The question of Canada's position in relation to trans-Pacific air services has been under consideration for some time, and it has been contemplated that, at an appropriate time, certain trans-Pacific air services would be inaugurated.

2. Up to the present time, it has been contemplated that such services would he undertaken by Trans-Canada Air Lines but, by virtue of the fact that Trans-Canada Air Lines have been fully occupied in inaugurating the Canada-United Kingdom, Canada-Bermuda, Caribbean, and possibly South American services, no serious attention has been given yet to the trans-Pacific services.

3. In the meantime, United States air lines have been active in this field and have inaugurated the under-mentioned trans-Pacific services:

(a) Pan American World Airways

(i) from San Francisco and Los Angeles via Honolulu to Japan, the Philippines, Shanghai, French Indo China, Calcutta and onwards

(ii) via Honolulu to New Zealand and Australia

(b) Northwest Orient Airlines

from Chicago or Seattle via Anchorage to Tokyo, Korea, Shanghai, China and the Philippines. Note: These two lines carried 51,142 passengers in the period January to August, 1947, at a passenger load factor of 62 percent.

4. Not only has Canada no trans-Pacific air services as yet, but it does not have any trans-Pacific steamship services, as the steamship services formerly performed by Canadian Pacific Steamships have been discontinued due to the fact that the vessels utilized on this service were destroyed during the war.

5. As the provision of a trans-Pacific steamship service cannot be realized for some time and may not be possible on the same scale as formerly because of the prohibitive cost involved, consideration of the early inauguration of a trans-Pacific air service would appear appropriate at this time.

6. If such an air service were provided it would tend to protect Canada's trade position in the Pacific to some extent before American air lines operating in this area have become too strongly entrenched. If and when a steamship service is reestablished, the air service inaugurated would be complementary thereto and it probably would avoid the provision of expensive passenger vessels formerly in this service.

7. Under date of June 11, 1946, Canada entered into a bilateral agreement with Australia for air services between Canada and Australia. Under the annex of this agreement, on air line designated by the Government of Australia was to operate on a route as follows:

Sydney to Vancouver via Fiji, Canton Island, Honolulu, San Francisco or other intermediate stopping places as may be mutually agreed upon in both directions. Under the same agreement, an air line designated by the Government of Canada was to operate a return service originating in Canada and terminating in Australia. The route to be operated by the designated air line of the Government of Canada was to be Vancouver to Sydney via such intermediate stopping places as may be mutually agreed in both directions.

8. The Government of Australia designated British Commonwealth Pacific Airlines Ltd. to operate this service, which service has been operated since May, 1947.

The Government of Canada has not yet designated an air line to operate the Canada-Australia service.

9. No agreement has yet been reached between Canada and New Zealand regarding a trans-Pacific air service to New Zealand, but Air Transport Board Licence No. 225, dated May 31, 1947, to British Commonwealth Pacific Airlines specifies that British Commonwealth Pacific Airlines Ltd. may operate an international scheduled commercial air service for the transport of passengers, goods and mail as follows:

(a) between the terminal Vancouver, Province of British Columbia, Canada, and the terminal Sydney, Australia, serving the intermediate points New Caledonia (optional), Fiji Islands, Canton Island, Honolulu and San Francisco, U.S.A.

(b) between the terminal Vancouver, Province of British Columbia, Canada, and the terminal Whenupai (Auckland), New Zealand, serving the intermediate points Fiji Islands, Canton Island, Honolulu and San Francisco, U.S.A. subject to the proviso that:

"As and when an Agreement for Air Services is concluded between the Governments of Canada and New Zealand, this licence will be revised insofar as may be necessary to conform with the provisions of such Agreement."

10. The United Kingdom is pressing Canada to help it by providing a service to China.

11. The Minister is in receipt of a letter from Canadian Pacific Air Lines requesting that consideration be given to the designation of that company to operate 2 trans-Pacific services as follows:

(a) The service specified in the Canada-Australia Agreement dated June 11, 1946 (referred to in paragraph 7 above)

(b) A service between Vancouver and Hong Kong via Kodiak Island, Shemya, Tokyo, Japan and Shanghai, China.

12. Canadian Pacific Air Lines, Limited suggest that as the Canadian Pacific Railway Company, through the Canadian Pacific Steamships, have been in the Pacific transportation business since 1886 and have established agencies in connection with their steamship services throughout the Orient, Australia and New Zealand and as these agencies have been maintained in the hope and expectation that they sooner or later would be again in a position to operate steamships in the Pacific that Canadian Pacific Air Lines, Limited,

(a) would be in a better position to establish a transPacific air service at lower development cost than could be performed by any other interest;

(b) are willing to undertake this service as soon as the necessary formalities are completed and the necessary equipment fr the service has been acquired;

(c) the establishment of such an air service would permit Canadian Pacific Railway Company to recover a considerable part of their lost position in the Pacific.

13. Canadian Pacific Air Lines, Limited now have agents at twenty points in the Pacific (see Schedule A) † and they estimate that the cost of maintaining such agencies is $200,000. per annum.

14. Canadian Pacific Air Lines, Limited are not requesting any subsidy for such service.

15. Canadian Pacific Air Lines, Limited summarize their reasons for believing it would be in Canada's national interest to designate Canadian Pacific Air Lines, Limited to operate the two Pacific routes above named as follows:

(a) The Canadian Pacific have been providing transportation to the Orient since 1886 and are well established throughout the whole Pacific area.

(b) The Canadian Pacific have an extensive traffic organization already in existence throughout the Orient, as well as in the United States and Canada, which no air line could afford to duplicate.

(c) At the present time, American steamships and American air lines are making rapid inroads into the traffic formerly handled by Canadian carriers but neither the air lines nor the steamships in the United States can offer the complementary services which Canadian Pacific would be prepared to operate, combining steamship and air line transportation in the Pacific area.

(d) Because the Canadian Pacific traffic organization is already established throughout the Orient, we would be in a position to commence operations with a minimum of delay, which is felt to be essential if Canada's position in the field of Oriental trade as well as international air transport is to be developed and maintained.

(e) Canadian Pacific Air Lines has, on its flight staff, a number of crews who have had considerable over-ocean experience and presently employs the necessary trained personnel to operate the Pacific routes.

(f) In order that the expenditure of Canadian funds in foreign countries may be held to a minimum, it is essential that established facilities be used to the best advantage. In line with this policy, it is felt that the combined services which Canadian Pacific could offer would constitute an ideal transportation organization in that high speed cargo and passenger traffic would be handled by air, heavy cargo and leisurely tourist traffic by ship, and the same agency could arrange combination passenger trips, one way air and return ship.

(g) With the close co-operation which exists between Canadian Pacific Air Lines and Trans-Canada Air Lines, it would be possible to turn over to T.C.A. at Vancouver air passengers for New York and Europe. T.C.A. would thus benefit indirectly from the services of all Canadian Pacific agents throughout the Pacific who would book air traffic over Trans-Canada's lines to the Eastern United States and Europe.

(h) In the event of a third world war, Canada would have two air lines operating internationally, with personnel trained in international and overseas operations. This would be a distinct advantage in aiding and augmenting the armed forces for purposes of national defence.

[LIONEL CHEVRIER]