BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

) In the matter of ) ) Docket DOT-OST-2013-0072 2013/2014 U.S.-Brazil Combination ) Frequency Allocation Proceeding ) )

CONSOLIDATED REPLY OF US AIRWAYS, INC.

Communications with respect to this document should be address ed to:

Howard Kass Vice President, Legal a nd Government Affairs Benjamin T. Slocum Director, Legal and Government Affairs US Airways, Inc. 1401 H Street, NW, Suite 1075 Washington, DC 20005 (202) 326-5153 howard.kass@usairways.com benjamin.slocum@usairways.com

DATED: May 14, 2013- i - TABLE OF CONTENTS Overview .......................................................................................................................... 1

I. Introduction ......................................................................................................... 2 II. Even if Wrongly Treated as a Single Carrier, US Airways and American’s Proposals Will Generate Greater Consumer Benefits than Delta’s Proposal .............................................................................................................. 5 III. The Department Should Not Place US Airways Charlotte-Sao Paulo Service – an Essential Alternative to Atlanta – at Risk Barely Sixteen Months after its Inauguration ................................................................................................... 7 A. The Charlotte-Sao Paulo Service that US Airways and the Department Toiled to Achieve Could be Interrupted without Department Action ................................................................................... 7

B. Charlotte Provides an Essential Alternative to Atlanta that Must be Maintained to Ensure Consumer Choice ............................................... 7 C. The Department Should Ignore Delta’s Attempt to Discredit Charlotte Based on Local Traffic ............................................................................ 9 IV. The Public Interest Requires that Philadelphia-Sao Paulo Service Commence ......................................................................................................... 11 A. Department Precedent Favors the Introduction of New Entrants and New Gateways to Brazil ........................................................................ 11 B. Philadelphia Provides More Consumer Benefits as an Alternative to Other Connecting Hubs than JFK Does as another Flight Serving Local New York Passengers ................................................................. 12 C. Philadelphia Deserves Sao Paulo Service, and is Primed and Ready to Support It ........................................................................................... 14 V. The Department Should Not Bail Out Delta After It Voluntarily Abandoned Detroit-Sao Paulo Service ................................................................................ 16 A. Delta’s Frequency Exchange with US Airways is Not Part of this Proceeding ............................................................................................. 16 B. Delta Sold its Detroit-Sao Paulo Frequencies for Good Reason ...... 17 C. Delta’s Practice Is to Withdraw from Brazil Routes, Not Expand Them ....................................................................................................... 19 VI. Conclusion - US Airways’ Service Proposal Provides More Benefits than Delta’s Service Proposal in Every Way ........................................................... 21BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

) In the matter of ) ) Docket DOT-OST-2013-0072 2013/2014 U.S.-Brazil Combination ) Frequency Allocation Proceeding ) )

CONSOLIDATED REPLY OF US AIRWAYS, INC. Pursuant to Subpart C of the Department of Transpor tation’s (“Department”)

Rules of Practice and the D epartment’s April 12, 2013, Order Instituting Proceeding (“Instituting Order”), US Airways, Inc. submits this reply to the competing applications of Delta Air Lines, Inc. and Am erican Airlines, Inc. for unrestricted frequencies to serve Sao Paulo, Brazil. 1

Overview The purpose of this pleading is to re spond to the applications, supplements and answers submitted by competing applicants, in further support of US Airways’ request for 14 unrestricted Brazil frequencies av ailable for use beginning October 1, 2014. US Airways will use seven of thes e frequencies to continue benefiting consumers flying on its new Charlotte-Sao Paulo service, which will commence June 8, 2013, using frequencies le ased temporarily from United. The other seven frequencies will be used to institute new servic e from US Airways’ Philadelphia hub, a new gateway to Brazil in the Northeastern United States.

1 Common names of carriers are used.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 2 - This pleading is organized into six sections that, taken as a whole, demonstrate why the Department should a llocate 14 frequencies to US Airways

before others receive an award. Followi ng an Introduction in Section I, Section II explains that US Airways and American re main separate companies and shows that even if US Airways and Amer ican are wrongly viewed as a single entity, US Airways’ proposal would still generate t he greatest public benefits. Sections III and IV show that continuing US Airways’ Charlotte-Sao Paulo service is required by the public interest, as is opening a new gateway at Ph iladelphia. Section V explains why the Department should not bail Delta out of its decision to voluntarily abandon DetroitSao Paulo service. Finally, Section VI concludes by summari zing the many more public benefits an award to US Airways of 14 frequencies will provide compared to authorizing the same-carrier-same-gateway services sought by Delta.

