**BEFORE THE**
**DEPARTMENT OF TRANSPORTATION WASHINGTON, D. C.** 

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**REPLY OF AMERICAN AIRLINES, INC.** 
Communications with respect to this document should be sent to:
VIRASB VAHIDI WILLIAM K. RIS, JR. Senior Vice President

- Senior Vice President

- Marketing and Planning Government & Regulatory and Chief Commercial Officer Affairs American Airlines, Inc. American Airlines, Inc. P.O. Box 619616, MD 5634 1101 17 th Street, N.W. DFW Airport, Texas 75161 Washington, D.C. 20036
ROBERT A. WIRICK FRANCIS C. HEIL Managing Director, Regulatory Senior Attorney and International Affairs American Airlines, Inc. American Airlines, Inc. 1101 17 th Street, N.W. P.O. Box 619616, MD 5635 Washington, D.C. 20036 DFW Airport, Texas 75261 (202) 496

- 5642 (817) 963

- 0394 francis.heil@aa.com robert.wirick@aa.com

May 14 , 20131 **T HE** 
**DEPARTMENT OF TRANSPORTATION WASHINGTON, D. C.** 

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**REPLY OF AMERICA N AIRLINES, INC** 
.
American Airlines hereby replies to the answer submitted in this proceeding by Delta Air Lines on May 3, 2013. Because there is almost nothing new in Delta's pleading, our reply will be brief. The Department should promptly conclude this case by granting American's application in full, with seven frequencies
t o open a new gateway to Sao Paulo at Los Angeles, the largest U.S. city without nonstop service to Brazil, and with seven to bring intra

- gateway competition to Chicago.

**•** Delta again tries to bootstrap its way into getting seven of the 28 available frequencies by arguing that in order to continue serving Sao Paulo from Detroit, it must have that allotment to replace what it sold to US Airways. As a matter of sound policy, the Department should not reward Delta's improvident behavior at the expense of the other applicants, which would be placed in the position of paying Delta's debt
.2 **•** As it did in its supplement on April 24, 2013, Delta
counts and recounts American 's present holding of Brazil frequencies as if this were a disputed Presidential election. Indeed, Delta engages in this counting exercise more than 25 times in its supplement, answer, and accompanying exhibits. But that is not how the Department decides selection cases. In the 2007 U.S.

- China case, F inal Order 2007

- 2

- 10, dated February 6, 2010, p. 6 , the Department stated: "We are not persuaded by Continental's argument that because of United's position as the carrier having the largest number of frequ encies in the market, United's selection is counter to the Depar tment's pro

competition policy. ... The public interest benefits of United's service proposal

- gaining the first

- ever nonstop service to China from a new gateway, coupled with the largest cap acity t o maximize the benefits of that new service

- [are] compelling".

**•** Delta's answer neglects to mention that it holds two unrestricted frequencies that it is not using to serve Sao Paulo, or that since February 2009, a period of more than four
years, it has not taken advantage of the extra section opportunities offered by the Brazilian aeronautical authorities. From March 2009 to May 2013, when Delta operated zero Sao Paulo extra sections, American operated 553 (Exhibit AA

- SR

- 1 ).3 Had Delta op erated the same number of extra sections and used its two weekly dorman t S ao Paulo frequencies, Delta would have added 4 weekly round trip flights to Sao Paulo during this period. Clearly, Delta should not be preferred for an award where it has left signi ficant rights unexercised for a prolonged period.

**•** Delta continues to argue, without case support, that the proposed American/US Airways merger compels treating the two carriers as a single applicant. The Department's precedents say just the oppo site. See Order 2010

- 11

- 10, November 10, 2010, p. 1 n. 3, treating United and Continental as separate entities pending the Department's final action on their de facto route transfer application.

**•** Delta asserts that the Department has been "very
g enerous" to American by granting our application for 17 Brazil frequencies in 2012, which included seven R i o de Janeiro "backfill" frequencies to replace Sao Paulo eligible rights that American had been using at Rio but was transferring to Sao Paulo. Amer ican was not the beneficiary of any special
treatment in that proceeding. Ample unallocated frequencies were available, neither Delta nor any other carrier objected, and the Department took favorable action as it always does in such circumstances (DOT

- OST

- 2012

- 0079). As for seeking unallocated Rio frequencies to backfill a transfer of4 unrestricted frequencies to a Sao Paulo route, that practice was used by Delta in 2010 (DOT

- OST

- 2010

- 0186). Delta has no basis to suggest that there was anything unusual or questionable about American's following the same path in 2012.

**•** In an effort to mask the fact that it is seeking 21 of the 28 frequencies at issue, Delta again tries out the notion that on an "incremental" basis it is requesting only 14 because i t is merely recouping the seven it sold to US Airways. But the reality is that Delta wants 21, leaving just seven for the other applicants
. Under Delta’s scheme , fewer frequencies would be available for American and US Airways, which would end up footing the bill for Delta’s sale of valuable Sao Paulo rights.

**•** Not surprisingly, Delta's answer says nothing about capacity. Delta proposes to use 210

- seat B767 aircraft, the smallest equipment offered by any applicant. American, with
247

- seat B777s, has a 17.6 percent capacity advantage over Delta, or 27,010 annual roundtrip seats. The Department has long recognized the importance of capacity in selecting carriers to serve limited entry routes. See 2007 China case, Order 2007

- 1

- 4, p. 17 and 2010 Ha neda case, Order 2010

- 5

- 7, p. 10.5 Indeed, in the Haneda case, Delta said that it "will provide the largest capacity aircraft maximizing U.S.

