Petition for Writ of Certiorari — Delta Air Lines, Inc. v. Summerfield

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pi INDEX

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a Opinions Below .......2scveseccscsceevesssseccvess 1

. EEE OILS ED SP LEE OE eT DP 2

Ry Questions Presented .........cceccvessccsencvsevecs 2

4 i he aay So kin os owaa Cae Red eee 3

SE ONY ow cb ren ccrvecvessesedioucerssdserntesiaee 3

rd Specification of Errors To Be Urged ........... Tamas ae

A Reasons for Granting the Writ ..................... 8

of 1.The Court Below, in a Divided Decision, Has

E: Adopted a Construction of a Statute of the United

M States on a Question of Wide Importance, Which

4 Construction Will Have an Immediate Importance

< _ Far Beyond the Particular Facts and Parties In-

$. volved and Will Have a Continuing Effect Upon

Rd Important Considerations of Public Interest and

ns PETE Ee eT PPM pres Serarw enya eae 8

2 2.The Decision of the Majority of the Court Below

e Establishes a Construction of the Civil Aero-

ay nauties Act Which is in Direct Conflict With the

4% Decision of the Supreme Court in Transcontinental

2 & Western Air, Inc. v. Civil Aeronauties Board,

: ee es ED 6x65 i660 erkeeds seteesaes 12

. 3.The Decision of the Majority of the Court Below

- is Directly Contrary to the Well-Established Con-

struction of the Civil Aeronautics Act by the Civil

- i CE haw echcad<dhvews sau ceed ticade 14

E I fo ee ne re eS eae as eho 17

NNR, iui ns csecuenv shy censveesubvavtunedivets 19

‘ CITATIONS

é Cases:

3 Chicago and Southern Air Lines, Inc., Mail Rates,

H RE we ooo 5095 0 nv ees Pade ee keen 4,5

“é Transcontinental & Western Air, Ine. vy. Civil Aero-

> nauties Board, 336 U.S. 601 (1949)...... 2, 12, 13, 17

Statutes :

Civil Aeronautics Act of 1938, 52 Stat. 977, as

amended (47 U.S.C. 401 et seq.) :

EE i Gouin nkdowarsene ta ee eeeGi van eewes 16

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—_ Lh a DIY OR Cem “ ~ ET Leet at ON Ke dn REE,

IN THE

Supreme Court of the United States

Ocroser TERM, 1953

No.

Detta Ar Linzs, Inc., Petitioner,

Vv.

Artuur E. SumMMERFIELD, Postmaster General of the

United States, and Tue Unirep Sratss or AMERICA, on

behalf of the Postmaster General, Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE DISTRICT OF

COLUMBIA CIRCUIT.

Delta Air Lines, Inc., Petitioner herein (substituted as

a party Intervenor for Chicago and Southern Air Lines,

Ine. (R. 79), Intervenor below, by reason of a corporate

merger in which Petitioner was the continuing corpora-

tion) prays that a writ of certiorari issue to review the

judgment of the United States Court of Appeals for the

District of Columbia Circuit entered in Arthur E. Sum-

merfield, Postmaster General of the United States, et al v.

Civil Aeronautics Board, et al, No. 11351, on May 4, 1953.

OPINION BELOW

The opinion of the Court of Appeals for the District

of Columbia Cireuit (R. 68) is not yet reported. The

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opinion of the Civil Aeronautics Board (R. 51) is not yet

reported.

JURISDICTION

The judgment of the Circuit Court of Appeals was en-

tered on May 4, 1953 (R. 78). The jurisdiction of this

court is invoked under Title 28, United States Code, See.

tion 1254(1) and Title 49, United States Code, Section

646(f).

QUESTIONS PRESENTED

1. Whether the Civil Aeronautics Act does, or does not,

authorize the Civil Aeronautics Board, where the domestic

operations and the international operations of an air

carrier engaged in both had been determined by the Board

to be separate classes of service for rate making purposes,

to offset any of the revenues derived from the carrier’s

domestic services during a past three-year period of final

and closed air mail rates against such carrier’s require-

ments for compensation under the Act in its international

operations for which air mail rates were being fixed

retroactively for such period in the proceeding here in

question. ;

2. Whether, if the answer to Question 1 is in the affirm.

ative, the Board may exercise its discretion as to whether

or not, for reasons of public interest, any such possible

offset of revenues derived from the carrier’s domestic

class of service shall be made in whole or in part, or not

at all, in fixing air mail rates for the earrier’s international

class of service.

