Petition for Writ of Certiorari — Kerns v. Jordon

Supreme Court brief1974

Ask Donna

What actually matters in this document.

Text

INDEX

Page

Opinion below W. 1

Jurisdiction 2

Question presented 2

Statute involved 2

Statement 3

Reasons for granting the writ 12

Argument 13

I. The Ashbacker Doctrine Requires Fair Compara-

tive Hearings On Mutually Exclusive Applica-

tions 13

II. The Decision Below Involves Fundamental Issues

Concerning The Administration Of The Hearing

Provisions Of The Federal Aviation Act In Air-

line Route Cases Which Have Not Been, But

Should Be, Settled By This Court 15

A. The Right Of An Airline To File Responsive

Route Applications Supported By The Ash-

backer Doctrine In Appropriate Cases, Is

Vital To A Fair Comparative Hearing. The

Right Was Unnecessarily Abridged By The

Decision Below In A Manner That Finds No

Warrant In The Statute 16

B. The Decision Below Overruled Second Delta

Without Any Explanation Whatever; There

Is No Significant Distinction Between This

Case And Second Delta In Terms Of The

Emphasis Placed By The Board On Beyond-

Area Benefits 19

Page

III. Affirmation By This Court Of The Continuing

Vitality Of The Ashbacker Doctrine In Air

Route Cases Will Not Encroach On The Board’s

Discretion To Limit The Areas To Be Considered

In Air Route Cases 22

Conclusion 24

Appendices See accompanying volume

for Appendices A thru E

CITATIONS

Cases:

Ashbacker Radio Corp. v. Federal Communications

Commission, 326 U.S. 327 2, 4, 13, 15

Civil Aeronautics Board v. Delta Air Lines, Inc.,

867 U.S. 316

Continental Air Lines, Inc. v. Civil Aeronautics

Board, 448 F.2d 745

Delta Air Lines, Inc. v. Civil Aeronautics Board,

228 F.2d 17

Delta Air Lines, Inc. v. Civil Aeronautics Board,

275 F.2d 682, cert. denied, 362 U.S. 969 11, 14, 20,

Eastern Air Lines, Inc. v. Civil Aeronautics Board,

248 F.2d 607

National Airlines, Inc. v. Civil Aeronautics Board,

892 F.2d 504

St. Louis-Southeast Service Case,

27 C.A.B. 342 (1958)

31 C.A.B. 377 (1960)

Southern Tier Competitive Nonstop Investigation,

Order 69-7-135

Order 73-2-89

Order 73-5-22

Southern Transcontinental Service Case,

33 C.A.B. 701 (1961)

30 C. A. B. 70 (1958)

21, 22

Constitution: Page

Fifth Amendment to the Constitution of the United

States 14

Statutes:

Federal Aviation Act, 72 Stat. 731, et seq., 49

U.S.C. 1301, et seq.:

Section 401 14, 16

Section 401(b) 6, 17, 18

Section 401(c) 14, 16, 18

Section 401 (g) 18

Miscellaneous: Page

Civil Aeronautics Board Rules of Practice, 14

C. F. R.:

Section 302.911 17, 18

Federal Register:

38 F. R. 24894 18

IN THE

Supreme Court of the United States

OCTOBER TERM, 1973

No.

DELTA Am LINES, INC.,

Petitioner

CIvIL AERONAUTICS BOARD, et al.,

Respondents

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

Delta Air Lines, Inc. petitions for a writ of certiorari

to review the judgment of the United States Court of

Appeals for the District of Columbia Circuit, entered

in this case on October 23, 1973.

OPINION BELOW

The opinion of the court of appeals is not yet reported.

The opinion, and the court’s order filed November 20,

1978 sua sponte amending the opinion, are set forth in

Appendix A.

1 Appendices A, B, C, D and E are set forth in an accompanying

volume pursuant to permission granted by Rule 28(i). Citations

thereto will be to the specific Appendix and the page of the ac-

companying volume.

JURISDICTION

The judgment of the court of appeals was entered on

October 23, 1973 (Appendix B).

The petition of Delta Air Lines, Inc. for rehearing

was denied by the court of appeals on November 20,

1973.

The jurisdiction of this Court is invoked under 49

U.S.C. 1486 (f) and 28 U.S.C. 1254 (1).

QUESTION PRESENTED

Whether the Ashbacker doctrine* of fair comparative

hearing is applicable to airline route cases, and, if so,

whether the Civil Aeronautics Board may sua sponte de-

sign a new route proceeding within a previously well

defined area of the country, refuse to consolidate or even

hear one airline’s applications for new route authority

within that area, and thereafter award a route to an-

other airline in predominant measure upon the basis of

the traffic flowing over routes encompassed by the ex-

cluded applications, when it is clear that such traffic will

not, as a matter of economic fact, support operations by

two airlines, now or in the foreseeable future.

STATUTE INVOLVED

Sections 401(a), (b) and (c) of the Federal Aviation

Act (72 Stat. 754, 49 U.S.C. 1871 (a), (b) and (c))

provide:

Certificate of public convenience and necessity—

Essentiality

“(a) No air carrier shall engage in any air trans-

portation unless there is in force a certificate issued

2 Ashbacker Radio Corp. v. Federal Communications Commission,

326 U.S. 327.

by the Board authorizing such air carrier to engage

in such transportation.”

Application

“(b) Application for a certificate shall be made in

writing to the Board and shall be so verified, shall

be in such form and contain such information, and

shall be accompanied by such proof of service upon

such interested persons, as the Board shall by regu-

lation require.”

Notice of application; filing of protest or memo-

randum; hearing

„(e) Upon the filing of any such application, the

Board shall give due notice thereof to the public by

posting a notice of such application in the office of

the secretary of the Board and to such other persons

as the Board may by regulation determine. Any in-

terested person may file with the Board a protest or

memorandum of opposition to or in support of the

issuance of a certificate. Such application shall be

set for a public hearing, and the Board shall dispose

of such application as speedily as possible.”

STATEMENT

This controversy arises out of the so-called Southern

Tier Competitive Nonstop Investigation, an administra-

tive proceeding initiated by the Civil Aeronautics Board

(“Bourd”) sua sponte in 1967, primarily to reexamine

the essentially noncompetitive route structure established

six years earlier by the Board’s decision in the Southern

Transcontinental Service Case.

Prior to 1961 there had existed no single-carrier trans-

continental air service across the southern United States,

but such service was provided by a series of “interehange

flights”, in which a single aircraft was operated across

country by the personnel of successive airlines with ad-

joining routes. Single-carrier service was first authorized

by the Board in the Southern Transcontinental Service

Case, 33 C.A.B. 701 (1961) (“Southern Transcontinen-

tal“). That case was concerned with an integrated area

comprised of nine states: Florida, Georgia, Alabama,

Mississippi, Louisiana, Texas, New Mexico, Arizona and

California.

This nine state “southern tier“ area was forged by the

Board in the course of the decisional process, in large

part as a result of the Board’s own concern (30 C. A. B.

71-72 (1958) ) for the proper application of the doctrine

of Ashbacker Radio Corp. v. Federal Communications

Commission, 326 U.S. 327. In the end, the Board in-

cluded within the scope of the Southern Transcontinental

case the possibility of authorizing new airline service to

and from virtually all of the major cities in the southern

tier area, including the four cities most specifically at

issue here: San Antonio, El Paso, Albuquerque and

Phoenix. g

At the conelusion of the Southern Transcontinental

case, in 1961, the Board made new route awards aeross

the southern tier, ineluding awards of southern trans-

continental authority to petitioner Delta Air Lines, Ine.

(“Delta”) and to National Airlines, Inc. (National“);

it also made an award to Continental Air Lines, Ine.

(“Continental”) of a route between Los Angeles and

Houston by way of Phoenix, El Paso and San Antonio.

Although the Board's Examiner had recommended that

Albuquerque and Phoenix be ineluded in Delta's southern

transcontinental route, and although Delta had earlier

participated in this traffic through interchange flights, the

Board did not include such authority in Delta’s new cer-

tificate (33 C.A.B. at 719).

In 1967, only six years after the final decision in

Southern Transcontinental, the Board once again turned

its attention to the needs of the public for east-west

service in the southern tier. Although these 1967 pro-

ceedings included cities in eight of the nine “southern

tier states (excepting only Mississippi), as well as

routes and traffic throughout the area, this time the

Board selected specific markets for consideration and

separated them into four different administrative pro-

ceedings. In this Southern Tier Competitive Nonstop In-

vestigation (“Southern Tier“), the Board placed in issue

18 city-pairs (markets) :

(1) Miami-Tampa (10) Atlanta-Los Angeles

(2) Miami-New Orleans (11) Atlanta-San Francisco

(3) Miami-Houston (12) New Orleans-Dallas

(4) Miami-Dallas (13) New Orleans-Los Angeles

(5) Miami-Los Angeles (14) New Orleans-San Francisco

(6) Miami-San Francisco (15) Dallas-Los Angeles

(7) Tampa-New Orleans (16) Dallas-San Francisco

(8) Tampa-Dallas (17) Houston-Los Angeles

(9) Atlanta-Dallas (18) Houston-San Francisco

Second, in the Dallas/Fort Worth-Phoenix Nonstop Case

(C.A.B. Docket No. 18579) (“Dallas-Phoenix”), a single

market was directly involved:

(19) Dallas-Phoenix

Third, in the Service to Albuquerque Case (C.A.B. Docket

No. 18586) (“Albuquerque”), the Board placed in issue

the following pairs of cities:

(20) Albuquerque-San Francisco

(21) Albuquerque-Los Angeles

(22) Albuquerque-Chicago

(23) Albuquerque-Las Vegas

(24) Albuquerque-Dallas

Finally, in the Memphis/Huntsville/Birmingham-Los

Angeles Investigation (C.A.B. Docket No. 19023) (“Mem-

phis/Huntsville”), commenced a few months later, the

following city-pairs were directly at issue:

(25) Memphis-Los Angeles

(26) Huntsville-Los Angeles

(27) Birmingham-Los Angeles

Promptly after the institution of the Southern Tier

case, Delta moved to consolidate the Dallas-Phoenix, Al-

buquerque and Memphis/Huntsville cases therewith and to

expand the scope of the case also to include other south-

ern tier markets, for which Delta separately filed two

formal applications under Section 401(b) of the Federal

Aviation Act.“ One of the routes thus applied for by

Delta was between Miami in the east and San Francisco

and Los Angeles in the west, via intermediate points

which included Houston, San Antonio, El Paso, Albu-

querque and Phoenix. (If granted, this application would

have enabled Delta to provide nonstop, one-stop, and

multi-stop service in each of the San Antonio-Miami, El

Paso-Miami, Albuquerque-Miami and Phoenix-Miami lo-

cal markets.) Delta’s motion, and all similar motions by

other airlines, were denied by the Board except to the ex-

tent that the routes sought were already included in the

Southern Tier case. Hereinafter the phrase “excluded ap-

plications” means Delta’s applications above-described,

and “excluded area” is used to refer to that part of the

southern tier area encompassing San Antonio, Albuquer-

que, El Paso and Phoenix, particularly in the context

of service to Miami via Houston.

On October 30, 1967, Delta (and National) petitioned

the United States Court of Appeals for the District of

Columbia Circuit for judicial review of the order by

which the Board had thus refused to expand the scope

of the Southern Tier case and had denied consolidation of

Delta’s “excluded applications“. The court of appeals

dismissed these petitions for lack of jurisdiction at that

time, but concluded:

“Ashbacker does not necessarily require the Board

to enlarge a proceeding to include abutting segments

372 Stat. 754, 49 U.S.C. 1371(b).

Before these petitions came on for hearing, the Board itself

eliminated a restriction imposed upon the Dallas-Phoenix case, with

the result that Delta eventually was awarded the single route at

issue therein.

or prohibit the Board from considering in a separate

proceeding an area that borders on, or even lies

wholly within, the area covered in another proceed-

ing. It may be that simultaneous investigation of

contiguous areas does violate Ashbacker, but that

depends on the considerations adduced by the Board

in making its award.”

National Airlines, Inc. v. Civil Aeronautics Board, 392

F.2d 504, 510 (C.A.D.C.).

Insofar as the route Houston-Miami is concerned, the

following material shows, Delta submits, that the consid-

erations eventually adduced by the Board in awarding

the route to Continental did violate Delta’s rights under

the Ashbacker doctrine.

The Southern Tier case was subsequently tried before

a Board Examiner (now called an “Administrative Law

Judge”), with Delta introducing Ashbacker-type evi-

dence to demonstrate mutual exclusivity between the

routes placed in issue by the Board and Delta’s excluded

applications. Insofar as Houston-Miami service was in-

volved, the Examiner recommended certification of Con-

tinental from Houston to Miami upon the basis of public

benefits to the “excluded area”—which would thereby

receive new single-carrier service to Miami by virtue of

Continental’s pre-existing authority over the route Los

Angeles-Phoenix-E] Paso-San Antonio-Houston plus its

ability under standard Board practice to “tack” its pro-

posed Houston-Miami authority to that existing au-

thority.

The Ashbacker problem resulting from this recom-

mended award was called to the Board’s attention by

Delta. Although the resulting Southern Tier opinion

(C.A.B. Order 69-7-135 (1969)) purported to dismiss

Delta’s Ashbacker objections, the Ashbacker problem was

not directly faced by the Board because the decision it-

self contained not one award to an airline whose routes

were such as to raise problems of mutual exclusivity

with Delta’s excluded applications. Indeed, in that 1969

decision, the Board awarded the Houston-Miami route

not to Continental, but to Delta.

On October 17, 1969, Continental sought judicial re-

view in the United States Court of Appeals for the Dis-

trict of Columbia Circuit of the Board’s award of

Houston-Miami rights to Delta, on the ground that the

decision was inconsistent with the Dallas-Phoenix case

decided the same day, in which Delta had also prevailed.

The court of appeals vacated the Houston-Miami award,'

on the ground that the Board had not adequately ex-

plicated its reasons for the selection of Delta (Continen-

tal Air Lines. v. Civil Aeronautics Board, 443 F.2d 745

(C.A.D.C.)). Pursuant to the court’s permission, the

Board authorized Delta to continue service over the route

by exemption pendente lite.

While the Southern Tier case was before the court

of appeals, on September 21, 1970, the Board on the

basis of its procedural regulations dismissed as stale

Delta’s “excluded applications”, which by then had lain

for three years without action having been taken thereon

by the Board. Delta’s excluded applications thus never

received a hearing in any proceeding.

Following remand of the Southern Tier Houston-Miami

award by the court of appeals, the Board, although not

require to do so, ordered a new evidentiary hearing be-

fore a new Administrative Law Judge. At the hearing

Delta reintroduced up-dated Ashbacker evidence of mu-

tual exclusivity, showing that the traffic in the markets

involved in a Phoenix-Albuquerque-El Paso-San Antonio-

Houston-Miami route could not then or for many years

to come support an award to Delta if Houston-Miami

5 The other 17 awards made by the Board in the Southern Tier

case were not judicially challenged, and went into effect.

authority were awarded to Continental in this proceed-

ing. (This evidence, of course, could not be offered and

was not received in support of Delta’s application for

the Houston-Miami route itself.) Despite Delta’s Ash-

backer showing, the Administrative Law Judge recom-

mended an award to Continental, based on its frequency

of schedules in the Houston-Miami market and beyond-

area benefits. He purported to reject Delta’s Ash-

backer contentions, on the grounds that nonstop service

by Delta would be manifestly superior to Continental’s

one-stop authority—but without any analysis of the traffic

available to support such competitive services.

The Board selected Continental for the Houston-Miami

route precisely because of its “beyond area benefits” (pri-

marily to the “excluded area”) and the attendant greater

frequency of service in the Houston-Miami market. The

Board expressed the reasons for its award to Continental

in these terms:

“Our choice of Continental for a Houston-Miami

award is predicated primarily on the fact that it will

bring greater ser e benefits than any other appli-

cant to the primary market and offer superior be-

yond-area advantages as ‘well.”

Order 73-2-89 (App. C, p. 28), and:

“As we have observed, Continental can offer a

more extensive pattern of Houston-Miami nonstop

frequencies—four daily round trips—than any other

carrier. It can support this level of service because

= its substantial pool of support traffic west of

0 U

Id., p. 30, again:

“Specifically, the dissent’s computations include only

local and interline connecting passengers in the

* Delta had not limited its application to only nonstop authority,

see p. 6, supra.

Houston-Miami market and wholly disregard the

extensive pools of on-line support traffic available to

Continental west of Houston. In effect, this ap-

proach seems to ignore the very factor which has

led us to select Continental—namely the substantial

beyond area traffic support that will enable the car-

rier to provide more Houston-Miami frequencies and

greater beyond benefits than any other applicant.”

Id., pp. 34-35 (emphasis added).

The Board rejected Delta’s Ashbacker arguments, pri-

marily upon its interpretation of the law and also upon

the factual assertion and unprecedented basis that the

markets for which Delta had applied were then too small

to support service by even one carrier.“

Delta again petitioned for judicial review to the United

States Court of Appeals for the District of Columbia

Circuit. The court affirmed the Board on the grounds

that the Ashbacker doctrine could not be applied so as

to impair the considerable measure of discretion that the

Board must retain in defining the scope of air route

cases, that the Board is not required to tailor its proceed-

ings so as to equalize the advantages and disadvantages

with which every applicant enters a new route proceed-

ing, and that Continental’s beyond-area benefits to the

“excluded points” had not loomed large in the Board’s

decision. Delta’s excluded applications were character-

ized by the court as “defensive route applications” which

should not be encouraged.

The court thus rejected Delta’s contentions as to (1)

the decisional importance given by the Board to Conti-

nental’s proposed new services between Miami and the

“excluded area points”, and (2) the Board’s position that

7 See the Board’s Opinion and Order 73-2-89 (App. C, p. 36).

See also Opinion and Order on Reconsideration 73-5-22 (App. D,

pp. 64-66).

it is entitled to disregard what it characterizes as de-

fensive route applications. Thus, as to point (1), Con-

tinental’s service to the “excluded area” points, the court

said in its October 23 opinion:

“They were taken into account as a modest aspect

of the entire case.”

App. A, p. 12; and as to point (2) it said:

“Nor can we open the door to an equalization ap-

proach that would encourage all kinds of defensive

route applications. The Board must act realistically

in terms of existing route identification and business

patterns.“

Id., p. 13.

