14910-13] 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration (FAA) 

[Docket No. FAA-2010-0109] 

Notice on Petition for Waiver of tlie Terms of the Order Limiting Sclieduled Operations at 

LaGuardia Airport 

ACTION: Grant of petition with conditions. 

SUMMARY: The Secretary and the FAA are granting, subject to conditions, the joint waiver 

request of Deha Air Lines and US Airways from the prohibition on purchasing operating 

authorizations ("slots" or "slot interests") at LaGuardia Airport (LGA). The grant permits the 

carriers to consummate a transaction in which Delta would transfer 42 pairs of slot interests to 

US Airways at Ronald Reagan Washington National Airport (DCA), international route 

authorities to Sao Paulo and Tokyo; and terminal space at the Marine Air Terminal at LGA. US 

Airways would transfer 125 pairs of slot interests to Delta at LGA, and would lease an additional 

15 pairs of LGA slot interests with a purchase option, together with terminal space in LGA's 

Terminal C. The grant is subject to the conditions that the carriers dispose of 14 pairs of slot 

interests at DCA and 20 pairs of slot interests at LGA to eligible new entrant and limited 

incumbent carriers, pursuant to procedures set out in this Notice, and achieve a mutually 

satisfactory agreement regarding gates and associated facilities with any such purchaser. 

If you wish to review the backgroimd documents or comments received in this proceeding, you 

may go to http://www.regulations, gov at any time and follow the online instructions for 

accessing the electronic docket. You may also go to the U.S. Department of Transportation's 

Docket Operations in Room W12-140 on the ground floor of the West Building at 1200 New 

Jersey Avenue, SE, Washington, DC between 9 a.m. and 5 p.m. Monday through Friday, except 

Federal holidays. 

DATES: The waiver is effective upon Delta and US Airways satisfying the conditions required 

by this Notice. On February 9, 2010, the FAA issued the Notice of petition for waiver and 

solicited comments through March 22, in this Docket, on the grant of the petition with 

conditions. (75 Federal Register 7306, Feb. 18, 2010). On March 30, 2010, the FAA reopened 

the comment period and solicited rebuttal comments through April 5, 2010. (75 Federal Register 

16574, Apr. 1,2010). 
FOR FURTHER INFORMATION CONTACT: Rebecca MacPheison, Assistant Chief 

Counsel for Regulations, by telephone at (202) 267-3073 or by electronic mail at 

Rebecca.macpherson@faa.gov; or Jonathan Moss, Deputy Assistant General Counsel for 

Operations, by telephone at (202) 366-4710 or by electronic mail at jonathan.moss@dot.gov. 

SUPPLEMENTARY INFORMATION 

The proposed transaction and the waiver request 

In the Wendell H. Ford Aviation Investment and Reform Act for the 21'* Century (AIR-21), Pub. 

L. No. 106-181 (2000), Congress required a phase out and termination of the High Density Rule 

(HDR)' at LGA by January 1, 2007.^ Congress expressly retained the FAA's authority for 

"safety and the movement of air traffic."'' The FAA eliminated the terms of the HDR applicable 

at LGA; however, the demand for flights at LGA and resultant severe congestion prompted the 

FAA to re-impose quotas by means of an order published in 2006 and subsequently amended ( 

"LGA Order" or "Order")."^ The LGA Order, issued under the FAA's authority to regulate the 

use of navigable airspace,^ assigned to the incumbent carriers at LGA their slot interest holdings 

and authorized them to lease or trade authorizations for any consideration for the duration of the 

Order. The Order, originally scheduled to expire October 24, 2009, was extended through 

October 29, 2011. The Order does not allow for the purchase or sale of slot interests at LGA, 

and the only way for a carrier to purchase or sell such interests is therefore through obtaining a 

waiver of the Order. The FAA is authorized to grant waivers when it determines that "the 

exemption is in the public interest." 49 U.S.C. § 40109. 

In addition to limitations on the number of operations, both airports also are subject to "perimeter 

rules" that prohibit nonstop flights to and from airports beyond an established perimeter. DCA's, 

at 1,250 miles, is set by Federal statute.^ The perimeter rule at LGA was imposed by the Port 

' The HDR is codified at 14 C.F.R. Part 93, Subparts K and S. 

^ 49 U.S.C. § 41715(a)(2). 

M9 U.S.C. § 41715(b)(1). 

^ Operating Limitations at New York LaGuardia Airport, 71 Fed. Reg. 77,854 (Dec. 27, 2006); 72 Fed. Reg. 63,224 

(Nov. 8, 2007) (transfer, minimum usage, and withdrawal amendments); 72 Fed. Reg. 48,428 (Aug. 19, 2008) 

(reducing the reservations available for unscheduled operations); 74 Fed. Reg. 845 (Jan. 8, 2009) (extending the 

expiration date through Oct. 24, 2009); 74 Fed. Reg. 2,646 (Jan. 15, 2009) (reducing the peak-hour cap on scheduled 

operations to 71); 74 Fed. Reg. 51,653 (Oct. 7, 2009) (extending the expiration date through Oct. 29, 2011). 

^ 49 U.S.C. § 40103(b) directs the FAA to develop plans and policy for the use of the navigable airspace and, by 

order or rule, to regulate the use of the airspace as necessary to ensure its efficient use. 

^ 49 U.S.C. § 49109. Slot exemptions specifically authorized by Congress have allowed 24 slots to be used for 

beyond-perimeter nonstop operations, with US Airways holding 6 for service to Phoenix and 2 for Las Vegas, and 

Delta holding 2 for Salt Lake City. 49 U.S.C. § 41718. 
Authority of New York and New Jersey.' Banning flights to cities more than 1,500 miles away, 

the Rule was imposed in 1984 in an effort to ease ground congestion at the airport. 

Two air carriers, Delta and US Airways, have proposed an exchange of slot interests at these two 

airports. This exchange, which could potentially impact as many as 182 round-trip operations at 

the two airports,^ would qualify as a purchase under both the Order and the HDR.^ The caixiers 

consider the slot interest exchanges to be part of an integrated transaction because the sale of US 

Airways' slot interests to Delta at LGA is conditional upon the purchase by US Airways of 

Delta's slot interests at DCA. 

FAA's Tentative Determination 

On February 9, 2010, we issued a Notice for publication in the Federal Register that we had 

received from US Airways and Delta a petition for waiver of the LGA Order, and tentatively 

approved the proposed transaction subject to certain conditions.'" In conditionally approving the 

transaction, we stated our tentative determination that, while the proposed transaction had a 

number of benefits, a grant of the waiver in its entirety would result in a substantial increase in 

market concentration that would harm consumers. The public interest would best be served, we 

tentatively found, by creating new and/or additional competition at the airports to counterbalance 

that harm, specifically through divestiture of 14 pairs of slot interests at DCA and 20 pairs of slot 

interests at LGA to new entrant and limited incumbent carriers. We proposed the divestiture of 

two slot-pair bundles at DCA with Bundle A containing 8 pairs and Bundle B containing 6 pairs; 

and four slot-pair bundles at LaGuardia, with Bundle A containing 8 pairs and Bundles B-D 

containing 4 pairs per bundle. 

In the Notice, we noted that if the proposed transaction were approved as presented, it would 

lead to significantly increased concentration at DCA for US Airways and at LGA for Delta. 

Based on their February 2010 schedules, US Airways would raise its share of departures at DCA 

from 47 to 58%, with its share of slots (including regional affiliates) increasing from 44 to 54%. 

This increase would make it three times the size of its closest competitor (American Airlines). 

At LGA, Delta (with its affiliates) would ascend to a dominant position, raising its share of 

departures from 26 to 51% and its share of slots from 24 to 49%. Delta would become two and 

one-half times the size of its closest competitor (also American), and LGA would transition from 

an airport with three competing carriers of similar size to one having a single dominant carrier. 

^ The United States Court of Appeals for the Second Circuit upheld the right of the Port Authority of New York and 

New Jersey, as airport proprietor, to adopt perimeter rule under the circumstances at the time. Western Air Lines v. 

Port Authority of N.Y. and N.J.. 817 F.2d 222 (2d Cir. 1987). 

^ The transaction affects almost 10% of the total number (832) of DCA slots and more than 20% of the total number 

(1147) of LGA slots. 

' 14 C.F.R. §93.221. 

'° 75 Fed. Reg. 7308 (Feb. 18, 2010). 
The Notice stated concern that due to a dominance of this magnitude, other incumbent carriers 

would be limited in exerting competitive pressures and disciplining fares. This concern was 

fuither compounded by the fact that low-cost carriers ("LCCs") - which create the most 

competitive impact by the ability to dramatically lower fares and increase the volume of 

passengers in a market - had only a limited presence at DCA and LGA. Together, they have 

only 3.3% of slot interest holdings at DCA, and 6.8% at LGA." 

Another concern raised in the Notice was that, if the proposed transaction were approved as 

submitted, more markets would be served on a monopoly or dominant basis. In a number of 

instances either US Airways or Delta would depart a market in which they both compete, leaving 

the other in a monopoly position. In others, where only one of the two currently compete, the 

serving carrier would depart the market and the other would enter it, assuming a monopoly or 

dominant position in which it would have even greater pricing power by virtue of its increased 

concentration at DCA or LGA. We tentatively concluded that the transaction would produce 

higher fares for consumers in certain domestic markets, as the fewer the number of carriers 

competing in a market the more likely it is that the fares will be higher. Moreover, our analysis 

of US Airways' and Delta's fares at DCA and LGA showed that they tended to charge higher 

fares when they operate monopoly or dominant routes from those airports.'^ 

We also considered whether the three airports in the New York area, and the three in the 

Washington area, effectively disciplined fares at one another, such that if fares are perceived to 

be rising too high at one airport, the harm would be mitigated by consumers simply shifting to 

the other two. In analyzing both overlap and all markets at the airports, we found that yields 

(i.e., revenue per passenger mile) were substantially different among the airports.'^ The average 

yield in all markets at BWI is 48% less than DCA, and the average yield in all markets at Dulles 

is 37% less than DCA. Similarly, the average yield at JFK is 28% less than at LGA, and Newark 

" Following the issuance of the Notice, JetBlue received eight slot pairs at DCA from American Airlines in a 

temporary slot transfer that will expire October 29, 2011. JetBlue announced on April 28, 2010 that it planned to 

initiate service using those slot pairs beginning November 1, 2010. Including these temporary slots, LCCs will have 

5.2% of the slot interests at DCA. 

'^ DOT calculated that, at DCA, US Airways charged on average 124% of the Standard Industry Fare Level (SIFL), 

a cost-based index that the Department has used historically to assist in its evaluation of pricing. However, in 

markets where it held a 95 to 100% share of nonstop departures, US Airways charged substantially more. Delta, 

having a less strong position at LGA than US Airways at DCA, tends to price more competitively, averaging only 

89% of the index figures with its current slot interest holdings. However, we anticipate that Delta's increased market 

share after the transaction would permit it to increase the percent of SIFL associated with its service at LGA. In 

comparison, at Washington Dulles International Airport (IAD), the average of all carriers' fares vs. SIFL is 77%, 

and at Thurgood Marshall Baltimore-Washington Airport (BWI) the figure is 65%. The fares of the largest carrier at 

IAD, United Airlines, average 90% of SIFL, while those of the largest carrier at BWI, Southwest Airlines, average 

65%. At Newark Liberty International (EWR), the average of all carriers' fares vs. SIFL is 71 %, and at JFK the 

figure is 57%. The fares of the largest carrier at EWR, Continental Airlines, average 71 % of SIFL, while those of 

the largest carrier at JFK, JetBlue, average 57%. The NYCAVashington airports that have the largest proportion of 

low-cost carriers consistently provide lower fares. A further discussion of our SIFL methodology appears below. 

'^ Specifically, yield at DCA is 27 cents per mile, vs. 17 cents at Dulles and 14 cents at BWI, while yield at LGA is 

20.5 cents per mile, vs. 18.7 cents at EWR and 14.7 cents at JFK. 
is 9% less than at LGA. We reasoned that if the airports were effective economic substitutes for 

all passengers, the yield spreads would not differ so significantly. 

We also found that these differences in the level of yields at area airports tended to correlate with 

the level of low cost caiTier operations. Thus, passengers paid more for nonstop service of 

equivalent distance at DCA and LGA than at alternative airports that have sizable LCC 

competition. For example, for trips out to 1000 miles, passengers at LGA pay 23% more on 

average than those at JFK ($147 vs. $120 each way). Passengers at DCA pay 64% on average 

more than those at BWI ($184 vs. $113 each way). 

We also noted that Delta and US Airways were not committed to any markets for defined 

periods, and were free to discontinue those that were being proposed as part of the transaction 

and initiate routes elsewhere. We expressed concern that, given their added slot holdings, they 

could use those to target smaller competitors, for example by increasing their roundtrips in 

competitive markets and "sandwiching" competitor flights. The competitive harm, we feared, 

would occur not just at the city-pair level, but at the network or airport level as well, particularly 

given the finding that the other area airports did not serve as effective substitutes for each other. 

These concerns - the combination of incieased airport concentration, the increase in the number 

of monopoly or dominant markets in which increased pricing power could be exercised, and the 

potential for use of transferred slot interests in an anticompetitive manner - led us to propose that 

a relatively limited number of slots be divested as a condition for approving the transaction. At 

DCA, we proposed that 14 pairs be divested, to new entrant or limited incumbent carriers -

enough to initiate and/or increase service in one large market or multiple smaller markets. At 

LGA, we proposed a divestiture of 20 pairs to such carriers, in combinations that would allow 

new competition in three or four new markets. We reasoned that the relatively modest 

divestitures would allow the parties to realize almost all of their purported benefits, while 

limiting the increase in concentration at the airports and providing opportunities for greater 

competition.''* 

We also tentatively determined that the divestitures be made to U.S. or Canadian air carriers 

having fewer than five percent of the total slot holdings at the airport in question.'^ This 

''' US Airways and Delta also filed a notification and report with the Antitrust Division of the Department of Justice 

(DOJ) under the Hart-Scott-Rodino Act, 15 U.S.C. § 18a (HSR). Under the HSR process, DOJ reviews the 

transaction to determine whether it would substantially lessen competition or have other significant anticompetitive 

effects. Documents relevant to the HSR review were submitted to DOJ by the carriers, with access provided also to 

DOT, which independently assists DOJ in its analysis of the transaction. DOJ is continuing its review under HSR 

and has participated with comments in support of the Department's tentative determination in this proceeding. 

' ' To ensure the integrity of the 5% proposal, we also tentatively determined that carriers eligible to receive divested 

slots not code share with any carrier that has 5% or more slot holdings, and are not subsidiaries, either partially or 

wholly-owned, of a company whose combined slot interest holdings are equal to or greater than 5% at LGA and/or 
approach was designed to exclude carriers that already offer a level of service sufficient to affect 

pricing in the market, and include both limited incumbents that with few slots were most 

vulnerable to anticompetitive strategies, and new entrants that could bring the prospects of 

increased efficiencies and capacity, as well as vigorous price competition to the markets. 

We also proposed that the proceeds of the divestiture sales be collected and retained by the 

divesting carriers; that the divesting carriers be required to take their actions within a 60-day 

period; that carriers purchasing the slot interests be precluded from re-selling or leasing them to 

carriers that were ineligible to participate as purchasers in the divestiture proceeding; that the slot 

interests be sold in identified "bundles" (with specific times we indicated) so as to enable the 

purchasers of the slots to operate competitive service with them with times spread across the day. 

We also solicited comments on the specific means by which the carriers might sell the slot 

interests, noting such options as through private sales after FAA-monitored outreach efforts; 

through a blind, cash-only, process over an FAA website; and through an FAA website-based 

outreach process that allowed the carriers to negotiate the consideration and terms of sale with 

eligible purchasers. 

The Notice invited interested parties to submit their comments by March 22, 2010, to the docket 

management office at DOT, identifying them by docket number FAA 2010-0109. The 

comments that were received are summarized in Appendix A. 

US Airways-Delta Divestiture Counterproposal 

On March 22, in their comments, US Airways and Delta stated that, as they were "mindful of the 

concerns expressed by FAA" and desiring of a solution that would permit them to move forward, 

they had entered into provisional divestiture agreements with four carriers that were eligible 

under the terms of the Notice for 15 slot pairs at LGA and 4.5 slot pairs at DCA. The 15 slot 

pairs at LGA would be transferred, five each, to AirTran Airways, Inc., Spirit Airlines, Inc., and 

WestJet, Inc. over periods of up to 28 months; the 4.5 pairs at DCA would be transferred to 

JetBlue Airways, Inc. The carriers added that these more limited divestitures, "while 

diminishing the benefits of the transaction," would preserve enough of the benefits to permit 

them to go forward. As explained in their joint filing with the new entrant/ limited incumbent 

carriers to which they would divest slots under their counterproposal: (1) at DCA, JetBlue would 

acquire 4.5 pairs of slots (JetBlue intends otherwise to add one off-peak hour slot to complete a 

5-roundtrip service pattern); (2) at LGA, AirTran, Spirit, and WestJet would acquire 5 pairs of 

slots each, respectively, for a total of 15 pairs; (3) in all cases, the acquisition would be 

DCA. Carriers that would not qualify include those who are involved in a code-share relationship at DCA/LGA 

with carrier(s) that also would not qualify as of the date of the Notice. 

'^ We have also placed in the docket a number of other letters the Department received in connection with the DeltaUS Airways proposal, which were generated before the docket was established. These were typically general letters 

of support for the proposal. 
conditioned on FAA's grant of the LGA Waiver request; (4) the JetBlue transfer would take 

place relatively soon, but Delta would continue service with the slots under a lease from JetBlue 

for a period; (5) the AirTran and Spirit transactions would occur over a 24-iTionth period at dates 

of their choosing; and (6) the WestJet transaction would occur at a date of its choosing within 28 

months, and WestJet and Delta will be negotiating other commercial arrangements as well. 

The Joint Applicants also stated that if the FAA grants the waiver subject to the proposed 

divestiture conditions, they would not consummate the transaction, and reserved 

the right to seek judicial review. 

Given the issues raised by the Joint Applicants' counterproposal, the FAA determined that it was 

in the public interest to reopen the comment period through April 5. The rebuttal and 

supplemental comments are also summarized in Appendix A. We grant all motions for leave to 

file late comments, and all comments to date were accepted into the docket. 

STATUTORY AUTHORITY TO GRANT WAIVER SUBJECT TO SLOT INTEREST 

DIVESTITURES 

The FAA and the Secretary have authority to grant the requested waiver of the LaGuardia Order, 

and to grant the waiver subject to certain conditions. The FAA is authorized to grant an 

exemption when the Administrator determines the "exemption is in the public interest." 49 

U.S.C. § 40109. The Administrator may "modify or revoke an assignment [of the use of 

airspace]" when required in the public interest. 49 U.S.C. § 40103(b)(1). Courts have upheld 

the conditions an agency may place on its approval of a transaction to meet public interest 

standards.'^ 

Further, our consideration of Delta's and US Airways' request to waive the terms of the 

LaGuardia Order complies with and carriers out AIR-2rs mandate to instill competition at slotcontrolled airports and doing so in conjunction with considering the Secretary's Section 

'^ Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia Airport, 75 Fed. Reg. 

