Appendix to Petition for Writ of Certiorari — ABC Air Freight Co. v. Civil Aeronautics Board

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SUPREME COU | 1N THE

Supreme Court of the Brcited. Stutes

‘October Term, 1969

1105

Office: Supreme Court, US

FILED

JAN 22 1970

JOHN F. DAVIS, CLERK

owe aed

ABC AIR FREIGHT COMPANY, INC.; ADD AIRF REIGHT COR-

PORATION; AIRBORNE FREIGHT CORPORATION; AIR- , ‘

LAND FREIGHT CONSOLIDATORS, INC.; AIR-SE

A FOR-

WARDERS, INC.; AIRWAYS AIRFREIGHT: BARNETT AIR

CARGO, INC.;PETER A. BERNACKI, INC.; HENSEL,

MANN & LORBACHER, INC.; INTERNATIONAL C

BRUCK-

USTOMS

SERVICE, INC.; H. G. OLLENDORFF, INC.; PANALPINA

AIRF REIGHT, INC.; WTC AIR FREIGHT, and AIR F

FORWARDERS ASSOCIATION,

Petitioners,

against

CIVIL AERONAUTICS BOARD

and

CF AIR FREIGHT, INC.; CONSOLIDATED FREIGHTWA

‘REIGHT

bawrs s

iS Se haa

V5; IN.

P.L.E. AIR EREIGHT FORWARDING, INC.; PACIFIC INTER-

MOUNTAIN EXPRESS CO?: NAVAJO FREIGHT LIN

YELLOW FREIGHT SYSTEM, INC.; GLOBAL AIR

LTD.. GATEWAY TRANSPORTATION CO., INC., a

WAY AVIATION, INC.,

APPENDIX TO PETITION FOR WRIT OF C

ES, IN€.;

CARGO,

nd GATE-

Respondents.

ERTIOARI

TO THE UNITED STATES COURT. OF APPEALS

FOR THE SECOND CIRCUIT

LOUIS P, HAFFER

} 1730 Rhode Island

“/ ‘Washington, D.C.,

ROBERT N. MEISER

1730 Rhode Island

Washington, D.C.,

Avenue, N.W.

20036

Avenue, N.W.

20036

Attorneys for Petitioners

THE CASILLAS PRESS, INC. — 1717 K Street, N. W. — Washington, D. C. 20006

‘

*- °, . APPENDIX

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT.

" | No. 254—September Term, 1969.

(Argued September 16, 1969 Decided October 24, 1969.)

Docket No. 33623

ABC AIR FREIGHT COMPANY, INC.; ADD AIRFREIGHT COR-

PORATION; AIRBORNE FREIGHT CORPORATION; AIR-LAND

FREIGHT CONSOLIDATORS, INC:; AIR-SSEA FORWARDERS,

INC., AIRWAYS AIRFREIGHT; AMERICAN EXPRESS COM-

PANY; BARNETT AIR CARGO, INC.; PETER A. BERNACKI,

7 INC.; EMERY AIR FREIGHT CORPORATION; HENSEL, BRUCK-

: . MANN’ & LORBACHER,. INC.; INTERNATIONAL CUSTOMS

SERVICE, INC.; H. G. OLLENDORFF, INC.; PANALPINA AIR-

FREIGHT, INC.; PENSON FORWARDING CORPORATION: WIC

AIR FREIGHT; and AIR FREIGHT FORWARDING ASSOCIATION,

Petitioners,

hae

CIVIL AERONAUTICS BOARD,

Respondent,

and

CF AIR FREIGHT, INC.; CONSOLIDATED FREIGHTWAYS, INC.;

P.I.E. AIR FREIGHT FORWARDING, INC.; PACIFIC -INTER-

MOUNTAIN EXPRESS CO.; and NAVAJO FREIGHT LINES, INC.; °

YELLOW FREIGHT SYSTEM, INC.; GLOBAL AIR CARGO, LTD.;

GATEWAY TRANSPORTATION CO., INC. and GATEWAY AVIA-

TION, INC.,

Intervening Respondents.

‘e)

LUMBARD, Chief Judge,

[FRIENDLY and KAQMFMAN, Circuit Judges

}

~ Petition to review an order, 69-4-100, issued by the

- Civil Aeronautics Board after a remand from this court,

391 F.2d 295, which granted the applications of three

long-distance truckers or their subsidiaries to act as air

freight forwarders and related applications for acquisitions

of control, and to terminate a rule-making proceeding

with respect to the future authorizations of other long-

distance truckers or their affiliates. Petition denied in-

sofar as it. relates to the order and dismissed insofar as

it relates to the rule-making proceeding.

LOUIS P. HAFFER and ROBERT N. MEISER

(Andrew P. Goldstein, Washington, D. C., and

Paul Berger, New York, New York, of Coun-

sel), for Petitioners. |

O. D. OZMENT, Deputy General Counsel, Wash-

ington, D. C. (Warren L. Sharfman, Associate

General Counsel, Litigation and Research, J.

Michael Roach and James Keough, Attorneys,

Civil Aeronautics Board, Richard W. McLafen,

Assistant Attorney General, Howard E. Shapiro,

Attorney, Dept. of Justice, Joseph B. Gold-

man, General Counsel, Civil Aeronautics Board,

_ Washington, D. C., of Counsel), for Respondent.

JOHN N. WANNER and EUGENE T. LITPFERT

(Verner, Liipfert, Bernhard and McPherson,

Washington, D. C., of Counsel), RAYMOND

J. RASENBERGER (Zuckert, Scoutt & Rasen-

berger, Washington, D. C., of Counsel), and

ROBERT J. SISK (Hughes, Hubbard, Blair &

Reed, New York, New York, of Counsel),

for Intervening Respondents CF Air Freight,

Inc., Consolidated Freightways, Inc., PLE.

_ Air Freight Forwarding, Inc., Pacific Inter-

mountain Express Co., and Navajo Freight

Lines, Inc.

HOMER S. CARPENTER, Washington, D. C.,

for Intervening Respondents, Yellow Freight

System, Inc., Global Air Cargo, Ltd., Gate-

way Transportation Co., Inc., and Gateway ;

Aviation, Inc.

Friendly, Circuit Judge:

e In A. B. C. Air Freight Company vy. C. A. B.,:391 F.2d

295 (1968), this court vacated an order of the Civil Aero-

nautics Board dealing with applications of motor carriers

to operate as freight forwarders. The Board, with Vice.

Chairman Murphy dissenting, had granted applications of

three long-distance truckers or their subsidiaries to act

as air freight forwarders, along with related applications

for approval of acquisitions of control, and had indicated

an intention similarly to grant a fourth. We remanded

the cause for further corisistent proceedings. Having in-

vited the parties to file briefs directed to the action it

should take and having heard oral argument, the Board,

with Vice Chairman Murphy: again dissenting, rejected peti-

tioners’ contention that_it should dismiss the proceeding

or hold another evidentiary hearing. On the basis of fur-

ther findings it granted the applications of CF Air Freight,

Inc., and Navajo Freight Lines, Inc., to act as dbdmestic

and international air freight forwarders and of P. I. E.

Air Freight Forwarding, Inc. to act as a domestic air

freight forwarder for a period of five years: the Board

also granted related applications with respect to acquisi-

tions of ‘control. The authorizations and approvals were

made. subject to numerous conditions which are set out

in the margin.! The Board denied. the motions of seven

other motor carriers or their affiliates to intervene and

-have their applications consolidated. Instead it instituted

a rule-making proceeding with respect to the handling of °

applications fram these and other motor carriers and to

the making of reports, of which more hereafter. Peti-

tioners ask 11s to set aside the authorizations and to ter-

minate the rule-making proceeding as contrary to our man-

date and otherwise unlawful.

—

1 7. That the authorizations and approvals granted herein shall

be subject to the following conditions:

(a) The Board may revoke an authorization or approval, in

whole or in part, if it finds after hearing that (1) the holder is no

longer capable of performing the authorized air transportation or

of conforming to the Act or the regulations thereunder; (ii) the

holdér is no longer willing to conscientiously promote air cargo

and to benefit air transportation; or (iii) the holder’s operations,

alone or together with other similar carriers granted air freight for-

warding authority, will create a monopoly or monopolies and there-

by restrain competition or jeopardize another air carrier not a party

thereto, or will otherwise be inconsistent with the public interest.

(b) -If proceedings are instituted to revoke an authorization

or approval under paragraph 7(a), the Board may suspend or limit

such authorization or approval pending the outcome of the pro-

ceedings in accordance with the procedures specified by Sections

296.48 and 297.43 of the Board’s Economic Regulations.

‘ (c) CF Air Freight, Inc., Navajo Freight Lines, Inc., P.I.E.

Air Freight Forwarding, Inc., and National Air Freight Forwarding

Corporation shall file, in addition to the financial and satistical re-

ports prescribed by Part 244 of the Board’s Economic Regulatigns,

the following schedules in the format attached to this order: re

(i) The “Originating Air Station Data” schedule re.

flecting the source of air freight tonnage enplaned and

deplaned at originating air station (exclusive of.

The “most serious deficiency” we found in the Board’s

original order was “the ambiguity whether the Board has

(Footnote -1 Continued)

-reconsolidations) and data on the miles of surface move-

ment of the air freight before and after its air trans-

portation.

(ii) The “Supplemental Operating Statistics’ schedule

reflecting the number and weight of those air freight

shipments handled by both the air freight forwarder and

~ the surface carrier who is its parent or affiliate or who

operates as a separate division within the same corporate

structure.

(iii) The “Analysis of Traffic by Weight Breaks”

schedule reflecting, by specified weight breaks, the

number and weight of shipments handled in air freight

forwarding operations and the revenues received for the

shipments.

(d) The persons named in paragraph 7(c) above shall also

file with the Board, within 45 days after the close of each calendar

year, a report showing as of December 31 of such year the loca-

tion of each specialized air freight forwarding station and of each

surface transport terminal at which air freight forwarding services

are offered. The statement shall indicate, for each station or ter-—

minal, the number of drivers, salesmen, and other personnel who

are assigned to promote air freight exclusively.

(e) Navajo Freight Lines, Inc., Pacific Intermountain Express

Co., and Consolidated Freightways, Inc., shall file with the Board’s

Bureau of Accounts and Statistics, not later than 45 days after the

end of each calendar quarter, the “Analysis of Traffic by Weight

Breaks” schedule, in the format attached to this: order, reflecting,

by specified weight breaks, the number and weight of shipments

handled in long-haul motor carrier operations and the revenues re-

ceived for the shipments.

(f) In addition, the persons named in paragraph 7(e) above

shall file the “‘Analysis of Traffic by Weight Breaks” schedule show- -

ing comparable data, to the extent available, for the corresponding

quarter of each of the preceding five years.

established a-policy of entry for all truckers who want

to act as air freight forwarders or has. merely granted the

four applications that Were before it, and the inadequacy

of its consideration of effect on the existing forwarders

if the former is the right interpretation as we strongly sus-

pect.” 391 F.2d at 298. In addition, after citing the

Board’s previous policy of granting air forwarding authority,

to,surface carriers “only after study Af the particularized

situation convinced it that the carrier’s conflict of interest

would not ‘result in material diversion of traffic from air

to surface transportation and deprive the applicants of

sufficient incentive to conscientiously promote and de-

velop airfreight forwarding’ ” Air Freight Forwarder Au-:

thority Case, Order E-21056, July 10, 1964 (mimeo, p. 4),

we expressed concern that the Board had not adequately

explicated what we considered to be a significant de- ,

parturé from that policy, 391 P.2d at 301-05. While we

pointed out what seemed to be still other weaknesses

in the Board’s opinion, 391 F.2d at 305-07, which rein-

forced our conclusion that further consideration was desir-

able, we nevertheless recognized that even the present

record might “be sufficient for the Board to initiate a

properly controlled experiment in the authorization of

truckers as air freight forwarders, with the limitation on

numbers and the reporting and other requirements an

experiment would be expected to entail” 391 F.2d at

. 307.

The opinion on remand, Motor Carrier-Air Freight For-

warder Investigation, No. 69-4-100, April 21, 1969, at-

tempted to deal with these objections. With respect to

tt\\number of authorizations, the Board emphasized “that

it is granting only the applications before it and not pass-

ing upon any others,” save for a declaration that it “should

not deem the size, geographical extent, or general com-

modity rights of a trucker’s surface operations or author-

ity—of themselves—as factors showing that.the trucker

should be barred from the air freight forwarding business.”

Id. (mimeo, pp. 3-4). The Board’ made clear, however,

that this declaration meant just what it said and no more:

But long-haul truckers of general commodities

will not be granted air forwarding licenses rou-

tinely. Instqdad, each trucker applicant will be

required to show that it will conscientiously pro-

mote air cargo and that its operations, either

alone or in combination with others already

licensed, ‘will be in the public interest.. The

Board will not be satisfied with .mere recitations;

it will scrutinize each application (and any ob-

° jection) to insure that these criteria are met.

And the Board will maintain a close watch, over,

the experiment through new and more detailed

reporting requirements. As a final safeguard, the

Board will reserve the power to suspend the

processing of new applications and, if necessary,

even to terminate outstanding licenses. This

policy is being codified in proposed regulations

issued. concurrently with this order. For long-

haul truckers who seek to become air forwarders.

the rule will not be free entry, but monitored

entry.

Turning to the matter of surface carrier participation, the

Board reiterated its position that the second proviso to

§408(b) of the Federal Aviation Act, 49 U.S.C. § 1378(b)

(1964), was inapplicable to air freight forwarding, not

merely in precise terms as we had agreed, 391 F.2d at *

302, but at all.? However, noting our recognition that

2 Some added support for the Board's position was furnished*

subsequent to its decision by Pub. L. 91-62 § 1(2). (Aug. 20,

1969), 83 Stat. 103, amending §408(a) (5) of the Federal Avia

tion Act, which authorizes the Board to exempt any acquisition of

a noncertificated carrier from the requirement of approval “to the ex-

tent and for such periods as may be in the public interest.”.

“the Board might conclude, after studying the proposals

of a particular surface carrier, that despite its conflicts of

interest, the applicant will conscientiously promote air

transport,” 391 F.2d at 304, it found, after detailed ex-

amination of the record, that “[t]he. three successful ap-

plicants have clearly met that test” and concluded that

“(t]he time has come . . . to test the conflicts hypothesis

in a controlled experiment.” This was to be made possible

by the detailed reporting requirements imposed on the

three successful applicants, similar requirements proposed

for imposition on other successful trucking aspirants, and

-new reporting requirements proposed for the independents.

The rule-making proceeding initiated simultaneously with

the order fell into two main parts. One part concerned

- applications of long-haul motor carriers of general com-

modities for air freight forwarding authority or for ap-

proval of control of air freight forwarders. The proposed

regulations provide that such authority or approval may

be granted,

on an individual application basis, with or with-

out hearing, upon a showing that (1) the ap-

plicant is capable of performing the proposed

ail air transportation and of conforming to the Act

and the regulations thereunder; (2) the applicant

will conscientiously promote air cargo and will

‘benefit air transportation; and (3) the applicant’s

operations, alone or together with thos¢ of other

similar carriers granted air forwarding authority,

will not result in creating a monopoly; or mono-

polies and thereby restrain competition, or jeo-

pardize another air carrier and will not other-

wise be inconsistent with the public interest ....

/ oo applicant must show:

(a) A plan to conscientiously promote air

cargo. This showing shall include, inter alia:

(1) A statement as to whether the long-

haul motor carrier plans to solicit existing sur-

face customers for air cargo and, if so, the ex-

tent of such plans;

(2) A traffic estimate showing what traffic

is newly-generated or presently shipped by sur-

face means;

(3) An estimate of what portion of the long-

haul motor carrier’s existing surface traffic is

subject to diversion to air;

(4) An estimate of beyond-terminal-area

traffic moving by surface transportation over

the routes of the long-haul motor carrier or

via interline agreements; and

(5S) A statement of the proposed air cargo

sales force and facilities. ; Ae

(b) A statement of the long-haul motor car-

rier’s authority from the Interstate Commerce

Commission or other regulatory agency, includ-

ing a description of surface transportation au-

thorized and offered at the stations at which air

forwarding operations are proposed. \ -

would result from approval of the application. -

‘Authorizations are to continue until they expire by their

terms, the relevant regulations are terminated or revoked,

or the Board in revocation proceedings finds that con-

tinued Operation is contrary to the licensing criteria. The

other part related to reporting. Long-haul motor carrier YS

applicants who qualified in the future would be required

to file reports similar to those imposed:as conditions on ~

the three successful applicants, see fn. I In addifion, all

other air freight forwarders ‘would be required to make

additional reports, with the objective of placing the Board

in a position where it will be able to obtain a rather com-

plete statistical picture of the entire industry.

