B-127532, B-145837, NOV. 3, 1961

B-127532,B-145837: Nov 3, 1961

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TO THE SECRETARY OF DEFENSE: REFERENCE IS MADE TO LETTER OF SEPTEMBER 27. RELATIVE TO CHARTER AIR TRANSPORTATION AND SOME OF THE DEVELOPMENTS WHICH HAVE TAKEN PLACE AS A RESULT OF THE CLAIMS BY UNITED STATES OVERSEAS AIRLINES. IT IS INDICATED THAT THE GENERAL PROBLEM WAS TAKEN UP WITH CHAIRMAN ALLEN BOYD OF THE CIVIL AERONAUTICS BOARD. WE HAVE BEEN IN FREQUENT CONTACT RECENTLY WITH MR. WE UNDERSTAND THAT YOUR DEPARTMENT IS PARTICULARLY CONCERNED WITH THE POST 1958 CLAIMS WHICH WERE FILED BY UNITED STATES OVERSEAS AIRLINES. THE PARTIES HAVE STIPULATED THAT IF THE CARRIER IS ENTITLED TO EXCESS FERRY MILEAGE PAYMENTS ON TRAFFIC MOVING DURING THE PERIOD AFTER NOVEMBER 1958. THIS ISSUE IS THE MOST CRUCIAL ONE SO FAR AS WE ARE CONCERNED.

B-127532, B-145837, NOV. 3, 1961

TO THE SECRETARY OF DEFENSE:

REFERENCE IS MADE TO LETTER OF SEPTEMBER 27, 1961, FILE TCTMA-CC, FROM MAJOR GENERAL I. SEWELL NORRIS, EXECUTIVE DIRECTOR, MILITARY TRAFFIC MANAGEMENT AGENCY, RELATIVE TO CHARTER AIR TRANSPORTATION AND SOME OF THE DEVELOPMENTS WHICH HAVE TAKEN PLACE AS A RESULT OF THE CLAIMS BY UNITED STATES OVERSEAS AIRLINES, INC., FOR EXCESS OF FERRY MILES FLOWN AFTER NOVEMBER 14, 1958. IT IS INDICATED THAT THE GENERAL PROBLEM WAS TAKEN UP WITH CHAIRMAN ALLEN BOYD OF THE CIVIL AERONAUTICS BOARD, WITH THE VIEW TO HAVING VARIOUS CHARTER AIR CARRIERS AMEND PERTINENT TARIFF PROVISIONS IN ORDER TO REMOVE ANY QUESTION AS TO THE FIXED AND PREDETERMINABLE CHARACTER OF THE CHARGES APPLICABLE TO CHARTER AIR MOVEMENTS.

WE HAVE BEEN IN FREQUENT CONTACT RECENTLY WITH MR. CLEMENT T. MAYO, OF THE MILITARY TRAFFIC MANAGEMENT AGENCY'S LEGAL STAFF, AND HE HAS FURNISHED US WITH COPIES OF REVISIONS IN TARIFFS PROPOSED TO BE FILED BY SOME CHARTER AIR CARRIERS. WE WOULD LIKE TO EXPRESS OUR APPRECIATION FOR MR. MAYO'S ASSIGNMENT TO THE PROCEEDING INVOLVING UNITED STATES OVERSEAS AIRLINES IN MIAMI. MR. MAYO HELPED CONSIDERABLY IN THE PREPARATION OF THE GOVERNMENT'S CASE AND HIS ADVICE AND PARTICIPATION IN THAT PROCEEDING CONTRIBUTED TO THE DISPOSITION OF THE CASE IN THE RELATIVELY SHORT TIME IT REQUIRED. WE UNDERSTAND THAT YOUR DEPARTMENT IS PARTICULARLY CONCERNED WITH THE POST 1958 CLAIMS WHICH WERE FILED BY UNITED STATES OVERSEAS AIRLINES.

BY WAY OF SUMMARY, THE PARTIES HAVE STIPULATED THAT IF THE CARRIER IS ENTITLED TO EXCESS FERRY MILEAGE PAYMENTS ON TRAFFIC MOVING DURING THE PERIOD AFTER NOVEMBER 1958, IT WOULD BE ENTITLED TO A LITTLE MORE THAN $424,000. THIS ISSUE IS THE MOST CRUCIAL ONE SO FAR AS WE ARE CONCERNED. AS YOUR DEPARTMENT KNOWS, THE CIVIL AERONAUTICS BOARD'S EXEMPTION ORDERS FIRST BECAME EFFECTIVE NOVEMBER 14, 1958, AND ALL INTERESTED GOVERNMENT AND CARRIER REPRESENTATIVES ASSUMED THAT FERRY MILEAGE WOULD THEREAFTER BE LIMITED TO THE BID BASIS. HOWEVER, UNITED STATES OVERSEAS AIRLINES NOW CONTENDS THAT THE JOINT MILITARY AIR TRANSPORTATION AGREEMENTS MADE BETWEEN THE DEPARTMENT OF DEFENSE AND AIR CARRIER REPRESENTATIVES WERE NOT APPROPRIATELY IMPLEMENTED SO AS TO REFLECT THAT FERRY MILEAGE PAYMENTS WERE TO BE LIMITED TO THE BID BASIS.

