Environmental Benefits of Reducing Excess
Air Transport Capacity

By Scott C. Whitney*

In Fiscal Year 1973, the United States domestic scheduled airline
industry achieved a system load factor of 52.2 percent.' This means
our national domestic scheduled airline system, on an overall basis,
operated almost half empty. The seats that were occupied generated
more than 122.5 billion revenue passenger miles producing gross air
transport revenues of nearly $8 billion.2 In an ideal air transport
system, one in which capacity exactly fits traffic demand, aircraft
miles and fuel could almost have been cut in half. This would
have produced a saving of approximately one billion plane miles
operated,' representing a saving of about $4 billion in operating
costs4 and a saving of some 4 billion gallons of fuel.5

Naturally, in such an ideal world, the airlines could reduce their
fleet size and related equipment to about half the present numbers,
thereby reducing their investment by more than $3 billion.' Air-
line profits would soar exponentially, because once break-even load

* Professor of Law, William & Mary College; Partner, Bechhoefer, Snapp, Sharlitt,

Lyman & Whitney, Washington, D.C.

1. Civil Aeronautics Board, Air Carrier Traffic Statistics, year ended June 30,
1973. These data relate to domestic scheduled Trunkline and Local Service Airline
operations. International, Supplemental and All-cargo carrier operations are not in-
cluded in this study.

2. Civil Aeronautics Board, Air Carrier Financial Statistics, year ended June 30,
1973. Overall domestic scheduled operations including all-cargo service grossed
$9,129,615,000 while passenger revenues were $7,965,265,000.

3. Total revenue aircraft miles operated in fiscal 1973 were 2,030,654,000, of
which only 81,975,000 were all-cargo mileage. CAB Air Carrier Traffic Statistics,
year ended June 30, 1973.

4. Total operating costs in fiscal 1973 were $8,610,317,000, of which only $70
million were incurred by all cargo operations. CAB Air Carrier Financial Statistics,
year ended June 30, 1973.

5. Domestic Scheduled Air Carriers consumed 8 billion gallons of jet fuel in
1972. Air Transport Association Tabulation CAB Forms 41.

6. Total investment in operating property before depreciation was $10,944,-
039,000; after depreciation, $6,968,472,000. Id.



COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

factor is reached, additional passenger revenue beyond that point is
largely profit.

In terms of environmental consequences, the foregoing idealized
scenario would produce a dramatically improved world: fleet noise
levels and aircraft emissions would be cut in half, consumption of
nonrenewable fuel resources would be halved, substantial quantities
of strategic metals and sophisticated electronic equipment presently
committed to supernumerary jet aircraft could be reallocated to
other productive uses, and the resultant prosperity of the airlines
would enable them to finance the research and development of
quiet-engine, emission-free air transport technologies for the re-
mainder of their flight operations significantly earlier than now ap-
pears to be feasible.

Of course no such utopian matching of air transport capacity
with travel demand is feasible in the real world. Yet the fact re-
mains that significant improvement in existing air transport capacity
allocation is attainable. This has been conclusively demonstrated by
the limited but significant capacity reduction agreements that have
been authorized to date, and has led the Civil Aeronautics Board
(CAB) to institute a broad gauge investigation, the Capacity Re-
duction Agreement Case, Docket 22908. It is the purpose of this
study to consider what regulatory procedures can best achieve the
maximum reduction of excess airline capacity and to assess the en-
vironmental consequences that would result.

Before considering the limitations and possibilities of the pending
Capacity Reduction Agreement Case, it is necessary to understand
the mechanics of a capacity limitation agreement. In any given do-
mestic market, the CAB, by virtue of air carrier reported origin and
destination (hereafter 0 & D) traffic data, is able to determine the
volume of traffic carried in that market on a daily basis.' Similarly,
the CAB has accurate and up-to-date information on the schedules
and type of equipment operated in that market to carry the traffic.
By virtue of Phase 6A of the Domestic Passenger Fare Investigation,
Docket 21866 (DPFI), the CAB has "standardized" seating con-

7. These data are derived from reports filed by the scheduled air carriers pur-
suant to Section 407 of the Federal Aviation Act of 1958, 49 U.S.C. § 1377 (1970).
Data as to traffic fluctuations by day of the week, and even by flight, as well as
by direction by time of day, is required to be furnished in Docket 22908. Capacity
Reduction Agreement Case, Docket 22908, Report of Prehearing Conference at 11
(October 19, 1973).

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Benefits of Reducing Air Transport Capacity

figurations by aircraft type for the purpose of computing load fac-
tors for rate-making purposes." From these data it is possible to
compute each air carrier's market share, each individual carrier's
load factor in the market, individual flight load factors, and, of
course, the overall composite segment load factor in the market.

When a capacity limitation agreement is negotiated, it is first
necessary to identify the future period during which the agree-
ment will prevail, to forecast the total traffic in the market for
that period (using most recent historic traffic as a base and a
statistically derived "growth factor") and to agree upon a "target"
load factor, i.e., the optimum load factor to be achieved, balancing
carrier profitability against adequate capacity to serve the public in
that market. What constitutes "adequate" capacity is both an in-
tricate matter to determine, and also involves a measure of subjec-
tive judgment. Virtually all markets have periods of peak demand
(both on a seasonal basis and on an ad hoc basis, e.g., holidays) and
some markets also have directional imbalances, that is, more traffic
over time in one direction than in the other. The art of deriving a
viable "target" load factor thus consists of selecting several "targets"
for different parts of the future operating period which reflect these
fluctuations in demand' and to key these various "targets" at a
level which will at once be sufficiently low to assure adequate seats
to the public, but sufficiently high to maximize carrier efficiency
and profitability.'0

8. CAB Docket 21866. Although the actual number of seats available on any
given aircraft may vary in practice depending on individual carrier decisions as to
number of seats abreast, pitch (i.e., the fore-aft spacing of seats), size and number
of lounges, and other considerations, the Board has established a "standardized" con-
figuration.to be used to compute load factors for rate-making purposes.

9. For example, in the New York/Newark-San Juan market the CAB approved
a 75 percent load factor for the peak season and a 65 percent load factor for the
off-peak season. Ad hoc fluctuations, primarily on holidays, are usually handled by
scheduling "extra sections" which, if not advertised in advance, are acceptable fre-
quency additions beyond the regular schedules authorized to be operated under the
capacity agreement. Another device to cope with ad hoc holiday fluctuations is to
permit substitution of wide-body jets for conventional jets or higher-density for lower-
density jets. See CAB Order 73-8-59, at 2 (August 10, 1973).

10. What constitutes an optimum load factor has as yet not been definitively
determined by the CAB. In Phase 6B of the Domestic Passenger Fare Investigation
(DPFI) the CAB established for rate-making purposes a long-term load factor stand-
ard of 55 percent, but in CAB Order 73-4-98, at 5 (April 24, 1973), the CAB
suggested that quarterly average load factors of 65 percent might be appropriate in
capacity agreement situations. As stated, supra note 9, the Board has approved a

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Once the "target" load factors are determined, it is possible to
calculate, given the traffic forecast for the various peak and off-
peak periods of the overall capacity agreement period, how much
total capacity should be operated by the carriers in the market.
This total capacity is thereupon allocated among the carriers usually
on a basis related to historic scheduling performance. 1

CAPACITY REDUCTION AGREEMENTS UNDER THE

FEDERAL AVIATION ACT OF 1958

The Federal Aviation Act of 1958, and its predecessor, the Civil
Aeronautics Act of 1938,12 have consistently been interpreted by
the CAB as establishing a regulatory scheme in which the certi-
ficated airlines should retain managerial control and discretion'over
such details of operations as the volume of services offered, the tim-
ing of such services, the choice of type of aircraft to be operated and
the seating configuration in the aircraft. 13 In this connection the

"target" load factor of 75 percent in the New York/Newark-San Juan market and
parties to a capacity agreement must report those flights experiencing load factors
higher than 95 percent. In CAB Order 73-11-50, at 4 (November 13, 1973) the
Board would preclude schedule cutbacks in markets experiencing load factors of
72 percent or more.

11. For example, in the New York/Newark-San Juan market the CAB approved
a carrier capacity allocation permitting American to operate 35 percent, Eastern 37
percent and Pan American 28 percent of the total approved capacity to produce the
"target" load factors of 65 percent in the off-peak and 75 percent in the peak
period. CAB Order 73-8-59 (August 10, 1973). Because different carriers may op-
erate different equipment, it is necessary to establish a record of "equivalent fre-
quencies": for instance, it may be determined that one wide-body frequency equals
two narrow-body jet frequencies.

12. The Federal Aviation Act of 1958, 49 U.S.C. §§ 1301-1542 (1970) super-
seded the Civil Aeronautics Act of 1938, 52 Stat. 973. Insofar as it pertains to this
article, the Federal Aviation Act re-enacted the 1938 provisions.

13. There are certain partial exceptions to this proposition:
(a) Subsidized air carriers are required by § 406(b)(3) of the Federal Avia-
tion Act, 49 U.S.C. § 1376(b)(3) (1970) to provide "honest, economical and
efficient management," a provision used by the Civil Aeronautics Board to dis-
allow subsidy compensation for operation of excess capacity. See Trans-Pacific
Airlines, Ltd. & Hawaiian Airlines, Ltd., Mail Rates, 20 C.A.B. 668 (1955),
as modified, 21 C.A.B. 933 (1955).
(b) The CAB has undertaken to regulate the adequacy of service available
in a given market, through what are known as "adequacy cases." These
adequacy cases have been recognized as ineffective to assure adequate service
and were superseded by a negotiating procedure between air carriers and civic
complainants presided over by the Director of the Office of Community Re-
lations of the CAB.

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Benefits of Reducing Air Transport Capacity

CAB in its order authorizing the transcontinental capacity limita-
tion agreement, the first notable exception to the historic laissez-
faire regulatory approach to airline scheduling, stated:

It remains our conviction, as indicated on several recent oc-
casions, [citing orders 70-11-35, 71-3-71 and 71-5-68], that the
Federal Aviation Act contemplates a competitive air transporta-
tion system and that decisions regarding flight scheduling and
increases or reductions in the capacity offered to the public
"go to the very heart" of such a system. [Citing order 70-11-35
supra] A competitive system, we firmly believe, is inherently
more efficient and more responsive to the needs of the public
than is a system in which production is allocated by mutual
agreement of the producers. Under the competitive system air
carrier scheduling and capacity should be established by the
competitive decision of individual carriers. Inter-carrier agree-
ments relating to scheduling and capacity are inconsistent with
the general competitive norm established by the Act and with
the antitrust laws. [Citing the Act but noting the qualification
to the competitive norm set forth in section 102(d) which
refers to competition -to the extent necessary to assure the
sound development of the national air transportation system.]
Hence the Board has in the past, except in highly unusual and
limited circumstances, refused to permit the carriers to discuss
multilateral action in these areas.

Instead, we urged the carriers to take unilateral action to bring
their capacity more in line with actual demand. 14

The Board was motivated to depart from its longstanding "hands
off" policy toward airline scheduling by several factors which had
developed during the period immediately preceding its landmark
decision in August 1971:

- A national economic slow-down accompanied by actual de-
clines in airline traffic as opposed to anticipated continued growth;

(c) The CAB in the Domestic Passenger Fare Investigation, Phase 6 B-Load
Factor, Docket 21566, established load factor standards for rate-making purposes.
Expenses related to operations producing lower load factors would not be
recognized for rate-making purposes.
(d) Similarly, in Phase 6 A of that investigation the CAB established seating
configuration standards.
(e) Other phases of this investigation, notably Phase 7 (Fare Level), Phase 8
(Rate of Return) and Phase 9 (Fare Structure) were based on the assumption
that a standardized load factor based upon a consistent seating configuration was
essential to the determination of a domestic fare system which precluded charg-
ing the public for excess capacity.

