Dear George,
As suggested yesterday, I am writing this letter quite informally to indicate the way our minds are running in relation to the compulsory stop at Shannon Airport. I want to make it quite clear that the views expressed in this letter are my own and do not necessarily represent the views of the Government. I feel, however, that it would be helpful if, at this stage, we could examine possible solutions 'without prejudice' to the respective attitudes of our Governments; if between us we can find a solution that we believe capable of acceptance, we can then formalise our discussions. If not, we will not, in any way, have committed our Governments and will have done no damage.

Our problem about Shannon is two-fold (a) financial and (b) political and social:

FINANCIAL PROBLEM. Since the advent of long distance commercial flying our State has spent very considerable sums in the development of air field facilities and of aeronautical development. In the last four years we have spent close on £5 millions on aeronautical development. The following is a summary of our total expenditure and losses on the two airports since 1938.

The foregoing figures do not take into account the losses which we have incurred in connection with our own airlines, which amount to a further sum of approximately £729,303.

In terms of a big and wealthy nation such as the United States this expenditure and loss may sound trivial. But for a small far from wealthy state with a population of less than three millions this expenditure is very considerable. This is all the more so because we, unlike the United States or wealthier countries, do not require the elaborate aeronautical facilities which we have provided, for our own airline. Neither our population nor our wealth could withstand the competition, in the field of international aviation, of the bigger and wealthier countries.

I know that in our present discussions we are only concerned with Shannon. I merely mentioned the total expenditure on civil aviation so as to give the overall picture. Undoubtedly some of the losses we sustained form part of pioneering risks which we undertook; some of these ventures were a failure incurring substantial financial losses which cannot now be helped. It is important for us, however, now to try and place Shannon on a self-supporting basis, as we cannot continue to sustain heavy financial losses on Shannon; inasmuch as Shannon is of no value to our own airline this loss is tantamount to a subsidy by us to the United States Air Carriers and other airlines to whom Shannon is a vital necessity.

The cost of Shannon for the year 1948-'49 is estimated to be £462,209 made up as follows:-

The receipts on the other hand only amount to £157,056 made up as follows:-

Thus even with the compulsory stop and a very high frequency of traffic Shannon lost, in the year 1948-'49, £305,153. The loss for the current year is expected to be higher. Any decrease in the number of landings will, of course, add to the loss. The running costs of Shannon cannot be reduced, on the contrary, with de-valuation and additional equipment which, I think, should be provided, these will increase.

POLITICAL AND SOCIAL PROBLEM. I probably need not dwell in any length on this aspect as the unfortunate press publicity which surrounded the recent negotiations was itself a good indication of the many difficulties involved, from the political and social point of view. The policy of this Government, as indeed also the policy of the last Government, is to disperse employment and industry throughout the country. Shannon has been a potential factor in providing employment over a wide area of country in the Counties of Limerick and Clare and the closing of Shannon or the reduction of its employment giving capacity will inevitably lead to unemployment in those areas. The type of employment provided by Shannon, directly or indirectly, is of a nature that will not permit of re-employment locally, hence it would lead to migration towards Dublin or to emigration from the country. This situation would naturally create serious political and social difficulties for the Government.

For the reasons set out above it is obvious that the Government must set its face against giving its approval to any proposal which is likely to have adverse effect on the financial position of Shannon or on the employment it provides, and must seek to avoid a position wherein it will, in effect, be subsidizing the airlines for whose benefit facilities are being provided at Shannon.

From the point of view of the airlines I can readily appreciate the annoyance at being placed in the position of either having to stop at Shannon or of having to circum-navigate our air-space. This undoubtedly must involve them in considerable irritation, loss of time, and financial loss.

Accordingly, we have a situation where we, as the operators of Shannon, lose money and are dissatisfied and where you and the United States Airlines also lose money and are dissatisfied. It seems, therefore, that our mutual aim should be to seek a solution that will minimize these losses on both sides and eliminate some, at least, of the resultant worries. It occurred to me that a possible solution might be found on somewhat the following lines:

1. In return for a waiver by us of the compulsory stop at Shannon the United States Air-carriers to pay a fee to be determined in respect of each air-craft flying the North Atlantic Route whether it landed at Shannon or not, or whether it over-flew our air-space or not, such fees to be applied towards the cost of the maintenance of Shannon and the various services which have to be maintained there.
2. In addition, some agreement to be reached with the United States Airlines whereby Shannon would be used by them as a dispersal centre for all trans-Atlantic air freight coming and going to Europe.

Shannon, together with the meteorological services, direction finding, and radio services it provides is a vital necessity to all North Atlantic air traffic. If Shannon closed down to-morrow the whole North Atlantic air traffic would be seriously impeded. It is recognised to be one of the best airports in the world and certainly the best on the North Atlantic Route. From the point of view of its location and facilities, whether planes come down at Shannon or not, they use its facilities when air-borne and require it as an operational landing ground for refuelling and other purposes. It does not therefore seem unreasonable that the airlines should contribute towards its up-keep whether they land or not.

At present air-craft who could reach their destination by over-flying have either to land at Shannon or to circumnavigate our air-space. Landings inevitably involve heavy financial expenditure, by way of fuel, operational time, and wear or tear. Likewise each air-craft which has to circumnavigate our air-space incurs heavy additional expenditure by way of increased flying time and distance and loss of pay-load. Thus the waiver of the compulsory stop at Shannon should represent a substantial financial saving to the airlines concerned. A portion of the saving thus involved could be used in the manner I have indicated to defray the charges of the essential services which we have to maintain exclusively for their benefit.

Shannon Airport is already recognised to be in a different position to the other airports on the North Atlantic Route inasmuch as all the countries whose lines operate on the North Atlantic have made agreements accepting the compulsory stop. It is the only airport where such conditions are admitted to be reasonable and necessary on this route. It forms part of the necessary navigational requirements of that area and in addition provides landing facilities when required for traffic, operational or emergency purposes. To a certain extent it is more important than the chain of weather-ships which are being maintained on the Atlantic inasmuch as it provides these landing facilities as well as the navigational ones. I mention these points to show that Shannon is in a completely exceptional position.

As regards the development of Shannon as a freight dispersal centre of all trans-Atlantic freight, it appears to me, without very much technical knowledge, that a proposition of this kind should be of mutual benefit to the United States Airlines and to ourselves. Shannon is the only free airport in the world, which means that freight can be trans-shipped or, if necessary, stored without any customs duty. For many years to come, I think that it will be difficult for air-carriers to obtain full loads of freight from one given city in the United States to another given city in Europe. It should, however, be possible to develop freight transport if the carriers would ferry their freight for Europe to Shannon and there re-distribute it, for carriage, to various points of destination in Europe. Inversely European freight for the United States could be brought to Shannon for dispersal. Such an arrangement could only be worked if the United States Air-carriers were prepared to come to joint agreement on the use of the free-port at Shannon as a dispersal centre. It might also be possible for our own Airline to co-operate in such a scheme for the dispersal of freight from Shannon to different points in Europe.

The future use of Shannon as a freight dispersal centre for Europe is a matter that would require technical examination by the interests involved. Possibly, the traffic may not warrant it and there may be many objections on both sides; however, it is worth examining carefully if the general idea is acceptable.

I find that I have written at much greater length than I intended to but I was anxious to set out our difficulties quite frankly so that we could seek a solution which would be of mutual advantage to both our countries. Perhaps you could take soundings as to the suggestions I have made so that we can decide whether it is worth pursuing these further.