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Civil Aeronautics Board (2)
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Civil Aeronautics Board (2)
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Philip W. Buchen Files
Philip Buchen's General Subject Files
subjects
Civil Aeronautics Board. (06/30/1940 - 01/01/1985)
Aeronautics, Commercial
Legislation
Regulatory reform
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1975
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1974-11-01
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1974
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The original documents are located in Box 2, folder "Civil Aeronautics Board (2)" of the
Philip Buchen Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 2 of the Philip Buchen Files at the Gerald R. Ford Presidential Library
July 25, 1975
Signature
Dear Mrs. Bogge:
Thank you for your letter to the President concerning the
Civil Aeronautics Board's forthcoming decision in the
transationtic route proceeding, and recommending the
inclusion of New Orleans as a co-terminal on a transatiantic
reute.
As I am sure you are aware, the President has only limited
authority to review decisions of the Civil Aeronautics Board,
which is an independent regulatory agency. Your letter is
appreciated, however, and you may be assured that your
views will receive appropriate consideration.
Sincerely,
Philip W. Buchen
Counsel to the President
The Honorable Lindy (Mrs. Hale) Boggs
House of Representatives
Washington, D.C. 20515
DC:ns
Incoming sent to Mr. Buchen
FORD i LIBRARY GERALD
6-30
RS. HALE) BOGGS, M.C.
WASHINGTON OFFICE:
DISTRICT, LOUISIANA
1519 LONGWORTH BUILDING
WASHINGTON, D.C. 20515
COMMITTEES:
BANKING, CURRENCY AND
BARBARA RATHE
HOUSING
Longress of the United States
ADMINISTRATIVE ASSISTANT
HOUSE ADMINISTRATION
ARBA BOARD
House of Representatives
NIEBUCA REVOLUTION
Washington, D.C. 20515
1776-1976
June 25, 1975
Honorable Gerald R. Ford
The President
Executive Office
MP
The White House
1600 Pennsylvania Avenue
Washington, D. C. 20500
Dear Mr. President:
I understand the Civil Aeronautics Board will shortly
forward to you its recommendations on the Transatlantic Route
Proceeding - Docket No. 25908.
In view of its population, world trade activities, ocean
freight traffic, offshore oil and gas expertise and foreign tourist
industry, among other things, the City of New Orleans should be
designated as a co-terminal on the route of a transatlantic airline
authorized to operate non-stop between New Orleans and Europe, and
I am advised that the Law Judge who heard the case has so recommended.
I fully support the City's position in this matter, Mr. President,
and would like to take this opportunity to urge your favorable considera-
tion of New Orleans' request to be designated as a co-terminal on the
transatlantic route under review.
My warmest and best personal regards.
Sincerely,
Landy
Lindy (Mrs. Hale) Boggs, M. C.
LB:mpk
FORD i LIBRARY 938870
yes number action
SEP 2 1975
Republican Party of Hawaii
George A. Henrickson
September 15, 1975
Chairman
Mrs. Patricia B. Davis
1st Vice Chairman
Carl K. Mirikitani
2nd Vice Chairman
Douglas L. Shanaman
3rd Vice Chairman
William B. Paul
4th Vice Chairman
Mrs. Jean S. Coleman
The Honorable John Marsh
Secretary
Counsel to the President
Herman E. Mulder
White House
Treasurer
Washington, D. C. 20500
Mrs. Carla W. Coray
National Committeewoman
Dear Mr. Marsh:
Edward Brennan
National Committeeman
This letter is being written to you on behalf of Hawaiian
Charles Isaak
Airlines and its recent application to the Civil Aeronau
Hawaii County Chairman
tics Board for the certificated scheduled airline route
Fred Hemmings, Jr.
authority between Vancouver, British Columbia, Canada and
Honolulu County Chairman
Honolulu, Hawaii. Recently I have read in the newspaper
Michael S. Downing
that the administrative judge to the CAB, Mr. Ross Neumann,
Maui County Chairman
has recommended to the CAB that Western Airlines be certi-
Edward L. Sarita
ficated for the scheduled airline route between Vancouver,
Kauai County Chairman
British Columbia and Honolulu, Hawaii. The purpose of my
letter is to urge you to reconsider the application of
Hawaiian Airlines as the most logical recipient of that
certificated scheduled air route between Vancouver and
Honolulu.
It is my understanding that Hawaiian Airlines proposes the
highest service frequency to the islands from Vancouver of
all proposals that are now before the CAB. Frequency pro-
posed in its application as I understand it is twice a day.
This high service frequency would only lead to increased
employment in the islands for local people in the airline
industry. I have been advised that the initial estimate by
Hawaiian Airlines is that 182 new airline jobs would be pro-
vided of which a majority would be here in Hawaii. Hawaiian
Airlines has had a long history in aviation to the citizens
of Hawaii and certainly would be identified as the "Hawaiian"
carrier to Hawaii from Canada. This identification is a
most valuable asset in todays very competitive market place.
In addition to Hawaiian Airlines being an identi ied carrier
GERALD
LIBRARY
The Honorable John Marsh
Page 2
September 15, 1975
from Hawaii to Canada, it proposes to promote and develop
freight service flights from all of the islands to Canada,
assisting the State of Hawaii in its agricultural deve-
lopment and small business growth, particularly as it is
applied to our neighbor islands.
In my discussion with the executives of Hawaiian Airlines
concerning its ability to provide the equipment and crews
to effectively handle this route I have been assured by
Hawaiian Airlines that they are presentlv maintaining and
providing complete maintenance service for many of the
international carriers who come to Hawaii and that they
have available crews for the aircraft which would be flying
between the islands, although these crews would have to be
upgraded. I have also been advised that Hawaiian Airlines
has available the aircraft to meet the needs for providing
the best service between Vancouver and Hawaii to the general
public.
As a lifelong resident in the State of Hawaii I am vitally
concerned with providing our Hawaiian businesses the oppor-
tunity of competing on a scale much larger than just within
the State of Hawaii. Hawaiian Airlines is asking for that
opportunity and I am asking you, as counsel to the President,
to please assist us in seeing what can be done about obtain-
ing for our local airline, Hawaiian Airlines, the opportunity
of providing scheduled airline service between Vancouver,
British Columbia, Canada and the State of Hawaii. It is my
understanding that the CAB will now review the recommendation
of Judge Neumann and would then make a recommendation to the
President for final selectio of the carrier for this sche-
duled airline route. I would ask that you keep our airline,
Hawaiian Airlines, in mind should you have the opportunity
of making a recommendation either to the CAB or to the
President relative to the airline route award for Vancouver
to Honolulu.
Very truly yours,
Garys Chairman
Republican Party of Hawaii
BERALD FORD LIBRARY
grin
THE WHITE HOUSE
WASHINGTON
Regulatory
September 25, 1975
MEMORANDUM FOR:
PHIL BUCHEN
FROM:
MAX FRIEDERSDORF M. 6.
SUBJECT:
Joint Letter from Senators Mansfield,
Hatfield & Packwood
Pursuant to our instructions concerning contacts to regulatory
agencies, I am referring the attached letter to you for
direct handling.
It has not been acknowledged.
Please note their deadline request.
GERALD FORD LIBRARY
9-25
RUSSELL B. LONG, LA., CHAIRMAN
HERMAN E. TALMADGE, GA.
CARL T. CURTIS, NEBR.
VANCE HARTKE. IND.
PAUL J. FANNIN, ARIZ.
SIBRAHAM RIBICOFF, CONN.
CLIFFORD P. HANSEN, WYO.
HARRY F. BYRD, JR., VA.
ROBERT J. DOLE, KANS.
GAYLORD NELSON, WIS.
BOB PACKWOOD, OREG.
WALTER F. MONDALE, MINN.
WILLIAM V. ROTH, JR., DEL.
MIKE GRAVEL, ALASKA
United States Senate
BILL BROCK, TENN.
LLOYD BENTSEN, TEX.
WILLIAM D. HATHAWAY, MAINE
COMMITTEE ON FINANCE
FLOYD K. HASKELL, COLO.
WASHINGTON, D.C. 20510
MICHAEL STERN, STAFF DIRECTOR
DONALD V. MOOREHEAD, CHIEF MINORITY COUNSEL
September 24, 1975
The Honorable Gerald R. Ford
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500
Dear President Ford:
For the past 18 months, Evergreen Helicopters of
McMinnville, Oregon has had pending before CAB a proposal
MP
to acquire Johnson Flying Service of Missoula, Montana.
The CAB has informed us that their approval of the
acquisition is imminent.
Since final approval must come from the White House,
we are taking this opportunity to urge you to expedite
this matter with all possible haste. We understand that
CAB is fully supportive of the proposed merger so that
there appears to be no reason to delay the matter further.
If final approval cannot be issued by October 6,
1975, would you please notify us immediately.
Cordially,
Like MIKE MANSFIELD monefied
middled
MARK HATFIELD
Bob Packwood
BOB PACKWOOD
BP:kbs
cc:CAB
FORD is LIBRARY GERALD
[oct 1975?
Eva,
Mr. Buchen talked to Walter Hickel. Mr. nickel
was calling-re Section 801. He wants Mr. B
to check on, I believe (I listened in in the
end) :
Western Airlines from:
Ripecision
0 Anchorage, Alaska - San Francisco
Bur.of
(2) Los Angeles - Miami
- way down linein decision making
Mr. Buchen is to check with CAB tomorrow. Please
operating
remind.
