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

_____________________________________ ) Applications of ) ) SOUTHWEST AIRLINES CO. ) JETBLUE AIRWAYS CORP. ) AMERICAN AIRLINES, INC. ) PEOPLE EXPRESS AIRLINES, INC. ) Docket DOT - OST - 2000 - 7182 ) For exemptions from 14 C.F.R. Part 93, ) Subparts K and S, pursuant to 49 U.S.C. ) § 41718(b) ) ) For service at Ronald Reagan ) Washington National Airport (within

- ) perimeter slot exemptions) )

_____________________________________ )

ANSWER OF SOUTHWEST AIRLINES CO.

Communication with respect to this document should be addressed to:

Ron Ricks Robert W. Kneisley Executive Vice President
-- Associate General Counsel C hief Legal and Regulatory Officer Leslie C. Abbott Mark Shaw Senior Attorney Vice President General Counsel & SOUTHWEST AIRLINES CO. Corporate Secretary 919 18 th Street , NW SOUTHWEST AIRLINES CO. Suite 60 0 2702 Love Field Drive Washington, DC 2000 6 Dallas, TX 75235
- 1611 bob.kneisley@wnco.com (202) 263

- 6284

April 1, 20141 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

_____________________________________ ) Applications of ) ) SOUTHWEST AIRLINES CO. ) AMERICAN AIRLINES, INC. ) JETBLUE AIRWAYS CORP. ) PEOPLE EXPRESS AIRLINES, INC. ) Docket DOT - OST - 2000 - 7182 ) For exemptions from 14 C.F.R. Part 93, ) Subparts K and S, pursuant to 49 U.S.C. ) § 41718(b) ) ) For service at Ronald Reagan ) Washington National Airport (within

- ) perimeter slot exemptions) )

_____________________________________ ) ANSWER OF SOUTHWEST AIRLINES CO. On March 5, 2014 , the Department of Transportation (“ DOT ” or “ Department ” ) established a slot exemption pro ceeding pursuant to 49 U.S.C. § 41718(b) request ing applications from carriers for two AIR

- 21 slot exemptions prev iously held by Republic Airline. 1 These slot exemptions authorize service to a medium hub or smaller airport within the 1,250
- mile perimeter established for civil operations at Ronald Reagan Washington National Airport ( “ DCA ” ) under Title 49 U.S.C. § 49109. Southwest is currently using the slot exemptions to serve the DCA

- MCI route on a pendente lite basis until such time as the exemptions are permanently reallocated. 2 Southwest’s competitive service has garnered widespread public support as illustrated by the 27

1 Common names of airlines are used. 2 Order Confirming Grant of Temporary Slot Exemption Authority , Order 2014

- 1
- 6 , Docket DOT

- OST

- 2000
- 7182 (Jan. 27, 2014)

.2

congressional and community letters and the 7, 0 25 signature petition calling for the continuation of Southwest’s DCA

- MCI service filed in the docket today. Sout hwest Airlines , JetBlue Airways, and American Airlines filed responsive applications

. 3 Southwest proposes to make permanent its large

- jet, low
- fare competitive service to Kansas City, Missouri ( “ MCI ” ), and would further leverage the scarce slot exemptions by providing one
- stop, same
- plane service between DCA and Oakland International Airport (“OAK”) via MCI. When considered side

- by
- side , Southwest’s proposal provides by far the greatest consumer benefits of any Application in this case on a ll key metrics: the size of the market to be served, size of aircraft to be used, seats to be offered, and the number of passengers to be carried , both in the local DCA market and in connecting /beyond cities

. Summary Statistics Southwest JetBlue American MCI JAX ISP Aircraft Type B737
- 700 (143 Seats) E
- 190

( 100 Seats) CRJ

- 200

(50 Seats) Market Totals Current O&D Market Size 189,420 146,729 29,685 Applicant Projections Annual Seats 104,390 73,000 36,500 Estimated Annual Onboard Passengers 88,732 58,400 29,565 Projected Load Factor 85% 80% 81% Local Washington DC O&D Passengers 88,732 58,400 18,330 Total DCA Local Passenger Pool 1.8 Million 270,000 29,685 Southwest’s proposed continuation of its service to Kansas City would: (1) provid e strong low
- fare competition on a monopoly DCA route; (2) offer the only large

jet service in the market and significantly increas e the available capacity on this

3 As explained below, People Express does not hold either a DOT or FAA certificate is therefore ineligible for award of the slot exemptions at issue in this proceeding.3

otherwise under
- served route; and (3) provid e o ne - stop, same
- plane service between DCA and OAK, the largest domestic airport without direct service to DCA. In addition: Southwest’s 143
- seat B737
- 700 mainline aircraft will provide 43% more seats than JetBlue ’s regional jet (RJ ) service and 186% more seats than American ’s RJ service

. Southwest’s DCA

- MCI actual load factor for the week prior to the filing of the application was 85% , higher than the projected load factors of both JetBlue and American , both of which would fly significantly smaller airc raft

. Southwest’s load factor for the most recent week available (beginning March 22 ) was 90%. Southwest would carry 52% more passengers than JetBlue and 200% more passengers than American. The Kansas City O&D market size is the largest of any market pr oposed in the case. It is 29% larger than Jacksonville and 538% larger than Islip. Without Southwest service, Kansas City is significantly under

- served compared to Jacksonville. DCA

- JAX has twice the current seat capacity of DCA

- MCI without Southwest s ervice

. Unlike American ’s proposal where 53% of its ISP

- DCA traffic would connect to or from points beyond DCA , Southwest’s MCI

- DCA traffic would be entirely local to DCA. American’s plan to devote more than half the capacity of its DCA flights to connecting passengers who have no need to travel through DCA is a gross waste of slots that should not be rewarded with additional slot exemptions.

