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PROTOTYPE AIRCRAFT DEVELOPMENT

MONDAY, MAY 8, 1960

UNITED STATES SENATE,

SUBCOMMITTEE ON AVIATION OF THE
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C. The subcommittee met, pursuant to call, at 10 a. m., in the committee room, United States Capitol Building, Senator Edwin C. Johnson (chairman) presiding.

Present: Senators Johnson (chairman) and McMahon.
The CHAIRMAN. The hearing will please come to order.

The committee has before it six bills dealing with prototype aircraft, copies of which will be printed in the record at this point.

(The bills are as follows:)

[8. 237, 81st Cong., 1st sess.) A BILL To promote interstate and foreign commerce and strengthen the national defense by providing for

cargo aircraft adaptable for postal, commercial, and military service, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SHORT TITLE SECTION 1. This Act may be cited as the "Air Merchant Marine Act of 1949”.

DEFINITIONS SEC. 2. For the purposes of this Act,

(1) The term “Corporation" means the Aircraft Development Corporation created by this Act.

(2) The term "cargo aircraft” means aircraft of such type or types as in the judgment of the Corporation are (i) most suitable for efficient use for the transportation of cargo or freight in air commerce, and (ii) capable of being readily adapted and used for military purposes; and such term includes aircraft equipment which, in the judgment of the Corporation, will increase efficiency in the operation or utilization of such aircraft.

(3) The term "aircraft equipment” means accessories, appliances, devices, instruments, and other equipment of whatever description used, or capable of being or intended to be used, in the operation or maintenance, or loading or unloading, of aircraft.

(4) The term "person” means an individual, partnership, corporation, association, joint-stock company, or trust.

(5) The term "citizen of the United States” has the same meaning as in the Civil Aeronautics Act of 1938, as amended.

(6) The term "air commerce" means interstate, overseas, or foreign air commerce, as defined in the Civil Aeronautics Act of 1938, as amended.

DECLARATION OF POLICY SEC. 3. (a) It is hereby declared to be the policy of Congress to provide for the taking of appropriate action to insure that there will be available a number of cargo aircraft adequate to meet the potential commercial requirements of the United States (as determined from time to time pursuant to section 5) but not in

(a) It is priate actioeet the poto tim

excess of a number adequate to meet the military reserve requirements of the United States (as determined from time to time pursuant to section 5).

(b) It is further declared to be the policy of Congress that the Secretary of Defense, the Secretary of Commerce, the Civil Aeronautics Board, the National Advisory Committee for Aeronautics, and all other officers, departments, and agencies having functions related to the functions of the Corporation created by section 4 shall cooperate fully with the Corporation and shall exercise such related functions in such manner consistent with the applicable provisions of law as will best effectuate the policy declared in subsection (a).

AIRCRAFT DEVELOPMENT CORPORATION Sec. 4. (a) There is hereby created within the Department of the Air Force a body corporate under the name “Aircraft Development Corporation”. The Corporation shall, independently of the Secretary of the Air Force, exercise the functions vested in it by or pursuant to law, except that the budgeting, accounting, personnel, and related routine management functions of the Corporation shall be performed under the supervision of the Secretary of the Air Force through such facilities as he shall designate or establish.

(b) The Corporation shall have capital stock of $100,000,000, all of which shall be subscribed for by the Reconstruction Finance Corporation for the United States, and shall be transferred by the Reconstruction Finance Corporation to the Directors of the Corporation as funds are requisitioned by the Secretary of the Air Force.

(c) (1). The management of the Corporation shall be vested in a board of five directors, to be appointed by the Secretary of the Air Force, by and with the advice and consent of the Senate.

(2) The Secretary of the Air Force shall designate, from among the directors, a chairman for the board of directors.

(3) A majority of the directors shall constitute a quorum for the transaction of the business of the board. Action shall be taken only by affirmative vote of a majority of those present. A vacancy in the office of director shall not impair the power of the remaining directors to exercise the functions of the board.

(4) The office of director shall be a full-time position. Each director shall receive compensation at the rate of $12,000 per annum, payable in equal monthly installments.

(5) The board of directors shall have power, subject to the authority vested in them by this Act and the laws of the United States, to prescribe, amend, and repeal bylaws, rules, and regulations governing the manner in which the general business of the Corporation may be conducted and the functions vested in it may be exercised.

