JULIE OETTINGER

MANAGING DIRECTOR–INTERNATIONAL & REGULATORY AFFAIRS

(202) 296-2370 

(202) 296-2869 FAX

JULIE.OETTINGER@UNITED.COM

March 1, 2010 

Susan Kurland 

Assistant Secretary for Aviation 

 and International Affairs 

U.S. Department of Transportation 

1200 New Jersey Avenue, SE. 

Washington, D.C. 20590 

Re: Small Community Air Service Development Program 2009,

 Order 2010-2-12, Docket DOT-OST-2009-0149

Dear Ms. Kurland: 

 In the referenced order issued last week, the Department made a number of grants 

under the Small Community Air Service (“SCAS”) program. These included awards of 

$1 million to Huntsville, AL (“HSV”) which filed an application that included a proposal 

of service to Washington/Baltimore and Orlando and $500,000 to Knoxville, TN 

(“TYS”) which filed an application proposing service to, inter alia, 

Washington/Baltimore, Denver or Chicago.1 Because United serves the HuntsvilleWashington/Baltimore and Knoxville-Washington/Baltimore markets on an unsubsidized 

basis, United submitted comments to the Department expressing concern about these 

applications. See, United letter dated October 2, 2009. In view of the Department’s 

recent grant awards to HSV and TYS, United is now writing to urge the Department to 

clarify that any use of these grants to HSV or TYS to subsidize additional service to 

 

1

 TYS suppressed from the public version of its application any specific identification of the cities 

for which it seeks SCAS funds. While it identifies Washington/Baltimore, Chicago and Denver 

as examples of cities for which subsidy might be offered, a supporting letter attached to the 

application singles out Washington/Baltimore as the top priority for subsidized service. See letter 

of East Tennesseans for Airfare Competition (ETAC) dated August 27, 2009 and attached as 

Exhibit 2 to TYS’s application (ETAC is one of the two sponsors of the TYS application, along 

with the Metropolitan Knoxville Airport Authority). United offers multiple daily services with its 

United Express product in all three markets and objects equally to SCAS awards being used to 

subsidize service from Knoxville to either Chicago or Denver for the same reasons applicable to 

Washington/ Baltimore. Because of ETAC’s prioritization, United in the text refers only to 

Washington/Baltimore but objects equally to any use of SCAS funds to support new subsidized 

service to Denver or Chicago as well. 
March 1, 2010 

Page 2 

 

Washington/Baltimore (or any other city where existing service is being operated) is 

inconsistent with the Department’s policies and would be prohibited.2 

United is concerned with the anti-competitive use of SCAS funds. 

In its October 2 letter, United raised its concern with the grant applications of HSV 

and TYS to the extent that they sought a grant to subsidize the introduction of additional 

service to Washington/Baltimore. Such a grant would be in clear conflict with the 

Department’s long-standing policy of not awarding SCAS grants to fund competing 

service in a city-pair market that is already served, which would be the case of the citypair markets identified above where United Express currently operates multiple daily 

non-stop flights. The Department restated this policy in its order inviting applications for 

SCAS grants from this year’s appropriation when it noted that it “is reluctant to subsidize 

one carrier but not others in a competitive market.” Order 2009-7-11 at page 3. Based 

on this concern, the Department has required that communities requesting grants for 

duplicative service should not only meet such basic selection criteria as “insufficient 

service” and “unreasonably high fares,” but also that they should: 

“...explain in detail why the existing service is insufficient or 

unsatisfactory, or provide other compelling information to support such 

proposals. This information is necessary for the Department to consider 

the competitive implications of giving financial or other tangible 

incentives for one carrier that the other carrier is not receiving.” 

 

Id. 

 As United noted in its October 2 letter, the grant applications of HSV and TYS 

made no effort to provide the detailed analysis required by the Department to 

demonstrate a need for subsidized competition in the Huntsville-Washington/Baltimore 

or Knoxville-Washington/Baltimore markets. In addition, these cities’ concerns with fare 

levels seemed to be general and had no particular applicability to the Washington/ 

Baltimore market. Nor did they offer any detailed analysis in an attempt to demonstrate 

that the multiple daily nonstop flights by United Express and other carriers were 

“insufficient or unsatisfactory” to meet the needs of any specific market as required by 

the Department’s order.3

The Department’s 2009 SCAS Awards did not address United’s concerns. 

 Unfortunately, the Department’s Order 2010-2-12 makes no reference to the 

markets for which it is awarding the grants to HSV and TYS, and United can only 

2

 United on this date will be filing a copy of this letter in the above-referenced docket.

3

 Additional multiple daily services are operated in the Huntsville-Washington/Baltimore market 

by Delta and USAirways and in the Knoxville-Washington/Baltimore market by USAirways. 

The Knoxville-Chicago market is served daily by both United Express and American Eagle. 
March 1, 2010 

Page 3 

assume that the Department intended that certain limits exist on grant utilization 

consistent with the statement of the Department’s policy in Order 2009-7-11 quoted 

above. Specifically, in light of the Department’s repeated policy statements on this 

matter, United believes that any use of the awards to HSV or TYS to subsidize additional 

service by one carrier where another is already operating unsubsidized service would 

require a detailed discussion by the Department of the “competitive implications” of the 

award on United’s multiple daily services in the Huntsville-Washington/Baltimore and 

Knoxville-Washington/Baltimore markets. Absent such a specific earmark of funds for 

subsidizing additional services in these markets which already have service and a 

discussion justifying such a subsidy, United assumes that the Department intended for the 

grants to HSV and TYS to be wholly devoted to subsidizing services in entirely new 

markets also identified in their respective applications and consistent with Departmental 

policies.4 

 

 For the foregoing reasons, United urges the Department to clarify that using any 

portion of HSV’s $1 million or TYS’s $500,000 grants to subsidize service to 

Washington/Baltimore (or Chicago or Denver) is inconsistent with the Department’s 

policies in this case and is prohibited under those policies. Absent such a clarification, 

the Department should provide a full and detailed explanation as to how it could find that 

subsidizing service in these markets would be consistent with its policy quoted above in 

light of the failure of both HSV’s and TYS’s grant applications to provide the detailed 

information that would be required to comply with that policy. The Department’s 

explanation should address specifically the competitive implications of subsidized service 

by another carrier in these markets and how such service would affect fare levels in these 

and other markets. 

 Respectfully submitted, 

 Julie Oettinger 

 Managing Director—International & 

 Regulatory Affairs 

cc: Docket Section 

 Todd Homan 

 

4 In the case of HSV, the other market identified where it is considering subsidization of new 

service is Orlando, where there is today no nonstop service to Huntsville. TYS did not disclose 

the markets in which it intended to offer subsidy for new service except to name Washington/ 

Baltimore as its top priority.