Rights
He should call Mr. Hickel on Saturday at the
has
Brown Palace Hotel in Denver. IDID NOT GET
under
A NUMBER
review
Thanks.
Bd.
merSchuiltz Heye - -393-3111
Genil Counsel
CAB
Called Prided on 10/25/75
FORD is LIBRARY
P.
THE WHITE HOUSE
CAB
WASHINGTON
October 2, 1975
Dear Senator Mansfield:
This will acknowledge your letter of September 24, 1975,
concerning the CAB approval of the merger between
Evergreen Helicopters and Johnson Flying Service.
The case was still pending at the CAB when we received
your letter and the Board has complied with our request
for expedited treatment. Interested Executive agencies
received copies of the Board's decision today and are
treating it on an expedited basis.
I am confident that final action can be taken by October 6,
1975, as you requested.
With kind regards,
Sincerely,
They W.Buclen
Philip W. Buchen
Counsel to the President
Honorable Mike Mansfield
United States Senate
Washington, D. C. 20510
cc: Senator Mark Hatfield
Senator Bob Packwood
FORD is LIBRARY 0ERALD
Dudley said he
has talked with mr Hills
+ agree that
they won't he calling
then -
just stay Northwest with
FORD is LIBRARY GERALD
Thursday10/2/75
9:05
Mr. Buchen would like you and Dudley to handle
these two items.
Mr. Buchen said Charles Goodell's partner is representing
if you need to call them.
He doesn't know who represents Pan Am
FORD is LIBRARY 078830
Wednesday 10/1/75
Meeting
10/2/75
3:30 p.m.
12:05 Mel Laird will be chairing an energy project
Thursday and Friday -- so he won't be able to
attend the meeting at 3:30 p.m. Thursday 10/2
with Don Nyrob.
cc: Mr. Hills
Monday 9/29/75
Meeting
10/1/75
3 p.m.
4:10
Mr. Buchen has scheduled a meeting for 3 p.m.
on Wednesday 10/1 to meet with Mel Laird and Don Nyrop
of Northwestern -- along with Mr. Hills.
cc: Mr. Hills
Gun
paid
LISARRY GERALD FORD
DRAFT
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON D.C. 20503
ACTION
MEMORANDUM FOR THE PRESIDENT
Subject: Civil Aeronautics Board Decision: Service to Saipan,
Docket 24421
The Civil Aeronautics Board has found it in the public interest
to award now route authority to Continental/Air Micronesia to
provide service between points in Japan and Saipan, Mariana
Islands, Trust Territory of the Pacific Islands. The Board'
decision contains conditions designed to focus attention on
the development of Saipan as the gateway to the Trust Territory
and to reduce revenue diversion claimed by Pan American on its
existing Guam-Japan operations.
Department of Commerce recommends that you return the case to the
Board, with a request that the Board act within 30 days to submit
a new order and that the new order award authority to a carrier
already serving Japan (i.e., Pan American or Northwest). The
position of Commerce is based upon the belief that the introduction
of Continental into Japan would cause an opening of the U.S.-Japan
bilateral agreement and result in the U.S. having to make major
concessions to JAL regarding service to more U.S. points and U.S.-
beyond rights, that Continental potentially may not be able to
serve the Japan-Saipan market well and thus be a detriment to the
development of Micronesian tourism, and that the U.S. obligation
under U.N. trusteeship to develop the Micronesian economy will
not be carried out if Contential receives the route award. Of the
two carriers currently serving Japan, Commerce favors Pan American
for Saipan-Japan authority.
National Security Cóuncil recommends that you return the case to
the Board, with a request that the Board act within 30 days to
submit a new order and that the new order award authority to a
carrier already serving Japan. The position of National Security
Council is based upon the belief that the introduction of
Continental into Japan may cause the reopening of the U.S. -Japan
bilateral agreement and a Japanese request for rights for JAL to
U.S. beyond gateway cities which the U.S. would not want to
grant, that Continental could not compete effectively against
Japan Air Lines, that a decision favoring Continental over Pan
American would have an adverse impact upon Pan American S efforts
GERALD
LIBRARY
2
to secure financial credit, and that returning the order to
the Board will eliminate the potential for complicating the
consideration of aviation issues which may arise during
Emperor Hirohito's visit. National Security Council favors
Pan American for the route award.
Council on International Economic Policy recommends that the
Board's decision be modified to designate Pan American as the
most appropriate carrier. The basis for CIEP's recommendation
is the belief that selection of a carrier other than Pan American
will give rise to serious bilateral difficulties with Japan which
would require the U.S. to allow JAL service to more interior U.S.
cities and to U.S. beyond cities (e.g., New York to Buenos Aires),
that an award to Pan American would serve the goal of fuel
conservation as the carrier already flies over Saipan daily on
the route from Guam to Japan, that selection of a carrier other
than Pan American would serve as a negative signal to its financial
backers both current and potential, that the addition of Continental
into the Micronesia-Japan market would result in intense competition
which could well lead to over-capacity and uneconomic returns for
JAL, Pan American, and Continental. Representatives of the Japanese
Aviation Commission have indicated to CIEP that designation of Pan
American would raise the fewest logistical and policy problems for
the Japanese.
The Department of Transportation recommends that the Board's order
be approved for a three-vear period. The Departments of Interior,
State, Defense, and Justice, the Council on Wage and Price Stability
and [the Office of the Council to the President] have no objection
to the Board's proposed order. Copies of the agency viewpoints are
attached for your consideration.
It is the understanding of the Office of Management and Budget
that all executive agencies which participated in the review
of this case were aware of the full range of primary arguments
for and against the selection of Continental rather than Pan
American or Northwest. We believe that a Presidential decision
to overturn the Board's proposed order to award new route
authority should be based upon compelling reasons which would
support such action. After a thorough review of the record
plus the comments of each reviewing executive agency, the Office
of Management and Budget recommends you approve the Board's
decision by signing the order where indicated.
Calvin J. Collier
Associate Director for
Economics and Government
Attachments:
CAB letter of transmittal
GERALD
CAB order
LIBRARY
3
Option. and Implementation Actions
1) Approve the Board's decision an order. II
Sign the order where indicated.
2) Return the case to the Board and request a new order be
submitted within 30 days and that the new order award
authority to a carrier already serving Japan. L
Staff to prepare letter to the Chairman.
3) Direct the Board to award the new route authority to Pan
American. 1]
Staff to prepare letter to the Chairman.
4) Approve the Board's order for a three-year period. 17
Staff to prepare letter to the Chairman.
5) See me. []
FORD
LIBRARY
air
THE WHITE HOUSE
WASHINGTON
September 25, 1975
MEMORANDUM FOR:
PHIL BUCHEN
FROM:
MAX FRIEDERSDORF M.G.
SUBJECT:
Joint Letter from Senators Mansfield,
Hatfield & Packwood
Pursuant to our instructions concerning contacts to regulatory
agencies, I am referring the attached letter to you for
direct handling.
It has not been acknowledged.
Please note their deadline request.
FORD i LIBRARY 03RALD
RUSSELL B. LONG, LA., CHAIRMAN
9-25
HERMAN E. TALMADGE, GA.
CARL T. CURTIS, NEBR.
VANCE HARTKE, IND.
PAUL J. FANNIN, ARIZ.
ABRAHAM RIBICOFF, CONN.
CLIFFORD P. HANSEN, WYO.
HARRY F. BYRD, JR., VA.
ROBERT J. DOLE, KANS.
GAYLORD NELSON, WIS.
BOB PACKWOOD, OREG.
WALTER F. MONDALE, MINN.
WILLIAM V. ROTH, JR., DEL.
MIKE GRAVEL, ALASKA
BILL BROCK, TENN,
United States Senate
LLOYD BENTSEN, TEX.
WILLIAM D. HATHAWAY, MAINE
FLOYD K. HASKELL, COLO.
COMMITTEE ON FINANCE
WASHINGTON, D.C. 20510
MICHAEL STERN. STAFF DIRECTOR
DONALD V. MOOREHEAD, CHIEF MINORITY COUNSEL
September 24, 1975
The Honorable Gerald R. Ford
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500
Dear President Ford:
For the past 18 months, Evergreen Helicopters of
McMinnville, Oregon has had pending before CAB a proposal
MP
to acquire Johnson Flying Service of Missoula, Montana.
The CAB has informed us that their approval of the
acquisition is imminent.
Since final approval must come from the White House,
we are taking this opportunity to urge you to expedite
this matter with all possible haste. We understand that
CAB is fully supportive of the proposed merger so that
there appears to be no reason to delay the matter further.
I
If final approval cannot be issued by October 6,
1975, would you please notify us immediately.
Cordially,
Like MIKE MANSFIELD
MARK HATFIELD
Bob Packwood
BOB PACKWOOD
BP kbs
CC: CAB
FORD i GERALD LIBRARY
Saturday 10/4/75
12:55 John Robson would appreciate a call.
363-3662
He's at home and we can reach him there.
Will take just a couple of minutes.
(The attached letter came in today.)
FORD is LIBRARY 038870
airlines
THE WHITE HOUSE
WASHINGTON
October 6, 1975
Dear Senator Mansfield:
This is in further response to your letter of September 24, 1975,
requesting expedited treatment of the merger between Evergreen
Helicopters and Johnson Flying Service.
I have just learned that the President has approved the Board's
Order approving the merger, in time to meet your deadline of
October 6, 1975.