We find it unnecessary to deal with petitioners’ conten-

tions that since the Board failed to petition the Supreme

Court for review of this court’s decision, it wa$pbound to_

give our views with respect to the policy concefning sur-

face carrier participation in air freight forwarding greater

weight than it did. Apart from the problem. raised by

the agency’s likely inability to obtain certiorari to review

an order of remand, cf. F.7.C. v. Colgate-Palmolive Co.,

380 U.S. 374, 383 (1965), and the possible bearing of

Pub. L. No. 91-62, see fn. 2, we are satisfied that the

nuance of difference between the Board’s. views and those

intimated in our previous opinion did not affect its de-

cision. Fully recognizing its responsibility to develop air

transportation, the Board did not deny that it must con-

sider the bearing of a prospective air freight forwarder’s |

involvement in surface transportation; it said only that

this should not constitute a bar. Here it satisfied itself

that, # light of the plans of two of the applicants to

conduct their air freight forwarding through separate com-

panies and of the third to conduct its through a separate

division with a management team recruited from the

aviation industry and dedieated to air cargo’s promotion,

the applicants would not seek to divert potential air cargo

to surface transport but rather would zealously promote

it. Petitioners say the Board was too easily satisfied and

contend that the regulations proposed in the rule-making

proceeding demonstrate this. But the former issue was

for the Board to decide and we cannot’ take the Board’s

professions with respect to its future policy so lightly as

petitioners would have us, see F. C C: v. Schreiber, 381 :

U.S. 279, 296 (1965). While the proposed regulations

do not assure a heariiig, they do permit any interested

tae

person to object to any new authorizations on the ground,

_ among others, of a belief “that the long-haul motor carrier

or its affiliate will not promote air cargo.” While it may

indeed be difficult to establish this at the start, the re-

ports to be filed by the three successful applicants and

other long-haul truckers that may receive authority in the

future will ultimately afford a basis for truly informed ,

decision on an issue that now lies in the realm of con-

jecture.

Similar considerations require us to reject petitioners’

contention that the Board’s avowed limitation on the

number of applications granted is simply a form of words.

When an independent regulatory agency says that “‘long-

haul truckers of general commodities will not be granted

air forwarding licenses routinely” and that its policy to-

ward them “will not be free entry, but monitored entry,”

a reviewing court must assume the agency means what it

says, unless and until experience should indicate the con-

trary. We will expect-the Board to be selective in ac-

cordance with its. word. We would assume, for, example,'

in light of the Board’s expressed concern that-the nation’s

three rage cg are now responsible for more than half

of all air ff visits. forwarder tonnage and the 10 leading

cities for over three-quarters, whereas 101 of the 131 cities.

reported produced less than 5%, that it would prefer long-

haul trucker applicants with well laid plans to develop the

lesser markets, in contrast, e.g., to an applicant planning,

as Consolidated Freightways is doing, to operate for the.

first year only in the four cities ranking highest in volume

* of air freight forwarder traffic, and would not multiply

the latter type of authorization in the absence of a strong

showing of public interest. In sum we expect that the.

-~ Board will in time demand that the performance of the

long-haul truckers as air freight forwarders should con-

form to the rationale stated for their authorization, and

that if the “controlled experiment” proves disappointing,

new authorizations will not be granted and existing gnes

may be revoked. We anticipate also that in granting ad- —

ded authorizations to long-haul truckers the Board will —

take the condition of the independent forwarders into

proper account. In performing these difficult tasks the |

Board will be immeasurably aided by the detailed report-

ing requirements imposed or proposed as a result of the

remand. If deficiencies should emerge in the Board’s per-

formance, these can be brought before a court at an ap-

propriate time.

While we have felt free to consider the Board’s pro-

posed regulations as casting light on its action in granting

the three authorizations, as all parties have agreed to de rf

proper, we have no power to terminate the rule-mak:ng

proceeding with respect to the long-haul truckers, as peti-

tioners ask, even if we had any will to do so. Although

comments on the proposed regulations were due by May

23, 1969% the Board has not yet acted upon them, and

review would thus be premature. Myers v. Bethlehem

Shipbuilding Corp., 303 U.S. 41 (1938). Neither would

the situation be altered if the regulations with respect to

Jong-haul truckers are adopted. These regulations, in con-

‘trast, to any new reporting requirements on the inde-

pendents, do not compel petitioners to do anything they

have not previously done or to refrain from doing any-

thing they were previously permitted to do, as in Abbott

Laboratories v, Gardner, 387 U.S. 136 (1967), and Gardner

y. Toilet Goods Ass’ n, 387 U.S. 167 (1967). Petitioners

will be affected by the regulations only when, as and if

the Board grants further authorizations to long-haul truckers

under them. We need not consider whether review could

be thhad, or where, if the mere possibility ‘of such grants

were unlawful'since, for reasons indicated, we do not

believe this to be so. Failing that, review must await

further grants pursuant to the regulations, by _— peti-

tioners — be aggrieved.

_' Insofar as the petition to review is addressed to Order

69-4-100, it is denied; insofar as it is addressed to the

Notice of Proposed Rule Making, it is dismissed.

. 15

UNITED STATES OF AMERICA

CIVIL AERONAUTICS BOARD

WASHINGTON, D. C.

Adopted by the Civil Aeronautics Board

at its office in Washington, D. C..

on the 21st day of April, 1969

— — — — —_ a — _ — — — — — —<

= ~~

MOTOR CARRIER-AIR FREIGHT ., Docket 16857

FORWARDER INVESTIGATION

OPINION ON REMAND

By Order E-25725 the Board authorized three long-

haul motor carriers of general conimodities to engage in”

air freight forwarding, either directly or through subsidi-

aries. Recognizing that the Board had previously restricted

the entry of such long-haul truckers into the air forwarding

business, the Board ruled that a new policy deserves a

trial. Thereafter, in response to a petition for review filed

by. 19 air freight forwarders and their trade association,

the United States Court of Appeals for the Second Circuit

vacated the Board’s’ order and remanded the case for fur-

ther proceedings not inconsistent with the Court’s opinion.

ABC Air Freight Co., Inc., et al. v. CAB, 391 F:2d 295

(1968). '

The Board then invited the parties to file briefs di-

rected to the action which the Board should take in light

of the remand. In their responses, the Air Freight For-

warders Association and six direct air carriers contend

that the Board should dismiss the proceéding of hold

another evidentiary hearing; the applicants assert that they

should be licensed immediately. Additionally, seven other

motor carriers or motor carrier affiliates request leave to

_ intervene and consolidation of their applications for for-

warding authority. The Board has heard oral argument.

The threshold decision facing the Board is: whether

_-it-must terminate the proceeding or reopen the record;

or whether it can rule on the merits of the applications.

_ In the Board’s view, the Court’s decision does not preclude

the Board from licensing some-or all of the four applicants

before it now. According to the Court, the most serious’

deficiency in the Board’s order was an ambiguity as to

whether the, Board established a policy of entry for all

long-haul truckers or merely granted the applications before

it. Reading the Board’s opinion as a commitment to grant

authorizations to all, the Court found the Board’s opinion

to be inadequate. But the Court stated clearly that it did

not wish to be misunderstood as ruling that the present

record might not be sufficient for the Board to initiate a

properly controlled experiment in the authorization of long-

haul truckers as air freight forwarders.

Nor does the Board believe that it should reopen the

record as a matter of administrative discretion. The present

record is well documented and reasonably current. It con-

tains a complete picture of the air freight forwarding indus-

-try and of air freight through 1965 and, on some matters,

mid-1966. Noone suggests that the present prospécts of

air forwarders and air freight have changed materially since

the record was closed. Of course, where, as here, the

essential questions before the Board relate to economic —

predictions about the future, any record based upon past

facts yields some uncertainties. But those parties asking

for reopening do. not suggest what, if any, evidence they

will present to alleviate that or any other problem. Ac-

cordingly, the Board concludes that it should base a final

decision upon the present record.

Reviewing the record in the light of the Court’s

opinion, the Board believes that it can and should grant

‘authority to the three applicants who received awards

before.’| In brief, the Board finds that those applicants’

authorization will result in substantial public benefits,

will not result in conflicts of interest which will interfere

with the promotion of air cargo, and will not reduce

effective competition by the existing independent air for-

warding industry. The Board further concludes that the

Congressional restrictions against surface carrier participa-

tion in airline operations do not disqualify the applicants

from becoming air fatwarders who solicit cargo to be

transported by air. And the Board believes that its policy -

should continue to be one of granting authorizations

which will contribute to the\growth and development of

air cargo, rather than one of protecting SuSE: forwarders

from competition.

The Board emphasizes, however, that it is granting

only the applications before it and not passing upon any

others. For other applicants, the Board tentatively con-

cludes only that it should not deem the size, geographical

extent, or general commodity rights of a trucker’s surface

operations or authority—of themselves—as factors showing

that the trucker should be barred from the air freight tor-

warding business. But long-haul truckers of general com-

modities will not be granted air forwarding licenses rou-

tinely. Instead, each trucker applicant will be required

to show that it will conscientiously promote air cargo and

that its operations, either alone or in combination with

I The fourth applicant, who did not receive an award in Ordet

E-25725, will not be granted authority for the reasons stated in _

_ Part Vil of this Opinion.

So See

others already licensed, will be* in’ the public interest. The

Board will not be satisfied with mere recitafions; it will

scrutinize each application (and any objection) to insure

that these criteria are met. And the Board will maintain

a close watch over the experiment through new and-more

detailed reporting requirements. Avs a final safeguard, the

Board will reserve the power to, suspend the processing of

new applications and, if necessary,-even to terminate out-

standing licenses. This policy is beihg codified in proposed

. yegulations issued concurrently with this order. For long-

haul truckers who seek to become air forwarders, the’ Tule

will not be free ‘entry, but monitored entry.

We turn now to.a detailed discussion of the reasons

for our decision in light of the Court’s mandate that we

articulate our rationale more precisely and that we élabo-

rate On our findings. Accordingly, this option supersedes .

our earlier one contained in Order E-25725. Except as

modified herein, we will adopt the examiner’s 5 ag

conclusions in his initial decision; which is attached to.

At the outset, the Board rejects the contention that

the second proviso of Section 408(b) reflects a Congres-

sional policy against surface carrier participation in the

air forwarding business.

When Congress enacted the Civil Aeronautics Act of

1938, it intended to prevent the control of the struggling

airlines by those engaged in a competing form of trans‘

portation. “ Following the pattern of the Motor Carrier. Act,

Congress included in Section. 408(b) a second proviso which

precludes a surface carrier from acquiring an air carrier un-

less the surface carrier shows that it can a aircraft to

public advantage in its surface operations. The Board lias -

repéatedly recognized that the proviso controls where ‘a

surface carrier seeks to “‘acquire’’ a direct carrier. And ‘

although the proviso does not literally ‘cover a surface

carrier’s request under Section 401 for authority to Op-

erate aircraft; the Board- applies the second proviso’s

panes, in certificate proceedings. ;

With respect to air freight iokeandebs however, the

Board -has long taken a different view. In the original

Air Freight Forwarder Case, 9 C.A.B, 473, 502 (1948),

the Board ruled that “the secorid proviso does not apply

' -dn a case where the company of which: control. is acquired

Is an air freight forwarder.” ‘It-went on to say:

“We’ believe that Congress did not intend it

[the second proviso] to be applicable. The

language of ’the section is such as to indicate

that it was ‘directed to the case of control of

a direct air carrier by a direct common Carrier,

ar by a person. controlled by, or controlling,

such common carrier or affiliated therewith.

_ The requirements laid down therein were ob-

viously’ framed with referénce fo. the experience

of direct carriers and ‘are at best inappropriate

where indirect carriers are involved. si ssintcitdo,

(/d. at 503). ~

The Board’s conclusion was judicially approved in Amieri-

can Airlines vy. CAB: 178 F.2d 903, 909 (7 Cir. 1949)

_ and was reaffirmed in the Air Freight Forwarder Investiga-

tion, 21 C.A.B: 536, 545 (1955) and 23 C.A.B. 376, 378

(1956). Pm

In pen the instant proceeding, the’Court, which

accepted the proposition that the second proviso did not

apply * “in terms” to indirect air carriers, suggested that

“the Board is ‘nevertheless obligated to consider the policies

behind the proviso in regulating’ entry into forwarding”?

2 The Court cited National Air Freight Forwarding Co . CAB,

197 F.2d 384 4 (Dp. C. Cir. 1952). But the District of aes Circuit

(Continued)

20 |

(391 F.2d at 302). As support for its view, the Court |

referred to ‘a long-standing Congressional policy about

railroad and other sufface carrier participation in different

transportation modes. The Board has recdgnized repeatedly

that the Congressional policy is appltcable whenever | a sur-

face carrier seeks to acquire or to become a direct air car-

rier. E.g., American Export Lines, Control, 4 C.A.B 104,

106-107 (1943). But the Board has never read the Con- .

gressioni! policy as intended to conteyh entry into the for-

warding business. . \

Nor does the Board do so now. ‘When it eked the

Act [the Civil Aeronautics Act of 1938], Congress was

concerned Only with direct carriers.”. See American Air-

lines v. CAB, supra. Indeed, Congress took pains to pro-

vide that the regulatory scheme covering direct carriers

need not be applied to-forwarders and other indirect. car-

riers (present Section 101(3)). Similarly, in the Freight

Forwarder Act of 1942, enacted when Congress turned its

attention to surface forwarders, Congress did ‘not legislate

the rule cited by the Court; instead it allowed direct carriers

ff"

: (Continued)

Court was there dealing with the contention: that Section 408 in

its entirety covers only technical “acquisitions” of control and,

hence, was inapplicable where a railroad affiliate applied for for-

warding authority in its own name and did not ask for approval

of the previously-created control relationship (197 F.2d at 385-386;

9 C.A.B. at 510-511). In that situation, the District of Columbia

Circuit Court rightly ruled as an alternative holding that “the Board

may apply the policies of $408” —not of the second ‘Proviso— “even

where there is no technical § 408 control relationship:’ (197 F.2d

at 386; see also American President Lines, 7 C.A.B. 799 (1947).)

. Moreover, in the 1952. decision, the Court noted without question

the Board’s refusal to apply the second proviso, as well as the

Board’s statement that ,the proviso “is ‘directed to the case of con-’

trol of a direct carrier by a direct common carrier * * *.’” (tr

* F.2d at 385-386, note 6. _-Emphasis supplied).

by rail, water, and highway, to perform forwarding services

through affiliates.3 Against this background, the Boarv”

cannot impute to Congress an intent to establish like

policies for direct carriers and for freight forwarders.

- As a practical matter, the Board perceives no reason

why the Congress should have imposed a statutory barrier

against surface carrier. participation in air forwarding. The

‘statutory goal is to promote air cargo, and. that task is

a primary responsibility of the airlines. Thé forwarders

are welcome auxiliaries, who supplement? the airlines’

efforts. The statutory provisions authorizing the Board

to permit free entry into forwarding -signify to us that

the Congress recognized that the Board’s-duty towards

air cargo‘is to protect competition—not-competitors.4

Today, competition in‘air cargo comes from the airlines,

who promote 78 percent of the traffic, and the handful

of forwarders, who promote almost all the rest. In light

of present-day conditions, there is no basis for any con-

clusion that surface: carrier entry into forwarding. will-

stifle the promotion Of air cargo by the airlines. Nor, as

we explain later, do we think that it will eliminate com-

petision by strong independent forwarders. On the con-

trary, vigorous new entrants can promote competition in

forwarding even if they replace a few other, ineffective

competitors. ;

3 See Ownership of Stock in Freight Forwarders, 265 L.C.C. 73,

76-77 (1947); Calore Express Co., Inc., 87 M.C.C. 379, 384 (1961).

As we understand it; under the Act railroads are not limited to con-

trolling railroad forwarders. Rather, railroads are allowed to partici-

pate in highway traffic by controlling trucking forwarders, even in

circumstances where the railroads cannot lawfully control truckers

themselves.

4 Notwithstanding the entrenched forwarders’ requests, Congress

has declined to abolish the free entry system for, air forwarding. See

HRC 4839, 90th Cong., Ist Sess. (1967); H.R. 4181, 88th Cong., Ist

(Continued):

“ >

As the history of forwdrder regulation shows, the _

Board has ‘always recognized these precepts. Initially, of

course, when the forwarding industry was in its infancy, f

the Board’ s policies were influenced strongly by the fledg- 2

ling air cargo industry’s need to establish itself. Thus, in

the 1948 Air Freight ‘Forwarder Case, the record showed

that the certificated cargo carriers transported only about

“63 thillion ton-miles of air freight*in 1947 (9 CAB. at

481). Those applicants who had solicited air cargo as

agents were in a precarious financial position: Emery,

whose freight revenues were among, the largest, had not

yet shown a profit U/d. at°491). Accordingly, the Board

denied the applications of railroad affiliates to becédme

forwarders, although it authorized letters of registration

for surface freight forwarders and their -affiliates, and for

motor carrier affiliates. .

When it decided the 1949 Air Freight Forwarder Case

(International), 11 C.A.B. 182, the Board again granted”

authorizations for surface forwarders, surface forwarder -

affiliates, and motor carrier affiliates. In addition, the

Board was faced with applications by railroad affiliates

which had_been ‘denied authority in the domestic case.

° Finding that the railroad affiliates did not offer the same

danger as in the domestic field, the Board approved their

entry into international air forwarding.

