# Appendix VolI — World Airways, Inc. v. Pan American World Airways, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385001_1111%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix VolI - **Published:** January 1, 1968 - **Citation:** 391 U.S. 461 ## Text “8 | : : bat VOLUME 1 cus oa Supreme rt of the Huited States oe ear : Ocrosus Tena, er" Costin Ween. No. 800 Se tag: oy ' -. .* Wortp Airways, Ino., Er Au, Petitioners, . ae re : : ae | Pan Amertcan Wort Airways, Ino., TRANS Wort EE OK. 73° | om, Inc. and AMERICAN AIRLINES, Ivo, - | ages a tN ‘ Be hae ‘Respondents ; a ee oA ee oan ee: Maret Oxi, Awnonaurics Boann, Petitioner, . 3 hs . - Pay AMERICAN Wort AIRWAYS, name TRANS Wort | AIRLINES, Inc, sok RPE Amines, Ino, .. 4 ., Respondents. No. 969 Raamicas Sogury OF p TRAVEL Agaarie Io, Petitioner, — \: v. : e ’ Pan Aue Womna Ammwavs, Ixo., TRANS Wont Aruines, Ino. arid AMERICAN Arurnes, Inc.,. ot sie eicemas _ ON PETITIONS FOR WRIT OF CERTIORARI TO THE UNITED STATES 4 ' COURT OF APPEALS FOR THE SECOND CIRCUIT ~ A. ‘ . 4 — — nia =) Petition For Certiorari Filed In No. 800, November i _ Petition For Certiorari(Filed In No. 946, December 22, 1967 Petition For Certiorari Filed In No. 969, December 28, 1967 - Certiorari granted and consolidated January ” 1968" = ee " PREBLE ANE PAO RIED BRE SOLE A I REI RN * NER eS Ser YO Be ARONA ARIE CORNED aera te bane er i 2 ee AD SS .. : . : . ° : -s . . . ° se Z . ’ . . . Me ri ~ March 19, 1965 ‘ cosenneseecedigne | *. INDEX TO APPENDIX ee es ” Pagee'ta | o ‘ res Certified Appendix "Records _ Pages AS VOLUME a oe “Relevan anes Entries’ . Ia * Docket No. 13795 be 115 Notice by CAB that it will el with | processing of appliéations for supplemental — -, air service, July'12, 1963 . : R la 304° Order No. 20573 | ee 633 Report of Prehearing Conference, June 2, or , 1964 7a... 4108 Holiday his Inc., HOLT. cus ay ; Testimony of Richard D. ‘Neumann.«. 20a —— ‘World Airways, Ine.: ROY se Cag Vat Ss 6065 World—300 .... : Qa 6229 . World Form D a . 6414 | World W-5 . ee: | 6622 Bureau of Economie Regulation, BER Een ooo ay ue Index ‘" 27a | 7174 Joint intervenor? JES“. sediwaosens a 7386 Joint Exhibits of ‘Ameriesh Flyers Air- pe ree line, et al., Je211 = natal «30a sie Joint Intervenors: 7788 > JI-1080 Riven . 81a — 8084 JLB: ......... —_ 37a | "9847 —« Joint Intervenors’. brief to the Examiner | . 39a LATA ART TT PRIN Wo il a — Sek ji Guat 2 fe nae eine . Docket No. 13795, (Continued) | | | ro - 10010 Recommended Detision of Examiner, Au are 2. gust 27, 1965 oe eaten a MB 10269" Excepti —— of J Joint - Intervenors, aa enya oe | e | ber G1 eececvee aclucctmesteess ea 312a . ; . A cater “yl Joini Titervenors September %, a 3 aus. 965, f perinboswenens - 3lla 3 -11275- ‘Answet of Joint Intervénors, September eas: | 3 at, 1965 | Nicincnnsees ori ‘pie, _323a —. * 14859 Oral Argument, October 13 and 14, 1965... ~ 825a .., A1T34 » Order No, E-23350 ......... ARE aes SE 11982. Petition for Reconsideration by. Jo éint: ) “e * en 2 tervenors, April 4, 1966 an ¢ . 485a “\- - 12008 Answer of Joint apa, April 1, | . . \ | 1966" TRECee - 500a - “42044 ‘ihe of haf ween, — > i : Oe . dgpnicwsn ---- 508a 12093 is Order No. E- 23600 sab piiiedaleicin tw + a Docket 11908 et.al. a a E-16023, dated November 14, 1960. : © Order -of-. Inyestigation \and Consolidation, . Supplemental Order of Investigatign and Con- solidation, E-17 190, dated July 8, 1961. . Order No. E- 17607, dated Csteher 18, 1961. Recommended Deciston of Examiner, dated September: 21, 1962. “Orders - Nos. E-20530 and 5.20531, dated . October 8, 1963 and Supplemental Orders Nos.” _ E-20530 and B- 20531, dated March 3, 1964, - 6. Or der No. B: 20776, dated “?— 30, 1964. i _ iB. Supplemental Air Servi awe Proceeding, Docket 18795 ‘et al.: ~* 1. Order on Presniiha: B-20573, March 13, 1964. | 2. Recommended Decision of Examiner (cover- .ing domestic, overseas and foreign isspes), - August 27, 1965. ; + i. 3. Opinion (covering domestic issues only), _H-23350, Mareh 11, 1966. % &: ‘Supplemental. Opinidi ‘and Order on Recon- | ae effective Hovesinar 26, —— sideration (covering domestic issues . only), E- 23600, April 29, 1966. Opinion- (covering. ‘overseas and foreign is- . sues), E-24237,. approved by the President, _ September 27, 1966.- -6. Order (adopting amendments té Parts 208: and 378 of the Board's me E-24238, 2 -TIa =) . Order ‘Deayiie Reconsideration (covering. overseas. and foreign issues), ‘E- 24431, No-- '. vember 22, 1966. * D, Reg. No. ER-478, dated Wisin ‘29, 1966. Reg. No. ER-479, dated November 22, 1966. Oar peeopinat Transatlantic Charter Investigation, ‘Daemes 11908 et al. ie. % 4 . or - S Order No. E- 20776, dated April 30, 1964. Revommended Decision of ‘Examiner, dated October 8, 1964. ; Order (reopening Investigation for additional Rete applicants), . E-21966, March:30, 1965. « 4: Order (adding. All-Expense. Tour issue), . E- 22686, September 23, 1965. ‘ Recommended *Décision of ‘Examiner, Decem: ber 22, 1965... - Opinion (All- Expense a Phase, amending + authority ‘of “Capitol and Saturn), E-24240, approv ed by the President, September 27, 1966. %, Opinion (adopting amendments: to Parts 295 and 378 of the Board’s Regulations), E- see, effective: November. 26, 1966. Opinion (issuing certificates to four additional carriers), E+24242, appr oved eid the President, September 27, 1966. 2 II. At. -_ United States Court of Appeals for the Second — Circuit, Nos. 30947-8. . 1. 2 a wow Petition for Review, ‘Was ember 25, 1966, Argument Heard, June 15, 1967. Judgmeiit Remanded, July 20, 1967. Filed J udgment, J uly 20, 1967. Petitions for Rehearing -and Reheari en bane, er 1967. =] D Petitions for Rehearing Denied, September 29, . 190!. curiam, September 29, 1967. Filed Orders Denying Petition for Rehearing en bane, September 29, 1967.. . Filed Motions ‘to Stay Issuance of Mandate, October 4, 1967. . Filed Order Granting Stay. of ‘Jewustice of Mandate under Rule 28(c), October 13, 1967. 2. Filed Notice of Filing of Petition of Writ of Certiorari (World Kei et al. ), November 11, 1967. . Filed Notice of: Filing of Petition for Writ of - Certiorari (CAB), December 26, 1967. | Filed Notice of Filing’ of Petition for Writ of Certiorari (American Society of” Travel Agents), December 29, 1967. . Fited Certified Copy of Order of Supreme Court Granting Petition for Writ of Certiorari . (World: Airways et al... CAB, American So- ~ ciety of Travel Agents), February 6, 1968. ,o . Filed Orders Denying Petitions for Rehearing,. . September 29, 1967." . Petitions for Rehearing ¢ en banc Denied, per - ams _ (115, 117) - 115 UNITED STATES OF AMERICA | Crvm Axrronavtics Boarp. | ae” Wasuneton, D. C. ‘SUPPLEMENTAL Arm SERVICE Docket — ‘et al. ane NOTICE ‘ Notice i is hereby given that the Civil Aeronauties Board q : has-decided to move forward with the processing of the — applications listed below whith seek certificates of public : convenience and. necessity authorizing supplemental air ‘ transportation der section 401(d)(3)-of the Federal Avi- ation Act of 1958>as amended : * *. « * ¢ Po: i: ee 0 In order to facilitate and expedite the Board’s deter- mination of the scope of the proceeding, the issues therein, and the manner in which the proceéding*will be processed, parties are instructed to submit on. or before August 5, 1963, written expressions of their views on these questions. ae e x * “304 ‘Order No., F-20573.” UNITED STATES. OF AMERICA Crvin Arronavutics Boarp - WasHINGTON, D. C. oo Served MAR 13 1964 _ | - Adopted by the Civil Aeronautics Board at its office in Washington, D.C. on the 13th day of March, 1964 Qe SUPPLEMENTAL AIR. SERVICE. Docket. 13795 et al. . ORDER ON PROCEDURE. - By Notice of July B, 1963, from the Chief a ——_— ~. ~° “the Board announced its intention. to move forward with . ‘the processing of some 55: applications listed in the Notice __ which appeared to. seek certificates of public convenience and necessity authorizing supplemental air transportation under section 401(d)(3) of the Act. All interested persons were offered an opportunity , to express their views on ~ ‘such matters as the scope of the proceeding, the issues - 3 therein, and the manner in-which the proceeding should be ~ provessed, and to comment on, -the suggestions made by others. ; Rate Numerous motions, snigextionn, and coinments have been . a received.’ The Board has carefully considered all docu- .- . Applicants filing motions were AAXICO Airlines, Inc., Ameri- ean Flyers Airline Corp. and Capitol Airways, Inc., California. Air i Charter, Inc. and Richard D. Neumann, Coral Airlines, East Coast - -6 3a | (304, 305) ments filed and is taking this opportunity to set forth its - conclusions with respect to procedural matters to the ex- tent that ‘such action is appropriate at this time. A matter of paramount importance is the establishment of the issues to be tried in the proceeding. The applica- tions noticed for hearing raise a multitude “of questions 305 | apart from requests for certification . to provide gsupple- - mental air transportation services. Some involve issues . solely in terms of conventional route-type certificates; a _ few request interim operating authérity under Public Law - 87-528; others speeifically or- implicitly seek individually | ticketed and individually waybilled authority for the trans- portation of persons ‘and property; and still others re- ' quest. authority cast in terms of “charter” and “non- Scheduled” air“transportation, ‘air transportation “on a _ charter basis”, or similar variants from the statutory defi- nition of supplemental air -transportation.? ‘Flying a vite,; Tae, Edde Airlines, Inc., Johnson Flying Service, - Ine., Modern Air Transport, Inc., Overseas National Airways, Inc., esPurdue Aeronautics ‘Corp., Saturn Airways, Ine., Sourdough Air - - Transport, In®., Southern Air Transport, Ine:, Standard: Airways, . Ine., Trans International Airlines, U. S. Overseas Airlines, Ine., ‘World Airways, Inc., and Zantop Air Transport, Inc. Motions or ° statements were filed on behalf of the 11 certificated route carriers, Bureau of Economic Regulation, Bonanza Air Lines, Ine., Lake Central Airlines, Inc., Pan American-Grace Airways, Inc., and ‘Seaboard World Airlines, Inc: Answers ‘were submitted by’ the.11. certificated route carriers, Bureau of Economie Regulation, Capitol | Airways, Inc. and American Flyers Airline Corp., Modern Air Transport, Inc., Richard D. Neumann, Overseas National Airways, _Inc., Saturn Airways, Inc., and Southern Air Transport, Ince. * Section 401(d) (3) of the Act authorizing the- issuance of cer- tificates for supplemental air transportatjon. provides as follows: “(3) In the case of an application for a certificate to engage ‘in supplemental air transportation, the Board may “issue a & * est a 4a (305, 306) : As indicated initially, the Board’s purpose in ‘causing issuance of the Notice was to considef such applications ‘as - request authority to engage -in supplemental air transpor- tation within the meaning of the Act. We adhere. to that determination, and we will consolidate the noticed appli- cations herein only insofar as the relief they seek comports . with the statutory definition. Were the Board also to per- mit: litigation of the host of extraneous ae Roch outlined; the basic function and utility of this proceeding effectively would be destroyed and there would be sub- Ye stituted #h its place a proceeding of clearly unmanageable | proportions. Because of the extremely broad nature and Scope of many.of the applications, a precise severance of particular applications or portions thereof is for the most part eT - All applicants are Placed on notice certificate, to any applicant not holding a certificate under paragraph (1) or (2) of.this subsection, authorizing the whole - or any part thereof, and for such periods as may be required by-the public convenience and necessity, if it finds that the . applicant is fit, willing, and able properly to perform the transportation covered by the application dhd to conform to the provisions of this Act and the rules, regulations, and re- quirements of the Board hereunder. Any certificate issued pursuant to this paragraph shall contain such limitations as-the Board shall find necessary to assure that the service rendered - pursuant thereta will be limited to a air _—— tion as defined in this Act.” : “Supplemental air transportation” is in turn defined i in section 101(33) of the Act to mean “charter trips in air transportation, other than the transportation of mail by aircraft, rendered pursuant to a certificate of public convenience and. necessity issued pursuant ,. to section 401(d)(3) of this Act to supplement thé scheduled ser- vice authorized by certificates of public convenience and necessity © . issued pursuant . to sections 401(d) (1) and (2) of this Act. x *Some applications are, however, clearly subject to severance. Included in this ee are the re of mate in‘ Docket * . 5a (306) that to the extent they intetided by their applications under . _ consideration to seek authority not falling within the scope of supplemental air transportation, it will be inéumbent ‘upon them to file new applications which will take their | _ «+ * regular place-on the Board’s docket. Wieea With ‘the proceeding restricted in this manner, the ulti- : mate issues to be determined are those posed by section 401(d) (3). - These issues are (1) whether the. public con- venience and necessity require the. supplemental air trans- | portation requested by the applications; (2) whether the. © .