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06/23/77 Delta Air Lines, Inc., v. Civil Aeronautics Board

June 23, 1977

DELTA AIR LINES, INC., PETITIONER

v.

CIVIL AERONAUTICS BOARD, RESPONDENT, *WESTERN AIR LINES, INC., NORTHWEST

AIRLINES, INC., PAN AMERICAN WORLD AIRWAYS, INC., INTERVENORS. PAN AMERICAN WORLD AIRWAYS, INC., PETITIONER,

v.

CIVIL AERONAUTICS BOARD, RESPONDENT, WESTERN AIR LINES, INC., NORTHWEST AIRLINES, INC., INTERVENORS. NATIONAL AIRLINES, INC., PETITIONER,

v.

CIVIL AERONAUTICS BOARD, RESPONDENT, WESTERN AIR LINES, INC., PAN AMERICAN WORLD

AMERICAN AIRLINES, INC., PETITIONER

v.

CIVIL AERONAUTICS BOARD, RESPONDENT, PAN AMERICAN WORLD AIRWAYS, INC., WESTERN AIR LINES, INC., INTERVENORS



McGowan, Leventhal and Robb, Circuit Judges.

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

AIRWAYS, INC., NORTHWEST AIRLINES, INC., INTERVENORS.

Nos. 76-1241, 76-1309, 76-1429, 76-1602 1977.CDC.133

Petitions for Review of Order of the Civil Aeronautics Board.

APPELLATE PANEL:

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MCGOWAN

McGOWAN, Circuit Judge:

These consolidated cases present the first occasion for judicial review of a matter which has already occupied the attention of the Civil Aeronautics Board for nearly ten years -the award of competitive nonstop authority on the Miami-Los Angeles route. Of the various contentions pressed upon us by the several contending parties, only three warrant discussion in some detail:

*fn1. The claim by Delta Air Lines, Inc., that it was entitled to priority by reason of its 1972 merger with Northeast Airlines, Inc.

*fn2. The challenge by National Airlines, Inc., the incumbent monopoly carrier on the route, to the Board's alleged failure to comply with the Energy Policy and Conservation Act of 1975.

*fn3. The contention (echoed by National) of Pan American World Airways, Inc., the carrier recommended for the route by the Administrative Law Judge but displaced at the Board level by Western Air Lines, Inc., that the Board unfairly took into account events occurring during the three-year interval between the closing of the record and the Board's decision.

We find no basis in either of the first two for disturbing the Board's action. The third, however, presents procedural problems which cause us to conclude that the case should be remanded to the Board for reconsideration after opportunity is afforded for adversarial inquiry into matters occurring after the closing of the record in 1973. I

On March 10, 1967 the Board initiated the Southern Tier Competitive Nonstop Investigation. The Miami-Los Angeles route was among the eighteen markets under consideration in that proceeding. Single carrier nonstop service between the two cities had originally been authorized in the Southern Transcontinental Service Case, 33 C.A.B. 701 (1961) (see also 14 C.F.R. § 202.11 (1976)), and from 1961 until 1969 National enjoyed monopoly certification over the route.

The Board, in July, 1969, awarded competitive nonstop authority in the Miami-Los Angeles market to Northeast Airlines, Inc. "for route strengthening purposes." On petition for reconsideration, Eastern Airlines, Inc., a competing applicant, suggested that, given Northeast's comparatively weak financial posture, Northeast might be a likely candidate for a merger, and that, under such circumstances, the Board's solicitude for the welfare of Northeast's route structure might be ill-advised. In response, Northeast categorically assured the Board that no merger was contemplated. Apparently in reliance on this representation, the Board, without discussion, affirmed its award to Northeast in an order issued September 18, 1969. Six days later, Northeast decided to seek a merger. Meanwhile, on October 1, 1969, Northeast commenced nonstop service under its new authority.

Northeast's first prospective merger partner was Northwest Airlines, Inc. In August, 1970, after a public hearing, the Board's Examiner recommended that the proposed merger be approved, and that all of Northeast's certificates, including that which covered the Miami-Los Angeles route, be transferred to Northwest. The Examiner reached this result over the objections of Delta and another carrier, and despite his recognition that Miami-Los Angeles authority had only been granted to Northeast in an effort to counterbalance existing limitations in Northeast's route system. The Board itself was not quite so accommodating in its review of the proposed merger. Although conceding that the transaction would prove economically beneficial to both parties, and would entail no monopoly dangers, a three-member majority of the Board was unwilling to accept transfer of the Miami-Los Angeles authority without an opportunity to reconsider the route award in the light of post-merger circumstances. The December, 1970 order accompanying the Board's opinion approved the merger subject to the conditions

(a) that the authorization of Northwest Airlines to operate segment 7 of Northeast's certificate for Route 27 (Miami-Los Angeles) be stayed pending final decision in a proceeding for the purpose of reexamination of such authorization to be instituted upon transfer of the certificate, and (b) that the transferred certificate for Route 27 shall be subject to whatever determinations are made regarding segment 7 in such proceeding . . . .

