Opinion ID: 296613
Heading Depth: 2
Heading Rank: 2

Heading: The 1970 Data

Text: 21 The questionable accuracy of the 1970 data figures in Appendix A to the Board's September 1969 order was not long in being revealed. Two months later came the Board's Order on Reconsideration, wherein the Board admitted that Appendix A contained errors of about one-half million dollars. 22 The Board then proceeded to make a new 1970 forecast, employing forecasting techniques that had not been employed by either the parties or the Examiner. The calculations made by the Board on the basis of 1970 estimates in Appendix A were never subjected to examination or cross-examination in any administrative proceeding. They were challenged by several parties-- successfully, as shown above-- after the Board's order in September 1969. The validity of all awards of new routes to Southern and the denial of any routes to Delta rests upon the Board's 1970 forecast figures supplied in its Order on Reconsideration, which is challenged for the first time in this judicial review. 22 The Board urged strenuously at oral argument that the Board and its processes were not subject to cross-examination by the interested parties. With this we can agree, but the financial data and the method of calculation or financial forecasting employed by the Board should be subject to examination and cross-examination by the adversary parties. It is for this reason that, if the Board is to rely on its wholly new 1970 forecast, it is required to hold a hearing as contemplated by the Administrative Procedure Act: 23 A party is entitled to present his case    by oral or documentary evidence, to submit rebuttal evidence, and to conduct such cross-examination as may be required for full and true disclosure of the facts. 23 24 The questionable reliability of this 1970 forecast is indicated by the admitted fact that it involves a 1970 forecast of operating revenues for Southern, while the 1970 cost figures compared by the Board were not an estimate of 1970 costs but were an extrapolation of previous cost experience of Southern and other airlines for the year ended March 1969. 25 Appendix A (Revised) to the Board's Order on Reconsideration of November 1969 used average Local Service Air Carriers' Unit costs for indirect costs and Southern's costs for direct costs. For the year ended March 1969 these costs were stated as lower than the costs for the similar period ended March 1968, relied on by the Board in its Appendix A to its original Final Order of September 1969. Hence, although the Board's 1970 forecast of Southern's revenue (having been challenged by the other parties) was actually lower in Appendix A (Revised) than it had been two months earlier, yet the Board could still predict an operating profit of about $650,000 and a consequent $20,000 subsidy reduction for Southern because of lower costs. 24 We are extremely dubious that airline cost figures can be simply extended from the past to provide a worthwhile forecast for the future with no allowance made for an upswing in airline costs in 1970. Whether this doubt is proved right or wrong, the other parties to this comparative proceeding to determine the award of new airline routes are entitled to an open adversary hearing to disprove their accuracy. 26 We have alluded above to the lack of opportunity for the other parties to challenge the 1970 figures in relation to Southern. But another flaw in the Board's procedure in using these 1970 forecasts is that no other party put in, or indeed had an opportunity to utilize, 1970 forecast figures for its own operations on these routes. We were told at oral argument that updating of figures is frequently indulged in by the Board or the Examiner after the evidence is closed, otherwise the final decision may come out based on stale statistics. But surely such updating can only be justified if done on a comparative basis, i.e., updating the forecasts for all parties. 25 It can hardly be termed a 'comparative proceeding' if the financial forecast for one applicant, Southern, is based on 1970 data, while the forecasts for all the other competing applicants for the same routes are pegged to 1969 estimates. 26 As we said in a previous CAB case: 'The requirement for a comparative proceeding means all the give-and-take of contesting parties, including cross examination, rebuttal, participation in rehearing proceedings, objections, briefs and arguments as contesting parties.' 27 27 What was done here was not sufficient to meet that standard of an adversary proceeding; the Board's initial computations were too cryptic, had large errors and undisclosed premises, thus precluding adequate challenge. The later figures are, again, cryptic and contain untested premises. 28 The Board complains that it would defer proceedings interminably if there had to be a new hearing every time a new forecast year is used. There are acceptable alternative solutions, three of which are; one, the Board can work out, in advance, with all the airlines, general formulas for updating which can be applied mechanically in all (or almost all) cases, instead of depending on ad hoc computations in particular cases which are subject to attack and criticism; or, Two, the further hearing on updating can be limited to that issue alone and can be given special priority so that it need not delay proceedings unduly; or, Three, perhaps the Board can work out some procedure for an exchange of written views in advance of decision (e.g., a tentative recomputation offered for criticism to the parties), which will give all parties an adequate understanding of the underpinnings and the details of the computations as well as an opportunity to point out errors and alternatives and to answer opposing presentations (akin to exchanges of proposed detailed findings of facts and objections to the others' findings). 29 The time lag created by this appeal may make all three solutions inapplicable to this case, on remand the Board may choose other procedures; nor do we imply that in other future cases the three suggested solutions are the only acceptable. 30