Appendix — American Airlines, Inc. v. Civil Aeronautics Board
Supreme Court brief1977
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Text
Federal Aviation Act
Sec. 1002(g) ...... ————— 1a
1——K Za
Administrative Procedure Act
11 T Ree 3a
Re © ens 6a
Judgment of Court of Appeals 6a
Order of Court of Appeals Denying Rehearing .. 8a
Order of Court of Appeals Denying Rehearing
— 9a
Civil Aeronautics Board Order 75.672 10a
Civil Aeronautics Board Order 75-8-99 46a
Civil Aeronautics Board Order 75-9-115 63a
APPENDIX A
Statutes Involved
Federal Aviation Act
Sec. 1002. [72 Stat. 788, 49 U.S.C. 1482)
Power to Prescribe Rates and Practices
of Air Carriers
(d) Whenever, after notice and hearing, upon complaint,
or upon its own initiative, the Board shall be of the opinion
that any individual or joint rate, fare, or charge demanded,
charged, collected or received by any air carrier for inter-
state or overseas air transportation, or any classification,
rule, regulation, or practice affecting such rate, fare, or
charge, or the value of the service thereunder, is or will
be unjust or unreasonable, or unjustly discriminatory, or
unduly preferential, or unduly prejudicial, the Board shall
determine and prescribe the lawful rate, fare, or charge
(or the maximum or minimum, or the maximum and
minimum thereof) thereafter to be demanded, charged,
collected, or received, or the lawful classification, rule,
regulation, or practice thereafter to be made effective:
Provided, That as to rates, fares, and charges for over-
seas air transportation, the Board shall determine and
prescribe only a just and reasonable maximum or min-
imum, or maximum and minimum rate, fare, or charge.
Suspension of Rates
(g) Whenever any air carrier shall file with the Board
a tariff stating a new individual or joint (between air
2a
Appendix A
carriers) rate, fare, or charge for interstate or overseas
air transportation or any classification, rule, regulation,
or practice affecting such rate, fare, or charge, or the value
of the service thereunder, the Board is empowered, upon
complaint or upon its own initiative, at once, and, if it so
orders, without answer or other formal pleading by the
air carrier, but upon reasonable notice, to enter upon a
hearing concerning the lawfulness of such rate, fare, or
charge, or such classification, rule, regulation, or practice ;
and pending such hearing and the decision thereon, the
Board, by filing with such tariff, and delivering to the air
earrier affected thereby, a statement in writing of its
reasons for such suspension, may suspend the operation
of such tariff and defer the use of such rate, fare, or
charge, or such classification, rule, regulation, o1 practice,
for a period of ninety days, and, if the proceeding has not
been concluded and a final order made within such period,
the Board may, from time to time, extend the period of
suspension, but not for a longer period in the aggregate
than one hundred and eighty days beyond the time when
such tariff would otherwise go into effect; and, after
hearing, whether completed before or after the rate, fare,
charge, classification, rule, regulation, or practice goes
into effect, the Board may make such order with reference
thereto as would be proper in a proceeding instituted after
such rate, fare, charge, classification, rule, regulation, or
practice had become effective. If the proceeding has not
been concluded and an order made within the period of
suspension, the proposed rate, fare, charge, classification,
rule, regulation, or practice shall go into effect at the end
of such period: Provided, That this subsection shall not
apply to any initial tariff filed by any air carrier.
3a
Appendia A
Sec. 1006. [72 Stat. 795, as amended by 74 Stat. 255, 75
Stat. 497, 49 U.S.C. 1486)
Orders Subject to Review; Petition for Review
(a) Any order, affirmative or negative, issued by the
Board or Administrator under this Chapter, except any
order in respect of any foreign air carrier subject to the
approval of the President as provided in section 801 of
this Chapter, shall be subject to review by the courts of
appeals of the United States or the United States Court
of Appeals for the District of Columbia upon petition,
filed within sixty days after the entry of such order, by
any person disclosing a substantial interest in such order.
After the expiration of said sixty days a petition may be
filed only by leave of court upon a showing of reasonable
grounds for failure to file the petition theretofore.
Review by Supreme Court
(f) The judgment and decree of the court affirming,
modifying, or setting aside any such order of the Board
or Administrator shall be subject only to review by the
Supreme Court of the United States upon certification
or certiorari as provided in section . 254 of title 28, United
States Code.
Administrative Procedure Act [Chapter 5 of Title 5,
USL.)
4553. Rule making
(a) This section applies, according to the provisions
thereof, except to the extent that there is involved—
(1) a military or foreign affairs function of the United
States; or
da
Appendix A
(2) a matter relating to agency management or per-
sonnel or to public property, loans, grants, bene-
fits, or contracts.
(b) Genera! notice of proposed rule making shall be
published in the Federal Register, unless persons subject
thereto are named and either personally served or other-
wise have actual notice thereof in accordance with law.
The notice shall include—
(1) a statement of the time, place, and nature of
public rule making proceedings;
(2) reference to the legal authority under which the
rule is proposed; and
(3) either the terms or substance of the proposed rule
or a description of the subjects and issues in-
volved.
Except when notice or hearing is required by statute, this
subsection does not apply—
(A) to interpretative rules, general statements of
policy, or rules of agency organization, proce-
dure, or practice; or
(B) when the agency for good cause finds (and in-
corporates the finding and a brief statement of
reasons therefor in the rules issued) that notice
and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.
(c) After notice required by this section, the
shall give interested persons an opportunity to participate
in the rule making through submission of written data,
5a
Appendix A
views, or arguments with or without opportunity for —
presentation. After consideration of the relevant ma —
presented, the agency shall incorporate in the rules adop
a concise general statement of their basis and —
When rules are required by statute to be made on t e
record after opportunity for an agency hearing, sections
556 and 557 of this title apply instead of this subsection.
i icati ice of a substantive
d) The required publication or service of a
nie * be made not less than 30 days before its effective
date, except— |
(1) a substantive rule which grants or recognizes an
exemption or relieves a restriction ;
(2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good
cause found and published with the rule.
(e) Each agency shall give an interested person the
right to petition for the issuance, amendment, or repeal
of a rule.
6a
APPENDIX B
UNITED STATES COURT OF APPEALS
For tue Disraict or Cotumeu Creevir
[No Opinion]
No. 75-2020—September Term, 1976
American Arruives, Ivc., Deura Am Luves, Iwe.,
Eastern Araiives, Inc., and Trans Won Araives, Iwe.,
Petitioners,
v.
Crvm Arronavutics Boarp,
Respondent,
Tur Nationa Passencer Trarric Assoc., Ixc.,
Intervenor.
On Petition for Review of Orders of the Civil Aero-
nautics Board.
Before:
Waiont and Ross, Circuit Judges,
and Gesew,* District Judge.
JUDGMENT
This cause came on to be heard on a petition for review
of orders of the Civil Aeronautics Board and was argued
* Of the United States District Court for the District of
— sitting by designation pursuant to 28 U.S.C. § 292(a)
7a
Appendix B
by counsel. While the issues presented occasion no need
for an opinion, they have been accorded full consideration
by the court. See Local Rule 13(c).
Our consideration of this case convinces us that it does
not come within the principle announced in Moss v. CAB,
430 F.2d 891 (D.C. Cir. 1970). We are further of the view
that the case is moot since the suspended tariffs have been
withdrawn by the airlines.
On consideration of the foregoing, it is Onbrnrp and
Apsvpoep by this court that the petition for review of the
Board’s orders is hereby dismissed.
Per Curiam
For the Court:
/s/ Grorce A. Fisner
Greorce A. Fisner
CLERK
Frizep Dec 17 1976
Georce A. Fisner
Crunk
Ra
Appendia B
UNITED STATES COURT OF APPEALS
For tue Distaict or Coruna Crrcuit
No. 75-2020—September Term, 1976
American Arrives, Ixc., DTA Arm Lives, Ixc.,
Eastern Arniines, Ixc., and Trans Wortp Aries, Ixc.,
Petitioners,
V.
Civm Agronavtics Boarp,
Respondent,
Tue Nationa, Passencer Trarric Assoc., Ixc.,
Intervenor.
Before:
_ + Wrtomt anv Ross, Circuit Judges;
Grsru,“ United States District Judge for the United States
District Court for the District of Columbia
ORDER
On consideration of the petition for rehearing filed by
petitioners, it is
Orperep by the Court that petitioners’ aforesaid petition
is denied.
Sitting by designation pursuant to 28 U.S.C. § 292(a).
— —
9a
Appendiz H
UNITED STATES COURT OF APPEALS
For tue District or Cotumau Circuit
No. 75-2020—September Term, 1976
American Aratives, Ivc., Devta Am Lives, Ivc.,
Eastern Alka Es, INC., and Trans Wortp Alntuxrs, Ixc.,
Petitioners,
V.
Crvm Agronavutics Boarp,
Respondent,
Tue NATox AL Passencer Trarric Assoc., Inc.,
Intervenor.
Before:
Bazeiton, Chief Judge;
Wricut, McGowayx, Tamm, LAVXXT AL, Roptnson,
Mickixxvox, Ross ann Wiikey Circuit Judges
ORDER
The suggestion for rehearing en banc filed by petitioners
having been transmitted to the full Court, and no Judge
having requested a vote with respect thereto, it is
Oxverev by the Court, en banc, that petitioners’ afore-
said suggestion for rehearing en banc is denied.
Per Curiam
For the Court:
/s/ Gronda A. Fisner
Georce A. Fisner
Clerk
10a
APPENDIX C
Order 75-6-72
UNITED STATES OF AMERICA
Civm Agronavutics Boarp
Wasutnorton, D.C.
Adopted by the Civil Aeronautics Board
at its office in Washington, D.C.
on the 13th day of June, 1975
Docket 27947
Domestic passenger fare increases proposed by
Various Carriers
Docket 27417
Petition by the
Drranruxxr or TRANSPORTATION
requesting the Board to issue a show cause order with
respect to the standard load factor
Onver or Investication ann Suspension
By tariff revisions marked to become effective on various
dates from June 15 through July 1, 1975, all domestic
trunkline and regional carriers operating within the 48
contiguous states and the District of Columbia propose to
Revisions to Airline Tariff Publishers Com , Ine., Agent
C.A.B. Nos. 229, 246, and 249. *
— — — — — ——
lla
Appendix C
extend the four percent fare increase which become effee-
tive on November 15, 1974 beyond its expiration date of
June 30, 1975. Some carriers propose to limit the extension
to an additional six and one-half months and have included
a new expiration date of January 14, 1976, while others
contend that it should be made a permanent part of the
fare structure. In addition, five carriers propose a further
increase in fares of either five or six percent. A summary
of the carriers’ proposals appears in Attachment A.
All carriers argue that both fuel and non- fuel costs have
continued to rise, and that a roll-back in fares by four per-
cent would be financially unsound in light of the very poor
financial results in the first quarter of 1975. Five carriers
contend that costs (primarily fuel cost) have risen to such
an extent that they are not being offset by the higher fares
previously permitted and that a further increase is now
mandatory. No carrier contends that a further increase
would be inconsistent with the Board’s standards adopted
in the Domestic Passenger Fare Investigation (DPF).
However, several express concern over the possible adverse
effect of an additional increase at this time, essentially be-
cause of the “unsettled” state of the economy.
The complainants, on the other hand, argue that continu-
ing the four percent increase, and in partieular in. lement.
ing a further increase, will only cause a further decline in
airline financial results because higher fares will cause
greater numbers of passengers to foresake air travel. The
complainants allege that the root cause of the carriers’
financial difficulty is their inability or unwillingness to
match capacity to traffic, and that the recent increases in
fares have created a growing disincentive to fly.
A summary of the carriers’ justifications appears in
Attachment B. Complaints have been filed by the Council!
12a
Appendix C
on Wage and Price Stability (Council) against TWA and
American; against TWA, American and Eastern by the
Board's Office of the Consumer Adovocate (OCA); and
against several carriers by the National Passenger Traffic
Association, Ine. (NPTA). A summary of these complaints
and answers thereto appears in Attachment C.
In addition, the Department of Transportation (DOT)
has petitioned the Board for an order to show cause why
ratemaking load-factor standards should not be increased,
particularly in the longer-haul trunkline markets. A sum-
mary of DO T's petition and answers thereto appears in
Attachment D.