JETBLUE AIRWAYS I. Southwest Would Serve a Larger Market with Larger Aircraft than JetBlue , Benefiting Far More Local DCA Passengers The limited number of slot exemptions that are available for service from DCA should be used to provide the greatest benefits to the largest number of consumers possible , consistent with the AIR
- 21 guidelines

. Southwest’s MCI proposal would do th at by providing competitive service on a monopoly route to a considerably larger4

market than JetBlue’s proposed service to Jacksonville

. The DCA

- MCI local O&D market is 29% larger than the local DCA

- JAX market (Exhibit WN

- R
- 101), and MCI serves a metropolitan population base that is 60% larger than the Jacksonville population (Exhibit WN

- R
- 102). In addition, with 75 daily flights to 26 nonstop destinatio ns, 4 Southwest’s se rvice at Kansas City is far more extensive than JetBlue’s at Jacksonville. 5 As a consequence, Southwest’s proposed nonstop from DCA to MCI with continuing (same

plane) service to OAK would serve a total Washington O& D market of 1.8 million passengers, while JetBlue’s proposal would serve a market of only 2 70 ,000 passengers (Exhibit WN
- R
- 103)

. 6 Furthermore, Southwest’s proposal would provide superior public benefits and far more efficient use of the slot exemptions b y operating 143
- seat B737
- 700 mainline aircraft , with 43% more seats per departure than JetBlue’s proposed 100
- seat RJ service (Exhibit WN

- R
- 104)

. As a result, Southwest would offer 31,000 more annual seats than JetBlue (Exhibit WN

- R
- 10 4 ) and would carry over 30,000 more annual DCA local O&D passengers (Exhibit WN

- R
- 10 5 ). II. Without Southwest ’s Service, DCA - MCI Is Far More Under - S erved t han DCA - JAX , a Market that Already Has Five Daily Nonstop Round Trips There is a far greater need for Southwest’s DCA

- MCI service than there is for JetBlue’s service , which would be in addition to American’s existing five daily round trips in the DCA

- JAX market . In fact, by any reasonable measure the DCA

- MCI market is far more under
- s erved than the DCA

- JAX market (Ex hibit WN
- R
- 10)

. The DCA

- JAX

4 Summer schedule 2014. 5 JetBlue offers only six daily roundtrips at JA X to three nonstop destinations

. Summer schedule 2014. 6 Both numbers include potential connecting markets beyond MCI and JAX respectively.5

market currently has 90% more daily seat departures per day than DCA

- MCI without Southwest’s service (Exhibit WN

- R
- 10 7 ), even though it is a significantly smaller O&D market (Exhibit WN

- R
- 101). 7 The DCA

- JAX nonstop market already consumes 10 DCA slots compared to six for DCA

- MCI (excluding Southwest)

. The JAX market simply does not justify two additional scarce slot exemption s for yet another small aircraft service

. Moreover, the DCA

- JAX load factor is only 74%, a further indication that despite the use of small aircraft, there is significant unused capacity in the market. By comparison, the DCA

- MCI load factor for all carriers is 80% and Southwest’s load factor f or the most recent week available is 90%. 8 III. Southwest, not JetBlue, Would Produce the Most Consumer Savings With the Two Slot Exemptions at Issue in this Proceeding Since Southwest began its DCA

- MCI pendent e lite service on February 1, 2014 , its load factor has increased rapidly to above 85%, notwithstanding the fact that Southwest had no time for advance marketing or reservations period prior to its quick start
- up ( Exhibit WN
- 3 ). In the week prior to filing o f the application 9 (the week that began on March 15, 2014) Southwest’s average DCA

- MCI local fare was $147 (Exhibit WN
- 2). If Southwest is forced to discontinue its current service then US Airways /American will gain another monopoly DCA market, and it can be expected that the average market fare will increase by approximately 21% (Exhibit WN

- 2 and WN
- R
1 08 ). 10 The fare savings to Southwest’s passengers alone if it is able to continue

7 In fact the current DCA

- JAX market without JetBlue has more seats than DCA

- MCI even including Southwest’s current DCA

- MCI service. 8 Source: U.S. DOT, T

- 100 Data, via Diio LLC, YE Nov 2013. Southwest data from the week of March 15, 2014. See Exhibit WN

- 3 from Southwest’s Application. The week that just became available (week of March 22, 2014) had an even higher load factor of 90%. 9 Southwest’s average fare in the latest week available (week of March 22, 2014) was $145. 10 The difference between the current DCA

- MCI market fare with Southwest service ($171) and the estimated US/AA DCA monopoly f are of $207 is 21%..6

service in this market would be $5.3 million per year. Importantly, t his is 18% greater