14. CAB Order 71-8-91, at 3 (August 19, 1971).

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- The commitment of the airline industry to purchase substantial
numbers of new jet aircraft such as the Boeing 747, the Lockheed
1011 and the DC-10, which offer greatly increased capacity com-
pared to the prior generation of narrow-body jet aircraft;

- The insistence of airline managements to build up and main-
tain high levels of flight frequencies in major competitive markets
to preserve their market shares vis-h-vis competitors;

- Steeply declining load factors resulting from the over-capacity
and the scheduling practices resulting from the competitive impetus
of airlines to maintain market shares, a combination which more than
offset the seat-mile economies inherent in the large capacity jet air-
craft, thereby producing staggering operating losses;

- And finally, the CAB's apprehension that the carriers would
not or could not take effective unilateral action to tailor capacity
to actual demand "quickly enough to avert lasting injury."1 5

The CAB concluded that continuation of these conditions would
be harmful to the public interest:

In addition to the environmental impact of flights unjustified
by public need, the public must also ultimately bear the burden
of a prolongation of the carriers' operation of unneeded services
[citing the short term inability of the standardized load factors
established in the Domestic Passenger Fare Investigation to
deter excess capacity) and the seriously high losses which the
carriers are now experiencing. This unhealthy situation is of
course the very antithesis of the statutory objectives of provid-
ing the public with adequate, economical and efficient service
at reasonable charges and with developing and maintaining a
financially sound competitive industry. [Citing sections 102(c)
and (d), 49 U.S.C. 1302(c) and (d) (1970).]",

It should be emphasized that apart from the foregoing reference
to "environmental impact," the primary concern that has motivated
the CAB to permit multilateral capacity reduction discussions and
to approve resulting capacity reduction agreements has until quite
recently been predominantly economic:

In our judgment, a limited departure from our normal policy
of leaving scheduling and capacity to the free play of com-

15. Id. at 3-4.
16. Id. at 4.

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Benefits of Reducing Air Transport Capacity

petitive forces is justified at this time as a means of affirming
the very statutory objectives of economical, efficient service
to the public and a financially sound air transportation system
which that policy would in normal times and under normal
circumstances be expected to achieve.1 7

The history and results of the various multilateral capacity reduc-
tion agreements approved by the CAB demonstrate that this
regulatory technique, although sparingly used until the onset of
the "energy crisis," can in fact provide a means by which far-
reaching reductions in excess capacity can be achieved and thereby
attain the beneficial environmental consequences described in
Part II of this study.

On March 11, 1971, the CAB authorized TWA and other interest-
ed carriers to conduct the first preliminary discussions to identify
markets in which multilateral reductions of capacity might be agreed
upon. 8 These discussions were held and eighteen such city-pair
markets were identified. Approval was thereupon sought to conduct
capacity reduction negotiations with respect to these specific mar-
kets. The CAB in fact approved such discussions with respect to
only thirteen city-pair markets, namely those that met the following
criteria promulgated by the Board:

First, the markets must be of substantial size. In this connection,
all but one of the authorized city-pair markets ranked in the top
twelve domestic markets in the United States based on revenue
passenger miles, and the other ranked 28th.

Second, the markets must be experiencing low load factors which
are projected to continue, i.e., a low percent of occupied, compared
to total available, seats. With two exceptions the city-pair markets
experienced load factors between 37 and 51 percent. The two excep-
tions had load factors of 59 and 68 percent but were nevertheless
included in the CAB's authorization because they were lower-yield
markets, i.e., markets which, because of low fare characteristics,
were less profitable than many other lower load factor domestic
markets.

Third, the markets must be served by a minimum of three com-
petitive air carriers.

17. Id. at 5.
18. CAB Order 71-3-71.

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Fourth, there must be a showing that "there is room for capacity
reduction."19

Accordingly, the CAB authorized discussions subject to certain
constraints intended to protect the interests of all affected parties.
One such requirement was the mandatory presence of CAB staff
observers and such other observers as any local, state or federal
agency deems fit. Likewise, representatives of civic, trade or con-
sumer associations, as well as representatives of opposing or non-
participating air carriers, were authorized to observe but not partici-
pate in the discussions. A full transcript of the discussions was re-
quired to be made at carrier expense and subsequently to be filed
with the Board within ten days. The procedure adopted by the
CAB contemplated that any agreement reached as a result of the
discussions be filed with the CAB within fifteen days for approval
or disapproval under Section 412 of the Federal Aviation Act, which
authorizes the Board to approve agreements among carriers "for
controlling, regulating, preventing or otherwise eliminating destruc-
tive, oppressive or wasteful competition, or for regulating stops,
schedules and charter service .... .20 CAB approval of any such
agreement would confer antitrust immunity by virtue of Section 414
of the Act.2 ' Provision was made for the filing of objections to any
such agreement and for replies thereto.

The discussions went forward pursuant to these guidelines and
three carriers (American, TWA and United) filed an application
requesting approval of an agreement to reduce scheduled capacity
in four markets: New York/Newark-Los Angeles; New York/
Newark-San Francisco; Chicago-San Francisco; and Washington/
Baltimore-Los Angeles.

The agreement sought to curtail schedule frequency sufficient to
raise load factors in the four markets from the first quarter 1971
range of 26 to 36 percent, to a uniform level of 50 percent during
the 1971-1972 off-peak period (October-May) and to a level of 60
percent during the 1972 peak period (July-September), thereby
producing an average load factor over the term of the agreement

19. CAB Order 71-5-68, at 2 (May 14, 1971).
20. 49 U.S.C. § 1382 (1970).
21. 49 U.S.C. § 1384 (1970). The Department of Justice has objected to au-

thorization of discussions as to 4 of the 13 markets, but the Board has rejected
this position. CAB Order 71-5-68, at 3 (May 14, 1971).

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Benefits of Reducing Air Transport Capacity

of 52.5 percent.22 In order to achieve these "target" load factors
the carriers proposed reductions of off-peak capacity in the (then)
present level of weekly nonstop round trips that ranged between
a low of 10.2 percent and a high of 38 percent, and somewhat
more modest schedule reductions during the peak period that
ranged between 6.1 percent and 15.7 percent, depending on the
market.2"

The CAB approved this agreement despite substantial opposition,
and based its approval on four rather dramatic findings.

First, the three applicant carriers had incurred 1970 losses of $131
million in aggregate, and first quarter 1971 losses alone aggregated
$94 million.24

Second, load factors in the subject markets had declined steeply
between the first quarter of 1970 compared to the first quarter of
1971 (e.g., 8.5 load factor percentage points in the New York-Los
Angeles market, the largest of the four markets).- 5

Third, domestic trunkline traffic on an overall basis had declined
.4 percent during the six months of 1971 compared to the corre-
sponding period in 1970 and more specifically, traffic in the four sub-

22. CAB Order 71-8-91, at 1-2 (August 19, 1971). Phase 6 B of the Domestic
Passenger Fare Investigation had established 52.5 percent as the reasonable interim
standard load factor for rate-making purposes.

23. To May 31, 1972

Present Level
Weekly Nonstop

Round Trips Proposed Level Percent of Reduction
NY-LA 185 132 28.9
NY-SF 143 89 38.0
CHI-SF 147 105 28.6
WASH-LA 73 66 10.2

June 1 to September 16, 1972

Present Level
Weekly Nonstop

Round Trips Proposed Level Percent of Reduction
NY-LA 185 157 15.4
NY-SF 143 121 15.7
CHI-SF 147 126 14.3
WASH-LA 73 69 6.1

CAB Order 71-8-91, at 2.

24. Id. at 5.
25. Id. at 6.

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ject markets had declined 9 percent in the first quarter of 1971
versus the first quarter of 1970.26

Fourth, the applicants forecast savings of $60 million during the
one year term of the agreement whereas the Department of Trans-
portation forecast savings ranging between $45 million and $151
million depending on whether carriers merely grounded freed air-
craft or sold them.27

Apart from the question whether resulting frequency would be
fully adequate to meet the demands of the traveling public, a
matter which the CAB affirmed, opposition to the agreement fo-
cused on three primary issues.

Issue One: Whether freed capacity would not be eliminated but
rather would be redirected to other non-agreement markets, thereby
disrupting existing competitive relationships and service quanta in
such markets. The CAB disposed of this issue by finding, "the ap-
plicant carriers have represented that there will not be any large-
scale shifting of capacity; and the Board is relying upon those rep-
resentations in approving the agreement." The CAB further noted
that "any large-scale shifting of capacity to markets already ade-
quately served would be wholly inconsistent with the purposes for
which this agreement is approved .... -28

Issue Two: Whether remaining capacity in an agreement market
should be structured to accomplish various purposes, inter alia:
(a) to assure a sufficient spread in the timing of schedules and dis-

26. Id.
27. See id.
28. Id. at 7 n.21. The Board retained jurisdiction to monitor the execution of

this agreement and provided for a reporting system whereby each participating car-
rier is required within 15 days after the end of each calendar month to submit a
report, in a form prescribed by the Board in Appendix A to its order, showing the
traffic performance of each flight in each affected market.

Subsequently, various non-agreement carriers alleged that authorization for the
agreement should be rescinded because freed capacity was in fact being shifted to
non-agreement markets, and that the above-noted reporting requirement is inade-
quate and must be supplemented by disclosure of the disposition of freed capacity
if the integrity of the agreement is to be maintained. The Board dismissed the
former notion on the ground that the shift of freed capacity was not "large-scale"
or even "significant." As to the request for a reporting requirement to disclose
ultimate dispositon of freed equipment, this was denied for all practical purposes
when the Board merely adopted a more detailed version of its original Appendix
A. The carrier which had requested the disclosure requirement did not petition for
reconsideration, presumably because it was in the final stages of concluding a
capacity limitation agreement of its own. See CAB Order 72-4-63 (April 13, 1972).

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Benefits of Reducing Air Transport Capacity

persion of service between airports serving a common area; (b) to
preclude operations between 2200 hours and 0700 to abate noise.
The CAB emphatically rejected these suggestions and opted for an
"aggregate reductions" approach rather than a "specific flight allo-
cation" method. The CAB concluded that "[i]t would be both dif-
ficult and a departure from our prior practice to attempt to ordain
in advance an appropriate pattern of operations in these and other
markets . . ." but rather such matters should "be left to the mana-
gerial discretion of individual air carriers. Even when there has
been a general agreement on total volume of service to be offered
in a market, competitive forces should still operate to produce a
pattern of schedules most appropriately related to the demand for
air service. 29

Issue Three: Whether a hearing was necessary before CAB ap-
proval of the agreement, to compile an evidentiary record both as
to the sufficiency of labor protective provisions and as to the al-
leged anti-competitive aspects of the agreement. The CAB denied
this motion which had been advanced by the labor parties. °

Thus the CAB, with two members dissenting, approved the first
capacity limitation agreement for a period of one year.

In addition to the discussions which led to the above-described
capacity agreement, American, Eastern and Pan American under-
took, pursuant to the authorization of Order 71-5-68, to negotiate
an agreement affecting the New York/Newark-San Juan market.
However, no agreement was reached within the 90 days allowed
by the discussion authorization order, but subsequently Pan Ameri-
can requested and received (two members of the Board dissenting)

29. CAB Order 71-8-91, at 7-8 (August 19, 1971).
30. Id. at 9-10. One of the labor parties, the Airline Pilots Association Interna-

tional (ALPA), challenged this decision in the United States Court of Appeals for
the District of Columbia. The Court held that the Board was not required to hold a
hearing on the anti-competitive aspects of the agreement but remanded the case
to the Board on the ground that "we are unable to determine the basis on which
the Board denied a hearing on the impact of the agreement on carrier employees
...." Airline Pilots Ass'n Int'l v. Civil Aeronautics Board, 475 F.2d 900, 902 (D.C.
Cir. 1973). Thereafter, the Board pursuant to the terms of the remand invited ALPA
to comment "as to the impact the agreement has had, and will be expected to
have, on carrier employees." CAB Order 73-2-60, at 2 (February 14, 1973). On
April 3, 1973, the Board, noting that ALPA had conceded that "no significant in-
jury has actually occurred, at least within the classes and crafts represented by
ALPA, which is fairly attributable to the capacity agreement," terminated the pro-
ceedings on remand. CAB Order 73-4-13, at 1, 3 (April 3, 1973).

