National Capital Airlines, Inc. v. CAB

• Decision Date: 12 September 1969
• Docket Number: No. 22634.,22634.
• Citation: 419 F.2d 668
• Parties: NATIONAL CAPITAL AIRLINES, INC., Petitioner v. CIVIL AERONAUTICS BOARD, Respondent, Washington Airways, Inc., Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

419 F.2d 668 (1969)

NATIONAL CAPITAL AIRLINES, INC., Petitioner v. CIVIL AERONAUTICS BOARD, Respondent, Washington Airways, Inc., Intervenor.

No. 22634.

United States Court of Appeals District of Columbia Circuit.

Argued June 18, 1969.

Decided September 12, 1969.

Petition for Rehearing Denied October 28, 1969.

COPYRIGHT MATERIAL OMITTED

Mr. Julian H. Singman, Washington, D. C., with whom Messrs. B. Michael Rauh and Orlin L. Livdahl, Jr., Washington, D. C., were on the brief, for petitioner.

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, Robert L. Toomey, Atty., Civil Aeronautics Board, and Howard E. Shapiro, Atty., Department of Justice, were on the brief, for respondent.

Messrs. Howard C. Westwood, William H. Allen, and Richard D. Copaken, Washington, D. C., were on the brief, for intervenor.

Before McGOWAN, TAMM and ROBB, Circuit Judges.

ROBB, Circuit Judge:

This is a petition¹ by National Capital Airlines (National Capital) to review an order issued by the Civil Aeronautics Board in a proceeding known as the Washington-Baltimore Helicopter Service Investigation. In that proceeding National Capital was an unsuccessful applicant for a certificate of public convenience and necessity,² authorizing scheduled helicopter service in the Washington-Baltimore area. The challenged order awarded a certificate for that service to the intervenors, Washington Airways, Inc. (Washington Airways).³ By the same order the Board approved⁴ the ownership and control of Washington Airways by its organizers, nine of the fixed-wing carriers authorized to serve the Washington-Baltimore area.

The petitioner attacks the Board's order on several grounds. First, it contends that the Board abused its discretion by permitting Washington Airways to participate in the proceeding, and that the Board committed other procedural errors to the prejudice of the petitioners. Second, petitioner contends that the Board's approval of ownership and control of Washington Airways by its sponsors is unlawful under the Federal Aviation Act and the anti-trust laws because this joint venture of nine carriers will result in the creation of a monopoly and will restrain competition. Finally, the petitioner argues that the Board's conclusion that Washington Airways is better qualified than National Capital to perform the service certificated is not supported either by substantial evidence or by adequate subsidiary findings. We find the petitioner's arguments unpersuasive and we affirm.

National Capital is a corporation organized under the sponsorship of San Francisco & Oakland Helicopter Airways (SFO) for the purpose of operating a helicopter service in the Washington-Baltimore area. Forty-nine percent of the issued common stock of National Capital is held by SFO and its president. The remaining shares have been purchased by persons with business or other interests in the Washington-Baltimore area.

Washington Airways is likewise a corporation organized solely to apply for a certificate in the Washington-Baltimore Helicopter Service Investigation and operate the service if it received the authority. Although it is owned by nine of the airlines that serve Washington and Baltimore, other airlines serving the two cities are free to become owners.

Ninety-eight percent of the stock of Washington Airways is owned in equal shares by six trunkline air carriers: American Airlines, Eastern Airlines, Northwest Airlines, Pan American World Airways, Trans World Airlines and United Air Lines. The remaining two percent is owned by two local service carriers, Allegheny Airlines and Mohawk Airlines, and a trunkline carrier, Northeast Airlines. Northeast Airlines and the two local service carriers receive government subsidy. The board of directors of Washington Airways is made up of one representative of each of the owning carriers. The maximum equity contribution of each of the unsubsidized trunk carrier owners is $500,000. The maximum contribution of each of the local service carriers and Northeast is $20,000. There is a formula, based on relative amounts of revenue passenger miles of traffic transported to and from Washington and Baltimore by each of the carrier owners and the relative use of Washington Airways' services by passengers of the respective carrier owners, by which the losses expected to be generated by the helicopter operation are to be shared among the owners. So far as the local service carriers are concerned, neither of them can be made to absorb in any year any part of the loss in excess of its maximum equity investment of $20,000.00.