–
or $900,000 annually

-- than the $4.4 million for JetBlue’s projected passengers (Exhibit WN
- R
- 1 09 ). Clearly Southwest’s proposed use of the slot exemptions at issue in this proceeding would generate significantly greater consumer benefits than JetBlue’s pro posal. IV. The So - Calle d “MIT Study” Touted by JetBlue Is Fatally Flawed and Should be Disregarded JetBlue touts the conclusions of a 2013 MIT white paper 11 that supposedly suggests that “

... no other carrier presently has the ability to lower fares like JetBlue.” 12 However, this paper is not only irrelevant to the current proceeding but also is based on a seriously flawed analysis that s hould be disregarded. Following are three of the study’s most glaring analytical errors:

o The MIT model is based on the overall airport average fare
– not individual market fares. C ertain airports have more leis ure markets than other airports and in many cases, l ower fares are a function of the types of markets , rather than the presence of a low cost carrier

. 13 A correct model would use market fares as the dependent variable and woul d control for leisure markets. This would increase the sample size to at least 5,000 O&D markets compared to 445 “ observations ” used in the MIT model , increasing the model’s reliability.

o The model omits baggage and cancellation/rebooking fees as integral components of the cost of point - to - point air travel. Since all U.S. airlines except Southwest charge these increasingly significant fees, they must be included in any analysis to facilitate an apples
- to
- apples comparison. However, the MIT analysis omits them altogether, calling into

11 Michael D. Wittman and William S. Swelbar, MIT International Center for Air Transportation, Evolving Trends of U.S. Domestic Airfares: The Impacts of Competition, Consolidation, and Low

- Cost Carriers , August, 2013. See also Exhibit B6
- 2014
- 103, this docket. 12 JetBlue Application at p. 14. 13 The MIT study controlled only for leisure airports . It did not control for the effects of leisure markets

. For example, a leisure market from JFK (such as JFK

- MCO) where JetBlue has a large pre sence was not controlled for and the effect of lower fares was all attributed to JetBlue in the MIT model, and not to the fact that it is a leisure market per se.7

question any conclusions that JetBlue might draw from the model output (See Exhibit WN

- R
- 11 0 ). 14

o The model analyzes airports rather than cities , ignor ing the disciplining impact of low fares at one airport ( e.g. , Chicago Midway) on fares at adjacent airports ( e.g. , Chicago O’Hare). This major flaw eliminates billions of dollars of annual consumer fare savings from cross - airport competition provided by Southwest in numerous large markets served by multiple airports ( e.g. , Dallas
- DFW and DAL; Houston
- IAH and HOU; and Chicago

- ORD and MDW ). Re
- running the MIT model with certain corrections that could be made, 15 the Campbell

- Hill Aviation Group determined that Southwest saves passengers over $6.0 billion per year in lower fares, while JetBlue saves consumers $1.7 billion. Fare savings produced by Southwest are 3.5 times as much as JetBlue, and 1.4 times the fare savi ngs created by all other L C C’s combined 16 (Exhibit WN

- R
- 11 1 ). An objective analysis shows that Southwest , not JetBlue , produces the most downward pressure on fares and the greatest fare response by legacy carriers. In fact, JetBlue’s projected DCA

- JAX yield is actually 12% higher than Southwest’s current DCA

- MCI yield (Exhibit WN
- R
- 11 2 ). Contrary to the implied assertions of JetBlue and the authors of the MIT model , there is ample evidence that the “S outhwest Effect” continues to save U.S. consumers bi llions, not millions, annually

. See , e.g. , Exhibits WN
- R
- 11 3 through R
- 1 1 6 illustrating recent examples of the Southwest Effect at Newark, LaGuardia, Greenville

Spartanburg , and Charleston , SC

. In each case, Southwest’s entry into these markets caused significant fare reductions, which in turn stimulated dramatic increases in traffic.

14 JetBlue includes bag and change fees when it is beneficial for comparison purposes in its application ( see , e.g. , JetBlue’s Application at page 8 and Exhibit B6
- 2014
- 102). 15 Campbell

- Hill does not endorse the MIT model but made the corrections to illustrate the model’s deficiencies. 16 The total for all other LCCs includes JetBlue.8

AMERICAN AIRLINES V. American , by Far the Largest Slot Hold er at DCA, Proposes Inefficient Small Aircraft Service that Could Easily be Provide d with its E xisting P ortfolio of Over 500 Slots American seeks the slot exemptions at issue in this proceeding to enable it to maintain its existing nonstop RJ service to Islip, Long Island. Despite its claims, American does not need these two slot exemptions to provide this service and could easily do so today by using just two of its over 500 DCA slots. Even after the recent divestitures required in its settlement with the U.S. government , American still contr ols 58% of all DCA slots. This portfolio dwarfs the next largest carrier (Delta) and is almost six times the number of slots held by Southwest (Exhibit WN

- R
- 201). 17 Moreover, the combined American/US Airways continues to waste an enormous number of the slots in its portfolio by: (1) using small aircraft for 73% of its operations and (2) carrying connecting passengers through DCA, rather than devoting all its capacity to serve the local O&D market. In fact, AA /US’s average aircraft size at DCA has declined to the lowest of any domestic carrier hub (Exhibits WN

- R
- 202 and WN
- R
203). American’s average aircraft size at DCA is now a dismal 77 seats, and the combined carrier uses commuter aircraft on 344 of its 504 total slots even though it has just 146 commuter slots (Exhibit WN

