B-125728, JULY 26, 1956, 36 COMP. GEN. 66

B-125728, JULY 26, 1956, 36 COMP. GEN. 66

AIRCRAFT - CHARTERS - FERRY CHARGES AN AIRLINE ENGAGED IN CHARTER AIR SERVICE FOR THE MILITARY AGENCIES MAY NOT CHARGE FOR FERRY MILEAGE FOR FLIGHTS TO AND FROM THE CHARTER POINT OF ORIGIN AND DESTINATION ON WHICH THE AIRLINE ASSESSES AND COLLECTS REVENUE FOR CARGO OTHER THAN THAT OF THE MILITARY CHARTERER.

TO THE COMPTROLLER, UNITED AIR LINES, INC., JULY 26, 1956:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JULY 2, 1956, AND EARLIER CORRESPONDENCE, CONCERNING THE QUESTION OF FERRY MILEAGE CHARGES ON CERTAIN CHARTER MOVEMENTS WHICH YOUR COMPANY PERFORMED FOR THE MILITARY AGENCIES.

WHEN YOU AND MR. DALY WERE HERE LAST OCTOBER AND CONFERRED WITH REPRESENTATIVES OF OUR OFFICE, YOU ASKED THAT WE INVESTIGATE CERTAIN CLAIMS WHICH OUR TRANSPORTATION DIVISION HAS PRESENTED TO YOUR COMPANY FOR OVERPAYMENTS MADE ADMINISTRATIVELY FOR CHARTER AIR SERVICES PERFORMED BY UNITED AIR LINES FOR THE MILITARY AGENCIES. YOU LEFT WITH US A LIST SHOWING SOME FORTY-ONE MOVEMENTS, INVOLVING DISPUTED FERRY MILEAGE CLAIMS, AGGREGATING $37,315.30, AND INDICATED THAT THE MOVEMENT IDENTIFIED AS " CAM NO. 3696" SHOULD BE TREATED AS A TEST CASE. IT MAY BE OBSERVED, HOWEVER, THAT OF THE 41 INSTANCES LISTED BY YOU THE TEST ITEM INVOLVES THE SMALLEST AMOUNT OF EARNED REVENUE IN THE LOT; THAT ONLY 18 INSTANCES INVOLVED REVENUE DERIVED IN AMOUNTS OF LESS THAN $100; THAT THE REMAINING 23 INSTANCES INVOLVE REVENUE DERIVED IN AMOUNTS RANGING UP TO $1,103.63, WITH THE DERIVED REVENUE EXCEEDING, IN SIX INSTANCES, 50 PERCENT OF THE FERRY CHARGES IN DISPUTE, AND IN 9 OTHER INSTANCES, EXCEEDING 25 PERCENT OF SUCH FERRY CHARGES. THESE DERIVED REVENUES WOULD SEEM TOO SUBSTANTIAL TO JUSTIFY REGARDING THEM AS MERE INCIDENTAL EARNINGS ACCRUING IN FERRY OPERATION, EVEN IF A FERRY OPERATION WERE PERMITTED TO RETAIN ITS CLASSIFICATION AS SUCH WHEN REVENUE IS EARNED.

THE TEST CASE INVOLVED THE MOVEMENT OF 40 PASSENGERS, EACH APPARENTLY WITH 66 POUNDS OF BAGGAGE, FROM FORT LEWIS ( SEATTLE-TACOMA AIRPORT) WASHINGTON, TO CAMP ROBERTS ( PASO ROBLES), CALIFORNIA, IN A DC-4 TYPE PLANE, ON JUNE 11, 1951, IN CHARTER SERVICE. FOR THE SERVICES IN QUESTION COVERED BY TRANSPORTATION REQUEST NO. WQ 35,983,589, DATED JUNE 11, 1951, YOU CLAIMED, PER BILL NO. WQ-01-899, TOTAL CHARGES OF $2,555.85, WHICH WERE PAID ADMINISTRATIVELY. A CHARTER CERTIFICATE WAS ISSUED, IDENTIFIED AS COMMERCIAL AIR MOVEMENT 3696 ( CAM NO. 3696) SHOWING THAT THE CHARGES IN QUESTION WERE COMPUTED ON THE BASIS OF LIVE AND FERRY MILEAGE AND AT RATES FOR EACH, AS FOLLOWS:

