Continental Air Lines, Inc. v. C. A. B.
| Citation | 522 F.2d 107,173 U.S.App.D.C. 1 |
| Decision Date | 14 October 1975 |
| Docket Number | Nos. 73-1714,73-1718,s. 73-1714 |
| Parties | CONTINENTAL AIR LINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, American Airlines, Inc., et al., Intervenors. CONTINENTAL AIR LINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, American Airlines, Inc., et al., Intervenors. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Thomas D. Finney, Jr., Washington, D.C., with whom Lee M. Hydeman and James T. Lloyd, Washington, D.C., were on the brief, for petitioner.
Alan R. Demby, Atty., C. A. B. with whom Richard Littell, Gen. Counsel, O. D. Ozment, Deputy Gen. Counsel, Glen M. Bendixsen, Associate Gen. Counsel and Robert L. Toomey, Atty., C. A. B., were on the brief, for respondent.
Carl D. Lawson, Atty., Dept. of Justice, with whom Bruce B. Wilson, Acting Asst. Atty. Gen., Robert B. Nicholson, Atty., Dept. of Justice, was on the brief, for intervenor United States.
Edmund E. Harvey, Washington, D.C. for intervenor Trans World Airlines, Inc.
Alfred V. J. Prather and J. William Doolittle, Washington, D.C., were on the brief for intervenor American Airlines, Inc.
Henry L. Hill, Chicago, Ill., was on the brief for intervenor United Air Lines, Inc., J. Stanley Stroud, Chicago, Ill., also entered an appearance for intervenor United Air Lines, Inc. in No. 73-1718. Frank P. Cihlar, Washington, D.C., also entered an appearance for intervenor United Air Lines, Inc., in No. 73-1714.
James W. Callison, Atlanta, Ga., was on the brief for intervenor, Delta Airlines, Inc. Robert Reed Gray, Washington, D.C., also entered an appearance for intervenor, Delta Airlines, Inc.
Before WRIGHT, TAMM and WILKEY, Circuit Judges.
In this consolidated appeal, petitioner Continental Air Lines, Inc. (hereinafter "Continental"), joined in several of its arguments by the Department of Justice as intervenor, challenges four administrative orders of the Civil Aeronautics Board (hereinafter "the Board") which established and implemented a Board policy concerning standards for commercial airplane seat configurations. Several airlines 1 have also intervened, basically urging us to uphold the Board's orders. However, for the reasons stated below, we must set aside the Board's orders and remand for further proceedings.
This case is an outgrowth of the Board's extensive Domestic Passenger Fare Investigation which was initiated in January, 1970. 2 Its purpose was "to set ratemaking standards with respect to the various elements underlying both fare level and fare structure . . . ." CAB Order 70-1-147 (Jan. 29, 1970), J.A. I. 40. On February 26, 1970, the Board divided the investigation into nine phases, Phase 6 of which was designated "Load Factor and Seating Configurations." 3
Hearings on Phase 6 were initially held before an Administrative Law Judge, in August 1970. On November 19, 1970, the Board divided Phase 6 into two subphases, and, at the request of American Airlines, Inc., (hereinafter "American") ordered the record on the seating configuration issues (designated Phase 6A) certified directly to the Board. CAB Order 70-11-91 (Nov. 19, 1970), J.A. I. 55.
At that point in the proceedings, the major seating configuration issue was the use of five-abreast seating in the coach sections of narrow-bodied jets. 4 Petitioner Continental, alone among the major carriers, had been offering such a service since 1964 with Board approval. However, the Board, noting a dilemma based on the "recent movement of some trunk carriers to five-abreast seating," 5 concluded that rapid execution of the Board's ratemaking functions necessitated certification of the Phase 6A record.
Most of the trunk lines supported the adoption of mandatory fare differentials for varying seating configurations. They argued that the Board has the power to adopt such standards as an adjunct to its statutory ratemaking authority and urged the Board to act to prevent a competitive "seat war" which would ultimately degrade the economics of coach operations. CAB Order 71-4-48 (Apr. 8, 1971), J.A. I. 76-77. Other carriers, most notably Continental, and the Department of Transportation opposed the adoption of mandatory fare differentials based upon seating accommodations. While endorsing the utilization of seating standards for Phase 7 fare level purposes, they argued that the Board lacked authority to establish fare differentials, citing the prohibition of section 401(e)(4) of the Federal Aviation Act of 1958, 49 U.S.C. §§ 1302-1542 (1970) (hereinafter "the Act") against certificate limitations on carrier accommodations. Id., J.A. I. 77-78.