- R
- 204). W ith all the wastage in American’s DCA schedule, it would be a simple matter for American to fund a daily ISP

- DCA roundtrip from its existing portfolio. For example, American curr ently serves 19 DCA markets with at least four daily RJ roundtrips (Exhibit WN

- R
- 20 6 ). American could easily drop a single round trip in one of these markets , and/ or up - gauge aircraft on a single roundtrip ,

17 Delta controls 106 slots at DCA (includes marketing carriers) , or 12% of the total DCA slots.9

to free up a pair of slots to serve ISP. Ameri can’s self

- serving claim that it cannot serve ISP without the award of slot exemptions is simply not credible. New American also wastes enormous DCA capacity to accommodate connecting passengers at its DCA hub. Thirty

- eight percent of US Airways’ traffi c at DCA consists of passengers who are only connecting at DCA to other cities (Exhibit WN

- R
- 205). These passengers have no reason to be at DCA other than to change planes, thereby blocking seats that would otherwise go to local travelers. For example, American /US Airways has four daily flights between ISP and its hub at PHL

. ISP passengers can conveniently connect at PHL to over 100 nonstop destinations. It is not necessary for those ISP passengers to connect at DCA, and indeed it would be a waste of valuable slot capacity to do so. The fact that American chooses to use its massive slot portfolio in an ineffici ent and anti
- competitive manner is a decision of its own choosing and most certainly should not be rewarded with an award of scarce slot exemptions

. VI. The Consumer Benefits o f Southwest’ Service Proposal Dwarf Any Benefits Claimed By American A comparison of the markets demonstrates conclusively that Southwest’s proposal to serve DCA

- MCI would benefit significantly more local DCA passengers and would serve a much larger market than American’s proposal. The DCA

- MCI local O&D market is more than six times as large as the ISP local market (Exhibit WN

- R
- 20 7 )

. With only 29,685 annual passengers, it is not surprising that American proposes serving ISP with a very small 50
- seat aircraft , once again wasting scarce capacity at DCA. Moreover , Exhibit WN
- R
- 20 8 shows that over half

– 53% of American’s current ISP

-10

DCA on

- board traffic are no t even local passengers but connect through DCA to and from other destinations

. By comparison, all of Southwest’s capacity would be dedicated to DCA local passengers. Moreover, Southwest proposes to use 143

- seat aircraft which will provide the market with 186% more seats, none of which will be used to connect passengers at DCA (Exhibit WN

- R
- 2 09 ). On an annual basis this means that Southwest will provide local DCA passengers 104,390 seats compared to AA’s total of only 36,500 seats

. As noted above, th e difference in local seats is even greater since 53% of American’s onboard passengers will be connecting at DCA and approximately half of the seat capacity will be blocked by them. In total, Southwest can be expected to carry over 74,000 more local DCA annual O&D passengers than American (Exhibit WN
- R
- 210) , making far greater use of the valuable slot exemptions. It is also significant t hat the total DCA local passenger pool for Southwest’s proposal including beyond points is 1.8 million compared to less than 30,000 for American’s proposal (Exhibit WN

- R
- 21 1 ). Without doubt, Southwest’s large

jet, low
- fare DCA

- MCI service will provide significantly greater competitive benefits to a much larger number of consumers than American could provide with its small plane, high
- fare service to a much smaller market.
PEOPLE EXPRESS AIRLI NES VII. Because People Express Holds Neither a DOT or FAA Certificate, it is Not Eligible to Receive Slot Exemptions People Express proposes to serve Myrtle Beach and West Palm Beach seasonally if it were awarded the slot exemptions in this proceeding. This application should be disregarded. As it acknowledges in its application, People Express has not11

been found fit to hold a DOT certificate or FAA operating authority, and therefore is ineligible for the award of slot exemptions. Moreover, it is unclear whether this company will ever obtain the necessary DOT and FAA authority, as it has been actively pursuing the required certificates for sever al years without success. 18 People Express tries to overcome these difficulties by seeking to “operate under the supervision of VISION Airlines while working through certification for it s own DOT and FAA Certificates”. 19 But the applicant does not explain how an entity that is itself not legally authorized to provide air transportation could lawfully be awarded slot exemptions, or how “supervision” by a separate carrier could overcome the applicant’s lack of necessary legal authority. Moreover, even if People Express possessed the necessary economic and operating authorities, its service proposal pales in comparison to Southwest’s in this proceeding. The DCA

- MCI local market is 26% larger than the DCA

- PBI market and 75% larger than the DCA

- MYR market , both of which People Express would only serve seasonally (Exhibit WN

- R
- 301). 20

18 E.g. , http://articles.dailypress.com/2013

- 08
- 31/business/dp

- tidewaterbiz
- peoplexpress
20130831_1_president
- michael
- morisi
- people
- express - xtra
- airways (Struggling People Express Lays Off Newport News Employees, Aug. 13, 2013); and http://articles.dailypress.com/2013

- 12
- 10/news/dp

- tidewaterbiz
- peopleexpress
- resign
20131210_1_people
- express - michael
- morisi
- startup
- airline
- people (People Express President and Founder Resigns, Dec. 10, 2013) 19 Application of People Express, p. 3 , filed in this Docket. 20 All market data are based on 12
- month totals, not partial years.12 CONCLUSION
For the reasons given above and in its Application , Southwest’s proposal for DCA

