### u.s; Department ofTransportation Office of the Secretory ofTransportation



### Mr. EdwardP. Faberman Wiley Rein, LLP 

### 1776 

### K StreetNW Washington, DC 20006

# DearM~ Assistant Secretary 

## MAY 2 6 

## 2010 X1-100316-001

1200 NewJersey Avenue. SE Washington. DC 20590



### Thank you for your letter concerning a grant award underthe Department's Small CommunityAir Service Development Program ("Small Conmlunity Progranl") to Huntsville, Alabama. Your letter makes reference to a March I 

### letter from United Airlines ("United"), which offers nonstop service between Huntsville and Washington Dulles airport. Among other points, United's letter asserted that Huntsville should not be peffilitted to use grant funds to extend serviceto any ofthe Baltimore/Washington airports, as doing so would be anticompetitive and inconsistent with the Department'spolicies. Your lettercontended that Baltimore is a different market than the two Washington-area airports and that United's position was therefore incorrect. 

### I have responded to United's letter, noting that Huntsville was specifically targeting Thurgood Marshall Baltimore/Washington International (BWI) 

### airport in its proposal, and that the Department's selection ofHuntsville and use ofgrant funds for BWIHuntsville service were consistent with the relevant statutory criteria and DOT's policies. A copy ofmy letter to United is enclosed. As is our nOffilal practice, I am placing a copy ofyour letter and this response in Docket OST-2009-0149 as a contact outside the record ofthis matter. I 

### appreciate your interest in the Small CommunityAir Service Development Program.

Enclosure Sincerely yours,

Susan 

### L. Kurland Assistant Secretary for Aviation and International Affairs

# \Vilev

-llei'rl LU'

1776 KSTREET NW WASHING10N. OC 20006 PHONE 202.719.1000 FAX 202.719.1049
7925 JONES BRANCH DRIVE McLEAN. VA 22102 PHONE 103.905.2800 FAX 703.905.2820 www.wileyrein.com March 15,2010

Susan Kurland Assistant Secretary for Aviation and International Affairs U.S. DepartmentofTransportation 1200 New Jersey Avenue, SE Washington, DC 20590 Re: Small CommunityAir Service Development Program, Order 2010-2-12 (Docket DOT-OST-2009-0149) Dear Assistant SecretaryKurland: 

### X1-100316-001 I

Edward P. Faberman 202.719.7402 efaberman@wileyrein.com

On February 18,2010, the Department ofTransportation issued an Order Awarding Grants under the Small CommunityAir Service ("SeAS") Development Grants. The Orderwas issued under the "Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century ("AIR-21)." The Act was issued to help smaller communities enhance their air service and address issues related to high airfares. ! As multiple government studieshave found, when low fares arebroughtto a market, thatmarket sees a significant increase in service and passengers. One ofthe communities that received a grant was Huntsville, Alabama. Huntsville presented information to the Department showing that the current fares offered in certain markets including the Huntsvil1e-Washington market limited flight options. Huntsville demonstrated that with a grant under the AIR-21 program, it would be able to expand opportunities for residents ofthe Huntsville area to travel to the important Washington-Baltimore market and residents oftheWashington-Baltimore market to travel to Huntsville. In various letters including one dated March 1, 2010 (submitted to this docket), United Airlines claims that a grant to Huntsville Airport allowingthe addition of service to Baltimore is inconsistent with Department policies since it would subsidize additional service to Washington/Baltimore. In the letter, United states it is "concerned with the anti-competitiveuse ofSCAS funds." As to Washington/Baltimore market, on behalfofAirTran Airways, we note that when the Department amended the US-Mexico aviation agreement in October2005, it specifically stated, "Theamended agreement also providesthat, for designation purposes, (1) Washington, D.C. and Baltimore, Maryland, shall be regarded as separatepoints." The Federal Aviation Administration again "emphasized that

# \Vilev (lei'II llf'
Susan Kurland March 15, 2010 Page 2 

### X1-100316-001

Baltimore is a differentmarket than the two Washington area airports in the "Notice ofa Petition for Waiver ofthe Terms ofthe Order Limiting Scheduled Operations at LaGuardia Airport," dated February 9,2010, when it stated: The Department also considered whether the three airports in the New York area, and the three in the Washington area, effectively constitute the same market for all passengers, such that iffares areperceived to be rising too high at one airport, the harm would bemitigatedby consumers simply shifting to the othertwo, Department analysts, evaluating passenger ticket data that contained actual fare information, looked at whetherthe three airports at New York and the three in Washingtonwere effective substitutes for each other, and concluded that they were not. TheDepartment also found that thedifferences inthe level of yields at area airports tended to correlate with the level oflow cost carrier operations. Apparently United has accepted the Department'sdecision to considerWashington and Baltimore as separate markets since it did not raise this "concern"regarding services to Cancun even though five carriers have authority to operate between Cancun and the Baltimore and Washington markets.! Apparently, United Airlines believes that despite the fact that the Departmenthas specifically determined that Baltimore (BWI International Airport) is a separate market from the Washington, DC market (Ronald Regan Washington National Airport/Dulles International Airport), all ofthese airports must be considered as a single market for awards under AIR-21,

I United, US Airways, and Delta Airlines have authority to serve Du\les-Cancun and AirTran Airways and USA 3000 have authority to serve BWI-Cancun.

# ·\''1lev I{ell] ttP
Susan Kurland March 15, 2010

I Page 

### 3 

### Xl-100316-001

Forthese reasons, it is importantthat the Department immediately dismiss United's incorrectclaims. TheDepartment should advise United that although United would liketo limit competition inthe entire MarylandlDistrict ofColumbialVirginia area, there is no question that Baltimore (BWI) is a different market from Washington, D.C. (DCA and lAD). Itis time to allow the residents and businesses ofHuntsville to enjoy thebenefits 

### of low fares. Sincerely,

# &?~ Edward P. Faberman



# ,.