7306 at 7307 (Feb. 18, 2010). The LaGuardia Order was issued under the FAA's authority to "develop plans and 

policy for the use of the navigable airspace and assign by regulation or order the use of the airspace necessary to 

ensure the safety of aircraft and the efficient use of airspace." 49 U.S.C. § 40103(b)(1). Operating Limitations at 

New York LaGuardia Airport, 71 Fed. Reg. 77,854 (Dec. 27, 2006); 72 Fed. Reg. 63,224 (Nov. 8, 2007) (transfer, 

minimum usage, and withdrawal amendments); 72 Fed. Reg. 48,428 (Aug. 19, 2008) (reducing the reservations 

available for unscheduled operations); 74 Fed. Reg. 845 (Jan. 8, 2009) (extending the expiration date through Oct. 

24, 2009); 74 Fed. Reg. 2,646 (Jan. 15, 2009) (reducing the peak-hour cap on scheduled operations to 71); 74 Fed. 

Reg. 51,653 (Oct. 7, 2009)(extending the expiration date through Oct. 29, 2011). 

'* See South Dakota v. Dole, 483 U.S. 203, 208 (1987) ("The Federal Government may establish and impose 

reasonable conditions relevant to federal interest... and to the over-all objectives thereto"); N.Y. Cent. Sec. Corp. v. 

United States, 287 U.S. 12 (1932) (upholding Interstate Commerce Commission order approving the acquisition of 

the "Big Four" railroad companies by N.Y. Central upon the condition that it also acquire short line railroads on 

certain terms). 
40101(a)'s pro-competitive public interest factors.'"* Congress did not exclude the Administrator 

from considering the "public interest" to include factors beyond "safety," "national defense" and 

"security." Rather, Congress expressly directed the Administrator to consider those matters 

"among others." Accordingly, as we articulated in our February Notice, it is rational for the 

FAA to consider, as being in the "public interest," "other factors" including the fostering of 

competition in the context of the slot program. The "public interest" includes policies furthering 

airline competition, as provided in 49 U.S.C. §§ 40101(a)(4), (6), (9), (10), (12) - (13) and (d). 

These goals have been public policy since at least the time of adoption of the Airline 

Deregulation Act of 1978, Pub. L. No. 95-504 (92 Stat. 1705), and they include (among others) 

maximizing reliance on competitive market forces; avoiding unreasonable industry concentration 

and excessive market domination; and encouraging entry into air transportation markets by new 

20 

carriers. 

The FAA Consistently Exercises its Slot Allocation Authority in a Pro-Competitive Fashion 

None of the commenters dispute the fact that the FAA has the authority to limit flight operations 

at congested airports and to distribute and allocate landing and takeoff reservations (slot 

interests) to designated air carriers at controlled airports. The FAA holds this power due to its 

authority to manage and control the "efficient use of airspace," to assign the use of airspace and 

to modify or revoke such an assigimient in the public interest. 49 U.S.C. § 40103(b)(1). 

Managing slot allocations is a subset of controlling the navigable airspace; and courts are clear 

that the FAA may consider pro-competitive policies in carrying out its powers to manage the 

efficient use of navigable airspace. In Northwest Airlines, Inc. v. Goldschmidt, 645 F.2d 1309, 

1315-16, 1318 (8* Cir. 1981), the Court found that the FAA may allocate slots, divest them from 

incumbent carriers and reallocate them to requesting new entrants, mindful of the procompetitive policy of the Airline Deregulation Act of 1978. That case analyzed the FAA's 

reallocation of slots under the HDR, 14 C.F.R. Part 93, Subpart K. At the time, the HDR limited 

flight operations at congested airports in order to reduce landing and takeoff delays and 

" Neither the Joint Applicants nor other carriers arguing against the waiver conditions cite any cases prohibiting the 

FAA or the Secretary from considering competitive goals in the public interest. N.Y.. op cit., upheld an agency's 

public interest conditions to an acquisition, despite the industry's opposition to the conditions. That decision 

affirmed the Interstate Commerce Commission's conditions to the New York railroad's acquisition of the "Big 

Four" railroads on the asserted "burdensome" condition of acquiring the short-lines. Similarly, our conditions to the 

waiver are intended to promote the public interest by fostering and promoting competition in the airline industry and 

to benefit the traveling public. 

The fact that the Supreme Court vacated a National Highway Traffic Safety Administration rescission of its "passive 

restraint" rule on the grounds that NHTSA relied on a factor Congress had not intended it to consider has no bearing 

on the fact that the FAA may legitimately consider public interest factors in carrying out the slot program. Motor 

Vehicle Mfrs. Ass'n of U.S.. Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 44 (1983). 

^° Reliance on United States v. Oberle, 136F.3d 1414, 1423-34 (10* Cir. 1998), for the proposition that Congress 

should have included pro-competitive factors in Section 40101(d), is misplaced. That case held the Government did 

not need to reach a burden-of-proof level of "beyond a reasonable doubt" in applying the "three strikes" enhanced 

sentencing statute. 

8 
permitted airline scheduling committees to allocate the slots among interested carriers. (The 

committees operated under antitrust immunity, granted by the then-operative Civil Aeronautics 

Board.) When the scheduling committee refused to provide slots to a new entrant at Washington 

National Airport, the allocation process broke down and the FAA attempted to resolve the 

distribution process by requiring incumbent carriers to yield slots or move slot times to new 

entrants. 

The United States Court of Appeals for the Eighth Circuit rejected arguments that the HDR was 

limited to safety functions only and that the operative statute (Section 40103) did not authorize 

slot allocation by the FAA. The holding in that case - that the power to manage the efficient use 

of airspace comprises the power to allocate slots and that the FAA may validly divest slots, in 

consideration of the pro-competitive policy of the Airline Deregulation Act - should suffice to 

resolve concerns about our statutory authority to condition a waiver of a slot transfer transaction 

on a divestiture of slot interests to foster a competitive environment.^' 

The FAA also relied in large part on the Airline Deregulation Act's pro-competition policies 

when it issued the "Buy-Sell" amendment to the HDR. The Buy-Sell Rule provided a secondary 

market in slots and imposed a minimum utilization requirement and an administrative lottery 

mechanism giving preference to new entrants.^^ The Buy-Sell Rule, 14 C.F.R. Part 93, Subpart 

S, High Density Traffic Airports; Slot Allocation and Transfer Methods, 50 Fed. Reg. 52,180 

(Dec. 20, 1985). The preamble specifically stated that the rule relies on the FAA's "statutory 

responsibilities including the need to place maximum reliance on market forces" in allocating 

slots. 50 Fed. Reg. at 52,182. " That regulation opened up a secondary market for slot interests 

by permitting holders to buy or sell slots for any consideration from or to any person.^^ 

^' See Eileen M. Gleimer, Slot Regulation at High Density Airports: How Did We Get Here and Where Are We 

Going?, 61 J. Air L. & Com. 877, 883, fn. 25 (1996), stating that the court determined the action was within the 

agency's statutory authority and "was consistent with the pro-competitive policies of the Airline Deregulation Act." 

^^ In creating an administrative mechanism to lottery new and withdrawn slots with a preference for new entrants, 

the Buy-Sell Rule was informed by the Airline Deregulation Act to expressly give "special consideration" to new 

entrants. 50 Fed. Reg. at 52185. 

^^ The Buy-Sell Rule's major objective was to achieve the policy goals of the Airline Deregulation Act, that is, to 

maximize competition at the congested airports, by giving new entrant carriers an opportunity to purchase slots: 

[T]he ability to buy and sell slots also removes existing artificial barriers to entry into high density airport 

markets. The elimination of barriers to entry is essential for the optimal operation of a competitive market. 

The rule accomplishes this by placing new entrants in the same position as incumbent carriers desiring 

additional slots. 50 Fed. Reg. at 52186. 

^'* Were we unable to consider pro-competitive factors in implementing our authority over navigable airspace, it is 

very likely we would not have issued the Buy-Sell Rule in the first place. In that event, it would not have been 

possible for the petitioners to seek approval for the transaction before us. The Airline Deregulation Act, which 

"replaced the old form of regulation with a new economic regime that relied heavily on free-market mechanisms," 

(Delta Air Lines. Inc. v. C.A.B.. 674 F.2d 1, 3 (D.C. Cir. 1982) spawned new entrant airlines clamoring to enter the 

highly-regulated slot-constrained airports. 

In this regard, we note, as does the U.S. Department of Justice in its comments in this docket, that the 

petitioners' arguments about lack of FAA authority over pro-competitive slot divestitures are in stark contrast with 

their previous assertions that the FAA has the authority to re-implement the Buy-Sell provision at LaGuardia and 

that this provision "has worked to promote new entry and enhance competition at 'capped airports' for more than 
The following year, the FAA further carried out an administrative mechanism giving a 

preference to new entrants at slot-controlled airports by implementing a "reverse lottery" 

withdrawing up to 5% of slots from incumbent carriers and reallocating them to new entrant and 

limited incumbent carriers. Special Slot Withdrawal and Reallocation Procedures, 51 Fed. Reg. 

8632 (Mar. 12, 1986). The FAA considered pro-competitive public interest factors in justifying 

the preferential nature of the lottery by noting that there had been "very little oppoitunity for new 

entry by air carriers" at the HDR-controlled airports and that providing "immediate access" for 

them would "serve the pro-coinpetitive principles of the Airline Deregulation Act." 51 Fed. Reg. 

at 8633, 8635. 

The FAA has consistently relied on pro-competitive policy goals in carrying out its slot 

programs. For example, in 1992, the FAA amended the Buy-Sell Rule to expand protections and 

treatment afforded to new entrant and limited incumbent carriers at airports regulated by the 

HDR, explaining that the amendments "enhance competition by affording new entrant and 

limited incumbent carriers greater access." High Density Traffic Airports; Slot Allocation and 

Transfer Methods, 57 Fed. Reg. 37,308 at 37,309 (Aug. 18, 1992). During 2000, when 

instituting the phase-out of the HDR at LaGuardia, the FAA issued a notice of intent to conduct a 

lottery of the AIR-21 slot exemptions granted at LaGuardia, specifically identifying new entrant 

and limited incumbent carriers to be eligible for the lottery. Further, the temporary "slot" 

regulation at O'Hare International Airport applied pro-competitive policies from the Airline 

Deregulation Act in granting preferential treatment to new entrant and limited incumbent airlines 

in assigning new or withdrawn slot interests. Congestion and Delay Reduction Rule at Chicago 

O'Hare hitemational Airport, 14 C.F.R. Part 93, Subpart B; 14 C.F.R. § 93.30. 

The FAA has the authority to consider pro-competitive factors under several statutory sources, 

notably Sections 40101(d) (as described above), 40103(b) (authorizing the FAA to manage the 

"efficient" use of airspace), 40103(e) (directing the FAA to prohibit the exclusive use of air 

navigation facilities), and 47107(d) (requiring the FAA to carry out its airport and airway 

two decades." Comments of Delta Air Lines at 3, Docket No. FAA-2006-25755 (July 14, 2009), Reply Comments 

of the United States Department of Justice, Public Version, at 12. 

^^ In the context of the slot program, ensuring the "efficient" use of airspace means making productive use of the 

slots including operating larger aircraft with lower costs and offering lower fares to consumers, resulting in more 

passengers per flight. New entrant and limited incumbent carriers typically use larger aircraft and offer lower fares 

and "would most likely be more efficient, from a consumer benefit standpoint." See Department of Justice Reply 

Comment at 6-7. 

^^ Without the slot divestiture conditions, the transaction would lead to significantly increased airline concentration 

at DCA and LGA; the carriers would increase the number of markets they serve on a monopoly or dominant basis 

and charge premium airfares, thus negating the purpose of the prohibition on exclusive rights at federally-assisted 

facilities. See 40 U.S.A.G. 71 (1941), stating that the purpose of the provision is to "promote and encourage 

competition in civil aeronautics." 

10 
97 

program in a manner fostering competition)." It is appropriate for (he FAA to use these tools in 

response to the request before us, to approve a significant slot interest transaction that would 

affect the competitive structure of the aviation industry at two important, slot-controlled airports. 

By conditioning the waiver on slot divestitures, the FAA is carrying out Congressional intent to 

ensure the provision of opportunities for competition in the slot program. 

Furthermore, we disagree with the argument made by some commenters that the FAA 

regulations in 14 C.F.R Part 11 allow the FAA to consider only safety matters in deciding 

whether or not to grant an exemption or waiver request. The FAA regulations require the 

applicant for a waiver to address, in addition to safety concerns, why the request "would be in 

the public interest, that is, how it would benefit the public as a whole" and to provide any 

additional information suppoiting the request. 14 C.F.R. §§ 11.81(d), (g). As indicated in the 

body of this Notice, we do not find that petitioners satisfied the "public interest" concern 

showing how the transaction - without our proposed divestiture remedy - would benefit the 

public as a whole. 

Moreover, in a situation such as this, where two major domestic airlines seek the approval of a 

dramatic market shift with significant economic and competitive impact on the aviation industry 

and the traveling public, the Administrator does not act without input and guidance from the 

Secretary. As the head of the Department, the Secretary has broad oversight of significant FAA 

decisions. In evaluating the waiver request, the Secretary considers the public interest in 

furthering airline competition, as provided in 49 U.S.C. §§ 40101(a)(4), (6), (9), (10), (12) and 

(13). The waiver of the LGA Order on the conditions set forth in this Notice carries out the 

Congressional intent of ArR-21 to allow for new airline entry, to increase competition, and lower 

inflated prices at the slot-controlled airports. The Secretary has previously conditioned air 

carrier route transfers and grants of antitrust immunity on the divestiture of slots and/or other 

assets for the purposes of ensuring competitive opportunities for other airlines.'^' Accordingly, 

the Secretary (i) has the authority to waive the terms of the LaGuardia Order to further the 

^^ Congress directed the FAA to ensure that each airport and airway program be carried out "consistently" with 

Section 40101(a) to "foster competition, prevent unfair methods of competition in air transportation [and] prevent 

unjust and discriminatory practices." 49 U.S.C. § 47101(d). 

^^ Some commenters assert that 49 U.S.C. §§ 40113(a) and 46105(a), by referring to "aviation safety duties and 

powers," limit the Administrator's administrative powers to those involving safety only. Reading the "aviation 

safety duties and powers" clause, however, to authorize the Administrator to take action over not only "aviation 

safety duties" but also over the Administrator's other, more extensive "powers" conforms to the text of the statutory 

provision before it was recodified without substantive change: "The Administrator shall be responsible for the 

exercise of all powers and the discharge of all duties of the Administration." 49 U.S.C. § 1341(a). It does not divest 

the Administrator of pro-competitive, public interest policy considerations. See, the recodification of Title 49, Pub. 

L. No. 103-272 (1994), H.R. Rep. 103-180 at 262 (1993)." The purpose of H.R. 1758 is to restate in comprehensive 

form, without substantive change, certain permanent and general laws related to transportation." 

^^ See 49 U.S.C. §§ 102 and 106. 

^° 49 U.S.C. § 41715(a)(2) directs the Secretary to terminate the HDR at LGA as of January 1, 2007. See H. Rept. 

106-167 (106* Cong., l" Sess. 1999) at 37-42. 

^' 75 Fed. Reg. 7306 at 7308. 

11 
Secretary's public interest goal of maximizing airline competition, among other things; and (ii) 

may condition the waiver on carriers takmg specific actions that foster competition at slotcontrolled aiiports. 

The Slot Divestiture Conditions Do Not Violate Other Laws or Regulations 

Continental in its comments claims that our slot divestiture conditions constitute unauthorized 

market-based pricing and an unauthorized withdrawal of slots under the LaGuardia Order and 

the HDR. Continental's concerns reflect a misunderstanding of our action. For purposes of the 

requested waiver, we are not asserting any FAA right to collect monies by monetizing slot 

interests through an auction. Rather, in responding to a request for a waiver from the LaGuardia 

Order prohibition on a permanent transfer of slots, we simply are conditioning the waiver on a 

divestiture of some of the slot interests to new entrant and limited incumbent carriers. Those slot 

interests would not be divested to the FAA; they would be sold by the respective petitioning 

carriers to eligible purchasers and the petitioning carriers would retain the proceeds of the sales. 

Nor are we affirmatively withdrawing slot interests. Consequently, the provisions in the LGA 

Order and the HDR governing withdrawals of slots by the FAA are inapplicable to our action.^^ 

We also do not accept the comments of the Joint Applicants, Continental or United, that the 

Department of Justice, not the Secretary (or FAA), is the sole source of competition authority 

over slot transactions. While DOJ has the authority under Section 7 of the Clayton Act to reject 

anticompetitive transactions, that does not remove DOT's responsibility to carry out its programs 

consistently with the pro-competitive public interest criteria contained in Section 40101(a)(4), 

(6), (9), (10), (12) and (13). In considering the petitioners' waiver request in the public interest, 

the DOT is not asserting antitrust jurisdiction or implementing Clayton Act authority. Neither 

the FAA nor the Secretary is exercising the former "Section 408" authority over airline 

transactions. Petitioners are ignoring the fact that they petitioned the FAA for a waiver from a 

validly issued Order that prohibits permanent slot interest transfers at LaGuardia. The FAA is 

considering the waiver, not exercising antitrust authority nor intruding on the Department of 

Justice's jurisdiction. As the DOJ indicated in its reply comments, the FAA's proposed 

decision "does not usurp" the DOJ's investigative authority under Section 7 of the Clayton Act 

(at p. 13). See Bowman Transp. Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 298-

99 (1974) ("A policy in favor of competition embodied in the laws has application in a variety of 

economic affairs.") 

^^ Continental referred to Verizon Communications v. Law Offices of Curtis V. Trinko, 540 U.S. 398,407-08 (2004) 

for the proposition that our action "compelling" US Airways and Delta to divest their slot interests may undermine 

their incentives to invest in beneficial infrastructure. We repeat that we are not, however, directing a slot divestiture. 

Rather, we are granting a waiver request, which is subject to a finding that it is in the public interest, subject to procompetitive remedies. The two regulatory actions are of a different nature. 

" Continental claims that we have not proven that the carriers' practices would rise to a Sherman Act Section 2 

offense; we are not invoking or attempting to enforce antitrust laws. Rather, we are asserting our authority to protect 

the traveling public by fostering competition in the context of the requested waiver. 

