BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Motions and Application of AMERICAN AIRLINES, INC. HAWAIIAN AIRLINES, INC. In the matter of 2010 U.S. - Haneda Combination Services Allocation Proceeding ) ) ) ) ) ) ) ) Docket DOT - OST - 2010 - 0018

PETITION OF DELTA AIR LINES, INC

. FOR RECONSIDERATION OF ORDER 2014 - 12 - 9 Communications with respect to this document should be addressed to: Glen Hauenstein Executive Vice President

& Chief Revenue Officer Robert J. Cortelyou Senior Vice President

– Network Planning DELTA AIR LINES, INC. 1030 Delta Boulevard Atlanta, Georgia 30320 Seth P. Waxman Kelly P. Dunbar WILMER CUTLER PICKERING

HALE AND DOOR LLP 1875 Pennsylvania Avenue, N.W. Washington D.C. 20006 (202) 663

- 6000 seth.waxman@wilmerhale.com
Alexander Van der Bellen Managing Director and Associate General

Counsel

– Regulatory and International Affairs DELTA AIR LINES, INC. 1212 New York Avenue, N.W. Washington, D.C. 20005 (202) 842

- 4184 sascha.vanderb ellen@delta.com

December 22, 2014BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Motion and Application of AMERICAN AIRLINES, INC. HAWAIIAN AIRLINES, INC. In the matter of 2010 U.S. - Haneda Combination Services Allocation Proceeding ) ) ) ) ) ) ) ) Docket DOT - OST - 2010 - 0018

PETITION OF DELTA AIR LINES, INC

. FOR RECONSIDERATION OF ORDER 2014 - 12 - 9 Delta Air Lines, Inc. respectfully petitions for reconsideration of Order 2014

- 12

- 9 (“Order”), which institutes a route proceeding to determine whether to reallocate frequencies assigned to Delta for Seattle

- Haneda. The Department awarded those frequencies to Delta “indefinitely” in 2013, subject to two conditions: (i) that Delta retain “the necessary underlying authority to serve the markets authorized” and (ii) that “the slot pair will become dormant and will revert a utomatically to the Department if it is not used for a period of 90 days.” Order 2013

- 2

- 4 (“Allocation Order”). The Allocation Order contains no notice of other grounds for revocation of that authority, and Delta is full compliance with the order’s state d conditions. Despite that, the Department has elected to consider whether to reallocate those frequencies to another carrier. That decision is arbitrary and capricious and contrary to law, as would be any final decision by the Department to reallocate t he frequencies. See 5 U.S.C. § 706(2). Delta accordingly seeks reconsideration of the Order.
1. The Department’s reexamination of the Seattle

- Haneda frequencies unlawfully conflicts with the terms of the Department’s orders. As noted above, the Allocati on Order granted Delta the Seattle

- Haneda frequencies “indefinitely,” but it imposed two conditions on Delta’s continued use of the frequencies. As relevant, the dormancy condition states that “ theDelta Petition Page 2
slot pair will become dormant and will revert automatical ly to the Department if it is not used for a period of 90 days .” Order 2013

- 2

- 4. Delta is in compliance with that condition, as well as the other express terms and conditions of the Allocation Order. It thus is entitled to “indefinite[]” use of the Seat tle

- Haneda frequencies

— language that is inconsistent with the view that the Department may revoke the frequency at will based on conditions not set forth in the Allocation Order itself. See Oxford English Dictionary 842 (2d ed.) (indefinitely: “Without d efinition or limitation to a particular thing, case, time, etc.”). That the Allocation Order cannot be read to reserve by implication authority to revoke the “indefinite[]” allocation is bolstered by the fact that the Department knows how to reserve discre tion to amend, modify, or revoke frequency allocations when it so intends. E.g. , Order
2000

- 10

- 6 (adopting, in addition to a dormancy condition, an express condition that “ we may amend, modify, or revoke the allocation at any time and without hearing, at our discretion ”); accord Order 99

- 8

- 9 (similar); Order 99

- 4

- 21 (similar); see also Order 97

- 11

- 35 , at 5 & n.9 (stating “we award frequency allocations on the express basis that we may amend, modify, or revoke them in our discretion and without a hearing” and citing orders containing such express language). The Allocation Order here contains no such “amend, modify or revoke” provision. Because an agency is bound to “follow its own rules and decisions,” National Cable Television Ass’n, Inc. v. FCC , 747 F.2d 1503, 1509 (D.C. Cir. 1984), that the Allocation Order cannot be read to authorize the Department’s decision to reexamine the allocation should be end of the matter. Cf. Achernar Broad. Co. v. FCC , 62 F.3d 1441, 1447 (D.C. Cir. 1995) (“ It i s a rudimentary principle that agencies are bound to adhere to their own rules and procedures”). In the Order, the Departme nt nevertheless states that it “does not need to decide whether Delta’s current level of Seattle

