### II [I ! BEFORE THE OFFICE OF THE SECRETARY DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.
Applications of US AIRWAYS, INC. REPUBLIC AIRLINES INC. MN AIRLINES, LLC

d/b/a SUN COUNTRY AIRLINES AIRTRAN AIRWAYS INC. SOUTHWEST AIRLINES CO. For exemptions from 14 C.F.R. Part 93, Subparts K and S, pursuant to 49 U.S.C. §41718(b) For service from Ronald Reagan Washington National Airport (withinperimeter slot exemptions) ) 

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### ) ) ) Docket DOT-OST-2000-7182



## -----------------------------) CONSOLIDATED ANSWER OF

SOUTHWEST AIRLINES CO.

Bob Jordan

Executive Vice President -- Strategy and Planning SOUTHWESTAIRLINES CO. 2702 Love Field Drive Dallas, TX 75235-1611 Ron Ricks

Executive Vice President -- Corporate Services SOUTHWESTAIRLINES CO. 2702 Love Field Drive Dallas, TX 75235-1611 October 15, 2010 Communication with respect to this document should be addressed to: Robert W. Kneisley

Associate General Counsel Leslie C. Abbott

Attorney SOUTHWEST AIRLINES CO. 1901 L Street, NW Suite 640 Washington, DC 20036 bob.kneisley@wnco.com (202) 263-6284BEFORE THE OFFICE OF THE SECRETARY DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Applications of US AIRWAYS, INC. REPUBLIC AIRLINES INC. MN AIRLINES, LLC

d/b/a SUN COUNTRYAIRLINES AIRTRAN AIRWAYS INC. SOUTHWEST AIRLINES CO. For exemptions from 14 C.F.R. Part 93, Subparts K and S, pursuant to 49 U.S.C. 

### § 41718(b) For service from Ronald Reagan Washington National Airport (withinperimeter slot exemptions) 

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# -----------------------------) Docket DOT-OST-2000-7182

CONSOLIDATED ANSWER OF

SOUTHWEST AIRLINES CO. On September 2, 2010, the Department of Transportation ("DOT" or "Departm,ent") established a slot exemption proceeding pursuant to 49 U.S.C. 

### §41718(b) to allocate two within perimeter "Vision-100 slot exemptions" for service at Ronald Reagan Washington National Airport ("Washington National Airport" or "DCA") pursuant to Title 49 U.S.C. 

### § 49109. Five airlines, including Southwest Airlines Co. ("Southwest"), filed responsive applications. Southwest proposes to initiate its first-ever service at Washington National Airport and provide large jet, low-fare competition to Kansas City, Missouri. A review of the applications makes clear that Southwest's proposal is superior to each of the other applicants based on the major statutory decisional factors. Specifically, unlike most of 

### 1the other applicants, Southwest is a true new entrant, with zero slots at DCA (Exhibit WN-R-5). By awarding these two slot exemptions to Southwest, the Department would facilitate entry by the nation's leading low-fare carrier at one of the highest fare airports in the country. Consistent with Southwest's 40-year history of providing low fares, Southwest will reduce fares in the DCA-MCI market by over 25%, more than any other applicant in any market, and will save consumers over $10 million annually (Exhibits WN-R-2 and WN-R-3).1 Southwest's service will benefit over 60,000 local DCA-MCI passengers each year, the highest number ofany applicant (Exhibit WN-R-1) and would also serve the largest population of any applicant city (Exhibit WN-R-8). Finally, Southwest proposes to utilize the slots via large 137-seatjet aircraft, far above the DCA airport-wide average of 93 seats, and offering many more seats than applicants proposing to use using regional jets (RJs) (Exhibit WN-R-6). Accordingly, Southwest urges the Department to grant its Application for the two slot exemptions at issue. I. Southwest's Proposal Will Produce Maximum Competitive Benefits and Fare Savings to Consumers As a true new entrant to DCA, Southwest would provide robust low-fare competition, fulfilling the objectives of AIR-21 and Vision 100. As noted in its Application, Southwest has long desired to serve Washington, DC via National Airport but has been prevented from doing so due to a lack of available slots. An award of the two slot exemptions at issue in this proceeding would enable Southwest to initiate service to DCA for the first time, and to integrate that service into its extensive route network thereby generating substantial benefits to the public. Moreover, once it has established a position at DCA, Southwest would look to grow and expand its presence
1 Included in this Consolidated Answer is a statement of Dr. Brian Campbell and corresponding exhibits prepared by the Campbell-Hill Aviation Group on behalf of Southwest Airlines. 

### 2over time, opening the possibility of generating low-fare competition on a broader scale to an airportwhich sorely needs it. Consistent with Southwest's low-fare philosophy, it will offer DCA-MCI consumers the lowest fare per mile and the largest fare savings per passenger of any applicant (Exhibits WN-R-2 and WN-R-4). Moreover, Southwest will provide over $10 million in annual fare savings to nonstop DCA passengers, dwarfing the projected consumer benefits ofevery other applicant (Exhibit WN-R-3). II. US Airways, Already the Largest Slot Holder at DCA, Proposes High-Fare, Inefficient RJ Service that it Could Easily Provide with its Existing Slots If awarded the slot exemptions, US Airways proposes to provide nonstop service to Pensacola, Florida (PNS) using RJ aircraft. However, US Airways currently operates almost 50% of the slots at Washington National Airport, more than two and a half times as many as Delta, the next largest airline (Exhibit WN-R-10). With access to 205 slot pairs at DCA, US Airways could certainly shift one daily roundtrip flight to serve the PNS market if it desires to do so. Moreover, US Airways proposes to use equipment averaging only 81 seats for its D9A-PNS service.2 Slots (and slot exemptions) at DCA are valuable and scarce public assets that should be put to their most efficient use by the carriers that have been given the rights to operate them. Southwest proposes service with 137-seat 737 aircraft, almost 60% largerthan the RJ aircraft proposed by US Airways. Southwest's low-fare proposal in the DCA-MCI market would also benefit significantly more local DCA passengers and would serve a much larger market than US Airways' proposal. The DCA-MCI local O&D market is 149% larger than the entire
2 us Airways proposes to use 76 seat RJs for the winter season and 86 seat RJs for the summer season, for an average of 81 seats. Application of US Airways, pg. 2. 

### 3Gulf Coast and 5.4 times the size of the DCA-PNS market which attracted only 33,070 passengers for the 12 months ended March 31, 2010 (Exhibit WN-R-11). Similarly, the Kansas City MSA population is twice the size of US Airways' claimed service region (the "Gulf Coast") and it is 4.5 times the size of Pensacola by itself (Exhibit WN-R-17). Due to the small size of US Airway's proposed aircraft, its high fares, and the fact that it would allocate a significant portion of its capacity to non-Washington passengers (34.9%) who would only connect at DCA,3 US Airways forecasts carrying just 28,000 annual DCA local passengers (Exhibit WN-R-13). By comparison, all of Southwest's capacity would be dedicated to DCA local passengers. Southwest's first year forecast of 83,300 DCA passengers is three times the number projected by US Airways (Exhibit WN-R-14). Finally, US Airways' average fares at DCA are significantly higher than Southwest's system fares. While US Airways does not forecast an average fare for the PNS market, Campbell-Hill performed a regression analysis incorporating all nonstop markets as data points to determine a representative "yield curve" for US Airways at DCA and Southwest's system (Exhibit WN-R-15).4 From these equations it is reasonable to predict that US Airways' average DCA-PNS local fare would be approximately $206. The comparable fare for a distance of 816 miles on Southwest would be $126, or 39% less (Exhibit WN-R-16). US Airways would actually offer negative fare "savings" to consumers because its projected nonstop fare exceeds its average fare for connecting service in the market (Exhibit WN-R-4). Clearly Southwest's

3 Application of US Airways, pg. 2. 4 Campbell-Hill included the average fees paid per passenger for checked baggage and reservations cancellations or re-booking for both carriers. In 01, 2010 the domestic system average amount paid by US Airways passengers was $15.76, and for Southwest passengers it was $.037. 