* applicants ‘are fit, willing;’and able- properly to perform: ) the transportation covered by ‘their applications and to conform to the provisions of the Act and the rules, regu- lations, and requirements‘ of the Board thereunder ;. and (3) what_limitations, if any, should be imposed by the: Board to assure that the service rendered pursuant to any certificate to be issued will be limited to supplemental air transportation as defined in the Act. Since the authority of supplemental. air carriers to engage in operations for . the military. is now contained in their currently effective 14044 and World“in Dockets 14529 and 14530, which in substance “ seek certification undér other provisions of section 401(d). The applications: of World Wide in Dockets 13915 and 13916 are interim applications which were denied by the: Board, with the * qualification that action upon the request for reconsideration of the -denial of‘interim authority would be held in abeyance pending an ‘expedited hearing on the fitness issues involved in the carrier’s applications for permanent certification. Order E-19009,. dated ‘ November 14, 1962. The carrier did not whe be ngs of the oppor- tunity afforded. Since we are not here consider ng further requests for interim authority and the basis for the deferment in Order * «H-19009 no longer exists, the applications’ will be ‘finally denied. We find no persuasive basis for severarice and separate considera- tion of the applications of Purdue in Dockets 18798 and 13799 ass w- . requested Ry Lake Central, and therefore the carrier’s motion seek- ing this relief will be denied. fie a “oe i (308, 306) Pane . determination, and we will ¢ solidate the noticed. appli- 2 cations herein only insofar as thn relief they seek Comports ~* 2 ’ As” indicated ‘initially, the: Board’s purpose in causing: issuance of the Notice was to consider such’ applications as © request authority to engage in supplemental air transpor- tation within the meaning of the Act. We adhere to that with the statutory definition. Were the Board-also to per- mit litigation of the host of extraneous questions of the t outlined, the basic function. and utility of. this om i effectively -would be destroyed and there would be sub- stituted in its place a proceeding of clearly unmanageable * proportions. Because of the: extremely broad nature and scope of many of the applications, ‘@ precise severance of "~~ $06 . particular applications or penthens thereof‘ is for the most ; — impracticable.” $ ‘All er: are. yams. on notice [ certificate, ‘to any enaliaint not holding a certificate under paragraph (1) or (2) of this subsection, au orizing the whole or any: part thereof, and for such periods may be required by-the public conyenience and-necessity, if it finds that the applicant is fit, willing, and able properly to perform the transportation covered’ by the application and .to confotm to the provisions of this Act and the rules, regulations, and: re-: quirements of the. Board hereunder. Any eertificate issued ' pursuant to this-paragraph shall-contain such limitations as the - Board shall find necessary to assure that the service rendered - pursuant thereto will be limited'to: — air a _ ‘tion as defined in this Act.” “Supplemental air transportation” is in turn defined in section 101(33) of the-Act to mean “charter trips in air transportation, to a certificate of public convenience and: necessity issued pursuant to section 401(d)(3) of this Act to supplement the scheduled ser- ' vice authorized by certificates of public convenience and necessity _ issued pursuant to sections 401(a)(1) and (2) of this Act.” “8 Some applications are, however, clearly subject to severance. Included in this category are “the ee of. Edde in Docket \ Mic other than the transportation of mail-by aircraft, rendered pursuant — wi DP 5a (806) that to the extent they intended by their applications under consideration to seek authority not falling within the scope of supplemental, air transpgtation, it will be incumbent -_ upon them to file new applications whieh will .take ‘their © regular place on the Board’s dogget. With the proeceding restficted in this manner, the ulti- mate issues to.be detefmined are those ‘posed by section. 401(d)(3). These issyes are (1) Whether the: public con- venience and necessi#¥ require the supplemental air trans- portation. requested by .the applications; (2) whether the applicants are fit, willing, and able properly to perform: the ‘transportation covered by their applications and to conform‘ to the provisions of the Act and the rules, regu- lations, and, requirements of the- Board theretinder ; and (3). what limitations, if any, should be imposed by the Board to assure that the service rendered pursuant to any - certifiéate to be issued will be limited to supplemental air transportation as defined in the Act. Since the authority of supplemental air carriers to engage in operations for the military ‘is now contained in their eurrently* effective - 14044 and World in Dockets 14529 and 14530, which in substance seek certification under other provisions of section 401(d). — The applications of World Wide in Dockets 13915 and 13916 are interim applications which were denied by the Board, with the ‘qualification that action upon the request for reconsideration of the ‘ denial of interim authority would be held in abeyance pending an expedited hearing on the fitness issues involved in the carrier’s ° applications for ‘permanent certification. Order E+19009, dated November 14, 1962. The carrier did not avail itself of the oppor. | tunity afforded. Since we are not. here considering further requests for interim authority and the basis for the deferment in Order E-19009 no longer exists, the applications will be finally denied. _ _ We find no persuasive basis for severance and-separate considera- tion of the a, yr of Purdue in.Dockets 13798 and 13799 as requested by ing this relief will be denied. ¢ ‘ ake Central, and therefore the carrier’s motion seek- (806, 307), interim bectttionian: also pertinent is the quinine the ce ce extent to which any of the applicants should be certificated ay _ to provide air transportation services for the Department’ - © + of Defense. Subsidiary issues within this broad general framework may well be desirable. These are, however; mat- _ ters best left for formulation and resolution by the exam- iner as a result’ ‘of the prehearing’ conference or in some ‘ other appropriate manner. ] ‘In view of the breadth of the, authority requested, the - complexity of the questions involved, and the f&mbeér of applicants seeking authorizations, the determination. of the. best means of procpssing the applications is a particularly reveal a’ wide divergence of views. A few applicants’ desire separate hearings on their in- . dividual applications. Most. recognize -that some. form/of — consolidated hearings i is both necessary and desirable but differ markedly on the procedures to be followed. As far : as geographic area is concerned, some applicants degire * that all applications be heard together so that the*issues— will be wérld-wide in scope; others.suggest separate pro- ceedings to be conducted: successively, the first dealing with overseas and foreign authority and the second with ing into three or more geographic areas for separate con- sideration. A similar diversity of opinion exists on whether the questions of .public convenience and necessity and the . fitness of the individual applicants should’ be heard -to- . gether or separately, and’ if separately, which should pre- : ‘ \ § ce this dcineee,: be limited to bilgi who now, hold” difficult one. On this question the: filings of the. oun k . Y ~ domestic i issues; and still others would divide the proceed- pte _eede the other. Also,. there are suggestions to the effect . ® 7 Se ~~. anddisposition. oa i ree ec ea ce interim -operating authority as supplemental air carriers and that all other applications be set for separate hearing . After giving due weight to all of the’ views ‘expressed, ome we have concluded that: the public intendt would best be ae served -by hearing all applications on both public conven- Ps * jence and necessity and fitness questions ina single con- solidated proceeding. If the applications were compart: mentalized for. separate’ consideration’ in’ terms of such ° matters as issues, geographic scope, and type of applicant, _ some benéfits would be. achieved, particularly from the - standpoint of narrowing the questions: to be resolved at. "* any one time. However, these applications raise common _» and interrelated problems. which. in many* respects trans-— . _ cend geographical divisions and can .best be treated in broad perspective: All things considered, the single- pro-— -ceeding conducted with all issues present offers the pro- sn cedural vehicle most likely to provide for a comprehensive _ and cohesive review of the future role of the supplemental air transportation industry,, which is our primary task. ‘We consider it likely that ‘the area approach would in. - -. erease the total time neeessary to process the applications. * '. _. Moreover, the division of.the applications on an area basis = would require multiple participation by at least’a majority — of the applicants in two of more separate proceedings, " since virtually/all of -ther. ‘seek Overseas and foreign as | well as interstate authority, and this procedure might thus . constitute a substantial drain on their energies and re-*. sources.. From the standpoint of most of the applicants, the single. proceeding in’ which all applications are. heard would appear to provide the least costly and burdensome ie procedure. .°>.5 > shoe i iG aa zy * (308) Fela eS 8, As so constituted, ‘the proceeding will encompass all ap- plications’ to the extent that they request ‘authority to en-- _ gage in interstate, overseas, ‘and foreign supplemental air .. ‘ransportation.* We are not persuaded that anything i is to be gained here by segregating public ‘convenience and ne- . cessity and fitness i issues for separate hearing and decision. ~ On the contrary, in the circumstances of the present pro- ceeding, we believe that; the Board woud benefit from the | ‘ abilify to assess public convenience and necessity in the light of data concerning the operating plans, financial status, and other attributes of the fitness of particular -ap- plicants, Nor do we find any sound ae excluding | from participation in this proceeding any“of the three . categories of applicants. desiring supplemental air trans- portation. authorizations—new applicants, applicants hold- ing interim authority, and those denied interim authority. Except to the extent that particular applicants may be affected by the outcome of periding cases, it would appear that all — be ‘entitled to prosecute their — | herein.® ° * As urged by : some of the parties, we will not, however, consider herein issues related to civil passenger. chafter authority in the transatlantic area. Such issues are under consideration in 4#he ‘Transatlantic: Charter Investigation, Docket 11908 et al.; and reason is apparent to relitigate-them in this proceeding. The _Board’s decision in the Charter Investigatjon was served on March ’ -3, 1964 (Orders E-20530'and 20531). _ § By Order E- 19009, dated November 14, 1962; the Board, aieeee ‘ : other things, set the 401(d) (3) applications “ef the following car- riers for hearing, with the direction that the question of fitness, willjngness, and ability be heard and decided before any remaining issues: Air Cargo Express, Inc: (ACE), d/b/a Columbia Airlirtes (Dockets 13894: and 13895); Airline Transport Carriers, Inc., « d/b/a California-Hawaiian Airlines (13884 and 13885) ; Blatz Air. lines, Inc. (13871 and 13872); ‘Paramount Airlines, Ine. (13897 * and es ; Quaker City tat Inc. d/b/a’ Admiral iti zs . . ve ss é % j , 2 ‘ ‘ a a ae . . . .” = NB crctsienineo hectic oo teen ° . . e . Be i © (308, 308) ‘_ Several of the parties have suggested that once the Board has set -the scope of this proceeding and acted ‘upon re- - lated procedural questions, further procedural steps should _ 309 be held in abeyance. until after final decision in th Trans- atlantic Charter Investigation, Docket 11908: e¢ al. and in the rulemaking proceeding in Docket -14148.° The pro- ponents point out that at.issue in the Charter Investiga- tion are questions such as market size, liberalization of the charter rules, and?whether the applicants therein will be treated as a‘class, all df, which could have a béaring on the future course of this proceeding.. Further, the possible . ‘amendments to Part 207 involved. in’ Docket 14148 might __ have a major effect'on the size of the charter market realis- - tically-available. to the supplemental air carriers. It $s as- ‘serted that. for these reasons the - deferment. suggested -would permit\the development of a more meaningful record. Inc. (13877 and 13878); and World Wide ‘Airlines, Inc. (13904 ‘and- 13905). Subsequently, Airline Transport Carriers, Blatz and: - Paramount were found unfit for permanent certification and their applications were therefore denied in their entirety (Orders. E- 20227 and 20228, served December 3, 1968, E-20474 and E-20475, . Served February 14, 1964, and E-20263 and E-202 8 .Decem- . .. ber 16, 1963) ; and prehearing conferences on the ACE and World, ‘ Wide applications were indefinitely postponed at the request of the ° _ applicants, while further procedural steps with réspect to Admiral -* “were postponed pending Board decision in the Paramount case. ' . If the latter three carriers desire to ‘further prosecufe their appli- cations, it will be incumbent upon them to make that desire known _', by an appropriate filing within the period allowed for reguesting reconsideration of this order, after which the Board will prescribe the appropriate further procedures. — Cam, * Docket 14148 is concerned. with revisions in Part 207 of the. Economic Regulations which may be necessary or desirable-as the. result of section 3 of Public Law 87-528, which amended section 401(e) of the Act so as to grant certificated all-cargo route carriers - _. the statutory. right to engage in passenger charters: subject: to reg- ’ ulations prescribed by the Board. ies hie > ra = Me / ’ j y : ; / 10a '. (309) | 7 While there is substantial’ merit to this suggestion, there - are countervailing factors ‘to be considered. Since. the Board’s decision in the Charter: Investigation has been is- sued, any pertinent principles to be gleaned from that pro- ceeding are now available subject, of course, to the normal ‘ procedures with respect to petitions. for reconsideration. ‘The time of final decision in Docket 14148 is presently un- - _ determined, and awaiting its final outcome could mean a substantial further delay in the process of -hearing and deciding the ‘present applications—a. process which, under the most favorable cormiitions, will be protracted. More- over, while the decisions rendered’ in the Charter Investi- gation and: Docket 14148 may be useful in the conduct of * this proceeding, they can serve only as guides and will not - © preclude the applicants herein from contending for the use, _of different rules, standards and concepts in the disposi- tion of their-applications. In addition, we cannot overlook the distinct element of public interest in avoiding unneces- sary delay in disposing of: the applications of carriers who have lo sought the stability which would flow from per- manent Status. Balancing all of these considerations, we believe the better course is to move forward with this pro- ceeding at this time. _ - Included in some of the filings are sadinsety eat the . Board establish ground rules for the trial of this proceed- _ ing on a variety of questions, such as the scope of new authorizations that might be granted, the standards of fit- "ness to be cage and the type of limitations that might be imposed to assure that operations are truly supplemen- tal in nature. These questions go beyond considerations of ‘procedure and: involve matters of substance