Tue Fare Proposats
The carriers have purported to follow all the DPFI
standards in evaluating the industry’s present revenue
need, and most of those which are proposing an additional
increase beyond the four percent have gone the further
step of making the full discount-fare adjustment.“ All
carriers use calendar 1974 as the base period. Although
the computations vary somewhat from carrier to carrier,
they are as a general rule substantially similar, and sup-
port the carriers’ claims that their proposed fares do not
exceed those allowable under the Board’s DPFI standards
as so far applied. Most have computed the unadjusted or
actual 48-state rate of return on investment (ROT) at ap-
proximately 8 percent, and typically at approximately 10
percent as adjusted for Phase 5 discount fares, standard
seating, and the load factor standard. Without the full
discount-fare adjustment the carriers generally estimate
——
13a
Appendiz C
that an approximate 12 percent fare increase is needed to
raise the industry ROI to 12 percent. With the fare in-
creases of 5 or 6 percent, including the full discount fare
adjustment, the carriers estimate an ROI of between 10.38
and 11.5 percent (Eastern does not compute the final
adjusted ROI, but estimates that an 8 percent fare increase
would be required to reach the 12 percent ROI standard).
The Board’s analysis of present revenue need produces
a different result. In making our analysis, we have refined
the cost-escalation factor, and have made an adjustment
for aircraft utilization for the first time. We have also
made the full discount-fare adjustment, as have some
carriers. Finally, we have used a different base period,
since the tariff-filing lead time did not permit the carriers
to use the most recent data for the year ended March 31,
1975, as we have done.
The ROI computed on this basis, including annualization
of the four percent fare increase, is 11.29 percent, four
points above the actual ROI of 7.28 percent realized by the
trunkline industry. (See Attachment E.) Nevertheless, it
remains below the 12 percent return which the Board has
found reasonable for ratemaking purposes and, accord-
ingly, retention of the four percent is warranted on a
temporary basis at this time. However, we are not now
persuaded that the carriers should be permitted to in-
corporate the November 15, 1974 four percent fare increase
as a permanent part of the fare level. The economic situa-
tion is uncertain, as is the impact of the various major
discount-fare programs which the carriers have established
in recent months. For these reasons, we will suspend the
proposals which would extend the four percent increase
indefinitely. Our analysis also indicates that the proposed
increases over and above the present fare level would result
144
Appendix C
in an excessive ROI for the industry, and should be
suspended.
As indicated, our ROI computations reflect various mod-
ifications in the approach we have followed in evaluating
previous fare-increase proposals. It should be stressed
that none of the foregoing modifications reflect a departure
from the basic principles of the DPFI. The full discount-
fare adjustment is merely an implementation of a policy
enunciated in our 1972 decision in Phase 5 of the DPFI
and thus has been long heralded. The adjustment for
aircraft utilization is required in order to avoid reflecting
in the future-period fare leve' the abnormally low utiliza-
tion experienced in 1974 as a result of fuel constraints
which have been subsequently relieved. The modification
in the inflation factor merely reflects the fact that fuel
costs are no longer rising as rapidly as they did in the
base period. We have also refined the belly-cargo revenue-
offset adjustment to reflect annualization of cargo-rate
imereases as a necessary corollary to the annualization
of fare and cost increases. These various adjustments and
other considerations underlying our conclusions are dis-
cussed in detail below.
The cost-escalation factor is intended to adjust base
period costs to reflect the level of costs experienced at the
effective date of the fare increase. The factor previously
used, and used here by the carriers in their justifications,
was based on the increase in operating expense per avail-
able-seat-mile (at the standard load factor) from one
year to the next. This technique accomplishes the desired
result as long as unit costs are increasing at a reasonably
steady rate. However, this does not appear to be the situ-
ation at this time and, as a consequence, we have developed
a refined methodology for developing the escalation factor
15a⁴
Appendix C
insofar as it is influenced by fuel prices. While we have
continued to use the traditional approach with respect
to non-fuel costs, we have estimated the price of fuel as of
July 1, 1975 to be 1.5 cents a gallon higher than the average
for the first quarter 1975. This basically reflects the im-
pact of the $1.00-a-barrel tax increase on imported erude
oil which was effected in February 1975. The impact of
that increase, estimated to be about 1.3 cents a gallon for
aviation fuel, is expected to flow through to the airlines
sometime around the middie of the second quarter. Our
total computed cost factor is 7.85 percent, about one half
that computed by most carriers. Some of this difference,
however, stems from the fact that we are using a more
recent base period which reflects higher cost levels than
the data used by the carriers. .
We have made a ultilization adjustment in =
proposals because the higher load factors which ap-
— the ratemaking standard during 1974 resulted
from reduced frequencies and aircraft utilization, rather
than from traffic growth as had been contemplated in the
DPFI. The present methodology makes no adjustment to
account for higher load factors due solely to less efficient
utilization of aircraft (zero utilization when an aircraft
is grounded). However, this element has not previously
been of material consequence. We believe such an adjust-
ment in the present atypical circumstances is wholly con-
sistent with the fundamental principle which evolved from
the DPFI, that the general fare level should not be bur-
dened by unnecessary capacity. Accordingly, we have
adjusted 1974 utilization rates, by carrier and by aircraft
type, to reflect their 1972 experience.“ For the year ended
* This the most recent normal calendar-year to the
of the fect erates in 1978 We have r le no adjust-
ment in the case of those carriers whose 1974 utilization exceeded
that in 1972.
OO eV
16a
Appendiz C
March 1975, the overall adjusted increase in utilization
equated to a $33,996,000 decrease in depreciation and in-
surance cost, and a $285,266,000 decrease in investment
and interest expense. We believe this approach provides
a reasonable adjustment in present circumstances.‘
As indicated, we have concluded that it is now appro-
priate to make the full discount-fare adjustment. The
carriers have been on notice for over two years that the
Board would eventually make such an adjustment. Never-
theless, in recent months they have established a number
of major discount fares in an effort to stimulate traffic
growth which has sagged because of the downturn in the
economy, and to fill the substantial number of additional
seats they have placed in service. We recognize that the
general economic downturn and consequent decline in
domestic passenger growth may well warrant discount-
fare experimentation. However, it does not follow that the
fundamental Phase 5 principle that full-fare traffic not be
burdened by non-cost-based discount fares should be ig-
nored. To the contrary, if anything, these circumstances
would seem to require that the Board now take the neces-
sary steps to avoid burdening the regular fare level.“ This
modification raises the ROI by about 2.5 points.
In summary, after making the adjustments described
above, the industry’s ROI remains under the 12 percent
standard. While as discussed in detail later, we believe
We have incorporated into the utilization adjustment four
— B. 747 of Continental representing $66 million of invest-
ment.
In most of the Board's recent orders involving major diseount-
fare proposals the carriers have been forewarned that the fares
would be subjected to the Phase 5 adjustment. A notice of pro-
posed rulemaking dealing with the details of the adjustment
methodology will be issued shortly.
17a
Appendix C
that a review of the load-factor standard is now indicated,
an adjustment for present purposes would not be war-
ranted. In these circumstances, a rollback of the four per-
cent increase permitted last November does not appear
warranted.
At the time the four percent fare increase was introduced
last November, the Board members were divided as to
whether it was justified. Since that time, however, the
carriers’ unit costs have continued to escalate at a rapid
rate. Thus, their unit costs (after various DPFI adjust.
ments) for the year ended June 30, 1974—the base year
employed in the Board’s earlier assessment of this fare
increase—averaged 3.54 cents per available seat-mile
(¢/ASM). Using what it deemed a reasonably representa-
tive cost-escalation factor, the Board projected a 1974 year-
end unit-cost level of 3.93 ¢/ASM, and the dissenting mem-
bers argued for a somewhat lower figure. However, the
carriers’ subsequently reported operating results for the
year ended March 31, 1975—the base period being emploved
here—show a DPFI-adjusted unit-cost level of 5.98 ASM.
Applieation of the refined cost-escalation factor and other
adjustments described above points to a 1975 midyear unit-
cost level of 4.23 ¢/ASM, which is nearly eight percent
higher than the 1974 year-end level projected last fall. This
substantial rise in the unit-cost level compels the conclu-
sion, even by those who argued that the fare increase was
unjustified at the time it was introduced, that it cannot
now be rolled back but must be permitted to remain in
effect until January 14, 1976.
In our judgment, the complainants do not indicate error
in the foregoing analysis.“ The complaints of the Council
*In addition to its which are basically similar to
those of the other ts, NPTA once again alleges that
18a
Appendix C
and OCA center on the possible adverse impact on traffic.”
The Council contends that fares should be rolled back to
the level prevailing prior to the 4 percent increase last
November—and perhaps to an even lower level—unless
the Board can satisfy itself, among other things, that the
present price elasticity of airline traffic will in fact insure
that higher fares will produce higher total revenues. How-
ever, the Council provides no evidence to support the prop-
osition that traffic is now so elastic that continuing the
four percent increase will have a negative impact on reve-
nues. On the other hand, a number of factors suggest that
this is not the case. For example, yield was up 14.7 per-
cent in the year ended March 1975 over the previous year,
yet traffic remained relatively constant (down —.46 per-
cent and revenues rose by 14.2 percent. During the early
the carriers should not be permitted fare increases because they
have failed to take advantage of a cost-sharing proposal of NPTA.
That proposal would in effect compensate NPTA members for the
ticketing and reservation services they provide for company em-
ployees, which according to NPTA would be considerably less
than the present 7 percent commission which the airlines pay
commercial travel agencies. NPTA claims that this costs the air-
lines about $100 million a year. The Board has in the past declined
to consider the merits of NPTA’s proposal in connection with
pending fare increases, and NPTA has provided no reason which
persuades us that we should now reverse that policy. The merits
of OCA’s allegations as to TWA’s relative efficiency aside, con-
tinuation of present fare levels would be warranted even were
TWA’s results climinated from DPI adjusted totals.
’ Numerous references are made to the increases in domestic air
fares over the past year and a half, the cumulative effect of which
is undeniably substantial. However, reciting fare increases without
providing any comparative basis is meaningless. For example,
comparing 1974 over 1972 (just prior to the round of increases
repeatedly referred to), the increase in yield expressed in constant
dollars is only 2.3 percent, which cannot be considered unreasonable
in light of the substantially greater impact petroleum price in-
— have had on the airline industry versus the economy in
general.
—— J—ñ—ä— 2
19a
Appendia C
months of 1974, when the then recent cancellation of a num-
ber of discount fares resulted in rather substantial in-
creases in yield (on top of the six percent fuel-related
increase which was permitted in mid-April 1974), traffic
did not drop as dramatically as would be expected in an
elastic market. Rather, during the peak summer months
of June through September, a considerable amount of dis-
count fare traffic shifted to full fares. This consumer re-
action does not suggest a substantially elastic market.’
Moreover, we cannot ignore the fact that the airline indus-
try is in unanimous agreement that continuation of the
four percent is necessary.
The complainants also contend that the carriers should
not expect to earn a 12 percent ROI in the present eco-
nomie climate. A basic concept of the DPFI is that in
periods of low load factor the carriers’ actual ROI will
tend to be below the 12 percent ratemaking standard and,
conversely, will exceed the standard when load factor rises
above 55 percent.’ Thus, for ratemaking purposes, the
Board does not recognize a decline in load factor caused
by economic recession or any other factor. The Board’s
policy is, therefore, consistent with the complainants’ con-
tention that carriers should not expect a 12 percent return
in the present circumstances. The adjusted ROI ap-
proaches the recognized level only because of the severity
of the Board’s ratemaking adjustments. The actual ROI
Along similar lines, the Council and OCA express concern for
the discretionary traveler, contending that the solution to recent
traffic declines is to reduce the cost of air travel so as to generate
new business. However, this argument ignores the influx of many
greatly reduced promotional fares initiated by the carriers in
recent months; such as 7-30 day excursion fares in all markets
over 750 miles, night coach excursion fares, “no frill” fares in
certain markets, and other more selectively availab:. fares.
*See Order 71-4-59, April 9, 1971, Opinion, pages 72-74.
20a
Appendiz C
for the year ended March 31, 1975 was only 7.28 percent,
and without the four percent increase now marked to ex-
pire this could drop significantly. As long as actual load
factors remains low, whether because of the economic cli-
mate or for whatever reason, the airline industry’s actual
earnings will be below the recognized ROI. This is not
inconsistent with the fluctuation in earnings of other in-
dustries. In summary, the complainants’ concern about
permitting the industry to earn a 12 percent ROI in the
present economic climate stems from a lack of understand-
ing of the Board’s policy.”
In the area of cost control, the complainants’ primary
concern, with the exception of NPTA, appears to be with
alleged deficiencies evidenced by the declining load factor,
particularly insofar as it is caused by the addition of ca-
pacity. However, under the standard load factor methodol-
ogy, the decline in load factor is not reflected in the car-
riers’ claims, or in the Board’s calculation of revenue need.
