JANUARY 30, 1947. ARBITRATION DECISION IN RESPECT TO ALLOCATION OF SHIPPING AND ROUTES OR AREAS TO BE SERVED UNDER PROPOSED INTERIM PLAN FOR CONTINUING WATER SERVICE TO, FROM, AND WITHIN THE TERRITORY OF ALASKA The three principal common carriers operating prewar in this trade and since the outbreak of the war as agents of the War Shipping Administration and the U. S. Maritime Commission as successors, are the Alaska Steamship Company, Northland Transportation Company, and the Alaska Transportation Company. A fourth prewar common carrier, namely, the Santa Ana Steamship Company, has not during the war operated as an agent of the Government but has indicated the possibility of resumption of its single ship service, to the Kuskokwin River area. It has not been involved in the negotiations for an interim period operation. The three carriers first named, which for convenience hereafter will be referred to as Alaska Steam, Northland, and Alaska Transportation, were asked to submit plans for private operation based alternatively on financial aid from the Maritime Commission, or without such aid. A plan was submitted by Alaska Steam and Northland jointly and generally agreed to by Alaska Transportation without prejudice to the different positions of the carriers as to appropriate allocation of vessels and of routes or territories to be served respectively. In the absence of intercarrier agreement on these points, the carriers publicly agreed before a special Subcommittee on Alaska of the House Merchant Marine and Fisheries Committee to subject the controversial points to arbitration by the undersigned three representatives of the U. S. Maritime Commission in consultation with a three-man technical committee, previously appointed by the aforesaid Subcommittee, and to abide thereby. The Technical Committee consists of Mr. Worth Fowler, Mr. Thomas Plant, and Admiral F. A. Zeusler. The proposed interim agreement would be one between the U. S. Maritime Commission and the three principal Alaskan carriers and between the three carriers. By its terms, the Maritime Commission would agree to supply usable war-built shipping owned by it under nominal charter terms for the period of the agreement and to reinsure the hull risk, both as to its vessels so chartered and the vessels owned by the carriers and mutually agreed to be used in the operation. The carriers in turn would agree to maintain needed service with such combined fleets for the period of the agreement and to coordinate their scheduling and operations to the extent that such coordination would benefit the public and produce the cheapest over-all transportation cost. Since the agreement would be predicated upon an appropriate adjustment of transportation rates, it would be effective only with the effectiveness of such rates and would terminate June 30, 1948. A provision would permit the Santa Ana Steamship Company to participate in the agreement. The broad terms of the proposed agreement have the approval of the House Subcommittee and its Technical Committee. It is further proposed that the agreement have special legislative sanction. The arbitrators, in conjunction with the Technical Committee, held a hearing, attended by the Carriers, at the Commission offices January 29, 1947. The accuracy of the following facts was conceded: 1. Prewar, Alaska Transportation served only Southeastern Alaska except for three trips to Cook Inlet. 2. Northland, prewar, served only Southeastern Alaska except for occasional trips to Western Alaska. 3. Alaska Steam, prewar, served Southeastern and Southwestern Alaska, including Kodiak Island, Alaska Peninsula, Bristol Bay, Cook Inlet, Norton Sound, and Kotzebue Sound, with occasional seasonal calls in other areas as traffic inducements offered. 4. Wartime agency operations were on a pool basis. The agents sailed vessels as directed and did not strictly follow the prewar pattern. 5. The commercial refrigeration needs of the Territory have grown materially since prewar. The increased amount of refrigeration facilities suggested individually by the carriers aggregate an amount more than double prewar capacity. 6. Increased military traffic, largely in Southwestern Alaska, and the Aleutian Chain, is a new postwar factor. Included in the bracket is: (a) Dry maintenance supplies and construction material; (b) chill, cool, and reefer North-bound. There is no sizable movement South-bound and only sporadic movement interport Alaska. 7. Population increase during the war has been unbalanced, the principal increase being in the rail-belt areas of Southwestern Alaska and military establishments on the Aleutian Chain. 8. Canadian passenger ship and air-travel competition has materially increased and is increasing. It is difficult to measure with any assurance the future passenger needs of the Territory. 