BEFORE THE

OFFICE OF THE SECRETARY

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON D.C.

__________________________________________

)

Joint Application of )

) 

UNITED AIRLINES, INC. and ) Docket DOT-OST-2014-0058

SKYWEST AIRLINES, INC. ) and 

) Docket DOT-OST-2014-0059

for an exemption pursuant to 49 U.S.C § 40109 and )

designations (Houston-Leon/Guanajuato, Mexico) )

__________________________________________ )

ANSWER OF SOUTHWEST 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 Regulatory Officer Leslie C. Abbott

Mark Shaw Senior Attorney

 Vice President General Counsel & SOUTHWEST AIRLINES CO.

 Corporate Secretary 919 18th 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, 2014
1

BEFORE THE

OFFICE OF THE SECRETARY

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON D.C.

__________________________________________

)

Joint Application of )

) 

UNITED AIRLINES, INC. and ) Docket DOT-OST-2014-0058

SKYWEST AIRLINES, INC. ) and

) Docket DOT-OST-2014-0059

for an exemption pursuant to 49 U.S.C § 40109 and )

designations (Houston-Leon/Guanajuato, Mexico) )

__________________________________________ )

ANSWER 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 about 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 Agreement (“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 Joint 
2

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

1

 

Thus, if the United/SkyWest application is granted, the two U.S. designations 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 

designations in this market are subject to being rescinded if Southwest were to actively

seek competing authority 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 application 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 

benefits 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 thereby 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-share 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

progress in liberalizing 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 these 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 Southwest’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 constructing 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 projected 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/foreigntrade/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-newhobby-international-terminal.html/
4

Because Southwest is not currently prepared to offer service on the Houston -

Leon route, however, we do not oppose the grant of United/SkyWest 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 Joint 

Application that the exemption and designation requested by United/SkyWest 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 competition 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 service for Delta, which possessed the

only other exemption authority in the market. Because neither United nor Frontier 

presented firm plans to serve the market 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 regularlyscheduled service in the subject city-pair markets with its own aircraft, we 
5

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 proceeding where America West

Airlines and its code-share affiliate Mesa Airlines held the two available exemption 

authorities to serve the Phoenix-Puerto Vallarta/San Jose del Cabo markets.6In that 

case the Department used identical language to express its 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 public 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, 2014

 

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.
CERTIFICATE OF SERVICE

I hereby certify that on May 5, 2014, a copy of the foregoing was served via email 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@airlineinfo.com

__________________________

Leslie C. Abbott