14910-13 ]

DEPARTMEN T O FTRANSPORTATIO N Federa l Aviatio n Administratio n (FAA ) [Docke t No . FAA-2010-0109 ] Notic e o n Petitio n fo r

Waive r of tli e Term s of

th e Orde r

Limitin g Scliedule dOperation s a t LaGuardi aAirpor t ACTION : Grant

o f petitio n wit

h conditions . SUMMARY : Th e Secretar y an dth e FAA are granting , subjec t t o conditions , th e join t

waiver reques t o f Deh aAi r Line s an dU S Airway s fromth e prohibitio n o n purchasin g operatin g authorization s ("slots " o r

"slo t interests" ) a

t LaGuardi aAirpor

t (LGA) . Th e grant

permit s th e carrier s t o consummat e atransactio n i n whic h Delt awoul dtransfer 4 2 pair s o f

slo t interest s t o U S Airway s a

t Ronal dReagan Washingto n Nationa l Airpor t (DCA) , international route authoritie s t o Sao Paul o an dTokyo ; an dterminal spac e a t th e Marin e Ai r

Terminal a

t LGA . U S Airway s woul dtransfer

125 pair s o f

slo t interest s t o Delt aa

t LGA , an dwoul dleas e a

n additional 1 5 pair s o f LGA slo t interest s wit

h apurchas e option , togethe r wit h terminal spac e i n LGA' s Terminal C . Th e grant

i s subjec t t o th e condition s tha

t th e carrier s dispos e o f

1 4 pair s o f

slo t interest s a t DC A an d2 0 pair s o f

slo t interest s a

t LGA t o eligibl e ne w entran t an dlimite d incumbent

carriers , pursuan t

t o procedure s set

ou t i n thi s Notice , an dachiev e amutuall y satisfactor y agreemen t

regardin g gate s an dassociate dfacilitie s wit h any suc h purchaser . I f yo u wis h t o revie w th e backgroimddocument s o r comment s receive di n thi s proceeding , yo u may g o t o http://www.regulations , gov a t any tim e an dfollo w th e onlin e instruction s fo r accessin g th e electroni c docket . Yo u may als o g o t o th e U.S . Departmen t o f Transportation' s Docket Operation s i n Roo mW12-14 0 o n th e groun dfloor o f th e Wes t Buildin g a

t 1200 Ne w Jerse y Avenue , SE , Washington , D C betwee n 9 a.m . an d5 p.m . Monday throug h Friday , excep t Federal holidays . DATES : Th e waive r

i s effectiv e upo n Delt aan dU S Airway s satisfyin g th e condition s require d b y thi s Notice . O n Februar y 9 , 2010 , th e FA A issue dth e Notic e o f petitio n fo

r waive r an d solicite dcomment s throug h Marc h 22 , i n thi s Docket , o n th e gran t o f th e petitio n wit

h conditions . (7 5 Federal Registe r 7306 , Feb . 18 , 2010) . On Marc h 30 , 2010 , th e FAA reopene d th e comment

perio dan dsolicite drebuttal comment s throug h Apri l 5 , 2010 . (7 5 Federal Registe r 16574 , Apr . 1,2010) .FO RFURTHE RINFORMATIO N CONTACT : Rebecc aMacPheison , Assistan t Chie f Counse l for

Regulations , b y telephon e a t (202 ) 267-307 3 o r

b y electroni c mai l a

t Rebecca.macpherson@faa.gov ; o r Jonatha n Moss , Deputy Assistan t Genera l Counse l for Operations , b y telephon e a t (202 ) 366-471 0 o r

b y electroni c mai l a

t jonathan.moss@dot.gov . SUPPLEMENTAR Y INFORMATIO N Th e propose dtransactio n an dth e waive r reques t I n th e Wendel l H . For dAviatio n Investmen t an dReformAc t

fo r th e 21' * Centur y (AIR-21) , Pub . L . No . 106-18 1 (2000) , Congres s require daphas e ou t an dterminatio n o f

th e Hig h Densit y Rul e (HDR) ' a

t LG A b y Januar y 1 , 2007. ^ Congres s expressl y retaine dth e FAA' s authorit y for "safety an dth e movemen t of ai r traffic."' ' Th e FA A eliminate dth e term s o f th e HD Rapplicabl e at LGA ; however , th e deman dfo r flight s a t LG A an dresultan t

sever e congestio n prompte dth e FA A t o re-impos e quota s b y mean s of a n orde r publishe di n 200 6 an dsubsequentl y amende d( "LG A Order " o r