9. The cannery business North-bound and South-bound is a major factor in the trade, controlling the general routing of ships during the season. The salmon packers have withdrawn and sold their vessels and now depend on commercial service. 10. The prewar operations are accurately described in reports USMC 571 and 572 and in the Technical Committee's report. The views of the contending parties can be briefly summarized as follows: Alaska Steam and Northland believe that the prewar operation should control the relative allocation of shipping and routes between the carriers. They hold that if additional passenger ships need to be added to the service, they should be operated by one or both companies and not by Alaska Transportation. They further hold that the postwar military traffic should go on a territorial basis in accordance with prewar services. As pointed out above, the principal postwar military traffic is in the westward area, served principally by Alaska Steam. They object to competitive expansion based on wartime operation at government expense being continued. The Alaska Transportation Company maintains that the war period was one of growth and that they are entitled to continued participation in that growth to the degree that they, as agents, participated during the war period and to date. They seek under the proposed interim plan to enter the passenger transportation field, to continue to participate in the military traffic, and the general right to trade commercial in Western Alaska as their business judgment may dictate. All carriers agree that flexibility is desirable, both in the aggregate ship allocations, and otherwise. The arbitrators and the Technical Committee are in Agreement on the following findings. 1. In view of the uncertainties of passenger requirements, plus the fact that passenger-vessel operation, in general, under present conditions represents a relatively more unprofitable operation than that of cargo vessels, no additional passenger ships beyond the five combination vessels owned by Alaska Steam and Northland should be allocated; except as to a suitable trooper, apparently needed for handling large movements of cannery workers and supplies to and from Alaska seasonally, principally for canneries located in Southwestern Alaska and Bristol Bay. 2. The aggregate refrigeration capacity asked does not exceed the probable peak territorial requirements, including that of the military. 3. In lieu of allocation of small tankers to the trade, existing deck storage tanks should be installed on the allocated vessels. This, it is believed, will serve the territorial needs. 4. The wartime agency operation does not present a sound basis for allocation of shipping or trade routes under the interim plan, but the prewar operation as described in the Commission's report cited above does offer the sound basis, subject however, to two qualifications: (a) that all carriers be free to compete for military traffic, regardless of territory, but within the respective allocation of ships. (b) That the agreement be flexible so that by mutual consent of the carriers ships can be used to the best advantage of the Territor's needs, including economy of operation. 5. If any of the carriers operate in the Alaska trade during the period of the agreement, a ship or ships acquired by purchase or charter, other than the nominal charter provision of the proposed agreement, such ship or ships shall operate within the scope herein described and a corresponding reduction shall be made in the respective allocation of Commission-owned ships. 6. Gross or dead-weight tonnage prewar is not the most satisfactory measure of prewar operations respectively. The unit number of ships employed prewar, while also not entirely satisfactory, presents a sounder basis for allocation under the interim plan. 7. In accordance with the above and subject to the qualifications stated in No. 4 above, the areas to be served respectively are as follows: ÁLASKA STEAM: Alaska generally, except that if Santa Ana Steamship Company resumes operation, either under this plan or privately, Alaska Steam will not serve the Kuskokwim River-Goodnews Bay area. NORTHLAND: Southeastern Alaska, except as to passenger and cargo operations on its remaining combination vessel in joint service with the four such remaining vessels of Alaska Steam. ALASKA TRANSPORTATION: Southeastern Alaska only. 8. In accordance with the above, allocation of shipping be as follows: ALASKA STEAM Company-owned vessels 4 Passenger Vessels: SS Alaska, SS Aleutian, SS Baranof, SS Denali. 