O rder 201 2

- 11

- 12

UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.
Issued by the Department of Transportation on the 15 th day of November , 201 2

Served: N ovember 15 , 201 2

ORDER TO SHOW CAUSE

SUMMARY

By this Order, we tentatively decide that it is in the public interest to grant the motion of Delta Air Lines, Inc. (Delta) to move its Detroit

- Haneda slot pair for scheduled combination services to Seattle

- Haneda , rather than select an alternative use for that slot pair

.

BACKGROUND

Under the Memorandum of Understanding between the United States and Japan, signed on October 25, 2010, four daily slot pairs are available to carriers from each country to provide scheduled combination services between the United States and Tok yo’s Haneda Airport. 1 By Order 2010

- 7

- 2, issued July 6, 2010, we allocated the four slot pairs as follows: 1) one slot pair to Hawaiian Airlines, Inc. (Hawaiian) for Honolulu

- Haneda service; 2) two slot pairs to Delta, one for Los Angeles

- Haneda and one f or Detroit

- Haneda services; and 3) one slot pair to American Airlines, Inc. (American) for New York (JFK)

- Haneda service. 2

On July 30, 2012, Delta filed a motion requesting authority to move its Detroit

- Haneda slot pair to the Seattle

- Haneda route and ask ed the Department to institute any necessary proceedings to

1 The scheduled operations are subject to the following conditions: 1) U.S. operations at Haneda are permitted between 2200 and 0700 hours local time; 2) departures from Haneda to a point in the 48 contiguous U.S. states are not permitted prior to midnight; and 3) extra sections are not permitted.
2 Not selected in that proceeding were American for one slot pair for Los Angeles

- Haneda service; Continental Airlines, Inc., for one slot pair for Newark

- Haneda service; Continental Micronesia, Inc., for one slot pair for Guam

Haneda service; Delta for one slot pair for Seattle

- Haneda and one slot pair for Honolulu

- Haneda services; Hawaiian for a second Honolulu

- Haneda service; and United Air Lines, Inc. (United) for one slot pair for San Francisco

Haneda service. Motion of

DELTA AIR LINES, INC.

in the matter of 2010 U.S.

- Haneda Combination Services Allocation Proceeding Docket DOT

- OST

- 2010

- 00182 enable Delta to change gateways. United and Hawaiian filed objections to Delta’s motion

. Alaska Airlines, Inc. (Alaska), the Delta Master Executive Council of the Air Line Pilots Association (De lta MEC ), and the Port of Seattle each filed answers in support of Delta. American fil ed an answer stating that it had no objection to Delta’s request, provided that all carriers holding Haneda slots are granted equivalent relief. Delta then filed a response asserting that it stood ready to demonstrate the merits of its Seattle proposal in any carrier selection proceedings that the Department deemed necessary.

By Order 201 2

- 8

- 20 , issued August 17 , 201 2 , the Department instituted this proceed ing to determine whether it is in the public interest to grant Delta’s motion to transfer its Detroit

Haneda slot pair to the Seattle

- Haneda route, or whether the public interest instead would be better served by an alternative use of that slot pair. The Order set forth a procedural schedule and evidentiary requirements for the establishment of a record for the Department to make a decision in this case. Pursuant to that procedural schedule, applications and any support ing material were d ue August 27, 201 2 , a nswers were d ue September 6, 2012 , and replies were due September 13, 2012

.

SUMMARY OF APPLICATIONS AND RESPONSIVE PLEADINGS

Four carriers

– American, Delta, Hawaiian, and United

– filed applications for the slot pair under consideration

, to provide daily combination services in the U.S.

- Tokyo (Haneda) market. 3

American proposes daily service from Los Angeles using B

- 777 aircraft. Delta proposes daily service from Seattle using B

- 767 aircraft . Hawaiian proposes daily service from Kona using A

- 330 aircraft. United proposes daily service from San Francisco using B

- 777 aircraft.

Answers and replies were filed by each of the applicant carriers. Alaska filed an answer and reply reaffirming its support of Delta ’s proposal . In addition, a number of civic parties filed formal pleadings in support of the various applicant carriers. T he Continental Master Executive Council of the Air Line Pilots Association

, the San Francisco International Airport, and the United Master Executive Council of the Air Line Pilots Association filed in support of United ’s proposal

. The Delta MEC and the Port of Seattle filed in support of Delta ’s proposal

.