(6) The board of directors of the Corporation shall have the power to hold hearings and to require by subpena or otherwise the attendance of such witnesses, the production of such correspondence, books, papers, and documents, to administer such oaths, and to take such testimony as it deems advisable. In case of disobedience to any such subpena, the aid of any United States district court may be invoked in requiring the attendance and testimony of witnesses and the production of documentary evidence, and such court within the jurisdiction of which the inquiry is carried on may, in case of contumacy or refusal to obey a subpena issued to any officer, agent, or employee of any corporation or to any other person, issue an order requiring such corporation or other person to appear or to give evidence touching the matter in question; and any failure to obey such order of the court may be punished by the court as a contempt thereof.

(d) The Corporation shall have, and may exercise, the following general powers, in addition to those elsewhere conferred in this Act:

(1) To have succession until dissolved by Act of Congress (2) To adopt, alter, and use a corporate seal, which shall be judicially noticed.

(3) To execute all instruments necessary or appropriate in the exercise of any of its powers.

(4) To acquire, hold, and dispose of property.

(5) To sue and be sued, to complain and defend, in any court of competent jurisdiction, State or Federal.

(6) To determine the character of and necessity for its obligations and expenditures and the manner in which they shall be incurred, allowed, and paid, subject to laws applicable generally to Government corporations.

(7) To employ such personnel as shall be necessary for the transaction of the business of the Corporation; to define their authority and duties; to require bonds for the faithful performance of their duties, the premiums on such bonds to be paid by the Corporation; and to fix and pay their compensation. Such compensation shall be fixed in accordance with the Classification Act of 1923, as amended.

(8) To employ experts, advisers, and consultants, or organizations thereof, as authorized by section 15 of the Act of August 2, 1946 (5 U. S. C., sec. 55a); and to compensate individuals so employed at rates not in excess of $50 per diem, and to pay their actual and necessary traveling and subsistence expenses (including in lieu of subsistence per diem allowances at a rate not in excess of $10) while so employed.

(9) To utilize the services, information, facilities, and personnel of the various departments and ageneies of the Government to the extent that such services, information, facilities, and personnel, in the opinion of such departments and agencies, can be furnished without undue interference with the performance of the work and duties of such departments and agencies.

(10) To take such other action as may be necessary or appropriate to carry out the functions vested in it by or pursuant to law.

(e) The Corporation shall be subject to the Government Corporation Control Act, as amended, to the same extent as wholly owned Government corporations listed in section 101 of such Act.

(f) The Corporation shall annually, on January 1, transmit to the Congress a report of its activities during the preceding year.

SURVEY OF POTENTIAL NEEDS FOR CARGO AIRCRAFT

Sec. 5. The Corporation is authorized and directed to make a continuing survey and study of (1) the potential commercial requirements of the United States for cargo aircraft and (2) the military reserve requirements of the United States for cargo aircraft. The Corporation shall report to Congress, from time to time, the results of such survey and study, but not less frequently than annually.

PURCHASE OF CARGO AIRCRAFT Sec. 6. So long as the aggregate number of cargo aircraft (privately owned and owned by the United States) is inadequate to effectuate the policy declared in section 3 (a), it shall be the duty of the Corporation, within the limits of funds available to it, to purchase from manufacturers in the United States such number of cargo aircraft as may be necessary to effectuate such policy. Such aircraft shall be of existing types and of types hereafter developed, in such proportions as in the judgment of the Corporation will best promote air commerce and strengthen the national defense.

LEASING OF CARGO AIRCRAFT

Sec. 7. (a) Except as provided in section 8, aircraft purchased pursuant to section 6 shall be leased by the Corporation to citizens of the United States certificated to engage in the transportation of commodities in air commerce, Joint use of such aircraft over two or more certificated air lines shall be permitted.

(b) Each lease made pursuant to this section shall provide that during the period of the lease not less than 75 per centum of the personnel employed by the lessee in connection with its operations of leased cargo aircraft in air commerce shall be members of the reserve components of the armed services of the United States.