The Board’s nondoctrinaire approach is nowhere better .

illustrated than in the 1955 Air Freight Forwarder Investi-

gation. Then holding that domestic forwarding authoriza-

tions should be issued to two railroad affiliates, whose

at ~~

4 (Continued) (

Sess. (1963); Hearings before Subcommittee No. 4 on Distribution

Problems of the House Select Committee on Small Business, 89th

Cong., Ist Sess. 103-121, 129 (Vol. 1, 1966).

> ¢

23 -

applications had been denied in the 1948 Case, the Board

was aware that airline domestic freight revenues and ton-

miles had increased over 65 percent since the earlier Board

decision (21 C.A.B. at 541). And aithough the individual

forwarders’ financial health was frail by today’s standards

(id. at 598), the Board found that several vigorous for-

warder enterprises had developed and that domestic com-

_ petition by railroads should no longer be deferred.

Again, in the 1964 Airfreight Forwarder Authority

Case, 40 C.A.B. 673, the Board refuted the argument that

there was a presumption against granting authority to- .

applicants having direct surface transportation interests. ©

' Rather, the Board characterized its policy as prohibiting |

“entry by surface carriers into the -airfreight forwarder

field where it appeared that such "conflicts of interest ‘fy

would arise between air and surface operations ‘as to re-

sult in material diversion of. traffic from air to surface

transportation and deprive the applicants of. sufficient -

incentive to conscientiously promote and develop airfreight

forwarding. * * *” Ud. at 675). That, of course, is

fundamentally a factual test.

In sum, the history of the ,Board’s forwarder fegula-

tion is that as the air cargo industry has grown, the Board

has narrowed its shield of protection enough to allow. in-

creased competition from surface interests. Only rarely

during recent years have surface carrier requests for for-

warding authority been denied on conflict of interest

grounds. In July 1965, however, the staff issued an order

under delegated authority in which it adopted a restrictive

> While in 1958 the Board denied REA’s ‘application for for-

warding authority (Railway Express Agency, Airfreight Forwarder

Application, 27 C.A.B: 500), the Board’s consistent treatment .of

REA over the preceding decade shows that REA was regarded as

unique, primarily because it wag the largest nongovernment carrier

. (Continued)

en 7 ae Gs.

view of Board policy and denied such a request. Telstar

* Air Freight,*Inc., Order E-22479. . Within months after that

unappealed staff action became final, the Board instituted

this Investigation to consider whether long-haul motor

carriers of general commodities should be allowed to par-

ticipate in air forwarding.

The central question posed by the Court’ s remand is

whether the Board is legally free to give an affirmative —

answer to that question. Since the Boartd does not regard

its past policies as mandetéd by the second proviso, the

Board believes that it may lawfully continue to shape

and reshape those policies as a matter of judgment; it

need not corapile an evidentiary record to justify each

adjustment of policy. “Of course, the Board must remain

faithful to the public interest commandmenis of the. Act. °

So long as it does so, the Board believes that it can rely

upon its judgment and experience as a basis for adapting

its policies to the dynamic technology of the air cargo

industry and to the needs of the public. In any event,

the Board finds that the record here justifies a new policy.

_ Il.

In finding that a new policy is needed, the Board is

convinced that ‘the three applicants’ entry into the air »

forwarding business is likely to produce important public

benefits. Indeed, as the Board found in its earlier opinion,

the participation of strong new entrants like the applicants

may be essential to achieve the full promise of air cargo.

> (Continued) |

of small-package traffic by all mddes of transport. (See Airfreight

Forwarder Authority Case, 40 Cc A.B. 673, 674-675.) In contrast

to REA’s cases, the Board authdrized United Parcel Managers Co.

and United Parcel Service of. America, Inc., which in turn owned

12 regional operating companies, to acquire Air Parcel, Inc., an air

freight forwarder. (United Parcel Managers Co., Order E-7324, April

22, 1953). eens .

“Ne

‘

one keahy there is no doubt that the’ air cargo industry -

stands onthe threshold of.a new era. Over the 1951-1965

periodgdomestic and# international air freight. ton-miles

increased sevenfold. In the Iast year surveyed, 1965,

domestic freight traffic increased over the preceding year

~ by 26 percent; international traffic by almost 46 percent.

The result is that U. S. domestic and international freight -

shipments reached about 1.7 billion ton-miles in 1965.

Yet despite that growth, the carriers’ excess freight

capacity has been increasing at an alarming rate, The-

domestic trunklines’ unused cargo capacity, which had been -—

less than a billion ton-miles before 1959, reached more than

3 billion ton-miles in 1965. Each year the carriers have

found cargo enough to fill only about a quarter or less of

their freight capacity, leaving the rest to be flown empty.

Unless air freight can achieve a dramatic breakthrough, ©

it will lag even further behind available aircraft capacity

soon. By 1970, the Nation’s air carriers are expected ‘to.

have a fleet of all-cargo aircraft capable of carrying 6.5.

“billion ton-miles of freight. Even without considering the

additional freight capacity of combination aircraft, air cargo

| must expand several times to fill the airlines’ pressing need

for more freight.

Given, sitexielte darelagemes. air’ freight can meet

the challenge. One important factor is that air transpor- .

tation’no longer commands a premium rate vis-a-vis sur- |

face transport. The Board has previously found that be-

tween 1946 and 1966 motor carrier rates increased by

52 percent; and air freight rates decreased by 30 percent.®

Motor carrier rates, particularly for small packages, are

expected to continue increasing. With the adyent of the*

larger jets, improved ground handling techniques, and

6 Airlift-Slick Route Transfer Case, Order E-26810, May 20,

1968 (mimeo page 7).

tile *

containerization, the ton-mile costs of air freight should

~~ continue to decline, thus narrowing the gap between sur-

face and air transportation costs.’ Even if motor trans- -

portation rates remain less than air freight rates, shippers ° :

will increasingly find that air transportation is economical

. because it produces savings in overall distribution costs.

Based upon these cqnsiderations, one. forecast of record

estimates that domestic air freight ‘will more than“double

by 1970. — ;

But that breakthrough in air freight will not come

,» about from lower rates alone. Both the ditect air carriers,

and the forwarders who generate over 20 percent of aif

freight traffic, must ‘increase their promotional efforts.

They must awaken shippers to the new low rates and to

the savings in warehousing and distribution costs and

other advantages of air over surface transportation. And

they -must make massive investments in containerization,

computerized billing ‘systems, and sophisticated communi-

- cations networks. One’ fact is inescapable: the needed*

, promotional campaigns and investments will require sub-

. Stantial capital expenditures.

‘There is reason to doubt that many existing indepén-

dent~air forwarders cain afford the necessary sales effort 3

and capital investments. Most forwarders ‘are thinly cap- .

italized. ‘ Of 124 forwarders reporting assets-in 1966, 112

had less than $2 million in total assets; 102 had less than

$1 ‘million;-85 had less than $500,000; and 48 had less

lesa 8160000 ‘And most forwarders, who already carry

‘heavy debt loads, will have difficulty raising outside capital.

It is true that. the industry includes many substantial

forwarders. But these’ large forwarders cannot be relied

upon to carry the burden alone. Even Emery, the forwarder ~

which controls 30 percent of industry revenues, concedes

a rie ,

that if it could ‘have-budgeted more money for promotional

efforts, it could have generated more air freight. If the

5 SS a,

a © - F

dominant company in the industry ‘must cuftail its promo-

tion of air freight because of finances, sur y the other

forwarders will be even more limited on f nds.

~.' There is thus a demonstrated neéd for new, able, and

well-financed enterprises to enter the air forwarding busi-

‘ness. The applicants have come forward to Till that role.

Ideally, perhaps, the Board might have been given the’

Opportunity to choose: between the applicants and other

equally knowledgeable and large companies having no con- °

nections with long-haul surface carriers.” ‘That possibility

_ would have raised the question, posed by the Court,

whether the greater sales effort called for in the future

can be better afforded solely by new independent for-

warders. But although the Board’s liberal entry policies —

have been outstanding for many years, few large indepen- ©

dents have asked to become forwarders. Of the 11 inde-

pendents -with applications now on file, none are as large

as the 17 largest forwarders. All have less than $190,000

in total assets; and seven have less than $75,000.7 If the

Board spurns ‘the trucking-related applicants now, it will

be left with nothing better than the bare hope that other

applicants, equally-qualified but without long-haul surface

connections, will emerge someday. a

Of course, the Board would not license these appli-

cants if it. concluded that they would experience a dis-

abling. conflict of interest between their air and surface

Operations—a conflict depriving them of an incentive to

‘promote air freight. In Part III of this Opinion, however,

the Board has spelled out the reasons why it.finds the

very opposite to be the case. Given the applicants’ dem-

Nanstted intention to promote air cargo conscientiously,

they have the resources needed to aid in accomplishing

that. goal. - ;

7 As of March 13,.1969. In the preceding six months, the Board

licensed only one applicant whose total asséts were in the $/ million

/ category. Included among the so-called independents are intrastate

and regional truckers.

. i $

"| we cut a

° '

_. About this there can be no real dispute. As the

examiner found, the applicants. are large, well-financed,

profitable Organizations, They will provide sophisticated

management, experienced personnel, and substantial addi-

tional -air forwarding facilities. They plan aggressive pro-

motional programs combining promising, new sales ap-

proaches with the formulas which have proven successful

for forwarders like Emery. And the applicants -will have

access to nationwide communicatiohs networks and to ~ '’

‘computerized billing and reporting systems, thus Satisfying |

shippers’ demands for an_ efficient and reliable service,

- All told, the applicants’ will be a potent force in developing

new air freight—even in the 10 leading cities in which one

_ Or more applicants will compete with existing forwarders. |

. 4

But entirely apart from those thriving markets, the

applicants also have an exceptional ability to stimulate air

freight in underdeveloped cities. Today, the Nation’s three °

largest cities account for over one-half of all freight for-

warder tonnage; the 10 leading cities are responsible for

over three-quarters. - Conversely, among 131 cities reported,

* the lowest ranking .41 ¢ities produced .only one-tenth of

one percent of the traffic; 101 cities produced less than.

five percent. This Overconcentration of forwarder activities

is Obviously inimical to the development of a truly national

air freight transportation system.

Yet either existing nor new independent air forwarders

can be relied upon to develop theNess productive cities,

It ix true, of course, that Emery an&some other forwarders

have opened sales ‘and operating statious in some of those

cities. As Emery has discovered, however, those stations

incur average direct transportation costs per pound far in

excess of those experienced #t more lucrative stations, —

Cons€guently, these’ secondary markets may not be directly

profitable. The ‘thinly-capitalized independent companies

now applying .permission to enter the forwarding busi-

ness are not equipped to make their mark in the under-

“developed cities. This means that Emery and a relatively

‘

few other forwarders will continue to dominate the for-

warding business in those cities—thus depriving the cities

of the very competition which they need to harvest their

full freight potential. | 3 |

The applicants are the most likely candidates to pro-

vide that needed competition. First, they are financially

strong enough to open new air-Only terminals in cities

Where separate facilities are needed. though initially un-

profitable. Second, where Separate air-only stations are

not immediately practical, the applicants can begin by

basing air forwarding personnel at the existing. terminals ©

of their -surface affiliates. By sharing those existing ter-

minals with the surface operations, the applicants can re-

. duce the heavy overhead costs attributable to their. air

freight activities, thereby making service to smaller cities

more feasible.

The applicants have not only the capacity fo begin

Operations in the less promoted communities, but also the.

intention dp do so. Navajo Freight Lines plans to begin

services at terminals in 13 cities, six of which are not

among the top 10.8 Although CF Air Freight will limit

itself for the first six months or a year to operations at ,

the four largest cities, it intends to open two more stations.

each year thereafter. The third applicant, P.I.E. Air Freight

Forwarding, will open ai-Only stations in 14 cities and

will offer direct air forwarding service through struck termi-

nals in 16 other communities. In all. the air gto

-arms_of the applicants will offer immediate air forwarding

services to 21 cities not among the top 10 traffic generat- -

ing points, and to 12 cities not among the top 20. More

cities will receive service later.

8 In listing Navajo’s initial stations, the examiner inadvertently

omitted to mention Philadelphia and Phoenix. -

"30 | 4

The increased competition which the applicants will

provide in the intermediate-sized cities can be ex pected

to stimulate an immense growth in air freight. By com-

parison with the 10 leading air freight centers in terms

of comparative economic indicia, the intermediate-sized

cities’ freight traffic is grossly and’ disproportionately small.

Lack of vigorous, competitive promotion is plainly one

cause. The applicants’ entry into these markets will pro-

vide a long overdue competitive spur. Not only will the

increased competition aid both shippers and the airlines,

but it will probably generate new freight far exceeding

any diversion from independent forwarders. As a result,

the applicants will not jeopardize the able independents’

operations in underdeveloped markets, but may actually

- benefit them. If our expectations prove false, the Board

will retain the option not only to suspend or terminate

the applicants’ authorizations, but also to limit them geo-

graphically.

Finally, the applicants’ authorization may increase the

chances of air freight’s message being carried to smaller

cities in which no air forwarder will operate for many

years. - Regrettable as it may be, a substantial number of -

cities do not possess a freight potential adequate to support

direct forwarder operations. Unless they are adjacent to

the terminal area of larger cities, those cities must depend

upon coordinated truck-air transportation, Although smaller

cities are linked to airports by surface transportation, effec-

tive intermodal transportation will not come into being

‘ unless truckers gain an incentive to facilitate combined air-

surface shipments. As explained in the next section of

this Opinion, our decision today will go a long way towards

providing truckers with that incentive. Henceforth, we

believe, the applicants will be able to cooperate with their

surface affiliates (and other truckers who interline traffic

with those affiliates) to tap shipping sources located beyond

the metropolitan areas.

: "31

In sum, the Board believes that the applicants’ entry

will stimulate the growth of air cargo from several sources:

metropolitan areas now being served by many existing

forwarders; other -cities in which the applicants’ competi-

tive force will stimulate a lagging freight development;

and smaller cities which will depend ‘upon a more vigorous

use of coordinated truck-air interline operations. In each

area, the applicants’ authorizations will help to realize air

cargo’s full promise. |

Il. i

Our 1967 findings that important public advantages

will result from motor carrier entry into air freight for-

warding were said to have been undermined by the con-

flict of interest problem. The Court was dubious that the

entire trucking industry could be found immune to con-

flicts. Nevertheless, the Court recognized that the Board

might conclude, after Studying a particular surface carrier’s

proposals, that the carrier will conscientiously promote

air transport. The three successful applicants have clearly.

met that test.

To illustrate, CF Air Freight, a subsidiary of Consoli-

dated Freightways, plans to conduct: its Operations auto-

nomously. It will establish its own sales organization,

with personnel developing specialized air freight marketing

programs. With some exceptions listed by the examiner,

it will function as a separate company in fact as well as

form. Its president will report directly to the president

of the holding company; in other respects it will be inde-

pendent of any motor carrier in the Consolidated Freight®

ways. system. Indeed, the holding company’s president

Stated unequivocally that CF Air Freight’s salesmen will

solicit the affiliated truckers’ customers for air freight.

P.I.E. Air Freight Forwarding, a*subsidiary of Pacific

Intermountain Express Co., plans to conduct Operations

in 14 cities from separate airport terminals, stocked with

air freight equipment and staffed by personnel specializing

in air freight. At 16 other points, it will employ driver

salesmen who will be headquartered at a motor Carrier

terminal but will devote themselves exclusively to air freight.

P.1.E. Air Freight will also offer air freight at other loca-

tions using its parent’s facilities and personnel. While in

comparison to CF Air Freight this applicant will offer a

coordinated truck and air service, it will also be operated

independently and will. not refrain from soliciting customers

of its motor carrier parent.

Unlike the other two successful applicants, Navajo

Freight Lines proposes to establish its air forwarding enter-

prise as a separate division within the corporation. As a

guarantee of the division’s commitment to air forwarding,

Navajo has assembled a management team drawn from the

aviation ‘industry and dedicated to air cargo’s promotion.

Navajo will commence air forwarding operations at surface

facilities, with some new Air forwarding pick-up equipment,

but will establish separate facilities as traffic growth dic-

tates. Its 25 full-time air freight salesmen, together with |

other air forwarding staff, will be directed to solicit poten-

tial customers whether or not they patronize Navajo’s sur-

face Operations.

