BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Motion and Application of AMERICAN AIRLINES, INC. in the matter of 2010 U.S.

- Haneda Combination Services Allocation Proceeding Docket DOT

- OST

- 2010

- 0018

CONSOLIDATED REPLY OF AMERICAN AIRLINES, INC.

Howard Kass Vice President

– Regulatory Affairs Robert A. Wirick Managing Director, Regulatory and International Affairs Abigail Donovan Director, Congressional and Federal Affairs American Airlines, Inc. 1101 17th Street, N.W. Washington, DC 20036 (202) 326.5153 howard.kass@aa.com robert.wirick@aa.com abigail.donovan@aa.com Charles A. Hunnicutt Patricia N. Snyder Thompson Hine LLP 1919 M Street, NW Suite 700 Washington, DC 20036

- 1600 (202) 263.4189 charles.hunnicutt@thompsonhine.co m patricia.snyder@thompsonhine.com

October 28, 2014BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Motion and Application of AMERICAN AIRLINES, INC. in the matter of 2010 U.S.

- Haneda Combination Services Allocation Proceeding Docket DOT

- OST

- 2010

- 0018

CONSOLIDATED REPLY OF AMERICAN AIRLINES, INC. The Department should grant the application of American Airlines, Inc. (“American”) for the Haneda frequenc y held by Delta Air Lines, Inc. (“Delta”) without further delay. American is anxious to get into the market and provide a competitive alternative to existing U.S.

- Haneda services. No legal impediment prevents immediate reallocation of the frequency. The Department has the power and the right to withdraw the frequency from Delta, given its effective abandonment of the market. Delta has had the required due process of notice and an opportunity to present its views, and no other application for the Haneda frequency is pending. The Department should allow American to offer U.S. consumers the Haneda service the United States worked hard to obtain

. 1
1. The Department Has the Right and the Duty to Withdraw the Seattle
Haneda Frequency from Delta. Delta is providing no public benefits with its Haneda frequency, even though it is planning just enough service to keep it from reverting automatically to the Department.

1 This Consolidated Reply responds to the Consolidated Answer of Delta Air Lines, Inc. ; Consolidated Answer of the Port of Seattle; Consolidated Answer of the Delta MEC , all filed on ( October 17, 2014). October 28, 2014Consolidated Reply of American Airlines, Inc. Page 2 of 1 0 It has had adequate notice of American’s challenge, and an opportunity to present i ts views. In this unique situation, the Department should withdraw Delta’s frequency and award it to American. The Dormancy Condition. Delta and its supporters assert that Delta can keep its Seattle

- Haneda frequency if it “complies with” the dormancy con dition. 2 Their assertion is based on a misreading of the letter and spirit of the dormancy condition. The dormancy condition is not a guarantee that a carrier can keep a frequency indefinitely simply by providing a few flights every 90 days. The frequen cy may not revert automatically, but the analysis does not stop there. Read literally, the dormancy condition’s only function is to terminate an un us ed frequency automatically, allowing the Department to reallocate the frequency to another carrier without further procedure. In relevant part, the dormancy condition reads as follows: The slot pair allocation will remain in effect indefinitely, . . . provided [ ] that the slot pair will become dormant and will revert automatically to the Department if it is not used for a period of 90 days (once inaugurated); 3 The dormancy condition is one tool available to the Department to ensure that scarce frequencies are used. Another tool available to the Department is to withdraw an underuse d valuable frequency for reallocation

. Delta’s position that a carrier can maintain frequencies but provide no public benefits is inconsistent with long

- standing Department policy. The Department has said,

2 Consolidated Answer of Delta Air Lines, Inc. at 3

- 4 (Docket DOT

- OST

- 2010

- 0018, October 17, 2014). See also, Consolidated Answer of the Port of Seattle at 4; Consolidated Answer of the Delta MEC at 3

. 3 Order 2013

- 2

- 4 at 6.Consolidated Reply of American Airlines, Inc. Page 3 of 1 0 Should frequency allocations not be us ed, we hav e the power to reallocate them to ensure that they are used effectively and in a manner that best promotes competition and otherwise serves the public interest.” 4 In this circumstance, U.S. carriers have only four daily flights into Haneda.
Because U.S.