THE GOVERNMENT'S DEFENSE, WHICH IS MORE FULLY REVEALED IN OUR DRAFT OF BRIEF (COPY ATTACHED), IS THAT THE EXEMPTION ORDERS WERE SUFFICIENT IN THEMSELVES TO HOLD DOWN FERRY MILEAGE CHARGES TO THE BID BASIS. THE GOVERNMENT ALSO SAYS THAT IF IMPLEMENTATION WAS NECESSARY, IT WAS ACCOMPLISHED BY THE SUBMISSION OF BIDS AND CHARTER AIR MOVEMENT CERTIFICATES AS WELL AS A LETTER RECEIVED BY THE MILITARY TRAFFIC MANAGEMENT AGENCY, FROM UNITED STATES OVERSEAS AIRLINES IN EARLY FEBRUARY 1959, STATING THAT THEY INTENDED TO BE BOUND BY THE EXEMPTION ORDERS AND THAT THE MAXIMUM FERRY MILEAGE FOR WHICH PAYMENT WOULD BESOUGHT WOULD BE THAT SPECIFIED IN ITS BIDS. COMMISSIONER BOSARGE, PRESIDING AT THE HEARING IN MIAMI, ALLOWED THE PARTIES 30 DAYS TO FILE BRIEFS (DUE OCTOBER 26), AND 15 DAYS THEREAFTER FOR REPLY BRIEFS, FOLLOWING WHICH HE WILL PREPARE HIS REPORT. EXCEPTIONS TO THE PRELIMINARY DRAFT OF REPORT AND ORAL ARGUMENT MAY THEN BE MADE.

WE UNDERSTAND THAT MOST, IF NOT ALL, OF THE CHARTER AIR CARRIERS DOING BUSINESS WITH THE DEPARTMENT OF DEFENSE HAVE REVISED THEIR TARIFFS TO INCLUDE PROVISIONS DESIGNED TO LIMIT FERRY MILEAGE CLAIMS TO THE BASIS SET FORTH IN THEIR BIDS AND CAM AND CAFM CERTIFICATES. WE AGREE THAT THE REVISED PROVISIONS IN OVERSEAS NATIONAL AIRWAYS LOCAL MILITARY CHARTER TARIFF NO. M-1, C.A.B. NO. 39, 2ND REVISED PAGE 3, REPRESENT AN IMPROVEMENT OVER THE DEFINITIONS PREVIOUSLY CONTAINED IN TARIFFS OF A SIMILAR NATURE IN THAT THEY ARE MORE EXPLICIT THAN THERETOFORE IN REFLECTING THE INTENTIONS OF THE CONTRACTING PARTIES THAT THE FERRY MILEAGE AGREED UPON WOULD BE THE MAXIMUM FOR WHICH PAYMENT WOULD BE SOUGHT BY THE CARRIER. IN OUR VIEW THE SAID REVISED PROVISIONS COULD BE MADE EVEN MORE DEFINITE AND MORE CONCLUSIVE UPON THE CARRIERS IF THEY INCORPORATED IN A SPECIFIC REFERENCE TO THE PARTICULAR EXEMPTION ORDER AUTHORIZING THE LIMITATION OF PAYMENTS FOR FERRY MILEAGE AS STATED IN THE CARRIERS' RATE AND SERVICE PROPOSALS.

AS INFORMALLY INDICATED TO MR. MAYO, OUR OFFICE FAVORS, FOR SIMPLICITY IN PREDETERMINING THE APPLICABLE CHARGES OF THE CHARTER AIR CARRIERS, A TARIFF REQUIREMENT FOR THE APPLICATION OF A FIXED LIVE MILEAGE RATE TO THE LIVE OR CHARTER TRANSPORTATION WITHOUT REFERENCE TO ANY FERRY MILEAGE THAT MIGHT BE REQUIRED OR WHICH THE CARRIER SEES FIT OR FINDS DESIRABLE TO FLY IN CONNECTION WITH ANY PARTICULAR CHARTER AIR MOVEMENT. IT IS UNDERSTOOD THAT THE USE OF A LIVE MILEAGE RATE WITH THE FERRY MILEAGE FACTOR BUILT INTO SUCH RATE IS NOT FAVORED BY THE CHARTER AIR CARRIERS GENERALLY BUT THAT THE FORMULATION OF A REASONABLE AND COMPENSATORY LIVE MILEAGE RATE IS FEASIBLE. IT HAS BEEN SUGGESTED THAT ONE OF THE PRINCIPAL REASONS FOR THE RELUCTANCE OF THE CHARTER AIR CARRIERS TO COOPERATE IN THE PUBLICATION OF A LIVE MILEAGE RATE ONLY, WITH THE FERRY MILEAGE FACTOR BUILT IN, STEMS FROM THEIR PROFESSED DESIRE TO MAINTAIN A COMPETITIVE POSITION WITH THE RAILROADS WHO ARE PRIVILEGED, UNDER SECTION 22 OF THE INTERSTATE COMMERCE ACT, TO SUBMIT PROMPT QUOTATIONS OF REDUCED RATES COVERING LARGE MOVEMENTS OF MILITARY PERSONNEL.