I. Introduction Of the applicants participating in th is proceeding, only US Airways has submitted a proposal that best meets the goals of the In stituting Order and generates the greatest public benefits. By using 14 frequencies to maintain new

service to Sao Paulo from its Charlo tte hub and to open a new gateway to Sao Paulo from its Philadelphia hub, US Airw ays offers numerous unique and valuable benefits, including:



## • Daily year-round Sao Paulo service from two new U.S. gateways —Charlotte and Philadelphia—US Airways’ la rgest and second largest hubs;



## • Continued daily year-round service from Charlotte gateway —US Airways’ largest hub and one of the world’ s largest airline hubs, offering moreConsolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 3 - than 640 daily departures to 136 destinati ons in the United States, Canada, the Caribbean, Europe, Mexi co and Latin America;



## • An attractive new U.S. gateway to Sao Paulo at Philadelphia , from which US Airways operates more than 450 daily departures to 117 destinations in the United States, Canada, the Caribbean, Europe, Mexico, the Middle East and Latin America;



## • Daily year-round Sao Paulo connections at Charlotte to 87 U.S. cities southbound and 97 U.S. cities northbound; 2



## • Daily year-round Sao Paulo c onnections at Philadelphia to 65 U.S. cities southbound and 61 U.S. cities northbound; 3 and



## • Service provided with US Airways’ newest Airbus A330-200 aircraft— the largest aircraft proposed in this proceeding —offering two classes of service, including Envoy cla ss with fully lie-flat seats. In addition, US Airways is the only U.S.-Sao Paulo new entrant applicant in this proceeding, albeit one that has proven it s commitment to Brazil service. Indeed, US Airways will commence Charlotte-Sao Paulo service on June 8, 2013, having

overcome obstacles no incumbent U.S. carri er has ever faced, including having to

find a commercial solution to overcome th e complete lack of available Sao Paulo frequencies. Despite these impediments, cons umers will soon enjoy the benefits of

new service between the United States and Sao Paulo. US Airways’ existing Charlotte-Rio de Janeiro service has unque stionably benefited travelers between the U.S. and Brazil. As such, US Airway s deserves the opportuni ty to preserve Charlotte-Sao Paulo service beyond Octo ber 2014, and to bri ng even greater

2 See Supplement of US Airways, Inc. to App lication for an Exemption and Frequency Allocation , April 24, 2013, Docket DOT-OST-2013-0 072 (“US Supplement”), p. 9.

3 See Answer of US Airways, Inc. , May 3, 2013, Docket DOT-OST-2013-0072 (“US Answer”), p.14, Figure 4.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 4 - benefits to consumers with new Sao Paulo service fr om a new gateway at Philadelphia. Delta, on the other hand, seeks 75 percent of th e available unrestricted frequencies for duplicative service at existing gat eways, using the smallest aircraft of any applicant. It makes this request despi te failing to use all of its existing unrestricted frequencies to operate Sao Paulo service, or to operate additional extrasection/peak season Sao Pa ulo flights. In fact, Delta o ffers little justification for an award of 21 frequencies other than its desire for an “equi table” distribution of frequencies. 4 As explained in US Airways’ Answ er, allocating additional unrestricted frequencies to Delta for more-o f-the-same service, simply to achieve parity, would not accomplish the Instituting Order’s goal of maximizing public benefits between the

U.S. and Sao Paulo. 5 This proceeding represents the final opportunity for the Department to allocate unrestricted frequencie s prior to the implementation of U.S.-Brazil Open

Skies in 2015. Rather than merely achieving frequency parity, it is essential that the Department ensure that the maximum number of consumers and communities receive the benefits of new service. Approv al of US Airways’ proposal to open two new gateways to Sao Paulo at its lar gest hubs—Charlotte and Philadelphia—will guarantee that travelers and ship pers all along the East Coast, as well as in scores

4 Consolidated Answer of Delta Air Lines, Inc ., May 3, 2013, Docket DOT-OST-2013-0072 (“Delta Answer”), p. 1.

5 US Answer, p. 6-8 (“Delta’s purel y duplicative service proposal offers so few benefits that striving for symmetry would negate the Department’s goal of maximizing the benefits flowing from these limited entry rights.”).Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 5 - of connecting cities across the country enjoy the benefits of additional service, choice of airline and gateway, and improved access to Brazil.

