1939: Transportation

National Policy.

The end of the year 1939 finds the United States of America still without a clear-cut and comprehensive National Transportation Policy, in spite of the strong recommendations made in December 1938 that such a policy be adopted. Some progress was made, however, in that each house of the Congress passed its own general transportation bill, but action in the House of Representatives came so late in the session that there was time left only for the appointment of the conference committee. The special session in September was limited absolutely to consideration of the neutrality laws, and the conference committee meetings, first scheduled for Dec. 10, have been postponed and in all probability will not begin until the Congress reconvenes in January. Each of the two bills embodies some of the recommendations of the President's Committee, but neither goes far enough and there will undoubtedly be a long struggle before anything is agreed upon and enacted into law.

Probably the most important and certainly the most controversial of the recommendations included in these bills is that the waterways be placed under the control of the Interstate Commerce Commission. The chances for the success of this change were not enhanced by the transfer, last July, of the Inland Waterways Commission and the Federal Barge Lines from the War Department to the Department of Commerce under the governmental reorganization bill. Shortly afterward, General T. Q. Ashburn, for many years the head of both the commission and the barge lines, resigned under pressure and was succeeded by Chester Thompson, and associates. As Mr. Thompson is a waterways advocate, having been for many years a member of the Mississippi Valley Association, this does not mean that it will be any easier to bring the waterways under the Interstate Commerce Commission, especially if an attempt is made to carry out the further recommendation of the President's Committee that tolls be imposed on commercial shipping on the waterways.

As predicted last year, the smooth and relatively efficient working of the new Civil Aeronautics Authority seems to have eliminated most of the talk of placing air transportation under the I.C.C., though air-rail express rates gave rise to some discussion during the past year. Provision of airports and operating subsidies have continued without much control, except by the C.A.A. for the latter.

Highway Transportation.

There is little talk of including the highways in the transportation bill, though the suggestion in last year's article that they might well be required to obtain certificates of public necessity and convenience has been mentioned by two or three other writers during the year. This was due largely to the proposal of the Public Roads Administration, successor to the United States Bureau of Public Roads formerly in the Department of Agriculture, that $40,000,000,000 to $50,000,000,000 be spent within the next twenty years on super-highways in and around large cities. This recommendation was somewhat of a surprise after the report of the bureau on super-highways earlier in the year in which cross-country or transcontinental super-highways were definitely rejected as uneconomical and unwise, though the same report recommended improvement of existing highways, widening of streets and elimination of bottlenecks in and around cities. Perhaps this is what is meant by the later recommendation, though such work used to be done principally by municipalities but now leans heavily on Federal assistance. Of course, interstate motor carrier traffic is already regulated by the I.C.C. under the Motor Carrier Act of 1935 as amended in 1938. This act is working fairly well under the Motor Carrier Division of the I.C.C., though some further amendments are likely within the next year or two as the result of experience in the enforcement of the act. One of the chief difficulties is still the varying state regulations as to weights and dimensions of trucks. However, strong efforts are being continued to reach workable agreements on these matters.

Maritime Transportation.

Though coastwise shipping rates have a definite effect on some interstate rates by land there is no likelihood that authority over them will be vested in the I.C.C. and the merchant marine is flourishing under the Maritime Commission. Practically every shipyard and coastal steel plant in the country is being rehabilitated and has received contracts for construction of vessels for the commission, while most of the larger yards are busily engaged in building for the United States Navy. The commission has continued liberal construction and operating subsidies but has failed to exercise its power to fix minimum intercoastal rates, this in spite of the cutthroat competition which resulted in the withdrawal of the American-Hawaiian and Luckenbach steamship companies from the Intercoastal Steamship Freight Association last spring. The largest ship built by the commission is the America which was launched early in September. This 34,000-ton vessel cost $17,000,000 and is scheduled to enter the trans-atlantic service next spring, war regulations permitting. The ship can carry 1,219 passengers, has a top speed of 22 knots, and is also equipped with safety devices which would keep her afloat even though three compartments were flooded. The commission has placed under construction or launched 69 other vessels and established three training stations equipped to turn out 3,000 merchant marines a year. In addition, the commission has developed standardized designs for two types of cargo vessels and 24 Pacific coast ships. American shipping is now in a peculiarly demoralized condition due to the order of President Roosevelt, in conformance with the Neutrality Act, prohibiting American ships and citizens from entering the war zone, but it is hoped that some additional business will become available in the South American trade due to the necessary withdrawal of the ships of the belligerent and other nations. At any rate, the policy of the commission is to provide a merchant fleet ample to take advantage of any opportunity or meet any emergency. (See also MERCHANT MARINE, AMERICAN.)

