# VIA FEDERAL EXPRESS September
26, 2014 Mr. Brett



# J . Hatt Executive Vice President and General Counsel and Secretary United Airlines 233 South Wacker Drive Chicago,
IL 60606 Dear Mr. Hart:



# THE PORT AUTIIORnY

OF NY & 

# NJ I am responding

to your letter dated September

15

1 

## h 

# to Mr. Buchbinder

. Your

l etter complains about the rates and charges United Airlines (UAL) pays at Newark International Airp01t (EWR) and advises that UAL
is prepared

to initiate

a formal proceeding with the FAA to challenge those rates and charges, should one final effmt between UAL and the Port Authority fail to result in an alteration
of the rates at EWR. The Port Authority remain

s willing
to continue

it s dialogue with UAL on EWR rates and charges. UAL
is EWR's

l argest ten ant with 70% market share and, as we under stand, UAL's most profitable market
in the US. Therefore,
we recogni ze the importance

of EWR
to UAL and, of course, the Pmt Authority. Additionally,

as has been previously related

to UAL business repre

s entatives

, the Port Authority takes seriously
its federal obligations

as airport sponsor. However

, before this dialogue continues,

it is impmtant

to recognize the federal ground rules which govem rates and charges

- rul es which govem the issues raised
in your letter but which are simply ignor

e d. Your letter states that the rate-making

at EWR "violates federal

l aw and resu

l ts in unr easonab

le and discriminatory charges.

. ." As you may know,
in 2005 and 2006, prior

t o the VAL/Continental Airlines merger, Continental Airlines raised with the Port Authority virtually the same issues that are set fmth in your recent

l ette
r , including complaints that EWR's flight fee is the highest
in the country, that EWR generates substan tial

r evenue

s urpluses and that such surpluses are being

u sed for non-aeronautical purposes.

In 

# re sponding

to these claims,
th e Pott Authority reminded Continental

th at the rate

s and charges which were the subjec

t of it s inquiry were the re su lt of a long-standing written agreement between Contine nta

l and the Pmi Authority, entered into willingly, containing fmmulas and
a methodology

for th e computation

of those fees. As such, we noted that under Depatiment

of Transportation Rates and Charges Policy, Continental was bound by the agreeme

nt struck wit h the Pmt Authority and its protestations about the perceived inequity
of that formula did not change that fact.

### THE PORT AUTIIORnY

O F N Y & 

### N J Now more than nine years later

, after having merged with Continental

, UAL assumed the same agreement. You cited what you characteri

ze as numerous ways in which EWR

r ates and charges violate federal law, and threaten

to ask the FAA to investigate those rates and charges, ignoring the fact that UAL is bound by this written agreement which sets those rates. In fact, in 2013, the FAA restated the policy referred

to in our prior correspondence,

and clearly restated that

- "[T]he Depa11ment will not entertain

a complaint about the reasonablene

ss of a fee set by agreement filed by
a pat1y
to the agreement
sett ing the disputed fee." 78 Fed. Reg. 55330, 55332 (September

10, 2013). compare,

61 Fed. Reg. 31994,32018 (June 21, 1996). Your company appears
to take the position that the federal govemment

h as left open the option of a grant assurance challenge

to rates and charges
by an air canier before the FAA as long as such challenge bypasses the Depru1ment

of Transpm1ation expedited rates and charges proceedings under Section 113 of th e Federal Aviation Authorization
Act of 1994, 49 USC 47129. However, that position

is simply incorrect. The Rates and Charges Policy notes that the Authorization
Act expressly excludes challenges

to fees imposed pmsuant

to a written agreement with air carriers. The Rates and Charges Policy also makes clear that an "FAA proceeding

is not intended

to provide

a mechanism

for adjudicating

the respective rights of the pa11ies
to a fee dispute" and while, the Department might entertain

a complaint about "reasonableness

of a fee set by agreement filed by an aeronautical user who is not
a party to the agreement",

as noted above,

it plainly states that it "w ill not ente rtain"

a complaint

by one who
is a pa11y to such

a written agreement.

78 Fed. Reg. at 55332. Further, while the Pm1 Authority stan d s ready to continue

to communicate with you about the i ssues rai se d in your letter, some comments

on the points you raise are warranted. Your letter refers to a "hidden 'cost-plus' f01mula

" t hat creates

a mark up in the EWR flight fee and results
in a high

e r fee than paid by carriers

at New York aitports.



### It would appear that you are referencing
the methodology

for calculating flight fees that appears

in your agreement. That methodology provides for
a factor on dire ct costs to cover indirect costs, which are not otherwise reimbursed

at EWR. Such costs are recovered directly

at the New York ailports. As to th e accumulation

of

s urplu ses, th e amounts referenced

in your letter would appear
to include non-aeronautical revenues. However,
the Rates and Charges Policy makes

c l ear that an aeronautical

us er is not entitled
to shru·e in non-aeronautical

re venues, absent an agreement with the airp011 proprietor

to do so

. Id

. at 55333. As to UAL's asse11ion

th a t th e EWR

r ate base includes excessive costs due to the Port Authority's failure
to control operating expenses, including security costs, the Pm1 Authority would note that from 2010 through 2013 flight fee-related fixed charges, the largest component of that factor, have re mained

fl a t as h ave the age ncy 's general administrative charges.
As the tra ve 1lin g public know

s well, incr eased sec urity costs have been an unfortunate outgrowth

of the 2lHEPORTAUTHORRYOFNY&NJeventsof9/11andthePortAuthorityhasabsorbedsignificantamountsofsuchcostsasadirectresultofthenecessaryprecautionstakenafterthatevent.TheseprecautionshavebeenimplementedtoprotectthesafetyofthetravelingpublicbothUALandthePortAuth01ityserve.AsIamsureyouagree,safetyandsecuritymustremainourtoppriority.Finally,UALreferstoincreasedcostsduetothePortAuthority'simplementationoftheAircraftRescueandFireFighting(ARFF)Cadre.Atthesametime,byrequestingare.visiontothecarriers'leasestomitigatetheeffectofthesecharges,UALappearstoacknowledgethattheresultingratesandchargesareanoutgrowthofthefeestructureintheleaseagreement.Inrecentdiscussions,theP01tAuthorityhasacknowledgedthatthecreationandimplementationoftheARFFCadre,asrequiredbytheFAA,hasledtoanincreaseincoststoEWRairlinesthatwanantstheexplorationofmethodstolessenthisimpact.TheP01tAuthoritystandsreadytomeetwithUALand looksforwardtoamoreproductivedialogueonthesematters,butemphasizesitsbeliefthatforthereasonsstated,suchadialogue,ratherthanthepursuitofthemeritlessadminish·ativelitigationmentionedinyourletter,istheappropriatecourse.1/CarleneV.McintyreAssistantGeneralCounselcc:DarrellBuchbinder,Esq.Robe1iS.Span,Esq.MarcL.Warren,Esq.3