Senator CAPEHART. We are delighted that you came and you certainly can be very helpful. We understand that your committee has reported a bill favorably to the full House committee. Representative ALLEN. That is correct, sir. Senator CAPEHART. Do we have a copy of that? Representative ALLEN. I will give you one if you like. It is House Joint Resolution 396. Senator CAPEHART. That is exactly as you have reported it? Representative ALLEN. That was the bill we considered, and then we considered also amendments and recommended adoption of these amendments to the bill. Senator CAPEHART. We are to understand, then, that the bill, House Joint Resolution 396, together with the proposed amendments that I hold in my hand, is the bill that has been or will be reported favorably by your subcommittee to the full House committee? Representative ALLEN. That is correct, sir. Senator CAPEHART. I do not believe that I have any questions, but we would be delighted to have you make a statement if you care to or elaborate in any way that you care to on this subject. Representative ALLEN. Senator, may I say this: Our subcommittee met, starting with meetings in July of a year ago, endeavoring to cause those interested to crystallize their opinions and particularly to have the Maritime Commission make recommendations to us. We met again early in this session and reiterated those requests. Finally, after several months, a draft of a resolution was presented to the subcommittee in an informal discussion, in which Mr. Mellen appeared, and he stated, and we thought it was the fact at the time, that the draft came as close to an agreement as all parties interested could get. Senator CAPEHART. You are talking about House Joint Resolution 396 now? Representative ALLEN. That was then submitted by Mr. Tollefson, as House Joint Resolution 396. From that point on, when the subcommittee met and considered the matter, I think I state the view fairly, when I say that the four of us who were present, Mr. King of California being out of the city, agreed that we wished to, under all the circumstances, continue the operation of Public Law 12 for a sufficient period to give an orderly transition into anything else that might develop, and for that reason, we recommended House Joint Resolution 396, with the amendment to its purpose to show that it was virtually a continuation of Public Law 12, with an amendment to strike our section 4, because Admiral Callaghan of the Navy felt it would unduly restrict military operations. And with two amendments, which would demonstrate that we wished to keep open the competition to the barge lines and others that might wish to come in, and with an amendment fixing the date at September 30, 1949, because that seemed to be the date at which the heavy summer travel ended and the light winter travel began, and the date at which, if there were a transition, we could expect the transition to occur with as few dislocations as possible. With those thoughts in mind, we favored the amendments, and we voted to report the bill. Senator CAPEHART. Thank you, Mr. Allen. That is all unless someone else has some questions they would like to ask Mr. Allen. I gather you are all familiar with House Joint Resolution 396, all interested parties are familiar with it. Governor Gruening, are you familiar with it? Governor GRUENING. Oh, yes. Senator CAPEHAR1. And you are, Delegate Bartlett? Delegate BARTLETT. Yes, sir. Senator CAPEHART. And you are, Mr. Mellen? Mr. MELLEN. Yes, sir. Mr. Chairman, you asked if anyone wanted to ask a question of Mr. Allen, and I would like to. Senator CAPEHART. Mr. Mellen. Mr. MELLEN. I would like Mr. Allen to review the original 218 to see whether the amendments that I have inscribed in this document are in accordance with the action of his subcommittee. Representative ALLEN. Yes; they are, Mr. Mellen. Senator CAPEHART. Is that your idea? Mr. MELLEN. We raised no objection to the amendment suggested by Mr. Allen's subcommittee. It is the same as 396, excepting it is Senate 219. Senator CAPEHART. And you have incorporated the amendments, I gather, that he has typewritten here? Mr. MELLEN. Yes, and I have had him review it, and he says it is in accord with his subcommittee's recommendations, and we raise no objection. Senator CAPEHART. Then this is the bill as recommended by the Commission. That is correct; is it not? Mr. MELLEN. Yes, sir. Senator CAPEHART. This is your recommendation? Mr. MELLEN. Yes, sir. We join with Mr. Allen's subcommittee in his proposed amendments. Representative ALLEN. Might I have one more word? Representative ALLEN. There is an amendment in there which says: "made available to the Commission for such purposes." It is quite possible that