Kodiak Airways, Inc. v. CAB

• Decision Date: 19 July 1971
• Docket Number: No. 24483.,24483.
• Citation: 447 F.2d 341
• Parties: KODIAK AIRWAYS, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent. Wien Consolidated Airlines, Inc., Western Air Lines, Inc., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

447 F.2d 341 (1971)

KODIAK AIRWAYS, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent Wien Consolidated Airlines, Inc., Western Air Lines, Inc., Intervenors.

No. 24483.

United States Court of Appeals, District of Columbia Circuit.

Argued January 20, 1971.

Decided July 19, 1971.

Mr. Jerrold Scoutt, Jr., Washington, D. C., for petitioner. Mr. Warren C. Nighswander, Washington, D. C., also entered an appearance for petitioner.

Mr. O. D. Ozment, Deputy Gen. Counsel, Civil Aeronautics Board, with whom Messrs. R. Tenney Johnson, Gen. Counsel, Warren L. Sharfman, Associate Gen. Counsel, Litigation and Research, and Ivars V. Mellups, Atty., Civil Aeronautics Board, were on the brief, for respondent. Mr. Howard E. Shapiro, Atty., Department of Justice, also entered an appearance for respondent.

Mr. Theodore I. Seamon, Washington, D. C., with whom Mr. Gerald P. O'Grady, Los Angeles, Cal., was on the brief, for intervenors. Mr. Joseph D. Sullivan, Washington, D. C., also entered an appearance for intervenor Wien Consolidated Airlines, Inc. Mr. Ernest T. Kaufmann, Washington, D. C., also entered an appearance for intervenor Western Air Lines, Inc.

Before TAMM, MacKINNON and WILKEY, Circuit Judges.

TAMM, Circuit Judge:

In its Order 70-7-113, dated July 23, 1970, the Civil Aeronautics Board (hereinafter "the Board") allowed Western Air Lines, Inc. (hereinafter "Western") to temporarily suspend service on a certain intra-Alaskan air route. In the same order the Board granted Wien Consolidated Airways, Inc. (hereinafter "Wien") a temporary exemption from the certification requirements of section 401 of the Federal Aviation Act of 1958, 49 U.S.C. § 1371 (1964). This exemption authorized Wien to serve the route pending completion of proceedings being held to determine which carrier should be given certification authority to provide this service. The Board also approved an agreement between Western and Wien which provided that Western would assign and sublease certain terminal facilities to Wien and that Wien would employ Western personnel working at these facilities.

Kodiak Airways, Inc. (hereinafter "Kodiak"), one of the applicants for certification authority, asks us to set aside the Board's three interrelated actions on the ground that in granting Wien exemption authority the Board did not comply with the statute governing such grants, section 416(b) of the Aviation Act, 49 U.S.C. § 1386(b) (1964). Before reaching the merits of this claim, however, we must first decide whether Kodiak has sufficient interest in Order 70-7-113 to challenge it.

I. History of the Case

The route segment in question here extends from Anchorage to Kodiak and includes intermediate stops at Kenai and Homer. Prior to the grant of exemption authority to Wien this route was served exclusively by Western, which was certificated for the route. Western was also the only carrier operating scheduled nonstop flights between Kodiak and Seattle.

The proceedings in this case began in 1968 when Kodiak, Northern Consolidated Airlines, Inc., later to become Wien Consolidated Airways, Inc. by virtue of its merger with Wien Alaska Airline, Inc., and Alaska Airlines, Inc. (hereinafter "Alaska") filed applications for exemption authority to provide additional service in several of the markets of the Anchorage-Kodiak route segment. In Order 69-3-68, issued March 19, 1969, the Board denied these applications for exemption authority. In the same order the Board instituted the Alaska Service Investigation, which was designed:

to examine the entire Alaskan air route structure to determine what changes are necessary to provide for better service to the public, improved scheduling and operational flexibility for the carriers, elimination of uneconomic and wasteful competition, and reduction of federal subsidy payments.

(Id. at 1.) Included in the investigation were the questions of authorizing new or additional service in the Kodiak, Homer, Kenai and Anchorage markets and of terminating or modifying Western's authority to serve these markets.