Delta petitioned for rehearing and suggested the ap-

propriateness of rehearing in Banc. In its petition, Delta

laid heavy emphasis on the opinion’s failure even to cite

one of the court’s own leading cases—Delta Air Lines,

Inc. v. Civil Aeronautics Board, 275 F.2d 632 (C.A.D.C.),

cert. denied, 362 U.S. 969 (“Second Delta“). Delta urged

that the court’s reading of the Board’s treatment of the

beyond-area benefits to the “excluded points” as only a

“modest aspect of the entire case“ was directly contrary

to the Board’s own statement that excluded area traffic

was “the very factor which led [it] to select Continen-

tal“.“ The petition for rehearing was denied by an order

filed on November 20, 1973, but simultaneously the court

issued, sua sponte, an order amending its original opinion

as follows:

“Page 12, second paragraph, omit the following:

‘They were taken into account as a modest aspect

of the entire case. The Board, however, remained

focused .. .’

* the quote from the Board's opinion at p. 10, supra (emphasis

ed).

Substitute the following:

‘That is to say, this is not a case where Continental

had no advantage over the competing carriers in

terms of Houston-Miami service, and was awarded

the route because of the beyond-area benefits. The

Board was primarily focused aes

App. A, pp. 17-18. This substituted language only

served to emphasize the court’s failure to follow, distin-

guish, or even cite its own opinion in Second Delta, supra,

which amounted to a sub gilentio overruling thereof.

REASONS FOR GRANTING THE WRIT

Although this Court has not yet considered the appli-

cation of the Ashbacker doctrine to airline new route

cases, the question has arisen in a number of cases in

the circuit courts of appeals. Therein the airlines’ right

to a fair comparative hearing on mutually exclusive ap-

plications for new routes has been declared, and in sev-

eral cases has been found to have been improperly denied

by the Board. The United States Court of Appeals for

the District of Columbia Circuit, we submit, failed to

apply this Court’s Ashbacker doctrine to the facts of

the case below and, by failing to reconcile or even

cite the leading decision in which Ashbacker rights were

held violated, has cast serious doubt on the validity

and applicability of that doctrine to airline cases. It is

appropriate for this Court to consider through a writ of

certiorari the precedent of the Ashbacker doctrine and

assess its current vitality as applied to air route cases.

Furthermore, the court below has also sanctioned ad-

ministrative procedures under which the Civil Aeronau-

ties Board may initiate new route proceedings sua sponte

and may, by predetermining with selective particularity

what routes may be contended for therein, determine pre-

cisely what advantages and disadvantages the airlines

—

competing for these routes will enjoy in the subsequent

proceeding, but may nevertheless refuse to consolidate or

even to hear applications for logically related and mu-

tually exclusive routes.

It is essential for this Court to rule on the applicability

and scope of the Ashbacker doctrine because it is a gen-

eral rule of law in route proceedings conducted by the

Civil Aeronautics Board. There is probably no more basic

doctrine with respect to route proceedings in terms of

contentions before the Board and the courts of appeals;

it is a doctrine that pervades the scope of practically

every airline route case; but the boundaries have yet to

be set by this Court. The uncertainty of those boundaries

is a matter of continuing concern to both the Civil Aero-

nauties Board and the carriers in administrative pro-

ceedings, witness the contention of Continental Air Lines

(an intervenor below) with respect to the application of

Ashbacker to similar facts, in a brief dated December

21, 1973, as set forth in Appendix E.“ Reference to the

argument contained therein demonstrates that basic is-

sues of fair comparative hearing in air route cases are

a continuing matter and should be settled by this Court.

ARGUMENT

I. THE ASHBACKER DOCTRINE REQUIRES FAIR

COMPARATIVE HEARINGS ON MUTUALLY EX-

CLUSIVE APPLICATIONS.

Under the doctrine of Ashbacker Radio Corp. v. Fed-

eral Communications Commission, 326 U.S. 327, an ad-

ministrative agency which is required by statute to grant

* Continental’s contentions are of value in respect of reasons for

granting a writ of certiorari herein only because Continental now

not only supports before the Board the very Ashbacker argument

raised by Delta herein and contested by Continental below, but

— relies on Second Delta for the same proposition urged by

ta below.

the benefit of a hearing to applicants for licenses, must

grant a comparative hearing to applications that are

“mutually exclusive”. Mutual exclusivity exists in situ-

ations wherein a prior consideration of one application

would substantially narrow the possibility that the agency

could subsequently award the other application.

It has been established in the courts of appeals that

the Ashbacker doctrine applies to route proceedings be-

fore the Civil Aeronautics Board. In Second Delta, supra,

the court said:

“If the grant of one of several applications for a

new route does as a matter of economic necessity,

preclude the grant of any other application, the doc-

trine of Ashbacker clearly applies. Likewise, if the

foreseeable traffic would support two carriers and

there are, let us say, five applicants the grant of

any one is an effective denial of three of the remain-

ing four applications, and Ashbacker applies.”

275 F.2d at 638.

Section 401 of the Federal Aviation Act“ accords a

public hearing to every applicant for a certificate of pub-

lie convenience and necessity for a new airline route; in

particular, Section 401(c) gives this right as to applica-

tions for new routes. This right to a hearing is guaran-

teed by the “due process clause” of Amendment V to

the Constitution of the United States.

Application of the Ashbacker doctrine to the complexi-

ties of modern air transportation presents many prob-

lems, as the court of appeals itself noted in Second Delta:

“ t is true, as the Board argues, that the appli-

cation of the Ashbacker doctrine to awards of air-

plane routes presents many difficulties not in the

radio cases. We pointed this out in Eastern Air

10 72 Stat. 754, 49 U.S.C. 1371.

—

Lines v. Civil Aeronautics Board. We now iterate

the doctrine there stated; the Bourd must have a

considerable measure of discretion in limiting the

areas to be considered in its air-route cases. But

at the same time we emphasize that the Board can-

not, either intentionally or by the demonstrable ef-

fect of an order, avoid what is now known as the

Ashbacker doctrine.”

275 F.2d at 687 (emphasis added).

The Ashbacker doctrine is not a technicality, but a

practical conclusion of sound common sense. As the court

of appeals said in Delta Air Lines, Inc. v. Civil Aeronau-

tics Board, 228 F.2d 17 (C. A. D.C.) (“First Delta“):

“The Board says the only right of Delta is to have

the issue of exclusivity decided before a grant of

Eastern’s application. It so construes the Ashbacker

doctrine. We think such an interpretation would re-

duce the rule of that case to an empty shell, all form

and no substance. * * We read Ashbacker as a

— of substance and not as a mere prescription of

orm.“

228 F.2d at 21.

II. THE DECISION BELOW INVOLVES FUNDA-

MENTAL ISSUES CONCERNING THE ADMINIS-

TRATION OF THE HEARING PROVISIONS OF

THE FEDERAL AVIATION ACT IN AIRLINE

ROUTE CASES WHICH HAVE NOT BEEN, BUT

SHOULD BE, SETTLED BY THIS COURT.

As in the original Ashbacker™ decision of this Court,

the competing interests which bring the doctrine of that

case into play in the context of air route proceedings are

fundamental and substantial. They are, on the one hand,

the conceded power of the agency to structure its proceed-

Ashbacker Radio Corp. v. F. C. C., supra.

ings in furtherance of the efficient conduct of its statu-

tory functions and, on the other, the statutory right of

an applicant to a fair hearing.“ This conflict was re-

solved in the case at bar in favor of the agency, errone-

ously, we submit, and with far-reaching implications that

threaten to erode the right to a hearing in future air

route proceedings under the Federal Aviation Act.

A. The Right Of An Airline To File Responsive Route

Applications, Supported By The Ashbacker Doctrine

In Appropriate Cases, Is Vital To A Fair Compara-

tive Hearing. The Right Was Unnecessarily

Abridged By The Decision Below In A Manner That

Finds No Warrant In The Statute.

The court below accepted the Board’s contentions that

it must retain considerable discretion in defining the

scope of air route cases (App. A, p. 10)—a proposition

which Delta does not contest—and that the Board is

therefore entitled to disregard what it characterizes as

“defensive” route applications (App. A, p. 13) —a propo-

sition Delta strongly challenges. In so doing, we submit,

the court went much further than it apparently realized

in stripping the Ashbacker doctrine of vitality for air

route cases.

The court thereby gave sanction to Board procedures

under which new route applications in conflict with the

Board’s “prior-to-hearing” concept of how the air trans-

portation system should be expanded, can never receive

the hearing which Congress has decreed it shall receive

“as speedily as possible“ (Section 401(c)).” This result

12 Section 401 of the Act, 49 U.S.C. 1371, guarantees a hearing to

an applicant for a new airline route as well as a hearing before a

certificate previously granted may be amended, modified, suspended

or revoked. In the latter context, this Court had occasion to empha-

size the importance of the right to hearing in Civil Aeronautics

Board v. Delta Air Lines, Inc., 367 U.S. 316.

18 49 U.S.C. 1871(c).

—

flows from the Board’s dual practices (followed by it

below) of (a) initiating new route cases sua sponte, and

(b) dismissing an airline’s applications as stale without

a hearing ever having been had thereon,“ neither of

which finds any support in the Federal Aviation Act.

The assertion that Delta’s excluded applications were

“defensive” even if true—cannot make them any less

worthy of Ashbacker protection, notwithstanding the sug-

gestion implicit in the court’s opinion that this should

be the case.

The point to which the court did not address itself is

that when the Board commences a new route case sua

sponte, as it did here, and itself selects specific route

segments to be competed for, the right of airlines to sub-

mit responsive applications is absolutely vital to a fair

hearing and to the administration of the Federal Avia-

tion Act.

Section 401 (b) of the Act“ specifies that new certifi-

cates of public convenience and necessity shall be initi-

™ See, 14 C.F.R. § 302.911.

45 Delta, in any event, questions the validity of this characteriza-

tion, the use of which, we submit, is indicative of the court’s failure

to grasp and fairly resolve the real competing interests involved. It

should be pointed out that: (1) in the Southern Transcontinental

case, instituted in 1958, Delta sought authority to serve El Paso,

Tucson, Phoenix, Albuquerque and San Antonio; (2) the Board’s

Examiner recommended Delta’s certification at Albuquerque, Tucson

and Phoenix on a route to the west coast (33 C.A.B. at 926); and

(3) after the Board denied Delta authority at these intermediate

points (33 C. A. B. at 719) and stated that it was deciding the south-

ern tier air transportation route pattern for the foreseeable future

(33 C.A.B. at 73), Delta took the first opportunity offered to seek

authority at those points earlier denied it—namely, at the time the

Board instituted the case below. Delta had and has a continuing

affirmative interest in serving the excluded area points and its

application, therefore, cannot properly be characterized as “de-

16 49 U.S.C. 1871(b).

fensive“.

ated by written application by the prospective carrier.

There is in Section 401(b) no provision like that found

in Section 401 (g), * permitting the Board to act upon

its own initiative with respect to modifications of a car-

rier’s existing route.

Despite this seemingly clear statutory scheme, the

Board frequently commences new route proceedings of its

own initiative, and indeed did so here.

Coupled with this assertion of the right itself to insti-

tute new route cases, is the Board’s assertion of the right

not to pass on applications properly filed by the airlines.

Section 401 (e) of the Act“ specifies:

“Such application [for a certificate] shall be set for

a public hearing, and the Board shall dispose of such

application as speedily as possible.“ (emphasis

added)

Despite this command, the Board has decreed (in Section

302.911 of its Rules of Practice, 14 C. F. R. § 302.911)

that it may neglect new route applications, let them

slumber unheard for three years, and then dismiss them

as stale.* The Board did so here with Delta’s “excluded

applications”.

The 18 discrete markets in issue in the Southern Tier

case (see p. 5, supra) were designated by the Board,

not by any applicant. If the Board is allowed to insti-

tute and frame new route proceedings by deliberate se-

17 49 U.S.C. 1371(g).

18 49 U.S.C. 1371 (c).

1 The Board recently has amended further its regulation to pro.

vide that a route application properly filed can be dismissed without

hearing as “likely to become stale”, if the Board denies a motion

for expeditious hearing on such application. 38 F.R. 24894, Septem-

ber 11, 1973.

—

lection of particular segments,” and if, most or all routes

are to be awarded to the carrier which exhibits the

greatest beyond-benefits, administrative dangers lurk in

the court’s uncritical iteration that:

„.. . [P]re-existing certificates do give an advan-

tage to certain applicants for a new segment, but

that is not inherently unfair.”

App. A, p. 13.

Against the background of these administrative prac-

tices, the airlines must have the right to file responsive

route applications whenever the Board itself either ini-

tiates a proceeding or redefines an application submitted

to it. Absent such a right, there is no way the carrier

can hope to have its own application properly before the

Board at the critical time (i.e., when related applications

are scheduled for hearing), both to protect the carrier’s

own interest and as a means of pointing out to the Board

how the scope of a proposed investigation might be im-

proved in the public interest.

B. The Decision Below Overruled Second Delta With-

out Any Explanation Whatever; There Is No Sig-

nificant Distinction Between This Case And Sec-

ond Delta In Terms Of The Emphasis Placed By

The Board On Beyond-Area Benefits.

In Second Delta, the excluded applications were be-

tween the west coast and the southeast. TWA had pre-

existing authority between St. Louis and the west coast,

and obtained St. Louis-southeast rights. The emphasis

given by the Board to the “beyond-area” benefits which

TWA could provide over its existing routes west of St.

Louis is shown by the court’s opinion in Second Delta

20 In the past, the Board has often set down area-type proceedings

while excluding applications for out-of-area routes—an approach

upheld by the courts so long as the area is a reasonable one (see

Eastern Air Lines, Inc. v. Civil Aeronautics Board, 243 F.2d 607

(C.A.D.C.)). That, however, was not the Board’s approach below.

which in turn quoted the Board’s decision in the St.

Louis-Southeast Service Case, 27 C.A.B. 342 (there under

judicial scrutiny) to the effect that:

“It was the carrier’s ability to provide these beyond-

area’ benefits that was responsible for our selection

of TWA as the carrier to perform the St. Louis-

Southeast services that were found to be required

by the public convenience and necessity.”

275 F.2d at 637.

Other quotations from the St. Louis- Southeast decision

show that benefits in the local markets under considera-

tion were stressed by the Board to at least the same

extent as in the case at bar:

“As indicated previously, we have selected TWA

to provide the needed service over the St. Louis-

Southeast route we are authorizing herein. We do

so because we are convinced that TWA will provide

substantially greater public benefits than any of the

other applicants.”

27. C.A.B. at 347 (footnote omitted).

* * * * *

“Aside from seasonal factors, the end-on integra-

tion of the extension from St. Louis to the Southeast

with that portion of route 2 extending west of St.

Louis will permit TWA to combine the traffic flow

to and from cities east and west of St. Louis so as

to support maximum frequencies in the St. Louis-

Southeast markets and better develop the traffic

potential in this area.”

Id. at 348 (emphasis added).

* * * * +

“In view of the growing importance of the south-

east area, both from an economic and a national

defense standpoint, as well as the increasing volume

of traffic exchanged between the Southeast and cities

—

west of the Mississippi, we see no reason on the

present record to deny the traveling public the ad-

ditional single-plane frequencies that TWA will be

able to offer over and above current interchange

services.”

Id. at 350.

* * * * *

4 pve are not deciding on the basis of the pres-

ent record whether direct one-carrier southern trans-

continental non-stop or multi-stop service is required

by the public convenience and necessity nor could we

properly do so.”

Id. at 351.

Despite these recitations by the Board of “reliance” on

benefit to the local market at issue, the court in Second

Delta recognized the improper reliance on beyond-area

benefits in violation of the rights of other carriers with

applications pending for routes to and from the beyond

points. Thus, in Second Delta, the Board’s recitation

on the benefits offered by TWA in the local market was

not accepted by the court as determinative of the Ash-

backer issue.

In the case at bar, the Board gave equal or even

greater emphasis to such beyond-area benefits, calling

them “the very factor’ leading to Continental’s selec-

tion (see the full quotation at p. 10 of this Petition,

supra). As a practical matter, then, there is no dis-

tinction between the case at bar and Second Delta in

terms of the weight given to beyond-area benefits, com-

pared with the weight given to service benefits offered

over the routes directly in issue. The court below, there-

fore, either erred in its assessment of the Ashbacker

aspects of the Board’s decision herein or sapped the Ash-

backer doctrine of any vitality as applied to air route

cases, all without even mention—much less discussion—

of Second Delta.

III. AFFIRMATION BY THIS COURT OF THE CONTIN.

UING VITALITY OF THE ASHBACKER DOCTRINE

IN AIR ROUTE CASES WILL NOT ENCROACH

UPON THE BOARD’S DISCRETION TO LIMIT THE

AREAS TO BE CONSIDERED IN AIR ROUTE

CASES.

Reading the opinion of the court below, it is a fair

conclusion that the court was most impressed by the

Board’s urging that a contrary result would permit the

expansion of new route cases beyond manageable limits,

and that this danger alone is sufficient to distinguish or

render obsolete the ruling of law in Second Delta™ or

justify narrowing the protections heretofore afforded by

it in furtherance of this Court’s decision in Ashbacker.

There are, however, a number of reasons why ap-

plication of Ashbacker to the facts at bar would not

produce a dangerous precedent, in terms of threat to the

administrative process. These reasons were fully urged

to the court below.

First, Delta’s excluded application lay totally within

the geographic area covered by the 18 markets specifi-

cally included by the Board within the scope of the

Southern Tier proceeding.

21 It should be noted that the facts at bar present an even stronger

case for application of the Ashbacker doctrine of fair hearing than

did those in the Second Delta case ignored by the court below. There

the excluded applications were (at the time of the Board’s award to

TWA) pending before the Board in another proceeding. The only

issue posed, therefore, was whether the prior award to TWA would

“dry up” some or all of the traffic available to support and justify

awards to other airlines in the later proceeding.

The same issue is posed herein, of course, as it is in all Ash-

backer cases. But there is an additional aspect of unfairness here,

because Delta’s excluded applications are not being heard in any

proceeding and, indeed, have been dismissed by the Board without

any hearing ever having been had.

—

Second, Delta’s excluded application involved cities

which the Board had in earlier proceedings determined

must of necessity be considered as part of an integral

area—thus requiring simultaneous consideration—in order

to avoid Ashbacker problems.

Third, Delta’s excluded application would have enabled

Delta to provide service which had once existed (and

in which Delta had then participated through interchange

service) but which the Board a few years earlier had

ordered discontinued. It is this service which Continental

can now provide—even though Delta has not been given

an opportunity to try an application for it.

Fourth, if (contrary to Delta’s view) the main point

upon which the Board focused was the service to be of-

fered by Continental between Miami and Houston, the

Ashbacker problem could have been avoided by an appro-

priate restriction on Continental’s authority. The Board

did this in the case of TWA (31 C.A.B. 377) after re-

mand in Second Delta, supra.