3. Whether the decision below by the Court of Appeals

effects a recapture of earnings of the air carrier under a

closed rate in its domestic class of service contrary to

the construction of the mail rate provisions of the Civil

Aeronautics Act laid down by the United States Supreme

Court in Transcontinental & Western Air, Inc. vy. Civil

Aeronautics Board, 336 U. S. 601 (1949).

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4, Whether the Board, in fixing mail rates for an air

carrier may give weight to rate-fixing policies desirable

in the public interest for the air transportation industry

as a whole and, therefore, for the particular air carrier

(for which rates are being fixed) as an integral part of

such industry.

STATUTES INVOLVED

The pertinent provisions of the Civil Aeronautics Act of

1938, as amended,' which will be referred to as the Act,

are set forth in the Appendix hereto.

STATEMENT

Chicago and Southern Air Lines, Inc. (hereinafter called

““C&S’’) during the period relevant to this case conducted

domestic air transport operations over routes extending 4

between Chicago and Detroit, on the one hand, and

Houston and New Orleans, on the other, and interna-

tional air transport operations over routes extending be- ;

tween the two last mentioned cities and Caracas, Venezuela :

via Havana and Kingston. The certificates of public 3

convenience and necessity for both operations authorize the

transportation of mail. persons, and property. This case

concerns the fair and reasonable rates of compensation

for the transportation of mail to which C&S is entitled

under the Civil Aeronauties Act for transporting mail

by aircraft in its international operations during the period

from January 1, 1948, to December 15, 1950.

The Board, in July 1948, fixed, among other things, final

mail rates effective January 1, 1948, for the air transport

operations of C&S? over its domestic air transport routes

PR Pe eae

1Act of June 23, 1938, e. 601, 52 Stat. 977, as amended, 49

U.S.C. 401, et seq. ;

2?Chicago and Southern Air Lines, Inc., has since merged with

Delta Air Lines, Inc., by statutory corporate merger, Delta being

the surviving corporation. Delta has been substituted as an In-

tervenor herein subsequent to the decision of the Court of Appeals

(R. 79).

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(appropriate allocations having been made by the Board

of costs and investment between the domestic and the in-

ternational air services of C&S.) This decision of the

Board is reported in Chicago and Southern Air Lines,

Inc., Mail Rates, 9 C.A.B. 786. The final rates so estab-

lished in that case for the domestic routes of C&S re-

mained in effect and unchallenged by the Postmaster

General or anyone else during each of the years 1948,

1949, and 1950. Those rates were fixed on a sliding scale

related to the percentage of passenger seats occupied to

seats available (load factor) and were estimated by the

Board to produce varying rates of return after taxes upon

the C&S investment allocated by the Board to the domestic

air services. The Board’s actual language in showing

these estimated rates of return and certain other possible

earnings which it approved is quoted in the footnote.®

3«* | . The operating income per revenue plane mile before

Federal income taxes, and the rate of return on recognized in-

vestment after income taxes at 38 percent, for various load factors

indicated, are presented below.

Percent return on

Operating income recognized invest-

Revenue passenger before income tax, ment after income

load factor per revenue mile taxes at 38%

Percent Cents Percent

EP senvevddesvesves —3.85 (7)

DP? sewewsaveonseees 3.87 3.6

Sl: ise tuck ineewenye 7.90 7.3

iv crackspaeeneaee 11.03 10.2

7” tguvddvanetnewes 14.16 13.1

1 The loss of 3.85 cents per revenue mile is equivalent to a loss

of 5.7 percent on recognized investment, without allowance for

Federal tax credits.

From the above tabulation, it appears that C&S under honest,

economical, and efficient management may be expected to earn a

rate of return, over an annual period, of 7.3 percent, with a 60

percent annual revenue passenger load factor. At the forecast

passenger load factor of 60.09 percent, the estimated rate of return

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1S ee RO " —

Subsequently, and in a separate proceeding from that

in which the final rates for the domestic routes were fixed,

the Board, on October 18, 1951, fixed final mail rates for

the air transport operations of C&S over its international

routes, retroactively for the period from November 1, 1946

to December 15, 1950, and prospectively from December

16, 1950 (R. 51). It is this proceeding for the fixing of

the mail rates for the international services which is now

before the Court.

