aircraft Company'n Survey of C P , A. '« VrnPJiaeJ^&jr, Jj'reight Route to do with Potentials " The sixty pages that constitute Exhibit 18 and 18A, as drafted hy the Douglas Company, provided the basic C.P.A. presentation at the hearing.  Without attempt at appraisal,  these exhibits have already been summated on pages 41 to 49 inclusive of this report.  The Air Transport Board's  apparent unquestioned acceptance of the Douglas findings, as evidenced by i t s report to the Cabinet, has been dealt with in Chapter T, page 84 to 92 inclusive. The intent of the present chapter i s to evaluate the Douglas report i n the light of Mr. O'Donnell's summation, and with regard to correspondence and relevant reading by the writer since the hearing's conclusion. Three phases of the Douglas survey are to be covered: (1)  The apparent bias introduced into the treatment of the subject matter by those responsible for the drafting of the exhibits concerned.  (2)  The fallacies involved i n the Price-Demand Relationship, derived from the curve depicted on page 46 of this thesis, and on which the basic conclusions of the Douglas Report are determined.  (3)  The non-existence of a consequential source of air freight potential between Canada and the Orient, despite the contentions to the contrary in the Douglas report.  Apparent Bias It is not intended to give a f u l l coverage in this matter, inasmuch as several examples w i l l suffice to  - 154 substantiate the contention. a a. At page 10, Exhibit 18,^striking graph is set out showing Canada's percentage of world total air cargo traffic falling from 19$ in 1937 to 1$ i n 1951.  This  graph is followed by the statement: "This condition i s a result of lack of adequate airfreight capacity." To use 1937 as the base and to include a l l phases of air freight operations is misleading, inasmuch as pre-war Canada saw large scale north-south bush operations i n air freight carriage to do with mining development beyond - in  r a i l head. Air freight of the type'involved^the C.P.A. Air Freight Application involved transport between metropolitan terminal pairs i n competition with existing surface carriers, both r a i l and road.  Employing the  same data, but using the year 1948 as a base, the following results:  (T.C.A. commenced air freight service i n  that year) Table 22 Relative Progress - TT.S. and Canadian Aircargo U.S.A. g a n a d a 1948 1949 1950 1951  100$ 110  151 196  100$  110 151 168  These figures are just as misleading as those cited by Douglas, showing percentages rather than total volume, no and hence i n themselves of^real' significance. iLi. On page 11, Exhibit 18 a further graph is included contending that "although equal i n 1940, Canad-  - 155 ian air cargo rates are now more than twice than those of the United States."  Rates are shown as6.0^ per ton-  mile for both countries in 1940, as opposed to 21^ for the U.S. and 44^ for Canada in 1951.  In the detail of  Exhibit 18A, the supporting document, i t is found that these figures are based upon composite revenue per tonmile for the U.S. of both air freight and air express, and for Canada of T.C.A. trans-continental air freight, express and excess baggage. Had s t r i c t l y air freight rates been compared, and a comparable U.S. carrier such been as American Airlines A used for illustration the gap would have been reduced considerably, with approximately 33^ for T.C.A. and 22^ for American per ton-mile. Ho mention is made of C.P.A, air cargo rates for present routes, on which i t has monopoly rights, yielding 50$ and more per ton-mile, nor was mention made of the general rate increase of 25$ then being sought by U.S. all-cargo lines nor of T.C.A.'s application pending for a drop to the U.S. rate level. c.  On page 13 of Exhibit 18 a thumbnail sketch of  Canadian r a i l and air routes between Montreal, Toronto and Vancouver i s depicted.  Total r a i l mileage i s given  as 3504; total air mileage, 2550. This illustration is summated: "Rail mileage is 37$ greater than a i r mileage over the proposed route.  This means that a 37$ higher  airfreight ton-mile rate w i l l result in no greater cost to the shipper. In the United States the average r a i l  - 156 mileage i s 17$ greater than air mileage." fl) The impression i s thus given that the Canadian air freight operator gets a head start in relit ion to his American counterpart in his efforts to divert traffic from r a i l haulage.  On inspection, however, i t is realized that  the Douglas routing of a freight or r a i l express shipment from Montreal goes f i r s t to Toronto, then to Canora, then to The Pas, then hack to Canora, then on to Vancouver.  Such r a i l shipment would, of course, in  reality he moved across the direct route across northern more  Ontario, not via Toronto, further, The Pas would not come into the picture at a l l .  Adjusting for the redundant  mileage thus involved, Montreal-Vancouver yields a 2930 r a i l mileage as opposed to the 3504 figure cited.  This  amounts to 15$ greater than the proposed air routing, and hence of no consequent disparity from the TJ.S. airr a i l mileage relationship. d.  On page 14 of the Exhibit 18 is a quotation from  the Report of the TRoyal Commission on Transportation: . . . the great difference In fundamental conditions between Canada and the United Stales. . (is that). . . producers and consumers in the United States with its large population have the advantage of a great number of widely distributed market and supply centres. The long haul is less in evidence there than in Canada . . This quotation is from page 46 of the 1951 Royal Commission report and Involves an error in that report as pointed out to the writer by Dr. A.W. Currie of the University of Tor(1) Exhibit 18, Appendix III, page 13.  - 157 onto.  In a c t u a l i t y , the long haul i s more i n evidence  in the United States.  In this regard, Mr. R.A. Brown,  the late head of the D.B.S. Railway S t a t i s t i c s Department, supplied the writer with the following figures taken from U.S. Railroad Transportation ( S t a t i s t i c a l Record - page 31 - 1951)  and from D.B.S. S t a t i s t i c s of  Steam Railroads for 1951: Average haul f o r U.S. Railways Average haul for Canadian Railways  420 miles 339 miles  Hence no significant difference exists.  On the  same page the foregoing "length of haul" comparison i s summated:  "This places a geographic handicap on the  development of remote hut important markets and i n creases the need for swift long range transportation." Of course, as Prof. Waines pointed out i n his testimony, this i s not so.  The longer the haul, the more important  the freight t o l l becomes to the supplier or purchaser. The primary need of distant markets i s for economical transport; swiftness i s d i s t i n c t l y secondary. e.  The most glaring evidence of biased treatment  of subject matter involved the comparison of Canadian and U.S. per capita railway express shipments, as set out on page 15 of Exhibit 18.  This treatment, apparently  accepted at i t s face value by the A i r Transport Board T  and passed on to the Cabinet i n substantiation of C.P.A. s ease, has already been made the abject of a complete discussion within Chapter YII of this t h e s i s , entitled R a i l Express i n Canada and the U.S.A.  - 159 F a l l a c i e s InvMfred i n -age Douglas Price-Demand Relationship As noted on page 45 of t h i s t h e s i s , the potential for  the O.P.A. route was assessed i n a most specific  manner within the Douglas Report, Exhibits 18 and 18A. As evidenced by the charted relationship set out on page 46 of the report i n hand, the Douglas people plotted on logarithmic paper time demand for t r a i n freight services against revenue per ton mile for the same services. Prom this relationship a series of steps were then taken which yielded precise figures i n tons and dollars as to the  loads to be expected for each of the C.P.A. route  segments, employing present volume of r a i l express as the  data source for airfreight penetetion. Inasmuch as a copy of Exhibit 18A accompanies each  copy of this t h e s i s , i t i s proposed to f a c i l i t a t e the discussion of the price-demand curve i n question by f i r s t tracing through the prooess- steps involved p r i o r to assessing same. Turning then to page 39 of Exhibit 18A, the underl y i n g assumptions made by Douglas are to be found. In part these are as follows: Studies of United States freight movement have shown that the relationship between rate and volume i s consistent for the various freight c l a s s i f i c a t i o n s . Therefore, i t i s possible to use Canadian Railway carload freight data, the only c l a s s i f i c a t i o n for which adequate stati s t i c s are available, to estimate airfreight demand at various rate l e v e l s . The ton-miles for each major commodity group have been plotted against their average tonmile rate i n Figure 12. The high degree of correlation i s apparent.  - 160 •  •  *  •  •  By assuming a r a t e , ana hence i t s corresponding volume, i t is possible to determine the percentage decrease i n volume that can he expected f o r any increase i n the rates . . . It i s t h i s percentage relationship that has been assumed applicable to other freight c l a s s i f i c a t i o n s , namely the distribution of high value freight between airfreight and r a i l express. (1) Page 40 of Exhibit 18A sets out the revenues and ton-miles Involved i n Canadian P a c i f i c Railway f r e i g h t T r a f f i c , January to July 1952, with a four segment breakdown only; namely, Products of Agriculture, Products of Mines, Products of Forests and Animal Products. The straight l i n e correlation depicted on page 41 of Exhibit 18A, and included at page 46 of the report i n hand, simply plots revenue against ton-miles for the data supplied on page 40.  Page 42 of Exhibit 18A sets  out a table consisting of data read o f f from the aforementioned straight l i n e correlation.  The f i r s t  two columns of this table comprise data so d i r e c t l y read o f f , whilst the second two columns constitute a reduction of the preceding readings to a common base, set of hence yieliding a^ratios.  Thus  an a i r freight rate  equal to the minimum r a i l freight would, i n accordance with the Douglas contentions, make possible a t o t a l diversion of t r a f f i c from r a i l to a i r .  A rate  three times that of the basic r a i l rate would y i e l d a diversion to a i r of only 7$. (1)  A t o t a l of eleven  Douglas Eeport, Exhibit 18A, page 39.  - 161 such  diversion ratios  am p l o t t e d  are l i s t e d  on p a g e 43 w i t h  Relsfenshlp f o r Canadian to  -  the  i n this  The  step takes d i r e c t  r a i l w a y express tabled  volume and  computations  a "Determination S e r v i c e , " and Originating  account  tariff  data,  The  press r a t e s are f i r s t  comparative  the percentage  are then used  c u r v e s e t out  service into  Existing  express  of E x h i b i t  a total  miles of  a i r and  each  rail  ex-  a i r to r a i l , f o l l o w to determine  expected  from  by C.P.A.'s  e x i s t i n g r a i l w a y express  - b a f f l e f o r 1951  18A,  Volumes  on t h e p r e c e d i n g page  p e r o r a t i o n to be  proposed  Proposed  s e t out f o r the v a r i o u s r o u t e  s e e t o r s , w i t h a column f o r r a t i o ,  the Price-Demand  the  It constitutes  Express  T e r m i n a t i n g w i t h i n 100  These r a t i o s  comprising  Potentials for  i s "Based on R a i l w a y  and  of c u r r e n t  s e t out on page 44.  of A i r f r e i g h t  s t a t i o n f o r 1951."  36  of a i r r a t e to  rate. The n e x t  ing.  o r d i n a t e i s used  of volume moving' b y a i r ,  w i t h t h e a b s c i s s a showing t h e r a t i o s rail  table,  c a p t i o n , "Price-Demand  Freight."  designate the percentage  page 42  i s s e t out  C.P.I, d a t a o n l y b e i n g  on page  shown, w i t h  f o r the r o u t e segments b e i n g d e t e r m i n e d  s i m p l y d o u b l i n g t h e C.P.R. d a t a to  traffic.  by  a l l o w f o r C.1T.R.  traffic. A t y p i c a l r o u t e segment, T o r o n t o - V a n c o u v e r , by the w r i t e r been u n d e r l i n e d ^ o n page 44 t o f u r t h e r a i d of  the p r o c e s s  involved.  It will  be s e e n  has  clarification that  the  - 162 air rate, door to door, i s given at $26.25, with a corresponding r a i l rate of $14.00.  The r a t i o , a i r to  r a i l , i s then recorded as 1:1.88. Referring then to the Price-Demand curve on page 43, this ratio i s marked i n to show how the penetration of 22$ was  determined.  This percentage penetration is then applied to the approximation of existing r a i l express volume to give an air freight potential figure for the Torontoeastbound Vancouver segment of 309 tons annually,R with a figure of 1,672  tons annually forecasted for the segment  westbound, as noted i n the appropriate columns of the table on page 44. Pages 45, 46 and 47 simply take the forecasted potential tonnages determined on page 44 and reduce to them^route segment revenue data, yielding a t o t a l gross for the route of #2,198,352, as f i n a l l y derived on page 47.  This potential gross was apparently  appraised by the Board as r e a l i s t i c and based on sound premises inasmuch as i t was reported to the Cabinet without accompanying c r i t i c a l comment. Board stated on page 3 of their report: In order to arrive at an estimate of potent i a l cargo availabe on the all-cargo a i r service applied f o r , a study was submitted on behalf of Canadian Pacific A i r l i n e s limited based upon a price-demand curve prepared from Canadian rail-my data and application of t h i s curve to less than carload r a i l express shipments between areas served by the proposed route. This study  The  - 163 i n d i c a t e d s u f f i c i e n t volume t o s u p p o r t a f i v e times weekly s e r v i c e with. DC6A a i r c r a f t and g r o s s revenues h o t t e r than $2 m i l l i o n s annually. (2) This d e r i v a t i o n of g r o s s revenue p o t e n t i a l , together w i t h t h e a s s o c i a t e d tonnage d a t a , comprised t h e most f o r c e f u l , as w e l l as t h e most e l a b o r a t e l y p r e p a r e d , p o r t i o n of t h e C.P.A. c a s e .  I n essence,  C.P.A. had p o i n t e d to what w o n d e r f u l t h i n g s t h e U.S. a l l - c a r g o o p e r a t o r s had done i n t h a t c o u n t r y ; then C.P.A. c o n t r a s t e d American r e m i t s w i t h the apparent i n a c t i o n and a l l e g e d d i s i n t e r e s t of T.C.A. i n the finally a i r cargo f i e l d ; A employing the Douglas  submission  to summarize t h e i r c o n t e n t i o n s that the b u s i n e s s was t h e r e and a v a i l a b l e to anyone prepared t o go after i t .  The whole c a s e r e s t e d e s s e n t i a l l y on t h e  v a l i d i t y o f the Douglas computations. of M a r i t i m e C e n t r a l Airways s t a t e d :  As Mr. W e l l s , " I t d i d appear  to me that the main case f o r t h e ap p l i c a * r e s t e d on the evidence and e x h i b i t s produced by Mr. C r i l l y , " the Douglas A i r c r a f t Company's w i t n e s s . (3) However, i t was anomalous t h a t c o m i s e l f o r a l l concerned gave the priee-demand r e l a t i o n s h i p a very wide b e r t h . I n t h i s r e g a r d , M r . H a m i l t o n , counsel f o r A s s o c i a t e d Airways o f Edmonton, made the follbwing summating comments: Mr. C r l i l y ' s graphs are found i n E x h i b i t 18 and 18A. We might say t h a t he was n o t (2) (3)  A i r Transport Board r e p o r t So the C a b i n e t , p.3. A i r f r e i g h t Case T r a n s c r i p t , page 1347.  - 164 questioned too thoroughly on the b a s i s o f the graphs, but I am quite sure that my l e a r n e d f r i e n d , counsel f o r T.C.A. had the necessary s l i d e r u l e t a l e n t a v a i l a b l e so t h a t , i f i t were^necessary p a r t of t h e i r ease i f they f e l t i t necessary to break down t h i s evidence, they could have e a s i l y made use of t h a t t a l e n t and p o s s i b l y have g i v e n us some e n l i g h t e n i n g information i n connection with t h i s b a s i s . (4) Even the C.P.A. counsel was" admittedly confused by the workings of the Douglas computations as to route potential.  