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on January 25, 1972, permission to resume discussions subject to the
further constraint not originally contained in Order 71-5-68, that
any agreement contemplated must terminate on or before October
28, 1972.1 Subsequently, on June 16, 1972, the CAB (with two
members dissenting) approved a capacity reduction agreement in
the New York/Newark-San Juan market designed to achieve a 75
percent load factor during the peak period (August 1-September
9, 1972) and a 65 percent load factor in the off-peak period (Sep-
tember 10-October 28, 1972, at which time the agreement was to
terminate) .32 The CAB relied on essentially the same findings that
formed the basis for approval of the earlier transcontinental agree-
ment: submarginal load factors, the forthcoming introduction of
more high capacity, wide-body jet aircraft, unsatisfactory operating
results, the fact that public service would remain unimpaired, and
finally, the unusually low yield characteristic of the market due
to the low fare level that prevailed in this market.3

The CAB likewise rejected the arguments of carriers seeking to
impose reporting requirements as to the disposition of freed capac-
ity, and the related argument that participants in a capacity limita-
tion agreement should be barred from increasing schedule fre-
quency in any other non-agreement market it is authorized to serve
during the pendency of the capacity limitation agreement. The
CAB reiterated its position that a hearing was not required either
as to anti-competitive issues or the need for labor protective pro-
visions.34

Subsequently, the participants in both of these approved capacity
limitation agreements thereafter requested authority to conduct fur-
ther discussions with a view to extending the duration of the agree-
ments and the CAB grudgingly granted permission.3 5 In the case of
the transcontinental agreement, the CAB noted that although when
it authorized this initial agreement it had stated that it would not

31. CAB Order 72-1-86 (January 25, 1972). The subject carriers were unable to
reach agreement within the allotted 90 day discussion period, but subsequently re-
ceived a further 30 days in which to discuss an agreement. CAB Order 72-4-127
(April 24, 1972).

32. CAB Order 72-6-70.
33. Id. at 2-3.
34. Id. at 4.
35. CAB Order 72-8-42 (August 9, 1972) (Transcontinental Agreement); CAB

Order 72-9-13 (September 5, 1972) (San Juan Agreement).

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Benefits of Reducing Air Transport Capacity

countenance agreements exceeding one year, it now tentatively ap-
peared necessary to grant a "transition period to facilitate a return
to unilateral scheduling in the four markets" and that "a further
agreement of no more than six months may be justifiable," espe-
cially because the transition would take place during "the forth-
coming off-peak winter season. ' 3' However, the CAB reiterated its
determination not "to approve any subsequent request for discus-
sions or extensions of any agreements in these markets beyond the
six-month period."3 7

The CAB further noted that operations under the first agreement
had been "reasonably satisfactory" and although traffic growth was
showing signs of resuming "at a healthy and fairly steady rate,"
the "upward trend has been underway for less than ten months"
and the carriers "are starting back from a very deep trough of losses
indeed." 8 The CAB once again denied a request for a hearing which
had been advanced this time by the Aviation Consumer Action
Project.39 All of the original procedural machinery established by
the CAB for conducting the earlier discussions was established for
the new discussions.40

As to the renewal of permission to conduct further San Juan dis-
cussions, the CAB found that the prevailing agreement would have
operated only thirteen weeks before expiration, that Pan American
had forecast an operating loss of $7 million in 1973 absent further
capacity limitations in the San Juan market, that American and
Eastern had economic problems as well, and that consideration of
an extension was necessary to determine whether extended capacity
limitations are required to avoid fare increases in this unique mar-
ket.4' The CAB imposed the now customary procedural format on
the ensuing discussions.4 2

On November 2, 1972, the CAB, having earlier tentatively noted
the need for a "transition" period to phase back to unilateral sched-
uling in the four transcontinental markets, predictably approved ex-
tension of an "amendatory agreement" that would extend the orig-

36. CAB Order 72-8-42, at 2 & n.5 (August 9, 1972) (two members dissented).
37. Id. at 2.
38. Id. at 2-3.
39. Id. at 5.
40. Id. at 5-6.
41. CAB Order 72-9-13, at 1-4 (September 5, 1972) (two members dissented).
42. Id. at 4-5.

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inal agreement at the same level of capacity in the four subject mar-
kets until April 28, 1973, the autumn-winter period ending on the
date when spring-summer schedules become effective.43 The main
CAB order (as distinguished from Member Timm's concurring opin-
ion) reiterated its "extreme reluctance to approve such agreements
in view of the Federal Aviation Act's insistence on a competitive air
carrier system, and because over the long run that system will op-
erate most efficiently if carriers are required to make capacity de-
cisions unilaterally."44 Pursuing its grudging policy of authorizing
such agreements only because of the existence of putatively tem-
porary, exceptional circumstances, the CAB concluded there ex-
isted "a need for a short additional period of agreed-upon restraint
lest a return to unilateral scheduling for the autumn and winter
months of 1972-73, traditionally months of substantially lesser de-
mand, results in the operation by the applicants of levels of capacity
out of line with demand." 45 To underscore the need for this short
period of continued restraint, the opinion cited Big-Three losses,
after taxes, of $142 million during the period January 1970 through
June 1972, the possibility of further "serious losses" in the forthcom-
ing off-peak season, the evident success of the prior agreement in
increasing load factors on the subject routes, and the substantial
savings achieved by the agreement carriers.4

6 Similarly, the opinion
rejected the now customary requests for reporting use of freed
capacity and for more detailed regulation of schedules to assure
more appropriate scheduling of retained services.47

The truly remarkable aspect of the CAB's decision was the special
concurring opinion written by the then newly installed member
(now Chairman) Robert D. Timm. Contrary to this and prior ma-
jority views, Member Timm demonstrated that excess capacity was
not a recent phenomenon nor an unusual circumstance, but rather
a "problem that has recurringly plagued the air transportation in-
dustry," and moreover, a problem which "[i]n 34 years neither the
industry nor the CAB has been able to solve .... .Member Timm

43. CAB Order 72-11-6 (two members dissenting, one member filing a special
concurring opinion).

44. Id. at 2.
45. Id.
46. Id. at 3-4.
47. Id. at 5-6.
48. Id. Concurring Opinion at 1.

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Benefits of Reducing Air Transport Capacity

convincingly demonstrated what has been well known to airline mar-
keting executives for years but never publicly acknowledged, that
in competitive markets a given carrier's market share "is directly
related to frequency of service and capacity in a given market." 49

Moreover, Member Timm adduced data demonstrating that "the
carrier with the most frequencies and greatest capacity in a given
market will normally carry a percentage of the traffic in excess
of its percentage of the frequencies and percentage of capacity."50

Conversely, Member Timm established that "normally when a car-
rier unilaterally cuts back its service the traffic which would have
been carried on these flights is largely lost to the competing serv-
ices."1 Thus in one stroke the futility of relying upon unilateral car-
rier scheduling restraint to confine capacity to traffic demand in
competitive markets was made luminously clear. As Member Timm
succinctly put it, "[t]he problem is that no carrier management can
individually cure this industry problem. '2 This proposition was
demonstrated by a tabular analysis that demonstrated that despite
widespread industry recognition that serious excess capacity would
result if wide-body jets were scheduled into service to replace nar-
row-body jets on a one-for-one basis, that nonetheless in the 34
leading markets in which this transition was made, the transition
was made on a one-for-one basis in no fewer than 28 of the 34
markets. 53

Member Timm emphasized that the overcapacity dilemma can
be solved if it is recognized that overcapacity "is basically an
industry problem and as such can only be effectively dealt with on
an industry level" and that "[s]o long as we rely upon unilateral
restraint the overcapacity dilemma shall forever plague this in-
dustry."

54

In another tabular analysis Member Timm demonstrated that by
virtue of the transcontinental capacity agreement, TWA had im-
proved its load factor by 16.7 percentage points, while other car-

49. Id. at 2.
50. Id. (emphasis added).
51. Id. (emphasis added).
52. Id. at 5.
53. Id. at 6-6a.
54. Id. at 7. Member Timm noted that while the load-factor standard established

in the Domestic Passenger Fare Investigation is a step in the right direction, "this
step does nothing to alter the consequences of the capacity dilemma." Id.

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COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

riers in comparable non-agreement markets during the same period
had, despite the pressures of immense operating losses, improved
load factors by unilateral restraint a mere 3.3 percentage points.5"
Translated into terms of operating results, TWA had lost $18 million
in the agreement markets during the 6 months ending March 1971
(prior to the capacity limitation agreement), but had earned a profit
of $4.8 million in these markets during the corresponding 6 months
when the agreement was in effect." As to cost savings alone, both
TWA and American each saved from $12 to $12.5 million and
United reported an increase in operating profits of $4 million dur-
ing the first 6 months of the agreement.5 7

Of equal significance to his recognition that unilateral action to
contain excess capacity is futile, Member Timm first squarely recog-
nized the beneficial environmental implications of eliminating ex-
cess capacity.

Increases in on-board load factors and resultant profits have
not been the only benefits of the capacity agreement in the
four markets here at issue. In the first 6 months of the agree-
ment compared with the same period a year earlier on these
routes the carriers:

Flew 17,000,000 fewer plane miles;
Flew 3,200,000,000 fewer empty seat miles;
Subjected busy airports at New York, Chicago, Los Angeles,

San Francisco, Washington and Baltimore to 7,250 fewer air-
craft movements. The dramatic reduction in the number of
flights at these major hubs means a lessening in airport con-
gestion, a lessening in exposure to aircraft noise, and a lessening
in exposure of all passengers at these airports to delays in flight
due to congestion.58

Thereafter, the CAB on November 2, 1972, predictably also ap-
proved renewal of the New York/Newark-San Juan agreement for

55. Id. at 9.
56. Id. at 9-10.
57. Id. at 10.
58. Id. While this enumeration of environmental benefits resulting from elimi-

nation of excess capacity is by no means complete, as will be shown in Part II,
infra, this was the first detailed recognition of possible environmental benefits, as
distinguished from cursory references in prior Board decisions to largely unspecified
environmental benefits that might accrue from capacity limitation agreements. See,
e.g., CAB Order 71-8-91, at 4 (August 19, 1971). See also the majority opinion in
the instant case. CAB Order 72-11-6, at 2.

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Benefits of Reducing Air Transport Capacity

the period ending April 28, 1973, largely on the grounds relied upon
in approving the original 13-week agreement.5 9

The final episode in this history, which began when the partici-
pants in the two capacity reduction agreements sought permission
to discuss a third round of agreements, reveals an almost total re-
versal of prior CAB attitudes toward such agreements and closely
reflects the views expressed by Chairman Timm. The CAB almost
perfunctorily granted the application of Eastern Airlines requesting
authority to engage in renewed capacity reduction discussions with
American and Pan American looking toward a continuation of the
multilateral capacity agreement in the New York/Newark-San Juan
market.6" However, the CAB, in response to the application of
United seeking permission for a third round of transcontinental
discussions, issued a detailed opinion granting that permission re-
lying on grounds that constituted a major regulatory change of
policy. The CAB no longer viewed overcapacity as an unusual crisis
brought on by essentially nonrecurring phenomena, but rather recog-
nized the "chronic and persistent industry-wide tendency to operate
excessive capacity .... 61 Moreover, the CAB acknowledged that
its expressed "concerns" about the regulatory use of capacity agree-
ments "may have been misplaced. '6 2 In fact the CAB noted that
"[u]pon further examination based upon the actual operation of
the agreements ...we have tentatively concluded that capacity
agreements constitute a useful and successful regulatory device that
can be employed pragmatically in order to help achieve, particu-
larly, the rate of return found required by the Board in Phase 8
of the recently concluded Domestic Passenger Fare Investigation
(DPFI), Docket 21866."63

The CAB also expressed doubts that mere imposition of a long-
term standard load factor (55 percent) in Phase 6B of the DPFI
would preclude excess capacity, noting that post-1972 data indicate
a leveling off, and in some markets, an actual decline in load fac-
tors. 4 In fact, the CAB recognized that if the necessary arithmetic
adjustments to translate "standard" seating configuration criteria

59. CAB Order 72-11-7.
60. CAB Order 73-3-30 (March 9, 1973) (one member dissented).
61. CAB Order 73-4-98, at 2 (April 24, 1973) (emphasis added).
62. Id.
63. Id. at 3 (emphasis added).
64. Id.