These applicants’ proposals cast doubt upon the con-

ventional conflicts shibboleths. While the examiner assumed

that motor carriers would prefer to carry “all” traffic by

surface means, these applicants testified to the contrary. |

According to them, truckers now carry the so-called ‘‘small-

shipment traffic” at a loss or minimal gain. As a result,

they say, the applicants and their affiliates will be eager

to divert small-shipment traffic to air if they can thereby

harvest the forwarders’ profit. ire

_ In judging the good faith of the applicants’ position,

- they Board need not find indisputable proof of the assertions

E %

about smiall-package traffic. The record contains several

ICC studies showing the comparatively high cost of that

traffic. Moreover, the Interstate Commerce Commission

has stated as a matter of public record both its concern

over the small-pacKage problem and its recognition that

many motor carriers believe that small-package traffic is

noncompensatory.? These matters lend enough credence

to the applicants’ words io justify putting the quéstion to

the test of actual experience. In their special quarterly

reports to the Board, the applicants will be asked to supply

detailed information about both their own and their sur-

face arms’ small-shipment traffic. By. comparing the trends

in small-shipment traffic for the air and surface enterprises

of the same company or corporate system, the Board will

be able to make a truly informed judgment whether the

surface carrier applicants keep their promise to divert a sub-

stantial tion of that traffic to affiliated air freight for-

warders.. | |

In this connection, the Board has considered documents

which suggested to the Court that motor carriers would be

‘unwilling to divert small shipments to the airlines. That

small shipments comprise a large percentage of motor car-

rier shipments is not, to.our minds, dispositive. In the

case of Consolidated Freightways, for example, while less-

than-100 pound shipments constitute almost 28 percent

of total shipments, they account for less than 2 percent ©

of tonnage shipped and only 6 percent of revenues. With

motor carrier revenues increasing over 8.6 percent annually,

truckers are not likely to view a loss of small-shipment

revenues as catastrophic. . This is particularly true if the: -

truckers believe that those revenues cannot be translated

into profits, or cannot match the profits which their air

forwarding arms will earn through shipping that traffic by

air. 7

9 See e.g., LTL Cor Rates—Between East and Territories West,

326 1.C.C. 174, 177 (1966); General Increases—Eastern Central Terri-

tory, 316 I1.C.C. 467 (1962).

> : -

The applicants’ promotion. of air transportation will

not be limited to small shipments. Stridtly speaking, of

course, the licensing of a trucker or its affiliate as an air

forwarder will not reduce the trucker’s potential conflicts _

of interest about shipments which can be carried profitably

by surface. But it wiilteduce the trucker’s incentives to

thwart the diversion of that traffic to air. Without air

forwarding authority, a trucker can earn nothing by tyrning

shipments over to air carriers and, hence, has no reason

to do so. If the trucker or its affiliate is awarded air

freight forwarder authority, ‘however, the trucker will have’

incentives to permit air traffic to grow. As an air freight

forwarder or its affiliate, the trucker will have a stake in

the air forwarding business; the corporate system can con-

solidate shipments and realize earnings from the spread be-.—

tween the air carrier rates for small and large shipments,

It is clear that these truckers can do’ much for air transport

if they cooperate with their air arms’ activities, instead of

battling against any diversion of their surface traffic to air.

The Court’s concern about conflicts was not directed

' to a controlled experiment, limited to truckers who show

a plan to promote air freight conscientiously.. Thus, in

questioning whether truckers would boost air freight over

surface in marginal cases, or would support efforts to ex-

pand air forwarding terminal areas, the Court had in mind ‘

cases where the trucker-forwarder would be required to

balance the.economic interests of both its surface and air

activities. The successful applicants here,‘ however, are

organized as air-only components; each is insulated from

the trucking operation both by organization and by a man-

date to solicit the same customers. Similarly, when the

10 The Board does not adopt the examiner’s assumption that air

forwarding may not be as profitable as motor carriage. Insofar as

_ the record illuminates this question, it tends to show that some for-

warders -have rates of return which are higher than the applicants’.

Court wondered whether independent forwarders would

remain vigorous enough to compete with motor carriers

and thereby insure that the truckers would promote air

freight, the Court’s fears premised “a large- scale invasion

by. motor carriers * * *” (391 F.2d at 304). The limited

_ number of. trucking-related forwarders to. be licensed will

‘ have no chance to silence the competitive voice of inde-

pendent forwarders—and certainly not of the airlines, who

promote nearly four-fifths of interstate air cargo.

It is still possible, of course, to speculate pro and _

con whether. the conflict of interest hypothesis has any

remaining vigor for truckers or affiliates like the three

applicants. The lessons of the past teach some skepticism.

By 1964, sixty-two percent of companies engaged in air

freight forwarding ‘were surface carriers or their affiliates.

Yet they have not dominated air forwarding; the preemi-

nent air forwarder is an independent (Emery) who captures

the lion’s share of total industry revenues. On the other

hand, the surface carrier-air forwarders have not failed to

promote air traffic; they include a number of leading air

forwarders.11_ While few if any of the existing surface

carrier-air forwarders have surface rights as competitive

with air as those of the long-haul truckers, the former’s

entry into air forwarding was also once opposed by air

transportation's defender¢”

The time has come, the Boarw believes, to test the

conflicts hypothesis in a controlled experiment. Each

applicant has given persuasive evidence of its intentidn to

promote air cargo. Each has offered a different organiza-

ngs pian to guard ‘against conflicts with the related

1 Though one ,exhibit (BOR- 1) purports to show that indepen-

dent air freight Tptwarders have been more productive than surface-

affiliated forwarders, the inclusion of Emery in the former group

distorts the comparison and renders it meaningless.

‘

~~»

ss 36

Surface operation. Only experience can verify or disprove

the applicants’ promise, or indicate whether one’s organiza- :

tional format is sounder than another’s. During the experi-

mental period, the Board will receive from the applicants

Special reports showirig whether the applicants are stimu-

lating new off-line business, increasing traffic from outside

present terminal areas, and receiving new traffic from their

Surface divisions or affiliates. That information will enable

the Board to: answer the conflicts question on the basis * ~

of fact, not surmise. .

If other trucking-related enterprises can show that they

are equally dedicated to air cargo promotion, they too \will

be eligible to participate in the experiment under the terms

of the proposed regulations issued today. As the regula-

tions make clear, however, only applicants whose proposals

affirmatively show promise of conscientious promotion will

be licensed. \

B 3 6

IV.

The applicants’ entry into air forwarding is also opposed

on the grounds that it will Supposedly decimate the existing

air forwarder industry. That contention is advanced pri-

marily by the Air Freight Forwarders Association, repre-

senting the American kxpress Company and 20 of the other

24 largest forwarders.12 The Board must reject.the argument.

The record contains little evidence designed expressly

to answer the impact question. The forwarders and their

12 The record shows 22, not 21 members of the Association; but

two members merged with’ each other last year. Airborne Freight

Corp., Order 68-9-140, Sept. 27, 1968. Two other Association mem-

"bers merged into firms which were not Originally part of the Assdécia- ‘

tion. A fourth Association member changed its corporate name.

allies did not present any diversion estimates; and they .

_ do not offer to do so now. Although the applicants

sponsored shipper witnesses who testified on this. subject,

the Board agrees with the examiner (Tr. 78) that the

shippers’ testimony is entitled to little weight pro or con.

_In these circumstances, the Board is called upon not

merely to consider the facts of record, but also to draw

inferences from them, taking into-account the Board’s

accumulated experience. Such judgments about the future

' necessarily involve elements of uncertainty. That is partic-

ularly true when, as now, the regulatory action “contem-

plates a proposed development, new, not existing,” Tequiring

a type of judgment going beyond “the mere evaluation

of past facts * * *.” See*American Airlines v. CAB,

192 F.2d 417, 420 (D.C. Cir. 1951). So, although the

Board cannot foretell the answer to the impact question

\with mathematical precision, it also Cannot escape the duty

>to determine the reasonable probabilities.

As we see it, those probabilities are heavily in favor

of the examiner’s conclusion that “[t]he market potential

is large enough, if developed, to support the existing for-

warders, the applicants, and a substantial numer of addi-

tional forwarders * * * .” The examiner’s assessment

rested only partially on the top 10 forwarders’ Operating

statistics. In addition, the examiner also correctly recog-

nized that the history of the entire forwarding industry’ is

- financial growth justifies allowing new competition, not

preserving the status quo.

One excellent guide to the forwarding industry’s ability

to withstand competition is the record of its growth since

the 1955 Investigation. Then, as now, the Board heard

the incumbent forwarders argue that the entry of surface-

controlled applicants (two railroad affiliates) would destroy -

competition. At that time, the evidence for the test year

(1953) showed that forwarders had shipped only 30 ,900

4 a

tons of freight and‘ had’ gross revenues of $13.5 million—~

Only Emery had a substantial overall profit ($407,000)

and only six other forwarders earned overall profits between

$10,000 and $30,900 (21 C.A.B. at 598, 656-657).

. In contrast, by 1964, the forwarding industry increased

its cargo shipments by nearly sevenfold, to 200,000 tons

of cargo. ‘By 1965, the industry’S gross revenues exceeded

those of 1953 by 12 times, equalling $163.6 million. And

by 1965 the number of forwarders earning profits of

$10,000 or more’ on farwarding operations was 35, of :

whom 16 earned between '$10,000-$30,000, nine earned

between $30,000-$100,000, seven earned between $100,000-

_$300,000;-and three earned over $475,000. Emery’s pro-

as fits were over $5.4 million. ~ ,

In the 1955 Jnvestigation, when it rejected the for-

warding industry’s pleas for a protettionist policy, the

Board found that “several vigorous successful forwarder

enterprises have already developed” and that the railroad-

controlled forwarders would encourage competition (21

C.A.B. at 545). Although the railroad-controlled forwarders

did not implement their authority, the number of author-

ized forwarders has increased from 43 at the time of the

Investigation to 137 in 1966. Despite this heightened

competition—or, more likely, partly because of it—the for-

warding industry has become much more affluent. In this

context, it would be illogical for the Board to reverse its

=e ne by adopting a protectionist policy found unjustified

a decade ago.

Moreover, the. Association’s arguments about the appli-

_ cants’ supposed ability to dominate forwarding are greatly

- exaggerated. Considering the applicants’ plans to conduct

their air forwarding ventures as independent enterprises,

the crucial facts relate to the size of those operations, not

of their affiliates’ surface services. The record shows that

P.I.E. Air Freight Forwarding anticipates. first-year revenues

a3:

. of $4.2 million; CF Air Freight, of $1.5 million; and

Navajo Freight Lines, of $1.8 million. In 1965, eight of.

the Association’s members grossed over $4. million; 13. °

members (and one nonmember) grossed: over $1 million.

With the industry’s tremendous growth~rate continuing, '

-other forwarders will have an opportunity to reach the --

million dollar mark before the -applicants begin Operations

this year or next. Contrary to the examiner’s finding,

these stronger forwarders may not suffer even “minor

‘losses’ with the entry of the applicants into competition.

As to most of the remaining, smaller forwarders, the

examiner prophesied that some may be initially injured

but, will be strehgthened in the long run by the addition

of strong new f warders like.the applicants. Even that

initial injury is opan to question. Many smaller forwarders

| ice in particular commodities or

tailor their operations to uniqué needs of certain shippers.

Even among forwarders who will compete with the appli-

cants, little or no diversion may result. On an industry-

wide basis, the three applicants’ aggregate initial revenues

are anticipated ta be equivalent to less than five percent

of the independentNorwarders’ 1965 revenues—and less

of their 1969 or 1970 revenues... Part of the applicants’

revenues will not represent diversion; they will come from

newly-generated business. .All in all, for the overwhelming

majority of forwarders, the Board believes that the appli-

cants will stimulate so much new freight that they will

contribute to the existing forwarders’ continued ‘growth—

and not undermine it.

Obviously, a few of the weakest forwarders may dis-

continue operations after the long-haul truckers enter the

field. Notwithstanding the examiner’s speculation, how-

ever, it cannot be said that the demise of those forwarders

will be hastened by that new competition. Taking advan-

tage of the. Board’s free entry policy and the industry’s

low initial capital requirements, some small companies

——EEeEeEe—EEEeE Ei

have begun forwarding businesses which are ill-conceived,

inadequately financed, and poorly managed. To those

* ventures, it makes no difference whether competition comes

-s from the applicants or from the many large independent

‘-torwarders. Whether or not the applicants and other

truckers are licensed, those few weak forwarders will dis-

cover that competition is inevitable and inevitably disastrous.

- The Board finds no reason to believe that air forwarding

will be inundated by long-haul truckers and railroads. First.

so far as truckers are concerned, only two long-haul truckers

other than the applicants and their affiliates applied before

our September 1967 decision to become or to acquire air

forwarders; only 10 more applied thereafter. Second, our

monitored-entry policy will be selective as to those .truckers

who can qualify to become forwarders. Moreover, our

proposed rules provide that a trucker forwarder must make

an appropriate showing “that its operations (either alone

or together with other similar carriers granted air forward-

ing authority) will not result increating a monopoly or

monopolies and thereby restrain competition or ‘jeopardize

another air carrier, or will not otherwise be inconsistent

with the public interest.” Finally, contentions regarding

railroads are to be evaluated in proceedings regarding rail-—

roads, _

In the final analysis, the Board must look ahead aad

give its Opinion whether air transportation will benefit

more from increased competition or from protectionism.

In.our view, the case for protectionism is far more specu-

lative than the case for competition. And to the extent

necessary, Competition is also the preferred: statutory goal.

Airlift asserts that the applicant will gain control of

most air cargo and, by threatening to withhold such cargo

from the direct air carriers, will be able to pressure the

¥ ‘

direct air carriers to grant rate concessions. But for the

reasons already explained, the Board believes that trucking-

related forwarders will not dominate air cargo. Nor will

they be likely to try to act in concert in negotiating with

the airlines. Rather, individual trucking-related forwarders

can be expected to compete vigorously with each other,

and also to face strong competition from independent

forwarders and the independent airlines. Hence, as the

examiner correctly concluded, the argument espoused by

Airlift “is based on assumptions not in accord with the

facts of present day air transportation’,

Vi.

The applicants’ authorizations will be made subject

to the conditions spelled out. in the accompanying order.

While these conditions will enable the Board to monitor

and maintain control over the experiment, the Majority

does not believe that the requirements will create proce-

dural difficulties. ;

The reporting condition will enable the Board to

monitor the experiment closely. Whereas independent

forwarders now file their reports under Part 244 semi-

annually, the applicants will file their special reports

quarterly. They will be directed to provide new, addi-

tional traffic and station informationwhich will show

whether they are promoting air freight m new, untapped

sources, At least some of the independent forwarders will

file the more detailed reporting information so that the

Board can evaluate the Operations of independent Ind

trucker-affiliated forwarders on a comparable basis.

Together with the Part 244 filings by* independent

air forwarders, the applicants’ filings will show if the appli-

cants” Operations have any undue competitive effect upon

the independent forwarding industry. We do not antici-

pate that our staff will encounter difficulties in analyzing

the reports promptly and in keeping the. Board fully in-

formed. Conditions .in the applicants’ licenses will give

the Board power to protect existing forwarders by restrict-

ing, suspending, or terminating the applicants’ authoriza-

tions if necessary. Unless the experiment ends sooner,

the Board will reevaluate it at the end of five years. |

The new regulations incorporate similar safeguards.

In order to consider the possibility that the new reporting

regulation may burden forwarders, the Board has invited

parties to the rulemaking. proceeding to comment on this

point and to submit proposals to except smaller forwarders

from the new rule. 9

VIL.

Although the Board has found that licenses should

be granted to three of the applicants, it has reached a

different conclusion regarding the fourth applicant, D. C.

International, Inc. |

In Order E-25725 the Board deferred action on D. C.’s

application because National City Lines, Inc., a motor car-

rier holding company whose acquisition of control of D. C.

had been approved by the ICC, had not applied for Board

approval of the control relationship. Thereafter, D. C.’and

Los Angeles Seattle Motor Express, Inc., a major West

Coast trucker, agreed to merge with and into T.I.M.E. _

Freight, Inc., another transcontinental motor carrier. As

a result of this merger, T.I.M.E. Freight will change its

name, to T.1.M.E.—D.C., Inc., and will be controlled by

National City Lines. On . 1968, the parties sub-

.mitted a petition requesting both substitution of T.1.M.E.

Freight in lieu of D.C. as the party-applicant, and approval

of the control and interlocking relationships.

As we see it, these events make D.C.’s present appli-

cation moot. D.C.’s promotional plans, which were the

43 ie

weakest before us, were premised upon the corporate

organization existing at the time of hearing. There has

been no opportunity to explore on the record what changes

may result from the major corporate reorganization. Accord-

ingly, we find that D.C.’s application should not be granted,

although the new carrier can refile a new application under

eur proposed regulations.

VIL.

The Board will deny the-motions of seven long-haul

truckers or trucking subsidiaries to consolidate their appli-

cations for forwarding authority, with this proceeding. ee

Similarly, we will deny the request of four of those car

riers for permission to intervene.

Plainly, movants are not entitled to consolidation or

to intervention as a matter of‘law. Under the Board’s

_ Rules of Practice, motions to consolidate must ordinarily

be filed by the time of the prehearing conference and

, must ordinarily relate to an application pending by that

time. Requests for intervention must be filed by that

date too. All the motions here were filed after the Court’s

remand. One motion selinpe to an application filed eight

- months after the prehearing conference and after the

hearings began. The other motions concern applications

that were not submitted until after the Board published

its first opinion. ; end

While the Rules allow the Board to grant consolida- .

tion. or intervention if the movants show good cause for |

their failure to file on time, the’ movants have not given

ample justification here. In essence, their position is that

the Court remand changed the ground rules and that, for

the first time, the applicants’ applications and the movants’

applications have become mutually exclusive. We disagree.

44.»