### 411 ) low-fare proposal will provide significantly greater competitive benefits for a larger number of consumers than allocating even more scare slot resources to the largest slot holder at DCA to offer high-fare RJ service. III. Republic Holds Over 140 Slots at DCA and Proposes High-Fare RJ Service in a Market Where it Already Offers Two Daily Flights Republic's application proposes to continue its current RJ service in the DCAMCI market. However, Republic already has two daily roundtrips in this market aside from the slot exemption service at issue in this proceeding. A third roundtrip by Republic would simply maintain the high-fare duopoly between Republic and US Airways that exists today in this market. It would not provide close to the level of competitive benefits that new low-fare competition from Southwest, using large jet aircraft, would bring to this market. Despite Republic's claim that it would "provide passengers with the substantial benefit of low fares,,,5 its average one-way fare plus average per-passenger checked baggage and cancellation fees was a very high $174 per passenger for the period year ending March 2010. Based on Campbell-Hill's analysis, Southwest's average fare would be approximately $132,6 for the same time period, 24% lower than Republic's (Exhibit WN-R-21). On a fare-per-mile basis the difference is even more striking. Republic's current fare in the DCA-MCI market amounts to 18.3 cents/mile whereas Southwest's would be only 13.9 cents/mile (Exhibit WN-R-2). As noted in Southwest's Application, the potential consumer savings generated by Southwest's low-fare service in the DCA-MCI local marketalone would be $10.5 million annually (Exhibit WN-R-3). Southwest would clearly offer robust low-fare competition in this market where none exists today.
5 Application of Republic Airline Inc., pg. 9 (internal quotation marks omitted). 6 Including average per-passenger checked baggage and cancellation fees of$0.37. 

### 5In addition, Republic's service proposal contemplates the use of 99-seat ERJ190 aircraft. While this aircraft is larger than the 76 seat aircraft that Republic uses today, Southwest's Boeing 737-700NG proposal would provide 27,000, or 38%, more seats per year than Republic (Exhibit WN-R-18). It is also curious that Republic is only proposing to up-gauge its equipment in the DCA-MCI market if and when it is awarded the slots at issue here. If Republic really believes that this market warrants larger aircraft, it is certainly free to up-gauge the aircraft in its current service but has chosen not to do so. Southwest would also provide convenient one-stop service from DCA to 11 points beyond MCI.7 Republic's proposal would only serve five connecting markets beyond MCI (Exhibit WN-R-19).8 There are 1.7 million DCA O&D passengers in the 11 Southwest beyond markets and only 0.9 million in the five Republic beyond markets. Southwest's low-fare proposal would therefore serve nearly twice as many connecting passengers as Republic. Republic also erroneously characterizes Southwest's BWI-MCI service as part of the DCA-Kansas City market. However, the DOT reached a contrary conclusion in the recent DLIUS Slot Swap proceeding where it found, supported by the Department of Justice, that DCA is a separate competitive market from BWI. 9 In analyzing both overlap and all markets at DCA and BWI, the DOT found that the average yield in all markets at BWI is 48% below that at DCA. 1o DOJ concurred with this finding and stated in its Reply Comments in the same docket that flights at DCA provide closer competition

7This forecast is conservatively limited to routings with less than 25% circuity. 8 Republic's application states that it will provide one-stop connecting service to eight cities but ifthe 25% circuity filter is applied, only five one-stop connections are possible. Application of Republic Airlines Inc., pg 8. 9 See, DOT Grant ofWaiver with Conditions, 75 FR 26322, 26323-24, Docket No. FM-2010-0109 (May 11, 2010). 10 lQ. at 26331. 

### 6to other flights at DCA than do flights at BWI or lAD. Thus DOJ concluded that market power can be exercised at DCA despite the presence of competition from the other two nearbyairports. 11 Southwest's experience is consistent with these findings. Southwest's fares at BWI have not effectively disciplined the fares of major carriers at DCA as they would be expected to if the Baltimore/Washington area were a single competitive market (Exhibit WN-R-23). In addition, as Campbell-Hill's analysis demonstrates, there are 31 destinations that carriers serve from both DCAIIAD and BWI. If DCA, lAD and BWI all served the same competitive market, carriers would be able to reach all passengers through service to a single airport as they do in the Chicago (ORD/MDW) and Houston (IAH/HOU) markets (Exhibit WN-R-22). Therefore, Southwest's service from BWI to Kansas City is not relevant to this proceeding. Based on every legitimate measurement available, Southwest's service proposal provides much greater consumer benefits than a continuation of Republic's high-fare RJ service. Finally, while Republic asserts in its application that it only operates 22 slots at DCA, FAA records show that Republic holds a total of 141 DCA slots. Although Republic's application states that it does not have "the right to control" 113 ofthe slots it holds, Republic has offered no documentation for that assertion. Thus, on its face, it appears that Republic is a very large holder of DCA slots and cannot credibly argue that it is either a new entrant or limited incumbent that will inject new competition at DCA.

11 Reply Comments of DOJ, pgs. 9-11, FAA-2010-0109. 

### 7IV. Sun Country's Service Would Benefit Far Fewer Passengers than Southwest's Proposal Sun Country proposes to serve the Washington-Lansing, Michigan (LAN) market with continuing one-stop service to MSP. With an average 147-seat airplane,12 Sun Country projects that it will carry 31,390 local DCA-LAN passengers and 51,100 DCAMSP passengers one-stop over LAN.13 Assuming that Sun Country's local passenger projections are accurate, it would still carry less than half of the local 63,306 passengers that Southwest estimates it will carry in the MCI-DCA market (Exhibit WN-R-24). However, Sun Country's local DCALAN passenger projection appears to be greatly overstated. The base year total 

### 0&0 passengers in the market were only 17,290 and so the applicant is projecting that it will carry 82% more passengers than the entire market for the latest 12 months14 (Exhibit WN-R-25). With only one roundtrip per day and a reduction in fare of just 21%,15 it seems unlikely that the market would increase by 82% and that Sun Country would get 100% of the market. It also seems unlikely that Sun Country will be able to attract 51,100 one-stop passengers from DCA to MSP when Delta Airlines already provides seven nonstop flights in this market. Finally, Sun Country's service would provide only one connection beyond Lansing to MSP, a city that already has ample nonstop service from DCA. By comparison, Southwest would provide connecting service to 11 cities beyond MCI in markets that have extremely limited nonstop service to DCA, and a total of 1.7 million 

### 0&0 passengers. 12 OAG schedule analysis for the week of September 20,2010. 13 Application of Sun Country Airlines, Exhibits SY-2 and SY-4. 14YE Q1, 2010. 15 Application of Sun Country Airlines, Exhibit SY-2. 

### 8In sum, Sun Country's application falls far short of providing the competitive benefits, fare-savings, and additional one-stop service options that Southwest Airlines would provide in the DCA-MCI market. 