Tue Loap-Facror STanparp
Without offering any factual support or legal basis for
doing so, the complainants urge the Board to apply a
higher load-factor standard in evaluating the instant pro-
posals. A partial answer to this contention is that imple-
mentation of the full discount-fare adjustment in effect
implies a significantly higher load factor than 55 percent.
Since all discount fares are eliminated in our evaluation,”
It is important to distinguish between ratemaking ROI and
actual ROI, with the stringent adjustment we have made, the
— about 11 pereent. However, the actual ROI is only 7.28
pereen
Children's fares are not excluded since are regarded
part of the basic fare structure. aad *
2a
Appendix C
the load- factor standard becomes a full-fare standard. and
the industry's fare level is thus tied to the revenues gener-
ated by full-fare revenue passenger-miles. However, since
actual yield is less than the full-fare yield used for rate-
making purposes, the industry would need to realize a load
factor substantially in excess of 55 percent in order to
achieve the recognized ROI.”
Moreover, at this point, it is impossible to predict the
consequences of raising the full-fare load-factor standard
to 60 or 65 percent us the complaints suggest. Since these
represent system-average load factors, it is possible that
operations at this level would create serious adequacy-of-
service problems. In addition, since load factors are now
trending downward, it would be inconsistent with past
Board policy to reverse the trend abruptly for ratemaking
purposes, and would place the carriers in an untenable
earnings position. We refer here to the Board’s decision
to phase in the present 55 percent standard partly because
the economic climate prevailing at that time was inhibiting
traffic growth, and therefore the carriers’ ability to bring
capacity into line with demand.
Nevertheless, we are persuaded that circumstances have
changed sufficiently in the years intervening since our
Phase 6B DPFI decision to warrant a reevaluation of the
55 percent load-factor standard, as requested by DOT.
DOT contends that raising the standard to at least 65 per-
cent, particularly in longer-haul markets, would result in
lower coach fares for all passengers in return for some-
what less convenient service, aud would be consistent with
Indeed, achievement of a 12 percent ROI in 1974 would have
required an actual load factor somewhat above 60 percent when
the discount-fare traffic is taken into account.
22a
Appendia C
the national need for fuel effieieney.!“ However, we do not
believe that a show cause order would provide an effective
forum.
The level of the standard load factor is of major con-
sequence to the public, since it represents that level of
service which the public is asked to pay for and which over
the longer term can expect to receive. It also has a major
impact on carrier earnings when actual load factors devi-
ate substantially from the standard, and thus discourages
inefficient scheduling practices. For example, the base pe-
riod used in evaluating the December 1, 1973 five percent
fare increase was the year ended June 30, 1973. At that
time, the carriers’ load factor was 52.1 percent (48.2 after
adjusting for standard seating) and, as a result, in excess
of $500 million in operating expense was disallowed.'* Sub-
sequent to the Board’s decision on this standard, the car-
riers’ load factors gradually rose toward the 55 percent, as
expected. Nevertheless, until the impact of the fuel crisis
on scheduling practices, the actual 48-state load factors
remained considerably below the standard. As load factors
increased due to fuel-related schedule reductions, the im-
pact of the load-factor adjustment diminished sharply. For
the year ended June 1974, the base period used in evaluat-
ing the November 1974 four percent fare increase, the load
factor was 55.2 percent (53.1 with standard seats), and the
load-factor adjustment disallowed $145 million in operating
expense.
Several carriers—Allegheny, Braniff, Continental, Eastern,
Frontier, National, Southern, United and Western—filed com-
ments along with the Aviation Consumer Action Project. A sum-
mary of these comments, DOT’s petition and answer appear in
Attachment D.
This reflects elimination of only the Phase 5 discount fares.
Phase 6B of the DPI.
— m — —
23a
Appendiæ C
DOT cites the fact that the DPI findings on load factor
were based upon 1967-1969 experience. Now, just six years
later, the unprecedented rise in fuel prices is having a sig-
nificant impact on costs and most probably will cause sig-
nificant changes in the carriers’ scheduling practices as
they seek to control consumption. We agree with DOT that
the present standard needs to be reevaluated in order to
insure that such an important ratemaking input reflects
what all sources indicate will be the continuing impact of
fuel on the economics of the airline industry. No details
need be cited to prove the major change that has taken
place over the last year as a direct result of the fuel crisis
What concerns us most is the indefinite duration of that
change, and the apparent lack of any real possibility that
the situation will revert to the years of low fuel prices
and unlimited supplies. Indeed, current national policy in-
dicates that prices can only rise in the future as we seek
fuel independence. Tentative estimates are that the Ad-
ministration’s present fuel policy could ultimately raise the
domestic airlines’ fuel bill between $640 million and $1.5
billion annually.““
The fundamental question which is presented in this sit-
uation is whether or not the cost/quality of service rela-
tionship inherent in the present load-factor standard has
been sufficiently increased on the cost side to warrant some
balancing modification on the quality of service side. In
other words, largely because of fuel price increases, the
cost of operating aircraft has risen more rapidly than costs
generally. In terms of real dollars, it costs more today
than in previous years to provide the same level of service.
In terms of constant dollars, the current cost level is 9.8
16 At present, $2 of the contemplated $3-per-bbl. increase in the
tariff on imported crude has been imposed.
24a
Appendiz C
percent above 1972. The load-factor standard would need
to be raised to 60.4 percent if this cost increase were to be
absorbed through a decrease in the quality of service rather
than passed on to the passenger. While future increases
in fares may prove to be warranted, current conditions
nevertheless dictate a reexamination of the basic cost/qual-
ity of service relationship as reflected in the load-factor
standard so that at least some portion of the escalating
cost level may be offset by an adjustment in the quality
of service. Also, we have previously indicated our inten-
tions of focusing upon the desirability of applying the
standard load-factor adjustment by class of service (Order
74-12-109, December 27, 1974, footnote 59). Accordingly,
our reexamination of the load-factor standard will encom-
pass this issue as well.
We have concluded to undertake a rulemaking proceed-
ing, rather than pursue the show-cause procedure urged by
DOT, as the most effective means of dealing promptly with
the question of the load-factor standard. A formal public
hearing would be extremely time consuming, and we be-
lieve these issues need to be explored as expeditiously as
possible. On the other hand, the rulemaking approach
should provide an adequate forum in which all parties can
fully present their views.“
The Board is also considering a reexamination of issues
relating to the rate of return. On the one hand, substan-
tial questions have Deen raised in recent months in the
public arena as to the reasonableness of the 12 percent
standard. On the other hand, there have been changes in
the capital market since the Board’s decision on this is-
DOT's petition in Docket 27417 will be consolidated into the
rulemaking proceeding.
25a
Appendia C
sue in the DPFI. Under these circumstances, the time may
be ripe for a review of this issue. N
We view the periodic reevaluation of previously estab-
lished ratemaking principles and standards in the light —
ibly altered conditions as an appropriate exercise 0
— — However, the institution of a proceed-
ing in which the Board examines these principles and
standards should not be construed as any prejudgment or
commitment to change. N .
Accordingly, upon consideration of the tariff filings, the
justifications, complaints, answers, and all relevant mat-
ters, the Board concludes that the proposals to increase
domestic fares beyond current levels, and those proposals
which would continue the present fare level indefinitely,
may be unjust, unreasonable, unjustly discriminatory, un-
duly preferential, unduly prejudicial, or otherwise unlaw-
ful and should be investigated. We further conclude that
the fares should be suspended pending investigation. We
find that the complaints do not set forth sufficient facts to
warrant investigation of the proposals which would con-
tinue the present level of fares until January 14, 1976, and
the requests therefor and consequently the requests for
suspension will be denied, and the complaints dismissed.
Accordingly, pursuant to the Federal Aviation Act of
1958, and particularly sections 204, 403, 404, aud 1002 there-
of,
Ir Is Onveren Tuat:
1. An investigation be instituted to determine whether
the provisions described in Attachment F hereto, and rules,
regulations and practices affecting such provisions, are or
will be unjust, unreasonabi:, unjustiy discriminatory, un-
duly preferential, unduly prejudicial, or otherwise unlaw-
26a
Appendix C
ful, and, if found to be unlawful, to determine and pre-
scribe the lawful provisions and rules, regulations, or
practices affecting such provisions;
2. Pending hearing and decision by the Board, the provi-
sions described in Attachment F hereto are suspended and
their use deferred to and including September 12, 1975,
unless otherwise ordered by the Board, and that no changes
be made therein during the period of suspension except
by order or special permission of the Board;
3. Except to the extent granted herein, the complaints
in Dockets 27862, 27864, 27886, and 27887 are hereby dis-
missed ;
4. The investigation ordered herein be assigned before
an Administrative Law Judge at a time and place hereafter
to be designated ;
5. A copy of this order be filed with the aforesaid tariffs
and be served on the domestic scheduled certificated air
carriers, the Allied Pilots Association, the Civil Aeronau-
ties Board’s Office of Consumer Advocate, the Council on
Wage and Price Stability, the Department of Transporta-
tion, and the National Passenger Traffic Association, which
are hereby made parties to this proceeding, and upon the
Aviation Consumer Action Project.
This order will be published in the Federal Register.
By the Civil Aeronauties Board:
Epwiy Z. Hottann
Secretary
(SEAL)
Timm, Member, Fun tree Arracuep
Concurrine Statement.
27a
Appendiz C
Timm, Memper, Concurrinc STaTeMeENT:
When the Board instituted the Domestic Passenger-Fare
Investigation, it did so out of a desire to introduce the ele-
ments of stability and predictability into what had there-
tofore been a variable and unreliable area of ad hoc de-
cision-making. It alarms me to see those principles and
the results already achieved by their implementation in the
present coherent and orderly fare regime jeopardized by
the new era of unpredictability which the Board seems to
herald in this decision.
Several new adjustments which the Board has made in
computing the air transportation industry’s revenue need
are of particular concern since they impose novel and
unannounced standards upon which the industry and the
public have not been given the opportunity for comment.
The new utilization factor, for example, arbitrarily ad-
justs 1974 utilization to the 1972 carrier experience. This
simplistic and somewhat broad-brush approach should
have been announced by the Board well in advance of this
decision so that the public and the industry could have
submitted comments and replies to the proposal. An ROT
computation excluding this utilization adjustment would
produce a 10.53 percent instead of an 11.29 pereent ROI.
The end result would be that a further 1.5 percent fare
increase above the present level including the 4 percent
increase of last year would still not bring the industry-
wide ROI to 12 percent. I believe that such an adjust-
ment is inevitable and desirable but I believe that fairness
and administrative due process require advance notice.
The full discount-fare adjustment which the Board is
implementing here is also a matter of concern to me, since
it prejudges the rule-making procedure which would he
the more appropriate means of arriving at this adjustment.
28a
Appendiz C
Furthermore it chooses to deal with military traffic in
the same way as other discount passengers, in effect con-
sidering them full-fare-paying passengers and subjecting
them to the Phase 5 adjustment. I trust that this approach
means that the Board will not discourage carrier dis-
continuance of these military fares since it would be un-
conscionable to require their continuation in a fare regime
while simultaneously penalizing the carriers and their
shareholders for offering them.
As to the rule-making proceeding which the Board is
initiating today to reexamine the load factor standard, I
believe that this vital question which will have such far-
reaching effects on the public interest in general and on
air transportation economics in particular should be fully
explored in a formal public hearing in which all parties
may fully participate. The halfway measure which the
Board offers here as a compromise with DOT’s show-cause
technique will sacrifice thoroughness for speed and will
impede a full exploration of all points of view. I believe
a similar approach should be taken in any reexamination
of the level and application of ROI.
However, it seems to me that all of these policy changes,
which may result in sharp deviations from past Board
actions and orders, should not be dealt with precipitously
but should be thoroughly examined in an orderly manner
by the Board. I do not believe that the instant question
before us today provides an appropriate vehicle for a re-
assessment of Board policy relative to specific formulae or
petitions presently being considered by the Board. The
only procedure consonant with the Board’s statutory obli-
gations is for the Board to communicate its proposed policy
change to the staff and the public who may then study and
cominent on these principles prior to their implementation
—— woh: —
— —ñ4——ʃk —ä6—. ß —
29a
Appendix C
by the Board. Without this procedure, any standard set
by the Board at any time may, under the pressure of time
deadlines, cease to be a standard, and become merely a
brief benchmark that will lead to short-term, case-by-case,
ad hoc decision-making. The result will be a bewildered
public, bewildered industry ‘and financial communities, and
a bewildered Board, all wondering whether our U.S. trans-
port system can endure beyond the transitory moment.