which the Board should not undertake to decide in advance of de- velopment and evaluation of the ee a lla | (310) 310 . For —" the seope of permissible operations will be - governed i in large measure by the meaning ascribed “char- Aer”, a term undefined in the Act. As in the case af the Transatlantic Charter Investigation, the parties herein will be free to urge their own constructions of the term as‘it ‘should be applied to ahy awards for supplemental air transportation. Similarly, in the Large Irregular Air Car- rier Investigation, the Board made its views known in some defail on considerations affecting fitness. The question of. _ whether and to what extent the standards heretofore ap- . plied must or should be changed or modified in. the light . of the Court’s decision in the United case’ and the enact- . ment of Public Law 87: 528 is a matter to be ee in this proceeding. . In the course ‘of processing the’ ciialiiadbiais for interim operating authority pursuant to Public Law 87-528, the Board reviewed, insofar as pertinent here, the fitness of some 23 carriers, granting interim authority to 15 carriers and denying it to the remaining 8. The Bureau of Eco- nomic Regulation (Bureau) proposes that, as to the scope of the fitness issues in the present proceeding, the Board’s decisions on the. interim applications should “as a matter of policy be deemed res jud cata” with respect to events - which occurred prior to the interim proceedings. In view of the fact that those decisions were related to the grant of interim authorizations and were not based on a hearing record, we are not prepared to treat the interim decisions as res judicata. : - ™United Air Lines, Inc. v. ¢. A. B, 278 F. 2d 446 (1960), va- . cated sub nom. All American Airwoys, et al. v. United Air Lines, et al., 364 U.S. 297 (798Q). ‘ . tas 2 SE en eee ae ae ee 4 ‘ Jae Ba ntinks SAT SENMAR MA Eth in nds Sree ern a) _ =—_— : : % ea (310, 311) 12a A petition for’ leave to intervene has been filed on behalf of 11 certificated route carriers,* and the petition is opposed _by Modern, ‘Saturn, and World. Modern asserts that no facts or circumstances have been demonstrated which war- . rant intervention, particularly - since - petitioners “are not themselves engaged -in supplemental air transportation. Saturn takes the position that intervention by these car- riers should be limited to specific areas in which they have — a legitimate interest. World charges ‘that the petitioners -have entered into a conspiracy to drive the supplemental . air carriers out of business, and that in furtherance of that conspiracy they have entered into various agreements sub- ject to section 412 of the Act which have not been filed with 311 the Board for approval. World concludes that intervention . Should be denied on the grounds that petitioners “are law violators and come into this case with unélean hands and’ . the real purpose of said carriers is to monopolize air trans- _ portation.” ie We find that petitioners have sufficient competitive inter- est to warrant intervention and that their participation "may reasonably be: expected to assist in the development of a sound record. Petitioners possess extensive authority to provide charter services without regard to the points -. naméd in their certificates. For the most part, the applica- | tions herein are equally broad in scope,.so that limiting petitioners’ participation to specific areas is not practica- ble. However, we expect petitioner's to utilize joint pres- - . 8 American Airlines, Inc., Braniff Airways, Inc., Continental Air Lines, Inc., Delta Air Lines, Inc., Eastern Air Lines, Inc., National - : Airlines, Inc., Northwest ‘Airlines, Ine., Pan American World Air- ways, Inc., Trans World Airlines, "Ine., "United Air Lines, Inc., and ae, Western Air Lines, Inc. 13a (311), entations and joint representation to the maximum extent deemed feasible’ by the examiner, and the use of multiple_ counsel is to’ be avoided. These steps will go far in sim-. plifying the record | and expediting the conduct of the pro- . ceeding.® an _-—The contentions of World are aie inerit: No facts are set forth ‘in support. of the carrier’s. allegations, and if such facts exist, there are ample procedures available by * . which World may seek to have them brought on in appro- - - priate fashion for consideration by the: Board. Unsup- ported’ charges. of this: ‘nature, however, pr ovide. no gana - basis for withholding intervention. ! On the matter of intervention, we note ‘that while the American et al. and Flying Tiger petitions are directéd to the coiisolidated proceeding,: other carriers and. persons previously have filed petitions for leave to intervene’ with respect to many of the individual] applications’ being con- . solidated herein. All such persons dre placed on notice that if they desire to seek leave to intervene ‘in this pro- ceeding as now constituted, it will be necessary for them to file-new petitions within the time limits prescribed by _ the Board’s Rules of Practice. | : One further procedural matter requires comment. The — applications here ‘under consideration, which were respon- sive to amendments to the Act made by Public Law 87- 528, have been on file for over a year, ‘and by the notice process" preceding the issuance of this order all interested persons ‘ have been. given a full opportunity to comment upon ‘the _ principal factors involved in establishing this proceeding. Under these Cereumnatenees, there is no necessity for ait ; ' For siniilar reasons we will grant the petition for leave to’ inter- vene filed by The Flying Tiger Line Inc., — is “opposed by Saturn. — _asaaeaiies ya) es 14a (311, 312) | -Viding an éxtensive further period for the filing of néw “applications; motions-to_consolidate, or other requests ad- _ dressed. to the isgues. Our order will therefore provide an . acceler ed cuto date for the filing of stich documents, ve been found not to require comment or action by. the Board. | _ AcconprNazy, Ir Is OnpERED Tua: .1.. The following applications be and they hetbby are | the extent that they request certificates of public conven- ience and necessity for supplemental air transportation pursuant to section 401(d)(3) of the Act: AAXICO Air- lines, Inc., Dockeés 13795 and 13796; American Flyers Airline Corp., Dockets ‘13860, 13861, and 13862; California ‘Ait Charter, Inc., Dockets: 13886 and 13887; Capitol Air- — ways, Inc., Dockets 13863, 13864, and 13865; Conner Air Lines, Inc., Dockets 13874 and 13875; Coral Airlines, Dock- ets 14372 and 14382; East Coast Flying Service, Inc., Docket 14464; Imperial Airlines, Inc., Dockets 13929 and 13930;. Johnson Flying Service, Inc., Dockets 13867 :and Air Transport, Inc.; Dockets 13857 and 13858; Overseas . National Airways, Inc., Dockets 13881 and 13882; Purdue - Aeronautics Corp.,° ‘Dockets 13798 and 13799; Richard D. Neumann, Dockets 13888 and 13889; Saturn Airways, Inc., Dockets 13853 and 13854; Sourdough at Transport, Inc. " consolidated for hearing and decision in this proceeding: ‘to ) 13868; .Marshfield Airways, Inc., Docket 14284; Modern | -§ spielen neacdbals ‘15a | (312) Dockets 13820 and 13821; Southern ‘Air Transport, Inc., ‘Dockets 13818 and 13819; Standard Airways, Inc., Dockets 13816 and 13817; Trans International Airlines, Dockets 13835 and 13836; Transocean Air Lines, Dockets 13921 and 13922; U. S. Overseas. Airlines, Inc., Bockets ‘13906. and: 13907; Vance’ Roberts, Dockets 13827 and 13828; World Airways, Inc., Dockets 13811 and 13812; and Zantop Air é Transport, Inc.; Dockets 13912 and 13913 ; | ef The following applications ‘be and. they hereby are severed from this proceeding: Edde Airlines, Inc., Docket 14044; World Airways, Inc., Dockets 14529 and 14530; and World Wide Airlines, Inc., Dockets-13904, 13905, 13915 and 13916;: ees: agile 3. Order E-19009, dated November 14, 1962, be and it hereby is vacated insofar-as it deferred action on portions of the petition of World Wide for reconsideration of Order E-18877 and consolidated. the petition, as deferred, with proceedings on the carrier’s applications for certificates of public convenience and necessity in Dockets 13904 and ° 13905, and the said petition of World Wide for reconsid- eration of Order E-18877 and its applications in Dockets . 13915 and 13916. be and they ‘hereby are denied in their: ° entirety; a 4. Petitions for reconsideration of this order, motions to consolidate applications, and all other requests ad- _ dressed to the issues shall be filed within twenty (20) days after the date of service of this order, and no further such petitions, motions, or requests filed thereafter will be enter- tained ; 16a ae = (313) | “5. Answers ‘to. the petitions, motions, and requests, de- scribed in ordering paragraph 4 hereof shall be filed within as ten (10) days after‘the expiration of the period provided . - for the _ of san petitions, motions, and requests ; ee pe 6 The persons having applications listedn ordering. | | paragraph 1 ‘hereof be and. they hereby are made parties . to this proceeding; en \ e y \ o v \ , \ 7. The petitions for leave to intervene filed by the Fly- ing Tiger Line Inc. and on'behalf of American Airlines, Inc., Braniff Airways, Iac., Continental Air Lines; Inc., - Delta Air Lines, Inc., Eastern Air Lines, Inc., National Airlines, Inc., Northwest Airlines, Ine., Pan American World Airways, Inc., Trans World Airlines, Inc:, Uffited Air Lines, Inc., and Western aad ‘Lines, Ine., be and they hereby are granted; =>. me 8. ‘To. the extent not granted herein, all motions and re- quests be and they hereby are denied; ; 9. This proceeding shall be set down before an examiner of the Board for further proceedings in conformity with ° . the provisions. of this order} and : 10. This order shall be’ published in the Federal Reg. , ister. , ; By the Civil Acronantics Board: Hanotp R. SanpERson ; _ Secretary (SEAL) | | (633, 634, 637) ‘| UNITED STATES OF AMERICA : _ Crvin AERONAUTICS Boarp - Wasurnerton, D. C. . . es - £ . ? eh @ , > | aes _ SUPPLEMENTADAIR SERVICE PROCEEDING . Sams Docket 13795 et al. saath , ~~ Report or Prenearinc ConrerENCE Served: JUN 2 1964 a an 2? oe er ° - 634 @ -CaRRIER INTERVENORs: 2. i, : .-2..% ° a, James Bell, Pogue &. Neal, 1001 Connecticut Avenue, - N. W., Washington, D. C. 20036, for Alaska Airlines, Inc. and the Trunkline Intervenors _ at $ > eam 637 _ This proceeding. is concerned with applications’ seeking certificates of public convenience and necessity authorizing supplemental air transportation, under Section 401(d) (3) of the Act. The scope of the proeeeding, the ultimate is- sues, and other procedural matters, were established by \ \ . = . : : \ ° . Se on sere a . a : . 5 sy k \ RS \ . X 7 @, 639, 647) ) the ‘Board in Order E- 20573, dated March. 13, 1964. ‘As | presently constituted, ‘the case involves. some 23 applicants : and 47 —— ‘Issues. - 2 The suggestions of the. parties tor: specification of - -par- ticular subsidiary issues; within the broad. framework of ‘ - the ultimate’ issues stated by the Board in Order E-20573 were discussed extensively. The statement of issuessprevi- _ . , ously: circulated by the. Bureau, as revised after discugsion at the conference, was accepted for the purposes of this — proceeding (Appendix A). The following matters of ex- planation, clarification, qualification, or addition should also be noted: > ; 1. There is no issue in this proceeding. concerning the _ award of authority to perform civil passenger charters: . in the Sa, area. > 647 Afrewprs - TO Report OF PREHEARING: ConFERENCE - SraTeMent oF. Issuzs The Board in Order E- 20573, March 13, 1964, dade the ultimate issues to be determined in this. a to be as follows: ‘ : “ * See —_ Order E- 20747, ‘April 217, 1964. e : . . o's 2s : . . " ¢ . ‘ . . . ° . . “eae . I lei eMsbinainass : 2 . ree on wa” ; em ’ : . ° . . > . . ? 19a . . 641; 649, #50) = Whether the public converiience and necessity 7 re-" quire the supplémental air.. transportation requested sa the applications;* : : * ° e. ee @ d. How should the term “charter”, -as ‘related to sup- c _ plemental service, be defined? . (1) Should the’ term = Ne any one or. -more or.a combination ‘of the fo lowing: -(i) Traditional planeload charter. es Hire-of aircraft by-more than one charterer —Passenge? and/or Cargo, eT and/or Civil. cops oe (iii) All -Expense Tour Charter — By travel agents, hotels, resorts, or other ‘persons. (2) How shoud the types of charters indicated in ‘item, d. (1), (i), (ii), (iii) be defined and what ‘terms, .con- . ' ditions, and limitations, if any, shouldbe imposed on each if found to ‘be h eeees as bile ie) —e. To what extent, if any, eu the services applied for herein involve diversion of traffic from the scheduled "carriers! Fate NaS oe ee ' Sat, en ee a : eee * The awards of civil passenger charter authority in the trans- atlantic area is not in. issue in this proceeding, Order E-20573, ‘March 13, 1964 (p: 7” OPTED ae NE . ae ; (4108) oie ss 4108 | “HOLIDAY AIRWAYS, INC. oS 0. EXHIBIT HOLT TEsTIMoNY: oF Ricwarp D. Neumann esis As an example, a tour would leave Thursday, ar | Ou riving Los Angeles\early Thursday evening. e passen- ger stays overnight hursday night, and. departs for San Francisco Friday ‘evening, arriving in San Francisco’ early evening.. Arrangements. will be mse in “both. Los Angeles ‘and San Francisco r entertainment and hatels. On. Fri... . -day night the passenger would stay in San. Francisco. On Satfirday; they will be taken on a sightseeing: tour. through- . out the San Fran¢isco Area. On Saturday ‘night, . they would be taken % on a tour of. night spots: and restaurants. S ~ ‘Sunday morning the passenger would be free to attend -~ . _ the Church. of his ‘choice. He would return to Chicago *. _ Sunday évening. We. would’ intend. to price these tours." at eer $15.00 to $20.00 higher than the sum of - ~ - the lowest ‘local propeller~or:jet segment fares. - - Howmay Armways, Inc, " considers overseas and interna- _ ee ~tional ‘all expense paid | tours a considerably more lucrative ' market than the domestic tours, and therefore, would :ex- pend considerably more coca and money on their pro-. motion.* ** ay a : . \ ad d md] @ \ eo. . ¢ ° \ wy - = . > . ‘ y = ae 4 a . - : ¢ e , . > - : ‘ ; , x : ; ‘ ga aT ‘ . : ae ; - Pa Gt ecretitn ss wes cueuc asnispecal : . ‘ : ‘ t - r "it Oo Src . ; { a” s . . Ps | ; 7 . : *. ° se * 21a : Baas _— 3 | 3 (6065) 2. Pa ait : a « °* e * ° “ worip AIRWAYS," INC. : WORLD EXHIBIT 300 “ @« 2 * . . “ % Charter Revenue of." | : senapeet Revenue - « Z : s International & ae Domestic ee ——— an. 5 1959 - = ae. ates, ie ntoe Nana 1960 © EO ee “1961 . eet 1962 ee » 1963 | 0.5 a | oe ce (Sdurée: World Exhibits 304 and sense % Ra a * ¢ * co whe et Y ~ , ‘ . y > 6229 e “WORLD AIRWAYS EXHIBIT } (See opposite) jQ37 peeinnen 24 NaGhSTD: -— « « - a) - = m4 a a "| . ' J e Schedule of Statistics for Charter Operations January 1, 1961 - December 31, 1963 ; Rae ian = ne No. of Gir: ‘. aa Passenger , | 4 - Charter . __ Period eit Charter . . No. of Pax Miles .