American Airlines, Inc. v. Civil Aeronautics Board

• Decision Date: 02 March 1966
• Docket Number: 18840.,No. 18833,18834,18833
• Parties: AMERICAN AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, The Slick Corporation, Air Freight Forwarders Association, the Flying Tiger Line, Inc., Intervenors. TRANS WORLD AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, The Slick Corporation, Air Freight Forwarders Association, the Flying Tiger Line, Inc., Intervenors. UNITED AIR LINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, The Slick Corporation, Air Freight Forwarders Association, the Flying Tiger Line, Inc., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

359 F.2d 624 (1966)

AMERICAN AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, The Slick Corporation, Air Freight Forwarders Association, the Flying Tiger Line, Inc., Intervenors.

TRANS WORLD AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, The Slick Corporation, Air Freight Forwarders Association, the Flying Tiger Line, Inc., Intervenors.

UNITED AIR LINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, The Slick Corporation, Air Freight Forwarders Association, the Flying Tiger Line, Inc., Intervenors.

Nos. 18833, 18834, 18840.

United States Court of Appeals District of Columbia Circuit.

Argued June 16, 1965.

Decided March 2, 1966.

Mr. Alfred V. J. Prather, Washington, D. C., for petitioner in No. 18833. Mr. Gerry Levenberg, Washington, D. C., also entered an appearance.

Mr. Warren E. Baker, Washington, D. C., with whom Mr. Joseph M. Paul, Jr., Washington, D. C., was on the brief, for petitioner in No. 18834.

Mr. O. D. Ozment, Associate Gen. Counsel, Litigation and Legislation, C. A. B., with whom Asst. Atty. Gen. William H. Orrick, Jr., Messrs. John H. Wanner, Gen. Counsel, Joseph B. Goldman, Deputy Gen. Counsel. C. A. B., and Lionel Kestenbaum, Atty., Dept. of Justice, were on the brief, for respondent.

Mr. Richard P. Taylor, Washington, D. C., with whom Mr. William E. Miller, Washington, D. C., was on the brief, for intervenor Slick Corp.

Messrs. Robert L. Stern, Chicago, Ill., and J. Francis Reilly, Washington, D. C., were on the brief for petitioner in No. 18840.

Mr. Louis P. Haffer, Washington, D. C., was on the brief for intervenor Air Freight Forwarders Ass'n.

Messrs. B. Howell Hill and Frank H. Strickler, Washington, D. C., were on the brief for Braniff Airways as amicus curiae.

Messrs. R. S. Maurer and James W. Callison, Atlanta, Ga., were on the brief for Delta Airlines, Inc., as amicus curiae. Mr. Robert Reed Gray, Washington, D. C., also entered an appearance.

Messrs. Herman F. Scheurer, Jr., and C. Edward Leasure, Washington, D. C., were on the brief for Continental Airlines, Inc., as amicus curiae.

Mr. Lipman Redman, Washington, D. C., was on the brief for Airlift International, Inc., as amicus curiae.

Mr. Edwin Jason Dryer, Washington, D. C., entered an appearance for intervenor, Flying Tiger Line, Inc.

Before BAZELON, Chief Judge, FAHY, WASHINGTON,^* DANAHER, BURGER, WRIGHT, McGOWAN, TAMM and LEVENTHAL, Circuit Judges, sitting en banc.

LEVENTHAL, Circuit Judge:

On August 7, 1964, the Civil Aeronautics Board,¹ two members dissenting, issued a "policy statement" regulation (PS-24), providing that only all-cargo carriers may provide "blocked space service" — essentially the sale of space on flights at wholesale rates, when "blocked" or reserved by the user on an agreement to use a specified amount of space.² Concomitantly, the Board vacated its suspension of a tariff proposing such blocked space service filed by Slick Airways, one of the all-cargo carriers.³ Defensive tariffs, similar to but not identical with Slick's were filed by American Airlines, Trans-World Airlines and United Airlines,⁴ petitioners here, who are combination carriers, i. e. carriers authorized to carry persons as well as property and mail.⁵ These tariffs were summarily rejected in Order No. E-21170, August 11, 1964, brought before this court on petitions for review.

The CAB's regulation was the culmination of a rule making proceeding (Docket 14148), held pursuant to notice of January 23, 1964, and supplemental notice of June 22, 1964. All interested parties had opportunity, of which petitioners availed themselves, to present their positions to the Board through oral arguments as well as written data, views, and rebuttals. The procedure followed by the Board admittedly complies fully with the requirements for rule making established in section 4 of the Administrative Procedure Act, 5 U.S.C. § 1003. The question before us is whether this regulation effected a modification of petitioners' existing certificates which, under § 401(g) of the Federal Aviation Act, 49 U.S.C. § 1371(g), may be accomplished only after a full adjudicatory hearing. We hold that the regulation was validly issued.