Mr. B r a i s s t a t e d t h a t : as . . . so far^the demand curve i s concerned i t took me a l o n g long time to understand i t . Towards the end I was beginning t o make somet h i n g out of i t , but I am a f r a i d that i f I went i n t o i t i n too much d e t a i l I would f i r s t confuse myself and p o s s i b l y i n the process not confuse the Board but n o t help the Boad. (5) However, Mr. B r a i s was quite prepared to a c c e p t  the  f i n d i n g s of the Douglas r e p o r t as sound and to  present them to the Boshd as h i s c l i e n t ' s a p p r a i s a l of  the route p o t e n t i a l .  As f o r Mr. O'Donnell, he  chose t o leave i t to the Board's  economist, Mr. Jaworski,  and to the Board members themselves to determine as to whether the survey f i n d i n g s were sound. regard, Mr. O'Donnell  In t h i s  stated:  . . . my advisers t e l l me that Mr. C r i l l y ' s approach i s based on unsound assumptions. I r e a l i z e that the Board has access to the very best t e c h n i c a l advice, the very best of s t a t i s t i c i a n s and f o r e c a s t e r s , and they can e a s i l y have that v e r i f i e d to t h e i r s a t i s f a c t i o n . (6) (4) (5) (6)  I b i d . , page 1326. I b i d , , page 1292. I b i d . , -page 1434.  - 165 In addition to the foregoing summating statement, Mr. O'Donnell had previously read into the transcript a b r i e f statement covering the alleged weaknesses of the Douglas approach.  This statement summed up the  appraisal, made at the request of the writer of t h i s -thesis, of the Douglas price-demand relationship by Mr. T.G. Donnelly, Assistant Dominion Research S t a t i s t i c i a n , of the Dominion Bureau of S t a t i s t i c s , Ottawa. Mr. Donnelly contended that*  (See Transcript page 1455)  1.  Ho economist would think i t valid to plot a demand curve based on four points only. 2. The Douglas demand curve assumes consistency between the e l a s t i c i t y of the demand schedules for a i r ana r a i l f r e i g h t . This i s not the case. 3. The same curve assumes that a purely monetary rate consideration governs the volume of goods shipped. Such i s not the case. 4. Pour separate and d i s t i n c t groups of demand curves are involved rather than the single composite curve depicted on page 41. (thesis page 46) As noted above, Mr. O'Donnell read these four shortcomings of the process involved into the transcript without further comment other than to say tha-t he was content to leave f i n a l appraisal of the matter to the Board's advisers.  As also noted previously, the Board  made no c r i t i c a l comment of the process, when reporting the available potential so derived to the Cabinet in support of C.P.A.'s application approval.  In this  regard, the writer has been fortunate to obtain a copy of the relevant section of the Air Transport Board Economists report to his superiors to do with  - 166 the price-demand relationship put forward by the Douglas Company. This report, together with other related data, was forwarded to the writer under cover of a letter dated February 22, 1954 by Dr. A. Board economist.  Jaworski,  In his l e t t e r , i t i s of interest  that Dr. Jaworski stated: . . . I was greatly disappointed by the f a c t that Professor Currie and Professor Yfaines did not c r i t i c i z e Mr. C r i l l y ! s demand curve, r e s t r i c t i n g themselves only to general statements which are known to every student of transportation economics. In fairness to the two professors i t should be noted that i t was part of Mr. O'Donnell's strategy that t h e i r statements were so r e s t r i c t e d .  Their t e s t i -  mony was kept aloof from the immediate b a t t l e f i e l d ; their statements were r e s t r i c t e d to their particular f i e l d s , covering the shortcomings of duplication of transit f a c i l i t i e s i n a general, rather than in a particular manner.. I t should be further noted that Dr. Jaworski appended a note to the effect that he was expressing his personal views i n his statements, not those of the Board. The report of Dr. Jaworski to the Board i s quoted i n part as follows: *  •  •  It i s commonly recognized that the relation between volume of t r a f f i c and rates i s of a very complicated nature and i t i s not probaBLe that even i n the future i t would be possible to describe this relationship by a simple  - 167 mathematical formula or to present i t hy a smooth curve. There is a tendency among economists with a mathematical background to assume that the economic events are moving continuously, and therefore, i t s relationship could be presented by a curve. However, there are many instances i n transportation where, to the several changes i n rates there i s no apparent response i n changes of volume. And suddenly a drastic change i n volume may occur, thus indicating that the previous changes i n rates without a s i g n i f i c a t ehange i n volume, are carrying an unnoticeable, for the time being, cumulative effect. For example, l a s t May, a 10 percent increase i n American air cargo commodity rates took place, 33 Hew York department stores switched sudden/ly. their transcontinental shipments of ready-to-wear apparel, from a i r to r a i l , that represented over 500 tons of f r e i g h t .  Douglas Report (Exhibit 18A, page 39) by considering i m p l i c i t l y Exhibit £ 0 , concludes: ""Therefore, i t i s possible to use Canadian railway car-load freight data, the only c l a s s i f i c a t i o n for which adequate s t a t i s t i c s are available, to estimate air freight demand at various rate levels." The air cargo i s competing with the railway express, which in turn competes with the 1CL movement and f i n a l l y , we get the railway car-load t r a f f i c . Therefore, i t i s not understood why Douglas Report jumps to the Canadian ear-load freight data when the waybill analysis of the Canadian LOL movement"in 1949 i s availableT The pertinent extract from the LCI s u r v e y i s submitted as Exhibit D. (by Dr. Jaworski to the Board) By considering only significant v o l umes of t r a f f i c and the corresponding rates we may notice ( i n Exhibit D) that on an average revenue of §»8 cents per ton-mile, the corresponding volume i n ton-miles was 9.75 percent of the total-volume, where on a higher average revenue of 4.3 cents, the corresponding volume of t r a f f i c was much higher too, namely 19.6 percent of the volume, and again, on a 4.5 cent rate, the volume i s 15.5 percent, and f i n a l l y on 5.2 cents rate,  - 168 the eor responding volume is as high as 24.076 percent of the t o t a l volume. Therefore, we must conclude that the survey of the Canadian ICI movement does not support the basic assumpt i o n of Douglas study; a simple mathematical relationship between t r a f f i c " rates and volume. {low rates with high volumes and vice-versa.) Considering the graph onpage 41, Exhibit 18A, we must assume that the commodity specification of the points i s not essential and only the volume data with the corresponding rates are important f o r establishing the demand curve. Such an assumption i s f u l l y j u s t i f i e d , because the graph on page 43 that has. been computed from the previous gisph does not carry any specification of the commodities whatsoever. During the cross-examination of Mr. C r i l l y by Mr. YoungerT (page 363 of the Transcript) from Mr. C r i l l y s answer at the bottom of the page, i t may be concluded that a l l the points on the presented graph (on page 41, Exhibit 18A) must be primarily unfinished products, because manufacturing products w i l l be on a differ ergot but p a r a l l e l l i n e (shifted to the right) and therefore with exactly the same stope. I f this is so, a l l unfinished products which are moving on the same rates should have their volume combined together, and therefore, the product of mine, and product of forest that are moving p r a c t i c a l l y on the same r a t e , should have their volume combined, and by doing t h i s , the point w i l l be raised considerably. The highest point on the graph i s represented by the product of agriculture, showing a t r a f f i c volume of approximately 7.2 b i l l i o n ton-miles. It i s a known fact that the largest single commodity among the agricu l t u r a l products on the CPR system i s wheat. The rate for wheat i n Western Canada i s unchanged since 1922, and the changes may be introduced only by an Act of Parliament. Despite the fact of an unchanged r a t e , the changes i n volume of wheat t r a f f i c . . . between some years are as high as 5 b i l l i o n ton-miles, and therefore, the top point on the Douglas graph of 7.2 b i l l i o n ton-miles might move upwards or downwards..by the amount of 5* b i l l i o n ton-miles, depending which year i s considered.  - 169 A l l Douglas c a l c u l a t i o n s 13, (page 43, of E x h i b i t was drawn from F i g u r e 12 the whole Douglas Report F i g u r e 12.  are "based on Figure 18A) which i n t u r n (Page 41), t h e r e f o r e , stands and f a l l s with (7)  From the foregoing quotations from Dr.  JawoEki's  r e p o r t to the Board i t would appear that he i s i n complete agreement with Mr. Donnelly, the D.B.S, Research S t a t i s t i c i a n as to the f a c t that the Douglas price-demand r e l a t i o n s h i p was based upon unsound premises, y i e l d i n g i n consequaace t o t a l l y u n r e l i a b l e f o r e c a s t e d route p o t e n t i a l data.  I t should be noted  that the under l i n i n g s above were added by the w r i t e r . Another avenue of enquiry followed by the writer of t h i s t h e s i s t o do w i t h t h e Douglas p r i c e demand r e l a t i o n s h i p i n v o l v e d an endeavour t o query those r e s p o n s i b l e f o r the Wayne U n i v e r s i t y Studies, on the b a s i s of which s t u d i e s Mr. C r i l l y , the Douglas witness, had s t a t e d h i s work was based.  The three  p u b l i s h e d s t u d i e s were purchased from the Wayne U n i v e r s i t y Press and read i n r e l a t i o n to t h e Douglas report.  These p u b l i c a t i o n s a r e :  " A i r Cargo P o t e n t i a l i n Fresh F r u i t s and Vegetables" by P r o f . Spencer A. l a r s e n , 1944. " A i r Cargo P o t e n t i a l i n Drugs and Pharmac e u t i c a l s " by Prof, l a r s e n and P r o f . W i l l i a m R e i t z , 1948. "A Study of Markets f o r Airborne Seafoods" by P r o f . Larsen and P r o f . W i l l i a m R e i t z , In (7)  1946.  only the 1944 study i s any r e f e r e n c e made t o Dr. A. Jaworski, Report to A.T.B. r e C.P.A. A p p l i c a t i o n , pages 3 t o 5 i n c l u s i v e .  -  1 7 0  -  analysis of the type employed In the Douglas survey. On page 61 of the 1944 Wayne University study to do with a i r oargo there i s depicted a curve essentially similar to that set out on page 43 of the Douglas Exh i b i t 18A.  Hence, i t represents the second step i n  the process.  The f i r s t step, correlating freight  rates and t r a f f i c movements on logarithmic paper to obtain the r a t i o s for application to a i r cargo movements i s not included.  Presumably, the straight l i n e  curve captioned "Wayne University Studies" i n Exhibit 20, as f i l e d with $he Board by Douglas, was the source from which the above mentioned curve on page 61 of the 1944 of the 1944 Wayne study was derived.  In an effort  to confirm this presumption, the writer enquired o f Professor l a r s e n , with whom he had conducted previous correspondence, on January 27th, 1954, as follows: . . . I have purchased a copy of your "Air Cargo Potential i n Fresh Fruits and Vegetables" whieh gives me further data along the l i n e s suggested i n your reply of 22nd January 1954. Is there another book i n the series or another publication such as one containing an a r t i c l e by yourself to which 1 could r e f e r , giving the manner of derivat i o n of the Demand Schedule for A i r Cargo, Figure 1, page 61 of the book I have purchased? (8) In reply, Processor larsen suggested that I obtain the other two volumes i n the Wayne air cargo series, as noted on page 169 of this thesis.  Subsequently these  two texts were obtained and studied.  Ko reference to  (8)Better from writer to Prof. Spencer A. larsen, Director, Materials Management Center, Wayne University, D e t r o i t , Michigan, 27 Jan. 1954.  - 172 the type of forecasting i n the o r i g i n a l 1944 surrey appears at any point.  In consequence, Dr. William  R e i t z , Professor of Education, Wayne u n i v e r s i t y , and s t a t i s t i c i a n f o r a l l three volumes and the co-author of the l a s t two, was contacted hy l e t t e r on the 20th of February 1954.  The results of this contact were  most f r u i t f u l , inasmuch as Professor Reitz invited the author to meet with him and to discuss the matter at length.  In the course of this meeting, the follow-  ing points were established: (1)  Dr. Reitz agrees with the contentions of Mr. T.Gr. Donnelly, Dominion Bureau o f S t a t i s t i c s , as to the contended shortcomings of the Price-Demand Analysis as set out on page 165 of t h i s dissertation.  (2)  Exhibit 20 does contain the basic source of the demand curve on page 61 of the 1944 YsTayne study. However, as Professor larsen stated i n h i s earlier l e t t e r , "The general principle that i s being used (by Douglas) to estimate a i r f r e i g h t volume i n the materials you sent me seems to me to be somewhat oversimplified . . . " (9) Dr. Reitz pointed out that consumer and shipping company panels, vitamin loss over time, and many other factors were used to smooth i n t h e i r curves. S t r i c t assumptions to do with volume variation with rate were not made as has been done by Douglas.  (3)  The method of analysis i n question represented but a fraction of the e orient of the 1944 study, representing an independent fragment of same. Douglas, on the other hand, used the method exclusively to form the essential basis of i t s entire potential forecast for Canadian P a c i f i c A i r l i n e s .  (4)  The method o f analysis i n question has been dropped by Dr. Reitz and Professor larsen. Their i n i t i a l survey was i n large measure exploratory, being the f i r s t of i t s type i n the f i e l d . The panel testing phase of their  - 173 I n i t i a l survey has been retained. However, more precise and statistically sound forecast techniques have been adapted, some f o r the f i r s t time i n a i r cargo pred i c t i o n . These methods include the e s t i mation of national t r a f f i e (e.g. of drugs) by means of Invariant relationships derived from sample t r a f f i c data* the u t i l i z a t i o n of weighted eentres of production and sales; the combination of separate factor ratings into an a i r propensity index and the estimation of t r a f f i c potentials by means of the relationship between existing t r a f f i c charges and v o l umes of t r a f f i c , but on a particular commodity basis , , only. (5) Douglas A i r e r a f t Company is quite wrong i n the opinion of Dr. E e i t z , i n referring to the methods used by Mr. C r i l l y as the "Wayne method". Douglas i s simply employing a small part of a complex method i n i t i a l l y used by Wayne University back i n 1944, but long since dropped i n favour of the more precise tools of analysis referred to i n (4) above. Hathan Z e y f i t z , Dominion Research S t a t i s t i c i a n and h i s assi&ant Mr. T.G. Donnelly, considered the PriceDemand relationship, on which Douglas based i t s C.P.A. forecast, as being quite unsound. Prof. Waines and Dr. Currie concurred.  Dr. Jaworski also concurred in an  most emphatic manner i n his report to the Board.  Dr.  Eeitz states that i t i s not the "Wayne University method"; states that Douglas has oversimplified a method long since dropped by himself and his associates,  nevertheless, the  Air Transport Board reported the method and the results to the Cabinet without c r i t i c a l comment, putting that phase of the C.P.A. submission forward as further evidence to support their contention that the licence application for the Montreal-Vancouver all-cargo service should be granted.  - 173 -  Data to do with Japan-Canada A i r Cargo Potential As previously noted at page 45 of this report, four pages of Exhibit 18 and nine of Exhibit 18A were devoted to a portrayal of the tremendous t r a f f i c potential available through stimulation of trade with the Orient, p a r t i c u l a r l y Japan.  A through freight  plane service i s dealt with coupling C.P.A. 's present trans-Pacific services to the proposed Vancouver Montreal all-cargo service.  