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INTEREST - PAYMENTS ON RETROACTIVE RATE INCREASES - AIR CARRIERS - OVERSEAS PAYMENT OF INTEREST BY THE GOVERNMENT ON RETROACTIVE INCREASES IN RATES GRANTED TO OVERSEAS AIR CARRIERS BY THE CIVIL AERONAUTICS BOARD IS LIMITED BY THE CONTRACT PROVISIONS AND BY THE DATES THE INCREASES ARE ANNOUNCED. THE MILITARY AIR COMMAND (MAC) OF THE DEPARTMENT OF THE AIR FORCE ADVISES THAT THE AIR CARRIERS WILL ACCEPT 75 PERCENT OF THE ACCRUED INTEREST PROVIDING THE AIR CARRIERS ARE NOT REQUIRED TO SUBMIT BILLINGS FOR THE INTEREST. IN DECEMBER 1970 INFORMAL PROCEEDINGS WERE INITIATED BY THE CAB TO REVIEW THE RATES. EXCEPT FOR A SHORT PERIOD WHEN THE RATES WERE FROZEN AT EXISTING LEVELS. THE SOLE ISSUE WAS WHETHER THE CAB HAD STATUTORY AUTHORITY TO INCREASE CHARGES RETROACTIVELY.

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B-186771, NOVEMBER 3, 1976, 56 COMP.GEN. 55

INTEREST - PAYMENTS ON RETROACTIVE RATE INCREASES - AIR CARRIERS - OVERSEAS PAYMENT OF INTEREST BY THE GOVERNMENT ON RETROACTIVE INCREASES IN RATES GRANTED TO OVERSEAS AIR CARRIERS BY THE CIVIL AERONAUTICS BOARD IS LIMITED BY THE CONTRACT PROVISIONS AND BY THE DATES THE INCREASES ARE ANNOUNCED.

IN THE MATTER OF PAYMENT OF RETROACTIVE INTEREST, NOVEMBER 3, 1976:

THE DEPARTMENT OF THE AIR FORCE HAS REQUESTED AN ADVANCE DECISION ON THE PAYMENT OF INTEREST ON RETROACTIVE INCREASES IN RATES AND FARES GRANTED TO SEVERAL AMERICAN OVERSEAS AIR CARRIERS BY THE CIVIL AERONAUTICS BOARD (CAB) UNDER ECONOMIC REGULATIONS (ER) 861, AMENDMENT 22. THE MILITARY AIR COMMAND (MAC) OF THE DEPARTMENT OF THE AIR FORCE ADVISES THAT THE AIR CARRIERS WILL ACCEPT 75 PERCENT OF THE ACCRUED INTEREST PROVIDING THE AIR CARRIERS ARE NOT REQUIRED TO SUBMIT BILLINGS FOR THE INTEREST. UNDERSTAND THAT THE GENERAL SERVICES ADMINISTRATION EXAMINED THE CLAIMS FOR THE INCREASE IN RATES AND CERTIFIED THE AMOUNTS FOR PAYMENT TO THE AIR CARRIERS FOR THE FISCAL YEARS BEGINNING ON JULY 1, 1972 AND JULY 1, 1973.

UNDER PART 288 OF THE CAB REGULATIONS, ENTITLED "EXEMPTION OF AIR CARRIERS FOR MILITARY TRANSPORTATION," 14 C.F.R. 288, THE CAB PRESCRIBES MINIMUM RATES AND FARES WHICH APPLY FOR THE TRANSPORTATION OF MAC CARGO AND PASSENGERS. ALTHOUGH MAC AND THE AIRLINES MAY CONTRACT FOR HIGHER CHARGES, IN ACTUAL PRACTICE THE MINIMUM RATES PRESCRIBED BY CAB GENERALLY BECOME THE CONTRACT RATES. IN DECEMBER 1970 INFORMAL PROCEEDINGS WERE INITIATED BY THE CAB TO REVIEW THE RATES.