12 
Conditioning the waiver on slot interest divestitures is consistent - and does not interfere - with 

the competitive structure of the airline industry, or the statutory policy goal of "placing 

maximum reliance on competitive market forces," as asserted by United and some other 

commenters. The conditions mitigate the competitive burdens of the transaction and ensure that 

the transaction will not result in undue industry concentration, the impediment of new entry, or 

otherwise disadvantage the traveling public. The policy goals direct us not only to place 

"maximum" reliance on competitive market forces but also to rely on "actual and potential 

competition" to avoid "unreasonable industry concentration," and to encourage "entry into 

transportation markets by new and existing air carriers." Section 40101(a)(6), (10), (12). Our 

action on the waiver request responds aptly to these policy directives.'"' 

Our slot divestiture conditions do not withdraw slot exemption service authorized under 49 

U.S.C. §§ 41714(c), 41716(b), 41718. We do not mandate the divestitures of any slot 

exemptions that US Airways or Delta may hold. 

We also are not bound to allocate the divested slots without charge, as Spirit prefers. The slot 

exemptions provisions directing the Secretary to grant slot exemptions from the HDR to new 

entrant and limited incumbent carriers under specified provisions are not applicable here. The 

FAA is under no statutory obligation to have the divested slot interests allocated to eligible 

carriers free of charge. Although Spirit as noted in its comments is concerned that it may lose 

out in any attempt to purchase slot interests due to its relatively small share of revenues 

compared to that of the other eligible carriers, a sale of the slot interests allows the petitioners to 

maximize the value of their slot interests as originally intended as part of the larger transaction. 

75Fed. Reg. at7311. 

The Slot Divestiture Conditions Are Not "Takings" 

The petitioners claim we cannot legitimately require the slot divestitures because that constitutes 

taking without just compensation. We do not agree with this assertion. As we indicated in the 

Notice, the FAA has the authority to condition the grant of a waiver.^^ See also. South Dakota v. 

Dole, 483 U.S. 203, 208 (1987) ("The Federal Government may establish and impose reasonable 

conditions relevant to federal interest... and to the over-all objectives thereto."). The FAA 

^•*United overstates the import of our waiver condition when it asserts that we are re-regulating the industry contrary 

to the Congressional directive in the Airline Deregulation Act. Conditions at slot-constrained airports are not 

reflective of a free, competitive market. The fact is that the FAA placed limits on flight operations that may be 

carried out at LGA and DCA due to congestion in the airspace; in the context of those flight limits, only certain 

airlines may operate at designated times. These airports thus are regulated by the Government and are in a different 

position than the vast majority of the other airports that are not slot-controlled. The FAA, in this instance, actually is 

instilling the opportunity for more competition at DCA and LGA, in reliance on the Airline Deregulation Act. By 

placing these conditions on the waiver grant, the FAA also is protecting against exclusive rights at the airports under 

49 U.S.C. § 40103(e) and is fostering competition at the federally-assisted LGA and DCA. 49 U.S.C. § 47107(d). 

" 75 Fed. Reg. at 7307, citing Starr v. Federal Aviation Administration, 589 F.2d 307, 311 (7*^ Cir. 1978). 

13 
expressly has the power to modify assignments of use of navigable airspace when in the "public 

interest" and to grant waivers only in the "public interest." As we discuss above, it is in the 

public interest for us to condition the waiver request of the transfer of 167 slot pairs on the 

divestiture of certain slots to earners with no or little presence at the constrained airports. This 

condition produces efficiencies, fosters competition, prevents um-easonable industry 

concentration, and protects the traveling public. 

In any event, the takings claim is inapposite because slot interests are not property subject to the 

takings clause. Slot interests are subject to pervasive federal encumbrances that limit any air 

carrier's property right or interest associated with them."''' The HDR provides that "[sjlots do not 

represent a property right but represent an operating privilege subject to absolute FAA control." 

14 C.F.R. § 93.223(a). Accordingly, any "proprietary interest" claimed by an air carrier in a slot 

is subject to the encumbrances placed on those slots by FAA regulation.^^ The Department, as 

we pointed out in the February Notice, has conditioned international aviation route transfers and 

antitrust immunity grants on divestitures of slots or route certificates in the past, and, because 

these are not "property," they do not constitute Fifth Amendment compensable takings.^^ A 

carrier's interest in slots is subject to extensive FAA regulation and Congressional direction.^^ 

There is no definitive judicial holding that slots are "property" subject to the Takings Clause.'*" 

In any event, a slot interest is substantially fettered and encumbered by FAA requirements, as 

explained above, and therefore a holder does not have the attributes of an unfettered right to "use 

the property, receive income produced by it, and to exclude others from it" as a tenant by entirety 

does under Michigan State law. United States v. Craft. 535 U.S. 274, 282 (2002). Rather, a 

'^ In the context of an air carrier's bankruptcy proceeding, it has been held that the FAA's control over slots 

substantially encumber a carrier's property interest: "a carrier possesses a proprietary right in allocated slots, [ ] 

limited as to the superior rights of the FAA." In re Gull Air. Inc. 890 F.2d 1255, 1260 (1st Cir. 1989). 

• See 14 C.F.R. §§ 93.211-229. At DCA, where slots are subject to the HDR, these encumbrances include, for 

example, the ability to withdraw slots for essential air services, operational needs, and non-use. 14 C.F.R. §§ 

93.219, 93.223 & 93.227. At LaGuardia, slot interests are subject to the terms of the Order which grants only a 

temporary interest in the slots to carriers, providing for only leases or temporary transfers through the duration of the 

Order. 71 Fed. Reg. 77,854 at 77,860, as amended 74 Fed. Reg. 51,653 (Oct. 7, 2009). They are subject to the 

terms of the January 2009 Order on voluntary retirements. 74 Fed. Reg. 2646 (Jan. 15, 2009). Also, slot interests at 

LaGuardia are subject to minimum utilization requirements. 71 Fed. Reg. 77,854 at 77,860. 

^^ See discussion of DOT Orders requiring such divestitures in the public interest. 75 Fed. Reg. 7306 at 7308. 

^^ The Port Authority of New York and New Jersey commented that slot interests are licenses, not federal property. 

We need not address, in this Notice, the Port Authority's arguments in this regard. 

'*" The United States Court of Appeals for the First Circuit held that it "need not decide [whether slots constituted 

part of a bankrupt carrier's estate]." In re Gull Air. 890 F.2d 1255, 1261, 1262 fn. 8. Unlike the situation in 

Ruckleshaus v. Monsanto. 467 U.S. 986, 1002-1003 (1984), where the Court determined that intangible property (a 

trade secret) exhibited characteristics of more tangible forms of property, slots lack many of those characteristics. 

For example, there is no state law recognizing a slot interest as a property right, as was the case in Monsanto. 

Additionally, unlike the cases relied on in Monsanto, a slot interest does not convert the carrier to the position of a 

creditor, such as a mechanic's lien does to a contractor, in Aimstrong v. United States, 364 U.S. 40 (1960); or a 

mortgage to a bank mortgagee, in Louisville Joint Stock Land Bank v. Radford. 295 U.S. 555, 596-602 (1935). Nor 

is a slot interest a contract subject to the Takings Clause as a war risk insurance contract is to a beneficiary, in Lynch 

V. United States. 292 U.S. 571, 579 (1934). 

14 
carrier's use of a slot interest is subject to FAA minimum utilization requirements and any right 

to "exclude others" is subject to FAA operational control, withdrawal rights, and congressional 

directives. 

Further, we disagree with petitioners' claims that the conditions on the waiver do not serve the 

government interest and are tantamount to "extortion." Nollan v. California Coastal 

Commission, 483 U.S. 825, (1987)."" Our grant of the waiver permitting the petitioners to 

proceed with the slot interest transaction, subject to slot divestitures to new entrant and low-cost 

carriers, substantially advances the FAA's legitimate objectives of more efficient use of 

constrained airspace and of fostering airline competition at airports. A "broad range of 

governmental purposes and regulations satisfies" the requirements for considering a condition to 

a waiver as substantially advancing a governmental interest. Nollan at 834-35. Accordingly, we 

find that the conditions to the waiver do not deprive petitioners of property without just 

compensation. 

Even assuming slots are property for puqDoses of the Takings Clause, the divestiture as a 

condition to the FAA waiver simply regulates the carriers' use of the slot interests and does not 

constitute a taking. The Supreme Court has identified several factors for consideration of when a 

government taking has occurred under the Fifth Amendment: "the character of the government 

action, its economic impact, and its interference with reasonable investment-backed 

expectations." See Penn Central Transportation Co v. New York City, 438 U.S. 104, 125(1978) 

(City Landmarks Preservation Commission disapproval of construction of a 50-story office 

building over Grand Central Terminal held not to be a "taking" of the owners' right to exploit the 

superadjacent airspace). 

Here, our waiver condition of slot divestiture would constitute a regulatory, not a takings, 

action. By conditioning the transfer of a large portion of slot interests on the sale of some of 

the slot interests, the FAA effectively is regulating the ability of the petitioning carrier to transfer 

slot interests in a manner that results in unreasonable industry concentration. Divesting some 

slot interests to petitioners' competitors v/ill ensure that the traveling public does not experience 

a degradation of fares, service or routes at the affected airports. 

"' Nollan struck down, as an unlawful "taking," a State condition on a building permit to replace a small beachfront 

bungalow with a larger house with a public easemicnt across the beach. The Court held that the permit condition did 

not substantially advance legitimate State interest related to land-use regulation. The Court did find, however, that a 

legitimate permit condition would have been a height limitation, a width restriction, or a ban on fences. 483 U.S. at 

836. 

"^ Lingle v. Chevron U.S.A. Inc.. 554 U.S. 528 (2005), cited by Continental for a takings test, is not apposite. That 

case reversed and remanded the Ninth Circuit Court of Appeals' holding that a Hawaii statute which responded to 

concerns of oil companies' market concentration by limiting the rent that oil companies charged to dealers, effected 

an unlawful taking. 

15 
With respect to reasonable investment-backed expectations, carriers have been on notice for 

decades that the FAA has considered slots to be an operating privilege not a property right. 14 

C.F.R. § 93.223(a). As discussed above, not otily have the FAA regulations been clear about the 

tentative nature of slots and the duration of slot interests, the FAA retired the slot system at 

Chicago O'Hare airport in 2008. 14 C.F.R. Part 93, Subpart B, Congestion and Delay Reduction 

at Chicago O'Hare International Airport, § 93.21 (e). In AIR-21 (2000), Congress legislated a 

phase-out of the HDR at the New York airports and at O'Hare. Accordingly, the carriers and 

those banks and financing firms holding slots as collateral were aware of the FAA/Congress' 

right to change the slot system, withdraw slots, etc. The Securities and Exchange Commission 

filings recognize the federal encumbrances to slot holdings.''^ Consequently, the ability of the 

FAA to condition the waiver allowing the transfer of massive amounts of slots on divestitures of 

a small percentage is a "burden we all must bear in exchange for 'the advantage of living and 

doing business in a civilized community.'" Monsanto, 467 U.S. 986, 1007. 

Because we may condition the grant of the waiver, and the conditions do not effect a "taking" of 

"property," we disagree with petitioners' contention that the conditions adversely affect the 

asserted "just compensation" to be derived from their slot interests under United States v. 50 

Acres of Land, 469 U.S. 24, 29 (1984). In any event, the process we will institute provides for 

the sale of the slot interests, subject to certain rules to maintain competition, for a bundle of slot 

interests. 

The FAA May Condition the Waiver on DCA Slot Interest Divestitures 

The petitioners assert that we have no jurisdiction over the DCA slot interest sale by Delta and 

purchase by US Airways, because the High Density Rule permits an unfettered sale of slots at 

DCA. They claim a forced divestiture of DCA slots conflicts with the HDR. 

As we explained in the Notice, we find that the slot swap between US Airways and Delta at both 

LaGuardia and DCA are a single transaction, such that the LGA purchase and sale would not 

occur without the DCA purchase and sale. Accordingly, we review both transactions as part of a 

*^ See, for example, America West Holdings Corporation Form 10-K for the Fiscal Year Ending December 31, 2003 

(at 11): 

At New York City's John F. Kennedy International Airport and LaGuardia Airport, and at Washington 

D.C.'s Ronald Reagan National airports, which are designated "High Density Airports" by the FAA, there 

are restrictions on the number of aircraft that may land and take-off during peak hours. At the New York 

airports, slot restrictions are abolished after January 1, 2007. In the future these takeoff and landing time 

slot restrictions and other restrictions on the use of various airports and their facilities may result in further 

curtailment of services by, and increased operating costs for, individual airlines, including AW A, 

particularly in light of the increase in the number of airlines operating at such airports. In general, the FAA 

rules relating to allocated slots at the High Density Airports contain provisions requiring the relinquishment 

of slots for non-use and permit carriers, under certain circumstances, to sell, lease or trade their slots to 

other carriers. All slots must be used on 80% of the dates during each two-month reporting period. Failure 

to satisfy the 80% use rate will result in loss of the slot which would revert to the FAA and be reassigned 

through a lottery arrangement. 

16 
single, unified transaction and may condition our waiver to the LGA Order on divestitures of 

slots at both airports. 

In the petition before us, the carriers seek a waiver from the buy-sell prohibition in the LGA 

Order for the purpose of exchanging slot interests at both LGA and DCA airports. We are not 

"bound by legal formalisms" in discharging its duty but instead will "take account of the 

economics of the transaction under investigation." See Reves v. Ernst & Young, 494 U.S. 56, 61 

(1990); The Shoshone Indian Tribe of the Wind River Reservation, Wyoming v. United States, 

58 Fed. CI. 77, 86 (2003) ("must examine the underlying economic reality" of the transaction). 

The fact that the slot swap concerns two airports does not compel us to segregate the 

transactions; rather, it is clear that the transactions are contingent on each other. The joint 

application of US Airways and Delta, filed August 24, 2009, before the U.S. Department of 

Transportation for approval of the transfer of U.S.-Brazil frequencies is expressly termed 

"contingent joint application," made dependent on completion of the Mutual Asset Purchase and 

Sale Agreement, which involves the slot interest transfer at issue here. As stated in the joint 

application: 

The Joint Applicants are submitting this application on a strictly contingent basis. The 

proposed transfer of the Joint Applicants' U.S.-Brazil frequencies is part of the larger 

transaction described herein. The Joint Applicants will proceed with the larger 

transaction only if all transaction components ... occur. (Joint application, fn. 2). 

The joint application explains that the larger transaction includes the swap of the slot interests at 

both LaGuardia and Reagan National airf)orts: 

The [Mutual Asset Purchase and Sale] Agreement further involves the transfer of certain 

slots and real estate at LaGuardia Airport to Delta from US Airways, and the transfer of 

slots from Delta to US Airways at Reagan Washington National Airport, allowing the 

Joint Applicants to expand their respective operations at these points." (Joint application, 

at 2-3). 

In such a situation, the agreements concerning each airport constitute "a single actual 

transaction." See SEC v. M&A West, Inc., 583 F.3d 1043, 1052-3 (9"" Cir. 2008) (holding that 

the "existence of multiple agreements bears little effect when the agreements collectively 

constitute a single transaction.") The fact that the slot purchase and sale agreements at both 

DCA and LGA were entered into simultaneously and were linked together creates a necessary 

nexus between the agreements for puiposes of conditioning our approval of the petition on 

certain remedies. Shoshone Indian Tribe, 53 Fed. CI. at 88-89. Further, considering the DCA 

and LGA slot swaps as a single transaction justifies the remedies at both LGA and DCA, which 

17 
effectuate the statutory goal of maximizing conipetitive opportunities for airlines and assuring 

that the traveling public receives the service and fare benefits provided by competitive airline 

service. 

THE PROPOSED TRANSACTION WOULD LEAD TO A REDUCTION IN 

COMPETITION AT DCA AND LGA 

In their filings, US Airways and Delta have not challenged the calculations stated in the Notice 

that, if the transaction were approved as proposed, the proportion of US Airways' share of slots 

and departures at DCA, and Delta's share of slots and departures at LGA, would increase 

substantially. DOT had calculated that US Airways' share of slot interests at DCA (including 

regional affiliates) would increase from 44% to 54%, and its share of departures would increase 

from 47 to 58%. Similarly, DOT's calculations for Delta's share of slot interests at LGA, 

including affiliates, would rise from 24 to 49%, and its share of departures would rise from 26 to 

51 percent. In both cases, the increases v/ould have the effect of making US Airways by far the 

dominant carrier at DCA, and Delta by far the dominant carrier at LGA. 

Rather than challenging the calculations of concentration, the carriers argued that the Notice fails 

to articulate the level of concentration that causes concern. 

The common metric used in antitrust analysis for market concentration levels is the HerfindahlHirschman Index, (HHI).'"' Under the Horizontal Merger Guidelines issued by the U.S. 

Department of Justice and the Federal Trade Commission, transactions that increase the HHI by 

more than 100 points in concentrated markets (concentrated markets are defined as those in 

which the HHI is in excess of 1800 points) presumptively raise antitrust concerns. In its 

comments to the docket in this case, the United States Department of Justice stated that it had 

calculated that, if the transaction were approved as proposed, the HHI at will increase at LGA by 

600 from 2394 to 2994, and at DCA will increase by 626 from 2756 to 3382."^^ Under the 

Guidelines, such increases in highly concentrated markets are presumptively likely to create or 

enhance market power or facilitate its exercise.'*^ 

As the methodology for the calculation of the HHI indicates, it is not simply the market share of 

the largest competitor that raises potential competitive concerns, but its magnitude relative to the 

market shares of others. As the Notice pointed out, if the transaction were approved as 

submitted, at DCA US Airways would become three times the size of its closest competitor. 

'*" The HHI for a particular market is calculated by squaring the market share of each firm competing in the market 

and then summing the resulting numbers. The HHI takes into account the relative size and distribution of the firms 

in a market and approaches zero when a market consists of a large number of firms of relatively equal size. The HHI 

increases both as the number of firms in the market decreases and as the disparity in size between those firms 

increases. See U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines. 

"' Comments of the United States Department of Justice, March 24, 2010, p. 5. 

'^ U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines §1.51 (1992). 

18 
while at LGA, Delta would become two-and-one-half times the size of its closest competitor. 

(Moreover, LGA would transition from an airport with three competing carriers of similar size to 

one with a single doininant carrier.) As also cited in the Notice, carriers with relatively weak 

minority positions have limited abilities to exert competitive pressure and discipline the fares of 

the dominant carriers, a point that neither US Airways nor Delta chose to dispute. 

In its comments, the Department of Justice concurred with our tentative view of the increased 

concentration levels. It emphasized another important point - that the transaction would reduce 

competition between US Airways and Delta: ''^ 

"The transaction also will reduce competition between Delta and US Airways at 

DCA and LGA. US Airways and Delta are principal rivals at the airports. Post 

transaction, however. Delta will shrink substantially at DCA, reducing its ability 

to compete effectively with US Airways. Similarly, US Airways will shrink 

substantially at LGA, reducing its ability to compete effectively with Delta.""*^ 

While not an issue directly addressed in the HHI, DOT believes that, as a general rule, in the 

aviation industry more competitive pressure and pricing discipline can be exerted by low-cost 

carriers than by incumbent legacy carriers. This view is supported by the Department of 

Justice,''^ as well as in the academic literature cited in the Notice and by DOJ in its Appendix A. 