- ne ; | Category - Quarter Fnded - ° Flights Pax » (thousands) - ~ Revenue ; cane _ Civil Passenger: -. * March 31, 1961 | : | . on et Interstate ay = | - ss 27h «ee $. 19,513 ; Overseas tae oes 5 -. 450 1,096 83 ,646 ; ; Foreign : sa iget a « ae 7 Civil Cargo: ® iste ote | Interstate - ” eee, Fe: - ; ee . | Overseas _ . oo. . + = =. ¢ .. : ‘* iow _ Foreign et oes ae F 7 boi ' A ? Military Passenger: ie | an a Broce t “ ial Interstate ae, ; 2. é -.. SEGERD yaaa -. , Overseas a= - ee ae , os Foreign : 108. 7,059 a 9,482 | ~ 274,978 ee sem $95 to Military Cargo: oe Ce ees : ° Interstate aoe ef 360 - - fe & ' Overseas bars: : e:: eee - ~ Foreign : : ™ : oa p) eS : - : : Total Quarter _ SP tend, ‘ rele eee 7,783 °° 11,0909 «= $=«-378, 137° Civil Passenger: -. ie June 30, 1961 = , : voltae faa" Interstate we :; . 17 , 2,530 4,662 - ~ $. 123,004 Overseas - eo a 1,170 39555 28}, ,338 ; Foreign = - - - = Civil Cargo: Peet ” ar -——~ _ Interstate : | si . PM wd. _. ia A - - : Overseas : eet Cite Ak as . - Se ee fs a 9 Charter _ Satenory 7 ( Civil Passenger: Interstate — Overseas Foreign» 1. i Civil Cargo: ss J \ a > (7792, 7788), | : rat ae business | is of immense importance to all of them and they, as well as travel agents, derive great benefit from the car- my of this kind of traffic.. pies 6 ) The Pan .American figures’ will serve as an example of es; this ee. >For. the calendar | ‘Year ae, revenues _ : “T7193 - from the carriage of all:expense ‘tour passengers in the. Pacific and ‘Hawaiian area amounted to $17,939, 000 .or Latin America, the revenue figure was $10,302,000, or 8% | - - of its: applicable. passenger revenue, and in its Alaska ee operations $153,000, or 3.5% of passenger revenues in that =¥ 13.6% of its passenger revenues obtained in this area. In ‘/ / . geographic area. Northwest’ has estimated revenues from | - the carriage of such passengers at $2,670 000, producing for fhat carrier. 7.6% of its Pacific, Hawaii and Alaska area - passenger revenues and. representing 8,900 passengers. . In "its Hawaii market, United carried 40,542 passengers, 15.1% of its total Hawaii passengers, for revenues of $5,000, p00. \ => *6 <> ° JOINT INTERVENORS’ EXHIBIT JEB fed se f “ Desriony or James F, Montgomery : D. The grant of all expense tour authority:would cause * serious diversion. - cepts Ate er ae expense tours Would appeal primarily to the vaca- ; - tion traveler. Attached to my testimony as Appendix ‘A is a table which shows the enormous amount of such reve- — nue now obtained by the certificated carriers which would - be exposed to diversion by grant of the authorizations herein. — Se hota. Aes pr sees ee | It is also pertinent ‘to’ note the amount of: revenues ob- _tained by the scheduled carriers from travel agents’ sales: _ for example, 64% for Braniff in its Latin American opera- tions, and almost 39% for. Pan ‘American in its Pacific operations.’ The passengers: who produced these’ révenues are, in effect, subject to the control of the travel agents. : Now this: is a situation of which I approve entirely. Pan. ‘geeezuecee ~American-and, I-bélieve, most other carriers fully recog- - nize that agents are of vital importance in the air trans: port business because the agent and the airline today. have | a common goal. However, this. situatién would radically * Both figures are low because they do not include interline and general agents’ sales made by agents, and because the total sales against which the percentages are calculated include: both military - and charter revenue. ae ee a aia Dy ¢ : a : ok ° (8084) ; ta " | ; ie | change if’ agents were allowed to charter aircraft ‘for all FS expense tours, Assuming such an agent’s charter, his. pri- — “mary economic incentive would be to fill his ‘plane, and he would do all i in his power to. persuade a passénger to take that charter flight instead of saling him a ticket on.a — | - 4 a uled —. - . BErore THE Civ AERONAUTICS Boarp, WasuiNeron, D. C. Supplemental Air Service Proceeding Docket No. 13795 a Brrr To THE EXaMINER oF “March 19,3965. American. Airlines, Inc. - Braniff Airways, Inc., | : Continental Air Lines, Ine. 7 ‘Delta Air Lines, im, °. PN ae Kastern Air Lines, Inc., . ° | ee ‘National Airlines, Inc; = -----~ ? ; Northwest. Airlines, Inc., 9 Pan American World Airways, Ine, | \. ° Trans World Airlines, Inc., Parsi United Air Lines, Inc., and - Western Air Lines, Bev. ns Poous &N at j : » 1001 Connecticut Avenue, N. W. "Washington, D. C. 20036 acee ‘ ee oe (8848), INDEX . IntRopuctioN | Siegen : , ee te Oe ee I. Alt ‘ipeliatiins to cael: all ‘expertise tour char- ‘ters to travel agents, should be denied as unlaw-* ful, . unneedéd, and . highly detrimental to the ; A. The- Board lacks the. statutory authority . to rmit supplementals to charter aircraft ‘to /trayel agents for all-expense tours: ‘ 2 : f 1.. The legislative history of P.L. 87. 528 doit A onstrates _ that Congress considered all. expense tour charters to travel agents'sell- _ ing individual space to the genéral ‘public tantamount to prohibited individually tick- ‘ eted travel we é. .@~ 2. -In any event, the failtire of travel agents to appear. in this s_- proceeding to present evi- | dence: as to. how, when, ‘and where all- expense tours will be performed, and their qualifications to provide such service, pre-. - cludes the Board from making the required ‘statutory findings in this proceeding to im- plement an all-expense. —_ charter as gram .... nh : 6 . B.. There is. no public need for the applicants all capeite tour proposal - wn «8 i _orderly-development of air transportation re ete ae Bite ne ote “ (8848, 8849) | gies 3 , 7 Se 1. The applicants all-expense Bour proposal . would merely duplicate, not supplement, the _ public service benefits now available through the literally hundreds of all-expense tours. offered, and vigorously promoted, by. the- , . certificated carriers. ..... : . 8 a. ‘The argument that: the cut-rate feature of the applicants’ all expense tour pro. |: posal will.generate an entirely new class — of air tral not presently moving by air _is sheer. verbalization ......: ett: Wh b. The*applicants all-expense tour program will permit travel agents to mount an. ~ extensivé’ Solicitation of the general pub- __liein mass media advertising based on’ * cut rate fares, thereby exposing to di- versions ‘in excess of $380 million de- rived by the trunklines from pleasure ~ travel ' | 16 8849 | C. A “restricted” all-expense tour program would still embrace diversion: of such significance, without redeeming public © benefits, as never i warrant adoption - of the program ...... ; 2 3. -Relianee by the malian upon the Wro: . pean inclusive tour experience as a ee ‘stration of “need” is utterly erroneous .. The argument of the applicants that’ hate , 22-.- “Ko S P .. .23 e s all-expense teur' program is needed to solve’ a ... the U..8. balance of ‘payments — is : without merit . | o we C. The applicants’ dlLexpease tour ‘petpenal is ~ highly detrimental to the orderly eee of. air transportation 3 ee Impiementation of the stains nur pro- * .Sposal-will thwart achievement of.the goal of - eontrolléd by: an uncontrolled tour: eae American flag air transportation : improved service with low, nondiscriminatory fares . 2 86 There i is a very real public danger arising se out of having an all-expense tour program industry ¢ ‘applicants réquires the grant of all-expense tour authority must be rejé@¥ed as both in- accurate and as an invalid. enw: for operating : authority 1. -. that the supplementals are “marginglly . ss — and need — 2 anol . x, 4 One of the most incredible current myths i is 2% hh eee le D. The argument that the “private” ‘aoed/oe the .— 42 42 | a. ‘Page B The’ aripumnt: that : the © supplementals “need” all- -expense tour authority in order to meet the 30% @ommercial | revenue rule of the DOD is both inaccurate ‘and an in- | ‘valid: basis for certification ; The ‘12 supplémentals eertivine ; in an ine’ ' dustry once comprising 105 carriers have ; available to.them a substantial affinity com- ‘mercial charter market} within the 48 con- _~tinental United States: which; along with | oe R {inue as | profitable asi cincee * The ‘argnment of the applicants thint their - all -expense tour program is needed to sdlve - military. charters, will permit them to con-, their alleged seasonal. problems, is without. merit ® —; ) ‘ II. The eieicaiiees abandoned on the jenand’ their coe request to ) provide split charters — oe oe * e@ AS : cy . ws ceen, >. Site ates ae oe “10010 yet . ie : . Recommended Decision of Examiner Robert L. Park . UNITED STATES OF AMERICA. eis | _ Crvit. AERON utics Boarp - ag: ite fhe * Wakmenenite, ‘D.C. ° ae \ - ‘SUPPLEMENTAL AIR SERVICE PROCEEDIN G yo - Docket 13795 et al. PP torte bacon? August 27, 1965 ‘ . Upon: -. AppLicants: Leonard Bebchick, 1225—19th Birest: N. W., », Washington, ‘D. C. 20036, for AAXICO Airlines, Inc. Rae D: Potts, 910—17th Street, N. W,, Washington, D. C. 50006, for American Flyers Airline Corporation. een “George Berkowitz, 233 Broadway; New York 4, New or: York, for Capitol Airways, Inc. — | 0: OBR A. Commer, Agent, P. O. Box .122, ‘Miami; Springs, es —_— for Conner Air Lines, Inc. -° « _* arren E. Miller, 810—18th Street, N. W., Washington, .. D. C.~for Conner | Air Lines, Ine.; and J hain Flying. Service, Inc. . _ Robert .R. Johnson, President, J siiaiom Flyin? Service, | Inc., Box 1366, Missoula, \ for Johnson Flying ervice, Inc. | | Howard 8. Boros, T11—14th Street, N. W., ata | ‘- D. ©. 20005, for ow oe, Inn . | an ~~ » we a . a - . , a , — 45a = ¢ " "Jeune P. Becker: adie, pico Ainpoct, ‘Trenton, New ec, | J ersey, for Modern Air Transport, Ine. Albert F. Beitel, 905 American Security Building, Wash- ington, D. C., for Modern Air: ‘Transport, Ine. C. Booker ‘Powell, 1010\Vermont Avenue, WwW ashington, Dp. C., for Overseas National Airways, Ine. ° Jun Scoutt, Jr. 1104 Brawner’ Building, g88—17th: * Street, N. W. Weshington, D. C. 20006, for Purdue Aero- nautics Corporation and World Airways, Inc. . ‘Lester M. Bridgeman, 1027 Woodward Building, Wash- ington 5, D. Cc, for Saturn Airways, Inc., and Vance Inter- "national Aiwa, Ine. ™ ' James J. Bierbower, P. 0. Box 19067, ‘Washington 6, D.C: , far en Air oo Ine. ’ (continued) ae We if any, must “ filed with the Docket Section, Civil Aeronautics Board, Washington, D. C. 20428,. and — served upon all parties within 10 days’ after the date of ae Service shown above.’ Briefs may be filed and served én all parties within 20 days ‘after the date fixed for*filing - exegptions. . & 10011 ftobeyt E. Fraley, 11065 Baird Avenue, Northridge, California, for Standard naahmee, Inc., and ssaiciaiele Air ~ Service. >. John J. Klak, Kak & Gerth, 818 LaSallé Building, 1028 3. Connecticut Avenue, re D.C. 20036, for Standard Airways, Ine.. - Edgar A. Stewart, Sr. , Municipal Airport, Chico, Califor. , “nia, for Stewart Air Service. Clayton L. Burwell, 720 Federal] Bar Building, Washing. ton, D. C. — for Trans International Airlines, Ine. 3 ¢ 10010, 10011) . i. seat ~— ; gia (10011) _ : ‘ Arnold Rotman, Weiner & Rotman, 6901 Topanga Canyon _ Boulevard, -Canoga’ Park, California 91303, for United States Overseas Airlines, Inc. > . Vance Roberts, B. O. Box 320, Boeing Field, Seattle, _ Washington, for Vance’ International Airways, Ine. James H. French, 1625 K Street, N. W., Washington; D. C. 20006, for Zantop Air Transport, Inc. Robert J. Wilson, 1120 Connecticut Avenue, N. W., Wash- - ington 6, D. C., for Zantop Air Transport, Inc. CarRIER INTERVENORS . - ___ John W. Kern, III, 912 American Security Building) Washington 5, D. C., for Airlift International, Inc. ? James Bell; Pogue & ‘Neal, 1001. Connecticut Avenue, N. W., ‘Washington, D. C., for the Trunkline Intervenors , and Alaska Airlines, Inc. _ James M. Verner, Verner, Liipfert and Bernhard, Suite 1035, Universal Building North, 1875. Connecticut Avenue, . 'N. W., Washington, D. C. 20009, for Allegheny Airlines, _ - Ine. Bonanza Air Lines, Inc., Frontier Airlines, Inc., Hawaiian Airlines; Inc., Lake Central ‘Airlines, Inc., Ozark Air Lines, Inc., and Trans-Texas Airways, Ine. . Edwin I. Colodny, Hangar 12, National Airport, Wash-. ae ington, D. C. 20001, for Allegheny Airlines, Ince. - . Harry.A. Bowen, 803 Jefferson Building; 1225—19th . _. Street, N. W., Washington, D. C. 20036, for Aloha Ai¥lines, Inc., and Frontier Airlines, Ine. Albert F. Grisard, 412 Metropolitan Bank Building, ~ Washington, D..C. 20005, for Bonanza Air Lines, Ine., and Lake Central Airlines, Inc. ae (10011, 10012) | Arthur M. Taylor, Jr., General Counsel; Bonanza Air. Lines, Inc., P. O. Box 391, Las _ Vegas, Nevada, 89100; for _ Bonanza Air Lines, ine. alvan V. Kerno, 1201 Shoreham: Building, Washington, D. C. 20005, for The Flying Tiger Line, Inc. | Richard A. Fitzgerald, 5900 East 39th Avenue, —_— 7, Colorado, for Frontier Airlinés, Inc. | Vernon Bortz, Pratt, Moore, Bortz, and Vitousek, 11th Floor, First National Bank Building, Honolulu 13, Hawaii, for Hawaiian Airlines, Ine. Lloyd W. Hartman, President, _ Central Airlines, 3 Inc., Weir Cook Airport, Indianapolis, Indiana, 46241, for es tie Central Airlines, Ine. . a Robert B. Hankins, Pierson, Ball, and Dowd, 1000 Ring Building, en Db. C 200 » for Mackey’ Airlines, Ine. .. Jean Paul Bradshaw, 701 Woodruff Building, Spring. . field, ‘Missouri 65805, ‘for Ozark Air Lines, Ine. | . = . . 10012 F Cecil A. Beasley, Jr., 730—15th Street, N. W. , Washing- ton 5, D. C., for Pacific Air’ Lines, Inc., Piedmont Aviation, Ine., and Southern Airways, Ine. Harry White, Pacific Air Lines, Iné., Taleteedbaned Air. port, San Francisco, California, for Pacific Air Lines, Inc. Howard C. Westwood, 701 Union Trust Building, Wash- ington, D. C. 20005, for Pan American-Grace Airways, Ine. Jerry W. Ryan, Pan Am Building, 200 Park, New York, -, New York, for Pan American World Airways, Ine. Gerald P. O’Grady, Koepenick & O’Grady, 1625 I Street, N. W., Washington, D. C. 20006, for Pacific Northern Airlines, Ine. 48a (10012) # Robert Kadlec, Pietisont Aviation, Smith Reynolds Air- | ‘port, Winston-Salem, . North —_— for Piedmont | Aviation, Inc. |. . -Stephen- L. Gelband, 1001 Connecticut Avenne, N. W, __ Washington, D. C. wee, for Seaboard World Airlines, Ine. ~ i ° v J. K. Courtenay, Southern Airways, ‘1. Atlanta Air. port, Atlanta, Georgia, for Southern. Airways; Inc. Theodore I. Seamon, 700 Woodward Building, Washing- ton, D. C., for Trans Caribbean Airways, Inc. R. E. McK aughan, President, 11th Floor, Lincoln Liberty . bestest Houston 2, Texas, for Trans-Texas sirwaye, Tne. | t Rutz 14 PARTICIPANTS Colonel Eugene B. Sisk, HQ MATS, Scott, Air Force Base, Illinois, for the Department of Defense. Clement T. Mayo, Defense Traffic Management Rareies, : ' Room 1929, Building T-7, Washington, D. C., for the De- partment of Defense. * Charles’ A. Hobbs, 1616 H Street, N. W., Waddtngtin D. C., for the American Society of Travel Agents. Jeias Lawrence Smith, Civil Aeronautics Board, Wash- | _ ington, D. C., for the Bureau of Economic Regulation. : Martin L. Sviedinah Chapman, Friedman, “Shea; Clubb, and Duff, Pensylvania Building, Washington, D. C. 20004, for United .States Overseas Airlines, ine. ( Change of * Counsel) \ - eiein Qnn> 49a (10013) 10013 - UNITED STATES OF AMERICA ' - Crvm Azronavtics Boarp ©. . Wasnineton, D.C. — SUPPLEMEN TAL AIR SERVICE PROCEEDING - | - Docket 18795 et al. ” Tt is recommended that the Board find: 1. Six applicants—Conner Air Lines, Ine, ‘Holiday Air- ways, Inc., Overseas National Airways; Ine. ie Standard Airways, Inc., Stewart Air Service, and United States Overseas Airlines, Inc.