- MCI

- OAK service will generate far greater public benefits than the competing applications. DCA has for too long suffered from inefficient service , high airfares, and inadequate competition. Awarding the slot exemptions available in this proceeding to Southwest for its large
- jet, competitive DCA

- MCI

- OAK proposal would be an import ant step toward making better use of the limited and valuable opportunity to operate at DCA. Respectfully submitted ,

__________________________ Robert W. Kneis ley

A pril 1, 2014C ERTIFICATE OF SERVIC E I hereby certify that on April 1 , 201 4 , a copy of the foregoing was served via e

mail on the following persons: msinick@ssd.com (Alaska Airlines) howard.kass@aa.com (American Airlines) francis.heil@aa.com (American Airlines) sascha.vanderbellen@delta.com (Delta Air Lines) robert.cohn@hoganlovells.com ( Republic Airways ) patrick.rizzi@hoganlovells.com ( Republic Airways) robert.land@jetblue.com (JetBlue Airways) jhill@dowlohnes.com (JetBlue Airways) perkmann@dowlohnes.com (JetBlue Airways) shawn .voyles@flypex.com (People Express) michael.morisi@flypex.com (People Express) dkirstein@yklaw.com (Spirit Airlines) jyoung@yklaw.com (Spirit Airlines) John.Fredericksen@suncountry.com (Sun Country Airlines) dan.weiss@united.com (United Air Lines) pmurphy@lopmurphy.com (USA3000) john.varley@virginamerica.com (Virgin America) susan.kurland@dot.gov bob.goldner@dot.gov todd.homan@dot.gov peter.irvine@dot.gov brian.ctr.meehan@faa.gov Mark D. VanLoh, A.A.E. Director of Aviation Kansas City International Airport Mark.VanLoh@kcmo.org Deborah Ale Flint Aviation Director for the Port of Oakland Oakland International Airport dale@portoakland.com John E. Potter President and Chief Executive Officer Metropolitan Washington Airports Authority john.potter@mwaa.com info@airlineinfo.com

__________________________ Leslie C. Abbott

## The Local DCA - MCI Market is 29% Larger than the DCA - JAX Market

189,420

146,729

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000

MCI JAX DCA O&D Passengers (YE Q3 2013)

Source : Innovata Schedule data for March 12, 2014; U.S. DOT Origin

- Passenger Survey, YE Q3 2013, via Diio. 

### +29% Exhibit WN - R - 101

## The Kansas City Metropolitan Area Population is 60% Larger than the Jacksonville Population

2.4

1.5

0.0 0.5 1.0 1.5 2.0 2.5

Kansas City Jacksonville 2012 Population

Note: Uses the Combined Statistical Area definitions. Source : U.S. Department of Commerce, Bureau of the Census. Exhibit WN - R - 102



### million

million +60%

## Southwest’s Proposal Would Serve a DCA Passenger Pool of Over 1.8 Million Compared to 270,000 for JetBlue
Proposed WN DCA - MCI WN Direct DCA - OAK Proposed B6 DCA - JAX Potential Connections



### JAX JAX DCA DCA

SJU SJU SJU SJU OAK OAK OAK 

### DCA DCA MCI MCI

LAS LAS LAS LAS
LAX LAX LAX LAX

SAN SAN SAN SAN DEN DEN DEN DEN

PHX PHX PHX PHX ABQ ABQ ABQ PDX PDX PDX PDX SEA SEA SEA SEA

O&D Passengers (YE Q3 2013) MCI 189,420 OAK 35,998 Local Plus Direct 225,417 Connecting 1,581,866 Total Passenger Pool 1,807,283 O&D Passengers (YE Q3 2013) JAX 146,729 Connecting 122,850 Total 269,579 Exhibit WN - R - 103

Source : Carrier applications and Innovata Schedule data. Eliminates circuitous routings.0 20,000 40,000 60,000 80,000 100,000 120,000

Southwest DCA-MCI JetBlue's DCA-JAX Proposal Annual One - Way Seats

104,390

73,000

(737 - 700) (E190) +31,390

Source: Carrier Proposals. 

## Southwest Would Provide 43% More Seats Per Departure and 31,000 More Annual Seats than JetBlue’s Proposed Service Exhibit WN - R - 104

0 20 40 60 80 100 120 140 160

Southwest DCA-MCI JetBlue's DCA-JAX Proposal (737 - 700) (E190) Average Seats per DCA Departure

143

100 +43% +43Seats0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

Southwest DCA-MCI JetBlue's DCA-JAX Proposal Annual One - Way Passengers

88,732

58,400

(737 - 700) (E190) +30,332 +52%

1/ 143 seats x 365 days x 2 directions x 85% load factor. The 85% load factor is the actual load factor for the most recent wee k available (See WN Application Exhibit WN
- 3) 2/ From page 13 of JetBlue’s application. Source: Carrier Proposals. 

