Order 2011

- 11

- 17 Served: November 16, 2011

U N I T E D S

T A T E S O F A

M E R I C A D E P A R T M E N T O F T R A N S P O R T A T

I O N UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the 15 th day of September

, 2011

Joint Application of

SOUTHWEST AIRLINES CO

. and AIRTRAN AIRWAYS, INC.

for approval of a transfer of route authority under 49 U.S.C. § 41105 Docket DOT

- OST

- 20 11

- 0051

ORDER TRANSFER RING AUTHORITY

Summary

By this order, we (1) grant a de facto transfer under section 41105 of Title 49 of the United States Code (“the Statute”) of the c ertificate s and other economic authorities held by AirTran Airways, Inc. (“ AirTran”)

, to AirTran under the common ownership of Southwest Airlines Co. (“Southwest”); (2) transfer and reissue the blanket route integration certificate of public convenience an d necess ity currently held by AirTran to AirTran and /or Southwest; and (3) transfer and amend the other economic authorities currently held by AirTran to AirTran and /or Southwest.

Background

On September 26, 2010, Southwest entered into an agreement to ac quire 100 percent of AirTran Holdings, Inc. (“AirTran holdings”) , the parent company of AirTran . Under the terms of the agreement, both AirTran and AirTran Holdings would merge into Southwest.

On March 17, 2011, AirTran and Southwest (collectively the “ J oint A pplicants”) filed the subject application in Docket DOT

- OST

- 2011

- 0051 for approval of (1) a de facto transfer of AirTran’s authority to AirTran under the ownership and control of Southwest; (2) reissue the international route authority issued to Ai rTran in the name of “AirTran Airways, Inc. and / or Southwest Airlines Co.”; and (3) approve a de jure transfer of AirTran’s international authority to Southwest once the two air carriers are combined into a single entity

. 1

1 The applican ts also simultaneously filed an application (Docket DOT

- OST

- 2011

- 0052) for an exemption from section 41105 to the extent necessary to allow the acquisition of AirTran Holdings, Inc., to be completed prior to our action on the de facto transfer request. By Order 2011

- 4

- 22, issued April 27, 2011, we granted the exemption, on the condition that AirTran and Southwest remain separate entities until our decision on the de facto transfer request.2

Interested persons were given 21 days to file objections to the application. No objections were received.

The Joint Applicants

AirTran , a Nevada corporation, holds an interstate scheduled passenger certificate, 2 a blanket route integration certificate

, 3 and exemption authority to c onduct foreign scheduled passenger air transportation between Atlanta and Bermuda; Baltimore and Bermuda; 4 Atlanta and Cancun; Baltimore and Cancun; 5 Milwaukee and Cancun; 6 Atlanta and Freeport, Bahamas; 7 points in the U.S. and Nassau, Bahamas; 8 points in the U.S. and Montego Bay, Jamaica; 9 points in the U.S. and Aruba; 10 and a point or points in the U.S. and a point or points in the Dominican Republic. 11 The air carrier currently operates 140 Boeing aircraft (88 B

- 717

- 200s and 52 B

- 737

- 700s), serving primar ily the East and Midwest U.S. and the aforementioned six international destinations.

Southwest

, a Texas corporation, holds interstate scheduled passenger certificate authority

, 12 as well as foreign scheduled passenger certificate authority to operate bet ween the United States and Canada. 13 The air carrier currently operates 548 Boeing aircraft (B

- 737) , providing point

- to

point service to approximately 71 cities in 37 states.

TRANSFER OF AUTHORITY

The Department has held that a stock acquisition result ing in common control of two or more air carriers having international route authority constitutes a de facto certificate transfer subject to section 41105. 14 Thus, t he Joint Applicants requested that the Department approve a de facto transfer of AirTran’s authority to AirTran under the ownership and control of Southwest

.