- c arrier service is severely limited at the airport , it is in the public interest to real locate Delta’s Haneda frequency, and the Department has the right to do so.
Due Process. Delta next argues that the Department would “violate the fundamental fairness a nd due process requirements of t he Administrative Procedure
Act ” 5 if it withdraws Delta’s frequency. Delta is again incorrect. Of course, Delta is entitled to notice and an opportunity to be heard before the Department can take the frequency away. One indication of the appropriate procedure is in a related provision of the law, 49 U.S.C. § 41110(c), dealing with foreign certificate authority, which is instructive if not strictly applicable. Under that provision, the Department can suspend or revoke certificate authority

“ after notice and a reasonable opportunity for the affected air carrier to present its views, but without a hearing .” The provision applies where a carrier has not provide d “ regularly scheduled transportation ” in a market for a 90

- day period

. It is not unfair to Delta to withdraw a frequency in this unique case, where Delta is providing no public benefits while keeping its frequency barely in force. In addition, Delta has had notice that its authority could be withdrawn since American’s October 2, 2014 filing and the Department’s October 6, 2014 procedural Notice. Delta has had

4 Fi nal Order, U.S.

- China Frequency Allocation , Order 95

- 2

- 30, OST

- DOT Docket 49760 at 5 (Feb. 14, 1995). See also , Order Instituting Proceeding, 1997 U.S.

- Argentina All

- Cargo Frequency Proceeding , Order 97

- 11

- 35 at 9

- 10 (Nov. 20, 1997) ( The value of frequen cies requires DOT to “preserve maximum flexibility to respond to changing conditions, whether in terms of the operations of the carriers already serving, the interests of the carriers that might want to serve, the overall state of the applicable bilateral relationship, or any other public interest factors.” )
5 Consolidated Answer of Delta Air Lines , at 3

- 4 (Docket DOT

- OST

- 2010

- 0018, October 17, 2014).Consolidated Reply of American Airlines, Inc. Page 4 of 1 0 ample opportunity to present its views. No further process is due

. In this unique circumstance, the Department should terminate Delta’s right and all ow American to provide a substantially superior service

. 6

2 . American’s Application for Haneda Service Is Uncontested A nd the Department Should Grant American’s Application Immediately. The Department can legally grant American’s application for Delta’s U.S.

- Haneda frequency now. No law requires the Department to institute a full reallocation proceeding. Under the Ashbacker doctrine, 7 when the Department considers two or more bona fide mutually exclusive applications, it must consider them at the same time. In its Motion and Answer, Hawaii an Airlines, Inc. (“Hawaiian”) does not offer a mutually exclusive application to the application offered by American. 8 Hawaiian’s statement of future intent is not the same as an applicatio n for the authority. The case law is clear: Ashbacker is relevant only when multiple applicants apply for a mutually excl us ive right. 9 No other carrier has applied for Delta’s Haneda frequency. The Department is under no obligation to delay American’s application.

6 See, e.g. , the Department’s policy statement, Certificate Duration in Limited Entry Markets, which contains the following example: [A] s an example, it is likely that we would consider a proposal of daily service in a market receiving three weekly flights to be subs tantially superior (assuming that we believe daily service to be economically a nd bilaterally feasible). Surely if an increase from three flights a week to seven is substantially superior, American’s proposal to provide daily service is substantially supe rior to Delta’s hiatus level of 17 flights for the entire winter season.
7 Ashbacker Radio Corp. v. Federal Communications Commission, 326 U.S. 327, 333 (Nov. 13, 1945) (“ The Ashbacker doctrine provides, ‘ that where two bona fide applications are mutuall y exclusive the grant of one without a hearing to both deprives the loser ’ of a Congressional mandated opportunity to compete for the proposed right .”).
8 Hawaiian Airlines’ Motion to Reopen Order 2013

- 2

- 4 and Answer to the Motion and Application of Ameri can Airlines , 2010 U.S.