Finally, when the Board sua sponte initiates a new

route case and handpicks the points to be contended for,

it must accept the possibility that some expansion of the

scope of the case may be forthcoming for the sake of

fairness.

For the foregoing reasons, the possibility of render-

ing future administrative proceedings unwieldy does not

exist in sufficient degree to justify the erosion of the

right to hearing that results from the decision below.

CONCLUSION

The decision below raises an important question of

administrative procedure which bears directly upon the

rights of competing air carriers to obtain fair and com-

parative consideration by the Civil Aeronautics Board of

applications properly filed by them. Delta believes that

the decision below is in error and that it conflicts with

this Court’s decision in Ashbacker as well as with other

decisions of the courts of appeals. The petition for cer-

tiorari should be granted. |

Respectfully submitted,

JAMES W. CALLISON

Vice President-Law & Regulatory

Affairs

Delta Air Lines, Inc.

Hartsfield Atlanta International

Airport

Atlanta, Georgia 30320

ROBERT REED GRAY

Louis HAYNER KURRELMEYER

1001 Connecticut Avenue, N.W.

Washington, D.C. 20036

Attorneys for Delta Air Lines, Inc.

February 19, 1974

APPENDIX A

APPENDIX B

APPENDIX C

APPENDIX D

APPENDIX E

APPENDIX F

INDEX TO APPENDICES

Opinion of court below dated October

28, 1973, together with order of court

dated November 20, 1973 eee

opinion

Judgment of court below

Opinion and order of Civil Aero-

nautics Board, No. 78-2- 89

Opinion and order on reconsideration

of Civil Aeronautics Board, No.

735-22

Excerpts from opening brief of Con-

tinental Air Lines, Inc. to Adminis-

trative Law Judge Sheehan in Amer-

ican/Frontier Route Exchange Agree-

ment, C. A. B. Docket No. 25397

Order of the Court of Appeals deny-

ing petition for re hearing

Page

—

APPENDIX A

Notice: This opinion is subject to formal revision before publica-

tion in the Federal Reporter or U.S. App. D. C. Reports. Users are

requested to notify the Clerk of any formal errors in order that

corrections may be made before the bound volumes go to press.

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 73-1377

DELTA AIR LINES, INC., PETITIONER

CIVII. AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC.; THE CITY oF EL Paso,

THE EL Paso AIRPORT BOARD & THE EL Paso CHAM-

BER OF COMMERCE; TUCSON AIRPORT AUTHORITY; THE

CITY OF PHOENIX, ARIZONA AND THE PHOENIX CHAM-

BER OF COMMERCE; THE CITIES OF HOUSTON, TEXAS

AND THE HOUSTON CHAMBER OF COMMERCE; THE

CITIES AND CHAMBERS OF COMMERCE OF MIDLAND AND

ODESSA, TEXAS; THE CITY OF SAN ANTONIO & THE

GREATER SAN ANTONIO CHAMBER OF COMMERCE; NA-

TIONAL AIRLINES, INC., INTERVENORS

No. 73-1387

BRANIFF AIRWAYS, INC., PETITIONER

CrviL AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC.; THE Crry oF EL PAso,

THE EL Paso AIRPORT BoarD & EL Paso CHAMBER OF

—

COMMERCE; TUCSON AIRPORT AuTHORITY; THE CITY

OF PHOENIX, ARIZONA AND THE PHOENIX CHAMBER OF

COMMERCE; THE CITIES OF HOUSTON, TEXAS AND THE

Houston CHAMBER OF COMMERCE; THE CITIES &

CHAMBERS OF COMMERCE OF MIDLAND AND ODESSA,

Texas; CITY OF SAN ANTONIO & THE GREATER SAN

ANTONIO CHAMBER OF COMMERCE; NATIONAL AIRLINES,

INC., INTERVENORS

No. 73-1391

TEXAS INTERNATIONAL AIRLINES, INC., PETITIONER

C w AERONAUTICS BOARD, RESPONDENT

HE Crry oF Houston, TEXAS AND THE Houston CHAM-

BER OF COMMERCE; THE CITY OF Et Paso, THE EL

oF SAN ANTONIO AND THE GREATER SAN ANTONIO

CHAMBER OF COMMERCE; NATIONAL AIRLINES, INC.;

MIDLAND AND ODESSA, TEXAS COMMERCE, INTERVENORS

No. 73-1414

EASTERN AIR LINES, INC., PETITIONER

CrviL AERONAUTICS BOARD, RESPONDENT

CoNTINENTAL AIR LINES, INC.; Crry oF Houston, TEXAS

AND THE HousTON CHAMBER OF COMMERCE; CITY OF

EL Paso, EL PASO AIRPORT BOARD AND THE EL Paso

CHAMBER OF COMMERCE; THE CITIES AND CHAMBERS

OF COMMERCE OF MIDLAND AND ODESSA, TEXAS, INTER-

VENORS

No. 73-1449

NATIONAL AIRLINES, INC., PETITIONER

CIVI. AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC.; THE CITY oF HOUSTON,

TEXAS AND THE HOUSTON CHAMBER OF COMMERCE;

City OF EL Paso, EL PASO AIRPORT BOARD, ET AL.;

THE CITIES AND CHAMBER OF COMMERCE OF MIDLAND

AND ODESSA, TEXAS, INTERVENORS

No. 73-1498

AMERICAN AIRLINES, INC., PETITIONER

CIVI AERONAUTICS BOARD, RESPONDENT

City OF Houston, TEXAS AND THE HOUSTON CHAMBER

OF COMMERCE; CONTINENTAL AIR LINES, INC.; EL Paso

Civic INTEREST; THE CITIES AND CHAMBERS OF Co-

MERCE OF MIDLAND AND ODESSA, TEXAS, INTERVENORS

Petitions for Review of Orders of the

Civil Aeronautics Board

Decided October 23, 1973

Robert Reed Gray, with whom James W. Callison and

[Louis] Hayner Kurrelmeyer, were on the brief, for peti-

tioner, No. 73-1377, Delta Air Lines, Inc. Nathaniel P.

Breed, Jr., also entered an appearance for petitioners,

No. 73-1377, Delta Air Lines, Inc.

Andrew T. A. MacDonald, for petitioner in No. 73

1449, National Airlines, Inc., and Intervenor in No. 73-

1377, 73-1887, and 73-1391.

James M. Verner, with whom John L. Richardson and

Stuart F. Pierson, were on the brief, for petitioner in

No. 73-1391, Texas International Airlines.

Ray Nerenberg, with whom Robert N. Duggan, for

petitioner in No. 73-1414, Eastern Air Lines, Inc.

B. Howell Hill, Jr., with whom Patrick F. J. Macrory

and Stephen M. Sacks, were on the brief, for petitioner in

No. 73-1387, Braniff Airways, Inc.

Ky P. Ewing, with whom Alfred V. J. Prather was on

the brief, for petitioner in No. 78-1498, American Air-

lines, Inc.

O. D. Ozment, Deputy General Counsel, Civil Aero-

nautics Board, with whom Richard Littell, General Coun-

sel, Robert L. Toomey, Attorney, Civil Aeronautics Board

and Howard E. Shapiro, Attorney, Department of Jus-

tice, were on the brief, for respondent. R. Tenney John-

son and Warren L. Sharfman, Attorneys, Civil Aero-

nautics Board, also entered appearances for respondent.

Thomas D. Finey, Jr., with whom Lee M. Hydeman,

was on the brief, for Intervenor, Continental Air Lines,

Inc.

Herman F. Scheurer, Jr., and John J. McLaughlin

were on the brief, for intervenor, El Paso Civil Interests.

Albert F. Grisard, for Intervenors The City of Phoenix,

Arizona, The Phoenix Chamber of Commerce and The

Tucson (Arizona) Airport Authority in No. 73-1377.

Robert M. Bechman, for intervenor, The Cities and

Chambers of Commerce of Midland and Odessa, Texas.

Cecil A. Beasley, Jr., and John C. Smuck, were on the

brief, for Intervenor, City of Houston, Texas and Houston

Chamber of Commerce.

Albert F. Beitel and Roger C. Ohlrich, were on the

brief, for intervenor, City of San Antonio and Greater

San Antonio Chamber of Commerce, in Nos. 73-1377,

78-1887 and 73-1391.

Before BAZELON, Chief Judge, LEVENTHAL and RoBIN-

SON, Circuit Judges.

Opinion for the Court filed by Circuit Judge LEVEN-

THAL.

LEVENTHAL, Circuit Judge: Petitioners, six air car-

riers, seek review of the Civil Aeronautics Board’s deci-

sion in the Southern Tier Competitive Non-Stop Investi-

gation (Houston-Miami Phase) by which the Board

| determined that there was a need for nonstop service in

| competition with National Airlines between Miami and

Houston, and selected Continental Air Lines to provide

such service.

Petitioners raise various arguments attacking the pro-

priety of the Board's rulings. We have found little merit

in these arguments, and accordingly do not pause to con-

sider them in any detail. We find, for example, that the

decision of the Administrative Law Judge as adopted by

the Board to the effect that there is a sufficiently large

market to sustain a competitive challenge to National

Airline’s monopoly of the Miami-Houston route to be sup-

ported by substantial evidence. Similarly, we discern no

Orders 73-2-89 (SJ.A. 560); Order 73-5-22 (S.J.A. 702);

Order 73-5-110 (S.J.A. 685).

procedural defect nor deviation from prior decisional

norms in the Board’s selection of Continental. That se-

nental, the only applicant that proposed substantial fare

reductions, a feature found attractive by the Board, of-

fered a mort attractive pattern of Houston-Miami non-

stop frequencies than any of the other applicants, in that

it proposed more (4) and better spaced round trips per

day. The Board noted that Continental’s ability to offer

these advantages in the Houston-Miami market was

ascribable in good measure to its volume of traffic com-

ing into Houston from points west—¢.g., Phoenix, Albu-

querque, San Antonio and El Paso. The Board also took

into account that Continental offered the extra dividend

of more beyond area benefits than those offered by any

of the other applicants, in providing new one-carrier

service to Miami (via the Houston stop) from Phoenix,

Albuquerque and El Paso, and competition for such one-

carrier service in the case of San Antonio.

Finally, the Board found that any disadvantages to the

Continental application were minimal and easily limited.

Without going into detail on these matters, we hold that

the Board’s findings were supported by substantial evi-

dence, and that there has been no substantial showing of

unexplained departure from standard decisional doctrine

or discriminatory and divergent treatment of the various

applicants.

II.

we turn to the challenge presented by Delta Air Lines

in reliance on its claim under the Ashbacker doctrine.’

With Delta challenging Continental, their positions

stand reversed from those occupied when, in 1971, Con-

tinental secured a ruling from this court setting aside

the Board’s 1969 decision concluding that the public con-

2 Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1946).

—

venience and necessity required competitive nonstop

service in the Houston-Miami market and awarding the

route to Delta. Continental Air Lines, Inc. v. CAB, 143

U.S. App. D. C. 330, 443 F.2d 745 (1971).

Delta’s Ashbacker argument derives from the fact that

Continental will be able to combine, or “tack,” its new

Miami-Houston award with its existing Houston-west

route system, so as to operate through flights (via at

least one intermediate stop at Houston) between Miami

and Albuquerque, El Paso, Phoenix, or San Antonio. Ac-

cording to Delta, Continental’s entry into these markets

will preclude Delta from receiving awards which it de-

sires for new authority involving the Albuquerque, El

Paso, Phoenix, San Antonio markets.

Delta insists that its complaint requires review of the

background of CAB’s treatment of airline service in the

southern portion of the United States. This could go all

the way back to the days when single plane service be-

tween California and Florida was achieved only by in-

terchange” flights along the routes of several carriers.

For present purposes, we can begin our historical ap-

proach with the investigation begun by the CAB in 1961

of service then being provided to more than 22 cities lying

in and between Florida and California. Southern Trans-

Continental Service Case, 88 CAB 701 (1961). The

Board’s awards of transcontinental routes to Delta (At-

lanta to Los Angeles/San Francisco) and to National

Airlines (Miami to Los Angeles) contemplated full free-

dom for intermediate stops and protection from compe-

tition on these routes. By 1967, the Board concluded that

changed conditions called for competition on the estab-

lished routes, toward the objective of better service be-

tween the principal city-pairs in the South. Instead of

another general area-wide study the Board decided to

focus on service in 18 primary markets.“

To keep the investigation within manageable bounds”

the Board decided to limit the scope of the case to those

designated markets “rather than institute an area type

proceeding.” Order E-24847 (March 30, 1967). To fur-

ther this aim, it imposed a pre-trial restriction under

which any new award would be in the form of a separate

segment instead of an addition to an existing segment.

(Id. at 3.)

Delta and several other carriers objected to the scope

of the case as structured by the Board and sought to

expand it into a much broader nroceeding. Delta, in

particular, requested, inter alia, the consolidation of ap-

plications for (1) a new route from San Francisco and

Los Angeles to Miami via numerous intermediate points,

including Phoenix, Albuquerque, El Paso, Dallas, Hunts-

ville, Atlanta, and Tampa, and (2) a second new segment

between the same west coast points and Miami via a

somewhat different set of intermediate cities, including

8 The 18 markets directly at issue in Southern Tier were:

Atlanta-Dallas/Fort Worth

Dallas/Fort Worth-Los Angeles/Long Beach

-New Orleans

San Francisco/Oakland

-Tampa/St. Petersburg/Clearwater

Houston-Los Angeles/Long Beach

-San Francisco/Oakland

Miami/Fort Lauderdale-New Orleans

Dallas / Fort Worth

San Franeisco/ Oakland

ouston

Tampa / St. Petersburg / Clearwater

New Orleans-San Franeisco/ Oakland

Tampa / St. Petersburg / Clearwater

Phoenix, El Paso, Albuquerque, Dallas, San Antonio,

Houston, New Orleans and Tampa.

By Order E-25720 (Sept. 21, 1967), the Board rejected

all attempts to broaden Southern Tier. It found that any

such expansion “would start a chain reaction” trans-

forming the proceeding into a massive area investigation

encompassing a review of the needs of hundreds of mar-

kets in the southern tier states. (Id. at 2, S.J.A. 11).

The Board therefore refused to consolidate Delta’s appli-

cations except to the extent they conformed to the exist-

ing scope of the case. It also rejected Delta’s related

claim that, under Ashbacker, a refusal to consolidate its

applications would require the Board to impose single-

plane restrictions on the operations of other applicants.

If these contentions were true there would be no

geographical limit to a proceeding. We do not find

these or the extensive pretrial restrictions proposed

by Delta to be necessary or desirable for imposition

prior to hearing. Neither can we enlarge the pro-

ceeding’s scope because certain carriers may have

more beyond-area traffic advantages than others

with respect to some segments to be considered. Dif-

fering route patterns afford carriers varying ad-

vantages in the service they can offer in any pro-

ceeding and it would be impractical to attempt to

fashion one in which all were equal. (Order E-25720,

p. 3 (S. J. A. 12).)

However, the Board noted that the parties remained

free to urge the need for more stringent restrietions

during the hearing and expressly invited them to submit

evidence to prove mutual exclusivity. (Ibid.)

Delta (along with National) then moved for judicial

review of the Board’s instituting orders. It argued that

the Board had violated Ashbacker by including the is-

sues of transcontinental authority on a nonstop basis or

via one-stop at certain southern tier cities (New Orleans,

Houston, Dallas), while excluding applications for one-

stop transcontinental routes via other southern tier points

(including Phoenix, Albuquerque, San Antonio and Hunts-

ville).

In National Airlines v. CAB, 129 U.S.App.D.C. 180,

392 F.2d 504 (1968), this court dismissed Delta’s peti-

tion, finding that the Board was not required as a matter

of law to consolidate the carrier’s excluded applications.

We took cognizance of the Board’s standard practice

of permitting parties to make a factual showing of eco-

nomic mutual exclusivity between such excluded appli-

eations and the route issues within a proceeding.

Our 1968 National Airlines decision is of significance

because in a context almost identical to that presented

here‘ this court there made clear that the Ashbacker

rule is basically a rule of fairness in comparative con-

sideration, that it must be applied with common sense and

in a practical fashion, that it cannot be applied in the

same way to complex air route questions as to tele-com-

munications proceedings, and that Ashbacker cannot be

applied so as to impair or eradicate the considerable

measure of discretion that the Board must retain in de-

fining the scope of air route cases.

structure its proceedings so as to equalize the beyond

market capabilities of all applicants to a route case. As

this court observed in National Airlines v. CAB:

Preexisting route intricacies render it almost im-

possible for the Board to tailor its proceedings so as

to equalize the advantages, and disadvantages, with

which each applicant enters a comparative proceed-

ing. The maturing and sophisticated route structure

and development preclude a simplistic vindication of

Ashbacker claims.

Even though Delta’s Ashbacker claim was dismissed as pre-

mature rather than conclusively rejected.

392 F.2d at 508, 129 U.S. App. D.C. at 184.

The rejection in the National Airlines case of any

simplistic presentation of Ashbacker claims has full vi-

tality for that aspect of the opinion that upheld the

Board’s approach in refusing to transform Southern Tier

into a massive area investigation. This court said:

Petitioners claim that the exclusion of San An-

tonio, Tucson and El Paso from any of the scheduled

proceedings deprives them of Ashbacker rights be-

cause petitioners have applied for transcontinental

routes with intermediate stops at these excluded

cities. American Airlines, for example, presently

serves these excluded cities on routes extending’ from

Houston and Dallas to the West Coast. By acquir-

ing Miami-Houston and Dallas authority in Southern

Tier, American would have a transcontinental route

that would, say petitioners, economically exclude the

applications petitioners have filed for similar au-

thority.

We think this situation is analogous to that in

Eastern Airlines, Inc. v. Civil Aeronautics Board.

There Northwest applied for Detroit-Miami rights

which Eastern already had, and the Board scheduled

this service for investigation. Eastern sought expan-

sion of this hearing to include its application for

Detroit-West Coast rights already held by North-

west. Eastern contended that this was required by

Ashbacker since a grant to Northwest would de

facto give it West Coast-Detroit-Miami rights, and

that if Eastern were not then given an opportunity

to attain the same transcontinental route by com-

pleting its missing segment, it could not as an eco-

nomic matter justify a second carrier on that route.

We held that Eastern could not, in the name of

Ashbacker, extend a geographically limited investi-

gation “into a massive consideration of the whole of

American air transportation.” (Footnotes omitted.)