T he Joint Applicants state in the application that upon consummation of the acquisition of AirTran by Southwest

, during a transition period, the air carriers will remain separate entiti es operated under separate brands. At the end of the transition period, however, AirTran and Southwest intend to integrate their operations, employees, and route networks into a single entity under the Southwest brand name . Therefore, the Join t Applicant s request that the Department

2 See Order 94

- 11

- 19

. This authority was most recently reissued by Order 2000

- 9

- 10, and amended by Order 2005

- 12

- 4.
3 See Order 2010

- 12

- 24

. 4 See Notice of Action Taken, dated December 10, 2010, in Docket DOT

- OST

- 2010

- 0292.
5 See Notice of Action Taken, dated August 6, 2010, in Docket DOT

- OST

- 2005

- 21134.
6 See Not ice of Action Taken, dated June 23, 2010, in Docket DOT

- OST

- 2010

- 0146.
7 See Notice of Action Taken, dated May 3, 2010, in Docket DOT

- OST

- 2000

- 8052.
8 See Notice of Action Taken, dated September 4, 2009, in Docket DOT

- OST

- 2009

- 0202.
9 See Notice of Acti on Taken, dated September 4, 2009, in Docket DOT

- OST

- 2009

- 0201.
10 See Notice of Action Taken, dated September 4, 2009, in Docket DOT

- OST

- 2009

- 0200.
11 See Notice of Action Taken, dated July 8, 2010, in Docket DOT

- OST

- 2010

- 0158.
12 See Order 79

- 6

- 187. Thi s authority was most recently reissued by Order 98

- 7

- 6 , and amended by Order 2005

- 12

- 4.
13 See Order 2009

- 4

- 12

. Southwest states that it has not provided service under this authority.
14 See Order 2001

- 12

- 15 and Order 2009

- 9

- 4.3

transfer the international route and other economic authorities currently held by AirTran to AirTran and/or Southwest to facilitate the merger into a single entity

. 15

Public Interest

A certificate may be transferred under s ection 41105 of the Statute if the Department determines that the transfer is in the public interest. The primary criteria in determining the “public interest” are whether the certificate transfer would conflict with important international aviation polic y objectives , w hether the surviving entities are U.S. citizens

, and whether they will be fit to hold the authority. Further, section 41105(b) requires the Department to analyze the impact of the transaction on the trade position of the United States in th e international air transportation market , the viability of the air carrier applicants, and competition in the domestic airline industry. 16

The Joint Applicants contend that the merger will advance U.S. international aviation policy by fostering U.S.

- fla g competition to near international destinations such as Mexico and the Caribbean , resulting in an improved U.S. trade position in international air transportation markets

. In this regard, the Joint A pplicants state that the combined air carriers’ network will provide consumers with new low

- fare travel options, connecting more U.S. cities to the international air transportation system with service provided by a low

- cost carrier

, thus stimulating additional demand in these markets. The Joint Applicants sta te that because AirTran operates internationally to countries governed by open skies or open entry agreements, with the exception of Mexico, other U.S. air carriers will not be precluded from entering these markets. T he Joint Applicants also assert that t he transfer of AirTran’s Mexico authority to Southwest will ensure that the current level of U.S. competition is maintained or improved. The merger will enable Southwest to expand AirTran’s existing international service with the combined air carrier’s br oader network of services and traffic support

. In this regard, Southwest will be in a strong er position to compete against foreign carriers and enhance U.S. commerce and the U.S. trade position.

The Joint Applicants assert that the merger will have a pos itive impact on the long

- term viability of the combined air carrier. According to the Joint Applicants, the merger will enable the combined air carrier to achieve millions of dollars in net synergies from efficiencies and sharing best practices between th e two entities , which will be attained without negatively impacting wages, labor, or currently served cities

. Further , t he acquisition of AirTran by Sout hwest will fill large voids in Southwest’s current route system by adding additional markets served su ch as Ronald Reagan Washington National Airport, La Guardia Airport, Charlotte Douglas International Airport, and Memphis International Airport. The addition of these markets, as well as others currently served by AirTran, will provide Southwest with the opportunity for new growth , which will lead to expanding low

- fare service and competition to more communities and consumers with in the U.S. Additionally, the Joint Applicants indicated that the merger will result in Southwest acquiring AirTran’s fleet of 88 B

- 717 aircraft, which are smaller than Southwest’s current fleet of B

- 737 aircraft. The smaller sized aircraft has a lower overall trip

15 Although the Joint Appli cants initially requested the subject authorities be issued to AirTran or Southwest, they clarified in an August 3, 2011, communication with the Department that the authorities should be transferred to AirTran and/or Southwest.
16 See Order 2000