The Postmaster General filed objections to the Board’s

Tentative Findings and Conclusions in the proceeding on

the mail rates for the international routes, and also filed

a Petition for Reconsideration of the Board’s final order

therein, in which he contended that the Act required the

Board to offset against the mail pay to be received on

the C&S international routes for the past period 1948-1950,

the amount by which C&S’s net profits on its domestic

routes under the forecasted passenger load factor during

the same period had exceeded a 7.4% rate of return

on investment. C&S had averaged a 12.51% annual rate

of return on its domestic operations for those years. The

Postmaster General argued that the difference between

a 74% return and the 12.51% return (approximately

after taxes is 7.4 percent. It should be noted that with an average

annual passenger load factor of 60 percent, the average base mail

rate will amount to 29.8 cents per airplane mile, but the average

effective mail rate will amount to approximately 26 cents per reve-

nue plane mile flown.

An extra cushion against unforeseen developments will be pro-

vided to the extent that C&S succeeds in developing additional

revenues from express, freight, and incidental sources above the

level forecast for the future period. Similarly, any economies

which the carrier’s management succeeds in accomplishing through

effective cost controls or improved operating procedures and tech-

niques, which serve to avert or mitigate anticipated increases in

prices and to decrease operating costs below the unit cost of 116.6

cents per revenue plane mile estimated herein, will inure to the

carrier in the form of higher earnings.’’ Chicago and Southern

Air Lines, Inc., Mail Rates, 9 C.A.B. 786, 812 (1948).

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$654,000 for the three years 1948-1950) constituted ‘‘ex-

cess profits’? of the domestic services of C&S and was |

‘‘other revenue’’ which, under Section 406(b) of the Act

(see the Appendix hereto), was, as a matter of law, re.

quired to be applied in reduction of the amount of ‘‘need”

of the air carrier determined by the Board for the inter-

national services.

C&S opposed these contentions, urging, inter alia, that

by the explicit terms of the Board’s Order, to which the

Postmaster General made no objection, the Board’s findings

in its opinion fixing the C&S domestic rates were not in-

tended to, and did not, impose a ceiling on the earnings

of C&S’s domestie division and that the Act neither re-

quired, nor permitted, the offset proposed by the Post-

master General.

The Board in its final opinion in the proceeding fixing

the C&S international rates, issued October 18, 1951 (R.

51), rejected the Postmaster General’s contention, saying, _

inter alia, ‘*. . . we believe that we are not required by _

Section 406(b) to reduce the carrier’s mail pay with any _

part of such other revenue if there are sound reasons |

for not doing so as a matter of economic policy’’ (R. 54).

The Board did not pass upon its power to make such an off-

set (R. 55) but concluded that, for the reasons of public pol-

icy set out in detail in its final opinion, the offset contended

for by the Postmaster General should not be made.

On appeal by the Postmaster General, the court below

held (Judge Prettyman dissenting) that the Board was

required by Section 406 of the Act to offset, against the

amount of mail compensation determined to be required

for the international services, the so-called ‘‘excess profits”

on the ecarrier’s domestic services during the 1948-1950

period.

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SPECIFICATION OF ERRORS TO BE URGED

The Court of Appeals erred:

(1) In holding that the Civil Aeronautics Board, in fix-

ing air mail rates for an air carrier for its international

services as a separate class of service and as a separate

rate-making unit from the domestic services of the car- |

rier, Was required by Section 406 of the Civil Aeronautics |

Act to offset any of the carrier’s earnings on the domes- |

tie services against the carrier’s ‘‘need’’ for mail compen- |

sation on its international services;

(2) In holding that the direction of Section 406 of the

Act to the effect that the Board, in fixing air mail rates for

a particular class of the carrier’s services, shall take into

consideration the ‘‘need’’ of the carrier for certain devel-

opmental purposes includes a requirement that the Board

go outside such class of service and ascertain whether there

are any other revenues of the air carrier arising in some

other class of service which could possibly be so offset;