- Haneda Combination Services Allocation Proceeding, Docket DOT

- OST

- 2010

- 0018 at 6 (Oct. 9, 2014).
9 Reuters, Ltd. v. Federal Communications Commission , 781 F.2d 946, 951 (D.C. Cir. 1986) (for Ashbacker to apply, multiple application s must be pending at the same time to give all parties the right to a hearing.); see also,Consolidated Reply of American Airlines, Inc. Page 5 of 1 0 3 . Department Action on American’s Motion A nd Application Is Unrelated to the U.S.
- Japan Negotiations. Delta argues that allowing it to keep its dormant frequency is “critical” to the U.S. Government’s efforts to open Haneda. Yet, Delta offe rs no coherent explanation as to why. Instead, Delta distracts the Department’s attention by complaining that it cannot compete. Delta’s complaints conveniently ignore the fact that , given its Narita hub , it compete s very effectively against other airlin es and alliances, as reflected in Delta’s U.S.

- Tokyo market share of nearly 25 per cent. 10
Delta’s current authorization to use one U.S.

- Haneda frequency is not a negotiating chit. Even if it had any negotiating value, Delta’s failure to use the frequency reduces that value to zero. It is not a negotiating chit because the Department decides which U.S. airline should be allowed to use limited U.S. rights

– not the Government of Japan . The United States holds the right to have whatever carriers it chooses to operate to Haneda

. Delta feigns that additional capacity at Haneda is “simply a matter of Japan’s political will.” 11 T he reality is that Delta has vigorously opposed any incremental change at Haneda throughout U.S.

- Japan negotiations. Delta ’s only objective is to move its entire Narita hub to Haneda. The chance of unfettered access for U.S. carriers to Haneda in the near term is unlikely

. The Department should not permit Delta to hold the U.S. Government, consumers, and U.S. carriers hosta ge.

Seaboard & Western Airlines, Inc. v. Civil Aeronautics Board , 181 F.2d 777, 779

- 80 (D.C. Cir. 1949) (“ The DC Circuit Court held when a Civil Aeronautics Board route selection proceeding is pending, the CAB “must include in the proceeding all pending applications for certificates ” over such proposed routes. ).
10 Consolidated Answer of Delta Air Lines, Inc. at 8, chart at bottom right (Docket DOT

- OST

- 2010

- 0018, October 17, 2014).
11 Id., at 11.Consolidated Reply of American Airlines, Inc. Page 6 of 1 0
If Delta is serious about changes at Haneda, then it should withdraw its insistence on moving its entire hub from Narita to Haneda as the only acceptable outcome during the next round of intergovernmental negotiations. Its analogy to the London

- Heathr ow situation within the U.S.

- European Union (“EU”) talks is simply wrong. There, the objector was Continental Airlines, Inc. (“Continental”), which insisted that U.S. carriers had to have unencumbered access to London

- Heathrow, despite capacity issues. L ike Continental at the time , Delta’s extreme and unrealistic position makes it more difficult for the United States to reach a satisfactory arrangement on Haneda with the Government of Japan. Further, Delta complains that it is in a “uniquely difficult p osition” at Haneda as it is has no Japanese alliance partner. Delta’s position at Haneda is not unique. In the U.S.

- EU example, US Airways , Inc. (“U S Airways”) was without a clear path to obtaining London

- Heathrow slots, as it was not in an immunized all iance with a British or European partner. Yet, US Airways found a way to launch a U.S.

- Heathrow service

.
4. Delta’s Defense That Carriers Make Seasonal Adj us tments Is Disingenuo us Beca us e the U.S.
- Japan Market Is Not Seasonal. Delta contends that it is “employing a temporary seasonal adj us tment, which in this case is intended to preserve and maintain Seattle as a viable U.S.

- Haneda gateway.” 12 This contention is nonsensical and wrong. First, the idea that an airline “preserves and maintains” a major U.S. city as a gateway by not serving it is risible. Delta is only preserving and maintaining its Narita

12 Id., at 8.Consolidated Reply of American Airlines, Inc. Page 7 of 1 0 hub through which it commands a whopping 24 per cent of all U.S.