—do not possess the qualifications | | necessary for certification as’ supplemental air carriers and _ their applications should ae eae ‘3° OO & so - eS eet : x (10018, 10019). applicants. In addition ‘to-the applicants, numerous other of which in their participation throughout the proceeding 2: 10019 pos were the Board’s Bureau of Economic Regulation (Bureau) . and the calptificated route carriers (Joint Intervenors).° - -. The hearings -have. been completed, briefs to. the Exam- _iner have been filed and the matters at issue are now ripe : fon decision.? 7 a sh . 2 The Joint : Intervenors are composed of Pan American World Airways, Inc. (Pan American) and all of the trunkline air carriers except Northeast Airlines, ‘Ine., viz., American Airlines, Inc., Bran- _ ‘iff. Airways, Inc,, Continental Air Lines, Inc., Delta -Air Lines, © parties were granted. leave to intervene, \the most active - Ine., Eastern Air Lines, Inc., National Airlines, Inc., Northwest - Airlines, Inc., Trans World Airlines, Inc., United Air Lines, Inc., and Western Air Lines, Inc. As shown by the service list: accom- . ‘ panying this decision, the other intervening parties are the Ameri- can Society of Tgavel Agents, Mackey Airlines, Inc.,,.Pan American- ’ - @race Airways, Inc., Trans Caribbean Airways, Inc:, the two cer. - tificated- Hawaiian carriers,,two mainland U. S.-Alaska carriers, _ three all-cargo carriers, and nine local service carriers. __ ihe applications under consideration here involve requests not only for certificates to engage in interstate supplemental air trans- portation, on which the Board may take final ction, but alsé seek authorizations to engage in overseas and foreign supplemental air - transportation. Disposition of the applications to the extent that . they request the latter types of authority is subject to the approval -. of the President pursuant -to section 801 of the Act. The’ orders and.proposed forms of certificates which are appended give recog- | “nition to the Presidential and non-Presidential portions of the . proceeding. However, in view of the “close interrelationship of the facts, issues, and considerations applicable to both the domestic and international phases of the. applications, the issuance of a separate pe decision by. the. Examiner as to each phase was not considered to . be either feasible’ or desirable. Accordingly, this regommended decision encompasses all matters“involved in tle proceéding, cf. Recommended Decision of Examiner Wiser, American-Eastern Merger, Docket 13355, November 27, 1962 (f.n. 2, p. 1). & .. a2 6 . 56a a (10019, 10020) ® eee ee 7 Pee Backarounp | ‘The present-day supplemental air’ carriers have had a complicated and often turbulent history. While their de- velopment has been consideréd in detail on numerous occa- sions by the Board and the courts, a brief consideration here of the more signifi¢ant background facts is necessary to.an understanding of thé setting within, which this case is to be decided. + : ome , 10020 - ’ Since the inception of regulation in 1938 under the Civil - Aeronautics Act, the predecessor to the present statute, ‘Ahe American air: transportation system has chad “non- scheduled”, “irregular”, or “supplemental” ‘ operators. * Originally they functioned under a general exemption which relieved them of the necessity o biaining a certif- icate of public convenience ‘and necessi y required by sec- tion 401(a) of the Act and of complying with certain addi- tional regulatory. provisions that. otherwise would be applicable tq their limited operations.‘ In the initial years _ their flight activities tended to be of a highly specialized: WU . interest. 7 nature, condutted with small aircraft, and, normally of a kind associated with a fixed base operation. a The close of World War II brought with it-a substantial surplus of large transport-type aircraft and flight-oriented personnel desirous of placing them in commercial ‘service. This dévelopment meant. an increased economical signifi- ‘* Then, as now, the exemption provigion (section 416(b)) enabled the Board’to relieve an air carrier of such requirements upon ap- propriate findings of undue burden upon the carrier and of public rm x) a Se we Oe el RRR BR Ron oe op a OE Stee ed . . : Gn. REPEAL US ey “ee ~— ° . wean | “5 (10020, 10021) | a ta io 07a * : 2 of e . os cance fer “nonscheduled” air transportation services and it also posed additional regulatory problems for the Board. The Board résponded first by modifying its blanket exemp- . tion regulation in. 1947 to require, among other things, a ° Letter of Registration from the Board as a contition pre-. ae _ ¢edent to operations ‘with large aircraft, the holders ‘of which were known as large irregular carriers. enerally speaking, these carriers were authorized ‘to engage in ' interstate and Overseas air transportation of persons and property (and foreign air transportation of. property only) > wa | between any two points, provided that the services Were held out and-operated on an infrequent and-irregular basis.° . ‘Although the Board imposed a “freeze”. on issuance of new Letters‘of Registration in 1948,* the large irregulars continued ‘to operate in this fashion until 1949.° In that _year the regulation was again revised so as to ternfinate ‘the blanket exemption, and the Board in lieu therevf begart _to act upon applications for individual exemption author-’ ‘the ‘Large I rregular Air Carrier Investigation, Docket 5132 . ity. These applications were in various stages of -process- ing when the Board, in September 1951, decided to institute et al. The purpose of the “Investigation was to determine (1). the appropriate place of the large irregulars in the national air. transportation system and the extent of the ra ° _ * The various geographic components of air transportation. are -> defined in section 101(21). In general terms, interstate operations ate between the 50 states; the overseas category involves air trans- portation service between the United States and its territories and ', Possessions ; and foreign air transportation is that between, ¢ place in the United States and a place outside thereof. . yw. vy iO e dé yy : 58a . (10021, 10022) ; ‘ he : Co. operations which they should be permitted .to conduct, (2) the carriers to receive qperating authority, and (3) whether - the- authorization should be by way of certificate, under section 401 of the Act or by exemption from the certificate . and other requirements. ia . The Investigation consumed over'g-decade of hearings, decisions, and court litigation. In 1955 the Board decided | the public interest issues in the case.* It found that the large irregular carriers, thereafter to be kriown as sup- 10022 7 plemental air carriers, were performing a useful public: | service responsive'to a public need and that their authority . should be continued and enlarged. The Board concluded that, in addition to an unlimited number of planeload charter operations, the supplementals should be permitted to conduct regularly . scheduled individual services up to _ & maximum frequency of 10 one-way flights per month be- _ tween any two points.’ At the time the Board did not - undertake to decide the questions concerning the applicants’ qualifications and the form of authority. ultimately to be granted, but issued an exemption giving the entire class of @arriers the new authority on an interim basis pending © Investigation, 22 C. A. B. 838 (1955). ™ Geographically, the authority to operate charter flights and . limited frequency individual passenger and cargd services applied in interstate, intraterritorial (excluding services within Alaska) , _and overseas air transportation, while flights in foreign air trans-: portation were to be restricted to charter and individually waybilled cargo services only. Fr reasons not here pertinent, the new au- thorizations as to foreign air transportation did not become effec- tive, and the authority in this area reverted to the preexisting “ir- regular” authority. Order E-10161, April 3, 1956. ASO s ahd a "59a (10022, 10023) resolution of these further. questions. ‘Upon judicial. re- view ‘the Court; while not ‘taking issue with the Board’s determination as to the need for’and scope of supplemental services, found that the Board’s action was defective in that: the Board had made: insufficient findings to support the interim exemption, since it could not be determined from the Board’s order what circumstances “could make certification an undue burden” on the supplementals or ‘why their certification “i8 not in the public interest.” 10023 ' , . — 2 While the judicial review, proceeding was pending, and © _ Subsequently, the Investigation was going forward on the | issues of carrier qualification, carrier selection, and ‘the _ form of authority to be issued. In 1959 the Board reached ~ final decision in the interstate phase on these questions and issued certificates to the applicants comprising the’ supplemental air carrier class who were found to be quali- fied.° These certificates, among other things, authorized the holders to engage in air transportation domestically of the scope found required in. the 1955 decision, without regard to fixed routes or designated points. Upon judicial review, however, the Board’s action was again‘found to be legally defective, this time by virtue of the Court’s holding that section 401(e) of the Act. precluded the issuance of: ernst | oo Ses — - 8 American Airlines, Inc. v. C.\A. B., 98 U.S. App. D. ©. 348, - 235 F. 2d 845, 851 (1956), cert. den. 353 U..S. 905 (1957). ms - * Investigation, 28 C. A. B. 224 (1959). The Board thereafter decided to issué similar certificates in the overseas and foreign phases, Investigation, 32 C. A. B. 856 (1961). However, the Presi- dent withheld his approval and the certificates never. became effec- tive in view of the Court’s action in the United case, infra. | . 60a (10023, 10024) certificates as granted by the Board which did not contain named terminal and: intermediate points, and also pre- cluded the 10-flight limitation.” oo | . Being thus ynsuccessful in its efforts to authorize: sup- ~ - . plemental air carrier operations of -the type and scope x. deemed required by the public interest, the Board presented | to ee _ the matter to Congress for clarifying legislation. The Congress first enacted stop-gap interim legislation which was designed to afford Congress further time within which to consider the broader questions.” To this end, it author- © ized the Board to validate previously existing certificates and to confer interim operating authority to engage in supplemental ‘air transportation for a further ‘period of _ 20 months, Then, on July 10, 1962, Congress enacted Pub- lic Law 87-528,"* which is of direct relevance to the present proceeding. . ake eL | Among other things, Public Law’ 87-528 amended the -Act by adding new definitions of “supplemental air car- 1° United Air Lines, Inc. v. €. A. B.108 U. S. App. D. C. 1,. 278 F. 2d 446 (1960), vacated sub nom. All American Airways, et al. v. United Air Lines, et al., 364 U. S. 297 (1960). Section 401(e) - of the Act, as‘it existed at that time contained an unqualified re- quirement for specification of terminal and intermediate. points in a certificate and an explicit direction that no certificate should re- strict the right of a carrier to add or change schedules, equipment, etc. As noted infra, there have been subsequent amendments of the Act directed to these problems as they relate to supplemental.air carriers (section 401(e) (3) and (e)(4)). , . +4 Public Law 86-661, 74 Stat. 527, July 14, 1960. 1? 76 Stat. 143. eins | 6la (10024, 10025) rier” ® and “supplemental air transportation” 4 as well as a new subparagraph to section 401 of. the Act concerning the issuance of certificates for supplemental air transpor- — _ tation.’* The net’ effect of these’ various actions was to. supersede all prior regulation of the supplementals ‘and _ to confine the future role of these carriers exclusively to the operation of-charter services, The supplemental air _transportation which the Board may authorize was lim- ited to that which would supplement the scheduled ser- 10025 _ Vices certificated pursuant, to other subsections of section 401(d),** and is tobe made subject to “such limitations as ‘the. Board shall find ‘necessary to assure that the service - rendered pursuant thereto will be limited to supplemental _air transportation as defined in this Act.” ** As far as the Specification of terminal and intermediate points. in sup- plemental air carrier certificates is concerned, the amended Act requires such specification to the extent that the Board | considers it practicable, and otherwisé. it “shall designate '. only the geographical area or areas within or between | which service may be rendered.” *8 8 See, 101(32). | Berean eee ae be ™ Sec..101(33). | | | -§ See. 401(d) (3). 18 Td. *” See. 401(d) (3). - eae #8 Section 401(e) (3). Other of the principal amendments of the Act shouldbe briefly noted. Section 401(n) was added to give the Board broad -powers with respect to supplemental air carriers ‘in the imposition of requirements for insurance, performance bonds © — re ae 62a ° (10025, 10026) In addition, upon findings of fitness, willingness, and cy ability properly to perform such transportation and to ‘s conform to regulatory requirements, the legislation em- vw nnn pOwered the Board to issue new interim ‘certificates or 2 pein tase x | 10026 4] ——Tatio to those applicants meeting specified requirements, | Bias which would be effective pending disposition of their appli- cations. for permanent authority pursuant to section 401(d)(3) of the Act.