IT MAY BE THAT APPREHENSIONS WITH REGARD TO THE DETRIMENT POSSIBLY SUFFERED BY AIR CARRIERS BECAUSE OF INABILITY TO COMPETE WITH THE RAILROADS, IN THE CIRCUMSTANCES DESCRIBED ABOVE, ARE EXAGGERATED. AS WE UNDERSTAND IT, MANY OF THE LARGE GROUP MOVEMENTS OF MILITARY PERSONNEL ARE AIR DIRECTED, THAT IS, SPECIFICALLY SET ASIDE AND INTENDED FOR CHARTER AIR TRANSPORTATION. WE APPRECIATE THAT THE IMPROVED REVISED TARIFF PROVISIONS, AS ILLUSTRATED BY 2ND REVISED PAGE 3 OF OVERSEAS NATIONAL AIRWAYS TARIFF NO. M-1, SHOULD SERVE TO PROTECT THE INTERESTS OF THE GOVERNMENT INSOFAR AS THE ALLOCATION AND PAYMENT OF PUBLIC FUNDS FOR CHARTER AIR TRANSPORTATION ARE CONCERNED. NEVERTHELESS, WE FEEL THAT THE IDEAL TARIFF PUBLISHED FOR THE ACCOUNT OF THE CHARTER AIR CARRIERS PROVISIONS SHOULD BE AS EXPLICIT AND COMPREHENSIVE AS IS POSSIBLE. OUR EXPERIENCE WITH THE MIAMI CHARTER AIRLINE CASES UNDERLINES THE RISKS CREATED BY ANY TECHNICALITY OR DISCREPANCY IN TARIFF PUBLICATION SUSCEPTIBLE TO VARIOUS INTERPRETATIONS.

IN A SEPTEMBER MEETING WITH CIVIL AERONAUTICS BOARD REPRESENTATIVES AT WHICH DEPARTMENT OF DEFENSE REPRESENTATIVES WERE PRESENT, WE SUGGESTED THAT IT MIGHT BE DESIRABLE FOR THE BOARD TO INSTITUTE A GENERAL STUDY OR INVESTIGATION OF THE TARIFFS OF THE CHARTER AIR CARRIERS DOING BUSINESS WITH BOTH THE DEPARTMENT AND COMMERCIAL CONCERNS TO DETERMINE WHETHER THE NEED EXISTS FOR UNIFORM TARIFF RULES AND REGULATIONS WHICH ARE CAPABLE OF BEING APPLIED IN THE CASE OF ALL CUSTOMERS ALIKE TO PRODUCE THE SAME RESULT. SUCH A PROCEEDING SHOULD INCLUDE AN INQUIRY INTO THE PRACTICES AND PROCEDURES FOLLOWED BY THE CHARTER AIR CARRIERS IN CHARGING FOR LIVE AND FERRY MILEAGE SEGMENTS OF CIVILIAN AND MILITARY CHARTER AIR MOVEMENTS PRIOR TO AND AFTER THE EXEMPTION ORDER PERIOD. THE EXEMPTION ORDER TECHNIQUE OF PROVIDING A BASIS FOR PREDETERMINING CHARTER AIR CHARGES FOR THE DEPARTMENT OF DEFENSE DOES NOT SEEM TO BE AN ADEQUATE LONG-RANGE SUBSTITUTE FOR TARIFF PUBLICATION; THE PROBLEM IS NOT INCAPABLE OF SOLUTION NOTWITHSTANDING THE PECULIAR NATURE OF CHARTER AIR TRANSPORTATION. CHARTER BUS OPERATORS WERE ABLE TO DEVISE A TARIFF- PUBLISHED MEANS OF COMPUTING DEADHEAD OR FERRY MILEAGE CHARGES ON A CONSTRUCTIVE BASIS (COMPUTATION OF DEADHEAD RATES OR CHARGES ON ONE-WAY CHARTER PARTIES, 68 M.C.C. 285) AND IT IS NOT APPARENT WHY CHARTER AIR CARRIERS CANNOT DO LIKEWISE, WITHOUT THE BENEFIT OF AN EXEMPTION ORDER. WE WOULD BE INTERESTED IN ASCERTAINING AND SPREADING ON THE PUBLIC RECORD WHETHER THE CARRIERS ARE STRICTLY APPLYING THE TERMS OF THEIR TARIFFS AND OBTAINING PAYMENTS FOR EXCESS FERRY MILEAGE IN ALL CASES AFTER THE CHARTER ARRANGEMENT WAS MADE AND PAYMENT RECEIVED CONSISTENT WITH SUCH CHARTER ARRANGEMENT.