Some of the Board's pertinent remarks are set forth in the margin.1

Northwest petitioned for reconsideration, but, in an opinion dated March, 1971, the Board remained steadfast in its refusal to permit transfer of the Miami-Los Angeles route. One factor influential in stiffening the Board's resolve was Delta's expressed willingness to merge with Northeast " whether or not the Miami-Los Angeles segment is transferred to Delta as part of the merger." Rather than proceed in accordance with the restrictions imposed by the Board, Northwest withdrew from the prospective merger. In May, 1971, Northeast and Delta entered into a merger agreement, and another hearing was held by the Board; and, in October, 1971, the Examiner recommended that the merger be approved subject to certain conditions, including a stay of authority to operate the Miami-Los Angeles route pending completion of a section 401(g) proceeding.2 With minor variations not relevant here, the Board in May of 1972 concurred in the Examiner's recommendations. The language in that order referring to the Board's treatment of the Miami-Los Angeles route was essentially identical to that employed on the same subject in connection with the proposed Northwest merger. See text accompanying note 1 supra. Petitions for reconsideration raising issues unrelated to the present controversy were denied, and the Delta-Northeast merger finally approved, in July, 1972. On July 31, Northeast terminated its Miami-Los Angeles service, and National once again became a monopoly carrier between the two cities.

Approximately three weeks later, the Board, honoring its commitment to undertake a post-merger reevaluation of the Miami-Los Angeles market, instituted an investigation designated as the Miami-Los Angeles Competitive Nonstop Case. The stated purpose of this investigation was

to determine whether the public convenience and necessity require (a) the alteration, amendment, or modification of any carrier certificates so as to authorize nonstop service . . . between Miami-Fort Lauderdale, Fla., and Los Angeles-Ontario-Long Beach, Calif., and (b) the alteration, amendment, or modification of Delta Air Lines' certificate for route 27 so as to suspend, terminate, or otherwise modify authority to operate over segment 7.

An expedited hearing was scheduled, and on June 13, 1973, the ALJ issued his decision, finding a continuing need for nonstop competition on the Miami-Los Angeles route, and authorizing Pan American to provide the necessary service. On June 19, 1973, the Board, on its own initiative, granted discretionary review of the ALJ's determination.

The first delay encountered was precipitated by National's contention that certification of a nonstop competitive carrier "would constitute a major Federal action significantly affecting the quality of the environment," and would therefore require a detailed environmental statement under the National Environmental Policy Act of 1969, 42 U.S.C. §§ 4321 et seq. (1970). The ALJ rejected this position, and the Board purportedly followed suit in an order dated September 27, 1973. However, despite its belief that further formal exploration of environmental questions was not statutorily required, the Board announced its intention to accord such matters a thorough airing, and therefore instructed the Director of the Board's Bureau of Operating Rights "to prepare a statement with respect to the environment for consideration and comment by the parties, other environmentally concerned Federal agencies, and other interested persons." A preliminary draft of this environmental assessment was not completed until August, 1974, and the final version did not become available until the following December. Meanwhile, all other proceedings in the Miami-Los Angeles Competitive Nonstop Case were deferred pending completion of the environmental study. The Bureau's ultimate conclusion matched that reached eighteen months earlier by the ALJ, namely, that

the award of a certificate of public convenience and necessity authorizing nonstop air transportation between Miami-Ft. Lauderdale and Los Angeles-Ontario-Long Beach to one of the nine applicants, and the commencement of operations by the carrier selected, would not constitute a "major Federal action significantly affecting quality of the human environment" within the meaning of section 102(2)(c) of the National Environmental Policy Act of 1969.

J.A. 717. No party has challenged this conclusion before either the Board or this court.3

Oral argument was finally heard by the Board on April 16, 1975. Eleven months passed before the Board, on March 15, 1976, issued its decision, affirming the ALJ's finding of a need for competition on the Miami-Los Angeles route, but reversing his award of operating authority to Pan American, and certifying Western instead. At the same time, the Board denied a January, 1976 motion by National to postpone further action until after preparation of a statement under the EPCA estimating "the probable impact on energy efficiency and energy conservation of nonstop competitive authority in the Miami-Los Angeles market." Also denied in March, 1976 was a November, 1974 motion by Continental to reopen the record on the ground that changes in circumstances occurring since the close of economic hearings undermined the evidentiary basis for the ALJ's selection of Pan American, and made profitable operation of the Miami-Los Angeles route by Pan American unlikely.

Pan American had opposed the motions of both National and Continental. However, on the morning of March 15, 1976, only hours before the Board's decision was released, Pan American itself filed a motion to reopen the record for further evidentiary presentations. This motion to reopen was denied, and, on June 16, the Board promulgated an order rejecting various petitions for reconsideration and denying requests for a stay of the award pending judicial review. Such a stay was similarly denied by a motions panel of this court on July 2, 1976, but with directions for expedited hearing on the merits. II

Delta has attempted to persuade us of its entitlement to preferential treatment. Unimpressed by any of the theories advanced, and convinced that Delta had agreed, as one of the conditions of Board approval of the Delta-Northeast merger, to compete on an equal footing with other applicants for Miami-Los Angeles authority, we affirm the Board in its rejection of Delta's claims to special status.

During the Examiner's review of the proposed Northwest-Northeast merger in 1970, Delta urged that, whatever the Board's conclusion as to the overall advisability of the merger, in no event should the Miami-Los Angeles segment of Northeast's Route 27 be transferred to Northwest as part of the deal. *fn4 Criticizing what it characterized as Northeast's "emotional plea" for route strengthening in the Southern Tier investigation, the success of which was followed immediately by Northeast's initiation of merger negotiations, Delta argued that, if transfer of Miami-Los Angeles authority were permitted, other financially weak carriers would be encouraged to seek route awards for use as merger "bait." Technical ...


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