- 9

- 4 at 2.4

cost than the B

- 737, which will enable Southwest to serve smaller markets than it can currently profitably serve tod ay

. The Joint Applicants state that the transfer will positively affect the employees of both AirTran and Southwest by creating a financially stronger air carrier with increased efficiencies through an expanded route network, which otherwise would not b e achieve d by either stand

- alone air carrier. As a result, Southwest will continue to be able to make available higher than average salaries and benefits, in addition to increased job security and long

- term career opportunities for its employees , thereby furthering the overall viability of the combined air carrier

. Additionally,
t he Joint Applicants state that an involuntary furlough of front

- line employees is not anticipated upon the conclusion of the merger.

T he Joint Applicants affirm that Southwest ’s acquisition of AirTran will lead to expanded low

- fare service

, and will not have an undue effect on competition within the U.S. Specifically

, upon the conclusion of the merger, Southwest will begin providing service to Hartsfield

- Jackson Atlanta Intern ational Airport, an omnidirectional large hub airport where AirTran currently has a strong presence. This will lead to the addition of new non

- stop destinations and expand online connections for consumers. This will result in increased competition in thi s market, new air transportation connectivity, and routings to, from, and through Atlanta from cities currently served by Southwest to cities currently served by AirTran

. Additionally, the acquisition of AirTran, a currently profitable air carrier, will g enerate revenue synergies and therefore will allow the combined air carrier to more effectively compete with newly merged larger network air carriers. Southwest will be in a position to exploit new opportunities and enable it to focus on fleet growth and market expansion, which will lead to expanding low

- fare service and competition to more communities and consumers in the U.S. Moreover

, the Department of Justice, which has the primary responsibility for evaluating the likely effects of the proposed
trans action on domestic competition, has decided not to oppose the acquisition on antitrust grounds. In light of the above, the acquisition of AirTran by Southwest is not likely to substantially lessen domestic competition in the U.S.

Decision

Our review of the application and other information available to the Department raises no issues that would lead us to question the fitness or citizenship of either air carrier as a result of this transaction. 17 We bel ieve that Southwest will remain a viable air carrier after the acquisition of AirTran

, given the financial resources and managerial experience of Southwest

. T he combined air carrier will provide additional low

- fare scheduled service to consumers and markets through its expanded domestic and international r oute network , which would otherwise not be achieved by either of the stand

- alone air carriers without such a merger

. Accordingly, we conclude that the transfer of the certificate and other economic authorities held by AirTran to AirTran and/ or Southwest is in the public interest and does not conflict with our international aviation policy objectives

. 18

17 The Department recently concluded continuing fitness reviews of the Joint Applicants and found that each remained fit to conduct operations as U.S. certificated air carriers. Therefore, we will transfer and amend the certificates

18 The de facto transfer of a foreign certificate is subject to Presidentia l review under 49 U.S.C. § 41307

.5

and other economic authorities held by AirTran and Southwest, as requested by the Joint Applicants, to permit the air carriers to merge into a single entity.

We note that the amended authority discussed above shall not authorize multiple

- carrier services in limited

- entry markets, and that such authority may only be used in a manner that is consistent with the terms of applicable air services agreement s , or with the overall state of the aviation relations, between the United States and the foreign countries involved.

ACCORDINGLY,

1. We grant the request of Southwest Airlines Co. and AirTran Airways, I nc., for approval under 49 U.S.C. § 41105 of the de facto transfer of the certificate s and other economic authorities held by AirTran Airways, Inc.

, to AirTran Airways, Inc., under the ownership of Southwest Airlines Co.

2. We transfer and reissue the blanket route integration certificate of public convenience and necessity currently issued to AirTran Airways , Inc. , to AirTran Airways, Inc. and/ or Southwest Airlines Co.

3. We transfer the other economic authorities currently held by AirTran Airways, Inc. ( see At tachment A ), and amend them by changing the name of the holder from “AirTran Airways, Inc.” to “AirTran Airways, Inc. and / or Southwest Airlines Co.”