1974]



COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

(established in Phase 6A of the DPFI) into actual seating con-
figurations are made, that "the domestic system experience of the
industry has failed to reach even the relatively low interim load
factor standards [52.5 percent]." 65

Based on these factors, the CAB took issue with the Department
of Justice view "that fare policy should be allowed to perform its
function of bringing capacity into balance with demand" and noted
that "we are concerned that this process is too slow to bring the
industry back to economic health within a reasonable time frame.""
In this connection, the CAB clearly reasserted its authority to confer
antitrust immunity not only as to the renewed transcontinental
agreement, but as to "a series of co-existing capacity limitation
agreements," provided that a serious transportation need were found
to exist.67

The CAB's new attitude toward capacity agreements is best sum-
marized in its declaration:

To deal with overcapacity in city-pair markets, we will employ
a number of regulatory tools, and we will make use of segment
load factor data to identify such situations. Because capacity
agreements can immediately correct overcapacity in individual
competitive markets . . . it is the Board's tentative view that,
contrary to our earlier determinations . . . such agreements
properly constitute a useful regulatory tool that should not be
discarded for theoretical reasons. In light of this revised posi-
tion of the Board, carriers may wish to file applications for
permission to discuss capacity agreements in other markets.
If the carriers do not come forward with additional applications
for capacity discussions, the Board may, in the discharge of
its regulatory responsibilities, suggest those markets where ca-
pacity agreements would be warranted.6s

To facilitate carrier initiative in coming forward with more pro-
posed capacity reduction agreements, the CAB delineated "specific
regulatory guidelines" that the CAB "is considering utilizing when
passing upon proposed capacity limitation agreements. '

"69 First, al-

65. Id.
66. Id. at 4 (emphasis added).
67. Id. at 6 n.12.
68. Id. at 4 (emphasis added).
69. Id.

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Benefits of Reducing Air Transport Capacity

though service must meet passenger requirements, the DPFI Phase
6B 55 percent load factor standard "is not necessarily appropriate
for use in a capacity limitation agreement, and that in that latter
context, higher load factors-say a quarterly average of 65 percent,
by way of example-might well be in the public interest ..
Moreover, the CAB appears to have abandoned its "aggregate re-
ductions" approach to capacity agreements and notes that "capacity
agreements should provide for both a reasonable schedule spread
and flights properly timed to accommodate the needs of the mar-
kets concerned. '71 Second, as to freed capacity, "the Board would
not permit a carrier benefiting from an agreement to pursue a
corporate policy of using released capacity (or the financial benefits
resulting from agreement markets) in unduly adding capacity in
other, nonagreement markets." 72 Enforcement of this policy would
be achieved by revocation or non-renewal of agreements. Third, the
CAB abandoned both its "large market" requirement and its three
carrier competitive standard. 73 It would now appear that any com-
petitive market which, on the basis of segment load factor data,
appears to be "experiencing unduly low load factors on a persistent
basis" would be eligible for capacity agreement consideration. 4

Fourth, the CAB expressly contemplates agreements of two-year
duration.75

Doubtless one of the primary reasons for this regulatory volte face
is the fuel shortage emergency. The CAB's decision notes that the
first year of the transcontinental agreement eliminated 9,900 flights
in the coast-to-coast markets, and 2,700 flights in the Chicago-San
Francisco market, producing a saving of 120 million gallons of fuel
or more than 1.5 percent of total domestic trunk consumption for
1971.76 Reduction of airport congestion with reduced delay would
likewise conserve fuel on flights being operated to and from these
cities. The CAB concluded that "[g]iven the critical importance
that energy conservation represents for our economy, we believe

70. Id. at 5 (emphasis added).
71. Id.
72. Id.
73. Id. n.11.
74. Id. at 5.
75. Id.
76. Id. at 2.

1974]



COLUMBIA JOURNAL OF ENVIRONMENTAL LAw [1

that failure to consider these factors would be inconsistent with
our public interest mandate."7 T

Thereafter, on April 28, 1973, both capacity reduction agreements
expired by their terms. On July 27, 1973, the CAB, however, in-
stituted an investigation and ordered a hearing to determine wheth-
er capacity agreements should have a role in future regulation of air
transportation.

78

[T]he time is now ripe for such a proceeding. The Board has
embarked upon a comprehensive program to encourage and de-
velop an economically sound air transportation system which can
assure high quality service to the consumer at the lowest reason-
able fares. During most of the last 15 years, the airline industry's
financial results have been generally disappointing, with cyclical
periods of large losses, investor disenchantment, and fare in-
creases. Recognizing the interdependence of rate and route mat-
ters, the Board hopes to create a milieu in which responsible air-
line management can stabilize economic conditions, avoid waste-
ful practices, and pass along to ratepayers the benefits of new
technology. The question is whether our policy towards capacity
reduction agreements should be reevaluated to determine wheth-
er such agreements can or should play a part in the Board's
overall program.79

In addition to these economic considerations the CAB noted that
"it has become increasingly apparent that all practicable steps must
be taken to conserve the nation's energy resources. It appears that
capacity limitation agreements such as the one here at issue can
effect significant fuel savings."80 The CAB also recognized the need

77. Id. The perennial dissenters concurred in the result because of the possibility
of acute fuel shortage. Member Minetti, in a special concurring statement to which
member Murphy subscribed, noted "the growing signs that a severe fuel shortage

may be impending" and that it would not be "a responsible act to refuse to permit
carriers . . . to devise and present to the Board any type of plan-including but
not restricted to capacity limitation agreements-which might prove effective in deal-
ing with an acute fuel shortage if one should develop. I am willing to be shown
that capacity limitation agreements would be an effective tool in this regard; that

no alternative plan or combination of plans would be equally effective; and that
the beneficial results of such agreements in the circumstances of a severe fuel
shortage would outweigh the many and varied evils which in my view such
agreements otherwise involve." CAB Order 73-4-98, concurring Opinion, at 1
(April 24, 1973).

78. CAB Order 73-7-147.
79. Id. at 3.
80. Id. at 4.

[1: 65



Benefits of Reducing Air Transport Capacity

to make "a searching analysis of the agreement's environmental im-
pact,""' and acknowledged that despite its accumulation of "con-
siderable data on the workings of capacity limitation agreements...
factual gaps remain, particularly in the environmental area."82 Ac-
cordingly, the CAB authorized interim approval of the transcon-
tinental agreement for six months, instituted an expedited hearing,
and directed the Bureau of Operating Rights to prepare a draft en-
vironmental impact statement to be available for consideration and
comment by the parties, other environmentally concerned federal
agencies and other interested persons at least 15 days prior to hear-
ing.83 In the event this proceeding was not concluded prior to ex-
piration of the six months interim authority, a likely event, the CAB
indicated it would consider further extension based on data avail-
able at that point in time.84

On August 10, 1973, the CAB granted interim authority for the
New York/Newark-San Juan capacity agreement for six months or
until the conclusion of the above noted hearing, whichever occurs
first, and consolidated this agreement for hearing with the trans-
continental agreement.85 Thereafter a prehearing conference was
held on October 4 and 5, 1973, and a Report of Prehearing Con-
ference issued on October 19, 1973, in which hearings were sched-
uled for March 19, 1974.86

Sixteen basic issues and some twenty-four sub-issues are to be
determined in the CAB's Capacity Reduction Agreement Case."7

All but one basic issue is concerned with the two specific agree-
ments under consideration.88 Only Issue Sixteen appears to raise the
broad question of what policies should be adopted "with respect
to agreements between carriers limiting, apportioning, or controlling
the capacity or the quantity or quality of service to be provided in
domestic or overseas markets."8 9 This emphasis reflects the CAB's

81. Id.
82. Id. at 17.
83. Id. at 15, 18.
84. Id. at 18.
85. CAB Order 73-8-59.
86. Capacity Reduction Agreement Case, Report of Prehearing Conference, CAB

Docket 22908.
87. Id. at 2-8.
88. The Transcontinental Agreement No. 23703 and the San Juan Agreement No.

23672. id. at 5.
89. Id. at 8.

1974]



COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

assumption that capacity agreements must under existing law be
voluntary, that the CAB may at most "suggest" markets where
capacity agreements would be warranted, and that the CAB's regu-
latory role is confined to reacting to carrier applications for approval
of specific agreements, subject to general policy guidelines to be
formulated in Docket 22908.90

However, circumstances subsequent to the institution of this pro-
ceeding raise serious questions as to the adequacy of the system of
voluntary agreements. Aviation fuel shortages have now become,
and promise to continue to be, acute. On October 12, 1973, the
Energy Policy Office, acting pursuant to the Economic Stabilization
Act of 1970, as amended,91 adopted a mandatory fuel allocation plan
which imposes controls on consumption of "middle distillate fuels,"
i.e., airline turbine fuel. The CAB, on its own motion, promptly
authorized the airline industry to conduct such discussions as be-
come necessary "to consider adjustment of schedules to the extent
necessary to accommodate the President's fuel allocation program
with the least possible reduction of service to the public." '-

Shortly thereafter the CAB approved capacity reduction agree-
ments in no fewer than twenty major markets served by the Big
Three-American, TWA, and United." The CAB expressed mis-
givings that "fuel-shortage-caused service reductions," if mAnaged
on a unilateral basis, might not be carried out on an orderly and
fair basis.9 4 Specifically, the CAB was concerned that carriers might
allocate fuel to dense, competitive markets to the detriment of
service in sparse, monopoly markets, and also that schedule bunch-
ing at competitive prime-times might result." The CAB was like-
wise concerned that the "sudden press of world events aggravating
the fuel crisis" has compelled the CAB to take action without "a
full opportunity to answer all of the questions posed by the agree-
ments," and accordingly retained jurisdiction over the agreements in
order to "be in a position to order changes in the agreements, or
require that they be terminated, as new information becomes avail-
able."96

90. See note 61 supra.
91. Pub. L. No. 93-28 (April 30, 1973).
92. CAB Order 73-10-50, at 1 (October 12, 1973).
93. CAB Order 73-10-110 (October 31, 1973).
94. Id. at 2.
95. Id.
96. Id. at 3, 4.

[1: 65



Benefits of Reducing Air Transport Capacity

Subsequently, the CAB announced "The furtherance of this
program for rational and equitable schedule adjustments to ac-
commodate the fuel emergency will . . . best be facilitated if pro-
vision is made for relaxation in appropriate circumstances of un-
necessary restrictions on air carrier consultations looking toward an
industry-wide plan for carriers' operations under the fuel allocation
program."" The CAB established an industry-coordinating body to
conduct discussions, to provide a central source for necessary in-
formation, to discharge the reporting obligations imposed by the
CAB, and to perform other administrative details related to filing
of agreements for approval5 s Thereafter, extensive schedule cut-
backs were made and further capacity reduction agreements pro-
posed. 9 The CAB was obviously concerned that the exigencies of
the fuel crisis may have produced precipitate action but consoled
itself by quoting the United States Supreme Court, "The best . . .
[can become] an enemy of the good, and waiting for the perfect...
plan . . . [can lead to] defeating or postponing less ambitious but
more attainable . . . improvements."' °

However, as the more frenetic aspects of the fuel shortage crisis
become normalized, it becomes clear that the CAB in its pending

97. CAB Order 73-11-50, at 2 (November 13, 1973).
98. Id. at 3.
99. See THE TRAVEL AGENT, November 12, 1973, for an extensive listing of uni-

lateral schedule cuts. At least five further applications for approval of capacity
reduction agreements are pending as of December 15, 1973:

CAB Docket Carrier Markets

25990 TWA-United-Western San Francisco: Denver, Seattle,
Portland

26057 Pan Am-TWA-BOAC London: Philadelphia, Boston,
Chicago

25990 Eastern-Pan Am Miami-San Juan-Virgin Islands
25990 Frontier-TWA Denver-St. Louis

Albuquerque-Las Vegas
25990 Pan Am-American-Eastern New York/Newark-San Juan,

further reductions and exten-
sion of duration.