Of course, the Board has discretion after a Court re-

mend to reopen the record, to allow new interventions,

and to consolidate the original applications with subsequently

filed Ones. But where, as here, the Board can cure the

Court’s objections on the basis of the existing record, it is .

-not obkgated to hold new hearings simply to convenience

newcomers like the moyants. That is particularly so since

the applications are not mutually exclusive.’ The Board’s

_ decision today does not foreclose the movants’ entry in

later proceedings. Under the Board’s proposed regulations,

movants will be entitled to have their applications processed

_ under the same criteria applied to the three successful

applicants here. ;

The Board’s decision not to limit the experiment to

the three applicants ends any real likelihood that the

experiment will create unfair dislocations within the motor

carrier field. Actually, apart from the applicants and. the

movants, only five long-haul truckers have been interested

enough in air forwarding to file applications. In these

circumstances, any possibility that the movants or others

will be prejudiced by later Board action closing the class

is remote and speculative.

In sum, to withhold the applicants’ licenses now would

be unfair both to them and to the public. The applicants

have waited three years for their authorizations, expending

substantial sums of money in the process. . But more im-

portantly, shippers also await the benefits which the appli-

_cants’ authorization will bring. As we see it, any additional

delay cannot be squared with the public interest.

IX.

The last issue to which we turn is the Air Freight

Forwarders Association’s request for a moratorium. Accord-

‘ing to the Association, the Board should hold its action in

abeyance while it assesses the effect of the new terminal

20, rh 4 v3 ¥ ‘2,

area policies, the progress of ‘the, ade Sir plification Act

of 1968, and the renewed promotion of joint _aitline-truck

agreements under Section 1003 of the Act. The Associa-

tion’s arguments are unpersuasive.

The Board has. every intention to continue processing

forwarders’ requests to expand their pick-up and delivery

services beyond presently defined terminal areas. The

Board has granted many of those requests since judicial

decisions clarified the Board’s authority nearly two years

ago.13 Our experience shows, however, that expanded

terminal authority for air forwarders is not and will not

be a panacea. Many potential air freight markets lie out-

sidé the expanded terminal areas defined in forwarder tar- -

iffs approved or presently pending. And both inside and

Outside terminal areas, the competition brought by vigorous,

new entrants like the applicants will still be beneficial.

Proposed legislation known as the Trade Simplification

Act of 1968 was introduced in the 90th Congress but was

not enacted. Whether similar legislation will be introduced

in the 91st Congress is unknown. Even if enacted, how-

ever, that -legislation’s' main significance here is solely for

joint rates between truckers and forwarders—in international

transportation only. Confirmation of the legislation’s - |

limited impact here is Supplied by the fact that the 1968

bill’s primary advocate, the Department of Transportation,

has taken a position favoring motor carrier entry into air

forwarding.14 |

'3 Law Motor Freight, Inc. v. CAB, 364 F.2d 139 (1 Cir. 1966):

National Motor Freight Traffic Assoc., Inc. y. CAB, 374 F.2d 266

(D.C. Cir. 1966). Certiorari was denied in both cases on May 15,

1967, 387 U. S. 905.

14 The Department requested leave to file its Statement of Position *

as an Otherwise unauthorized document. Considering the Department’s

statement of its reasons for filing late, and the lack of prejudice to :

(Continued)

46 z :

Renewed promotion of joint agreements between air-

lines and truckers under Section 1003 of the Act will not

moot the need for the applicants’ services. In the past,

very little traffic has moved under airline-truck agreements.

The record is filled with recriminations about why that is

so. But the ultimate reason is economic. Most airline:truck

shipments have involved a relatively short surface haul. So

long as surface earriers can earn nothing for the longer air

journey, they have no incentive to turn shipments over to

airlines. To delay our décision will only perpqtuate the

present, ee, situation.

We have reviewed the parties’ remaining contentions

and find that they do not alter our decision. In view of

the foregoing and all the. facts of record, we find:

1. That CF Air Freight, Inc., and Navajo Freight

Lines, Inc., are capable of performing air transportation

as domestic and international air freight forwarders, and

that PILE. Air Freight Forwarding, Inc., is capable of per-

forming air transportation as a domestic air freight forwarder,

and that all are capable of conforming to the provisions of

the Federal Aviation Act and the Board’ S rules and regula-

tions thereunder.

2. That (a) the authorizations of CF Air Freight,

Inc., Navajo Freight Lines, Inc., and P.I.E. Air Freight For-

warding, Inc., as air freight forwarders, and (b) the control

of CF Air Freight, -Inc., by ‘Consolidated Freightways, Inc.,

the control of P.I.E. Air Freight Forwarding, Inc., ‘by

Pacific Intermountain Express Co., and the control of Na-

- tional Air Freight Forwarding Corporation by Pacific

14 (Continued) —

any party, we will accept the Department’ s document. Correspondingly,

we will deny the Air Freight Forwarders Association’s motion to strike

but will accept its reply pleading.

’

Intermountain Express Co., will not be inconsistent with

_or adverse to the public interest and‘ will not result in

creating a monopoly or monopolies and thereby -restrain

competition or Jeopardize another- air carrier not a party

ua ,

. 3. ThECF Air Freight, Inc., and Navajo Freight

Lines, Inc., should be authorized.to perform air transpor-

tation as domestic and international air freight forwarders

and that P.I.E. Air Freight Forwarding, Inc., should- be

authorized to perform air transportation as a domestic

air freight forwarder, each for a period of five’ years (sub-

ject to the provisions of subparagraphs 7(a) and 7(b) of

the attached order).

4. That approval should be granted to the controk

of CF Air Freight, Inc., by Consolidated Freightways, Inc.:

to the control of P.I.E. Air Freight Forwarding, Inc., by

Pacific’ Intermountain Express Co.; and to the contro! of

National Air Freight Forwarding Corporation by Pacific

Intermountain Express Co., the last for a period of five

years: (subjecf to the provisions of subparagraphs 7(a) and

/(b) of the attached order).

5. . That the interlocking relationships between the

officers and directors of Consolidated Freightways, Inc.,

and CF Air Freight, Inc.; of Pacific Intermountain Express

Co., and P.L.E. Air Freight Forwarding, Inc.; and of Pacific |

Intermountain _Express Co., and National Air Freight For-

warding Corporation, are not adverse to or inconsistent

with the public interest and should, therefore, be approved.

6. That the approval of the control and interlocking

relationships described in paragraphs 4 and 5 above should

be subject to the provisions of Part 251 of the Board’s

Economic Regulations now in effect and as hereafter

amended.

/ A .

7, That the authorizations and approvals granted

herein should be subject to the conditions contained in

the attached order.

8. That the Board should retain jurisdiction over

this proceeding for the purpose of reviewing at any time

the approvals and authorizations granted herein and of

imposing at any time, with or without hearing, such other

conditions as the Board may find just and reasonable.

9, That the application of D. C. International, Inc..

and the application of T.I.M.E. Freight, Inc.,.for substitu-

tion as party-applicant and for other relief, should be dis-

missed without prejudice.

10. That the motions to consolidate filed by ILM

Freight International, Inc., Roadway Express, Inc., Western

Gillette, Inc., Wilson Air ‘Freight Forwarding Systems, Inc..,

by Gateway Transportation Co., Inc., and Gateway Avia-

tion Co., Inc., by Yellow Transit Freight’ Lines, Inc., e¢ al.

and by Mercury Motor Express, Inc., should be denied:

and that the petition of the first four named movants for

leave to intervene should likewise be denied.

ll. That the motion of the Department of Transpor-

tation to file a statement of position should be granted;

and that the Air Freight Forwarders Association’s motion

to strike the Department’s pleading should be denied. but

Should be accepted as a reply thereto.

An appropriate order will be entered.

CROOKER, Chairman, MINETTI, GILLILLAND and.

ADAMS, Members, concurred in the above opinion.

MURPHY, Vice: hair, filed the attached dissent.

; 49

-MURPHY, VICE CHAIRMAN, DISSENTING: :

Without further evidentiary hearings, the only sound

course of action open to the Board, in my judgment, is

to deny the pending applieations and to terminate: this

investigation. I am not satisfied that the revised findings

are dispositive of the concerns articulated by the Court or

that they can find convincing support in the record.

The “monitored entry” system as proposed by the

majority consists, in my opinion, more of shadow than of

substance. Pragmatically speaking, we cannot hold the

gate against the tide of large, well financed applicants

from the long-haul trucking industry and the railroads

whichswill follow promptly upon entry of the order in«

this case.

The element of ‘this case which has most concerned

me is the conflicts of interest ‘which will face trucker-

forwarders. That such conflicts exist is undeniable. Rec-

ognizing this fact, the Board has endeavored to devise a

system of rules*and reporting regulations to cope with

the problem. However, I fear the proposed reporting

rules will lead us into a procedural morass as well as im-

pose an unbearable burden on all parties in interest. Bet-

ter that we take a hard look at the policy problem, in

light of the Court’s commentary, in a reopened evidentiary

hearing. . °

Insofar as the Court was concerned about impact on

the air freight forwarding industry, the record now is the

Same as it was when the question was before the Court.

The majority’s revised findings on this important issue

are of modest solace to those forwarders who will be put*s

out of business by the new trucker entrants and ‘to those

others who have literally created the business and ‘whose

potential growth mays be seriously undermined.

I can well understand the truckers’ motivation to enter

air freight forwarding which is a relatively new and Mra-

matically expanding field. It is patent that the largest

volume of future freight available for air service is that

pool now carried by surface modes. Air freight, is now

in a period of rapid growth whereas the surface modes

have reached a plateau of maturity with their future growth

keyed to annual increases in the economy. The availability

to air of traffic presently moving by surface modes far

exceeds any new traffic that air carriers might develop.

Hence, the question is not so much what the trucks can

do for air transport but rather what air transport authority

can do for the trucks. The majority opinion seems to

be keyed entirely the other way and to that extent con-

‘Stituteg an overdrawn indictment of the direct and indirect

air carriers presently promoting the booming dir freight

business.

The majority places great stress on the ability of the

truckers to bring the benefits of air freight to smaller off-

line points. Yet no applicant proposes to so limit its

operations. The fact of the matter is that there is presently

a comprehensive system of surface transport linking virtually

every hamlet with the nearest air terminal whether the ser-

vice is by an airline or an air freight forwarder truck, a

local cartage agent or an over-the-road line-haul truck. ser-

vice. Consequently, this is not a case in which the existing

system is so devoid of available. service that we must turn

to the ranks of the-very largest line-haul truckers, eventually

the railroads et al, to insure the availability of air service

to so-called off-airline points.

The trucker applicants are not essential to the continued

healthy growth and expansion of the air freight market.

if granted authority they would become very powerful

competitors operating in a framework of continuous conflicts

as to their best: corporate interests. The monitored entry

procedure is to all intents and purposes iree entry upon

recitation of the required incantation. These factors and

the revised opinion do not, in my view, measure up to

the standards imposed upon us by the Court in the re-

mand. As I have indicated many times before, | am an

ardent advocate of modernized coordination among the

transport modes so that consumers may have the very

best service. However, I fail to comprehend how inter-

modal coordination will be advantaged by this decision.

For these reasons of policy and procedure, I must

dissent.

/s/ Robert T. Murphy

f Appendix

DOCKET 16857

The Examiner’s initial decision referred to herein is

not attached to this copy because of the wide circulation

given at the time of its release. The initial decision is

attached to the original of the Board’s Opinion and to

the official copies in the Board's files and may be examined

there. It will also be printed as part of the official “Civil

Aeronautics Board Reports”’.

[Ed. note: The Examiner's initial decision appears infra

at A-132] a

t 7” - ORDER

A tull ‘public hearirig having been held in the above-

entitled proceeding, and the Board, upon consideration

of the record, having issued its opinion containing its

findings, conclusions, and decision, which is attached here-

to and made a part hereof:

IT IS ORDERED:

1. That Operating authorizations to engage in air

transportation as domestic and international air freight

forwarders in accordance with’ the provisions of Parts 296

und 297?%of the Economic Regulations of the Board be

issued to CF Air Freight, Inc.. and Navajo Freight Lines.

mc.*

2. That an Operating authorization to engage in air /

transportation as a. domestic air freight forwarder in accord-

ance with the provisions of Part 296 of the Economic

Regulations of the Board be issued to P.LE. Air Freight?

Forwarding, Ine.: °

* That the control of P.LE. Air Freight Forwarding,

Ine. by Pacific Intermountain Express Co., and the inter-

locking relationships involved therein be and they hereby

ire approved: ‘

4+. That the control of National Air Freight For-

warding Corporation by Pacific Intermountain Express Co..

and the interlocking relationships involved therein be and

they hereby are approved:

5. That control of CF Air Freight, Inc.. by Con-

solidated Freightways, Inc., and the interlocking relation-

ships involved therein be and they hereby are approved:

> -

;

‘ ‘

6. That (a) the operating authorizations of CF Air

Freight, Inc., Navajo Freight Lines, Inc., and P.LE. Air

Freight’ Forwarding, Inc.. and (b) the approval of the

control of National Air Freight, Forwarding Corporation

by Pacific Intermountain Express Co., shall terminate five

years from the effective date of this order (subject to the

provisions of subparagraphs 7(a) and 7(b) hereof):

7. That the authorizations and approvals granted

herein shall be subject to the following conditions:

(a) The Board may revoke an authorization

or approval, in whole or in part, if it finds after

hearing that (i) the holder is no longer capable

of performing the authorized air transportation

or of conforming :o the Act or the regulations

thereunder; (ii) the’ holder is no longer willing

to conscientiously promote air cargo and to

' benefit air transportation; or (iii) the holder’s

operations, alone or together with other similar

Carriers granted air freight forwarding authority,

will create a monopoly or monopolies and

thereby restrain competition or jeopardize

another air carrier not a party thereto, or will

otherwise be inconsistent with the public interest.

(b) If proceedings are instituted to revoke

an authorization or approval under paragraph

7(a), the Board may suspend or limit such

authorization or approval pending the outcome

of the proceedings in accordance with .the

procedures specified by Sections 296.48 and

297.43 of the Board’s Economic Regulations.

“® 1 ines, Inc., PILE. Air Freight Forwarding, Inc.,

and National Air Freight Forwarding Corpora-

tion shall file, in addition to the financial and

Statistical réports prescribed by Part 244 of the

Board’s Economic Regulations. the following

schedules in the format attached to this order:

(i) The “Originating Air Station

Data Schedule” reflecting the source of

air freight tonnage enplaned and deplaned

at originating air station (exclusive of

reconsolidations) and data on the miles

of surface movement of the air freight

before and. after its air ‘transportation.

(ii); The ‘Supplemental Operating

Statistics Schedule”: reflecting the number

and weight of those air freight shipments

handled by both the air-freigh® forwarder

and* the surface carrier who is its parent

or affiliate or who operates as a separate

division within the same corporate structure.

(iii) The “Analysis of Traffic by

Weight Breaks” schedule reflecting, by

specified weight breaks, the number and

weight of shipments handled in air freight

forwarding operations and the revenues

received for the shipments,

(d) The ‘persons named in paragraph 7(c)

above shall also file with the Board, within 45

days after the close of each Calendar year, a

report showing as of December 31 of such

year the location of each specialized air freight

forwarding station and of each surface transport

terminal at Which air freight forwarding services

are offered. The statement shall indicate, for

each station or terminal. the number of drivers.

salesmen, and oak personnel who are assigned

to promote air freight exclusively.

(e) Navajo Freight Lines. Inc., Pacific, Inter-

mountain Express Co., and Consolidated Freight-

ways, Inc., shall file with the Board’s Bureau

of Accounts and Statistics. not later than 45

days after the end of each calendar quarter,

the “Analysis of Traffic by Weight Breaks”

schedule, in the format attached to this order,

reflecting, by specified weight breaks, the

‘number and weight of shipments handled in

long-haul motor carrier Operations and the

\ revenues received for the shipments.

(f) In addition, the persons named in

paragraph 7(e) above shall file the “Analysis

of Traffic by Weight Breaks” schedule showing

’ comparable data, to the extent available, for

the corresponding quarter of each of the pre-

ceding five years.

8. That the approval Of the control and interlocking

relationships described in paragraphs 3, 4, and 5 above be

and hereby are subject to the provisions of Part 251 of

the Board’s Economic Regulations now in effect and as

hereafter amended; _ t

9. That the application of D. C. International, Inc.,

and the application of T.I.M.E. Freight, Inc., for substitution

as party-applicant and for other relief, be and hereby are .

dismissed without prejudice;

10. That the motions to consolidate filed by [LM °*

Freight International, Inc., Roadway Express, Inc., Western

Gillette, Inc., Wilson Air Freight Forwarding Systems, Inc.,

by Gateway Transportation Co., Inc., and Gateway Aviation’

Co,.: ine. by\ Yellow Transit Freight Lines, Inc., ef al, and

by, Mercury Motor Express, Inc., be and hereby are denied;

and that the petition of the first four named movants for

leave to intervene be and hereby is denied;

11.. That the motion of the Department of Transpor-

tation to file a statement of position be and hereby is

granted; and that the Air Freight Forwarders Association’s

motion to strike the Department’s pleading be and hereby

is denied, but such pleading be and hereby is accepted as

a reply thereto;

12. That the Board shall retain jurisdiction over this

proceeding for the purpose of reviewing the approvals of

the authorizations, common control, and interlocking re-

lationships granted herein and/or of imposing at any time,

with or without hearing, such other conditions as the

Board may find just and reasonable; and

g t

‘13. That this order shall become effective immediately.