two words "and vessels" should be added to the amendment to perfect its meaning. Senator CAPEHART. What page is that on? Senator CAPEHART (reading): To such operators, Government-owned vessels made available to the Commis-sion for such purposes. Representative ALLEN. Adding to the amendment the words "and vessels." Mr. MELLEN. What would be the effect of that, Mr. Allen? Representative ALLEN. I think it would make sure that we did not eliminate one class of vessels presently under the jurisdiction of the Commission and create a new class. Mr. MELLEN. Inasmuch as the word "include" is used, I was given the anlaysis, and I assumed that means in addition to those that we I think that any additional amendment would be unnecessary. Senator CAPEHART. Was that an amendment or just a suggestion, that you think we might put in here? own. Representative ALLEN. I think that is a perfecting amendment I shall suggest when our committee meets. Senator CAPEHART. It would be "such operators, Governmentowned vessels made available to the Commission for such purposes." Representative ALLEN. Add two words, "and vessels." Senator CAPEHART. Where? Representative ALLEN. After "purposes." Senator CAPEHART. "For such purposes and vessels"? Mr. MELLEN. "And vessels under the control of the jurisdiction." We have no objection to that. We think it is already taken care of by the use of the word "include." Senator CAPEHART. I believe we have a suggested bill from all interested parties now except one. Governor GRUENING. Ours is on its way here. Senator CAPEHART. Are those words agreeable to you "and vessels," Mr. Mellen? Mr. MELLEN. I raise no objection to it. I think it is superfluous, because of the first part saying "to include" which means they are already included. Senator CAPEHART. Our next witness will be Mr. Stanley B. Long, representing the Alaska Steamship Co. and the Northland Transportation Co. STATEMENT OF STANLEY B. LONG, ATTORNEY FOR ALASKA STEAMSHIP CO. AND NORTHLAND TRANSPORTATION CO., SEATTLE, WASH. Mr. LONG. Mr. Chairman, my name is Stanley B. Long. I am an attorney of Seattle, general counsel for Alaska Steamship Co., and representing also Northland Transportation Co. in this hearing. The executives of both companies have spent a very considerable amount of time in Washington during the past 6 months, all of April and a portion of May, and when notice of this hearing came Friday, it came right in the height of our season, and I have been delegated to present the matter in behalf of Mr. Skinner to the committee, in view of his inability to attend. Mr. Skinner did testify, I think, at some length in the House hearings here on May 17, 18, and 19. With your permission, Mr. Chairman, I should like to read a statement of Mr. Gilbert W. Skinner, president of the Alaska Steamship Co., in support of Senate Joint Resolutions 218 and 219, and commenting on Senate Joint Resolution 222, which is the identical bill introduced in the House as House Joint Resolution 401. In order to clarify the need and purposes of Senate Joint Resolutions 218 and 219, I feel that it would be helpful to the committee to briefly outline the historical background of the problems presented. As will be seen, the basic problem is simple and clear, the difficulty lies in its practical solution. Prior to the outbreak of World War II, the Alaska trade was served by four common carriers, namely, Alaska Steamship Co., Alaska Transportation Co., Northland Transportation Co., and Santa Ana Steamship Co. The service of these carriers was on a strictly private free enterprise basis, wholly unsubsidized. The prewar fleets owned by the four carriers were as follows: Alaska Steamship Co.: 17 vessels (11 combination cargo and passenger 6 cargo) totaling 69,018 gross tons, supplemented by vessels chartered for use during peak seasons. The chartered vessels would vary from two, I think, to as many in 1 year as six to carry the peak trade during the summer. Alaska Transportation Co.: Three vessels (cargo) totaling 3,675 gross tons. Northland Transportation Co.: Five vessels (three combination passenger and cargo-two cargo) totaling 14,405 gross tons. Santa Ana Steamship Co.: One vessel (cargo) of 1,756 gross tons. That represents, as I have indicated, the prewar fleets owned by the four carriers. During the spring of 1942, the fleets of all of the carriers were requisitioned for war use and the three principal operators acted during the war years as general agents for the War Shipping Administration and subsequently for the United States Maritime Commission. During this period the relative competitive position of the three companies in the Alaskan trade was maintained. Early in 1947 the general agency authority of the