Opinion ID: 319871
Heading Depth: 1
Heading Rank: 2

Heading: the two-stop restriction

Text: 16 In the challenged Order, the Board removed an existing two-stop restriction on Southern flights between St. Louis/Chicago and Tallahassee and replaced it with a two-stop requirement along the St. Louis/ Chicago-Orlando/Miami route. 17 Had this change not been made, Southern would have been authorized to offer at best three-stop service between St. Louis/Chicago and Orlando/Miami. Nevertheless, Southern protests that the Board should have allowed Southern to tack its existing St. Louis/Chicago-Memphis service to its newly-granted Memphis-Orlando/Miami permissive nonstop authority, and thus to create a new St. Louis/Chicago-Orlando /Miami one-stop route. We think the Board's imposition of the two-stop restriction was reasonable and supported by substantial evidence. 17 The Board proffered the following justification for the two-stop limitation: 'This restriction was designed to assure that Southern will concentrate on providing local services between Memphis and its existing Alabama and Florida points, on the one hand, and Miami and Orlando, on the other . . ..' 18 This reasoning has two basic components: (1) if granted the tacking authority, Southern might be tempted to enter the St. Louis/Chicago-Orlando/Miami one-stop market; and (2) if it did so, Southern's ability to provide local service between Memphis and Orlando/Miami would be impaired. 18 Both of these propositions are supported by substantial record evidence. The administrative law judge made the undisputed finding that 740,170 passengers traveled through the air along the St. Louis/Chicago-Orlando/Miami route in 1969. 19 This heavy concentration of traffic would have the potential of luring Southern into the St. Louis/Chicago-Orlando/Miami one-stop market, were the restrictions imposed by the Board not in existence. The danger that Southern's entry into this market would create is also apparent in the Board record. The administrative law judge further found, without contradiction, that 'the Chicago/St. Louis-Orlando/Miami markets . . . are high-density long-haul markets which receive multiple nonstop and one-stop services from trunkline carriers.' 20 It follows that any attempt by Southern to exploit these markets would encounter substantial, well-entrenched competition and might therefore result in financial losses that could impair Southern's ability to provide adequate local service in the Memphis/Alabama-Florida market. Thus, notwithstanding the Board's general policy of not attaching certificate restrictions, 21 the Board was justified in concluding that the public interest would be served by preventing Southern from straying into the one-stop St. Louis/Chicago-Orlando/Miami market at the expense of its basic local service obligations. 19 Southern's secondary line of attack on the two-stop restriction is that the imposition of such a restriction on Southern cannot be reconciled with the failure similarly to limit Delta's St. Louis-Miami authority. We disagree. The Board concluded that 'neither Eastern nor TWA-- the Miami-St. Louis incumbents who favor the imposition of a two-stop restriction on Delta's flights in the market-- has shown that a clear need for this restriction exists.' 22 The Board continued: 20 On the other hand, we see no need to eliminate or amend the two-stop restriction we imposed on Southern's flights between Chicago or St. Louis and Miami or Orlando. This restriction was designed to assure that Southern will concentrate on providing local services between Memphis and its existing Alabama and Florida points, on the one hand, and Miami and Orlando, on the other; it was not imposed to protect the incumbents in the Chicago/St. Louis-Florida markets. Therefore, its retention is in no way inconsistent with our decision not to impose a two-stop condition on Delta's Miami-St. Louis authority, as Southern suggests. 23 21 While it is clear that the imposition of a two-stop restriction on Southern was grounded on criteria different from those employed in determining whether Delta should be similarly restricted, this disparity is justified by the differing natures of the two carriers. Delta is a long-haul trunk carrier that operates on a non-subsidized basis. In contrast, Southern is basically a short-haul local carrier, whose operations are sustained in part by government subsidies. The Board has some responsibility for safeguarding the financial integrity of a carrier like Southern, whose business failures ultimately burden the public treasury, while the managements of Delta and other non-subsidized carriers can justifiably be allowed greater license in assessing business opportunities and risks, since their mistakes in judgment merely diminish the dividends of their shareholders. Moreover, the Board may reasonably seek to prevent Southern from straying from its basic local markets into long-haul routes, while long-haul service is the principal component of Delta's operations. Therefore, the Board acted reasonably in imposing a two-stop restriction on Southern's St. Louis/Chicago-Orlando/Miami service and not on Delta's.