TABLE

ROUTING MILEAGE

SOURCE

FROM--- TO--- (CODE)LIVE FERRY TOTAL SAN FRANCISCO --- SEATTLE ----- B -- ----- 680 ------- SEATTLE --------- PASO ROBLES - B

855 ------ ------- PASO ROBLES ----- SAN FRANCISCO B ------- 203 -------

TOTAL --------- ------------- --- 855 883 ----- -

RATE ---------- ------------- --- $1.75 $1.20 ----- -

PRICE --------- ------------- --- $1,496.25 $1,059.60 $2,555.85

SOURCE CODE:

B AIRWAYS DISTANCE CHARTS.

IN THE AUDIT OF THE CHARGES SO PAID, YOU WERE REQUESTED TO SUPPLY EVIDENCE OF PERFORMANCE OF THE FERRY MILEAGE FOR WHICH CHARGES WERE CLAIMED. YOU FURNISHED EVIDENCE TO SUBSTANTIATE THE FERRY FLIGHT FROM PASO ROBLES TO SAN FRANCISCO. WITH REFERENCE TO THE FLIGHT FROM SAN FRANCISCO TO SEATTLE, YOUR FORM COVERING THAT FLIGHT SHOWS THAT REVENUE OF $7.02 ACCRUED FOR FREIGHT SERVICE ON THAT MOVEMENT WHICH YOU HAVE LISTED UNDER THE CAPTION " COMMERCIAL AIR MOVEMENTS ( CAM-S/--- FERRY PORTIONS FLOWN AS EXTRA SECTIONS FROM WHICH UAL DERIVED REVENUES.'

IN VIEW OF THE REVENUE OPERATION OF THAT FLIGHT, THE MAXIMUM ALLOWABLE CHARGES WERE COMPUTED IN OUR TRANSPORTATION DIVISION TO BE AS FOLLOWS:

TABLE

ROUTING MILEAGE

SOURCE

FROM---TO--- (CODE) LIVE FERRY TOTAL SAN FRANCISCO --- SEATTLE ---- --- - ------- --------- ------- SEATTLE --------- PASO ROBLES (1) 845 --------- 845 PASO ROBLES ----- SAN FRANCISCO (2) -------- 178178

TOTAL --------- ------------ --- 845 178 -------

RATE ---------- --------------- $1.75 $1.20 -------

PRICE --------- ------------ --- 1,478.75 213.60 1,692.35

PRICE ----------------------------- $1,478.75 $213.60 $1,692.35

SOURCE CODE: (1) SEATTLE TO SAN JOSE ( DEPT.OF COM. PUB. 238) 709 MILES, PLUS SAN JOSE TO PASO ROBLES ( AIRWAYS DISTANCE CHART NUMBER 24 D.F.) 136 MILES, TOTAL 845 MILES. (2) PASO ROBLES TO SAN JOSE ( AIRWAYS DISTANCE CHART NUMBER 24 D.F.) 136 MILES, PLUS SAN JOSE TO SAN FRANCISCO ( DEPT. OF COM. PUB. 238) 42 MILES, TOTAL 178 MILES.

ACCORDINGLY, YOU WERE REQUESTED TO REFUND THE OVERPAYMENT $863.50 ($2,555.85 MINUS $1,692.35) OF WHICH $816 REPRESENTS THE FERRY MILEAGE CHARGES COLLECTED BY YOU FOR 680 MILES FROM SAN FRANCISCO TO SEATTLE AT $1.20 PER MILE.

YOU URGE THAT THIS PORTION OF OUR OVERCHARGE CLAIM SHOULD BE CANCELED, ON THE GROUND THAT THERE IS NO REQUIREMENT IN THE APPLICABLE TARIFF ( UNITED AIR LINES, INC., PASSENGER CHARTER TARIFF NO. 4, C.A.B. NO. 19) THAT A PLANE BE OPERATED EMPTY IN FERRY SERVICE, BUT THAT THE TARIFF SPECIFICALLY AUTHORIZES THE USE, BY THE CARRIER, OF ANY EMPTY OR UNUSED SPACE, CITING SPECIFICALLY RULES 1 (G) AND (C) OF THE TARIFF. THESE TWO RULES, IN PERTINENT PART, READ AS FOLLOWS:

GENERAL RULES

1. DEFINITIONS: AS USED IN THIS TARIFF, UNLESS THE CONTEXT OTHERWISE REQUIRES:

(G) FERRY CHARGE: THE TERM "FERRY CHARGE" MEANS THE CHARGE IMPOSED BY UAL FOR MOVING THE CHARTER PLANE TO THE POINT OF ORIGIN OF THE CHARTER FLIGHT OR FROM THE POINT OF DESTINATION OF THE CHARTER FLIGHT OR THE POINT OF TERMINATION OF THE CHARTER FLIGHT, AT THE REQUEST OF THE CHARTERER, TO ANY AGREED POINT.

14. BAGGAGE

(C) UNUSED SPACE: UAL RESERVES THE RIGHT TO USE ANY CARGO AND/OR STORAGE SPACE WITHOUT CHARGE ON THE CHARTER PLANE WHICH IS NOT NEEDED OR USED BY THE CHARTERER OR THE CHARTER PASSENGERS.

WHILE IT IS TRUE THAT NEITHER OF THESE TWO RULES SPECIFICALLY PROVIDES THAT FERRY CHARGES ARE MADE ONLY WHEN A PLANE IS FLOWN EMPTY TO THE POINT WHERE THE CHARTER FLIGHT BEGINS OR FROM THE DESTINATION OR TERMINATION OF THE CHARTER FLIGHT TO AN AGREED POINT, ATTENTION IS INVITED TO THE PROVISIONS OF RULE 18, FOURTH REVISED PAGE 17 OF THE TARIFF, EFFECTIVE SEPTEMBER 1, 1950, WHICH READS AS FOLLOWS:

18. COMPUTATION OF FARES AND CHARGES:

THE TOTAL CHARGE FOR A CHARTER FLIGHT SHALL INCLUDE THE FARE, COMPUTED IN ACCORDANCE WITH PARAGRAPH (A) OF THIS RULE, PLUS THE FERRY CHARGES COMPUTED IN ACCORDANCE WITH PARAGRAPH (B) OF THIS RULE, AND FOR LAY-OVER CHARGES COMPUTED IN ACCORDANCE WITH PARAGRAPH (C) OF THIS RULE WHEN THESE CHARGES ARE APPLICABLE.

(A) FARES:

THE FARE SHALL BE DETERMINED BY MULTIPLYING THE AIRPORT TO AIRPORT MILEAGE BY THE RATES APPLICABLE TO THE TYPE OF AIRCRAFT CHARTERED.

(B) FERRY CHARGES:

(1) FERRY CHARGES SHALL BE ASSESSED BY UAL

(A) WHEN A CHARTER PLANE OF THE TYPE REQUESTED BY THE CHARTERER IS NOT AVAILABLE AT THE POINT OF ORIGIN OF THE CHARTER FLIGHT AND UAL MUST FERRY SUCH CHARTER PLANE TO THE POINT OF ORIGIN OF THE CHARTER FLIGHT, AND/OR

(B) WHEN, UPON COMPLETION OF THE CHARTER FLIGHTS, UAL MUST FERRY THE CHARTER PLANE TO THE POINT AGREED UPON BETWEEN UAL AND THE CHARTERER.

(2) FERRY CHARGES SHALL BE DETERMINED BY MULTIPLYING THE AIRPORT TO AIRPORT MILEAGE BY THE RATES APPLICABLE TO THE TYPE OF AIRCRAFT CHARTERED.