With kind regards,
Sincerely,
Thelip W. Bucher
Philip W. Buchen
Counsel to the President
The Honorable Mike Mansfield
United States Senate
Washington, D.C. 20510
CC: Senator Mark Hatfield
Senator Bob Packwood
LIBRARY GERALD R. FORD
giving
THE WHITE HOUSE
Packwood
WASHINGTON
Son.
September 25, 1975
MEMORANDUM FOR:
PHIL BUCHEN
FROM:
MAX FRIEDERSDORF M. 6.
SUBJECT:
Joint Letter from Senators Mansfield,
Hatfield & Packwood
Pursuant to our instructions concerning contacts to regulatory
agencies, I am referring the attached letter to you for
direct handling.
It has not been acknowledged
Please note their deadline request.
LIBRARY GERALD P. FORD
9-25
RUSSELL B. LONG, LA., CHAIRMAN
HERMAN E. TALMADGE, GA.
CARL T. CURTIS, NEBR.
VANCE HARTKE, IND.
PAUL J. FANNIN, ARIZ.
ABRAHAM RIBICOFF, CONN.
CLIFFORD P. HANSEN, WYO.
HARRY F. BYRD, JR., VA.
ROBERT J. DOLE, KANS,
GAYLORD NELSON, WIS.
BOB PACKWOOD, OREG.
WALTER F. MONDALE, MINN.
WILLIAM V. ROTH, JR., DEL.
United States Senate
MIKE GRAVEL, ALASKA
BILL BROCK, TENN.
LLOYD BENTSEN, TEX.
WILLIAM D. HATHAWAY, MAINE
COMMITTEE ON FINANCE
FLOYD K. HASKELL, COLO.
WASHINGTON, D.C. 20510
MICHAEL STERN, STAFF DIRECTOR
DONALD V. MOOREHEAD, CHIEF MINORITY COUNSEL
September 24, 1975
The Honorable Gerald R. Ford
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500
Dear President Ford:
For the past 18 months, Evergreen Helicopters of
McMinnville, Oregon has had pending before CAB a proposal
ME
to acquire Johnson Flying Service of Missoula, Montana.
The CAB has informed us that their approval of the
acquisition is imminent.
Since final approval must come from the White House,
we are taking this opportunity to urge you to expedite
this matter with all possible haste. We understand that
CAB is fully supportive of the proposed merger so that
there appears to be no reason to delay the matter further.
If final approval cannot be issued by October 6,
1975, would you please notify us immediately.
Cordially,
whe MIKE MANSFIELD
Middle
MARK HATFIELD
Bob Packwood
BOB PACKWOOD
BP: kbs
CC: CAB
FORD i LIBRARY
THE WHITE HOUSE
WASHINGTON
October 6, 1975
MEMORANDUM FOR: PHIL BUCHEN
ROBERT T. HARTMANN
JACK MARSH
BILL SEIDMAN
ALAN GREENSPAN
MAX FRIEDERSDORF
FROM:
JIM CANNON in
SUBJECT:
Airline Regulatory Reform Legislation
I would appreciate your review and clearance of the
proposed airline regulatory reform legislation. This
bill would:
-- Increase entry into the industry and liberalize
charter service.
------------------------- Remove certificate restrictions (route regulation)
within five years and after five years would allow
a limited amount of entry into new markets.
-- Provide for rate flexibility within a designated
zone (limits) of price competition.
-- Eliminate anticompetitive agreements by the industry.
-- Adopt a liberal merger standard along the lines of
the Bank Merger Act.
-- Allow carriers to abandon routes after providing
sufficient notice to affected communities.
-- Provide an incentive for better management of
airlines.
-- Benefit consumers, eventually, through FORD lower air
fares.
GERALD
LIBRARY
2
These reform proposals have received favorable support
from Congressional members during informal discussions
and the tentative promise of hearings this year.
I would appreciate your comments by close of business
Wednesday, October 8. The bill has been cleared by
Secretary Coleman, Attorney General Levi, OMB (Collier),
and the Counsel's Office (Lazarus).
Attached for your review are OMB's Memorandum for the
President (Tab A), a Summary of the Aviation Act of 1975
(Tab B), the Draft Presidential Message (Tab C) and the
Bill itself (Tab D).
Attachments
FORD it LIBRARY 038470
area
/
SEP 29 1075
MEMORANDUM FOR:
THE PRESIDENT
FROM:
PAUL H. O'NEILL /s/
SUBJECT:
Airline Regulatory Reform
Drafting of legislation to reform airline regulation has
now been completed. This bill is the third and final
piece of legislation in the Administration's transportation
regulatory reform program. The Railroad Revitalization
Act was sent to the Congress in May. Legislation dealing
with the trucking industry is ready for submission pending
discussions with industry and union representatives. This
memorandum seeks aporoval to forward the proposed air bill
to Congress as soon as possible.
While the rail and truck bills each propose important
reform measures, the air bill is the most publicly visible
in that it deals with a direct consumer service and
pocketbook issue. Accordingly, we plan to accompany the
announcement of the bill with intensive briefings of the
press and various consumer groups in order to assure
increased consumer attention to the legislation.
The proposed legislation reflects a consistent Administration
approach in dealing with economic regulation. That is,
wherever possible, economic regulation which constrains
competition, increases prices unnecessarily, bars entry of
new firms or inhibits innovation, should be eliminated.
The specific reform neasures are designed to produce the
type of domestic airline system we would like to have ten
years from now--one that is healthy, competitive, and
efficient and which gives the public the best possible
service at the lowest possible cost.
Like the rail and truck bills, the air bill provides
increased flexibility for the airlines to adjust fares
to meet changing market conditions without Civil
LIBRARY GERALD FORD
2
Aeronautics Board (CAB) interference. It provides for
liberalization of entry and exit in order to encourage
competition and innovation and help keep prices down.
To accompany these reforms, the bill also provides for
antitrust enforcement by requiring airline mergers to be
subjected to proceedings and standards similar to those in
the Bank Herger Act. Further, it requires the CAB to subject
intercarrier agreements to a balancing test to weigh
competition against transportation needs before granting
such agreements antitrust immunity. It also provides an
opportunity for the Justice Department to challenge any
agreements they feel are anticompetitive. A detailed
summary of the legislation and a draft Presidential message
are attached.
As drafted, the legislation directs the CAB to implement
reform gradually over a five-year period. This approach
serves to minimize the spectre of chaotic market conditions
which the critics of reform claim will result from changing
the present system. By announcing a schedule for change,
the bill eliminates the uncertainties of the future and
provides the industry time to plan for an orderly adjustment
of financial and investment policies to correspond to the
changed regulatory environment. As currently contemplated,
it will be 1977 before the proposed reform measures begin
to go into effect. Accordingly, the bill will have little
or no effect on the short-tern financial condition of the
airlines.
This legislation is the product of lengthy discussion and
careful analysis by an Executive Branch task force on
transportation reform. The group has had a number of
formal and informal consultations and discussions with the
industry, labor groups and Members of Congress. For
example, the Department of Transportation last April
sponsored a day long Public Hearing of all interested
parties to get their VIews on problems with the airline
regulation system and potential solutions.
It appears there is growing interest and enthusiasm for
this reform and that vill be able to secure spensorship
for the legislation from several key legislators. There
LIBRARY GERALD R. FORD
2
is some chance that hearings in the Senate could be
scheduled this session. However, because we are nearing
the end of the congressional calendar, there is a better
likelihood that hearings will not be possible until early
next session.
Recommendation
That you approve submission of the legislation at earliest
possible date.
Decision:
Agree
Disagree
See me
FORD is GERALD LIBRARY
B
AVIATION ACT OF 1975
SUMMARY OF PROVISIONS/ANALYSIS OF NEED
ENTRY
No air carrier may operate unless it holds a certificate of "public
convenience and necessity" (PC&N) from the Civil Aeronautics Board. By
this requirement, the Board controls the entry of new firms into air
carriage and controls the expansion of existing firms into new markets.
The Board has interpreted this requirement so restrictively that no new
trunk carrier has ever been "certificated" since the Board was established
in 1938. With minor exceptions (primarily AIr New England and Kodiak-
Western Alaskan Airlines), no scheduled passenger carrier has been cer-
tificated since 1950.
With respect to entry by established firms into new markets, the
Board has been erratic--tending at times to permit carriers to expand
and at other times denying expansion. For the last five years,
Board maintained an unannounced route moratorium during which it refused
to even consider any major applications for new service.
The effect of overly restricting entry has been to protect the
markets of existing carriers and to deny consumers the benefits normally
associated with vigorous competition. For example, in 1967, World Air-
ways (a large charter carrier) filed an application for transcontinental
service with a one-way fare of $75, far below the prices then prevailing.
The Board failed to even set World's application for hearing and took
no action whatever until the application was dismissed six years datero
as being "stale."
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The Aviation Act of 1975 is designed to substantially ease the
burdens on qualified firms who wish to enter into air transportation,
or to expand into new markets, or to offer new varieties of service.
Yet, the proposed bill is far from "free entry." It contains nine
separate provisions designed to gradually but substantially increase
entry into air transportation while providing adequate time for exist-
ing carriers to rationalize their operations and adjust to the changing
economic environment.
First: Policy Changes. The Board's present declaration of policy
(Section 102 of the Federal Aviation Act), written 37 years ago
was framed in the context of an infant industry in need of protection
rather than a mature and healthy industry capable of operating in a
competitive environment. Since the Board has relied in its declaration
of policy to limit competition, the Aviation Act of 1975 proposes to
revise this declaration to stress the desirability of competition and
to deemphasize the protection of established carriers.