POSITION OF THE PARTIES

American asserts that Los Angeles is the largest U.S. m ainland Origin & Destination (O&D) market to Tokyo

, with two times more local passengers than San Francisco and six times more local passengers than Seattle. American states that the Los Angeles

- H aneda market is currently served by the Star alliance, through flights operated by All Nippon Airways Co., Ltd. (ANA) displaying the designator codes of United and US Airways, Inc. (US Airways); and by the SkyTeam alliance

, through fli ghts operated by Delt a. American ar gues that its proposal would enhance inter

- alliance competition in the large Los Angeles

- Haneda market by allowing its alliance, oneworld, to compete directly with Star and SkyTeam

.

3 See Appendix A for a summary of the applicants’ proposals in chart form.3 American also states that it would provide significant con necting opportunities for 25 U.S. cities, including the 10 largest U.S. m ainland

- Tokyo O&D markets. 4 T hrough its immunized cooperative relationship with Japan Airlines Co., Ltd. (JAL), it would provide connecting opportunities beyond Haneda to 29 cities i n Japan

, as well as to Shanghai, Beijing, Bangkok, Hong Kong, Seoul, Singapore, and Taiwan. 5

The competing carriers contend that the Los Angeles

- Tokyo market is already well served and the market would not support an additio nal Los Angeles

- Haneda flight. United argues that the Los Angeles

- Tokyo market already has nearly twice the amount of service as San Francisco

, and selecting Los Angeles would leave San Francisco

- the second largest West Coast

- Tokyo market

- without any nonstop U.S. carrier service to Haneda

. 6 Delta contends that

, if American receives the Los Angeles

- Haneda slots

, it would likely reduce its current Los Angeles

- Narita service, as it did with its New York (JFK)

- Narita service when it was awarded a New York

- Haneda slot pair. 7 Hawaiian argues that American’s track record of repeated cancellations on its New York (JFK)

- Haneda service suggests that a n additional allocation at Los Angeles would be a waste of valuable resources. 8

Delta maintains that its proposal would make the most productive use of the Haneda slot pair

. Delta states that Seattle is the largest U.S.

- Tokyo O&D market without any nonstop Haneda service

, and that Seattle competes with San Francisco and Los Angeles for U.S.

- Tokyo traffic. D elta states that

, through the combination of its own services and its partnership with Alaska, Delta would provide one

- stop service to Haneda from 42 points in the United States. 9

Delta notes that

, subsequent to the 2010 U.S.

- Haneda Combination Services A llocation Proceeding , the American/JAL and United/ANA joint ventures were granted antitrust immunity, and argues that American and United are able to access Haneda through the metal

- neutral transpacific joint venture flights of their Japanese partners. 10 D elta further states that it is the sole independent network competitor against the Star and oneworld immunized alliances

, and that only its proposal would preserve the three

- way alliance competitive market structure that currently exists in the U.S.

- Haneda market. 11

The competing carriers question the viability of Delta’s proposal, given the size of the Seattle

Haneda market and the fact that Delta’s proposed connection s rely heavily on code

- sha re service provided by Alaska. American argues that Seattle i s the sixth largest Tokyo O&D market and the smallest market proposed in this proceeding, and points out that Los Angeles is the largest O&D market proposed in this proceeding. 12 Hawaiian asserts that the Seattle market is not large enough to support additional Tokyo service and that Delta’s propos al will suffer the same fate as

4 American Application

, at 8.
5 American Answer , at 2.
6 United Answer , at 9.
7 Delta Answer , at 13.
8 Hawaiian Answer , at 25

- 26.
9 Delta Application , at 9.
10 Delta Application

, at 2.
11 Delta Answer , at 5.
12 American Answer , at 3.4 its Detroit

- Haneda service. 13 United calls Delta’s competition arguments based on metal neutral ity misguided, contending that additional opportunities for U.S. carriers, consum ers, and communities are key be nefits of immunized joint ventures

. 14

Hawaiian asserts that, of the four U.S. carrier services to Haneda, its Honolulu

- Haneda service has been the most successful

, and that an award for Kona

- Haneda service would make the bes t use of the slot pair. Hawaiian states t hat Kona is underserved as the second

- largest U.S.