129 U.S.App.D.C. at 186, 392 F.2d at 508.

The thrust of Delta’s present Ashbacker claim to this

court is that the CAB has denied Delta a right to a fair

hearing because it has refused to hear Delta’s applica-

tion for authority to serve an area, has avowedly struc-

tured the proceedings so as to avoid area considerations,

and has nevertheless granted the route in issue to Con-

tinental on the basis of the service it can render to the

same area. Delta says that the decision before us for

review violates this principle because the Board has se-

lected Continental because of beyond-area benefits to the

“excluded points.”

It would serve no useful purpose for this decision to

become entangled in all of the details of Delta’s objec-

tions, and what the Board counsel identifies as its change

in the service it really proffers so far as the excluded

ints are concerned. It suffices to say that the Board

decision does not rest in dominant degree upon the be-

yond-area benefits to the “excluded points.” They were

taken into account as a modest aspect of the entire case.

The Board, however, remained focused on service between

Houston and Miami and did not, fairly speaking, con-

vert this into an area case which turned on determina-

tion of the service to and from excluded points, or any

determination of the need for such service or the carrier

best qualified to give such service.

It is true that the Board did give consideration to

traffic generated at the excluded points when it came to

measure the quantity of traffic between Houston and

Miami—for the purpose of appraising the feasibility and

realism in Continental’s proffer as to Houston-Miami

service, and of appraising the quantity and quality of

the Houston-Miami service proposed by Continental. But

the focus was on the Houston-Miami segment, even though

the CAB traditionally views proposals for any particular

segment not with tunnel vision but rather with a pe

—

ripheral vision that takes into account the support (or

diversion) ascribable to nearby service.

In sum, Delta’s Ashbacker claim rests on the fallacy

that Continental was selected for its ability to serve the

needs of the excluded cities whereas it was actually se-

lected upon evaluation of the Houston-Miami market, its

need for service, and the kind of service in that market

proffered by Continental, including the service made

possible by Continental’s backup support—for well

spaced round trips daily at fare reductions, and all of

the other items discussed above.

Delta was given the opportunity to make a showing

of mutual exclusivity that Ashbacker contemplates. But

that did not require putting its applications on an equal

par with the backup service in fact available from Con-

tinental’s existing traffic. As already noted, pre-existing

certificates do give an advantage to certain applicants

for a new segment, but that is not inherently unfair.

Nor can we open the door to an equalization approach

that would encourage all kinds of defensive route appli-

cations. The Board must act realistically in terms of

existing route identification and business patterns.

The four members of the Board were in agreement

in denying the Ashbacker claim in Delta’s petition for

reconsideration, and we are in agreement in rejecting

its petition for review.

III.

Various parties claim that route restrictions should

have been imposed upon Continental to protect the losing

applicants against excessive diversion of traffic. They

claim inconsistency between the Board’s decision not to

impose restrictions (Order 73-2-89 p. 11-12 (S.J.A. 571-

72); (Order 73-5-22 p. 13 (S.J.A. 714) in order to pro-

tect competitors from excessive diversion and its qualifi-

cation of the award to Continental by a two-stop require-

ment of any transcontinental route by the carrier along

the southern tier (Order 73-2-89 p. 4 (S. J. A. 564). We

discern no inconsistency. The purpose of the two- stop

limitation upon Continental is to “preserve for the Board

maximum decisional flexibility” in awarding a new trans-

continental route, already in the hearing process, by as-

suring that Continental did not become a substantial par-

ticipant in Miami-Los Angeles traffic. Id. In no way

did the Board intimate that these restrictions were being

used to protect certain of the applicants from diversion.

In fact, the Board found that the award of the Miami-

Houston route to Continental would involve only mini-

mal diversion. (Order 73-2-89 pp. 11-12 (S. J. A. 571-

72).

Upon reconsideration, requests for operating restric-

tions were pressed more forcefully. Petitioners here

assert that settled practice entitles carriers to defer their

arguments on route operating restrictions until the Board

has made its award to one of the competing applicants.

We see no valid foundation to such a claim of entitle

ment. Typically, all parties are aware of what routes

are being sought and by whom. They can argue, possi-

bly in the alternative, that if such routes are granted

operating restrictions will be necessary to prevent undue

diversion. Indeed, it would seem appropriate that the

Board should have before it the argument as to amount

of restriction that would be required as to any particular

carrier so that it could consider whether to assume that

burden in making such an award.

Finally, we endeavor to put to rest two erroneous

theories of proper Board procedure. American Airlines

protests the failure of the Board to give reasons why it

—

did not award the route on the basis of a “net-benefit”

formula propounded by American. No such burden can

be put on an agency. Reasoned decision making demands

that an agency articulate the standards upon which it

bases it awards. The Board did so hereby expressly

adopting the Administrative Law Judge’s Initial Deci-

sion, which contained an explanation of the ten carrier

selection factors. (Order 73-2-89 p. 1 (SJ.A. 561);

(Initial Decision of Examiner Wm. H. Dapper pp. 20-21

(S.J.A. 498-99). The agency had sufficiently indicated

its general approach in terms of the factors that were

taken into account. This necessarily entailed judgment

on the part of the CAB in its heft of the various factors

in any particular case. It was not required—indeed, it

may well have been unable—to produce a quantifying

formula as the definition of its approach. It may be

said, indeed, that American’s formula, oversimplified, is

merely that the less service is offered, the less diversion

will result. The Board, however, although required to

consider diversion, was entitled to go beyond the appli-

cant that caused the least diversion and select the car-

rier that proffered the most service to the public.

National Airlines asserts that it was entitled to a de-

termination of its petition for reconsideration by a ma-

jority of the Board, and that delay until a five-man board

came into being was consequently required when the

Board split 2-2 on its petition for rehearing. We find

no merit in this point. In Braniff Airways v. CAB,

126 U.S.App.D.C. 399, 379 F.2d 453 (1967), we found

a Board duty to consider a matter upon rehearing where

the application for reconsideration identified a funda-

mental defect in the Board’s order as originally entered.

For reasons already set forth, that is not the condition

that confronts us here. Where the Board’s order is

without such a gross defect, its initial decision is or-

dinarily to be taken as its authoritative action. The

—

Board has the legal authority to decide upon reconsidera-

tion whether to adhere to its initial conclusion or to

amend or reverse it; but a party has no right to recon-

sideration by more than quorum of the Board. Where

that quorum refuses to take action to overturn an order

valid when originally entered, the administrative process

is terminated.

The petitions to review are denied, and the Board’s

order stands affirmed.

So ordered

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1973

No. 73-1377, 73-1387,

73-1391, 73-1414,

73-1449, 73-1498

[Filed Nov. 20, 1973, United States Court of Appeals for

the Distriet of Columbia Cireuit, Hugh E. Kline, Clerk!

DELTA AIR LINES, INC., Er AL. PETITIONER

CIVII. AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC., THE CITY OF EL PASO,

THE EL Paso AlRrORT BOARD & THE EL Paso CHAM-

BER OF COMMERCE, TUCSON AIRPORT AUTHORITY, THE

CITY OF PHOENIX, ARIZONA AND THE PHOENIX CHAM-

BER OF COMMERCE, THE CITIES OF HOUSTON, TEXAS

AND THE HousTON CHAMBER OF COMMERCE, THE

CITIES AND CHAMBERS OF COMMERCE OF MIDLAND AND

OpEssA TEXAS, THE CiTY OF SAN ANTONIO & THE

GREATER SAN ANTONIO CHAMBER OF COMMERCE, NA-

TIONAL AIRLINES, INC., INTERVENORS

Before: BAZELON, Chief Judge, LEVENTHAL and Ro-

INSON, Circuit Judges.

ORDER

It is ORDERED by the Court sua sponte that the opin-

ion of October 23, 1973 in the above entitled cases is

amended as follows:

Page 12, second paragraph, omit the following:

“They were taken into account as a modest aspect

1 the entire case. The Board, however, remained

Substitute the following:

“That is to say, this is not a case where Continental

had no advantage over the competing carriers in

terms of Houston-Miami service, and was awarded

the route because of the beyond-area benefits. The

Board was primarily focused

Per Curiam

—

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

SEPTEMBER TERM, 1972

No. 73-1377

[Filed Oct. 23, 1973, United States Court of Appeals for

the District of Columbia Circuit, Hugh E. Kline, Clerk]

DELTA AIR LINES, INC., PETITIONER

CivIL AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC.; THE CITY OF EL PASO,

THE EL Paso AIRPORT BoA D & THE EL Paso CHAM-

BER OF COMMERCE; TUCSON AIRPORT AUTHORITY; THE

CITY OF PHOENIX, ARIZONA AND THE PHOENIX CHAM-

OF COMMERCE; THE CITIES OF HOUSTON, TEXAS

AND THE HOUSTON CHAMBER OF COMMERCE; THE

CITIES AND CHAMBERS OF COMMERCE OF MIDLAND AND

OpESSA TEXAS; THE CITY OF SAN ANTONIO & THE

GREATER SAN ANTONIO CHAMBER OF COMMERCE; Na-

TIONAL AIRLINES, INC., INTERVENORS

No. 73-1387

BRANIFF AIRWAYS, INC., PETITIONER

CW. AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC.; THE Crry OF EL PASO,

Tue EL Paso Amrport BoarD & EL Paso CHAMBER OF

COMMERCE; TUCSON AIRPORT AuTHorITY; THE CITY

or PHOENIX, ARIZONA AND THE PHOENIX CHAMBER OF

COMMERCE; THE CITIES OF HOUSTON, TEXAS AND THE

HousToN CHAMBER OF COMMERCE; THe Cites &

CHAMBERS OF COMMERCE OF MIDLAND AND ODESSA,

Texas; CITY or SAN ANTONIO & THE GREATER SAN

ANTONIO CHAMBER OF COMMERCE; NATIONAL AIRLINES,

INC., INTERVENORS

No. 73-1391

TEXAS INTERNATIONAL AIRLINES, INC., PETITIONER

CrviL AERONAUTICS BOARD, RESPONDENT

THE CiTy OF Houston, TEXAS AND THE HousToN CHAM-

BER OF COMMERCE; THE CITY OF EL Paso, THE EL

Paso AIRPORT BOARD AND THE EL Paso CHAMBER OF

COMMERCE; CONTINENTAL AIR LINES, Inc.; THE CITY

oF SAN ANTONIO AND THE GREATER SAN ANTONIO

CHAMBER OF COMMERCE; NATIONAL AIRLINES, INC.;

MIDLAND AND ODESSA, TEXAS COMMERCE, INTERVENORS

— —

No. 73-1414

EASTERN AIR LINES, INC., PETITIONER

Crvi AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC.; Crry OF HOUSTON, TEXAS

AND THE HousTON CHAMBER OF COMMERCE; CITY OF

EL Paso, EL Paso AIRPORT BOARD AND THE EL Paso

CHAMBER OF COMMERCE; THE CITIES AND CHAMBERS

OF COMMERCE OF MIDLAND AND ODESSA, TEXAS, INTER-

VENORS

No. 73-1449

NATIONAL AIRLINES, INC., PETITIONER

CIVIL AERONAUTICS BOARD, RESPONDENT

CONTINENTAL AIR LINES, INC.; THE CITY OF HOUSTON,

TEXAS AND THE HOUSTON CHAMBER OF COMMERCE;

Ciry oF EL Paso, EL Paso AIRPORT BOARD, ET AL.;

TRE CITIES AND CHAMBER OF COMMERCE OF MIDLAND

AND ODESSA, TEXAS, INTERVENORS

No. 73-1498

AMERICAN AIRLINES, INC., PETITIONER

Cv. AERONAUTICS BOARD, RESPONDENT

City oF Houston, TEXAS AND THE HOUSTON CHAMBER

oF COMMERCE; CONTINENTAL AIR LINES, INC.; EL Paso

Cryn. INTEREST; THE CITIES AND CHAMBERS OF COM-

MERCE OF MIDLAND AND ODESSA, TEXAS, INTERVENORS

PETITIONS FOR REVIEW OF ORDERS OF THE

CIVIL AERONAUTICS BOARD

Before: BAZELON, Chief Judge, LEVENTHAL and Ros-

INSON, Circuit Judges.

JUDGMENT

These causes came on to be heard on Petitions for Re.

view of an Order of the Civil Aeronautics Board and

were argued by counsel. On consideration of the fore-

going, it is

ORDERED AND ADJUDGED by this Court that the

petitions to review are denied and the Board’s order is

affirmed, in accordance with the opinion of this Court

filed herein this date.

Per Curiam

For the Court

/s/ Hugh E. Kline

HucH E. KLINE

Clerk

Date: October 23, 1973

Opinion for the Court filed by Circuit Judge Leventhal.

—

APPENDIX C

UNITED STATES OF AMERICA

CIVIL AERONAUTICS BOARD

WASHINGTON, D. C.

DOCKET 18257

SOUTHERN TIER COMPETITIVE NONSTOP INVESTIGATION

(Houston-Miami Phase)

Decided: February 23, 1973

Continental Air Lines’ certificate for route 29 amended

by adding a new segment between the terminal point

Houston, Tex., and the terminal point Miami-Fort

Lauderdale, Fla., subject to conditions.

Applications of American Airlines, Braniff Airways, Del-

ta Air Lines, Eastern Air Lines, and Texas Interna-

tional Airlines denied, and investigation terminated.

APPEARANCES:

Same as in the administrative law judge’s initial de-

cision and, in addition, the following:

Roy Nerenberg for Eastern Air Lines.

James F. Bell for Pan American World Airways.

Charles W. Pope for the City and Chamber of Com-

merce of San Antonio, Tex.

F. M. Dunlevy, Jr., for the City and Chamber of Com-

merce of Oklahoma City, Okla.

Roger C. Ohlrich for the City and Chamber of Com-

merce of Albuquerque.

OPINION

- «

BY THE BOARD:

This proceeding involves a determination of the need

for competitive nonstop service in the Houston-Miami

market and, if required, which carrier should be selected

to provide the service. This phase of the Southern Tier

investigation was remanded to the Board by mandate of

the United States Court of Appeals for the District of

Columbia Circuit. Continental Air Lines, Inc. v. CAB,

443 F.2d 745 (D.C. Cir. 1971).

In an initial decision, attached as an appendix, Ad-

ministrative Law Judge William H. Dapper concluded

that there is a need for competitive nonstop service and

that Continental Air Lines should be selected to provide

the service. The Board exercised its right of discre-

tionary review, briefs to the Board have been filed, and

oral argument has been heard.“ Upon consideration of

the matters presented, we have decided to affirm Judge

Dapper’s disposition of the issues with one modifica-

tion. We shall impose a two-stop restriction on flights

1 Briefs to the Board were filed by Braniff, Continental, Delta,

Eastern, National, Texas International, and the City of San Antonio

and the Greater San Antonio Chamber of Commerce. American

Airlines; the City of Albuquerque, et al.; the City Airport Board

and Chamber of Commerce of El Paso; the City and Chamber of

Commerce of Houston; the City, Board of City Development and

Chamber of Commerce of Lubbock; the Greater Miami Traffic As-

sociation; Midland/Odessa Cities and Chambers of Commerce; the

City and Chamber of Commerce of Phoenix; and the Tucson Airport

Authority adopted their briefs to the administrative law judge as

their briefs to the Board. Pan American and Western Air Lines

filed briefs on the sole issue of the need for a restriction against

one-stop Los Angeles-Miami service.

operated between Los Angeles and Miami. Accordingly,

except to the extent modified herein, we adopt his findings

and conclusions as our own.

Need for Nonstop Competition

We agree with Judge Dapper’s conclusion that the

Houston-Miami/Ft. Lauderdale market has an affirmative

need for competitive nonstop service.

Traffic over this 960-mile segment, which totalled about

120,000 true O&D and interline connecting passengers in

1971 (or nearly 330 per day), is presently served by

National, the only certificated incumbent, and by Delta,

under a pendente lite exemption. (As we have repeated-

ly indicated, however, no weight will be given Delta’s

exempted operations as a factor favoring its selection

for certificated authority here. See Order 71-3-34, March

5, 1971)

In our view, the record clearly establishes a need for

competition to meet the present and potential needs of

Houston-Miami passengers, and to assure the continued

growth and development of the market. The record also

shows that the Houston-Miami market is sufficiently

large and strong to support competition—a finding that

even National does not seriously dispute.

In 1969, when the Board initially considered the issue,

it found the basic deficiency in National’s Houston-Miami

services to be the carrier’s failure to develop the market

aggressively and, in particular, to provide a sufficient

level of nonstop frequencies. At that time, National pro-

vided only a single daily westbound nonstop flight for

Miami-Houston passengers. With Delta in the market,

National has increased its nonstop operations slightly

to one daily round trip, but has continued to concen-

trate on flights making one or more intermediate stops

between Miami and Houston. Despite this fact, the mar-

ket has demontrated its responsiveness to nonstop com-

petition by expanding significantly between 1969 and

1971, in the face of a general lag in traffic growth

throughout the country. Judge Dapper estimated that

with continued competition Houston-Miami would gener-

ate more than 150,000 passengers (well over 400 per

day) in 1973, the forecast year.

National asserts that, as a monopoly carrier, it would

schedule only two daily Houston-Miami nonstop round

trips, one fewer

than the market now receives. We con-

sider this an unimpressive level of nonstop frequencies

for a long-haul market of Houston-Miami’s size. More-

over, apart from any specific service pattern National

would offer in the immediate future as a monopoly car-

rier, we have serious doubts about whether the incum-

bent can be expected to respond effectively to the long-

range demands of Houston-Miami traffic. Our concern

is grounded on the fact that in the absence of competi-

tion, National has a far greater incentive to route Hou-

ston-Miami passengers over New Orleans, thereby lending

important beyond support to its services in the larger

and highly competitive Houston-New Orleans and New

Orleans-Miami markets. (The latter generated 287,000

and 129,000 O&D and connecting passengers, respectively,

in 1971). Under the circumstances, we find that the

public convenience and necessity require competitive non-

stop service to afford Houston-Miami passengers a com-

plete, well balanced pattern of nonstop schedules and to

safeguard the continued growth of the market.

In this connection, we are not persuaded by National’s

contentions that the special characteristics of the Houston-

Miami market, with its substantial component of tourist

traffic, make frequent nonstop flights evenly spaced

throughout the day unnecessary. For example, National

claims that morning departures from Miami—which else-

considered prime-time—are unpopular,

where would be

and cites as evidence low load factors experienced on

National’s and Delta’s morning nonstops between Miami

and Houston. However, the probative value of this ex-

perience is undermined by the fact that the two carriers’

morning nonstops were closely bunched—i.e. scheduled

from 15 to 40 minutes apart. As a result, the low load

factors on these flights do not, standing alone, demon-

strate that morning departures at Miami are unattrac-

tive. Indeed, an examination of current schedules shows

a substantial number of such morning departures in nu-

merous markets, some not notably different from the one

at issue in any relevant way (e. g., Miami-Dallas, Miami-

New Orleans) In short, the record does not support the

thesis that Houston-Miami’s needs for nonstop competi-

tion should be minimized or assessed differently from the

service needs of similar markets.

