Foreign Relations of the United States, 1952–1954, Africa and South Asia, Volume XI, Part 2

611.9194/2–854

Memorandum by David H. Ernst, Aviation Policy Staff, Office of Transport and Communications Policy¹

[Washington,] March 25, 1954.

United States–India Air Transport Relations

The United States-India Air Transport Agreement, signed in New Delhi on November 14, 1946,² was negotiated on the initiative of the United States in the course of the general post-war program to secure for United States air carriers the air transport rights needed to conduct services abroad deemed to be in the national interest. In the main its provisions follow those agreed upon by the United States and the United Kingdom in the so-called “Bermuda Agreement” of February 11, 1946.³

Difficulties with India under the agreement arise primarily with regard to Article IV which was designed to effect reasonable control over the quantum of services operated. This Article contains a set of principles the purpose of which is to insure an equilibrium between the capacity and frequency of the air services authorized by the agreement on the one hand and the requirements of the public for air transport on the other. Another purpose of the principles is to insure a proper relationship between those air services (United States and India) and air services of other nations operating on the specified air routes or sections thereof. Included in the agreement at the insistence of India in 1946 is Article IX which provides that, if, in the judgment of one contracting party, there has been a failure to fulfill the conditions under which the rights are granted in accordance with the agreement, it may withhold, revoke, or condition the operating permit of the designated airline of the other party. However, such limiting action may be taken only after consultation between the parties. This provision, under which unilateral action to restrict the capacity offered by the airline of the other contracting party might be taken, is in its interpretation an unusual feature of the United States–India Agreement. Article X contains provision for consultation with a view to initiating amendments of the agreement. When such consultation has been initiated, either party may notify the other of its desire to terminate the agreement.

In July 1951, after almost four years of United States carrier operations to India, the Government of India requested formal aviation consultations under the agreement, strongly advancing its view that Pan American World Airways and Trans World Airlines were carrying an excessive volume of traffic between India and other countries. Owing to India’s inability to send representatives to Washington and United States insistence that formal talks be in Washington, a compromise was reached whereby United States representatives went to New Delhi for informal exploratory talks in lieu of formal consultations.

The Indian representatives made it clear in these 1951 talks that they sought a substantial reduction of United States air service into and through India, involving primarily a restruction on traffic carried between India and third countries on routes served by Air India International or through India on such routes. In 1951 India had insisted upon and had obtained arrangements with the United Kingdom and the Netherlands giving India control over the volume of services offered by BOAC and KLM and then sought to follow a similar course with the United States. Suggested was a mathematical formula to predetermine the over-all capacity to be offered by the United States carriers. The United States representatives reviewed the Bermuda capacity principles with the Indian representatives, agreed that the traffic carried by United States carriers between the United States and India had been lower in relation to traffic carried between India and other countries than had been expected but stressed the special circumstances, notably Indian exchange control regulations, which placed limitations upon the ability of the United States airlines to develop such traffic. The United States representatives emphasized the necessity of freedom to develop further the traffic potentials and argued against the Indian desire to limit such development through the application of rigid restrictions. It was repeatedly stressed that the application of restrictions was contrary to both the long-run interests of Indian international airlines and the general development of the trade and economy of India. Finally, the United States representatives successfully resisted Indian attempts to turn the talks into a formal consultation which would have given India the legal basis under Article IX for unilateral action to restrict United States carrier operations at that time.

These 1951 exploratory talks thus gave clear indication that India possessed sharply restrictionist views regarding the capacity of services utilizing the right to carry traffic having its origin and destination in countries other than that of the nationality of the carrier. Further, it was apparent that India sought a severe reduction in the number of weekly flights of United States air carriers.

While no direct action resulted from these talks, it was apparent that further Indian action against the agreement and United States carrier operations under it was probable. Further issues on the matter were successfully avoided until the fall of 1952 when India requested the United States to choose between a voluntary limitation by United States carriers on their flights to India and amendment of the agreement to incorporate restrictive provisions. This proposal was shortly followed by the Indian request for formal consultations under Article X to amend the agreement on the basis of the view of the Government of India that United States airline services were excessive and prejudicial to the operations of Air India International.