## Southwest Will Carry Over 30,000 More Annual Passengers than JetBlue

/1 /2 Exhibit WN - R - 105

## Without Southwest's Service, MCI Would Be Severely Underserved Compared to JAX (O&D Passengers per Seat Departure)

1.38

0.56 0.81

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

MCI Without Southwest JAX without B6 JAX with B6 DCA O&D Passengers per Seat Departure

1/ From JetBue’s Application, Exhibit B6
- 2014
- 102. Source : Innovata Schedule data for March 12, 2014; U.S. DOT Origin

- Passenger Survey, YE Q3 2013, via Diio. 259 201 376 Passengers per Day Each Way
188 359 459 Seats per Day

Each Way /1 Exhibit WN - R - 106

## The Smaller DCA - JAX Market Has More Seat Capacity than DCA - MCI

188 359

0 50 100 150 200 250 300 350 400

MCI Excluding WN Current JAX Daily Seat Departures

Source : Innovata Schedule data for March 12, 2014

. Exhibit WN - R - 107

Daily Departures: 3 5y = 3404.7x -0.737

0¢ 20¢ 40¢ 60¢ 80¢ 100¢ 120¢

0 250 500 750 1,000 1,250 

## Absent Southwest Competitive Service, DCA - MCI Fares Will Increase to US/AA DCA Monopoly Levels

Nonstop Distance (miles) US DCA Fare Per Mile (YE Q3 2013)

Note : Average fare paid per mile excludes zero fare passengers (frequent flyer redemptions, etc .). Includes baggage and cancellation/rebooking fees.

Includes markets with at least 520 one
- way flights for the year (the equivalent of 5 roundtrips per week ). Source : U.S. DOT, Origin

- Destination Passenger Survey, YE Q3 2013, via DIIO. 

### US DCA Monopoly Markets Within the Perimeter

US DCA Nonstop Markets With LCC Competition Exhibit WN - R - 108$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0

Southwest DCA-MCI JetBlue's DCA-JAX Proposal Fare Savings for Passengers Onboard Each Airline

$5.3 Million

(737 - 700) (E190) +$900,000 +18%

1/ If Southwest is forced to exit the DCA

- MCI market it is assumed the US will increase fares to its monopoly levels. This fare will be $207, which compares to the cu rr ent Southwest fare of $147 (See WN Application Exhibit WN

- 2 and Exhibit WN
- R
- 108 with the US DCA monopoly yield curve). The fare difference of $60 is multiplied by the projected WN annual DCA

- MCI onboard passengers of 88,732. 2/ JetBlue estimates that its fare will by $75 lower than American’s monopoly fare. JetBlue’s projected savings is multipl ied by 58,400 onboard passengers (See B6 Application at page 13). Source: Carrier Proposals. 

## Southwest DCA - MCI Service Will Save Passengers $900,000 More than JetBlue’s Proposal Annually

/1 /2 $4.4 Million Exhibit WN - R - 109

## JetBlue Charges Many Fees that Southwest Does Not

$0 $0 $0 $0 $0 $40 $75 $150

$0 $20 $40 $60 $80 $100 $120 $140 $160

Fees

Source : Carrier websites and JetBlue Application, page 8, footnote 14. Exhibit WN - R - 110

Southwest JetBlue Southwest JetBlue Southwest JetBlue Southwest JetBlue
1 st Checked Bag 2 nd Checked Bag Cancel/Change Fee More than 60 Days Cancel/Change Fee Within 60 Days Up to

## Southwest Saves Domestic Passengers Over $6 Billion Annually
– 3.5 Times As Much As JetBlue and 1.4 Times All Other LCCs Combined

$6.0

$1.7

$0.5 $0.2 $1.1 $0.9

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0

Southwest/AirTran JetBlue Frontier Virgin America Spirit Allegiant Annual Aggregate Fare Benefit of Low Cost Carriers (Billions)

Note: Benefit numbers are derived by multiplying the O&D passengers by the fare savings from each carrier derived from a corrected Swelbar /MIT econometric model. Passengers in markets served by multiple low cost carriers are allocated based on the carriers’ share of all LCC O&D passengers in those markets. Source : U.S. DOT, Origin

- Destination Passenger Survey, via Diio, YE Q2 2013. Exhibit WN - R - 1110.0¢ 2.0¢ 4.0¢ 6.0¢ 8.0¢ 10.0¢ 12.0¢ 14.0¢ 16.0¢ 18.0¢ 20.0¢

Southwest DCA-MCI JetBlue's DCA-JAX Proposal Yield (cent per RPM)

15.5¢

(737 - 700) (E190) +12%

Source: Carrier Proposals. 

## JetBlue’s Proposed Fare per Mile (Yield) is 12% Higher than Southwest’s Current DCA - MCI Yield

17.4¢

Fare $147 $110 Nonstop Miles 950 634 Exhibit WN - R - 112Percentage Change in WN Newark Markets

-25% -17% -12% -11% -7% 10%

-26% -40% -20%

0% 20% 40% 60% 80%

BWI STL PHX DEN Chicago Houston +331% +76%

+42% +37% +25% +32%

+0% Year - Over - Year Market Fare Change Year - Over - Year O&D Passenger Change

Change in Annual O&D Passengers: + 18,041 + 82,705 +117,906 +117,755 +219,673 +92,163
Includes Fared passengers only and excludes all taxes and fees. For Chicago and St. Louis the before period is YE Q1 2011 an d t he after period is YE Q1 2012. All other markets use YE Q1 2011 as the before period and YE Q2 2012 as the after period. Source : DOT, Origin

- Destination Passenger Survey., via Diio LLC. 