Carrier Selection

Having found a need for competitive nonstop service

between Houston and Miami, we affirm Judge Dapper’s

selection of Continental to provide this service. How-

ever, we will modify his determination in one respect,

by imposing a two-stop restriction on Continental’s au-

thority between Miami and Los Angeles. While we do

not suggest that such a restriction is mandated by the

Ashbacker doctrine, we have decided to adopt it on policy

grounds. Specifically, we believe that a two-stop limita-

tion will effectively assure that Continental does not be-

come a substantial participant in Miami-Los Angeles

traffic and will thus preserve for the Board maximum

decisional flexibility in the Miami-Los Angeles Competi-

tive Nonstop Case, now in the hearing process. More-

over, Continental has not proposed one-stop Miami-Los

Angeles service and should therefore not be hampered

by our restriction.

Our choice of Continental for a Houston-Miami award

is predicated primarily on the fact that it will bring

greater service benefits than any other applicant to the

primary market and offer superior beyond-area advant-

ages as well. At the same time, we believe that Con-

tinental’s proposal will not seriously harm any other

carrier.

When the Board in the original phase of the case

selected Delta rather than Continental for a Houston-

Miami award it did so largely on the basis of broad

considerations of the overall balance and health of the air

transportation industry as a whole. It thus expressed

concern, on the one hand, that (1) Delta, as one of the

two carriers with an existing southern transcontinental

route system, faced far more diversion than did Con-

tinental in the Southern Tier and other cases, and, on

the other, that (2) Continental had received substantial

new route authority, sufficient for it “to digest at one

time.” Order 69-7-135, at p. 45.

The experience of the intervening 314 years since the

Board’s earlier decision leads us to place less emphasis

on such industry balance factors in selecting a Houston-

Miami competitive carrier. First, the balanced complex

of route awards made in the original Southern Tier pro-

ceeding has in any case been altered by the fact that an

award of the major Miami-Los Angeles route, initially

granted to Northeast, is once more under consideration

and could conceivably be made to one of the applicants

here (all of which, except TXI, are also applicants for

Miami-Los Angeles authority). Next, notwithstanding

the diversionary impact of the Board’s 1969 awards,

Delta has retained its position as one of the industry’s

most profitable airlines, and has recently obtained major

new route opportunities through its merger with North-

east.

Similarly, industry balance or carrier strengthening

considerations can be said to favor only two of the four

remaining applicants—Texas International and, to a

lesser extent, Braniff—over Continental. For reasons

detailed below, however, we believe that an award to

Texas International would be inappropriate. In the

case of Braniff, a financially sound and profitable trunk-

line, we cannot agree that the somewhat smaller size

of its route system under most indicia should be accorded

more weight than Continental’s advantage in public

benefits.

Also, Continental has had ample time to digest its

earlier route awards and, by and large, has done so

successfully. Several parties, however, point to the one

exception, the Dallas-Los Angeles market, awarded to

Continental in the original phase of this case. While

the carrier promptly instituted operations in this market,

it was forced to withdraw its services about two years

later. We agree with Judge Dapper that Continental’s

Dallas-Los Angeles experience does not indicate the air-

line would find it difficult to absorb a Houston-Miami

route, or that it would be less than an effective competi-

tor in the market. Indeed, Continental’s problem in the

Dallas-Los Angeles market was not essentially attributa-

ble to absorption difficulties (it had strong identity at

both terminals), but to the fact that it was certificated

during a traffic recession period against two incum-

bents, each with substantial beyond support that Conti-

nental lacked. By contrast, the carrier has significant

back-up traffic support for its Houston-Miami proposal,

faces only a single competitor, and would inaugurate its

services in a market which has shown steady growth

through the recent nationwide traffic lag.

1The remaining applicants, American and Eastern, two of the

industry’s Big Four, are considerably larger than Continental.

For all these reasons, our choice of a Houston-Miami

competitor, like Judge Dapper’s, turns on the traditional

carrier selection factors directly applicable to the market

at issue rather than on wider industry balance consid-

erations.

cision, pp. 12-16.

At the outset, we are prepared to assume for the pur-

poses of this opinion that all applicants, other than

Texas International, can be expected with reasonable

assurance to operate their proposals at a profit.’ The

relative profitability of their various operations is there-

fore not nearly as important a decisional factor as the

public benefits they can provide.

As we have observed, Continental can offer a more ex-

tensive pattern of Houston-Miami nonstop frequencies—

four daily round trips—than any other carrier. It can

support this level of service because of its substantial

2 However, we find Judge Dapper’s adjustments to these carriers’

various forecasts to be reasonable.

These are Judge Dapper’s estimates. Continental forecasts a

somewhat lower total of first single-plane passengers—30,000. Either

_—

petitive than to first single- plane service, Continental’s

Miami-San Antonio flights represent a substantial public

interest factor in this market, where more than 30 per-

cent of the traffic moves on interline connecting flights.

Finally, Continental would provide first single-carrier

service to nearly 4,700 beyond passengers and additional

on-line connections to numerous others.

Several parties, particularly Delta, argue that while

Continental proposes the greatest quantity of Houston-

Miami service, the primary market’s needs can be better

met by a carrier operating a more limited pattern of

turn-around nonstop frequencies tailored to the travel

demands of local passengers. While the turn-around

services proposed by Delta and Eastern may well repre-

sent valuable public benefits, we find them outweighed,

on balance and under the factual circumstances before us,

by Continental’s ability to offer more Houston-Miami non-

stop frequencies and substantially superior beyond bene-

fits. We note in this regard that the principal defici-

ency in National’s Houston-Miami service has been its

failure to provide a full, balanced pattern of nonstop

flights because of a greater incentive to move Houston-

Miami traffic over intermediate points; however, the

market has not seriously suffered other shortcomings, no-

tably high load factors, which often occur when a small-

er market is served as part of a long-haul route. We

are confident that Continental can correct this existing

deficiency by providing for Houston-Miami passengers

the frequent, well-timed nonstops it has in fact proposed.

Moreover, considering the substantial size and length of

the Houston-Miami route, we find no support for specula-

forecast supports our finding that Continental would offer the most

beyond benefits. In this connection, we reject Delta’s claim that

several of Continental’s proposed flights would violate certain condi-

tions in the latter’s certificate. See I.D. pp. 58-61. Delta’s Ash-

backer argument is discussed below, pp. 12-15. .

* See p. 1, supra.

tion that Continental would subordinate its needs to those

of other markets.

Finally, an evaluation of Texas International’s appli-

cation involves certain additional considerations. The

local service airline’s proposal is second only to Conti-

nental’s in overall primary market and beyond-segment

benefits. In view of its obviously greater need for

strengthening, TXI might thus at first glance seem a

reasonable choice for an award here. On the whole,

however, its selection at this time involves unacceptable

financial risks for the carrier and, in turn, brings into

question its ultimate ability to meet Houston-Miami's

needs for effective competition. Specifically, while TXI

has forecast an operating profit of about $1 million for

its proposal (about $25,000 short of a full return on

investment after taxes), its estimate that it would cap-

ture nearly 40 percent of Houston-Miami traffic in com-

petition with a strong trunkline incumbent seems un-

duly optimistic, as Judge Dapper found. This is espe-

cially true since TXI has no identity on the east coast

and would have to open an expensive new station at

Miami. The unusual expenditure of energy and resources

that would be necessary for the carrier to absorb this

new route and open the new Miami station are not ade-

quately reflected in its costing approach based on its

historic unit expenses. Equally important, we cannot

overlook TXI’s severe losses in recent years and the fact

that it has recently undergone a financial reorganiza-

tion. In fact, these difficulties were directly responsible

for a delay of nearly five months in the carrier’s imple-

mentation of the Houston-Mexico City authority it re-

ceived in the Houston-Monterrey-Mezxico City Case, Order

72-5-61, caused in part by the expense involved in open-

ing a new Mexico City station. Under the circumstances,

we do not find this an appropriate occasion to award

Texas International a major, long-haul route that would,

—

at the very least, strain its resources when it has barely

begun to absorb its new Mexico City authority.

We appreciate, of course, that Continental, too, has

little identity in the East and would—unlike Delta,

Braniff or Eastern—be required to open a new Miami

station. Continental's position, however, is hardly com-

parable to TXI’s. In the first place, of course, its finan-

cial strength and equipment resources are far greater.

Furthermore, Continental’s forecast (unlike TXI’s) has

expressly taken into account its preoperating and pro-

motional expenses, totaling $850,000, for the first year

of operations (i. e., it has not amortized these expenses

over a longer period, an approach which would have sub-

stantially increased its profits). For these reasons, and

because of its sizeable beyond area back-up traffic sup-

port, Continental should be able to overcome its lack of

east coast identity without undue difficulty.

| Having determined that Continental could offer more

significant public service benefits than any other carrier,

we find that its advantage in this regard is not vitiated

by the diversionary impact of its proposal. In the pri-

mary market, we estimate that Continental would divert

about 12,000 more passengers from National than would

Delta (which proposes only two daily turn-around trips),

or about $730,000 in additional gross passenger revenues.“

Significantly, National would retain more passengers in

1973 than it carried in 1971 in competition with Delta,

and about the same number as it attracted in fiscal 1969,

its last full year as the monopoly incumbent. The only

other carrier that could face significant diversion is

Eastern, which would lose approximately $1.5 million in

This computation assumes a 56-percent market share for Na-

tional in competition with Delta (the historic 1971 breakdown)

and a 48-percent share in competition with Continental (per I.D.

2 bof It also employs National’s yield figures reported in exhibit

-1R-2.

gross revenues in the Miami-San Antonio market as a

result of Continental’s introduction of competitive one-

stop flights. As Judge Dapper found, use of growth off-

set methodology would reduce the diversion figure to

about $430,000.

For carriers such as National and Eastern, diversion

levels of this order are relatively modest, in our judg-

ment, and are outweighed by Continental’s superior pub-

lie service benefits for passengers in the Houston-Miami

market and numerous beyond markets, including Miami-

San Antonio.

In addition, as Judge Dapper observed, Continental’s

proposal would not have a significant impact on any

other carrier. Certain applicants—TXI and, to a lesser

degree, Braniff—have claimed that Continental could

potentially divert substantial revenues from them if it

decided to operate services which it has not in fact pro

posed. We consider these contentions too speculative to

warrant decisive consideration. Moreover, as to Braniff's

diversion claim, we believe that even if Continental were

to operate single-plane flights between Miami and Denver

(a service it has not proposed) its diversionary impact

on Braniff would not be so substantial as to affect our

decision. It seems clear, however, that Continental’s

actual proposal would not seriously harm either Braniff

or Texas International. See LD. 51-54.

Finally, our colleague in dissent disputes the econom-

ies of our competitive award on the basis of certain

“load-factor” assumptions. We must, respectfully, differ

with his views. Specifically, the dissent’s computations

inelude only local and interline connecting passengers in

the Houston-Miami market and wholly disregard the ex-

tensive pools of on-line support traffic available to Con-

¢TXI has also claimed substantial diversion in markets where

its existing participation is minimal.

—

tinental west of Houston. In effeet, this approach seems

to ignore the very factor which has led us to select

Continental—namely, the substantial beyond area traffic

support that will enable the carrier to provide more

Houston-Miami frequencies and greater beyond benefits

than any other applicant.

Other Considerations

Lastly, we turn to Delta’s contention that Ashbacker

considerations effectively foreclose Continental’s selection

for a Houston-Miami award. Specifically, Delta argues

that the Board, having refused to consolidate its appli-

cations for nonstop rights in the Miami-San Antonio/

El Paso/Phoenix markets, cannot now permit Continental

by tacking to obtain one-stop single-plane authority in

the same markets. Conversely, Delta urges that an award

to Continental, restricted to prohibit single-plane service

in the affected beyond-markets, could not be supported

under the Board’s carrier selection standards. We are

not pursuaded by Delta’s contention.

Delta has already presented variations of its Ashbacker

claim to the United States Court of Appeals for the

District of Columbia Circuit. Thus, in National Airlines

v. CAB, 392 F. 2d 504 (D.C. Cir. 1968), the Court,

inter alia, rejected the carrier’s argument that the Board

was required to accord comparative consideration to its

Miami-San Antonio/ El Paso/Phoenix applications. Delta

now claims that while the Board was not required to

consolidate its nonstop applications, it cannot now author-

ize Continental to offer single-plane service in the same

markets.“ We disagree.

In fact, Delta has also presented this argument to the Court.

When Continental appealed our decisions in the original Southern

Tier and Dallas-Phoenix cases to the court, Delta defended the

Board’s determination in part by raising the same Ashbacker

grounds it advances here—namely, that Continental’s selection in

In the first place, Delta has not established that Con-

tinental’s single-plane flights between Miami and San

Antonio, El Paso and Phoenix and its own application

for nonstop rights in each of these markets are mu-

tually exclusive as a matter of law or economic fact.

In at least two of these markets, Miami-El Paso and

Miami-Phoenix, existing traffic flows (about 5,000 and

14,000 passengers, respectively, in 1971) are 80 small

that the Board is not likely to approve a nonstop award

regardless of Continental’s presence. In the somewhat

larger Miami-San Antonio market, (with 22,000 pas-

sengers in 1971) Delta would in any event have to con-

tend with the presence of Eastern, which operates one-

stop service and carriers more than 80 percent of the

single-carrier traffic. Equally important, in the event

the Board decided that the public convenience and neces-

sity required nonstop service in any of these markets,

Continental’s proposed one-stop, two-stop and three- stop

flights would not as an economic matter preclude the

more attractive nonstop services that Delta would pro-

vide, as Judge Dapper found.

In addition, both the Board and the courts have long

recognized that we are not obliged to tailor our pro-

ceedings so as to equalize the beyond-area capabilities

of all applicants to a route case. While Delta does not

dispute this settled doctrine its position here would

undermine the principle and thereby endanger the Board’s

ability to control the scope of its own proceedings. Thus,

in any case where one applicant possessed a significant

the Houston-Miami market on the basis of its beyond services

“between the southwest and Miami would be ‘inappropriate’ because

of Ashbacker considerations” (Delta’s brief to the Court, p. 42).

While the Court did not address Delta’s claim in terms, its ruling

that the Board had not applied carrier selection criteria consistently

in considering the Dallas-Phoenix and Houston-Miami routes at least

suggests that it was not impressed with Delta’s efforts to distinguish

the two markets on grounds.

—

route integration advantage permitting it to elaim sub-

stantial beyond benefits, a competing carrier could simply

file a defensive application for nonstop rights in the same

beyond markets. The Board would then be forced to

choose between a massive expansion of the scope of 4

proceeding, or if it chose not to expand it, to eliminate

route integration and beyond benefits as a factor in its

decision. The elimination of such back-up support traf-

fic would also reduce the level of service possible in the

primary markets at issue. We do not believe that such

an interpretation of the Ashbacker doctrine is warranted.

Accordingly, in view of the foregoing and all the facts

of record, we find that the public convenience and neces-

sity require that Continental’s certificate for route 29

be amended by:

1. Adding a new segment to read as follows:

“18. Between the terminal point Houston, Tex., and

the terminal point Miami-Fort Lauderdale,

Fla ”

2. Consolidating existing conditions (9), (10) and

(14) and amending the new condition to read as fol-

lows: ®

“(9) The holder shall not schedule single-plane serv-

ice (a) over segment 6 between Chicago, III., on the

one hand, and points south of Kansas City, Mo., on

the other hand (other than points on segment 6),

(b) between Denver, Colo., on the one hand, and

Fort Worth or Dallas, Tex., on the other hand, (c)

between Los Angeles-Ontario-Long Beach, Calif., on

the one hand, and Dallas and Fort Worth, Tex., on

the other hand, except over segment 16, or (d) be-

tween Portland, Oreg., or Seattle-Tacoma, Wash., on

Our consolidation of the existing single-plane restrictions now

contained in conditions (9), (10) and (14) is for administrative

purposes only and works no change in substance.

the one hand, and Miami-Fort Lauderdale, Fla., on

the other hand.”

and renumbering subsequent conditions.

8. Adding a new condition (18) to read as follows:

“(18) Flights between Los Angeles-Ontario-Long

Beach, Calif., and Miami-Fort Lauderdale, Fia.,

shall serve two intermediate points.”

We further find:

1. That Continental is a citizen of the United States

within the meaning of the Act and is fit, willing, and

able properly to perform the transportation herein au-

thorized and to conform to the provisions of the Federal

Aviation Act and the rules, regulations, and requirements

of the Board thereunder.

2. That for the purpose of determining a license fee in

accordance with the schedule set forth in section 389.25

of the Board’s regulations, the annual transport revenue

increase for Continental is estimated to be greater than

$10 million in the first full year of operation.

3. That, except to the extent granted herein, all ap-

plications, motions, petitions, and requests involved in

this proceeding should be denied, and the investigation

should be terminated.

An appropriate order will be entered.

BROWNE, Chairman, MINETTI and MURPHY, Mem-

bers, concurred in.the above opinion. GILLILLAND,

Vice Chairman, and TIMM, Member, filed the attached

separate dissents.

GILLILLAND, VICE CHAIRMAN, DISSENTING:

The rickety characteristics of the decision have been

capably demonstrated by Member Timm and I agree with

much that he has said. The great danger in the award,

as I see it, lies in the fact that the Board is here creat-

ing still another transcontinental carrier. There are al-

ready too many and the resulting excessive capacity has

neither been conducive to sound economic conditions in

the industry, nor considered to be consistent with the

public interest. The Board, of course, has here recog-

nized this danger and sought to ameliorate it by imposing

a two-stop restriction. This is not sufficient. Although

there are prospective beyond benefits of substantial na-

ture they do not restore the scales to balance. I would

not make the award.

/8/ Whitney Gillilland

1 Indeed the Board has recently been constrained to deal with this

problem by methods which in earlier years would scarcely have

been countenanced. These are the intercarrier agreements related

to C.A.B. Orders 71-8-91, 72-6-70, 72-11-6, and 72-11-7.

TIMM, MEMBER, DISSENTING:

The economics of competition in the airline industry

have never been a mathematical constant. In 1938 when

the Civil Aeronautics Board came into being, carriers

were flying aircraft with a seating capacity of as high

as 21 passengers.’ Today, the carriers are flying air-

craft which were beyond the wildest dreams of the in-

dustry back in 1938. The Boeing 747 will carry in ex-

cess of 400 passengers. The DC-10 and L-1011 will carry

in excess of 300 passengers.