"Order")." ^ Th e LG A Order , issue dunde r th e FAA' s authority t o regulat e th e us e o f navigabl e airspace, ^ assigne dt o th e incumben t carrier s at

LG A thei r

slo t interes t holding s an dauthorize dthe mt o leas e o r trad e authorization s fo r

an y consideratio n for

th e duratio n of

th e Order . Th e Order , originall y schedule dt o expir e Octobe r 24 , 2009 , wa s extende dthroug h Octobe r 29 , 2011 . Th e Orde r

doe s not allo w for th e purchas e o r

sal e o f slo t interest s a

t LGA , an dth e onl y way for

acarrie r t o purchas e o r

sel l suc h interest s i s therefor e throug h obtainin g a waive r of th e Order . Th e FA A i s authorize dt o gran t waiver s whe n i t

determine s tha t

"th e exemptio n i s i n th e publi c interest. " 4 9 U.S.C . § 40109 . I n additio n t o limitation s o n th e numbe r of operations , both airport s als o ar e subjec t t o "perimete r rules " tha t

prohibi t nonsto p flight s t o an dfro mairport s beyon da n establishe dperimeter . DCA's , a t 1,25 0 miles , i s se t

b y Federa l statute. ^ Th e perimete r rul e a t LG A wa s impose db y th e Port

' Th e HD Ri s codifie dat

1 4 C.F.R . Par t

93 , Subpart s K

an dS . ^ 4 9 U.S.C . § 41715(a)(2) . M 9 U.S.C . § 41715(b)(1) . ^ Operatin g Limitation s a t Ne w York

LaGuardi aAirport , 7 1 Fed . Reg . 77,85 4 (Dec . 27 , 2006) ; 7 2 Fed . Reg . 63,22 4 (Nov . 8 , 2007 ) (transfer , minimu musage , an dwithdrawa l amendments) ; 7 2 Fed . Reg . 48,42 8 (Aug . 19 , 2008 ) (reducin g th e reservation s availabl e fo r unschedule doperations) ; 7 4 Fed . Reg . 84 5 (Jan . 8 , 2009 ) (extendin g th e expiratio n dat e throug h Oct . 24 , 2009) ; 7 4 Fed . Reg . 2,64 6 (Jan . 15 , 2009 ) (reducin g th e peak-hou r cap o n schedule d operation s t o 71) ; 7 4 Fed . Reg . 51,65 3 (Oct . 7 , 2009 ) (extendin g th e expiratio n dat e throug h Oct . 29 , 2011) . ^ 4 9 U.S.C . § 40103(b ) direct s th e FA A t o develo p plan s an dpolic y fo r th e us e o f

th e navigabl e airspac e and , b y orde r o r rule , to regulate th e us e o f th e airspac e a s necessar y t o ensur e it s efficien t use . ^ 4 9 U.S.C . § 49109 . Slo t exemption s specificall y authorize db y Congres s hav e allowe d2 4 slot s t o b e use dfor beyond-perimete r

nonsto p operations , wit

h U S Airway s holdin g 6 fo r servic e to Phoeni x an d2 fo r La s Vegas , an d Delt aholdin g 2 fo

r Sal t Lak e City . 4 9 U.S.C . § 41718 .Authority of Ne w Yor

k an dNe w Jersey. ' Bannin g flight s t o citie s mor e than 1,500 mile s away , th e Rul e wa s impose di n 198 4 i n a n effor t t o eas e groun dcongestio n a t th e airport . Two ai r carriers , Delt aan dU S Airways , hav e propose da n exchang e o f

