# Petition for Writ of Certiorari — Kerns v. Jordon > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1356%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1974 - **Citation:** 415 U.S. 919 ## 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, 16 8 15 275 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 19 3 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 v. 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. 2 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 4 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- a 5 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. -_ 7 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 8 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. 9 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. 10 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). 11 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). 12 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 — 13 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. 14 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. 15 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. 16 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). — 17 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“. 18 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. — 19 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. 20 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 — 21 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. 22 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. 24 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 19 59 74 81 — 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 v. 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 V. CrviL AERONAUTICS BOARD, RESPONDENT CONTINENTAL AIR LINES, INC.; THE Crry oF EL PAso, THE EL Paso AIRPORT BoarD & EL Paso CHAMBER OF — 2 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 V. 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 v. 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 V. 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 V. 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 4 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. _ 5 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. I. 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). — 7 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 8 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- 10 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. * 11 392 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. 12 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 — 18 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. A. 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- 14 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. B. 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 — 15 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 — 16 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 17 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 v. 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: 18 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 — 19 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 v. 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 20 No. 73-1387 BRANIFF AIRWAYS, INC., PETITIONER V. 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 v. 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 — — 21 No. 73-1414 EASTERN AIR LINES, INC., PETITIONER V. 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 v. 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 v. 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. — 28 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. 24 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. 25 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- 26 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 27 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. 1 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. 80 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 _— 31 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. — 35 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. — 37 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. 89 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. 40 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 41 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. . 42 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. — 43 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 44 130 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. — 45 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 46 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 — 47 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. 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The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_1356%3A1. Public record. Not legal advice.