In conclusion, I concur in the ultimate result which the
Board has reached today, but I do so without prejudice to
future fare filings that may reflect the upward march of
costs. I note that, despite the application of almost every
conceivable downward adjustment of carrier revenue nee,
which I discussed above, the Board has found today that
the economic circumstances in the air transportation indus-
try fully justify last year’s 4 percent fare increase at the
present time and in effect entitle the carriers to an increase
of about 1 percent over their present fares.
s, Rozert D. Timm
American
Braniff
Continental
Delta
Eastern
National
Northwest
TWA
United
Western
Airwest
Allegheny
Frontier
North Central
Ozark
Piedmont
Southern
Texas International
30a
Appendix C
ATTACHMENT A
SUMMARY OF PROPOSALS
Continuation of
the 4 percent
nnn
Continuation of the 4 percent
plus an additional
5 percent 6 percent
xe
xX:
x?
x:
x?
1 Marked to expire with January 14, 1976.
31a
Appendix C
ATTACHMENT B
Summary of Carrier Justifications
In support, the carriers allege, inter alia, that the decline
in the economy has placed the industry in a severe revenue
deficiency which will remain as long as these economic
conditions continue; that a reduction in the general fare
level, in the middle of the summer peak travel season,
would seriously exacerbate the financial difficulties facing
the industry; that fares must be set in recognition of the
continuing cost increases being experienced by the industry
aud that it is obvious from the most recent financial results,
that fare increases have not heen forthcoming in time to
offset cost increases; and, that if the four percent fare
increase were allowed to expire, the industry return could
very well fall to a negative return and thus the continua-
tion of present fares cannot be economically disputed.
American, Eastern, TWA, and United propose to in-
crease fares five to six percent over present levels. In sup-
port of their proposals, these carriers allege, inter alia,
that cost increases, particularly aviation fuel, have far
outgained revenues, and that even with the DPFT rate-
making standard adjustments the requested increases are
fully justified. Further, these carriers contend that even
after the modifications and changes suggested hy Members
Minetti and West in the Board methodology of evaluating
industry rate of return, the requested increases will fall
short of the Board’s return standard, and without the
increase will approximate only seven percent. They em-
phasize that these pro forma regulatory returns are not
real-world achievable returns, and as a practical matter
cannot be achieved without outside forces such as the
mandatory fuel allocation program which was largely re-
32a
Appendix C
sponsible for the reasonable earnings of some carriers in
1974. The carriers contend that they cannot, nor should
they be expected to stop the inflation process, and while
they are making every effort to curtail costs, the current
and projected increases in aviation fuel are beyond the
control of the airline industry. They note that since No-
vember 1974, when the Board granted the carriers a four
percent increase, the average price per gallon of fuel has
risen almost 16 percent for the domestic trunk industry.
Those carriers urging continuation of the present level
of passenger fares state that there is no question that
after application of DPFI standards a further increase is
warranted, but because of the uncertain effect such an
increase could have on recovery, both on the general econ-
omy and air transportation in particular, they feel that
fares should not be increased further at this time. There
is a general agreement that because of the present and
potential fuel price situation, an increase in fares may be
unavoidable in the near future. They further assert that
a rollback in the present level of fares would only create
very significant losses, since it is unlikely that such a
small fare decrease would have any stimulative effect.
ATTACHMENT C
Summary or CompLaInts AND ANSWERS
Council on Wage and Price Stability (Council)
The Council has filed a complaint against the proposals
of both TWA and American seeking suspension and in-
vestigation of both the renewal of the 4 percent increase
and the further increases. The Council states that its in-
terest in filing the complaint is “to see that in reaching its
G—TꝓwPPfk— ũ — — — —
33a
Appendix C
decisions, the Board also takes into account the potential
inflationary and anti-competitive consequences of its ac-
tions, and acts to minimize those consequences.” The Coun-
cil believes that fares should be rolled back to the level
prevailing before the 4 percent increase unless the Board
can satisfy itself that: (1) the present price elasticity of
air passenger traffic is such that higher air fares will in
fact produce higher total revenues; (2) the carriers have
made every effort to reduce their operating expenses—that
fares should only be increased if required to meet uncor.-
trollable increases in costs; and (3) no fare increase
should be granted under present circumstance for the pur-
poses of raising the carriers’ return on investment to the
12 percent level. In the view of the Council, the justifica-
tions filed by American and TWA fail to establish grounds
for fare relief in each of these areas. Finally, the Council
asserts that these are not normal times and the carriers
have no right to expect to earn “normal”, i.e., 12 percent,
rates of return during the current period of high inflation
and severe recession.
Office of the Consumer Advocate (OCA)
The OCA has filed complaints against the retention of
the 4 percent increase and the additional 5 percent increase
proposed by TWA and 6 percent proposed by American
and Eastern. The OCA asserts that the airline industry
is rapidly pricing itself out of the market and that it is,
therefore, “incumbent upon the Board to step in and pre-
vent TWA, and other carriers considering fare increases
from self-destruction.” Otherwise, states the OCA, air
travelers will be limited to business travelers and those
individuals in the higher income brackets who can afford
the luxury of air travel. The OCA contends that higher
34a
Appendix C
load factors are imperative and that the publie must not
be required to pay for high costs attributable to the pres-
ent situation of overcapacity.
With respect to TWA in particular, OCA contends that
that carrier’s poor performance is not representative of or
comparable to the industry’s efficiency and accordingly
should not be the basis of an industry-wide rate increase.
OCA asserts that the load factor situation is one cause of
American’s high first quarter 1975 loss and that the an-
swer to spiraling costs is not adding more capacity as
American has done but reducing capacity unilaterally. In
reviewing efficiency measurements, OCA notes that East-
ern’s productivity—i.e. revenue ton miles generated per
employee is 25 percent less than that for the entire indus-
try. Finally, OCA alleges that the carriers have not ade-
quately reduced controllable costs, and that there exists a
price increase/traffic decrease spiral which must be stopped.
National Passenger Traffic Association (NPT A)
The NPTA is a nationwide association representing over
300 companies and business org. nizations which operate
business travel departments providing airline ticketing and
reservation services for company employees. The com-
plainant requests that the Board deny both the renewal of
the 4 percent increase and any further increase by any
carrier. The NPTA asserts that a fare increase would
seriously reduce traffic and thus be counter-productive.
The NPTA further contends that the carriers have not
demonstrated that they are taking all reasonable steps to
control their non-fuel related costs. In particular, the com-
plainant cites the failure of the carriers to agree to a cost
sharing with the NPTA which allegedly has resulted in a
greater use of commercial travel agents by business trav-
elers and thus higher costs to the carriers.
—— —— — —
35a
Appendix C
Answers of the Carriers’
TWA argues that the complaints by OCA and the Coun-
cil fail to discuss the pre ood fare increase within the
context of the DPFI and that the complainants would have
the Board adopt an ephemeral emotional standard which
would be contrary to the Board’s legal power. The carrier
asserts that ii sufficiently justified both the extension of
the existing 4 percent and proposed 5 percent fare in-
ereases using industry-wide data and the DPFI method-
ology, and that OCA’s contention that TWA’s perform-
ance should not be the basis of an industry-wide rate in-
crease is not relevant. The carrier further asserts that the
ratemaking ROI would be only 11.19 percent even if TWA
were eliminated from the industry totals. TWA claims
that while the proposed 5 percent and retention of the
4 percent fare increase would yield an 11.19 percent regu-
latory ROI, the real world ROI would be —0.47 percent
due to the vicissitudes of the economy and the 55 percent
load factor standard which the carrier feels is unattainable
in the present economic climate. TWA charges that the
Council’s complaint attacks the DPFI and avoids the issue
of whether or not the proposed fares are justified accord-
ing to present legal standards. The carrier asserts that the
1The Department of Transportation (DOT) filed an answer to
the Council’s complaint stating that it “reluctantly” supports both
retention of the 4 percent increase and further 5 and 6 percent
increases. In addition, the answer reiterates DOT's support of a
65 percent ratemaking load-factor standard, and asserts that the
12 at ROI should be a long-range goal rather than an in-
flexible yardstick for all fare increase requests. Also, the Allied
Pilots Association has filed a statement in support of American’s
inerease. APA states that the central problem facing
the carriers is the mounting fuel prices and that there is no reason
why the airline industry alone should be called upon to swallow
such cost burdens.
36a
Appendiz C
airline industry has made significant efforts to retain traffic
and generate new traffic as evidenced by the extensive
promotional fare programs of recent months.
In response to OCA’s allegations that TWA has failed
to exercise capacity restraint, the carrier asserts that prob-
ably no other carrier in the industry has made more
stringent efforts to hold down capacity in relation to the
soft traffic experienced this year than has TWA. Over the
past winter TWA grounded six wide body aircraft and in
the forthcoming months it will have four L-1011 aircraft
grounded in the early part of the summer and six grounded
by August. TWA contends that the fact that its drastic
actions in curtailing capacity have not solved its problems
is reflective of the fact that unilateral capacity reductions
cannot spare a carrier the difficulties of a declining market.
Finally, TWA asserts that contrary to the view of OCA,
its non-fuel costs are not out of line with other carriers,
but its fuel costs are, and this is a matter over which it
has no control.
American, Eastern, and United answer, inter alia, that
the complaints are actually petitions for reconsideration
of DPFI standards and as such are not germane to the
instant case. The carriers state that the industry ROI will
remain below 12 percent even with the requested increase,
particularly since sharply higher fuel costs seem inevitable
with President Ford’s recent energy message and asser-
tions by Arab leaders that oil prices will soon rise. The
carriers argue that the DPFI methodology prohibits in-
efficient carriers from being rewarded unwarranted fare
increases. Application of these DPF] standards results in
the elimination of more than one billion in industry oper-
ating and interest expense, and $626 million in industry
investment. In addition, the carriers contend that compari-
—— es
37a
Appendix C
sons of the airline industry to non-regulated businesses are
inherently unfair since the latter have broad discretion in
reducing losses while the air carriers have public responsi-
bilities which preclude such unilateral acts.
The respondents argue that this is not a case of expect-
ing “normal” profits but simply a case that they must have
revenue increases in order to overcome their present posi-
tion of no profits.? They contend that the carriers have
not achieved the Board’s rate of return standard for many
years and that in competing with other industries for capi-
tal, the airline industry is at or near the bottom in any
measure of American business.
Finally, the carriers allege that the complainants’ con-
tentions that the 4 percent increase of last fall resulted in
the traffic downturn during the first quarter of 1975 are un-
substantiated. Among other factors, they cite the fact that
first quarter 1974 traffic results were distorted by the fuel
crisis, and that adjusting for this fact, traffic declined only
1.4 percent in the first quarter of 1975. Moreover, it is
alleged that even with the 4 percent increase last fall, fares
for much of the travelling public have actually declined
by reason of the Board’s Phase 9 (Fare Structure) deci-
sion and the introduction of various discount fares so that
average passenger-mile yield has decreased 4.4 percent.
ATTACHMENT D
DOT’s Petition
On January 17th, 1975, the United States Department of
Transportation (DOT) filed a petition with the Board stat-
ing that the Board should take immediate steps to direct
2 American claims that with a fare rollback, adjusted regulatory
rate of return for the industry would be less than the interest paid
on the carriers’ debt.
38a
Appendix C
the carriers to show cause why ratemaking load factor
standards should not be increased. In support of its peti-
tion DOT states its belief that the excursion fares recently
approved for the airlines! should be approved for only a
short period of time pending consideration of an increase
in ratemaking load factors to 60-65 percent. DOT believes
the excursion fare to be discriminatory since it would be
limited to selected travelers and estimates that “if imple-
mented on an industry-wide basis, would reduce the fare
level by about 4 percent.”
DOT contends that the increase in ratemaking load fac-
tors to 60-65 percent, at cost levels then prevailing, would
result in a fare reduction for all coach passengers of ap-
proximately 10 percent. Such action, DOT asserts, would
promote expanded air travel, encourage the carriers to
operate at higher load factors, and increase fuel efficiency.
DOT believes that raising the load factor standard to at
least 65 percent, particularly in the longer haul markets,
would result in lower coach fares for all passengers in re-
turn for somewhat less convenient service and would be
consistent with the national need for fuel efficiency.
DOT states that the proposed changes must take place in
the competitive environment versu the two alternatives
capacity agreements or a government controlled fuel allo-
cation program. Both alternatives, DOT believes, may re-
sult in the passenger receiving service at higher load fac-
tors than those the passengers pay for and would receive
in a competitive environment. Finally DOT asserts that
even if recovery of fuel cost increases through increased
fares is necessary at some future time, the public will have
Order 75-1-72, January 17, 1975 wherein the Board a
“Bicentennial” excursion fares in markets over 1,500 miles.