- Haneda benefits," and that the Department has on numerous occasions stated that the size of the aircraft and am ount of capacity delivered by the applicant is an important selection criteria for maximizing public benefits in carrier selection cases" (Delta Answer, DOT

OST

- 2010

- 0086, March 1, 2010, p. 13).

**•** While Delta calls Detroit

- Sao Paulo a "successful" service, its load factor do es not support such a claim. Based
on T

- 100 data for the year ended October 31, 2012, the most recent year with publicly available numbers , Delta's load factor

was just 71 percent, and in three of the months was in the 5 3

- 59 p ercent range ( See Exhibit AA

- SR

- 2)
. Furthermore, these load factors were on 210

- seat aircraft. If Delta had been operating larger a ircraft, as America n has proposed, Delta's Detroit

- Sao Paulo annual load factor would have been even less
.

**•** Delta is the only applicant not proposing to serve Sao Paulo from a new gateway. Delta would use all 21 of the 28 frequencies it is seeking at its existing Atlanta, New York, and Detroit gateways by adding a second trip at Atlanta, a sixth trip at New York, and continuing to serve the Detroit

- Sao Paulo route with a free refill (at the expense of the other applicants) of the frequencies it sold to US Airways. American, in contrast, will provide far greater benefits to the public by6 opening Los Angeles as a new g ateway to Brazil, and introducing intra

- gateway competition against United Air Lines at Chicago. The Department's consistent policy in selection cases is to favor new gateway proposals. See 2007 China case, Order 2007

- 1

- 4, January 6, 2007, p. 19. The De partment should follow that well

- established policy here as well.

**•** American's application to serve the Los Angeles

- Sao Paulo and Chicago

- Sao Paulo routes has received strong public support which we are submitting under a separate cover letter.
Su pporters of American’s Los Angeles

- Sao Paulo proposal include
Senator s Dianne Feinstein, Barbara Boxer, 2 1 U.S. Representatives from California, the L t. Governor of California, the M ayor of Los Angeles , and Los Angeles World Airports, the operator of LAX . Supporter s of Amer ican’s Chicago

- Sao Paulo proposal include all 18 U.S. Representatives from Ill i nois and the Mayor of Chicago . American has received substantial additional support from business leaders, c hambers of c ommerce, and economic development organizations, and mor e than 2000 American employees at Los Angeles and Chicago.7 **CONCLUSION** The proposals are submitted and the record is clear. To secure the greatest public benefits, American should be awarded 14 fre q uencies to fund its proposed service to Sao Paulo fro m Los Angeles (2013) and Chicago (2014)
.

Respectfully submitted,

__________________________ Francis C. Heil Senior Attorney American Airlines, Inc.

May 14, 2013OST 2013-0072 Exhibit AA-SR-1 Page 1 of 1

Source: OAG Year Round Trip Flights 2009 (March - December) 75 2010 93 2011 151 2012 172 2013 (January - May) 62 TOTAL 553

Year Round Trip Flights 2009 104 2010 104 2011 104 2012 104 2013 104 TOTAL 520
TOTAL U.S. - SAO PAULO ROUND TRIP FLIGHTS DELTA COULD HAVE OPERATED 1073 DELTA HAS FAILED TO UTILIZE SIGNIFICANT OPPORTUNITIES AVAILABLE TO INCREASE ITS U.S. - BRAZIL SERVICES

U.S. - SAO PAULO FREQUENCIES LEFT ON THE TABLE BY DELTA U.S. - SAO PAULO EXTRA SECTION ROUND TRIP FLIGHTS FLOWN BY AMERICAN

HAD DELTA UTILIZED THE OPPORTUNITIES AVAILABLE IT COULD HAVE OPERATED AN ADDITIONAL 4 WEEKLY ROUND TRIP FLIGHTS IN THE PERIOD 2009 MARCH - 2013 MAYOST 2013-0072 Exhibit AA-SR-2 Page 1 of 1

Source: T100 YE October 2012 Month / Year Operations Seats Onboard Load Factor Oct-12 62 13,020 10,727 82.4% Sep-12 59 12,390 10,417 84.1% Aug-12 60 12,600 9,915 78.7% Jul-12 60 12,600 10,410 82.6% Jun-12 60 12,600 8,968 71.2% May-12 60 12,600 8,307 65.9% Apr-12 59 12,390 6,945 56.1% Mar-12 62 13,020 6,829 52.5% Feb-12 58 12,180 7,139 58.6% Jan-12 61 12,810 10,274 80.2% Dec-11 54 11,340 7,912 69.8% Nov-11 41 8,610 5,523 64.1% AVERAGE 70.7% 

### DELTA'S ANNUAL DETROIT - SAO PAULO LOAD FACTOR IS BARELY ABOVE 70% AND IN 3 MONTHS WAS IN THE 53% - 59% RANGE**CERTIFICATE OF SERVICE**

I hereby certify that I have this day served the foregoing document by email on the following persons: sascha.vanderbellen@delta.com t homas.bolling@united.com dan.weiss@united.com karine.faden@united.com benjamin.slocum@usairways.com howard.kass@usairways.com

_____________________ Francis C. Heil

May 14 , 2013