Railroads.

The reorganization situation of railroads in 1939 is virtually the same as last year. Only two Class I roads, the Chicago and Eastern Indiana, 808 miles, whose reorganization plan has been approved by both the I.C.C. and the courts, and the Central Railroad of New Jersey, 1,155 miles, joined 81 other roads, 31 per cent of United States mileage, in bankruptcy during the year, although some progress has been made on other reorganization plans. It will be remembered that Section 77 of the Bankruptcy Act was extended to the railroads a few years ago in the hope of expediting reorganization through bankruptcy proceedings. A further step was taken this past year in the only railroad bill passed by both houses of the Congress and signed by President Roosevelt on July 28, 1939. This was the Chandler Bill, designed to provide for voluntary reorganizations without the expense of bankruptcy proceedings. This provides that any railroad not in need of reorganization under Section 77 of the Bankruptcy Act may file a reorganization or readjustment plan with the I.C.C. if it has the approval of 25 per cent of the creditors. The commission may hold the plan from 120 to 180 days depending on the complications. If approved by the commission, two-thirds of the creditors and a majority of each class of creditors, the plan may then be filed in a District Court. Filing must take place within one year of the enactment of legislation. If approved by the Court and 75 per cent of creditors and 60 per cent of each class of creditors it will be promulgated by the Court. Final readjustments must be completed within one year of filing with the Court or the Plan becomes void.

It is hoped that this voluntary reorganization plan will enable the Lehigh Valley and the Baltimore and Ohio and some other roads which barely escaped receiverships under Section 77 to put into effect plans on which they have been working for some time. It came too late to save the Jersey Central. This was partly because of exorbitant tax claims by the state, amounting to $11,500,000 for this road alone, which were unpaid since 1932 because of dispute. As one decision has already been rendered in their favor, it seems likely that this and the other roads involved, principally the Pennsylvania, Reading and Lehigh Valley, will be relieved of part of this burden by the courts. It seems unreasonable that state taxes alone should constitute 40 per cent of the roads' total tax bill.

It should be noted that the Chandler Bill will be in effect for only one year, unless extended by the Congress, and it remains to be seen whether it will be more effective than the old 'friendly' receiverships which resulted from bankruptcy proceedings before Section 77 became available to the rails. At least, proceedings can not drag along in the courts for years as they do now, for there has been little change in the situation for the last five or six years. It would seem that some drastic action will be required to relieve the 31 per cent of our mileage now in receivership, or trusteeship, of the legal and financial entanglements fastened upon them by bankruptcy proceedings.

One of the main reforms is the wiping out of the equities of stockholders and unsecured creditors, a condition insisted upon by the I.C.C. in practically all cases which they have approved, and it is worth noting that this policy has received support from the Supreme Court, though not in a railroad case. In the reorganization of the Los Angeles Lumber Products Co., the Court concurred unanimously in an opinion written by Associate Justice Douglas which said, 'We believe that to accord the creditor his full right of priority against the corporate assets . . . the stockholders' participation must be based on a contribution in money or in money's worth.' Under this policy the stockholders will have to be satisfied and in fact should be happy if allowed to get out from under with a whole skin.

