BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Joint Application of UNITED AIRLINES, INC. and SKYWEST AIRLINES, INC. for an exemption pursuant to 49 U.S.C. § 40109 and designations (Houston-Leon/Guanajuato, Mexico) Docket DOT-OST-2014-0058 Docket DOT-OST-2014-0059

REPLY OF THE CITY OF HOUSTON

Communications with respect to this document should be sent to: Mario C. Diaz Director Ian Wadsworth Chief Commercial Officer Department of Aviation CITY OF HOUSTON 16930 John F. Kennedy Blvd. Houston, TX 77032 (281) 233-3000 (281) 233-1859 (fax) Rachel B. Trinder Jol A. Silversmith ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com For the City of Houston and the Greater Hou ston Partnership Dated: May 12, 2014BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Joint Application of UNITED AIRLINES, INC. and SKYWEST AIRLINES, INC. for an exemption pursuant to 49 U.S.C. § 40109 and designations (Houston-Leon/Guanajuato, Mexico) Docket DOT-OST-2014-0058 Docket DOT-OST-2014-0059

REPLY OF THE CITY OF HOUSTON

The City of Houston (Houston or the City) respectfully submits this reply to the joint application filed on Apr il 18, 2014 by United Airlines, I nc. (United) and SkyWest Airlines, Inc. (SkyWest) (toget her, the United carriers), and t he answer filed by Southwest Airlines Co. (Southwes t) on May 5, 2014, concerning t he exemption authority requested by the United carriers – which includes a U.S.-Mexico operating carrier designation for SkyWest on the Houston-Leon/Guanajuato, Mexico route, and a marketing carrier designation fo r United to permit United to di splay its “UA” designator code on SkyWest’s fli ghts on that route. Houston is extremely fortunate to be the largest U.S.-Mexico ai r transportation gateway, with flights to more than 25 destinations in Mexico. Its success in this regard reflects many factors, includi ng the City’s geographical locati on and its stat us as a world class international community, with extensive global trade ties . Notably, in 2013 Mexico was Houston’s largest overall foreign business partner; the val ue of the trade was more than $28 billion.Reply of the City of Houston Page 2

With one of the strongest regiona l economies in the U.S. and a fast growing population, Houston is experienc ing rising demand for global ai r service. To accommodate this growth, multipl e airport expans ion and develop ment projects are underway at both George Bush Interc ontinental (IAH) and William P. Hobby (HOU or Hobby) airports. Houston’s two principal carriers, United and Southwest, have made significant facilities funding co mmitments in partnership with the City. At IAH, a new

concourse at Terminal B was rec ently opened and a new 15 gate i nternational terminal is being planned. At Hobby, a new international terminal will open in 2015, which will support additional service to Mex ico, the Caribbean and norther n South America.

An essential factor in Houston’ s ability to attract extensive a ir service from both U.S. and foreign carriers has been the U.S. Government’s succes s in expanding the route opportunities available fo r international service through Open Skies agreements. As of now, however, open opportuniti es do not yet exist for air services between the U.S. and Mexico; the applicable bi lateral not only severely lim its the number of carrier designations available in each ci ty-pair (to as few as two per nation in many cases), but also requires that an operating carrier (which does not itself hold out services in its own name) obtain a separat e designation even wh en its mainline carr ier already holds one for the same city-pair. This sev erely limits com petition in ma ny key U.S.-Mexico markets, as well as the operatio nal flexibility of carriers. The City is aware that U.S. negot iations with Mexico are schedu led for the end of May, and Houston is extremely hopeful that the talks will produ ce at least a very broad liberalization of the agreemen t that will remove the designatio n limits and operating carrier designation requirement s currently applicable. If agre ement on a sufficientlyReply of the City of Houston Page 3

liberalized U.S.-Mexico bilate ral is reached, then grant of req uests such as that of the

United carriers will bec ome entirely routi ne and will not impac t the opportunities remaining for other carriers wis hing to serve the same city-pai r. However, without such a liberalized agreement, carriers such as Southwest may have no option but to seek the designations held by other airli nes where those carriers (combi ned with the latter’s operating carriers) hold more th an one designati on in limited e ntry U.S-Mexico markets. Houston is very much aware that the U.S. Government has diligen tly sought

bilateral liberalization with Me xico over many years, and hopes that the current Government of Mexico will co me to the negotiating table ready t o achieve significant

liberalization within a very short time fram e. Houston hopes t hat this matter can be resolved within the next few months so that both the United car riers and Southwest

have available to them all the designations they need to meet t raffic demand. Insofar as the current applicati on is concerned, the City welco mes the commitment of the United carriers to their Houston-Mexico servi ces as well as Southwest’s plans for new interna tional services starting in 20 15. Additionally, because

Houston understands that Southw est does not oppose the applicat ion that is pending in these dockets and simply asks t hat the Department reaffirm guid ance previously set forth regarding making designati ons available to ensure competi tion among carriers, Houston respectfully supports Southwest’s request. It is impor tant that airlines, the City, and the industry as a whole hav e the benefit of that guidance f or future planning purposes. The confirmation sought i n this case by Southwest is of a well-established policy, and should not be controversial.Reply of the City of Houston Page 4

Respectfully submitted,

Rachel B. Trinder Jol A. Silversmith ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com For the City of Houston and the Greater Houston Partnership Dated: May 12, 2014CERTIFICATE OF SERVICE I certify that on this 12th day of May 2014, a copy of the fore going was served on the parties named below in acco rdance with the Department’s Rul es of Practice.

Jol A. Silversmith

msinick@ssd.com (Counsel for Alaska Airlines) robert.wirick@aa.com , benjamin.slocum@aa.com , francis.heil@aa.com , and howard.kass@aa.com (American Airlines) sascha.vanderbellen@delta.com and sametta.c.barnett@delta.com (Delta Airlines) jhill@cooley.com and perkmann@cooley.com (Counsel for JetBlue Airways) matwood@cozen.com (Counsel for Kalitta Air) robert.cohn@hoganlovells.com and patrick.rizzi@hoganlovells.com (Republic Airlines) temerson@skywest.com (SkyWest Airlines) bob.kneisley@wnco.com and leslie.abbott@wnco.com (Southwest Airlines) dkirstein@yklaw.com and jyoung@yklaw.com (Counsel for Spirit Airlines) john.frederickson@suncountry.com (Sun Country) hershel.kamen@united.com , dan.weiss@united.com , steve.morrissey@united.com , karine.faden@united.com , thomas.bolling@united.com , and abby.bried@united.com (United Airlines) sseiden@crowell.com and gmurphy@crowell.com (Counsel for United Airlines) anita.mosner@hklaw.com and jennifer.nowak@hklaw.com (Counsel for UPS) dsmalls@ups.com (UPS) john.varley@virginamerica.com and barbara.russell@virginamerica.com (Virgin America) paul.gretch@dot.gov , brian.hedberg@dot.gov , brett.kruger@dot.gov , and reese.davidson@dot.gov (DOT) john.s.duncan@faa.gov (FAA) ronald.williams@ustranscom.mil (USTRANSCOM) urskr@state.gov (State Department) pmurphy@lopmurphy.com info@airlineinfo.com