At both LGA and DCA the second largest carrier would be the legacy carrier American Airlines. 

Moreover, low-cost carriers have only a very limited presence at both airports, with a 3.3% share 

of slot interest holdings at DCA^° and a 6.8% share at LGA, and they face substantial barriers to 

increasing their presence, because entry to both airports is governed by slot regimes. As stated in 

the Notice, studies indicate that entry by low-cost carriers dramatically lowers fares and 

increases the volume of passengers in a market,^' a point reinforced by Southwest's assertion in 

its comments that, were it to operate the slots to be divested, empirical data indicated that it 

would armually carry more than 340,000 additional passengers to and from each of the two 

airports and that its fares would average 33% lower than Delta's average fare at LGA and 49% 

lower than US Airways' average fare at DCA.^^ 

"^ DOT calculates that at DCA there would be a sharp decrease in service by Delta, reducing it from a major 

competitor on DCA routes with US Airways to one holding fewer than 5.5% of the O&D passengers. Similarly, at 

LGA US Airways' share of O&D passengers would fall to just 6 percent. In these cases, we fear that the diminished 

presence of Delta at DCA and of US Airways' at LGA will lessen their abilities to competitively price their 

remaining flights at the respective airports. 

''^ Comments of the United States Department of Justice, March 24, 2010, p. 4. 

'*^ Sei Comments of the United States Department of Justice, Appendix A. 

'" If the temporary slots interests acquired by JetBlue'from American were included, the LCC percentage at DCA 

would rise to 5.2 per cent. 

^'Notice, p. 12. 

'^ Comments of Southwest Airlines Co., p. 11-12. 

19 
In addition, the Department of Justice, in its comments, stated that Delta has, in the past, 

assumed inconsistent positions on the competitive effects of slot shares and concentrations at 

DCA and LGA: 

During Delta's bankruptcy three years ago, US Airways considered acquiring 

Delta. Delta resisted US Airways' overtures, arguing that the merger would cause 

competitive harm at DCA and LGA. At that time. Delta argued that slot shares 

resulting from the merger levels that are approximately the same as the shares that 

would result from the present proposed transaction raised substantial competitive 

concerns. Delta's current position is precisely the opposite.^'' [citations omitted]. 

Although US Airways and Delta questioned the concern expressed in the Notice regarding the 

potentially anticompetitive effects resulting from increased airport concentration levels, they 

nonetheless offered a counterproposal under which they would voluntarily divest 15 slot pairs at 

LGA and 4.5 slot pairs at DCA. The slot pairs would be divested to four different carriers that 

were eligible under the terms of the Notice, with no carrier receiving more than 5 slot pairs. 

The carriers have not demonstrated that tliese voluntary divestitures should or would reasonably 

assuage the competitive concerns we expressed in our February 9 Notice. In particular, the 

divestiture of only 4.5 pairs of slots at DCA - where the Notice clearly indicated there were 

serious concentration and competition concerns - and the inability of the four low-cost 

beneficiaries to mount their own competing service in the near-term were disappointing elements 

to the counterproposal. As discussed more fully below, we conclude that the counterproposal 

falls significantly short of what we believe the minimum levels of divestiture must be to 

adequately protect the public interest. 

Our Concerns About Potential Anticompetitive Harm are Weil-Founded and Fully 

Justifiable 

In the Notice, we set out concerns that US Airways and Delta could increase the number of 

markets they serve on a monopoly or dominant basis, and that consumers at these airports may 

be harmed by the loss of nonstop service, the loss of a nonstop competitor, or the transfer of 

nonstop monopoly service to a more dominant carrier. 

^^ Comments of the United States Department of Justice, March 24, 2010, p. 5, n.8, citing Hearing on the State of the 

Airline Industry: The Potential Impact of Airline Mergers and Industry Consolidation Before the S. Comm. on 

Commerce, Science and Transportation, 110th Cong. (Jan. 24, 2007) (testimony of Gerald Grinstein, CEO of Delta 

Air Lines) ("The combined carrier would overwhelming [sic] dominate at these unique airports with restricted entry 

due to slot controls... At Washington National, a merged US Airways-Delta would operate nearly four times more 

slots as its next largest competitor ... At New York-LaGuardia, the combined carrier would operate almost twice as 

many slots as the next largest competitor ...."). 

20 
We also tentatively concluded that the proposed transaction was likely to result in higher fares 

for consumers in certain domestic markets, as the carriers could rely on their increased 

dominance to inaintain or enhance their premium fare structure in markets served at both 

airports. Furthermore, we expressed concerns that because slot restrictions at both airports 

substantially hinder proportional increases in competition by other carriers, higher fares could be 

sustainable due to the carriers' increased market power at both airports. 

In reaching these tentative conclusions, we relied on statistical information indicating that US 

Airways and Delta already charge higher relative fares where they operate monopoly or 

dominant routes from airports where they have a strong presence, such as DCA and LGA. That 

information included relating US Airways' and Delta's average fares at DCA and LGA to the 

Standard Industry Fare Level (SIFL), a cost-based index that we have used historically to assist 

in its evaluation of pricing. That information indicated that the average fares charged by US 

Airways at DCA and Delta at LGA substantially exceeded not only the average fares at the other 

DC-area and NYC-area airports, but of the largest carriers at each of those airports. 

It is telling that US Airways and Delta have not urged in response that their fares are at or below 

averages, nor provided data showing that they do not utilize their pricing power to charge 

premium fares in markets that they dominate. Rather, they asserted that FAA's concerns about 

potential anticompetitive actions were mere speculation, as we did not point to specific instances 

of harm; argued that the SIFL was effectively obsolete as a useful measure of cost; and urged 

that the benefits of the transaction, which they assessed at $44.3 million less in consumer costs 

for travel on affected routes and $153 million if increased flying due to improved cormectivity 

and service were included, would outweigh the conceivable harms. 

As to the concerns about harm in specific markets, those concerns are real and demonstrable. If 

the transaction is consummated as finally proposed. Delta plans to withdraw from a number of 

DCA nonstop routes on which it competes with US Airways, and US Airways plans to withdraw 

from other LGA nonstop routes on which it competes with Delta. Unless new service is 

instituted by carriers other than DL and US, these routes will become new monopoly routes for 

the remaining carrier. 

Moreover, at various other communities LfS Airways will depart markets at which it is the sole 

or dominant provider of LGA nonstop service, and Delta will enter those same markets and 

become the sole or dominant provider of service. At several more. Delta will depart a inarket at 

which it is the sole provider of DCA nonstop service, and US Airways will enter that same 

market and become the sole provider of such service. While replacing one dominant carrier with 

another in a market might at first glance seem to have a neutral overall impact, such a conclusion 

would ignore the greater economic dominance that the succeeding carrier would have as a result 

of the transaction. Although the carriers plan to add nonstop service to a number of new 

communities, that service is likely to be provided on a monopoly basis and as a result can be 

21 
priced at a premium. As discussed also below, there is no assurance that such service will 

continue for the longer term. Delta has already notified the airport at Roanoke, VA that it does 

not plan to continue its service from that airport to LGA, leaving that community without any 

nonstop service to New York City aiiports, and its intentions for service to other Virginia 

communities has also been questioned. 

While some of the consumer benefits cited in support of this transaction may prove to be shortlived, the consequences of carrier dominance, if not effectively remediated, will likely be more 

persistent. In this regard, DOJ noted that: 

The FAA has concluded that the increased concentration resulting from the 

transaction will lead Delta and US Airways to 'rely on their increased dominance to 

maintain or enhance their premium fare structure in markets served at both airports' 

[citing the Notice at 7,309]. This is consistent with an extensive body of empirical 

work finding that airport concentration is associated with higher fares.^^ 

DOJ also asserted that: 

The parties' transaction will make LCC entry at LGA and DCA less likely, 

depriving consumers of the lower fares and vigorous competition that LCCs bring 

to the marketplace. It will increase the share of slots held by Delta and US 

Airways, giving them more revenue and profits at risk due to entry, more markets 

for which it will be in their interest to forestall entry, and thus, less incentive to 

sell or lease slots to a potential entrant. 

And also: 

LGA and DCA slots are highly concentrated in the hands of Delta and US 

Airways, both of which have little incentive to sell or lease slots to other carriers 

that would compete with them. 

[Cjoncem about LCC entry is especially great at DCA and LGA, where limited 

LCC presence and slot controls protect high fares for incumbent carriers. 

57 

As noted above, in the Notice we had provided data to the effect that US Airways maintained an 

average fare that was high relative to SIFL at DCA. The carriers challenged the use of SIFL in 

this context, arguing that it was calibrated to regulate airline fares in the 1970's, has limited 

'"' Letter of March 25, 2010 from Jim Webb and Mark Warner, United States Senators from Virginia, to DOT 

Secretary Ray LaHood, Docket FAA 2010-0109. 

^^ Comments of the United States Department of Justice, March 24, 2010, p. 6-7. 

^* Id., p. 4. 

" Id., pp. 8-9. 

22 
current use, fails to control for certain factors, and is biased in favor of longer routes at the 

expense of shorter ones.''*^ 

A mileage cost-based fare benchmark, SIFL is calculated every quarter based on airline 

operating costs reported to DOT by 17 major airlines (composed of 6 legacy, 4 LCCs and 7 other 

carriers). Far from being obsolete, as the parties suggest, SIFL has been utilized by the Internal 

Revenue Service, the Government Accountability Office, the Department, other government 

agencies, the airline and airline consulting industries, and academics for fare analysis for many 

years. More importantly, the results achieved in our SIFL-based analysis mirror those of other 

tests. 

The first of these other tests of airpoit fare rankings is found in our "Domestic Airline Fares 

Consumer Report," which is published quarterly. Table 7 of this report currently contains 

average fare premiums for 121 city markets, sorted by fare premium percentages in descending 

order. For the Third Quarter 2009, DCA ranks number 3 with a 27.7% fare premium, while 

LGA appears as number 16 with a percent fare premium of 9%. These fare premium 

calculations include distance and density adjustments, and clearly substantiate our concern that 

DCA and LGA are high-fare airports - even before the additional concentration and resultant 

increase in pricing power that would result from the carriers' proposed transaction. 

Furthermore, an analysis of comparative yields - also discussed in the Notice, but in the context 

of comparing the three DC and three NYC airports - produced the same conclusions. We found 

that the average yield (i.e., revenue per passenger mile) in all markets at BWI is 48% less than 

DCA, and the average yield in all markets at Dulles is 37% less than DCA.^° Similarly, the 

average yield at JFK is 28% less than at LGA, and Newark is 9% less than at LGA.^' Moreover, 

using mileage-based calculations that should allay the carriers' concerns about long-haul bias in 

the SIFL figures, we determined that for trips out to 1000 miles, passengers at LGA pay 23% 

more on average than those at JFK ($147 vs. $120 each way), while passengers at DCA pay 64% 

on average more than those at BWI ($184 vs. $113 each way). 

'* Any bias that may exist between long-haul and short-haul markets, as argued by the parties, does not apply to the 

SIFL analysis used in this case, which is based on average passenger trip length at each of the three Washington or 

New York airports (which are all in excess of 500 miles). 

^' These costs are reported to DOT in "Form 41 Financial data" by certificated air carriers as a condition of their 

holding a U.S. air transport certificate of public convenience and necessity. U.S. air carriers submit these data 

accompanied by sworn statements attesting, under penalty of law, as to as to the accuracy and timeliness of the data. 

* Yield at DCA is 27 cents per mile, vs. 17 cents at Dulles and 14 cents at BWI. 

^' Yield at LGA is 20.5 cents per mile, vs. 18.7 cents at EWR and 14.7 cents at JFK. 

^^ These differences in the level of yields at area airports tended to correlate with the level of low cost carrier 

operations. Passengers pay more for nonstop service of equivalent distance at DCA and LGA than at alternative 

airports that have sizable LCC competition. 

23 
Market Analysis Confirms the Reasonableness of Our Concerns on Fares 

A review of both US Airways' and Delta's historical pricing in siinilar markets indicates that 

absent the opportunity for additional competition afforded by slot divestiture, consumer savings 

at DCA and LGA as a result of this transaction would be negligible. In assessing US Airways' 

and Delta's claims as to potential consumer savings that would arise as a result of the proposed 

transaction, we considered materials presented by US Airways that provided base period and 

forecast period estimates of market total passengers, projected load factors, and other data. We 

compared the forecasted fares against US Airways' historical pricing in comparable markets, " 

and given their poor correlation we believe the forecasts understate the average fares likely to 

actually prevail longer term in the particular markets. It may be that the prospective fares listed 

in the document are introductory fares, or other short-term or promotional fares. In any event, 

given the divergence between these claimed fares and US Airways' historic pricing, we were 

unable to corroborate US Airways' claims of savings in the DCA market. Rather, projecting the 

historic pricing trends, it is reasonable to assume that US Airways at DCA would, especially 

over time, utilize its increased pricing power to exact premium fares in many of the markets 

impacted by the transaction. 

We did not have a similar document from Delta that projected its fares in each proposed 

market. However, in order to assess the potential impact of Delta's pricing policies on the 

traveling public we also examined probable Delta fares based on the carrier's historic pricing 

performance at LGA.^^ As with DCA, we were unable to coiToborate the carrier's claims of 

potential consumer savings and, as with DCA as well, the data indicated a likelihood that, 

especially over time. Delta would utilize its pricing power to exact premium fares in many of the 

markets affected by the transaction. 

Even if greater support might be mustered for the carriers' claims of consumer cost savings, we 

compared those claims with the savings that might occur under a divestiture scenario. Based 

*^ In this, we compared the existing average fares from the O&D with the Standard Industry Fare Level (SIFL) 

metric fare for each of 39 DCA markets and stratified the markets based on US Airways' market share, into 

monopoly, dominant, competitive, and non-competitive markets. These results provided a measure against which 

US Airways' forecast fares were compared to their historical pricing performance and against the SIFL metric. 

" DOT did request that Delta provide any documents it had that were equivalent to what US Airways had provided, 

but the number of markets for which they were able to offer information was limited to 10 out of approximately 36 

markets where service is proposed. While useful, the limited data prevented the Department from fully analyzing 

the level of forecast fares and required the Department to independently review Delta's apparent pricing strategies in 

the markets. 

*^ Staff calculated passenger-weighted average fares that reflected Delta's historic pricing in their existing markets, 

with which they estimated, together with other data (such as currently prevailing fares in the market and information 

on the competitive environment to be expected in the market) likely Delta fare ranges as a percent of SIFL in 

various city-pair markets. Of particular importance in this assessment was consideration for Delta's future potential 

market share and the competitive position that would enhance or diminish Delta's pricing power. 

24 
upon an analysis conducted by the Department of Justice,^^ we are persuaded that additional 

LCC presence at an airport is associated with significantly lower average fares and higher 

passenger volumes at that airport and consequently greater public benefit from competition.^^ 

Moreover, there is convincing evidence, also based upon the Depaitment of Justice findings, that 

as additional LCC presence grows at an airport over time, it is associated with large and 

statistically significant price decreases and passenger volume increases at that airport. This 

demonstrates precisely why the divestiture of slots to LCCs can ameliorate the competitive 

concerns raised by the applicants' proposed transaction.^^ 

The Three DC Area and Three NYC Area Airports are not "Interchangeable" 

In our February Notice, we tentatively found that other airports in the New York and 

Washington, DC areas did not significantly impact the ability of carriers to exert pricing power at 

LGA and DCA, respectively. US Airways and Delta dispute this conclusion and maintain, as a 

key element in support of their application, that the three major metropolitan airports in 

Washington, and the three major metropolitan airports in New York, respectively constitute 

single product markets, implying that if fares were perceived to be rising too high at one airport, 

the harm would be mitigated by consumers simply shifting to the other two. Their argument 

heavily relied on a study performed on their behalf by Compass/Lexecon, entitled "Analysis of 

Relevant Airport Groupings," which was submitted to the docket. The study addressed "whether 

the relevant origin (destination) points in New York and Washington are individual airports or 

groups of airports that passengers are willing to use interchangeably." 

While the study never concluded per se that the airports were "interchangeable," it concluded 

that there were "statistically significant relationships between fares at the three major New York 

airports, and separately, between fares at the three major Washington area airports... [indicating] 

that fares at each airport... are affected by competitive conditions at the other airports" in the 

same metropolitan area.^° 

^^ Here, we placed reliance on an analysis conducted by the Department of Justice, which that found that 10 extra 

percentage points of low-cost carrier share at an airport reduces on average the airport-wide price premium or 

discount by 4 to 9 percentage points, and increases the total number of passengers at the airport by 7.7 to 14.8%, 

depending on the sample used. 

^^ DOJ Appendix A at A-7. 

Their analysis showed, for example, that as LCC presence at an airport increases by 20 percentage points (from 

zero to 20%, say), the average airport-wide fare premium falls by an average of 8 to 18 percentage points, depending 

on the sample of airports examined. Similarly, a 20 percentage point increase in LCC presence is associated with a 

15 to 30% increase in the number of passengers at that airport. 

**' Id. at A-6. 

TM US Airways and Delta also asserted that the Department of Transportation and the Department of Justice have 

effectively treated the three Washington area airports as economic substitutes. Comments of Delta and US Airways 

at p. 34 and 35. With regard to DOT, they cited Order 2006-6-17 (June 12, 2006) as evidencing such a position. In 

that case, three applicants competed for an award of two slot exemptions at DCA to serve a community within the 

1250-mile perimeter. DOT found the case to be "extremely close" between Comair's proposal to serve Savannah 

25 
We have both reviewed the Compass/Lexecon study, as well as comments offered to the docket 

on this issue, and we are confident in concluding that, while fares at one of the three DC-area or 

NYC-area can exert a minor influence on fares at the others in some markets, it is quite clear that 

the airpoits are not economic substitutes. We further conclude that the presence of less costly 

service alternatives from BWI and IAD in Washington and EWR and JFK in New York are not 

sufficient to mitigate the harm to consumers that can occur from significantly reduced 

competition at DCA and LGA. 

The Compass/Lexecon analytical approach was to compare fare trends over time between the 

three New York and three Washington area airports and common destinations. They found them 

to be systematically linked over time, such that a change in fare levels at one New York airport is 

associated with an increase in the fare at other area airports. From these observed "price 

linkages" they concluded that the New York and Washington area airports are "commonly 

accepted to be substitutes." 

We believe the methodology of the study was flawed in a number of fundamental respects. 