- Tokyo O&D market without nonstop service to/from Tokyo

, and the only market proposed in this proceeding without nonstop service to Tokyo . Hawaiian further states that only its proposal will provide a sustainable ongoing volume of passengers

. 15 Hawaiian argues that selecting its proposal would reduce concentration in markets dominated by the oneworld, SkyTeam, and Star alliances, while doubling Hawaiian’s Tokyo serv ice. 16

Hawaiian acknowledges that its proposal would largely serve Japan originating passengers, but
asserts that the introduction of a nonstop Kona

- Haneda flight would have a substantial positive impact on Hawaii’s tourism

- based economy

, create over 1,400 U.S. jobs, and generate $ 74 million in new exports annua l ly. 17 18

The competing carriers generally argue that an award to Hawaiian would place half of the limited Haneda opportunities in the state of Hawaii

, and that the public interest would not be served by primarily benefit ing Japanese leisure passengers. Delta and United argue that Hawaiian does not need a limited Haneda slot pair since i t is free to begin service at Narita

. 19 The competing carriers also ques tion the timeline for institut ing Hawaiian’s proposed service, given Hawaiian’s own acknowledgement that Kona International Airport may require updates to C ustoms and Immigration facilities

. 20

United maintains that its San Francisco

- Haneda proposal would b est maximize public benefits by combining the large San Francisco gateway with numerous online connections

, claiming the most online connections of any applicant in this proceeding

. United argues that its proposal would provide nonstop Haneda service in the second largest West Coast

- Tokyo market , a market that is nearly three times larger than the Seattle

- Tokyo market. 21 United further argues that it has the largest and most comprehensiv e hub on the West Coast , and that its San Francisco

- Haneda

13 Hawaiian Answer , at 29

- 31.
14 United Reply , at 6

- 8.
15 Hawaiian Reply , at 3.
16 Hawaiian Answer , at 9
17 Hawaiian Answer , at 4.
18 On September 25, 2012, Hawaiian filed a motion requesting that the Departme nt take official notice of a White House press release highlighting the importance of boosting foreign travel and tourism to the United States. In addition to the press release, Hawaiian attached a copy of Executive Order 13597 (published at Fed. Reg. 337 3 (2012)) Establishing Visa and Foreign Visitor Processing Goals and the Task Force on Travel and Competitiveness, and also attached a 2012 Task Force report on “National Travel and Tourism Strategy.” We received no opposition to Hawaiian’s motion and wil l take official notice of the cited press release.
19 Delta Answer , at 10; and United Answer , at 8.
20 Hawaiian Application , at 4, n.2.
21 United Application , at 3.5 proposal w ould reach a catchment area far larger than the proposals offered by Delta and Hawaiian

. 22

United asserts that it is the only U.S. carrier serving Japan that is not permitted to operate at Haneda with its own aircraft and crews, and that selection of its p roposal would establish competitive parity among U.S. carriers at Haneda , while also providing competition with the San Francisco

- Haneda services provided by American’s oneworld partner, JAL

. 23

American argues that United should not receive an award sinc e United and its Star alliance partner ANA already command the largest presence in the U.S.

- Japan nonstop market

, operating a combined 210 weekly nonstop frequencies compared to oneworld’s 118 weekly nonstop frequencies. 24 Hawaiian argues that the San Fran cisco

- Tokyo market already has abundant service, and that the market is not large enough to accommodate United’s proposed service addition. 25 Delta contends that

, if United were awarded a San Francisco

- Haneda slot pair, it would reduce its San Francisco

- Narita service , while Delta’s proposal would inject true new capacity to Tokyo

. 26

TENTATIVE DECISION

W e have tentatively decided that it is in the public interest to grant the motion of Delta to move its Detroit

- Haneda slot pair to provide da ily scheduled services between Seattle , Washington and Tokyo’s Haneda International Airport , rather than select an alternative use for that slot pair

.

Since we last examined the allocation of Haneda slots in the 2010 U.S.

- Haneda Combination Services Allocation Proceeding

, we have had the benefit of two years of U.S. carrier experience operating within the limited arrival/departure

- time window at Haneda. We also now have the benefit of knowing which U.S. gateways Japanese carriers have chosen to serve with their limited slot pair allocation s

– Honolulu and Los Angeles for ANA; and Honolulu and San Francisco for JAL

. Against this background, and h aving considered the entire record before us , we tentatively select Delta’s proposed Seattle

- Haneda service. We tentatively find that Delta ’s proposal would best serve the public interest by providing the first nonstop Haneda service on a significant mainland U.S.

