National Air Carrier Association v. CAB, 23012.

• Decision Date: 28 May 1970
• Docket Number: No. 23012.,23012.
• Citation: 436 F.2d 185,141 US App. DC 31
• Parties: NATIONAL AIR CARRIER ASSOCIATION, American Flyers Airline Corporation, Capitol International Airways, Inc., Overseas National Airways, Inc., Saturn Airways, Inc., Trans International Airline, Inc., World Airways, Inc., Petitioners, v. CIVIL AERONAUTICS BOARD, Respondent, Pan American World Airways, Inc., Trans World Airlines, Inc., Creative Tour Operators Association, Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

141 US App. DC 31, 436 F.2d 185 (1970)

NATIONAL AIR CARRIER ASSOCIATION, American Flyers Airline Corporation, Capitol International Airways, Inc., Overseas National Airways, Inc., Saturn Airways, Inc., Trans International Airline, Inc., World Airways, Inc., Petitioners, v. CIVIL AERONAUTICS BOARD, Respondent, Pan American World Airways, Inc., Trans World Airlines, Inc., Creative Tour Operators Association, Intervenors.

No. 23012.

United States Court of Appeals, District of Columbia Circuit.

Argued December 2, 1969.

Decided May 28, 1970.

Mr. Robert M. Lichtman, Washington, D. C., with whom Mr. Jerry D. Anker, Washington, D. C., was on the brief, for petitioners. Mr. Leonard N. Bebchick, Washington, D. C., also entered an appearance for petitioners.

Mr. Warren L. Sharfman, Associate Gen. Counsel, Litigation and Research, Civil Aeronautics Board, with whom Messrs. Joseph B. Goldman, Gen. Counsel, O. D. Ozment, Deputy Gen. Counsel, and Robert L. Toomey, Attorney, Civil Aeronautics Board, were on the brief, for respondent. Mr. Howard E. Shapiro, Attorney, Department of Justice, also entered an appearance for respondent.

Mr. Robert N. Duggan, Washington, D. C., entered an appearance for intervenor, Pan American World Airways, Inc.

Mr. Ulrich V. Hoffman entered an appearance for intervenor, Trans World Airlines, Inc.

Mr. Andrew L. Frey entered an appearance for intervenor, Creative Tour Operators Assn.

Before McGOWAN, TAMM and ROBB, Circuit Judges.

TAMM, Circuit Judge:

In this petition we are confronted with the question of whether the Civil Aeronautics Board erred in approving without a hearing certain transatlantic fare agreements adopted by the member air carriers of the International Air Transport Association. For the reasons hereinafter stated, we hold that the Commission's action must be affirmed in part and reversed in part.

I. THE FARE AGREEMENT

The International Air Transport Association (IATA) is a trade organization of domestic and foreign air carriers which are engaged in scheduled international air transportation. The member carriers periodically meet in "traffic conferences" to take joint action on matters of mutual concern, including types of fares offered to the public. These agreements, which take the form of resolutions, are subject to approval by the parent nations of the member carriers; in this country, the Civil Aeronautics Board has long asserted jurisdiction over IATA resolutions under section 412 of the Aviation Act, 49 U.S.C. § 1382 (1964). See generally IATA Traffic Conference Resolutions, 6 C.A.B. 639 (1946). The Board's approval of an IATA resolution confers antitrust immunity by virtue of section 414 of the Act, 49 U.S.C. § 1384 (1964); the rates contemplated by the agreements are then embodied in tariffs which are filed with the Board pursuant to 49 U.S.C. § 1373 (1964). On the other hand, if any member carrier's government disapproves an IATA agreement, or if the agreement otherwise expires, an "open rate" situation is created. When this happens, each carrier is free to set its own fares, subject, of course, to any limitations imposed by its government. Conflicts among nations as to appropriate fare levels must be resolved by diplomatic consultation; if this effort is unsuccessful, nations may exclude foreign carriers charging unacceptable fares. Thus, the danger that an open rate situation may disrupt harmonious international relations is obvious.

The resolutions presently in issue, which relate to fares offered between this country and Europe, are the product of a series of IATA traffic conferences held in Cannes, France and Dallas, Texas in 1968 and early 1969. In general, they were designed to be in effect for a two-year period terminating on March 31, 1971. The fare package itself is lengthy, complex, and esoteric, but for present purposes its salient features may be summarized as follows:

(1) Fare increases for individually-ticketed passengers were effected through elimination of the five per cent discount for passengers purchasing round-trip tickets.