Most significantly, while the study claimed a relationship in the movement of fares, it effectively 

admitted that the degree of relationship in the actual of level of fare changes was small. The 

results indicated that an increase in the fares at one New York airport of 10% is associated with 

an increase in the fare at another New York airport of only about 2.8%. At Washington, the 

corresponding figure was only 2.1%. If the major New York and Washington airports are 

"economic substitutes," as the authors contended, that appears to be at odds with the fact that a 

price change at one would produce a change at the others of only one quarter or one fifth as 

much.^' 

and US Airways to serve Sarasota Bradenton, as each satisfied two of the statutory criteria and offered similar 

benefits to the respective communities. In weighing the advantages and disadvantages of the proposals, we 

ultimately selected the US Airways proposal because the population in the Sarasota MSA was larger than 

Savannah's, US Airways' proposal included a right-sizing of aircraft to reflect the seasonality of the Sarasota 

market, and Savannah had better access to the Washington area with three nonstops to IAD versus Sarasota's one to 

BWI. In no way was the Department by doing so stating or implying that service between DCA, IAD and BWI was 

interchangeable. Order 2006-6-17 at 7, 8. With regard to DOJ, Delta and US Airways cited a DOJ 2001 press 

release and a 1996 speech by an Assistant Attorney General. In these instances concerns were raised about 

prospective transactions that would increase concentration by carriers at DC-area airports. Again, these did not 

state that the airports were economic substitutes for one another. DOJ's position on the issue is clearly set forth in 

its filings in this matter, which support DOT's proposed action. 

^' The study also failed to control for changing macro or even regional economic trends. Moreover, in testing 

whether common airport markets are competitive, reliance should not made simply on changes in fare trends alone 

over time, but rather should also examine whether passenger levels at each airport pair responds to changes in price 

over time at other area airport pairs in the same city-pair market. Finally, the study attempts to .show that 

populations in the New York and Washington areas are dispersed in such a manner that many could drive roughly 

equal distances to "competing" airports. However, in doing so it failed to reflect the drive time effects of 

congestion, or differences in the availability or cost of parking, accessibility to mass transit and airport amenities, 

although these factors clearly alter the practical substitutability (cost/value to consumers) of different airports to 

consumers. 

26 
Also, in its comments the Department of Justice expressed criticism of the Compass Lexecon 

study, observing that the study failed to define the level of correlation in fares that would place 

the airports in the same relevant market, such that market power could not be exercised at DCA 

(or LGA) independently of BWI and IAD (or JFK and EWR).^^ 

However, given the issues raised by the Compass/Lexecon analysis, we also independently 

considered whether the three airports in the New York area, and the three in the Washington 

area, effectively constitute the same market for all passengers. Comparative yields. Standard 

Industry Fare Levels, and Fare/Demand data were all studied for the DC and New York airports. 

In our review of each of these metrics, we found that for a large portion of passengers, especially 

time-sensitive passengers in each respective metropolitan area, the New York and Washington 

area airports are not effective substitutes for each other. 

a. Yield Analysis 

In analyzing both overlap and all markets at the airports, we found that yields (i.e., revenue per 

passenger mile) were substantially different among the airports. Specifically, we found the 

average yield in all markets at DCA is 27 cents per mile, vs. 17 cents at Dulles and 14 cents at 

BWI. Similarly, the average yield at LGA is 20.5 cents per mile, vs. 18.7 cents at EWR and 14.7 

cents at JFK. If the airports were effective economic substitutes for all passengers, we would 

expect to see a greater self-equalizing of yields and the yield spreads would not differ so 

significantly. 

b. Standard Industry Fare Levels 

DOT conducted an analysis of the level of passenger weighted fares as a percent of SIFL at 

Washington and New York City airports to test the proposition that fares at these airports are 

essentially undifferentiated. The results are summarized at Appendix B. 

^^ It is not surprising that there is some correlation among fares at nearby airports, and more correlation than one 

would find among three random airports. DOJ asserted that such correlation alone does not show whether fares at 

DCA or LGA are constrained by fares at nearby airports. 

^^ In its comments, United Airlines contended that the differentials in yield affecting LGA and DCA may be due 

simply to the added costs of slots and problems with delays. As a general point, airline fares are market-based rather 

than cost-based (as evidenced in the variance in SIFL ratios discussed above). However, the three Washington and 

three New York airports largely share the same weather, a major cause for delays, and DOT Ontime Performance 

data for the fourth quarter 2009 indicates that delays are more common at IAD than DCA or BWI, and more 

common at EWR than at LGA or JFK. (The percentage of delayed flights were 17.7% for DCA, 17.4% at BWI, and 

19.4% at IAD, as well as 24% for LGA, 198.8% for JFK, and 29.1% for EWR.). Further, the cost for slots could not 

explain the wide disparity between yields at DCA, IAD, and BWI on one hand and LGA, EWR, and JFK on the 

other. As noted above, DCA's all markets yield is 37% above IAD and 48% above BWI, while LGA's comparable 

figure is 8% higher than EWR and 28% higher than JFK. The value of a one cent yield difference per quarter on all 

scheduled passengers at DCA is estimated at $28.9 million, and $41 million at LGA - many times the value of a slot 

at those airports. 

27 
DOT found that the relationship of actual fares to the SIFL fare benchmark is very different at 

the respective area airports. At the Washington airports, actual fares are 65% of SIFL at BWI, 

77% at IAD and 101% at DCA. At New York, the actual fares are 71% of SIFL at EWR, 57% of 

SIFL at JFK, and 82% of SIFL at LGA. 

These disparities in weighted fares, consistent with our findings on yields, implies that price 

competition among the airpoits does not appear pervasive enough to discipline individual airport 

prices and thereby eliminate substantial price differentials. 

c. Fare/Demand Data 

If the three DC and three NYC airports were economic substitutes, a change in the fare levels at 

one should produce a corresponding change in passenger levels both at that airport and the others 

in its area. (One would expect that passengers would book less travel at an airport where fares 

were increased and more travel at the others, if the airports were indeed "competitors.")^'^ 

We found no evidence of any significant substitutability existing among New York and 

Washington area airports. Substantial yield disparities and substantial differences in SIFL ratios 

were found to exist among the airports in both common and non-common markets, and there 

were very low levels of correlation between the fare differences and the traffic volume 

differences at the airports. 

The Department of Justice also supported the proposition that most passengers do not consider 

the airports to be interchangeable.^^ DOJ noted that the sometimes significant differences in 

average fares at the various airports, and the high values attached to the slots and the carrier's 

efforts to protect these slots, "show there is differentiation between LGA and DCA and other 

area airports." It further observed that "Although other airports may be acceptable substitutes for 

''* In order to test this proposition we conducted a time series analysis using O&D data for the same period as used in 

the Compass/Lexecon study. The regressions produced correlation coefficients (R^) for each set of airports that 

were very low, with levels not significantly differentiated from zero - indicating the lack of a relationship between 

fare differences at DCA/LGA and traffic differences at the other metropolitan area airports. Even when regressions 

were performed focusing on overlap markets where the fare difference between the reference airport market and the 

base airport market were the greatest and where highest fares exist at the base airport - where consumers would be 

most likely to seek lower fares by turning to an alternative or substitute airport - the correlation coefficients were 

not substantially differentiated from zero. 

'^ Although supporting divestment of Delta slots at LGA in order to expand opportunities for new entrants and 

limited incumbents in the NYC metropolitan area, the Port Authority of New York and New Jersey contended that 

there were flaws in DOT's analysis of airport substitutability and stated that it operates its airports to serve one 

travel region, with each airport having overlapping market areas. While market areas may "overlap," that does not 

mean that passengers within the market areas are indifferent as to which airport they utilize, or that fares at one 

discipline those at others. We believe the further discussion as presented above addresses the Port Authority's other 

concerns. 

28 
some passengers (particularly price-sensitive passengers) they clearly are not close substitutes 

for other passengers, and competition among carriers at DCA and LGA matters."'''^ 

In conclusion, we believe that the evidence presented by the parties in support of their contention 

that Washington and New York area airports are effective substitutes is unconvincing. Any low 

level of substitution that may be demonstrated is inadequate to effectively discipline prices 

among the area airports, leaving the traveling public vulnerable to high fares arising from lack of 

competition and high market concentration. 

The Reputed Benefits of the Transaction Do Not Mitigate the Potential Harms 

The Joint Applicants have asserted that the FAA failed to consider the benefits of the proposed 

transaction, including improvements in service and increased competition among the parties. 

Specifically, the Joint Applicants claim that the transaction will result in a more efficient 

utilization of slots and facilities through upgauging of aircraft size at both LGA and DCA, 

thereby increasing throughput and competition while reducing congestion and delay. In addition, 

the Joint Applicants argue that the facilities transfer will enable Delta to create a seamless hub at 

LGA and will facilitate enhanced competition and preserve and enhance small community access 

at both LGA and DCA. 

By deciding to tentatively grant the waiver as conditioned in the Notice, we not only carefully 

considered these efficiencies, we also concluded that they would likely be realized if the 

transaction were implemented as remedied. It is clear from the record in this proceeding that the 

slots at issue in this transaction are currently being used sub-optimally and inefficiently, both 

from the perspective of the carriers holding them as well as from the perspective of the public 

interest. 

We concur that the transaction would provide a greater economic incentive to both carriers to 

achieve more efficient utilization of slots and facilities at both airports through upgauging 

aircraft size and that that would produce public benefits. However, we also concur with the 

Department of Justice in noting that, "the parties' benefits estimations use incorrect baselines, or 

77 

'but-for-world,' against which to compare their promised capacity and traffic gains." Rather 

than comparing the projected increase in capacity and traffic at current levels, the appropriate 

comparison is against alternatives to the current commercial situation faced by US Airways at 

LGA and Delta's plaimed operations absent the transaction at DCA.^^ As such, we believe that 

the Joint Applicants have overstated the public benefits and understated the potential harms from 

the transaction. Indeed, in many airport-pair markets, the Joint Applicants are merely replacing 

each other's services at the two respective airports. Given that Delta and US Airways are 

^^ Comments of the United States Department of Justice, March 24, 2010, p. 16. 

^' Reply Comments of the United States Department of Justice, April 5, 2010, p 4, footnote 7. 

^^ Comments of the United States Department of Justice, March 24, 2010, p. 18. 

29 
currently priinary competitors for each other at each of these aiiports, the loss in potential 

competition in the markets they both currently serve is particularly important. In addition, 

Delta's claimed public benefits of creating a hub at LGA are also overstated. For example, as 

Southwest notes, creating a hub at LGA would likely necessitate reliance on regional jets, as 

Delta uses at other hubs, potentially eroding the benefits of upgauging. Further, a hub at LGA 

would utilize a significant amount of its scarce capacity to accommodate passengers who have 

no need or desire to be at LGA but are only stopping there on a journey elsewhere.^ 

The Joint Applicants assert that one of the main benefits of the transaction is increased or 

enhanced service to small communities. While Delta and US Airways have made public some of 

their new intended services, including service to small communities, the carriers have not 

released all intended service changes and in no way are bound to implement any of the proposed 

services in new markets. Also, if service to small communities with an established history of 

nonstop service to these slot controlled airports is eliminated, while service is armounced to other 

small communities with a history of unsustainable nonstop service, it is questionable as to 

whether the proposed service is really beneficial to small communities as a whole, or is merely 

beneficial to some small communities at the expense of others. 

The Joint Applicants have the flexibility to provide service to small communities, even when 

faced with the proposed remedies, by eliminating marginal new frequencies in existing medium 

and large markets and/or by upgauging existing frequencies to release slots to allocate to small 

communities. While there are competitive reasons for allocating a set number of frequencies to a 

particular market, if service to smaller coimmunities is as important as the parties contend, the 

carriers will allocate the necessary resources to serve them. In fact, despite their threats that 

small community service is at risk in a remedied transaction, the carriers may determine that it is 

financially beneficial to serve small communities at the expense of fewer frequencies in larger 

markets because yields in smaller markets are less susceptible to the dilutive effects of LCCs. 

DOT, on multiple occasions, has stated in DCA slot exemption proceedings that US Airways, 

with its large portfolio of DCA slot holdings, has had the ability to add new service to smaller 

0 1 

communities from DCA, but has chosen not to do so. 

Unless mitigated, the potential harms in the proposed transaction are substantial. First, as 

explained above, the transaction will reduce competition between Delta and US Airways and 

competition from nearby airports will not completely offset lost competition between the two 

TM Comments of Southwest Airlines, p. 5. 

^° Indeed, a market-by-market analysis using the carriers' own metrics of proposed services in new markets for 

Delta at LGA and US Airways at DCA gives rise to concern that, in some of the smaller markets, some of their 

services may not be sustainable over the longer term. 

^' See, e.g., DOT Order 2008-2-28 Granting Within-Perimeter Slot Exemptions at Ronald Reagan Washington 

National Airport, February 22, 2008, p. 10; and DOT Order 2007-5-12 Granting Within-Perimeter Slot Exemptions 

at Ronald Reagan Washington National Airport, May 23, 2007, p. 15. 

30 
carriers at DCA and LGA. The Joint Applicants currently compete on a number of LGA and 

DCA nonstop routes and have competed on many others in the past. Scheduling plans submitted 

in the record indicate that Delta plans to withdraw from DCA nonstop routes on which it 

currently competes with US Airways, and US Airways plans to withdraw from certain LGA 

nonstop routes where it competes with Delta. We agree with DOJ that, "In the longer run, 

competition between Delta and US Airways will be lost across a number of routes." This lost 

competition is unlikely to be replaced by other incumbent competitors because they have 

significantly fewer slots and therefore focus their services at these airports on core markets, 

particularly large hub or focus cities where they can comiect passengers to additional 

destinations. As DOJ concludes, "the transaction will reduce the number of carriers with 

'excess' slots to discipline a fare increase by the dominant carriers from two to one at LGA and 

from one to zero at DCA."^^ 

Second, evidence in the record establishes that the transaction will inhibit new entry at LGA and 

DCA. The record shows that there is a pattern of slot hoarding by incumbent carriers at both 

LGA and DCA in order to prevent new entrants and limited incumbents from obtaining or 

expanding competitive service at those airports. In its Notice, the FAA noted the lack of robust 

entry by new entrants or expansion by limited incumbents at these airports. DOJ concludes that 

slots at both airports are "highly concentrated in the hands of Delta and US Airways, both of 

which have little incentive to sell or lease slots to other carriers that would compete with 

them."^'* Noting that fares are especially high at DCA due to limited presence of low-cost 

carriers and slot controls, DOJ cites evidence in the record that shows that both US Airways and 

Delta believe that competitive entry by low-cost carriers "would substantially lower their 

protected fares and profits at these airports."^^ DOJ further notes that incumbent carriers are 

hoarding and babysitting slots at these airports by flying excessive frequencies using small 

airplanes. In an effort to discourage these anti-competitive practices the 80% use-or-lose rules 

were established. Legacy carriers, however, have effectively developed methods tcfbypass the 

use-or-lose provision by using their regional affiliates to downgauge equipment on existing 

routes while increasing frequency. While the carriers may claim that higher frequency service in 

a market can benefit consumers, the motivation for that may be simply covering more slots at a 

lower per departure trip cost and preventing the more efficient use of a finite number of slots. 

For example, in the LGA-Raleigh/Durharn market, US Airways, Delta and American offer a total 

of 23 weekday departures with average se^ats per departure equaling just 49 (May 2010 

schedules). 

^^ Comments of the United States Department of Justice, March 24, 2010, p. 13. 

"W.,p.l6. 

85 

'Ud.,p.%. 

Id., p.9. 

7rf.,p.lO,fn. 24. 

31 
Also, the larger the slot portfolio of a given carrier, the greater the flexibility the carrier has to 

abuse the system, to bypass the provisions of the use-or-lose rules, and to block new entrants or 

limited incumbents from gaining new or improved access to these slot controlled facilities. The 

proposed transaction would give DL and US exactly that - larger slot holdings across many 

hours of the day, allowing these two carriers greater flexibility to bypass the 80% use-or-lose 

rules and to cover as many slots as possible by maintaining small regional aircraft operations. 

Fuithermore, we agree with DOJ that the transaction will reduce the availability of slots, given 

that US Airways and Delta will have: (1) substantially increased slot shares at DCA and LGA 

respectively; (2) greater marketing and scheduling "presence" at both airports that will allow 

them to exact a price premium in both existing and new markets; and, (3) a greater interest in 

maintaining the price premiums that exist at those airports by forestalling new entry.^^ 

In order to discipline the increased concentration and additional pricing power for both US 

Airways and Delta and thereby mitigating the reduction in competition due to the transaction, 

significant additional competition is necessary. As analyses by both the Department, DOJ, and 

Southwest conclude, competition by new entrants and limited incumbents, particularly LCCs, 

will not only maximize the economic efficiency of the slots at both airports through the operation 

of more seats at lower fares per slot than by Delta or US Airways, but will also minimize the 

total number of slot divestitures required to remedy the anticompetitive effects of the transaction. 

We agree that there can be important benefits provided as a result of the proposed transaction, 

but it is at the margins, where those potential benefits are at their least, that divestitures have 

been proposed. US Airways and Delta have claimed that, overall, the proposed transaction 

would generate $153 million in savings. Yet, a study commissioned from Campbell Aviation 

Consultants for Southwest Airlines claims that, if Southwest operated the 20 slot pairs at LGA 

and the 14 slot pairs at DCA, the passenger fare savings per year would total $193 million 

compared to the use of those slots by Delta and US Airways. The Campbell study asserts that 

Southwest's average fare would be 33% lower than Delta's at LGA and 49% lower than US 

Airways' fare at DCA. In addition, it estimates that Southwest would carry more than 340,000 

additional passengers to and from each airport annually. We note that the thrust of this study is 

supported by the analysis performed by DOJ, discussed above, which found that increased lowcost carrier share at airports significantly reduces price premiums and significantly increases 

ridership. 

We have concluded that the benefits of the Delta-US Airways transaction as proposed would not 

outweigh its potential for harm to the traveling public, but that the divestitures we have proposed 

*'W.,p. 12. 

*^ Comments of Southwest Airlines, p. 10. 

32 
will bring significant additional consumer benefits that would assure overall net benefit to the 

public. 

