BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRAN S PORTATION

WASHINGTON D

. C

.

________________________________ _____ _____ ) Joint Application of ) ) UNITED AIRLINES , INC. and ) Docket DOT - OST - 2014 - 0058 SKYWEST AIR LINES, INC. ) and ) Docket DOT - OST - 2014 - 0059 f or an exemption pursuant to 49 U.S.C § 40109 and ) designations (Houston

- Leon/Guanajuato, Mexico ) )

_____________________________________ _____ )

ANSWER OF SOUTHWES T AIRLINES CO

. Communications with respect to this document should be addressed to:

Ron Ricks Robert W. Kneisley Executive Vice President

-- Associate General Counsel Chief Legal and R egulatory Officer Leslie C. Abbott Mark Shaw Senior Attorney Vice President General Counsel & SOUTHWEST AIRLINES CO. Corporate Secretary 919 18 th Street, NW SOUTHWEST AIRLINES CO. Suite 600 2702 Love Field Drive Washington, DC 20006 Dallas, TX 75235

- 1611 bob.kneisley@wnco.com (202) 263

- 6284

May 5 , 20141 BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRAN S PORTATION

WASHINGTON D

. C

.

________________________________ _____ _____ ) Joint A pplication of ) ) UNITED AIRLINES, INC. and ) Docket DOT - OST - 2014 - 0058 SKYWEST AIRLINES, INC. ) and ) Docket DOT - OST - 2014 - 0059 f or an exemption pursuant to 49 U.S.C § 40109 and ) designations (Houston

- Leon/Guanajuato, Mexico ) )

_____________________________________ _____ )

AN SWER OF SOUTHWEST AIRLINES CO

. On April 18, 2014, United Airlines and SkyWest Airlines (d/b/a United Express) (the “Joint Applicants”) filed an application , pursuant to 49 U.S.C. § 40109 and Subpart C of the Department’s Rules of Practice , for an exemption from 49 U.S.C. § 41101 authorizing SkyWest to provide scheduled foreign air transportation between Houston (IAH) and Leon/Guanajuato, Mexico (BJX) beginning on or abou t October 26, 2014 for a period of at least two years

. SkyWest proposes to operate the IAH

- BJX flights under the United Express brand pursuant to a capacity purchase agreement with United. Under the terms of the U.S.

– Mexico Air Transport Services Agreem ent (“U.S.

– Mexico Agreement”), as amended, the United States may designate up to two airlines to provide scheduled service on this route. United and its code

- share partner, ExpressJet (d/b/a United Express) currently hold the two available U.S. carrier designations. United proposes to relinquish its designation once the Department approves the Joint2

Application to enable SkyWest to provide service on the route under the United brand

. 1 Thus, if the United/SkyW est application is granted, the two U.S. des ignations in this
market will continue to be used on behalf of a single carrier

. Southwest does not oppose the grant of the Joint Application at this time, as Southwest is not currently seeking authority to serve the Houston

- BJX market. However, for the reasons detailed below, Southwest urges the Department to put the Joint Applicants on notice that their authority and corresponding U.S. carrier designation s in this market are subject to being rescinded if Southwest were to actively seek competing authori ty to serve the Houston

- BJX market. Southwest believes that no single U.S. carrier should be permitted to occupy two (or more) U.S. designations in limited

- entry U.S.

- Mexico city

- pair markets in cases
where another U.S. carrier has filed a competing ap plication to serve the same market. To allow one carrier to occupy two or more designations under those circumstances
would be plainly anti

- competitive, as it would block a new entrant carrier from entering and competing on that route. The Department has many times recognized the public benefit s generated from competition by new entrant carriers on limited

- designation
routes , particularly to Mexico. 2 Moreover, to allow a single carrier to control two or more designations in a U

. S

. - Mexico market, and ther eby block new entry, would undermine the route rights that the
United States fought long and hard to achieve in negotiations with the Mexican

1 Joint Application, p. 1. 2 See, e.g

. , 2005 Los Angeles

- Mexico City Combination Service Proceeding , Docket OST

- 2005

- 20406 (Order 2005

- 05

- 01), where the Department selected Alaska Airlines due, in part, to its new entrant status and greater public benefits than airlines with existing code

- sha re relationships in the market. Similarly, the Department selected Alaska over Continental and American, in part, due to the greater public benefits that would result from its new entrant status, Los Angeles

- San Jose del Cabo Exemption Proceeding , Docket OST

- 2000

- 8361 (Order 2001

- 1

- 11).3

government . Despite the fact that Mexico is the United States’ third largest trading partner , 3 p rogress in libera lizing trans

- border commercial aviation has been exceedingly
slow. It took the U.S. several decades to achieve the current two or three U.S. carrier designations per city

- pair

. Having fought so long for th e se rights, the Department
should not now permit a single U.S. carrier to occupy two or more designations with its
affiliates and/ or partner carriers when to do so would preclude the very competition and new service options that the U

. S

. sought to achieve. Southwest is aware that the two governments are currently engaged in talks to consider, inter alia , a liberalization of the limits on carrier designations for both countries. We hope these talks succeed in eliminating or at least increasing the current U.S.