II. Even if Wrongly Treated as a Single Carrier, US Airways and American’s Proposals Will Generate Greater C onsumer Benefits than Delta’s Proposal Delta has repeatedly assert ed that the Department sh ould treat US Airways and American as a single carrier for this pr oceeding, stating “[i] n reality there are only two applicants in this proceeding.” 6 This is wrong. US Airways and American remain separate companies. Finding to t he contrary would ignore this fact and Department precedent. 7 But even if US Airways and American were wrongly considered a single-entity for purposes of this proceeding, it would not matter because US Airways and American have each submitted compelling proposals that will provide more consumer benefits than the same-carrier-at-the-same-gateway service proposed by Delta.

6 Application Supplement of Delta Air Lines, Inc ., April 24, 2013, Docket DOT-OST-2013-0072 (“Delta Supplement”), p. 2. See also Delta Answer, p. 2 (stating that t he idea of US Airways and American as separate carriers today is a “fleeting and transient fact”).

7 In the US Answer, US Airways cited Department precedent requiring that applications for limitedentry route authority be consider ed and evaluated individually and on their own merits, even where two applicants in a single proceeding may be engaged in merger activities. ( See US Answer, p.3-4.) That precedent is applicable here.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 6 - US Airways previously set forth the hi erarchy of consumer benefits that will result from allocating frequencies bas ed on (i) preserving existing service; 8 (ii) adding new service at new gateways; (iii) adding new competing service at an existing gateway; and (iv) adding duplicative, same-carrier service at an existing gateway. Using this clearly defined approach (w hich is wholly consistent with Department precedent), approval of US Airwa ys’ proposals—which satisfies criteria (i) through (iii)—will unquestionably generate maximum benefits. Moreover, the benefits brought by American’s proposal would also exceed any benefits that Delta might produce, as shown in Figure 1. Figure 1: US Airways’ Service Proposal Offers Maximum Benefits; American’s Service Proposal Offers Le ss Benefits, but More Than Delta’s Purely Duplicative Service

The public interest clearly justifies full awar ds to US Airways on this basis alone.

8 Except in the case of a carrier that voluntarily divested frequencies needed to maintain such service.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 7 - III. The Department Should Not Place US Airways Charlotte-Sao Paulo Service – an Essential Alternative to Atlanta – at Risk Barely Sixteen Months after its Inauguration

A. The Charlotte-Sao Paulo Service that US Airways and the Department Toiled to Achieve Could be Inte rrupted without Department Action

US Airways will commence daily Charlotte-Sao Paulo service on June 8,

2013. This is the result of a years-long effort by US Airways and the Department to bring new U.S. carrier service to Sao P aulo—a feat previously believed to be impossible due to the lack of Sao Paulo frequencies. US Airways’ Supplement documented the efforts required to bring th is valuable new service to fruition. 9 However, unless US Airways receives seven unrestricted frequencies in this proceeding, Charlotte-Sao Paulo service will be lost in late October 2014 when US Airways’ frequency lease with United expires. 10 It is imperative that US Airways receive seven frequencies to continue this new service.

B. Charlotte Provides an Essential Alte rnative to Atlanta that Must be Maintained to Ensure Consumer Choice

Delta goes to great lengths to portr ay Miami as the primary alternative connecting gateway to Atlanta, and uses American’s service there to justify an award of frequencies. 11 However, the fact remains that Miami is not the main alternative, because it is an entirely differ ent type of airport t han Atlanta. Delta’s

9 See US Supplement, p. 5-6.

10 In negotiating an amendment of the frequency lease with United, US Airways obtained the maximum extension possible. Further extension of the lease is not available, and it will expire in late October 2014.

11 See, e.g. Delta Answer, p. 5 and 7, and Exhibits DL-A-201 and DL-A-205.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 8 - own exhibits suggest that Miami focuses on the local marketplace as Miami offers connections to 50 cities, while Atlanta o ffers three times as many connections. 12 In fact, American serves 49 cities in the Un ited States from Miam i compared to 66 international destinations, including 32 po ints in Mexico and Central and South

America. 13 The low number of domestic connec ting points compared to the high

level of Brazilian and other Latin American service demonstr ates that Miami serves predominantly local traffic. Miami International Airport’s website fu rther reflects Miami as an international origin and destination airport, primarily to Latin America. Fifty -three international

carriers offer service to 86 international des tinations, resulting in a nearly even split

between international and domes tic flights and passengers. 14 Furthermore, eight of Miami’s top 10 trade par tners by value were Latin Am erican countries, with Brazil being number one. 15 Rather, Charlotte is the princi ple competing connecting gateway with Atlanta. US Airways’ service to Sao Paulo from Charlotte will connect conveniently to more cities than Miami’s total possibl e connections. With more than 640 daily departures to 136 destinations, Charlotte provi des the essential alte rnative to Delta’s Atlanta gateway, offering additional choi ce and new connecting opportunities. In

total Charlotte will benefit 97 U.S. cities with Northbound connecting service, and 87

12 See Exhibit DL-A-205 (duplicating Delta Supplement Exhibit DL-206).

13 Source: Innovata August 1-31, 2013.

14 See Miami-Dade Aviation Department (M DAD), Facts-At-A-Glance, p.1, available at http://www.miami-airport.com/pdfdoc/facts_at_a_glance.pdf.