* DOT states that, to provide reasonably convenient service,
raising short-haul ratemaking load factors may not be appropriate.
39a
Appendix C
the benefits of increased fuel efficiency stemming from
higher load factors and the fares will stiil be below the level
which would have been necessary if the Board had con-
tinued to utilize present load factor levels in ratemaking.
In response to comments, DOT states that the data base
for the load factor portion of the DPFI was 1967, 1968, and
1969 experience and the final decision was rendered in
April 1971. Were it not for significantly changed condi-
tions, DOT states that it would not recommend a change
in the load factor standard it recommended over four years
ago; but two key changes have occurred which warrant re-
examination of the 1971 load factor standard. First, the
increased cost of imported crude oil has caused the Admin-
istration to embark on a program of reducing fuel use.
And second, the increased cost of fuel has resulted in sub-
stantial fare increases.
DOT further states that it does not believe that the 65
percent standard is appropriate for all markets, but that
there are many markets in which higher load factors are
acceptable and warranted, and that such higher load fac-
tors could provide significant benefits to the publie in terms
of more reasonable rates. Concerning the alternative posed
by American Airlines to allocate fuel, DOT answers that
such action does not benefit passengers in that passengers
are entitled to receive service in a competitive environment
at the level implied in those rates and that the allocation
program might well result in many passengers paying for
one level of service and receiving a lower level of service
(ie,, higher load factors and greater delay). Concerning
another alternative, promotional fares, DOT asserts that
unless properly structured, such fares debase the fare
structure and burden other fare passengers; thus they do
not achieve the basic objective DOT seeks.
40a
Appendiz C
SumMary or ComMENTs
Allegheny
Allegheny contends that DOT’s pleading is imprecise as
to its objective and devoid of factual or analytical support
for the propositions advanced. The carrier asserts that the
use of a show cause procedure to accomplish DOs objec-
tives is contrary to the established ratemaking scheme of
the Act which empowers the Board to prescribe changes in
fares only after notice and hearing.
Aviation Consumer Action Project (ACAP)
ACAP supports the reduction in the general domestic
passenger fare level proposed by DOT and requests that
the Board conduct an investigation and hearing to deter-
mine the proper amount of such reduction. ACAP contends
that the carriers appear to recognize, in the form of various
discount fare requests, that the cost of air travel now ex-
ceeds the ability to pay of a large number of potential pas-
sengers. ACAP agrees with DOT that fare decreases
should take the form of an across-the-board reduction in
coach fares, rather than the complex discount plan, but
alleges that DOT has not presented adequate financial
data to determine the proper amount of such a decrease.
Finally, ACAP asserts it (sic) belief that the Board cannot
properly set fare levels through a show cause order, but
only after notice and hearing.
Braniff
Braniff asserts that the DOT petition rests on the unsup-
ported assumption that fares could be reduced if the Board
adopted a 65 percent load factor, wholly ignoring the tre-
mendous increases in fuel costs being concurrently advo-
4la
Appendix C
cated by the very Administration of which DOT is a part.
The carrier contends that the request for an order to show
cause is in material respects a petition for reconsideration
of Order 71-4-54, by which load factor standards were first
established, and of Order 74-3-81, March 18, 1974, wherein
trunkline standards were affirmed, but standards for the
shorter haul local service carriers were rescinded. In sum-
mary, Braniff alleges that the DOT petition has no factual
predicate and that it simply rehashes arguments recently
made and rejected in the barely concluded (except for
remand) DPFI.
Continental
Continental opposes the petition of DOT for three rea-
sons. First, the petition is vague in that it offers no pa-
rameters for defining “longer haul — —. does —
provide explanation or justification for ing
percent. ‘Second, the Board has already dealt specifically
with D0 T's request in Phase 9. And third, Continental is
concerned that the use of an average 65 percent load factor
standard will cause significant public inconvenience by
virtue of the fact that, to attain this average, the carriers
necessarily will have to operate many flights fully booked
at great inconvenience to passengers.
Eastern
Eastern states that DOT has provided nothing to dem-
onstrate the actual financial effect upon the trunk carriers.
It contends that the traffic increase needed just to break-
even with DOT’s 10 percent fare cut is 15.9 percent and
DOT has made no showing that this traffic increase could
ever be achieved or even accommodated on existing ca-
42a
Appendix C
pacity, or that the resulting load factor would be “reason-
ably attainable.”
Frontier
Frontier asserts that DOT has completely ignored the
fact that even under current fare levels the industry has
not come close to achieving the 12 percent rate of return
preseribed by the Board. Rather, the carrier contends,
DOT has blandly assumed a 10 percent reduction in fares
will miraculously generate enough new traffic to offset lost
revenues, as well as justifying new ratemaking load fac-
tors of 60 to 65 percent. Frontier submits that regardless
of the pressures in favor of lowering the cost of air
transportation and saving fuel, the Board cannot abdicate
its responsibility to foster “sound economic conditions,”
and should not abandon the principles of the Df when
DOT has not submitted a shred of evidence or economic
support to demonstrate that the years of hearings and
analysis upon which the DPFI is founded are unreliable.
National
. National alleges that the Board has already dealt with a
similar proposal by DOT in Order 74-3-82, March 18, 1974,
concluding that the massive record of the DPF is insuffi-
cient to reach any firm conclusions as to the validity of the
DOT proposal on passenger service quality; and that it
would be entirely improper to use a show cause procedure
at this point to attempt to implement the plan. Jn a sense,
contends National, DOT is advocating ratemaking by the
Board without a hearing which would violate Section 1002
of the Act and/or the decision of the court in Moss ve.
— USCA (D. C. Cireuit). No. 23,627, denied July 9,
43u
Appendix C
Southern
In the case of the local service carriers such as itself,
Southern contends that DO T's vision of the economics
passed through to the publie in the form of higher load
factors and lower fares is simply unattainable. The car-
rier agrees with DOT that if the arguments have any
validity at all, such validity is solely and exclusively con-
fined to the longest haul “trunkline” markets.
United
United’s principal objection to the DOT petition is its
attempt to avoid proper ratemaking procedure through an
improper use of the show cause procedure. United states
that as the Board explicitly stated in Order 73-2-30, the
show cause procedure is not appropriate in cases which
“raise controversial and complex questions of fact, law
or policy” and in which the relief requested will have more
than “a minimal impact on competing certificated carriers,”
and clearly, the facts are in controversy. United further
contends that DOT offers no support for its proposed
change in a standard only established after an extensive
evidentiary hearing in the DPFI that considered the com-
plicated and controversial issues involved ; and that the
impact of the DOT proposal on the industry is more than
“minimal.”
Western
Western endorses the position that the petition for an
order to show cause is contrary to Section 1002(d) of the
Act. The carrier contends that DOT has failed to estab-
lish that an average load factor of 65 percent is attainable
in long-haul markets given the present state of the econ-
44a
Appendix C
omy and the airline industry, or that such a high average
load factor would e desirable from the travelling public’s
point of view. W. tern alleges that, in effect, the request
by DOT is an imp. operly filed petition for reconsideration
of the Board’s recently issued opinions on reconsideration
concluding Phases 6B and 9 of the DPFI.
ATTACHMENT E
DOMESTIC TRUNK INDUSTRY
RATE OF RETURN ON INVESTMENT
48-STATE SCHEDULED PASSENGER SERVICE
For the Twelve Months Ended
March 31, 1975
(dollar amounts in thousands)
DPFI Other
Actual Adjustments! Adjustments?
RPM's (Millions) 105,435 99,971 97,958
ASM'’s (Millions) 196,893 181,765 178,105
Load Factor 53.5% 55.0% 55.0%
Yield 7.7327¢ 8.0575¢ 8.2927¢
Passenger Revenue $8,152,952 $8,055,180 $8,123,368
Operating Revenue $8,361,926 $8,264,154 $8,332,342
Operating Expense 7,816,941 7,239,575 7,516,623
Operating Profit $ 544,985 $1,024,579 $ 815,719
Interest 235,951 215,824 195,956
Income Before Tax $ 309,034 $ 808,755 $ 619,763
Income Tax @ 48% 148,336 388,202 297,486
Net Income $ 160,698 $ 420,553 $ 322,277
Return Element 6 396,649 $ 636,377 $ 518,233
Investment $5,446,233 $4,981,647 $4,590,873
R. O. I. 7.28% 12.77% 11.29%
1 Removal of all discount fares; standard seating; and 55 percent standard
load factor.
2 Includes Column 2 adjustments plus cost factor, annuali -
creases, plus adjustments for — grounded — 2 62
45a
Appendix C
ATTACHMENT F
Tantrr C. A. B. No. 229 Issvep sy AmNI Tarirr
Puklis RING Company, AGENT
Supplement No. 3
Supplement Nos. 2, 4, 5 and 6 insofar as the supplements
would cancel the four percent negative surcharge effec-
tive July 1, 1975 in Supplement No. 1.
Tantrr C.A.B. No. 246, Issuep sy Arntine Tarirr
Pusuisainc Company, AGENT
Supplement No. 6 insofar as the supplement would can-
cel the four percent negative surcharge effective July
1, 1975 in Supplement No. 1 on behalf of carriers other
than AL, AA, BN, FL, PI and UA.
Tantrr C. A. B. No. 249, Issuep sy Arnuine Tartrr
PusiisHine Company, AGENT
Supplement Nos. 8, 10, 18, and 21.
Supplement Nos. 6, 9, 11, 14, 15, 17, and 20 insofar as
the supplements would cancel the four percent nega-
tive surcharge effective July 1, 1975 in Supplement No.
1 on behalf of carriers other than AL, AA, FL, NC, PI
and UA.
The suspension of the above supplements does not stay
the cancellation of supplements other than Supplement
No. 1.
46a
Appendix C
Order 75-8-99
UNITED STATES OF AMERICA
Civ, Atronautics Boarp
Wasurnoton, D. C.
Adopted by the Civil Aeronautics Board
at its office in Washington, D. C.
on the 19th day of August, 1975
—
Docket 27947
Domestic passenger-fare increases proposed by
Various CARRIERS
Docket 27417
Petition by the
DEPARTMENT OF TRANSPORTATION
requesting the Board to issue a show cause order with
respect to the standard load factor
—
Orver Denyine Petitions ror RECONSIDERATION
By Order 75-6-72, June 13, 1975, the Board permitted the
carriers to extend the four percent fare increase which
became effective on November 15, 1974 for a further period
through January 14, 1976. At the same time, the Board
suspended proposals of five carriers to increase fares above
their current level.!“ Eastern, American, and TWA have
American Airlines, Inc. (American) and Eastern Air Lin
Ine. (Eastern) proposed a six percent increase, while Trans World
Airlines, Ine. (TWA), United Air Lines, Ine. (United), and
Frontier Airlines, Ine. proposed a five percent increase.
— —
47a
‘Appendiz C
now petitioned for reconsideration of that suspension, al-
leging that the Board erred in abandoning principles it
has previously utilized in the evaluation of proposed gen-
eral fare increases, and that it has “indiscriminately
juggled figures in order to avoid the necessity for a fare
increase.“
Specifically, petitioners contest the following adjust-
ments made by the Board:
1) A full discount-fare adjustment rather than adjust-
ment for only those discount fares considered in
Phase 5 of the Domestic Passenger-Fare Investi-
gation, (DPFI1);
2) An aircraft utilization adjustment to reflect 1972
experience;
3) A modification in the methodology used to compute
the cost inflation factor;
4) An annualization of cargo-rate increases in con-
junction with the belly-cargo adjustment.
The petitioners contend that correction for alleged errors
in the Board’s computations leads to the unquestionable
conclusion that a further increase in fares is necessary,
and that the corrections are fully justified as proper under
standards prescribed by the Board.’
2 Both TWA and Eastern aleo address the Board’s decision to
undertake a rule-making p ing to reexamine the present load-
factor standard. Both carriers assert that the most effective and
efficient procedure would be a formal evidentiary hearing, that the
of a proper load-factor standard involves complex and
complicated issues that can only be resolved on the basis of a full
and adequate formal record. Board will dispose of the peti-
tions insofar as they are directed to this question by subsequent
* Answers to the petitions were received from the National
Passenger Traffic Association (NPTA) and National Airlines, Ine.
48a
Appendix C
Upon review of the petitions and all other relevant
matters, the Board finds that they do not establish error
in its ultimate conclusion, nor do they otherwise provide
information which would support lifting the Board’s sus-
pension.
The Board’s current evaluation of fare proposals is
rooted directly in its decisions in the DPFI and it has now
heen four years since the Board first implemented the rate-
making standards developed in that investigation.‘ During
this period, the Board has dealt with several fare-increase
proposals, and each time has incorporated further refine-
ments in methodology in a continuing effort to implement
more accurately the basic ratemaking principles in the
context of the particular operational cireumstances exist-
ing at the time the increase was requested.