*® In order to ease the transition to rE + ah ll-charter type of operation, Public Law 87-528. also =a - authprized the Board to‘ permit, for a phase-out period not to exceed two years from date of enactment of legislation, billed services subject to certain -restrictions.”° The Board’s initial processing of the requests¢for interim " authority was completed in the fall of 1962. -All of the-sup- plemental air carriers issued interim certificates were 4 . 2 = i _, or equivalent security arrangements for the protection of the pub- - lie, and minimum -standards of operational performance. It also and gave the Board powers of suspension and revocation under - alties was extended to violations of economic regulatory provisions * (section 901), and under new section 417 the. Board may. issue special operating authorizations to stipplemental air carriers so ‘as to enable them to. meet temporary needs for individually ticketed ,and individually waybilled service between points within the United States, upon finding the existence of the circumstances specified in this section. pe 19 PL, 87-528, See. 7. 20 Sec. 9.. o . . — . SE ee eS ee eee b 2s os “ ee eS ee eee ee ree ea at oe 4 e * . b . . ~ new interim authorizations for supplemental air transpor- continuation of individually ticketed and individually way- imposed a continuing fitness requirement upon the supplementals particular conditions. The Board’s authority to impose civil pen- — , 63a i . (10026, 10027 ) authorized (1) to perform unlimited cargo and passenger charter flights in interstate air transportation, (2) to en- gage in air transportation of persons and property pur- suant to contracts with the Department of Defense, and (3) to conduct cargo. charter flights in overséas and foreign | air transportation subject to certain conditions. Virtually _ all were granted civil passenger charter rights in overseas - air transportation, mostly for use as backhauls in con- junction with military operations, and a few may conduct * intraterritorial cargo and/or passenger charter flights. _ No supplemental initially received authority to transport _ passengers in foreign air transportation: However, more recently two supplemental carriers were certificated to pro- 10027 vide transatlantic civil passenger charters,” and. the in- ‘terim certificates of four other. supplementals have been — - amended ‘to’ include authority to: operate civil passenger charters in the transpacific or transatlantic areas, or both, for temporary periods.” About half of ‘the interim certif- *1 Capitol and Saturn in the Transatlantic Charter Investigation, Docket 11908 et al., Orders E-20530° and E-20531 served March 3, 1964.. The Board originally also selected ONA as a third carrier ° but the President returned the Board’s order without his approval because of serious questions concerning ONA’s financial fitness that arose after the Board’s decision. The record has flow been reopened for further hearings to determine. whether supplemental service | ‘ additional to that provided by Capitol and Saturn should. be au- thorized, and if so, by wom. Order E-21966, March 30, 1965. ** World and TIA both received such authority ‘with respect to . transpacific operations for the interim period pending disposition in: this proceéding of their applications for permanent certificates. Orders E-21304, September 21, 1964, and. E-21574, Deceniber 9, 1964, The same two carriers may now perform transatlantic pas- In broad outline, public convenience and necessity matters are concerned primarily with the public “need for: supplemental air carrier service, and requiie consideration _ of the impact: that certification of the applicants, or any of them, would have on the other presently certificated - earriers. Also inherent in the “need” aspect of the proceed: ing is the determination of whether the public convenience . and necessity require that any authority granted be issued to a class of carriers, as has been the Board’s practice . 10030 > « om heretofore, or whether such authorizations should be tai- _lored to meet particular needs and requirements, Geo- . _ Order E-20573, March 13, 1964, | p. 3, | "88 The-subissues as eo as the result of the prehearing con- ' ference are contained in Appendix A to the ow Confer- ence vines issued June 1964. a dee el 3 _ the Act. . moe ef Ta A eet Sy | | _ (10080). / . (w graphically, the possible areas for certificating Operations _.by the applicants are worldwide in scope, except that the - Board has excluded from consideration here any grant of... _ authority to supplemental air carriers for civil passenger _ charter flights in the-transatlantic area and the authoriza- tion of supplemental air transportation within Alaska.”*. . Fitness is essentially the matter of qualification appli- cable. to any party seeking certification, and the standards used in ‘making this judgment must give due recognition to any inherent differences between supplemental air. transportation and the mor e conventional types of certif- . leated operations, Innportant ingredients are both opera- tional and financial fitness, as well as comparative qualifi- « cations in those instances where the Board may be picking and choosing between " competing applicants: The terms, conditions, and limitations imposed on the supplementals _ must. assure:sound regulation and adequate protection of | the public;*and they must carry out the Congressional ae directive. that the services permitted be of a kind: that “supplement the scheduled service” authorized by other types of certificates issued by the Board. Stated somewhat © Orders E-20573, March 13, 1964, and E-20902; June 5, 1964. As indicated previously, section 401(e) (3) requires.that any-cer- - tificates issued designate terminal and intermediate points if “prac-: area or areas for,service. In addition, it already has been noted that the disposition of all applications is subject to approval of the President insofar as they request. authority to engage in overseas and foreign supplemental air transportation. Alle applicants ex- | cept Stewart Air Service have requested this authgrity, and copies. _ of their applications making this request have been transmitted to the President in accordance with the provisions of section 801 of 7 tigable”, and if not, the designation in lieu thereof of the geographic ~*~ SO i. ss | - ‘ F 68a A a ; a “differently: there’! is a basic statutory mandate that iw izations for supplemental air transportation, which by definition is-confined to “charter trips in air transporta-.. tion”, respect the distinction between charter or: group S transportation, on the one hand,-and individually ticketed- _—— sa, and individually - -waybilled air transportation services, on the other.’ . Except fh situations contemplated by section aN 417 of the Act, individual services are, and have been,since ~ - the. enactment f Public Law :87-528, therfle — : ~ of the’ certificated scheduled carriers, — ¥ By far the greatest emphasis throughout has hoon 4 upon ‘ the geared efforts to expand. the scope and nature of ~ their ‘authori .» Virtually all of the applicants seek Te- ~ moval of the ie barriers against the supplenientals as *a class engaging in passenger operations in foreign .air transportation : SO that: they nay for the future provide unlimited passenger and cargo charter operations - in all’ "geographic areas open to them under the issues in this proceeding. Most applicants do not oppose. a grant of. ~ authority of identical scope | to other applicants. found qualified. 79 And all urge | that the Board in “delineating: ssietanmaee ei 27 Section 101(33) defines’ “guppleniental air ‘tratpeetation” as “ @ ® ® charter trips in-air transportation, other than the transpor- tation of mail by aircraft, rendered pursuant to a certificate of bliec convenience aiid necessity issued pursuant to section 401(d) Oo) of this Act to supplement. the scheduled service authorized by certificates of public yo nvenience and necessity — poureuant, to... ‘t. i sections. 401 (d) (1) ani (2) of this Act.” : 28 Section 417 is the vehicle by which ascii may be au- thorized to meet temporary and limited needs for se ser- \ ~ viees, See fn. 18,supra. |» 29'To the’ extent anal the positions of ‘ie various. applicants ‘are diseygsed in the ‘summaries set forth in Appendix A hereto. mine | | , 69a. a. ees d ey Be cs Pi eae ae ae RR oe their authority redefine the word “charter” ‘to include “all-. . ‘ expense tour” -charters ‘to ticket agents .or “split” omer -- . | ters, or both, in addition to the traditional planeload char-— ters now authorized.” . ee : Ree aay f .O oe _ 3° As will*appear in more’ detail. later, the word “charter” is un- defined in the Act. Generally, the Board has heretofore restricted. *. its meaning to the engagement of the entire capacity of‘an aircraft ‘ by a person for his own use ar by a representative of: a group for the use of such group, provided, however, that tickét agents may not: charter aircraft themselves and in ‘turn sell transportation to, the public on an individual basis. ‘The usual types of planeload ‘charters are “pro rata” charters, where the cost is divided among the passengers transported; “single entity” charters, where the en- tire cost is borne by the charterer; and “mixed” charters, where the ¥ cost is absorbed partly by the participants and partly by the char- ee ; Hh ete e's “ts “Split” charters are ones in which one-half of an aircraft is engaged by one person or group otherwise eligible to obtain chirter _ services, and the remaining half is engaged by another such person — or group, thus permitting two relatively small groups jointly to-. charter an aircraft, At present this*type of authority is enjoyed by the supplemental carriers holding ‘authority to provide trans- —. - atlarttic civil passenger charters. | hee Sones os oi - The .“all-expense tour” charter does nét presently exist in our * transportation system.. It is generally understood ‘to mean a char- _‘«° ter In'which a tour operator or ticket, agent would engage an air- craft for the carriage.of persons traveling on all-expense tours. Such tours would involve not only the point-to-point air transporta- # - tion but also related land portions such as the necessary surface tees ‘transportation; hotel accommodations, sightseeing, ete. The ques- tion, of authorizing all-expense tour charters ‘has been litigated only y in the Transatlantic Charter Investigation, and the Board’s deci- _ gion denying applications for:such authority in that case has not been finally acted upon by’the President. Order E-20776, April a 30,.1964. In January 1965 the Board proposed to grant, such au- .. thority. to all supplementals on an jnterim basis pending decision > | on their applications in this case; but subsequently it deferred any- ~ further action at'this time. (SPDR, January 5, 1965; and SPDR- * a ~ ry PS Sy ee ie OO LN RV ADTs Ceti Bete . Pas SEs “hada Gan a a 70a (10032, 10033). : . The pertinent contentions of the parties concerning the issues and the relevant evidence in support of their posi-. tions are discussed in appropriate sections of this decision. 10033. It is worthy of note at this point, however, that on public convenience and necessity issues there are substantial areas © which are not in dispute. Thus, no party opposes the grant. of unlimited passenger and cargo authority to the appli-- ..eants for the conduct of military operations on behalf of the Department of Defense, although the Bureau, unlike the applicants, would not grant such authority on a world- wide basis but would make it coextensive with the civil © authority, if} any, awarded to each applicant. , Further, there is no objection, to the certification of qualified appli-’ _ eants to provide conventional passenger and cargo plane- load charters between the contiguous 48 states (or between such states and transborder points), provided. that the _ Board imposes appropriate restrictions .to prevent ‘the ‘rendition of ‘individually ticketed services in the guise of _ charters.** The real controversy centers around any geo- -6A, April 27,.1965, Docket 15777.): There is some suggestion by various applicants here that they should be authorized to sell indi-° vidually ticketed .all-expense tours directly as well as by charters to ticket agents. The Board has already determined that such pro- posals aré tantamount to individual services which do not fall within the scope of. charter transportation. Transatiantic Charter Investigation, Order E-17607, October 18, 1961.. — 30a A possible exception is Flying Tiger. Although its position is _ . - not entirely clear, its brief tothe Examiner (p. 4) is susceptible to the interpretation that-the carrier opposes any: service, civil or - milita¥y, by ‘any supplemental. However, Flying Tiger did not — participate actively in the proceeding and has pointed to no evi- dence in support of such a position. pie Tla | ie ie eee fee — (10033,- 10034) graphical expansion of supplemental air carrier operations - beyond these limits, any liberalization of the charter con- cept to include split charters and all-expense tour charters, ‘and, to a lesser extent, upon the fitness, willingness, and — ‘ ability of particular applicants. © - Historic CHarter OPERATIONS — A great mass of statistical compilations and other data - were submitted by the parties concerning the past charter ~ operations of the supplementals and the scheduled carriers. .Perhaps the most significant is the informative and valu- able work done by the Bureau in collecting and correlating information for the years 1961 through 1963 submitted by 10034 all carrier ‘marten in this. seiiailtiea and much of this data is reflected in capsule form in Appendix B to this decision. Appendix C, which is based upon the reports filed with the Board" by the 15 applicants herein which were originally issued interim operating authority as supple- mental air carriers, sets forth various comparative meas- - urements ‘of revenue and financial results for the -sup- _ plemental industry for the years ended September 30, 1961-1964. The more important: facts to: be gleaned from. the record with respect to past. operations will now be con- _ sidered. The oiled of the Military (hist Services. Al- - though the supplementals always have conducted substan- tial operations for the military, -durifg the latter forties - and the decade of the fifties rhany concentrated primarily a G hei he Eh PRR ey be Oe ne ee ae ee ee -. © | (10036, 10087) = “ nent in the transportation of military cargo, receiving — roughly 80 —_ of the funds. expended for such ser- vices:** ' , As might be expected, there has been a marked variation between the individual supplementals in the degree of their reliance on military revenues. ‘Looking at the year ended September: 30, 1964, to illustrate the point, the supple- mentals developed $71,865,000 in military contract and charter revenues. Three of. the 15 applicants. here who hold or thén-held supplemental authority—Johnson Fly- ing Service, ONA, and USOA—performed no military ser- vices while those operated by three others—Purdue, Vance ~ International, and Standard—developed under $80,000 each for the year. At the other extreme, World Aitways was the recipient of $22,162,000 in military revenues, repre- senting 89.2 ‘percent of its total contract and charter rév- -‘enues and about 30 percent of the military revenues of «ll the supplementals combined. World, together - with four of the other major. supplemental carriers having a rela- : tively high — on military operations,” as a group ae Bis 10037 eee | accounted for 79 percent of the military revenues of the entire supplemental industry.” . | | 83 The comparison may also be made on the basis of charter pas- sengers and tons of cargo transported. In calendar 1963 the sup- plementals carried some 330,000 military passengers and 26,048 tons of cargo as contrasted. to about 274 000 passengers and 3 467 tons for the route carriers. % AAXICO (98.8 percent), Capitol (66. 