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01/31/75 United States of America, v. Civil Aeronautics Board

January 31, 1975

UNITED STATES OF AMERICA, PETITIONER

v.

CIVIL AERONAUTICS BOARD, RESPONDENT, AMERICAN AIRLINES, INC., ET AL. NORTHWEST AIRLINES, INC., INTERVENORS. UNITED STATES OF AMERICA, PETITIONER

v.

CIVIL



before Armed Services Board of Control Ap-

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

AERONAUTICS BOARD, RESPONDENT, BRANIFF

AIRWAYS, INC., ET AL. NORTHWEST

AIRLINES, INC., INTERVENORS 1975.CDC.21

Petitions for Review of Orders of the Civil Aeronautics Board.

APPELLATE PANEL:

Wilkey, Circuit Judge, Nichols,. Judge, United States Court of Claims, and Gasch,.. United States District Judge for the District of Columbia. Opinion for the Court filed by Judge Nichols.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE NICHOLS

Petitioner, United States, on behalf of the Defense Department , seeks review of Civil Aeronautics Board Economic Regulations 819 and 861 (of August 28, 1973, and June 11, 1974, respectively). The effect of these ER's is that DOD owes, as stated by counsel roughly, an additional $5,000,000 to the intervenors, United States commercial airlines, for charter air services rendered to the Military Airlift Command during the period July 1, 1972, to August 28, 1973.

The sole issue is the power of the CAB to correct an order founded on an error of fact and to make its correction in this case retroactive to a date not earlier than the initiation of the original proceedings. There is no challenge to the reasonableness of the rates as reset.

This case is different from the usual CAB-set public tariffs. Under 14 C.F.R. Part 288, the CAB merely prescribes the minimum rates which carriers must charge MAC, leaving the actual rates to contract negotiations between the carriers and MAC. 14 C.F.R. §§ 288.5, 288.6, 288.7, ER-536, 33 Fed. Reg. 6645, May 1, 1968; ER-786, 38 Fed. Reg. 745, January 4, 1973; ER-494, 32 Fed. Reg. 7901, June 1, 1967; and as otherwise amended. In actual practice, the minimum rates are usually also the contract rates. In theory the CAB is not setting rates under 49 U.S.C. § 1482 (d), but is granting exemptions on terms under 49 U.S.C. 1386 (b) (1).

This procedure under Part 288 was established in 1960 with Congressional Committee concurrence after it was found that unlimited competition for MAC business resulted in too low an economic return to the carriers for the carriers to upgrade their equipment into the jet age. Under the present procedure, MAC pays reasonable profits to the carriers so that the carriers in turn can keep their emergency CRAF (Civil Reserve Air Fleet) equipped to DOD needs. To the extent that MAC fails to pay reasonable charter service fees, to that extent MAC's emergency CRAF resources deteriorate. I

Since the chronology of events is critical to the resolution of this case, the following table sets forth the important dates of the CAB proceedings:

December 1970 Informal rate review proceedings initiated by

CAB request of cost data from carriers.

May 11, 1971 Carriers' formal petition for rate increases

filed.

June 1971 CAB merges formal petition and informal

proceedings into formal proceedings.

August 1971 Price freeze period (Aug. 1971-Mar. 1972)

under the President's Economic Stabilization

Program complicates and delays rate proceed-

ings.

December 29, 1972 ER-786 (38 Fed. Reg. 745-755, Jan. 4, 1973)

issues, raising minimum charter rates 2.66%

retroactive to July 1, 1971.

February 16 and Carriers formally request reconsideration and

23, 1973 amendment of ER-786, alleging errors as set

forth hereinafter. They seek adjustment of

minimum rates for the period beginning July 1,

1972.

March 14, 1973 DOD opposes reconsideration ...


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