Northeast Airlines, Inc. v. CAB, 6220

• Decision Date: 08 May 1964
• Docket Number: 6233.,No. 6220,6220
• Citation: 331 F.2d 579
• Parties: NORTHEAST AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent (two cases).
• Court: U.S. Court of Appeals — First Circuit

331 F.2d 579 (1964)

NORTHEAST AIRLINES, INC., Petitioner, v. CIVIL AERONAUTICS BOARD, Respondent (two cases).

Nos. 6220, 6233.

United States Court of Appeals First Circuit.

May 8, 1964.

Clarence I. Peterson, Boston, Mass., with whom Henry E. Foley, Boston, Mass., Chester C. Davis, New York City, Foley, Hoag & Eliot, Boston, Mass., and Wilmer, Cutler & Pickering, Washington, D. C., were on brief, for petitioner.

O. D. Ozment, Associate General Counsel, Litigation and Legislation, Civil Aeronautics Board, with whom John H. Wanner, General Counsel, Joseph B. Goldman, Deputy General Counsel, and Robert L. Toomey, Peter B. Schwarzkopf, Mordecai B. Braunstein, David A. Heymsfeld, and John M. Stuhldreher, Attorneys, Civil Aeronautics Board, were on brief, for respondent.

Francis V. Hanify, Boston, Mass., Edward J. Hickey, Jr., James L. Highsaw, Jr., Washington, D. C., Tyler & Reynolds, Boston, Mass., and Mulholland, Hickey & Lyman, Washington, D. C., on brief of Master Executive Council of Northeast Pilots and International Ass'n of Machinists as amici curiæ.

Joseph P. Rooney, Boston, Mass., William A. Nelson, Miami, Fla., Andrew T. A. Macdonald, Washington, D. C., Gaston, Snow, Motley & Holt, Boston, Mass., and Cross, Murphy & Smith, Washington, D. C., on brief of National Airlines, Inc., as amicus curiæ.

E. Smythe Gambrell, Harold L. Russell, Atlanta, Ga., Robert Proctor, Richard Wait, Boston, Mass., James H. Bratton, Jr., Jackson Cook, Gambrell, Harlan, Russell, Moye & Richardson, Atlanta, Ga., and Choate, Hall & Stewart, Boston, Mass., on brief of Eastern Air Lines, Inc., as amicus curiæ.

Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH, Circuit Judges.

WOODBURY, Chief Judge.

Prior to 1956 Eastern Air Lines, Inc., and National Airlines, Inc., Eastern and National hereinafter, were established "grandfather" air carriers over the "East Coast-Florida" route and Northeast Airlines, Inc., Northeast hereinafter, had "grandfather" authority over a route system consisting of short-haul segments extending north from New York to Boston and fanning out over New England. It was the smallest of the domestic trunk line air carriers and the only one still receiving federal subsidy. In 1956 in a proceeding involving applications for new and additional air services along the eastern seaboard of the United States from Maine to Florida entitled the New York-Florida Case, 124 C.A.B. 94, the Civil Aeronautics Board, hereinafter the Board, at page 98 stated the issue before it and the majority's decision as follows:

"A principal question in this proceeding is whether the public convenience and necessity require additional air service between the Northeast and Florida, and, if so, the selection of the carrier to provide it. We agree with the examiner\'s conclusion that an additional service should be authorized from New York to Miami via Philadelphia, Baltimore, Washington, Jacksonville, and Tampa-St. Petersburg/Clearwater (`Tampa\'). However, we would select Northeast rather than Delta to provide the service."

In deciding the underlying question of need for additional service over the East Coast-Florida route the Board considered the present and prospective traffic over it, the adequacy of the service provided by Eastern and National, and the Congressional policy embodied in § 2(d) of the Civil Aeronautics Act of 1938, 52 Stat. 973, 980, favoring competition between air carriers to the extent necessary to assure the sound development of an air-transportation system properly adapted to the needs of foreign and domestic commerce, the Postal Service and the national defense.

The Board first pointed out that the New York-Miami market was the foremost travel market in the country generating about 33 percent more passenger miles than the next largest market, Los Angeles-New York, from almost three times the number of passengers, and that the market had enjoyed outstanding traffic growth in recent years which showed no signs of having reached a plateau. The Board forecast that traffic growth would continue at a high rate in the future and said that "there can be little question that the markets here involved are in material aspects more than comparable to those for which in recent cases we have authorized service by more than two carriers."

