Braniff Master Executive Council of Air Line Pilots Ass'n Intern. v. C.A.B., 82-1482

• Decision Date: 10 January 1983
• Docket Number: No. 82-1482,82-1482
• Citation: 693 F.2d 220
• Parties: 111 L.R.R.M. (BNA) 3041, 224 U.S.App.D.C. 105 BRANIFF MASTER EXECUTIVE COUNCIL OF the AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent, Eastern Air Lines, Inc., Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 220

693 F.2d 220

111 L.R.R.M. (BNA) 3041, 224 U.S.App.D.C. 105

BRANIFF MASTER EXECUTIVE COUNCIL OF the AIR LINE PILOTS ASSOCIATION INTERNATIONAL, Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent Eastern Air Lines, Inc., Intervenor.

No. 82-1482.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 23, 1982.

Decided Nov. 19, 1982.

As modified on Denial of Rehearing Jan. 10, 1983.

Daniel M. Katz, Washington, D.C., for petitioner.

Mark W. Frisbie, Atty., C.A.B., with whom William F. Baxter, Asst. Atty. Gen., Ivars V. Mellups, Acting Gen. Counsel, Thomas L. Ray, Acting Associate Gen. Counsel, C.A.B., John J. Powers, III, and Robert J. Wiggers, Attys., Dept. of Justice, Washington, D.C., were on the brief, for respondent. Alan R. Demby, Atty., C.A.B., Washington, D.C., also entered an appearance for respondent.

Robert N. Duggan, Washington, D.C., for intervenor, Eastern Air Lines, Inc.

Before MacKINNON and GINSBURG, Circuit Judges, and BAZELON, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge:

Following a practice the Interstate Commerce Commission developed in railroad consolidation cases, ¹ the Civil Aeronautics Board (CAB or Board) historically has conditioned approval of airline route transfers and mergers upon carrier acceptance of terms mitigating hardship to employees. See United-Capital Merger Case, 33 C.A.B. 301, 323 (1961); North Atlantic Route Transfer Case, 14 C.A.B. 910, 916-19 (1951); United Western, Acquisition of Air Carrier Property, 11 C.A.B. 701, 707-08 (1950), aff'd sub nom. Western Air Lines v. CAB, 194 F.2d 211 (9th Cir. 1952). Such terms, known as labor protective provisions (LPPs), may include displacement compensation, integration of seniority lists, and mandatory arbitration of disputes. See Delta-Northeast Merger Case, 59 C.A.B. 608, 640-45 (1972); Allegheny-Mohawk Merger Case, 59 C.A.B. 22, 31-40 (1972); United-Capital Merger Case, 33 C.A.B. 307, 342-47 (1961). ² The Board's objective in This case concerns the Board's handling of LPPs in an urgent setting. In April 1982, when Braniff Airways, Inc. (Braniff) was still afloat but in dire financial straits, the CAB, meeting in an emergency session, granted interim approval for the transfer of most of Braniff's South American routes to Eastern Air Lines, Inc. (Eastern). The Board set a fifteen-month period as the duration of the temporary authority. It decided not to impose LPPs at that time, but said it would consider the issue in the hearing on long-term authorization and might then impose LPPs retroactively. Eastern Air Lines Application, Order 82-4-144 at 4 n. 4 (April 27, 1982), Joint Appendix (J.A.) 150.

                imposing LPPs has been to ward off labor strife that could impede or delay a route transfer or merger, or detrimentally affect a carrier's stability or efficiency.   Kent v. CAB, 204 F.2d 263, 265 (2d Cir.), cert. denied, 346 U.S. 826, 74 S.Ct. 46, 98 L.Ed. 351 (1953);  Western Air Lines v. CAB, 194 F.2d 211, 214 (9th Cir. 1952)
                

Braniff Master Executive Council (BMEC), an organization representing former Braniff pilots, ³ has petitioned this court to set aside the Board's interim order approving the Eastern/Braniff agreement for a fifteen-month period, to the extent that the order fails to include LPPs. In light of the unprecedented circumstances in which the Board acted, we hold that initial deferral of the LPP issue was reasonable. We further hold, however, that the Board impermissibly prolonged the deferral period and must now expedite resolution of this matter.

