BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Complaint of Benjamin Edelman, Esq. Docket DOT-OST-2013-0025

SUR-REPLY OF BRITISH AIRWAYS PLC TO REPLY OF COMPLAINANT

Communications with respect to th is document should be sent to:

Richard Mendles General Counsel, Americas James B. Blaney Senior Counsel, Americas British Airways Plc 2 Park Avenue, Suite 1100 New York, NY 10016 richard.mendles@ba.com jim.blaney@ba.com Richard F. Hans Keara M. Gordon Colleen Carey DLA Piper LLP 1251 Avenue of the Americas New York, NY 10020 keara.gordon@dlapiper.com richard.hans@dlapiper.com colleen.carey@dlapiper.com

Don H. Hainbach Erin M. Tallardy Garofalo Goerlich Hainbach PC 1200 New Hampshire Avenue NW Washington, DC 20036 Phone: 202-776-3970 dhainbach@ggh-airlaw.com etallardy@ggh-airlaw.com

May 3, 2013BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Complaint of Benjamin Edelman, Esq. Docket DOT-OST-2013-0025

SUR-REPLY OF BRITISH AIRWAYS PLC TO REPLY OF COMPLAINANT

British Airways Plc (“British Airways” or “BA”) hereby responds to the reply (the “Reply”) filed by Benjamin Edelman (“Mr. Edelma n” or “Complainant”) to BA’s answer (the “Answer”), which responded to Mr. Edelman’s co mplaint (the “Complaint”) alleging that BA misrepresented airline-imposed fuel surcharges as taxes in violation of 49 U.S.C. § 41712 and that BA’s fuel surcharges exceeded actual fuel costs. BA respectfully requests that the Department of Transportation (“DOT”) declin e to conduct an enforcement proceeding and dismiss the Complaint pursuant to 14 C.F.R. § 302.406(a)(2).

Introduction

Mr. Edelman’s Complaint advanced a host of unfounded allegations against BA, one of which was a brazen claim that BA’s fuel surcharges exceeded its cost of fuel. In his Reply, Mr. Edelman conclusively disproves that assertion: he admits that BA’s fuel surcharges do not

exceed its actual fuel cost on at least two of his three sample routes, for LHR-LAX, thus effectively admitting that he was wrong. (Reply at 6-7.) For the reasons set forth in this brief,Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 2 his analysis is similarly flawed and thus produces an equally errant conclusion with regard to the third sample route, BOS-LHR. Mr. Edelman’s Reply also implie dly concedes other arguments.

• For example, in its Answer, BA establishe d that the price of jet fuel, with limited exceptions, has risen significantly and nearly continuously since 2003, and that its fuel surcharge, while never recouping the entire cost of fuel, ge nerally has tracked (although not precisely) the rising fuel market. (Ans wer at 3-4.) Mr. Ed elman does not dispute those facts.

• BA established that there cannot be – for a host of reasons – an exact correlation between the fuel surcharge imposed and the cost of fuel actually ex pended on a particular flight. (Answer at 5-7.) Mr. Edelman does not di spute that such a calculation would be impossible. Instead, he claims that such a standard is “perfection,” and he claims he never demanded that. But, he does demand precisely that.

• BA asserted that it was clear that Mr. Edel man was not confused, much less deceived, by anything he viewed on the BA website. (Answer at 2.) In response to that challenge, Mr. Edelman is mute.

• BA established that the relief that Mr. Edelman seeks is unavailable to him, citing case law establishing that there is no private right of action under 49 U.S.C. § 41712. (Answer at 2-3.) Again, Mr. Edelman makes no argument in response. For all of the reasons herein and in its Answer, BA respectfully urges the DOT to decline to commence an investigation or formal enfor cement proceeding. Finally, since the parties have completed two rounds of briefing, we ask that the DOT not permit any further pleadings.Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 3 I. THE CRUSHING COST OF FUEL JUSTIFIES A FUEL SURCHARGE. Mr. Edelman’s complaints about the imposition of a fuel surcharge ignore a significant fact: since 2003, the annual cost of jet fuel to BA has more than quadrupled, from £842 million as of March 2003, to a stagge ring £3.7 billion in 2012. In an attempt to defray a portion of these skyrocketing costs, BA imposes a fuel surcharge on its flights. In so doing, BA is not unique or an outlier – many airlines began to impose fuel surcharges in the same period a nd that remains the indus try practice today. And, fuel surcharges are not limited to airlines; th ey are imposed by numerous other transportationrelated industries, such as: agribusiness companies, concrete companies, food delivery services, railroads, records management companies, shredding services, shipping companies, transportation companies, trucking companie s and waste management and environmental