- Haneda service triggers the dormancy condition.” Order at 5. According to the Department, “[w]here frequency allocations are not being operated effectively, the Department has the authority to reallocate them to ensure that they are usedDelta Petition Page 3
effectively and in a manner that promotes competition and otherwise best serves the public interest.” Id. The Department does not cite a single statutory provision or regula tion as a source of that authority. Instead, it relies upon two prior orders of the Department arising from a U.S.

- China frequency allocation proceeding. Id. at n.18 (citing Order 95

- 2

- 30 and Order 94

- 12

- 17). But those orders provide no support whatsoev er for the Department’s decision. In those orders, as relevant, the Department awarded two U.S.

- China frequencies to a carrier (Evergreen) despite the concern that the “Evergreen w[ould] not use those frequencies.” Order 94

- 12

- 7 at 8. 1 To address that con cern, the Department proposed that “any awards ... will include the requirement that carriers not using their frequencies return them to the Department for reallocation.” Id. It also explained that the final order would “establish further procedures on
thi s issue and will explicitly retain the Department’s right to reallocate the frequencies.” Id. In the final order, the Department did just that: it established an express “procedures for the return of unused frequencies.” Id. at 1; see id. at 5

- 6 (desc ribing the procedures). Evergreen was thus on notice from the start that any unused frequencies could be reallocated; just as Delta is on notice that its frequencies can be reallocated if it violates the dormancy condition. The cited orders thus provide no support for the Order here and in, fact, they are consistent with the view that the Department must follow the express terms, conditions, and procedures it establishes in the order allocating a frequency. Put simply, if th e Department wants to retain discretion to amend, modify, or revoke a frequency allocation, it can impose that condition or a similar condition in allocating the frequency, as it knows how to do. See supra p.

1 In fact, Evergreen was granted additional frequencies notwithstanding that it “had made less than full use of its frequencies,” its service had been “sporadic,” and its service levels had been reduced because of “lower volumes of [traffic]” during the off

- peak season. Order 94

- 12

- 7 at 8. The Department found that Evergreen nonetheless had “firm plans” to use the frequencies. Id. That order is thus another example of “firm use” precedent (discussed further below) that supports giving carriers flexibility and discretion to use frequencies in the face of difficult startup and market conditions, which is certainly true of mainland service during the current winter Haneda season.Delta Petition Page 4

2 . The Allocation Order contains no such lan guage, no r does it contain the specific non

- use procedures included in the China orders. Those orders are thus beside the point here. Furthermore, Delta is aware of no basis for the position that the Department has the legal authority to override the term s of an allocation order at any time, for any reason, and without notice in the order itself of that possibility. 2 But even if the Department had that authority, it could not be exercised where there is an express condition that addresses the basis for th e reexamination. The stated ground for reexamining the Seattle

- Haneda allocation is that Delta is not using the frequencies sufficiently. But the Department imposed an express dormancy condition in the Allocation Order to address the very question of how often Delta must use the frequencies. Any background authority cannot be used to make an end

- run around that express condition. Even if the grant of a frequency typically carries with it an implied right to reexamine the allocation for various reasons ( for example, safety or market changes), such authority is not available where, as here, the Department imposed a specific (dormancy) condition governing the issue prompting the reexamination (use of the frequencies). Cf. National Mining Ass’n v. U.S. Dept . of Interior , 105 F.3d 691, 694 (D.C. Cir. 1997) (agency “cannot rely on its general authority to make rules necessary to carry out its functions when a specific statutory directive defines the relevant functions ... in a particular area”) (internal quotati on marks omitted).
2. The Order is arbitrary and capricious for a second reason: the Department failed to offer any reasoned explanation for reexamining the Seattle

- Haneda frequencies when it has permitted other similarly situated carriers to retain limit ed entry authority that has been not been

