September 15, 2014 

Darrell B. Buchbinder, Esq. 

General Counsel 

Port Authority of New York and New Jersey 

225 Park Avenue South 

121h Floor 

New York, NY 10003 Dear Mr. Buchbinder: 

I write to follow up on the conversations United Airlines (United) has had with Port 

Authority of New York and New Jersey (Port Authority) representatives in person, by 

telephone and in writing, for more than a year about the excessive and unreasonable 

costs that the Port Authority requires United to pay at Newark Liberty International 

Airport (EWR), costs that are grossly disproportionate to those paid by carriers serving 

the New York airports. 

As United representatives have discussed with Port Authority officials, the Port Authority 

requires carriers at EWR to pay significantly higher rates and charges than it requires 

carriers at John F. Kennedy International Airport (JFK) and LaGuardia Airport (LGA) in 

New York to pay. United has many times requested that the Port Authority reduce the 

2014 EWR Flight Fee and other charges at EWR and eliminate the fee disparity 

between EWR and its New York airports. The Port Authority, however, continues to 

charge United these excessive, unreasonable, and discriminatory fees at EWR, which is 

one of the country's most important hubs and a critical gateway to the Atlantic for the 

traveling public. 

Under federal law, the Port Authority is required to operate EWR "for the use and 

benefit of the public, on fair and reasonable terms, and without unjust discrimination." 

14 C.F.R. Part 152 App. D. In fact, however, the Port Authority, contrary to the interests 

of the traveling public and the aeronautical users of the airport, imposes excessive, 

unreasonable, and discriminatory fees at EWR in order to generate substantial financial 

surpluses that it unlawfully diverts to fund loss-making non-aeronautical operations and 

projects. 

Instead of functioning in accordance with its grant assurances and as a prudent airport 

proprietor that charges users only what is necessary to cover its aeronautical costs, the 
airlines pay excessive and unreasonable fees for non-airport projects. 

The rate-making structure at EWR violates federal law and results in unreasonable and 

discriminatory aeronautical charges in at least the following ways: 

• The airfield fees paid by United should be related to recovering the costs of 

operating and maintaining the airfield and must be transparent and reasonable. 

See, e.g., Rates and Charges Policy, 78 Fed. Reg. 55,330, 55,333-35 (Sep. 10, 

2013), §§ 2-2.72. Yet, the EWR Flight Fee is set through a hidden "cost-plus" 

formula that creates a mark-up of as much as 38% above actual costs. This 

formula creates a perverse incentive for the Port Authority to increase the 

expenses included in the rate base, because the more "costs" the Port Authority 

passes on to the airlines, the more profit it earns. 

• The hidden mark-up in the EWR Flight Fee contributes to a discriminatory rate 

structure that significantly impacts United. By the Port Authority's own reckoning, 

the disparity between rates at EWR and those at JFK cost United approximately 

$37 million in 2013. That disparity will increase in 2014 and every year 

thereafter. 

• The Federal Aviation Administration (FAA) has recognized that accumulation of 

surplus revenues may warrant an investigation into the reasonableness of rates. 

See, e.g., 78 Fed. Reg. at 55,335. EWR typically generates an annual surplus in 

excess of $160 million. In the five year period 2007-2011, EWR gave the Port 

Authority a staggering $1.6 billion in operating cash flow. This is money the Port Authority collects from United and other airlines, but that far exceeds the costs of 

operating EWR. 

• Since 2004, the Port Authority has diverted more than $2 billion from the New 

York area airports to non-airport uses. At the same time, the airfield fees at EWR 

are by far the highest in the nation - 59% higher than at the next most expensive 

non-Port Authority airport (Chicago O'Hare) and even 75% higher than at JFK, 

which is operated by the Port Authority. 

• The EWR rate base includes excessive and unreasonable administrative costs, 

largely the result of unconstrained spending on overtime and other benefits. 
million. Making the financial impact even worse, the Port Authority also charges 

a mark-up on these costs. Security costs have risen 40% since 2010. While 

security is a necessary cost at all airports, high salaries and benefits, as well as 

excessive overtime, contribute to unreasonably high expenses at EWR. 

The Port Authority's practice of passing on costs and charging a profit that is a 

percentage of costs acts as a disincentive to control costs and encourages irresponsible 

fiscal decisions by the Port Authority. The more the Port Authority charges, the more 

profit it makes, and the more profit it makes at EWR, the more money it has to spend 

elsewhere on projects unrelated to the airport and the people it serves. 