## While Other EWR Domestic Fares Increased, Fares in Southwest Markets Declined by 13% and Passengers Increased by 36%

EWR Market All Other Domestic EWR Markets O&D Passengers Ave. Fare +36%

- 13% Wtd . Ave. Change Exhibit WN - R - 113Percentage Change in WN LaGuardia Markets

-22% -17% -15%

-37% -40% -20%

0% 20% 40% 60% 80%

BWI Chicago DEN STL +192%

+37% +27% +35% Year - Over - Year Market Fare Change Year - Over - Year O&D Passenger Change

Change in Annual O&D Passengers: +50,968 +509,210 +175,569 +77,890

Includes Fared passengers only and excludes all taxes and fees. Includes all markets where data for a full year of nonstop s erv ice is available. Source : DOT, Origin

- Destination Passenger Survey., via Diio LLC. 

## Fares in Southwest’s LGA Markets Declined by 20% and Passengers Increased by 37% After Southwest Entered

LGA Market O&D Passengers Ave. Fare +37%

- 20% Wtd . Ave. Change

Before Period: YE Q2 2009 YE Q2 2009 YE Q1 2012 YE Q2 2012 After Period: YE Q2 2010 YE Q2 2010 YE Q2 2013 YE Q2 2013 Exhibit WN - R - 114-44% -25% -35%
-63% -80% -60% -40% -20%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

BNA BWI Houston Chicago Percentage Change in WN GSP Markets +808% +1,006% +232%

+152% Year - Over - Year Market Fare Change Year - Over - Year O&D Passenger Change

Change in Annual O&D Passengers: +26,661 +68,328 +39,083 +78,225

Includes Fared passengers only and excludes all taxes and fees. Includes all markets initially started by Southwest at GSP . The before period is CY 2010 and the after period is YE Q1 2012. Source : DOT, Origin

- Destination Passenger Survey., via Diio LLC. GSP Market O&D Passengers Ave. Fare +309%

- 38% Wtd . Ave. Change 

## Fares in Southwest’s Greenville - Spartanburg Markets Declined by 38% and Passengers Increased by 309% After Southwest Entered Exhibit WN - R - 115-33% -13% -19%

-55% -80% -60% -40% -20%

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

BNA BWI Houston Chicago Percentage Change in WN CHS Markets +308% +308%

+100%

+56% Year - Over - Year Market Fare Change Year - Over - Year O&D Passenger Change

Change in Annual O&D Passengers: +40,268 +99,481 +21,993 +68,517

Includes Fared passengers only and excludes all taxes and fees. Includes all markets initially started by Southwest at CHS. Th e before period is CY 2010 and the after period is YE Q1 2012. Source : DOT, Origin

- Destination Passenger Survey., via Diio LLC. CHS Market O&D Passengers Ave. Fare +150%

- 29% Wtd . Ave. Change 

## Fares in Southwest’s Charleston Markets Declined by 29% and Passengers Increased by 150% After Southwest Entered Exhibit WN - R - 1160 100 200 300 400 500 600

New American Slots Post Divestiture Southwest Slots Post Divestiture Including MCI DCA Slots Operated

504

DCA Slot Share: 58% 10% 5.7x

Source: Slot Reports, announced divestitures and Innovata Schedule Data March 2014. 

## American Controls 58% of DCA Slots
– Almost Six Times Southwest’s Total

88 Exhibit WN - R - 201

## American Wastes Enormous DCA Operating Capacity And the Trend Has Worsened Significantly In Recent Years

92 89 83 79 79 92 92 91 87 86 87 86 84 79 77

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 US Seats per Departure

US Airways flights. Source : Innovata Schedules for mid
- March Mondays, 2000
- 2014 

### Down 11% Since 2010

US RJ or Commuter Percent Of Departures 43% 44% 52% 58% 58% 52% 55% 56% 59% 65% 63% 63% 73% Southwest B737 - 700 Aircraft Capacity - 143 Seats

65% 73% Exhibit WN - R - 202

## American’s Average Aircraft Size at DCA is Lower than the Average at Any Other Domestic Hub

Average Aircraft Size for Domestic Flights (Seats)

78 83 83 84 87 89 91 94 99 100 103 104 104 107 108 111 115 124 129 132 132 142

77

0 20 40 60 80 100 120 140 160

US-DCA UA-IAD UA-ORD AA-ORD US-PHL UA-IAH UA-DEN DL-LGA DL-DTW UA-EWR DL-SLC US-CLT DL-MSP UA-LAX UA-SFO AA-DFW DL-JFK AA-LAX US-PHX AA-MIA DL-LAX DL-ATL WN/FL Average

US Airways flights. Source : Innovata Schedule Data, March 2014. Exhibit WN - R - 20316 146 294

50 344

130

0 50 100 150 200 250 300 350 400

US Airways American Total American/US Airways Commuter Slots DCA Flights with Commuter Aircraft (Aircraft with 76 seats of fewer) 

## AA Underutilizes Air Carrier Slots by Flying Small Commuter Aircraft

DCA Commuter Slots/Flights for US/AA

Note: Commuter slots are restricted to operations with aircraft with 76 seats or less. Source : FAA s lot reports and Innovata Schedule Data, March 2014. Exhibit WN - R - 204Local 62% Connecting/ Thru 38%

Mainline/Large Aircraft Only RJ/Commuter Aircraft Only Both Aircraft 

## The AA “Hub” at DCA Wastes Valuable Slots on Connecting Passengers

AA/US Airways’ DCA Network Distribution of US Airways’ DCA Onboard Passengers /1

1/ US Airways data from U.S . DOT, T

- 100 and O&D data, via Diio, YE Q3 2013. Source: Innovata Schedules for September 2014. 