2 Although the Department has public interest authority under various section o f Title 49 of the United States Code, e.g., 49 U.S.C. §§ 40101, 40109, that general authority must be exercised consistent with, among other things, the express terms of the orders, rules, and procedures that the Department establishes and also with the re quirements of the Administrative Procedure Act. For example, Delta is aware of no authority for the view that the Department’s public interest authority permits it to breach the plain terms of the Allocation Order by reexamining Delta’s frequencies despit e its compliance with all terms and conditions.Delta Petition Page 5
used for much longer periods of time. The Department’s failure to cite, much less address, this relevant precedent is arbitrary and capricious both because the Department “must treat similar cases in a similar man ner” absent a good reason, Kries v. Sec’y of the Airforce , 406 F.3d 684, 687 (D.C. Cir. 2005), and because “an agency acts arbitrarily and capriciously if it ‘reverses its position in the face of a precedent it has not persuasively distinguished,’” New York Cross Harbor RR v. Surface Transportation Bd. , 374 F.3d 1177, 1181 (D.C. Cir. 2004). As explained by Delta in its Answer, starting in at least 2002, American has allowed its limited entry Brazil frequencies to go unused for months at a time, frequently for periods of 90 days or more , with no action by the Department to reexamine those freq uencies. See Delta Answer at 7

- 8. In addition, in the Brazil route proceeding

— one cited affirmatively by American in its papers

— the Department took no action for more than three and a half years to revoke and reallocate United’s unused Brazil frequencies that were dormant and where that carrier had no stated plans to use them

. See Order 2008

- 10

- 20. Without acknowledging that precedent and practice, the Order subjects the Seattle

Haneda frequencies to reexamination on the basis of single

- season “Seattle

- H aneda service cutbacks.” Order at 5. That unexplained, differential treatment of similarly situated carriers violates the Administrative Procedure Act’s basic requireme nt of reasoned decisionmaking: “where an agency treats similar situations differently without a reasoned explanation, its decision will be vacated as arbitrary and capricious.” ANR Pipeline Co. v. FERC , 71 F.3d 897, 901 (D.C. Cir. 1995). Because the Department has offered no plausible reason

— and none is apparent

— for treating Delta differently from American or United, the Order is legally infirm. See Republic Airline Inc. v. U.S. Dept. of Transp. , 669 F.3d 296, 300

- 02 (D.C. Cir. 2012) (v acating DOT slot exemption order for failure to account for relevant Department precedent).
3. The Order countermands precedent in another respect. Under Department precedent, where a carrier holding unused frequencies has “firm plans” to use them, thoseDelta Petition Page 6
frequencies will remain with the holder and they will not be reallocated. See Order 2005

- 4

- 13 at 3 n.5 (declining to confiscate and reallocate to American five U.S.

- Brazil frequencies held by United that had been dormant since “at least 2003” where United announced on April 4, 2005 that it had firm plans to use them effective October 31, 2005); Order 95

- 3

- 52 at 4 (declining to confiscate and reallocate to American on a permanent basis four U.S.

- Brazil frequencies held by United where United announced firm plans to use them effective August 1, 1995). Once again, the Order fails to account for those precedents. As Delta has explained, it has firm plans to use the Seattle

- Haneda route daily as of March 29 through the summer season. Indeed, Delta is moving aggressively to develop Seattle as a hub with new Delta and Delta Connection

- operated service, b oth domestic and international. Although Delta has faced challenges in establish ing the Seattle

- Haneda service, Delta continue s to implement a Seattle strategy and has seen passenger t raffic and profitability surge. See Delta Answer at 6

- 7. These plans, as detailed more fully in Delta’s Answer, fall squarely within the “firm use” line of Department decisions. Yet the Department offers no justification for not applying those precedents here. That renders the Order and any subsequent decision to reallocate the frequencies arbitrary and capricious. See Republic Airline , 669 F.3d at 301 (vacating DOT order where the Department did not “distinguish” but “ignored completely” contrary precedent).
4. Finally, the Order unreasonably ignores alternatives to a new route proceeding that would balance Delta’s reliance interests with the Department’s interests

. As the Supreme Court has explained, certificated carriers should enjoy “security of route” so that a carrier has “assurance ... that its investment in operations would be protected insofar as reasonably possible.” CAB v. Delta Air Lines , 367 U.S. 316, 324 (1961). Here, Delta has invested in operations based on th e assurance that, as the Allocation Order states, Delta has the right to use the Seattle

