BEFORE THE

U.S. DEPARTMENT OF TRAN S PORTATION

OFFICE OF THE SECRETARY

WASHINGTON

, D

. C

.

____________________________ _ ____ _____ _____ )

Application of )

)

SOUTHWEST AIRLINES CO. )

)

f or an exemption pursuant to 49 U.S.C § 40109 ) Docket No. OST

- 2014

- 0222

to engage in foreign scheduled air transportation )

of persons, property and mail between Houston )

Hobby International Airport and Cancun, Mexico City )

Puerto Vallarta, and San Jose del Cabo, Mexico )

)

(HOU

- CUN) )

(HOU

- MEX) )

(HOU

- PVR) )

(HOU

- SJD) )

_____________________________ _ ________ _____ )

CONTINGENT ANSWER OF SOUTHWEST AIRLINES CO.

AND MOTION FOR LEAVE TO FILE

Communications with respect to this document should be sent to:

Ron Ricks Robert W. Kneisley

Executive Vice President

- Associate General Counsel

Chief Legal & Regulatory Officer Leslie C. Abbott

Mark Shaw Senior Attorney

Vice President General Counsel & SOUTHWEST AIRLINES CO.

Corporate Secretary 919 18th Street, N.W., Suite 600

Southwest Airlines Co. Washington, D.C. 20006

2702 Love Field Drive bob.kneisley@wnco.com

Dallas, TX 75235

- 1611 (202) 263

- 6284

January 16, 20151 BEFORE THE

U.S. DEPARTMENT OF TRAN S PORTATION

OFFICE OF THE SECRETARY

WASHINGTON

, D

. C

.

______________________________ _ __ _____ _____ )

Application of )

)

SOUTHWEST AIRLINES CO. )

)

f or an exemption pursuant to 49 U.S.C § 40109 ) Docket No. OST

- 2014

- 0222

to engage in foreign scheduled air transportation )

of persons, property and mail between Houston )

Hobby International Airport and Cancun, Mexico City

, )

Puerto Vallarta, and San Jose del Cabo, Mexico )

)

(HOU

- CUN) )

(HOU

- MEX) )

(HOU

- PVR) )

( HOU

- SJD) )

_______________________________ _ ______ _____ )

CONTINGENT ANSWER OF SOUTHWEST AIRLINES CO.

AND MOTION FOR LEAVE TO FILE

Southwest Airlines files this Contingent Answer in response to the unauthorized

Consolidated Surreply filed by United Airlines and SkyWest Airlines ( “ United ’s Sur r eply ” )

in this docket on January 12, 201 5

. 1 United’s Sur r eply consists almost entirely of re

hash of arguments that United made (or could h ave made) in prior pleadings. The

S ur r eply therefore fails to demonstrate “good cause” as required by Rule 6 of the

Departm ent’s Rules of Practice ( 14 CFR § 302.6 ) for the acceptance of unauthorized

pleadings.

If, however, the Department accept s United’s Sur r eply, Southwest seeks leave to

file this Contingent Answer under Rule 6 for good cause

. Southwest’s Answer is

1 Common names of carriers are used herein.Contingent Answer of Southwest Airlines

January 16, 2015

2 narrowly tailored to address misleading statements in United’s filing and will t here by

contribut e to a more accurate basis for the Department’s decision.

I. There is no Basis for Holding a Formal Carrier Selection Proceeding,

W hich Even United Now Concedes “Will Unduly Harm Consumers.”

While United contin ues to argue that the Department cannot reallocate one of

United’s two designations to Southwest in the subject markets without “instituting a

carrier selection proceeding

, ” United undercuts its ow n argument by conceding that

s uch a proceeding is “ unnecessary and costly” and “will unduly harm consumers.” 2 On

the latter point, Southwest agrees. Moreover, there is no legal or policy basis for

requiring a formal “carrier selection proceeding” in this case.

Unlike the cases cited by United, the relief that Southwest seeks here will not in

any way prevent United from continuing to serve the markets. The Haneda slot

allocation proceeding , for example, is ina pplicable for several reasons including the fact

that a DOT decision in th at case will necessarily grant one carrier access to a particular

market while denying it to all other applicants. Here, by contrast, reallocating one of

United’s two designations in both the Houston

- MEX and Houston

- SJD market s to

Southwest will not deny access to United . Instead United will retain one designation in

each market, allowing United to offer any number of frequencies with any gauge of

aircraft.

Further, United’s characterizat ion of its partner carrier SkyWest as a “ competitive

alternative ” 3 in these markets is greatly exaggerated at best

. SkyWest operates in

these markets solely on behalf of United Airlines under the United Express d/b/a.

2 United Sur r eply , p p .2

- 3

. 3 Id. , p. 3.Contingent Answer of Southwest Airlines

January 16, 2015

3 Accordingly, United , not SkyWest, co ntrols the pricing, capacity, scheduling, and

marketing of SkyWest’s United Express service

. A consumer cannot book a SkyWest

named or

- marketed flight from Houston to MEX or SJD. Far from being a “ competitive

alternative ” to United , SkyWest provides no competition that is in any way independent

from United. Thus the reallocation of SkyWest ’s designation s would not eliminate a

separate competitor , it would open the door to Southwest to provide independent

competition to United’s ser vice that now does not exist . If United wishes to c ontinue to

offer small aircraft service in these markets , it is authorized to do so under its remaining

designation.

