BEFORE THE

OFFICE OF THE SECRETARY

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON D.C.

__________________________________________

)

Joint Application of )

) 

UNITED AIRLINES, INC. and ) Docket DOT-OST-2014-0100

SKYWEST AIRLINES, INC. ) and

) Docket DOT-OST-2014-0101

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

designations (Houston-Puerto Vallarta (PVR) and )

Houston-San Jose del Cabo (SJD), 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

June 24, 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-2014-0100

SKYWEST AIRLINES, INC. ) and

) Docket DOT-OST-2014-0101

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

designations (Houston-Puerto Vallarta (PVR) and )

Houston-San Jose del Cabo (SJD), Mexico) )

__________________________________________ )

ANSWER OF SOUTHWEST AIRLINES CO.

On June 9, 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 on a seasonal basis 

between Houston (IAH), on the one hand, and Puerto Vallarta (PVD) and San Jose del 

Cabo (SJD), Mexico on the other hand, beginning on or about November 1, 2014. 

SkyWest proposes to operate the IAH-PVR/SJD 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 three airlines 

to provide scheduled service on each of these routes. United and its partner carrier, 

ExpressJet (d/b/a United Express), currently hold two of the three available U.S. carrier 

designations on each route. In its application, United proposes to substitute SkyWest’s 
2

United Express service for the United branded service that ExpressJet currently 

provides on these routes. However, judging from the Joint Application, the timing of 

ExpressJet’s return of the designations is not entirely clear and solely within United’s 

discretion. United concedes, in a footnote, that “ExpressJet will retain its operating 

designations until the Department has taken action on the Joint Application, the Joint 

Applicants have begun providing the service requested herein, and ExpressJet has 

given notice to the Department that its operating designations are no longer required.”1

Thus, United appears to contemplate that it will hold or control all three designations for 

an unspecified period of time. And, even assuming ExpressJet relinquishes its 

designations, United will continue to control two designations on both routes.

Southwest does not oppose the grant of the Joint Application at this time, as 

Southwest is not currently seeking authority to serve the Houston-PVR or Houston-SJD 

markets. However Southwest is likely to do so within the next year so that it can initiate 

service once the new international terminal at Houston Hobby Airport is completed.

2

Therefore, for the reasons detailed below, Southwest urges the Department to put the 

Joint Applicants on notice that if either of the markets are fully subscribed, one of their 

authorities and corresponding U.S. carrier designations are subject to being rescinded if 

Southwest were to actively seek competing authority to serve the Houston-PVR and/or

Houston-SJD markets. 

 

1

 Joint Application, p. 3, n.4.

2 Construction of an international terminal at Houston Hobby, 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, is well underway. The facility is projected to open in the fourth 

quarter of 2015. 
3

Southwest believes that the governing principle should be that no single U.S. 

carrier is permitted to occupy or control more than one designation in U.S. - Mexico citypair markets when doing so would block the entry of another U.S. carrier on that route. 

To allow one carrier to control two or more designations under those circumstances 

would be plainly anti-competitive, as it would block a new entrant carrier from 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.3

Moreover, to allow a single carrier to control two or more designations in a U.S. -

Mexico market would undermine the route rights that the United States fought long and 

hard to achieve in negotiations with the Mexican government. Despite the fact that 

Mexico is the United States’ third largest trading partner,

4

the current bilateral 

agreement is highly restrictive and severely limits competition and service from U.S. 

carriers. 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. 

 

3

See, e.g., Order 2005-05-01 (Los Angeles-Mexico City Combination Service Proceeding), May 1, 2005, 

Docket OST-2005-20406, where the Department selected Alaska Airlines due, in part, to its new entrant 

status that produced 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).

4

 U.S. Census Bureau, statistics for 2014 year-to-date, available at: http://www.census.gov/foreigntrade/statistics/highlights/top/top1402yr.html.
4

Therefore, we request that the Department make clear in its grant of the Joint 

Application that the exemptions and designations 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 those routes and no designations are 

available. Southwest’s request is in fact entirely consistent with the Department’s 

longstanding policy to promote competition on limited-entry U.S. - Mexico routes. 

Earlier this year, the Department addressed a similar issue when United and SkyWest 

filed a joint application for the second of two available designations in the IAH-Leon 

(BXJ) market. Southwest answered that application in a similar manner as here. DOT 

granted the joint application but stated that:

should a competing U.S. carrier present a firm proposal to provide 

scheduled Houston-Leon/Guanajuato service, we would be prepared to 

reconsider whether, in those circumstances, award of the authority 

granted here continues to be in the public interest.5

The Department made similar findings 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 route6and in a 

2004 proceeding where America West and its code-share affiliate Mesa Airlines held 

the two available exemption authorities to serve the Phoenix-Puerto Vallarta/San Jose 

del Cabo markets.7 Southwest requests that the Department take a similar procompetitive approach in the Houston – PVR and SJD markets that are at issue in this 

proceeding, putting the Joint Applicants on notice that the authority granted may no 

 

5 Notice of Action Taken, May 27, 2014 (Dockets DOT-OST-2014-0058 and DOT-OST-2014-0059), at 2.

6 Notice of Action Taken, May 11, 2005 (Docket OST-2005-20927), at 3.

7 Notice of Action Taken, February 13, 2004 (Docket OST-2003-16444), at 3-4.
5

longer “be in the public interest” if another U.S. carrier seeks to provide competing 

service in either market with its own aircraft. 

Respectfully submitted,

______________________

Robert W. Kneisley

June 24, 2014
6

CERTIFICATE OF SERVICE

I hereby certify that on June 24, 2014, a copy of the foregoing was served via email on the following persons:

msinick@ssd.com

howard.kass@aa.com

bob.wirick@aa.com

sascha.vanderbellen@delta.com

sametta.c.barnett@delta.com

chris.walker@delta.com

robert.cohn@hoganlovells.com

patrick.rizzi@hoganlovells.com

jhill@cooley.com

perkmann@cooley.com

dkirstein@yklaw.com

jyoung@yklaw.com

thomas.ting@suncountry.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

john.s.duncan@faa.gov

info@airlineinfo.com

__________________________

Leslie C. Abbott