Maritime Commission was about to expire and the trade was to be returned to the carriers for private operation. Senator CAPEHART. At that time, did the three companies make all the ports in Alaska? Mr. LONG. During the war years? Senator CAPEHART. Prior to the war. Mr. LONG. Prior to the war years? No. Prior to the war years, Alaska Transportation Co. confined its operation to Southeastern Alaska. Alaska Steamship served the entire territory-southeastern, southwestern, Bering Sea, and the entire area. Northland Transportation Co. confined most of its operations to southeastern with occasional voyages during the summer to southwestern Alaska. Senator CAPEHART. Is that the basis on which it is allocated at the moment? Mr. LONG. I can give you just a little history of that, if you wish, Senator. Senator CAPEHART. I do not particularly care about it. Mr. LONG. At the moment, it is allocated by agreement effective here last month, and on a slightly different basis, between the carriers approved by the Commission. Senator ČAPEHART. The Maritime Commission? Mr. LONG. Yes, sir. Senator CAPEHART. For all practical purposes, the allocation is about the same as it was prior to the war? Mr. LONG. Approximately, and that was the situation under Public Law 12. An arbitration board was agreed upon by the carriers, hearing was held, arbitration award was issued, and operation under Public Law 12 until the last 30 days was pursuant to the arbitration of the board and followed the prewar pattern which was established by the free competition of the three companies. During the war years the requisitioned fleets of the carriers had been heavily depleted as a result of war casualties, requisitions for title, some of the vessels so requisitioned having been transferred to Russia under lend-lease arrangements, and others were sold by the carriers as a result of their heavy war usage and obsolescence for the trade. Thus the fleets of the respective operators early in 1947 were as follows: Alaska Steamship Co.: Five vessels (four combination freight and passenger-1 cargo), total gross tonnage 23,823. Alaska Transportation Co.: One vessel (cargo), gross tonnage 951. Northland Transportation Co.: One vessel (combination freight and passenger), gross tonnage 3,133. Santa Ana Steamship Co.: None. In considering the return to private operation, all of the carriers were prepared and were financially able to purchase or charter the necessary vessels in accordance with the terms of the Ship Sales Act. of 1946. To do so, however, would have involved increasing the then existing rates approximately 85 percent. That is to say, if vessels were purchased or chartered on the basis of price set in the 1946 Ship Sales Act, the rates then existing would have to be increased approximately 85 percent to place them on a compensatory basis in view of the increase in capital structure resulting from purchase or charter. Senator CAPEHART. That is 85 percent of the then existing rates? Mr. LONG. Yes. Senator CAPEHART. And what percentage above the rates prior to the war? Mr. LONG. Sixteen percent as of 1947. The prewar rates had been increased by 16 percent by result of a surcharge by 1947. Senator CAPEHART. Sixteen percent? Mr. LONG. Yes. Senator CAPEHART. Then this 85 percent would be Mr. LONG. The 85 percent of 116. Senator CAPEHART. 85 percent of 116? You do not mean the rates would have been less than they were prewar? Mr. LONG. No; I am trying to indicate this to you, Mr. Senator: assuming the prewar rates 100 with 16 percent surcharge, which was in effect in 1947, the increase would have been 85 percent of 116 added to 116. In other words, the increase would have been 85 percent in addition over the 116. This increase was made necessary as a result of greatly increased operating costs built up during the war period, as well as the capital charges which would accompany the investment in new vessels. It should be noted that during the last 2 years of Government operation in this trade, the Government losses during 1945 were approximately $2,500,000, and in 1946 approximately $4,000,000. I may say that those losses during those 2 years occurred while the rates were 100 plus the 16 percent surcharge, in other words, prewar rates plus 16 percent. These losses did not take into account any capital charges or hullinsurance costs but were strictly operating losses occasioned by increased operating costs which could not be met under the rate structure then prevailing: prewar rates plus a surcharge of 16 percent. It was thus apparent to the operators who were and are still willing to invest their funds in new vessels, that in order to compensate for the 85 percent revenue deficiency, a substantial increase would be |