Second: Procedural Changes. The Board has often refused to hear
K applications, to render decisions within a reasonable period of time,
and often used the device of procedural motions to settle substantive
questions.
The Aviation Act of 1975 deals with these matters by proposing proced-
ural changes which would require the Board to hear and decide cases
speedily. In order to avoid burdening the Board with the necessity of
hearing spurious applications, the Board will be given the option of
dismissing any cases it chooses not to hear. However, any cases
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missed shall be dismissed for cause and will be reviewable by the
of Appeals--thus ending the practice of dismissing applications on pro-
cedural grounds and the applicant having no recourse to court review.
Third: Supplemental vs. Scheduled Service. Some doubt exists as to
whether paragraph 401 (d) (3)
of the Federal Aviation Act was
intended to prevent supplemental carriers (i.e., charter carriers) from
also applying for authority to provide scheduled service. The Board has
recently undertaken to address this question but no decision has been
rendered. Partly as a result of this legal ambiguity, no supplemental
carrier has ever been permitted to undertake scheduled service even
though qualified in every other respect. Accordingly, the Aviation Act
of 1975 proposes to amend paragraph 401 (d) (3) SO that supplemental air
carriers will clearly have the same right as anyone else to apply for
authority to provide scheduled service.
Fourth: Charter Service. The Board has generally placed such
severe limitations on charter services that its growth has beer severely
impaired. For example, prior to August 7, 1975, the only inclusive
tour charter rule in effect contained a number of highly restrictive
conditions. These conditions included: (1) a minimum of seven days
must elapse between departure and return; (2) the land portion of the
tour must provide overnight hotel accommodations at a minimum of three
places, other than the point of origin, no less than 50 air miles from
each other; and (3). the charge to the passengers for the tour. shall
be not less than 110 percent of any available scheduled fare. As can
be judged from the last condition, the price of an inclusive tour was
not based on the cost of the specific charter flight and the related
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ground accommodations, but on the price of an unrelated scheduled fare.
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This condition, taken in conjunction with the three stop requirement
severely limited the saleability of inclusive tour charter services.
Legislation presently before Congress S.421
would substan-
tially broaden the availability of charter services. In response to
this legislation and substantial public criticism the Board has recently
expanded charter availability on its own initiative (Part 378(a) effective
September 13, 1975). The Aviation Act of 1975 incorporates the essential
features of S. 421
in order to guarantee the continued availability
of charter services which are not unduly restricted.
Fifth: Unserved Markets. Under the present law, a Board finding
of public convenience and necessity is required even when the applicant
is otherwise fit, willing and able to serve and when no service is cur-
rently being provided by established firms. When qualified firms are
prevented from offering service which established firms are not willing
to provide, no useful function is served--not even the dubious function
of protecting existing firms. Accordingly, the Aviation Act of 1975
guarantees approval for qualified applicants wishing to provide non-stop
service between points where such service is not being provided by cer-
tificated carriers.
Sixth: Liberalized Exemptions. In the Board's early years
erators of small aircraft from the detailed economic regulation admin-
istered by the Board. The original aircraft limitation, 12,500 pounds,
was set at approximately half the weight of a DC-3--then the equipment
operated by the Nation's major airlines. So long as they operated
aircraft smaller than that size (approximately 19 seats), commuter air
carriers (also called scheduled air taxis or third level air carriers)
were free to charge whatever price they chose and to operate where and FORD
when they chose. Operating within this exemption, a vigorous and GERAL Lipid-
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1y growing industry of more than 200 firms has developed, primarily
providing service to small and isolated towns not served by certificated
carriers. Recently, the Board increased its exemption so that commuter
carriers could fly aircraft containing up to 30 seats without becoming
subject to Board regulation. Since the Nation's smallest certificated
air carriers are now completing their conversion to all jet aircraft
(with a normal minimum capacity of approximately 90 passengers), the
Aviation Act of 1975 would liberalize the exemption for commuter carriers
by allowing them to increase the size of aircraft operated from 30 seats
to 55 seats. This change will enable commuter carriers to purchase the
larger turbo-prop pressurized aircraft once utilized by local service
carriers and should materially expand the scope of operations for commu-
ter carriers. This provision will be most significant for small points
not attractive to certificated carriers who have switched to large air-
craft. At the same time, since this equipment is not used by certificated
carriers, the intrusion of commuter carriers into the markets of those
carriers will be limited.
The six entry provisions outlined above all leave considerable dis-
cretion to the Board or affect charter operations or are directed at
specific localized problems. Thus, it is possible that these changes
will have limited impact on scheduled service in the major city-pair
markets where the bulk of air passengers are carried. The next threee
provisions are designed to gradually but substantially increase the ex-
tent of competition in these major markets.
First: Certificate Restrictions. Over a period of years, the
Board has attached numerous types of conditions and restrictions to the
operating certificates held by air carriers. In many instances they
may not carry local passengers, may not provide through plane service,
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must continue flights to points beyond a certain destination, or abide
by other restrictions. By and large, these restrictions were imposed
either to protect the markets of established carriers or to prevent the
creation of inadvertent operating authority. Viewed as a comprehensive
whole, these restrictions simply protect the markets of established car-
riers by preventing other air carriers from providing services they would
like to provide.
These restrictions are both wasteful and indefensible. Accordingly,
the Aviation Act of 1975 would direct the Board to undertake a proceeding
to gradually eliminate all existing certificate restrictions within a
five year period 'and prohibit the Board from imposing such restrictions
in the future. In doing so, the Board would be directed to proceed care-
fully with an eye toward the effects on various carriers. The phasing
of the restriction removal program is dictated by the desire to provide
all existing carriers with adequate opportunity to increase their effi-
ciency and adjust their operations to the requirements of a more competi-
tive environment,
Second: Discretionary Mileage. At the present time, existing air
carriers are permitted to fly up to two percent of their aircraft miles
in charter markets not specified in their operating certificates. The
so-called two percent route rule thus permits carriers a measure
of discretion in the markets that they may serve without formal Board
approval. The program has offered carriers a means of moving into new
markets without the requirement for expensive and burdensome legal pro-
ceedings.
The aviation Act of 1975 provides that, following the completion
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of the certificate restriction removal program, each air carrier would
be allowed to provide a limited amount of scheduled service in addition
to those services specified in its operating certificate. In essence,
this provision is analogous to the present two percent off-route charter
rule. Carriers could use this authority for a gradual expansion and
rationalization of their route systems. The expansion process would be
gradual since the total amount of authority created each year would be
only approximately five percent of system operations. Following a period
of satisfactory service in markets entered under the discretionary mile-
age rule, the points served could be automatically added to the carrier's
certificate of public convenience and necessity without the requirement
for further legal proceedings.
ABANDONMENT OF SERVICE
As it controls entry into air carriage; so does the Board control
exit from air carriage (or abandonment of service). With the exception
of routes receiving subsidy, the Board has tended to be fairly liberal
with regard to abandonment. As trunk carriers progressed to larger
equipment, they withdrew from smaller points and were replaced in most
instances by local service carriers. As local service carriers progressed
to larger equipment, they too have withdrawn from a number of points,
often to be replaced by commuter carriers. Indeed, the number of
points served by certificated carriers has declined markedly since the
mid-1960
By all appearances, trunk air carriers serve few points which they
would wish to abandon and which would not receive air service if abandon-
ment were completely unregulated. During 1974, trunk carriers (not on
subsidy) served only three points which by the Board's estimate
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might be jeopardized by totally unregulated abandonment, and this
would be a maximum estimate since several of these points might be
expected to continue to receive service from commuter carriers.
In contrast to the trunk lines, local service air carriers receive
subsidies explicitly designed to promote service to small
communities. With an adequate subsidy program such subsidized service
would not be in jeopardy even if abandonment were completely free.
Despite the fact that abandonment does not seem to be a major prob-
lem, the existing standard for abandonment should be changed for two
reasons. First, to the extent that carriers are compelled to serve losing
markets against their wishes without subsidy, a scheme of cross-subsidy
payments must be employed--meaning that the costs of such service are
defrayed by passengers elsewhere on the carrier's system. There is
simply no justification for such a situation; if subsidy is deemed de-
sirable, it should be explicitly paid by the government rather than by
air travelers flying in other parts of the air system. Second, carriers
are more likely to enter new markets if abandonment provisions are lib-
eralized. A carrier facing the decision of whether or not to enter a
marginal market must surely take into consideration his ability to cease
providing the service if his judgment should prove wrong and if the mar-
ket should prove unprofitable. To the extent that liberalizing abandon-
ment increases the willingness of carriers to test the water and to enter
new markets, liberalizing abandonment will actually increase the number
of points receiving scheduled air service by certificated carriers.
The Aviation Act of 1975 deals with the abandonment issue in the
following manner. First, where alternative scheduled air service is
provided, carriers would be permitted to exit upon 90 days notice.
Y
Where alternative scheduled air service is not provided, carriers would
be permitted to exit whenever, after taking into account subsidy pay-
ments, they were unable to cover fully allocated costs for a period of
one year or they were unable to cover direct operating costs for a
three-month period, except that the Board could require continued service
if the community or another public body were willing to defray the car-
rier's losses.
The new abandonment standard will have the effect of reducing what-
ever inadvertent and unintentional cross-subsidies now exist. It will
also encourage entry into marginal markets where the provision of such
service is now discouraged by the possibility that a carrier may be
trapped into providing unprofitable service.
