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contracts, although the present and current Cunard-White Star merger, which we will discuss later, undoubtedly would have some effect on the contracts.

Mr. SIROVICH. How many ships of the White Star Line ply between England and New York ?

Mr. SAUGSTAD. Two express steamers. Any vessels in the service must accept mail.

Mr. SIROVICH. Just two?

Mr. Saugstad. Two sailings a week. The contracts did not specify the number of ships but specified two sailings a week from Southampton by the two companies, the Cunard vessel on Saturday and the White Star vessel on Wednesday.

Mr. SIROVICH. And these two ships receive a bounty of about a million dollars, a little over a million, and their subsidy, the White Star!

Mr. SAUGSTAD. £100,000 to each company.
Mr. SIROVICH. I say, that is about a million dollars!
Mr. SAUGSTAD. For the two companies; yes, sir.

The contracts in the North Atlantic trade were so closely drawn that if the volume of mail carried increased or decreased by as much as 8 percent the Government or the operator, as the case might be, could claim one-half increase or one-half deduction under that contract. I mean one-half of the percentage. That is, an 8-percent increase in the volume of mail would entitle the company to a 4. percent increase in pay. One year that was brought about when the budget provided for 104,000 pounds for one line and 96,000 pounds for the other line, which indicated a shift of mail between the two operators.

There were practically no Admiralty provisions. The Admiralty provisions, or rather the nationality provisions, under the last con. tracts, provided generally that at least three-fourths of the crew were to be British citizens, and that the chairman, managing director, and the majority of the board of directors of the contracting company must be British citizens. The Admiralty took a minor interest in the two contracts. They provided only that such of the mail ships, as might from time to time be agreed upon between the Admiralty and the contractor, were to be stiffened to carry an armament of guns not to exceed 6 inches in caliber, the cost of such work being borne by the Admiralty. If the contractor builds any mail ships in the future, he has to provide a protected steering gear. That also is an Admiralty provision. And the contractor agreed in a general way to encourage the practice of the Admiralty system of signalling, both visual and wireless, with men-of-war signal stations and on merchant vessels, and in the case of visual signalling the Admiralty agreed to furnish the operator with the most modern equipment of lamps and apparatus.

The contractor agreed generally to cooperate in the distribution of naval intelligence, and he agreed generally, to encourage the Royal Naval Reserve movement, both among the officers and the men on board the contract ships. The admiralty provisions were identical for both the Cunard and the White Star Lines. The contracts were identical in all respects.

Mr. SIROVICH. Were there any other lines that could have competed for 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. 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.

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.

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Mr. SIROVICH. That was a contract that was signed in 1928? Mr. SAUGSTAD. Yes, sir; for 5 years. Mr. SIROVICH. And it was under this contract that 90 percent of the traffic that was borne on these ships was mainly Americans; is that right? That is the testimony that was rendered here. Mr. SAUGSTAD. You mean during that period? Mr. SIROVICH. Yes. Mr. Saugstad. If those are the figures to show passenger traffic during that period. I have no knowledge of that whatever.

The Chairman. You are not undertaking to testify yourself whether it was or not? Mr. SAUGSTAD. No, sir; not on traffic. Mr. SIROVICH. Go right ahead. Mr. SAUGSTAD. The next contract is that between the United Kingdom and Africa, which amounts to £37,070, $179,000. Unless there is some particular reason for inquiring into that, I would suggest that we pass it by. It involves the movement of mail, parcels post, and is of no substantial importance as compared with the Far East contract or the trans-Atlantic contract.

Mr. SIROVICH. How many sailings do they have from England to Africa, once a week?

Mr. Saugstad. I don't know. I might say that the operator of the African services is the Ellerman Line, and when we get into the Italian section it will be of interest to learn that the South African Government has subsidized an Italian line which is in competition with this particular operation.

Mr. CULKIN. That is a colonial subsidy? Who subsidizes the South African Line, the Italians ? Mr. SIROVICH. No; the British ? Mr. SAUGSTAD. The Government of the Union of South Africa is now subsidizing an Italian line for services from South Africa into the Mediterranean. Mr. SIROVICH. Are there any ships operating between Great Britain and Canada?

Jr. SAUGSTAD. Yes, sir; those are operated, however, at Canadian Government expense, Canadian Pacific ships, which is a subject to be taken up if we go into the smaller countries.

Mr. SIROVICH. Are they subsidized, too? Mr. SAUGSTAD. Yes, sir. They have been for the past 4 years. They have been subsidized since our own subsidized services went into effect.