4. The authority granted may only be used in a manner consistent with the terms of the air transport agreement s between the United States and our aviation partners. 19

5. Unless disapproved by the President of the United States under section 41307 of the Statute, this order shall become effective on the 61st day after its submission for section 41307 review or
upon the date of receipt of advice from the President or his designee under Executive Order 12597 and implementing regulations that he or she does not intend to disapprove the Department’s order under that section, whichever occurs earlier. 20

19 The subject certificate is being amended to reflect the Department’s approval, under 49 U.S.C. § 41105, of the transfer of the economic authorities held by AirTran to Southwest. To facilitate a smooth transition of the integrated services and to provide for maximum operational flexibility during this time, the certificate will read, “AirTran Airways, Inc. and/ or Southwest Airlines Co.” Additional condition(s) may apply, as indicated.
20 This order was submitted for sect ion 41307 review on September 15, 2011. The 61 st day is November 16, 2011. Since the President ’ s designee did not disapprove this order before that date, it became effective on November 16, 2011.6

6. We will serve a copy of this order on the persons listed in Attachment B

.
By:

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs

An electronic version of this document is available on the World Wide Web at http://www.regulations.gov

## Certificate of Public Convenience and Necessity for

Blanket Route Integration (as reissued)


## This Certifies That



# AIRTRAN AIRWAYS , I NC

. and/ or SOUTHWEST AIRLINES CO.

is authorized, subject to the provisions of Subtitle VII of Title 49 of United States Code, the orders, rules, and regulations issued thereunder, and the attached Terms, Conditions, and Limitations, to integrate authority it currently holds or that may be granted to it during the term of this certificate, whether under 49 U

. S

. C

. §§ 40109 or 41102 , to engage in foreign air transportation of persons, property, and mail.

This certificate is not transferable without the approval of the Department of the Transportation.

By Direction of the Secretary

Issued by Order 2011

- 11

- 17 Susan L. Kurland On September 15, 2011 Assistant Secretary for Effective on November 16, 2011 Aviation and International AffairsAttachment


### Terms, Conditions, and Limitations

AIRTRAN AIRWAYS, INC. AND/OR SOUTHWEST AIRLINES CO.

is currently authorized to engage in foreign air transportation of persons, property, and mail in accordance with authority granted to each air carrier by the Department of Transportation under 49 U.S.C. §§ 40109 and 41102, and all terms, conditions, and limitations attached to such authority. With respect to all such authority currently held by each air carrier involving any points named on its existing certificates of public convenience and necessity and its existin g exemptions and, unless otherwise provided, any future grants of authority issued under 49 U.S.C. §§ 40109 and 41102, each air carrier is authorized to integrate all such authority, subject to the following conditions.

(1) The holder shall at all times conduct its operations in accordance with the regulations prescribed by the Department of Transportation for the services authorized by this certificate, and with such other reasonable terms, conditions, and limitations as the Department of Transportation may prescribe in the public interest.

(2) The holder shall at all times conduct its operations in accordance with all treaties and agreements between the United States and other countries, and the exercise of the privileges granted by this certificate is subject to compliance with such treaties and agreements and with any order of the Department of Transportation issued under them.

(3) The exercise of the authority granted here is subject to the holder first obtaining from the appropriate foreign govern ments such operating rights as may be necessary.

(4) Comply with all applicable requirements of the Federal Aviation Administration, the Transportation Security Administration, and with all applicable U.S. Government requirements concerning security, inc luding, but not limited to, 49 CFR Part 1544. To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charter flights) to or from a foreign airport, contact i ts Principal Security Inspector ( “ PSI ” ) to advise the PSI of its plans and to find out whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served.

(5) The holder shall at all times re main a “citizen of the United States” as required by 49 U.S.C. 40102(a)(15).

(6) The holder shall maintain in effect liability insurance coverage as required under 14 CFR Part 205. Failure to maintain such insurance coverage will render a certificate ine ffective, and this or other failure to comply with the provisions of Subtitle VII of 49 U.S.C. or the Department’s regulations shall be sufficient grounds to revoke this certificate.2

(7) Where the holder’s certificate or exemption authority is limited to cargo only, the holder is not authorized to carry passengers (other than cargo attendants accompanying the freight shipments).

(8) Should the holder propose any substantial changes in its ownership, management, or operations (as that term is defined in 14 CFR 204.2(l)), it must first comply with the requirements of 14 CFR 204.5.