If a market generated 110 passengers a day in each

direction it could support ten daily round trips with a

DC-3 (configured as it was in the 30’s and 40’s with 21

seats) at a 52.5 percent load factor.“ If this same route

was flown in 1973 with one daily round trip using a

747 configured at 330 seats, the market would produce

only a 33.8-percent load factor on this one flight.

In order to get a proper perspective of the true market

economics of today’s jet age equipment, I am attaching

hereto as Appendix A a breakdown of the annual passen-

gers required in any given market to produce varying load

factors with varying frequencies of operation. The fig-

ures are broken down for one- and two-carrier opera-

tions for the DC-9-80, 727-100, 727-200, DC-10, L-1011,

and the 747. Taking the DC-10 as an example, page

3 of Appendix A, if a carrier wanted to operate two

daily round trips in any market with such equipment

1 The famed DC-3 entered service on June 25, 1936, with a seating

capacity of 21.

2 It should be pointed out that present configurations as flown

are approximately 330 seats for the 747 and 220 seats for the DC-10

and L-1011.

In the DPFI, Phase 6-B, the Board found 52.5 percent to be a

reasonable short-term industry load-factor standard. It further

found a 55-percent load factor to be achievable in the long term.

7... TE

it would be necessary for that market to generate 168,630

annual passengers for the carrier to operate with a 52.5-

percent load factor. This, of course, assumes that every

passenger in the market will travel on these two flights.

Appendix B is broken down in the same manner as

Appendix A. However, it specifies the average daily pas-

sengers needed in both directions in a given market to

achieve the desired load factors.

In the Board’s recent decision in the Additional Serv-

ice to San Diego Case (San Diego-Denver), Docket 18104,

order 72-12-29, the Board stated at page 12 of its order:

“The Board believes that the demand of a second market

should not be the justification for awarding competitive

service in the primary market. Bearing in mind

this holding of the Board, we can look at the true

economics of competition in the Houston-Miami market.

Houston Miami is a market of 960 miles in length

well suited to the use of narrow- and wide-body equip-

ment. In 1971, this market generated 87,570 local pas-

sengers and 27,740 connecting passengers, for a total of

115,310 true O & D and connecting passengers.“

The majority on page 12 of their opinion allege that the dis-

sent’s [traffic] computations include only local and interline con-

necting passengers in the Houston-Miami market and wholly dis-

regard the extensive pools of on-line support traffic available to

Continental west of Houston.” However, these “extensive pools” of

traffic include not only passengers presently using the Houston gate-

way to Miami but also include a substantial number of passengers

currently moving via existing single-plane services. The former

classifications are, of course, included in our calculations. The

latter obviously would not desert superior service to avail them-

selves of Continental’s new authorization. Again it must be pointed

out that this case was set down and is before the Board solely to

consider the needs of the Houston-Miami market, and not the needs

of the Miami-Southwest United States markets. As this Board said

in the San Diego-Denver case, supra, “the demand of a second

market should not be the — for awarding competitive

service in the primary market. .

Assuming a 10-percent® growth in this market for

1973 to 126,841 true O & D and connecting passengers,

what kind of service would be required to achieve varying

load factors? The table below shows the load factors

National would achieve under varying assumptions of

the percentage of the market which would use the non-

stop service. The first set of figures is based upon the

use of 727-200 equipment configured for 130 seats. The

second set of figures is based upon the use of DC-10

equipment configured for 249 seats.

ONE-CARRIER SERVICE

% of

Market Passengers Passenger Load Factor Passenger Load Factor

Using Using With 727-200 With DC-10

Nonstop Nonstop Service (%) Service (%)

Service Service 1 R. T. 2R.T. 3 R. T. 1 R. T. 2 R. T. 3 RT.

90 156.4 1 60.2 40.1 62.8 31.4 20.9

80 139.0 * 53.5 35.6 55.8 27.9 18.6

70 121.6 93.5 46.8 31.2 48.8 24.4 16.2

60 104.3 80.2 40.1 26.7 41.9 20.9 14.0

50 86.9 66.8 33.4 22.3 34.9 17.4 11.6

40 69.5 53.4 26.7 17.8 27.9 14.0 9.3

1 Only 130 passengers could be carried or 74.8 percent of the market.

National has been providing and will continue to pro-

vide regular and more frequent one-stop flights in this

market. In the light of this fact even if 90 percent

of the passengers in this market were to use the nonstop

service, this market could only support two daily non-

stop round trips with a 727-200. A third flight would

give the carrier a 40.1-percent overall load factor, i. e.,

clearly excess capacity.

5 In view of the fact that the local traffic in this market declined

from 1970 to 1971 and the manned space program creating a great

deal of community of interest between Houston and Miami has been

curtailed, I feel that a 10-percent growth for the calendar years

1972 and 1973 is not unrealistic.

—

National now has DC-10 service in this market. If

they were to operate only one daily nonstop round trip

with this plane it could be expected that somewhere be-

tween 40 and 70 percent of the passengers might choose

that flight. If that were so, then the carrier would

operate that flight with a load factor ranging from 27.9

percent to 48.8 percent. More service with either type of

equipment would amount to wasteful and excessive ca-

pacity according to every Board standard.

To get a true picture of what competition in this

market will mean, let us assume that the majority is

right in its estimate of 150,000 passengers for 1973. If

95 percent of the market used one-carrier service, this

would produce 195.2 passengers per day in each direction

or 97.6 per carrier. The table below shows the number of

nonstop seats required per carrier to meet the Board’s

DPFI standard of 52.5-percent and 55-percent load factor

under varying assumptions of the percentage of market

using nonstop service.

SERVICE REQUIRED PER CARRIER

% of Market Using Passengers Using Seats Required

Nonstop Services Nonstop Service @ 52.5% @ 55%

90 87.8 167.2 159.6

80 78.1 148.8 142.0

70 68.3 130.1 124.2

60 58.6 111.6 106.5

50 48.8 93.0 88.7

If National and Continental equally divide the pas-

sengers using nonstop service and operate 727-200 equip-

ment over the segment, the following chart reflects the

resulting load factor. Note the difference in loads is

due to the fact that National operates its equipment with

130 seats and Continental operates its equipment with

only 110 seats.

PASSENGER LOAD FACTOR WITH 727-200

% of Market Passengers One Round Trip Two Round Trips

Using Non- Using Non- Per Carrier (%) Per Carrier (%)

stop Service stop Service CO NA Total CO NA Total

90 87.8 798 67.5 73.2 39.9 338 36.6

80 78.1 71.0 60.1 65.1 35.5 30.0 32.5

70 68.3 62.1 52.5 56.9 31.0 26.3 28.5

60 58.6 53.3 45.1 48.8 26.6 22.5 244

50 48.6 44.2 37.4 40.5 22.1 18.7 20.3

Note that if each carrier operated only two round

trips a day with a 727-200 and they captured 90 percent

of the total market, the two carriers would obtain less

than a 37-percent load factor—wasteful and excessive

competition by anyone’s standards.

If National and Continental equally divide the pas-

sengers using nonstop service and operate DC- 10 equip-

ment over the segment, the following chart reflects the

resulting load factor. Note again the difference in loads

is due to different seating density—200 for Continental

and 249 for National.

PASSENGER LOAD FACTOR WITH DC-10

% of Market Passengers One Round Trip Two Round Trips

Using Non- Using Non- Per Carrier (%) Per Carrier (%)

stop Service stop Service CO NA Total CO NA Total

90 87.8 43.9 35.3 39.1 22.0 17.6 19.6

80 78.1 39.1 31.4 34.8 19.5 15.7 17.4

70 68.3 34.2 27.4 30.4 17.1 13.7 15.2

60 58.6 29.3 23.5 26.1 14.7 118 13.1

50 48.8 24.4 19.6 21.7 12.2 98 109

It should be clear from the two preceding charts that

the concept of improved nonstop service because of com-

petition is highly illusory.

—

The ability of National to schedule Houston-Miami via

the intermediate point New Orleans will draw Houston-

Miami passengers because of the limited amount of non-

stop service which can be economically supported. This

factor in turn will limit the need for competitive service

in the nonstop market.

In a market of this limited size with a strong inter-

mediate point with balanced traffic flows to each end of

the proposed nonstop segment, competition will not be

economically viable and will act as a deterrent to the in-

dustry in reaching a 12 percent rate of return. Com-

petition will have to be cross subsidized from earnings

of carriers in other markets or by the public ultimately

through fare increases.

National states in its brief to the Board that in the

event no new authority is given in this proceeding that

they would put on one more daily nonstop round trip

in this market in addition to the 144 round trips it

presently offers. As we have seen in the table on page 3,

three daily nonstop round trips with a 727-200 captur-

ing 90 percent of the market, will only generate a load

factor for National of 40.1 percent. Two daily flights

will generate load factors of 60.2 percent. Under these

circumstances the offering of 214 daily nonstop round

trips should give an overall load factor balance in the

low 50’s, a figure entirely consistent wich the Board’s

standards of 52.5 percent and 55 percent.

Given these economic realities it is incumbent to take

one further step. In every well run business enterprise,

every new undertaking of major significance is preceded

by some type of cost-benefit study. What will have to

be the outlay? What will be the benefits received? This

same cost-benefit technique should be a part of every new

award of route authority under the Federal Aviation

Act.

We have seen above that if no new authority is grant-

ed in this proceeding National will offer 214 daily nonstop

round trips in the market in addition to several one- and

two-stop frequencies. If Continental is granted certifi-

cate authority, as the majority is here deciding to do,

National will offer 114 daily nonstop round-trip fre-

quencies and Continental will offer four daily nonstop

round-trip frequencies with 727-200 equipment. This

will give the market a total of 544 daily nonstop round-

trip flights.

What are the benefits to the Houston-Miami market

and its passengers?

(1) The public have three more daily nonstops in

each direction to choose from.

(2) Some passengers who would otherwise have taken

a one-stop flight will now save 30 to 45 minutes

on a 960-mile trip.

What are the costs?

(1) The three extra daily nonstops in each direc-

tion will cost the air transportation system and

eventually the traveling public $3,725,000 in ad-

ditional direct operating expenses every year.“

(2) At a time when the supply of jet fuel is becom-

ing a major element of concern to the industry,

Taken from exhibit CO-406, page 1. This figure is three-fourths

of the direct operating costs for four daily nonstop frequencies.

Assuming 150,000 passengers in the market, 90 percent using the

5½ daily nonstop services on an equal basis per flight, this cost

breaks down to approximately $50 per passenger for those who

would be using the three extra flights. In the long run, it would be

more beneficial to the system and the traveling public to pay $45

to each of these passengers and have them use the less frequent

service which is more economically attuned to the demands of the

—

these three flights will annually consume 7,734,

786 gallons of fuel.

(3) Residents around the Houston-Miami airports

will be exposed to the noise from 5,380 more

takeoffs and landings per year.

(4) Wasteful and excessive capacity will be operated

in the market.

Just how wasteful these additional flights are can be

seen from the following. Let us assume, as the majority

does, that the market will grow from 115,310 passengers

a year in 1971 to 150,000 passengers a year in 1973.

Let us further assume that 90 percent of these passengers

will travel on the nonstop service. This means that each

flight will operate with 33.6 passengers on board or a

load factor of 30.5 percent for Continental and 25.6

percent for National.* This type of wasteful and exces-

sive capacity does not square with reasonable economics.

The Board cannot have a system of dual standards—

one for fixing rates and one for awarding routes. Once

the Board has established a rate standard which requires

the carriers to maintain a 52.5-percent to 55-percent

industry load factor, it is improper to make route awards

which would do violence to that standard.

In summary, the award of additional competition in the

Houston-Miami market is contrary to the sound economic

regulation of the United States air transportation sys-

tem.

/3/ RoBert D. Timm

Fuel consumption based upon 1,444 gallons per annual block hour

per flight. Block hours taken from exhibit CO-406 and figured at

1785.5 per flight annually.

»The difference in load factors again is accounted for by the

fact that Continental - operates its 727-200 with 110 seats and Na-

tional with 130 seats.

*AQ{OUdEO OFVIOAT SE POUINSSY S}VOS BIQUIIVAT 96 ¢

"SYSIY CSOYR UO S[OABTZ PORAVUL OY} Ul een [TS Suyumssy »