### V. AirTran Proposes to Serve Markets Much Smallerthan Kansas City. Each With EXisting Nonstop or One-stop Flight Options AirTran proposes to serve either the DCA-RSW or DCA-SRQ market if awarded the slot pair at issue in this proceeding. AirTran, while referencing its low fares generally, provides no information on the fares it would charge or potential fare savings to consumers in these particular markets. One can only assume from this omission that any fare savings will be negligible and should not be considered by the Department. In addition, each of these communities is relatively modest in size, ensuring that only a small number of consumers would benefit from AirTran's service. By comparison, the Kansas City MSA population is over 200% larger than the population of the two alternative markets proposed by AirTran (Exhibit WN-R-2S). While AirTran does not project how many passengers it would carry, clearly a much greater number of consumers would benefit from Southwest's low-fare service to Kansas City since the population as well as the 

### 0&0 traffic are so much larger (Exhibits WN-R-S and WN-R-7). Furthermore, both of AirTran's proposed markets already have nonstop service, as well as numerous conveniently timed single-connection flights, from DCA. AirTran currently provides one roundtrip nonstop flight along with additional connecting flights via Atlanta in the DCA-RSW market and US Airways serves the DCA-SRQ market on a nonstop basis (Exhibits WN-R-29 and WN-R-30). AirTran also serves the DCA-SRQ market with connections via Atlanta and other carriers provide convenient connecting 

### 9service as well. Thus, for markets their size, both RSW and SRQ have reasonable service options to Washington National Airport today. Finally, from AirTran's application it does not appear that either of these cities would provide any additional one-stop options for travelers, in contrast to Southwest's 11 one-stop connections beyond Kansas City. Taken as a whole, AirTran's application plainly does not provide the same level of consumer benefits as Southwest's proposal.
Conclusion The information given above demonstrates conclusively that Southwest Airlines will provide far greater benefits to the public than any competing application for the slot exemptions at issue here. We therefore urge the Department to grant the two slot exemptions to Southwest to enable it to initiate its first-ever service to Washington National Airport and provide low-fare competition on the DCA-MCI route. Sincerely,

# ~~ Robert W. Kn€:ey October 15, 2010

10CERTIFICATE OF SERVICE I hereby certify that I have this 15th day of October 2010, served a copy of the foregoing Consolidated Answer of Southwest Airlines Co. by email upon those persons listed below: susan.kurland@dot.gov (U.S. Department ofTransportation) todd.Homan@dot.gov (U.S. Department ofTransportation) carl.nelson@aa.com (American) hkamen@coair.com (Continental) dan.weiss@coair.com (Continental) rbkeiner@crowell.com (Counsel for Continental) recohn@hhlaw.com (Counsel for Republic) prrizzi@hhlaw.com (Counsel for Republic) sascha.vanderbellen@delta.com (Delta) jeff.morgan@delta.com (Delta) msinick@ssd.com (Counsel for Alaska) jyoung@yklaw.com (Counsel for Spirit) dkirstein'@Yklaw.com (Counsel for Spirit) jeffrey.manley@united.com (United) howard.kass@usairways.com (US Airways) benjamin.slocum@usairways.com (US Airways) robert.land@jetblue.com (JetBlue) jhill@dlalaw.com (Counsel for JetBlue) efaberman@wileyrein.com (Counsel for AirTran) John.Fredericksen@suncountry.com (Sun Country) mlbenge@zsrlaw.com (Counsel for Sun Country)**jh~oglia@zsrlaw.com** (Counsel for Sun Country)

### Rebuttal Statement ofDr. Brian M. Campbell
1.0 Overview Southwest Airlines is the largest and most successful low-fare airline in the world, yet has no presence at all at Reagan National Airport (DCA). Southwest has attempted on previous occasions to acquire competitively timed DCA slots but has not been able to do so. This proceeding offers Southwest a new and unique opportunity to gain access to DCA and bring its low-fare service directlyto the nation's capitol for the first time. If awarded the slot pair in this case Southwest would be a true new entrant at DCA, bringing its consistently low-fare/high value service to the close-in Washington DC market. 

### In fact, Southwest's service proposal in this proceeding is superior to the proposal ofevery other applicant. This is demonstrated clearly by a comparison ofthe competing proposals in terms of the Department's key decisional criteria as shown in the attached exhibits andTable 

### 1.

1Table 1 ServiceProposal Comparison: KeyDecisionalFactors US Service Feature Southwest Airways 1. DCAlocal passengers a. Nonstop 68,306 28,000 

### b. Downline connections 14,994 Q c. Total 83,800 28,000 2. Low-Fare Proposal Yes No 3. Farepermilel 13.9¢ 25.5¢ 4. Total consumer savings(loss) for nonstop DCA passengers(millions)2 $10.5 $(0.4) 5. Aircraft B737-700NG RJ 6. Seats 137 81 3 7. Total one-way seatsto/from DCA 100,010 59,130 -Southwest Percent 69.1% Greater(Less) 8. Current slots operated 0 410 NS = Not Supplied.

1Including checkedbaggage and cancellation fees (ExhibitWN-R-2). 2ExhibitWN-R-3. 3 Average ofEMB-170 and EMB-I75. 4 Average seats per departure, weekofSeptember 20, 2010. 2 Republic AirTran

NS NS NS NS NS NS No Yes 18.3¢ NS

$0 NS RJ B717 99 117 72,270 85,410 38.4% 17.1%

22 24 Sun Country

31,390 51,100 82,490

No 29.9¢
$0.4 B737 1474
107,300 (6.8%)
0As shown in Table 1, Southwest has by far the lowest fare proposal in this case; it will carry more than twice as many nonstop DCA passengers than any other applicant; it will save consumers more money than any other applicant; it is the only applicantthatpermits the first two bags to "ride free" and it does not charge for reservation changes; and Southwest Airlines is one ofonlytwo applicants thathaveno access to DCAtoday. 2.0 Rebuttal To US Airways Based on current FAA slot data, US Airways and its affiliates operate 410 daily slots at DCA. This represents almost 50% ofall slots at DCA and is 2.65 times the slots operated by Delta, the second largest DCA operator. Ifthe Pensacola-WashingtonDC market is so important to US Airways, as it now suggests that it is,s then US Airways could easily shift one ofits 205 daily roundtrip DCA flights to PNS. However, it has not done so. Instead it seeks an award of yet two more slots to add to its overwhelmingly dominant DCA share and thereby deprive SouthwestAirlines from obtaining even atoehold in this critical airport. (ExhibitWN-R-10). US Airways has a history ofinefficient slot utilization at DCA. While some ofits slots are restricted to commuter-sized planes, the carrier also operates many ofits mainline slots with commuter aircraft. This practice, also known as "slot sitting", works to the disbenefit of Washington travelers, the airport's financial interests, and would-be new entrants like Southwest Airlines that could provide much more efficient and convenient low-fare competition at DCA. 6 Exhibit WN-R-9 shows the history ofUS Airway's average seats per departure at DCA since 2000. In the years 2000 and 2001 it operated 97-98 seat aircraft, on average. Since then US Airways' average aircraft size became significantly smaller, and currently it is only 87 seats per departure. Southwest's low-fareproposal in the DCA-MCI marketwould benefit significantlymore local DCA passengers and would serve a much larger market than US Airways. The DCA-MCI local O&D market is 149% larger than the entire GulfCoast and 5.4 times the size ofthe DCAPNS market which was only 33,070 passengers for the 12 months ended March 31, 2010 (Exhibit WN-R-11). The DCA-PNS market has over 10 convenient connecting services in both