IT IS PARTICULARLY TO BE NOTED THAT, UNDER THE PROVISIONS OF PARAGRAPH B (1) (A) AND (B) OF THE QUOTED RULE 18, FERRY CHARGES ARE AUTHORIZED TO BE ASSESSED BY UNITED AIR LINES WHEN " UAL MUST FERRY SUCH CHARTER PLANE" TO THE POINT OF ORIGIN AND, UPON COMPLETION OF THE CHARTER FLIGHT, TO THE POINT AGREED UPON BETWEEN UNITED AIR LINES AND THE CHARTERER (ITALICS SUPPLIED). TO DETERMINE THE OPERATION AND EFFECT OF THIS PROVISION, IT IS NECESSARY TO ASCERTAIN THE MEANING OF THE WORD FERRY" AS USED IN THE QUOTED PHRASE. APPARENTLY YOUR TARIFF AFFORDS NO DEFINITION OF THE WORD ,FERRY" OR ANY SPECIFIC BASIS FOR DETERMINING WHAT IS OR WHAT IS NOT A "FERRY FLIGHT.' IT IS TRUE THAT RULE 1 (G) TO WHICH YOU REFER DEFINES " FERRY CHARGE" AS THE CHARGE IMPOSED BY UNITED AIR LINES "FOR MOVING" A "CHARTER PLANE" TO THE POINT OF ORIGIN OF THE CHARTER FLIGHT AND FROM THE DESTINATION OF THE CHARTER FLIGHT TO ANY AGREED POINT BUT THE PROVISIONS OF THIS RULE MUST NECESSARILY BE READ IN CONNECTION WITH THE PROVISIONS OF RULE 18 (B) (1), QUOTED ABOVE, WHICH SPECIFICALLY AUTHORIZE THE ASSESSMENT OF " FERRY CHARGES" ONLY WHEN UNITED AIR LINES MUST "FERRY" THE PLANE BETWEEN THE POINTS CONCERNED. IN THE ABSENCE OF A DEFINITION OF THIS PROVISION IN THE TARIFF, RECOURSE TO DEFINITIONS IN TARIFFS OF OTHER AIR CARRIERS OPERATING CHARTER SERVICES SEEMS JUSTIFIED. IN " MILITARY TRAFFIC TARIFF NO. 1 NAMING AIRPORT TO AIRPORT CHARTER RATES AND PASSENGER MILE RATES," JOHN J. KLAK, AGENT, C.A.B. NO. 3, IT IS PROVIDED ON PAGE 5, EFFECTIVE MAY 26, 1951:

FERRY MILES: MEANS MILES WHICH CARRIER IS REQUIRED TO OPERATE AN AIRCRAFT WITHOUT PAYLOAD (ITALICS SUPPLIED) BETWEEN POINTS WHERE IT IS BASED BY THE CARRIER AND THE ORIGIN OF A CHARTER FLIGHT AND BETWEEN THE DESTINATION OF A CHARTER FLIGHT AND THE POINT TO WHICH THE AIRCRAFT IS TO BE RETURNED FOR THE NEXT OPERATION BY THE CARRIER, ALSO, SUCH OTHER FLIGHTS OF THE CHARTERED AIRCRAFT, UNOCCUPIED BY PASSENGERS AND THEIR BAGGAGE, EQUIPMENT OR OTHER PROPERTY (ITALICS SUPPLIED) AS MAY BE NECESSARY TO PROVIDE THE KIND OF TRIP CHARTERER REQUESTS.

SIMILARLY AMERICAN AIRLINES, INC., LOCAL CHARTER TARIFF NO. 1-D, C.A.B. NO. 54, EFFECTIVE FEBRUARY 22, 1951, CONTAINS IN RULE 1.1 (E) THE DEFINITION:

FERRY MILEAGE MEANS ANY MILEAGE WITHOUT PAYLOAD OPERATED BY CARRIER INCIDENTAL TO AN ACTUAL CHARTER.

LIKEWISE, NATIONAL AIRLINES, INC., CHARTER TARIFF NO. 3, C.A.B. 45, EFFECTIVE JANUARY 21, 1951, CONTAINS IN RULE 1 (H) A DEFINITION OF " FERRY MILES" THAT IS SUBSTANTIALLY THE SAME AS THAT QUOTED ABOVE FROM AGENT KLAK'S TARIFF CAB NO. 3. THESE PROVISIONS, WHICH ARE UNDERSTOOD HERE TO BE CONSISTENT WITH THE EFFECT ORDINARILY GIVEN THE TERMS "FERRY FLIGHT" AND "FERRY MILEAGE" AS USED IN THE INDUSTRY IN CONNECTION WITH THE COLLECTION OF TARIFF CHARGES, WOULD SEEM TO REQUIRE THAT THE PROVISIONS OF RULE 18 (B) (1) OF YOUR TARIFF BE GIVEN EFFECT AS APPLYING ONLY TO CHARTER PLANES OPERATED WITHOUT PAYLOAD.