The Air Transport Board  reported to the Cabinet that such Oriental t r a f f i c would bolster eastbound C.P.A. domestic all-cargo f l i g h t s , hence indicating that an obvious deficiency in the potential load factor picture would be thus compensated. Commencing on page 52 of Exhibit 18A, there i s set out an elaborate breakdown of Canadian and TJ.S. trade figures to do with Japanese imports and exports. Again a purely weight-value basis i s employed.  In  part the assumptions, as set out on page 52, are as follow: A l o g i c a l approach to measuring the Orient a i r cargo potential i s based on: fl) (2)  the breakdown of Orient of value per pound with the estimated effect of the penetration of this  trade by variation volume rate reduction on volume  The export-import s t a t i s t i c s between Canada and the United States and Japan were analyzed by individual account, using the value of each commodity and i t s weight to arrive at the value per pound. . .  - 174 The volumes for each value per pound category were cumulated . . . and appear graphically i n Figures 14 and 15. The degree of penetration into these curves by a i r cargo depends largely on the p r e v a i l ing route structure. . . Since the actual volume of Orient air cargo is not known, i t was necessary to assume an approximate value per pound figure to mark the present degree of penetration. A study of trans-Atlantic a i r cargo volume by I.A.T.A. members indicated that their transAtlantic a i r freight volume i n 1951 was the equivalent of a l l trans-Atlantic trade valued at or over $8.20 per pound. As non-I.A.T.A. members carry significant portions of this t r a f f i c , $8.20 is^considered unduly conservative. Henee a value of $8.00 was used i n this analysis. To determine the increased penetration as rates are reduced, i t was assumed that the equivalent value per pound moving by a i r w i l l decrease directly with the r a t e . With a 10$ rate reduction, the present degree of penetration by a i r cargo, estimated at $8.00 per pound, w i l l drop to $7.20 per pound, with a resultant increase i n potential as noted i n Table XXZvTI. (10) At the time of the actual A.T.B. hearing, there simply was not time to f u l l y check the various phases minut e of such l a s t ^submissions as the Douglas and Gruneau reports, despite their importance r e l a t i v e to the case. Hence, as regards the alleged Orient p o t e n t i a l , Mr. O'Donnell simply stated: One other thing I should like to mention, that is Mr. C r i l l y ' s reference to the Japanese trade. As far as I am concerned i t i s quite irrelevant. I suppose as this study has been put before the Board we should give i t some attention inasmuch as considerable ink and paper has been expended in printing i t i n booklet form. (11) (10) (11)  Exhibit 18A, page 52. Air Freight Hearing Transcript, page  1454.  - 175 Mr. O'Donnell r e s t r i c t e d his comments to the supposedly summating graph to do with the Orient trade which appears at page 16 of Exhibit 18. is headed with the statement:  This graph  "Trade with the Orient  requires rapid trans-continental service.  The Orient  market i s growing . . . The proposed service w i l l stimulate the flow of Canada's trade . . . "  (12)  The abscissa covers the years 1948 to 1951, with the ordinate marked o f f i n percentages, ranging from zero to 1000$. Canada's exports to the United Kingdom, the United States, B r a z i l and Japan are depicted over the years as percentages of 1948 data.  In consequence,  f l a t , apparently stagnated lines are shown for the  U.S.  and B r i t a i n , with Japanese trade yielding a near v e r t i c a l climb to over 800$ of the 1948 f i g u r e s .  Of  course, as Mr. O'Donnell pointed out, such percentage increase figures do not mean anything when no statement of totals involved i s included. To start from nothing makes multiple increases readily obtainable. In this regard Mr. O'Donnell further noted that, with reference to data set out i n the Dominion Bureau of S t a t i s t i c s publication "Trade of Canada, Exports to Bach Country," calendar year 1951, pages 109-111, an actual decline category which in exports to Japan f o r 1950 and 1951 of goods of that^ could conceivably come into a i r cargo transfers, took place.  "Thus," staged Mr. O'Donnell, "insofar as a i r  (12)  Exhibit 18, page 16.  - 176 cargo p o t e n t i a l i s concerned, I considerfcthe charted r e l a t i o n s h i p on page 16 of E x h i b i t 18 to be quite m i s l e a d i n g . " (13) f u r t h e r to the data source r e f e r r e d to by Mr. O'Donnell I t i s of i n t e r e s t to note t h a t f o r the years mentioned, 1950 and 1951,  there would not have been  one f u l l DC-6A a i r e r a f t l o a d a v a i l a b l e f o r c a r r i a g e i n e i t h e r d i r e c t i o n across the P a c i f i c of merchandise which could conceivably be considered as a i r cargo p o t e n t i a l a t present-day r a t e s i n terms of s t r i c t l y Japan-Oanada commerce. Subsequent to the h e a r i n g , the w r i t e r attempted to f u r t h e r appraise the P a c i f i c p o t e n t i a l .  P i r s t , an  e f f o r t was made t o obtain the I.A.T.A. t r a n s - A t l a n t i c survey r e f e r r e d to on page 174. Enquiry at t h e head o f f i c e o f that o r g a n i z a t i o n i n Montreal was to no avail.  Mr. Harold E . Shenton, I.A.T.A. Economics  and S t a t i s t i c s O f f i c e r , was,unable to f i n d any t r a c e of such a study i n h i s f i l e s .  However, upon w r i t i n g  to Mr. W i l l i a m M. C r i l l y , the Douglas witness, i t was determined that the study r e f e r r e d to was another o f Douglas's p r e s e n t a t i o n s .  Mr. C r i l l y s t a t e d :  The ief erence on page 5E of the Canadian P a c i f i c A i r L i n e s Appendix Report, SM 14662A, i s not van I.A.T.A. study,, but to a study of t r a n s - A t l a n t i c a i r f r e i g h t by I.A.T.A. members which was conducted by Douglas. (14) Prom the supporting data s u p p l i e d by Mr. C r i l l y i t would appear t h a t t h i s A t l a n t i c study was c a r r i e d  (13) T r a n s c r i p t , p. 1454. 114) s e t t e r dated, Jan. 20,  - 177 -  out by Douglas for Swissair on a promotional basis in relation to a i r c r a f t sales as was the survey conducted for Canadian P a c i f i c A i r Lines. As for the general outlook of Orient trade with relation to airborne commerce, aseries of texts were consulted.  The outlook f o r a i r eargo across the  P a c i f i c would appear to be most dubious despite the Douglas contentions to the contrary.  As Ellsworth  Huntington summatea i n his Principles of Economic Geography at pege 638, "The greatest trade of a l l i s between countries that are most alike."  Canada and  the Orient could not be more unlike i n every respect. In t h i s regard Mr. Walter A. J^&ius, In h i s TJ.S. Shipping i n Transpacific Trade, states at page 6: The countries of the Hew World are spacious, r i c h l y endowed with raw materials and f e r t i l e aggricultural lands, and Inhabited by an independent, progressive population with a high standard of l i v i n g . The Par East i s crowded, deficient i n resources, bound by p o l i t i c a l and economic t i e s to Western nations and by cultural bonds to an age old civilization . . . The purchasing power of the great masses of the Orient is too low to permit them to buy on a large scale the manufactured products of the TJ.S. They must trade agfgricultural and mineral products primarily for the essential basic foodstuffs and raw materials they lack—wheat, lumber,- scrap i r o n , wood pulp, cotton. The U.S. looks to the Orient for many raw materials: rubber, t i n , copra, s i l k , coconut and other vegetable o i l s . Trans-Pacific trade is thus predominately an exchange of raw materials between two two continents whose geographic resources are  -  1 7 8  -  quite widely divergent and whose economies are at a different stage of development. Irans-Pacifio trade faces two great handicaps, one, the distances involved, and two, the wide disparity between the standards of l i v i n g of the peoples of the eastern and western shores. (15) Mr. Radius had written his test i n 1944 under the sponsorship of the American Council of the Institute of Pacific Relations. His data covered the period  1922-  1938, hence r e s t r i c t i n g himself to the r e l a t i v e l y normal, pre-war period of Pacific commerce. To check his concepts with current thought i n the l i g h t of a i r cargo possibilities, the writer corresponded with a number of authorities, receiving detailed replies from: Clarence M. Young Executive Vice President Pan American World Airways System (in charge of .Pacific-Alaska Division of that firm) R.P. Reese Cargo Sales Manager U.S. Regional Offices P h i l l i p i n e Air l i n e s Paul H. McClelland U.S. Army Sea Transport Control Seattle, Washington (pre-war Paeific Coast U.S. Manager for 1I.Y.K.) Mr. McClelland, whose entire l i f e has been devoted to stimulation of trans-Pacific trade i s most cautious as to his expectations regarding a i r penetration, stating in part: With regard to the Trans-Paific a i r potential, i t seems to me that i n normal times there are two main considerations that w i l l make for a i r l i f t preference, v i z . , seasonal demand, and )  U.S. Shipping i n Trans-Pacific Trade, pages 6-7.  - 179 saving of i n t e r e s t charges t o balance the difference i n t r a n s p o r t a t i o n c o s t . Fnere time i s not too e s s e n t i a l , the tendency w i l l he t o larel o f f i n favor of the cheaper mode. The Orient has considerable buying power but on a narrow margin of p r o f i t and the merchant cannot a f f o r d t o put too much of h i s cost i n t o speed. Over the years I b e l i e v e the standard of l i v i n g of the Orient w i l l gradually approach that of the West, so that the two areas w i l l become i n c r e a s i n g l y interdependent f o r the higher c l a s s commodit i e s which w i l l stand the higher a i r r a t e s , but that i s going to be slow. (16| I t w i l l have been noted that the Douglas appraisal of Orient p o t e n t i a l was based on the assumption that the value of merchandise per pound was the basic c r i t e r i o n f o r e s t a b l i s h i n g the p o s s i b i l i t i e s of d i v e r sion to a i r carriage.  In t h i s regard, Mr. Young s t a t e s :  We do not believe the value of the goods i s too serious a bar, as a i r transport lends i t s e l f to the carriage of c e r t a i n commodities when the a i r cargo charges themselves exceed the f.o.b. value. An example, which occurs to u s , i s baby c h i c k s . The value f.o.b. P a c i f i c Coast might be $18.00 f o r a 12 pound carton of 100 c h i c k s , yet they move f r e e l y at rates of $3.11 per pound. This commodity i s t y p i c a l of several where a i r t r a n s p o r t a t i o n i s the only meihod which can be used at a l l . (17) As f o r distances, a survey that purportedly produced reasonable r e s u l t s on the A t l a n t i c could hardly be d i r e c t l y applicable to the P a c i f i c on a straight percentage rate reduction b a s i s .  In t h i s regard, Mr.  Young notes that the lew York-Paris distance i s 3638 miles against 8501 from San Francisco to Hong Kong (16) (17)  P . H . McClelland, l e t t e r to w r i t e r , 28/l/54 C.M. Young, l e t t e r to w r i t e r , 9/2/54.  - 180 by the mid-Pacific routing, as flown by Pan American. Mr. Young further states in this regard: I f we accept as axiomatic that rates must roughly correspond, to distance, you are quite r i g h t , and t h i s i s borne out by a comparison of ton mile rates i n the Atlantic and P a c i f i c . The cargo rates on the A t l a n t i c for general cargo are broken down into three weight classes: under 100 pounds, 100 to 440 pounds, and a new break of over 440 pounds.. Using the lew York Paris mileage given, these work out to approximately 64/, 48/ and 45/ per ton mile respectively. P a c i f i c rates are equalized between the P a c i f i c Coast terminals and the Orient terminals, Tokyo/Hong Kong/Manila. Using the mileage given for San Francisco/ Hong Kong, the three rates work out to 58/, 44$z and 41/ respectively. In the reverse direction there are lower rates from the Orient brought about by an attempt to equalize the flow of cargo, which i s normally out of balance, as so much more goods move from the U.S. Ton mile rates work out to 52/, 39/ and 36/ respectively. (18) Hence, P a c i f i c rates per ton-mile are well i n l i n e with those on the A t l a n t i c , being actually less heavy on this basis.  However, i n view of the mileages  involved, i t i s roughly twice as costly to ship goods across the P a c i f i c as opposed to the A t l a n t i c . This, i n addition to the fact that P a c i f i c trade i s "not i n a hurry" by virtue of the raw material nature of most of the goods involved. As Mr. Reese of P h i l l i p i n e A i r l i n e s notes: Present general commodity rates for cargo are approximately 100 times greater than surface rates, and we can therefore hope to attract only a very t r i f l i n g percentage of the volume of freight moving from the l o r t h American continent to the Orient and Asia. The. a i r carriers operating asross the Pacific are doing (18) Ibid., page 2.  - 181 what they can to stimulate the use of a i r cargo by introducing specific commodity rates substantially below the general commodity rates. Even the lowest of these rates are based on 36$/ a ton mile, which when compared to the ocean ton mile r a t e , i s s t i l l fantasti c a l l y high. l o r a d i c a l reduction i n these rates can be made u n t i l a i r c r a f t better suited to the carriage of cargo (and by that I mean a much more economical operating cost) can be made available to the a i r c a r r i e r s . At the present time none of the a i r l i n e s operating across the P a c i f i c use a l l cargo a i r c r a f t , which as you know, i s so common cn the l o r t h A t l a n t i c . One of the big reasons why a l l cargo a i r c r a f t cannot be successfully used on the P a c i f i c i s that these a i r c r a f t are not cargo a i r c r a f t but converted passenger planes. This i s true even of the DC-6A which i s merely a DC-6 with a few concessions made to cargo, but s t i l l retains the round h u l l and s t i l l poses a considerable problem by having the cargo doors 100 or more inches from the ground. (19) Along the same l i n e s , Mr. Young remarks: Your point with reference to present day a i r craft appears substantially correct. They are excellent for the carriage of passengers, but since a premium is placed on speed, this must be paid f o r . The concept of cargo carriage is to schedule a i r c r a f t , as you have indicated, with an eye to passenger t r a f f i c , and to u t i l i z e residual space for cargo. This provides an excellent service f o r cargo but perhaps the f u l l potential cannot be realized unless, and u n t i l , an a i r c r a f t designed for eargo alone i s economically possible. A closer approach has been made i n the Atlantic by using stripped down DC-4 and DC-6 a i r c r a f t . Here the community of interest between the two sides of the A t l a n t i c i s strongly i n evidence and heavy volumes reasonably well balanced d i r e c t i o n a l l y , make possible a f u l l cargo operation. (20) . But not so on the P a c i f i c .  The facts appraised and  the authorities consulted a l l bear out Mr, O'Donnell's (19) (24)  P.P. Reese, l e t t e r to writer, 19/l/54. G.M. Young, l e t t e r to writer, 9/2/54.  - 182. content ion that the inclusion of the Orient potential data i n the Douglas submission for O.P.A. was both misleading and irrelevant.  For t h e i m m e d i a t e  future,  hence w i t h relation to the C.P.A. application for a Montreal-Vancouver a i r freight run, trans-Pacific a i r freight t r a f f i c would appear to be non-existent insofar as significant volumes a r e concerned.  Lockheed Constellation Cargo Pod  Chapter X Australian Air Transport Providing a Contemporary and P a r a l l e l Case History for ^Canadian guidance. Insofar as this dissertation i s concerned, the preceding chapter completes the treatment of the evidence brought f o r t h hy the applicant and interveners in the Canadian P a c i f i c Air Freight Case.  The eleventh, and  f i n a l chapter summates the topic as a whole and offers such conclusions and recommendations as the observations of the writer would appear to j u s t i f y . The present chapter to do with Australian Air Transport is essentially an i n s e r t .  