slo t interest s at

thes e tw o airports . Thi s exchange , whic h coul dpotentiall y impac t a s man y a s 18 2 round-tri p operation s a t th e tw o airports, ^ woul dqualif y a s apurchas e unde r

both th e Orde r

an dth e HDR. ^ Th e caixier s conside r th e slo t interes t exchange s t o b e part

of an integrate dtransactio n becaus e th e sal e of U S Airways ' slo t

interest s t o Delt aa

t LG A i s conditional upo n th e purchas e b y U S Airway s of Delta' s slo t

interest s a

t DCA . FAA' s Tentativ e Determinatio n O n Februar y 9 , 2010 , w e issue daNotic e fo r publicatio n i n th e Federa l Registe r tha t w e ha d receive dfro mU S Airway s an dDelt aapetitio n for waive r o f th e LG A Order , an dtentativel y approve dth e propose dtransactio n subjec t t o certai n conditions.' " In conditionall y approvin g th e transaction , w e state dou r tentativ e determinatio n that , whil e th e propose dtransactio n ha da numbe r o f benefits, agran t

of th e waive r

i n it s entirety woul dresul t i n asubstantial increas e i n marke t concentratio n tha t

woul dhar mconsumers . Th e publi c interes t woul dbes t

b e served , w e tentativel y found , b y creatin g ne w and/o r additional competitio n a t th e airport s t o counterbalanc e tha t harm , specificall y throug h divestitur e o f 1 4 pair s o f

slo t interest s a t

DC A an d2 0 pair s o f

slo t interest s a

t LG A t o ne w entran t

an dlimite dincumben t

carriers . W e propose dth e divestitur e of tw o slot-pai r

bundle s at

DCA with Bundl e A containin g 8 pair s an dBundl e B containin g 6 pairs ; an dfour slot-pai r bundle s a

t LaGuardia , with Bundl e A containin g 8 pair s an dBundle s B- D containin g 4 pair s pe r

bundle . I n th e Notice , w e note dtha t i f th e propose dtransactio n wer e approve da s presented , it woul d lea dt o significantl y increase dconcentratio n a t DC A fo r U S Airway s an dat

LG A for Delta . Base do n thei r

Februar y 201 0 schedules , U S Airway s woul drais e it s shar e o f departure s a

t DCA fro m4 7 t o 58% , with it s shar e of slot s (includin g regiona l affiliates ) increasin g fro m4 4 t o 54% . Thi s increas e woul dmak e i t thre e time s th e siz e of

it s closes t

competito r

(America n Airlines) . A t LGA , Delt a(with it s affiliates ) woul dascen dt o adominan t position , raisin g it s shar e o f departure s fro m2 6 t o 51 % an dit s shar e o f slot s fro m2 4 t o 49% . Delt awoul dbecom e tw o an d one-hal f time s th e siz e of

it s closes t

competito r

(als o American) , an dLG A woul dtransitio n fro m a n airport with thre e competin g carrier s o f similar siz e t o on e havin g asingl e dominan t carrier .

^ Th e Unite dState s Cour t o f Appeal s for

th e Secon dCircui t

uphel dth e righ t

o f th e Por t Authority o f

Ne w Yor k an d Ne w Jersey , a s airport

proprietor , t o adop t

perimete r

rul e unde r

th e circumstance s at

th e time . Wester n Ai r

Line s v . Por t Authority o f

N.Y . an dN.J. . 81 7 F.2 d22 2 (2 dCir. 1987) . ^ Th e transactio n affect s almos t 10 % o f th e total numbe r

(832 ) o f DC A slot s an dmor e tha n 20 % o f th e total numbe r (1147 ) o f LG A slots . ' 1 4 C.F.R . §93.221 . '° 7 5 Fed . Reg . 730 8 (Feb . 18 , 2010) .Th e Notic e state dconcern that du e to adominanc e of

thi s magnitude , othe r

incumben t

carrier s woul db e limite din exertin g competitiv e pressure s an ddisciplinin g fares . Thi s concern wa s fuithe r compounde db y th e fac t that low-cos t carrier s ("LCCs" ) - whic h creat e th e mos t competitiv e impac t

b y th e abilit y t o dramaticall y lowe r fare s an dincreas e th e volum e of passenger s i n amarke t