services. BA’s fuel surcharge was in troduced after the en d of fiscal year 2004 (March 31, 2004), when BA paid a 9.5 percent increase in fuel and oil costs over the prior ye ar, (for a total of £922 million), and it predicted an additional £150 milli on fuel cost increase in 2004/2005. By March 2005, fuel prices were at “record highs”; the cost of fuel was up 75 percent from early December 2003, which resulted in a “heavy hit to the bottom lin e.” Fuel was “the major cost issue” for BA at that time. And, as explained in BA’s Answer, with limited exceptions, the cost of jet fuel rose significantly and nearly continuously since 2003. (Answer at 3-4.)Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 4

II. MR. EDELMAN’S ANALYSIS REMAINS FLAWED. Mr. Edelman’s revised analysis conclusively disproves his initial (incorrect) assertion that BA’s fuel surcharges exceeded its actual fuel cost on at least two of his three sample routes, for LHR-LAX. (Complaint at 2- 3; Reply at 6-7.) As to the remaining BOS-LHR route, Mr. Edelman’s revised analysis continues to su ffer from misinformation and a fundamental misunderstanding of airline economics. BA does not intend to engage in a never-ending loop of dueling calculations with Mr. Edelman. Neverthe less, BA is compelled to point out certain glaring misconceptions that continue to inflate Mr. Edelman’s estimated fuel surcharge revenue

and underestimate BA’s cost of fuel.

1. Mr. Edelman’s Analysis Continues to Underestimate the Cost of Fuel. Mr. Edelman’s analysis assumed that BA’s planes contain the exact amount of fuel necessary to get passengers to their destinati on and no more, based on the scheduled flight time, which BA pointed out was incorrect. (Answer at 7-8.) In response, Mr. Edelman continuesSur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 5 improperly to assert that the ca lculation should be base d on the exact amount of fuel necessary to reach a destination, without allowances. (See Reply at 5.) European Union regulations require BA to carry more than the exact amount of fuel required to travel between two points. The Eur opean regulations require operators to calculate

the usable fuel to include sufficient fuel to taxi , fly to the destination, have sufficient additional reserve fuel, which includes fuel to fly to an alternate airport, and a ny additional fuel the commander may require. EU OPS 1.255. For a six hour and twenty minute flight, such as the one Mr. Edelman focuses upon from BOS-LHR, the regulations requi re that BA, at a minimum, carry the amount of jet fuel necessary to fly for eight to nine hours. Those requirements, as well as comparable requirements imposed on U.S. ca rriers by the Federal Aviation Administration, reflect the inescapable fact that the fuel require d for a typical flight exceeds the bare minimum suggested by Mr. Edelman’s calculations. Furthermore, Mr. Edelman attempts to explai n the inaccuracies in his initial analysis by complaining that he had to rely on publicly av ailable information to support it, suggesting that the use of publicly available information constituted the failing in his analysis. 1 (Reply at 5.) He misses the point. BA’s criticism, among others, was that Mr. Edelman used stale and inaccurate information rather than availing himself of more recent, publicly available information, such as

the information BA used in its Answer. For ex ample, Mr. Edelman obtained fuel consumption

information from a 2003 BA website rather than the updated information available from BA’s 2007 Factbook, which disclosed higher fuel consum ption figures. Mr. Edelman’s use of such stale information improperly unde restimated the cost of fuel to BA in his analysis.

1 BA also relied solely on publicly available information since information concerning BA’s fuel costs and fuel surcharge revenue is confidential, competitively-se nsitive information that would damage BA if it were disclosed in a public filing.Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 6 Finally, Mr. Edelman’s attempt to use the fu el surcharge analysis contained within the

comment of Mike Borsetti as confirmation of the accuracy of his own analysis is misguided because Mr. Borsetti’s analysis is similarly flaw ed. Mr. Borsetti’s fuel cost for the BOS-LHR flight ($1,009.5 per tonne) was alleged to be base d on “the current highest average price paid ... compiled weekly by IATA.” (DOT-OST-2013-0025- 0060.) Yet a review of the actual price from IATA’s website as of January 25, 2013 (shor tly before Mr. Edelman filed his complaint) was actually $1,054.8 per tonne and the price as of March 1, 2013 was even higher at $1,078.3 per tonne. Moreover, Mr. Borset ti, like Mr. Edelman, also failed to factor in European Union regulations that require the plane to carry approxim ately the jet fuel necessary to fly for eight to nine hours. Both of these errors signif icantly understate BA’s cost of fuel.