15 Id.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 9 - U.S. cities communities with southbound co nnections, including 57 communities in

the United States not serv ed by American via Miami. 16

An award for Charlotte-Sao Paulo service will ensure that connecting travelers have a choice when choosing which U.S. gateway to use for travel to/from Sao Paulo. The Department must preser ve this competitive alternative.

C. The Department Should Ignore Delta’ s Attempt to Discredit Charlotte Based on Local Traffic

Delta states that Atlanta is more deserving of its seco nd Sao Paulo flight than

Charlotte is of its first because Atlant a’s population is larger than Charlotte’s. 17 Based on Delta’s logic, At lanta-Rio de Janeiro should outperform Charlotte-Rio de Janeiro in number of local pa ssengers. However, as Figur e 2 shows, the opposite is

true.

16 Assumes maximum 4-hour connection time and no more than 130% circuity. Although Delta touts the 150 connecting points at Atlanta, Delta never provides a number of ci ties that actually connect to its proposed Sao Paulo service wi thin a reasonable time period, and includes numerous backhaul cities (e.g. San Juan) as well as cities with ex isting nonstop service (e.g. Detroit and New York).

17 See Delta Answer, p. 7 and Exhibit DL-A-204.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 10 - Figure 2: US Airways’ Ch arlotte-Rio de Janeiro Service Has Grown to Carry More Local Passengers than Atlanta-Ri o de Janeiro Despite Having Half the Population

Source: US DOT Data, Q4 2009 thru Q32012 US Airways expects similar success with its new Charlotte-Sao Paulo service. Similarly, Delta suggests that Detroit has more local Sao Paulo passenger

traffic than Charlotte. 18 However, this comparison is faulty as Detroit currently has nonstop Sao Paulo service an d Charlotte does not. The stimulative effects of nonstop air service on local marketplace passenger traffic are well known. The Department should not be misled by De lta’s apples-to-or anges comparison. The City of Charlotte enthusiastic ally supports US Airways proposal. 19 Charlotte is a rapidly growing and diverse city which has provided strong support for US Airways’ largest hub. Both Charlotte and the State of Nort h Carolina are bases

18 See Exhibit DL-A-212.

19 See Answer of the City of Charlotte, Docket DOT-OST-2013-0072, May 3, 2013 (“CLT Answer”)

.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 11 - for major companies with ex tensive international oper ations and strong ties to

Brazil. 20 With state-of-the-art facilities and co nstruction of an expanded international terminal underway, 21 Charlotte has proven its abili ty to support Brazil service. IV. The Public Interest Requires that Philadelphia-Sao Paulo Service Commence A. Department Precedent Favors th e Introduction of New Entrants and New Gateways to Brazil

The Department has repeatedly empha sized its strong commitment to encouraging and promoting new entry and new gateways in limited-entry marketplaces, particularly in Brazil. Specif ically, in approving US Airways’ request for frequencies to serve Charlotte-Rio de Janeiro, the Departm ent acknowledged: For the October 2009 frequencies, we tentatively find that the introduction of new U.S. air carrier competition through our selection of US Airways and its Charlotte-Rio de Janeiro proposal, along with the benefits of new gateway competition ...would better serve the public interest...

... Selection of US Airways would not only introduce new U.S. air carrier competition, but it would do so at an a dditional U.S. gateway and a major hub, resulting in more ser vice options for the traveling public

. 22

20 See CLT Answer, p.3.

21 See CLT Answer, p.4.

22 2009 U.S.-Brazil Combination Frequency Proceeding , Order 2009-3-14, pp.7-8 (emphasis added).Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 12 - Approval of US Airways’ Philadelphi a-Sao Paulo proposal would result in virtually identical benefits. 23 B. Philadelphia Provides More Consum er Benefits as an Alternative to Other Connecting Hubs than JFK Does as another Flight Serving Local New York Passengers