5US Application, atpage 2. 6 See ExhibitWN-l. 3directions on both US Airways and other carriers (ExhibitWN-R-12). This market is reasonably well servedtoday without the allocation ofextremely scarce DCA slot exemptions. Dueto the small size ofUS Airway's proposed flight equipment (81 seats on average), its high fares, and the fact that it would allocate a significant portion of its capacity to nonWashingtonpassengers (34.9%) who only connect at DCA, US Airways' forecasts carryingjust 28,000 annual DCA local passengers.7 By comparison, all of Southwest's capacity would be dedicated to DCA local passengers. Its first year forecast of 83,300 DCA passengers8 is three times the numberprojectedbyUS Airways.9 US Airways' average fares at DCA are significantly higher than Southwest's system fares. To compare the two, Campbell-Hill used regression analysis incorporating all nonstop markets as data points to determine a representative "yield curve" for each airline (Exhibit WNR-15). From these equations it is reasonable to predict that US Airways' average DCA-PNS local fare would be approximately $206. The comparable fare for the DCA-PNS distance of816 miles on Southwest wouldbe $126, or 38.8% less (Exhibits WN-R-15 and WN-R-16).10 In both instances, Campbell-Hill has added the average fees paidperpassenger for checkedbaggage and reservations cancellations or re-booking. In 

### Q 1, 2010 the domestic system average fee amount paid by US Airways passengers was $15.76, and for Southwest passengers it was only $.037. This striking difference is due to the fact that Southwest does not charge for the first or second checkedbag, nor does it charge for reservations cancellation andre-booking. Finally, it is important to note that the Kansas City MSA population is twice the size of US Airways' claimed serviceregion ofthe "GulfCoast;" and it is 4.5 times the size ofPensacola by itself (Exhibit WN-R-17). Regardless of the relevant market definition for US Airways' proposal it is much smallerthan Kansas City. 

### 3.0 Rebuttal to Republic Airlines Replacement ofoneRepublic RJ roundtrip with another Republic RJ roundtrip would add nothing new to the DCA-MCI market. This market is servedbytwo high-fare carriers (Republic
7ExhibitWN-R-13. gExhibitWN-7. 9 ExhibitWN-R-14. 10 Thehighr2 values for each yield curve (regression equation) is indicative ofthe excellentrepresentation ofthe individual market fares bythe calibrated equations. 4and US Airways) today and that would not change ifthis slotpairis granted to Republic. On the other hand, an award to Southwest would inject sorely-needed low-fare competition in the market. The largerbenefitto Washington DC is that entryby Southwest at DCAwould bring the Southwestbrand and its low-fare/high value product to the D.C. market for the first time through convenientDCA. According to the FAA, Republic currently operates 22 DCA slots. On the other hand, FAA records show that Republic holds a total of 141 DCA slots. Although Republic's application states that it does not have "the right to control" 113 ofthe slots it holds, Republic has offered no documentation for that assertion. Thus it appears that Republic is a very large holder ofDCA slots and cannot credibly argue that itis either anew entrant or limited incumbent thatwill injectnew competition at DCA. Republic's service proposal contemplates the use of 99-seat ERJ-190 aircraft. On the other hand Southwest's B-737-700NG proposal would provide 27,000, or 38%, more seats per yearthan Republic (ExhibitWN-R-18). In addition, Southwest would provide convenient one-stop service from DCA to 11 points beyond MCI with less than 25% circuity. Conversely, Republic's proposal would serve only five connecting markets beyond MCI using the same circuity filter (Exhibit WN-R-19). There are 1.7 million DCA O&D passengers in the 11 Southwest beyond markets and only 0.9 million in the 5 Republic beyond markets (Exhibit WN-R-20). Southwest's low-fare proposal would therefore serve nearlytwice as many connectingpassengers as Republic. From Campbell-Hill's analysis (Exhibit WN-9 and WN-R-15) Southwest's average fare in the DCA
- MCI market will be approximately $132. 11 For the same time period (YE March, 2010) Republic's average fare plus its average per-passenger checked baggage and cancellation fees was $174. Southwest's fare would therefore be 24% lower than Republic's (ExhibitWN-R21). Republic's proposal does not come close to being a "low-fare option," notwithstanding its unsubstantiated claims to that effect. 12 Republic improperly characterizes Southwest's BWI-MCI service as being part of the Washington-Kansas City market. Empirical evidence demonstrates convincingly that for the most part BWI and DCA serve separate markets, and this has been Southwest's experience and

II Including average checkedbaggage and cancellation fees of$0.37 perpassenger. 12 See, for example, Republic'sApplication atpage7. 5that ofother carriers as well. Campbell-Hill demonstrates this point two ways. First, an analysis of the OAG schedules shows that 31 destinations are served by the same airline from both Washington (DCA, lAD, or both) and BWI (Exhibit WN-R-22). IfBWI and DCAIIAD were truly substitutable, carriers would not split their operations among these airports but would instead serve the region from only one airport. 13 However, this is not the case as the OAG data show. Therefore Southwest must have access to DCA to effectively serve the Washington, D.C. market.Further evidence that the Washington DC and Baltimore airports are not substitutable is shown by comparing Southwest's fares at BWI to the fares ofmajor incumbent carriers at DCA and lAD. This analysis is presented in Exhibit WN-R-23 in terms ofcomparative yield curves. The curves in Exhibit WN-R-23 were constructed by regression analysis in the same manner as all other yield curves in these exhibits. Exhibit WN-R-23 makes clear that Southwest's fares at BWI have not equalizedthe fares at DCA or lAD in the same O&D markets. Ifthe airports were substitutes for each other, onewould expectto see the DCA and lAD yield curves much closerto Southwest'syield curve at BWI. 

### 4.0 Rebuttal To Sun CountryAirlines Sun Country proposes to serve the Lansing-Washington nonstop market as a by-product of serving MSP-DCA on a one-stop basis. With an average 147-seat airplane14 Sun Country projects that 

### itwill carry 31,390 local LAN-DCA passengers and 51,100 MSP-DCA passengers one-stop overLAN. It is doubtful that the carrier can obtain 51,100 one-stop passengers in the MSP-DCA market that is already well served with nonstops. However, the main issue for this case is the fact that Sun Country would carry only 31,390 local LAN-DCA passengers whereas Southwest will carry 63,306 local MCI-DCA passengers (Exhibit WN-R-24). Even Sun Country's local LAN-DCA projection is suspect. The base year total O&D passengers in the market was only 17,290, and so the applicant is projecting that it will carry 82% more passengers than the entire

13 Bycontrast, United andAmerican servethe greaterChicago market onlythrough O'Hareand Southwest serves it only through Midway. DFW IDALis another example ofa single market servedbytwo airports. 14 OAG schedule analysis forthe week ofSeptember 20, 20IO. 6market for the latest 12 months 15 (Exhibit WN-R-25). With only one roundtrip per day and a reduction in fare ofjust 21% (Exhibit SY-2) it defies economic logic that the market would increase by 82% and that Sun Country would get 100% of that market. Under favorable assumptions Southwest projects a total LAN-DCA market of 29,391 passengers with Sun Country'sproposed service (ExhibitWN-R-31, page 1), but Sun Countrywould not obtain 100% ofthis market. One reason why Southwest would carry many more local passenger in the MCI-DCA market than Sun Country would in the LAN-DCA market is that Kansas City is simply a much larger market. The population of Kansas City is over 4.5 times the population of Lansing (Exhibit WN-R-26). Furthermore, Southwest's equivalent fare for a market with the LAN-DCA mileage wouldbe 24% lower than the fares proposedby Sun Country (ExhibitWN-R-27). 5.0 Rebuttal to AirTran AirTran proposes to serve either the DCA-RSW or DCA-SRQ market ifawarded the slot pairinthis case. Thecarrier'sApplication statesthat itwill operate either B717 orB737 aircraft. Campbell-Hillbelieves AirTran is more likely to operate the B717 given the relatively small size and seasonality ofits proposedmarkets. Southwest'sproposal would serve amarket that is more than three times thepopulation ofeitherFt. Meyers or Sarasota (ExhibitWN-R-28). There is an abundance ofconveniently timed single-connection service in both the DCARSW and DCA-SRQ markets (Exhibits WN-R-29 and WN-R-30). In fact, in the DCA-RSW market AirTran alreadyprovides one roundtrip nonstop flight along with some connecting flights via Atlanta. AirTran also serves the DCA-SRQ market with connections via Atlanta, and other carriersprovideconvenient connecting service as well. AirTran charges passengers for all checked baggage as well as for reservation cancellations/re-booking. Southwest charges only ifthree or more bags are checked. For the first quarter of 2010 AirTran's average baggage/reservation fees were $11.43 per passenger while Southwest's were only $0.37 per passenger. 16 IfSouthwest is awarded this pair ofDCA