2. Mr. Edelman’s Analysis Continues to Inflate Fuel Surcharge Revenue. Mr. Edelman criticizes BA for not using the “most precise data” available for load factors, which he contends are reflected in “BA’ s 2012 Traffic Statistics.” (Reply at 6.) Mr. Edelman’s source material, however, was not BA-s pecific but instead reflected the aggregate load factors for International Airlines Group (“I AG”), which reported the combined load factors for BA and Iberia Airlines. (Complaint at 3.) A review of IAG’s pub licly available January 2013 Group Traffic and Capacity Sta tistics reveals that BA ’s load factors are much lower than those utilized by Mr. Edelman (BA’s passenger load factor for the North America route was 77 percent and its cargo load factor was 69.6 percent) . Therefore, Mr. Edelma n’s analysis is flawed

and his estimate of fuel surc harge revenue remains improperly inflated. Making these simple adjustments would drop Mr. Edelman’s estimate of BA’s fuel surcharge revenue below his estimate of BA’s cost of fuel on any route, including the BOS-LHR route.Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 7

3. Mr. Edelman’s Basis Fare is Well Below th e Average Fare Paid by Customers on that Flight. Mr. Edelman asserts that BA’s fuel surc harge is not a reasonable estimate of perpassenger fuel costs above a baseline and supports this inaccurate asserti on with a price quote he obtained for a flight from BOS-LH R, which departed on March 4, 2013. (Complaint at 2.) As an initial matter, Mr. Edelman selected for his an alysis one of the least desirable (and, as such, least expensive) flight s: a daytime departure on a Monday in March. 2 That quote reflected a base fare of $182, which resulted in the fuel surcha rge exceeding 70 percent of the round-trip ticket price. (Complaint at Attachment 6.) As BA has already explained, Mr. Edelman’s analysis was not an accurate representation of the fares paid fo r that flight. In fact, the base fare relied upon by Mr. Edelman ($182) was the lowest base fare paid by any BO S-LHR economy class passenger on that flight. Moreover, it was well below the average base fare price of approximately $796 paid by BOS-LHR passengers in economy class on that flight. The fuel surcharge for the average base fare paid by an economy class BOS-LHR passenger represented only approximately 36 percent of the ticket price, and for many of the ticke ts on that flight, the fuel surcharge was a significantly lower percentage than that. III. BA’S CARRIER CHARGES COMPLY WITH DOT RULES. Mr. Edelman’s allegations regarding the “C arrier Charges” terminology are even more misplaced than his fuel surcharg e allegations. (Reply at 9-10.) Although he cites the DOT’s February 21, 2012 Guidance (the “February Guidan ce”), Mr. Edelman fails to acknowledge that

2 In contrast to Mr. Edelman’s selected flight, economy passengers typically prefer nighttime flights and they prefer to travel on weekends. March is also during the low season for trav el between the U.S. and the U.K.Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 8 the February Guidance specifical ly addresses and authorizes th e carrier charge terminology: “Language such as ‘Taxes and carrier-impos ed fees’ would be acceptable, for example.” 3 Mr. Edelman also fails to acknowledge that the “Carrier Charges” terminology reflects widespread industry prac tice. For example:

• Delta’s website refers to $645.70 in “taxes/ca rrier-imposed fees” in connection with a JFK-LHR routing and further indicates that $458 of the “carrier-imposed fees” are attributable to a “carrier-imposed international surcharge,”

• Lufthansa’s website refers to an “international surcharge,”

• Air France’s site refers to a “carrier su rcharge” as well as to a “carrier imposed surcharge,” and

• KLM’s site refers to a “carrier-im posed international surcharge.”