- Mexico designation limits, so that Southwe st’s concern with the Joint Application
will cease to exist. However, at the present time there is no assurance that such a
result will be achieved , at least in the near term, and thus the concern remains at this
time

. Southwest is currently construct ing an international terminal at Houston Hobby Airport which will enable Southwest to offer a broad range of competitive U.S. carrier
services from Houston to points in Mexico as well as destinations in the Caribbean and South America. The facility is pro jected to open in the fourth quarter of 2015

. 4 At some point after the Hobby terminal opens, Southwest plans to offer competitive service on
several Houston

- Mexico city pair routes, including Houston

– Leon

.

3 U.S. Census Bureau, statistics for 2014 year

- to

- date, available at : http://www.census.gov/foreign

trade/statistics/highlights/top /top1402yr.html

. 4 For more information on the new Houston Hobby Airport International Facility, see, e.g. , http://aviationblog.dallasnews.com/2013/09/southwest

- airlines

- houston

- officials

- break

- ground

- on - new hobby

- international

- terminal.html/4

Because Southwest is not currently prepare d to offer service on the Houston

- Leon route, however, we do not oppose the grant of United/SkyW est Joint Application at
this time. We concur with the Department’s policy not to let valuable operating rights in
limited

- designation markets go unused, and thus we have no objection to United and its affiliate/partner carriers using the available designations so long as no independent U.S. carrier wishes to provide competing service. However, we do request that the Department make clear in its grant of the J oint Application that the exemption and designation requested by United/SkyW est are subject to being rescinded if another U.S. carrier files an application to provide competing service with its own aircraft on that route. For the reasons given above, such
action is necessary to carry out the Department’s policy of fostering competition and new entry in limited

- designation international markets. Southwest’s request is in fact entirely consistent with the Department’s longstanding policy to promote c ompetition on limited

- entry U.S.

- Mexico routes . For example, the Department addressed a similar issue in 2005 when United and Frontier
raised concerns that Delta’s regional partner ASA was applying for the second ( and final ) U.S. carrier designation on the Salt Lake City

– San Jose del Cabo , Mexico route

. There , ASA was proposing to provide branded s ervice for Delta, which possessed the only other exemption authority in the market

. B ecause neither United nor Frontier presented firm plans to serve the m arket with its own aircraft , the Department granted ASA the requested authority, but stated that: ...should a competing U.S. carrier present a proposal to provide regularly

scheduled service in the subject city

- pair markets with its own aircraft, we5

would be prepared to reconsider whether, in the circumstances presented, award of the authority here continues to be in the public interest. 5 Similarly, the Department stated its willingness to evaluate competing applications from new entrant carriers in a 2003 p roceeding where America West
Airlines and its code

- share affiliate Mesa Airlines held the two available exemption
authorit ies to serve the Phoenix

- Puerto Vallarta/San Jose del Cabo markets. 6 In that
case the De partment used identical language to express i ts concern , stating that if
another U.S. carrier should propose competing service with its own aircraft in that market, “ we would be prepared to reconsider whether, in the circumstances presented, award of the authority granted here continues to be in the public interest.” 7 Southwest requests that the Department take a similar pro - competitive approach
in the Houston

– BJX market that is at issue in this proceeding , putting the Joint Applicants on notice that the authority granted may no longer “be in the pu blic interest” if another U.S. carrier seeks to provide competing service in that market with its own
aircraft

. Respectfully submitted,

______________________ Robert W. Kneisley
May 5 , 201 4

5 Notice of Action Taken , May 11, 2005 (Docket OST

- 2005

- 20927), at 3, Application of Atlantic Southeast Airlines, Inc. to serve the Salt Lake City

- San Jose del Cabo, Mexico market. 6 Notice of Action Taken , February 13, 2004 (Docket OST

- 2003

- 16444), at 3

- 4, Joint Application of America West Airlines, Inc ., and Mesa Airlines, Inc., to serve the Phoenix

- Puerto Vallarta/San Jose del Cabo markets. 7 Id . at 4.C ERTIFICATE OF SERVIC E I hereby certify that on May 5 , 201 4 , a copy of the foregoing was served via e

mail on the following persons: msinick@ssd.com howard.kass@aa.com francis.heil@aa.com sascha.vanderbellen@delta.com sametta.c.barnett@delta.com robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com jhill@dowlohnes.com perkmann@dowlohnes.com dkirstein@yklaw.com jyoung@yklaw.com John.Fredericksen@suncountry.com matwood@cozen.com dan.weiss@united.com gmurphy@crowell.com sseiden@crowell.com temerson@skywest.com pmurphy@lopmurphy.com john.varley@virginamerica.com anita.mosner@hklaw.com jennifer.nowak@hklaw.com Dwight.moore@transcom.mil paul.gretch@dot.gov brian.hedberg@dot.gov brett.kruger@dot.gov reese.davidson@dot.gov urskr@state.gov info@ai rlineinfo.com

__________________________ Leslie C. Abbott