Delta Air Lines, Inc. v. Summerfield

Background

Delta Air Lines is the successor to Chicago and Southern Air Lines (C&S), which ran both domestic and foreign flights. C&S applied for subsidy pay for its Latin-American routes covering 1946 through 1950. In 1948 the Board set domestic subsidy rates expected to yield a 7.4% return, and for 1948–1950 those domestic rates produced more than $654,000 above that return. The Board later fixed foreign-route subsidies retroactively (Nov. 1, 1946–Dec. 15, 1950) and prospectively, giving a 7% return for the past period and 10% for the future, but refused to offset the excess domestic earnings against the international subsidy for reasons of economic policy.

Reasoning

The key question was whether the Board must measure an airline’s need for mail subsidy by the carrier’s entire operations or may ignore some revenues for policy reasons. The Court held that the statute requires the Board to consider “the need of each such air carrier,” measured by its whole operations and “together with all other revenue of the air carrier.” The Act defines an air carrier as a single entity, so the Board must offset all revenues when computing any subsidy. The Court concluded the Board erred by excluding domestic profits for policy reasons and affirmed the Court of Appeals’ reversal of the Board’s order.

Real world impact

The decision means airlines that operate both domestic and international routes cannot have excess domestic earnings excluded when the Board calculates mail subsidies for foreign service. That will reduce subsidies for international routes when carriers have surplus domestic profits. Policy choices about dividing revenues between services must be made by Congress, not by ignoring statutory limits in rate-setting.