The transition from use of the term “fue l surcharges” to the terminology “Carrier Charges” resulted from BA’s unde rstanding, primarily based on the February Guidance, that the DOT preferred that terminology. BA’s Answer, as well as the balance of this Sur-reply, refute any allegation that BA did not co mply with the requirement that it provide a reasonable estimate

of costs incurred above a historical baseline. Mr. Edelman’s additional allegation regardi ng the “Charges applied to your flight” page is nonsensical. (Reply at 9-10, Attachment 1.) That page is conspicuously named “Charges applied to your flight” and clearly distinguis hed between “Government, authority and airport charges,” on the one hand, and “British Airways f ees and carrier charges,” on the other hand. There is virtually no possibility that any consumer could possibly be confused. As Mr. Edelman

3 BA respectfully submits there is no meaningful distinction between the word “fees” and the word “charges.” For example, Merriam-Webst er’s Dictionary defines a fee as “a sum .... charged for a service” and a charge as “the price demanded for something.”Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 9 is likely aware, the “tax breakdown” language he references is lifted from the backend code defining the structure—not content— of the website. Mr. Edelman is simply attempting to create

an issue where none exists. 4

IV. BA’S ONBUSINESS WEB PAGES AR E NOT OFFERED TO THE GENERAL PUBLIC. BA welcomes Mr. Edelman’s acknowledgment that OnBusiness is a business-to-business (“B2B”) initiative. (Reply at 10.) BA respectfully disagrees, how ever, that the fact that the OnBusiness program is not offered to the public is irrelevant. The DOT’s consumer protection regulations, including its regulations governing Internet advertisements, historically have been applie d to protect the general public. See, e.g., Department notices entitled “ Prohibition on Deceptive Practices In the Marketing of Airfare To the Public Using the Internet ,” dated January 18, 2001 and “ Revised Enforcement Policy on Deceptive Practices Regarding Service Fees Char ged by Travel Agents In the Marketing and Sale of Airfares To the Public Via the Internet ,” dated December 19, 2001 (emphasis added). The DOT also recently confirmed that its co nsumer protection rules regarding disclosure of ancillary fee information ar e intended to protect the genera l public and do not apply to nonpublic arrangements between carriers and corporate travel offices. It stated, The rules regarding display of an cillary fee information, including baggage allowances and fees, only appl y to displays of flight schedules and fares that are availabl e to the general public. With respect to flight displays that are not available to the general public, an online booking tool is not required to display ancillary fee information as it is for publicly available service .... For example, if an online booki ng tool provided limited access to displays of flight schedules and fares that are only available to a specific group with special access, such as airline employees, or a company’s employees pur suant to a carrier’s contract with

4 Out of an overabundance of caution, BA is in the pr ocess of changing that page’s structural code from “Tax Breakdown” to “Breakdown of Taxe s, Fees and Carrier Charges.”Sur-Reply of British Airways to Reply of Complainant May 3, 2013 Page 10 that company, the requirement to di splay ancillary fee information does not apply to those limited access displays. Answers to Frequently Asked Questions Concerni ng the Enforcement of th e Second Final Rule on Enhancing Airline Passengers Protections (EAPP#2), Section VII, Question #7, Revised on June 15, 2012 (emphasis added). The OnBusiness Terms and Conditions specify that “Membership is not open to individuals” and the OnBusiness program is not he ld out to the general pub lic. BA is not aware of any precedent for the DOT applying its co nsumer protection regul ations to travel arrangements between carriers and corporate travel departments. BA’s pract ice is also consistent with the practice of U.S. carriers. As such, th e allegations regarding the OnBusiness program are

without merit. V. MR. EDELMAN MISCHARACTERIZES THE NATURE OF THE TENSION BETWEEN THE EU A ND US RULES. Mr. Edelman mischaracterizes the “tension” be tween the US and EU rules raised by BA in its Answer. EU rules require (in relation to th e sale of flights to or from the EU) that the indication of the final price to be paid for a flight shall be accompanie d by details of “other charges, surcharges or fees, such as those re lated to security or fuel.” Regulation (EC) No. 1008/2008 of the European Parliament and of the Council [2008] L 293/3, Art. 23. This means that any fuel surcharge should be described as such, rather than using the “carrier charge” terminology suggested by the DOT. To ensure co mpliance with EU rules, BA has continued to use the term “fuel surcharge” for all of its wo rldwide flights, but, in deference to the DOT’s preference for the term “carrier charges,” has done so using the terminology “European fuel surcharge/U.S. carrier charge.” It is this tension to which BA previously referred which, contrary to Mr. Edelman’s asse rtions, is entirely genuine.