On April 8, 1971, the Board announced a "tentative" order in the Phase 6A proceeding, which was founded on the premise that:
Air carriers, in providing scheduled passenger service for the public, are dealing with the sale of a product; this product is essentially space in an aircraft. In any particular aircraft there is a limited amount of space available for passenger services. Since this space is divided into units for sale to the public, the larger each unit, the fewer units a carrier will have available to sell, the fewer the number of passengers a carrier can accommodate and the fewer the number of units over which a carrier can recover its cost.
Id., J.A. I. 83. The Board concluded that sections 102(c), 1002(d), and 1002(e) of the Act enabled it to prescribe fare differentials for different seating configurations and rejected arguments that section 401(e)(4) proscribed such action, asserting that section 401(e)(4) "does not in any way restrict the Board's clear powers under section 1002 of the Act to regulate fares in relation to the nature of the services provided." Id., J.A. I. 85.
The Board reached the tentative conclusion that the standard for coach-class fares in narrow-bodied jets should be six seats abreast and imposed a 8.5 per cent surcharge on five-abreast seating. The Board felt that
failure to differentiate the 5-abreast and 6-abreast services for fare purposes will inevitably lead to the erosion of 6-abreast seating as competition forces more and more carriers to convert to the more commodious and attractive 5-abreast configuration.
The Board next turned to the question of wide-bodied jets--DC-10's and L-1011's designed for nine-abreast seating and B-747's designed for ten-abreast. While choosing not to impose a surcharge on aircraft configured at eight- and nine-abreast seating, which utilize a seat of the same width as the five- abreast seat in the narrow-bodied jets, the Board recognized a "dilemma" on this question, but argued that all the carriers had already adopted the more spacious configuration and that in light of the then-current low load factors on wide-bodied jets, there was little need for denser seating. Id., J.A. I. 108-09.
The Board also took note of another new development in coach configuration--the installation of complimentary coach lounges in wide-bodied jets, recently initiated by American Airlines. CAB Order 71-3-80 (Mar. 12, 1971), J.A. I. 61. While the Board expressed concern over the long-term economic implications of this practice, it deferred any "definite conclusions" regarding the need for configuration standards and mandatory fare differentials for lounge services at that time. CAB Order 71-4-48, supra, J.A. I. 109.
Board Member Murphy dissented, finding the standards "an unlawful, unwarranted exercise of our ratemaking power" and "ill-advised interference with the managerial discretion of all the airlines." Id., J.A. I. 117. He thought that the threat of excessive variations of seating density did not exist. Member Murphy pointed to the newly developed "Two-plus-Two" seating arrangement 6 as a more likely alternative to five-abreast seating and recognized that a more spacious configuration could only prove uneconomical when coupled with high load factors, which had not existed in the industry in recent years. He also believed that the imposition of seating standards would violate the prohibition of section 401(e)(4). Id., J.A. I. 130-31.
Exceptions to the tentative decision were filed on April 22, 1971, by nearly all parties involved, including, for the first time, the Department of Justice. On June 29, 1971, the Board ordered the record reopened to consider three industry developments which had occurred during the preceding year: (1) the impact of Two-plus-Two seating in narrow-bodied jets and its effect on the ability of six-abreast seating to compete with five-abreast seating; (2) the experience of the first full year of use of wide-bodied jets and its impact on configuration standards for those planes; and (3) new evidence on coach lounges in wide-bodied jets in light of their increased utilization by several carriers. CAB Order 71-6-147 (June 29, 1971), J.A. I. 61-63. The Board again found it necessary to proceed to an expedited decision, after hearings before an Administrative Law Judge but before a decision on his part.
During those hearings, evidence indicated that there had been no stampede by the airlines to install five-abreast seating and that Two-plus-Two seating could compete effectively with five-abreast configurations. Market surveys indicated that the public preferred wide-bodied jets to narrow-bodied aircraft at standard seating and that the public would not pay a 8.5 percent surcharge for more comfortable seating. As for coach lounges, American and United Air Lines (hereinafter "United"), two major lounge operators, argued against the adoption of a surcharge and noted that most lounge seats were for sale. See J.A. IV. 1052-A, 1056, 1072-A, 1099-1100. Trans World Airlines, Inc. (hereinafter "TWA"), joined by most non-lounge operators, argued in favor of a surcharge and foresaw another "domino-impact" in which the lounge would proliferate...
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