Mr. SAUGSTAD. The contracts to the P. & O. Co. have always been let upon prepared specifications wholly or in part covering the entire eastern system, and the principle has been, of course, to accept the lowest bids for the service from competent bidders, but in practice. that principle has not always been followed. However, when the principle of public bidding has been set aside it has been justified before the House of Parliament on the basis of the competency of the operator and time-saving conditions involved.

The original contracts were made between the British Admiralty and the company. This was primarily because of the experimental situation that existed in steam navigation in the 1830's. While steam power was being developed the Admiralty carried the principal burden, and I might say that the same principle applied to the original Cunard contracts. Private capital in the thirties was not ready to go into an experiment which required as much capital as those lines required and which carried the risk that they carried at that time.

Mr. CULKIN. That was the introduction of steam?

Mr. SAUGSTAD. That is the introduction of steam; yes, sir. The basis of this study has been from the beginning of steam navigation. We have not extended beyond that so far as any Government interest was concerned.

Mr. SIROVICH. Did not Cunard extend his lines with a subsidy and loan from the Government at the time?

Mr. SAUGSTAD. Yes, sir. I would not say loan. He began with a contract. The Royal Mail began with a loan, and we will take that up a little later.

Mr. SIROVICH. They loaned money and they gave them money, Cunard, when he first entered into the development with ships. Mr. SAUGSTAD. I don't think so.

Mr. SIROVICH. That is what I read. He came somewhere from Novia Scotia or Newfoundland, did he not?

Mr. SAUGSTAD. His original contract was to Nova Scotia.

Mr. SIROVICH. That is where he came from.

Mr. SAUGSTAD. Mr. Cunard was born in Philadelphia.

Mr. SIROVICH. From what he read, I thought he was born in Newfoundland.

Mr. SAUGSTAD. No; he was born in Philadelphia, I believe, and went to Nova Scotia, and when the trans-Atlantic competition became intense he transferred his operations down to New York. That was the beginning of the trans-Atlantic service at New York for the Cunard Co.

About 1866 the British post office felt that the competition in the principal steamer lines had become so active that they proposed to undertake to handle the contracts from that time on the basis of competitive bidding.

Since 1907 the amounts of money so far as the P. &. O. is concerned, have not varied to any great extent. When the contract was first extended to Hong Kong in 1844, the contract amount was £115,000 for the line from Suez to Calcutta, £45,000 for the extension to Hong Kong. At the time of the final contract in 1907, the contract amount was £305,000, an equivalent of $1,484,000. That compares with the current amount previously stated as being £341,000.

I a general way the same conditions apply to the P. & O. operato the Far East as applied to the French operations to the Far East diselissed this forenoon, in that certain space preferences given to the British Government for the movement of British at tris,ness, and unless there are questions on that point I do ve I will elaborate it.

Mr. SHAICH. The only difference, however, is that the French, au trought out, go into partnership with their Far Eastern at marine and assume 50 to 90 percent of the liabilities! SAUGSTAD. Yes, sir.

SIROVICH. Whereas here it is a direct ship subsidy through
Hum of the mail contract!

M- SAUGSTAD. Yes, sir.

CULKIN Do you know whether the Government has any reptation on the board of that line?

V- NAUGSTAD. No, sir.

M- CUTKIN. You do not know whether they do or not?

SAUGSTAD. I do not know that they have, but on information ‚' of. I would say that they have not.

M- CULKIN. Do they exercise any supervision over its finances? Mr SAUGSTAD. I do not think so; no.

Mr. SIROVICH. Now, this money that the British Government gives a na i subsidy is not based on the universal postal rate, is it! Me SAUGSTAD, No, sir. It is a flat amount.

M- SIROVICH. In other words, it is a pure indirect subsidy given zh the medium of a mail contract?

M- SAUGSTAD, Yes, sir. I might say in that connection that the figures I had to show the amount of mail that moved over at stem was 1,500,000 bags in one year. So that in practice ftat particular year

M SIROVICH (interposing). That is the P. & O.!

Mr. SAUGSTAD. That is the P. & ().

Mr. SIROVICH, And how much would that amount to according the universal postal rate?