- ha donl y alimite dpresenc e a t DCA an dLGA . Together , the y hav e onl y 3.3 % of

slo t interes t holding s a

t DCA , an d6.8 % a

t LGA. " Anothe r concern raise di n th e Notic e wa s that , i f th e propose dtransactio n wer e approve da s submitted , mor e market s woul db e serve do n amonopol y o r dominan t

basis . I n anumbe r

o f instance s eithe r

U S Airway s o r

Delt awoul ddepart

amarke t i n whic h the y both compete , leavin g th e othe r i n amonopol y position . In others , wher e onl y on e o f th e tw o currentl y compete , th e servin g carrie r

woul ddepart

th e marke t

an dth e othe r

woul dente r

it , assumin g amonopol y o r dominant positio n i n whic h it

woul dhav e eve n greate r pricin g powe r

b y virtu e o f

it s increase d concentratio n a

t DC A o r LGA . W e tentativel y conclude dthat th e transactio n woul dproduc e highe r fare s for consumer s i n certai n domesti c markets , a s th e fewer th e numbe r

of carrier s competin g in amarke t

th e mor e likel y i t

i s tha t th e fare s wil l b e higher . Moreover , ou r analysi s of U S Airways ' an dDelta' s fare s a t DC A an dLG A showe dtha t the y tende dt o charg e highe r fare s whe n the y operat e monopol y o r dominan t

route s fro mthos e airports.' ^ W e als o considere dwhethe r th e thre e airport s i n th e Ne w Yor k area , an dth e thre e i n th e Washingto n area , effectivel y discipline dfare s at on e another , suc h tha t

i f fare s ar e perceive dt o b e risin g to o hig h at

on e airport , th e har mwoul db e mitigate db y consumer s simpl y shiftin g t o th e othe r two . In analyzin g both overlap an dal l market s a t th e airports , w e foun dthat yield s (i.e. , revenu e pe r

passenge r

mile ) wer e substantiall y differen t amon g th e airports.' ^ Th e average yiel di n al l market s a

t BWI i s 48 % les s tha n DCA , an dth e averag e yiel di n al l market s at Dulle s i s 37 % les s tha n DCA . Similarly , th e averag e yiel da t JF K i s 28 % les s tha n at

LGA , an dNewar

k

" Followin g th e issuanc e o f th e Notice , JetBlu e receive deigh t slo t pair s at DC A fro mAmerica n Airline s i n a temporary slo t

transfe r that wil l expir e Octobe r

29 , 2011 . JetBlu e announce do n Apri l 28 , 201 0 that i t planne dt o initiat e servic e usin g thos e slo t pair s beginnin g Novembe r 1 , 2010 . Includin g thes e temporary slots , LCC s wil l hav e 5.2 % o f th e slo t interest s at

DCA . ' ^ DO T calculate dthat , at DCA , U S Airway s chargedo n averag e 124 % o f th e Standar dIndustry Far e Leve l (SIFL) , acost-base dinde x that

th e Departmen t

ha s use dhistoricall y t o assis t i n it s evaluatio n o f

pricing . However , in market s wher e i

t hel da9 5 t o 100 % shar e o f nonsto p departures , U S Airway s chargedsubstantiall y more . Delta , havin g ales s stron g positio n a t LG A tha n U S Airway s at DCA , tend s t o pric e mor e competitively , averagin g onl y 89 % o f th e inde x figure s wit

h it s curren t

slo t interes t holdings . However , w e anticipat e tha t Delta' s increase dmarke t shar e afte r th e transactio n woul dpermi t i t t o increas e th e percen t

o f SIF L associate dwit

h it s servic e at

LGA . In comparison , at

Washingto n Dulle s Internationa l Airport (IAD) , th e averag e o f

al l carriers ' fare s vs . SIF L i s 77% , anda t Thurgoo dMarshal l Baltimore-Washingto n Airpor t (BWI ) th e figure i s 65% . Th e fare s o f th e larges t

