BRITISH AIR SERVICES IN THE PACIFIC

INTRODUCTION
Following discussions between the British Commonwealth countries
at Montreal and London last year, Cabinet on Agendum No. 805 [1]
approved, inter alia, that the Australian Government join with the
New Zealand and United Kingdom Governments in the formation of a
tripartite operating organisation to operate a trans-Pacific civil
air service. It was envisaged that the service operated by the
tripartite organisation would run in a parallel partnership
arrangement with a similar service to be operated by Trans-Canada
Airlines. It is contemplated that a United States company would
also operate a service from North America to Australasia.

2. At the C.A.T.C. Meeting held in London during July last certain
subsidiary principles in regard to capacity to be operated,
division of capacity, unused capacity, pooling of revenues,
pooling of expenses, agency arrangements etc. in relation to the
British services were agreed. The C.A.T.C. Meeting also confirmed
the Montreal recommendation that, on the basis of four trips a
fortnight operated by the tripartite organisation, three should
operate from Sydney to the U.S.A. and Vancouver and one should
operate from Auckland to the U.S.A. and Vancouver. Intermediate
calls agreed upon were Fiji, Canton Island, Honolulu and San
Francisco-a call at Noumea being dependent on the performance of
the aircraft used and on the traffic offering.

NEED FOR A TRANS-PACIFIC AIR SERVICE
3. There is at present no adequate air connection between
Australia and America, the only services between the two
continents being military services operated by the British and the
United States Forces respectively. The British (R.A.F.T.C.)
service operates once a week between Sydney and Montreal via the
United States, but is run primarily for military traffic and the
accommodation available for civilian passengers and mails is very
limited. The United States (U.S.A.T.C.) service also operates only
once a week and this service is not generally available for
Australian civil traffic. On the other hand the need for
expeditious communications between Australia and the United States
is growing and, in consequence, there is real requirement for the
establishment of civil air services at the earliest possible
moment.

4. A factor bearing on the urgency of establishing a British civil
air service is the approach made some while ago by the United
States Legation with a proposal that Australia should conclude an
agreement conferring reciprocal rights for the operation of
regular air services between Australia and the United States. The
conclusion of such an agreement is a prerequisite to the
establishment of a United States air service to Australia, and it
is known that the American operating company (Pan American
Airways) is anxious to commence such a service early next year. It
is recalled that Pan American Airways operated between U.S.A. and
New Zealand prior to the Pacific War. This matter of an agreement
for reciprocal rights is the subject of a separate Cabinet
submission. [2] It is most desirable, however, for obvious reasons
that a British Commonwealth air service should be instituted
across the Pacific prior to or at the same time as the United
States service, otherwise the British Commonwealth will suffer
considerably in prestige and may find great difficulty in
overtaking the commercial advantage which would accrue to the
American service if it should be established substantially prior
to the British service.

5. For the reasons indicated in paragraphs 3 and 4 it is urgently
necessary that prompt steps be taken towards the establishment of
a British service. In view of the preoccupation of the United
Kingdom with the Atlantic and other services of greater importance
to that country and in view of the fact that Australia is the
British country most concerned in the establishment of the Pacific
service it behoves us to take the lead.

PROPOSED PACIFIC AIR COMMISSION
6. It is considered that the best course to secure real progress
in this matter is for the three British Governments concerned in
the proposed tripartite service to appoint a Pacific Air
Commission-broadly on the lines of the Tasman Air Commission-
representing the three Governments (and with headquarters in
Australia) and to direct the Commission forthwith to investigate
and recommend to the Governments how the service should be
organised. The Commission's inquiries and recommendations should
cover the constitution and organisation of the tripartite
operating organisation as well as the operational and financial
problems involved.

7. It is apparent that the organisation of a tripartite operating
organisation as envisaged in the Inter-Governmental discussions
hitherto will require considerable time and, in view of the
extreme urgency of having a British civil service across the
Pacific without delay, the Commission should be instructed also to
investigate and report on the feasibility and method of
instituting an interim British service until such time as the
proposed joint corporation can be constituted and commence
operations. On present information it seems unlikely that Trans-
Canada Airlines will be able to commence their service to
Australia before 1947.

8. An aspect of the problem which requires early settlement is the
proportionate interests which each of the three Governments should
have in the joint operating organisation and the corresponding
proportions of the financial liability which each will assume.

From discussions in London it is understood that the United
Kingdom Authorities would not be averse to a 20% interest, but the
New Zealand representatives at the C.A.T.C. Meeting were unable to
give any indication of what share New Zealand would wish to
assume. Having regard to the relative status of Australia and New
Zealand and the probable traffic potentialities of the two
countries (as indicated by the three to one frequency agreed upon-
vide paragraph 2) it would appear that the appropriate proportions
for Australia and New Zealand would be 60 and 20-thus making the
respective interests, Australia 60%; United Kingdom 20%; New
Zealand 20%. Should, however, New Zealand desire to assume a
higher proportion it is thought that Australia might agree,
provided our interest is not less than 50%.

COSTS OF THE SERVICE
9. The financial liability involved for either the interim or
ultimate joint organisation services cannot be closely estimated
at this stage-these being aspects to be investigated by the
proposed Commission-but British Overseas Airways Corporation
estimated some months ago that a four times fortnightly service
with trips terminating three at Sydney and one at Auckland (vide
paragraph 2) operated with Canadian-built Douglas DC4M aircraft
would involve a capital expenditure of the order of 750,000
sterling and an annual payment of the order 350,000 sterling
(assuming 60% traffic loading) against which there would be
considerable credit to the Governments from airmail fees. The DC4M
aircraft may not be available before early 1947, and one of the
major problems for the Commission to investigate is the question
of aircraft to be used on the interim service. Further, it is
unlikely that the interim service would commence with a greater
frequency than one trip per week (the initial frequency proposed
for the Pan American service). It is likely, therefore, that the
costs of the interim service would be less than the amounts
estimated by B.O.A.C. for the permanent service.

AUSTRALIA - NEW ZEALAND CONSULTATION
10. The New Zealand Government has recently indicated its desire
to arrange a conference on the Ministerial level to discuss,
amongst other subjects, the subject of the trans-Pacific service.

Such a conference will undoubtedly have to be held at an
appropriate time but the immediate need is to establish the
proposed Pacific Air Commission, as has already been agreed by the
three Governments concerned, so that the Commission may make the
inquiries and recommendations already mentioned. The Ministerial
conference would then be in a better position to reach decisions
on the trans-Pacific service.

RECOMMENDATIONS
11. It is recommended that Cabinet endorse the views expressed in
this Agendum and give authority for the United Kingdom and New
Zealand Governments to be informed of the proposal to constitute
immediately a Pacific Air Commission, broadly on the lines of the
Tasman Air Commission. Although the ultimate function of the
Commission would be to control and supervise on behalf of the
Governments the operations of the joint operating organisation,
its immediate task should be to submit recommendations regarding
the detailed organisation and functioning of the operating
corporation and the financial implications involved. If the
Commission endorses the view held here, that it would be
impracticable for the tripartite operating organisation to be
constituted and commence operating by approximately the time the
American service will be ready to start, then the Commission
should immediately examine and submit proposals for an interim
British Commonwealth service to commence prior to or
simultaneously with the American service. This objective can
probably be best attained by the Commission selecting an existing
operator to run the service pending the establishment of the
permanent joint operating organisation.

12. It is also recommended that Australia indicate its readiness
in principle to accept a 50 to 60 per cent share in the joint
organisation, and in the consequential financial liability. [3]