(3) In quoting the statute to the effect, and in holding,

that it is the duty of the Board under Section 406 of the

Act, in fixing air mail rates, ‘‘to ‘take into consideration,

among other factors, ... all other revenue of the air car-

rier’’’. (Page 5 of Opinion of the Court below, R. 72) ;

(4) In holding that Section 406 of the Civil Aeronautics

Act does not vest discretion in the Board as to the extent P

if any to which, in fixing air mail rates for an air carrier’s

international class of services, it will offset against the car- ;

rier’s ‘‘need’’ for air mail compensation for such services :

j

certain other revenue of the carrier derived from its domes-

tic class of services;

(5) In holding that Chicago and Southern had received

excess earnings on its domestic services ;

(6) In holding that the Board’s determination was un-

lawful insofar as it gave effect, for reasons of public in-

terest, to rate fixing policies of importance to the air trans-

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port industry as a whole in fixing the rates of a sin

rier which is an integral part of that industry;

(7) In holding that as a matter of law the Boar

thorized, and required to effect a recapture of pas

ings of an air carrier on its domestic services under

tic mail rates which had long been closed and with

to which no proceeding was pending, by offsettir

earnings against the carrier’s ‘‘need’’ for mail cor

tion on its international services, in a subsequent p

ing in which the only issue was the fixing of mail rs

the international services; and

(8) In setting aside the order of the Board.

REASONS FOR GRANTING THE WRIT

1. The Court Below, in a Divided Decision, Has Ad

Construction of a Statute of the United States on

tion of Wide Importance, Which Construction Will ]

Immediate Importance Far Beyond the Particular F:

Parties Involved and Will Have a Continuing Effex:

Important Considerations of Public Interest and }

Policy.

A divided court below has created a national p

The majority may not have realized this. There is

cussion of it in the opinion. If the Civil Aeronautics

is forced to follow the decision below, the result so

later will be to drive domestic air carriers out of a

stantial international operations into which several «

have been certificated during the last ten years vu

carefully developed national policy.* Thus the n

4 TWA, a domestic air carrier, was issued a certificate fo

across the North Atlantic to Europe and to Africa and be

the Orient. Braniff Airways, a domestic air carrier, wa

a certificate for a route from the United States thro

Caribbean and down the west coast of South America to

Janeiro and Buenos Aires. Northwest Airlines, a dome

carrier, was issued a certificate for routes from the Unite

across the North Pacific to points in Asia. Chicago and §

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single car-

oard is au-

past earn-

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Adopted a

on a Ques-

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9

air policy of the United States as it concerns international

operations of United States air carriers will be seriously

affected and the so-called ‘‘chosen instrument,’’ i.e., one

United States international air operator, not engaged in

domestic air operations, is apt to be left alone in the field, in

the status it enjoyed during the infancy of international air

services and before the development of such national air

policy. This result will follow, not as a result of national

policy determinations (which have been to the contrary) but

because of the decision below by two Judges.

This result will follow because domestic air carriers en-

gaged in both domestic and international air operations

must compete domestically with other domestic air car-

riers who are not engaged in international operations. If

those who do so compete are to have their domestic earn-

ings siphoned off to subsidize the admittedly economically

weaker (R. 54) international operations, good business

sense, as well as survival domestically, will move them out

of the international field.®

Air Lines (now Delta), a domestic air carrier, was issued a certi-

fieate for routes from the United States to Carribbean points and

the North coast of South America.

Detailed statements of the reasons underlying the policies adopted

by this Government with respect to its international air transport

system are set out in the following: Hearings Before the Sub-

committee on Aviation of the Committee on Commerce, United

States Senate 79th Congress, 1st Session, on S. 326; Hearings

Before the Committee on Interstate and Foreign Commerce,

House of Representatives, 80th Congress, 1st Session, on Bills

Relative to Overseas Air Transportation; Hearings Before a Sub-

committee of the Committee on Interstate and Foreign Commerce,

United States Senate, 80th Congress, 1st Session, on S. 987;

American Export Airlines, Trans-Atlantic Service, 2 C.A.B. 16,

Northeast Airlines, et al, North Atlantic Route Case, 6 C.A.B. 319;

“Survival in the Air Age,’’ A Report by the President’s Air

Policy Commission, January 1, 1948, pages 118-119.