### DCA DCA Exhibit WN - R - 205

## American Could Easily Fund ISP Service With Slots From One of Many Markets Where it is Slot - Sitting

Note: Markets highlighted in red are FAA large or medium hubs based on CY 2012 enplanements. Source : Innovata Schedule Data for Monday September 8, 2014. Daily AA/US Roundtrip Total AA/US

Daily % Average Aircraft Markets Regional Jet Flights Roundtrips RJ Size Philadelphia 8 9 89% 60 Raleigh/Durham 7 7 100% 66 Columbus 7 7 100% 63 Indianapolis 7 7 100% 69 New York Kennedy 6 6 100% 51 Nashville 6 6 100% 60 Hartford 6 7 86% 71 Providence 5 6 83% 76 Pittsburgh 5 5 100% 64 Charleston 5 5 100% 60 St. Louis 5 5 100% 64 New Orleans 5 5 100% 76 Jacksonville 5 5 100% 72 Huntsville 4 4 100% 60 Portland 4 4 100% 73 Norfolk 4 4 100% 48 Dayton 4 4 100% 50 Westchester County 4 4 100% 48 Syracuse 4 4 100% 60 Total/Average 101 104 97% 63 

### DCA Markets with at Least 4 Daily AA/US Regional Jet Roundtrips Exhibit WN - R - 206

## The DCA - MCI Market is Over Six Times As Large As the DCA - ISP Market

189,420

29,685

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000

MCI ISP DCA O&D Passengers (YE Q3 2013)

Source : Innovata Schedule data for March 12, 2014; U.S. DOT Origin

- Passenger Survey, YE Q3 2013, via Diio. 

## 6.3x Exhibit WN - R - 207

## Over Half of American’s DCA - ISP Passengers Flow Beyond DCA

Passengers Flowing Over DCA 53% DCA Local Passengers 47% 

### Distribution of US DCA - ISP Onboard Passengers

Source: U.S. DOT O&D Survey Data, and T

- 100 Data, YE Q3 2013, via Diio. 

### There is no valid justification for wasting valuable DCA slots on non - Local passengers Exhibit WN - R - 2080 20,000 40,000 60,000 80,000 100,000 120,000

Southwest DCA-MCI AA's DCA-ISP Proposal Annual One - Way Seats

104,390

36,500

(737 - 700) (CRJ - 200) +67,890

Source: Carrier Proposals. 

## Southwest Would Provide 186 % More Seats Per Departure and

67,000 More Annual Seats than American’s Proposed Service Exhibit WN - R - 209

0 20 40 60 80 100 120 140 160

Southwest DCA-MCI AA's DCA-ISP Proposal (737 - 700) (CRJ - 200) Average Seats per DCA Departure

143

50 +186% +93Seats0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

Southwest DCA-MCI AA's DCA-ISP Proposal Total Onboard AA's DCA-ISP Local Passengers Annual One - Way Passengers

88,732

13,896

(737 - 700) (CRJ - 200) +59,167 +200%

1/ 143 seats x 365 days x 2 directions x 85% load factor. The 85% load factor is the actual load factor for the most recent wee k available (See WN Application Exhibit WN
- 3) 2/ 50 seats x 365 days x 81% (From page 3 of American’s Application). 3/ Predicted onboard passengers x US’ local share of total (47%) in the DCA

- ISP market for YE Q3 2013. Source: Carrier Proposals. 

## Southwest Will Carry Over 74,000 More Local DCA Passengers than American

/1 /2 (CRJ - 200) /3

29,565 +74,836 +538% Exhibit WN - R - 210Proposed WN DCA - MCI WN Direct DCA - OAK Proposed US DCA - ISP Potential Connections



### DCA DCA ISP ISP ISP

OAK OAK OAK 

### DCA DCA MCI MCI

LAS LAS LAS LAS
LAX LAX LAX LAX

SAN SAN SAN SAN DEN DEN DEN DEN

PHX PHX PHX PHX ABQ ABQ ABQ PDX PDX PDX PDX SEA SEA SEA SEA

O&D Passengers (YE Q3 2013) MCI 189,420 OAK 35,998 Local Plus Direct 225,417 Connecting 1,581,866 Total Passenger Pool 1,807,283 

## Southwest’s Proposal Would Serve a DCA Passenger Pool of Over 1.8 Million Compared to 29,685 for American

O&D Passengers

(YE Q3 2013) ISP 29,685 Beyond ISP 0 Total 29,685 Exhibit WN - R - 211

Source : Carrier applications and Innovata Schedule data. Eliminates circuitous routings.

## The DCA - MCI Market is 26% Larger than DCA - PBI and 757% Larger than DCA - MYR

189,420

150,213

22,095

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000

MCI PBI MYR DCA O&D Passengers (YE Q3 2013)

Source : Innovata Schedule data for March 12, 2014; U.S. DOT Origin

- Passenger Survey, YE Q3 2013, via Diio. 

### +26% +757% Exhibit WN - R - 301