Meanwhile, the federal government pours hundreds of millions of dollars of airport grant 

money into EWR and airlines pay hundreds of millions of dollars in fees at EWR. The 

federal government pays the grant money with the expectation that it will be wisely and 

effectively used to improve the safety and efficiency of the airport. But much of it is not. 

The Port Authority has, in effect, absolute monopolistic power over the airlines as the 

airport sponsor and it has used this power to charge excessive fees to the airlines in 

order to subsidize non-aeronautical projects. The Port Authority's practice is unfair, 

unreasonable, and unsound public policy. At a minimum, it violates federal airport grant 

assurances. 

The most egregious, recent example of the Port Authority's imposition of excessive 

costs on United and other airlines is the Port Authority's implementation of the revised 

ARFF program. While the safe and legal operation of Port Authority airports is of the 

highest concern to United, such operation did not require the extremely inefficient and 

costly measures the Port Authority has taken to implement that program. 

The Port Authority determined to staff ARFF with airport police, trained as firefighters, 

each of whom will cost the Port Authority an average of $240,000 annually in 

compensation, overtime, and benefits, an amount well in excess of the market for 

trained firefighters. The Port Authority's budget for the 2014 ARFF costs includes 

mandatory overtime expense (required by the collective bargaining agreements with its 

unions) that totals 42% of straight-time expense. The Port Authority will include the 

entire cost of the ARFF in the EWR Flight Fee rate base, along with a $9 million markup. United's costs at EWR will increase by more than $25 million annually and almost 

510% more than in 2012 as a result of the revised ARFF program. 
ARFF duties even though such officers will not perform ARFF functions. We are not 

aware of any other major airport that cross-trains police and firefighting personnel in this 

manner. United appreciates the Port Authority Police Department, its individual officers' 

work to execute this important mandate and their daily efforts to ensure the safety of the 

traveling public and airline and airport personnel. Our criticism lies with the Port 

Authority's decision to implement the FAA requirements in a manner that is 

unnecessarily inefficient and costly, unreasonable, and does not comport with industry 

practice. 

Given the massive cost increase from ARFF and the overall growing impact of our cost 

burden disparity with New York airport-based carriers, we respectfully suggest that it is 

appropriate for the Port Authority to consider both: (1) revising the New Jersey carriers' 

leases to achieve a reasonable and non-discriminatory fee structure; and (2) reducing 

the unreasonable ARFF and other security and administrative costs included in the 

Flight Fee. Doing so would be consistent with federal law; the former would also ensure 

a level competitive playing field for airline operations in New Jersey and New York. 

While United and other New Jersey carriers have signed leases in effect for our 

operations at EWR, the Port Authority's acknowledgement that the EWR rate-making 

formula creates a huge disparity with JFK rates confirms that those leases have come 

to operate in a way that creates unreasonable rates and charges and a disproportionate 

impact on New Jersey's airline operations versus those of the Port Authority's New York 

airports. 

Within the past year alone, United has made numerous good faith efforts to informally 

resolve its complaints. Between September 2013 and May 2014, for example, Nene 

Foxhall, United's Executive Vice President for Communications and Government Affairs, 

had seven meetings and three phone calls with senior Port Authority officials. Our CEO 

Jeff Smisek has also met with Port Authority officials. To date, these efforts have been 

fruitless. One Port Authority response has been to suggest that United assume your 

compliance burden by increasing its operations at EWR so that the Port Authority would 

not see a loss of revenue if the Port Authority reduced EWR charges to a reasonable, 

non-discriminatory level. Such a plan is not feasible, and it should not be necessary for 

United to take on additional burdens to protect the Port Authority's unlawful revenue 

stream. 
Before doing so, however, and in compliance with 14 C.F.R. § 16.21, United requests 

one further effort at informal resolution with the Port Authority. We request a meeting 

with you or your designee at your earliest convenience, but no later than thirty days 

from the date of this letter. The goal of the meeting is for the Port Authority to agree to 

alter its rate-making at EWR so as to comply with federal airport grant assurances by 

charging fees at EWR that are fair and reasonable, including reducing the unreasonable 

ARFF and other security and administrative costs included in the Flight Fee. 

I look forward to hearing from you. 

Sincerely, 

Brett Hart 

General Counsel 

cc: Robert Span, Steinbrecher & Span LLP 

Marc Warren, Crowell & Moring LLP