By opening a new Northeastern U.S. gat eway to Sao Paulo, US Airways’ Philadelphia-Sao Paulo servic e will provide an attractive alternative to United’s existing service at Newark and Washington-Dulles for many connecting passengers—another key benefit the Departm ent has recognized in limited-entry

selection cases. 24 Philadelphia offers service to 83 U.S. cities, more than either Newark (77) or Wash ington-Dulles (78). 25 Importantly, US Airways’ PhiladelphiaSao Paulo service will connect more communi ties to Brazil than either Newark or Washington-Dulles, demonstrating its attr activeness. Southbound, Philadelphia will connect 65 cities to Sao Paulo, substantia lly more than the 49 connections offered by Newark and 59 offered by Washington-Du lles. Northbound, 61 U.S. communities

23 Delta argues US Airways should support its Philadelphia-Sao Paulo service with the seven frequencies Delta will transfer to US Airways in March 2015 or else US Airways would be warehousing frequencies. US Airw ays has other plans for the seven frequen cies it will receive fromDelta in 2015. If US Airways does not receive seven frequencies in October 2014 for PhiladelphiaSao Paulo in favor of Detroit, it will be forced to del ay introduction of serv ice while Delt a warehouses seven October 2014 frequencies until March 2015. Such a result would be contrary to the Department’s policy against allowing bilateral rights to lie unused for extended periods, as previously acknowledged by Delta. ( See Application of Delta Air Lines, Inc. for Atlanta-Rio de Janeiro Frequencies , Order 2005-2-10, February 16, 2005, p. 3.)

24 See, e.g., 2009 U.S.-Brazil Combination Frequency Proceeding , Order 2009-3-14, p. 7-8.

25 Source: August 2013 OAG schedules.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 13 - will enjoy Sao Paulo connections via Philadel phia, while Newark provides only 46 connections and Washington-Dulles offers 54. 26 Despite Delta’s incorrect assertion t hat Philadelphia competes with JFK, 27 the fact remains that Philadelphia provides broad benefits for conn ecting passengers in a way that JFK simply cannot. Unlike Phil adelphia, JFK is not a strong connecting hub for any carrier – a fact already admitted by Delta. 28 Rather, Delta’s JFK proposal would serve New York origin and destination passengers, providing a fifth

JFK service option, in the same time slot as one of the already existing Sao Paulo flights. As such, Delta’s proposed duplicative serv ice at JFK stands in sharp contrast to US Airways’ innovative Philadelphia-Sao Paulo service. US Airways’ new service will likely compete for many connecting pas sengers with United’s Newark-Sao Paulo and Washington-Sao Paulo services. It will leverage the strength of US Airways’ Philadelphia hub to provide far more connec ting opportunities than JFK, bringing the

benefits of new Sao Paulo service to a fa r greater number of communities and travelers. Any attempt by Delta to c onvert JFK into a connecting airport is completely contrary to the record of this proceeding and years of operational experience at JFK.

26 Source: Innovata Friday June 14, 2013 Innovata Schedule as of March 4, 2013. See also US Answer, p. 14-15. 27 See Delta Answer, p. 9.

28 See US Answer, p. 12 for a complete discussion of Delta’s acknowledgment of the limitations of JFK as a connecting hub. US Airways inco rporates these arguments by reference.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 14 - C. Philadelphia Deserves Sao Paulo Se rvice, and is Primed and Ready to Support It Philadelphia is the largest hub airport and largest U.S. city (by population) without Sao Paulo service (or service to any South American point), despite important and growing cultural, business and tourism ties between the city and

Brazil. 29 The city is home to the fourth la rgest Brazilian population in the U.S.—the largest of any applicant city in this pr oceeding, and larger than Atlanta and Detroit. 30 Brazilians are the single lar gest Latin American travel gr oup to Philadelphia. Brazil is also the largest Latin American expor t market for Philadelphia and its largest South American import market. 31 It is therefore not surp rising that 32 multi-national companies have their headquarters or a subs tantial presence in both Philadelphia

and Brazil. 32 Beyond just Philadelphia, the Commonw ealth of Pennsylvania also enjoys a close economic relationship with Brazil. Since 1998, Pennsylvania has had a trade representative in Brazil which has helped gr ow trade between the two significantly. Pennsylvania exports to Brazil exceed $2 b illion annually—the four th greatest in the U.S.—and Brazil ranks seventh among tr ading partners with Pennsylvania, due largely to the chemical, machinery, metal manufacturing and mineral/ore

industries. 33 Moreover, a significant number of Pennsylvania-based corporations,