15 YE Q1, 2010. 16 Derived from DOTForm41 and O&D databases. 7slots, its system-wide policy of no baggage fees and no change/cancellation fees would be applied.


### 6.0 Conclusion Southwest Airlines' low-fare proposal would benefit the highest number of DCA passengers, especially in the nonstop market. It would generate by far the greatest amount of consumer savings and traffic stimulation. Southwest's proposal with 137-seat mainline aircraft would utilize scarce DCA slot resources more efficiently than other applicants, especially US Airways and Republic. 17 Southwest Airlines has no access to DCA today. An award ofthe exemption slots in this proceeding would, for the first time, bring Southwest's low-fare/high value service to the nation's capital through the close-in preferred airport. 

### In my opinion no competing proposal comes close to offering the public benefits and competitive advantages as the Southwest service proposal. SouthwestAirlines shouldbe awarded thepairofslots available in this case.

17 Bothcarriersproposeto use RJ equipment with less than 100 seats. 8

## SouthwestWill Carry More DCA Nonstop Passengers Than Any OtherApplicant (Based on Each Applicant's Forecast) DCA Nonstop

Passengers (FirstYear) 80,000 70,000 68,306 60,000 50,000 40,000 30,000 20,000 10,000 

### o 31,390 28,000



### Southwest Sun Country US Airways MCI LAN PNS Sources: Exhibit WN-7, US Airways Application at page 2, Sun Country Corrected Exhibits SY-2-3. No Forecast 

### Republic MCI No 

### AirTran SRQ/RSW E xhibitWN-R -l

## SouthwestWill Offerthe Lowest Fare Per Mile ofAll Applicants Average Fare per Mile

and Fees1

35.0¢ 30.0¢ 25.0¢ 20.0¢ 15.0¢ 10.0¢

5.0¢ O.O¢ 13.9¢



### Southwest MCI DCA Nonstop Mileage 950 Fare per Mile 13.9¢ % Southwest Lower 18.3¢



### Republic MCI 950 18.3¢

24% 1/All fare data includes derived cancellation and baggage fees for Q1 2010. Sources: Exhibits WN-3-4. Exhibit WN-R-21 . Exhibit WN-R-27.and carrier applications. 29.9¢ 25.2¢



### US Airways Sun Country PNS LAN 816 478 25.2¢ 29.9¢

45% 54% ExhibitWN-R-2

No Fare Proposal 

### AirTran SRQ/RSW

## SouthwestWill Provide the Largest Annual Consumer Fare Savings to Nonstop DCA Passengers
Consumer Fare Savings (Millions)

$13.00 $11.00 $10.50

$9.00 $7.00 $5.00 $3.00 $1.00 -$1.00 $0.37 $0.00 

### Southwest Sun Country Republic

Sources: Exhibit WN-6,WN-R-31 and WN-R-32. -$0.45 

### US Airways No Fare Proposal 

### AirTran Exhibit WN-R-3Fare Savings perOne-Way

Passenger $50 $40 $30 $20 $10

$0

-$10 -$20 

## SouthwestWill Provide the Largest Fare Savings per Passenger ofAny Applicant

$46

$15
$0

-$16 No Fare Proposal



### Southwest Sun Country Republic US Airways AirTran

Sources: Exhibit WN-R-32. Exhibit WN-R -4DCA Slots Held ByApplicant 300
250 2431

200



## . 150
100
50



### o US Airways

## Southwest Holds No Slots At DCA

. 1412

18 

# I I 0 0 l 

### Republic AirTran Southwest Sun Country

11 US Airways total includes slots held by its wholly-owned subsidiaries Piedmont and PSA, but does not include the 167 slots operated for US Airways by other carriers. 21 Republic includes slots held by Chautauqua and Frontier. Source: FAA Slot Reports As ofOctober 12, 2010 (Current and Future). Exhibit WN-R-5Seats per Departure 

### By Applicant 160 140 120 

## SouthwestWill Operate Much Larger Aircraft At DCA Than the Airport Average

147 1 137

99 Exhibit WN-R -6

100 8717 DCAAverage = 93 Seats

---------- -- - -- ERJ-190 80 60 40 20

0 

### Sun Country Southwest AirTran Republic
11 Average seats per departure according to Sun Country OAG schedules forthe week ofSeptember 20, 2010. 21AirTran'sApplication states that it will operate either 8717 or 8737 aircraft. Campbell-Hill believes AirTran is more likely to operate the 8717 aircraft given the relatively small size and seasonality of its proposed markets. 31 Average of six months with each aircraft. Sources: Exhibit WN-7,AirTran Application at page 6, US Airways Application at page 2, Republic Application at page 3, Sun Country OAG schedules for week of September 20, 2010. 

### ----------813--- -- --- - EMB-170/17



### US AirwaysDCAO&D Passengers (YE Q1 2010) 200,000 180,000 160,000 140,000 120,000 100",000

80,000 60,000 40,000 20,000 0 

## Kansas City Has More DCA O&D Passengers Than All Other Proposed Cities

179,980

128,750

39,180 33,070 17,290



### Mel RSW SRQ PNS LAN Applicant Carrier Southwest, Republic AirTran AirTran US Airways Sun Country

Note: Includes Far ed Passengers. Sources: U.S. DOT, Origin-Destination Passenger Survey, via Data Base Products. Exhibit WN-R -7

## Kansas City Has A Larger Population Than All Other Proposed Cities
2009 MSA Population 2,500,000
2,000,000
1,500,000
1,000,000

500,000



### o 2,066,732



### Kansas City Applicant Carrier Southwest, Republic

Source: u.s.Census,American Community Survey. 688,126 586,908 455,102



### Sarasota Ft. Myers Pensacola AirTran AirTran US Airways Exhibit WN-R -8

453,603


### Lansing Sun CountryExhibit WN-R -9 

## SouthwestWould Operate the 8737NG at DCA With 560/0 More Seats per Departure Than US Airways, the Largest Carrierat DCA AverageAircraft Size (Seats) 

### 140 130 

# -- 

# --

# ------ - - ",
- - 

# - - 

# -- - 

# --- - 

# -

# ----**~** 

# -

# ---- - 

# -- - - 

# - - - - "- SouthwestAverage Aircraft Size 

### 120 110


# -- '\ 

# \**~** 

# "/'

. -- US AirwaysAverage Aircraft Size at DCA 

### 100

90 80 70 in Markets Over 250 Miles 

### 60 50 v 

# 01 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year 

### us Average Aircraft Size at DCA 

### 97 98 73 79 88 90 87 85 85 86 87 SouthwestAverage Aircraft Size 

### 134 134 135 135 136 136 136 136 136 136 136 Note: Includes nonstop markets over 250 miles. Source: OAG Schedules for mid·September2000 - 2009 and the week ofSeptember 20, 2010. (September 2000 - 2010 Max editions).