1 Cargo Ship: SS Victoria. Commission-owned vessels 2 VC-2's with the right reserved to the Maritime Commission to substitute therefore 2 Z-EC-2's, or EC-2's. 8 C-1-MAV-1's. 1 Trooper with Maritime Commission reserving the right to substitute a trooper for the SS Young America. NORTHLAND Company owned vessel 1 Passenger Vessel, S. S. North Sea. Commissioned owned vessels 2 C-1-MAV-1's; 2 R-1-MAV-3's. ALASKA TRANSPORTATION Company owned vessels S. S. Tongass with right of the carrier to require substitution of 1 C-1-MAV-1 or 1 N-3 as is. Commission owned vessels Any two of the following: 1 N-3 as is; 1 R-1-MAV-3; 1 C-1-MAV-1. Summarized, the arbitration findings will allow service by Alaska Steam of 16 vessels vs. prewar total of 17; by Northland of 5 vessels vs. prewar total of 5, and by Alaska Transportation of 3 vessels vs. prewar total of 3. Ships can be withdrawn from individual allocation by mutual consent of individual carrier and the Maritime Commission. Should trade needs clearly require additional allocations, they may be made by mutual consent of the Commission and the individual carrier with the joint understanding that such additional allocations, if made, will be generally consistent with the above findings. The arbitrators are authorized to say that the Technical Committee, individually and collectively, completely concurs in the above arbitration findings. (Sgd.) G. H. Helmbold, G. H. Helmbold, Arbitrator. (Sgd.) G. R. TALMAGE, Jr., G. R. Talmage, Jr., Arbitrator. (Sgd.) J. FRIEDLANDER, Jr., J. Friedlander, Jr., Arbitrator. (Sgd.) WORTH_B. FOWLER, Chairman, Technical Committee. APRIL 2, 1947. SUPPLEMENTAL ARBITRATION DECISION IN CONNECTION WITH ARBITRATION DECISION IN RESPECT TO ALLOCATION OF SHIPPING AND ROUTES OR AREA TO BE SERVED UNDER PROPOSED INTERIM PLAN FOR CONTINUING Water SERVICE TO, FROM AND WITHIN THE TERRITORY OF ALASKA The arbitrators appointed by the Alaska Steamship Co., Northland Transportation Co. and the Alaska Transportation Co., signatory hereto, are in receipt of a letter, dated February 22, 1947, from the Alaska Transportation Co., dealing with the original arbitration decision, stating various considerations intended to present new facts previously not considered by the arbitrators and seeking a reconsideration of the award in the way of (a) allocating to the Alaska Transportation Co., four vessels as a basic fleet, consisting of Privately owned vessels.-1 N-3 or substitute. Commission-owned vessels.-1 N-3, 1 C-1 MAV-1, 1 R-1 MAV-3. (b) permitting Alaska Transportation Co. to compete with respect to cannery business without area restriction. In the communication referred to it was further stated: "If we are to be limited to the fleet and services presently provided for in the award, we have regretfully concluded that such a restriction would almost certainly create such a heavy operating deficit as to require us to suspend operations." Oral query by the arbitrators was made as to whether this should be interpreted as indicating (a) an unwillingness to enter into the proposed contract if the award were not amended, or (b) an advance statement of probable suspension subsequent to signature. Oral reply from the Alaska Transportation Co. was in confirmation of interpretation (a). The arbitrators also inquired orally of the Alaska Steamship Co. and the Northland Transportation Co. as to whether they were agreeable to a reopening of the arbitration proceedings. Their oral answer was in the negative. The arbitrators further consulted the technical committee and the conclusions below represent the unanimous views of the arbitrators and the technical committee. 1. The one alleged new fact not fully explored by the arbitrators deals with the question of whether Northland Transportation Co., prewar, generally operated in the Alaska trade the five vessels then owned by them, or whether, in fact, the operation of three of these ships was so spasmodic in the trade as not to represent a normal use, even seasonally. The conclusion is that all five ships were regularly used in the Alaska trace prewar. 2. There being no new facts presented not previously considered by the arbitrators, there appeared no basis for a reconsideration, entirely aside from the technical question as to whether under the circumstances there could be reopening. 3. The arbitrators recognize that the purpose of the arbitration was to settle disputed questions of territorial and shipping allocations as between the carriers who stated their willingness to enter into a period agreement to provide service to the Territory of Alaska. It was agreed at the arbitration hearing that all avenues of flexibility be left open to meet contingencies of service, operating loss, etc., either (a) through mutual agreement of the Maritime Commission and the individual carrier, generally consistent with the voluntary agreement of the carriers as represented by the arbitration award, or (b) through mutual agreement of the carriers. Representatives of the Maritime Commission had stated that they would not recommend to the