PRICING
The Board has broad powers with respect to the regulation of air
fares, or prices. Price competition has been discouraged and, indeed,
virtually non-existent. As a result, consumers have been deprived of
the benefits of vigorous competition.
In intrastate markets where both entry and pricing have been less
restricted prices have been markedly lower than in comparable inter-
state markets. Similarly, commuter air carriers, operating completely
free of controls over entry and pricing, and operating equipment which
is more costly per passenger mile, tend to charge comparable or lower
fares than regulated carriers on shorter flights. The evidence
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clear that restrictions on price competition have significanaly
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harmed air travelers.
Ironically, at the same time consumers have been harmed by fares
higher than they otherwise would have been, air carriers have not bene-
fitted from this lack of price competition. Instead, air carriers,
operating in a structurally competitive industry, have tended to dissapate
any excess profits which might have been earned by engaging in service
competition- most visibly in the form of in-flight movies, free drinks,
and other amenities but most expensively in terms of scheduling additional
flights.
With the expansion of opportunities for new firms to engage in air
transportation, whatever rationale originally existed for inflexible
prices has evaporated. Accordingly, the Aviation Act of 1975 proposes
substantial changes in the Board's powers with respect to pricing. Max-
imum price regulation would be left to the Board, as it presently is,
along with the Board's traditional function of preventing discriminatory
and preferential pricing. Minimum prices, however, would generally not
be regulated except that the Board would retain powers to prevent preda-
tory pricing. In addition, the proposed bill would alter the Board's
powers with respect to suspending questionable rates. The proposed bill
would permit the Board to suspend any rate increase where the change
would result in prices more than 110 percent of the level existing a
year earlier but would not permit the suspension of smaller increases.
With.respect to minimum prices, the Board would be empowered to
suspend any rate which; on the basis of a prelíminary finding, the Board
believed to be below direct operating costs. This provision would be
phased in over a period of three years. During the first year, the
Board could suspend any rate decrease of more than 20 percent; during
the second year, the Board could suspend any rate decrease of more than
40 percent. During the third and suceeding years, the Board could not
suspend any rate unless it believed, on the basis of a preliminary find-
ing, that the rate, was likely to be below direct operating costs. The
direct operating cost criteria is established as a protection against
predatory pricing and, within certain guidelines, the specific defi-
nition of the term is left to the Board's discretion.
ANTICOMPETITIVE AGREEMENTS
The Federal Aviation Act presently provides that all agreements
among air carriers must be filed with the Board and that the Board must
approve or disapprove such agreements. Further, once Board approval is
given, agreements are immune to any challenge under antitrust laws.
Most of the agreements filed with the Board are undisputably innocuous
and do not raise serious antitrust considerations. Nevertheless, some
agreements, and particular agreements among carriers to restrict capa-
city, do have serious anticompetitive effects.
While broad and special exemptions from the antitrust laws may have
had some validity during the years when Congress was seeking to nurture
and foster an infant industry, the rationale for such special exemptions
has long since passed. The Aviation Act of 1975 provides both procedural
and substantive remedies.
From a procedural standpoint, the Act requires the Board to notify
both the Secretary of Transportation and the Attorney General of all
agreements filed wish the Board and to hold hearing in accordance with
5 USC 556if requested. Such a procedural requirement will eliminate the
type of situation which occured during the early 1970's when the Board
first approved domestic capacity agreements andatifeq extended those
agreements without hearings.
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On a substantive level, the Aviation Act of 1975 prohibits the
Board from approving agreements which control levels of capacity, equip-
ment or schedules, or which relate to pooling or apportioning of earnings
or of fixing of rates. The Board could continue to approve all other
types of agreements and could continue to confer antitrust immunity.
However, before the Board could approve such agreements, they would
have to find that the agreements meet two stringent tests. First, the
agreement must meet a serious transportation need. Second, other reason-
able, less anticompetitive alternatives must not be available. The im-
provements which will be provided by the enactment of the proposed bill
will improve procedural fairness, eliminate antitrust abuses, and place
airlines more nearly on a par with other sectors of our economy.
MERGERS
To allow appropriate restructuring to occur within the industry and
in accordance with the general policy of substituting antitrust law
for regulation wherever possible, the bill includes a new merger provision.
Effective 30 months after enactment of the legislation, a Bank Merger
Act type standard would be applied to mergers in the airline industry.
This standard would permit approval of mergers otherwise violating the
Clayton Act if the anticompetitive effects are outweighed by the
benefits to be gained in meeting the transportation needs of the
community and if no less anticompetitive alternative is available.
Merger proposals would be filed with the CAB. The Attorney General
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would have 60 days in which to file an antitrust suit in the district
court. Court action would be stayed until completion of CAB proceedings.
Upon an affirmative CAB finding, the court would consider the issues
de novo, using the same standard as the CAB. The CAB would appear as
a party of interest and the Department of Transportation would provide
its views on the implication of the transaction on public transportation
needs.
Until such a provision takes affect, the bill provides for all
mergers filed with the CAB to be considered under existing standards
and procedures.
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Draft Presidential Message
DRAFT
Aviation Act of 1975
TO THE CONGRESS OF THE UNITED STATES:
As part of my program to strengthen the Nation's economy
through greater reliance on competition in the marketplace, I
announced earlier this year my intention to send to the
Congress a comprehensive program for the reform of transpor-
tation regulation. In May, I sent to Congress the Railroad
Revitalization Act aimed at rebuilding a healthy, progressive
rail system for the Nation. Today I am pleased to submit
the Aviation Act of 1975 which will provide similar improve-
ments in the regulatory environment of our airlines. To
complete the package, I will soon be forwarding similar
legislation for the reform of regulation governing the motor
carrier industry.
The result of the regulatory reform measures proposed
in this legislation will have a direct and beneficial
impact on the American consumer. Countless Americans use
air travel on a regular basis in connection with their jobs
and leisure activities. But for many Americans, air travel
has become a luxury too expensive to afford. In part, today's
high costs of air transportation are attributable to inflation
and the rising cost of fuel and labor. But they are also the
result of long years of excessive economic regulation.
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In 1938, when the Congress authorized the creation of the
Civil Aeronautics Board, there was a belief that some form
of government intervention was needed to protect the infant
airline industry. Accordingly, the Board was instructed to
regulate this industry in order to promote its growth and
development. Entry into the industry was strictly controlled.
Even those airlines who were allowed entry into the industry
were rigorously controlled with respect to what markets
they could serve and fares were regulated. Real competition
was intentionally dampened.
In the almost four decades since economic regulation of
airlines was established, this industry has grown tremendously.
It can no longer be called an infant. Consequently, protective
government regulation established to serve the particular needs
of a new industry has outlived its original purpose. The
rigidly controlled regulatory structure now serves to stifle
competition, increase cost to travelers, makes the industry
less efficient than it could be and denies large segments of
the American public access to lower cost air transportation.
A number of studies have indicated that the cost of air
transportation to American consumers is far higher than
necessary as a result of overregulation.
The overriding objective of the proposed legislation is
to ensure that we have the most efficient airline system in
the world providing the American public with the best
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service at the lowest possible cost. We must make sure that
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more
the industry responds to natural market forces and to consumer
demands rather than to artificial constraints set out by
government. This legislation would replace the present
promotional and protectionist regulatory system with one which
serves the needs of the public by allowing the naturally
competitive nature of the industry to operate. It provides
the airline industry increased flexibility to adjust prices
to meet market demands. And it will make it substantially
easier for firms who wish and are able to provide airline
services to do SO. These measures will be introduced
gradually to permit the industry to adjust to a new regulatory
environment. Government will continue to set rigid safety
and financial standards for the airlines. But the focus
of the new regulatory scheme will be to protect consumer
interests, rather than those of the industry.
I urge the Congress to give careful and speedy attention
to these measures so that the over 200 million passengers who
use our airlines every year are given the benefits of greater
competition that will flow from regulatory reform of this
industry.
LIBRARY GERALD F. FORD
FORD LIBRA
&
CERALE
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That this
Act may be cited as the "Aviation Act of 1975. 11
SEC. 2. Except as otherwise specified, wherever in this
Act an amendment is expressed in terms of an amendment to a
section or other provision, the reference shall be considered to
be made to a section or other provision of the Federal Aviation
Act of 1958, as amended.
Definitions
SEC. 3. Section 101 as amended, is further amended by
renumbering paragraphs (2) through (19) as paragraphs (3)
through (20) and by inserting therein the following new paragraph:
"(2) Advance-purchase charter trip' means a charter
trip arranged pursuant to a contract between an air carrier or
foreign air carrier and a person authorized by the Board to
act as a charter organizer, and sold by such charter organizer
to members of the general public on an advance purchase basis
in accordance with regulations prescribed by the Board. Such
regulations may not require that participants purchase the
transportation or pay any deposit more than thirty days prior
to departure, prohibit the charter organizer from selling up to
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twenty-five percent of the seats at any time prior to the departure
date, require a prorated price, prevent the organizer from
assuming the commercial risk of the venture, require that the
trip exceed three days in the Western Hemisphere or seven days
in other areas, or otherwise unduly restrict the availability of
such charters. 11
(b) Section 101 is further amended by renumbering
paragraph (2) as that paragraph was numbered prior to the
enactment of this section as paragraph (22) and paragraphs (21)
through (36) as paragraphs (23) through (38), and by inserting
therein the following new paragraph:
"(21) 'Inclusive tour charter trip' means a charter trip
which combines air transportation, pursuant to a contract between
an air carrier or foreign air carrier and a person authorized
by the Board to sell inclusive tours, and land arrangements at
one or more points of destination, sold to members of the public
at a price which is not unjust or unreasonable for the charter
air transportation plus a charge for land arrangements and subject
to such other requirements not inconsistent herewith as the Board
shall by regulation prescribe to assure that such charter trips
do not substantially impair essential scheduled service.