The Board has even explicitly approved discussion of the possibility of complete
temporary withdrawal and bilateral allocation of markets by competing air carriers.
CAB Order 73-11-50, at 3 n.4 (November 13, 1973). One such "bilateral allocation"
has in fact occurred, i.e., United withdrew from the Washington-San Diego market,
leaving it to American, in return for American's withdrawal from Hartford-Los
Angeles. New York Times, November 1, 1973.

100. Schwabacker v. U.S., 334 U.S. 182, 193 (1948).

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COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

investigation in Docket 22908 has a regulatory obligation to formu-
late a considered program of capacity control procedures which
over the long term will assure a rational relationship between avail-
able capacity and consumer use. It has now become apparent that
no nation can any longer afford the luxury of running its air
transport system virtually half empty. The large volume of unused
excess capacity was originally viewed as economically intolerable.
While the economic waste continues to be an important considera-
tion, the more recent dual constraints imposed by the fuel shortage
and the need for environmental reform lend the greatest importance
to what the CAB wants to accomplish in Docket 22908. As noted
hereafter, it may well be necessary for Congress to grant the CAB
additional authority to prescribe and require capacity reductions in
order to achieve optimal matching of capacity with demand.

ENVIRONMENTAL AND ENERGY FACTORS REQUIRE MoRE EFFECTIVE

REGULATION TO CORRELATE AIRLINE CAPACITY WITH USER DEMAND

It is imperative that the airline industry and its regulators recog-
nize that the present fuel shortage is not an ephemeral condition.
A new regulatory era has dawned, in this country and throughout
the world, which must assure that past waste in airline operations
will not recur.

The history of air carrier operations shows that despite blatant
diseconomics, the airline industry has persisted for more than two
decades in operating increased discounts of excess capacity. In
1950 the load factor for the total domestic operations of the cer-
tificated route air carriers was 61.2 percent; by 1960 it had declined
to 58.5 percent; and by 1970 to 48.9 percent.1"' Total airline capac-
ity, expressed in overall available ton miles operated by domestic
scheduled carriers, has increased substantially during this period:

Billions of Ton Miles Operated:

1950 1.86
1960 7.24
1970 32.54102

101. CrviL AERONAUTICS BOARD, HANDBOOK OF AIRLINE STATISTICS 26 (1971
ed.). The corresponding data for the entire airline industry, i.e., certificated route
carriers plus supplemental air carriers, are strikingly similar: 1950 60.8%

1960 59.3

1970 49.7
102. Id. at 10.

[1: 65



Benefits of Reducing Air Transport Capacity

As the meteoric increase experienced between 1960 and 1970
suggests, the rate of increase was itself increasing. In fact, the an-
nual rate of growth of overall available ton miles operated by sched-
uled domestic carriers was 10.4 percent per year in 1960, but had
increased to a rate of 26.2 percent before the near calamitous events
of the 1970-1973 period produced virtually no-growth conditions.",
Fuel consumption kept pace with these increased operations. In
1951, the first year that reported industry fuel consumption was
tabulated by the CAB, total domestic operations consumed slightly
over one half billion gallons of aviation fuel compared to slightly
more than eight billion gallons twenty years later.1 04

The financial consequences of these operations can only be
characterized as unsatisfactory. From an operating profit for total
domestic services of $64.4 million in 1950, the industry declined to
$37.3 million in 1960, and to a loss of $.8 million in 1970.1"5 In
terms of rate of return on investment, total domestic airline opera-
tions garnered a positive return of 11.43 percent in 1950, which
declined to 2.92 percent in 1960 and 0.28 percent in 1970.0'

This financial and operational history of air transportation since
1950 confirms Chairman Timm's view that economic forces cannot
be relied upon to produce an optimum matching of airline capacity
with actual demand. Despite the economic decline chronicled by the
foregoing statistics, as recently as mid-1973 only two capacity re-
duction schemes (involving a mere five markets) had been actually
implemented. Until the onset of the fuel shortage crisis, the ma-
jority of a divided CAB had made it clear that capacity limitation
was a temporary expedient to help the industry through what was
thought to be nonrecurring economic doldrums. The two dissenting
members had invariably castigated the authorization of even these
limited capacity agreements; even after the fuel crisis, they only
grudgingly acquiesced in its use as an expedient made temporarily
necessary by world conditions.10 7

It must now be recognized that the present fuel shortage crisis

103. Id. at 11.
104. Id. at 65. The total for all certificated route air carrier operations during the

same period increased from slightly more than 683 million gallons to over 10.1
billion gallons. Id.

105. Id. at 72.
106. Id. at 76, 393. (The 1970 return on investment includes the effect of in-

vestment tax credits.)
107. CAB Order 73-4-98 (concurring opinion of member Minetti).

1974]



COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [1: 65

is not a temporary phenomenon which, once overcome, will permit
a return to a regulatory climate of "business as usual." At least four
major environmental and resource factors demonstrate a long-term
and continuing need to regulate airline scheduling to coordinate
available capacity as closely as possible to user demand.

Limited Non-renewable Fuel Sources

The available evidence suggests that significant limitations in jet
fuel consumption will be necessary for at least the remainder of
this century. The current jet fuel shortage is but a limited part of
the larger national and world petroleum shortage. The Department
of Interior forecast of United States supply and demand for the
remainder of the century supports this view:

1971 1975 1980 1985 2000

Domestic Supply 22,569 22,130 23,770 23,600 21,220
Percent of Total 74.0 63.1 56.3 46.6 29.7
Supplemental Supplies 7,923 12,960 18,420 27,100 50,160
Percent of Total 26.0 36.9 43.7 53.4 70.3
Total 30,492 35,090 42,190 50,700 71,380

(Trillions of BTU ) 108

Regardless of the precise accuracy of such forecasts, it is clear
that-even assuming major conservation efforts, resort to alternative
and new energy sources, universal exploration and production of

108. U.S. DEP'T OF INTERIOR, UNITED STATES ENERGY THROUGH THE YER 2000,
at 10 (1972) [hereinafter cited as INTERIOR REPORT]. More recent forecasts are no
more encouraging. The General Energy Development Division of Applied Tech-
nology for the Atomic Energy Commission forecast in April 1973,

Between 1970 and 1985 our use of energy may nearly double. From an
examination of the various sources of our future energy, three significant
trends emerge. The sum of our domestic gas and oil production is expected to
decrease, even though significant supplies from the North Slope in Alaska are
expected. Both domestic coal and nuclear energy use will expand significantly.
In spite of this expansion, and as a direct result of our shrinking domestic oil
and gas production, oil and gas imports will expand greatly. Imported oil may
quadruple and represent nearly one fourth of the national energy supply. Some
estimates suggest a $25 billion oil import bill by 1985 and a staggering trade
deficit.

J.C. Bresee, Fuel Supplies and Non-Nuclear Energy 2 (hereinafter cited as AEC
REPORT). (An unpublished study presented to the Southern Industrial Nuclear Board
Symposium, April, 1973.) The study is based in part on a 1972 National Petroleum
Council Study. Id. It must be noted that since this estimate the posted price of crude
oil has quadrupled.



Benefits of Reducing Air Transport Capacity

petroleum and increased refinery capacity-there will be a sig-
nificant shortfall in the supply of petroleum and petroleum products.
To be sure, the President in various Energy Messages has announced
a national commitment to "Project Independence," an all-out pro-
gram to achieve national energy self-sufficiency at the earliest pos-
sible date."°9 The "Project Independence" Study contained a mix-
ture of good news and bad news. On the one hand it concluded that
"The United States has the resources and technology for self-suf-
ficiency. A properly directed, sustained national commitment can
attain that goal.""'  However, it was recognized that at best "1985
is the earliest date by which self-sufficiency can reasonably be ex-
pected with this program" and at best U.S. dependence on oil im-
ports can only be cut in half (to 6 million barrels per day) by
1980.11 The Study recognizes that these objectives can be attained
only if the total recommended "Project Independence" program is
adopted now in time for Fiscal Year 1975 budgeting and is sus-
tained over the next decade and beyond.' 12

Significantly, five "tasks" are "required to regain and sustain
self-sufficiency, and simultaneous effort is required on all five."' 1 3

The first task is to "conserve energy by reducing consumption and
conserve energy resources by increasing the technical efficiency of
conversion processes." Some 22 percent of total program effort is
allocated to the conservation measures, involving a 215 percent in-
crease in budget in this area between Fiscal 1973 and 1975.114 In

109. See Address by the President on the Energy Emergency, November 7, 1973,
p. 1. "In the long run, it means that we must develop new sources of energy which
will give us the capacity to meet our needs without relying on any foreign nation."

In his June 29, 1973, Energy Message the President directed the Chairman of the
Atomic Energy Commission to develop by December 1, 1973, a program to achieve
self-sufficiency by the earliest possible date.

110. AEC, THE NATION'S ENERGY FUTURE, A Report Submitted to Richard M.
Nixon, President of the United States by D.L. Ray, Chairman U.S. Atomic Energy
Commission, at vii (1973) [hereinafter cited as ENERGY FUTURE REPORT].

111. Id. at viii.
112. See id. at viii and 75-79.
113. Id. at vii.
114. See id. at vii, 7, and 13. The other tasks are:

Task 2. Increase domestic production of oil and natural gas as rapidly as
possible.
Task 3. Increase the use of coal, first to supplement and later to replace
oil and natural gas.
Task 4. Expand the production of nuclear energy as rapidly as possible,
first to supplement and later to replace fossil energy.

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COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [1: 65

the case of airlines, the Report makes it clear that reduced consump-
tion, not increased technical efficiency in the conversion process, is
the most promising option. 115 Thus, under the most recent and most
optimistic assessment of the energy situation, it appears that con-
servation through reduced consumption is the number one task, that
continued dependence on imported supply will continue at least un-
til 1980 and that many of the other necessary tasks may be difficult
of attainment or impossible within the projected time-frame, there-
by creating even greater pressure for reduced consumption until
such tasks are accomplished.

Moreover, it is evident that given world energy conditions other
factors not considered by the "Project Independence" Report will
bear on availability of jet fuel. One such factor involves interna-
tional competition for the world's limited petroleum resources. The
AEC Report forecasts that, "Japan oil imports will equal ours by
1985 while Western Europe may require nearly as much as both
countries." '11 6 The economic result of this competition for scarce
resources is already evident in the rapidly escalating price of crude

Task 5. Promote, to the maximum extent feasible, the use of renewable
energy sources (hydro, geothermal, solar) and pursue the promise of fusion
and central station solar power.

ENERGY FuTuRE REPORT at vii.
Attainment of some of these tasks are, to put it mildly, problematical. Any signif-

icant increase in domestic production of oil and natural gas will necessitate ex-
ploitation of reserves on the Continental shelf (where at least half of the nation's
reserves are located), thereby raising severe environmental problems. Expansion of
nuclear capacity, especially the Liquid Metal Fast Breeder Reactor, on the scale
assumed in the Report and within the time frame contemplated, is highly problemati-
cal in view of recent judicial decisions. See, e.g., Scientists' Institute For Public Infor-
mation, Inc. v. AEC, 481 F.2d 1079 (Cir. 1973). Expanded use of coal likewise faces
severe constraints imposed by the Clean Air Amendments of 1970, 42 U.S.C. 1857-58a
(1970), and of course the ability to make operational any of the renewable energy
sources, which is not feasible under the current state of the arts, is conjectural. The
need for substantially expanded refinery capacity, a factor severely affecting the avail-
able supply of jet fuel, is not even listed as a "task" to be accomplished in the Report.
Thus to the extent there is a shortfall or delay in accomplishing any of these tasks,
more need will arise for conservation of available supplies.

115. The Report shows that of the 7.7 million barrels per day oil equivalent ac-
tually consumed in 1970 by the transportation industry 5.8 or over 75 percent was
lost energy; by 1980 the corresponding figures are 12 million barrels equivalent
per day consumed but 9 million lost, again a 75 percent conversion loss. This con-
dition is a function of the fact that no change in transport technology is projected
which would produce increased conversion efficiencies. See ENERGY FUTURE RE-
PORT at 42-43.