Commission such an agreement unless it incorporated an agreement between the carriers pursuant to section 15 of the 1916 Shipping Act to adjust service to meet public needs. The arbitrators' decision further committed the carriers to such an agreement and stated in finding 4: "That the agreement be flexible so that by mutual consent of the carriers, ships can be used to the best advantage of the Territory's needs, including economy of operation." [Italics added.] The question of modified allocation is accordingly one that cannot be answered by the arbitrators but should be directed to the Maritime Commission subsequent to accomplishment of a signed agreement as between the Commission and the Alaska carriers. By telegraphic concurrence: G. H. HELMBOLD, Arbitrators. WORTH FOWLER, Chairman, Technical Committee. SECOND REPORT TO CONGRESS BY THE UNITED STATES MARITIME COMMISSION UNITED STATES MARITIME COMMISSION, The Honorable JOSEPH W. MARTIN, Jr., MY DEAR MR. SPEAKER: There is transmitted herewith the second report of Alaska Ocean Transportation activities pursuant to the provisions of section 2, Public Law 12, Eightieth Congress. Sincerely yours, Enclosure. W. W. Smith, Chairman. SECOND REPORT TO CONGRESS BY THE U. S. MARITIME COMMISSION OF ALASKAN OCEAN TRANSPORTATION ACTIVITIES, IN ACCORDANCE WITH SECTION 2 OF PUBLIC LAW 12, 80TH CONGRESS This report covering the quarter ended September 7, 1947, is submitted in accordance with the requirements of section 2, Public Law 12, Eightieth Congress, approved March 7, 1947. The contracting Alaskan steamship lines operating in accordance with the provisions of contract SUMC-C-60,018, effective May 15, 1947, completed 50 voyages with 28 vessels between the period of 7May 2 and August 31, 1947. During that time the Alaskan lines carried 11,921 passengers and 201,170 tons of cargo, including military supplies, as indicated in appendix A. This cargo consists of general merchandise, foodstuffs, etc., for the northbound movement, while the south-bound movement consisted mostly of canned and frozen fish, fish oil and fish products. Appendix A hereof indicates estimated direct operating expenses only; however, it is expected figures covering the cost of hull insurance, depreciation, allowances for repairs and overhauls and lay-up costs will be included in reports following, therefore indicating total operating results. On account of the seasonal and unbalanced nature of the Alaskan trade, the cargo-tonnage figures for the peak summer months are not indicative of a yeararound operation. In this connection, the cargo handled during the summer of 1947 parallels the prewar pattern both as to type and quantity carried. Some of the northern areas have an extremely short season, lasting from 45 to 60 days, while ports in southeastern Alaska may be served throughout the year. While available data covering operating revenues and expenses are preliminary and subject to adjustment, present estimates based on anticipated traffic for the peak season and at the present-rate levels indicate revenue may meet out-ofpocket costs, including the insurance expenses of the Commission, provided there is no further major increase in operating costs during this period. There appears little hope, however, of an charter hire payments pursuant to the recapture provisions of the charter contract. Experiencing in the Alaska service generally indicates that operations during the winter season show unfavorable results because of reduced traffic and the necessity for vessel lay-up. The probable losses during the coming winter period must not be overlooked. With the present expiration of the Merchant Ship Sales Act, on February 29, 1948, commitments for purchase will have to be made by that date if there is to be permanence of service unless the Congress in its wisdom extends the Merchant Ship Sales Act, 1946. Capital charges incident thereto will require additional revenue. Economies that may be developed in the interim period will improve the operating results. The Commission is now conducting a survey and study of Alaskan ports in order to determine the extent of the shore-side facilities. One factor probably contributing to the extremely high expenses of the Alaska operation is the apparent inadequacy of shore-side facilities such as wharves, warehouses, and landing equipment. A program for the development of such facilities, which possibly could be on a self-liquidating basis, should be developed promptly and considered in conjunction with the long-term legislative requirements of the Alaskan transportation problem. A petition was filed on May 8, 1947, by the Governor of Alaska, requesting the suspension of the effective date of the tariffs naming new freight rates filed by the Alaska steamship lines with the Maritime Commission, which rates were to be |