Ralph Nader and the Aviation Consumer Action Project asked a federal court yesterday to overturn a recent decision of the Civil Aeronautics Board granting airlines increased freedom to raise fares without the agency's involvement.
Their suit filed in the U.S. Court of Appeals in Washington charged that the CAB decision violates the Airline Deregulation Act of 1978 by ignoring a congressional mandate to continue monitoring airline fares until that power is ended statutorily at the end of 1982. The ACAP is a Nader-associated nonprofit group that has participated in numerous proceedings before the CAB.
The board's decision, issued formally last week, granted airlines a three-tiered system of fare flexibility. Airlines are allowed to raise fares by unlimited amount for routes of 200 miles or less, by 50 percent above an agency-fixed base level for routes up to 400 miles and 30 percent above the base for routes or more than 400 miles.
The decision already has come under sharp attack in Congress.In addition to those who believe the board's action went beyond what was envisioned by the Airline Deregulation Act, there are others who contend the uneven application of the tier system discriminates against the smaller communities served by airlines flying the shorter routes.
Airlines have been granted unlimited authority to raise prices on short routes, while fare increases have been limited on longer routes where there is generally more competition to keep fares down without the board-set limits, they contend.
"This case poses the question of whether the CAB may deregulate domestic air fares according to its own timetable or whether it must adhere to the schedule Congress established to ensure an orderly transition from 40 years of rigid economic regulation to an unregulated regime," Nader and the ACAP told the court yesterday.
The suit noted that the deregulation law required the board to establish and revise at least twice a year a standard industry fare level for normal coach fares.
Based on average carrier costs, the fare level was designed to cover the airlines' costs and to earn them an adequate return. In addition, the law created a zone 5 percent above and 50 percent below the standard industry fare level within which airlines are free to set fares without CAB interference.
The suit contends that Congress specifically gave the CAB the power to expand the downward zone but not the power to expand the upward zone. All CAB power over fares ends on Jan. 1, 1983, a year after its power to make route awards ends, the suit notes.
"There was a purpose behind the timetable," Nader and the ACAP told the court. "By choosing to phase out economic regulation gradually rather than immediately, Congress was simply acknowledging that pricing patterns, route structures and industry practices built up under 40 years of CAB regulation would not immediately give way to a fully competitive environment." Although the board's route-award policy has been liberal, it has not eradicated "all vestiges of market power," the suit contends.
"If the timetable for fare deregulation is to be advanced, it must be done by Congress, not the board," Nader and the ACAP said.
The suit asked the court to prohibit airlines from raising fares under the board's decision pending final resolution of the challenge. Most of the major airlines already used the provision to raise air fares between 4 percent and 6 percent on June 1, and many have announced plans to raise fares another 10 percent on July 1.