116. AEC REPORT, at 2.



Benefits of Reducing Air Transport Capacity

oil in the world market. Thus, quite apart from the political de-
cision to seek petroleum self-sufficiency for national security rea-
sons, this nation's economic capacity to import quantities sufficient
to meet the predicted shortfall is doubtful. A further complication
results from the increasing sophistication of Mideast oil suppliers
manifested by their realization that it is in their national interest
to curtail production thereby prolonging the life of their reserves
and optimizing their profits. There is likewise increasing awareness
that accumulation of vast deposits of foreign currency during a
long-term period of world inflation and corresponding currency de-
flation is counter-productive. The problem of accessibility to ade-
quate supplies of Mideast oil thus transcends the present political
imbroglio arising from the Mideast War.

Still a further factor that will tend to increase domestic (as
well as world) consumption of all energy sources including petro-
leum is the substantial forecast increase in conversion losses, i.e.,
the loss that results from converting basic fossil fuel into its ultimate
form for consumption. The Department of Interior forecasts the
1971 level of conversion loss (some 17.3 percent of total gross energy
inputs) will increase to 27 percent by the year 2000, an increase in
absolute terms from 11,936 trillion BTU per year to 51,830 trillion
BTU per year. 117 As heretofore noted, the transportation industry
ranks conspicuously high in conversion losses with no forecast pros-
pect of improvement.

Finally, at least during the initial months of the energy crisis the
airline industry, compared to other consumers of petroleum and
petroleum products, was among those most adversely affected. This
acute impact arose from a variety of circumstances which include,
inter alia: distillates were hardest hit by virtue of the shortage of
refinery capacity; in the scale of national priorities other categories
of consumers (notably the Department of Defense, home heating
oil, and others) ranked higher than airlines; and other consumers
(such as the electric utilities) had the option to convert to coal
or other non-petroleum fuel sources. The Energy Policy Office
initially imposed on the trunkline industry a 15 percent reduction
in available fuel based on 1972 levels, and a 10 percent reduction
for Local Service Carriers, which in 1974 would produce a 25 per-
cent and 20 percent shortfall respectively, inasmuch as 1974 con-

117. INTERIOR REPoRT, at 2.

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COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

sumption based on proposed scheduling increases would have been
10 percent higher than 1972.118 These factors strongly suggest the
need for long-term and continuing regulation to match as closely
as possible airline capacity to consumer demand.

Abatement of Jet Aircraft Noise

As of August 1973 there were approximately 2000 large jet air-
craft operating in the U.S. fleet, serving some 500 individual major
terminals and carrying approximately 190 million passengers. 1"
Despite a substantial investment in aviation noise control research
and development in both the federal and private sectors, jet noise
affects approximately 16 million persons in the United States and

in spite of the introduction of quieter new aircraft, the number
will continue to be of major proportion until the mid 1980's
unless aggressive action is taken. The adverse effects of this noise
range from annoyance to the possibility of hearing damage.
These effects have resulted in numerous law suits and, in some
cases, have prevented expansion of existing airports or construc-
tion of new ones. 12D

The Noise Control Act of 1972 I21 authorized the Administrator of
the Environmental Protection Agency (EPA) to coordinate federal
noise control activities, federal research and development related
to noise, and to provide technical assistance at the state level to
formulate codes and laws compatible with federal noise regula-
tion.122 The evident intent of Congress was to coordinate the ac-

118. See Demkovich, Transportation Report / Higher Fuel Costs Could Offset
Airlines' Gains from Flight Cutbacks, 5 NAT'L Joun. REP. 1944 (1973); I. Corrigan,
Energy Report / Federal Energy Office Fuel Priorities Spell Trouble for American
Motorists, 5 NAT'L JOUR. REP. 1950-51 (1973).

119. EPA, REPORT ON AIRCRAFT-AIRPORT NOISE 4 (1973) [hereinafter cited as
EPA NOISE REPORT]. This study is to determine "the (1) adequacy of Federal
Aviation Administration flight and operational noise controls; (2) adequacy of noise
emission standards on new and existing aircraft, together with recommendations on
the retrofitting and phaseout of existing aircraft; (3) implications of identifying
and achieving levels of cumulative noise exposure around airports; and (4) addi-
tional measures available to airport operators and local governments to control air-
craft noise." See Noise Control Act of 1972, Pub. L. No. 92-574, § 7(a), 86 Stat.
1239 (Oct. 27, 1972).

120. EPA NoIsE REPORT at 6-7.
121. Pub. L. No. 92-574, 86 Stat. 1239 (Oct. 27, 1972).
122. EPA NoIsE REPORT at 7.

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Benefits of Reducing Air Transport Capacity

tivities of EPA under the Noise Control Act with those of FAA un-
der the Federal Aviation Act and other agencies such as NASA to
produce a coherent program of noise abatement. Section 7(a) of
the Noise Control Act directed EPA to produce a report for sub-
mission to Congress evaluating the effectiveness of existing fed-
eral regulatory efforts to control jet noise within acceptable stan-
dards. 123 In addition, Section 5 of the Noise Control Act directs
EPA to prepare both a Criteria Document and an Environmental
Noise Effects Document to assure that health and welfare objectives
of the Act will be realized by the overall federal regulatory noise
control system. 11

4

The EPA Noise Report found "that existing FAA flight and op-
erational controls do not adequately protect the public health and
welfare from aircraft noise.' 2

' EPA notes that, as of August 1973,
FAA had adopted only two Federal Aviation Regulations and two
Advisory Circulars related to flight and operational noise controls. 12

Apart from these regulatory efforts, which EPA characterizes as in-
adequate, FAA "in its fifteen years of existence, has devoted sub-
stantial effort to the technological, economic, and legal background
necessary to propose seven noise emission regulations capable of
effecting significant noise reduction in a safe and economically rea-
sonable manner.' 27 However, only two of the seven regulations
have been issued and they "did not utilize public health and wel-
fare considerations as a basic constraint in their development, since
this was not required by the Federal Aviation Act of 1958, until its
amendment by the Noise Control Act of 1972."128 EPA expressed

123. Pub. L. No. 92-574, § 7(a), 86 Stat. 1239 (Oct. 27, 1972). EPA has
completed this study.

124. As of this writing, only the Criteria Document has been completed.
125. EPA NoIse REPORT at 14 (footnote omitted).
126. Id. The Circulars are not binding on aircraft operators. The Regulations

were FAR 91.55, which prohibits flight at speeds in excess of Mach 1 to preclude
sonic booms, and FAR 91.87, which pertains to operations at airports with operating
control towers. EPA concludes these regulations are inadequate. Id. at 14 et passim.

127. Id. at 32.
128. Id. at 30. Of the two operative FAR's only Part 36 is germane to this anal-

ysis (FAR 91.55 relates to Civil Aircraft Sonic Boom, i.e., supersonic aircraft opera-
tions). FAR Part 36 propounded three appendices: Appendix A prescribes conditions
under which noise type certification tests for aircraft must be conducted and what
noise measurement procedures must be used; Appendix B prescribes the computa-
tional procedures to be used to determine the noise evaluation quantity, i.e., the ef-
fective perceived noise level (EPNL): Appendix C prescribes noise level criteria,

1974]



COLUMBIA JOURNAL OF ENVIPON'MENTAL LAW

the view that the Regulations in question "do not provide adequate-
ly for such needs." For all practical purposes, Regulation 36-which
prescribes noise standards for the issuance of type certificates for
subsonic transport category aircraft and subsonic turbojet aircraft
regardless of category-constitutes the primary operative noise con-
trol provision presently available to control jet aircraft operations.
Five other regulatory proposals are under consideration as of this
writing. 129 Of these, the proposal for Fleet Noise Level Require-
ments is the most important. On January 24, 1973, the FAA had is-
sued an Advanced Notice of Proposed Rulemaking which would
establish operating practices that would prevent escalation of exist-
ing fleet noise levels produced by domestic airline operations, would
require a substantial reduction in fleet noise levels on or before July
1, 1976, and would thereafter require aircraft to comply with FAR
36 noise standards on and after July 1, 1978.13° The FAA Ad-
vanced Notice explains the significance of fleet noise levels:

The FNL concept is based on the principle that the noise level
of any given fleet is a function of the jet-engine noise of each
airplane in that fleet and the total number of takeoffs and land-
ings of each airplane in that fleet. The major elements of the
FNL concept are: (1) determining the noise levels for each air-
plane in the fleet, (2) determining the total number of opera-

noise measuring points and aircraft flight test conditions for which compliance must
be shown at noise levels determined in accordance with Appendices A and B.
See 14 C.F.R. § 36-422-46 (1973).

129. "[T]he FAA has issued two Notices of Proposed Rule Making (NPRM) and
three Advanced Notices of Proposed Rule Making (ANPRM) that have not yet re-
sulted in regulations as proposed. The notices, the general titles, and the dates of
issue are: 1. ANPRM 70-33; Civil Supersonic Aircraft Noise Type Certification
Standards, 4 August 1970. 2. ANPRM 70-44; Civil Airplane Noise Reduction Retro-
fit Requirements, 30 October 1970. 3. NPRM 71-26; Noise Type Certification and
Acoustical Change Approvals, 13 September 1971. 4. NPRM 72-19; Newly Pro-
duced Airplanes of Older Type Design; Proposed Application of Noise Standards, 7
July 1972. 5. ANPRM 73-3; Civil Airplane Fleet Noise (FNL) Requirements,
24 January 1973." EPA NOISE REPORT at 33.

130. Proposed FAA Reg. §§ 121.801-11, 38 Fed. Reg. 2769 (1973). The pro-
posed regulations would apply to all aircraft operated in interstate commerce (but
not in foreign or overseas air commerce) under Part 121 of the Federal Aviation
Regulations (14 CFR § 121) by carriers operating turbo jet aircraft having maximum
weights of 75,000 pounds or greater. Id. Part 36 sets maximum perceived noise output
to be attained by all aircraft type-certificated after December 1, 1969. Id., n.1. The
interim 1976 phased reduction in fleet noise levels would require that 50 percent
of the ultimate 1978 reduction be achieved by July 1, 1976. Id. at 2770.

[1: 65



Benefits of Reducing Air Transport Capacity

tions (takeoffs and landings), for each airplane type for a rep-
resentative 90-day period, (3) calculating a fleet noise level
based on a mean logarithmic equation, and (4) establishing a
precise limit on fleet noise levels.13 1

EPA expressed qualified approval of the FAA proposed FNL ap-
proach but noted no fewer than five major weaknesses for which
it prescribed remedial provisions.13 2

Currently, EPA is preparing detailed, comprehensive noise abate-
ment and control regulations to be submitted to FAA for publication
and adoption. Under Section 611(c) of the Federal Aviation Act,
as amended by the Noise Control Act, FAA must consider these
regulations, and within thirty days publish them as a notice of pro-
posed rulemaking. Thereafter, within sixty days of publication, FAA
must conduct public hearings and thereafter either: (1) adopt the
regulations; (2) adopt modifications thereof; or (3) reject the regu-
lations, in which event it must publish "a detailed explanation pro-
viding reasons for the decision not to prescribe such regulations."
EPA may, in the latter event, request FAA reconsideration. FAA
must then give such reconsideration and act within ninety days,
supporting whatever action it takes with a written report. The
report must, among other things, be supported by detailed findings
and reasons. Thereafter, EPA can trigger still further review
procedures.