The record discloses that helicopter operations in the past have not been self-supporting. For a time Congress authorized the payment of subsidies to helicopter operators, and pursuant to this authority the Board certificated helicopter service for the metropolitan areas of Los Angeles, New York and Chicago. This experiment came to an end in 1965 when Congress directed that no more subsidies be paid. Since that time the service at New York and Los Angeles, as well as the service in the San Francisco Bay area, that the Board had meanwhile certificated without subsidy eligibility, have been supported by one or more trunkline carriers in each area.⁵ In return for their financial assistance the fixed-wing carriers have ordinarily received favored treatment of some sort from the helicopter operators; for example, the helicopter terminals have been located at or near the terminals or gates used by the supporting fixed-wing carriers.

In a case decided in 1963 the Board concluded that the public convenience and necessity did not require helicopter service subsidized by the government in the Washington-Baltimore area. Washington, D. C., Helicopter Service Case, 38 C.A.B. 823 (1963). None of the applicants in that case was willing to accept a certificate that did not contemplate the possibility of subsidy. In 1966, however, the Board concluded that the matter should be re-examined. The Board was led to this conclusion by several factors: (1) the rapid growth of traffic in the area since 1963, (2) the congestion at Washington National Airport creating a need to move flights from Washington National to more distant airports and (3) the interest in supporting helicopter service shown by trunkline carriers in other parts of the country. Accordingly, the Board began a new Washington-Baltimore helicopter service investigation, to determine whether this service could now be maintained without federal subsidy. The Board made all the trunkline carriers serving the Washington-Baltimore area parties to the case and said that they would be given an equal opportunity to participate in any financial arrangement with any helicopter operator selected for a certificate. The local service carriers of the area were also made parties. The Board's purpose in this designation of parties was to "avoid any unfair competitive disadvantage to non-participating carriers", and to insure that "any financial arrangements with trunkline carriers will not disadvantage local service carriers." C.A.B. Order No. E24-133, August 29, 1966.

The Board's order instituting the proceeding required that all applications, motions for consolidation, and other procedural motions be filed before September 29, 1966. By that date eleven applications had been filed, including the application of National Capital. There was no application by a fixed-wing carrier and none which contemplated financial support by a fixed-wing carrier. Thereafter a prehearing conference with the examiner was held by the parties, pursuant to the Board's rules,⁶ and the examiner issued his prehearing conference report, defining the issues and fixing procedural dates. Eleven days later American Air Lines filed a motion for a 30-day extension of the procedural dates that had been fixed. The stated ground of the motion was that American Air Lines desired to canvass other carriers to see whether it would be possible to develop a jointly held corporation to own and operate the helicopter service. At the same time American filed its own application for a certificate and asked that this application be consolidated for hearing with the others on file, if American's motion for an extension of time were not granted. As the reason for its late filing American represented that the emergency expedient of "trunkline-helicopter financial and management relationships", adopted by the airlines after the termination of federal subsidy payments in 1965, was unsatisfactory, but that there had been "little opportunity * * * to focus on the question of a long-term answer to the helicopter service problem." American submitted that there was "good cause", under the Board's rules,⁷ for its late filing, because it "is no one's fault that there has not been an opportunity heretofore to focus on" the problem of developing a permanent financing scheme for helicopter operations.

The Board granted American's motion for an extension of the established procedural dates and for the consolidation of American's application for hearing and disposition with the others on file. The Board recognized the possible hardship which its order might cause to the other applicants who had prepared their cases for hearing; and the Board expressed doubt that in a "normal and usual type of a route proceeding" the reasons advanced by American for its late filing would have constituted "good cause" for American's untimely filing. The Board found, however, that the problems involved in the proceeding were not normal or usual; on the contrary, said the Board, "they are still complex and difficult, and the answers are elusive and it is far from clear at this point that they lie in a proceeding in which we are limited to authorizing the operation of such services only by persons who will be acting independently of...