- Haneda frequencies “indefinitely,” so long as it complies with the terms andDelta Petition Page 7

conditions of the Allocation Order

. To place that authority now in jeopardy unfairly upse ts Delta’s reliance interests and undermines the security of the route principle. In its Answer, Delta proposed an alternative to the Department that would better protect Delta’s reliance interests. See Delta Answer at 7. Specifically, Delta proposed tha t if the Department is concerned that the dormancy condition is now insufficient, the Department could consider amending that condition. 3 But prior to any amendment, principles of fairness and reliance would demand giving Delta notice of the new conditio n and the opportunity to conform to the amended condition prior to placing Delta’s frequencies up for grabs in a route proceeding. See Order 2007

- 12

- 21 (“T he issue is whether American was on notice that a change in its proposed plans could lead to a reexa mination of the frequency allotment. The record demonstrates that it was given such notice.”). The Order does not discuss this alternative. That failure constitutes independent legal error. “[R] easoned decisionmaking requires” agencies to consider “reas onable alternatives” raised by the parties. American Gas Ass’n v. FERC , 593 F.3d 14, 19 (D.C. Cir. 2010); see Chamber of Commerce of U.S. v. SEC , 412 F.3d 133, 145 (D.C. Cir. 2005) (SEC violated the APA in failing to consider an alternative that was “neither frivolous nor out of bounds”); Laclede Gas Co. v. FERC , 873 F.2d 1494, 1498 (D.C. Cir. 1989) (“where a party raises facially reasonable alternatives to FERC’s decision to reject a contested settlement, the agency must either consider those alterna tives or give some reason ... for declining to do so”); Walter O. Boswell Memorial Hosp. v. Heckler , 749 F.2d 788, 797 (D.C. Cir. 1984) (“an agency must consider reasonably obvious alternative rules and explain its reasons for rejecting alternatives in suffi cient detail to permit judicial review”) (internal alterations omitted)

. The Department’s failure to consider or discuss the alternative raised by Delta renders the Order and any subsequent reallocation of Delta’s frequencies arbitrary and capricious.

3 Although the source of any legal a uthority to amend the dormancy condition in this way is unclear , if the Department is correct that it has implied authority to revoke frequencies, then it certainly has th e i mplied authority to amend the conditions governing frequencies as well.Delta Petition Page 8

* * * * * In short, there is no lawful basis for the Department to reconsider “whether it remains in the public interest to allow this limited Haneda opportunity to remain with Delta for Service at Seattle, or ... an alternative use of the authority.” Order at 5. The Department cannot lawfully strip frequency authority from a duly authorized carrier operating and maintaining service in accordance with its operating conditions. That outcome would be unlawful, contrary to agency precedent, reflect bad policy, a nd would invite appellate reversal. The Department should correct those legal and policy errors now by reconsidering the Order. Reconsideration is especially appropriate given the harm that a route proceeding would inflict on Delta. Delta has allocated a ircraft and is actively marketing and promoting Seattle

Haneda service for the Summer 2015 season beginning on March 29, 2015. If the continuation of Delta’s service is put in doubt during a route proceeding, Delta will not be able to market its service e ffectively, and it will incur losses from having committed aircraft to a route it may be unable to operate. Although Delta will continue to raise its legal objections to any final decision by the Department to reallocate Delta’s frequencies, Delta respect fully requests that the Department redress these errors at the outset by vacating the Order, thus avoiding a costly, time

- consuming route proceeding that would substantially harm the airline.Delta Petition Page 9

For the foregoing reasons, Delta respectfully requests that the Department grant the petition for reconsideration and vacate Order 2014

- 12

- 9.
Respectfully submitted,

_________________________________ Alexander Van der Bellen Managing Director, Regulatory and International Affairs

& Associate General Counsel DELTA AIR LINES, INC.C ERTIFICATE OF SERVICE A copy of the foregoing document has been ser ved this 22 day of December, 2014 , upon the following persons via email: howard.kass@aa.com abigail.donovan@aa.com robert.wirick@aa.com charles.hunnicut@thompsonhine.com patricia.snyder@thomsponhine.com jhill@cooley.com perkmann@cooley.com bberlin@cooley.com dan.weiss@united.com thomas.bolling@united.com steve.morrissey@united.com marshall.sinick@squirepb.com lhalloway@crowell.com gmurphy@crowell.com Mike.Donatelli@alpa.org dino.atsalis@alpa.org Doug.Ralph@alpa.org Ishiwata.K@portseattle.org Safora.I@portseattle.org sascha.vanderbellen@delta.com chris.walker@delta.com paul.gretch@dot.gov brian.hedberg@dot.gov brett.kruger@dot.gov todd.homan@dot.gov peter.irvine@dot.gov englets@state.gov cristinasa@state.gov eugene_alford@ita.doc.gov info@airlineinfo.com