THE COUNTERPROPOSAL OFFERED BY THE PARTIES FAILS TO MEET THE 

ESSENTIAL REQUIREMENTS FOR A SUITABLE REMEDY 

The divestitures proposed by the FAA were designed to mitigate the competitive harm resulting 

from the transaction at the least cost to the transaction itself. While the Joint Applicants' 

counterproposal includes divestitures of 15 slots at LGA and 4.5 at DCA, Southwest argues that 

the FAA's proposed divestiture of 20 slot pairs at LGA and 14 pairs at DCA is not enough, and 

that even greater divestitures should be required.^^ 

We have concluded that the divestiture of 20 slot pairs at LGA and 14 slot pairs at DCA are the 

minimum necessary to remedy the reduction in competition resulting from the transaction while 

preserving legitimate efficiencies obtained from it. While the divestiture of more slots than 

proposed in the Notice would make the market more competitive, we seek to minimize the 

numbers of slot pairs required to remedy the transaction by maximizing the competitive potential 

of the divestiture packages. This objective is accomplished under the specific circumstances of 

this case by balancing four essential components of an effective slot remedy package. The first 

component is a sufficient number of divested slots to allow other carriers to mount an effective 

competitive response to the increased dominance and reduction of competition that would occur 

as a result of the transaction. The second remedy component is to define the pool of competitors 

eligible to take up the remedy based on the carriers that would have the greatest economic 

incentive to use slots obtained as intensively as possible, thereby exerting the most competitive 

discipline per slot (by operating larger capacity aircraft and offering the most price competition 

at the affected airports). As DOJ points out in the Appendix to its comments^° it is widely 

recognized in the literature that low cost carriers exert maximum competitive pressure in the 

markets they serve by selling more seats at lower fares. The third remedy component is to 

ensure that the bundles of slots for divestiture are both suitable for a commercially viable pattern 

of scheduled service in the types of markets affected by the transaction and are constructed 

proportionate to the slots that were being transferred between the parties to the transaction. The 

fourth component is to ensure that a process for distributing the divested slot packages is not left 

to the parties themselves, given the overv/helming incentive for them to structure the divestitures 

to minimize the competitive impact on themselves and thereby the benefits to consumers.^' The 

counterproposal offered by the parties fails to satisfy each and every one of these four essential 

remedy components, and therefore fails to meet the essential requirements for a suitable remedy. 

*' Comments of Southwest Airlines, p.7. 

* Comments of the United States Department of Justice, Appendix A at A-2. 

^' Reply Comments of the United States Department of Justice, April 5, 2010, p.8. 

33 
Furthermore, while Delta and US Airways have offered a counterproposal for fewer divestitures, 

they have neither demonstrated that our number is arbitrary nor have they shown that their 

number better suits the public interest or addresses the competitive harm resulting from the 

transaction. We have noted that we agree with the Departinent of Justice that there will be a 

significant reduction in competition between US Airways and Delta on a number of overlap 

routes, based on their confidential post-transaction plans. Remedying this loss of competition 

alone substantiates the number of divestitures put forward by the FAA, even before other 

anticoinpetitive effects are considered, such as the effects of increased city and airport carrier 

"presence" factors which impact capacity and pricing in other markets at the two airports. 

The Joint Applicants, Continental and the Delta Master Executive Council of ALPA argue that 

the remedy proposed for this transaction is substantially more onerous when compared with 

DOT'S tentative decision in the oneworld antitrust immunity case involving American Airlines, 

British Airways, and Iberia^^ or the final decision in the recent Star Alliance immunity case.^^ 

However, the cases are not comparable. Antitrust immunity applications are governed by 

different statutes (49 U.S.C. §§ 41308 and 41309) and standards than those applicable to the 

transaction before us. Further, the facts and circumstances of each case are very different. Delta 

and US Airways seek a waiver from an Order allowing them to consummate a slot transaction 

involving a significant number of slots at two constrained domestic airports that would have a 

substantial impact on domestic competition. The antitrust immunity cases, on the other hand, 

involve cooperation on long-haul, inter-continental itineraries, in a context of inter-alliance 

competition for global traffic flows. There is no immunity grant possible for cooperation 

between two U.S. carriers on domestic routes.^"^ Foreign carriers partner with one or more 

domestic carriers to expand code-sharing and alliance opportunities to compete with other 

alliances of foreign and domestic carriers, many of which are already exempt from the antitrust 

laws. If the Department determines that an exemption from the antitrust laws is necessary, the 

Department next considers whether those benefits can be achieved "by reasonably available 

alternatives that are materially less anticompetitive." 49 U.S.C. § 41309(b)(1)(B). The 

Department therefore considers the substantial benefits that may result from the airline alliances 

'^ Joint Application of American Airlines, Inc., British Airways PLC, FinnAir OYJ, Iberia Lineas Aereas de Espana 

and Royal Jordanian Airlines under 49 U.S.C. §§41308 and 41309 for approval of, and antitrust immunity for, 

agreements; DOT-OST-2008-0252; DOT Show Cause Order 2010-2-8; case now pending DOT final disposition. 

'^ Final Order 2009-7-10 (Docket OST-2008-0234). 

'•* Evaluating the competitive impact in international markets differs substantially from such an evaluation in 

domestic markets. It is widely accepted in the airline industry that connecting competition is much more effective at 

disciplining fares on long-haul routes than on short haul routes, due to much longer journey times and the ratio of 

the non-stop elapsed journey time to the elapsed journey time of a connecting itinerary. Furthermore, factors such 

as circuity play a much more important role in the efficacy of connecting competition on short- and medium-haul 

routes and thereby on a competitive assessment of a reduction in competition on such routes. The relevant markets 

in this case are therefore considerably different, resulting in a fundamentally different competitive impact, and 

typically requiring different remedies. 

34 
and determines the extent of required slol divestitures or other remedies as a condition to the 

grant of immunity. 

As proposed in the Notice, our remedy is designed to allow non-aligned, new entrants and 

limited incumbents to establish new or complement existing patterns of services that are 

commercially viable at both slot-constrained airports. The Notice issued February 9, 2010, set 

forth a proposal under which slot interests at DCA and LGA would be bundled in a divestiture. 

The purpose of bundling the slot interests was to ensure that a purchaser would obtain a 

sufficient number of slot interests that would inake it possible to initiate service in a way that 

provides meaningful new competition. V/e continue to believe that bundling provides the best 

opportunity to achieve this goal. 

However, after reviewing the comments submitted on the Notice and further consideration, we 

have slightly adjusted the four proposed bundles at LGA from one bundle of eight slot pairs and 

three bundles of four slot pairs each, to tv/o bundles of six slot pairs each and two bundles of four 

slot pairs each. We noted that Delta and US Airways' counterproposal at LGA indicated an 

interest from two limited incumbents (AirTran and Spirit) and one prospective new entrant 

(WestJet) for five slot pairs each. The 6-6-4-4 arrangement may better accommodate the interest 

they demonstrated, as the individual bundles would allow existing slot portfolios and 

corresponding patterns of service to be expanded or new service to be launched with moderate 

frequency service. By making available for purchase from the existing slot holder two bundles of 

slots at DCA and four bundles of slots at LGA, limited incumbent carriers will have the 

opportunity to build on their limited presence at the slot constrained airports by adding 

frequencies to existing markets for better schedule coverage throughout the day, a key benefit to 

their customers, and a key defense against a dominant carrier that may choose to inundate 

markets in which it competes with new entrants and limited incumbents with excess capacity in 

order to force the smaller carrier from the market. Both new entrant and limited incumbents 

could also establish new service to other focus cities in their networks. Bundles of slots will also 

allow carriers with limited operations to improve efficiencies at these constrained airports in 

terms of better utilization of ground staff, equipment and facilities. Efficiencies will also be 

gained in the form of increased throughput, as new entrants and limited incumbents will offer on 

average more seats per departure than proposed by US Airways and Delta with their reliance on 

regional affiliates for over 80% of their proposed new flying from DCA and LGA. 

'^ Delta and US Airways further claim that the recent American-JetBlue transaction should satisfy DOT's concerns 

with regard to low-cost entry at DCA. In that transaction, JetBlue will lease 8 slot pairs at DCA. However, the 

source of the slots is American, which would have the second largest number of slots and be second in departure 

share at DCA were we to approve the US-DL proposal. US Airways would retain the same level of concentration 

that cause our concerns here, and even obtains a more dominant position over its nearest rival at the airport. 

35 
With only two limited incumbents currently serving DCA, the creation of two slot bundles 

provides for diversified penetration in the form of a new entrant or limited incumbent launching 

service in either high frequency business markets or multiple smaller markets. 

TERMS OF FINAL WAIVER NOTICE: 

This grant of waiver is conditioned on: (1) the divestiture by US Airways of 20 pairs of slot 

interests at LGA in the slot bundles identified below; (2) the divestiture by Delta of 14 pairs of 

slot interests at DCA in the slot bundles identified below (these slot interests will be made 

available for purchase by new entrants and limited incumbents as discussed later), and; (3) US 

Airways and Delta making available gates and other ground facilities on reasonable terms to the 

purchasers of divested slots if requested by the purchaser, and if such gates and facilities are not 

available from the airport authority. The following discussion details these conditions and 

establishes the procedure for the purchase of divested slot interests. As we discussed in the 

February Notice, our goal of maximizing competition and consumer benefits will be realized 

most effectively by ensuring that the slot interest bundles are purchased by limited incumbents 

and new entrants (sometimes referred to herein as "eligible carriers"). As described in the 

February 9, 2010 Notice, eligible carriers must be U.S. or Canadian air carriers having fewer 

than five percent of total slot holdings at DCA and/or LGA, do not code share to or from DCA or 

LGA with any carrier that has five percent or more slot holdings, and are not subsidiaries, either 

partially or wholly owned, of a company whose combined slot interest holdings are equal to or 

greater than five percent at LGA and/or DCA. Carriers that would not qualify include those who 

are involved in a code-share relationship at DCA/LGA with carrier(s) that also would not qualify 

as of the date of this Notice. 

As proposed, divested slot interests will be bundled for reallocation. This bundling ensures a 

purchaser can obtain sufficient slot interests to initiate or increase service in a manner that meets 

its operational needs and enhances competition. The sellers may not set a reserve price for the 

slot interest bundles. 

As discussed above, we have slightly adjusted the four proposed bundles at LGA from one 

bundle of eight slot pairs and three bundles of four slot pairs each, to two bimdles of six slot pairs 

each and two bundles of four slot pairs each. For the DCA slot interests, there will be two 

bundles (one consisting of eight pairs and another of six pairs). For the LGA slot interests, there 

will be four bundles (two consisting of six pairs and two of four pairs). The following table 

shows the slot interest bundles as adopted. 

36 
At DCA: Bundle A would consist of 8 pairs of slots at: 0700 (2), 0800 (1), 1000 (2), 1100 (1), 

1200(1), 1300 (1), 1400 (2), 1500 (1), 1600 (2), 1900 (1), 2000 (1) 2100 (1), and 

Bundle B would consist of 6 pairs of slots at: 0700 (1), 0900 (2), 1100 (1), 1200 (1), 1300 (2), 

1700 (1), 1800 (1) 1900 (1); 2000 (1), 2100 (1). 

At LGA: Bundle A would consist of 6 pairs of slots at: 0600 (D), 0700 (D), 0800 (A), 0800 (D), 

0900 (A), 1000 (D), 1300 (A), 1400 (D), 1700 (A), 1800 (D), 2000 (A), and 2100 (A); 

Bundle B would consist of 6 pairs of slots at: 0700 (D), 0900 (A), 1000 (D), 1100 (A), 1200 (D), 

1300 (A), 1400 (D), 1500 (A), 1600 (D), 1700 (A), 1700 (D), and 2000 (A); 

Bundle C would consist of 4 pairs of slots at: 0600 (D), 0800 (A), 0900 (D), 1100 (A), 1200 (D), 

1500 (A), 1600 (D), and 2000 (A); and 

Bundle D would consist of 4 pairs of slots at: 0700 (D), 1000 (A), 1100 (D), 1300 (A), 1400 (D), 

1800 (A), 1900 (D) and 2100 (A). 

Eligible carriers may be unable to use acquired slot interests if they cannot obtain access to gates, 

ticket counters, baggage handling services, loading bridges, and other ground facilities. If the 

purchaser lacks access to gates and ground facilities or is unable to obtain such access from the 

airport authority, the seller must make these available to the purchaser under reasonable terms 

and rates. 

The divested slot interests will be subject to certain limitations to ensure they achieve the 

competition goals discussed in this grant of waiver. These limitations on the LGA slot interests 

are effective until the termination of the LaGuardia Order (currently October 29, 2011), and they 

do not expire for the DCA slot interests. The FAA will waive the respective use or lose 

provisions of the LaGuardia Order and HDR for 6 months following purchase to allow the 

purchaser to begin service, but the purchaser must initiate service no later than 6 months 

following purchase. The purchaser may lease the acquired slots to the seller until the purchaser 

is ready to initiate service to maximize operations at the airports. The slot interests may not be 

sold or leased during the 12 months following purchase because the purchaser must hold and use 

the acquired slot interests. However, purchasers may engage in one-for-one trades of these slot 

interests for operational needs. The slot interest limitations would attach to the slot interest 

acquired by the eligible carrier in a one-for-one trade. Any one-for-one trades are subject to the 

FAA notice requirements in the LaGuardia Order and HDR. After the initial 12 months, the slot 

interests may be sold (in the case of DCA slot interests), traded, or leased to any carrier that at 

the time of the sale, trade, or lease would have met the eligibility requirements to make an offer 

37 
under this Waiver for the divested slot interests. Trades or leases of LGA slot interests may not 

exceed the duration of the LaGuardia Order as stated in that Order. Any of these transactions are 

reportable under the HDR and LaGuardia Order. 

Within 30 days of this grant of waiver. Delta and US Airways must notify in writing to the FAA 

whether they intend to proceed with the slot transfer transaction. If they intend to consummate 

the slot transfer transaction subject to this waiver, that notice must provide the following 

information for the divested slots: 

(1) Operating Authorization number (LGA) or slot number (DCA) and time; 

(2) Frequency; 

(3) Effective Date(s); 

(4) Other pertinent information, if applicable; and 

(5) Carrier's authorized representative. 

The FAA will post a notice of the available slot interest bundles on the FAA website at 

http://www.fly.faa.gov a notice of the available slot interest bundles within two business days of 

receiving all required information for the sellers and, if practicable, will publish the notice in the 

Federal Register. The notice will provide seven business days for purchase offers to be received 

and will specify a closing date and time. Eligible carriers may register to purchase the slot 

interest bundles via email to 7-awa-slotadmin@faa.gov. Registration must be received 15 days 

prior to the start of the offer period and must state whether there is any common ownership or 

control of, by, or with any other carrier and certify that no purchase offer information will be 

disclosed to any person other than its agent. 

An eligible carrier may purchase only one slot interest bundle at each airport, except at the 

seller's option as discussed later, as we seek to maximize the interest of eligible carriers in 

participating in the proceeding. This limitation will prevent any one carrier from acquiring all 

divested slots, which was raised as a concern in the comments. We are also incorporating 

specific procedures to facilitate the sales process on multiple slot interest bundles. An eligible 

carrier will register for each slot interest bundle that it wishes to buy, and it will be assigned a 

random number for each registration so no information identifying the purchaser is available to 

the seller or public. A purchaser will be allowed to indicate its preference ranking for each slot 

interest bundle as part of its offer. Finally, as discussed in more detail later, the FAA will review 

the offers for each bundle in order (i.e., bundles A and B for DCA and A, B, C, and D for LGA). 

All offers to purchase slot bundles must be sent to the FAA electronically, via the email address 

above, by the closing date and time. The offer must include the prospective purchaser's assigned 

number, the monetary amount, and the preference ranking for that slot interest bundle. No 

extensions of time will be granted, and late offers will not be considered. The FAA will post all 

38 
offers on the website as soon as practicable after they are received. Each purchaser can submit 

multiple offers until the closing date and time. 

Once the sales period closes, the FAA will determine the highest offer for each bundle. If each 

bundle has only a single offer, the FAA will notify the seller by forwarding the purchaser's 

identification. If one eligible carrier has made the highest purchase offer on multiple bundles, 

the FAA will determine which offer will be valid based on preference ranking and bundle order. 

The FAA will identify the next-highest offer from a carrier that remains eligible to purchase the 

bundle as the successful offer on the other bundles. This information will be forwarded to the 

respective seller. The FAA will also provide information about the amount of the highest offer, 

and the selling carrier may choose to accept the highest offer instead of the offer identified by the 

FAA. Upon acceptance, the FAA will notify the selling and purchasing carriers to allow them to 

carry out the transaction, including any gate and ground facilities arrangements. The seller and 

purchaser must notify the FAA that the transaction has been completed and certify that only 

monetary consideration will be or has been exchanged for the slot interest bundles. This 

nodfication must occur within five business days of notification by the FAA of the winning 

offer. A transaction is final, and the waiver will be effective, only when any issues related to 

gates or ground facilities have been resolved, although not all purchasers may need gates and 

facilities beyond what they already have. The FAA then will approve the transaction and will 

maintain and make publicly available a record of the offers received, the identity of the seller and 

purchaser, and the winning price. 

In the unlikely event that there are no offers for a slot interest, those slot interests will revert 

automatically to the FAA. If necessary, we will announce at a later date a means for disposing of 

or retiring a slot interest that attracts no piiirchase offer. We do not expect that this need will 

arise. 

The grant of waiver becomes effective upon FAA approval of all slot interest bundle 

transactions. 

Issued in Washington, DC on May 4, 2010 

Ray LaHood / I J. Randolph Babbitt 

Secretary ^— ^ Administrator, FAA 

UHMT 

39 
offers on the website as soon as practicable after they are received. Each purchaser can submit 

multiple offers until the closing date and time. 

Once the sales period closes, the FAA will determine the highest offer for each bundle. If each 

bundle has only a single offer, the FAA will notify the seller by forwarding the purchaser's 

identification. If one eligible carrier has made the highest purchase offer on multiple bundles, 

the FAA will determine which offer will be valid based on preference ranking and bundle order. 

The FAA will identify the next-highest offer from a carrier that reinains eligible to purchase the 

bundle as the successful offer on the other bundles. This information will be forwarded to the 

respective seller. The FAA will also provide information about the amount of the highest offer, 

and the selling carrier may choose to accept the highest offer instead of the offer identified by the 

FAA. Upon acceptance, the FAA will notify the selling and purchasing carriers to allow them to 

carry out the transaction, including any gate and ground facilities arrangements. The seller and 

purchaser must notify the FAA that the transaction has been completed and certify that only 

monetary consideration will be or has been exchanged for the slot interest bundles. This 

notification must occur within five business days of notification by the FAA of the winning 

offer. A transaction is final, and the waiver will be effective, only when any issues related to 

gates or ground facilities have been resolved, although not all purchasers may need gates and 

facilities beyond what they already have. The FAA then will approve the treinsaction and will 

maintain and make publicly available a record of the offers received, the identity of the seller and 

purchaser, and the winning price. 

In the unlikely event that there are no offers for a slot interest, those slot interests will revert 

automatically to the FAA. If necessary, we will aimounce at a later date a means for disposing of 

or retiring a slot interest that attracts no purchase offer. We do not expect that this need will 

arise. 

The grant of waiver becomes effective upon FAA approval of all slot interest bundle 

transactions. 

Issued in Washinaron, D / on May 4, 2010 

J. Randolph Babbitt 

Administrator, FAA 

39 
Appendix A 

Summary of Comments 

We received comments from numerous commenters which we have summarized below. 

US Airways-Delta Response 

Delta and US Airways submitted comments in opposition to the FAA's divestiture conditions. 

The caiTiers asserted that: 

(1) Congress empowered FAA only to promote safety and the efficient use of airspace and, thus, 

it lacks the statutory authority to consider potential effects on competition in carrying out its 

other duties. 