Mr. SAUGSTAD. I have no idea. I am speaking of bags.
M-STROVICH. Yes. You know the weight of a bag?

Mr. Sangeran. I do not know what the weight of a bag is. Mr. Surovich. Of course, if we could determine that, we would be a direct position to determine exactly how much money they were subsidizing, because if the universal postal rate is so much a i and there are so many pounds in a bag and they carry bags, it is a question of multiplication.

Mr SAUGSTAD. I do not know whether there is a certain number of i per bag.

Col KENNETH GARDNER. The bag is not always precisely the same

t. They vary.

T & CHAIRMAN. And what is your name, for the reporter? He 24 vor remark and would like to know who made it.

Corel GARDNER. I just wanted to say that the bags do not run sely the same. The poundage is estimated by the year. Mr. SAUGSTAD. I want to say in addition to the P. & O). operation re have calculated from time to time the amount of money this would represent on a mileage basis, and it is shown by fixed

payments to British operators of vessels into the Far East that they vary from 30 shillings, about $7.30, per mile, at times, and on certain runs to 45 shillings, an equivalent of 97 cents to $1.22 per mile at other times on the main lines.

A fair average during the period of competition beginning with the opening of the Suez Canal would be about 5 shillings per mile sailed. Statements made by officials of the P. & O. Co. indicate that they have received a return of about 4 shillings per mile as the return on their contract service during recent years.

The operation over that line is restricted to a certain number of days and hours between Marseilles and ports of the Far East. I cite Marseilles since this port is the point of departure of British mails to the Far East. Contracts are so closely drawn that allowances are made for prevailing winds, the monsoons, so that allowances are made to take care of the retarding effect on the vessel. But the vessels must keep up their itineraries or they must sail on time, unless the owners want to incur heavy mail penalties. That is the principle of operation on all British mail lines.

Have you any questions on that line?

Mr. SIROVICH. I would like to know about the American line that the British have. You are talking only of the Orient?

Mr. SAUGSTAD. Yes, sir; speaking of the P. & O. That is the larger line.

Mr. SIROVICH. About how many ships have they in that line? Mr. SAUGSTAD. I do not know. I have not had time to calculate the number of ships. Would you like to have that inserted in the record?

Mr. SIROVICH. Yes; I think that would be interesting. Have they passenger ships there alone or combination of passenger and cargo? (See p. 265.)

Mr. SAUGSTAD. The mail contracts cover passenger ships only. There are no contract provision which specifies that the contract shall operate extra tonnage for commercial purposes.

Mr. SIROVICH. And the same formula that prevails between France and her colonial possessions so far as 25-percent cargo and differences in the cost of transportation are concerned applies to England just as it does to France?

Mr. SAUGSTAD. No, sir; not by the contract. There are certain preferences so far as space allotment is concerned.

Mr. SIROVICH. But then so far as passengers are concerned, too; I mean those that work for the Government?

Mr. SAUGSTAD. So far as I know; no.

The next British contract in point of size is that between the United Kingdom and New York, which has been a dual arrangement under 2 separate contracts until recently, 1 the White Star Line, the other the Cunard Line. The latest appropriation, that for 1934, which includes also the South American and Central American services but those are small amounts for parcel-post movementis £222,000, an equivalent of $1,080,000.

The last contract of which I have record is the contract of 1928, which was for a 5-year period. The contracts apparently_terminated 2 years ago, and the sessional papers of the House of Commons do not show as yet any documents which replace those two

although the present and current Cunard-White Star ger, which we will discuss later, undoubtedly would have some

the contracts,

SOVICH. How many ships of the White Star Line ply beHand and New York!

AUASTAD. Two express steamers, Any vessels in the service tmail.

K-VICH. Just two!

M. SALGSTAD, Two sailings a week. The contracts did not specify ter of ships but specified two sailings a week from Southby the two companies, the Cunard vessel on Saturday and te Star vessel on Wednesday.

SOVICH. And these two ships receive a bounty of about a rodollars, a little over a million, and their subsidy, the White

Saugstad. £100,000 to each company.

Ve SROVICH. I say, that is about a million dollars!

SAUGSTAD. For the two companies; yes, sir.