*This applies to all international routes operated by domestic

air carriers where the international routes are substantial com-

pared to the total operations of the carrier.

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This alone justifies and requires the Supreme Court to

review this case and direct the proper course under the

federal statutes in question.

The offset between the international ‘‘need’’ and domes-

tic earnings of an air carrier required by the majority of

the Court of Appeals will place the air carrier operating

both international and domestic services in such a posi-

tion that it not only loses its incentive to continue operating

international services but also has its competitive position

in its domestic services seriously impaired. As noted earlier,

the international services are economically weaker than the

domestic. Therefore, the air carrier can only look forward

in the indefinite future, under the Court of Appeals decis-

ion, to a constant draining off of its domestic earnings for

the financial support of its international operations. Domes-

tic air carriers operating international routes compete

domestically with air carriers engaged exclusively in domes-

tic services whose domestic earnings are not subjected to

such diversion. Under such circumstances the air carriers

operating both types of service could not maintain the

same level of domestic earnings as their competitors and

necessarily would compete at a great disadvantage. In

such a situation, the air earrier’s alternative is to withdraw

from international operations in order to maintain its com-

petitive position in the larger domestic market.

Other public interest objectives which the Board has

found to exist with respect to domestic air services also

would be jeopardized under the decision of the court below.

The increasing public acceptance of air transport in re-

cent years has made it possible for the Board to place a

substantial number of domestic air carriers on uniform

service mail rates for domestic services without including

any element of subsidy payments. Necessary further im-

provements in earnings can open the way for reductions

in passenger and cargo rates, increases in the volume of air

coach services, and other benefits to the public.

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. aan

But the offset doctrine advanced by the Court of Appeals

would submit the domestic operations of the domestic air

carriers operating international services to the debilitating

financial drain of subsidizing their international services.

The effect of this is particularly critical because, as noted

above, a substantial proportion of the domestic services are

on uniform service mail rates. Furthermore, it is axiomatic

that domestic passenger and cargo rates must, for competi-

tive reasons, be substantially the same as between carriers.

Consequently, the air carriers operating both domestic and

international services cannot, under the principles laid

down by the Court of Appeals, maintain the same level

of domestic earnings under uniform domestic mail rates

as can its domestic competitors who have no international

services to which their earnings must be diverted. Under

such circumstances, the more limited level of domestic

earnings of those carriers which operate both types of serv-

ice would provide a higher floor to domestic passenger and

cargo rates than would otherwise be the case—unless, al-

ternatively the Board should increase the domestic mail

rates of such carriers to make up their earnings deficien-

cies. In either event, public advantages inherent in lower

passenger and cargo rates or in uniform mail rates are ad-

versely affected. ]

The Civil Aeronautics Board in its mail rate proceedings

has classified the international and domestic services of a

single air carrier as different classes of services for rate-

making purposes, as authorized by Section 406 of the Act, ;

and has thus treated such services as constituting separate

rate making units.® On this premise it has not offset earn-

ings between the two classes of services. The Board has

thereby geared its rate-making process to the preservation

of the basic conditions believed by it to be essential to the :

support of the public interest objectives described above. [

4

11

®TIt has done this in all cases where the international services

were substantial as compared to the total operations of the air ;

carrier. ;

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The court below says that the Board was in error in that

respect. The reversal by the divided court below of this

well established construction of the statute by the Board,

which will result in widespread public dislocations in the

field of international air operations, justifies the Supreme

Court in granting the requested review.

12

2. The Decision of the Majority of the Court Below Estab-

lishes a Construction of the Civil Aeronautics Act Which is

in Direct Conflict With the Decision of the Supreme Court

in Transcontinental & Western Air, Inc. v. Civil Aeronau-

tics Board, 336 U.S. 601 (1949).

The principles laid down by the decision of the court be-

low are directly contrary to those laid down by the Supreme

Court in Transcontinental & Western Air, Inc. v. Civil

Aeronautics Board, 336 U.S. 601 (1949). In that decision,

this Court held that in fixing mail rates for air carriers

the Board was without statutory authority to revise an

air carrier’s mail rates retroactively to a date prior to the

institution of the rate proceeding. In the present case, how-

ever, the court below holds that the statute authorizes the

recapture of the earnings made by C&S for a past period

under final domestic mail rates which were closed and with

respect to which no proceedings for review were pending.

