60129958_3.docx -1- UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY Washington, D.C. ALASKA AIRLINES, INC., et al .,

v. LOS ANGELES WORLD AIRPORTS, et al . Docket No. OST-2007-27331



### COMPLAINANTS’ AND RE SPONDENTS’ JUNE

15, 2011 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

M. Roy Goldberg SHEPPARD MULLIN RICHTER & HAMPTON LLP 1300 I Street, NW Suite 1100 East Washington, DC 20005-3314 Phone: (202) 218-0007 Fax: (202) 218-0020 rgoldberg@sheppardmullin.com Counsel for: Alaska Airlines, Inc. AirTran Airways, Inc. ATA Airlines, Inc. Frontier Airlines, Inc. Midwest Airlines, Inc. Southwest Airlines Co. US Airways Group, Inc. Steven S. Rosenthal Jeffery A. Tomasevich J.D. Taliaferro K AYE S CHOLER LLP 901 Fifteenth Street, NW Washington, DC 20005 Phone (202) 682-3500 Fax: (202) 682-3580 email: srosenthal@kayescholer.com jtomasevich@kayescholer.com jtaliaferro@kayescholer.com Carmen A. Trutanich Los Angeles City Attorney Raymond S. Ilgunas, Interim General Counsel, Los Angeles World Airports

L OS A NGELES C ITY A TTORNEY ’ S O FFICE Los Angeles World Airports One World Way Los Angeles, CA 90045 Phone: (424) 646-5010 Counsel for RespondentsCOMPLAINANTS’ AND RESPONDENTS’ JUNE 15, 2011 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

60129958_3.DOCX -2- Robert W. Kneisley Associate General Counsel Leslie Abbott Attorney SOUTHWEST AIRLINES CO. 1901 L Street, N.W. Suite 640 Washington, DC 20036 Howard Kass Vice President, Legal and Government Affairs US AIRWAYS GROUP, INC. 1401 H Street, N.W. Suite 1075 Washington, DC 20005 Kyle Levine Senior Attorney ALASKA AIRLINES, INC. 19300 International Blvd. Seattle, Washington 98188-5303 Jacqueline Peter Counsel FRONTIER AIRLINES, INC. 7001 Tower Road Denver, Colorado 80249
Steve Rossum Executive Vice President & General Counsel AIRTRAN AIRWAYS, INC. 9955 AirTran Boulevard Orlando, Florida 32827 Edward P. Faberman WILEY REIN LLP 1776 K Street, N.W. Washington, DC 20006 Counsel for Air Tran Airways, Inc.

DATED: June 15, 2011COMPLAINANTS’ AND RESPONDENTS’ JUNE 15, 2011 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

60129958_3.DOCX -1- The T1/T3 Airlines 1 and Los Angeles World Airports 2 (“LAWA”) (collectively, the “Parties”) hereby jointly file this status report, in response to the DOT’s “Third Order Granting an Interim Stay of Proceedings and Extending Deadline to File Procedural Comments,” Order 2010-10, January 14, 2011 (“Third Order”), regarding the efforts to settle the remanded issues set forth in DOT’s Order 2009-11-24 (“November 24 Notice”) and Order 2009-12-17 (“First Order”).

BACKGROUND On November 24, 2009, following remand of certain issues by the United States Court of Appeals for the Dist rict of Columbia Circuit (t he “D.C. Circuit”), the DOT issued the November 24 Notice in this case. The November 24 Notice directed the T1/T3 Airlines and LAWA “to advise the Department . . . whether there is a possibility of settlement on the issues remanded” by the D.C. Circuit. November 24 Notice, at 5. The November 24 Notice further directed another submission on procedural issues at a later date. Id

. Following LAWA’s and the T1/T3 Airlines ’ initial submissions on December 2, 2009 and December 4, 2009, respectively, the Partie s held a conference call with DOT on December 16, 2009. During that call, the Partie s discussed additional procedural issues, and DOT subsequently issued the First Order, directing the Parties to file, no later than

1 The T1/T3 Airlines are the seven air carri ers that on February 16, 2007, filed with the Office of the Secretary of the United States Department of Tran sportation a “Joint Complaint in Opposition to New Terminal Charges at Los Angeles International Airport.” 2 Respondents in this case are LAWA, the Los Angeles Board Of Ai rport Commissioners (“BOAC”), and the City Of Los Angeles, Cali fornia (“City”). As used herein, LAWA refers to all Respondents.COMPLAINANTS’ AND RESPONDENTS’ JUNE 15, 2011 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