The petitioners contend that the Board cannot legally
make adjustments not previously made until the carriers
have been given an opportunity to comment on their valid-
ity. In so doing, they appear to imply a deviation from
the basic objectives toward which the ratemaking stan-
dards developed in the DPFI are directed. We perceive
no inconsistency between adherence to those principles and
change in analytical methodology. The refinements which
(National). NPTA asserts that in Order 75-6-72 the Board has not
substantially deviated from the DPFI standards but, rather, has
properly applied the principles as announced in the DPFI to the
evolution of changing facts and circumstances within the industry.
National’s answer simply supports the point contained in the peti-
tions of the other three carriers. United Air Lines, Ine. (United)
filed a telegraphic answer in support of TWA’s petition, stating
that continued upward price pressures make the industry outlook
= more pessimistic than when the five percent increases were
* Orders 71-4-59/71-4-60, April 9, 1971, first applied the interim
standard load factor of 52.5 percent.
— —
49a
Appendix C
we have made in methodology have been for the sole pur-
pose of more effectively reflecting the ratemaking ap-
proach laid down in the DPFI. To freeze the methodology
would be to inhibit the ability of the Board to perform
its regulatory functions in the light of changing conditions
and to make the most accurate possible assessment of
future conditions. We do not agree that the Board is
obligated to give the carriers “an opportunity to comment”
on the validity of adjustments we deem necessary in a sus-
pension case prior to investigation. If that were the case
the Board’s suspension powers would be seriously compro-
mised. In any event, carriers have the right which they
have here exercised to seek reconsideration of a suspension
order.
In the past, the Board has incorporated an adjustment
of base-period results to reflect annualization of fare in-
creases which had taken place during the base year and
has applied a cost inflation factor to reflect the level of
costs which would prevail es of the effective date of the
tariff. We note that the petitioners do not object to the
Board’s use of a cost inflation factor, per se, but rather
contest the method of calculating that factor for present
purposes of evaluation. It is our opinion that the further
adjustments which we have made in this instance to which
the petitioners object are reasonable in light of the abnor-
malities which occurred during the base period, and rep-
resent necessary modifications in methodology if the
Board’s basic ratemaking approach is to be preserved.
Discount-Fare Adjustment
As we indicated in our previous order, the carriers have
been on notice for more than two years that the Board
would in due course make the full discount-fare adjustment.
50a
Appendiæ C
Indeed, the minority statement issued in connection with
the initial 4 percent inerease in November 1974 urged that
it be made at that time, and several carriers have reflected
the full adjustment in their justifications. The importance
of moving to a full adjustment now is underscored by the
marked reemphasis on discount fares in recent months and
the prospect for its continuation.’ Failure by the Board
to take this step might serve to encourage the introduction
of questionable fares and create a further long-term pres-
sure on the general fare level. This decision is fully con-
sonant, in our opinion, with the fundamental principle of
the DPFI, that full-fare traffic not be burdened with the
cost of carrying passengers not traveling on cost-based
fares.
In making the full adjustment for discount-fare travel,
the Board first determined the traffic carried during the
base year from reports filed under Phase 5 of the DPFI.*
The Board then calculated the number of passengers who
would have needed to be generated for the fare to break
even. The generated passengers were then deducted from
actual traffic results and 100 percent of related traffic and
capacity costs were eliminated, as well as a 100 percent
disallowance of related interest and investment.
5 In its recent orders disposing of these discount fares, the Board
indicated its intention to treat the fares within the parameters of
Phase 5; ie, that it would include traffic moving on the fares in
the diseount-fare adjustment in subsequent evaluations of proposed
general fare increases. See for example: Orders 75-1-72; January
17, 1975; 75-1-131, January 30, 1975; 75-3-17, March 6, 1975;
75-3-102, March 27, 1975; and 75-4-47, April 9, 1975.
As Eastern points out, approximately 50 percent of the traffic
is in the “All other” category. This is due to the fact that Discover
America, youth, and family fares no longer account for the major
share of discount-fare traffic. Review of this category reveals that
it does not contain a significant amount of non-diseount fare traffic.
ee ——
5la
Appendiz C
American contends that the 100 percent elimination of
interest and investment related to discount-fare carriage
is inconsistent with the 75 percent factor utilized by the
Board in making other adjustments, notably the annualiza-
tion of fare increases. It appears upon reexamination that
the Board’s analysis does contain an inconsistency. How-
ever, it lies not in the discount-fare adjustment as Ameri-
can contends, but in the adjustment to interest and invest-
ment related to annualization of past fare increases. The
Board calculates the effect of a fare increase at —.7 elas-
ticity and, accordingly, the number of passengers decreases.
In the past, 100 percent of both capacity and traffic costs
related to this decline in traffic has been deducted from
carrier expenses. A corresponding full reduction should
be made in related interest and investment, a correction
which is reflected in Appendix A.
Military Fares
In Order 75-6-72, the Board eliminated traffic and costs
related to all discount fares other than children’s fares,
which the Board has stated should be treated as part of
the basic fare structure for purposes of assessing revenue
need.“ The petitioners argue that military fares should
similarly be recognized and should not, therefore, have
been included in the Board’s adjustment for discount fares.
American contends that, if military fares are to be treated
like other discount fares, the carriers must also have the
corresponding freedom which they now lack to cancel the
fares if they deem it appropriate. Eastern asserts that
the Board’s inclusion of military fares runs counter to its
conclusion in Phase 5 of the DPFI that such fares “are
justified under the policy of Section 102(a) of the Act to
1 Order 72-12-18, December 5, 1972, p. 75, fn. 91.
52a
Appendiz C
properly adapt the air transportation system to the needs
of the national defense.”* In the Board’s opinion, resolu-
tion of thig,jssue should appropriately await the rule-
making pr ing dealing with implementation of Phase
5. However, we have decided to exclude military fares
from the discount-fare adjustment in the interim, the effect
of which is incorporated into the calculations set forth in
Appendix A.
Utilization Adjustment
The petitioners argue that the utilization adjustment ap-
plied by the Board was not developed in any phase of the
DPFI and should not, therefore, be used by the Board
until all parties have had an opportunity to present their
views concerning its validity. Additionally, they contend
that this adjustment duplicates the disallowance of capa-
city resulting from application of the load-factor standard;
that a more proper comparison would be between the cur-
rent utilization rate and a 1972 ratemaking utilization rate;
that 1974 results reflect carrier adjustments to external
events; and that the costs incurred should be fully recog-
nized in the absence of any finding that actual utilization
rates were the result of anything other than “honest eco-
nomic, and efficient management.”
The Board’s utilization adjustment was prompted by a
concern that the methodology which it had previously fol-
lowed made no adjustment to account for higher load fac-
tors due solely to less efficient utilization of aircraft. Until
the constraints imposed by the fuel crisis and especially
the fuel embargo during the first part of 1974, such an
adjustment did not appear necessary. At the time of the
Board’s most recent evaluation of industry need prior to
* Id.
53a
Appendix C
that under review here (October 1974), the base period
involved was the year ended June 1974, a period which to
some extent reflected the consiraints brought about by the
fuel crisis but not nearly to the extent that more recent
periods have.’ Since the Board relies upon data for the
latest 12 months, each period since the vear ended Decem
ber 1974 is materially affected by the abnormalities stem.
ming from fuel price and availability constraints.
The decision to adjust the utilization rates actually oper.
ated in the most recent base period to that achieved in 1972
was not made “arbitrarily” as the petitioners contend, but
rather because 1972 represents “the most recent normal
calendar-year prior to the development of the fuel crisis
in 1973.” * The adjustment implies only that, over the long
run, carrier managements can be assumed to strive for at
least the same level of utilization at which they operated
prior to the fue’ crisis. In our opinion, this is the minimum
that should be anticipated.
As for the methodology utilized in making this adjust-
ment, both American and TWA contend that the Board
should have compared “ratemaking” utilization rates be-
tween the two years as the load-factor adjustment implic-
itly changes the actual level of utilization achieved. How-
ever, in our view, the load-factor adjustment does not affect
the utilization rate but, rather, measures the amount of
excess capacity in the system in terms of number of air-
craft in the carriers’ fleets. The production of a given num.
»The trunk carriers’ domestic aircraft utilization dropped 11
6 percent, and 1.9 percent from the prior
year during the four quarters of 1974. Moreover, it appears that
the carriers generally did not include in the “days assigned to
aireraft which were grounded due to the
crisis. If the carriers had done so, their utilization rates would
been significantly lower in the first two quarters of 1974.
|
54
Appendix C
ber of available seat-miles (AS M's) is a function of the
average number of seats in each aircraft, the total number
of aircraft, and the degree to which the aircraft is actually
operated. Under the load-factor adjustment, actual ASM’s
are compared with adjusted, or allowable ASM’s," and
capacity costs are decreased accordingly. Related invest-
ment in flight equipment and interest expense are disal-
lowed, at 75 percent of the percentage difference in actual
versus allowable ASM’s. The effect of this adjustment is
to reflect a reduction in the number of aircraft in the fleet,
not a change in the utilization of those aircraft which re-
main, as the petitioners claim. Accordingly, it is our opin-
ion that a comparison of actual utilization rates for both
years is proper.
Therefore, the utilization adjustment does not duplicate,
nor double-count, the capacity disallowed under the load-
factor adjustment. The adjustment for utilization, with
the related reduction in expense for depreciation and in-
surance and the disallowance of interest and investment,
is based upon actual 48-state operating results in keeping
with our belief that the abnormal conditions reflected in
the year ended March 1975 results should be recognized.
Accordingly, the utilization adjustment is made before the
standard load-factor adjustment. The effect is that the
adjustment to a 55 percent load factor is made on the basis
of a reduced level of operations and duplication is thereby
avoided.
Cost Escalation Factor
Order 75-6-72 explained the computation of the cost esca-
lation factor used by the Board in some detail, and the
n The allowable ASM’s are those necessary to carry full-fare
traffic at a 55 percent load factor.
55a
Appendix C
reasons why its intended purpose “to adjust base-period
costs to reflect the level of costs experienced at the effee-
tive date of the fare increase” indicated modification in the
methodology previously used. The Board explained that
using the overall increases in operating expense per avail-
able seat-mile (at the standard load factor) from one year
to the next accomplishes the desired result as long as unit
costs are increasing at a reasonably steady rate. However,
this is no longer the situation. As a consequence, a refine-
ment was developed whereby the effect of rising fuel prices
on the overall cost increase experienced by the carriers
could be estimated separately from that of nonfuel ex-
penses.
It is well known that, while the price of fuel continues
to inch upward, the trend has been markedly less pre-
cipitous during the first half of this year. It would, there-
fore, be unrealistic at this time to project last year’s trend
of escalation into the year ahead. Consistent with this
judgment, the Board has estimated the price of fuel at July
1, 1975 at 27.4 cents per gallon. American contends that
this estimate is based on incorrect data and that the price
of fuel should be higher than the Board’s estimate. It is
true that, at the time, the Board made its estimate based
upon incorrect data.“ However, data for the month of May
(26.9 cents per gallon) indicate almost no increase in fuel
prices since April. It would therefore appear that 27.4
cents per gallon is a reasonable estimate of the price the
carriers will be paying for fuel as of July 1 and that no
change in this respect is warranted.