## US Airways Operates Over TwiceAs Many Slots As the Second Largest Airline at DCA and Southwest Has None No. of DCA Slots Total = 830 450 410 400 350 300 250 200 150 100

50

0 Percent ofTotal 49% 19% 14% 8% 3% 3%

1/ Republic (F9/YX) is listed by the FAA as the "holder" of 141 slots, including those held by Chautauqua and Frontier. Note: Combines United and Continental slots. 6 AS 2% 1%

Sources: FAA Slot Reports As ofOctober 12, 2010 (Current and Future). Slots of regional affiliates that operated for multiple airlines were allocated using the OAG. Exhibit WN-R -l0

6 NK 1%

## The DCA-MCI Market Is Nearly 150% LargerThan The DCA-Gulf Coast Market and Over 440% Largerthan DCA-PNS
Fared 0&0 Passengers YE Q1 2010 200,000 180,000 160,000 140,000 120,000 100,000

80,000 60,000 40,000 20,000 0+--- 179,980

DCA-MCI

Source: u.s.DOT, Origin-Destination Passenger Survey, YE 01 2010, via Data Base Products. +149%

72,220 25,230 VPS MOB PNS DCA-GulfCoast Region Exhibit WN
-R
-llExhibit WN-R-12 

## There Are Many Convenient Connecting Services Between DCA and PNS SOUTHBOUND Connect PNS**DCADe~Time** Carrier Flight Numbers Hub Time Arrival Time**Ela~sed** 1 7:45:00 US US2401-/US2681- CLT 1:12:00 10:25:00 3:40:00 2 12:00:00 DL DL2339IDL1666 ATL 1:07:00 15:07:00 4:07:00 3 8:00:00 DL DL2739IDL1308 ATL 0:46:00 11 :09:00 4:09:00 4 20:06:00 US US2421-/US2657- CLT 0:59:00 23:16:00 4:10:00 5 19:00:00 DL DL 1839/DL1977 ATL 0:56:00 22:20:00 4:20:00 6 12:10:00 US US 1459/US2650- CLT 1:24:00 15:36:00 4:26:00 7 9:00:00 DL DL2639/DL1270 ATL 1:14:00 12:29:00 4:29:00 8 17:20:00 DL DL 1631/DL3951- MEM 0:45:00 20:57:00 4:37:00 9 16:00:00 DL DL 1539/DL2643 ATL 1:16:00 19:39:00 4:39:00 10 18:59:00 FL 174/455 ATL 1:27:00 22:40:00 4:41 :00 11 14:00:00 DL DL 1639/DL2141 ATL 1:20:00 17:43:00 4:43:00
NORTHBOUND Connect PNS**De~Time** Carrier Flight Numbers Hub Time DCA Arrival Time**Ela~sed** 1 11 :06:00 FL 439/179 ATL 0:40:00 15:42:00 3:36:00 2 9:15:00 DL DL2694/DL2338 ATL 0:55:00 13:59:00 3:44:00 3 17:56:00 FL 426/187 ATL 0:45:00 22:40:00 3:44:00 4 13:09:00 DL DL327IDL1938 ATL 0:55:00 17:59:00 3:50:00 5 18:23:00 DL DL 1912/DL1438 ATL 0:51 :00 23:15:00 3:52:00 6 16:10:00 US 2760/1060 CLT 1:02:00 21:04:00 3:54:00 7 6:10:00 DL DL2298/DL2638 ATL 0:47:00 11:08:00 3:58:00 8 6:00:00 US 2618/1440 CLT 1:06:00 11 :02:00 4:02:00 9 6:25:00 DL DL3815-IDL2782 MEM 0:32:00 11 :28:00 4:03:00 10 11 :05:00 US 2640/1766 CLT 1:08:00 16:12:00 4:07:00 11 11 :49:00 DL DL1530IDL2038 ATL 1:21 :00 17:09:00 4:20:00 12 15:47:00 DL DL2031IDL1638 ATL 1:16:00 21 :14:00 4:27:00 13 16:25:00 DL DL4268-/DL2020 MEM 1:07:00 22:03:00 4:38:00 14 7:30:00 DL DL1174IDL2438 ATL 1:30:00 13:09:00 4:39:00 Source: Oneworld, SkyTeam, and StarAlliance booking tools; airtran.com, frontier.com for October 11, 2010.

## US Airways Would Only Carry 28,000 Local DCA-PNS Passengers With Its High-Fare Small Aircraft Proposal

11 US Airways Application at page 2. 21 From Exhibit WN-R-16. 

### Total Annual Onboard Passengers -Local DCA-PNS -Connections at DCA EstimatedAverage One-Way US Airways Fare2 

### (Incl. baggage and cancellation US Airways Forecast1 

### Number % 

### 43,000 100.0% 28,000 65.1% 15,000 34.9%

fees) $206 Exhibit WN-R-13

## Southwest's Forecast of Local DCA Passengers Is Three Times the Number Projected by US Airways

Local Onboard Passengers 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0+--- 83,300 DCA-Beyond MCI 14,994

Southwest Estimated DCA·MCI Local and Beyond MCI Passengers

Source: Southwest Exhibit WN-7 and Application of US Airways, page 2. +198%
28,000

US Airways Estimated DCA·PNS Local Passengers Exhibit WN-R -14

## Southwest's Average System Fares Are Significantly LowerThan US Airways' Fares at DCA (Fare Curves Derived by Regression Analysis)
YE Q1 2010 Nonstop MarketYield 1

100.0¢ Exhibit WN-R -1S

90.0¢
- WN's System Yield Curve y= 1,659 X-O.6979 

### R2 = 0.91 80.0¢
- US at DCA Yield Curve y= 16,881 X
-O.9699 

### R2 = 0.91 70.0¢ 60.0¢ 50.0¢ . 40.0¢ 30.0¢ 25.3¢ 20.0¢ 10.0¢ : 15.4¢ 

### , , , ,**O.O¢+-------~----~------~------~------~----~------_.------~------~----_.** 

## o Average Fare Savings 100 $127 200 300 $116 $107 400 500 600 Nonstop Miles $101 $95 $90

1 Average fare include an average checked baggage/cancellation fee based on Q1 2010 Form 41 fees and trafficstatistics. For US Airways this amount is $15
.76 and for Southwest it is $0
.37. , 700 80d 900 'PNS

(816) $86 $81 $78

Note: Includes airport pairs for which the "fare curve" carrier handled more than 20 one-way passengers per day based on YE Q1 2010 0&0 passenger traffic. Source: OAG (May,Aug. and Nov. 2009 and Feb. 2010 Max editions) and U.S. DOT, Origin-Destination Passenger Survey,via Data Base Products) 1000 $74

## Southwest's System Fare Levels Are 39% Lower Than the Projected Average DCA-PNS Fare on US Airways
YE Q1 2010 Average Fare and Fees $250
$200
$150
$100

$50 $206

$0+ 1

--- Average US Airways Fare Plus Fees

Source: Exhibit WN-R-15. -39% $126

Fare and Fees Using Southwest's Yield Curve Exhibit WN-R -16

## The Kansas City MSA Population is 

# 98% Larger Than US Airways' GulfCoast Market and 

# 354% Largerthan the Pensacola MSA
2009 Population 2,500,000 2,066,732 2,000,000 +98% 1,500,000 1,045,296 Exhibit WN-R -17

1,000,000 FortWalton Beach MSA Mobile MSA 500,000 455,102 Pensacola MSA 

### o +1-----' Kansas City MSA Population US Airways' GulfCoast Definition

Source: u.s.Census,American Community Survey and Application of US Airways, page 5.