On February 2, 1970, Western and Wien filed a joint application requesting temporary suspension of Western on the route in question and a temporary exemption for Wien to provide replacement service pending final resolution of the Alaska Service Investigation.¹ The joint application also requested approval of an agreement whereby Western contracted to sell Wien its ground property and equipment and assign or sublease its interests in terminal facilities located at the Kenai, Homer and Kodiak stations,² with the proviso that this property was to be re-transferred to Western if Wien was not granted certification authority to serve the route. Western's employees at the stations involved were to be offered employment by Wien and integrated into its seniority structure and employment plan. Contemporaneous with the consummation of this agreement and the filing of the joint application, Western discontinued its nonstop flights between Seattle and Kodiak.

Kodiak, Alaska, and Western Alaska Airlines, Inc. (hereinafter "Western Alaska") filed answers in opposition to the joint application and applications of their own for exemption authority to provide service between Kodiak and Anchorage.³ They also applied for certification authority over the Anchorage-Kenai-Homer-Kodiak route, and the Board consolidated these applications in the Alaska Service Investigation.

In Order 70-3-110, issued March 23, 1970, the Board denied all four applications for exemption authority, doing so because they "raised difficult and complex questions including issues of carrier selection and mutual exclusivity" which "would be more appropriately decided after the development of a complete evidentiary record in the pending Alaska Service Investigation." (J.A. 112.) The Board also rejected a request for severance of the issues regarding service on the Anchorage-Kenai-Homer-Kodiak route, concluding that "no useful purpose would be served by instituting a separate investigation at this time." (J.A. 112, n. 3.)

Petitions for reconsideration of the Board's order were filed by Alaska and by Western and Wien jointly. Kodiak and Western Alaska filed a joint answer opposing these petitions, and Western filed an answer in opposition to Alaska's petition in which it stated that it would resume Kodiak-Seattle nonstop service. It did so, on a seasonal basis, on June 1, 1970.

In its order on reconsideration, Order 70-7-113, dated July 23, 1970, the Board 70-7-113, dated July 23, 1970, the Board approved Western's application for temporary suspension of services on the Anchorage-Kenai-Homer-Kodiak route segment,⁴ granted Wien an exemption to provide service on this route until 90 days after final decision in the Alaska Service Investigation, and approved the agreement between the two dealing with the transfer of Wien's ground facilities and the disposition of its employees. The Board changed its mind with regard to the Western/Wien application "in the light of changed circumstances and various matters raised in the pleadings." (J.A. 161.) The only "changed circumstance" referred to specifically was Western's resumption of nonstop service between Seattle and Kodiak on a seasonal basis. The Board felt that "Alaska's exemption application was predicated on Western's discontinuance of Kodiak-Seattle non-stop service" and that it would be "inappropriate" to grant Alaska's application in view of the fact that this condition no longer existed. (J.A. 162.) Of the three remaining applicants, the Board felt Wien was clearly the best qualified. The Board emphasized, however, that its selection of Wien for exemption authority would not affect its decision in the Alaska Service Investigation as to which carrier should be granted certification authority. (J.A. 162-63.)

Kodiak filed a motion for stay of the effectiveness of Order 70-7-113 with the Board and, before the Board rendered its decision, filed a similar motion with this court. Both motions were eventually denied. We did, however, grant Kodiak's motion for expedited consideration of its appeal.

Proceedings in the Alaska Service Investigation have continued while the parties contested the grant of exemption authority to Wien, but they are still not completed. Hearings ended on July 22, 1970, and the record was officially closed on August 5, 1970. The Hearing Examiner issued an initial decision awarding the route to Wien on March 26, 1971, but appeals from this decision are expected to consume several more months.

II. Kodiak's Interest in the Board's Order 70-7-113

Section 1006 of the Federal Aviation Act of 1958, 49 U.S.C. § 1486 (1964), reads in pertinent part:

(a) Any order, affirmative or negative, issued by the Board or Administrator under the Act * * * shall be subject to review by the courts of appeals of the United States or the United States Court of Appeals for the District of Columbia upon petition * * * by any person disclosing a substantial interest in such order.

Thus, to obtain review of the Board's Order 70-7-113, Kodiak must establish that it has a substantial interest in this order.

It is important at the outset to note the nature of the interest which Kodiak claims in these proceedings. Although Kodiak was itself an applicant for exemption authority, it does not rely on its competitive position in asserting that it has a "substantial interest" in the Board's order. In fact, it now contends that the statutory prerequisites for granting exemption authority were not and could not be met in these circumstances and that the grant of exemption authority to any carrier was therefore improper. Kodiak's claim of interest in these proceedings rests solely upon its argument that the allegedly improper grant of exemption authority will prevent it from receiving fair comparative consideration of its application for certification authority. Kodiak thus claims the requisite standing not as a disappointed...