009 ˙989 00 %%, 08999

OS % Ses gte

Oos gi 988 ess 818˙818

Osos vEs6T S8 C81

ost' got stress Porte

osr‘oze Orrs

pes‘oss 898808

seg 0888

Z6r's9t olige

960°8 880°LL

Oze'L9s Oe O9S'STS 880˙088 9

geg veSG OBS'O8T S8 988588 *

SSL‘OSS Orot ots'est 86l891 8

SOT'LPT otto verre sstiert 8

pec'sL OL, sro 90°99 1

1 quewdinbe

08-6-O 40 OOT-LEL WIS

sd} punoi doysuou A[rep

Butmo]joy oy} Suh

JOLLIVS YOVO YA

SPOYIVUL ̊ Ee. ul

008's9s O8 e 00 OPS'OTS OBL‘SET O96'SST 00Z'SLT O89'LST O9T'OPT 9

oon Pes9GT 808881 Z6T'S9T OLT'PST setze O9T‘OPT rost ssttt *

OSN t SOT'LPT 999 ˙981 rost SSO'OTT SLS‘OTT ost 809˙56 960˙U8 8

OZT'SOT Stress vot'te 960˙⁰8 880 l 08004 8089 590˙99 8

099˙89 den = sac‘sh gos pra'ss 86 opo'ss 9989˙T8 880˙ 1

1 queudmbe

08-6 OC 0 OOT-LEL

una sd punor doysuou

Kip Supmojpos oy WTA

vnn 19pLIGO-9[SUTs UT

29 %0L %99 %09 %0°SS 9 ˙89 209 9 %0P

| JO ne PI conporg on perinbey sieBuessey Hαð,

—

Adv eFe1eae Se Poumnsse #}¥08 ej PZT i

Wu S804} UO S[eAwIZ YoXIVUT OY} UI en [Te ZurwNssy ,

006'8L9 ore O88'sso Osler 098/76 088˙97 009'ZSP OFS'LOP 080°Z98 9

OZT'sh9 816˙909 v0ον 90 sss vos 080898 318˙288 799˙688 *

0e = PST‘OSS 880 s zee OTL'R6S 881988 Os vos SPZ‘LIZ 8

O99'TLS des sse ri isst 360˙061 OFO'TST 986'Z9T 2388˙ P51 7

oer gde 9LO'LTT Pz9'80T 319˙66 97096 039˙b06 8918 9181 1

usudinbe 00Z-LZL U

adi punoz dojsuou AH p

Burmojjoy oy} Zuynvszedo

TOLLIVD dn WRIA

SPOYICU AVLLIGS-Z ul

— os OzZs‘9TS Ot es 099˙148 O86 8% SI9'L8S O09 Ol % OPO'TST 9

oog goregs sse 88˙718 PPT'6GT Z60'OGT OFO'TST 986'Z9T Sses' vt *

09°803 Fett viert 9868901 898˙6 f 69S'ZPT O8L‘SSt Z0Z‘ZZI v9 ˙801 8

ost gast glitt Pe9'80T 819˙66 950˙96 089 ˙⁰ 89 5˙T8 OTPH'SL 8

068‘L9 gg 888˙U9 8g. 5g 98L‘6 8Z9'LP 095.9 O 802‘98 r

1 quourdinbe 00Z-LZL

yy sd punor dogsuou

Ajrep Supmojyoy oy} UD

t PYIVUL JOLLIVI-o[3uys Uy

26 9¹ 601, 99 09 VSS BITES 6S 3 0

5 % , „% οννα, P¥O'] CoNnporg o parmMbey sieSuesseg penuLy

beds oui pournsse S}ves s1Qulreav OZzZ x

us S804} UO STACI) JoxTVUL OY} Uy eee [Te ZuruNssy ,

009‘896 098'668 Os Tg

00d 089i «= OF S‘9Z9

00s TS? 089 ˙ %% 099˙¹

006˙0 obe 081˙ 808

8 0950 O0 899 096˙T89

008˙ 180 og 009 ˙ LT

098198 O9Z'L88 — OLT'STS

006˙0 ore 0890

09% OS 068˙Y0l

009 vet OOS'PZT'T OOG'SPO'T OO9'896 OOS'S8B OST'SPS 000˙ 8s 00 L 88 00 ̃

O88 0, OF9'90L 089˙ 59 O0 ei O9T'SLS 086˙819

O9T'SLS O086'6ZS 068909 O08“ 1 Ohh ge

opp‘sss oss Ole, O0 Tse O80'68Z 096˙995

OZL‘'Z6T O99°9LT Ost 009°O9T org 08881

O08 18% Oh,’ gle'eve O0, Ogg“ 008188

Opp‘sss Oss'sss O9Z'LES O0 Tse O80'68 096˙998

080682 066'9% 965 O06'OPS OTS‘'9TS 08861

OZL'Z6T O99'9LT O89'89T 009°09T OFS‘PPT O8P‘SZT

Oos Ossis gigs 00808 Os os

t quotudiubo

TOTTI 4° OT-Od M

+ quom

~dynbe TTQT~T 20 OT-Od

uu dn punor doysuou

Ajrep Suymojjoz oy} yar

QOYIVUL IOLIIVS-9[3uls Uy

91. %0L 299

%09 %0'SS 6939 09 % SP %0P

« JO 470% POT CONpoIy on par;nbey sIeSuessey [eNUUY

sc eee aaa al

— u —

‘Aypudes eBvrsaw Se poumnsss s o/qUITeAe OEE x

must C894} UO eee eee OY} Ul yer, [Te Suywnssy ,

09L'908'T O08'989'r ogg t 009 t 08e SZL‘POs'T OOS*POST O90'PSO'T O09 ˙ U 9

O0 't opens“ t O88 888 t Os Dν,jẽ’M 096'690'T OSL‘TIO'T 009°896 OFZ'L9S 088 0“ *

080 S0 OBL‘TTO'T orgees ore oben 88 on Oh O9T'SLE 8

OOL'ZL Oον, ? rs 0017819 086689 068˙909 9 00sTSh Os trt 0 8

OSs'T9S One OLT'STS 060 ˙ ess 0866s ess oe =—s«COTS'9TS = OOL‘Z6T 1

1 quourdinbe l

Wit dtn punor

doysuou Hep uf

Aolloʒ om Supesodo

ve been

i SPFIVU ahne u

eos oerers gc 001.881 es oss O % 30e 008 TSP 9

OOL'SSL 089'PL9 ore «= ODT'BLG 086˙689 o6s‘sos O00 hr Oe 09% *

NO O %he e g Oe ee Sense § 6 Oss'I9g §«sTz‘szs 080˙688 8

oss ore OLT'STS 080˙688 086 hs eres = UG ‘OPS «=s«COTS‘9TZ 037861 8

Kot ost sec‘9ot org S6rv'sst Street ov'OST 0% 098°96 1

1 queuid be

LPL Ts sd

punorz doysuou

Ajrep Bupmoryoy

OF} N neu

JOLLIVO-9/3uls ui

%9L %0L %99 %09 %0'9S %9%9 09 297 207

11% eng „% 810j08q beo eonporg o peu;nbey SieBuessey ſenuuy

*Aqjoedeo one, SE POUINSSE ο⁰ VIQU[TEAT 96 r

e O94} SPOABI} YoyIVUT OY} UT dyer [Te Suyumnssy ,

Cort oper 0s OZSTT O'990'T Oö, 0096 O'F9B 8.294 9

Ozst't SSLo't 866 9°16 8˙ 5 5908 O'89L 8˙169 PTS *

0˙ 598 5908 8˙8 2169 9°89 8 ˙509 09e 89 8˙097 8

0˙919 9˙189 8˙667 8˙097 v 880% ores 9˙ 9 7s SLOE 8

0°883 8°893 9°63 v0 Sls 9˙10 0˙ 861 SZLT 9˙891 1

z queurdynbe

08-6-Od 40 OOT-L3L TH

adi punoi doysuou A[rep

Suaoyjos oy} Buyesedo

JOLLIBS YORE YPM

SJORIVU Hin- ul

83 0'03L 0 ˙819 0 v9 0˙919 0˙89 0˙ 509 O0 Ossh O 9

0˙919 9˙189 8˙667 8˙097 5 880 orss 9˙9 8 8˙708 *

0˙ 88 8˙80 5s 9˙998 8˙918 55 O's8s 8˙698 70 8

0°886 8°893 9˙6 50 8˙Tlẽ 9°T03 O'Z6T SSLT 98ST 8

OI ver 8˙5 ostt 9˙901 8˙001 o96 %s 8˙9L 1

1 guewdmbe

— beg

Mix sd punas doywdsu

Kip Supmoypoy oy} YQ p44

zum 19L11Bd-9[3uTsS UT

%SL %0L 99 %09 %99 9 ˙89 %0S 69h %0P

p % 1 «JO Gin, PBOT SoNpoOry oO )J sioSuesseg A e8uieay

@ xipueddy

onde oBv10aw SB PoulNssY swes B[QUIIVAV PZT x

"SYST S804} UO STOABI} JoxIVUL OY} UY Dyer} [Te Suyunssy ,

Oos“ O9SL'T OZINT oss t Orot Oos“ O'OPST OOITT 0366 9

O'ssr'T 8˙888 “1 9˙688˙T POGTT SIGOT 9˙ tO 0866 8 ˙868 9°86L v

O'OTI'T OMTIPOT 8˙296 8368 5818 8˙181 OI. 9°699 8˙969 8

0 5 8g 8˙969 9˙979 8˙089 0˙967 POPP 8˙968 8

O'SLE 8 L 58 9°L63 SSLs 909 0.9 88 98961 1

zusmdynbo 9083-LZL U

adi punoz dogsuou p

Sufaoſlog oy} Zurzesedo

AOLLIGD YOR YRTAA

SPOYIVU AILIIBI-Z uy

8 0

0 56 85g 8˙969 9˙979 8˙089 0˙967 v 8°968 *

0˙999 8˙089 9˙ 8 5 8˙607 9°068 O'SLE 8 ˙ 588 9°L63 8

O'SLE SLE 5 9˙¹⁶³ 8˙8¹⁴s 95098 08 88 5861 3

0˙981 9 BUL 8191 OST P'9sT 8˙081 U OTIT 3°66 1

r quowdmbe 008-LZL

Nu df punor doyuou

Ayrep Supmoryos ayy MU

JORIVUL JOpITE-9/Suys u

%SL %0L 99 %09 %SS 35989 %09 9 07

5 JO 8 4 „0 810}9B,y PBOT eoNporg oO permbey s1eBZuesseg Ajreq ννõ,ẽx

Kdo OFV10ae SY pournsss SjvEsS B[QULTEAT 08

“S1YZTY eBoy} UO SPOATZ YoRTSUL OY} Uy eee [Te Suyussy ,

OSITS

o gt

0'990'T

0˙889

0˙990˙

0˙ 56“.

0˙8³9

0˙886˙1

0°896

O'9SL

0˙086˙1

o'pss'T

O'ssTT

0°S6L

0968

0°066

0˙56¹

0˙569

0°968

0˙861

080

099

O'VOL

0˙898

0°088

0˙889

0˙898

. OOLT

%39 509

299

35989 09

%0P

„ JO ao, Oo sonporg 0} perynbey sieSusssey A eSvIeay

aA AN oO

TIOT“I 2° OT-Od TH

dyn punoz doysuou p

ufa. oy} Supesedo

TMHALTGS POC RTM

Gpeyxrvur ef- ul

1 ueudynbe TLOT~T 20 OT-OG

yy sd punor doysuou

Ajpep Supmojyjoy oy} GIL

JOYIVUL 10L1L1Bd-a[3uls ul

*AqoVedvs saBe1sav SY PouINssy 8}VOS O/QU/TVAV OFF

Rue S804} UO eee JoxTVUT OUR UT een [Te SuyuNssy ,

00s Oö Of,’ O,, = orose’s Oe, O o⁰e˙%,,ỹ,Z O 06% O0 9

Oe Ohe Oer §=O'ROT’S O OL O Oele tts *

COLES OL Oi O'OLES O'BLT'S O'6L0'% Oo , O'ZSL'T eg 8

Oos OBST O'OTL'T OPEST O'ZSHT ost“ t O'OSS'T O'SST'T 0°990'T 8

0°066 0'b26 o'sss O'36L 0'9SL 0˙869 0˙099 0˙569 0˙889 1

1 eα,lnbe z) Un

ad punar dogsuou ep

ufo oy} Buyvsedo

AJOLLIBS YOR UREA

SYSYAVUL IDLIVI-Z ul

O'SLyS O'OTSS O'OPT'S O'OSET O'STS'T gelt oog OST Ost 9

Oos t OBST O'OTL'T ost org oss“ O'OZST oOsst't O0'990'T *

ot O'98ST OLSZT O'BBT'T O'680'T ESOT 0°066 O'T68 0˙561 8

0°066 0 0˙898 0°36L O'93L 0˙869 0˙099 0˙569 0˙889 8

0˙967 09 0˙6 0˙968 089 S98 0˙088 0°L63 09 1

%SL %0L 99 09 299 989 09 9 0

5 % ονj „0 οj˖e POT onpoε 0} parinbey sieSuesseg Ajyeq eFvi0eay

APPENDIX

DOCKET 18257

THE ADMINISTRATIVE LAW JUDGE’S INITIAL

DECISION REFERRED TO HEREIN IS NOT AT-

TACHED TO THIS COPY BECAUSE OF THE WIDE

CIRCULATION GIVEN AT THE TIME OF ITS RE-

LEASE. 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 OF-

FICIAL “CIVIL AERONAUTICS BOARD REPORTS.”

Order 73-2-89

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 28rd day of February 1973

Docket 18257

SOUTHERN TIER COMPETITIVE NONSTOP INVESTIGATION

(Houston-Miami Phase)

ORDER

A full public hearing 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

hereto and made a part hereof,

IT IS ORDERED THAT:

1. An amended certificate of public convenience and

necessity in the form attached hereto be issued to Con-

tinental Air Lines, Inc., for route 29;

2. Said certificate shall be signed on behalf of the

Board by its Secretary, shall have affixed thereto the

seal of the Board, and, subject to the extension of its

effective date in accordance with the provisions of said

certificate, shall be effective on April 24, 1973: Provided,

however, That the effective date of said certificate shall

be automatically postponed until further Board order if

the appropriate license fee is not paid pursuant to sec-

tion 389.21 (b) of the Regulations; and

3. Except to the extent granted herein, all applications,

requests, and motions involved herein be and they here-

by are denied, and this investigation be and it hereby

is terminated.

By the Civil Aeronautics Board:

PHYLLIS T. KAYLOR

Acting Secretary

[SEAL]

APPENDIX D

Order 73-5-22

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 4th day of May 1973

Docket 18257

SOUTHERN TIER COMPETITIVE NONSTOP INVESTIGATION

(Houston-Miami Phase)

OPINION AND ORDER ON RECONSIDERATION

BY THE BOARD:

On February 23, 1978, the Board issued its decision

in the remanded phase of this proceeding (Order 73-

2-89), in which it found the need for competitive Houston-

Miami nonstep service and selected Continental Air Lines

for the award. Petitions for reconsideration of Order

78-2-89 were filed by American Airlines, Inc., Braniff

Airways, Inc., Delta Air Lines, Inc., Eastern Air Lines,

Inc., and Texas International Airlines, Inc. (TXI), sug-

gesting that they, rather than Continental, be selected

for the award. In addition, National Airlines filed a

petition opposing any award of nonstop competitive au-

thority. Answers to the petitions were filed by Braniff,

Continental, Delta, Eastern, and National. Answers gen-

erally opposed to reconsideration have also been filed by

the communities of Austin, El Paso, Houston, Midland/

Odessa, and San Antonio, Texas; Phoenix and Tucson,

Arizona; and Wichita, Kansas.

The Board has duly considered the matters presented.

The four members of the Board being equally divided as

to whether the new authority awarded to Continental by

Order 73-2-89 should stand or be withdrawn, the petitions

fail for want of a majority.

The following opinion represents the views of those

present Board members (Members Minetti and Murphy)

who concurred in the Board’s original decision in Order

73-2-89. It is partially concurred in, to the extent indi-

cated in their separate concurring and dissenting state-

ment, by those present Board members (the Chairman

and Vice Chairman) who dissented from the Board’s

original decision.

1. In arguing, on reconsideration, that Continental’s

application must be denied, Delta makes essentially two

contentions. First, the carrier asserts that the Board’s

decision in this proceeding is at odds with its simultane-

ously published decision in the Southern Airways Route

Realignment Investigation, Docket 18610, and, second, the

carrier claims that the award to Continental violates the

Ashbacker principle. Delta’s first argument was dis-

cussed in detail in the Board’s original opinion in the

Southern Route Realignment Case, Order 73-2-90, Feb-

ruary 23, 1978, and is further discussed in the Board’s

order on reconsideration in that proceeding, Order 73-

4-92, April 23, 1973. It need not be addressed here.

Delta’s claim that the Board’s award violates the Ash-

backer doctrine has been considered and rejected both by

Judge Dapper and the Board (see Order 73-2-89, pp.

13-15). However, since Delta has amplified and, in sev-

eral significant respects, altered its underlying conten-

tions in seeking reconsideration, some additional com-

ment is desirable.

Delta contends that the Ashbacker principle requires

that the Board either (a) expand the scope of the pro-

| —

ceeding to include contemporaneous consideration of cer-

tain new route proposals by Delta or (b) impose a re-

striction upon the authorization to Continental (or,

similarly, any potential award to American, Braniff,

or TXI, for that matter) which would preclude effective

through-service via Houston between Miami and certain

cities west of Houston. If there were such a restric-

tion, according to Delta, there would then be no basis

for selecting Continental in preference to Delta for the

Miami-Houston route. Additionally, Delta asserts that

the Board, although ostensibly considering service be-

tween Miami and Houston (having previously determined

not to turn the Southern Tier case into an area investi-

gation) has, in fact, erroneously decided the proceeding

on the basis of area considerations. These contentions,

which the Board finds lacking in merit, are best eval-

uated in light of Delta’s procedural posture before the

Board, the evidence which Delta adduced relating to its

Ashbacker claim, and the findings thus far made con-

cerning that claim.

The Delta applications, which were excluded from the

Southern Tier investigation, involved requests for trans-

continental routes. Specifically, Delta sought consolida-

tion of its application for the following route segments:

1. Between the terminal point Miami-Ft. Lauderdale,

the intermediate points Tampa-St. Petersburg-

Clearwater, Orlando - Melbourne - Titusville - Cocoa

= ia New Orleans, Houston and San Antonio,

1In its petition for reconsideration, Delta includes Miami-

Albuquerque (which Continental does not propose to serve) as one

of the “prohibited” beyond markets, despite the fact that on brief

to the Board it listed only Miami-El Paso/Phoenix/San Antonio

as markets in which our award would “effectively inject Continent-

al.” Of course, findings with respect to Delta’s Ashbacker claim

apply equally to the Miami-Albuquerque market.

(a) beyond San Antonio, the intermediate point

San Diego, and the coterminal points San Fran-

cisco-Oakland and Los Angeles-Long Beach, and

(b) beyond San Antonio, the intermediate point

Las Vegas, and the coterminal points San Fran-

cisco-Oakland and Los Angeles-Long Beach, and

(e) beyond San Antonio, the intermediate points

Dallas-Fort Worth, the alternate intermediate

points Albuquerque and El Paso, the intermediate

point Phoenix, and

(i) beyond Phoenix the intermediate point San

Diego and the coterminal points Los Angeles-

Long Beach and San Francisco-Oakland, and

(ii) beyond Phoenix the intermediate point

Las Vegas, and the coterminal points San

Francisco-Oakland and Los Angeles-Long

2. A. Between the coterminal points San Francisco-

Oakland and Los Angeles-Long Beach, Calif.,

the intermediate point San Diego;

B. Between the co-terminal points Los Angeles-

Long Beach and San Francisco-Oakland ;

and the intermediate point Phoenix, Ariz., the

alternate intermediate points Albuquerque,

N.M. and El Paso, Tex., the intermediate

points Fort Worth-Dallas, Tex., Memphis,

Tenn., Huntsville, Ala., Atlanta, Ga., Jackson-

ville, Orlando-Melbourne-Titusville-Cocoa Beach,

Tampa, and the terminal point Miami-Fort

Lauderdale, Fla.

Following the Board’s refusal to consolidate these appli-

cations in their entirety, Delta next moved for judicial

intervention. The Court of Appeals dismissed the car-

rier’s petition, pointing out that there was no require

ment for consolidation as a matter of law, and taking

cognizance of the Board’s standard procedure of permit-

—

ting applicants with excluded applications to make a fac-

tual demonstration that mutual exclusivity does, in fact,

exist. National Airlines et al. v. CAB, 392 F.2d 380

(D.C. Cir. 1968).

Thereafter, in the original phase of this proceeding,

Delta submitted exhibits showing the service which it

proposed to operate over the “excluded routes.” The car-

rier’s proposal (DL-200 I) included no flights via Houston

between Miami and El Paso, San Antonio, or Phoenix.

| Instead, all such flights were to be operated either on a

nonstop basis, or via New Orleans or Dallas. At the con-

clusion of that proceeding, Delta received the Houston-

Miami award, but the Board’s decision was reversed and

remanded by the Court of Appeals. Continental Air

Lines, Inc. v. CAB, 443 F.2d 745 (D.C. Cir. 1971).

In the remanded proceeding, following Delta’s presen-

tation of evidence, the administrative law judge rejected

Delta’s contention that Continental’s entry into the Miami-

El Paso/Phoenix/San Antonio markets on a one-stop

basis via Houston would preclude an award to Delta of

the authority which it had sought. He found that the

nonstop authority which Delta had requested was “so

manifestly superior to the one-stop authority which Con-

tinental could receive . . .” that there would be no mu-

tual exclusivity or prejudice to Delta’s application and

that “a subsequent grant of Delta’s application would

not be precluded by an award to Continental.” (I. D.

63-64). In challenging Judge Dapper’s conclusion on

brief to the Board, Delta argued that the operation of

one-stop service by Continental could preclude nonstop

service in that there was “competitive near-parity of

nonstop and one-stop services.” The Board found Delta’s

claim unpersuasive for two reasons, First, the Board

agreed with Judge Dapper that there would be no mu-

tual exclusivity as a matter of law or economic fact

between Continental’s single-plane service via Houston

and Delta’s application for nonstop rights between Miami

and the cities concerning which it now complains. Sec-

ond, the Board found that the limited traffic flow in

the “excluded” markets was too small to support a non-

stop award regardless of Continental’s presence. Delta

made no mention, however, at this stage of the proceed-

ing, about having sought one-stop as well as nonstop

rights. Nor did it allege that the award to Continental

would preclude additional one-stop operations by Delta.

Delta now asserts, for the first time, that the Board

erred in failing to determine whether a grant of Con-

tinental’s application would preclude a grant of one-stop

authority between Miami, on the one hand, and the west

of Houston cities, on the other. The carrier takes the

position that there would be mutual exclusivity between

service operated pursuant to our Houston-Miami award

to Continental and service which could be operated pur-

suant to Delta’s excluded application. However, to begin

with, Delta ignores the fact that its excluded application

was for service to these west-of-Houston points only in

conjunction with other transcontinental services along

the southern tier of states, and did not involve only a re-

quest for authority between Miami and the particular

cities involved. Ashbacker does not require the Board to

split an “unrestricted application into small sections and

. . . [compare such sections] with similarly segregated

sections of other applications. Delta Air Lines v.