- Japan ASMs, as shown on page 8 of its A nswer. Second, the Continental U.S.

- Tokyo and Continental U.S.

- Haneda markets show very little seasonality , even though Delta claims that the reductions are “temporary seasonal reductions.” 13 Delta produces no facts to support its statements because n o supporting facts exist. Exhibit AA

- 101 show s tha t capacity generally remains constant
year - round

. The data indicates that Delta is not investi ng in the Seattle

- Haneda market , strongly sugges ting that Delta is simply holding the frequenc y to the detrimen t of

consumers . The chart below shows that Seattle

- Haneda is the only market from the Continental U.S. to Haneda that has suffered severely reduced frequencies for the coming winter :

13 Id. , at 4

- 6.Consolidated Reply of American Airlines, Inc. Page 8 of 1 0

Exhibit AA

- 10 2 shows that Delta’s load factors at Seattle are signific antly lower than other carriers in the Continental U.S.

- Tokyo market

. At the same time as Delta is walking away from the Seattle

- Haneda market :

• Delta is actually increasing its services to Narita from Atlanta, Minneapolis, and JFK this winter ;

• Delta has not reduced its Seattle

- Narita services for the winter;

• Delta has increased its own Los Angeles

- Haneda frequencies from last winter to this winter as well as its ASMs ;

• United launched nonstop San Francisco

- Haneda service;

• All Nippon Airways is maintaining the level of frequencies from Los Angeles to Haneda and will actually its increase available seat miles (ASMs) ; and

• Japan Air Lines’ San Francisco

- Haneda frequencies will decrease by one, but its ASMs will increase because JAL is up

- gauging from a 186

- seat B788 to a 283

- seat B772 in December 2014. Put simply, no other carrier made a “seasonal adjustment ” to frequencies from the Continental U.S. to Tokyo this year, nor has Delta done so

– except in the Seattle

- Haneda market . Importantly, over the past year, American’s frequencies and its total ASMs from Chicago, Dallas / Fort Worth, and Los Angeles to Narita have remained consistent through the winter. Delta complains that in 2013, American reduced the number of weekly U.S.

- Brazil frequencies in part of t he shoulder season by 28 round trips, from 109 weekly round trips. First, unlike Delta, American Airlines is using its U.S

- Brazil frequencies effectively. In 2013, American Airlines provided 5,170 flights to over a dozen U.S.

- Brazil city pairs.Consolidated Reply of American Airlines, Inc. Page 9 of 1 0 Second, A merican and US Airways are working to integrate their services following the merger. That process affects all our services, including U.S.

- Brazil services. American fully expect s to communicate with the Department once its integration plans are completed

. Finally, Delta is wrong to compare the seasonal U.S.

- Brazil market with the U.S.

- Haneda market, which shows very little seasonality. Moreover, no seasonal swings in traffic can explain an 88 per cent decrease in flights. The Department should ignore Delta’s argument that its Seattle

- Haneda cutbacks reflect a seasonal adjustment, as there is little seasonality in U.S.

- Japan markets. Instead, the cutbacks reflect Delta’s effort to protect its hub at Narita.

5 . U.S. Carriers Can Effectively Use t he Hane da Frequencies Only o n t he U.S. West Coast, Due t o Their Constrained Timing. American made a good

- faith effort to make its JFK

- Haneda service successful, but found it impossible to offer an attractive service from the U.S. East Coast given the current operating constraints. Indeed, American was concerned from the beginning of this proceed ing in 2010 that t he 2200 to 0700 operating window would “ limit online connectivity between American’s proposed JFK and LAX schedules and beyond cities served by JAL via Haneda. ” 14 Delta also acknowledged that “ the scheduling limitations at Haneda pose cha llenges for Eastern U.S. service .” 15 Indeed, one reason Delta gave for transferring its frequency to Seattle was that “ Seattle’s West Coast location also allows