By the Civil Aeronautics Board:

/s/ Harold R. Sanderson

SO Secretary

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Attachment 1

ORIGINATING AIR STATION DATA

_ INSTRUCTIONS

(a) This schedule shall. be filed by each air freight

forwarder granted authorization by Board Order

(b) This schedule shall be filed each quarter in

duplicate and addressed to the Bureau of Accounts and

Statistics, Civil Aerénautics Board, Washington, D. C.

20428. It shall be filed so as to be received by the Board

within 45 days after the close of the prescribed reporting

period.

forwarding operations of the reporting: forwarder and. not

to its Operations conducted as an agent’ of a shipper or

as the commissioned agent of a direct air carrier.

(d) Definitions of “Originating Air Station”, ‘“‘Domestic’’

and “Overseas/Foreign” are found in § 244.1 of Part 244

of the Board’s Economic Regulations.

(e) Report weights in short tons (2,000 pounds)

computed to two decimal places.

(f) Where the reporting forwarder tenders both

domestic and overseas/foreign freight, the forwarder shall

file two separate reports listing the air stations for the

domestic operations on one schedule and the air stations

for the overseas/foreign operations on the other. Check

either Domestic or Overseas/Foreign in the heading as

applicable. Ae

(g) The originating air stations from which the re-

porting forwarder conducts its air freight forwarding

Operations shall be listed in Column 1 and the indicated

data ‘reported in Columns 2 through 11. List them in

alphabetical order until the volume of tons enplanéd from

60 i

these originating air stations represent 100% of the reporting -

forwarders total tons ‘enplaned domestically. The same

limits and instructions would apply when filing the Overseas/

Foreign’ schedule.

(h). Solumn 2. VOnS Enplaned (exclusive of recon-

solidations)” shall reflect the tons tendered to direct air

carriers at each Originating Air Station. This will include

tons delivered to the reporting forwarder by individual |

shippers, picked up by the reporting’ forwarder and picked

up by surface carriers (including a surface affiliate or sur-

face operation of the reporting forwarder). Tons being

reconsolidated should not be included. —

(i) Columns 3 through 6, “Source of Tons Enplaned”

Shall reflect the source, with regard to surface movement,

of the tons enplaned reported in Column 2. Those tons

delivered ‘to the reporting forwarder, picked up by the

reporting forwarder, and picked up by surface carriers

(including'a surface affiliate or surface Operation of the

reporting forwarder) from points within 49 miles of the

airport shall be reported in Column 3. Those tons deliverec

to and picked up from points 50-149 miles, 150-299 miles

and 300 miles or more from the airport shall be reported

in Columns 4 through 6, respectively.

Gj) Column ie “Tons Déplaned (exclusive of recon-

- solidations)” shall reflect the tons deplaned by the reportin:

forwarder at each Originating Air Station. This will include

tons picked up from the reporting forwarder by designated

consignees, delivered by the reporting forwarder and de-

livered by surface carriers (including -a surface affiliate or

surface operation of the reporting forwarder). Tons being

reconsolidated should not be included.

(k) Columns 8 ‘through 11; “Distribution of Tons

Deplaned” shall reflect the distribution, with regard to sur-

face movement, of the tons deplaned reported in Column

7, Those tons picked up. from the reporting forwarder,

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ey 4

oe forwarder, and delivered by

surface carriers (including a surface affiliate or surface

Operation of the reporting forwarder) at points within

49 miles of the aifport shall be reported in Column 8.

Those tons picked’ up and delivered at points 50-149 miles,

150-299 miles and 300 or more miles from the airport

shall be reported/in Columns 9. through 11, respectively.

delivered by the rep

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Attachment 2

SUPPLEMENTAL OPERATING STATISTICS

INSTRUCTIONS

(a) This schedule shall be filed by each air Pave

forwarder granted authorization by Board Order

(b) This schedule shall be filed each quarter in dupli-

cate and addressed to the Bureau of Accounts and Statis-

tics, Civil Aeronautics Board, Washington, D. C. 20428.

It shall be filed so as to be-received by the Board within

45 days after the close of the prescribed reporting period.

are found_in § 244.1 of Part 244 of the Board’s Economic

Regulations.

(d) Report weights in ioe tons (2,000 pounds),

‘computed to two decimal places. . Ue:

(e) /tem 1: .Report in the appropriate columns the

nuimber and weight of those shipments which the reporting

forwarder received from an associated surface carrier (who

is the forwarder’s parent or affiliate or who Operates as a

separate division within the same corporgte structure) prior —

to transporting them in its air freight forwarding operations.

(f) J/tem 2: Report in the appropriate columns the

number and weight of those shipments which the reporting

forwarder delivered to an associated surface carrier (who is

the forwarder’s parent or affiliate or who operates as a

separate division within the same corporate structure) subse-

quent to transporting them in its air freight forwarding

operations.

(g) /tem 3: Report in the appropriate columns the

number and weight of those shipments which the reporting

forwarder-accepted far air freight forwarding, but substituted

means Other than air for their transportation.

(h) /tems 4 and 5S) Report in the appropriate col-,

umns the number and weight of those shipments handled

by the reporting forwarder in its agency capacity. as appli-

cable under 8 296.3-and § 297.3 of Parts 296 and 297,

respectively, of the Board’s Economic Regulations.

; £

Attachment 3

ANALYSIS OF TRAFFIC BY WEIGHT BREAKS

INSTRUCTIONS

(a) This schedule shall be filed by each air freight

forwarder granted authorization by Board Order ns

and by the long-haul motor carrier who is its parent or

affiliate or’ who operates as a separate division within the

Same corporate structure. The indicated data shall reflect

air freight forwarding operations and long-haul motor ecar-

rier Operations, respectively.

(b) Each long-haul motor carrier, in addition to re-

porting data for the current quarter, shall report com-

parable data, insofar as they are available, relative to its

long-haul motor carrier operations for the corresponding

quarter of each of the preceding five years.

\ (c) Check either “Air” or “Surface” as appropriate

in the heading.

(d) This schedule shall be filed each quarter in dupli-

cate and addressed to the Bureau of Accounts and Statis-

tics, Civil Aeronautics Board,/Washington, D. C. 20428.

It shall be filed so as to be/received by the Board within

45 days after the a of the prescribed reporting period.

(e) This whedule shall apply only to domestic Opera-

tions and reflect in the specified weight breaks, the num- ~

ber and weight of shipments and the revenues received

% for the shipments.

Pre -

(f) “Shipment” shall be defined as a single consign-

‘ment of one or more pieces, from One shipper, at one

time, at one address, receipted for in one lot, and moving

on one airbill to one consignee at one destination address.

. (8) , Report weights in short tons (2000 pounds),

computed to two decimal places.

th) Column 2, “Shipments: Total Number” shall

reflect, for the specified weight breaks in column 1, the

total number of shipments received for air freight for-

warding or long-haul shipping, as appropriate.

(i) Column 3, “Shipments: Percentage of Total”

shall reflect the total number of shipments in each weight

break divided by the total number of shipments in the

specified weight breaks, in aggregate.

G) Column 4, “Tonnage: Total Weight” shall re-

flect, for the specified weight breaks in column 1, the

total weight in tons of the shipments reported in column

(k) Column 5, “Tonnage: Percentage of Total”

Shall reflect the total weight of the shipments in each

weight break divided by the total weight of the shipments

in the specified weight breaks, in aggregate. =

(1) Column 6, “Revenue: Total Dollars” shall re-

flect, for the specified weight breaks in column 1. ‘the ¥

total revenue received for the shipments reported in col-

5 *

umn 2.

(m) Column 7, “Revenue: Percentage of Total” shall .

reflect the total revenue received for the slfipments in eacly

weight break divided by the total reveniie received! for the

shipments in the specified weight breaks, in.aggregale.

——

: PSDR-22

EDR-159

UNITED STATES OF AMERICA

| CIVIL AERONAUTICS BOARD

i WASHINGTON, D.

Policy Statements

‘ > Economic Regulations

Docket No. 20926

Dated: Apr 21, 1969>

PART 399

STATEMENTS OF GENERAL POLICY

PART 296

CLASSIFICATION AND EXEMPTION OF

INDIRECT AIR CARRIERS

PART 297 ; “es

CLASSIFICATION AND EXEMPTION OF INTER-

NATIONAL AIR FREIGHT FORWARDERS

PART 244

FILING OF REPORTS BY AIR FREIGHT FORWARDERS,

INTERNATIONAL AIR FREIGHT FORWARDERS,

,AND COOPERATIVE SHIPPERS ASSOCIATIONS

PROCESSING OF APPLICATIONS BY LONG-HAUL MOTOR

CARRIERS OF GENERAL COMMODITIES AS AIR

FREIGHT FORWARDERS OR INTERNATIONAL

AIR FREIGHT FORWARDERS

NOTICE OF PROPOSED RULE MAKING

Notice is hereby given that the Civil Aeronautics Board

has under consideration proposed amendments to Parts 399,

296, 297, and 244 of the Board’s Regulations (14 CFR a

Parts 399, 296, 297, 244) concerning the filing and pro-

cessing of applications of long-haul motor carriers of general

commodities for authorization as air freight forwarders

or international air freight forwarders and applications of

long-haul motor carriers of general commodities for approval

of control of an air freight forwarder or international air

freight forwarder. The principal features of the proposed

amendments are further described in the Explanatory

Statement, and the proposed amendments. are set forth

in the Proposed Rule. This regulation is proposed under

the authority of Sections 204(a), 101(3), 407 and 416

of the Federal Aviation Act of 1958, as amended, 72

Stat. 743, 49 U.S.C. 1324; 72 Stat. 737, 49 U.S.C 1301;

_72 Stat. 766,-49 U.S.C. 1377; 72 Stat. 771, 49 U.S.C.

1386. It interprets or applies sections 102 and 408, 72

Stat. 740, 49 U.S.C. 1302: 72 Stat. 767, as amended by

74 Stat. 901, 49 U.S.C. 1378:

Interested persons may participate in the proposed

rule making through submission of twelve (12) copies of

written data, views, or arguments pertaining thereto, ad-

dressed’ to the Docket Section, Civil Aeronautics Board,

Washington,'D. C. 20428. All| relevant matter or com-

munications received on or before May 23, 1969, will be

considered by the Board before taking final action on the

proposals. Copies of communications will be available for

examination by interested persons in the Docket Section,

Room 712. Universal Building, 1825 Connecticut Avenue,

N. W., Washington, D. C., upon receipt thereof.

By the Civil Aeronautics Board:

ee:

/s/ Harold R. Sanderson

Secretary

(SEAL) |

VICE CHAIRMAN MURPHY DISSENTING:

See my dissent attached. to Order 69-4-100.

/s/ Robert T. Murphy

] ‘ oe

) , cs)

EXPLANATORY STATEMENT

In Order 69-4-100, dated April 21, 1969, issued con-

currently herewith, the Board determined to authorize three }

long-haul motor carriers of general commodities or their>

subsidiaries to engage in air. freight forwarding operations

on. an experimental basis for a temporary period. It also

approved the resulting control and interlocking relationships.

At the same time the Board announced that applications

by other motor carriers to enter the forwarding field would

be processed under regulations articulating a policy of

monitored entry. The proposed regulations are intended ~

to implement that policy.

In brief, these regulations provide that air freight. for-

warding authority may be granted to long-haul motor car-

riers of general commodities on an individual application

basis, with or without hearing, upon a showing that (1)

the applicant is capable of performing the proposed air

transportation and of conforming to the Act and the regula-

tions thereunder; (2) the applicant will conscientiously pro-

mote air cargo and will benefit air transportation; and (3)

the applicant’s operdtions, alone or together with those of

other similar carriers granted. air forwarding authority, will

not result in creating a monopoly or monopolies and there-

by restrain competition, or jeopardize another air carrier

and will not otherwise be inconsistent with the public

interest (Parts 399, 296 and 297). The regulations further

provide for approval of applicatians of long-haul motor’

carriers of general commodities for control of air freight

forwarders or international air freight forwarders, with or

without a hearing, based upon similar criteria (Part 399).

Finally, there will be new reporting requirements (Part 244)

both their own dnd their surface affitiates’ traffic in various

classes of small shipments as well as other data which will

indicate whether the applicants are stimulating new off-line

business, increasing traffic from outside present terminal areas,’

and receiving new traffic from their surface divisions or’ affiliates.

Specifically, this new class of ‘air carriers will be

‘required to file three additional schedules: (1) an “Orig-

and distribution of t6ns enplaned and deplaned at the

originating air station, and data on the miles of surface

movement of the air freight before and after its air trans-

portation; (2) a “Supplemental Operating Statistics” schedule

to provide the number and weight of those intermodal

air freight shipments handled by both the air freight. for-

warder and the surfs cari who is its parent or affiliat

or who operates as a arate division within the same

corporate structure; (3) an “Analysis of -Traffic by Weight

Breaks” schedule to indicate, by specified weight breaks,

the number and weight .of shipments handled in air -freight

forwarding operations and the revenues received therefor;1

and (4) an annual report setting forth the location of each

air freight farwarding station and each surface transport

terminal at which air freight forwarding services are offered

as well as certain personnel data relating to such’ stations

and _ terminals.

Independent forwarders will also be required to file

the “Originating Air Station Data” and the “Analysis of

Traffic by Weight Breaks” so that .the Board can evaluate

the Operations of independent and trucker-affiliated for-

warders on a comparative basis.?

| The related long-haul motor carriet will also be required to file an

“Analysis of Traffic by Weight Breaks” schedule containing applicable

data relative to its long-haul motor carrier operations, for both the current

* quarter and the corresponding quarter of each of the preceding five years.

2 The Board recognizes that the new reporting requirements may

prove burdensome to some of the independent forwarders, particularly the

smaller carriers. While the Board can waive the requirements for individual

carriers, it may be that the rule itself should not apply to the entire class

of independent forwarders. Comments on this issue should contain specific

data regarding the burdens involved in preparation of the reports and

specific proposals for delineating the exempted class of carriers.

It is our intention to impose these requirements for

a temporary period coterminous with the term of the

operating authorizations issued -in the Motor Carrier-Air

Freight Forwarder Investigation: (Docket 16857, Order 69-

4100) and for the duration of any proceeding in Waich a

renewal of ee authorization is sought.

-PROPOSED RULES.

It is proposed to amend Parts 399, 296, 297 and

244 of the Board’s Regulations (14 CFR-Parts 399, 296,

297, 244) as follows:

PART 399

1. Amend Part 399- by jai to the table lof con-

tents a new section at the end of Subpart B, reading as .

follows:

Sec, | 5 bt

399.218 Processing of applications of long-haul: motor:

_. cCarriers-for authority as air freight forwarders

or international air freight forwarders.

2. Amend Part 399 by adding new § 399,21 to read

as follows: :

§ 399.21 Processing of applications of long-haul motor :

scarriers for authority as air freight forwarders

or international air freight forwarders.

(a) General. This Policy Statement prescribes

the procedures and general standards which the Board will

use in -processing applications of long-haul motor carriers .

of general commodities for authorization as air freight

forwarders or international air freight forwarders. It will

also apply to such motor carriers’ applications for Board

approval of the acquisition of control of such forwarders.

(b) Definition of long-haul motor carrier. As

used in this section, the term “long-haul motor carrier”

means a motor carrier holding operating rights issued by

the Interstate Commerce Commission to haul general. com-

modities between any pair of points which are over 500

_ air miles apart, or an affiliate’ of such a carrier.

a long-haul motor, carrier applies for. authority as an air

freight forwarder or an international air freight forwarder

and submits a proposal to conscientiously promote air cargo

in conformity with Part 296 or 297, the following will be

the-Board’s policy in ordinary circumstances:

(1) The Board will process the

application without hearing. ~

(2) The Board. will not deem the size,

_ geographical extent, or general commodity

. lights of the long-haul motor carrier’s sur- oN

face transport authorization and operations, \

of, themselves, as factors indicating that the

applicant’ S Operations as an air freight for-

warder or international air freight forwarder

will result in creating a monopoly or mo--

nopolies, and thereby restrain competition |

or jeopardize any: air carrier, or will other-

wise be inconsistent with the public interest.

~ (d) Applications for acquisition of control.

Where a long-haul motor carrier applies for Board approval

to acquire control of an air freight forwarder or an inter-

national air freight forwarder and submits a proposal to

conscientiously promote air cargo, the Board’s policy in

ordinary circumstances will be ‘as follows:

(1) The Board will process the ‘applica-

tion without a hearing if it determines (i)

! For the definition of “affiliate” see $296.1(e), infra, p. 9.

that the transaction which is the subject

of the application does not .affect the

control of an air carrier directly engaged

in the operation of aircraft in air trans

portation, does ‘not result’ in creating a

monopoly and does not tend to restrain

competition, and (ii) that no person dis-

closing a substantial interest thén currently

is requesting a hearing. _

(2) The Board will not deem the

size, geographical extent, or general com-

modity rights of the long-haul motor car-

rier’s surface transport authorization and

Operations, of themselves, as factors indi-

cating that the motor carrier’s control of

the air freight forwarder or international

air freight forwarder will result in creating

a monopoly or monopolies, and thereby

restrain competition or jeopardize another

air carrier not a party to the consolidation,

merger,: purchase, lease, Operating contract,

or acquisition Of control, or will otherwise

be inconsistent with the public interest.