AT THE TIME OF THE SEPTEMBER MEETING WITH THE CIVIL AERONAUTICS BOARD REPRESENTATIVES IT WAS AGREED THAT THE GOVERNMENT WAS THEN INTERESTED IN PROMPT ESTABLISHMENT OF STABILITY AND CERTAINTY IN CHARTER AIR TRANSPORTATION TARIFF CHARGES. YOUR DEPARTMENT'S ACTIVITY IN ENCOURAGING THE PRESENT FORM OF REVISIONS IN THE CARRIERS' TARIFFS SATISFIES THE OBJECTIVE OF AN IMMEDIATE SOLUTION TO THE GENERAL PROBLEM, ALTHOUGH AS INDICATED WE FEEL THAT THE PROBLEM HAS NOT BEEN SOLVED PERMANENTLY. OBVIOUSLY, FURTHER CONSIDERATION MUST BE GIVEN TO THE EXTENSION OF THE CURRENT EXEMPTION ORDER WHICH IS EFFECTIVE UNTIL DECEMBER 31, 1961. THE CIVIL AERONAUTICS BOARD HAS PREVIOUSLY EXPRESSED THE VIEW THAT THE EXEMPTION ORDER METHOD OF REMEDYING THE SITUATION IS NOT THE LONG-RANGE ANSWER TO THE PROBLEMS CREATED BY DEALINGS WITH THE CHARTER AIR CARRIERS INSOFAR AS THEIR CHARGES ARE CONCERNED. THE EXEMPTION ORDERS HAVE BEEN RECOGNIZED AS TEMPORARY MEASURES INTENDED TO AFFORD RELIEF TO THE CONTRACTING PARTIES PENDING THE DEVELOPMENT OF AN ACCEPTABLE MEANS OF TARIFF PUBLICATION WHICH WOULD PROTECT MILITARY CHARTERERS IN ARRANGING FOR CHARTER AIR TRANSPORTATION. ON THE OTHER HAND, IT HAS BEEN INDICATED BY THE BOARD THAT AN EFFECTIVE TARIFF CANNOT BE DEVISED WHICH WOULD MEET THE MILITARY BID REQUIREMENTS AND STILL NOT VIOLATE SECTION 403 OF THE FEDERAL AVIATION ACT OR PLACE AN UNDUE BURDEN UPON THE AIR CARRIERS.

WE THINK THAT INTERESTED GOVERNMENT AGENCIES SHOULD SERIOUSLY CONSIDER OBTAINING CIVIL AERONAUTICS BOARD ACTION IN THE PUBLIC INTEREST BEFORE THE END OF THIS YEAR FOR THE PURPOSE OF REMOVING ANY QUESTION AS TO PRECISELY WHAT IS NECESSARY IN ORDER TO ENABLE A MILITARY AND CIVILIAN CHARTERER TO DETERMINE BY THE APPLICABLE TARIFF WHAT THE CHARGES WILL BE PRIOR TO THE ENGAGEMENT OF THE CARRIER SERVICES FOR THE LIVE AND FERRY MILEAGE. WILL CONTINUE TO TALK THESE MATTERS OVER WITH DEPARTMENT OF DEFENSE REPRESENTATIVES, WHOSE HELPFUL SPIRIT OF COOPERATION FOR THE PURPOSE OF INSURING SOUND PROCUREMENT PRACTICES AND THE EFFICIENT APPLICATION OF APPROPRIATED FUNDS, IS APPRECIATED.

THE CLAIMS OF OVERSEAS NATIONAL AIRWAYS, INC., ONE OF THE PLAINTIFF INTERVENORS IN THE ASSOCIATED AIR TRANSPORT CASE, ARE SCHEDULED FOR HEARING IN MIAMI ON NOVEMBER 10, 1961. THE ORIGINAL EXHIBIT FILED BY OVERSEAS NATIONAL AIRWAYS LISTED CLAIMS IN THE TOTAL AMOUNT OF ABOUT $42,000, BUT THE CARRIER IS NOW REVISING ITS EXHIBIT TO REFLECT A SUBSTANTIAL INCREASE IN THE TOTAL AMOUNT CLAIMED.