(2) While the Secretary of Transportation has authority to consider competition-related factors, 

he is prohibited by 49 U.S.C. § 106(f)(2)(D) from directing the FAA to use its authority to do 

what it cannot do directly. 

(3) The proposed divestiture would constitute an unlawful taking under the Fifth Amendment, 

because restrictions on the sale are imposed that would make it impossible for the carriers to 

realize full market value. 

(4) DOJ is the agency best equipped to consider whether the transfer will hinder competition, 

acknowledging that DOJ is currently undertaking a review. 

(5) FAA cannot use a waiver applicable to LGA to force a divestiture at DCA. 

(6) FAA failed to analyze "overwhelming evidence" that the proposed transaction will benefit 

competition, such as service to new destinations, upgauging of aircraft, new connecting 

opportunities, etc. 

(7) FAA's proposed divestitures fail to consider the integrated nature of the transaction. 

(8) FAA's concerns about potential anticompetitive actions are mere speculation, as it did not 

point to specific instances of harm. 

(9) FAA based its analysis on a 1970s vintage measure (SIFL) that fails to take into account the 

major changes in the industry over the last 30 years, such as industry deregulation, 

emergence of LCCs, etc. 

(10) FAA failed to articulate and explain the level of airport concentration that causes it concern. 

(11) The three DC-area and three NYC aiirports are competitively linked, and FAA's contention 

that they are not substitutes is inconsistent with past positions of DOT and DOJ. 

(12) FAA did not sufficiently explain why divestitures of 14 pairs at DCA and 20 pairs at LGA 

were appropriate, and that level of divestiture is inconsistent with DOT's recent action in the 

oneworld case in which only 4 pairs of slots were required to be leased for ten years. 

Notwithstanding these objections, US Airways and Delta stated that, as they were "mindful of 

the concerns expressed by FAA" and desiring of a solution that would permit them to move 

forward, they had entered into provisional divestiture agreements with four carriers that were 

40 
eligible under Ihe terms of the Notice for 15 slot pairs at LGA and 4.5 slot pairs at DCA. The 15 

slot pairs at LGA would be transferred, five each, to AirTran, Spirit, and WestJet over periods of 

up to 28 months; the 4.5 pairs at DCA would be transferred to JetBlue. The carriers added that 

these more limited divestitures, "while diminishing the benefits of the transaction," would 

preserve enough of the benefits to permit thein to go forward. 

US Airways and Delta stated that if the FAA grants the waiver subject to the proposed 

divestiture conditions, they would not consummate the transaction, and reserved 

the right to seek judicial review. 

Delta and US Airways submitted joint comments in another filing, together with the new entrant/ 

limited incumbent carriers to which they would divest slots under their counterproposal: AirTran 

Airways, Inc., Spirit Airlines, Inc., JetBlue Airways, Inc., and WestJet, Inc. These commenters 

urge the FAA to approve the pending request, as modified by the slot transfer agreements. 

Additional details on the counterproposal were provided: (1) at DCA, JetBlue would acquire 4.5 

pairs of slots (JetBlue intends otherwise to add one off-peak hour slot to complete a 5-roundtrip 

service pattern); (2) at LGA, AirTran, Spirit, and WestJet would acquire 5 pairs of slots each, 

respectively, for a total of 15 pairs; (3) in all cases, the acquisition would be conditioned on 

FAA's grant of the LGA Waiver request; (4) the JetBlue transfer would take place relatively 

soon, but Delta would continue service with the slots under a lease from JetBlue for a period; (5) 

the AirTran and Spirit transactions would occur over a 24-month period at dates of their 

choosing; and (6) the WestJet transaction would occur at a date of its choosing within 28 months. 

WestJet and Delta will be negotiating other commercial arrangements as well. 

Given the issues raised by the carriers' counterproposal, the FAA determined that it was in the 

public interest to reopen the comment period for seven days to give all interested parties 

additional time to file rebuttal comments. Comments filed by April 5, 2010, were considered. 

For convenience and brevity, the comments described below include responses made both on the 

initial Notice and on rebuttal. 

Summary of Comments from the United States Department of Justice 

The Department of Justice (DOJ) submitted comments in support of the FAA's tentative decision 

to grant the requested waiver with conditions. The Department cited several factors in its finding 

.of support, including: 

(1) The availability of slots is a substantial barrier to entry at LGA and DCA. Air carriers 

holding large concentrations of slots have little incentive to lease or sell slots to low-cost 

carriers, thus stifling competition and depriving consumers of lower fares. 

(2) The slot transaction will reduce competition between Delta and US Airways at LGA and 

DCA. The Department contends that, post transaction. Delta will shrink substantially at 

41 
DCA and US Airways will shrink substantially at LGA, thereby reducing either carrier's 

ability to compete with each other. 

(3) The transaction will increase the slot holdings of the dominant carriers at LGA and DCA. 

US Airways will increase its DCA slot holdings from 44% to 54%, and Delta will increase 

its LGA slot holdings from 24% to 49%, thus producing a highly concentrated market and 

an enhanced premium fare structure in markets served by both aiiports. 

(4) Most low-cost carrier slot acquisitions at LGA and DCA have been the result of 

Congressional or DOT/FAA action rather than secondary slot market transactions. Despite 

FAA regulations designed to ensure that underutilized slots are reallocated to carriers that 

will used them efficiently, incumbent carriers continue to hoard slots, in part, to keep the 

slots out of the hands of new entrants. 

(5) The proposed slot transaction will exacerbate the disincentives of either carrier to sell or 

lease slots to other carriers. With increased slot shares at LGA and DCA, the carriers will 

have more revenue and profit at risk, and thus even less incentive than exists today to sell or 

lease slots to potential new entrants;. 

(6) The FAA's proposed slot divestiture is not likely to interfere substantially with the purported 

increase in seat capacity at either airj:)ort. There is little evidence suggesting that a smaller 

transaction - as would result if the pcirties accepted the terms of the FAA's proposed waiver 

- would be unprofitable for the parties. 

(7) The consumer benefits from LCC entry that will likely result from the FAA's proposed 

divestiture almost certainly will outweigh any loss from Delta and US Airways making 

minor modifications to their proposed schedules. 

(8) DOJ favors an anonymous, cash-only sales of slots in which the FAA forwards the highest 

offer to the seller for acceptance or rejection if the method is implemented in a sound way. 

The Department advocates for the anonymity of potential buyers, but encourages the FAA to 

clarify what happens in the event that a carrier rejects the highest purchase offer. The 

Department also recommends expanding the restriction on re-sales and leases of slots 

purchased pursuant to the selected slot acquisition option. 

(9) The Department recommends precluding, for some reasonable period, purchasers from 

selling and leasing any slots to carriers not eligible under the terms of the final action taken 

on this proceeding in order to ensure that divested slots stay in the hands of new entrants or 

limited incumbents. 

(10) The Department notes that purchasers of divested slots will also need access to sufficient 

ground facilities, and recommends that the FAA should consider ways to ensure that the 

purchaser will obtain access to these facilities. In concluding its comments, DOJ finds that 

the FAA's proposed waiver with conditions will be in the public interest because it will free 

up slots for other cairiers, facilitate entry at LGA and DCA, increase competition, and lower 

fares for consumers without interfering with the purported benefits of the transaction. 

42 
Summary of Other Comments 

Southwest Airlines, Inc. filed comments, arguing that: 

(1) The consequences for the public of this attempted re-allocation of the markets by Delta and 

US Airways will be higher fares, less competition, and fewer service options. 

(2) Delta and US Airways have long been free to upgauge their aircraft, but they have done the 

opposite over the last decade (Delta's average aircraft size at LGA has declined to 105 seats, 

while US Airways' average aircraft size at DCA has sunk to 92 seats - reflecting economic 

inefficiencies at both airports). 

(3) FAA's proposed carve-outs of 20 and 14 slot pairs are a good start, but are too limited to 

have a significant restraining effect on fares, except in a few markets. 

(4) If the divested slots are divided among several carriers, the resulting competition will be so 

diluted it will have no effective price discipline. A carve-out of at least 40 pairs at LGA and 

20 pairs at DCA should be required. 

(5) DOT/FAA has ample legal authority to require carve-outs (Since DOT/FAA has the 

authority to grant the waiver request in full, it must also have the authority to grant it in 

part), and carve-outs here are "in the public interest." 

(6) Despite multiple efforts. Southwest has been unable to acquire DCA slots, or more than the 

14 slots it has at LGA. Its average fares would be 33% lower than Delta at LGA and 49% 

lower than US Airways at DCA. If it had 20 pairs at LGA it would generate $84 million 

annually in consumer savings, and if it had 14 pairs at DCA it would generate $109 million 

per year in consumer savings. It would also serve 340,000 more passengers at each of the 

airports. 

(7) FAA should allocate the divested slots via a transparent sales process to the purchaser with 

the highest cash offer. Other options invite a manipulation of the process for anticompetitive purposes (e.g., selecting the weakest competitors). 

(8) FAA should amend its order to require US Airways and Delta, working with the respective 

airport authorities, to make airport facilities available on terms no less favorable than those 

now accorded to the two carriers. 

United Air Lines, Inc. opposes the FAA's proposed divestiture conditions. United's major 

arguments are: (1) FAA lacks the legal authority to impose the slot divestiture condition under 

the premise that FAA authority is limited to the safety of aircraft operations and efficient use of 

airspace, and that the policy goals outlined in § 40101 do not apply to the Administrator's 

exercise of exemption powers; and (2) FAA has not shown that the transaction would adversely 

impact competition. United contends that the fact that the transaction increases the share of slots 

does not necessarily signify that the carriers will gain pricing power in any relevant market. 

United believes the FAA has not analyzed potential competitive effects in any relevant market, 

that FAA assertions of harm are speculation, and that the FAA has relied on flawed, outdated 

data in reaching its conclusions. The air carrier states that costs are higher at DCA due to the 

added costs of delays and the cost of acquiring slots. 

43 
American Airlines, Inc. supports the FAA's proposed divestiture conditions, but expressed 

concerns regarding the rationale. American's major arguments are: (1) offers reason for the 

failure of the secondary market at DCA and LGA as the current system of delegating slots to 

new entrants. American contends that there is no incentive to buy new slots when slots are 

readily distributed for free by the government; (2) disagrees that the proposed transaction will 

lead to higher fares. The air carrier cites the example of Continental Airlines having market 

dominance at EWR but maintaining lower fares than US Airways; and (3) supports a private sale 

arrangement for the slot divestiture. 

Continental Airlines, Inc. takes no position on the proposed transaction or whether other 

remedies are required, but argues that imposing conditions of divestiture exceeds FAA authority. 

Continental's major arguments are: (1) FAA has previously acknowledged that it lacked the 

authority to impose market-clearing charges for landings and takeoffs; (2) FAA slot rules require 

reallocation by lottery, should not be read to extend to divestitures for economic reasons, nor 

favor new entrants and limited incumbents; (3) requiring divestitures will violate carriers' 

property rights; (4) FAA's proposal conflicts with the Hart-Scott-Rodino review process; (5) 

DCA and LGA are not individual markets, and treating them as such is inconsistent with earlier 

DOJ conditions on domestic code-sharing and in DOT's Star Alliance carve-out (where the 

overlap was premised on defining EWR and JFK as a common origin and destination point); (6) 

holding a large percentage of slots at a carrier's hub is not inherently anticompetitive and is 

beneficial to consumers because it enables airlines to achieve economies of scope; and (7) FAA 

should not consider code-share relationships when calculating an individual carrier's slot 

position because code-share carriers are independent with respect to domestic service. 

Continental states that it should have the ability to acquire withdrawn slots at LGA despite its 

code-share with United Air Lines. 

Virgin America, Inc. commends the FAA for taking steps to address the competitive situation at 

slot-controlled airports. Virgin believes the government has not only the authority but the 

responsibility to enhance competition, and believes that the FAA action in this proposed 

transaction is consistent with applicable precedents. The air carrier states that the FAA should be 

more proactive by creating a permanent mechanism for resolving secondary market problems at 

slot-controlled airports. 

The Delta Master Executive Council of the Air Line Pilots Association submitted comments in 

support of the waiver, but without the imposition of "onerous and unjustified" divestiture 

conditions. ALPA believes that approval of the original petition will promote job growth, slot 

utilization, and competition. The commenter contends that increased operations at an airport are 

not necessarily harmful, citing the example of Continental Airlines having a larger percentage of 

operations at EWR than other air carriers, but charges a lower percentage of the standard 

44 
industry fare level (SIFL). ALPA believes the FAA's proposed number of divestitures is 

inconsistent with oneworld, where just 4 pairs of slots were required to be divested. 

Parties representing two Florida airports filed comments in general support of the waiver. The 

airports include the Sarasota/Bradenton International Airport (SRQ) and the Tallahassee 

Regional Airport (TLH). Both coinmenters expressed concern that the FAA's proposal could 

halt the transaction completely, thereby eliminating opportunities for expanded air service in the 

two communities. Additionally, the parties commented that the FAA proposal favors large 

airports and new entrant carriers over smaller communities who rely on network carriers. 

The Port Authority of New York and New Jersey (PANYNJ) filed a comment in support of the 

proposed divestiture conditions. PANYNJ compliments the FAA in its efforts to increase the 

presence of low-cost carriers at LGA and preserving small community service. PANYNJ 

supports the proposal to suspend use-or-lose provisions for new entrants and limited incumbents 

that would obtain the divested slots, but disagrees with the FAA on its conclusions regarding 

airport substitutability. The commenter reinforced that it would put forth its best efforts to 

ensure that new entrants and limited incumbents are accommodated, but believes that the Final 

Order should not impose any additional requirements in this regard. PANYNJ also believes that 

any transfer of slots should be conditioned on its ability to accommodate the new carrier at a 

corresponding gate. Regarding the slot transfer process, PANYNJ endorses the proposal that 

would allow the FAA to maintain a website for offers to purchase and transmission of the highest 

offer to the seller. 

The Honorable Henry E. Brown, Jr., U.S. Representative of the 1^' District of South Carolina, 

submitted a comment in support of the original petition submitted by Delta and US Airways, but 

does not support the FAA's proposed divestiture conditions. Congressman Brown cites South 

Carolina's significant tourism industry as a reason to expand air service to the State. He notes 

that Horry County, the State's largest tourism revenue generator, is the only major tourist 

destination in the United States that is not served by the Interstate System. Congressman Brown 

recognizes the FAA's responsibility under the Airline Deregulation Act to maximize airline 

competition and opportunities for new entrants, but pointed out that the proposed divestiture of 

14 pairs of slot interests at DCA would remove the possibility of expanded air service at MYR 

for the foreseeable future, which he believes is counter to the Act's directive to encourage air 

service to small communities. Congressman Brown also states that expanded direct air service to 

smaller and mid-sized communities serves the "greater good" of the country more than fostering 

competition between larger cities that already enjoy direct air service. 

The Honorable Louise M. Slaughter, U.S. Representative of the 28* District of New York, 

submitted a comment in strong support of the FAA's proposal to require the divestiture of slot 

interests at DCA and LGA to new entrant and limited incumbent carriers. Congresswoman 

45 
Slaughter commented that she would like to see an increase in the number of mandated slots to 

be divested, although she concurs that the proposal is a good first step to improving service to 

DCA and LGA. The Congresswoman expressed concern that the proposal does not force either 

caiTier to commit to any particular market for a defined period of time, thus enabling the caiTiers 

to discontinue certain routes and use their added slot interests to initiate new routes to target 

smaller competitors and stifle competition. 

Edward S. Faggen, former Vice President and General Counsel of the Metropolitan Washington 

Airport Authority (MWAA), commented in a personal capacity expressing support for the 

FAA's decision not to grant the waiver without first imposing conditions that protect the 

competitive environment at either airport. Mr. Faggen cites the FAA's High Density Rule as a 

successful means for enabling DCA to manage capacity, promote schedule reliability, and allow 

airport officials to effectively plan for airside and landside capacity improvements. The 

commenter believes that a waiver, without conditions, will lead to a challenge to the DCA HDR 

by new entrants or low-cost carriers, who may perceive the HDR to be anticompetitive. Mr. 

Faggen would like to see the number of DCA slots to be divested to increase from the proposed 

minimum of 14 to a number that expands access to other incumbents, and commensurate with 

airfield capacity capabilities, if possible. 

Citizens and organizations of the Rochester, New York metropolitan area, which are represented 

by the Honorable Louise M. Slaughter, U.S. Representative of the 28'*' District of New York, 

submitted eleven comments in general support of the proposed waiver. The cormnenters 

unanimously agree that the proposal would increase competition, lower fares, and improve air 

service in the Rochester, New York passenger market. A majority of the commenters would like 

to see an increase in the number of slots to be divested. 

Three individuals submitted comments in support of the FAA position. The commenters 

unanimously agree that the proposed waiver would increase competition by decreasing excessive 

market domination, lower fares, and improved air service. One individual expressed hope that 

the slot divesture will reduce delays, spur economic growth, and lead to cheaper access to 

popular vacation destinations. One individual expressed support for the public benefit of 

expanded operations by Southwest Airlines at LGA. 

One individual submitted a comment in opposition to any type of waiver for the proposed 

transaction. The individual believes that Delta is anti-competitive in its practices and seeks to 

harm other airlines economically. The commenter further cites Delta's decision to transfer its 

pension liability onto taxpayers as reason not to reward it with a favorable slot swap 

arrangement. 

46 
Two individuals submitted comments in sup]Dort of the US Airways - Delta Airlines position of 

granting the proposed waiver without conditions. One commenter assessed that the conditions 

intrude into the free market by forcing the divestiture of slots, and stated that it is not the role of 

government to "create additional competition." Another commenter was concerned about air 

carrier profitability and the ramifications to jobs and air carrier access should either airline seek 

bankruptcy protection. The coinmenters urged DOT to allow the slot swap to proceed as 

originally proposed in order to do everything possible to help airlines bolster profitability and 

keep people employed. 

Supplemental and Responsive Pleadings 

The initial comment period closed on March 22, 2010. The FAA determined that it was in the 

public interest to reopen the comment period until April 5, 2010, to give all interested parties 

additional time to file supplemental and rebuttal comments. 

WestJet stated that, in the past, regulatory and operational constraints have prevented it from 

sustaining competitive service to LGA. As a result of the independently negotiated slot 

transaction with Delta, which provides WestJet with 5 slot pairs at LGA, the carrier believes that 

it is now in a good position to compete against established carriers in the U.S. and Canadian 

markets. Additionally, WestJet cites expanded passenger access to Delta's extensive domestic 

network, as well as Delta's willingness to provide supporting services and facilities as evidence 

that the carrier and its passengers stand to benefit from the transaction. Further, the carrier cites 

Section I of Annex II to the Air Transport Agreement between the governments of the United 

States and Canada, which specifies that Canadian air carriers be afforded equal access to slot 

controlled airports. Accordingly, WestJet urged the FAA to approve the Delta-US Airways 

waiver request, thus enabling WestJet's slot transaction with Delta to proceed. 

