Transcontinental Western Air v. Civil Aeronautics Board/Dissent Jackson

Mr. Justice JACKSON, dissenting.

The Civil Aeronautics Board asks us to hold that it is denied by its organic Act any power retroactively to fix rates for carrying air mail. It has not convinced me that it has no power, whatever it should wisely do with it as matter of policy.

The fundamental premise of the Court's opinion is that the function of the Board in fixing the air-mail rate is analogous to rate-making for a railroad or a public utility. The two types of rates are not comparable. 'Rate' as applied to the Government's air-mail payments is an euphemism to embrace a subsidy as well as compensation. The statute requires the Board, in fixing the 'rate' for transportation of mail, to take into consideration the 'need of each such air carrier for compensation * *  * to insure the performance of such service, *  *  * and to enable such air carrier *  *  * to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the Postal Service, and the national defense.' § 406(b). These considerations are inappropriate in applying ordinary utility rate-making principles. Moreover, utility rates apply to a multitude of customers; the air-mail rate is paid by only one-the Government. Utility services must be paid for currently; air-mail payments can be and are being paid in lump sums on account of items long past.

Congress, in the Act before us, set up a scheme for dealing with each according to its separate nature. The rate for public carriage of passengers and goods by air lines, of course, cannot be fixed retroactively on the basis of experience, for the public must know at the time they take service hat they are to pay for it and the carrier must collect then or never. The Act recognizes this necessity with respect to passengers and cargo. Rates for transporting them are required by § 403, 49 U.S.C.A. § 483, to be embodied in filed and published tariffs, which may be altered only after hearing and notice and only prospectively. Section 1002 provides that the Board may institute proceedings to modify these rates and may, after prescribed procedures, set the rates thereafter to be charged. Thus, when Congress was dealing with utility rates for passengers and shippers, it permitted only prospective changes, and said so.

But Congress believed that, in the interest of the national defense and commercial aviation, it had to subsidize pioneering air lines and underwrite revenues above those to be realized from passenger and cargo carriage. A feasible way to do it was through air-mail payments. Its plan to that effect was detailed in § 406. But as to this subsidy rate, it enacted no prohibition against retroactivity and, if it had, it is difficult to see how the Board would have authority to go back even to the date of the petition. On the contrary, however, § 406(a) empowers and directs the Board to determine the air-mail rate and 'to make such rates effective from such date as it shall determine to be proper.' I see no justification for holding that this language means anything less than just what it says, or for holding that two such opposite kinds of payments must be governed by identical rules.

The Civil Aeronautics Board, however, asks us to hold that the same rules as to retrospective rates are 'applicable equally to mail, passenger and property rates under the Act.' It urges that its provisions do not 'convert the Board's primary function of fixing rates of compensation for the future into a duty to award amounts of compensation for the past' and that, if it sets too low a rate, 'the carrier has no redress save a new hearing and the fixing of a more adequate rate for the future.' It contends for application of decisions by which this Court 'has refused to require the capitalization of past losses in the rate base for the purpose of fixing future rates' or to allow 'current reimbursement out of new rates of deficiencies arising from a failure to earn a reasonable return in past years, or the capitalization of costs of maintaining excess capacity during early periods of operation.' And the Board argued that it has adhered to such rules and advances policy reasons why we should hold that it is without power to do otherwise.

I have not been able to reconcile the position which the Board took before this Court at its argument on February 8 and 9 with what appears to be its almost contemporaneous action. On February 21. 1949, the Board handed down an order in which it allowed to this very petitioner, in a lump sum, $2,748,000 for the period July 14, 1947, to December 31, 1948, and $33,333 in a lump sum each month thereafter. It said, 'The above payments for each of these carriers are in addition to, and not exclusive of, the mail rates provided for in previous temporary or final mail rate orders, for the respective periods stated.' (Emphasis supplied.) The TWA lump sum of $2,748,000 was to make them whole for the year 1948 and also to pay their 'grounding losses' for 1946, a year prior to the filing of its petition, which the Board asks us to hold as the limit of backward operation of rates. The Board said:

'In 1946, TWA incurred substantial costs because of the grounding of the Constellation aircraft. Similar costs were incurred by United and American in 1947 and 1948 when the DC-6 was grounded. These costs are merely another form of developmental costs attributable to the introduction of a new air craft type. It is clear that they are, in these cases, of such severity as to obstruct their current development. Under our statutory mandate to develop air transportation we should underwrite such costs in some appropriate manner.'

At the same time the Board issued a state ent of policy. As to the grounding costs which the Board had argued to this Court it had no power to reimburse retroactively, it said that it had originally felt they would not be high enough to require special mail-pay allowance for their 'reimbursement.' But it continued: 'Experience has not supported this view' and it is 'desirable to make special mail rate provision for established losses of this character.' It announced that this petitioner, among others, is being paid for grounding losses. 'In addition, in view of its obligation under § 406(b) of the Act, discussed above, the Board has concluded that the temporary mail rates for the United and TWA should be increased to an extent sufficient to meet the remainder of their approximate break-even needs for the year 1948. With respect to the entire retroactive period and the future, the Board will determine final rates after formal proceedings, which will give consideration to the full reasonable requirements of these two carriers.' (Emphasis supplied.)

What I get from the Board's orders and statements is that it is acting in a spirit completely contrary to its argument to this Court and to this Court's opinion, even if there may be a technical consistency, which I doubt. It appears to have authorized capitalization of losses for periods before any rate petition was filed and the amortization of those losses from subsidy payments afterward. I find far less statutory authorization for such a device for carrying losses forward into current rates than for forthright fixing of effective rates from such prior date as shall be proper. If the need for retroactivity is so imperative that it must be met by evasion, the policy arguments of the Board against construing the statute to permit retroactivity fail. I do not know that these matters of policy should influence the Court in any event, but if they do, my own predilections, unlike the Court's, favor fixing the subsidy on experience rather than on prophecy. In the light of what appears to be the practice, I see no reason why the statute should not be applied so as to carry out what its language conveys and why the subsidy rates should not be regarded as always tentative and subject to revision either to meet unforeseen contingencies or to recapture excessive payments. The Commission would no more be bound to reimburse extravagant management or improvident outlay after it has occurred than to allow for it in advance. In fact, excessive expense would probably be easier to detect in actual statements of operations than in estimates.

But if I were to consider accepting the Board's argument, I would at least set this case for reargument and require a candid explanation of what appears to be a material discrepancy between what the Board has led this Court to hold and the premises on which it seems actually to be proceeding.

Mr. Justice FRANKFURTER joins in this opinion.