(e) Exceptions.

(1) If the Board finds that the long-

haul motor carrier has not made a prima

facie showing that it will conscientiously

promote air cargo, the Board may (i) deny

the application without hearing; or (ii)

order a hearing.

(2) If the Board finds that the long-

haul motor carrier has not made a prima

facie showing that its operations (either

alone or together with other similar carriers

granted air forwarding authority) will not

result in creating a monopoly or monop-

olies and thereby restrain competition or

jeopardize another air carrier, or will not

otherwise be inconsistent with the public

interest, the Board may (i) deny an applica-

tion without hearing; or (ii) order a hear-

ing.

(3) The Board may also order a hear-

ing if any person demonstrates that he will

present evidence which may contradict the

prima facie showing of a long-haul motor

carrier described in this paragraph.

(f) Priority in processing applications and de-

ferral of applications. oh ¢

(1) Applications will not necessarily

be scheduled for processing in the chrono-

logical order in which they are filed. In

ordering its docket, the Board will give

priority to those applications which appear

best to effectuate the public interest, con-

sidering, among other things: (i) the num-

ber of similar applications previously proc-

essed and pending; (ii) the nature and

extent of air freight forwarder services

presently available at the cities in which

applicant proposes to provide service; (iii)

the nature of any objections filed: and

(iv) the complexity of issues raised.

(2) The Board may defer action on

any application or class of -applications

covered by this. Policy Statement if it con-.

cludes that the public interest so requires.

> PART 296 _

3. Amend the table of contents of Part 296 by

adding Subpart, ] entitled as follows: —

—s

. " Subpart i hatteidioninn of Long-haul

Sec.

296.80 *

396.81

296.82

296.83

296.84

296.85

296.86

296.87

296.88

296.89

4. Amend 8296.1 by adding paragraphs (d) and (e)

Motor Carriers of General

Commodities as, Air Freight

Forwarders

Applicability of subpart.

Applicability of other subparts.

Applicability of nol@y statement.

Application for operating authorization.

Notice.

Objections.: :

Criteria for authorization. ,

Conditions. he

Duration. : z

Revocation or suspension.

to read as follows:

§296.1

Definitions.

‘For the purposes of this part:

* * * *

(d) ‘“‘Long-haul motor carrier” means a motor

carrier holding operating rights issued by the Interstate

Commerce Commission to haul general commodities between

any pair of points which are over 500 air miles apart, or

an affiliate of such a carrier. * j

_ (e) An “affiliate” of a long-haul motor carrier

or an air freight forwarder means a person who controls

such carrier or is controlled by such carrier or by another

person who controls or.is controlled by such carrier.

~~ ra

A-

person who owns, directly, or indirectly, 20 percent or

more of the outstanding issued capital stock of a carrier, . --

in the absence of a proper showing to the Board that he

does not control the carrier despite his’ stock ownership,

shall be deemed to control saith carrier for udoinn of

this part. -—

3. “Amend Part 296 by adding Subpart I to read

as follows:

Subpart I—Authorization of Long-haul

~ Motor Carriers of General

Commodities as Air Freight

Forwarders

§ 296.80 Applicability of subpan.

This subpart sets forth the special rules applicable to

the processing of applications of long-haul motor Carriers, « °

as defined in § 296.1(d), for authorization to Operate in

their own names as air freight forwarders. Thé regulation

does not govern requests of’ motor carriers for Board ap-

proval of control relationships created when they apply

_ through subsidiaries for authorization as air freight forwarders:

§ 296.81 Applicability of other subparts.

Unless otherwise provided in this subpart, the provi-

sions of Subparts A through C and E through H of this

_ part shall be applicable to the processing of applications

of long-haui motor carriers for authority to gperate as air

freight nn and to the conduct of such operations.

§ 296.82 ° Applicability of policy statement.

_° The provisions. of § 399, 21 of the Board’s Policy State-

ments (14 CFR Part 399) shall be applicable to the proc-

essing of long-haul motor carriers for authority under this

subpart.

§ 296.83 Application for operating authorization.

. -) e

In additidn to the requirements set forth in 8 296.42,

a long-haul motor carrier applicant ‘must show:

(a) A plan to consciéntiously promote air cargo.

This showing shall include, inter alia: -

» (1). A statement as to whether the

- long-haul motor carrier plans to solicit

existing surface customers for air cargo | |

and, if so, the extent of such plans; .

traffic is newly-generated or presently

. Shipped by surface means;

(3) An estimate of what portion of

the long-haul motor carrier’s existing

surface traffic is subject to diversion to

air;

~ (4) An estimate of beyond-terminal-- ‘

area traffic moving by surface transporta-

tion over the routes of the long-haul

motor carrier or-via.interline agreements;

and ;

\y (5) A statement of the proposed air

cargo sales force and facilities.

(b) A statement of the long-haul motor carrier’s Zn

authority from the Interstate Commerce Commission

or Other regulatory agency, including a description

of surface transportation authorized and offered at

the stations at which air forwarding operations are.

proposed. ‘

would result from approval of the application. —

les eee

§ 296.84 Notice.

Notice of applications will be published in the Federal

, Register and in the Board*s weekly publication of applica-

tions filed."

: Within thirty,(30) days after publication of notice of

application in the Federal Register, any interested person

may file an objection thereto. The objection must set

forth an’ adequate factual showing of:

(a) the party’s interest in the matter;

° (b) his reasons for believing that ‘the long-

haul motor carrier or its- affiliate will not pro-

mote air cargo; and ff

(c). any other reasons why the application

‘ does not meet the licensing criteria of § 296.86.

If a hearing, is requested, the objection must set forth the

economic data and other facts which the party will offer

to prove.

§ 296.86 Criteria for authorization.

The Board will approve the apptication if it appears

that: : |

(a) the applicant is capable of performing

the ‘proposed air transportation and of con-

forming to the provisions of the Act and all

riles and requirements thereunder; _*

(b) the applicant will conscientiously pro- _

mote air cargo and will benefit air transporta-

- tion; and :

“ I Requests for the weekly publication should be addressed to the

€ Publications Section, Civil Aeronautics Board, Washington, D. C. 20428.

‘

;

TR NI NEN Be Et Mee PENS

Ae OEY Panes, ~ us .

“ ; > a . Seay

os (c) the applicant’s operations, algne or

together with those of other similar ‘carriets .

sy granted air forweiding authority, will not

create a monopoly or monopolies and thereby

restrain Competition or jeopardize another air

carrier, or Otherwise be inconsistent with the

public interest.2 ° es eo

8296. 87 ‘Conditions. mae

An iaiodisetion may’ be limited geographically or

by classes of traffic.- Additional conditions, and restrictions ;

may be imposed without hearing. ~

§ 296.88 Duration.

Unless sooner suspended or revoked, an authorization

will continue in effect until is.expires by its terms of un-.

til this subpart is terminated or revoked.

$296. 89 Revocation or suspension.

The Board may institute proceedings to revoke the

authorization of one or more long-haul motor carriers or

a group of motor carriers if it has cause to believe that

the continued operations of such carrier_or carriers’ are

contrary to the above-stated licensing criteria (8296.86).

Pending completion of revocation proceedings, the Board

‘may without hearing suspend or limit the au thorization

of such motor catfier or motor carriers: in accordance with

procedures specified by § 296.48.

/ + . f:

. fi.

: Section 399.21. (Policy Statements) articulates decisional stand-

ards in this area (see, supra, p. 5, et seq.). :

81.

‘PART 297

6. nSiena the sible. of contents of Part 297 by

adding si de F to read as follows: . :

Subpart F- Authorization of autre

Motor Carriers of General

Commodities as International

Air Freight Forwarders

Sec. oh :

7 J

297.60. Applicability of subpart. —

_ 297.61. Applicability of other subparts.

297.62 Applicability of policy statement.

297.63 Application for operating authorization.

297.64 Notice. .

297.65 Objections.

* 297-66 Criteria for authorization.

297.67 Conditions. 7

297.68 Duration.

-» 297.69 Revocation or suspension.

7. ° Amend § 297. 1 by adding ree (e) and (f)

to read as follows:

$297.1 Definitions. -

For the’ purposes of this part:

(e) ‘‘Long-haul motor carrier’? means a motor

carrier holding operating rights issued by the Inter-

state Commerce Commission to haul general com-

modities between any pair of points which are

over 500 air miles apart, or an affiliate of such

~ a Carrier.

3 (An “affiliate” of a long-haul motor carrier

‘or an air freight fowarder means a person who

<n.)

controls such carrier or is controlled by such carrier

or by another person who controls or is controlled,

by such carrier. A person who owns, directly or in-

directly, 20 percent or more of the outstanding is-

sued capital stoek of A carrier, in the absence of a

_ proper showing to the Board that he does not con-

trol the carrier despite his Stock ownership, shall be

deemed to control the carrier for purposes of this part.

8. Amend Part 297 by ~— new. Subpart F to

read as follows: ;

Subpart F— asheoiea tin of Long-haul /

Motor Carriers of General

Commodities as Infernational

tae ‘Air Freight Forwarders

$s ; i

§ 297.60 Jae of subpart.:

This subpart sets forth the special rules applicable

to the processing of applications of long-haul motor car-

riers, as defined in § 297.1(e), for authorization to opetate

in their own names as international air freight - forwarders.

The: regulation does not govern requests of motor carriers

for Board approval of control relationships created Whey

they apply through subsidiaries for awthorization as inter-

national air freight forwarders.

sad J 297, 61 Applicability of other subparts.

Unless otherwise provided in this subpart, the provi-

. sions of Subparts A through E of this part shall be applica-

ble to the processing of applications of long-haul motor

_carriers for authority to operate as international air freight

forwarders and to the conduct of such operations.

. 3 297.62 Applicability of. policy statement.

‘The provisions of § 399.21 of the Board’s Policy

Statements (14 CFR Part 399) shall be applicable to the

- 83

processing of applications of long-haul motor catriers for

authority, under this subpart.

2 § 297. 63 ‘Application for operating authorization ‘*

In addition to the requirements set forth: in §297. 32, 7

a long-haul motor carrier applicant must show:

(a) A plan to conscientiously promote air cargo.

This showing shall include, inter alia:

(1) a statement as to whether the

long-haul motor carrier plans to solicit

existing surface customers for air cargo

and, if so, the extent-of such plansf -

(2) -a traffic estimate showing what

traffic is newly-generated or presently “

shipped by surface means;

(3) an estimate of what portion of 7

the long-haul motor carrier’s existing —

surface traffic is subject to diversion to’

air; ‘

, (4) an estimate of beyond-terminal-

area traffic moving by surface. transporta-

tiOh over the routes of the long-haul

4 ‘ motor carrier or via interline agreements;

and N é

(5) a statement’ of the proposed air

cargo sales force and facilities

(b) A statement of the long-haul motor carrier’s

authority from the Interstate Commerce Commission

or other regulatory agency, including a description

of surface transportation authorized and offered at

the stations at which air forwarding. operations are

proposed. -

84°

(c): A statement of any other wdvaiitaees which

would result from approval of the application.

§ 297.64 Notice.

Notice of applications will be published in the Federal

- Register and in the Board’s weekly publication of applica- -

tions fed? *. ary $

q 297, 65 Objections

Within thirty (30) days after publication of notice of

application in the Federal Register, any interested person ~

may file an objection thereto. The objection must set

forth an adequate factual showing of:

(a) the party’s interest in the matter;

(b) his reasons for believing that the long- —

haul .motor carrier or its affiliate wjll not pro-

_mote air cargo; and

does not meet the licensing criteria of § 297.66.

If a hearing is requested, the objection must set forth the

~ economic data and other facts which the party will offer

to prove.

| § 297.66 Criteria for authorization.

The Board will approve the application if it‘ appears

that:

(a) the adplidant is capable-of performing the

proposed ‘air transportation and of conforming to

the provisions of the Act and all ‘rules and require-

ments thereunder;

3 Requests for the waka publication should be eideanee to

the Publications Section, Civil Aeronautics Board, Washington, D. Co

20428.

(b) the applicant"w will cumeciealibaaier promote

air cargo and will benefit air transportation; and

- (c) the applicant’s operations,. alone or together

with those of other similar carriers granted air ~

forwarding authority, will not create a monopoly.

Or monopolies and thereby restrain competition -

or jeopardize another air ‘carrier, or otherwise

be inconsistent with the. public interest.¢ .

$297.67 Conditions. oy ng

_»

An authorization may be-limited geographically or

by classes of traffic. Additional conditions and restric-

tions may be imposed without hearing. ~

' $297.68 - Duration. —

‘Unless: sooner suspended or revoked, an authoriza-

tion will continue in effect until it expires by its terms

or until this subpart is ‘terminated ‘or revoked.

§ 297.69 Revocation’ or suspension.

The Board may institute proceedings to revoke the

authorization of one or more long-haul motor carriers or

a group of motor carriers if it has cause to believe that

the continued operations of such carrier or carriers are

contrary to the above-stated licensing criteria ($297. 66). ‘\~

Pending completion of revocation proceedings, the Board

may without hearing suspend or limit the authorization

of such motor carrier or motor carriers in accordance

with procedures Specified by § 297.43.

4 Section 399.21 (Policy Statements) articulates decisional stand-

ards in this area (see, supra,-p. 5, et seq.). ra

9. “ Amend the tible of contents of Part 244 by ,

adding §§ 244. 19a, 244. 19b, 244.19c and 244.19d entitled

_as follows:

“sec. x

: . x # * ae *

244.19a Originating air station data (Schedule T-4).

244.19b Supplemental operating staistics—long-haul

* otor carriers/air freight forwarders

, (Schedule T-5).

; 244.19c Analysis of traffic by weight breaks

Cm (Schedule T-6).

Pe os 244.19d Report of location of air freight forwarding

“ ; stations and surface transport terminals.

= * 10. Amend § 244.1 by defining the terms “affiliate”

;- and “long-haul motor carrier” to read as follows:

§ 244.1: Definitions.

* * AB ee oe s

An “affiliate” of a long-haul motor carrier or an air

freight forwarder means“ person who controls such car-

_ rier or is controlled by such carrier or by another person

who controls or is controlled by such carrier. A person

who owns, directly | or indirectly, 20 percent or more of

the outstanding issued’ ‘capital stock of a carrier,_in .the

‘absence of a proper‘showing to the Board that he does

not control the carrier despite his stock ownership, shall

-be deemed to cqntrol the carrier for purposes of this part.

“Long;haul mot6r carrief” means a motor carrier

holding operating rights issued by the Interstate Commerce

Commission to haul general commodities between any

_ pair of points which are over 500 air miles /apart, or an

. affiliate of such a carrier. |

\v"-

~ 11. Amend § 244.10 by adding subdivision. (4) to

paragraph (b) and modifying paragraph (c) to eb eed

follows:

§ 244.10 Coen 7 .

* * * * ‘ *

(b). The aforesaid report consists of a state-

ment of certification and individual schedules ‘

to.be filed therewith at various specified times.

These schedules are identified as follows:

* * * _ * *

(4) Schedule T-4, Originating Air

Station Data; T-5, Supplemental Oper-

ating Statistics-Long-haul Motor Car-

riers/Air Freight Forwarders; T-6,

Analysis of Traffic by Weight Breaks;

all to be filed quarterly.

a shall be filed so as to be received by the Civil

_Aeronautics Board within forty-five (45) days

_ after the termination of each prescribed quarterly,

semi-annual and annual period and, with respect

to Schedule I, also within thirty (30) days after

a change relative to insurance data previously

reported. All documents filed in connection

with the report shall be considered a part there-

_of and included within the certification pertaining

to the report. The reports shall be addressed to

the Board, attention of the Bureau of Aécounts

and Statistics. .

12. Add new §$244.19a, 244.19b, 244.19¢ and

244.19d to read as follows:

88 : . \

§ 244.19a Originating air station data (Schedule T-4).

(a) The schedule of originating air station data

shall be filed by all air freight forwarders and

international air freight‘ forwarders. It is designated

as Schedule T-4 of CAB Form 244, and shall be

prepared for each calendar quarterly period and

filed with the Board as provided in § 244.10.

(b) Schedule T-4 shall be filed separately

with respect to domestic and overseas/foreign

air Operations. The schedule shall reflect the

source and distribution of tons enplaned and

‘deplaned (exclusive of reconsolidations) at the

originating air station, and data on the miles of

surface movement of the air freight before arid

after its air transportation. All the aforesaid

categories shall be itemized and subdivided as

shown by Schedule T-4 and the instructions

thereon.

§ 244.19b Supplemental operating statistics—long-

haul motor carriers/air freight forwarders

(Schedule T-5).