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(c) Paragraph 34 of section 101 as that section was
numbered prior to the enactment of this section is amended
as follows:
"(37) 'Supplemental air transportation' means charter
trips, including advance-purchase charter trips, inclusive
tour charter trips, and other types of charter trips in air
transportation, rendered pursuant to a certificate of public
convenience and necessity issued pursuant to section 401 (d) (3)
of this Act. Nothing in this paragraph shall permit a
supplemental air carrier to sell or offer for sale an inclusive
tour in air transportation by selling or offering for sale
individual tickets directly to members of the general public,
but a supplemental air carrier may control or be under the
control of a person authorized by the Board to make such sales,
if such control has been approved by the Board pursuant to
sections 408 and 409 of this Act.
Declaration of Policy: The Board
SEC. 4. Section 102 is amended to read as follows:
"SEC. 102. In the exercise and performance of its powers 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:
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"(a) The encouragement and development of an air
transportation system which is responsive to the needs of the
public and is adapted to the present and future needs of the
foreign and domestic commerce of the United States, of the
Postal Service, and of the National defense;
"(b) The provision of a variety of adequate, economic,
efficient and low-cost services by air carriers without unjust
discriminations, undue preferences or advantages, or unfair
or deceptive practices; and the need to improve relations
among and coordinate transportation by air carriers;
"(c) Maximum reliance on competitive market forces
and on actual and potential competition to provide the needed
air transportation system;
"(d) The encouragement of new air carriers; and
"(e) The importance of the highest degree of safety
in air commerce".
Procedural Expedition
SEC. 5. Section 401 (c) is amended as follows:
"(c) (1) 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.
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5
Any interested person may file with the Board a protest or
memorandum of opposition to or in support of the issuance of
a certificate. Unless the Board issues an order finding that
the public interest requires that the application be dismissed
on the merits, or the application requests authority to engage
in foreign air transportation, the application shall be set for
a public hearing within sixty days from the date the application
is filed with the Board. Any order of dismissal issued by the
Board shall be deemed a final order subject to judicial review
as prescribed in section 1006 of this Act. Mutually exclusive
applications shall be heard at the same time. If an application
regarding interstate and overseas transportation is set for
public hearing, final disposition of such application must be
made within ten months of the date such application was filed,
except where the Board finds that the application raises issue
of major air transportation significance, in which case the decision
must be made within twelve months of the date the application
was filed. In addition, by order in extraordinary circumstances,
the Board may delay decision for up to thirty days beyond the
applicable date for decision.
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"(2) The dates specified in paragraph (1) do not apply
to applications pending on the date of enactment of this paragraph
or to applications filed within twelve months of such enactment.
Applications pending on the date of such enactment must be
disposed of within eighteen months of the date of such enactment.
Applications filed within twelve months of the date of enactment
must be disposed of within eighteen months of the date of application.
"(3) If the Board does not act within the time specified
in paragraphs (1) and (2), the certificate authority requested in
the application shall become effective, and the Board shall issue
the certificate as requested without further proceedings. 11
Entry
SEC. 6.
(a) Subsection 401(d)(3) is amended as follows:
"(3) In the case of an application for a certificate to engage
in supplemental air transportation, the Board shall issue a certificate,
as may be required by the public convenience and necessity, authorizing
the whole or any part thereof and for such periods as the Board
may specify, if it finds that the applicant is fit, willing, and able
properly to perform the transportation covered by the application
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and to conform to the provisions of this Act and the rules,
regulations, and requirements of the Board hereunder. Any
certificate issued pursuant to this paragraph shall contain such
limitations as the Board shall find necessary to assure that the
service rendered pursuant thereto will be limited to supplemental
air transportation as defined in this Act. 11
(b) Section 401 (d) is amended by adding the following:
paragraphs:
"(4) The Board shall issue a certificate for interstate
air transportation between any two cities not receiving nonstop
scheduled air transportation by an air carrier holding a certificate
of public conveniénce and necessity to an applicant if it finds
the applicant is fit, willing, and able to perform such transportation
properly, and to conform to the provisions of this Act and the
rules, regulations, and requirements of the Board hereunder.
"(5) Any air carrier that engages in interstate air
transportation solely with aircraft having a capacity of less than
fifty-six passengers or 16,000 pounds of property shall not be
required to obtain a certificate of public convenience and necessity
if that carrier conforms to such financial responsibility requirements
as the Board may by regulation impose. The Board shall by
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regulation increase the passenger or property capacities specified
in this paragraph when the public interest so requires. Air
transportation pursuant to this paragraph is not subject to sections
403, 404, 405(b), (c), (d), 408, 409 or 412, except for the
provisions regarding joint fares and through rates. 11
(c) Section 401(e)(1) is amended to add at the end:
"The Board shall not, however, impose closed-door,
single-plane service, mandatory stop, long-haul restrictions, or
similar restrictions, on any new certificate or amendment to any
existing certificate. 11 By January 1, 1981 the Board shall reissue
all certificates for interstate air transportation in the form of an
unduplicated list of city pairs that each certificated air carrier
is authorized to serve pursuant to the terms of subsection (o) (1)
or as otherwise provided by this section. Subsequent to
January 1, 1981 each amendment to a certificate authorizing
interstate air transportation shall take the form of additions
to, or deletions from, such listing.
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Route Transfers
SEC. 7. Section 401(h) is amended to read as follows:
"(h)(1) By January 1, 1978, the Board shall prepare an
unduplicated list of city pairs that each interstate certificated air
carrier is authorized to serve on January 1, 1981, pursuant to the
terms of subsection (o) (1). This list shall be the basis for determining
whether a city pair route is eligible for transfer, sale, or lease
pursuant to the provisions of subsection (h) (2).
"(h)(2) On or after January 1, 1978, each air carrier
engaged in interstate scheduled air transportation may transfer,
sell or lease any of its authority to engage in scheduled interstate
air transportation or the authority conferred by section 401(o)(1)
to engage in interstate scheduled air transportation to any air
carrier the Board finds is fit, willing and able to perform such
transportation properly, and to conform to the provisions of this
Act and the rules, regulations, and requirements of the Board
thereunder.
"(h)(3) In the case of an application for transfer, sale or
lease of a route pursuant to section 401(h)(2) to an air carrier
which the Board has found fit, willing and able to engage in air
transportation, and conforms to the provisions of the Act and the
rules, regulations, and requirements thereunder, the Board shall
approve the transaction unless the transaction fails to meet the standards
in section 408. If the transferee of the route does not hold
10
certificate authority from the Board, the Board shall determine
whether the applicant meets the requirements of section 401(h)(2)
within six months of the date the request is filed.
"(h)(4) Prior to January 1, 1978, a certificate may not
be transferred unless such transfer is approved by the Board
as being consistent with the public interest.
Abandonments
SEC. 8. Section 401(j) is amended as follows:
"(j)(1) No air carrier shall abandon any route, or part
thereof, for which a certificate has been issued by the Board,
unless, upon the application of such air carrier, after notice
and hearing, the Board shall find such abandonment meets the
standards set forth in this subsection or is otherwise found to
be in the public interest. Except as provided in paragraph (3),
any carrier shall be permitted to abandon any route or part
thereof for which a certificate has been issued:
"(A) if that carrier has operated the route or part thereof
below fullo allocated cost (including a reasonable return on
investment) considering payments pursuant to section 406(b)(3),
for a period immediately preceding the abandonment petition of at
11
least one year, except the Board may require continuation of
service for one additional year if the public interest requires; or
"(B) if a carrier can demonstrate its operations for the
route under consideration have been conducted below the direct
cost for that route for a period of at least three months immediately
preceding the abandonment petition; or
"(C) upon ninety days notice to the Board if the carrier
can demonstrate that service will be provided by another air
carrier.
"(2) Any interested person may file with the Board a
protest or memorandum of opposition to or in support of any
abandonment petition. The Board may require any air carrier
abandoning a route or part thereof to establish reasonable,
cooperative working relationships with any air carrier providing
replacement services.
"(3) The Board may require continuation of service to
a point if the local community or State or other public body agrees
to provide sufficient support to assure that the carrier's total
revenues, including any subsidy payments pursuant to section 406
the route or part thereof, cover fully allocated costs (including
reasonable return on investment) for the specific service at issue.
LIBRARY GERALD A. FORD
12
"(4) Any carrier may temporarily suspend service on
any route or part thereof upon reasonable notice to the Board
if service is provided by another air carrier. In the absence
of such service temporary suspensions shall be authorized if
the suspension meets the standards set forth in subsection (j) (1)
for abandonments or is otherwise found to be in the public
interest. 11
Route Expansion
SEC. 9. Section 401 is amended by adding the following
new subsections:
"Removal of Restrictions"
"(o)(1) On or after January 1, 1981, each air carrier
engaged in interstate scheduled air transportation may engage in
nonstop scheduled air transportation without regard to any
certificate limitations or other restrictions between any points in
the United States named in its certificate or certificates on
January 1, 1975. Within sixty days of the enactment of this
paragraph, the Board shall undertake a proceeding to phase out
all existing restrictions in such certificate or certificates authorizing
interstate air transportation. In exercising this authority, the
Board shall proceed equitably, giving due consideration to the
effects of elimination of restrictions on each air carrier. The
13
Board shall proceed expeditiously and report its progress to
Congress annually.