- Tokyo route that currently lacks any such service, there by establishing a new U.S. gateway to Haneda . We tentatively find that Delta’s proposed service would further serve the public interest by providing a number of western cities with a first one

- stop connecting opportunit y to Haneda

. 27 We tentatively find in addition that o ther cities that now enjoy one

- stop connections over more southerly gateways would gain the option of service over a less circuitous northwest gateway. 28

22 United Answer , at 3

- 4.
23 United Answer , at 2 and 10.
24 American Answer , at 5.
25 Hawaiian Answer , at 28.
26 Delta Answer , at 10 (citing United Application, at n.4).
27 Delta Exhibit , DL

- R

- 201.
28 Delta Exhibits , DL

- 203 and DL

- 204.6 Allowing Delta to move from Detroit to Seattle would also advance one of the prime objectives we sought t o achieve in our last Haneda proceeding, namely, seeking with our limited number of Haneda opportunities to address a diversity of public interest goals. We tentatively find that an outcome that brings first

- time Haneda service and first U.S.

- flag Haneda service to the sixth

largest O&D market

, while also promoting the geographic diversity of the U.S.

- Haneda gateways , would be consistent with our established approach for the award of limited Haneda slot opportunities and would b est serve the public interest.

The competing carriers argue that Delta’s proposal should not be selected because the Seattle

Tokyo O&D market is the smallest proposed in this proceeding. W e tentatively find , however, that only Delta’s proposal would op en Haneda access to a new region of the country, the Pacific Northwest, r esulting in a greater number of service options for the traveling public.

We have also considered the competing carrier s’ argument that Delta ’s connecting services rely too heavily o n services operated by its code

- share partner Alaska. 29 Alaska points out , however, that its marketing relationship with Delta is more comprehensive than traditional code

- share arrangements, and that Alaska and Delta regularly adjust their schedules to facilitate effective connections. 30 Also, Delta notes that Alaska provides effective feed traffic for Delta’s other Seattle services to Asia

. 31 Therefore, we tentatively find that the proposed connections, offered through Delta’s marketing relationship wit h Alaska

, further support the viability of Delta’s proposed new gateway service and grant of Delta ’s motion

.

W e tentatively find that the public benefits that would be achieved by our tentative selection outweigh the benefits of the other applications.

We recognize that American would provide service in the largest U.S.

- Tokyo market proposed in this proceeding

. However , we note that Los Angeles already has two daily nonstop flights to Haneda. Delta serves Los Angeles

- Haneda with its own flights, and United offers Los Angeles

Haneda service through its code share with ANA. Given the very limited opportunities for U.S. carrier service to Haneda, we tentatively do not find American’s arguments p e rsuasive for adding

more Haneda service at Los Angeles whi le other significant U.S.

- Tokyo gateways have no access to Haneda.

United’s proposal offers certain notable attributes. It would offer the first U.S.

- carrier nonstop service using its own aircraft in the sizeable San Francisco

- Haneda market , the second l argest U.S.

- Tokyo O&D market in this case

. United also would offer an extensive number of on

- line connections through its San Francisco hub to an appreciable catchment area

. On balance, however, we tentatively find that our public interest objectives in this proceeding would be better served by establishing the first U.S.

- flag nonstop Haneda service of any sort at Seattle. While San Francisco may not have service to Haneda fro m a U.S. carrier operating its own aircraft

, American offers daily nonstop San Francisco

- Haneda service through its code share with JAL. While United’s San Francisco hub might arguably reach more passengers than the combined

29 United Answer , at 4

- 6; Hawaiian Answer , at 29

- 30; and American Answer , at 2

- 3.
30 Reply of Alaska , at 1.
31 Delta Exhi bit , DL R

- 202.7 Delta/Alaska hub at Seattle, 32 we tentatively find that the Delta proposal offers important advantages of its own in terms of catchment area. Specifically, we note that Delta will provide more new cities with first one stop Haneda service than United; that it will better serve the Pacific Northwest; and that, in a number of cas es, service via Seattle is less circuitous than service over San Francisco. 33 Against this background, we tentatively find that an award to Delta represents the better allocation of this limited Haneda opportunity.

While w e note that Kona currently lacks n onstop service to Tokyo, we recognize that the State of Hawaii now enjoys three of the eight total U.S.