Ie or tracts in the North Atlantic trade were so closely drawn at if the volume of mail carried increased or decreased by as percent the Government or the operator, as the case might 4 dum one-half increase or one-half deduction under that I mean one-half of the percentage. That is, an 8-percent ve in the volume of mail would entitle the company to a 4t increase in pav. One year that was brought about when E get prov.ded for 104,000 pounds for one line and 96,000 s for the other line, which indicated a shift of mail between operators.

t

Ire were practically no Admiralty provisions. The Admiralty v spons, or rather the nationality provisions, under the last cona t-, provided generally that at least three-fourths of the crew e to be British citizens, and that the chairman, managing direc the majority of the board of directors of the contracting any must be British citizens. The Admiralty took a minor st in the two contracts. They provided only that such of the stops, as might from time to time be agreed upon between A inralty and the contractor, were to be stiffened to carry an ert of guns not to exceed 6 inches in caliber, the cost of such beng borne by the Admiralty. If the contractor builds any alships in the future, he has to provide a protected steering That also is an Admiralty provision. And the contractor agreed in a general way to encourage the practice of the Admiralty

of signalling, both visual and wireless, with men-of-war - al stations and on merchant vessels, and in the case of visual gang the Admiralty agreed to furnish the operator with the t modern equipment of lamps and apparatus.

I contractor agreed generally to cooperate in the distribution #raval intelligence, and he agreed generally to encourage the Rival Naval Reserve movement, both among the officers and the es on board the contract ships. The admiralty provisions were ertical for both the Cunard and the White Star Lines. The conrats were identical in all respects,

Mr SIROVICH. Were there any other lines that could have competed r that contract!

Mr. SAUGSTAD. Not in that trade.

Mr. SIROVICH. You mean in the North Atlantic trade route?
Mr. SAUGSTAD. Not on that trade. No British companies.
Mr. SIROVICH. I am talking of the British companies.

Mr. SAUGSTAD. No; no British companies.

Mr. SIROVICH. In other words, these two had been old-established concerns that had been operating over that route all along? Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Were there any friendly arrangements between the 1 wo so that they could divide the traffic between themselves?

Mr. SAUGSTAD. Not beyond usual conference arrangements, so far as I know.

Mr. SIROVICH. I mean, did any secret diplomacy prevail?
Mr. SAUGSTAD. I don't know.

Mr. SIROVICH. Is there any difference in the cost of sending your British mail over this route, and you find both of them practically receiving the same amount, 104,000 and 96,000, depending upon the exacerbation or remission one way or another 8 percent up or down? Mr. SAUGSTAD. Is there any difference in the cost of moving the

mail?

Mr. SIROVICH. Yes.

Mr. SAUGSTAD. Not so far as I know.

Mr. SIROVICH. So it looks as though there must have been some uniform agreement between the two that they can divide the thing among themselves.

Mr. SAUGSTAD. Well, the uniform agreement is arranged in this way: That one company arranges their sailing on Wednesday from Southampton, the other one for the Saturday sailing.

Mr. SIROVICH. Is that still the custom that is going on now?
Mr. SAUGSTAD. I do not know what the custom is now,

sume the same number of sailings.

Mr. SIROVICH. And that began in the year 1907?

Mr. SAUGSTAD. 1928.

but I pre

Mr. SIROVICH. I mean, it began in 1907 and continued on under the contracts?

Mr. SAUGSTAD. No, sir. We are talking now about the White StarCunard Co. in the North Atlantic run.

Mr. SIROVICH. As independents?

Mr. SAUGSTAD. No; under contract with the British Government. Mr. SIROVICH. I mean, that they were not united; they were independent of each other?

Mr. SAUGSTAD. They were. We have not come to the merger yet. The next contract is that between the United Kingdom and Africa. Mr. SIROVICH. What were the ships that operated on these routes? Mr. SAUGSTAD. The ships are not specified in the contract, but obviously they were the Majestic

Mr. SIROVICH (interposing). Ships that they took over from the Germans?

Mr. SAUGSTAD. Yes. They would be for the White Star the Majestic, the Olympic, and possibly the Britannic, and others in case of repairs. The Cunard Line maintained the Berengaria, the Aquitania, and under that contract, of course, the Mauretania and others were operating.