The next item in the British system is an item of £97,300, or about $470,000, for services across the English Channel. Those services are in effect nothing but extensions of the railway services continental and the British Isles, and they have no military or other political position in the system. They are purely carriers of mail under the contracts. Mr. SIROVICH. Between where? Mr. SAUGSTAD. Between the United Kingdom and the Continent. Mr. SIROVICH. What part of the Continent? Mr. SAUGSTAD. Across the Channel? Mr. SIROVICH. France? Mr. SAUGSTAD. Yes.

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Mr. SIROVICH. Belgium? Mr. SAUGSTAD. Belgium and all the foreign post. The so-called home trade” to Great Britain includes a range from Brest to the Elbe.

Then there is another item in the packet services which amount to £183,100, of $890,000 annually, and that is what is known as "home services.” That means the operation of vessels between the various portions of the United Kingdom itself in carriage of mail.

Mr. SIROVICH. That would be between the United Kingdom and what?

Mr. Saugstad. Within the United Kingdom itself. That is around the British Isles to some other section of the isles, one section and another.

Mr. SIROVICH. Scotland, Wales, Ireland, and Great Britain?
Mr. SIROVICH. That would be similar to our coastal trade?

Mr. SAUGSTAD. Somewhat, yes; only our coastal trade does not carry mail.

Those are the only comments I have to make upon the British mail contract system, unless there are some questions.

Mr. SIROVICH. How are the seamen trained over there that go between Great Britain and the United States, the personnel?

Mr. Saugstad. I have no knowledge on that. I may make a statement on that in a general sense later.

Mr. SIROVICH. Do the seamen work continuously, or do they do like what has been discussed, they lay them off after the trick and pick up a new crew!

Mr. SAUGSTAD. I have no idea on that at all. I may say that the contracts themselves, as I have pointed out, specify that the contractor shall encourage the general principle of Royal Naval Reserve.

Mr. SIROVICH. If they operate under the Naval Reserve they have got to be trained and experienced men?

Mr. SAUGSTAD. Yes, sir.

Mr. SIROVICH. Does Britain operate between Great Britain and South America ?

Mr. SAUGSTAD. There is a small allotment for the movement of parcels post. It has no bearing on any of the principal lines.

Mr. SIROVICH. This P. &0. Line, does that only go between Great Britain and Asia, or does it go to Australia, too?

Mr. SAUGSTAD. It includes certain branches to Australia, but the return service or the Australian service proper, is paid for by the Australian Government. In other words, the United Kingdom subsidizes an outward line known as the " P. & O. Line." The Australian Government subsidizes the home-bound line, which is the Orient Steam Navigation Co., to which the Australian Government pays 120,000 pounds annually for that service. It so happens that the capital stock of the Orient Steam Navigation Co. is all owned by the P. & O.

Mr. SIROVICH. Then P. & 0. goes to India, too?

Mr. SAUGSTAD. Yes, sir. I might say further that the P. & 0. is the principal owner of the Union Steamship Co. operating to San Francisco from New Zealand and Australia. In other words, the P. & 0. operation through subsidiaries now extends in a horseshoe

from the British Isles to the bottom of Australia, then continuously around to San Francisco and Vancouver so far as mail service is concerned. So a system is built up whereby mail for a spot near the southern part of New Zealand or South Australia may reach London practically on the same day, no matter which way it is sent. In other words, if four 14-knot ships were started from a line between Australia and New Zealand on the same day, 1 through the Suez Canal, 1 around South Africa, 1 to San Francisco and one to Vancouver, and 1 around South America, the mail should arrive in London at about the same time. Mr. SIROVICH. Is that a hypothetical case? Mr. SAUGSTAD. That is a hypothetical case. I just want to show the position of the company in the British Empire trade.

Mr. SIROVICH. Have they ever had any strikes in the shipment of cargo in Great Britain or in their ports?

Mr. SAUGSTAD. They undoubtedly have. I have no knowledge of that, sir. There was a statement made yesterday by Mr. Haag in regard to the Royal Mail Steam Navigation Co. which I would like to elaborate for the committee.

The CHAIRMAN. I am afraid we will have to suspend the hearings now. There is a roll call on the bonus and we will have to attend. We will have to adjourn now until 10 o'clock tomorrow morning.

(Accordingly, at 4:48 p. m., a recess was taken until 10 a. m. of the following day, Friday, Mar. 22, 1935.)

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