29 See Answer of the City of Philadelphia , Docket DOT-OST-2013-0072, May 3, 2013 (“PHL Answer”), Exhibit PHL-2.

30 See PHL Answer, Exhibit PHL-3.

31 See PHL Answer, Exhibits PHL-13, PHL-14.

32 See PHL Answer, Exhibit PHL-15.

33 See PHL Answer, p. 8.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 15 - including US Steel, TIMET, Crown Holdin gs, GE Transportation and Air Products,

have extensive business relation ships and interests in Brazil. 34 By any measure, Philadelphia and Pennsylvania have important and growing connections to Brazil, and strong ties exist to support US Airw ays’ Philadelphia-Sao Paulo service. The City of Philadelphia has ensured that US Airways’ Philadelphia-Sao Paulo operation will be well-served through the Philadelphia International Airport’s

International Terminal A-West. This state-of-the-art fa cility houses 13 new international gates as well as expanded federal inspection facilities (acknowledged to be among the easiest to transit) and an a ccommodating Arrivals Hall. Additional airport improvements includ e expanded security checkpoints, food and beverage outlets, a new connecting c oncourse that eliminates the need for second security screening, and new baggage facilities. 35 No other city or air port is better prepared to

welcome Sao Paulo travelers. Philadelphia, the Commonweal th of Pennsylvania and tens of thousands of connecting passengers need and deserve t he economic and competitive benefits that US Airways’ new Phil adelphia-Sao Paulo service wi ll generate. US Airways urges the Department to a llocate frequencies for this important and necessary

service.

34 See PHL Answer, p. 8-9.

35 See PHL Answer p. 12.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 16 - V. The Department Should Not Bail Out Delta After It Voluntarily Abandoned Detroit-Sao Paulo Service A. Delta’s Frequency Exchange with US Airw ays is Not Part of this Proceeding

Throughout this proceeding, Delta has repeatedly claimed t hat there are 35 frequencies at issue because of the seven unrestricted fr equencies it voluntarily agreed to transfer to US Airways in Marc h 2015. No matter how many times this claim is made, Delta is wrong—the Instit uting Order is clear that there are 28 frequencies at issue in this proceeding, not 35. 36 The Department should not countenance Delta’s attempt to inject other Sao Paulo frequencies into this proceeding. Although Delta strives to cast its Brazil frequency ex change with US Airways as something to which it was forced to agr ee, the fact remains Delta knowingly and voluntarily entered into an agreement with US Airways under which Delta received valuable LaGuardia slots (and will receive seven restricted Brazil frequencies) in exchange for its seven unrestricted Br azil frequencies, among other things. 37 By repeatedly seeking to interject this sepa rate commercial agreement into this proceeding, Delta is essentially asking t he Department not only to rebalance the

36 See Order 2013-4-9, p. 1 (“ By this order we institute the 2013/2014 U.S.-Brazil Combination Frequency Allocation Proceeding to select U.S. carriers to use (1) the 14 weekly combination frequencies that may be used to serve any point in Brazil, which become available October 1, 2013; and (2) the 14 weekly combination frequencies that may be used to serve any point in Brazil, which become available October 1, 2014; as set forth in the Memorandum of Consultations between the United States and Brazil dated March 19, 2011 (MOC).”).

37 This knowledge went to the highest levels of Delt a, as senior executives were personally involved with the negotiations.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 17 - commercial terms of this agreement but also to fund Delta’s purchase of LaGuardia slots—at the expense of consumers. B. Delta Sold its Detroit-Sao P aulo Frequencies for Good Reason

Delta argues that Detroit will lose Sao Paulo service if the Department does backfill the service. However, close exami nation reveals that Detroit may lose Sao Paulo service no matter this proceeding’s outcome. Despite Delta’s claim that Detroit is a “successful established service”, 38 Delta’s Detroit-Sao Paulo service has performed poorly since its inc eption, and there is no reason to believe it will improve

in the future. Delta’s aver age load factor on its Detroit-S ao Paulo service is only 69 percent, including a low of 53 percent in November 2010, and three months below 60 percent in February, March and April 2012. 39 In contrast, Delta’s load factor for its JFK and Atlanta services during this period averaged 79 percent and 86 percent, respectively. 40 Notably, Delta’s 69 percent Detroit-Sao Paulo load factor is less than the 70 percent load factor averaged by Korean Ai r Lines on the Los Angeles-Sao Paulo route, which Delta decries as evidence of an unsustainable service and as proof that American would move its Los Angeles-Sao Paulo frequencies to another gateway. 41 Citing Korean’s 70% load factor, Delta claims “It is unlikely that American’s flight

38 Delta Answer, p. 8.

39 Source: DOT T-100 data, October 2009-September 2012. One reason for this low level of passenger traffic may be the poor location of Detroit as a hub for Brazil service. Exhibit DL-A-214 touts the 114 cities that connect with Detroit; how ever, the map clearly shows that the majority of these connections involve highly circui tous, or even backhaul, routings.