## SouthwestWould Offer 27,000 or 38% More Seat Capacity For DCA-MCI Service Than Republic
DCA-MCI Seats for 1 Daily Roundtrip 120,000
100,000

80,000
60,000
40,000
20,000


### o +1------'

1/99 seats x 365 days x 98% completion factor 2/ 137 seats x 365 days x 98% completion factor 70,825

Republic Annual Seats/1

Source: Exhibit WN-7 and Application of Republic Airline, Inc, page 3. 98,000 +27,175

+38%

Proposed WN Annual Seats/2 Exhibit WN-R -18

## SouthwestWould Serve Many More Beyond Mel Markets and Passengers Than Republic Southwest**~' ,**  Annual DCA·MCI Local O&D Passengers:

. Southwest 11 8eyonds:

. Republic 5 8eyonds: 179,980 1,726,820 871,000 

## Republic

Note: Includes all online beyond markets that have less than 25% Circuity. Also includes announced Republic AUS Service. Includes fared passengers only. Source: U.S. DOT, Origin-Destination Passenger Survey,via Data Base Products ; OAG, schedules for the week of September 20, 2010, and Southwest Exhibit WN-8. Exhibit WN-R -19

## There Are 

# 980/0 More 0&0 Passengers in Southwest's Beyond MCI Markets than Republic's Beyond MCI Markets
Fared O&D Passengers to Points Beyond MCI 2,000,000 1,800,000 1,726,820 1,600,000 1,400,000 1,200,000 1,000,000

800,000 600,000 400,000 200,000 

### o +1__ -----l WN Beyond MCI ABQ, DAL, DEN, LAS, LAX, OAK, OKC,PDX,PHX,SAN,SEA +98%
871,000

Republic Beyond MCI LAX,SFO,DEN,SEA,AUS

Note: Includes all online beyond markets that have less than 25% Circuity. Also includes announced RepublicAUS Service. Source: U.S. DOT, Origin-Destination Passenger Survey,via Data Base Products ; OAG, schedules for the week ofSeptember20, 2010, and Southwest Exhibit WN-8. ExhibitWN-R -20

## Southwest's Average DCA-MCI Fare Would Be Approximately 24% Lowerthan Republic's Fare

YE 01 2010 Weighted Average Fare and Fees

$200 $180 $160 $140 $120 $100

$80 $60 $40 $20

$0 +1--------' $174

YE 01 2010 Republic Fare and Fees -24% $132

Southwest Proposed Fare and Fees

Note: Average fares includes checked baggage/cancellation fees estimated by Campbell-Hill Aviation Group from U.S. DOT airline data (Q1 2010). Fares based on fared passengers. Source: U.S. DOT Origin & Destination Survey, via Database Products Exhibit WN-R -21

### Example: 

## There Are 31 Destinations Served by the Same Carrier From Both WAS and BWI

American serves DFWfrom BWI, DCA and lAD. The American-DFW market is counted as 1 of31 carrierdestinations.

Note: Includes only domesticand Canada routes. WAS=DCA and lAD combined. Source: OAG, Schedules for the week of September 20, 2010 (September 2010 OAG Max Edition) Exhibit WN-R -22Fare Per Mile (YE Q1 2010)1 120¢
100¢

80¢
60¢
40¢ 

## Southwest's Fares at BWI Have Not Equalized Legacy Carrier Fares at DCA or lAD in Domestic Markets

UAat lAD
DL, US, AA at DCA

20¢ WN atBWI E xhibit WN-R -23**O¢+I---------------r---------------r---------------.--------------~--------------~------------~** 

### o 250 500 750 1,000 1,250 Nonstop Distance (miles)
1Average fare include an average checked baggage/cancellation fee based on 01 2010 Form 41 fees and traffic statistics. Note: Includes airport pairs for which the "fare curve" carrier handled more than 20 one-way passengers per day based on YE 01 2010 0&0 passenger traffic. Source: OAG (May, Aug. and Nov. 2009 and Feb. 2010 Max editions) and U.S. DOT, Origin-Destination Passenger Survey, via Data Base Products) 1,500Passengers 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 

## SouthwestWould Provide Nonstop Service for 118% More DCA Passengers Than Sun Country

68,306
+118%

31,390

0+1-----' Sun Country Projected DCA-LAN Local Passengers Onboard

Source: Exhibit WN-7 and Exhibit Corrected SY-2. Southwest DCA-MCI Projected Local Onboard Passengers Exhibit WN-R -24Passengers 35,000 30,000 25,000 20,000 15,000 10,000

5,000 

## Sun Country's Local Forecast For DCA-LAN is Over 80% Greaterthan The Total O&D Market (12 Months Ended March 31,2010)

31,390
+82%
17,290



### o +1----' YE Q1 2010 Total DCA-LAN Fared Passengers

Source: u.s.DOT, Origin-Destination Passenger Survey,via Data Base Products and Corrected SY-2. SY Local O&D Forecast Exhibit WN-R -2S

### 2009 Population 2,500,000
2,000,000
1,500,000
1,000,000

500,000 

## The Population in Kansas City is Over 4.5 Times the Population of Lansing

2,066,732
+356%

453,603



### o +1----' Kansas City MSA Population Lansing MSA Population

Source: u.s. Census,American Community Survey. ExhibitWN-R -26

## Southwest's Equivalent Fare Level is 24% Lowerthan Sun Country's Proposed Average Fare
One-Way Fares and Fees $160 $140 $120 $100

$80 $60 $40 $20

$0 +1----' $143 -24% $109

Sun Country Proposed LAN-DCA Fare and Southwest Fare and Fees at LAN-DCA Stage Fees Length

Note: Fare for Southwest derived from its system yield curve. See Exhibit WN-1O . Both include derived fares and fees. SY fees estimated at $13 based Q1 2010 DOT, Form 41 Data and Origin-Destination Passenger Survey Data. Source: U.S. DOT, Origin-Destination Passenger Survey,via Data Base Products and Corrected Exhibit SY-2. Exhibit WN-R -272009 Population

2,500,000
2,000,000
1,500,000

1,000,000

500,000 

## The Kansas City MSA Population is Over 200% LargerThan the Population ofthe Two Alternative Markets Proposed By AirTran

2,066,732

+200% +252%

688,126 586,908



### o +1-----' Kansas City MSA Sarasota MSA Ft. Myers MSA

Source: u.s.Census,American Community Survey. ExhibitWN-R-28

## There Are Many Convenient Single Connection Options Between DCA and RSW
SOUTHBOUND Connect DCA**De~Time** Carrier Flight Numbers Hub Time RSWArrival Time**Ela~sed** 1 8:00:00 FL 1181 Nonstop 0:00:00 10:30:00 2:30:00 2 5:45:00 US US1423/US1987 CLT 0:40:00 9:37:00 3:52:00 3 11:00:00 DL DL2439/DL1701 ATL 0:35:00 15:04:00 4:04:00 4 17:55:00 AA 735/4969 MIA 0:40:00 22:01:00 4:06:00 5 6:00:00 DL DL2939IDL1223 ATL 0:41 :00 10:15:00 4:15:00 6 12:10:00 US US1459/US1695 CLT 1:04:00 16:29:00 4:19:00 7 6:59:00 US US926/US1989 CLT 1:00:00 11:19:00 4:20:00 8 9:25:00 US US1967/US1809 CLT 1:05:00 13:49:00 4:24:00 9 7:20:00 AA 1269/4915 MIA 1:00:00 11 :50:00 4:30:00