carrie r at IAD , Unite dAirlines , averag e 90 % o f SIFL , whil e thos e o f

th e larges t

carrie r a t BWI , Southwes t

Airlines , averag e 65% . At Newark Libert y Internationa l (EWR) , th e averag e o f al l carriers ' fare s vs . SIF L i s 7 1 % , an dat JF K th e figure i s 57% . Th e fare s o f th e larges t

carrie r at EWR , Continenta l Airlines , averag e 7 1 % o f SIFL , whil e thos e o f th e larges t

carrie r a t JFK , JetBlue , averag e 57% . Th e NYCAVashingto n airport s tha t hav e th e larges t

proportio n o f low-cos t carrier s consistentl y provid e lowe r fares . A further

discussio n o f

ou r SIF L methodolog y appear s below . ' ^ Specifically , yiel dat

DC A i s 2 7 cent s pe r

mile , vs . 1 7 cent s a

t Dulle s an d1 4 cent s at

BWI , whil e yiel da

t LG A i s 20. 5 cent s pe r

mile , vs . 18. 7 cent s at

EW Ran d14. 7 cent s a

t JFK .i s 9 % les s than a t LGA . W e reasone dtha

t i f th e airport s wer e effectiv e economi c substitute s fo r al l passengers , th e yiel dspread s woul dno t differ s o significantly . W e als o foun dthat

thes e difference s i n th e leve l o f yield s a t are aairport s tende dt o correlat e with th e leve l o f

lo w cos t caiTie r operations . Thus , passenger s pai dmor e for nonsto p servic e o f equivalen t

distanc e a

t DC A an dLG A tha n a

t alternativ e airport s tha t

hav e sizabl e LC C competition . Fo r

example , for

trip s ou t t o 100 0 miles , passenger s a t LG A pay 23 % mor e o n average tha n thos e a

t JF K ($14 7 vs . $12 0 eac h way) . Passenger s a t DCA pa y 64 % o n averag e mor e tha n thos e at

BWI ($18 4 vs . $11 3 eac h way) . W e als o note dtha t

Delt aan dU S Airway s wer e no t committe dt o an y market s fo r define d periods , an dwer e fre e t o discontinu e thos e tha t wer e bein g propose da s part of th e transactio n an dinitiat e route s elsewhere . W e expresse dconcern that , give n thei r adde dslo t

holdings , the y coul dus e thos e t o targe t

smalle r competitors , for

exampl e b y increasin g thei r roundtrip s i n competitiv e market s an d"sandwiching " competito r flights . Th e competitiv e harm , w e feared , woul doccu r

not jus t a t th e city-pai r

level , but

a t th e network

o r airport leve l a s well , particularl y give n th e findin g tha t

th e othe r are aairport s di dno t

serv e a s effectiv e substitute s for eac h other . Thes e concern s - th e combinatio n of inciease dairport

concentration , th e increas e i n th e numbe r of monopol y o r

dominan t

market s i n whic h increase dpricin g powe r coul db e exercised , an dth e potential for

us e o f transferre dslo t

interest s i n a

n anticompetitiv e manne r - le du s t o propos e that arelativel y limite dnumbe r o f slot s b e diveste da s aconditio n for approvin g th e transaction . A t DCA , w e propose dtha t

1 4 pair s b e divested , t o ne w entran t o r limite dincumben t

carrier s - enoug h t o initiat e and/o r

increas e servic e i n on e larg e marke t o r multipl e smalle r

markets . A t LGA , w e propose dadivestitur e o f 2 0 pair s t o suc h carriers , i n combination s tha t woul dallo w ne w competitio n i n thre e o r four ne w markets . W e reasone dtha t th e relativel y modes t divestiture s woul dallo w th e partie s t o realiz e almos t al l o f thei r purporte dbenefits, whil e limitin g th e increas e i n concentratio n a t th e airport s an dprovidin g opportunitie s for greate r competition.'' * W e als o tentativel y determine dtha t th e divestiture s b e mad e t o U.S . o r Canadia n ai r

carrier s havin g fewer

tha n fiv e percen t

o f th e tota l slo t

holding s a

t th e airport

i n question.' ^ Thi s

'' ' U S Airway s an dDelt aals o file danotificatio n an drepor t wit h th e Antitrus t