(a) The schedule of supplemental operating

statistics shall be filed by (1) long-haul motor

carriers of general commodities which are author-

ized to operate as air freight forwarders or inter-

national air freight forwarders, and (2) air freight

forwarders or international air freight forwarders

which are affiliates of long-haul motor carriers.

It is designated as Schedule T-5 of CAB Form

244, and shall be prepared for each calendar

quarterly period and filed with the Board as pro-

vided in § 244.10.

_ (b) Schedule T-5 shall cover where applicable

both domestic and overseas/foreign air operations.

: ; "89

With respect to combirlation surface/air operations

of the forwarder, the schedule shall reflect the

number and weight of (1) shipments which the

reporting forwarder received from or delivered to

an affiliated long-haul motor carrier prior dr subse-

quent to transporting them.in its air freight for-:

warding Operations, and (2) shipments which the

, feporting carrier accepted for air freight forwarding,

but substituted other than air means for their

transportation. With respect to other air operations

by the forwarder, the schedule shall reflect the -

number and weight of all $hipments tendered by

the reporting carrier to direct air carriers in a

capacity.other than as a freight forwarder (shipper’s

agent or agent for direct air carrier). All the ~

aforesaid categories shall be itemized and sub-

divided as shown by Schedule T-5 and the instru-

tions thereon. {

§ 244.19¢ Analysis of traffic by weight breaks

(Schedule T-6).

(a) The schedule of analysis of traffic by weight

breaks shall be filed by all air freight forwarders,

international air freight forwarders and long-haul

motor carriers affiliated therewith or operating

as a separate division within the ‘forwarder’s cor-

porate structure. It is designated as Schedule

T-6 of CAB Form 244,-and shall be prepared for

each calendar quarterly period and filed with the

Board as provided in $244.10. In addition, each

long-haul motor carrier shall report applicable

data (insofar as they are available) relative to~its

long-haul motor carrier operations for the corres-

ponding quarter of each of the preceding five years.

(b) Separate schedules shall be filed with respect

to air operations and surface operations. The schedule

shall apply only to domestic operations and shall

reflect, in the specified weight breaks, the number

and weight of shipments and the revenues received

therefor, as well as the percentage of the total

represented by each weight break in the three main

categories—number of shipments, tonnage of ship-

ments and revenue derived from shipments. All

the aforesaid categories shall be itemized and sub-

divided as shown by Schedule T-6 and the instruc-

\\ tions thereon. ~

§244.19d — Report of location of air freight forwarding

stations and surface transport terminals. — +

Each long-haul motor carrier holding an authorization

to Operate as an air freight forwarder or international air

freight forwarder and each air freight forwarder or inter-

national air freight forwarder which is an affiliate of a

long-haul motor carrier shall file with the Board’s Bureau

of Accounts and Statistics, Washington, D. C. 20428,

within 45 days after the close of each calendar year, a

report showing as of December 31 of such year the loca-

tion of each specialized air freight forwarding station and

of each surface transport terminal at which air freight

forwarding services are offered. The statement shall indi-

cate, for each station or terminal, the number of drivers,

salesmen and other personnel who are assigned to promote

air freight exclusively. |

‘“

[391 F. ae 295]

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 281 — September’ Term, 1967. |

(Argued January 4, 1968 Decided March 13, 1968.)

Docket No. 31795

ABC AIR FREIGHT COMPANY, INC.; ACME AIR CARGO, INC.:

ADD AIRFREIGHT CORPORATION; AIRBORNE FREIGHT COR-

PORATION/AIR-LAND FREIGHT CONSOLIDATORS, INC.; AIR-

SEA FORWARDIRS INC.; AIRWAYS AIRFREIGHT; AMERICAN

EXPRESS COMPANY; BARNETT AIR CARGO, INC.; PETER A.

BERNACKI, INC.; DOMESTIC AIR EXPRESS; EMERY AIR

FREIGHT CORPORATION; HENSEL, BRUCKMANN & LOR-

BACHER, INC.; INTERNATIONAL CUSTOMS : SERVICE, INC. ;

H. G. OLLENDORFF, INC.;. PACIFIC AIR FREIGHT, INC.; PAN-

ALPINA AIR FREIGHT, INC.; PENSQN FORWARDING CORPO-

RATION; WTC AIR FREIGHT; and AIR FREIGHT FORWARDERS

ASSOCIATION,

\ ‘Petitioners,

t ‘ Vv. °

CIVIL AERONAUTICS BOARD,

Respondent.

C. F. AIR FREIGHT, INC., CONSOLIDATED FREIGHTWAYS,

INC., PI E AIR FREIGHT-FORWARDING, INC., PACIFIC INTER-

MOUNTAIN EXPRESS CO.DC INTERNATIONAL, INC.: and

NAVAJO FREIGHT LINES, INC.,

Intervenors-Respondents. \

Before: . f Xe } /

LUMBARD, Chief Judge, [ed

MOORE and FRIENDLY, Circuit Judges, es

Sone

Petition by air freight forwardyrs and their association

to review an order of the Civil Aeronautics Board grant-__

ing applications of long-haul m tor carriers: to act as air |

freight forwarders, directly or through subsidiaries, and |

related brief. Order‘vacated and cause remanded for

further findings. /

° }

}

/ . | .

oe /

LOUIS P. HAFFER, Washington, D. C. (Paul Berge

“New York, N. Y.; Andrew: P. Goldstein, Washington.

D. C., of Counsel), for Petitioners.

RAYMOND J. RASENBERGER (Lear, Scoutt & /Ras-

enberger, Washington, D. C.), for Intervenors, DC

International, Inc. jand Navajo Freight Lines, Inc.

EUGENE T. LIIPFERT (Verner, Liipfert & Befnhard,

Washington, D. C.; James M. Verners on. brief:

Robert J. Sisk (Hughes. Hubbard, Blair & Reed,

New York, N. Y.) on brief), for Intervening: Re-

spondents, CF Air Freight, Inc., Consolidated

Freightways, Inc., PLE. Air Freight Forwarding,

Inc., and Pacific Intermountain Express Co.

WARREN L. SHARFMAN, Associate General Counsel

(Joseph B. Goldman, General Counsel, O. D. Oz-

« ment, Deputy General Counsel, Harry N. Stein,

Donald F. Turner, Howard E. Shapiro, Attorneys,

Department of Justice, Washington, D. C.), for

Respondent, Civil Aeronautics Board. |

-FRIENDLY/ Circuit Judge

Under 8296.11 of the Civil Aeronautics Board’s Economic

.., Regulations, effective October 15, 1948, as amended, air

freight forwarders are exempted from the certificate, provi-

sions of 8401 of the Federal Aviation Act (other than sub-

. division’ (k)(3)), see $101(3), but must obtain letters of reg-

istration. While these are normally issued, under delegated .

power, by the Bureau of Operating Rights, 14 C.F.R.

§385.13(4) (1967), without a hearing,! the Board’s policy,

as we shall later develop in some detail, had been to deny

such letters to motor carriers or subsidiaries of motor car-

riers significantly competing with air carriers.

In January 1966 the Board began a proceeding known

as the: Motor Carrier-Air Freight Forwarder Investigation,

noting that “The fundamental question posed is whether

long-haul motor carriers of general commodities should be

allowed to participate in air transportation, either in their

own right or through the device of acquiring an air freight

forwarder.” Various applications for approval of acquisi-

tions of air freight forwarders were consolidated. |

These applications had somewhat altered their aspect by

the time Examiner [297] Ruhlen rendered his initial decision.

Two long-haul truckers, D. C. International, Inc. and Nav-

ajo Freight Lines, Inc., sought authority to act as air

freight forwarders in their own right. Consolidated Freight-

ways, Inc., the nation’s largest long-distance trucker, which

had ‘initially sought approval of Jits acquisition of contro:

of an existing domestic and international air “freight for-

warder, applied for a letter of registration for its wholly-

owned subsidiary, CF. Air Freight, Inc., and for the neces-

sary ancillary approvals under 88408 and 409. Pacific,

I The*Board will review decisions by the staff under such delega-

tion only if two or more of its members believe this desirable. 14

C.F.R. §385.54(b) (1967).

sy”

Intermountain Express Company, which also had initially

sought approval only of its acquisition of control of an

international air freight forwarder, applied both for this *

and for letters of registration for its subsidiary, PLE.

Air Freight ‘Forwarding, Inc., and related: relief. The ap

plications were opposed by eight scheduled airlines inclu

ing the six largest domestic operators, by all-cargo air car-—

‘ riers, and by air freight forwarders and their association,

most of whom have joined in the instant petition for re-

view. They were opposed also by the Board’s Bureau of

Operating Rights.

The Examiner rendered an Initial Decision in April 1967.

He began by saying that: :

“The immediate issue is whether the four ap-

plicants should be authorized to operate as

air freight forwarders, but the Board, in in-

stituting this proceeding, stated that the NE et

fundamental question is whether long-haul

~ motor carriers of general commodities should

be allowed to act as air freight | forwarders.”

He cbnabieeer that the issue must be resolved against the

background of “free entry” into air freight forwarding

which he regarded as established in the Air Freight For-

warder Case. 9 C.A.B. 473 (1948). Reviewing various

contentions of the applicants as to what their position as

motor caffier$ would enable them to contribute to air

transportation, he found these claims of special advan-

tages were ndt made out, save only that “use of the so-

phisticated accounting, billing, and reporting systems which

only a large organization can afford should assist the ap-

plicants in providing a convenient service to the public.”

Nevertheless he concluded that “the applicants, by provid-

ing sophisticated management, personnel, and e uipment

and devoting their well-financed experienced orggnization

to the generation and transportation of cargo air, will

contribute a substantidl benefit to the public: Turning

dacs

to the effect on existing air freight forwarders, he thought

“the strong and efficient forwarders will suffer only minor

losses with the entry of the applicants into competition,”

although “the demise of some of the weaker air freight

forwarders may be hastened by the competition provided

by the applicants.” Believing that “If the applicants are

to be successful, they will have to rely on newly gener-

ated traffic,’ the Examiner dismissed the arguments based

on their conflict of jnterest primarily on the basis that

“although in some circumstances for short periods of time

an energetic and clever promoter may be able to persuade

shippers to use modes of transportation adverse to their

economic interests, in the long run, the shipper will choose

that form of transportation which best meets his needs.”

Finally, following a previous Board ruling that the second

provisio to $408(b)? was ‘inapplicable to “indirect air. car-

| _riers,” Air Freight Forwarder Case, supra, 9 C.A.B. at

503, reaffirmed in Airfreight Forwarder Investigation, 21

C.A.B. 536, 544-45 (1955), he held there was [298] no legal

barrier to the applications, and proposed that all should

be granted for ah experimental period of five years.

The Board, over a dissent by Vice Chairman Murphy,

followed the Examiner’s recommendations except in a

minor respect not here material.? However, the Board

2 “Provided further, That if the applicant is a carrier other than

an air carrier, or a person controlled by a carrier other than an air

carrier or affiliated therewith within the meaning of section 5(8)

of the Interstate Commerce Act, as amended, such applicant shall

for the purpose of this section be considered an air carrier and the

Board shall not enter such an order of approval unless it finds that

the transaction proposed will promote the public interest by enab-

ling such carrier other than an air carrier to use aircraft to public

advantage in its operation and will-not restrain competition: . fj had

3 This related to D. C. International, Inc., which has come under

the control of National City Lines, Inc., a motor carrier holding

company. The Board deferred issuance of D. C. International’s

letter of registration until an application by National fer its con-

trol could be passed upon.

96 a

exhibited markedly greater enthusiasm over the new depar- .

ture than had the Examiner. Apparently dissatisfied with

the Examiner’s theory that the conflict of interest arising

from authorizing long distance truckers to act as air freight

forwarders should be disregarded because it would not be

effective in the long run, the Board decided that the double

~ role would lessen conflict rather than increase it. Whereas

the Examiner seemed to~have thought that generation of

new air freight by the. truckers would be only of the same

sort that any vigorous sales effort would. engender, the

Board found a particularized source in-the “large propor-

tion of the truckers’ present surface ‘traffic . . . comprised

of shipments ‘weighing less than 200 pounds, ” which they

now. transport “at a loss or minimal gain? and whence they

“could earn more as forwarders by shipping such packages

by air.”” It concluded also that authorizing the truckers to

act as air freight forwarders ‘ ‘should increase the intermodal

carnage ot freight by air and truck’’: indeed, it regarded its

decision “tas a real breakthrough in opening up the most

hopeful avenue for increasing intermodal transportation of

' freight by surface and air.” It thought also that “The par-

ticipation . . . of motor carriers like the applicants may well

be necessary to achieve the full promise of air cargo,”” em-

phasizing especially the role they could play in areas outside

the ten cities in which the traffic is most developed. For

these reasons, as well as those urged by the Examiner, it

was “convinced that a new policy towards motor carriers

like the applicants deserves a trial.”

- ee aes

The Board’s «lecision does not measure up to the stand-

cards required by 88(b) of the APA, as recently applied in

Northeast Airlines, Inc. vy. CAB, 331 F.2d 579 (1 Cir. 1964),

see especially Judge Afldrich’s concurring opinion, 331 F.2d

at 589. The most serious deficiency lies in the ambiguity

whether the Board has established a:policy of entry for

all truckers who want to act as air freight forwarders or

has merely granted the four applications that were before

it, and the inadequacy of its consideration of effeet on

the existing forwarders if the former is the nety/interete

tation as we strongly suspect.

. Certainly’ the Examiner thought, as instanced by our

first quotation, that the decision would have general -ap-

plicability.. That also would be the natural inference from

such statements by the Board as that “Our purpose in in-

stituting this investigatiof' was to determine whether our

traditional restrictions on surface carriers have become out-

moded far motor carriers like the applicants,” that it re-

garded its Wecision “as-a real breakthrough” in stimulating

‘ — intgrmodaf transportation, and that wi stabi “a

‘ new policy towards motor carriers like th&applicants.”

Indeed, the Board’s brief. in this court concedes that “its

findings and pronouncements also were such as to indicate

that it may be expected to grant future applications by

other long-haul motor " carritrs “to engage in air freight for-

warding activities’ =which, as indicated, is normally done

by its staff and without a hearing. ss

On the other hand, the agency almost completely failed

to examine the effect that entry of large numbers of mo-

tor carriers will have upon the structure of the air freight

forwarding industry. The Board’s opinion does not really

consider this question at all — its finding that “motor car-

riers like the applicants” [299] would stimulate the develop-

ment of air cargo is based entirely upon a review of the opera-

tional plans submitted by the four carriers in the instant

proceeding and no attempt is made to assess the effect of

a general motor ae Nee The Examiner’s analysis

is only slightly less scanty. At one point the possibility

of adverse effect upon the industry is discounted on the

- ground that “the independent freight forwarders” are in

an “impregnable” campetitive position at the present time.

‘But to evidence this conclusion, the Examiner pointed only

to the increasing profitability of the top ten forwarders.

As we have already noted, other parts of his opinion rec-

ognize that “the demise of some of the weaker air freight

forwarders may be hastened by the competition provided

by the applicants.”. 'f “some” of the existing forwarders

will sutcumb to the challenge of these four motor carriers,

the impact of a general policy admitting all long-haul

truckers will be much more severe, and the danger is en-

hanced by the probability, hereafter developed, that the

truckers would bend their efforts primarily to forwarding

freight now moving by air rather than to diverting freight

now moving by truck. f

The record shows that the air freight forwarding indus-

try is now very much divided between the haves and have-

nots. Of thé 120 forwarders the ten largést accounted for

72.8% of total revenue and earned 7.2 million dollars in

pre-tax profits in 1965; the remaining 110 suffered a net

- operating deficit of 1.1 million dollars. Seventy percent

of the domestic forwarders earned less than $25,000 in

1964; one-third operated at a loss. Indeed, even the ag-

gregate figure representing the profitability of the “im-

pregnable” top ten is quite deceiving’— of the 7.2 million

dollars earned by these forwarders, 5.2 was garnered by

_Emery Air Freight, which has consistently captured 30%

of the market. Taken as a whole the industry would thus

seem highly vulnerable to the effect of entry by many

' well-financed competitors.

As to the number of truckers that might take advantage

of the Board’s new policy, the Bureau of Operating Rights

presented figures that reveal the dimension of the problem:

- Numbers of Carriers in 1964 Compared by

Revenue Characteristics (Exhibit BOR-8)

$1,000,000 -

or More $200,000 to Under

Gross Revenue _ 1,000,000 — 200,000. = Total

. ICC Licensed

Motor Carriers. 1,195 2,536 «(11,748 15,479

CAB Authorized-

Air Freight .

‘. Forwarders 3 17 32 56 105

The dangers seem even greater than this chart reveals. There

are 50 truckers with gross revenue exceeding $25,000,000

and 20° with‘ gross revenue of some $40,000,000 or more

— a level attained in air freight forwarding only by Emery

Air Freight, with 30% of the market, even when Emery’s

thriving international forwarding operations are included.

Indeed, three of the four instant applicants have revenues

larger than even Emery — Consolidated Freightways being

three times as large. Only three other

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