40 Id.

41 See Delta Answer, p.11.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 18 - would be viable, and that Am erican would seek to pocket the frequencies and move them to new gateway [sic] us ing the unrestricted flexibilit y that is standard for Brazil

awards.” 42 Certainly, the same could be said to apply to Delta’s Detroit-Sao Paulo

service and its 69% load factor. Throughout this proceeding, Delta has repeatedly reminded the Department

of its 2004 decision to allow incumbent carriers freedom to move their Brazil frequencies among U.S. gateways. Given the demonstrated weakness of DetroitSao Paulo service, moving frequ encies from Detroit to a city with greater traffic may become Delta’s only alternative. If, notwithstanding its poor results, Delt a wishes to maintain Detroit-Sao Paulo service beyond March 2015, it should seek the frequencies it needs not from the Department but the marketplace, just as US Airways did to obtain frequencies for its

Charlotte-Sao Paulo service. Since Delt a requires only five frequencies for its Detroit-Sao Paulo service (in addition to its two Sao Paulo frequencies that it is now using for Rio de Janeiro service), it has am ple time to negotiate a frequency lease or purchase agreement with an incumbent carri er. US Airways did not ask the Department to extract Sao Paulo frequenci es from another carrier so that US Airways could begin Sao Paulo service, and the Department should not entertain Delta’s request that it do so in this proceeding.

42 Id.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 19 - C. Delta’s Practice Is to Withdraw from Brazil Routes, Not Expand Them

Delta has a long history of withdrawal from U.S.-Brazil routes, including

routes to/from Sao Paulo. I ndeed, Delta has retreated from at least three U.S.-Brazil routes since 2009, including Los Angeles -Sao Paulo, Atlanta-Recife and AtlantaFortaleza. 43 Given Detroit’s poor performance ( described above), it would not be surprising if Delta added Detroit-Sao Paulo to this list. Aside from not proposing any new Sao Paul o service in this proceeding, Delta has declined to take steps to expand the Sao Paulo service it currently enjoys: First, Delta does not use a ll 23 of its unrestricted fr equencies for service to Sao Paulo. By its own admission, tw o of these frequencies are used for less

restricted Rio de Janeiro service. 44 Second, Delta has not availed itself of the opportunity to operate extra section and peak season flights as the bilateral agreement permits. Third, Delta has failed to upgauge its existing Sao Paulo services to any of its at least four types of larger wide-bodied aircraft, 45 which would maximize use of the 23 Sao Paulo frequencies it holds currently. 46 Furthermore, Delta proposes to use even smaller widebody aircraft on any services it is awarded in this proceeding. 47

43 See Answer of American Airlines, Inc., May 3, 2013, p.6.

44 Exhibit DL-A-101.

45 By contrast, US Airways upgauged its Charlotte-R io de Janeiro service for the Winter 2012-13 operating season.

46 Just last week the Department stated a preference for the use of larger aircraft for service to airports with limited operating rights, eliminating US Airways from contention for a pair of DCA slot exemptions in part on the basis of proposed aircraft size. ( See Order 2013-5-6, May 7, 2013, p. 9.)

47 See US Answer, p. 18-20. Delta’s proposed aircraft is the smallest widebody aircraft in its fleet.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 20 - Finally, despite its apparent fascinati on with US Airways’ frequency lease from United, 48 Delta has made no effort to use the private marketplace to obtain additional Sao Paulo frequencie s. Indeed, the only market -based efforts made by Delta have been service expansions benefiting the Brazilian carrier GOL – of which Delta owns 3 percent and appoin ts a member to its Board of Directors – enabling it to benefit economically from the frequencies, slots, termi nal facilities, and other Sao

Paulo resources available to Brazilian carriers. 49

48 Even after the Department denied Delta’s Motion to compel US Airways and United to make their frequency lease public ( see Order 2013-4-9, p.6), Delta cont inues to question US Airways’ statements about its frequency lease. ( See Delta Answer, p. 4.)