Final domestic mail rates for C&S were fixed by the

Board in July 1948, effective January 1, 1948, and these

rates remained in effect and unchallenged, with no proceed-

ing pending seeking their revision, during each of the years

1948, 1949, and 1950. The earnings of C&S during those

years fell well within the allowable rate of return estab-

lished by the Board’s incentive scale (see footnote 3,

supra). In the present case, involving a proceeding in-

stituted only for the purpose of fixing international mail

rates for C&S, two of the three judges in the Court of

Appeals hold that the Board, in issuing its order of Octo-

ber 18, 1951, fixing only the international rates, must off-

set against those rates, and in effect recapture from the

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carrier, earnings under its closed domestic rates during

the years 1948, 1949, and 1950. This clearly violates the

holding in Transcontinental & Western Air, Inc. v. Cwil

Aeronautics Board, supra, that the statute does not author-

ize the review of closed rates.

The direct nature of the conflict between the decision of

the court below and the TWA Case is shown clearly by the

existing situation with respect to TWA’s own mail rates.

In the TWA Case the Court had before it a Board pro-

ceeding arising on a Petition filed by TWA on March 14,

1947 asking for an increase in its domestic mail rates effec-

tive from January 1, 1946. The Board held that it was

without power to revise TWA’s domestic rates for the

period prior to March 14, 1947, and the Supreme Court

affirmed. However, TWA’s international mail rates for

the period since February 5, 1946 are now still open in

another proceeding pending before the Board. A logical

application of the Court of Appeals decision would require

that the same domestic rates of TWA for the same period

which the Supreme Court said were beyond the Board’s

power to review directly in the original TWA Case, now

must be reviewed indirectly in the process of retroactively

offsetting earnings of TWA’s domestic services against its

international ‘‘need’’ during that period. No financial

stability, no accurate credit rating, no stable balance sheet

position, no dividend policy, and no ability to raise pri-

vate capital can struggle through such quicksands as are

piled up by the decision of the court below.

The decision of the court below erroneously sanctions a

cost-plus system of rate fixing contrary to the basic con-

cepts of the statute which the Supreme Court enunciated in

the TWA Case. If all closed rates are to be reviewed in

finalizing an open class of service rate, there is no incentive

to do well under the closed rate. In reaching its conclusion

in the TWA Case, the Court expressed the view that:

‘¢Petitioner’s reading of the Act would in practical

effect have the tendency to transform it into a cost-

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i. g

plus system of regulation, a construction which would

not harmonize with the apparent design of the Act ...’’,

(336 U.S. at p. 606).

14

Under the principles of the decision of the court below, the

air carrier operating both international and domestic serv-

ices can find its entire system rates for both classes of

service subject to adjustment long after the domestic rates

have been closed. Under such a regime all incentive to

economy and efficiency in domestie operations is lost. The

Post Office Department in fact is currently contending, in

certain mail rate proceedings now pending before the Board

and involving the future rates of such air carriers, that the

Board must implement the Court of Appeals decision by

setting up mechanics whereby offsets will be automatically

made in the future between domestic and international

earnings or whereby earnings above some minimum level

otherwise will be immobilized.

3. The Decision of the Majority of the Court Below is Di-

rectly Contrary to the Well-Established Construction of the

Civil Aeronautics Act by the Civil Aeronautics Board.

A question of interpretation of the Civil Aeronautics Act

is involved which the court below has resolved by rejecting

a methods of rate-fixing which has been consistently fol-

lowed by the Civil Aeronautics Board in fixing mail rates

for an air carrier operating both domestic and international

air services.

The decision of the majority of the court below rests on

an extremely narrow, clearly unjustified, and erroneous

interpretation of the Board’s rate-fixing powers under the

statute. While the court concedes, as it must, that the

statute expressly authorizes the Board to fix different mail

rates for different classes of service, the court denies any

substance to that grant of authority by ruling that in fixing

the rate for one class of service the Board must consider,

and include in its computation, the earnings from all classes

of service operated by the carrier. Such a qualification

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15

upon the power to fix different rates for different classes

of service makes the statutory grant of power meaningless.