The Board next observed that while the service over the route provided by Eastern and National was not inadequate within the meaning of § 404 of the Act, their service did not fully meet the needs of the traveling public. It found that during the peak winter season it was necessary to make New York-Miami reservations 3 or 4 weeks in advance to obtain the service desired, that the carriers' efforts to meet demands for space by too tight scheduling of aircraft had impaired on-time reliability and that Eastern and National had concentrated heavily on the New York-Miami market and had not provided comparable quality or quantity of service to many of the other markets involved. It said: "These factors of passenger inconvenience are at least comparable to those found in recent cases to warrant additional air service."

Finally on this issue the Board turned to the need for additional competition. It noted benefits already conferred by "vigorous competition" between Eastern and National and the promise of future benefits from the same source in the way of elimination of space shortages, but it said that in view of the fact that the needs of the traveling public were not now being fully met "it would not be consistent with our statutory obligations under the Act and the course of our decisions thereunder, to merely maintain the status quo, and rely upon the carriers' assurances as to their willingness and ability to remedy the situation." Observing that present shortcomings in service had existed over a substantial period of time and that the carriers had not demonstrated their ability to overcome them, the Board pointed to the Congressional policy favoring competition as a stimulus to "vigorous development of our national air route system" and said: "In the present case, we are convinced that a third carrier is required."

The Board divided on the issue of the selection of the carrier to provide the additional service required over the route. Three members of the Board disagreed with the examiner's choice of Delta and selected Northeast. They expressed the belief that extending Northeast's authority to Florida would eliminate its need for subsidy, and they pointed out that Northeast was the smallest of the trunk line carriers, that it had received less in the way of strengthening route awards than any of the original "grandfather" carriers, that all other regional air carriers had "achieved self-sufficiency largely as a result of the Board's policy of authorizing these carriers to expand their services into the long-haul high-density markets," and that this case provided the "last opportunity to accord similar treatment for Northeast."

The Board majority said it had "no doubt" that Northeast could compete "effectively" with Eastern and National, noted that only Northeast could provide one-carrier service from New England points north of Boston to points south of New York, particularly to the nation's capital, and said: "If its prospect for growth in the South is denied in this proceeding, it seems clear that its operations will be frozen in its present pattern, and that it will continue to be a drain on the Federal Treasury. Extended as we propose, it should become a self-sufficient trunk." The majority forecast an increase in northern New England traffic with improved service to that area as a result of one-carrier, one-airport connecting service in New York to points south and expressed the view that Northeast to some extent could integrate its operations in terms of seasonality, not so much in terms of transfer of aircraft from the Florida run in the winter to the New England run in the summer as in avoiding "peaks and valleys" in its personnel needs by using the additional employees needed for the New York-Florida peak season in the winter to meet the demands of the New England peak season in the summer. Expressing confidence in the ability of Northeast's management and the adequacy of its financial backing to effect the radical transformation necessary to convert Northeast from an essentially regional carrier to a trunk line carrier, the majority turned to the impact of added competition upon Eastern and National.

The majority recognized that an award of the run to Northeast would divert "substantial revenues" from Eastern and National. But the majority said that it "may be expected" that Northeast, at least initially, would divert less traffic from the two established carriers than any of the other passenger trunk line applicants for the route and prophesied that "Northeast's diversion will largely come out of future traffic growth in the markets involved." In further elaboration the majority said:

"The record clearly requires the conclusion that, in addition to the high overall traffic growth to be expected along the New York-Florida route, there are long-haul markets, such as New York-Tampa, Philadelphia-Miami, Baltimore-Miami, and Boston-Tampa, which have not as yet received the same measure of service and exploitation as the New York-Miami market, and which might be expected to respond favorably to more vigorous efforts for traffic development. Exploitation of these markets, which is an important byproduct to be expected from the addition of a third carrier to this route, should go far to offset traffic lost to Northeast. We are also in this proceeding granting Eastern and National additional operating rights which will provide them with additional traffic opportunities and growth."¹

Turning to the duration of the authorization to be awarded Northeast the Board majority said: "While we have confidence in the undertaking, we recognize that in extending the carrier to...