IT IS NOTED ALSO THAT RULE 18 APPARENTLY AUTHORIZES A FERRY CHARGE TO THE POINT OF ORIGIN OF THE CHARTER FLIGHT ONLY WHEN A CHARTER PLANE OF THE TYPE REQUESTED BY THE CHARTERER IS NOT AVAILABLE AT SUCH POINT. A PLANE FLOWN TO SUCH POINT IN REVENUE SERVICE WOULD SEEM TO BE AVAILABLE AT THE POINT OF ORIGIN OF THE CHARTER FLIGHT, WITHIN THE MEANING OF THIS RULE, WHETHER IT WAS FLOWN IN REGULARLY SCHEDULED SERVICE OR AS A SECOND SECTION OF A REGULARLY SCHEDULED FLIGHT TO SUCH POINT OF ORIGIN. IT IS NOT ENTIRELY CLEAR, FROM THE LANGUAGE USED IN THE CITED RULE 14 (G), WHAT MAY HAVE BEEN THE PURPOSE OR EFFECT OF THE RIGHT APPARENTLY RESERVED TO UNITED AIR LINES TO USE UNNEEDED OR UNUSED SPACE "WITHOUT CHARGE," BUT HOWEVER THAT MAY BE, THE PROVISION WOULD SEEM TO HAVE NO APPLICATION, WHERE AS HERE, REVENUE IS ASSESSED AND COLLECTED FOR THE TRANSPORTATION OF OTHER THAN THE CHARTER CARGO OF THE CHARTERER OF THE CHARTERED PLANE.

ASIDE FROM THE CONSIDERATION DISCUSSED ABOVE, THE CHARTER AIR CERTIFICATE, EXECUTED BY THE CARRIER AND THE CONTRACTING OFFICE OF THE UNITED STATES ARMY SPECIFICALLY PROVIDES THAT:

IF THE AGREED UPON FERRY MILEAGE CAN BE ELIMINATED OR REDUCED BY RESCHEDULING THE ASSIGNED EQUIPMENT IN REGULAR OR OTHER CHARTERED SERVICE, THE BENEFIT OF SUCH REDUCTION IN FERRY MILES FLOWN SHALL BE CREDITED BACK TO THE CONTRACTING AGENCY AT THE CONTRACT RATE PER MILE.

BY ELECTING TO OPERATE THE PLANE IN REVENUE SERVICE FROM SAN FRANCISCO TO SEATTLE, IT WOULD SEEM THAT UNITED AIR LINES, INC.'RESCHEDULED" THIS PLANE IN "REGULAR SERVICE" WITHIN THE MEANING OF THIS AGREEMENT, AND THAT THE FERRY MILEAGE CONTEMPLATED WHEN THE CHARTER WAS ARRANGED SHOULD PROPERLY BE "CREDITED BACK TO THE CONTRACTING AGENCY AT THE CONTRACT RATE PER MILE" IN ACCORDANCE WITH THIS AGREEMENT. THIS IS WHAT THE AUDIT ACTION HAS ACCOMPLISHED.

ACCORDINGLY, YOU ARE ADVISED THAT THE MAXIMUM ALLOWABLE CHARGES FOR THE SERVICES PERFORMED IN CONNECTION WITH " CAM NO. 3696" APPARENTLY HAVE BEEN CORRECTLY COMPUTED AND STATED BY OUR TRANSPORTATION DIVISION, AND THAT THE OVERPAYMENT OF $863.50 SHOULD BE PROMPTLY REMITTED TO PRECLUDE RECOVERY THEREOF BY SETOFF FROM AMOUNTS OTHERWISE FOUND DUE UNITED AIR LINES, INC., AS AUTHORIZED IN SECTION 322 OF THE TRANSPORTATION ACT OF 1940, AS AMENDED, 54 STAT. 955, (49 U.S.C. 66). THIS PRINCIPLE WILL LIKEWISE BE FOR APPLICATION WITH RESPECT TO THE OTHER CHARTER AIR MOVEMENTS IDENTIFIED ON THE STATEMENT MENTIONED ABOVE, SUBJECT TO REVIEW OF THE INDIVIDUAL TRANSACTIONS FOR A DETERMINATION OF THE CORRECTNESS OF THE AUDIT AND ACCOUNTING DETAILS OTHERWISE INVOLVED.