However, Australia  has seen f i t to do what Canada has not done and the consequences provide an i l l u s t r a t i v e case history for Canadian contemplation.  In Australia today there are  two a i r l i n e s operating p a r a l l e l routes an a transcontinental basis.  One is owned by the government; the  other by the shipping^ corporations. two a i r l i n e s account for 85$ of the domestic a i r f i e l d .  Together these  a l l transport i n  The privately owned line has  been carrying on with great d i f f i c u l t y , with claims of considerable f i n a n c i a l l o s s .  The publicly owned  l i n e has progressed dynamically since i t s inception. The privately owned line i s Australian National A i r ways Proprietary limited which came into existence i n 1936.  The publicly owned firm i s Trans-Australian A i r -  lines which, was conceived by the labour Government i n  - 184 1944.  Henoe, the relative progress of the two firms  during the past decade.  The Labourites fostered their  national air l i n e to the detriment of the private corporation, r e s t r i c t i n g the carriage of mail and personn e l on government business to their own operator. C i v i l air transport i n A u s t r a l i a , as i n Canada, was pioneered i n the 1920's, with emphasis on the remote northern and western areas.  In 1932 the f i r s t  trunk route between c a p i t a l c i t i e s was developed. By 1936  a l l major metropolitan pairs were linked by  interstate air services.  In 1939 the regular internal  a i r transport firms were f l y i n g approximately 45 m i l l i o n passenger miles annually.  In the 1944-45  f i s c a l year, 130 m i l l i o n passenger mjQes were flown. For the year ended June 30th, 1952, the total was 756 m i l l i o n passenger miles.  This constituted 50%  more passenger miles per capita population than flown by the domestic services of the U.S.A. for the same period. (1) U n t i l the advent of the Labour Party to national leadership i n 1944,  the p r i n c i p a l a i r operator had  been Australian national Airways Proprietary Limited. This firm, a proprietary company incorporated i n V i c t o r i a , i s the wholly owned subsidiary of what i s known i n A u s t r a l i a as the "shipping combine." fl)  This  P.M.C. Hasluck, Minister for T e r r i t o r i e s , Hansard, A u s t r a l i a , Commons, 24 Oct. 52, p. 3737; supplied by Hon. Hasluck to writer following l e t t e r from him dated 19 Hov. 53.  - 185 group i s made up of f i v e corporations: (2) 1. 2. 3. 4.  Huddart Parker Limited, Holyman Brothers Proprietary Limited, Union Steam Ship Company of lew Zealand, Ltd., Adelaide Steamship Company Limited,  5.  Peninsular and Oriental Steam navigation Co.Ltd.  Each firm holds 1,119,000 shares i n the a i r firm. The t o t a l shares outstanding i s given as 6 m i l l i o n , one other shipping firm having a minority i n t e r e s t . par value of the shares i s 5s. each.  The  The paid up capi-  t a l i s only 1.5 m i l l i o n pounds. As noted, up to 1944 this private f i r m , Australian national Airways, was the v i r t u a l counterpart of TransCanada A i r Lines from the standpoints of scope of operations and control over competition.  Ownership, of  course, was as the case f o r C.P.A. A.H.A. was the nation's prime trunk operator of a i r services, vested with a monopoly i n effect similar to that of T.C.A. On november 22, 1944, the A.IT.A. monopoly ceased to e x i s t .  On that date, i n the Federal Parliament,  the Acting Prime Minister, Mr. Porde, announced the Labour Government's intention of forming "a wholly Soijernment-owned statutory authority to take over, operate and maintain a l l interstate a i r l i n e s . " (3) The relevant act was introduced on July 4, 1945 and proclaimed August 16th, being- entitled The Australian national A i r l i n e s Act 1945, The act provided for the establishment and operation (2) (3)  Ibid., Dr. Evatt, Opp. Leader, p. 3875. R. Williams, Dir.Gen. of CivJL Aviation, with l e t t e r to writer dated £4/12/53.  - 186 by the Commonwealth, of national a i r l i n e services and for the setting up of the Australian National A i r l i n e s Commission, consisting of f i v e commissioners, to establish and operate such services. The Act included the following provisions: (4)  (for services)  1. between any place i n a State and any place i n another State; 2. between any place i n any "Territory of the Commonwealth and any place i n Australia outside the Territory; 3. between any place i n any Territory of the Commonwealth and any other place in that Territory; and 4. with the approval of the Minister, between any place i n Australia and any place outside A u s t r a l i a . As might be expected, the private firms objected, strenuously to the whole uni ertaking.  Australian  National Airways, together with Guinea Airv;ays l t d . and MacEobertson-Miller  Aviation Company, took the  matter to Australia's High Court.  This body ruled  that the proposed commission could not operate intBastate services, but that provision for interstate operations were l e g a l l y based, together with the provisions for the taking over of existing operators. A.N.A. challenged the High Court decision and asked for an appeal to Privy Council.  The Australian High  Court disallowed this application for appeal on the 17th of A p r i l , 1946.  Further, the Aet was subsequently  amended i n a legal manner to permit intrastate f l i g h t s . The Australian National A i r l i n e s Commission was (4)  Australian National A i r l i n e s Act, 1945-52, page 8.  - 187 established on February 12, 1946 with A.W. chairman, W.C.  Coles as  Taylor as vice-chairman, and  E.G.  Johnston (Assistant Director General of C i v i l Aviation) I.E. Fanning (Postmaster General's Dept.) and G.P.1T. Watt (Treasury) as the other three members.  Present  chairman i s G.P.P. Watt, Mr. Coles having resigned following the l i b e r a l s return to power inasmuch as he had actively supported the labour government i n i t s p o l i t i c a l programme. Mr. Johnston, who  i s s t i l l the  Assistant Director General of GivilaAviation and  who  supplied the writer with considerable data, i s no longer a member, his term of office expiring 11th February  1952.  Trans-Australia Airlines was set up by the Commission to operate the air services contemplated by the Act.  Interim daily service between Melbourne and  Sydney commenced on the 9th of September 1946 with converted Douglas C-47's.  Since the.t time operations  have expanded to provide a network linking 100 towns and centres throughout A u s t r a l i a , involving a route mileage of 25,441.  The Act had contemplated the tak-  ing over of existing air services such as those furnished by Australian national Airways l i m i t e d . l e g a l obstacles, however, resulted i n the growth of a pair of s t r i c t l y duplicated route structures. For the year ending June 30th, 1953, Australian  - 188 National (private) carried 567,889 passengers; TransAustralian, 646,226.  The private firm hauled 55,041  long tons of freight during the same period; the pub(5) l i e f irm, 16,256.  Inasmuch as the private firm i s  the subsidiary of the shipping firms, a i r freight i s naturally most readily diverted to i t . P r o f i t or loss information for Australian National is not d i r e c t l y available inasmuch as that a i r l i n e is a "proprietary company and i n accordance with the relevant l e g i s l a t i o n i n Australia i s not required to publish i t s balance sheets and accounts." (6) However, the results of a l i b e r a l government enquiry into the operations of the two firms, made i n 1952, gives the following data as tabled i n Hansard: (.7) Table 25 Trans-Australian (public) 1949- 1950 (to June 30th) ,$336,000 P r o f i t 1950- 1951 do. 341,000 P r o f i t June 50-December 51, 1951 (not given)  Australian National (private) £ 2 1 6 , 6 8 2 loss 10,221 loss 201,775 loss  Of course, this i s no prenf i n i t s e l f of superior operation by the public concern.  I t i s , however, an  indication of the extent that a i r transport leans f i n ancially on government support through mail pay, whether in excess of charge for service rendered or not.  The  private firm, i n 1951, was receiving 50,000 pounds per annum mail pay as opposed to 500,000 pounds for the public operator. In this regard i t is of interest to the statement made by r e c a l l A t h e Canadian A i r Transport Board's Chairman i n (5) Aviation Week, 2/ll/53, page 23. (6) P. Williams, l e t t e r to writer ,. 24/12/53._ (?) A u s t r a l i a , Commons .Hansard, 24/ ICy 52 ,p. t739.  - 189 the A i r Freight Case:  (8)  Mr. Wells, Maritime Central Airways, had queried Mr. McConachie as follows: Q.  Is i t your opinion that the all-cargo c a r r i e r i n Canada ought to he licenced to carry air mail and parcel post?  A.  I f they should he asked to c a r r y i t .  I HE CBAIEMAP: I am sorry, hut I do not believe that that i s a proper question to introduce since the carriage of a i r mail i s a matter that i s determined by the Post Office Department and i s one over which this Board does not exercise j u r i s d i c t i o n . Such mail pay as was received by Trans-Australian, the Commission's c a r r i e r , does not, however, seem to be greatly out of line as is evidenced by the following breakdown of the company's revenue dollar for 1951-52: Table 24 (9) Revenue Source" Passenger fares and baggage Freight Mail Other  Percentage 77%" 15% 7$ 5%  As noted on the preceding page, the private firm's losses were steadily mounting.  The return of the l i b e r -  als to power made possible the reversal of this trend. In 1952 four companion acts were brought before the Commons and Senate; becoming law In that year. The p i v o t a l document concerned comprises a s i x page act to approve an agreement made between the Commonwealth and Australian national Airways Proprietary, l i m i t e d , the short t i t l e being " C i v i l Aviation Agreement Act 1952." (8) (9)  A i r Transport Board, Air Freight Case Transcript, page 688. Trans-Australian A i r l i n e s , 7th Annual Report 1951-1952, page 19.  -  190  -  In introducing this C i v i l Aviation Agreement Act, Hon. P.M.C. Hasluck said i n part: . . . despite the fine service i t was providing, Australian National Airways Proprietary limited had been running at a loss on i t s internal services for some years. At the same time, Trans-Australian Airways was showing a p r o f i t , due entirely to the monopoly of a i r mail revenue which i t enjoyed. . . The directors of Australian National Airways Proprietary Limited, therefore, approached the Government (that would have been the Chifley Labour Government i n 1 9 4 9 - w r i t e r ' s note) and proposed the amalgamation of Australian National and Trans-Australian. They said i t was not possible for the two a i r l i n e s to compete on a p r o f i t a b l e basis and the single entity was the only possible way of conducting c i v i l a i r services within A u s t r a l i a . . . . When the company renewed this proposal to the present Government, we rejected i t . We are opposed i n principle to monopoly and and we w i l l seek to avoid i t wherever we can . . (10)  Rather than consolidation or amalgamation, a policy of rationalization such as put forward by the Puff Commission for Canadian railways was  adopted.  Hasluck noted that competition between the two  Mr. opera-  tors had been intense, resulting i n many cases of overlapping and provision of services in excess of public requirements.  In consequence, a provision of  the Agreement Act stipulated that time tables and services were to be integrated, a l l wasteful duplication to be dispensed wi tik. Further* 1 . Bach operator was to be given an equal share of a i r mail t r a f f i c . 2. Government business was to be freely (10)  P.M.C. Hasluck, Hansard, page  3738,  24/1C)/52.  - 191 available to both, a i r l i n e s . 5. Each operator to be assisted f i n a n c i a l l y to acquire heavy f l y i n g equipment. 4. The l e v e l of a i r route charges to be reduced. 5. Rationalization to be subject of mutual agreement between the two operators with a r e t i r e d judge appointed by the government to settle deadlocks. (11) The f i n a n c i a l assistance i n point (3) above involved a government guarantee to the Commonwealth Bank for loans up to four million pounds to be made to the private firm for purchase of a i r c r a f t . A further provision of t h i s same section provided that to the reqiiirements of any a i r c r a f t becoming surplus B r i t i s h Commonwealth P a c i f i c A i r l i n e s or ©uantas Overseas A i r l i n e s , both of which are j o i n t l y owned by A u s t r a l i a , Pew Zealand and B r i t a i n , then they shall be evenly divided between A.IT.A. and T.A.A., with the r a t i o n a l i z a t i o n judge to decide which firm i s to get the odd remaining a i r c r a f t , i f any! The reference to route charges i s to do with user fees f o r airway maintenance as currently contemplated by the C.A.A. i n the United States and as put i n effect i n 1947 by the Chifley labour Government. Australian national had refrained from paying these assessments, contesting t h e i r l e g a l i t y .  To the time  of the Agreement Act, A.IT.A. was thus one m i l l i o n pounds i n arrears.  Trans-Australian had regularly  paid the charges l e v i e d .  The Act provided for a 50%  reduction In these fees for the future plus a retro{11)  C i v i l Aviation Agreement Act, pages 2,3,4.  - 192 aetive provision to settle with Australian National for 337 thousand pounds i n l i e u of hack payments due, together with a comparable refund to TransAustralian in presumption of overpayment.  This  refund has been used by the writer to correct the p r o f i t data shown on page 188 of this report. The agreement was stipulated as to be i n effect for 15 years from date of passage.  The intention,  of course, was to lend s t a b i l i t y to the private firm's operations and expansion plans and to attempt to preclude a reversal of policy by a succeeding government.  Such planning has also gone into the  concept of Trans-Canada A i r l i n e s without a specific monopoly period being specified.  A government change  in Canada would doubtless bring an end to T.C.A.'s monopoly p r i v i l e g e s , assuming the Conservatives were returned to power.  In this regard, the leader of the  Opposition, Dr. Evatt, summated rather pointedy: I say, on behalf of the labour party, that we s h a l l take every available step to oppose the b i l l . I f , notwithstanding that, the b i l l be passed, a future labour government w i l l frankly t e l l the people that the new parliament w i l l not be bound by i t s predecessor. We s h a l l take every lawful step to set aside this agreement. As a party, we s h a l l undertake to restore the status and a c t i v i t i e s of Trans-Australian A i r l i n e s to the position that they occupied before this measure was introduced. (12) (12)  Dr. Evatt, Australia, Hansard, Commons, 29 October 1952, page 3883.  - 198 -  Just who was r i g h t , Labour or L i b e r a l , depends on the outlook of whosoever hazards the opinion. The crux of the matter would appear to have been that duplication was yielding losses where a single operator .public or private, would have s u f f i c e d . Adam Smith dealt with the topic i n his discussion of the London Post Office system i n lis "Wealth of labions."  Taussig brought the subject up to date  with respect to railroads and the economies of scale i n Chapters 62 to 64 inclusive of his"Principles of Economics."  