Accordingly, consultations began in New Delhi on May 11, 1953.⁴ In keeping with the basic principles of United States aviation policy, the Delegation firmly refused to agree to a predetermination of capacity. At the outset the United States offered to exchange certain traffic statistics in an effort to establish whether the Indian carrier was being injured by the operations of United States airlines. A review of the United States statistics and discussions with the Indian Delegation led the United States Delegation to the conclusion that a modest reduction in United States service would be appropriate. The United States Delegation did not feel, however, that India was able to prove the need for the restrictions upon which it insisted. In an attempt to preclude the unilateral imposition of restrictions by India or Indian denunciation of the agreement, the United States offered a temporary downward revision of the frequency of United States carrier operations. This offer was coupled with the understanding that the United States airlines would be free to increase their frequencies after January 1, 1954 if, in their own estimation, traffic warranted it. The United States steadfastly declined to accept any limitations on the type of traffic to be carried or any formula for predetermination of the capacity to be offered by United States carriers.

India rejected the United States offer because it did not include acceptance of the principle of predetermination of capacity, specific restriction of traffic having its origin and destination in countries other than the country of the nationality of the carrier and a reduction in frequencies sufficient to satisfy India. Indian efforts were continually concentrated on securing United States agreement to capacity predetermination. Failing success in this, the Indian Delegation ultimately suggested sine die adjournment to which the United States agreed. In this manner the formal consultation was recessed without any decisions having been reached affecting the agreement or the operations of United States air carriers under it.

Subsequently, by a note dated January 14, 1954,⁵ India formally gave notice to the United States of its desire to terminate the air agreement. Therefore, in accordance with its terms, the agreement will terminate on January 14, 1955. This note further expressed a desire for the early conclusion of a new agreement containing provisions to secure the Indian objective of protecting the development of Indian airlines operating abroad. The note stated that, for this purpose, India considers it necessary to ensure that air services are operated only in accordance with the specific agreement of the two governments in regard to capacity, frequency, and the carriage of traffic having its origin and destination in third countries.

This note is further affirmation that the current Indian policy on commercial rights in international air transport is at fundamental variance with that consistently held by the United States. Since the International Civil Aviation Conference at Chicago in 1944,⁶ the United States has advocated that international air transport operations have maximum freedom from restriction, and the Department of State has pursued an energetic and continuous program to secure the adoption of the same policy by other nations, particularly those important to the international operations of United States airlines. At the Chicago Conference the United States Delegation tried to obtain agreement of the conferring states to the inclusion in the Convention on International Civil Aviation of principles under which international air transport could have developed without artificial restrictions. This effort failed and later at a conference of states members of the International Civil Aviation Organization held in Geneva in 1947, the United States Delegation sought the adoption of a multilateral agreement on air transport incorporating this policy. This conference too showed that many states were not ready to accept such principles on a multilateral basis. The Department has, therefore, obtained air transport rights abroad for United States airlines by means of bilateral air agreements. All of these, which at present number forty-five, contain the basic principles on which the United States has refused to compromise not only in the extended talks and consultations with India, but also in instances of difficulties with other nations involving the capacity of airline operations. Since a fundamental and unprecedented departure from established United States international air transport policy would apparently be required in order to meet the Indian position, it is difficult to see how a new agreement can be negotiated with India if that country adheres rigidly to the predetermination of capacity principle.

1. This memorandum was an enclosure to a letter, dated Apr. 11, 1954, from Thruston B. Morton, Assistant Secretary of State for Congressional Relations, to the Honorable Charles A. Wolverton (R–New Jersey), Chairman of the Committee on Interstate and Foreign Commerce, House of Representatives.
2. For the text, see TIAS No. 1586, or 61 Stat. (pt. 3) 2573.
3. For the texts of the U.S.–U.K. “Bermuda Agreement” of Feb. 11, 1946 and the Final Act of the Bermuda Conference, see TIAS No. 1507, or 60 Stat. (pt. 2) 1499, 1512. For documentation on U.S. policy with respect to international civil aviation and the Bermuda Conference, see Foreign Relations, 1946, vol. i, pp. 1450 ff.
4. Documentation regarding these and earlier consultations between United States and India is in Department of State file 611.9194.
5. The Embassy in New Delhi transmitted Note No. S/53/1921/70 from the Government of India giving formal notice of its desire to terminate the air agreement in despatch 1295, Feb. 12, 1954 (611.9194/2–1254).
6. For documentation regarding the International Civil Aviation Conference at Chicago in 1944, see Foreign Relations, 1944, vol. ii, pp. 355 ff.