49 See “Delta and GOL Extend Codeshare to US -Brazil Routes”, May 9, 2013, Reuters available at http://www.reuters.com/arti cle/2013/05/09/snippetidUSL2N0DQ26C20130509?f eedType=RSS&feedName=m arketsNews&rpc=43Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 21 - VI. Conclusion - US Airways’ Service Proposal Provides More Benefits than Delta’s Service Proposal in Every Way

Throughout this proceeding, Delta has asked questions of, and demanded information from, US Airways – all of which US Airways has provided. Yet Delta has

still failed to demonstrate t hat frequency allocations to Atlanta, Detroit, and New York will achieve the Department’s objective of maximizing public benefits. Indeed, approval of Delta’s servic e proposal would actually reduce consumer choice. By preventing US Airways from commencing new service and opening new gateways to Sao Paulo, many consumers would lose t he alternative service options US Airways would provide. However, the serious flaws in Delt a’s service proposal are far more widespread. When compared side-by-side wit h US Airways’ service proposal, as shown in Figure 3, the many disqualifying in firmities of Delta’s application are clear.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 22 -

Figure 3: US Airways’ Se rvice Proposal Provides More Benefits than Delta’s Service Proposal in Every Facet US Airways Delta Proposes service at new gateways? YES No

New entrant? YES NoProposes duplicative samecarrier/same-gateway service? NO Yes

Proposes service at a gateway it has stated was not viable? NO – Charlotte and Philadelphia have a history of success Yes – Detroit averages a load factor under 70% Proposes service at a gateway it voluntarily tried to abandon? NO Yes – Delta voluntarily exchanged its Detroit frequencies for slots it considered more valuable Has a history of abandoning U.S.- Brazil routes? NO Yes – has withdrawn from three U.S.-Brazil routes since 2009 Uses Sao Paulo frequencies for service to less restricted Brazilian cities? NO Yes – uses two frequencies to serve Rio de Janeiro Proposes a small aircraft for Sao Paulo service? NO – US Airways’ A330-200 is the largest aircraft proposed YES – Delta’s B767- 300 is the smallest aircraft proposed and the smallest widebody in its fleet

In short, Delta’s proposal contains mult iple flaws, any one of which would be sufficient to deny its request. When combi ned, these infirmities should disqualify Delta from any allocation of frequencies – under no circumstance should a carrier that proposes no new compet itive benefits, has failed to fully utilize frequencies currently available to it, and bargained away frequenc ies, receive additionalConsolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 23 - frequencies, particularly when US Airways has demonstrated the superiority of its proposal.

* * * This proceeding is the Department’s final opportunity to allocate frequencies and set the U.S.-Brazil marketplace on the most competitive path possible before Open Skies. US Airways has demonstrated the superiority of its proposal, which contains virtually every competitive and consumer benefit recognized by the Department when awarding limited entry oper ating authority, including (i) two new gateways; (ii) a new entrant between the United States and Sao Paulo; (iii) the largest aircraft of any applicant; (iv) enhanced connecting opportunities; and (v) a close community of interest between its gateway cities and Brazil. US Airways urges the Department to allocate it the 14 frequencies it requires for its new

Charlotte-Sao Paulo and Phil adelphia-Sao Paulo services.Consolidated Reply of US Airways, Inc. Docket DOT-OST-2013-0072 May 14, 2013

- 24 - For the foregoing reasons, US Airways, In c. respectfully requests that the Department of Transportation grant it an exemption and 14 unrestricted Brazil frequencies as more fully explained herein, and grant such other or further relief as the Department deems necessary and appropriate.

Respectfully submitted,

__________________ _____________ Howard Kass Vice President, Legal a nd Government Affairs Benjamin T. Slocum Director, Legal and Government Affairs US Airways, Inc. 1401 H Street, NW, Suite 1075 Washington, DC 20005 (202) 326-5153 howard.kass@usairways.com benjamin.slocum@usairways.com

DATED: May 14, 2013CERTIFICATE OF SERVICE I hereby certify that on Ma y 14, 2013, a copy of t he Consolidated Reply of US Airways, Inc. was served via e-mail on each of the following: urskr@state.gov (Department of State) paul.gretch@dot.gov (Depar tment of Transportation) esta.rosenberg@dot.gov (Department of Transportation) brett.kruger@dot.gov (Depar tment of Transportation) brian.hedberg@dot.gov (D epartment of Transportation) francis.heil@aa.com (American) robert.wirick@aa.com (American) steve.morrissey@united.com (United) dan.weiss@united.com (United) richa.himani@united.com (United) karine.faden@united.com (United) sascha.vanderbellen@delta.com (Delta) mark.gale@phl.org (Philadel phia International Airport) tjorr@charlotteairport.com (Charlotte Douglas International Airport)

________________________ Benjamin T. Slocum