Ottawa, January 16, 1950

BACKGROUND OF DISCUSSION IN CABINET

Following the signature of the Bilateral Air Agreement last June, a number of reports were submitted to Cabinet from time to time concerning the implementation of this Agreement. However, at a meeting of the Cabinet on November 18th, the first reference was made to the possibility of the Air Transport Board taking direct action against Colonial Air Lines. The Prime Minister, Mr. Howe and Mr. Claxton were present at this meeting when Mr. Pearson reported that the United States District Court had voted two to one against the Colonial test case, but that the latter proposed to appeal this decision to the Supreme Court. He suggested that two courses of action were possible: One would involve suspension of the licences granted at Gander, and the other would be to take direct action against Colonial Airlines with respect to their licence granted by the Air Transport Board to operate between Montreal and New York.

2. On November 23rd, with the Prime Minister and Mr. Claxton present, but with Mr. Pearson absent, Mr. Howe as Acting Minister of Transport, reported that the Air Transport Board had asked for direction concerning the advisability of issuing a show-cause order to Colonial Airlines. The Cabinet after consideration decided that there would be no objection to the issuance of a show-cause order by the Air Transport Board should the Board feel it desirable. Accordingly, on November 30th, following the decision in the United States to continue the injunction which prevented the Civil Aeronautics Board from licensing T.C.A., Mr. Howe authorized the Air Transport Board to issue the show-cause order.

3.. Following the issuance of this show-cause order, and at the request of the United States Government, discussions were held in Ottawa between representatives of the two governments.

4. At a meeting of the Cabinet on December 21st, at which the Prime Minister, Mr. Howe and Mr. Claxton were present, Mr. Pearson reported on the preliminary results of these discussions. He suggested one solution might be for the Air Transport Board to withhold suspension in return for certain concessions which might be offered by the United States. The Cabinet agreed that the policy in this respect should be decided by the Secretary of State in consultation with the Minister of Transport.

5. Discussions were reconvened with the United. States representatives on January 10th in Ottawa. Prior to this on January 5th, Cabinet discussed this again. The Prime Minister, Mr. Howe and Mr. Claxton were all present. When Mr. Chevrier reported further on the results of these civil aviation discussions with the United States representatives, he pointed out at that stage it was hoped that the United States Supreme Court might be able to lift the injunction against the Civil Aeronautics Board. This was the first meeting at which Mr. Chevrier had been present during the past month and a half when this question was discussed in Cabinet. Cabinet noted Mr. Chevrier's report but took no action.

O.G. STONES