The age the per gallon was originally caleulated for the month of
25.93 cents Upon learning that Eastern’s reported
feck ata feed rtronetive adja’ of #49 mln the
56a
Appendix C
The petitioners’ major disagreement with the Board’s
methodology in computing the escalation factor centers
upon the assertion that notwithstanding its contention to
the contrary, the Board altered its method of computing
allowable cost increases for the non-fuel related portion
of total costs. We have reviewed our evaluations of the
industry's revenue need for the 5 percent increase pro-
posed for December 1973 and the 4 percent increase pro-
posed for November 1974 and are satisfied that our de-
velopment of a cost escalation factor here has been wholly
consistent with earlier methodology except, of course, with
respect to isolation of fuel cost.“
In its evaluation of both increases the Board based its
decision on 12 months ended June results for the respec-
tive years. On both occasions the effect of annualizing the
inflation factor to the effective date of the tariff equated
to the figure calculated from the June data. For example,
in Order 73-11-93, the Board calculated the increase in unit
cost from the year ended June 30, 1973 over the prior year
results as 4.74 percent. Annualizing the average unit-cost
increase (4.74 percent) to the end of the base period re-
sulted in a 2.343 percent cost increase.“ However, the fare
increase was to go into effect on December 1 of that same
year, and therefore, annualization of the cost increase for
an additional half year resulted in a total cost increase of
“In Order 74-3-96 the Board evaluated the need for a general
fare increase of 6 percent. While the Board did make use
cost escalation factor in its evaluation, the
57a
Appendix C
4.74 percent (1.02343 x 1.02343 1.0474 cost escalation
factor).“
In its present evaluation in connection with continuation
of the 4 percent increase, the Board has utilized this same
technique to approximate the unit cost of non-fuel related
expense as of July 1, 1975. However, the resulting cost
escalation factor does not equate to the average unit-cost
increase for the base period, as was the case above, be-
cause it reflects only nine months annualization of costs as
compared to a 12-month annualization reflected in the
earlier orders. The Board calculated the increase in non-
fuel related unit operating costs (at the standard load
factor) for the year ended March 31, 1975 as 8.3 percent
over the prior year. Annualization of average unit costs
during the base period plus the three months from March
31, 1975 to July 1, 1975 results in the 6.1 percent cost es-
calation factor which we have used.“
Belly-cargo Offset
The petitioners’ primary objection to annualization of
cargo- rate increases is that it constitutes a new adjustment
which the Board has not previously made and should not,
therefore, be utilized in evaluation of the instant fare in-
18 Since the tariff went into effect only 5 months after the base
strict adherence to the methodology would have dictated a
reduction in the cost esealation factor to reflect the 5-month period
rather than 6-month period. As stated in the order, the Board
considered this estimate “quite conservative” and did not therefore
make the downward adjustment.
% Apnualizing the average unit-cost increase for the base period
(8.3 percent) to approximate the unit cost as of March 31, 1975
equates to 4.1 percent (\/1.083). To annualize the increase for the
additional three months, the increase is equal to 2.0 percent
(\/1.041). Therefore, the total increase over average unit costs
base period necessary to estimate costs as of J 1 is 6.1
58a
Appendix C
creases. As we have previously stated, the present meth-
odology represents a series of refinements as the Board
continues to reach a more accurate method of evaluation.
The belly-cargo adjustment simply represents a justifiable
modification consistent with the reasoning which has here-
tofore prompted us to annualize passenger-fare increases
implemented during the base year, i.e., to reflect and assess
the impact of rate increases over an entire twelve-month
period.“
American contends that the Board failed to adjust cargo
traffic “to accurately reflect actual cargo volumes in the
forecast year.” The only support for this claim is the
allegation that domestic cargo revenue ton-miles in sched-
uled service have declined by 9.5 percent in the first four
months of 1975, compared to the same period of 1974. Sig-
nificantly, the decline in belly-cargo during that period was
considerably less, 4.8 percent, and a comparison of the
belly-cargo trend during those four months indicates a
positive growth rate in the immediate future versus cor-
responding periods a year ago. Moreover, even adjusting
the base-period traffic downward by 4.8 percent, which as
indicated does not appear warranted, would have a min-
imal impact on ROI, and would not have altered our
decision.
In summary, we have reexamined the methodology used
in analyzing the industry’s revenue need for ratemaking
purposes against each of the contentions raised by the pe-
titioners. This reexamination has prompted certain limited
adjustments as discussed previously, but nonetheless con-
firms our conclusion that temporary continuation of the
Eastern points out the Board did not make clear its source
8. percent nrc her t il hich tered
was t hi 1
— — ibit 5, p. 1 of 3 of TWA’s
59a
Appendiæ C
4 percent increase is warranted, and that a further increase
in fares at this time is not. Most emphatically, we are
wholly satisfied that the analytical methodology used in this
instance is entirely compatible with the fundameutal ob-
jectives which the ratemaking standards developed in the
DPI are intended to promote.
Accordingly, pursuant to the Federal Aviation Act of
1958, and particularly sections 204, 403, 404, and 1002
thereof,
Ir Is Onperep THAT:
1. Except to the extent granted herein, the petitions for
reconsideration filed by American Airlines, Inc., Eastern
Air Lines, Inc., and Trans World Airlines, Inc. filed in
Docket 27947 are denied ;
2. The action on petitions for reconsideration filed by
Eastern Air Lines, Inc. and Trans World Airlines, Ine.
with respect to Docket 27417 are hereby deferred; and
3. Copies of this order be served upon American Air-
lines, Inc., Eastern Air Lines, Inc., National Airlines, Ine.,
Trans World Airlines, Inc., United Air Lines, Inc., the De-
partment of Transportation, and the National Passenger
Traffic Association.
This order will be published in the Federal Register.
By the Civil Aeronautics Board:
Epwin Z. Holux p
Secretary
(SEAL)
Timm, Member, Fab tHe ATTacHED
Concurrine STATEMENT.
60a
Appendix C
Trimm, Memper, Coxcunnixd Srarxurxr:
At the time that the Board initially decided to disallow
these fare increase proposals, I concurred in the ultimate
result but expressed concern that several of the new ad-
justments which the Board then imposed in determining
carrier revenue need constituted “novel and unannounced
standards upon which the industry and the public have
not been given the opportunity for comment.”' Today the
Board once more defends its earlier adoption of such arbi-
trary policy changes as immediate implementation of a full
discount fare adjustment (thereby effectively prejudging
the rule-making proceeding by which the Board originally
proposed to deal with this issue), and imposition of a novel
utilization adjustment for which no advance notice was
given.“
I discussed some of the most troublesome problems in-
volved in these and other adjustments at some length in
my separate statement at that time, and do not intend to
belabor these issues by extended repetition now.“ Suffice
See my concurring statement in Order 75-6-72.
See Order 73-9-108.
*In a companion Advance Notice of Proposed Rule-making on
Domestic Load Factor Standards, PSDR-43, issued contempora-
neously herewith, the Board has once more rejected the institution
of a full evidentiary ing to determine what the load-factor
standard should be for rate- purposes. In a separate state-
ment attached thereto I pointed out that fairness would require
the full airing of issues that only a formal evidentiary i
ean provide, and I so recommended earlier in my separate state-
ment in Order 75-6-72.
Jam pleased that the Board has wisely chosen not to penalize
the carriers for offering military discount fares since it has today
excluded these fares, for the present at least, from the Phase 5
discount fare adjustment.
6la
Appendix C
it to say that today’s Board action perpetuates problems
which troubled me then and does not put to rest my doubts
about the wisdom or legality of denying the carriers the
advance notice which administrative due process would
seem to require.
/s/ Rosert D. Tiuu
Appendix C
DOMESTIC TRUNK INDUSTRY
RATE OF RETURN ON
APPENDIX A
INVESTMENT
48-STATE SCHEDULED PASSENGER SERVICE
Actual
(Millions) 105,435
ASM'’s (Millions) 196,893
Load Factor 53.5%
Yield 7.7327¢
Passenger Revenue 152,952
Operating Revenue $8,361,926
Operating Expense 7,816,941
Operating Profit 6 544,985
Interest 235,951
Income Before Tax $ 309,034
Income Tax @ 48% 148,336
Net Income $ 160,698
Return Element $ 396,649
Investment 65,446,233
R. O.. 7.28
1 Removal of all discount fares
seating; and 55 percent standard
2 Includes Column 2 adjustments plus cost factor, annualization of fare in-
creases, plus adjustments for utilization,
Note: IAI © Se © Se ae Se
from the traffic costs associated with the annual-
penses stemm
ization of past fare increases at 7 fare elasticity. Inadvertently, this
For the Twelve Months Ended
March 31, 1975
(dollar amounts in thousands)
DPFI
Adjustments! po
101,094
183,307
55.0%
7.9897¢
$8,077,103
$8,286,077
7,311,470
$ 974,607
218,241
$ 756,366
363,056
$ 19
$ 611,551
$5,037,442
12.14%
99,076
180,138
55.0%
8.2213¢
$8,145,291
$8,354,265
7,542,615
$ 811,650
196,166
$ 615,484
295,432
Ls
$ 516,218
$4,595,793
11.23%
grounded aircraft, and belly cargo.
Ex
adjustment was not contained in Attachment E of Order 15-6.
it should have been.
— —
— —
63a
Appendix C
Order 75-9-115
UNITED STATES OF AMERICA
Crvm Agronautics Boarp
Wasuineton, D. C.
Adopted by the Civil Aeronauties Board
at its office in Washington, D. C.
on the 30th day of September, 1975
Docket 28363
Domestic fare increases
proposed by certain carriers
—
Orper or INVESTIGATION Ax Db SusPENSION
By tariff revisions’ marked to become effective October
1, 1975, Eastern Air Lines, Inc. (Eastern) and Continental
Air Lines, Inc. (Continental) propose a general domestic
fare increase of 3.5 percent; and Trans World Airlines,
Inc. (TWA) and Western Air Lines, Inc. (Western) pro-
pose a general increase of five percent.“ With the excep-
tion of Western, each also proposes to remove the January
14, 1976 expiration date on the four percent increase first
permitted in November 1974 and extended this past June.
1 Revisions to Airline Tariff Publishing Company, Agent, Tariff
* Braniff Airways, Inc. and Frontier Airlines, Inc. had also
proposed a 3.5 percent increase for earlier effectiveness. Those
proposals were suspended to permit an evaluation of industry
revenue need on the basis of June 30, 1975 data (Order 75-9-36).
A 42 percent fuel surcharge proposed by United Air Lines, Ine.
based essentially on a pass-through of anticipated fuel price
escalation has also been suspended (Order 75-39-85).
64a
Appendiæ C
In supporting their proposals, the carriers have fol-
lowed the methodology used by the Board in cssessing
fare-increasing proposals before the Board in June 1975,
except for modification of the cost-inflation factor and, in
the case of TWA, elimination of the utilization adjust-
ment.“ The carriers allege, inter alia, that the Board de-
viated from its prior technique in calculating the cost-
inflation factor and that, based on their recalculation, an
increase of 3.5 percent will not raise the ratemaking re-
turn on investment (ROI) to the 12 percent standard.
TWA alleges that the utilization adjustment was unlaw-
fully adopted and that, in any event, a proper application
of such an adjustment would result in no expense disal-
lowance.
Complaints have been filed by the National Passenger
Traffie Association (NPTA) and the Council on Wage and
Price Stability which, together with answers thereto, are
summarized in Attachment A.‘
Upon consideration of the proposals, the complaints and
answers thereto, and all relevant matters, the Board con-
eludes that the proposals to increase present fares by
3.5 or 5.0 percent may be unjust, or unreasonable, or un-
At that time, the Board suspended general increases of five or
six percent proposed by certain carriers (Order 75-6-72). The
instant proposals were filed prior to the issuance of Order 75-8-99,
which denied petitions for reconsideration filed by American Air-
lines, Ine, Eastern Air Lines, Inc. and Trans World Airlines, Inc.
A joint petition requesting the establishment of emergency
procedures in connection with fuel price escalation anticipated due
to decontrol of domestic “old” erude has been filed by the
ment of Transportation, the Federal Energy Administration, and
the Council on Wage and Price Stability. That petition is con-
cerned with possible future developments which cannot be accu-
rately known at this time, and will be dealt with by su
order. On the other hand, the Board has recognized the potential
consequences of dramatic increases in fuel prices and that special
measures may be required to deal with these problems.
—
65a
Appendiæ C
justly discriminatory, or unduly prejudicial, or unduly
preferential, or otherwise unlawful, and should be investi-
gated. The Board further concludes that such proposals
should be suspended pending investigation. However, the
Board concludes that NPTA has not set forth sufficient
facts to warrant investigation of the proposals to cancel
the January 14, 1976 expiration date now applicable to
the four percent fare increase first permitted in November
1974, and the request therefor and consequently the re-
quest for suspension will be denied and the complaint dis-
missed.
In each case, the carriers base their proposals on con-
tentions as to the appropriate technique for caleulating re-
turn on investment which were raised in petitions for re-
consideration of Order 75-6-72. These arguments were
fully dealt with and disposed of in Order 75-8-99, which
denied reconsideration, and need not be further discussed
here. TWA (in its current justification) and Eastern (in
its answer to NPTA’s complaint) accept the Board's
methodology with respect to the cost-inflation factor, but
argue that their proposals are justified by projecting for-
ward to the new tariff effectiveness date of October 1.
While this may be true based on year ended March 1975
data, the Board has consistently used the most recently
available experience of the industry and has specifically
stated its intention to evaluate new proposals in the con-
text of year ended June 1975 data. On this basis, and
applying the same analytical approach used in Order
75-6-72, each of the proposals now before the Board would
produce an excessive return on investment by DPFI stan-
dards (See Attachment B).“
Only NPTA complained against extension of the four percent.
The details of the Board’s analysis are available for public
inspection in the Public Reference Room.