(c) Each lease made pursuant to this section shall provide that whenever, at the end of any calendar year, the net profits of the lessee from the use of the leased aircraft (after payment to the Corporation of the agreed compensation for such use and payment of the lessee's fair and reasonable overhead expenses applicable to such use) shall exceed 10 per centum of the lessee's capital necessarily employed in such use, the lessee shall pay over to the Corporation, as additional compensation for such use, one-half of such excess.

(d) Each lease made pursuant to this section shall be made upon such other terms and conditions as the Corporation deems appropriate to carry out the purposes of this Act, including terms and conditions

(1) governing the period of the lease;

(2) governing the compensation to be paid by the lessee for the use of the aircraft;

(3) governing the obligations of the lessee with respect to the care and maintenance of the aircraft; and

(4) relating to the recapture, utilization, and operation of the aircraft in the interests of national security, pursuant to section 10, and the compensation to be paid to the lessee therefor.

CARGO AIRCRAFT NOT LEASED TO PRIVATE OPERATORS SEC. 8. The Corporation shall not acquire the cargo aircraft in excess of the number which can be absorbed by private operators through leases under section 7.

RESEARCH AND DEVELOPMENT SEC. 9. (a) The Corporation is authorized and directed to initiate and support research and experiments for the purpose of developing new and improved types of cargo aircraft.

(b) The Corporation may do all things necessary to carry out the provisions of this section, and, without being limited thereby, the Corporation

(1) may enter into contracts or other arrangements for the carrying on by organizations or individuals, including other agencies of the United States, of such research and experiments as it deems necessary;

(2) may enter into such contracts or other arrangements, or modifications thereof, without legal consideration, without performance or other bonds, and without regard to section 3709 of the Revised Statutes (41 U. S. C., sec. 5); and

(3) may make advance, progress, and other payments which relate to such research and experiments without regard to the provisions of section 3648 of

the Revised Statutes (31 U. S. C., sec. 529). (c) Each contract or arrangement, or modification thereof, made pursuant to this section, shall contain, wherever appropriate

(1) a provision for the recovery of so much of the costs incurred by the Corporation in connection therewith as the Corporation deems practicable and expedient;

(2) å provision that cargo aircraft manufactured from types developed or substantially improved pursuant to this section shall be sold at a price allowing a reasonable profit, not exceeding such profit as may be prescribed by the Corporation;

(3) such provisions, consistent with the laws relating to the issuance or use of patents, governing the disposition and use of inventions made pursuant to such contract or arrangement, or modification thereof as will, in the judgment of the Corporation, best protect the public interest and the equities of the individual or organization with which such contract or arrangement, or modification thereof, is made; and

(4) a provision that cargo aircraft manufactured from types developed or substantially improved pursuant to this section shall be sold or resold only to purchasers who, by contract with the Corporation, have undertaken (A) to make no changes in such aircraft without first obtaining the approval of the Corporation; (B) to make, for an agreed sum payable by the Corporation, such changes in such aircraft as the Corporation may prescribe; and (C) when directed to do so pursuant to section 10, to surrender, utilize, or operate such aircraft. Each such contract between a purchaser and the Corporation shall contain terms and conditions relating to the surrender or utilization and operation of the aircraft in the interests of national security pursuant to section 10, and the compensation to be paid therefor.

POWERS OF THE PRESIDENT WITH RESPECT TO RECAPTURE OR UTILIZATION OF

CARGO AIRCRAFT SEC. 10. (a) Whenever the President determines that such action is advisable in the interests of national security

(1) he may direct the Corporation (A) to recapture such of the cargo, aircraft leased pursuant to section 8 or (B) to require the surrender of such of the cargo aircraft manufactured from types developed or substantially improved pursuant to section 10, as he may deem necessary; and when so directed the Corporation shall take appropriate action to recapture, or to require the surrender of, such aircraft;

(2) he may require (A) any person leasing aircraft pursuant to section 8 or (B) any purchaser of aircraft manufactured from types developed or substantially improved pursuant to seetion 10, to utilize and operate such

aircraft for such purposes and in such manner as he shall direct. (b) Aircraft recaptured or surrendered pursuant to subsection (a) (1) of this section shall be utilized for such purposes and in such manner as the Secretary of the Air Force shall prescribe as advisable in the interests of national security

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