NORTHBOUND Connect**RSWDe~Time** Carrier Flight Numbers Hub Time DCA Arrival Time**Ela~sed** 1 11 :59:00 FL 1180 Nonstop 0:00:00 14:10:00 2:11 :00 2 17:15:00 US US948/US1060 CLT 0:40:00 21:04:00 3:49:00 3 10:20:00 US US1988/US1712 CLT 0:54:00 14:20:00 4:00:00 4 15:10:00 US US1529/US1764 CLT 0:55:00 19:12:00 4:02:00 5 12:05:00 US US1126/US1766 CLT 0:54:00 16:12:00 4:07:00 6 19:15:00 US US1704/US1780 CLT 1:04:00 23:22:00 4:07:00 7 7:35:00 AA 4978/1068 MIA 1:00:00 11 :45:00 4:10:00 8 18:27:00 FL 162/187 ATL 0:40:00 22:40:00 4:13:00 9 19:01:00 DL DL1096/DL1438 ATL 0:44:00 23:15:00 4:14:00 10 8:30:00 US US1789/US1701 CLT 1:13:00 12:50:00 4:20:00 11 17:05:00 AA 4914/868 MIA 1:18:00 21:30:00 4:25:00 12 7:30:00 FL 178/186 ATL 0:59:00 12:00:00 4:30:00 Source: Oneworld, SkyTeam, and StarAlliance booking tools; airtran.com, frontier.com for October 11, 2010.

...**~---.-r~;---------;-------.~.--- .--~----**  Exhibit WN-R-29Exhibit WN-R-30 

## There Are Many Convenient Single Connection Options Between DCA and SRQ

SOUTHBOUND Connect SRQ DCA**De~** Time Carrier Flight Numbers Hub Time Arrival Time**Ela~sed** 1 8:45:00 US US3407- Nonstop 0:00:00 11:15:00 2:30:00 2 6:59:00 US US926/US3167- CLT 0:59:00 11 :07:00 4:08:00 3 12:10:00 US US1459/US2283- CLT 1:09:00 16:27:00 4:17:00 4 11:00:00 DL DL2439IDL1101 ATL 0:58:00 15:20:00 4:20:00 5 6:00:00 DL DL2939/DL1227 ATL 0:51:00 10:27:00 4:27:00 6 17:15:00 US US1773/US3235- CLT 1:19:00 21 :48:00 4:33:00 7 16:00:00 DL DL1539IDL689 ATL 0:51 :00 20:33:00 4:33:00

NORTHBOUND Connect SRQ**De~** Time Carrier Flight Numbers Hub Time DCA Arrival Time**Ela~sed** 1 12:09:00 US US3342- Nonstop 0:00:00 14:24:00 2:15:00 2 11 :08:00 DL DL2174/DL2238 ATL 0:35:00 14:57:00 3:49:00 3 18:44:00 FL 695/187 ATL 0:35:00 22:40:00 3:56:00 4 7:01:00 US US3115-/US1440 CLT 0:59:00 11 :02:00 4:01:00 5 17:00:00 US US2222-/US1060 CLT 1:02:00 21 :04:00 4:04:00 6 16:00:00 DL DL1138IDL1738 ATL 0:42:00 20:04:00 4:04:00 7 13:34:00 DL DL 1678/DL1938 ATL 1:06:00 17:59:00 4:25:00 8 11:11:00 FL 691/179 ATL 1:10:00 15:42:00 4:31 :00

Source: Oneworld, SkyTeam, and StarAlliance booking tools; airtran.com, frontier.com for October 11, 2010.**'I~"",.-_~,.,",,,,~--·; ,,~** **-:r-'.--:-:-;-----~.-.-.-----.-~--**(A) DCA Markets Airport Miles

--- LAN 478 

## Estimated Consumer Savings from Exhibit WN-R-31 Page 1of2 

## Sun Country's Proposed DCA - LAN Nonstop Service

(8) (C) (0) (E) (F) (G) (H) (I) (J) (K) (L) (M) (N) (0) Fare Stimulation Annual Passengers -Total Market ConsumerSurplus -Total Market Estimated A;erage Fare Before S Y SY Change Fare Before After Annual E x isting New Sen,;ce Stimulation Base Fare Fees Total Fare Absolute % Stimulation Stimulation New Stimulation Passengers Passengers Total 50% $140.13 $18.21 $158.34 $142.67 -$15.67 -10% 13% 17, 290 12,101 29, 391 $270, 936 $94,814

## Estimated Consumer Savings from Sun Country's Proposed DCA - LAN Nonstop Service (A) Nonstop Miles (8) Service Stimulation estimated by Campbell-Hill Aviation Group at 50% forfirst nonstop (one frequency) Exhibit WN-R-31 Page 2 of 2

(C) Average Fare for Fared Passengers (excludes passengers using frequentflier miles). Includes nonstop and connecting passengers. UsesYE March 2010 U.S. DOT Origin-Destination PassengerSurvey datavia Data Base Products. ExhibitWN-R-32. (D) Average Fees per passenger derived by Campbell-Hill Aviation Group using DOT Form-41 and DOT data (Q1 2010). (E) Column C + Column D (F) Sun Country's proposefare of$130 plus Q1 2010 average Sun Country baggage and cancellation fees per passengers ($12.67) derivedfrom U.S. DOT Form 41 data. Assumes that incumbentcarriers match Sun Country's Fares. (G) Column F - Column E (H) Column G / Column E (I) Calculated using a price elasticity coefficient of-1.2 (See Southwest Direct Exhibits, Appendix 1, page 3). The arc elasticityformula is: Arc Ep = [(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)] ,where Q1 = passengers beforeWN service, Q2 = Passengers afterWN service, P1=Fare Before WN service, P2 = Fare AfterWN service. (J) Fared passengersforYE March 2010 U.S. DOT Origin-Destination PassengerSurvey datavia Data Base Products. (K) Increases Column J by Column Ifare stimulation percentage and Column B QSI stimulation percentage. (L) Column J + Column K (M) ColumnJ x Column G (N) Column K x Column G x 0.5. This isthetriangle area in Southwest Direct Exhibits, Appendix 1, page 4. (0) Column M + Column N

## SouthwestWill Provide Greater Consumer Savings In the DCA Nonstop Markets Than Any OtherApplicant

US Sun Exhibit WN-R-32

Southwest Airways Republic Country AirTran ForecastOne-Way DCA N Nonstop Passengers 63,306 28,000 N/A 31,390 0 Average Market Fare (YE Q1 2010) $178 $190 1 $174 1 $158 2 F 0 Estimated FirstYear Fare $132 $206 $174 $143 3 R E 

### . C Fare Savings per Passenger $46 -$16 $0 $15 A 

## s T

Note: All fares include derived cancellation and baggage fees based on U.S. DOT Form 41 data (Q1 2010), and Origin-Destination Passenger Survey data (YE Q1 2010). 1/Carrier's average fare in the base year 2/This fare is based on U.S. DOT Origin Destination Passenger Survey fared passenger data for all carriers between DCA and LAN plus aweighted

average bag/cancellation fee of$18. 3/ $130 fare from Exhibit Corrected SY-2 plus derived baggage and cancellation fees of$13. Sources: Exhibit WN-R-1, Exhibit WN-4, U.S. DOT, Origin-Destination Passenger Survey, via Data Base Products, Exhibit WN-R-21, Exhibit WN-R-15, Exhibit WN-R-28.