60129958_3.DOCX -2- January 18, 2010, additional comments with regard to the five issues remanded by the D.C. Circuit as set forth in the November 24 Notice. On January 11, 2010, the T1/T3 Airlines and LAWA filed a joint motion to extend deadlines in this proceeding in order to attempt to reach agreement on the issues identified in the Notice. In its January 21 Order, DOT granted the Parties’ motion to extend the deadline to provide written submissions on re maining written and evidentiary issues from January 18, 2010 to October 18, 2010, but directed the Par ties to file periodic reports regarding the status of settlement negotiations. The first such report was due March 18, 2010, with successive reports to be filed approximately every 60 days thereafter. By the time of DOT’s January 21 Orde r, the T1/T3 Airlines and LAWA had already reached agreement on one of the five remanded issue identified by the November 24 Notice; namely, the “[t]imeliness of [the] T1 Airlines’ objection to fair market valuation” used by LAWA in setting base re nt (also known as the “Base Charge”) at LAX Terminal 1. November 24 Notice at 2. The four remaining D.C.-Circuit-remanded issues from the DOT’s November 24 are:

• Airfield vs. non-airfield space. “We must therefore grant the Tl/T3 Airlines’ petition and again remand the matter to the DOT either to justify or to abandon its disparate treatment of airfield and non-airfield space.”

• Other aeronautical uses of terminal space. “We grant the City's petition in this respect and direct the DOT on remand, either to justify or to abandon its objection to the City's considering non-aeronautical uses when setting terminal rents based upon FMV.”

• Burden of persuasion on rentable space. “We therefore grant th e City's petition to the extent of directing the DOT on remand to revisit the Tl/T3 Airlines’ complaint of discrimination and to apply to them the burden of persuasion that their disparate treatment is unjust.”COMPLAINANTS’ AND RESPONDENTS’ JUNE 15, 2011 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

60129958_3.DOCX -3- • Monopoly power. “On remand the DOT must expl ain why this case does not present the “extraordinary situation” in which alleged monopoly power is relevant to a fee dispute or, if it cannot, then go on to consider whether LAX had monopoly power in a relevant geographic market.” November 24 Notice at 2-3. In a “Second Order” dated November 18, 2010 the DOT ordered the Parties to file a written status report and invited the parties to file, by January 17, 2011, written submissions on: 1. Whether the current record evid ence on the four remaining remanded issues is sufficient or re quires supplementation; 2. What, if any, additional fact finding or evidence is contemplated and for which of the remanded issues; 3. The justification for such a dditional fact finding or evidence; 4. Whether an oral evidentiary hearing is necessary to hear the new evidence, if any; and 5. Any other procedural or evidentiar y issues the parties wish to note. However, in response to a joint submi ssion of the parties dated December 15, 2010, which described efforts being made to resolve the outstanding disputes, the DOT, in its Third Order, agreed to stay the remand proceedings until August 1, 2011 to allow the parties additional time to attempt to resolve the remaining issues. The DOT also ordered the parties to file periodic Joint Status Repor ts, including this Report.COMPLAINANTS’ AND RESPONDENTS’ JUNE 15, 2011 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS

60129958_3.DOCX -4- DESCRIPTION OF SETTLEMENT DISCUSSIONS SINCE THE APRIL 15, 2011 JOINT STATUS REPORT Since the last Joint Status Report was submitted on April 15, 2011, the new lease for Alaska Airlines, Inc. (“Alaska”) in Terminal 6 – which was approved by the BOAC on April 4, 2011 – has been submitted to the Lo s Angeles City Council for approval. The new Alaska lease is on the agenda for th e June 15, 2011 meeting of the Trade Commerce and Tourism Committee (TCT) of the City Coun cil. If approved by the TCT, it will be voted on by the full City Council on June 22, 2011. The Settlement Agreement, a condition of which is approval of the new lease by the Los Angeles City Council, calls for Alaska to dismiss its claims in this proceeding with prejudice. After Alaska dismisses its claims, it will no longer be part of the carrier coalition pursuing this case. The Alaska/LAWA settlement will not resolve the remaining issues pertaining to the other carrier s that are part of th e T1/T3 coalition. Regarding Terminal 1 and the other carri ers remaining at Terminal 3, when the most recent status report was provided to DOT on April 15, 2011, the T1/T3 Airlines hoped that by June 15, 2011, there would have be en tangible progress on the T1/T3 specific issues; unfortunately, that has not been the case, alt hough there have been initial conversations between LA WA and each of the T1 airlines. On the other hand, LAWA maintains that pr ogress is being made with regard to airport-wide issues. LAWA is currently engage d in discussions with all airlines at LAX, including the T1/T3 carriers, re garding airport-wide terminal charges, that, in LAWA’s belief, may render moot the terminal-specific concerns raised by the T1 and remaining T3 Airlines.