4 pereent), Southern (77.7 percent), and TIA (83.9 percent) - i * The calendar year 1963 total of some $38.5 million in military charter revenues of the certificated route carriers was divided Piece ethene. wie 75a (10037) s Supplemental Civil Operations. During the latter 1950’s i and early 1960’s the civil contract and charter revenues of the supplementals tended to remain static with little in ° the way of a discernible pattern. However, starting with 1962 there has beén a sharp-acceleration in the absolute volume and relative significance of such revenues, a devel- opment which is largely attributable to two factors. The - ' first was the enactment of Public Law 87-528 which re- quired a ‘phase-out of all individually ticketed and way- billed services of the supplementals by July 10, 1964. The second Was the announcement by. the Department of De- fense of its new commercial contract airlift ‘policy under which “contracts for. Fiscal Year 1966 * * * will be lim- ited in amount so that carriers who receive eontracts will _ derive at. least 30% of their air transportation revenues — during’ Fiscal Year 1966 from commercial sources.” * This combination of circumstances,has. compelled. the ‘supple- mentals as a matter ‘of practicaldjecessity to lend every | effort to the fullést possible éxploitation:of the civilian charter markets. — roughly on the basis of 70 percent for the combination passenger- cargo carriers and 30 percent for ‘the all-cargo carriers. ‘The -all-. cargo carriers generated 97 percent ($7.5 million) of the military cargo revenues of the scheduled carrier industry, virtually all in the interstate and transatlantic markets, and about’ 40 percent ($4,123,490) of the interstate military passenger revenues, The largest single area for the combination carriers was military pas- senger carriage across the Pacific for which they . received $20.7 - million. ¢ JI-R-11I. This policy contemplates that eventually the per- centage of revenue from commercial sourccs should reach 60 per- ' cent. - (10098) . -' . 400388 Ct i(‘(i‘ ‘Historic data for the calendar years 1961-1963 as com- piled by the Bureau, sNowing the functional apd geographic _ distribution of the contract and charter revenues of the supplementals, is set forth below: . | Se : 1961 _~—C«w 1962 1963 “Crvm Passencer ‘$3,847,262 $4,101,666 $6,003,769 __ Interstate - 2,565,924” 2,087;360 4,093,435 Overseas 1,121,881. - 1,865,184 1,730,437 — Latin America . ; paar te ; & Caribbean . 12,775 ~- 10,913 20,011 ! _» Transpacific 1,109,106 1,854,271. 1,710,426 : - Foreign -. , 159,457 149,122 179,897 ‘North America 92,147 53,887 125,617 Latin America = ; de ' '& Caribbean « — _ 21,101 oo _-* Transpacific . - 67,310 © 74,134 54,280 Crvm Carco 561,126 1,025,824 * 1,345,810 . Interstate 147,740 - 524,182 . 778,231 Overseas | 145,537 175,602 289,282 © ‘Latin America Bae eee ek & Caribbean 145,537 175,602 . 203,782 “ Transpacific . —s _ 85,500 —— Foreign 267,849: 326,040 278,297 _. North America 64,628 § 54,557 43,452 » Latin America Se eae is —" & Caribbean =-_—s‘171,393 . 130,244 194,060 ros Transpacific $$ - —.- fae 26,785 Transatlantic. - 31,828. 141,239 —- 14,000 Toran . $4,408,388 $5,127,490 $7,349,579 o°° Ta eee, permet Gee (10039) 10039. Ne toe. Rt azae Ae h olt will be noted that the mist sizeable increases in the 1963 * total took place in the interstate passenger and cargo reve- _nues.and that revenues derived from operations in other | geographic areas have not been large. The largest single item in overseas and foreign markets is the $1,710,426 ap- pearing as overseas passenger revenues -(transpacific), all of which was earned by World Airways as the result e of mixed passenger and cargo flights operated under con- tract with Western Electric.Company.*" * ae . . Appendix C provides a more dramatic illustration of the rising tide of supplemental civil contract and charter reve-_ nues in both an absolute and relative: sense. The supple- ‘mental industry totals for such revenues and their rela- tionship to prior years were as follows: % Increase ‘ : Amount _ i I Total Prior Year -°1962 * $9,222,000. 9» 12.2 15.4 | 1963 14,924,000 15.5 618 1964; + 25,040,000 Oa 69.1% *? Since the-supplementals lack certificate authority to transport civil passengers in.the foreign field, such operations as they have had in this area were conducted pursuant to individual exemptions granted by ‘the Board. In 1963, 49 applications were filed by the supplementals for authority to operate flights in the Caribbean, Latin America, and Bermuda areas. Between June 30, 1964, and. June 1, 1965, the Board granted some 55 exemptions covering | ‘flights by the supplemental air carriers to Mexico,.the Bahamas, _ Jamaica, and Bermuda, with the largest participants being Ameri- ~ can Flyers (19), Saturn (18), and Capitol (12). ‘CAB, Weekly - Summary of ‘Orders and Regulations. | Ms > 88 Appendix B, prepared by the Bureau on a calendar year basis, . Shows civil charter revenues of $7;443,336 in 1963 and. $27,982,592 in 1964. Here again, the principal areas of increase are in inter- state passenger and cargo operations. As noted in the appendix, _ the. 1964 total includes ‘the substantial transatlantic ‘revenues of Capitol and Saturn.- Oe fs inte (10040) ~ Despite - the rapid growth of civil reventies in recent ‘ periods the. supplemental air carriers’ as a group remain significantly short of the 30 percent requirement imposed . by the Department of Defense. As of the year ended Sep- tember 30, 1964,.seven s pplementals derived more than 30 percent of their ‘transp rtation revenues from civil -busi- ness while the remaining five operating carriers were be- -low this percentage in varying degrees.” ‘And, as in the case of operations for the military, the participation in civil revenues by the operating c; carriers does not fall info a pattern of even distribution but shows a wide fluctuation between the individual members of the class, In: the year * . ended September 30, 1964, for example, civil contract and charter revenues for supplementals operating throughout -. the year ranged from a high of $7,793,000 for Zantop down- ward to $104,000 for a carrier such as AAXICO, the fifth ranking carrier in terms of military revenues. The top . generators of civil revenues were Zantop ($7,793,000), sh Capitol ($5,340,000),: Saturn - ($3,455 000), and’ World ($2,690,000), and these four carriers. together accounted for over $19 million, or 76 percent, of the civil revenues’ of all the —— air. carriers combined. *The Present Status of the Supplemental i Sia The — vast differences between the supplemental my ° ‘the value of generalizations and underline the nece ity for e ; ¢ ; oe 39 Those) nesedion the 30 percent limitation were American Fly. £%s (33,8 -percent), Capitol (31.8 percent), Johnson Flying Service > “(100 percent); Purdue (86.9 percent), Vance International (53.4 percent), Saturn (73.6 percent) and Zantop (46:3: percent)... The carriers with less than the 30 -percent ratio \were AAXICO (1.2. percent), Modern (9 percent), Southern (18.9 percent), TIA (16. 1 percent), and World — 8 pa ; ee. ~pttn. - _ stantial gains in civil. revenues.” 7 nae = Ee rae ase ‘ st wi aS 2 - considering the situation of each individual carrier. With © this caveat, some broad conclusions are apparent concern-- _ ing their present status. | 10041 There has been a: noticeable improvement for the sup-. . -. plementals as a group.in many,of the indicia of opera- tional and. financial strength. Considered on a year-end: — September 30 basis, the total assets of the 15 applicants | herein who “were issued interim authority rose fred $27,716,000 in 1961 to $95,090,000 in 1964; their operatit revenues for the same years fro $62 million to $103 mi lion; and their operating profit in the same period from ~ $2 million to $13 million. In the critical area of civil .con- - tract and charter revenues there has been an Increase from $14,924,000 in 1963 to $25,240,000 in 1964, and such revenue now accounts: for at least 25 percent of their total transport revénues.’ All six carriers holding fiscal year 1965 long term military contracts managed to improve ‘their positions in this respect in this two year period. In the case of two carriers, AAXICO and World, the improve- 5 ment on a percentage basis has been relatively small. How- ~ ever, two others—CapitoF and Zantop—now meet .the 30 percent criteria established by the Department of Defense, — : and the remaining two—TIA and Southern—recorded sub: s _—_— . pt + re) . ‘ “?t ‘*° Appendix C. The incréases in the percentage of total operating revenues represented by civil contract and charter business from the year ended September 30, 1963, to the same point in 1964 were as follows: AAXICO, 0.6 percent to 1.2 percent ; Capitol, 14.9 percent - ,to 31.8 percent; Southern, 8.5 percent to 18.9 percent; TIA, 1.3 percent to 16.1. percent; World, 8.3 percent to 10.8 percent; and Zantep, 36.3 percent to 46.3 percent. - iy: j Riras > eo ; o 3 ; 40044 10042) 3 von ' Despite the brightgr. sib for the ‘snpplementals “in Be eh, --some réspects, there. are still significant problem ‘aréas ee __piparent \from . an. overall ‘assessment ‘of their financial. ' “condition which affect most ‘Gomponents of the ardup. Their ee -: total net, worth. hag shown a sharp: iherease—$1,2 million a te oe ole oor and $19, 625,000 i in 1964. siya as an waa j : 4 s ee sew Ee eee a fei 2 : 10042 aie ake 4 (ae ies “they. have not ‘attained the one-to- one ratio “of ‘current © | _-, ,assets. to, current liabilities, deemed desirable \for’ most: -* 6 ee aS business’ enterprises, for any year in’ this four-year period. ‘ i vere ‘Fartler, ‘in-each of’ these four’ years the. supplementals as -. “al glass have-had a. negative’ net worktig ‘capital position— 7 * — _ 1. $1,552,000; in, 1961," $5,208,000--in : 1962; $8,820,000 in 1963, - aaa $2,978 8,000 j in 1964. Althotgh this unfavorable working ~ Moret ¢ 2a ee capital “p positior? has. been a characteristic of thé supple-7 | \s. | ms. ore “ee “mental Andustry, it has spot’ den monstrably interfered with. pitta. . ‘the. ability of: most of’ the operating. carriers to ‘expand ~ ea ty operations, and improve net worth,” For’ example, Capitol, - 7.7 » PTI, and Zantop had a combined negative working capital we a _{position. in, the year. ended: September 30, 1964, of .about oe . “$9.4 inilliok. Nonetheless, for the: samé peribd they showed - . - substantial individual operating profits, a combined operat: oh. aa ‘profit of over "$6. million, ‘and*a ‘potabined positive net yt ~~ +S worth of $6 366,000 ; in fact, they.ranked“betwean the-seeond } any Fs and fifth positions in the supplemental iniitey by. ‘these Tare ee units. of qmeastiremént. el ye ae oe pes : ee Wrst AX, iripcn sy be: noted that both the e induatiyiet orth and work- pee “f figures cited, are affected ‘adversely by the inclusion of ling USOA, Standard; .and ONA, carriers which are not ~. ‘If they are excluded, sO as to limit the industry. ess plementals, the negative -working capital posi- ~ 8 ae eat RRO EE «MALY BE SF 4 ‘, ‘\, _- . »," tion of the:industry for 1964 would be reduced to 2 a and total | ee net: word, intréased by, 2. 3 million ; : } : , Aes ar ae te = A o , ae obs é ° a x: oor ad NY . j r4 “ype, a: — : . e we - eo ts ‘ °F pale net misint . : s Sla weiss 7" @qoqas, 10048), ae . a eae "10043 vent, for the supplementals. s. While the. seuplemenials « as a group were increasing - their operating profit from $5 millign in- 1963 to $13-million. in 1964, that of the certifi- tion of $16 million in 1961; In terms of- distribution of the “market, the. relative positions of the respective groups have. remained substantially - unchanged—about 97.5 per- cent for the ce'etificated route carriers and 2.5. percent for - ., the supplementAls. However, théir respective participa-- ; ‘tion: in total industry operating profits clearly favors the ie cértificated: route \carriers. In: 1962 the latter group of carriers obtained 89.8 percent of the industry operating ~ profits as contrasted to 96.4 percent in 1964, while the share | ‘of the supplemental declined. from 10.2. -percentto, 3. 6 per- . 