Now mismanagement of the airlines was not necessarily the fault of wicked or even stupid men. As Speaker Sam Rayburn had pointed out to me in the case of Congressmen, government administrators are no smarter nor more stupid than the average. But they hold their jobs by knowing which side their bread is buttered on and making the correct estimate of what action will produce the most votes.
The Civil Aeronautics Board, in light of current public opinion with respect to the profit motive, could hardly be expected to accept public responsibility for such economic regulation as would permit any airline to make a profit, especially one such as might be subject to political attack. Nor could it be expected to muster courage to defend such an apparent monopoly as its own route pattern had created, even though the law authorized it. Although the Board was directed to so administer the Act as to prevent “unfair or destructive practices,” it must permit “competition to the extent necessary to insure sound development of an air transportation system properly adapted to the needs of the foreign and domestic commerce of the United States, of the Postal Service, and the national defense.” Its decisions, predicated on an attempt to administer such complex mandates and still keep out of hot water, brought the airlines into jeopardy at the very moment when they had established their economic self-sufficiency and faced the brightest futures of their turbulent careers. In other words, economic regulation by political agency is an anachronism.
Meanwhile, with the real solution to the Board’s competition problem ready at hand, the Board even messed that up. This drama was unfolded before the Committee by a group of enterprising young veterans who, having participated in such wartime miracles as the transportation of air cargo over the Himalayan Hump, had concluded that this and other services as yet unexploited by the certificated passenger carriers offered unique opportunities for their postwar reconversion. Perhaps the gist of their testimony can be extracted from the statement of Amos E. Heacock, executive committee chairman of the National Independent Carriers, and president of Air Transport Associates.
“Let me review briefly,” he said, “the near miracles that have been wrought in the development of air transportation by United States veterans.... In the international contract air carrier field, Transocean Airlines, Seaboard and Western, Pacific Overseas Airlines, etc., have found an entirely new market for air transportation, formerly practically untouched by the scheduled airlines.... I want to point out to you an additional and perhaps the greatest air transportation feat performed by the veterans of World War II. I am referring to the amazing record of the Pacific Northwest-Alaska nonscheduled carriers.... The scheduled carriers that were subsidized to do the job of developing air transportation to Alaska were a miserable failure. The bulk of the cargo, 73.6 per cent of the northbound and 83.5 per cent of the southbound, was transported by the much maligned nonscheduled air carriers.... The records show that the non-skeds pioneered a wealth of new business.”
After referring to Section 2(d) of the Act, which provides for competition, the witness stated, “With an unprecedented opportunity to preserve competition to develop the air transportation system and so provide adequate and economical service, the Board’s actions have provided for just the reverse.”
One explanation of the Board’s action might be derived from the statement of C. R. Smith, chairman of American Airlines, one of the largest of the “Big Four.”
“If the law of the land is to be enforced against the certificated air carriers,” he said, “it should have similar enthusiasm of enforcement against the irregular carriers who compete directly for the same business of air transportation. We cannot live with economic health in an atmosphere half legal and half illegal. If this business is to be regulated, all should be regulated.” It would be interesting to know just what significance attaches to the use of the word “against” in this statement.
“If the Civil Aeronautics Act is to mean but little,” continued “C.R.,” “then let us return to the rules of the road which obtained before the Act was passed, when competition was direct and unregulated.” Had “C.R.” gone on to urge this course, he might have given a demonstration of the rugged individualism for which he is credited; instead he summed up, “We were in favor of the Act, we are in favor of the continuation of the Act, but if we are to abide by the terms of the Act, we ask that our competitors be bound by the same rules of public conduct.”
Juan Trippe, president of the Pan American Airways System, stated the issue in similarly clear terms:
“The fundamental problem, both domestically and internationally, is that although Congress intended to place the airline industry in the category of regulated public utilities, the airlines, while treated on one hand as public utilities, have, at the same time, been made subject to all of the competitive pressures proper and appropriate only in an unregulated industry. There is no precedent in American industry that I know of for such a Dr. Jekyll and Mr. Hyde arrangement.”