G-.D.H. Coles' further c l a r i f i e d the  matter for the writer with respect to the Canadian P a c i f i c A i r freight Case, as evidenced by the following quotation from his l e t t e r : In the early days of the Independent Labour Movement i n t h i s country - I man. i n the 1890's, there was a man called Major Eustace Edwa#Tds, who was both a S o c i a l i s t and a strong advocate of competition. He proposed that, instead of nationalising the railways, the State should build a public railway alongside each privately operated l i n e , i n order to ensure competitive conditions. He stood for Parliament with this as his main plank, c a l l i n g the system 'Industrial Bustatics,* after his own name. Heedless to say, his proposal was not adopted. This I think i s the reductio ad absurdum of the case which you say the Canadian newspapers are putting up. Clearly i t would be an immense waste of money to run a competitive a i r l i n e at high cost, where even a single a i r l i n e needs a subsidy. The remedy against possible inefficiency leading to overcharges i n snch as case i s surely effective  - 194 supervision, rather than the starting of a competitive a i r l i n e . I presume such a line could operate only hy creaming off the t r a f f i c and leaving the existing a i r l i n e in a worse position than ever, so as to need a s t i l l higher subsidy, and that the net cost of the service would he a great deal increased. (13) Current reports on the Australian aviation scene do not indicate that the private f i r m has prospered since the enactment of the Aviation Agreement h i l l . Aviation Week for March 23, 1955 reports that "A.N.A. Ready to Quit f l y i n g . "  The a r t i c l e asserts  that the government-sponsored plan to a l l e v i a t e domestic competition between AIT. A. and I .A. A. has f a i l e d i n i t s purpose. ing  A.l.A. i s reported as request-  a complete split-up of routes with no p a r a l l e l i n g  operations whatsoever.  The private carrier has can-  c e l l e d i t s order for Tickers Yiscount a i r c r a f t , despite the 7 m i l l i o n dollar loan made available to i t by the government for that purpose.  The f i n a l paragraph, of  course, explains the true s i t t u a t i o n : Another factor is the strong upsurge of labor Party power. The party, i f returned to power, might abrogate the present ANATAA operations setup and nationalize the country's entire a i r l i n e business. (14) A furtner a r t i c l e , appearing i n the October 19th, 1953  of Aviation Week indicates that another temporary  truce has been arrived at, stating i n part: (13 (14)  Prof. G.D.H. Cole, l e t t e r to writer, 14/12/53 Aviation Week, McGraw-Hill, Hew York, 23/3/55 page 18. '  - 195 Differences between privately owned AHA and the government owned TAA have been resolved after three months of talks that place the carriers on a ' f a i r competitive footing.' Each operator i s reviewing existing services to avoid over-scheduling and to reduce wasteful operation. Duplication of services w i l l be eliminated on two feeder routes, now flown by both operators at a loss . . . . . (15) But time i s running out for the private operator. Trans-Australian, the government's firm, takes deliver of i t s Yickers Viscount a i r c r a f t during 1954.  These  vibration free turbo-propeller a i r c r a f t have proven an outstanding success in Europe, where B r i t i s h European Airways have cornered the European i n t e r - c i t y air transport market by widespread use of these Tickers ships.  Trans-Australian is taking delivery  of s i x such a i r c r a f t ; Australian Hational has nothing more modern than converted wartime DG-4's. Further, public opinion, regardless of political creed, i s on the public firm's side.  For one thing, the "shipping  combine" i s not, apparently, a popular one.  For  another, the private firm has been plagued with f a t a l accidents since the inception of i t s publicly sponsored competitor.  Trans-Australian has yet to have  a f a t a l accident. Australian-national, quoting from Hansard, has: (15)  Ibid., 19/10/53, page 99.  - 196 . . . i n the space of a comparatively few months had f i v e major crashes. When the relatives attempted to sue the company, i t was wise enough^ to s * t l e their claims out of court. I f those crashes had happened to Trans-Australian they would have been invoked hy this Government as a reason for disposing of the company. . . nobody i n this chamber can be s a t i s f i e d with the record of Australian national Airways Proprfetary limited during the last few years. I t i s one of the worst records of any a i r l i n e operating anywhere i n the world, including the American eomnanies . . . (16) It should of course be borne i n mind that i t i s a member of the opposition who i s speaking.  Neverthe-  l e s s , the Speaker made no protest thus indicating that the facts are substantially as stated. When a f i e l d i s divided between two competitors, neither of whom haso achieved maximum returns through f u l l u t i l i z a t i o n of available capital equipment, sooner or later one of two events w i l l  tenspire.  The one firm  w i l l simply eliminate the other; or they w i l l agree to divide the f i e l d and carry on, each wary of possible encroachment by the other.  P o l i t i c s can influence the  process, but over time, i t cannot prevent i t .  The  word "competition" i s meaningless i n such situations insofar as i t i s normally considered beneficial to the interests of the community. As Professor Waines and Doctor Our rie stated at the Air Freight Hearing i n Ottawa, "Competition i s only useful for what i t achieves." (17) Joan Robinson further c l a r i f i e d the (16) K . B . Beazley, Australia, Hansard, Commons, 29/10/52, page 5897. (17) see page 66 of this report.  - 197 matter In her text "Economies of Imperfect Competition." In some industries, of which railways and the distributors of gas and electricity are familiar examples, the smallest practicable plant has a very large capacity output, and i f the market i s not s u f f i c i e n t l y large to use such plant up to capacity, there i s no p o s s i b i l i t y of competition. I f by chance two firms were to be engaged i n such an industry, they would either, compete against each other so that neither was able to gather i t s costs, and the one with the least endurance would disappear, or they would form a combine. There i s no p o s s i b l i t y of long period competitive equilibrium when the average costs of an individual firm f a l l with increases of output. (16) Air transport is inherently expensive.  The  way need only propel i t s loads over i t s tracks.  railThe  a i r l i n e must both t o t a l l y support as well as move i t s loads.  The power of several locomotives must be  expended by a DC-6A to move what amounts to less load than can be moved i n the smallest railway boxcar. The cost of aviation fuel i s a multiple of that employed in railway service.  Complex and costly airway and  airplane navigational f a c i l i t i e s must be provided no matter how sparse the t r a f f i c .  Presuming that airway  transport services are needed or desired, only governments can muster the funds to provide same.  I f the  task is assigned to private enterprise then government funds must, of necessity, be forthcoming i n subsidy. Competition simply heightens the ultimate cost to the taxpayer.  Australia is i n the process of making just  such a costly experiment, subsidizing a private firm (16) Joan Robinson, Economics of Imperfect Compet i i t i o n , 1946, Macmillan, 1st ed. 1933, p.166.  - 198 to maintain services p a r a l l e l i n g those already offered hy an a i r l i n e owned hy i t s e l f . equivalent to  Government credit to  a  n  •*ke- extent -e#Aseven m i l l i o n dollars has been extended to the private f i r m , despite said firm's continuous loss record.  One half of the government's airmail  business has been turned over to the private f i r m , complete with the inherent subsidy involved.  The  government has agreed that i t s publicly owned a i r l i n e w i l l start no new service, w i l l purchase no new  equip-  ment, w i l l take no action of any kind, without the approval, no matter how long delayed, of the private firm.  Neither f i r m , i f i t had the f i e l d entirely to  i t s e l f , would have presently approached minimum unit cost levels through f u l l u t i l i z a t i o n of i t s f a c i l i t i e s . Operating together on a p a r a l l e l basis the possiHLity of attaining such an optimum state becomes more than doubly remote.  Whether s o c i a l i s t or c a p i t a l i s t , one  cannot help but f e e l , i n the light of Australian experience, that the Canadian Cabinet's positive decision i n the A i r freight Case was right and that the A i r Transport Board's oblique recommendations were wrong.  Chapter XI. The Canadian P a c i f i c A i r Freight Case. Summation and Conclusions  The C.P.A. Evidence and the Cabinet Decision In support of i t s application for authority to operate an a l l - f r e i g h t a i r service between Montreal and Vancouver, Canadian P a c i f i c Air l i n e s produced no conclusive evidence to substantiate the existence of adequate t r a f f i c potential to j u s t i f y the service.  The Douglas Report, the applicant's key submission, was substantially comprised of data and findings which, upon examination, even the A i r Transport Board's economist, Dr. Jaworski, found to be inaccurate and based upon unsound premises.  In essence, the appli-  cation involved a request f o r permission to enter the Canadian transcontinental a i r transport f i e l d .  The  proposed carriage of air freight was incidental to the request, i n the light of the consistent and most substantial financial losses suffered by the all-cargo carriers i n the U.S.A. Canadian P a c i f i c , presuming i t desired an ultimate p r o f i t from i t s operations i n the proposed domestic f i e l d , sought the all-cargo licence simply as a f i r s t step i n a process.  As has been done  by the all-cargo carriers i n the U.S.A., the next step would have been to apply for mail and parcel post rights and ultimately for a duplicating passenger franchise.  By i t s decision to deny the C.P.A. application,  the -Cabinet  - 200 -  ^saw f i t to f o r e s t a l l the touching o f f of this chain reaction which would hare ultimately led to a t o t a l duplication of Canadian trunk l i n e a i r services. T.C.A. and the Air Freight Case Upon review of the operating data brought forward during the hearing to do with the- services of T.C.A. and C.P.A. i t would not appear that the l a t t e r firm i s i n any way more e f f i c i e n t or economic i n i t s operations, insofar as a point by point comparison with T.C.A. i s concerned.  The evidence as to the a i r f r e i g h t losses  incurred i n the U.S. despite that country's r e l a t i v e l y slow and costly r a i l express f a c i l i t i e s would adequately j u s t i f y T.C.A. 's slow approach to reduced rate a i r freight haulage i n this country.  Unfortunately, moreover  the application, the hearing and the resultant publicity would appear to have pressured T.C.A. into a position presently where i t must establish ^uneconomic air freight services rather than further jeapardize i t s monopoly p o s i t i o n . The A i r Transport Board and the A i r Freight Case It would be presumptuous for the writer to set out criticisms of a j u d i c i a l board.  However, as brought  out i n this t h e s i s , the evidence would appear to have t o t a l l y confirmed the Cabinet's decision to give heed to the recommendations of Prof. Waines, Dr. Currie and Mr. McGregor and to thus negate the Board's contentions. However, one point of procedure was f e l t to have placed  •S3 * 1  ^5  •  ANCOUVER  SEATTLE  ACOMA  IPOR-^AND  MINNEAPOLIS  ^  ALBANY^  BUFFALO  I SALT LAKE CITY  d^P-  •  ^  y  PROVIDENCE  HARTFC  BRI ,0 SCRANTON^ WILKES-BARRE^ ALLENTC ALLENTOWN  NEW HAVEN  N E W YORK  OMAHA  • • • IJOSE  LADELPHIA DENVERl  FRESNO  'Cfy  INDIANAPOLIS^ KANSAS  CINCINNATI  ClTYl ST  LOUIS' 'LOUISVILLE  ^ . O S  NORFOLK  ANGEL!  "")SAN BERNARDINO k  OKLAHOMA  PHOENIX  KNOXVILLE  NASHVILLE  CI"Y( MEMPHIS I  ATLANTA  BIRMINGHAM  —  r  -  FORT WORTH  DALL AS  POPULATION JACKSONVILLE  OF S T A N D A R D M E T R O P O L I T A N  CANADA AND UNITED  STATES  SHOWING A R E A S OF OVER  250,000  LAST  SAN ANTONIO  MIAMI  TC A  F E B 12.1953  10,000,000  5,000,000  3,000.000  AREAS  CENSUS  1.000,000  750,000  500,000  250,000  - 201 the interveners i n a deleterious position with respect to the preparation of their cases and i n the matter of their treatment by the press. permitted  This procedural point  involved the A last-minute introduction of such voluminous submissions as the Douglas and Gruneau reports, yielding a quite s u p e r f i c i a l appraisal of same by the interveners with consequent one-sided press coverage aside from quite inadequate submissions i n rebuttal to the Board.  In this regard the writer contacted the  Board of Transport Commissioners i n Canada and the C i v i l Aeronautics Board i n the United States to seek to determine t h e i r attitude towards t h i s element of surprise i n supposedly fact-finding enquiries. Mr. C. W. Rump, Acting Secretary of the B.T.C. replied i n  . . . the Board has given specific directions in a number of important cases, for example, applications for general rate increases, r e quiring parties to give an outline of their evidence to the other parties and to the Board in advance of hearing. The purpose i s to expedite the hearing, f a c i l i t a t e dealing with the evidence and avoid surprise. In general, the parties have complied with such directions by giving f u l l outlines of the evidence of their witnesses and the exh i b i t f s , charts, studies etc. that they i n tend to adduce. In a number of cases where the evidence and exhibits were lengthy and- complex the Board has also granted adjournments of days and sometimes weeks to enable opposite parties to consult experts before proceeding with cross examination or their own evidence. (1) O.W. Rump, Acting Secretary, Board of Transport Commissioners, letter to writer, 26/11/55.  - 202 In addition, Mr, Rump enclosed a copy of the Board's Rules of Practice which substantiates the contentions set out i n his l e t t e r whereby the Transport Commissioners appear to have obviated the necessity of time consuming examinations for discovery in their fact finding enquiries.  As regards the  C i v i l Aeronautics Board, Mr. Josh l e e , Member, dealt with the matter i n question thusly: It i s a matter of standard Board practice to require that i n i t i a l exhibits prepared by applicants be exchanged prior to the hearing in order to permit interveners and other parties an opportunity to study these data p r i o r to the hearing. I t i s by this means that the actual hearing i s shortened substant i a l l y and the Board i s afforded an opportunity to have a f u l l exploration of a l l relevant f a c t s . The element of surprise i n our admini s t r a t i v e proceedings has to a very large extent been eliminated. It has been our experience that this results i n a proceeding in which the aoeuracy of economic data i n issue can be tested in a much more s a t i s f a c tory manner than i n the usual legal proceeding. (2) These B.T.C. and C.A.B. letters were then forwarded to Mr. John Baldwin, Chairman of the Canadian A i r Transport Board, together with a respectful request for comment. In reply, Mr. Baldwin stated i n part: Since September 18th, 1953, a l l notices of Hearings published on behalf of the A i r Transport Board have contained a paragraph the sole objective of which has been to eliminate the surprise element occasioned at Board Hearings by the introduction of documentary evidence the nature of ?^hich an interested party could not be expected to refute with(2)  Josh l e e , Member C.A.B., Washington, i> o l e t t e r to writer, 1st December 1953.  - 203 out considerable technical preparation. . . (3) It w i l l be noted that this step was taken on September 18th, 1953.  The Air Transport Board had  operated without benefit of this provision for nine years.  The Canadian Pacific Air Freight Case had come  to a close more than s i x months prior to ife adoption. In the light of the contentions of Mr. lee and Mr. Pump, said adoption would appear to be a belated but d e f i n i t e l y forward step. Mr. Baldwin further commented: Unlike most administrative tribunals the Board does not regard i t s hearings as a t r i a l between opposing interests the outcome of which shall be conclusive, but merely as one phase i n the process by which the Board determines what i s required by the present and future public convenience and necessity or public interest, as the case may be. . . . the Aeronautics Act E.S.C. 1952 confers on the Board the power 'to make rules for the regulation of i t s proceedings' which the Board could make at any time should the need a r i s e , however the Board believes that Canadian publ i c interest i s better served by adhering to a procedure which w i l l permit the introduction of evidence by any interested party which may shed l i g h t on what is required in that interest and which the adoption of a code of standard rules of practice might tend to frustrate i f not eliminate. (3) It would thus appear that the A i r Transport Board and the other two above mentioned tribunals d i f f e r i n the matter of aims and procedural concepts.  