"(2) On or after January 1, 1981, each air carrier
engaged in foreign air transportation may engage in nonstop
scheduled air transportation between any United States points
named in its certificate or certificates and served by that air
carrier on January 1, 1975. Sixty days from enactment, the
Board shall undertake a proceeding to eliminate any requirements
which preclude such nonstop service.
"Discretionary Scheduled Operations"
"(p)(1) The authority granted in this paragraph shall
become effective on January 1, 1981.
"(A) determine and publish the number of available seat
miles operated in interstate passenger scheduled air transportation
by certificated air carriers and the number of available seat
miles operated in intrastate passenger scheduled air transportation
by air carriers certificated by a State regulatory authority during
the preceing calendar year;
"(B) determine and publish the number of available ton-miles
operated by certificated all-cargo air carriers interstate scheduled
air transportation during the preceding calendar year;
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14
"(C) establish classes of scheduled passenger air carriers,
as follows: in Class I, those air carriers which operated in
excess of five billion available seat miles in interstate scheduled
air transportation during the preceding calendar year, or which
operated in excess of one billion available seat miles in interstate
and intrastate scheduled air transportation during the preceding
calendar year and did not receive subsidy payments pursuant to
section 406; in Class II, those carriers which operated in excess
of one billion available seat miles in interstate and intrastate
scheduled air transportation during the preceding calendar year
but less than five billion available seat miles in interstate and
intrastate scheduled air transportation during the preceding
calendar year and which are not in Class I; and in Class III,
those carriers which operated less than one billion available seat
miles in interstate and intrastate scheduled air transportation during
the preceding calendar year except those carriers certificated by
State authorities and who have not operated at least 100 million available
seat miles in intrastate scheduled air transportation shall not be
in this class; and
"(D) determine and publish the average number of available
seat miles in scheduled air transportation for each of the three
ORD
classes of air carriers in (C) and of available ton-miles for those
LIBRARY
carriers referred to in (B).
15
"(3) Notwithstanding any other provision of this section,
each air carrier holding a certificate of public convenience and
necessity for scheduled air transportation and each air carrier
engaged in intrastate scheduled air transportation pursuant to a
certificate issued by a State regulatory authority and which reports
its available seat miles in passenger scheduled air transportation
to the Board may engage in interstate scheduled air transportation
in any and all markets of its choosing in addition to that transportation
otherwise authorized, subject to the following limitations on the
level of such additional operations
"(A) a carrier in Class I shall be limited in each calendar
year to a level of additional operations which does not exceed
five percent of the average number of available seat miles in
interstate and intrastate scheduled air transportation operated
by carriers in its class during the preceding calendar year; and
"(B) a carrier in Class II or Class III shall be limited
in each calendar year to a level of additional operations which
does not exceed ten percent of the average number of available
seat miles in interstate and intrastate scheduled air transportation
operated by carriers in its class during the preceding calendar
year or which does not exceed ten percent of the available seat
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16
miles operated by the individual carrier in interstate and intrastate
scheduled air transportation, whichever is greater; and
"(C) all-cargo carriers shall be limited in each calendar
year to a level of additional operations which does not exceed
ten percent of the average number of available ton-miles operated
in scheduled air transportation by carriers in its class during the
preceding calendar year.
"(4) Carriers in Classes I through III shall be permitted
to carry mail and cargo on any flights conducted pursuant to
this paragraph.
"(5) Operations conducted pursuant to this paragraph
may be combined with any other authority held by the carrier
to permit single-plane and single-carrier services using combinations
of the carrier's existing authority and the new authority.
"Additional Authority"
"(q) Any carrier engaging continuously for twelve
consecutive months in nonstop scheduled air transportation pursuant
to the authority conferred by subsection (p) of this section may
apply to the Board for a certificate of public convenience and
necessity authorizing unrestricted nonstop scheduled air transportation
in such market. Within thirty days of the date of application, the
Board shall grant such application and issue the certificate as requeste NUBRARY
17
unless the Board determines that the applicant has not conformed
to the provisions of this Act with respect to the service in
question. Breaks in service occasioned by labor disputes or by
factors beyond the control of carrier shall not destroy the
continuity of services rendered before and after the break in
service, but such periods of time shall not be counted towards
meeting the requirement that service be offered for twelve
months. 11
"Scheduled Air Transportation Defined"
"(r) For the purposes of paragraphs (d)(4), (o), . (p)
and (q) 'scheduled air transportation' means interstate air
transportation performed by a carrier between two or more
points, with a minimum of five round trips per week, pursuant
to published flight schedules which specify the times, days
of the week and places between which such flights are performed."
Transportation of Mail
SEC. 10. Section 405(b) is amended to read as follows:
"(b) Each air carrier shall, from time to time, file with
the Board and the Postmaster General a statement showing the
points between which such air carrier is authorized to engage in
air transportation, and all schedules, and all changes therein, of
FORD
aircraft regularly operated by the carrier between such points,
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18
setting forth in respect of each such schedule the points served
thereby and the time of arrival and departure at each such point.
The Postmaster General may designate any such schedule for
the transportation of mail between the points between which the
air carrier is authorized by its certificate to transport mail.
No change shall be made in any schedules designated except
upon ten days' notice thereof as herein provided. No air carrier
shall transport mail in accordance with any schedule other than
a schedule designated under this subsection for the transportation
of mail. 11
Consolidation, Merger, and Acquisition of Control
SEC. 11. (a) The first sentence of Section 408(b) is amended
by inserting after the first reference to the word "Board" the
following:
"and at the same time a copy to the
Attorney General and the Secretary of
Transportation".
(b) The first proviso of Section 408(b) is amended by
adding after the first "That" the words "(i) with respect to an
application filed within thirty months from enactment of the
Aviation Act of 1975, " and by adding after the last word of that
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LIBRARY
19
proviso (and before the colon therefollowing):"; and (ii) with
respect to an application filed more than thirty months from
enactment of the Aviation Act of 1975, the Board shall not
approve such a transaction:
"(1) if it would result in a monopoly or would be
in furtherance of any combination or conspiracy to monopolize
or to attempt to monopolize the business of air transportation
in any part of the United States, or
"(2) whose effect in any section of the country may be
substantially to lessen competition, or to tend to create a
monopoly, or which in any other manner would be in restraint
of trade, unless the Board finds that the anticompetitive effects
of the proposed transaction are outweighed in the public interest
by the probable effect of the transaction in meeting the transportation
convenience and needs of the community or communities to be
served, and unless it finds that such transportation convenience
and needs may not be satisfied by any less anticompetitive
alternative. The party challenging the transaction shall bear the
burden of proving the anticompetitive effects, and the proponents
of the transaction shall bear the burden of proving that it meets
the transportation convenience and needs of the community or
communities to be served and that such convenience and needs
may not be satisfied by any less anticompetitive alternatives
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20
(c) Section 408 is further amended by adding the following
new subsection:
"(g) (1) Any transaction specified in subsection (a),
regarding which an application is filed more than thirty months
following enactment of this paragraph, may not be consummated
before the ninetieth calendar day after the date on which the
application therefor was presented to the Board, and the Attorney
General. The Attorney General may bring an action under the
antitrust laws arising out of such a transaction in the United
States District Court for the District of Columbia or in any
other appropriate District Court within such ninety-day period. The
Attorney General shall publicly notify the Secretary of Transportation
before filing such an action. No transaction specified in subsection
(a) shall be consummated until the antitrust action, and all appeals
from such action, which shall be taken pursuant to Expediting
Act, as amended, 15 U.S.C. §8 28-29, have been concluded. After
the filing of such an antitrust action, all proceedings thereunder
shall be stayed until the termination of the Board proceeding under
subsection (b) and the termination of all judicial proceedings, if
any, brought under Section 1006 with respect to a Board order
issued pursuant to subsection (b). The Attorney General may not
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21
however seek judicial review under Section 1006 of a Board
proceeding on a transaction as to which the Attorney General has
a pending antitrust action pursuant to this subsection.
"(2) In any action brought by the Attorney General
under this subsection, the standards applied by the court shall
be identical with those that the Board is directed to apply
under Section 408(b)(ii), and the court shall review de novo the
issues presented.
"(3) The Board may appear as a party of its own motion
and as of rights and be represented by its counsel in any
action brought by the Attorney General pursuant to this subsection,
and in any such action the Secretary of Transportation shall
file with the District Court a statement setting forth his views
on the challenged transaction and the implications of the challenged
transaction upon national transportation policy.
"(4) Upon the consummation of a transaction approved
under this section and after the termination of any antitrust
litigation commenced within the period prescribed in this section,
or upon the termination of such period if no such litigation is
commenced therein, the transaction may not thereafter be attacked
in any judicial proceeding on the ground that it alone and of
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22
constitutes a violation of any antitrust laws other than Section 2
of the Sherman Act, 15 U.S.C. @ 2, but nothing in this chapter
shall exempt any person involved in or affected by such a
transaction from complying with the antitrust laws after the
consummation of such transaction. For the purposes of this
section, the term 'antitrust laws' means the 'antitrust laws'
as defined in Section 1 of the Clayton Act as amended,
15 U.S.C. $12.
"(5) All transactions approved by the Board pursuant
to this section may be challenged by the Attorney General in
an action brought to enforce Section 2 of the Sherman Act,
15 U.S.C. 8 2, notwithstanding any other provision of this section
or section 414. 11
(d) Section 408 is further amended by adding the following
new subsection:
"(h) The Board must issue a final order with
respect to any application filed pursuant to Section 408 within
one calendar year.