(2) Contract Bulk Inclusive Tour Fares (CVIT\'s) — This set of fares provides for the sale of blocks of seats to tour operators, who will then retail them to the public as part of inclusive tours composed of ground accommodations as well as air transportation.

(3) Affinity Group Fares — These fares are available only to groups which are comprised of members of an organization existing primarily for purposes other than travel, and which satisfy other prescribed limitations. Fare levels vary with the size of the group, the season of the year, and the direction of travel.

(4) Incentive Group Fares — Like the CBIT\'s, the Incentive Group Fares are a promotional innovation. They are available to groups of a specified size which are composed of employees, dealers, or agents of a profit-making organization, and which are traveling under an established "incentive travel program" rewarding past work or encouraging future activity.

(5) Group Inclusive Tour Fares (GIT\'s) — These fares are available to groups of fifteen or more purchasing package tours from a tour operator; the tours must include a specified minimum expenditure for ground accommodations.

(6) California Proportional Fares — The IATA resolution also reduced the "proportional fares," or amounts added on to the basic transatlantic fare, for passengers originating their flights in California rather than New York; proportional fares from other points outside of New York were not significantly changed.

The agreements embodying these fares were duly filed with the Civil Aeronautics Board early in 1969.¹

II. PROCEDURAL HISTORY OF THE CONTROVERSY

The procedural steps underlying the present posture of this case constitute only a small portion of the continuing battle between the scheduled airlines which are members of IATA and the supplemental carriers. The supplementals, which include both foreign and domestic airlines, are engaged in providing charter transportation only. See 49 U. S.C. § 1301(33) (1964). In contrast, the IATA regular-route carriers offer both charter and regularly scheduled services. In the past few years, the percentage of all transatlantic passengers using charter rather than scheduled services has increased, and the market share of the supplemental carriers has increased also. (Brief for the Respondent at 7 n. 7.) The competition between the supplementals and the scheduled airlines for charter passengers is direct and intense.

On February 25, 1969, shortly after the IATA resolutions described above had been filed, the National Air Carrier Association (NACA) informed the Civil Aeronautics Board of its intention to oppose the agreement. (App. 10 n. 2.) NACA is a trade organization of supplemental carriers; the six other petitioners in the present action are members of this organization. On March 3, 1969, the Board issued an order establishing the schedule for receipt of documentary evidence, complaints, objections, and answers relating to the IATA resolutions. This schedule was expedited because of "the fact that the agreement contains controversial elements and is intended to become effective in a relatively short period of time." (App. 10-11.) NACA thereupon filed a petition for reconsideration of this procedural schedule, alleging in essence that the substantiality and complexity of the issues presented by the agreement demanded an evidentiary hearing, rather than an exchange of documents, as a basis for proper decision. (App. 12-19.) Later, NACA filed a motion to suspend the procedural schedule (App. 65-71) which was denied by the Board. (App. 82.)

On April 4, 1969, after various papers had been filed by the participating parties, the Board issued another order scheduling oral argument "in light of the considerable controversy surrounding the agreement" (App. 201), but continuing in its determination that an evidentiary hearing was unnecessary. Oral argument was held on April 16, and on April 30, 1969, the basic order presently under challenge was issued. In this April 30 order, the Board granted approval for the full term of the agreement to the Affinity Group, Incentive Group, and GIT fares. At the same time, the order granted approval through March 31, 1970 to the elimination of the round-trip discount, the CBIT's, and the California Proportional Fares,² and ordered an expedited investigation of the desirability of extending approval beyond that date. NACA sought a stay of this order pending judicial review, but the Board denied the motion. (App. 271-281.) Thereafter the intervenors in the present action and several other parties to the administrative proceedings moved for reconsideration of the April 30 order, seeking an extension of the limited-term approval of the CBIT fares. This motion was denied by the Board on July 16, 1969. (App. 290-293.) In the present action, the petitioners assert two major grounds for reversal: (1) that the Board erred in approving the three group fares without an evidentiary hearing, and (2) that the Board's findings were insufficient to support interim approval for those fare changes which were scheduled for further investigation. A third major question emerged clearly at oral argument: does the Civil Aeronautics Board have statutory power to grant the kind of interim approval, or "approval pendente lite," that it ordered in the present case?

Subsequent to the filing of the instant petition for review, a number of significant developments in the controversy transpired. On October 19, 1969 — approximately three months after the Board had denied the petition to reconsider the April 30 order — the underlying IATA conference resolutions expired as a result of the withdrawal of the Italian airline Alitalia from the agreement. This withdrawal was made possible by an IATA rule which permits any member carrier to terminate an agreement if any of the other carriers' governments places conditions on its approval...