As Judge Prettyman observes in his dissenting opinion

below, the concept of fixing different rates for different

classes of service clearly contemplates that a rate for a

particular class of service may be fixed upon the basis of

the revenues, expenses, and other factors relating to that

class of service and no other service.

The court below in undertaking to quote a portion of the

statute left out certain words necessary to convey its

proper meaning and thus reveals one way in which the

court erred. The majority opinion says, in effect, that the

court thinks it is ‘‘the duty of the Board in fixing ‘fair and

reasonable rates of compensation’ under § 406(b) in each

case to ‘take into consideration, among other factors, .. .

all other revenue of the air carrier’ ’’. (R. 72, second full

paragraph on the page.) This quotation suggests offset to

the mind. The statute properly quoted does not. Section

406(b) provides (see the Appendix hereto) that in deter-

mining the rate in each case the Board ‘‘shall take into

consideration, among other factors, .. . the need of each

such air carrier for compensation for the transportation of

mail sufficient ... together with all other revenue of the air

carrier, to enable such air carrier... ’’ (emphasis added)

to accomplish certain important developmental objectives :

as revealed by the full language of Section 406(b) of the

Act. As Judge Prettyman said in his dissent below:

‘¢ It is noteworthy that the statute does not de- q

seribe need as the remainder after all other revenue is

deducted. The statute does not speak of offsets or de-

ductions. The statute is affirmative in its prescription. P

It speaks of compensation which ‘together with’ all t

other revenue will enable the carrier, ete. This is lan-

guage appropriate to a measure of discretion in re- j

spect to the particular carrier and to the particular

service...’ (R. 77).

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The whole statutory emphasis is upon meeting the develop-

mental need. The reference to ‘‘other revenue’’ is entirely

incidental thereto. Obviously, a discretionary concept,

rather than one of mandatory offset, is intended. The lan-

guage simply cannot be quoted grammatically in the manner

attempted by the court below.

The court below refuses to recognize that the statute au-

thorizes the Board to give weight to overall public interest

objectives in fixing mail rates and in determining rate-

fixing methods. Although the opinion of the Board in this

ease describes in detail the public interest considerations

which have lead the Board to conclude that mail rates for

domestic and international services should be fixed as sepa-

rate rate-making units without offset of earnings between

them (R. 19-21; and 54-55), the court below, without deny-

ing the existence and force of these considerations, holds

that the Board was not authorized by the statute to give

weight to them in fixing the carrier’s international rates.

The court’s conclusion clearly is inconsistent with the lan-

guage of Section 2 of the Act (see the Appendix hereto)

and with the language of Section 406 of the Act which di-

rects and authorizes the Board to take into account broad

considerations in fixing mail rates. For example, the first

sentence of Section 406(b) provides:

“Tn fixing and determining fair and reasonable rates

of compensation under this section, the Board, con-

sidering the conditions peculiar to transportation by

aircraft and to the particular air carrier or class of air

carriers, may fix different rates for different air car-

riers or classes of air carriers, and different classes of

service’’. (emphasis added).

A subsequent portion of Section 406(b) provides that:

‘‘In determining the rate in each case, the Board

shall take into consideration, among other factors, ...

the need of each such air carrier for compensation for

the transportation of mail sufficient to insure the per-

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17

formance of such service, and, together with all other

revenue of the air carrier to enable such air carrier

under honest economical, and efficient management, to

maintain and continue the development of air trans-

portation to the extent and of the character and quality

required for the commerce of the United States, the

Postal Service, and the national defense.’’ (emphasis

added).

Such broad statutory directives clearly authorize the Board

to frame its rate-fixing method in this case upon the basis

of the considerations of public interest which the Board in

its opinion found were applicable to this case.

CONCLUSION

The decision by the divided court below will change, im-

portantly, if not reverse completely, the national policy of

the United States developed during a long period of care-

ful consideration which has placed a number of domestic

air carriers in the field of international air operations;

that decision is inconsistent with the principles and the

decision laid down by the Supreme Court in Transconti-

nental & Western Air, Inc. v. Civil Aeronautics Board, 336

U.S. 601 (1949) forbidding the review of closed rates and

repudiating the theory of a cost-plus system of rate fixing;

and that decision over-ruled well-established constructions

of the Civil Aeronautics Act affecting the broad public in-

terest placed upon the Act by the administrative agency

charged with its administration.