BACKGROUND

Beginning in March 1982, financially-distressed Braniff sought to sell its South American route network in an effort to gain needed funds that might enable it to survive as a domestic air carrier. ⁴ On March 17, 1982, Braniff agreed to lease its South American routes, ground equipment, and facilities to Pan American World Airways, Inc. (Pan Am) for four years at a price of $30 million. That same day, the two airlines submitted their agreement to the CAB for approval, pursuant to section 412 of the Federal Aviation Act, a section generally applicable to air carrier agreements. ⁵ On April 2, 1982, Braniff and Pan Just over a month after the submission, the CAB denied interim approval of the Pan Am/Braniff agreement. The Board determined that transfer of Braniff's routes to Pan Am "would reduce actual competition in certain South American markets and would essentially leave Pan Am as the sole U.S.-flag carrier in South America, thus reversing the United States' policy for 30 years of assuring that at least two U.S. carriers maintain a substantial presence in South America." Braniff-Pan American Route Transfer Case, Order 82-4-113 at 4 (April 20, 1982), J.A. 264. The Board noted it had considered the agreement under section 408 as well as 412 of the Federal Aviation Act; section 408 applies to mergers, consolidations or purchases of substantial portions of a carrier. ⁶ The Board further announced it was prepared to consider expeditiously alternative agreements for the disposition of Braniff's South American network. Id. at 4-5, J.A. 264-65.

                Am asked the CAB not to condition approval of the agreement on the inclusion of LPPs;  they represented that "if Braniff had to bear the burden of payment, the benefits of the Agreement [to Braniff] would evaporate," and the arrangement negotiated would cease to make "economic sense for Pan Am if [that carrier] were saddled with LPPs."    J.A. 214.  Pan Am did agree, however, to take on all of Braniff's South American-based ground personnel
                

The CAB's rejection of the Pan Am/Braniff submission set off a flurry of activity. Braniff faced a forecasted negative cash situation in South America as early as April 27, 1982. Cessation of service on Braniff's South American routes was an attendant prospect. The threat of a break in U.S.-flag service to certain South American countries prompted President Reagan, on April 23, 1982, to write to CAB Chairman McKinnon, urging that the Board "immediately take all necessary steps ... to ensure that U.S. carrier service continues without interruption on all Central and South American routes served by Braniff." J.A. 275. Meanwhile, Braniff sought to attract another carrier to an arrangement that would assure unbroken operation of the South American network.

On April 26, 1982, one day before Braniff had threatened to stop its South American flights, Braniff and Eastern submitted an agreement to the CAB patterned on the Believing it confronted an emergency, the CAB convened to consider the Eastern/Braniff submission on the night of April 26 in a closed meeting. The meeting yielded interim approval of the agreement for a fifteen-month period. The next day, the Board issued an order granting the interim approval, citing Eastern's ability to take over the network without lessening competition. Eastern Air Lines Application, Order 82-4-144 at 3 (April 27, 1982), J.A. 149. The Board announced it was acting under section 412 of the Federal Aviation Act, but the similarity between the Pan Am/Braniff and Eastern/Braniff submissions suggests the Board's awareness that section 408 was applicable to the transaction. At oral argument, counsel for the CAB stated that the Board proceeded under section 408 as well as section 412. ⁹ The section 408 involvement is significant because Congress has instructed the Board to act on transactions under section 412 within twelve months, those under 408, within six months. 49 U.S.C. Sec. 1490 (set out infra note 24).

                Pan Am/Braniff submission.  Under this agreement, Braniff would lease its South American routes, ground equipment, and facilities to Eastern for six years at a price of $30 million.  Upon the CAB's interim approval of the agreement, Eastern would immediately pay $11 million;  a portion of this sum would be used to keep Braniff operating in South America until June 1, 1982, when Eastern would take over. 7   Eastern, like Pan Am in its earlier route-acquisition bid, rejected LPPs for Braniff's U.S.-based personnel, including pilots, but it did agree to hire all of Braniff's South American-based personnel, including flight attendants. 8
                

The Board acknowledged the fifteen-month duration of the interim authorization was "longer than is usually provided for pendente lite exemptions." Order 82-4-144 at 4, J.A. 150. The CAB justified this unusual authorization as "essential to avoid an interruption of service to South America, to promote the United States' foreign aviation policy objectives in this region, and to preserve the Board's decisional flexibility in proceedings on long-term replacement authority." Id. Triggering the instant controversy, the Board decided not to impose LPPs at the outset, but to take up this issue later as part of a full hearing on permanent approval of the Eastern/Braniff agreement, with retroactive imposition of LPPs an eventual possibility. Order 82-4-144 at 4 n. 4, J.A. 150.

Three unions representing Braniff workers, including the Air Line Pilots Association, parent organization of BMEC, petitioned for reconsideration of the Board's April 27 order to the extent that it deferred the LPP issue. ¹⁰ In a September 22, 1982,

order outlining procedures for determining whether the Eastern/Braniff agreement should achieve permanent approval, ¹¹ the Board recognized, explicitly, that sections 408 and 412 of the Federal Aviation Act were both applicable. However, the CAB stated its time schedule would accord with the one-year limitation applicable to section 412 proceedings, rather than the six-month limitation governing section 408 transactions. See Braniff South American Route Transfer Case, Order 82-9-81 at 14 n. 22 (September 22, 1982). The Board also affirmed in the September 22 order its initial decision to defer consideration of LPPs. Id. at 15-17. This postponement, first announced in the Board's April 27 order and later affirmed in...