14 Application of American Airlines, Inc . at 6 (Docket DOT

- OST

- 2010

- 0018, Feb. 16, 2010).
15 Application of Delta Air Lines , Inc . at 4 (Docket DOT

- OST

- 2010

- 0018, Feb. 16, 2010).Consolidated Reply of American Airlines, Inc. Page 10 of 1 0 for a more attractive and consumer friendly schedule that is a better fit with the Haneda
opera ting window .” 16 Despite these shared views about the viability of an East Coast gateway, Delta criticizes American for not hoarding its valuable Haneda frequency and instead returning it to the Department for reallocation. 17 We encourage Delta to follow Am erican’s lead and return its underused frequency for immediate reallocation to American.
Concl us ion American respectfully urges the Department to withdraw the Seattle

- Haneda authority from Delta and immediately grant American ’s application to serve the Los Angeles

- Haneda market . By taking this prudent action, the Department will provide

consumers with an opportunity to benefit from a sound policy decision , which allows American to make effective use of Delta's vastly underused U.S.

- Haneda frequency allocat ion. 18
Respectfully submitted,

Howard Kass Robert A. Wirick Abigail Donovan

16 Motion of Delta Air Lines , Inc. at 1 (Docket DOT

- OST

- 2010

- 0018, July 30, 2012).
17 Consolidated Answer of Delta Air Lines, Inc. at 1 ( Docket DOT

- OST

- 2010

- 0018, October 17, 2014).
18 American also seeks such other and further relief as the Department may deem appropriate t o initiate service.

## 0 50 100 150 200 250 300 350Jan-14Feb-14Mar-14Apr-14May-14Jun-14Jul-14Aug-14Sep-14Oct-14Nov-14Dec-14Jan-15Feb-15Mar-15 

# The Continental U.S.
- Tokyo Market Is Not Seasonal Except for Delta

AA DL JL NH UA

Source: Diio , accessed October 27, 2014 

### Exhibit AA
- 101

Continental U.S.

- HND Frequencies per Month

## 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 20 40 60 80 100 120 140 160Jun-13Jul-13Aug-13Sep-13Oct-13Nov-13Dec-13Jan-14Feb-14Mar-14Apr-14



## Industry Frequency Industry Load Factor Load Factor DL SEA-HND

Source: Diio , using most recently available T

- 100 traffic data, accessed October 27, 2014 

## Excluding DL SEA

- HND Exhibit AA
- 102 

# Delta Is Not Investing in the Seattle
- Haneda Market Delta’s SEA

- HND Load Factors Are Significantly Below Other U.S.

- Haneda Operators
Continental U.S.

- HND Frequencies per Month Load FactorCERTIFICATE OF SERVICE
I, Abigail Donovan, certify that, on October 28, 2014, I ca us ed to be served a copy of the foregoing Consolidated Reply of American Airlines, Inc. by email upon those addressees listed below:
paul.gretch@dot.gov (DOT) brian.hedberg@dot.gov ( DOT) brett.kruger@dot.gov ( DOT) todd.homan@dot.gov ( DOT) peter.irvine@dot.gov ( DOT) EngleTS@state.gov ( Dep’t of State ) cristinasa@state.gov ( Dep’t. of State ) eugene.alford@ita.doc.go v ( Dep’t. of Commerce) sascha.vanderbellen@delta.com (Delta) chris.walker@delta.com (Delta) Mike.Donatelli@alpa.org ( Delta MEC/ALPA) jhill@cooley.com (Hawaiian) Perkmann@cooley.com ( Hawaiian) bberlin@cooley.com ( Hawaiian ) Robert.Lamansky@hawaiianair.com (Hawai ian) glindsey@lawa.org ( Los Angeles World Airports) ishiwata.k@ portseattle.org ( Port of Seattle) safora.i@portseattle.org (P ort of Seattle) dan.weiss@united.com ( United) steve.Morr issey@united.com ( United) gmurphy@crowell.com ( United) sseiden@crowell.com ( United) info@airlineinfo.com (A irlineInfo.com)

_________________________________ Abigail Donovan