Transcontinental Western Air v. Civil Aeronautics Board/Opinion of the Court
The question in this case is whether the Civil Aeronautics Board has authority to fix a new mail rate for air carriers and to make it retroactive for a period in which a final rate previously fixed by the Board was in effect and unchallenged by the initiation of a mail rate proceeding. The answer turns primarily on the meaning of § 406(a) of the Civil Aeronautics Act of 1938 as amended, 52 Stat. 998, 49 U.S.C. § 486(a), 49 U.S.C.A. § 486(a), which empowers the Board to fix and determine the fair and reasonable rates of compensation for the transportation of mail by aircraft and 'to make such rates effective from such date make such rates effective from such date as it shall determine to be proper * * *.' 
The Board in an order dated October 26, 1945, fixed a mail rate of 45 cents per mail ton-mile for petitioner.  From that date until March 14, 1947, petitioner was paid at that rate for its air carrier services. During that time no action was taken by petitioner or by the government to initiate a change in that rate. On March 14, 1947, petitioner filed a petition with the Board alleging that its mail rate had not been fair and reasonable since January 1, 1946, and requesting the Board to fix a fair and reasonable rate 'from and after January 1, 1946.' After hearing the Board by a divided vote ruled that it had no authority to fix a mail rate for a period prior to March 14, 1947, and dismissed the petition insofar as it sought that relief. 8 C.A.B. 685. The Court of Appeals affirmed the order of the Board. 169 F.2d 893. The case is here on a petition for a writ of certiorari which we granted because of the importance of the question to the carriers and public alike.
The language of § 406(a) which empowers the Board to 'fix and determine' after notice and hearing 'the fair and reasonable rates of compensation' for the transportation of mail by aircraft  reads like a typical public utility rate-making authority. Both subdivisions (a) and (b) of § 406, to be sure, reflect some characteristics of ratemaking which are peculiar to air carriers. That is true of the methods specified in § 406(a) for ascertaining the rates of compensation-'aircraft-mile, pound-mile, weight, space, or any combination thereof, or otherwise * * *.' Special standards for rate-making are also prescribed. The Board is authorized to consider 'the conditions peculiar to transportation by aircraft and to the particular air carrier or class of air carriers' in fixing different rates for different air carriers or classes of air carriers and different classes of service. § 406(b). And the Board in determining the rate is authorized and directed to consider 'the need of each such air carrier for compensation for the transportation of mail sufficient to insure the performance of such service, and, together with all other revenue of the air carrier, to enable such air carrier under honest, economical, and efficient management, to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the Postal Service, and the national defense.' § 406(b).
Considerable reliance is placed on this last provision for the view that the Board has authority under the 'make effective' clause to order such retroactive adjustments of rates as the 'need' of the air carrier makes appropriate. But such a standard has its counterparts in other legislation dealing with rate-making  and does not necessarily mark a departure from the customary pattern of fixing rates prospectively. Yet, unless we found a congressional purpose to make a radical break with tradition, we would be most reluctant to give the 'make effective' clause the broad meaning which petitioner urges. For the rates of carriers and other utilities fixed by public authorities, while usually prospective, are sometimes made retroactive to the date of the commencement of the ratemaking proceeding. See United States v. New York Central R. Co., 279 U.S. 73, 49 S.Ct. 260, 73 L.Ed. 619. But, so far as we are aware, they have never been retroactive to an earlier date.
The language of the Act does not suggest that Congress intended to break with these traditions of rate-making.  Moreover, the legislative history indicates that the 'make effective' clause was inserted only to make clear that the rates could be made retroactive to the date of the application.  Finally the scheme of the Act and its underlying policy seem to us to preclude the more expansive reading of the clause urged on us by petitioner.
Petitioner's reading of the Act would in practical effect have the tendency to transform it into a cost-plus system of regulation, a construction which would not harmonize with the apparent design of the Act. Thus § 406(b) authorizes the Board to fix rates for 'classes of air carriers.'  It is plain that the uniform rate for the class is an important regulatory device. For § 2(d) of the Act looks to the sound development of an air transportation system through competition.  A uniform rate forces carriers within a given class to compete in securing revenue and in reducing or controlling costs. If the Board had authority on the basis of the carrier's needs to make rates retroactive to any point of time, there would be a powerful incentive to seek relief from the uniform rate, not to live within it.
In sum a construction which would make it possible to revise rates retroactively to any point of time would be a real innovation which should have a more solid basis than our own predilections. We cannot but feel that if the rate-making power were to be put to such a novel use, the purpose would have been made clear. It is too unprecedented a departure from the conventions of rate-making to rest on mere inference.
It is pointed out that the Board apparently considers past operating losses in fixing rates  and that therefore it is a matter of no great consequence if the rates are made retroactive to one date rather than another. But the power to fix rates to recoup past losses is a distinct question not before us.
Mr. Justice REED took no part in the consideration or decision of this case.
Mr. Justice JACKSON, dissenting.
- Section 406 provides:
- See 6 C.A.B. 595.
- See note 1, supra.
- See § 1 of Title I of the Transportation Act of 1940, 54 tat. 899, 49 U.S.C., note prior to § 1, 49 U.S.C.A. note preceding § 1: 'It is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of this Act * * * to * * * foster sound economic conditions in transportation and among the several carriers; * * * all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service, and of the national defense. All of the provisions of this Act shall be administered and enforced with a view to carrying out the above declaration of policy.'
- The other rate-making provisions of the Act likewise follow the conventional pattern. See § 1002(d) and (e), 49 U.S.C.A. § 642(d, e).
- The Interstate Commerce Commission in its administration of the Air Mail Act of 1934 as amended, 48 Stat. 933, 935, 49 Stat. 614, 616, 39 U.S.C.A. § 469 et seq., had asserted the power to make its orders effective as of the date of initiation of the proceeding. But there was a sharp divergence of views within the Commission over its authority to do so. See Air Mail Compensation, 216 I.C.C. 166, 222 I.C.C. 602. The congressional committees seemed primarily concerned with that problem in their consideration of the 'make effective' clause in the bills which preceded the ones resulting in the Act. See S. Hearings, Committee on Interstate Commerce, S. 2 and S. 1760, 75th Cong., 1st Sess. 179, 180, 239, 291, 343, 483-485, 523. And see H.R. Hearings, Committee on Interstate and Foreign Commerce, H.R. 5234 and H.R. 4652, 75th Cong., 1st Sess. 325-327. The policy of adhering to conventional rate-making is suggested by H.R. Rep. No. 911, 75th Cong., 1st Sess. 18, and by the statements of Senator Truman who was in charge of the bill in the Senate. 81 Cong.Rec. 9202, 9204.
- § 406(b) supra note 1.
- Section 2(d) provides:
- After the present case was argued in this Court, the Civil Aeronautics Board, on February 21, 1949, awarded a temporary mail rate, increase to TWA effective March 14, 1947, to compensate it for losses sustained prior thereto as the result of grounding the Constellation aircraft. American Airlines, Inc., et al., Mail Rate Increases, C.A.B. Docket No. 2849, Serial No. 3-2484 (Feb. 21, 1949). That action does not render the present case moot, for the new temporary mail rate covers only a part of the losses on the basis of which a rate increase was sought here. Nor do we have in this case any question concerning the power of the Board over temporary, as distinguished from final, mail rates. See Essair, Inc., Temporary Mail Rate, 6 C.A.B. 687, 690-691; In the Matter of National Airlines Inc., Docket No. 3037, Serial No. E1271, March 5, 1948.