The importance of the air transportation system of inter-

national and domestic services to the national defense and

to the public interest of the nation generally is universaliy

accepted. The decision of the court below in a divided

opinion so importantly and adversely affecting areas of

broad public interest as referred to above, should not be

permitted to stand without review by the Supreme Court.

Wuererore, Petitioner prays that a writ of certiorari

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18

issue with a view to causing the decision below to be re.

viewed by this Court.

L. Wetcu Posve,

805 15th Street, N. W.,

Washington 5, D. C.,

Attorney for Petitioner.

Of Counsel:

R. S. Maurer,

Vice President-Legal,

Delta Air Lines, Inc.,

Municipal Airport,

Atlanta, Georgia.

Pocus & Neat,

805 15th Street, N. W.,

Washington 5, D. C.

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19

APPENDIX

The Civil Aeronautics Act of 1938, 52 Stat. 977, as

amended, 49 U.S.C. 401, et seg., provides in part as fol-

lows:

‘‘Declaration of Policy

‘Sec, 2 [52 Stat. 980, 49 U.S.C. 402] In the exercise and

performance of its —_— and duties under this Act, the

[Board] * * * shall consider the following, among other

things, as being in the public interest, and in accordance

with the public convenience and necessity—

(a) The encouragement and development of an air-trans-

portation system properly adapted to the present and fu-

ture needs of the foreign and domestic commerce of the

United States, of the Postal Service, and of the national

defense ;

(b) The regulation of air transportation in such manner

as to recognize and preserve the inherent advantages of,

assure the highest degree of safety in, and foster sound

economic conditions in, such transportation, and to im-

prove the relations between, and coordinate transportation

by, air carriers;

(c) The promotion of adequate, economical, and efficient

service by air carriers at reasonable charges, without un-

just discriminations, undue preferences or advantages, or

unfair or destructive competitive practices ;

(d) Competition to the extent necessary to assure the

sound development of an air-transportation system prop-

erly adapted to the needs of the foreign and domestic com-

merece of the United States, of the Postal Service, and of

the national defense ;

(e) The regulation of air commerce in such manner as

to best promote its development and safety; and

(f) The encouragement and development of civil aero-

nauties.”’

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‘‘Rates for Transportation of Mail

‘‘Authority to Fix Rates

“*Sec. 406 [52 Stat. 998, 49 U.S.C. 486] (a) The [Board

* * * is empowered and directed, upon its own initiative o

upon petition of the Postmaster General or an air carrie

(1) to fix and determine from time to time, after notic

and hearing, the fair and reasonable rates of compenss

tion for the transportation of mail by aircraft, the facil;

ties used and useful therefor, and the services connecte

therewith * * * by each holder of a certificate authorizin

the transportation of mail by aircraft, and to make suc

rates effective from such date as it shall determine to b

proper; (2) to prescribe the method or methods, by ai

craft-mile, pound-mile, weight, space, or any combinatio

thereof, or otherwise, for ascertaining such rates of con

pensation for each air carrier or class of air carriers; an

(3) to publish the same; and the rates so fixed and dete:

mined shall be paid by the Postmaster General from appri

priations for the transportation of mail by aircraft.

‘*Rate-Making Elements

(b) In fixing and determining fair and reasonable rate

of compensation under this section, the [Board] * * *, cor

sidering the conditions peculiar to transportation by aii

craft and to the particular air carrier or class of air cai

riers, may fix different rates for different air carriers o

classes of air carriers, and different classes of service. I

determining the rate in each ease, the [Board] * * * sha

take into consideration, among other factors, the conditio

that such air carriers may hold and operate under certif

cates authorizing the carriage of mail only by providin

necessary and adequate facilities and service for the trans

portation of mail; such standards respecting the characte

and quality of service to be rendered by air carriers as ma

be prescribed by or pursuant to law; and the need of eac

such air carrier for compensation for the transportatio

of mail sufficient to insure the performance of such service

and, together with all other revenue of the air carrier, t

enable such air carrier under honest, economical, and eff

cient management, to maintain and continue the develoy

ment of air transportation to the extent and of the chara

ter and quality required for the commerce of the Unite

States, the Postal Service, and the national defense.”’

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