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Agreements
SEC. 12. Section 412 is amended by striking subsection (b)
and adding immediately after subsection (a) the following new
subsections:
"(b) After each agreement is filed, the Board shall give
notice of the agreement to the Attorney General and the Secretary of
Transportation within ten days of receipt of the agreement. The
Attorney General or the Secretary of Transportation may request
the Board to hold a hearing in accordance with 5 U.S.C. $556 to
determine if the agreement is consistent with the provisions of this
Act, and if so requested, the Board shall hold such a hearing. If
the Attorney General or the Secretary of Transportation believes that
because of changed circumstances, any agreement which has been
previously approved by the Board has anticompetitive implications
or no longer serves a transportation need, the Attorney General or
the Secretary of Transportation may request the Board to hold a
hearing in accordance with 5 U.S.C. §556 to determine whether the
agreement remains consistent with the provisions of this Act. If so
requested, the Board shall hold such a hearing, and may after such
hearing disapprove the agreement.
"(c) The Board may not approve any contract or agreement
in interstate or overseas air transportation (1) which controls levels
of capacity, equipment, or schedules, (2) which relates to pooling
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24
or apportioning earnings (except for mutual aid pact agreements
among air carriers), losses, traffic, or service, (3) which fixes
rates, fares or charges (except for joint rates, fares or charges),
or (4) which fixes prices, commissions, rates or other forms of
contracts for goods or services provided to or for air carriers by
persons other than air carriers. For the purposes of this section,
agreements among carriers allocating operations at high traffic
airports as identified by the Secretary of Transportation shall not
be deemed pooling or capacity agreements. In addition, the Board
may not approve any contract or agreement between an air carrier
not directly engaged in the operation of aircraft in air transportation
and a common carrier subject to the Interstate Commerce Act, as
amended, governing the compensation to be received by such common
carrier for transportation services performed by it.
"(d) The Board may. approve any such contract or agree-
ment, whether or not previously approved by it, which it finds not adverse
to the public interest, not in violation of this Act, and which does not
reduce or eliminate competition, unless there is clear and
convincing evidence the contract or agreement is necessary to meet
a serious transportation need or to secure important public benefits,
and no less anticompetitive alternative is available to reach the same
result.
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LIBRARY
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"(e) With respect to foreign air transportation the Board
shall by order disapprove any such contract or agreement, whether
or not previously approved by it, that it finds to be adverse to the
public interest, or in violation of the Act, and shall by order approve
any such contract or agreement, or any modification or cancellation
thereof, that it does not find to be adverse to the public interest,
or in violation of this Act. "
Antitrust Immunity
SEC. 13. Section 414 is amended by adding the words "in air
transportation" before the word "authorized".
Rates
SEC. 14. Section 1002 is amended by:
(a) Amending paragraph (d) so as to read:
"(d) Whenever, after notice and hearing, upon complaint,
or upon its own initiative, the Board shall be of the opinion that
any individual or joint rate, fare, or charge demanded, charged,
collected or received by any air carrier for interstate or overseas
air transportation, or any classification, rule, regulation, or practice
affecting such rate, fare, or charge, is or will be unjust or
unreasonable, or unjustly discriminatory, or unduly preferential,
or unduly prejudicial, the Board shall determine and prescribe
26
the maximum or minimum lawful rate, fare, or charge thereafter
to be demanded, charged, collected, or received, or the lawful
classification, rule, regulation, or practice thereafter to be made
effective:
Provided, however, that a rate above direct costs may
not be found to be unjust or unreasonable on the basis that it is too
low, and the Board may not require an air carrier to charge, demand,
collect or receive compensation in excess of that air carrier's
direct costs for the service at issue. "
(b) Amending paragraph (e) so as to read:
"(e) In exercising and performing its powers and duties
with respect to the determination of maximum rates for the
carriage of persons or property, the Board shall take into
consideration, among other factors - -
"(1) the effect of such rates upon the movement of traffic;
"(2) the need in the public interest of adequate and
efficient transportation of persons and property by air
carriers at the lowest cost consistent with the furnishing
of such service;
"(3) the quality and type of service required by the public
in each market;
"(4) the need for price competition to promote a
27
healthy air transportation industry which provides
maximum benefits to consumers;
"(5) the need of each carrier for revenue sufficient
to enable such air carrier, under honest, economical
and efficient management, to provide adequate and
efficient air carrier service; and
"(6) the desirability of a variety of price and service
options such as peak and off-peak pricing to improve
economic efficiency."
(c) Amending paragraph (g) so as to read:
"(g) Whenever any air carrier shall file with the Board a
tariff stating a new individual or joint (between air carriers) rate,
fare, or charge for interstate or overseas air transportation or
any classification, rule, regulation, or practice affecting such rate,
fare, or charge, the Board is empowered, upon complaint or upon
its own initiative, at once, and, if it so orders, without answer
or other formal pleading by the air carrier, but upon reasonable
notice, to enter upon a hearing concerning the lawfulness of such
rate, fare, or charge, or such classification, rule, regulation, or
practice; and pending such hearing and the decision thereon the Board,
by filing with such tariff, and delivering to such air carrier
28
affected thereby, a statement in writing of its reasons for such
suspension, may suspend the operation of such tariff and defer
the use of such rate, fare, or charge, or such classification,
rule, regulation, or practice for a period of no longer than 90
days if:
(a) with respect to any proposed increase the proposed
tariff would be more than 10 percent higher than the
tariff in effect 365 days prior to the filing of the proposed
tariff; or
(b) with respect to any proposed decrease, there is
clear and convincing reason to believe that the proposed
tariff will be below the direct costs of the service at issue; or
(c) with respect to any decrease filed within one year
following the enactment of this paragraph, the proposed
tariff would be more than 20 percent lower than the tariff
in effect on the day of the enactment of this paragraph and
the Board believes the tariff will be found to be unlawful; or
(d) with respect to any decrease filed in the period
commencing one year from the enactment of this paragraph
and ending two years from such enactment, that the proposed
tariff would be more than 40 percent lower than the
29
tariff in effect on the day of enactment of this paragraph
and the Board believes the tariff will be found to be
unlawful.
If the proceeding has not been concluded and a final order made
within the initial period of suspension, the Board may, from time
to time, extend the period of suspension, but not for a longer period
in the aggregate than one hundred and eighty days beyond the
time when such tariff would otherwise go into effect. After
hearing, the Board may make such order with reference thereto
as would be proper in a proceeding instituted after such rate,
fare, charge, classification, rule, regulation, or practice had
become effective. Any proceeding pursuant to this subsection shall
be completed and a final order issued within one hundred and
eighty days of the time when such tariff would otherwise go into
effect. If the proceeding has not been concluded and an order made
within the period of suspension, the proposed rate, fare, charge,
classification, rule, regulation, or practice shall go into effect
at the end of such period: Provided, that this subsection shall not
apply to any initial tariff filed by any air carrier. Provided further,
that the fact that a tariff may be suspended pursuant to this paragraph
shall not create a presumption with respect to its ultimate lawfulness. "
30
(d) Amending paragraph (i) so as to read:
"(i) The Board shall, whenever required by the public
convenience and necessity, after notice and hearing, upon complaint
or upon its own initiative, establish through service and the
maximum joint rates, fares, or charges for interstate or overseas
air transportation, or the classifications, rules, regulations, or
practices affecting such rates, fares or charges, and the terms
and conditions under which such through service shall be operated."
(e) Add a new paragraph (k) to read as follows:
"(k) 'Direct Costs' means the direct operating cost of
providing service to which a rate, fare, or charge applies, and
shall not include such items as general and administrative expenses;
depreciation; interest payment; amortization; capital expenses;
costs associated with the development of a new route or service;
and other fixed costs or costs which do not vary immediately and
directly as a result of the service at issue. "
Postal Service Contract Authority
SEC. 15. Section 5402(a) of title 39, United States Code,
is amended to read as follows:
"(a) If the Postal Service determines that service by
certificated air carriers between any pair or pairs of points is
31
not adequate for its purposes, it may contract for the transportation
of mail by air in such manner and under such terms and conditions
as it deems appropriate:
"(1) with any certificated air carrier between any of
the points between which the carrier is authorized by the
Civil Aeronautics Board to engage in the transportation of
mail;
"(2) with any other certificated air carrier, if no
certificated air carrier so authorized is willing so to
contract, or between points between which no certificated
air carrier is authorized by the Civil Aeronautics Board
to engage in such transportation; or
''(3) with any other air carrier, if no certificated air
carrier is willing so to contract. 11
Local Service Subsidy Study
SEC. 16. The Secretary of Transportation shall undertake
a Study of the Local Service Air Carrier Subsidy Program and
make recommendations to Congress for any necessary changes
in the subsidy system within one year of the date of enactment
of this section. The Secretary shall consult with community
leaders in the cities now receiving subsidized air service, the
local service air carriers, the Chairman of the CAB, and the
32
relevant Committees of Congress. As part of this study, the
Secretary shall identify the cost of local service subsidy involved
in providing service at each city.