1 33

131. Proposed FAA Reg. §§ 121.801-11, 38 Fed. Reg. 2770 (1973).
132. EPA NOISE REPORT at 41-42.
133. Section 611(c), Pub. L. No. 92-574, 86 Stat. 1240 (October 27, 1972)

provides: "Not earlier than the date of submission of the report required by section
7 (a) of the Noise Control Act of 1972, EPA shall submit to the FAA proposed
regulations to provide such control and abatement of aircraft noise and sonic boom
(including control and abatement through the exercise of any of the FAA's regulatory
authority over air commerce or transportation or over aircraft or airport operations)
as EPA determines is necessary to protect the public health and welfare. The
FAA shall consider such proposed regulations submitted by EPA under this para-
graph and shall, within thirty days of the date of its submission to the FAA,
publish the proposed regulations in a notice of proposed rulemaking. Within sixty
days after such publication, the FAA shall commence a hearing at which interested
persons shall be afforded an opportunity for oral (as well as written) presentations
of data, views, and arguments. Within a reasonable time after the conclusion of
such hearing and after consultation with EPA, the FAA shall-

(A) in accordance with subsection (b), prescribe regulations (i) substan-
tially as they were submitted by EPA, or (ii) which are a modification of
the proposed regulations submitted by EPA, or

(B) publish in the Federal Register a notice that it is not prescribing

1974]



COLUMBIA JOURNAL OF ENVIRONMENTAL LAW [1: 65

Thus Congress has structured a complex collaborative inter-agency
regulating scheme to carry out its objective of reducing aircraft noise
to levels compatible with the public health and welfare. In view of
EPA's outspoken criticism of FAA handling of the aircraft noise
problem, it is predictable that serious inter-agency differences will
arise over the substance of the forthcoming EPA-authored noise
abatement regulations. Even if this collaborative regulatory ap-
paratus ultimately proves workable-a matter subject to some doubt
-it is evident that under the most optimistic assumptions, compli-
ance with necessary statutory procedural requirements may well
produce significant delay in achieving acceptable noise levels. 134

Even after noise abatement regulations are finally established, a rea-
sonable additional period of time would be necessary to enable the

any regulation in response to EPA's submission of proposed regulations,
together with a detailed explanation providing reasons for the decision not
to prescribe such regulations.

"If EPA has reason to believe that the FAA's action with respect to a regulation
proposed by EPA under paragraph (1) (A) (ii) or (1) (B) of this subsection does
not protect the public health and welfare from aircraft noise or sonic boom, con-
sistent with the considerations listed in subsection (d) of this section, EPA shall
consult with the FAA and may request the FAA to review, and report to EPA on,
the advisability of prescribing the regulation originally proposed by EPA. Any such
request shall be published in the Federal Register and shall include a detailed
statement of the information on which it is based. The FAA shall complete the
review requested and shall report to EPA within such time as EPA specifies in
the request, but such time specified may not be less than ninety days from the date
the request was made. The FAA's report shall be accompanied by a detailed state-
ment of the FAA's findings and the reasons for the FAA's conclusions; shall identify
any statement filed pursuant to section 102(2) (C) of the National Environmental
Policy Act of 1969 with respect to such action of the FAA under paragraph (1)
of this subsection; and shall specify whether (and where) such statements are
available for public inspection. The FAA's report shall be published in the Federal
Register, except in a case in which EPA's request proposed specific action to be
taken by the FAA, and the FAA's report indicates such action will be taken."

134. Nor can any significant relief from existing aircraft noise impact be ex-
pected from establishment of local regulations. The Supreme Court has recently up-
held federal preemption of all regulatory action which would affect interstate
airline operations. Lockheed v. Burbank, 93 Sup. Ct. 1854 (1973). The EPA
Report notes,

It is quite evident that the actual ability of airport proprietors and
State and local governmental agencies to control aircraft noise at existing
airports is relatively limited.

Taking all of the above, together with the Burbank decision, it would appear
that the states, local governments and airport proprietors are severely limited in
ability to act and that there is an implication that the full burden of controlling
aircraft noise rests on the federal government. EPA NOISE REPORT at 105.



Benefits of Reducing Air Transport Capacity

air carriers to implement equipment and operational changes made
necessary by these regulations. As shown hereafter, there is reason
to doubt that industry compliance will be feasible within the rea-
sonably near future. Consequently, CAB capacity reduction meas-
ures offer a potentially faster and more effective means of reducing
fleet noise levels by the simple expedient of discontinuing super-
fluous flights.

Reduction of Aircraft Emissions and Other Pollutants

As early as the Air Quality Act of 1967, Congress had specifically
identified aircraft engine exhaust emissions as a subject of national
concern and had directed the Department of Health, Education and
Welfare (HEW) to conduct a study to determine the extent of this
problem and to recommend strategies to produce relief.135 The
Study concluded that reduction of particulate emissions from jet
aircraft is both desirable and feasible, that although there were no
laws or regulations in force at that time to compel the industry to
take steps to reduce emissions, HEW anticipated industry coopera-
tion, but intended to recommend congressional action in the event
industry failed to take meaningful steps. A key facet of the HEW
report was recognition of the need for extensive research and devel-
opment both as to control techniques as well as monitoring and
measuring procedures. In March 1970, the Secretaries of HEW
and Transportation met with representatives of 31 airlines and
agreed on a schedule for retrofitting all JT8D engines with reduced
smoke combusters by the end of 1972. As of July 1973, this pro-
gram was 85 percent completed. Apart from this program, little else
of a tangible nature was accomplished under the 1967 Act.'1 6 The
Clean Air Amendments of 1970 not only required EPA study of
the aircraft emissions problem but directed the Administrator of the
EPA to

establish standards applicable to emissions of any air pollutant
from any class or classes of aircraft engines which in his judg-

135. HEW, NATURE AND CONTROL OF AIRCRAFT ENGINE EMISSIONS-REPORT TO

THE UNITED STATES CONGRESS (1968).
136. Details of this history are set forth in the introduction to EPA, AIRCRAFT

ENISSIONS: IMPACT ON Am QUALITY AND FEASIBILITY OF CONTROL (1972) [herein-
after cited as EPA EMISSIONs STUDY].

1974]



COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

ment cause or contribute to or are likely to cause or contribute
to air pollution which endangers the public health or welfare. 13

Moreover, the Secretary of Transportation is directed to issue regu-
lations ensuring compliance with these standards. 138

The EPA Emissions Study reached several important conclusions.
First, aircraft operations cause or contribute to air pollution which
endangers the public health and welfare. Second, aircraft emissions
are significant contributors to the regional burden of pollution in
comparison to other sources which will have to be controlled to
meet National Ambient Air Quality Standards. Third, airports in
many regions exert localized impact on air quality by producing
pollution in excess of acceptable standards, even though relief is
otherwise provided in the region by controlling automobiles and
stationary sources; in other words, control of non-aircraft sources in
and around such airports will not be adequate by themselves to meet
national standards absent control of aircraft emissions. The Study
recognizes the need for modification of airline ground procedures,
improved maintenance of engines, development and use of new
combustion technologies and retrofit of existing engines with such
improved technology.13 9

On the same day that EPA released its Emissions Study, it pub-
lished its proposed standards for control of air pollution from air-
craft and aircraft engines. 40 Thereafter, on July 17, 1973, EPA
published regulations governing Emission Standards and Test Pro-
cedures for Aircraft.4 1 These regulations deal with three kinds of
pollution: fuel venting, smoke and gaseous emissions. Fuel venting
is prohibited as of January 1, 1974 on all turbojet/turbofan engines
possessing 8,000 pounds of thrust or greater and prohibit as of Jan-
uary 1, 1975 fuel venting as to such engines having under 8,000
pounds thrust and also as to turboprops. By January 1, 1974, all
JT8D engines cannot exceed a smoke number of 30 (which is
achieved by the existing smoke burner can); by January 1, 1978,
all JT3D engines cannot exceed a smoke number of 25; by January
1, 1976, all engines having 29,000 pounds or more thrust (the JT9D,

137. §231(a)(2), 42 U.S.C. § 1857f -9(a)(2) (1970).
138. Clean Air Act, as amended, § 231(b), 42 U.S.C. § 1857f - 9(b) (1970).
139. EPA EMISSIONS STUDY at 5-6.
140. Proposed EPA Reg., 37 Fed. Reg. 26488 (1972).
141. 38 Fed. Reg. 19088 (1973).

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Benefits of Reducing Air Transport Capacity

CF-6 and RB-211 engines) cannot exceed a smoke number that
ranges between 22 at 29,000 pounds thrust to 18 at 59,000 pounds.
By January 1, 1979, all turbojet/turbofan/turboprop engines manu-
factured must meet new and strict gaseous emissions standards
based on design goals of the planned and current NASA/Air Force
research and development programs. These standards apply to hy-
drocarbons, carbon monoxide, oxides of nitrogen and smoke, and
they must continue to be met throughout the life of the engine.
All turbojet/turbofan engines over 8 000 pounds thrust that are
type certificated after January 1, 1981, must meet the foregoing
standards. The regulations also contain other comprehensive provi-
sions related to test procedures, foreign aircraft using U.S. airports
and other matters not germane to this discussion.

At this writing it appears fair to conclude that, although the fuel
venting situation and the JT8D smoke problems appear to be ade-
quately dealt with, important smoke problems and gaseous emis-
sions goals will not be adequately met until late in this decade and
early in the 1980's, even under the most optimistic assumption that
the mandated target dates will be met. Thus, as in the case of air-
craft noise, it appears that, to the extent that the CAB can curtail
a significant volume of unnecessary jet aircraft operations by im-
plementing capacity reductions, it can contribute significantly to
reduction of smoke and gaseous emissions from aircraft and thereby
assist in the attainment of National Ambient Air. Quality Standards
in the major metropolitan areas. 142

Economic Aspects of Capacity Reduction and
Noise and Emissions Control

One of the most potent obstacles to achieving early reduction of
aircraft noise and emissions to acceptable levels is the great cost
involved. This problem is aggravated by the economic weakness of
most of the airline industry. The Air Transport Association, the trade

142. Airline operations also contribute significantly to other kinds of pollution,
notably water quality. Most such problems occur at major maintenance and over-
haul bases where various toxic chemicals are employed in certain technical processes
related to aircraft and engine maintenance and overhaul. To the extent capacity
reductions result in phasing out or deactivation of superfluous aircraft the volume
of these maintenance and overhaul procedures, and the resulting pollution will
thereby be reduced.

1974]



COLUMBIA JOURNAL OF ENVIRONMENTAL LAW

and service organization representing virtually all of the scheduled,
certificated airlines in the United States, outlined the dimensions
of this problem in testimony before the Senate Aviation Subcom-
mittee on Aircraft Noise.'43

The ATA Statement forthrightly proclaims that if all new 727, 737,
DC-9 and 747 aircraft delivered after 1972 meet the standards pre-
scribed in FAR-36, "the nearest thing we have to a national stand-
ard," that the airline industry "would still exceed Part 36 noise
levels in 1982."'" The largest "noise gaps" would occur primarily,
but not exclusively, in the approach, rather than the take-off, regime.
The ATA Statement examines four options available to close or nar-
row these "noise gaps":

Option 1. If all 707, 727 and DC-8 aircraft remaining in the in-
dustry fleet in 1977 or 1982 are replaced on a 2 for 3 basis by the
new, quiet wide-body jets (L-1011, DC-1), there would still be a
"noise gap" in the approach regime. The cost of executing this op-
tion would be $5.3 billion if accomplished by 1977, or $3.8 billion
if accomplished by 1982."'

Option 2. If all state-of-the-art FAA retrofit equipment were in-
stalled on all JT3D engines there would still be "noise gaps" in 1977
and 1982 on approach regimes. The cost of executing this retrofit
would be in the range of $327-467 million for 1977 and $246-352
million for 1982 not counting labor, aircraft downtime or higher op-
erating costs, all of which would be substantial. 146

Option 3. If the NASA new front fans were installed on all air-
craft using JT3D engines, a gap would still exist between the noise
level required by Part 36 and the actual noise level on the critical
approach regime. The cost of refanning by 1977 would be between
$766-934 million and by 1982 between $580-704 million. 47 These
figures again reflect only the cost of hardware.

Option 4. Retrofit of the JT8D fleet to meet Part 36 requirements,
including refanning. Again a "noise gap" in terms of actual fleet
noise levels would occur on the approach regime and the cost would

143. Statement of Clifton F. von Kann, Senior Vice-President-Operations and
Airports, Air Transport Association of America, before the Senate Aviation Subcom-
mittee on Aircraft Noise, Los Angeles, March 30, 1973.