THEN ON MAY 11, 1971, SEVERAL AIR CARRIERS REQUESTED THE CAB FOR AN INCREASE IN THE MINIMUM RATES FOR MAC TRANSPORTATION. ON DECEMBER 29, 1972, THE CAB ISSUED ER-786, WHICH PROVIDED FOR AN INCREASE IN THE MINIMUM RATES, AND MADE THOSE INCREASES RETROACTIVE TO JULY 1, 1971. ON FEBRUARY 16 AND 23, 1973, THE AIR CARRIERS REQUESTED RECONSIDERATION OF CAB'S FINDINGS AND ALLEGED THAT ERRORS HAD BEEN MADE WHICH REQUIRED FURTHER ADJUSTMENT IN THE MINIMUM RATES. THE DEPARTMENT OF DEFENSE (DOD) FILED A PETITION IN OPPOSITION TO THE CARRIERS' CONTENTIONS.

THEREAFTER, AND ON AUGUST 28, 1973, THE CAB ISSUED ER-819, WHICH INCREASED THE RATES AND MADE THE INCREASES RETROACTIVE TO JULY 1, 1972, EXCEPT FOR A SHORT PERIOD WHEN THE RATES WERE FROZEN AT EXISTING LEVELS. THEN ON JUNE 11, 1974, THE CAB ISSUED ER-861 WHICH AUTHORIZED APPLICATION OF THE INCREASED RATES FOR THE TRANSPORTATION RENDERED DURING THE PRICE FREEZE PERIOD OF JUNE 13 TO AUGUST 12, 1973.

PRIOR TO THE ISSUANCE OF ER-861, AND ON MARCH 12, 1974, THE DOD BROUGHT FORMAL PROCEEDINGS IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA CIRCUIT AND REQUESTED REVIEW OF ER-819. THE SOLE ISSUE WAS WHETHER THE CAB HAD STATUTORY AUTHORITY TO INCREASE CHARGES RETROACTIVELY. THE COURT FOUND THAT THE CAB HAD AUTHORITY TO REOPEN PROCEEDINGS TO CORRECT FACTUAL ERRORS MADE IN THE INITIAL PROCEEDINGS. SEE UNITED STATES V. CIVIL AERONAUTICS BOARD, 510 F. 2D 769 (CT. APP. DC CIR. 1975). THIS JUDGMENT BECAME FINAL ON MAY 1, 1975.

FOLLOWING THAT DECISION, THE AIR CARRIERS CLAIMED THE ADDITIONAL AMOUNTS DUE AND ASKED FOR PAYMENT OF INTEREST ON THE RETROACTIVE PAYMENTS. THE INTEREST CLAIMS APPARENTLY ARE BASED UPON PARAGRAPH 55 (PAGE L-14) OF THE CONTRACTS. CONTRACTS F-11626-73-C-0023 AND F-11626 73-C-0032 WITH NORTHWEST AIRLINES, INC., ARE REPRESENTATIVE OF THE CONTRACTS INVOLVED. THE INTEREST PROVISION IN PARAGRAPH 55 PROVIDES THAT INTEREST SHALL ACCRUE FROM THE TIME A CLAIM IS DENIED TO THE DATE A JUDGMENT BY A COURT OF COMPETENT JURISDICTION BECOMES FINAL. WITH REGARD TO THE PAYMENT OF INTEREST PURSUANT TO CONTRACT, SEE 51 COMP.GEN. 251 (1971).

PRIOR TO THE CAB ANNOUNCEMENTS ON AUGUST 28, 1973, AND JUNE 11, 1974, THE INCREASE DID NOT FACTUALLY EXIST AND NO CLAIMS COULD BE PRESENTED TO THE GOVERNMENT. SINCE THE GOVERNMENT WAS NOT RESPONSIBLE FOR THE DELAY IN IMPLEMENTING THE INCREASE, THERE CAN BE NO OBLIGATION TO PAY INTEREST FOR THE PERIODS PRIOR TO THE DATES THE INCREASES WERE ANNOUNCED.

ACCORDINGLY, INTEREST ON THE INCREASES IS PROPERLY PAYABLE UNDER THE CONTRACT FROM THE DATE OF THE CAB ANNOUNCEMENT ON AUGUST 28, 1973.

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