3 cent im the same — m: y # The Joint Interv enors note that for he year ended September * 30, 1964, five supplementals—AAXICO, Capitol, TIA, World, and Zantop—had. sizeable rates of return. on investment and on &tock- . holders’ equity... However, the Joint Intervenors would be the first . ~ to contend; were the question’ one relating to their own earnings, - ‘that: profitability patterns must be assessed from a long range standpoint rather than by a keyhole.approach. The record makes clear that the results indicated are not. representative when viewed . over a period of years, either for these individual carriers or for og ‘the he supplemental industry generally. + eated route carriers more than doubled from $166 million to $350 million and rose to the 1964 level from a loss posi- a 4 a x on ° : - a pditiaaiiaacs ahs ~ bite dies eneeites — a Oe i ct i A NER ti i a on iain ies ett * (10043, 10044). -As-has been the situation for: the past several .years, the. paramount problem for the supplementals .is how best to achieve a substantial expansion of their civil business. a The solution to this problem is of fundamental importance both to provide a‘sound economic base for their operations . . and to permit ‘them maximum participation in military _ revenues. While it may be reasonably anticipated that the level of military need for auxiliary assistance from civil air. carriers will continue to be high or to’ increase,. two - 40044 other factors are of particular significance. The first j is the ' Board’s action in March 1965 setting new and reduced : minimum rates for both international .and domestic mili- tary air transportation, the effect of which will be. to re- duce the governmental cost for international military air transportation alone of about $19 million annually with additional savings to the’ government domestically. a. less compensated for by carrier cost-savings or additional ‘volume, the supplementals, as major participants in. mili-- tary carriage, may be materially affected. ‘ The other military aspect is, of course, the future ,appli- cation of the: Department of Defense “30 percent com- -Mercial” requirement. Appendix E illustrates the situa- tion: as it existed for the six supplemental air carriers holding long t military contracts for fiscal year 1965, based on operating results for the year ended September 30, 1964. Looking at their actual operating revenues for the year, the six carriers as a group were. $5,265,000 short 2 of meeting the 30 percent ratio had it been i in effect during 4s CAB Press Release, 65- 25, March 18, 1965 (ER-432, PS-26). aint 83a. : ; | (10044, 10045) that period. Taking their actual: commercial revenues as representing the 30 percent, their maximum entitlement, _ ,aS,a group, to tilitary revenues .would have totaled - $48,494,000, some $17.5 million less than the military reve- nues actually received.. Put another way, in order to maintain their actual 1964 military revenues of $66 mil- --’ lion, again assuming ‘effectiveness of the Department of Defense policy, it would have been necessary for these car- _ riers as a group to generate an additional $7;522,000 from civil business.* Viewing the carriers individually, in order ., to maintain their —_ 4 level of military business, Capitol ee aa te ‘and Pectin would have no- difficulty since they fully met | the 30. percen{ quota. . However, four carriers—A AXICO, Southern, TLA. World—had shortages in civil reve- _. nues necessary to comply with the 32 percent: standard of $3,477,000, $56 6,000, $2,398,000, and $6,747,000, — tively:* . ‘Since the close of the record the Department of Defense contracts for fiscal year 1966 have beene awarded.** The military will. pay approximately $155 million for airlift by “civil air ‘carriers as compared to about. $129 million in. 12 fiscal 1965. The share of the supplementals has been in- ereased to $52,354,000 ‘from the prior year‘ level of — - $43,468,000 and the contracts will be performed by the ~ _ same six supplemental air carriers. By reason of the loss of its LOGAIR contract in 1966 Capitol will experience a ** Should the Board approve the Saturn-AAXICO merger agree- ‘ment, AAXICO, as the surviving carrier, will have substantially - solved its problem i in this respect. _ 8 Press Release CAB 65-78, June 30, 1965. - ~ S4a (10045, 10046) - net loss in military revenues of $2,885,000. The remaining five, however, will have net - increases—$1,925,000 for ‘. AAXTCO, . $670,000 . for’ Southern, $1,755,000. for TIA, $51, 000 for. World, and $7,370,000 for Zantop. , Civil Operations of Other Carriers. In contrast to the vital role of civil contract and charter revenues for the sup- plementals, the civil charter business -of. the cértificated route industry is a relatively minor part of their activities, - _.Whether gauged by. passengers and tons of cargo carried, revenue passenger-miles, revenue aircraft miles flown, or other of the usual indicators; A breakdown of the revenues © ‘received for 1963 presents a Kenied ee picture. 10046 -As reported to the Bureau, the civil charter revenues for the scheduled- carriers—trunks, local service carriers, all-_ cargo carriers, and international combination _passenger- ‘cargo carriers—were as e as follows: Total _ Civi PasseNncER ve | ‘Interstate . | ig? eh $12,015,846 Overseas ert See ; 898,908 Latin America & Caribbéan | 898,908 Transpacific . en Foreign . | wie 3,430,287 | North America : an 1,098,184 . yLatin América & Caribbean — . _2,058,370 Transpacific 2 Pate 273,733 Total Civil Passenger ee as $16,345,041 — oA. Ratrinataath a S8Bdeinnee! »nmewe ~* « aot te SN AN ne i A a A Sti GION A A ns le ei le tly ta, ahaa ni ee Met Dh ra) AR Se LD w mre eee Se eee (10046, 10047) \ : } ats i , é Bs Civm Carco | 7 . Interstate — « : 7 "885,170 Overseas . | ee “9 158,556 » Latin America & Caribbean | 74,417 "Transpacific one oe _. 84,139 Foreign - | pot 7 : 2,564,538 , SOP Agee ; 24,566 Latin America & Caribbean Bory * 103,965 _Transpacific aes ' 376;204 + * Transatlantic: Satie 2,059,803 Total Civil Cargo | 3 . ~ 3,058,264 Total, passenger and cargo | $19,403,305 Ta 10047 | The ten trunklines Comprising the Joint Intervenors ac-_ a counted for $10,686,088 of the total of $12,015,846 in inter- "~ . state passenger revenues, and of this amount one carrier— - United—generated $5,604,938, or 52 percent. The balance in the interstate passenger charter field’ was composed of _ $833,603 for the local service carriers-and $496,155 for the all-cargo carriers. Of the overseas passenger total, $891,548 was developed by the combination carriers to $7,360 for the all-cargo carriers, while the foreign passenger’ charter revenues were divided $169,100 for the all-cargo carriers -*5 The remaining trunk, Northeast Airlines, was not included. However, in 1963 Noftheast had only: $146,000 in passenger char- ter business and none in freight charters as against overall trans- port revenues of $6.86 million. CAB, Air Carrier, Financial Sta- tistics. . ete ag Seas q ) oe ee a ge eS a 86a (10047, 10048) and $3,261,187 for the combination carriers. The all-cargo carriers produced: $227,190" of the $335,170 earned from interstate civil cargo charters and all of the $158,556 in overseas cargo charters. Foreign cargo charters were also dominated by the all- -cargo carriers which developed _/* $2,214,129 from this source to $350, 409 for the combination - "carriers. The comparative nam Ore of civil passengers and | - eargo charters for the scheduled carriers is best illustrated by relating the revenues received to the°overall transport . revenues of the carriers “involved. The Joint Intervenors , claim for 1963 doniestic civil charter revenues of $9, 953,000, -» about four-tenths of 1 percent of° their total transport revenues of roughly’ $2.4 billion. In foreign and overseas operations for, the same year the ratio ranged around ‘ percent or less for the individual carriers, with a high of 2.4 percent for Pan American’s Latin American division. - Included in the foregoing tabulation are reported civil charter revenues of $838,351 for local service carriers as 10048 ~_ eontrasted to 1963 overall transport revenues for the local service industry of $156,689,000 (exclusive of an addi- tional $68.million in subsidy)’ And the three all-cargo car- .. riers supplying data—Airlift International, Flying Tiger, . , and Seaboard—reported total civil, charter revenues of $3,272 490, roughly 4 percent of their total system revenues in 1963 of $83.2 million. Seaboard, which Strongly opposes alry competition from supplementals for transatlantic. civil. cargo charters, developed $755, 520 from ‘this source, which represents less than 3 percent of its 1963 total transport revenues, of $26, 552, 000. eae » ° . eee Pere ee , : (10048, 10049) Even if the comparisor is made on the basis of all con- tract and charter revenues—passenger and cargo, military and civil—the result is not changed ‘materially and no sig- nificant ‘growth trend for charter operations of the sched- uled carriers is evident. While charter revenues a$ a. percent of total transport revenues have progressively in- creased for the supplementals from 65.1 percent in 1959 to 93.2. percent in 1963, they have remained static for the -domestie trunks—0.4 percent in 1959..and 0.5 percent in - 1963. The same is true for the international and territorial combination carriers (5.4 percent in 1959 and 5.8 percent in 1963), and the charter revenues of local service carriers as a percentag® of their total transport revenues declined ., | from 2.5 percent in 1959. to 1 percent in 1963. For the, all-cargo carriers, the percentage rose in 1962 to 86.8 per. cent> (domestic) and 59.2 percent (international and ter- ‘ritorial) but declined to 76.2 percent and 48.4 percent, & respectively, in 196346 , | | 10049 THE Future ror TRapiTionaL CuHarTER SERVICE Historie data concerning traffic and participation have a © significant bearing on future market potential, but they do *° CAB Handbook of ‘Airline Statistics and Air Carrier Analytical ‘Charts and Summaries. The -above percentages for all-cargo car- “ riers are not representative of their civilian activities since, so far as appears from this record, the bulk of their charter revenues are obtained from military rather than civil operations... There is a further distortion by reason of the type..of data included. The 1963 totals, for example, include substantial revenues for AAXICO, now a supplemental air carrier, and for Slick and Aerovias Sud Americana, air carriers which “did not furnish information or _ otherwise participate in this proceeding. we Qa. Dini rendan d MALY. lal > ASIN Se retrnNigle Ling een eae ate LS (1961), to accompany H. R. 7318, p. 16. 88a ; (10049, 10050) _ not provide the exclusive-or necessarily the most inrportant basis for resolving these questions. There are numerous . other and often contradictory considerations to be assessed in reaching the ultimate’ judgment: : The substantial and valuable role of the supplemental air carriers in providing passenger and cargo service for ° the Department of Defense cannot be’ seriously disputed, --and no party*has undertaken te‘do.so on this record. ‘Their past contribution in fulfilling day. to day military require- _ ments, ‘as well as their response to-emergency situations exemplified by the. Berlin blockade, the Korean war, and the Lebanon crisis, have all been chronicled in detail and need no reiteration.*7 The supplementals have provided and-continue to provide a sizeable and flexible reservoir of trained personnel and equipment, fully committed to the purposes of national defense. In view of the worldwide nature of this. country’s international commitments, and © with the existing. state of political, upheaval and unrest, notably in Southeast Asia and the Caribbean, there is every indication ‘of a strong continuing need for the services of : the supplemental air, carriers to meet present and future defense requirements. a - 10050 ‘Similarly, there i is no ‘real argument with the proposition that the traditional planeload passenger and cargo charter operations ‘domestically between the 48 contiguous states by the. Presently operating and. qualified supplementals 47 Large Savegiilale Air Carrier Senssitiaielion, 22 C. A. B. 838, 860 (1955) ; S. Rep. No. 688, 87th Cong., 1st Sess. (1961), to -accom- pany S. 1969, p. 21; H. R. Rep. No. 1177, 87th Cong.,- ‘Ist Sess. " ae olhsabteiee x tahini pen 89a (10050, 10051) servé a useful public purpose responsive to public need. By their past charter operations the supplementals have: earned their. niche as an established part of the domestic air transportation system. Their domestic cliarter opera- - ‘tions have shown substantial growth; particularly. since’ the enactment of Public Law 87-528 and the termination of all individual sales authority; and the future charter potential for the supplementals within these limitations is conceded. Indeed, the.’ Joint Intervenors, in urging: re- striction of.any award for the supplemental air carriers to _ traditional planeload charters operated domestically. or to ~ transborder. points, contend that there is a vast reservoir- -of underdeveloped affinity group charter business available in the United States. To this end they presented an estimate . purporting to slow that members of national charter- worthy organizations’ and their families alone represent | a group charter potential of some 300 million people. While this forecast is suspect. in technique and unreliable as a fe 3 quantitative measurement of the probable market, it does indicate a sizeable Souree of charter traffic that has not been fully exploited by either the supplementals or the | : certificated: route carriers. Turning to overseas and foreign charter opera tions, the past provides a less Rrormative guide to the future. In the“ area of ¢ivil pastnger charters across the Atiantic, which are not in issue here, the certificated route carriers in recent years. have had intense. competition from the 10051 foreign air carriers and the ssupplementals for charter _ business;. yet the result has been that during this period both scheduled and charter traffic stl grown substantially. © Vv : ~ 90a. (10051, ee ee ee . With this exception, however, no parallel sitention exists in which to measure ag précisely the probable future develop- ment under comparable. competitive conditions.“* __ There are wide differences in the relative size of over-: @eas and foreign markets as shown by past air traffic. The - largest—the transatlantic—had 2.9 million passengers in -1963,. followed ‘by Central, America and ‘the Caribbean (2.4 million); the transpacific, composed of ‘Asian and aoe Oceania ‘countries (600,000); and South-America (418,- fo 000). The West Coast-Hawaii and principal U.S.-San Juan markets, which the Joint Intervenors would withhold from . | | ae Se. are. sizeablé¢ — accounting for 1963 ae ae cee 10052 - O & D. passengers totaling 645,000 and 1.2 million, re- spéctively. In terms of the number of passenger charters SAR artis hi MOAN ee A Co Soa aD a ah *® The more salient facts concerning the transatlantic passenger — charters can be bridfly noted. Both scheduled service traffic and charter traffic on the Notth Atlantic have shown strong growth patterns, and while TWA and Pan American have shared in_the scheduled traffic growth, their participation in charter traffic’ ‘has been static or dwindling. Thus scheduled traffic of the U.S. and foreign air carriers rose from about 1.7 million passengers in 1961 to 2.2 million in 1963, or approximately 31 percent, with the par- - ticipation of Pan American increasing from 403,602 passengers to 539,015 and that of TWA from 207,630 passengers to 359,143. . Although total charter traffic increased by some 97 percent, or three times as fast (148,366 i in; 1961 to 292,352 in 1963), Pan Ameri-- 4 can’s charter passengers declined from 22 490 to 16,014.and TWA’s increased only slightly from 11,452 to 19, 415. Percentage partici- ier pation in ‘charter traffic for foreign air carriers increased’ from: 28 go in 1957.to 77 percent, in 1962,; that of Pan American and WA -decreased from 27 percent to’5 percent; and there was a decrease from 45 percent to 18 per [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385001_1111%3A01. Public record. Not legal advice.