Another interesting development of the last few months in connection with some of the reorganization proceedings is the protest of the RFC against failure to recognize its loans as prior liens or claims to be paid in full. No decision has been reached in the matter in any case but the railroads still owe the RFC $436,651,283, as of Oct. 31, 1939, and the question of scaling down these governmental claims in the same way as those of other creditors is certainly a live issue. The Railroad Credit Corporation has made additional small disbursements during the year, bringing the total to approximately 80 per cent of the original fund with which it was entrusted.

Continued progress in operating efficiency and in the introduction of stream-lining and air-conditioning took place during the year and both freight and passenger schedules were speeded up. And while the roads operated at a loss for the first six months of the year, traffic began to pick up in June. This continued until September, when an unprecedented upturn in business raised industrial production to the highest level in ten years and brought steel production to nearly the actual production capacity of the mills. Housing construction was steadily increasing before this upturn and will be the largest since 1929. The rails profited by this activity and car loadings for the week ending November 11 were 75 per cent of the 1925-29 average for that week and the highest, allowing for seasonal changes, since May 1937 when the 'recession' began. Hence earnings are likely to be better than those of 1938 and already one or two of the more prosperous roads have announced special dividends. In-the matter of facilities this increase in business caught some of the roads with insufficient equipment and in fact it was only by quick action in remanning shops for the rehabilitation of equipment that a national car shortage was averted. This naturally resulted in orders for railway materials and equipment, and President J. J. Pelly of the American Association of Railroads estimated in his report to the association in November that freight car orders for the year would total 65,000 as compared with 16,303 in 1938. For the first ten months of 1939, 640,000 tons of rail were ordered, as compared with 230,115 for the similar period of 1938.

Wages and rates have remained practically static during the year. The rails abandoned their attempt to secure a 15 per cent reduction in wages when the President's Committee reported against them in favor of legislation for which they claim the administration promised support. They now allege that this promise has been broken since the President has given no active support and two of his Cabinet members have appeared in opposition to certain provisions of the Wheeler-Lea or general transportation bills now before the Congress. Passenger coach-fares on the Eastern roads have been on the experimental basis of 2½ cents per mile begun July 24, 1938 and to end on Jan. 24, 1940 unless the 18-month experimental period is extended by the I.C.C. On account of the uncertainty introduced by the two World's Fairs of 1939, the roads affected have already asked for a nine-month extension in order to obtain a six-month 'normal period' (Nov. 1, 1939, to May 1, 1940) unaffected by World's Fair traffic. These rates provide reductions for round trips but the rates will go back to 2 cents per mile in coaches, a rate put into effect by order of the Commission on June 1, 1936, if the above extension is not granted. Special World's Fair rates were in effect last year from April 28 to October 28 by which one could travel from any point in the United States to both fairs and return for $90 in coaches and $135 first class with Pullman charges added. Tickets were good for two months by any route and with any number of stop-overs. The National Bus Traffic Association offered the same service for $69.95 soon after the offer was made by the railroads. Of course, other special rates were made for round trips to each of the fairs. (See also RAILROADS.)

Air Transportation.

The accident and disaster situation has not materially changed in any of the fields of transportation as only about a 5 per cent decrease is expected in both fatalities and accidents. Transpacific air service has steadily developed and Pan American Airways is inaugurating a bi-monthly service with its California Clipper of approximately 4 days over the 7,500 miles from San Francisco, California, to Auckland, New Zealand. After some experimental flights PAA also made its first mail-carrying flight across the Atlantic last May, on the twelfth anniversary of Lindbergh's flight to Europe. Lisbon, Portugal, was reached 26½ hours after leaving the United States. Six hours were lost at Horta while postal employees stamped 23,000 letters. Five mail flights were made before the semi-weekly passenger flights were inaugurated. In June Imperial Airways inaugurated mail service between Port Washington, N. Y., and Southampton, England. The transatlantic rate is 30 cents per ½ ounce. For the first time in history the Post Office Department reported a profit on air mail, amounting to $736,954, for the fiscal year ending June 30, 1939. See also AVIATION; BUSINESS; NEW YORK MUNICIPAL AIRPORT.