144. Id. at 6.
145. Id. at 7.
146. Id.
147. Id. at 8.

[1: 65



Benefits of Reducing Air Transport Capacity

be $1.699 billion by 1977 and $1.681 for the 1982 fleet. A variation
on this option involves retrofit of both the JT3D and JT8D fleets
with acoustically treated nacelles, an expedient that would eliminate
the "noise gap"; but this would be achieved at a cost of as much
as $663 million, increased operating costs, increased fuel consump-
tion on the order of 100-150 million gallons per year and increased
engine emissions. 148 The ATA Statement concludes that it would
be imprudent to spend the substantial sums described above and
"by 1980 the public could be just as unhappy with us and with the
government as it is today." '149 Instead the ATA advocates major re-
search and development programs to produce better equipment and
a better appreciation of "psycho-acoustical" phenomena, i.e., the
subjective human reaction to various quantities and qualities of
noise.

The merits of the ATA thesis aside, it is quite clear that whether
the government insists on industry action to meet the Part 36 FNL
goals or permits the industry to invest instead in research and de-
velopment, or opts for some combination of these alternatives, two
facts appear inescapable: (1) acceptable noise levels will not be
achieved at forecast fleet operating levels by either 1977 or 1982;
(2) either option-retrofitting/refanning or research and develop-
ment-will involve substantial cost.

Again, the CAB by capacity reductions can contribute to the reso-
lution of these difficult problems. As heretofore noted, significant
capacity reductions would directly reduce cumulative fleet noise
levels by simply reducing the volume of flights operated. Whether
such capacity reduction would suffice to eliminate the apparently
inevitable "noise gaps" is not demonstrable from available data. The
CAB could, as a part of its investigation in Docket 22908, establish
an evidentiary record on the basis of which it would be possible to
determine the extent capacity reductions could obviate the "noise
gaps" in the industry's fleet noise level by 1977 and 1982.

As to the second problem, the great cost of coping with noise
abatement, the economic experience derived from the limited
capacity agreements that have already been tested demonstrates that
major cost savings and corresponding increased profits can be
realized by the airline industry. If a single carrier (TWA), by in-

148. Id. at 8-9.
149. Id. at 12.

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proving load factors by 16.7 percentage points in only four markets,
was able to convert a six month loss of $18 million into a profit of
$4.8 million (a net gain of some $22.8 million) in the subsequent
corresponding six months by use of capacity agreements, it is evi-
dent that an overall increase in industry load factors in every market
over, for example, 100 0 & D passengers per day, would produce
enormous profits despite the escalating operating costs experienced
during this inflationary period.'50 Again, the CAB could, as a part
of its investigation in Docket 22908, establish an evidentiary record
that would quantify the resulting increase in industry profit that
would result from achieving various target load factors. Similarly,
the CAB under its vote-making powers could assure that such profit
increases would not be a lucrative windfall to the industry, by im-
posing conditions requiring that either portions of the profit be em-
ployed in noise and emission abatement projects or that fare de-
creases be imposed to pass the savings on to the consumer.

CONCLUSION

The CAB appears to recognize the imperative need to establish a
regulatory device that will assure optimal coordination of airline
capacity with consumer demand. It has acknowledged that excess-
capacity operation is a chronic and persistent industry-wide tend-
ency, that economic self-interest does not produce unilateral sched-
uling restraint by carrier management, and that both the fuel short-
age and environmental considerations require regulatory interven-
tion in carrier scheduling practices. The CAB has likewise recog-
nized that it cannot provide this needed regulation by means of
its power over airline fares, but rather that long-term capacity agree-
ments are immediately necessary on an extensive scale to cope ef-
fectively with this problem. It has discarded virtually all of the
constraints it had imposed in the early capacity agreements, in-
cluding the three-carrier competitive standard, the "large market"
standard, the short duration of agreements limitation and the "ag-
gregative reductions" approach.

However, the CAB clearly believes that, under existing law, it
may only react passively to voluntary agreement proposals sub-
mitted by carriers, or that, at most, it may only suggest those markets

150. See note 57 and accompanying text.

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Benefits of Reducing Air Transport Capacity

where capacity agreements would be warranted. Assuming the
correctness of this view, two matters require consideration. First,
under existing law as interpreted by the CAB, what can it accom-
plish in the pending Capacity Reduction Agreement Case to fur-
ther its ultimate regulatory objective? Second, is additional legis-
lation necessary to enable the CAB to achieve adequate capacity
controls in the airline industry?

Suggested Goals for the Capacity Reduction Agreement Case.
As a minimum the Board should undertake to make three impor-
tant kinds of determinations in this proceeding:

(1) Establish appropriate "target" load factors, i.e., determine
the maximum capacity reductions that can be achieved con-
sistent with maintaining service that adequately meets the
needs of the public, the postal service and the national de-
fense;

(2) Identify all markets above a certain size in which excess
capacity exists;

(3) Quantify the various environmental benefits and resource
savings which could be achieved by achievement of the es-
tablished "target" load factors in all markets having a mini-
mum of 100 passengers per day.

Appropriate "Target" Load Factors. As heretofore noted, the
Board has not adopted a definitive position on what constitutes an
optimum load factor, i.e., one which reconciles the conflicting con-
cerns of maximizing load factors and offers adequate service to the
public. Most recently, the CAB has regarded 72 percent as a ceil-
ing.' Yet the CAB has approved a peak period target load factor
of 75 percent in the New York/Newark-San Juan market, and there
is presently pending before the CAB an application to make further
schedule reductions in that market, i.e., elimination of 16 additional
weekly round trip schedules which would undoubtedly produce
even higher load factors. 15 2 In the past, the CAB, when it has con-
sidered load factor levels in the context of service adequacy, has
generally had available rather gross traffic data. Today, however,

151. See note 10 supra.
152. See note 99 supra. The load factor consequences of further schedule re-

ductions are not specified but almost certainly they would produce load factors

higher than 75 percent.

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COLUMBIA JOURNAL OF ENVIRONM ENTAL LAW

with the expanded reporting requirements and given the detailed
information requests set forth in the Report of Prehearing Con-
ference in Docket 22908, the CAB will be able to employ sophis-
ticated computer techniques to determine segment demand fluctua-
tions on a day-of-week, by-direction, by-flight basis. Accordingly,
finely tuned service responses can be structured to achieve a far
closer matching of capacity to demand than has heretofore been
possible. At least during the fuel emergency period the Board should
be disposed to err on the high side in setting "target" load factors.
Skillful use of extra sections and substitution of equipment having
various seating capacities offers considerable flexibility to respon-
sive schedule planning.

Once appropriate "target" load factors are identified by the CAB,
the problem remains as to how to induce carriers to schedule flights
accordingly. Historically, CAB power to establish load factor goals
has been manifested through its powers over airline rates. In Phase
6B of the Domestic Passenger Fare Investigation the Board estab-
lished a long range 55 percent load factor standard for rate-making
purposes. To revise this upward to whatever "target" the CAB
found feasible in the pending investigation, would entail reopening
and reprocessing this complex and protracted rate proceeding. More-
over, even if this task were accomplished within some reasonable
time frame, there would be no assurance that the air carriers would
in fact adjust scheduling to attain the specified standard load factor
established in that proceeding. It has heretofore been noted that the
industry has not attained even the modest 55 percent standard load
factor set in Phase 6B.

Thus it would appear that under existing law the most the CAB
could do with regard to establishing optional "target" load factors,
would be to reach a carefully documented factual conclusion as
to what the target should be in given markets and rely on informal
"regulatory suasion" to encourage carriers to adopt schedules cal-
culated to achieve these goals.

Scope of markets to be Regulated. During the early stages of the
CAB's consideration of capacity agreements, it had confined capac-
ity reduction agreements to only those very large markets served by
at least three competitors in which unduly low load factors were be-
ing incurred. Subsequently, the Board abandoned both the large
market aspect and the three carrier requirement. The Board's present

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Benefits of Reducing Air Transport Capacity

standard appears to focus on whether the carriers serving a market
appear to be experiencing "unduly low load factors on a persistent
basis." A more precise formulation is required. The Board has es-
tablished a standard that it would consider or place in issue the
question of whether a market warranted competition when its traffic
reached 100 total passengers per day in both directions. A kind of
rebuttable presumption grew up that the presence of 100 passengers
travelling in a given market warranted competitive service. In sub-
sequent years, during the recent economic hard times of the airline
industry, this "competitive standard" has been much criticized as
being responsible, in part, for authorization of excess competitive
authority in the industry and resulting uneconomical overcapacity.
The Board, therefore, might well consider it appropriate to use this
100 daily passenger standard as the bench mark from which to meas-
ure in effecting a rollback to eliminate excess capacity. Thus the
Board might well undertake, as its starting point, to establish
"target" load factors of 80 percent in every competitive market in
the United States having 100 daily total passengers. Again, the
CAB would have recourse only to "regulatory suasion" to induce
carriers to tailor capacity in such identified markets to the "target"
load factors found appropriate in Docket 22908.

Quantification of Environmental Benefits and Resource Savings.
The CAB could make an invaluable contribution toward attainment
of an acceptable solution of the excess capacity problem if it de-
veloped in Docket 22908 a detailed, probative record that, as a
minimum, quantified the following:

1. The amount of reduction in fleet noise level that would result,
by individual carrier, by airport and by industry, if the "target"
load factors formulated by the CAB were achieved in all markets
having 100 or more daily passengers. This determination should be
made for a near term future year (e.g., 1975) and selected, more
distant years (e.g., 1980 and 1982).

2. The amount of reduction in aircraft emissions of smoke and
gaseous vapors that would result at major U.S. airports if capacity
were cut back in such a manner. In this connection, the record
should develop the extent such reductions would contribute to
achieving National Ambient Air Quality Standards in the region
in which each major airport is located.

3. The overall cost savings and forecast net economic benefit

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COLUMBIA JOURNAL OF ENVIRONMENTAL LAw

the airline industry would derive from implementation of the
above capacity reduction program.

4. The savings in jet fuel that would result from implementation
of the above plan.

5. The reduction in investment for flight equipment, mainte-
nance and overhaul facilities and other capital items that could be
achieved by implementation of above plan.

The foregoing findings would probably prove valuable by pro-
viding long-term incentives to the airline industry to reform its
scheduling practices. More importantly, however, they would pro-
vide Congress with uniquely valuable and relevant data on which
to base its decision whether overriding environmental and resource
considerations require granting the CAB expanded authority to regu-
late airline scheduling. The Senate, as a part of the emergency en-
ergy legislation, enacted S.2589, which would empower the CAB to
regulate airline schedules in considerable detail:

(b) (1) The Interstate Commerce Commission, with respect to
carriers subject to regulation under sections 1 ( 1 ) and 304( a ) ( 1 )
of title 49, United States Code [49 U.S.C. 1(1), 304(1) (a)], the
Civil Aeronautics Board, and the Federal Maritime Commission,
with respect to carriers operating in the domestic trades of the
United States including its territories and possessions, for the
duration of the energy emergency, in addition to their existing
powers, shall have the authority on their own motion or by mo-
tion of any interested party, to review and make reasonable and
necessary adjustments to the operating authority of carriers with-
in their respective jurisdictions in order to conserve fuel while
providing for the public convenience and necessity. Such ad-
justments may include but need not be limited to adjusting and
rationalizing the operations of such carriers with regard to fre-
quency of service, points served, scheduling to prevent duplica-
tion of service and reviewing or adjusting rate schedules to re-
flect such adjustment and rationalization.'"5

If Congress enacts temporary emergency legislation along the lines
of S.2589, the record compiled by the CAB in Docket 22908 would
be useful in a subsequent determination by Congress whether to ex-

153. S.2589, 93d Cong., 1st Sess. (1973). The corresponding legislation in the
House, H.R. 11450, 93d Cong., 1st Sess. (1973) does not contain such sweeping
powers. The Senate version, which passed the House December 15, 1973, was
vetoed by President Nixon on March 6, 1974.

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1974] Benefits of Reducing Air Transport Capacity 109

tend the effectiveness of this new regulatory power. If Congress
does not at this time grant this regulatory power, the record com-
piled by the CAB in Docket 22908 might well adduce material that
enables Congress to determine whether it would consider and
grant the CAB expanded power of airline scheduling. Whatever
ultimate use such data may be put to, it is quite clear that Docket
22908 presents the CAB with a unique opportunity as to develop
an evidentiary record that can profoundly influence the course this
nation will pursue in harmonizing the regulation of airline capacity
with environmental law.