(9) In the event that the holder ceases all operations for which it was found fit, willing, and able, its authority under this certificate shall be suspended under the terms of 14 CFR 204.7 and the holder may neither recommence nor advertise such operations unless its fitness to do so has been redetermined by the Department.

(10) The holder may combine services authorized by this certificate with all services authorized by oth er Department of Transportation certificates or exemptions; provided that such operations are in compliance with the provisions of all applicable bilateral aviation agreements, and provided further that (a) nothing in the award of the blanket route integra tion authority requested should be construed as conferring upon the holder additional rights (including fifth

- freedom intermediate and/or beyond rights) to serve markets where U.S. carrier entry is limited unless the holder first notifies the Department of its intent to serve such a market and unless and until the Department has completed any necessary carrier selection procedures to determine which carrier(s) should be authorized to exercise such rights; and (b) should there be a request by any carrier to use the limited

- entry route rights that are included in this certificate by virtue of the blanket route integration authority granted here, but that are not then being used by the holder, the holding of such authority by route integration will not be const rued as providing any preference for the holder in a competitive carrier selection proceeding to determine which carrier(s) should be entitled to use the authority at issue.

This certificate shall become effective on November 16, 2011

.Attachment A

OTHER ECONOMIC AUTHO RIZATIONS HELD BY AIRTRAN AIRWAYS, INC.

Docket Authority Type Effective Date Points DOT

- OST

- 2010

- 0292 Exemption December 10, 2010 Atlanta

- Bermuda Baltimore

- Bermuda
DOT

- OST

- 2005

- 21134 Exemption August 6, 2010 Atlanta

- Cancun Baltimore

- Cancun
DOT

- OST

- 2010

- 0146 Exem ption June 23, 2010 Milwaukee

- Cancun DOT

- OST

- 2000

- 8052 Exemption May 3, 2010 Atlanta

- Freeport, Bahamas DOT

- OST

- 2009

- 0202 Exemption April 18, 2011 U.S.

- Nassau, Bahamas DOT

- OST

- 2009

- 0201 Exemption April 18, 2011 U.S.

- Montego Bay, Jamaica DOT

- OST

- 2009

- 020 0 Exemption April 18, 2011 U.S.

- Aruba DOT

- OST

- 2010

- 0158 Exemption July 8, 2010 U.S.

- Dominican RepublicAttachment B

SERVICE LIST FOR SOUTHWEST AIRLINES C O

. AND AIRTRAN AIRWAYS , INC

.

MR ROBERT KNEISLEY ASSOCIATE GENERAL COUNSEL MS LESLIE ABBOTT ATTORNEY SOU THWEST AIRLINES CO 1901 L STREET NW WASHINGTON DC 200 3 6 MR PETER LYNCH ASST CHIEF COUNSEL F OR ENFORCEMENT AGC 300 FEDERAL AVIATION ADM INISTRATION 800 INDEPENDENCE AVE NUE SW WASHINGTON DC 20591

MR RON RICKS EXECUTIVE VICE PRESIDENT MS MADELEINE JOHNS ON VICE PRESIDENT GENERAL COUNSEL SOUTHWEST AIRLINES CO 2702 LOVE FIELD DRIVE DALLAS TX 75235 MR WILLIAM WEBER CERTIFICATION SECTION MANAGER FAA AFS 900 45005 AVIATION DRIVE SUITE 131 DULLES VA 20166

MR DAVID SLOAN POI FOR SOUTHWEST AIRLINES CO FAA SOU THWEST CMO 29 8700 FREEPORT PARKWAY IRVING TX 75063

MR STEVEN ROSSUM EXECUTIVE VICE PRESIDENT AIRTRAN AIRWAYS INC 9955 AIRTRAN BOULIVARD ORLANDO FL 32827 MS ANNE SUISSA RTS 42 OFFICE OF AIRLINE INFORMATION DOT/RITA/BTS E 34 1200 NEW JERSEY AVENUE SE WASH INGTON DC 20590

MR MARTIN POLOMSKI POI FOR AIRTRAN AIRWAYS INC FAA AIRTRAN CMO 37 5950 HAZELTINE NATIONAL DRIVE ORLANDO FL 32822

MR EDWARD FABERMAN COUNSEL FOR AIRTRAN AIRWAYS INC WILEY REIN LLP 1776 K STREET NW WASHINGTON DC 20006