It i s , of  course, beyond the scope of this thesis to hazard an opinion as to which is the more sound and correct. (3)  J.R. Baldwin, Chairman, A i r Transport Board, Ottawa, l e t t e r to writer, 21st January 1954.  -  204  -  T.C.A. and the Immediate Future Trans-Canada Air l i n e s lost considerable public support through the adverse press coverage given i t s side of the Canadian P a c i f i c A i r Freight Case argument. Typical newspaper reaction to the Cabinet decision has Additional been noted onpage 96 of this t h e s i s . Further^such e d i t o r i a l and news story captions are set oat below: (1) "Wide-Awake A i r l i n e Would Expose TCA" Vancouver Sun newspaper November 7th, 1953. (editorial) (2) "Government Action Mystifying i n Restraining Competition." V i c t o r i a Times reprinted i n Vancouver Sun newspaper  IT ov ember 18th, 1953. lew story.  (3) "TCA Coddling Balks northern Progress" Vancouver Sun newspaper ITovember 18th, 1953. Editorial. (4) "Competition Best Guarantee of Good Service" Vancouver Daily Province lovember 6th, 1953. Editorial. (5) "Monopoly Has Shackled Industry" Toronto Telegram March 12th, 1953. Editorial. (6) "CPA Urged to Try Again" Telegram (Toronto) December 12 t h , 1953. Editorial. Canadian P a c i f i c Air l i n e s lost the decision but made significant gains in public support for i t s e l f to  - 205 say nothing of the gain i n prestige for the Conservative party through that p o l i t i c a l group's championing of the Canadian P a c i f i c cause. In the l i g h t of the evidence contained within this would appear dissertation i t ^ i o readily apparent that the action taken hy the Cabinet to deny the C.P.A. application was right.  However, i t d e f i n i t e l y was not papular.  It  was not popular for three reasons, two of which are within the power of T.C.A. management to r e c t i f y f o r the future. (1)  C.P.A. was the under dog i n the public eye  and as such Immediately the more popular contestant. T.C.A. represented a monopoly operator, t r a d i t i o n a l l y unpopular i n concept. no control.  Over these f a c t s , T.C.A. had  The thought that they were requesting an  ultimate switch to private monopoly, or at least towards a greatly increased drain on the public purse, did not enter the public mind.  The odds were very d e f i n i t e l y  against T.C.A., but f a r more so than necessary for the following two r e c t i f i a b l e reasons. (2)  During T.C.A.'s f i r s t decade of existence,  i t was a most popular venture in the public mind. Its safety record, i t s dynamic expansion and f i n a n c i a l record were continually accorded favourable press reviews.  However, with continued growth T.C.A. l o s t  i t s former personal touch and coincidentally, i t s popular appeal.  With such rapid rise from such small beginnings,  - 206 employees at a l l l e v e l s f e l t that T.C.A. had achieved greatness, becoming robots i n consequence, mechanically mass producing transportation rather than remaining the friendly servants of the t r a v e l l i n g p u b l i c . in a c t u a l i t y , a r e l a t i v e l y small a i r l i n e .  T.C.A. i s , On a basis  of scheduled revenue passenger miles i t represents but a fourth the stature of American, or Trans World or United A i r Lines.  T.C.A. i s but a t h i r d the operation  r e l a t i v e to Eastern A i r Lines.  In a c t u a l i t y , T.C.A. i s  d i r e c t l y comparable to the systems of Capital and northwest A i r l i n e s on this basis of scheduled revenue passenger miles flown annually.  Rather than presume upon  greatness, T.C.A, should c a p i t a l i z e upon i t s smallness u n t i l such time as subsequent growth brings a natural accrual of public respect.  The problem i s doubly  ally important inasmuch as T.C.A. i s government^ owned. In such organizations there i s an ever present tendencjr towards a c i v i l service approach.  With management,  this takes the form normally of "empire building" without regard to proper departmental needs.  Hon. Herbert  Morrison has advised the writer that his forthcoming text w i l l cover phases of this problem. He stated i n part: I have . . . written a book which w i l l be published i n A p r i l by Oxford university Press, the t i t l e of which i s 'Government and P a r l i a ment; a survey from the inside.' Among other things i t deals with public accountability of publicly owned industries . . . (4) (4)  Hon. Herbert Morrison, M.P., letter to writer, 25th January 1954.  -  207 -  As for employees at the public contact l e v e l , they must he imbued with the concept that the T.C.A. franchise i s not beyond the bounds of revocation. They must s e l l more than, just t i c k e t s ; they must s e l l T.C.A. With the proper employee approach, whether i t be ticket c l e r k , stewardess or ramp handler and no matter what the slge of the a i r c r a f t , the passengers cease to become simply bewildered bearers of boarding passes; they become guests of the a i r l i n e .  If a  campaign of this nature i s consistently pursued, as i s currently the case for Capital A i r l i n e s , then such p l e a s ^ as T.C.A. s h a l l make before future A i r Transport Board hearings w i l l be faced with a more friendly press and p u b l i c . (3)  The other matter over which T.C.A. has con-  t r o l r e l a t i v e to i t s more enthusiastic acceptance with parliament and the public i s to do with the measuring of i t s own achievements.  Tery wisely, concentration  has i n the past been centred by top T.C.A. management upon building a safety eonscious, e f f i c i e n t and economic a i r transport organization.  However, i t would appear  that i n s u f f i c i e n t effort has been devoted to t e l l i n g the taxpayers and the Commons' members of the methods used and of the results so achieved i n the light of the comparable a c t i v i t i e s of Canadian Pacific A i r l i n e s in this country and p a r a l l e l i n g operators i n the United States.  - 208 The o r i g i n a l 193? Trans-Canada A i r l i n e s Aet s p e c i f i c a l l y provided that the evaluating yardstick for the government's a i r l i n e should he based upon the operations of comparable carriers i n the United States,of America.  In 1 George Y I , Ch. 43, that section  r e l a t i n g to the Trans-Canada Contract states: T a r i f f s - for the transport of passengers and goods by the Corporation at t a r i f f charges on a competitive basis with other similar transportation services i n North America. , . . Provided, however, that when the revenues of the Corporation i n the opinion of the Minister w i l l permit, charges may be imposed f o r landi n g , l i g h t i n g , and weather reports such as are charged f o r similar competing eoast-tocoast services i n North America. For the p u b l i c , for parliament, or for any fact finding tribunal i t is f e l t that T.C.A. should be i n readily a position to readily report^on every phase of i t s operations relative to i t s American counterparts. The C i v i l Aeronautics Board i s continually appraising the operations of the various U.S. carriers with a view to subsidy payment or withdrawal.  In the recently  decided Pan American l a t i n Imerica case, ten m i l l i o n dollars were lopped off allowable costs by the C.A.B. in view of alleged over-capacity and too high s e l l i n g expenses on the part of the a i r l i n e .  l a v i s h national  advertising and other projects of a promotional nature had raised s e l l i n g costs out of l i n e .  The  a i r l i n e had assumed that government subsidy would make up the d e f i c i t s .  The C.A.B. thought otherwise, dis-  - 209 allowing a l l s e l l i n g costs over a t o t a l representing 19$ of commercial revenues.  In this regard  Mr. J.H.  FitzGerald, Director, Bureau of Air Operations, C i v i l Aeronautics Board states: . . . the Board's mail rate p o l i c i e s areevolved under the c r i t e r i a of 'honest, economical and e f f i c i e n t management' set forth under Section 406 of the C i v i l Aeronautics Act of 1958, as amended, i n l i g h t of the developmental objectives of the Act, fhe p o l i c i e s , which are developed on a case-tocase b a s i s , are not static but are applied i n the light of the circumstances peculiar to each case. Thus, the standard of a ratio of 19$ adopted f o r the l a t i n American Divi s i o n of Pan American World Airways, Inc., for the period A p r i l 5 , 1948 through December 31, 1951, i s not necessarily applicable to domestic trunlclines nor to l o c a l service carriers. . . . (5) They may not be s t a t i c , but the yardsticks do exist and are being used to evaluate one a i r l i n e i n terms of another. Beard noted:  In the ease of Pan American the  "to the extent controllable management  p o l i c i e s were responsible for the losses, the government would not underwrite these losses with mail pay." As previously noted i n t h i s report i n hand, the C.A.B currently a l l o t s approximately 80 m i l l i o n dollars each year i n straight a i r l i n e subsidy payments.  Formerly  this was paid through the Post Office i n adjusted mail pay rates.  How i t i s paid d i r e c t l y through the  C.A.B. and subject to annual review by the nation's legislators.  The writer advocates a similar plan  for Canada.  The taxpayer should know what he i s  obliged to pay to maintain air transport.  I f he did  (6) Joseph H. FitzGerald, letter to writer, 4 / 2 /  - £10 he would not "be so quick to subscribe to p o l i c i e s that would result i n further increases, "for the 1952 Annual Report f o r T.C.A., as would hare been available to the Cabinet at the time i t was deliberating i t s Air Freight Case Seciston, a t o t a l i s shown of 4,843,052 ton miles of mail flown.  The  mail pay per ton mile i s shown as f l . 3 9 . (?) The basic figure f o r a comparable trunk operator in..the United States i s 45/ per ton mile for airmail with a considerable reduction being temporarily i n effect on the experimental all-up mail programme now under way. for  Hence, of T.C.A. 's me.il pay, at least one dollar every ton-mile must be properly considered as sub-  sidy, yielding a f i v e m i l l i o n dollar annual subsidy payment to the firm.  Airways f a c i l i t i e s furnished  at a f r a c t i o n of cost comprise another hidden subsidy payment.  In t h i s regard:  . . . In the period immediately following World War II the c a p i t a l expenditures f o r c i v i l aviation were very heavy, r i s i n g to |103,329,510 i n 1946-1947. Up to March 31, If50, the t o t a l expenditures of the Canadian Government on c i v i l aviation since the beginning amounted to approximately #360,000,000, not including mail payments and the cost of acquisition of certain war-time f a c i l i t i e s from the United States (about #90,000,000) while receipts t o t a l l e d only approximately #27,000,000. Provinces and municipalities have also contributed to the cost of ground f a c i l i t i e s . T.C.A. has been one of the p r i n c i p a l benefieiaasies, though by no means the only one. . , (8) (7) 1952 Annual Report, T.C.A., page 9. (8) Oliver J . l i s s i t z y n , Journal of Air Law, Winter 1952, Public Aid to foreign A i r l i n e s , p  - 211 The same author, i n his text "International A i r Transport and national Policy" states that: . . . the fact that most governments must pay heavy subsidies to keep their a i r transport companies alive has been an important factor in the trend towards concentration. I t i s obvious that i f the amount of t r a f f i c which i s inadequate to support even one company i s divided with a second, the total amount of subsidy would have to be increased. (9) It should be noted that i f i t be considered that T.C.A. is heavily subsidized on a ton-mile mail pay b a s i s , then C.P.A, i s doubly so.  Mr. W.J. Turnbull,  Deputy Postmaster General advises that: . . , the overall ton-mile rate paid Canadian P a c i f i c A i r l i n e s for air mail service on a l l "their domestic routes as a whole was $2.81 per ton-mile for the f i s c a l year A p r i l 1, 1952 - Mareh 31, 1953. (10) In this matter of comparative accounting as suggested above, the mere comparison of Forms 41, the C.A.B. reporting document which a l l north American carriers regularly f i l e including T.C.A., i s not enough* inasmuch as the C.A.B.'s form 41 Manual i s not uniformly followed by a l l c a r r i e r s .  The Board has the authority  to order such uniform accounting under section 407(a) of the Act.  However, i t permits carriers to employ  any system of accounts desired i n their own operations providing expenses are uniformly dealt with.  Hence,  in numerous mail rate decisions the C.A.B.'s s t a f f makes "adjustments" i n carrier figures to make data comparable. Direct co-operation with the Bureau of (9) O.J. l i s s i t z y n , see b i b . , page 256. (10) W.J. Turnbull, letter to writer, 28/l/54.  -  212 -  Air Operations, C i v i l Aeronautics Board would be mandatory f o r the successful maintenance of running measures of T.C.A. efficiency i n relation to i t s p a r a l l e l i n g competitors across the border.  The con-  tention i s that any government sponsored monopoly, such as T.C.A., should i n i t s best i n t e r e s t s , f o r the defense of i t s operations i n the press and i n parliament, separate subsidy from service charge and align i t s s t a t i s t i c s as suggested above.  Admit-  tedly, the Cabinet i s apparently s a t i s f i e d that the T.C.A. management has done and i s doing an e f f i c i e n t job.  The point at issue, however, i s that period-  i c a l l y they are going to be c a l l e d upon to publicly and should at a l l times be prepared to do so prove this clalmoin an effective and clear-cut manner. T.C.A. and the Ultimate Future The A i r Freight Case provided an indicator of things to come. Unfortunately, from the standpoint of long term s t a b i l i t y , C.P.A. i s the protege of the Conservatives; T.C.A. of the l i b e r a l s .  The advent of  the Conservatives to power would lead either to the duplication of T.C.A, services with C.P.A. f a c i l i t i e s or the t o t a l supplanting ofTEOa. by the private firm. I f either course has to be taken, the l a t t e r one i s preferable from the standpoint of straight economics.  - 212 "It is a wasteful process merely to duplicate a r a i l way l i n e . . . "(11)  And so i t is also with an a i r  transport operation as Australia has proven at considerable cost to her taxpayers.  Of course, one  further alternative would be available to the Conservative party, that being to leave T.C.A. continue as a government owned monopoly i n i t s present state as was done with the great B r i t i s h Overseas Airways Corporation upon the return to power of the Churchill government. It is indeed anomalous that i t should be the Canadian P a c i f i c Railway Company that is back of this move towards duplication of a i r f a c i l i t i e s .  This i s ,  of course, i n view of the fact that Sir Edward Beatty, the then C.P.R. president, fought so hard during the l a t t e r part of his lifetime to unify the operations of the Canadian national and the Canadian P a c i f i c .  Prom one  end of the country to the other, he continually- spoke out repeatedly i n favour of u n i f i c a t i o n .  As to his  estimate of possible savings he stated:: In addition to savings resulting from u n i f i cation of actual operations, there are other advantages. Account must be taken also of the saving in future capital expenditures. In providing for the normal growth of t r a f f i c and changes i n i t s character, the extension of one plant would obviously cost less than the extension of two. (12) (11) (12)  P.W. Taussig, Principles of Economics, Volume I I , page 220. B.W. Beatty, Before Senate of Canada, Special Committee, Railways, 1935, page 7.  Sir  - 214- -  Edward Beatty thus joins i n mutual sentiment  with Adam Smith, John Stuart M i l l , F.W.  Taussig, Joan  Robinson and a l l the rest who have been quoted on the same topic i n the same way at various points throughout t h i s report. To those who would say this applied to the depression and not to today, Sir Edward had t h i s to  say; . . . 