- Haneda route

- opportunities available to U.S. and Japanese carriers

. Consistent with our ongoing goal of using our limited Haneda rights to address a va riety of public interest objectives, including the objective of geographically diverse gateways, w e tentatively find that the public interest would be be tter served by opening Haneda nonstop access to a new region of the country

, the Pacific Northwest , tha n by allocating a fourth Haneda route to Hawaii

.

Our tentative decision to allow Delta to move its slot pair to Seattle is limited to the proposal considered in this proceeding

. Should any carrier, including Delta, currently serving Haneda wish to change its gateway, it should expect a comparable comparative selection proceeding to determine whether it is in the public interest to allow the carrier to do so.

TERMS, CONDITIONS, AND LIMITATIONS

We have tentatively decided to i mpose a startup condition for this award. If our tentative decision is made final, w e will require Delta to institute its pro posed services within 90 days after the service date of such a final order in this proceeding . In addition , we propose that the

s lot pair allocated in this proceeding be subject to a 90

- day dorma ncy condition, wherein any slot pair not utilized for a period of 90 days (once inaugurated) would be deemed dormant and revert to the Department.

ACCORDINGLY,

1. We tentatively find that it is in the public interest to grant the motion of Delta Air Lines , Inc.
to move one slot pair , currently allocated for Detroit

- Haneda services

, to the Seattle

- Haneda market , rather than select an alternative use for that slot pair ;

2. We gr ant the September 25, 2012

, motion of Hawaiian Airlines, Inc. ;

3. W e tentatively deny the remaining applications in this proceeding;

4 . We direct any interested parties having objections to our tentative findings and conclusions set forth in this order and in ordering paragraphs 1 and 3 above, to file their objections, in the above

- captioned docket, with the Department’s Docket Section, U.S. Department of Transportation, Docket Operations, M

- 30, West Building Ground Floor, Room W12

- 140, 1200

32 United Exhibit , UA

- A

- 104.
33 Delta Reply , at 7 and Delta Exhibit , DL

- R

- 201.8 New Jersey Avenue, S.E., Washington, D.C., 20590, no later than ten (10) calendar days from the date of service of this order; answers thereto shall be filed no later than seven (7) calendar days thereafter; 34

5 . If timely and properly supported objections are filed, we will afford full consideration to the matters or issues raised by the objections before we take further action; 35 if no objections are filed, we will deem all further procedural steps to be waived and will proceed to enter a final order awarding t he authority proposed in this order; and

6 . We will serve this order on the parties to the captioned docket of the order, the Japanese Ambassador to the United States in Washington, DC, the Federal Aviation Administration, and the U.S. Department of Stat e (Office of Aviation Negotiations).

By:

Susan L. Kurland Assistant Secretary for Aviation and International Affairs

(SEAL) An electronic version of this document is available on the World Wide Web at: http://www.regulations.gov

34 The original filing should be on 81⁄2" x 11" white paper using dark ink and be unbound without tabs, which will expedite use of our docket imaging system. In the alternative, filers are encouraged to use the electronic filing submission capability available through the Dockets/FDMS Internet site ( http://www.regulations.gov ) by following the instructions at the web site.
35 As we are providing for the filing of objec tions to this tentative decision, we will not entertain petitions for reconsideration of this order.Appendix A

1 The number of seats shown takes into account blocked seats for crew rest purposes, as carriers noted in their applications. Applicant Proposed Routing U.S.

- Haneda Depart/Arrive Times (Summer) Haneda

- U.S. Depart/Arrive Times (Summer) Type Aircraft Capacity 1

Depart Arrive Elapsed Depart Arrive Elapsed

American Los Angeles

– Haneda 0125 0500 +1 11:35 0005 1820 10:15 B

- 777 247 Seats

– 16 First / 37 Business / 194 Economy

Delta Seattle

– Haneda 1935 2200 +1 10:25 0000 1700 9:00 B

- 767 225 Seats

– 25 Business Elite / 29 Economy Comfort / 171 Economy Hawaiian Kona

– Haneda 1750 2200 +1 9:10 2355 1250 7:55 A

- 330 294 Seats

– 18 Business / 276 Economy

United San Francisco

– Haneda 1900 2215 +1 11:15 0005 1720 9:15 B

- 777 268 Seats

– 7 First / 40 Business / 221 Economy