The Board's policy statements in Regulation PS-24, essentially legislative findings and conclusions in support of its decision,⁶ may be summarized as follows: There is a distinction between combination carriers and all-cargo carriers inherent in their certificates and operating responsibilities thereunder. The reservation of blocked space to all-cargo carriers will further their role as specialists for large volume air freight service in all-cargo aircraft. This can be expected to be followed by a shift of small volume shipments to the combination carriers, whose cargo operations supplement their passenger services and who are better suited for meeting the needs of this category of traffic, at less cost. The blocked space traffic, consisting of traffic produced by frequent, regular and high volume shippers, has particular need for a specialized type of service marked, among other things, by low rates, appropriately convenient schedules and assurance that space will be available when needed. A large market of traffic now moved on surface carriers will become available if air carriers achieve a breakthrough in properly servicing such traffic — a breakthrough dependent on development of marketing and performance techniques adapted to serving the peculiar needs of these shippers, and dependent on attraction of high volume of traffic through rate reduction, in turn made possible by improved planning and efficiency.

The Board considered that its statutory responsibility to promote air transportation required it to pursue earliest possible achievement of the breakthrough, and that this depended on assigning the exclusive role of perfecting blocked space service to the specialized all-cargo carriers.

Of particular interest and significance were the following findings and conclusions:

However, the needed improvement in equipment utilization and load factors cannot be obtained if the traffic from blocked space arrangements is spread too thinly among carriers. Thus, if the blocked space concept is to be given a true test, we must make sure that excessive blocked space capacity is not offered. For this reason in particular, our policy contemplates that only the all-cargo carriers will be permitted to offer blocked space service at this time.

Assigning the all-cargo carriers the exclusive role of performing blocked-space service will, we believe, provide them with a needed source of financial strengthening. We recognize, of course, that some traffic now moving on the cargo services of the combination carriers may be diverted to the blocked space services of the all-cargo carriers, but we do not believe that such diversion would be significant. Moreover, these carriers can be expected to acquire an increasing share of small package shipments. Some traffic now moving on the all-cargo carriers at regular rates will be diverted to their lower blocked space rates. However, there is no reason to believe that attractive blocked space rates and the benefits of specialization will not ultimately bring about an increase in traffic more than offsetting any such diversion.

1. Petitioners say that the Board has no power by summary action, without hearing, to prevent a carrier or group of carriers from competing fully with other carriers. Their reliance on a "fundamental principle" that carriers should be able to compete with each other, though couched here in procedural terms, has overtones of an argument on the merits. At the outset we reject the sweeping argument, if that argument is being made or implied, that such agency action would be invalid even if taken after the most elaborate of procedures. That competitors in a regulated industry should be treated similarly in rate rulings in order to preserve competition is not denied. But that is not to say that reasonable distinctions between groups of competitors are impermissible, and that different services and rates may not then be authorized for the different groups or classes. Congress made a broad delegation of power to the Board, in § 416(a) of the Act (49 U.S.C. § 1386(a)), to "establish such just and reasonable classifications or groups of air carriers * * * as the nature of the services performed by such air carriers shall require."

Petitioners have made no presentation that the Board's distinction between combination carriers and all-cargo carriers is meaningless or without rational foundation. Congress has given the Board not only a wide regulatory authority, but a specific promotional function to initiate proposals for the purpose of expanding efficient civil aviation transport;⁷ the power to classify carriers and service; and the power to issue implementing rules and regulations.⁸ This combination of powers, together with the underlying findings and conclusions, suffices to sustain the regulation on the merits, assuming no procedural bar. See generally United States v. Storer Broadcasting Co., 351 U.S. 192, 76 S.Ct. 763, 100 L.Ed. 1081 (1956); National Broadcasting Co. v. United States, 319 U.S. 190, 63 S.Ct. 997, 87 L.Ed. 1344 (1943).

2. Petitioners claim that § 401(g) of the Federal Aviation Act, 49 U.S.C. § 1371(g), assures them an "adjudicatory hearing" because the Board action amounts to a modification or suspension of existing rights under their certificates of public convenience and necessity.

In essence, petitioners' argument is the same as the thesis this court accepted ten years ago in the Storer case,⁹ only to be reversed by the Supreme Court.¹⁰ This court held the multiple ownership rule of the Federal Communications Commission invalid because of the inadequacy of the rule making procedure followed in its adoption, an adjudicatory hearing being expressly guaranteed by statute to applicants for licenses. The Supreme...