Transport Azumah expressed a belief that the LGA slots are being liquidated at below-market 

value and suspects that this is the result of air carriers not being allowed to sell slots on the open 

market. The commenter believes that "hoarding" of slots will continue as long as air carriers are 

not allowed to freely buy and sell slots as needed. 

The Spirit Airlines Master Executive Council of the Air Line Pilots Association urged the FAA 

to approve the LaGuardia waiver request, as modified by the slot transfers to AirTran, Spirit, 

JetBlue and WestJet. The Council believes that such a grant will permit the beneficial 

transaction to proceed and to enable Spirit and its pilots to benefit from significant new service 

expansions and enhanced job opportunities. 

The Southwest Airlines Pilots Association expressed suppoit for the FAA's proposal to require 

the divestiture of slot interests at DCA and LGA to new entrant and limited incumbent carriers, 

and urges the DOT/FAA to deny the requested petition unless the proposed divestiture of 20 slot 

47 
pairs and LGA and 14 slot pairs at DCA is enforced. The Association believes that hubs 

dominated by two legacy carriers would be created at LGA and DCA, giving them unchecked 

market and pricing power. It also believes the revised slot transaction deal announced by Delta 

and US Airways on March 22, 2010 is a meager giveaway that would bar Southwest from an 

open, public, transparent proceeding that would enable Southwest to operate at these airports. 

The commenter stated that Southwest is interested in bidding on the slots to expand its low-fare 

service to consumers in a high-fare market, and cited its own economic expert as concluding that 

consumers would save approximately $200 million amiually if Southwest were given the 

opportunity to acquire the slots to be divested under the FAA proposal. The Association added 

that the public interest is not served by allowing dominant carriers to distribute a handful of slots 

to a chosen few airline competitors. 

JetBlue Airways, AirTran Airways, Inc. (joined by the AirTran Master Executive Council of the 

Air Line Pilots Association) submitted comments largely reiterating the views they had 

expressed in their initial comments to the docket. 

The Delta Master Executive Council of the Air Line Pilots Association submitted comments 

reiterating its earlier support for the Delta - US Airways petition, but adding that it agreed with 

the legacy carriers that the FAA has no statutory authority to impose the divestiture condition 

and disagreed with opposing comments, particularly those of Southwest Airlines and the 

Department of Justice, that approval of the LGA waiver request will reduce competition. The 

commenter asserted as well that the proposed slot transfers to AirTran, Spirit, JetBlue, and 

WestJet adequately address the FAA's competition concerns and demonstrates that the FAA 

should not substitute its regulatory judgment for the competitive marketplace. 

The Consumer Travel Alliance submitted comments in strong opposition to the revised slot 

transaction deal with AirTran, Spirit, JetBlue, and Westlet as announced by Delta and US 

Airways on March 22, 2010. The Alliance supports the original DOT/FAA order, but believes 

that the most recent slot transaction proposal is unacceptable and would serve only to maintain 

the current status of pricing in the market. Further, the Alliance argues that the proposal should 

be rejected out of hand, or the proceeding should be reopened for further investigation and 

additional comments should be permitted on the new proposal. 

A Notice of Communication was submitted to the public docket, in accordance with 14 C.F.R. 

Part 300, stating that Captain Doug Ralph of the Air Lines Pilot Association and James Van 

Woert of Delta Air Lines expressed support for the joint petition submitted by Delta and US 

Airways while attending an aviation roundtable at Stewart International Airport. The roundtable 

included Transportation Secretary Ray LaHood and Deputy Assistant Secretary for Aviation and 

International Affairs Christa Fomarotto. Captain Ralph expressed his hope that the Department 

would handle the proceeding expeditiously and asked about its status. Secretary LaHood 

48 
responded that, because the matter was under active consideration, he could not comment on any 

aspect and further noted that any discussion of the case at that time would be inappropriate. 

Southwest Airlines submitted reply comments in response to the independently negotiated slot 

trarisactions between Delta and US Airways and four low-cost carriers, AirTran, Spirit, JetBlue, 

and WestJet. Southwest strongly opposes the slot transaction and argues that it is a calculated 

effort by Delta and US Airways to avoid the FAA's proposed divestiture conditions while 

producing no meaningful competition to either carrier at LGA and DCA. The carrier added to its 

earlier comments to the effect that the splintered and minimal slot transfers in the six-party deal 

will have no meaningful impact on competition or concentration at LGA and DCA, and that the 

parties to the deal will likely serve at most one or two routes each from LGA and DCA with the 

transferred slots. It further asserted that both Spirit and AirTran have a long history of 

abandoning service in both markets after unsuccessful attempts to compete with incumbent 

carriers. Contending that it would generate more public benefits than all four slot transaction 

partners combined, the carrier argued that its exclusion from the six-party transaction was no 

accident because Delta and US Airways Icnow that Southwest can leverage even a small number 

of slots more effectively than the other eligible carriers, combined, because of its large domestic 

network. The carrier believes that, in order to assist airports in exercising their property rights 

and accommodating slot recipients, DOT/FAA should condition its waiver approval on the 

parallel divestiture of adequate and viably located ground facilities by Delta and US Airways. 

Asserting that LGA and DCA are separate markets that are effectively insulated from the 

competition at surrounding airports. Southwest contends that neither airlines nor passengers 

consider the three Washington/Baltimore area airports, or the three New York/Newark area 

airports, to be economic substitutes for one another. Finally, in deciding whether proposed slot 

transfers are in the public interest. Southwest urged the FAA to consider the potential impact on 

competition in the airline industry, noting among other considerations that more than 70 years. 

Congressional policy has been to maximize competition and deter anticompetitive actions in the 

U.S. Airline Industry. 

Virgin America submitted rebuttal comments in response to the modified slot transaction, 

contending that the tentative agreement between the carriers falls short of the divestiture of 20 

slot pairs at LGA and 14 slot pairs at DCA that the FAA tentatively concludes to be required of 

the public interest. Virgin America believes the petitioners' argument that the FAA lacks legal 

authority to condition the approval on divestitures misperceives the statutory basis upon which 

the FAA has relied, and expresses support for the various legal arguments recited by the FAA in 

the Notice. In particular, regarding the Joint Applicants claim that the DOT/FAA cannot rely on 

pro-competitive policies when administering slots. Virgin America believes that such argument 

was expressly refuted long ago by a Federal appeals court in Northwest Airlines v. Goldschmidt, 

645 F.2d 1309 (8th Cir. 1980). Similarly, Virgin America believes that the arguments by the 

49 
Joint Applicants, and other legacy can'iers, that the FAA's proposed divestiture constitutes an 

unlawful confiscation lack sufficient merit. 

Spirit Airlines, Inc. submitted rebuttal comments in response to the "pay-to-play" solution for 

redistribution of slots as announced by the FAA in its February 18, 2010 Notice. Spirit believes 

the FAA's proposal is not in the broad public interest. Spirit states that it was able to obtain 22 

slots at LGA only as a result of Congressional intervention via the Wendell H. Ford Aviation 

hivestment and Reform Act for the 21st Century (AIR-21), which was enacted in 2000. Since 

then. Spirit states that it has been unable to obtain through purchase or lease an adequate number 

of slots to efficiently increase service at LGA. The air canier contends that airlines with a small 

number of slots face unique operating problems, which harm their inability to compete, 

including: (1) during weather and FAA-imposed ground delays, small slot holders like Spirit are 

forced to cancel or delay their most important flights. In the event of a forced cancellation, 

because of the few flights they are able to offer, limited incumbent low-fare carriers may not be 

able to rebook passengers from canceled flights until flights leaving the next day, or may be 

forced to pay a substantial cost for re-accommodating passengers onto a flight on one of the large 

incumbents. Spirit asserts that, not only are the smaller, low-fare airlines disadvantaged, but so 

too are their passengers, many of whom require low fares to travel; (2) carriers with few slots 

have difficulty adjusting schedules. Slot trades are critically important for carriers to arrange 

flight schedules to enable their overall networks to function efficiently. Yet in the current 

circumstances the larger slot holders do not need to trade slot times with other carriers, and the 

small slot holders do not have sufficient slots to arrange workable trades with other smaller 

carriers; (3) low-fare carriers are seriously handicapped by their inability to acquire a number of 

slots sufficient to efficiently utilize a gate. The cost and difficulty of operating a shared gate if a 

carrier has only a few pairs of slots, in addition to staffing costs, makes it virtually impossible for 

low-fare carriers to add slots one or two pair at a time; and (4) with few slots it is particularly 

difficult to address new competition in one market without reducing or giving up service in 

another. Spirit believes that the "pay-to-play" process is the worst outcome for the carrier and its 

passengers, because it would not have the financial resources to compete with offers from major 

carriers for the released LGA slots regardless of how efficiently it could use them, the profit it 

could earn, and the low fare benefit it provides to consumers. Spirit argues that the alternative 

proposal of allowing it to consummate a transaction in which it would acquire 5 LGA slot pairs 

from Delta is in the best interest of consumers because the slots would provide some flexibility 

to respond to market changes like the new American New York - Fort Lauderdale service which 

is essential if Spirit is to remain a viable competitor in the New York - South Florida market, and 

the agreement gives it necessary flexibility to integrate the slots into its system in conjunction 

with aircraft acquisitions and seasonal route realignments, without disrupting its other services 

under pressure of the FAA use-or-lose requirements that could result in loss of slots. 

50 
The Port Authority of New York and New Jersey (PANYNJ) filed a rebuttal addressing two 

subjects raised by other parties in response to the Notice that were not directly raised by the 

Notice: (1) slots are not property of the airlines that have authority to conduct operations 

authorized by those slots; and (2) the Port Authority is the entity with the right to decide whether 

and how to allocate ground facilities at LGA. PANYNJ cites In re Braniff Airlines, 700 F. 2d 

935 (5th Cir. 1983), and other legal proceedings, in its contention that sufficient legal precedent 

establishes that slots "are actually the restriction of the use of propeity - the airplane; not 

property in themselves." The Port also cites 49 U.S.C. § 40103(b)(1), which provides that 

statutes under which the FAA issues slot orders and waivers preclude slots from being property. 

Regarding ground facilities, PANYNJ asserts the right to determine to whom and what 

circumstances to authorize use of airport facilities is an airport operator's proprietary power and 

right, as concluded in National Business Aviation Ass'n, Inc. v. City of Naples Airport, 162 

F.Supp.2d 1343, 1348 (M.D. Fla. 2001), as well as the airport proprietor's rights to determine 

whether and under what terms and conditions access should be provided to an airline, as 

provided by 49 U.S.C. § 41713(b)(3). Further, PANYNJ believes that if the FAA accepts these 

slot transfers as full or partial satisfaction of FAA's competition concerns, the benefits of the 

increase in the presence of new entrant/limited incumbent carriers at LGA should be maintained 

for the life of these slots, i.e., until October 29, 2011. Accordingly, the Port believes that if the 

FAA issues an order granting the waiver petition of Delta and US Airways based in whole or in 

part on the transfers of slots to JetBlue, AirTran, Spirit and Wes Jet, such an order should 

provide that those slots be subject to a restriction "precluding the carriers purchasing the slot 

interests acquired pursuant to [those transfers] from re-selling, or leasing, them to any carriers 

that are not eligible" to receive slots under the Waiver Proposal set forth in the Notice. 

Delta and US Airways submitted joint rebuttal corrmients in response to comments of the United 

States Justice Department and Southwest Airlines Co. The carriers reiterated many of the points 

they made earlier, particularly concerning their belief that the FAA has the authority to consider 

safety and efficient use of airspace, not competition. The carrier argues that both the DOJ and 

Southwest Airlines misinterpret regulatory guidance and legal precedent in their assertion that 

the FAA has statutory authority to condition the waiver grant on the divestiture of slots. The 

carriers also argued that: (a) there is no evidence that the transaction will reduce the likelihood of 

low-cost carrier entry; (b) the DOJ ignores imdisputed evidence that the transaction will increase, 

not reduce, competition; (c) the DOJ offers no evidence that increases in slot ownership at DCA 

and LGA would produce competitive harm or increase fares; (d) the DOJ's assertion relating to 

market definition do not address the parties' evidence; and (e) the DOJ's assertion that the 

proposed divestiture will not interfere with the transaction's benefits suffers from numerous 

flaws. The commenters also urged that their privately-contracted slot transfers should be 

approved, as the various parties have entered into a transaction that satisfies the FAA's and the 

DOJ's desire to see the slots go to low-cost carriers and Southwest's comments reflect an 

untenable attempt to exploit the waiver request for its own benefit. They also asserted that 

51 
Southwest has had ample opportunities to obtain DCA and LGA slots but has chosen Jiot to do 

so, that it cannot complain about market concentration given its near exclusive presence at its 

dominant aiiports, including Love Field Airport, and that there is no basis for Southwest's 

suggestion that it would make more beneficial use of the slots than JetBlue, AirTran, Spirit, and 

Westlet. 

DOJ submitted rebuttal comments in response to public comments challenging the FAA's 

statutory, factual, and analytical basis for imposing the proposed divestiture conditions. The 

DOJ also reiterated its support for the FAA's tentative decision. DOJ offers the following 

comments in reply to some of the parties' key arguments: (1) FAA divestitures offset harm while 

preserving puiported efficiencies. The Department counters claims that the conditions would 

provide more competitive harm than benefit, and furthers states that it used the same analytical 

scenario advanced by the opposing parties, while also taking into account the LCC factor, in 

conducting its analysis. The Department states that it reached a very different conclusion, that 

the aggregate impact on consumers from the proposed divestiture would be strongly positive; (2) 

the modification proposal warrants careful examination. The DOJ believes the circumstances 

and limited disclosed terms of the proposed transfers strongly suggest that the divestitures were 

structured to minimize the potential competitive effect on Delta and US Airways, and 

consequently potential benefits for consumers. The DOJ recommends that the FAA examine the 

details of the proposals, including the agreements themselves and surrounding circumstances, to 

evaluate their likely effects; (3) competition from nearby airports will not completely offset lost 

competition between US Airways and Delta at DCA and LGA. The DOJ contends that nothing 

in the parties' various submissions refutes the notion that flights out of DCA (or LGA) provide 

closer competition to other flights out of DCA (or LGA) than do flights out of IDA and BWI (or 

JFK and EWR), and thus that market power can be exercised at DCA (or LGA) against some 

passengers despite the presence of competition from the other two nearby airports; (4) 

DOT/FAA review of competition effects does not interfere with DOJ authority. The DOJ notes 

that it is particularly ironic that, before the Notice was issued in this matter. Delta urged 

DOT/FAA to undertake a broad analysis of the competitive effects of this transaction and only 

raised objections once the carrier saw the results of the FAA's competitive analysis. The DOJ 

concludes its reply comments by reiterating that the FAA has sufficient statutory, analytical, and 

factual basis to impose the conditions proposed in its Notice, and urged the FAA to subject the 

modified transaction proposed by the parties to close scrutiny. 

Delta and US Airways submitted a Motion for Leave to File Comments on April 7, 2010 in 

response to rebuttal comments of the DOJ. The carriers believe it is necessary to respond to 

comments included in the DOJ's rebuttal comment reply as a matter of correcting the record 

although the comment period has expired. The carriers offered the following rebuttals: (1) the 

DOJ's puiported misgivings about the alternative slot transfers are misplaced. The carriers 

reiterate that the slot transaction will not go forward under the terms proposed by the FAA, and 

52 
the modified slot proposal submitted by the six parties satisfies the FAA concerns while 

preserving the transaction. Further, the carriers disagree with the Department's favored cashonly winner-take-all process that, they believe, would virtually guarantee that all of the slots 

would go to better-capitalized Southwest; and (2) the DOJ has abandoned any defense of the 

FAA's consideration of competition. The commenter's believe that the DOJ has abandoned the 

view that it expressed in its initial comments that the FAA has authority to consider competition 

under 49 U.S.C. § 40101(a), and has chosen instead to defer to the FAA's view of its own 

authority. Additionally, the carriers argue that the Department fails to offer any coherent 

explanation for how the FAA's exercise of competition authority can be reconciled with 

Congress's decision to remove Section 7 authority from the DOT and to delegate that authority 

exclusively to the DOJ. Delta and US Airways conclude their Motion for Leave to File 

Comments by reiterating that the DOJ's rebuttal comments confirm the FAA has no legal 

authority to impose a divestiture condition, and therefore the FAA should either grant the carriers 

an exemption from the LGA Order, or promptly approve the modified transaction. A subsequent 

filing was also received, urging that the transaction between American and JetBlue, by which 

JetBlue would obtain eight slot pairs at DCA and use them to serve Boston, Orlando, and Ft. 

Lauderdale, should serve to resolve the Department's concerns about low-cost carrier entry and 

competition at that airport. 

53 
Appendix B 

Standard Industry Fare Level Analysis 

Washington and New York Area Airports 

The figures for Washington, depicted in the table below, show the percentage of total area 

O&D passengers using each of the WAS area airports, the passenger weighted percent of 

fares at each airport compared to the mileage adjusted SIFL expressed as a percent of SIFL, 

an identification of the largest passenger carrier at each airport, its percent of O&D traffic, 

and finally an indication of that carrier's passenger weighted fare as a percent of passenger 

weighted SIFL fares 

Washington Area Airports' Percent of SIFL, Largest Carrier SIFL and Percent of Traffic 

BWI 

DCA 

IAD 

% of WAS 

4 1% 

35% 

23% 

Apt % SIFL 

65% 

101% 

77% 

Lgest Car 

WN 

US 

UA 

% of Traffic 

48% 

33% 

47% 

%SIFL 

65% 

124% 

90% 

Note: If US Airways is removed from tfie DCA percent of SIFL calculation 

the airport average SIFL would decline to 88% of SIFL. 

As can be seen, the relationship of actual fares to the SIFL fare benchmark is very different at the 

three Washington area airports. Actual fares are 65% of SIFL at BWI, 77% at IAD and 101% at 

DCA. 

The comparable statistics for the NYC airports are summarized in the following table. 

New York Area Airports Percent of SIFL, Largest Carrier SIFL and Percent of Traffic 

EWR 

JFK 

LGA 

% of NYC 

30% 

34% 

35% 

Apt % SIFL 

7 1% 

57% 

82% 

Lgest Car 

CO 

B6 

DL 

% of Traffic 

59% 

46% 

30% 

%SIFL 

7 1% 

57% 

89% 

Note: If Delta is removed from the DCA percent of SIFL calculation 

the airport average SIFL would decline to 79% of SIFL. 

The results show that actual fares are 71% of SIFL at EWR, 57% of SIFL at JFK, and 82% of 

SIFL at LGA. Delta Air Lines is the largest carrier with 30% of traffic and a weighted average 

fare of 89% of SIFL. We noted that if Delta is excluded from LGA figures the airport percent of 

SIFL would decline to 79% of SIFL. 

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