II. Southwest Does Not Object to **United** Pursuing Extra

- B ilateral Authority for

Itself or United Express , but there is no Justification for Requiring

**Southwest** to Obtain Extra

- Bilateral Authority J ust to Enter the se Markets

.

United continues to argue

– for a third time now

– that Southwest should be

required to obtain “extra

- bilateral authority” in order to compete in markets that are

dominated by United and its e xpress partner via double designations that preclude new

entry by any U.S. carrier. United also insinuates that Southwe st is somehow seeking to

eliminate competition simply by trying to enter these markets under the current bilateral

agreement

.

United has it exactly backwards. It is United , not Southwest, that is trying to

suppress competition in these markets by relegating Southwest to a n uncertain, time

consuming, and unusual “extra

- bilateral” process just to enter markets that are

dominated by United’s dual designation , high

- fare service

. Let us be clear

– Southwest

has no objection to United seeking extra

- bila teral authority for itself or its expressContingent Answer of Southwest Airlines

January 16, 2015

4 partner if it wishes to do so. 4 Southwest welcomes any and all competition in these

markets. But United has offered no justification why Southwest

– a new entrant that will

provide sorely needed low

- fare competition

-- should be forced into an extra

- bilateral

remedy for its sole access to these markets while United retains two designations under

the current agreement. United’s suggestion that Southwest’s application to provide

independent compet ition in these markets would somehow lessen competition and

consumer choice has no basis whatsoever.

III. United Has Misrepresented Southwest’s Position on the Timing of the

Withdrawal and Reallocation of Un ited’s Double Designations

.

Finally, United ’s Sur r eply misrepresents Southwest’s position in claiming that

Southwest is asking the Department to withdraw and reallocate United’s double

designations in the affected markets immediately. 5 To the contrary, Southwest is

requesting the DOT to reallocate the d esignations on October 15, 2015, the date that

Southwest will initiate its Houston

– MEX and Houston

– SJD service

. Consistent with

the Department’s recent handling of U.S.

– Mexico designation reallocations

, United

would be free to market and sell tickets on the SkyWest United Express service until the

designations are reallocated. 6 Given that the date of withdrawal is a full nine months

away, United has ample time to re

- accommodate the very small number of United

Express passengers

– if any

– that are booked on flights after October 15 onto United

4 Similarly, Southwest does not object to the DOT asking the Government of Mexico to relax its metal

based designation requirement to allow SkyWest to operate under United’s single designation. However,

this effort should not delay Southwest’s entry in these markets.

5 See United Surreply , p. 7 (“Southwest would also apparently have the Department withdraw United’s

and/or SkyWest’s designations and force them to stop marketing, ticket sales and associated services

immediate ly...)

6 See, e.g.

, Notice of Action Taken in Dockets DOT

- OST

- 2014

- 0129 and

- 0130 at 2 ( DOT authorized

United to continue market ing and sell ing United Express service on ExpressJet until the date the

designation was withdrawn from ExpressJet and reallocated to SkyWest).Contingent Answer of Southwest Airlines

January 16, 2015

5 mainline flights in the two markets at issue. In fact, United Express service did not even

operate in the IAH

- SJD market from October t hrough December in either 2 013 or

2014. 7

~~~~~~~~~~~~~~~~~~~

Nothing in United ’s Sur r e ply changes the overriding fact that Southwest ’s

proposed Houston

- - Mexico service will provide independent competition

, significant

new low

- cost travel options for passengers , and is in the public interest. Acco rdingly,

we respectfully request that the Department expeditiously grant Southwest’s application

to enable it to provide HOU

- MEX and HOU

- SJD service as it has proposed

. 8

Respectfully submitted,

______________________ Robert W. Kneisley

January 1 6 , 2015

7 U.S. DOT, T

- 100 Data, YE June 2014 and Innovata Schedule Data.

8 Southwest also requests that the Department grant the uncon tested HOU

- CUN and HOU

- PVR authority

and corresponding designations requested in its Application as well.C ERTIFICATE OF SERVIC E

I hereby certify that on January 16, 2015, 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)

robert.wirick@aa.com (American Airlines)

sascha.vanderbellen@delta.com (Delta Air Lines)

chris.walker@delta.com (Delta Air Lines)

matwood@cozen.com (Frontier Airlines)

stephen.lachter@cozen.com (Frontier Airlines)

robert.land@jetblue.com (JetBlue Airways)

jhill@cooley.com (JetBlue Airways)

perkmann@cooley.com (JetBlue Airways)

robert.cohn@hoganlovells.com (Republic Airways)

patrick.rizzi@hoganlovells.com (Republic Airways)

dkirstein@yklaw.com (Spirit Airlines)

jyoung@yklaw.com (Spirit Airlines)

thomas.ting@suncountry.com (Sun Country Airlines)

dan.weiss@united .com (United Air l ines)

steve.morrissey@united.com (United Airlines)

gmurphy@crowell.com (United Airlines)

sseiden@crowe ll.com (United Airlines)

john.varley@virginamerica.com (Virgin America)

pjackson@swapa.org (Southwest Airlines Pilots’ Association)

rbtrinder@zsrlaw.com (City of Houston)

susan.kurland@dot.gov

brian.hedberg@dot.gov

brett.kruger@dot.gov

reese.davidson@dot.gov

todd.homan@dot.gov

peter.irvine@dot.gov

cristinasa@state.gov

info@airlineinfo.com

__________________________ Leslie C. Abbot t