66a
Appendiæ C
On the other hand, we see no basis for now precluding
retention of the four percent increase. An expiration date
was first appropriate since the latest data available at that
time reflected an abrupt shift in the carriers’ traffic inix
from discount to full-fare useage which raised a concern
that, if traffic volume continued to hold and the change in
mix became a longer-term trend, a rollback of the four
percent might become warranted. However, not only have
neither of these trends progressed, they have, in fact, re-
versed and have contributed to continuing inadequate in-
dustry earnings.
One further matter warrants comment. Our analysis of
industry data reveals a particularly troublesome trend of
an increasing spread between actual and ratemaking ROI.
Excesses in the direction of either total discount-fare traffic
or available seats are unmistakably obstacles to the indus-
try’s ability to improve its earnings position. Moreover,
increases in the proportion of discount-fare traffic must be
accompanied by significant increases in load factor in order
to maintain a satisfactory revenue/cost relationship. The
Board continues to firmly believe that the DPI discount-
fare and capacity adjustments are necessary to insure that
the normal-fare passenger is not unfairly burdened.
Accordingly, pursuant to the Federal Aviation Act of
1958, and particularly sections 204(a), 403, 404, and 1002
thereof,
Ir Is Onpverep THat:
1. An investigation be instituted to determine whether
the fares and provisions described in Attachment © at-
tached hereto, and rules, regulations and practices affeet-
ing such fares and provisions, are or will be unjust, unrea-
sonable, unjustly discriminatory, unduly preferential, un-
duly prejudicial, or otherwise unlawful, and, if found to be
ise
67a
Appendiz C
unlawful, to determine end prescribe the lawful fares and
provisions, and rules, regulations, or practices affecting
such fares and provisions:
2. Pending hearing and decision by the Board, the fares
and provisions described in Attachment ( hereto are sus.
pended and their use deferred to and including December
29, 1975, unless otherwise ordered by the Board, and that
no changes be made therein during the period of suspension
except by order or special permission of the Board;
3. The proceeding ordered herein be assigned for hear
ing before an Administrative Law Judge of the Board at
a time and place hereafter to be designated ;
4. The proceeding ordered in Docket 28302 be consoli-
dated into this proceeding:
5. Except to the extent granted herein, the complaints
in Dockets 28187, 28235 and 28239 are hereby dismissed:
and
6. Copies of this order will be filed in the aforesaid tar:
iff and served on Braniff Airways, Inc., Continental Air
Lines, Inc., Eastern Air Lines, Inc., Frontier Airlines, Ine.
Trans World Airlines, Inc., Western Air Lines, Inc., and
the complainants in Dockets 28187, 28235 and 28239 which
are hereby made parties to this proceeding.
This order will be published in the Federal Register.
By the Civil Aeronautics Board:
Ebwix Z. Hotianp
Secretary
()
Timm, Memeer, Fuad trae Artacnep
Dissentine Srarxuxxr.
68a
Appendix C
Timm, Memeer, Dissertine StaTexent:
By its action today, the Board is once sacrificing
le
the Domestic Passenger Fare Investigation in favor of the
perpeti.tion of such arbitrary policy changes as the im-
mediate implementation of a full discount fare adjustment
and the imposition of an aircraft utilization adjustment.
These arbitrary determinations which, in view of the eco-
nomies of the fare proposals presently before the Board,
are significantly weighty to justify, in their absence, the
implementation of the 3.5 percent increase proposed by
Eastern and Continental, have had neither the benefit of
public comment nor, in the case of the utilization adjust.
ment, the proper costing technique to include offsetting
start-up costs incurred in the reinstatement of anused air-
craft. As I have previously noted in my concurring state-
—— GR ae
prinei of the DPFT are being severely jeopardized
————— —ä—
continuing upward trend of aviation costs.
Moreover, of particular concern to me in the present in-
stance, is the majority’s failure to include in the cost esca-
lation factor the effects of the recent 10 percent fuel price
inerease announced by the Organization of Petroleum Ex-
porting Countries (OPEC) for effectiveness October 1
1975. In Order 75-6-72, the Board devise a refined method.
ology for developing the cost escalation factor with the
intent to have this figure, insofar as it is influenced by fuel
prices, more accurately reflect the costs being experienced
by the carriers on the proposed effective date of the tar-
in (e). To disregard these already-announced fuel price
increases in the calculation of the cost escalation factor
before us both undermines the general principle of the
eo.
Appendiz C
DPFI that additional costs incurred under operations in
line with DPFI standards should be offset by an increase
in revenues,' and contradicts the Board’s intent to use the
most recent figures in the determination of fare proposals.
This failure is particularly significant in the present cir-
cumstances since the fuel costs in the carriers’ contracts
are geared toward the price paid by the supplier, notwith
standing the delivery date to the carrier. As such, any
future fare proposals will be burdened by accumulated costs
incurred from the date of the fuel price increase.
In conclusion, I can only reiterate my intention to mea
sure fare proposals by the application of regulatory stan-
dards which have been developed in the proper legal forum
in a manner consonant with the Board’s statutory obliga.
tions. Under this standard, I cannot concur with my col-
leagues’ action in suspending the 3.5 percent fare increase
proposed by Continental and Fastern, especially in view
of the fact that, on competitive grounds, the fare increase
would probably not go into effect until, at the earliest,
November 1, 1975.
This action by the Board will trigger a new filing almost
immediately, for Board methodology and computations in-
dicate a 3 percent increase would be justified at this precise
time. Had the Board not inserted the unadjudicated new
utilization factor in their June order (see my comments in
concurring at that time) the instant fare would be justified
in my judgment.
At any rate, the Board has used a razor to slice its way
to a decision, when a very sharp knife would have cut
through the bureaucratic rate-making tangle that awaits
the Board when new cost impact figures become a reality
in the next few days.
/s/ Rosert D. Tun
1 Domestic Passenger Fare Investigation, Phase Fare Levels,
Order 71-4-59/60, April 9, 1971. ö
70a
Appendix C
ATTACHMENT A
Summary or Complaints axp Answers
Complaints
a a
Traffic Association Guta) end Go Gud —
Price Stability (CWPS). The thrust of the NPTA com-
plaint against the increases proposed by Eastern, Braniff,
Continental, TWA, and Frontier is that the carriers simply
seek further reconsideration of Order 75-6-72, wherein the
Board suspended all proposed increases above the present
level of fares. NPTA contends that the justifications ad-
vanced by the carriers contain little, if any, new or addi-
tional data not considered in Order 75-6-72 or subsequently
in Order 75-8-99, 2 85
for reconsideration.
The complaint of CWPS urges the Erard to carefally
assess the impact which a further fare increase Will have
on the slowly developing traffic recovery. CWPS expresses
its concern that the upward spiral of airline fares, in
combination with the recession, has been keeping the dis
eretionary traveler away from air travel; and thus, fur-
ther fare increases may in fact hurt—not help—the indus-
try’s profitability. Finally, CWPS argues that the carriers
should be permitted to pass through the higher costs of
aviation fuel; that the Board should continue to apply the
DPFI standards to nonfuel-related fare increases; that
pending final decision in the rulemaking proceeding, the
Board should adopt a higher ratemaking load factor; and
that the Board should reevaluate its measure of fare
elasticity.
Tla
Appendia C
Answers
Answers have been received from Eastern in response
to the complaint by NPTA, and from Continental and TWA
in response to the complaint by CWPS.
Eastern states in its answer that nothing advanced by
NPTA in its complaint has demonstrated any error in
Eastern’s approach, and, in fact, it has correctly calculated
the inflation factor applicable to the tariff effective date of
October 1, 1975. Eastern asserts that there can be no doubt
that the deteriorating financial results recently reported by
the carriers clearly indicate a need for increased revenues
on the part of the industry.
Continental replies to the compiaint of CWPS by siat-
ing that the effect of the CWPS proposal is to deprive
the carriers of sufficient additional revenue to cover the
very real cost increases that all carriers are experiencing.
Continental states, in addition, that for the purpose of
testing the pending fare proposals, the Board is bound to
its DPF] standards both os a matter of law and fairness,
and that they can only be amended by procedures that
will afford all parties their due process.
TWA answers the CWPS complaint by stating that air
fares have not risen in recent years to exorbitantly high
levels that, in fact, the domestic trunk yield has increased
by 28.4 percent, while the general inflation rate has risen
by 30.4 percent. TWA asserts that the emergency proce-
dures proposed by CWPS are intended for future increases,
whereas the instant proposal deals with already experi-
enced cost increases. TWA contends that the effect of the
changes would be to compel the airline industry to absorb
even more of its rea) world cost increases than it must
absorb already under existing standards. Finally, TWA
states that the suggested modifications to the DPFI stan-
dards suggested by CWPS are all issues raised previously
which the Board dismissed in Order 75-6-72.
ATTACHMENT B
URN ON INVESTMENT
ER SERVICE
une 30, 1975
DOMESTIC TRUNK INDUSTRY RATE OF RET
48-STATE SCHEDULED PASSENG
for the Twelve Months Ended J
(dollar amounts in thousands)
1 „
225 8 le le 22 ; fi
2583 88 522 8085 1 15
5288 b fa
et bs naa H
7
jl
"bi
Yield (¢)
Passenger Revenue
R.0.
73a
Appendix C
ATTACHMENT C
TARIFF C. A. B. No. 249
ISSUED BY
AIRLINE TARIFF PUBLISHING COMPANY, AGENT
All inereased fares on the following pages:
4th Revised Pages 209 and 210
9th Revised Pages 211 and 212
8th Revised Pages 213 and 214
5th Revised Pages 215 and 216
7th Revised Pages 217 and 218
4th Revised Pages 219, 220 and 221
12th and 13th Revised Page 300
8th Revised Pages 301, 302, 303 and 304
llth Revised Pages 305 and 306
7th Revised Pages 307 and 308
9th Revised Pages 309 and 310
6th Revised Pages 311 and 312
6th and 7th Revised Pages 313 and 314
Sth and 9th Revised Pages 315 and 316
5th Revised Pages 317 and 318
7th and 8th Revised Pages 319 and 320
8th Revised Pages 321 and 322
9th and 10th Revised Pages 323 and 324
llth Revised Pages 325 and 326
8th and 9th Revised Pages 327 and 328
Sth and 10th Revised Pages 329 and 330
11th Revised Pages 331 and
9th Revised Pages 333 and
14th Revised Pages 335 and
9th Revised Pages 337 and
3288
74a
Appendix C
10th Revised Pages 339 and 340
8th Revised Pages 341 and 342
13th and 14th Revised Pages 343 and 344
14th Revised Pages 345 and 346
10th and 11th Revised Pages 347 and 348
9th and 10th Revised Pages 349 and 350
9th Revised Pages 351 and 352
7th Revised Pages 353 and 354
Ist Revised Pages 354-A, 254-B, 354-C and 354-D
6th Revised Pages 647 and 648
8th Revised Pages 649 and 650
9th Revised Pages 651 and 652
llth and 12th Revised Pages 653 and 654
6th Revised Pages 655, 656, 657 and 658
10th and 11th Revised Pages 659 and 660
6th Revised Pages 661 and 662
10th Revised Pages 663 and 664
9th Revised Pages 665, 666, 667 and 668
8th Revised Pages 669, 670, 671 and 672
8th and 9th Revised Pages 673 and 674
4th Revised Pages 674-A and 674-B
Ist Revised Pages 674-C and 674-D
6th Revised Page 749
7th Revised Page 749 (except between Anchorage on
the one hand and Portland, Oregon and
Seattle on the other)
6th Revised Pages 750, 751 and 752
10th Revised Pages 753 and 754
4th Revise’) Pages 755 and 756
5th Revised Page 756 (except between Kodiak on
the one hand and Portland, Oregon and
Seattle on the other)
17th Revised Pages 757 and 758
— | — — —
75a
Appendia C
8th Revised Pages 759 and 760
7th Revised Pages 761 and 762
6th Revised Pages 763
All fares on the following pages which are reissues of
fares suspended herein on the above pages:
14th Revised Page 300
9th Revised Pages 301 and 302
10th Revised Pages 315 and 316
11th and 12th Revised Pages 323 and 324
10th Revised Pages 327, 328, 333 and 334
9th Revised Pages 341 and 342
15th Revised Pages 343 and 344
11th and 12th Revised Pages 349 and 350
13th Revised Pages 653 and 654
7th Revised Pages 655 and 656
10th Revised Pages 665 and 666
9th Revised Pages 669, 670, 671 and 672
7th Revised Page 750
5th Revised Page 755
18th and 19th Revised Pages 757 and 758
9th Revised Pages 759 and 760
8th Revised Pages 761 and 762
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.