'It i s human both to err and to forget.' Sometimes I fear that . . . we s h a l l speedily forget both the harm and the lessons of the depression. After a f u l l n e a l a man forgets previous hunger; with money i n their pockets or i n the bank most humans forget poverty. We f e e l we can waste i f we can afford i t . Canada cannot afford waste even i f , for the moment, i t can meet i t s b i l l s or pay i t s losses. What a depression does i s to expose our economic waste and our unsound p o l i c i e s . What prosperity does i s to cover up both. It i s l i k e water over a reef—when the water recedes the reef i s in f u l l view to a l l and a warning; when th© water r i s e s , the reef i s s t i l l there but concealed, and even i f concealed, capable of causing a wreck. Economic waste may continue even i f i t is concealed by our revenues. I f , for example, the Canadian national were earning and paying a l l i t s legitimate charges, and the Canadian P a c i f i c were earning and paying 1 0 $ on i t s Common Stock, the operations of the two companies i n competition would s t i l l represent an economic loss of from 50 to 75 m i l l i o n dollars per year. That i s the waste represented by duplication of e f f o r t , f a c i l i t i e s and services. We must not i n this country of natural wealth and great promise forget the lessons of our depression, or d i s miss p o l i c i e s which w i l l safeguard our future and expedite our development, because they are sane and wise and not solely the r e s u l t of the application of that most popular of a l l laws—the law of p o l i t i c a l expediency. ( 1 3 ) (13)  Sir E.W. Beatty, address, Canadian Industrial T r a f f i c league, Hamilton, 26/l/39, page 1 7 .  -  215  -  As for the question of long term consistency on the part of the Conservative Party i n Canada, the following quotation from R.B.Bennett's comments on the TransCanada A i r Lines Act, at the time of i t s consideration i n the Commons, makes for interesting reading: I submit that i n the light of the experience we have had i n this country, i f . we are going into t h i s a i r l i n e business we should own i t from the start . . . . . . . i t is one of the principles of this measure to pay the corporation's dividends; we might as well start i n and say we are going to direct the policy from the beginning. One of the d i f f i c u l t i e s today about the railroads is that we had nothing to do with laying them out. They were l a i d for contractors and not for the p u b l i c . They were l a i d out for the mileage and the subsidy and not otherwise. Here i s a franchise which is going to be very valuable . . . . Shall we hand i t over to private enterprise or not? . . . . It may be said that government ownership i s always i n e f f i c i e n t and that i t always has been. I am not prepared to say that i t need be, but even i f there i s inefficiency we can devise methods by which efficiency can be secured and the property retained i n the people . . . . (14) Sir Edward Beatty died i n 1945; Tiscount Bennett, In 1947.  Apparently, their concepts and convictions were  buried with them. However, despite the protestations of their present-day counterparts, Mr. Mather and Mr. Drew, the Canadian Cabinet has seen f i t to reaffirm the T.C.A. franchise  (14)  R.B. Bennett, Debates, Commons, March 25th, 1937, Volume I I I , page 2211.  - 216 by i t s denial of the Canadian Pacific A i r Freight Application.  The economic s t a b i l i t y of the nation's  a i r l i n e has been maintained free from deliberate exposure to jeopardy, at least for the time being. As Bennett urged, "the property has been retained i n the people."  Lockheed Supcrconstellation A i r c r a f t , eight of which have been purchased for delivery i i 1954. They represent a portion of a thirty, two million dollar a i r c r a f t Purchase order placed b'y T.C.A-.- i n 1951 and^l952, based on long .term planning for balanced expansion.  BIBLIOGRAPHY In the various sections of the Bibliography that follows the l i b r a r i e s where the various texts and periodicals were consulted are indicated i n the maimer noted below. The reference source is indicated (w) where said source has been obtained for permanent retention by the writer. I.O.A.O.  International C i v i l Aviation Organization l i b r a r y International Aviation Building Montreal, P.Q.  C. N.R.  Canadian National Railways law Department l i b r a r y 360 MeGill Street Montreal, P.Q.  D. B.S.  Dominion Bureau of S t a t i s t i c s l i b r a r y D.B.S. Building Tunney's Pasture Ottawa, Ontario  T.C.A.  Trans-Canada A i r l i n e s l i h a r y International Aviation Building Montreal, P.Q.  Toronto Eef.  Toronto Reference l i b r a r y College Street Toronto, Ontario,  Toronto C i r c .  Toronto public l i b r a r y Runneymede 3ranch Toronto, Ontario.  TJ. of T.  University of Toronto l i b r a r y , including Documents and publications obtained through Dr. A.W. Currie, University of Toronto. AIR TRANSPORTATION TEXTS  (1)  Baker, Prof. George P., James J . H i l l Prof, of Transportation, Harvard University, A i r Transportation, Harvard University Press, 1938. (U.ofT.)  (2)  Goodman, G i l b e r t , Assistant Prof, of Economies, Wayne University, Government Policy Toward Commercial Aviation, New York, Zing's Crown Press, 1944. (I.C.A.O.)  - 217 (3)  L i s s i t z y n , Oliver James, International A i r Transport ana. l a t i o n a l P o l i c y , Hew York, Council of foreign Halations, Inc., 1942. (Tor.Ref.)  (4)  Malkin, Richard, Boxcars i n the Sky, Hew York, Import Publications, Inc., 1951. (T.C.A.)  (5)  Longhurst, John, editor of the B r i t i s h journal, "Aeroplane," The C i v i l Aviation Experiment, london, Temple Press l i m i t e d , I960. (I.C.A.0.)  (6)  Hieholson, Joseph I . , lecturer Temple University, Air Transportation Management, Hew York, J. Wiley & Sons, L t d . , 19 51. (I.C.A.0.)  (7)  Puffer, Claude E., A i r Transportation, Philadelphia, The Blakiston Co., 1941. " (Tor.Ref.)  (8)  S o r r e l l , Lewis C,, Prof, of Transportation, University of Chicago, Prospects and Problems i n Aviation, Chicago, Chicago Association of Commerce, 1945. (Lincoln Printtag Co.) (I.C.A.O.)  (9)  S i l l c o x , L.K., Wheels or Wings, Syracuse, Syracuse University Press, 1953. (T.C.A.) Air Transport Wilson, G.' Lloyd ahd B$an, Leslie A., Professors of Economics, A University of I l l i n o i s , Hew York, Prentice-Hall Inc., 1949. (T.C.A.)  (10)  (11)  Wolfe, Thomas, former V.P. Pan-American Airways, A i r Transportation, T r a f f i c and Management, Hew York, McGraw-Hill, 1950. (T.C.A.)  (12)  Zacharoff, Lucien, V i t a l Problems of A i r Commerce, Hew York, Duell, Sloan & Pearce, Inc., ' 1946. (T.C.A.) PUBLICATIONS TO DO WITH AIR PREIGHT POTENTIAL  (1)  Civil;: Aeronautics Authority Staff Study, Domestic '""Air Cargo Forecast, U . S . Department" of Com± merce, washing-con, IVDZ. (c.h.R.)  (2)  Douglas DC-6A Airfreight Study, Douglas A i r c r a f t Oom-Dany, i n c . , santa Monica, C a l i f o r n i a , 1952. * (w)  (3)  Hielsen, Johannes, Chairman, Interim Report of the north Atlantic Cargo Meeting, International Air Transport Association, Hew York, 1953.(w)  (4)  Fletcher, R.V., Chairman Railway Committee for the Study of Transportation, American Association  - 218 of Railroads, Report of Subcommittee on A i r on A i r Transport, Washington, 1947. (I.C.A.O.) (5)  E a r s t , Harry E., A i r Oargo Consultant, Problems Affecting A i r Cargo Development i n ~ C a l i f o r n i a , prepared by the C a l i f o r n i a Aeronautics Commission, Sacramento, C a l i f o r n i a , 1950. (w)  (6)  Larsen, Spencer A., A i r Caggo Potential i n fresh f r u i t s and Vegetables, Wayne University Studies i n Air Transport I o . 1, D e t r o i t , Wayne Univers i t y Press, 1944. • (w)  (7)  Larsen Spencer A. and William Reitz, A i r Car^o Potential i n Drugs and P h a r m a c e u t i c a l 2 » for (6) above, 1945: ~ j^)  (8)  Larsen, Spencer A. and William R e i t z , Markets f o r Airborne Seafodds, as for (6) above, 1948.(w)  (9)  Port of Hew York Authority, Domestic A i r f r e i g h t Origin-Destination Survey,1950, published : December, 1952. fw)  (10)  Rausch, C.J. and L.R. Hadney, A i r Cargo Trends, Lockheed A i r Cago Progress Report, Lockheed A i r c r a f t Corporation, Burbank, C a l i f o r n i a , September, 1952. (w)  (11)  Rentzel, D.W., Domestic A i r Cargo, U.S. Department of Commerce, C i v i l Aeronautics Adminis t r a t i o n , December 1948, Washington, (w)  (12)  Tressler, Donald K., S c i e n t i f i c Director, Quartermaster food and Container Institute of the Armed forces, Marine Products of Commerce, Chapter to do with a i r transport of seafood products (VI), Cornell University Press, 1951. (fisheries Dept. Library - Ottawa) GOVERNMENT DOCUMENTS AND JOURNALS - Canada  (1)  A i r freight Case - before A i r Transport Board, 1953. a.  O f f i c i a l Transcript, as prepared by E.L. featherston, O f f i c i a l Reporter, R o c k l i f f e , Ottawa, transcript of hearing available at both A i r Transport Board Library, #3 Building, Ottawa and i n C.N.R. Law Dept. Library.  b.  Jaworski, A., staff economist, Report to Air Transport Board on Evidence Presented,(w)  - 219 c.  Baldwin, John H., Chairman, A i r Transport Board Report to the Cabinet, as appended.  d.  P.C. 1953-1755, Minute of the Committee of the Edvy Council, setting out the Cabinet decision and reasons therefor, as appended.  (2)  Chevrier, Honourable L i o n e l , Minister of Transport, an Address to do with Canadian Aviation, given at the Annual Meeting of the A i r Industries and Transport Association, Seigniory Club, Montebello, P.Q., November 10, 1952. (w)  (3)  Judgment, Board of Transport Commissioners, 15 June 1951, P i l e 45757, R a i l Express Rates for Fishery Products , Eing's P r i n t e r , Ottawa. ("0". of T.)  (4)  Judgment, Board of Transport Commissioners, 30 March 1948, i n r e Application of Railway Association of Canada . . . for authority to make a general increase i n t o l l s and freight r a t e s , Eing's P r i n t e r , Ottawa. (w)  (5)  Parliament, Commons, Debates. Parliament, Senate, Debates.  (6)  Report of the Royal Commission to Enquire into Railways and Transportation i n Canada, 1931-32. (Duff Report), Kings P r i n t e r , Ottawa, 1932. (Tor.Ref.)  (7)  Report of the Royal Commission to do with Canadian Transportation, King's Printer, Ottawa, 19 51. (Innis, Angus, Turgeon) (Tor.Ref.)  (8)  Rules, A i r Transport Board, governing f i l i n g of t a r i f f s and service schedules and relevant procedural provisions, Oct. 1, 1952, issued by John R. Belcher, Secretary, Ottawa. (w)  (9)  Rujes of Practice, Board of Transport Commissioners, General Order Ho. 729, June, 1949, King's Printer, Ottawa. (w)  (Tor.Ref.) (Tor.Ref.)  (10) S t a t i s t i c a l Data - a l l Dominion Bureau of S t a t i s t i c s publications, King's P r i n t e r , Ottawa. (DBS & w) (or Queen's Printer as applicable due date) a. C i v i l Aviation - Summary of Monthly Reports, D.B.S., Public Finance and Transportation Division. - Annual Report of the Department of Transport - Public Accounts of Canada.  - 220 h.  Agriculture - Ninth Census, B u l l e t i n ; 6-6 Volume YI, Vegetables, F r u i t s , e t c . , 1952.fw)  e.  Express S t a t i s t i c s - D.B.S. Annual.  d  Fisheries - Prime S t a t i s t i c s of Canada's Fisheries,_1932-1951, Canadian Fisheries Annual, 1953, w  *  Fisheries S t a t i s t i c s of Canada 1949 and 1950. e.  Labour Force - B u l l e t i n 5-1; Volume V, Ninth Census, 1952. - B u l l e t i n 5-3; Volume Y, Ninth Census, 1953.  f.  Manufactures, Preliminary Statement o f , Survey of Production(all phases)1938-50 General Review of Manufacturing Industries of Canada - 1949. w  g.  Population - Census Metropolitan Areas, Ninth Census, Bulletin 1-8, 1952.  (w  Motor Carriers - Freight and Passenger, D.B.S. Annual Publication. (DBS) Railways of Canada - Monthly T r a f f i c Reports of,  (DBS)  j.  Trade of Canada - A r t i c l e s Exported to Each Country and A r t i c l e s Imported from Each Country, calendar year 1952. (w)  k.  Canada Year Book - DBS Annual  (Tor.Ref.)  GOVERNMENT PUBLICATIONS - U.S.A. A i r Freight Cases: a. b,  C i v i l Aeronautics Board A i r Freight Decision, decided July 29th, 1949 (Docket 810 et al.) #E-3085-Vol. 10, Economic Cases. (C.N.R.) A i r Freight Rate Investigation, C.A.B., adopted 21st July 1952 (Docket 1705 et al.) #E-6119, as appended. (w)  c.  A i r Freight Rate Investigation, C.A.B., decided A p r i l 21st, 1948 (Docket 1705 et al.) #E-1639, V o l . 9, No. 23, as appended (w)  - 221 d.  A i r freight Rate Investigation - Directional Rates, adopted A p r i l 10th, 1950. (1705 et al.) #84048, Y o l . 11, Ho. 21, as appended. (w)  e.  Investigation of Accumulation, Assembly and Distribution Rules, decided Sept. 14th, 1950. (1705 et al.) #14606, #E-4984, as appended.(w)  f.  Miscellaneous relevant C.A.B. Economic Decisions such as the A i r f r e i g h t Forwarders Case of 1948 and such a i r l i n e efficiency appraisal cases as the 1953 Pan-American Airways Latin American Division ease. (C.H.R.,T.C.A. & w)  Form 41 Manual, C.A.B. Uniform System of Accounts f o r Air C a r r i e r s , Budget Bureau Bo. 39-ROM. (w) I n i t i a l l y effective January 1, 1947. Recurrent Reports of mileage and t r a f f i c data f o r a l l c e r t i f i e d a i r cargo c a r r i e r s , C.A.B., Bureau of A i r Operations, Accounting and S t a t i s t i c s Division. (T.C.A.) S t a t i s t i c a l Handbook of Aviation, C.A.A., 1953, Dept. of Commerce, Supt. of Docs., Washington, (w) Transportation S t a t i s t i c s , Monthly Comment on, Bureau of Transport Economics and Statistics, Interstate Commerce Commission, Washington.(U.ofT.) GOVBRHMEHT AID OTHER PUBLICATIOHS TO DO WITH AUSTRALIA Parliament, F i r s t Parliamentary Debates, (Hansard) Twentieth Session, 1952,"Representatives and Senate, covering passage of C i v i l Aviation Agreement Act, Canberra. (w) C i v i l Aviation Agreement Act, Ho. 100 of 1952, Commonwealth Govt. Printer, Canberra.  (w)  Australian national A i r l i n e s Act, 1945-1952, An Act to provide f o r the establishment . . . of national A i r l i n e services by the Commonwealth . . Commonwealth Govt.- p r i n t e r , Canberra. (w) Journal of the Parliaments of the Commonwealth, Issued under the authority of the General Council of the Commonwealth Parliamentary Association, Houses of Parliament, London.(Tor.Ref.) Trans-Australia A i r l i n e s , Annual Reports f o r f i r s t seven years of operation to June 30, 1952. (w)  - 222 -  SOTJPB OP QUOTATIONS USED FROM TEXTS ON ECONOMICS GENERALLY (1)  T a u s s i g , p.!., P r i n c i p l e s o f Economics, M a c M i l l a n Company, London, 1923, s e e t h e s i s page 213. ( T o r . R e f . ) Chapters reviewed: 62 - R a i l w a y s 63 - R a i l w a y P r o b l e m s 64 - P u b l i c Ownership and P u b l i c C o n t r o l .  (2)  Mill,  (3)  R o b i n s o n , Joan, E c o n o m i c s o f I m p e r f e c t C o m p e t i t i o n , f i r s t e d i t i o n 1933, M a c M i l l a n & Co., New Y o r k , 1950. Book I Y o n l y r e v i e w e d t o do w i t h The (Tor.) C o m p a r i s o n o f Monopoly and C o m p e t i t i v e Output. ( R e f . )  (4)  S m i t h , Adam, The W e a l t h o f N a t i o n s , 1776, J.M. Dent and S o n s , L i m i t e d , 1940. See t h e s i s page 104. (Tor.Pub.)  John S t u a r t , P r i n c i p l e s o f P o l i t i c a l Economy w i t h some o f t h e i r a p p l i c a t i o n s ' t o S o c i a l P h i l o s o p h y , 1848 r e v i s e d t o 1870, Longmans Green 8c Co., London, 1926. See t h e s i s page 118. (Tor.Pub.)  IISCBL1ANE0US DATA SOURCES (1)  T r a n s - C a n a d a A i r L i n e s and C a n a d i a n P a c i f i c A i r L i n e s Commodity T a r i f f s and D i s t a n c e T a b l e s . ( T . C . A . )  (2)  A m e r i c a n A i r l i n e s I n c . , I n t e r v e n e r , T e s t i m o n y on B e h a l f o f , B e f o r e the C.A.B., D o c k e t 810 e t a l . S u b m i s s i o n d a t e d J a n u a r y 15, 1947. (C.N.R.)  (3)  B e a t t y , S i r Edward, S e t o f 15 a d d r e s s e s d e l i v e r e d between 1935 and 1939 t o t h e v a r i o u s C a n a d i a n B o a r d s o f T r a d e , T r a n s p o r t a t i o n C l u b s and t h e S e n a t e Committee t o do w i t h t h e r a i l w a y p r o b lem, l o a n e d to the w r i t e r b y D r . A.W. C u r r i e .  (4)  C o r p o r a t i o n Annual Reports: T.C.A. (T.C.A. C.P.R. ( l i b r a r y has t o 1887) (Tor. Ref. P l y i n g T i g e r s , I n c . (1950-1-2-3) (w S l i c k A i r w a y s , I n c . (1950-1-2-3) (w A m e r i c a n A i r L i n e s , I n c . (1953) (w T r a n s - A u s t r a l i a A i r Lines(1946-7-8-9) (w (1950-1-2 ) (w  (5)  L e w i s , John H., A v i a t i o n - B u l l e t i n , Review o f A i r Cargo I n d u s t r y and S e a b o a r d and Western A i r l i n e s I n c . , J.H. L e w i s & Co., Member, New Y o r k S t o c k Exchange, S e p t . 30, 1952. (w )  - 225 McRae, R.W. , Trans-Panada A i r l i n e s , 1957-1940, a g r a d u a t i n g r e p o r t prepared "by w r i t e r iiTpartial f u l f i l l m e n t o f the requirements l e a d i n g t o the B.Comm. degree, U n i v e r s i t y of B r i t i s h Columbia, 1939-1940 s e s s i o n . fw) E a d i u s , W a l t e r A., U.S. S h i p p i n g i n T r a n s - P a c i f i c Trade, I s s u e d i n C o o p e r a t i o n w i t h the American C o u n c i l , I n s t i t u t e of P a c i f i c R e l a t i o n s , •Stanford U n i v e r s i t y P r e s s , 1944. (I.C.A.O.) S l i c k Airways, Incorporated: a . P r o x y Statement (55 "pages) r e l a t i n g t o the proposed merger of S l i c k Airways and The P l y i n g T i g e r l i n e . I n c . I s s u e d June 1 5 , 1955 hy J.P. G r a n t , T i c e - P r e s i d e n t and Secretary. (w ) 1. A p p l i c a t i o n of S l i c k Airways "before t h e C.A.B. to do w i t h Motion f o r Temporary Authorization f o r Carriage of A i r Express. Issued i n support of a p p l i c a t i o n on F e b r u a r y 16, 1955 by Thomas Grace, S l i c k Airways I n c . P r e s i d e n t . (w) PERIODICALS A v i a t i o n Week, M c G r a w - H i l l P u b l i s h i n g Co., N.Y. Aero D i g e s t , A e r o n a u t i c a l P u b l i s h i n g Co., Washington, D.C.  (w)  monthly, (Tor.Ref.)  A e r o p l a n e , Temple P r e s s , n o n t h l y , London, E n g l a n d . (Tor. R e f . & w. 5 C o m p e t i t i v e T r a n s p o r t a t i o n Review, monthly, Assoc i a t i o n of American R a i l r o a d s , Washing t o n , D.C. (w) F i n a n c i a l P o s t , F i n a n c i a l P o s t Corp., Toronto. (Tor.Ref. &  w.)  Law and Contemporary Problems, S c h o o l o f Law, Duke U n i v e r s i t y , Durham, H.C., A i r Cargo Eeview conta,ining 7 a r t i c l e s g i v i n g v a r i o u s a s p e c t s of the i n d u s t r y , i s s u e d Winter 19 50, T o l , 15. (I.C.A.O.) T r a n s p o r t and Communications Review, Dept. of Economic A f f a i r s , U n i t e d N a t i o n s , i s s u e d every two months, New Y o r k . (U.ofT.) W a l l S t r e e t J o u r n a l , W a l l S t r e e t Journal P u b l i s h i n g Company, New Y o r k , e d i t o r i a l , " F l y i n g F r e i g h t e r s i n a F i s c a l Fog," Jan. 2 1 s t , 1955. (D.B.S.)  CQRRESROUDEHCE A d a i t i v e correspondence r e c e i v e d from the f o l l o w i n g : (1)  E.H, Atkey, B r i s t o l Aeroplane Engines (Western) L i m i t e d , International Airport, Yancauver, B.C. B r i s t o l a i r c r a f t data and photographs.  (2)  Baldwin, J.R. Chairman, A i r Transport Board, Wellington Street, Ottawa, Ontario. . . . . . querying s u r p r i s e element i n Board proceedings and r e q u e s t i n g comment on l e t t e r s received from Mr. Lee of the C.A.B. and Mr. Rump of the B.T.C.  (5)  Bur wash, M.E. Assistant Director, Bureau of T r a n s p o r t a t i o n Economics Wellington Street, Ottawa, Ontario. querying government c o n s i d e r a t i o n of user charges f o r Canadian airways and requesting data to do w i t h investment of p u b l i c funds' i n airways, and their related f a c i l i t i e s .  (4)  Clarkson, Chistopher Sunn, John U.S. Representative, Tickers Limited, Tickers-Armstrongs L t d . , T i c k e r s House, 542 Madison Avenue, Bsadway, Westminster, Hew York 17, H.Y. London, S.W.I. T i c k e r s Tiscount data and photographs.  (5)  Black, Donald Manager, P u b l i c R e l a t i o n s , Douglas A i r c r a f t Company, Inc., Santa Monica, C a l i f o r n i a . A i r Cargo f o r e c a s t s , DC-6A,B & C brochures, a d d i t i o n a l copies of C.P.A. submission, photographs.  (6)  Cole, S.D.H. Preeland, 74 Holders H i l l Road, Hendon, II.W. 4, England. submitted statement t o P r o f . Cole g i v i n g the contentions of C.P.A. and T.C.A. r e l a t i v e to the A i r f r e i g h t A p p l i c a t i o n , r e q u e s t i n g h i s comments.  (7)  Q r i l l y , W i l l i a m M. Douglas witness at the A i r f r e i g h t Hearing. D i r e c t o r , Economic Research, Douglas A i r c r a f t Company, Inc. , Santa Monica, C a l i f o r n i a . . . . . . queried source and b a s i s f o r f o r e c a s t to do with P a c i f i c A i r f r e i g h t P o t e n t i a l i n C.P.A. report,  - ££5 (8)  F i t z g e r a l d , Joseph H. D i r e c t o r , Bureau of A i r Operdions, C i v i l A e r o n a u t i c s Board, Washington, D.C. to do -with a i r l i n e a p p r a i s a l s f o r subsidy allowance.  (9)  Grace, Thomas, P r e s i d e n t , S l i c k Airways, I n c . , Burbank, C a l i f o r n i a , to do w i t h proposed amalgamation, r e p o r t s , photographs,  annual  (10)  Hasluck, The Hon. P.H.C. Minister f o r Territories, Commonwealth of A u s t r a l i a , Canberra, A.C.T. . . . . . requesting data regarding T r a n s - A u s t r a l ! a and A u s t r a l i a n n a t i o n a l Airways.  (11)  Gruneau, 7.C. P r e s i d e n t , Gruneau Research l i m i t e d , Marketing Research, £0 BlQor S t r e e t West, Toronto, Ontario. submitted c r i t i c i s m s of the survey r e p o r t submitted by Gruneau Research at the h e a r i n g , requesting Mr. Gruneau's comments regarding same.  (IE)  Jaworksfci, Dr. A. Research Economist, A i r Transport Board, Wellington S t r e e t , Ottawa, Ontario. r e q u e s t i n g h i s views on the data submitted to the Board by Douglas on the b e h a l f of C.P.A. Furnished w r i t e r ' s c r i t i c i s m s of same and requested his comments.  (15)  K i m b a l l , Leonard S. D i r e c t o r of P u b l i c R e l a t i o n s , Plying Tiger L i n e , Inc. , Lockheed A i r Terminal, Burbank, C a l i f o r n i a . to do with proposed amalgamation, r e p o r t s and photographs.  (14)  annual  Lee, Josh Member, C i v i l Aeronautics Board, Washington E5, D.C, . . . . . to do with the A i r F r e i g h t Case (810 et a l . ) i n f i r s t exchange o f correspondence and with the element of s u r p r i s e i n C.A.B. hearing proceedings i n the second exchange.  - 226 (15)  Larsen, P r o f . Spencer A. D i r e c t o r , M a t e r i a l s Management Center, School of Business A d m i n i s t r a t i o n , Wayne U n i v e r s i t y , D e t r o i t 1, Michigan. to do with the Wayne U n i v e r s i t y A i r Cargo Studies  (16)  L e v i n , Samuel M. P r o f e s s o r of Economics, Wayne U n i v e r s i t y , D e t r o i t 1, Michigan. . . . . . to do with the Wayne Cargo Studies,  (17)  Lewis, J.H. C h i e f , Markets Branch, Department of f i s h e r i e s , Ottawa, Ontario. r e q u e s t i n g data to do w i t h airborne f i s h t r a f f i c p o t e n t i a l and f i s h e r i e s g e n e r a l l y .  (18) Lewis, John H. T o h n H. Lewis & Co., Members lew York Stock Exchange, 63 W a l l S t r e e t , lew York C i t y , to do with U.S. A i r f r e i g h t Industry. (19)  B i l l , A.M. A s s i s t a n t C l e r k of the P r i v y C o u n c i l , East Block, Parliament B u i l d i n g s , Ottawa, O n t a r i o . to do with A i r Transport Board r e p o r t to the Cabinet and Cabinet d e c i s i o n r e l e a s e .  (20)  McSIelland, P a u l H. Sea Transport C o n t r o l , (Pre-war P a c i f i c Coast) U.S. Army 9, (I.Y.K. t r a f f i c maager) S e a t t l e , Washington. to do with f o r e c a s t e d P a c i f i c p o t e n t i a l .  (21)  Morrison, Hon. Herbert House of Commons, London, S.W. 1. to do with a l l e g e d tendency of government c o n t r o l l e d undertakings to become i n e f f i c i e n t .  (22)  Murphy, W i l l i a m General Assignments, Dominion Bureau of S t a t i s t i c s , Ottawa, Ontario. D.B.S. data p l u s Douglas f o r e c a s t methods.  - 227 (23)  Reedy, Robert B. Manager , S a l e s Engineering, Lockheed A i r c r a f t Corporation, Burbank, C a l i f o r n i a . A i r F r e i g h t Surveys,  photographs.  (24)  Reese, R.B. Cargo Sales Manager, U.S. Regional O f f i c e s , P h i l l i p i n e A i r l i n e s , 212 Stockton S t r e e t , San F r a n c i s c o , C a l i f o r n i a . . . . . . to do with P a c i f i c p o t e n t i a l , present day a i r cargo a i r c r a f t , general a i r f r e i g h t f u t u r e .  (25)  R e i d , E.P. P r i n c i p a l Economist, Department of A g r i c u l t u r e , Ottawa, Ontario. to do with a i r f r e i g h t i n g o f p e r i s h a b l e s .  (26)  Rump, C.W, A c t i n g Seeretary, Board of Transport Commissioners, Ottawa, Ontario, to do w i t h B.T.C. procedural concepts.  (27)  Say en, Clarence IT. P r e s i d e n t , A i r Line P i l o t s A s s o c i a t i o n , 55th and C i c e r o , Chicago 38, I l l i n o i s . . . . . . to do w i t h A.I.P.A. i n t e r v e n t i o n i n the S l i c k - F l y i n g T i g e r s merger proceedings before the C.A.B.  (28)  R e i t z , Dr. W i l l i a m A. A s s o c i a t e Professor o f Education, Wayne U n i v e r s i t y , D e t r o i t Board of Education, D e t r o i t 1, Michigan. . . . . . t o do with Wayne U n i v e r s i t y A i r Cargo S t u d i e s . Met w i t h as w e l l as corresponded with Dr. R e i t z .  (29)  S t e r n . Ben D i r e c t o r , O f f i c e of A v i a t i o n Information, Department of Commerce, C i v i l Aeronautics A d m i n i s t r a t i o n , Washington 25, D.C. C.A.A. p u b l i c a t i o n s .  (30)  Superintendent of Documents, Government P r i n t i n g O f f i c e , Washington, D.C. other C.A.B. eases.and t r a n s p o r t p u b l i c a t i o n s .  - 228 (31)  Sweetnam, A l a n G. B3f our Guthrie L i m i t e d , West Hastings S t r e e t , Vaneouver, B.C.! to do with f o r e c a s t e d P a c i f i c  potential.  (32)  T a y l o r , S.W; R e g i s t r a r of Companies, Parliament B u i l d i n g s , Y i c t o r i a , B.C. . . . . . search data to do with Capilano Airways, L i m i t e d (a component predecessor of C.P.A.), P a c i f i c Western Airways, L i m i t e d (applicant f o r a i r coach p r i v i l e g e s across Canada) and Queen Charlotte A i r l i n e s , limited.  (33)  Tompkins, John B. E d i t o r and Manager, "Motor C a r r i e r , " 207 f e s t Hastings S t r e e t , Yanc ouver, B.C. . . . . . data t o do with highway t r a n s p o r t of f r e i g h t .  (34)  Turribull, W.J. Deputy Postmaster General Ottawa 4, Ontario. . . . . . data t o do with C.P.A. ton-mile m a i l r a t e s .  (35)  Wilson, L.G. Okanagan Investments L i m i t e d , Kelowna, B.C. to do w i t h history of a i r l i n e c o n s o l i d a t i o n s i n B r i t i s h Columbia.  (36)  Young, CM. Yice-President, Pan American World Airways, Inc., Hew York C i t y . . . . . . to do with combination c a r r i a g e of f r e i g h t and passengers hy Pan-Am plus P a c i f i c f r e i g h t data.  (37)  W i l l i a m s , R. D i r e c t o r - G e n e r a l of C i v i l A v i a t i o n , Commonwealth of A u s t r a l i a , 499 l i t t l e C o l l i n s S t r e e t , Melbourne, C . l . Australia. . . . . . t o do with T r a n s - A u s t r a l i a and A u s t r a l i a n N a t i o n a l Airways together with parliamentary and s t a t u t o r y data. onsiderable correspondence was non-productive i s not i n c l u d e d i n the above summation.  and, hence,  Alaska & The Orient  To Flin Flon  To Alaska & The Orient  To Prince George  To Prince Rupert  >THE PAS  U-OYDMlNSTBl  CPA  Mi  »°*TH BATTLEFORo  ,p  Lake °0P&  AIRLINE MAP  Winnipeg ^ASKATOOH  0F,  R  OA  PICKLE LAKE  Quill Lakes  Lake  YORKTON  Lake Dauphib  'e , n  U N I T E D STATES 1953  Lake St. Joseph  DAUPHIN  'AM  MEDICI^ CPA 00K  RI  W  TCA  TCA  THBR  LF  *ANB  C  S  ,  F  T C U R  R  M  )RED LAKE  TCA  o  IDGF  If.  Lake Nipigon  SIOUX LOOKOUT  SCALE 1: 5,400,000 1 INCH = 85.5 STATUTE MILES 1 CENTIMETER = 54 KILOMETERS  APUSKASING<  K  TCA WCA  g£n UR C0F  v/o '  \''''/  RQVJ«  50  P0  KALISPEI  .  D  STATUTE MILES  SHELBY  NWA  0  / GREAT  50  100  150  £ 0 -  150 200  Routes and Cities served, corrected up to Dec. 1, 1952  FT. WILLIAW1-PT. ARTHUR  Rainy Lake  100  50 KILOMETERS  50  AfV  E^  Compiled by OFFICIAL AIRLINE GUIDE 139 N. Clark St., Chicago 2, Illinois, U.S.A.  •EG 1/V£  0 *  OF THE  Lake Winnipegos\s  Coo  7  R'NCE ALBERT  Copyri h» by AMERICAN AVIATION PUBLICATIONS, Inc. 0  FALLS)  .Red Lafte  GRAND FORKS  VVCA  c  Lake  lve°  c  MOTOWN  BEMIDJI  HIBBING-CHISHOLM  )^0RTtt  HANCOCK-HOUGHTON  tAO  ,AULT STE. MAR* O S  BUTTE it  NWA  BAKER  \  -.FARGO  NWA  Leech Lake  BOZEIVIAH  0/V  ly  BISMARCKIV1ANDAN  MILES CITY  NWA  NWA  0  ,  ABERDEEN  POWELU  N  %°DY~L0VELL stf/A  A*  MINNEAPOLISST. PAUL  WATERTOWN  NOR  (SPEARFISH BORLAND  WAL  ,'ACKSON (SEASONAL)  WAL  PIERRE  RAPID CITY  HUROr  1  MASON CI  s  0GD>  UAJ-.  \AH  FAL  MADISON^  MWLINs  BNF  :RLOO CED7  NORFOLK  J-ARAMIE  DES  IES  UAL  FTL-  r//  o/?/v  GRAND ISLAND  er  AS , Aty LUls p  CITY  COLUMBIA GREAT _BEN-D-  SLl OBlspJ  ALAMOSAMONTE VISTA  CORTEZ •lake  ANT.  \\  A/Vj  CANYON  S  A  \BMlNGT0N  S^ASONA[  }  **B  B  FF  SA/yV\ FL/  GALM  ?/0  CAL  AAL--2^  PONCA CITY, JODWARD  — '  5&  R I V / L  /r  »UAN1  BNF  Butte  Passenger, mail, express and cargo roules. Routes of all-cargo operators. AAA . . . . Allegheny Airlines * AAL American Airlines System * AERONAVES Aeronaves De Mexico * AF Air France * AG Aerovias Guest, S. A. AR Aerolineas Argentinas AREA. , . . Aerovias Equartorianas, S. A. ASA Alaska Airlines ATSA . . . Aero Transportes, S.A. AVIANCA . . Aerovias Nacionales De Colombia, S.A, * BAL . . . . Bonanza Airlines * BCPA . . . . British Commonwealth Pacific BNF . . . , Branlff International Airways * B O A C . . . . British Overseas Airways CAI . . . . Colonial Airlines * CAL Continental Air Lines * CAP Capital Airlines * CD Cla. Dominicana de Aviaclon * CEN . . . . Central Airlines * CIA . . . . Caribbean International Airways CMA . . . . Mexlcana De Aviacion, S.A. * CNA Central Northern Airways CPA . . . . Canadian Pacific Air Lines C&S Chicago and Southern Air Lines CUBANA . . Cia. Cubana de Aviaclon, S.A. * DAL Delta Air Lines * EAL . . . . Eastern Air Lines * EB Brazilian International Airlines EL AL El Al, Israel Airlines EWA . . . . Wiggins Airways FAL Frontier Airlines + FTL Flying Tiger Lines * KLM Royal Dutch Airlines * LACS/4 . , , Llneas Areas Coslarricenses, S. A. * LAI Linee Aeree Italiane LAMSA , . . Lineas Asociadas Mexicanas * LAV Linea Aeropostal Venezolana LCA , , . . Lake Central Airlines MOH Mohawk Airlines * NAL . . . . National Airlines * NEA Northeast Ait lines * NOR . , . , North Central Airlines * NWA Northwest Airlines * OZA . . . . Ozark Air Lines PAA Pan American Airways System * PAI Piedmont Airlines PAL Pioneer Air Lines * PNA , , , . Pacific Northern Airlines PR Philippine Air Lines * QUSA . , , , "Q" Airways OCA Queen Charlotte Airlines REF Aerovias Reforma, S. A. * RID Riddle Aviation SABENA , . Belgian Air Lines SAS Scandinavian Airlines System SLl Slick Airways * SOU Southern Airlines >k SWA . . . . Southwest Airways SWISSAIR . . Swiss Air Lines TACA . . . . Taca International Airlines * TAN Transportes Aereos Nacionales, S.A, TCA Trans-Canada Air Lines * TMC Trans Mar de Cortes TTA . . . . Trans-Texas Airways * TWA Trans-World Airlines * UAL . . , , United Air Lines * USA U. S. Airlines * WAL Western Air Lines * WCA West Coast Airlines  CO  AJO  J RUTH  AAL  Kentucky Res.  FT. SMITH CAP  CARLSBAD  FAL.  NOGALES  SWEETWATER PAJ-  TYLER  MIDLAND-ODESSA TTA 0  iKTON  > GRAND^f  CASA!  [ONGVIEWKILGORE 5LADEWATEB  •O  IREVEPORT  DAL  MONROE  JACKS  McCAMEY  VACO  3WNW00D  JACC  'NATCHEZ  ALEXANDRIA"  SAN ANGELO  7  pAl-  HATTIESBURG MAR1ANNA; MOBILE,  Hi  VTRIE WA>( ^LDOSTA CiAL SOU" NAL  NALi  row ROUGE  BRYAN  MARFA-ALPINE~" -HERWOS/L LO  , BEAUM0NT^PORT ARTHUR 7  DEL RI0~  GAINESVILLE  0 >  J ^ L A K E CHARLES  LAFAYETTENEW IBERIA  BEACH  iNS  FOR OVER 15 YEARS MORE REVENUE AIRLINE MILES IN THE U. S. HAVE BEEN FLOWN WITH TEXACO AIRCRAFT ENGINE OIL THAN WITH ANY OTHER BRAND  5ALVEST0N NAJ^  CHIHUAHUA  LAKELAND  \ ^  ST PETERSBUJ CLEARWAT/*  -AGLE PASS ROSAL  ClUDAD O>  LST BEACV  ARflSOTAdRACtNTON  NUEVO LA/EDO  PARRAL  /  Please refer to OFFICIAL AIRLINE GUIDE or airline timetables for details of services available.  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