CAB, 275 F.2d 682, 645 (D.C. Cir. 1959). Moreover,

even if the Board were required to undertake such a

task, Delta has still failed to develop a record appropriate

for that purpose. Specifically, the only evidentiary sup-

port in the remanded proceeding for Delta’s claim of

mutual exclusivity appears in exhibits DL-901-905. These

exhibits simply show O&D and interline connecting traffic

in the Miami-Albuquerque, Miami-E] Paso, Miami-

Phoenix, and Miami-San Antonio markets. The point of

these exhibits is that traffic in these markets does not

approach the 100 passenger a day “standard” which

was used by the Board in 1966 (Gulf States-Midwest

Points Service Investigation, Order E-24202, September

19, 1966) as a benchmark for considering an award of

competitive nonstop service; and, thus, that Continental’s -

entry into the markets would preclude an award of com-

petitive nonstop authority to Delta. However, to the

extent that Delta now argues that Continental’s opera-

tions would preclude—as an economic matter—other one-

stop operations, its new contention is without record sup-

port because such an economic issue cannot be decided by

considering only Miami-El Paso/Phoenix/Albuquerque/

San Antonio traffic data alone, i. e., without also examin-

ing intermediate traffic support (e. g., Miami-New Or-

leans/ Dallas and Dallas/New Orleans-El Paso/Phoenix/

Albuquerque/San Antonio) which would have been avail-

able to support Delta’s flights. Indeed, since all of Delta’s

flights were to continue on to the west coast, passenger

movements between all these points and the west coast

would also have had to be included.* By limiting its evi-

dentiary showing to a recital of traffic in the Miami-El

Paso/Phoenix/San Antonio/Albuquerque markets, Delta

has not established that Continental’s operations would

It was these exhibits which the Board originally considered by

noting that the limited traffic flows in the Miami-El Paso and Miami-

Phoenix markets, viewed alone, would not be likely to support a

nonstop award regardless of Continental’s presence. (Original Opin-

ion at pp. 14-15.)

o Similarly, although Delta cites numerous exhibits on the mutual

exclusivity question that it introduced in the original Southern

Tier record, only two of these (DL-400 I and 401 I) have even the

remotest connection with the markets at issue. The latter exhibits,

however, apart from being dated, are largely irrelevant because they

were designed to show that an unrestricted Florida-California award

in Southern Tier would preclude a subsequent award of Florida-

California authority via Albuquerque, El Paso, Phoenix or San

Antonio. By contrast, the two-stop Miami-Los Angeles authority

Continental will receive in this case will permit it to participate

in only a negligible share of this market.

ies

preclude Delta’s proposed routings in the “excluded” mar-

kets. Thus, there is no more basis for a finding of legal

or actual exclusivity with respect to the one-stop serv-

ices than for the nonstop operations. Under these cir-

cumstances, there is no need to reach the question of what

conditions or restrictions, if any, might have been re-

quired if Delta had been able to show mutual exclusivity.

Next, the Board rejects Delta’s argument that having

decided not to turn Southern Tier into an area investi-

gation, the Board committed legal error in selecting Con-

tinental for the Miami-Houston route largely on the basis

of its ability to mount more local frequencies as a result

of its extensive pool of Houston-West support traffic and

its advantage in beyond benefits. Delta’s underlying as-

sumption—that factors of route integration and beyond

benefits are “area considerations’—is a non-sequitur.

Route integration and beyond benefits are basic carrier

selection factors even in proceedings where only one mar-

ket is at issue. For example, these were important con-

siderations in the Board’s choice of Delta over Continen-

tal in the Dallas/Ft. Worth-Phoenix Nonstop Service

Case, Order 69-7-137, which, with the service needs of

only one market at issue, was clearly not an area in-

vestigation.

The importance of route integration stems from the

fact that certificated carriers do not serve any city-

pair in a vacuum. As the Board observed recently:

Certificated operations at any particular city or mar-

ket must be considered in the context of the entire

route system of the airline performing the service,

because that point or market is, in fact, served as

part of a route network, rather than as an independ-

ent entity. Significantly, when the Board decides to

place a particular city on the certificated system it

does so not simply on an abstract finding that the

point deserves certificated service. Instead, the Board

is required to consider as a key decisional criterion

whether the point can be served economically by the

specific applicants involved, a determination which,

in turn, depends on such factors as how well the

new award would integrate with each applicant’s

route structure...” Order 72-9-39 at pp. 8-9.

Thus, the Board cannot realistically evaluate competing

applications for authority in a specific market without

taking note, for example, of the fact that one appli-

cant’s existing system, by providing back-up traffic sup-

port, enables it to schedule more service on an economic

basis in the primary market at issue. That is pre-

cisely the situation here, since Continental’s reserve of

Houston-west support traffic permits the carrier to offer

more Houston-Miami nonstop service than any other ap-

plicant. Far from being an “area consideration,” this

factor bears directly on the issue of Houston-Miami

service.

Similarly, the Board traditionally considers the service

benefits an applicant can bring to passengers in beyond

markets as an adjunct to its flights in the primary mar-

ket. In much the same way, it considers the harm

(through diversion) that the carrier might cause to in-

cumbents in these beyond markets. There is, however,

an important distinction between considering benefits to

a beyond market—Miami-Phoenix, for example, on a

Miami-Houston-Phoenix routing—and evaluating the serv-

ice needs of the same market independently (i. e., turn-

ing it into a primary market).

Curiously, Delta has had no trouble in grasping this

distinction in other contexts. For example, in the South-

ern Route Realignment case the Board awarded Delta

Memphis-Miami authority partly because of the beyond

benefits the carrier proposed in the Kansas City-Miami

market. In refuting Southern’s objection that the needs

of Kansas City-Miami were not in issue, Delta said,

“Southern apparently does not understand the difference

between an issue of need and a benefit. The “need” of

Kansas City-Miami was not at issue, whereas such po-

tential benefits were, and historically are, taken into

account as one of the factors in carrier selection.”

In addition, Delta’s reliance on Delta Air Lines v.

CAB, 275 F. 2d 632 (D. C. Cir. 1957) is misplaced. Un-

like the situation in that case, Delta has been permitted

and has had ample opportunity to demonstrate that any

award in this case is mutually exclusive with Delta’s

application for Miami-El Paso/ Phoenix/San Antonio un-

restricted rights which the Board refused to consolidate

into Southern Tier. As the Board (and Judge Dapper)

found, Delta has simply failed to prove mutual exclusiv-

ity. (It is typical of Delta’s posture in this proceeding

that the Second Delta case, on which the petition for

reconsideration now relies so heavily, was mentioned nei-

ther in the carrier’s brief to the administrative law judge

nor in its brief to the Board.)

Lastly, it should be emphasized that the Ashbacker

doctrine is not available simply for tactical maneuvering

purposes by particular applicants in route proceedings.

As the courts have made quite clear, the Board is not

required to tailor its proceedings so as to equalize the

advantages and disadvantages with which each applicant

enters a comparative proceeding. A single carrier, there-

fore, cannot simply file a defensive application for un-

restricted rights and compel the Board to choose between

a massive investigation of the whole of American air

transportation, on the one hand, and the wholesale im-

position of artificial restrictions which would—by exclud-

ing such a basic consideration as route integration—

seriously compromise the public need for an adequate

air transportation system. In the final analysis, consid-

erations of administrative fairness and the public con-

venience and necessity must govern.

2. The Board rejects TXI’s argument that the local

service carrier’s application was improperly evaluated.

While TXI now argues that it possesses “authority to

serve every one of the segment markets to which Con-

tinental proposes service except those involving Phoenix,

Tucson, Portland and Seattle., (emphasis supplied)

it does not challenge the Board’s basic findings that Con-

tinental has proposed—and would provide—a greater

volume of service in the primary market, a broader range

of services, and more first single-plane and overall single-

carrier benefits in beyond markets. These factors were

material. Moreover, apart from these largely undisputed

conclusions, the Board expressed a further doubt that

TXI would be able to operate successfully even the com-

petitive service projected in its proposal—let alone earn

a profit sufficient to make a positive contribution to the

carrier’s subsidy need. TXI’s contentions with regard to

the comparative appraisal of financial results thus also

overlooks the fact that subsidy considerations represent

a carrier selection factor which is unique to the evalua-

tion of local service carrier applications.“

TXI is also incorrect in suggesting that the Board

never departs from standard formulas (such as QSI or

Subpart K costing) to consider special or unusual fac-

tors associated with applications of particular carriers.

See, e. g., Alaska Service Investigation, Order 71-12-45,

December 9, 1971, pp. 8-18, Additional Service to Colum-

bia and Augusta Case, Order 71-7-118, July 21, 1971,

pp. 10-11, and, Gulf States-Midwest Points Service In-

vestigation, Order 69-9-18, September 8, 1969, p. 4. More-

over, in this particular situation, in considering the com-

peting applications of Continental and TXI, it would

have been inappropriate to overlook the special expenses

associated with TXI’s extension to Miami at the same

See, e. g., Indianapolis/Dayton-New York Subpart M Case, Order

69-8-130, August 24, 1969, at 2.

—

time that Continental had expressly ineluded a separate

$850,000 expense element to reflect similar special costs.

Finally, this case is distinguishable from the earlier

award to TXI of new Houston-Mexico City authority,

where it was found, inter alia, that the local service

carrier would be able to provide service to more points

than the other applicant and also achieve a subsidy need

reduction. In both cases concern was expressed over the

prospective economics of the local service carrier’s pro-

posed operations, including the problem of adequately

measuring developmental costs through the Subpart K

methodology. Doubts in this conne tion were resolved in

favor of a Houston-Mexico City award—notwithstanding

TXI had to open a new station at Mexico City—since

the prospects for subsidy improvement were significantly

greater, in part because the new award extended the car-

rier’s system from a fairly weak terminal point (Monter-

rey) to the far stronger terminal at Mexico City.“

8. Eastern, Braniff, and TXI seek the imposition of

various restrictions on Continental’s ability to schedule

through-plane service between Miami and points beyond

Houston, in order to minimize the alleged potential di-

versionary effects of the Board’s award herein on these

carriers. The question of further restrictions on the

award—in addition to the two-stop restriction on Miami-

Los Angeles service already imposed in order to pre-

serve the Board’s decisional flexibility in the pending

Miami-Los Angeles case—was discussed at some length

in the Board’s prior decision (including those portions of

the administrative law judge’s initial decision adopted

by the Board), and that discussion stands.

5 See Houston-Monterrey-Mexico City Service Case, Order 72-5-61,

served May 18, 1972, pp. 5-7. See also the Board’s decision not to

authorize TXI’s extension to Acapulco in the Texas-Mexico Service

Investigation Order 72-7-49, served July 17, 1972, pp. 4-5.

The petitioners now advance several new contentions

in support of the imposition of additional restrictions—

notably, Eastern’s contention that the loss of San Antonio-

Miami support traffic occasioned by the Board’s award

“may well force” Eastern to discontinue its existing San

Antonio-New Orleans-Miami flights, and Braniff’s con-

tention that it might be exposed to diversion of $3.7

million in the Denver-Miami market alone if Continental

were to operate a Houston-Miami service pattern wholly

different from that proposed in its exhibits of record.“

The merits of these new contentions cannot be addressed

here, as the Chairman and Vice Chairman do not reach

the issue of further restrictions on an award they would

not make in the first place, while the remaining two mem-

bers cannot speak for the Board. However, the Board

notes that these new contentions could have and should

have been made at an earlier stage of the proceedings,

when they could have been dealt with on the merits

by a full Board, and should not have been raised for

the first time on reconsideration. In particular, Braniff’s

new $3.7 million diversion calculation, because it was not

presented at the hearing and thus was not subjected to

cross-examination and rebuttal by the other parties, is

of extremely limited evidentiary or persuasive value.

ACCORDINGLY, IT IS ORDERED THAT:

.. The petitions for reconsideration be and they here-

by are denied.

2. The motion to strike filed by Continental be and

it hereby is denied.’

* Braniff’s diversion estimate of record, which was fully evalu-

ated by the administrative law judge (I. D. 51-52), totaled less than

$2.3 million in all markets.

* Continental has filed a motion to strike Eastern’s answer as

being “another” petition for reconsideration.

G. JOSEPH MINETTI and ROBERT T. MURPHY,

Members, concurred in the above opinion and order.

TIMM, Chairman, and GILLILLAND, Vice Chairman,

filed the attached concurrence and dissent.

EDWIN Z. HOLLAND

Secretary

[SEAL]

TIMM, CHAIRMAN, AND GILLILLAND, VICE

CHAIRMAN, CONCURRING AND DISSENTING:

For the reasons set forth in our earlier dissents, we

continue to believe that the competitive route award made

in this case is not justified. However, we concur in the

Board’s order on reconsideration insofar as it holds (1)

that the two basic arguments raised by Delta in its peti-

tion for reconsideration do not require, as a matter of

law, the denial of the application granted by the majority

herein; (2) that the Board applied the proper standards

in evaluating and denying the application of Texas Inter-

national; and (3) that the new contentions of various

parties which were advanced for the first time on recon-

sideration, and which could have and should have been

put forward at an earlier stage of the proceeding, do not

lay a proper foundation for reconsideration. Our concur-

rence in these conclusions (particularly the first of them)

is not to be taken as endorsement of those aspects of the

Board’s opinion here which inferentially might be thought

to support the route award made in Order 73-2-89 on the

merits. We repeat that, on the merits, we adhere to our

respective original views.

/s/ ROBERT D. TIMM

/8/ WHITNEY GILLILLAND

APPENDIX E

EXCERPTS FROM OPENING BRIEF OF CONTI-

NENTAL AIR LINES, INC. TO ADMINISTRATIVE

LAW JUDGE SHEEHAN IN AMERICAN/FRON-

TIER ROUTE EXCHANGE AGREEMENT, CAB

DOCKET NO. 25397

There follows the entirety of Section IV of Continen-

tal’s December 21, 1973 Brief to Administrative Law

Judge Sheehan, appearing at pages 35-41 thereof:

„IV. APPROVAL OF THE AGREEMENT WOULD

DENY DUE PROCESS TO CONTINENTAL IN

RELATION TO THE PENDING SAN DIEGO

CASE

“In its preliminary motions, Continental made clear

its concern that approval of this exchange agreement

might act to deny Continental’s pending application for

Denver-San Diego nonstop authority in the Additional

Service to San Diego Case, Docket 18104. The Board

denied Continental’s request for a pre-trial restriction

against Denver-San Diego single-plane service by Fron-

tier but recognized that consideration of such a restric-

tion is appropriate (Order 73-9-14, September 6, 1973,

p. 4):

‘In the Additional Service to San Diego Case, Docket

18104, Continental has applied for nonstop Denver-

San Diego authority. If the exchange agreement is

approved in this case, Frontier would be able to pro-

vide one-stop service in that market, and Continental

is concerned with the possibility that its application

for non-stop authority then might be denied on the

ground that the market does not need additional

service. While such a restriction may be appropriate

in any amended certificate that may be issued, we

are not prepared to impose it as a pre-trial matter.

—

. .ꝗ fm — — — . g

The issues in the case include the question of what

conditions, if any, should be imposed if the exchange

is approved and Continental may address itself to

this matter in the proceeding. .. .’

“Continental’s position is the unless this route ex-

change agreement is denied or Frontier is prohibited

from carrying Denver-San Diego traffic, Continental will

be denied due process to which it is entitled under the

Ashbacker doctrine.

“As shown in CO-200, Continental was twice recom-

mended by the Bureau and the Administrative Law

Judge to compete with Western as the second nonstop

carrier in the San Diego-Denver market. The proceeding

began in 1969 and has yet to be completed, notwith-

standing a remanded phase which was ordered by the

Board to consider the market’s ability to support com-

petition. By Order 72-12-29, December 8, 1972, the Board

declined to authorize competition solely on the grounds

that the Denver-San Diego market was not yet large

enough to support both Continental and the incumbent,

Western. The Board made clear, however, that the Den-

ver- San Diego market offers a ‘potential for future com-

petition.’ Order 72-12-29, p. 3. Continental filed its

petition for reconsideration of Order 72-12-29 on Janu-

ary 29, 1973. The Board has not acted on that petition,

and the case is still pending.

“If this route exchange is approved without an appro-

priate restriction, Frontier will be certificated for one-

stop single-plane authority between San Diego and Den-

ver via Phoenix. Frontier proposes two one-stop round

trip flights plus a round trip two-stop flight (FL-5) and

forecasts that it will capture 15% of a 125,215 passenger

market or 18,782 passengers, leaving 106,438 passengers

in 1974 (FL-105, p. 1). In the San Diego case, Judge

Goldberg estimated the 1978 market at 127,409 passen-

gers, but the Board reduced this estimate to 98,409

passengers and found that this level was insufficient at

the time to support Continental and Western (CO-201).

„Even assuming that Frontier would stimulate the

market by the 10% it has estimated, the remaining traf-

fie would be only 6,000 passengers or slightly over eight

per day each way above the level that the Board found

was inadequate to justify a second nonstop carrier. How-

ever, the Board believed that Continental’s entry as a

second nonstop carrier would stimulate the market by

only 10% thus Frontier’s 10% stimulation estimate for

one-stop service is overstated according to the Board’s

own theory. See Order 72-12-89, p. 9.

“Frontier has taken the position that a Denver-San

Diego through-plane restriction would undercut the viabil-

ity of its proposal in this case, thereby confirming the

interrelationship between this case and the San Diego

case (CO-SR-700, p. 1). Moreover, Frontier’s witnesses

made clear that the two cases are mutually exclusive as

a matter of economic fact. Frontier’s witness (Linkon)

testified that the ‘escape clause’ in the agreement was

included to permit Frontier to abandon the agreement

if Continental were awarded Denver-San Diego au-

thority (tr. 207). Mr. Linkon admitted that Frontier’s

proposal would be ‘materially affected’ either by Con-

tinental’s certification in the Denver-San Diego market

or by a Denver-San Diego through-plane restriction on

Frontier (tr. 208-10). Frontier’s chief economic wit-

ness (Coe) testified that if Continental were certificated

on top of Frontier in the Denver-San Diego market, the

result would be ‘nearly-devastating’ and that ‘the ball

game would be over for Frontier.’ (tr. 447, 523). Mr.

Coe concluded that ‘it would be bad for all three car-

riers’ in the Denver-San Diego market if both Conti-

nental and Frontier enter the market as they propose

(tr. 449-50). He testified that San Diego-Denver traffic

is ‘essential to the viability of our [Frontier’s] proposals’

(tr. 521). Mr. Coe agreed that Continental’s certifica-

—

tion in the San Diego case and the approval of the route

exchange agreement would adversely affect traffic and

revenues for both carriers not only in the Denver-San

Diego market but in the Kansas City-San Diego and

Colorado Springs-San Diego markets as well (tr. 449).

“The fact that Continental is an applicant for non-

stop San Diego-Denver authority in the San Diego case

whereas Frontier would obtain one-stop San Diego-Den-

ver authority from this exchange in no way lessens the

mutual exclusivity of the two grants. Mr. Coe’s testi-

mony as well as the exhibits submitted by Frontier in

this case make clear that the two matters are mutually

exclusive as a matter of economic fact. Indeed, out of

5.9 million in total net passenger revenue forecast by

Frontier in this case, $1.75 million or 30% comes from

markets which Continental would serve if authorized in

the San Diego case. Frontier estimates that it would

carry a total of 26,555 passengers in these markets. (FL-

105). That represents 24% of the traffic and 25% of

the net passenger revenue forecast by Continental in the

San Diego case (CO-300B; 401B, Docket 18104).

“The Board’s dec jon in the San Diego case is predi-

cated largely on what the Board believes would be the

unsatisfactory economic results of adding Continental to

the Denver-San Diego market in 1973. See Order 72-12-

29, pp.8-12. If this exchange is approved and Frontier

enters the Denver-San Diego market, Continental’s op-

portunity for certification would be seriously jeopardized.

Frontier undoubtedly would argue that Continenta

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.