Dear Sir:

CANADA -- AUSTRALIA AIR AGREEMENT

As you are aware, it was arranged that discussions would take place between representatives of Canada and Australia following the ICAO meetings in Brighton. The discussions were held in London between July 6th and 14th, the Canadian representative being Mr. A.S. Macdonald, Executive Director and Legal Adviser of the Air Transport Board, and the principal Australian representative being Mr. A.B. McFarlane, Director of Air Transport and External Relations of the Australian Department of Civil Aviation. The subject was fully explored but no real progress towards a satisfactory solution was achieved.

The Australians continue to hold the restrictive views previously expressed with regard to the capacity and frequency provisions in the present bilateral agreement with Canada, particularly that a designated airline of either country shall be entitled only to such capacity as will provide for the actual traffic between the terminal points in the two countries and that prior governmental approval is necessary for changes in frequencies. They do not recognize traffic originating or terminating behind the Canadian terminal as legitimate Canadian traffic and put particular emphasis on UK traffic which they claim for their own in this connection. They lay great stress on the necessity to maintain by their own airlines, direct channels of communication between the UK and the USA.

In essence, after reiterating the arguments previously advanced in correspondence, the Canadian view advanced was that the bilateral agreement between Australia and the USA permits operation under the Bermuda formula as to capacity and that we expect to receive from the Australians both in letter and in practice as good treatment as does the United States, particularly when both the United States and ourselves operate between the North American Continent and Australia under approximately similar conditions.

It was recognized in the discussions in London that the present agreement between Canada and Australia is not satisfactory and should be redrafted. It should be remembered that the present form was adopted before either the Bermuda or Geneva formulas on capacity were developed. There are several articles which are difficult to interpret and others which are not now satisfactory to either country.

The present position is that the Australians expect us to send a delegation to Australia as soon as possible to deal with the whole matter. They feel that there is no value in further correspondence and that the only course now is to sit down and attempt to agree on a workable arrangement. Mr. Macdonald feels they do not want to see a complete break in aviation relations with Canada and will make some attempt to reconcile our differences. At the same time, negotiations will not be easy and formal intergovernmental representations on a high level through External Affairs at least before and possibly during negotiations will undoubtedly be necessary to produce a co-operative attitude at the working level in the Australian Ministry of Civil Aviation.

During the discussions the Australians were told that in view of the then approaching Canadian election, it would be extremely difficult to give a firm commitment as to the date at which it would be possible for a Canadian delegation to go to Australia but, in any event, it would not be before November. The Australians expressed their understanding of our position but stated that an early meeting was, in their opinion, desirable and that the next move was up to Canada.

The Australians were assured that there was no intention on our part to delay unduly the conclusion of the discussions. It now appears that having in mind the other commitments of the Board, it may not be possible to send anyone to Australia much before early January 1954.

You will remember that Canadian Pacific Air Lines is operating its increased frequency under an authorization, the period of which expires in September 1953. In response to the Canadian request made during discussions in London the Australians indicated that there would be no difficulty about a further extension until the conclusion of the next discussions but suggested that we make a formal request for such an extension.

I suggest that we should now advise the Australian government that we would like to agree with them on a suitable time and place for discussions and at the same time submit a formal request for an extension of the period during which CPAL may continue their frequency of one flight per week until these discussions have taken place. In this connection, the Australians should be informed that it would be exceedingly difficult for us to send adequate representation to Canberra for discussions much before the end of the year but that this might be possible during January if that time were satisfactory to the Australian officials.

Sincerely yours,

J.R. BALDWIN