Divisio n o f

th e Departmen t

o f Justic e (DOJ ) unde r

th e Hart-Scott-Rodin o Act , 1 5 U.S.C . § 18 a(HSR) . Unde r th e HS Rprocess , DO J review s th e transactio n t o determin e whethe r it woul dsubstantiall y lesse n competitio n o r hav e othe r

significan t

anticompetitiv e effects . Document s relevan t t o th e HS Rrevie w wer e submitte dt o DO J b y th e carriers , wit h acces s provide dals o t o DOT , whic h independentl y assist s DO J in it s analysi s o f th e transaction . DO J i s continuin g it s revie w unde r HS R an dha s participate dwit

h comment s in suppor t

o f th e Department' s tentativ e determinatio n i n thi s proceeding . ' ' T o ensur e th e integrity o f th e 5 % proposal , w e als o tentativel y determine dthat carrier s eligibl e t o receiv e diveste d slot s no t cod e shar e wit

h an y carrie r

that ha s 5 % o r

mor e slo t

holdings , an dar e no t

subsidiaries , eithe r

partiall y o r wholly-owned , o f

acompan y whos e combine dslo t interes t holding s ar e equa l t o o r

greate r tha n 5 % at

LG A and/o rapproac h wa s designe dt o exclud e carrier s that alread y offe

r aleve l of

servic e sufficient

t o affect pricin g in th e market , an dinclud e bot h limite dincumbent s tha t with few slot s wer e mos t vulnerabl e t o anticompetitiv e strategies , an dne w entrant s tha t coul dbrin g th e prospect s of increase defficiencie s an dcapacity , a s wel l a s vigorou s pric e competitio n t o th e markets . W e als o propose dtha t

th e proceed s of

th e divestitur e sale s b e collecte dan dretaine db y th e divestin g carriers ; that

th e divestin g carrier s b e require dt o tak e thei r action s withi n a60-da y period ; tha t

carrier s purchasin g th e slo t interest s b e preclude dfro mre-sellin g o r leasin g the mt o carrier s that

wer e ineligibl e t o participat e a s purchaser s in th e divestitur e proceeding ; that th e slo t interest s b e sol di n identifie d"bundles " (wit h specifi c time s w e indicated ) s o a s t o enabl e th e purchaser s o f

th e slot s t o operat e competitiv e servic e with the mwith time s sprea dacros s th e day . W e als o solicite dcomment s o n th e specifi c means b y whic h th e carrier s migh t sel l th e slo t interests , notin g suc h option s a s throug h privat e sale s after FAA-monitore doutreac h efforts ; throug h ablind , cash-only , proces s ove r a n FA A website ; an dthroug h a n FA A website-base d outreac h proces s that

allowe dth e carrier s t o negotiat e th e consideratio n an dterm s of sal e with eligibl e purchasers . Th e Notic e invite dintereste dpartie s t o submi t thei r comment s b y Marc h 22 , 2010 , t o th e docke t managemen t

offic e at DOT , identifyin g the mb y docke t numbe r FA A 2010-0109 . Th e comment s tha t

wer e receive dar e summarize di n Appendi x A . U S Airways-Delt aDivestitur e Counterproposa l O n Marc h 22 , i n thei r

comments , U S Airway s an dDelt astate dthat , a s the y wer e "mindfu l of th e concern s expresse db y FAA " an ddesirin g o f asolutio n that

woul dpermi t

the mt o mov e forward , the y ha dentere dint o provisiona l divestitur e agreement s with four carrier s tha t

wer e eligibl e unde r th e term s of

th e Notic e for

1 5 slo t pair s a t LG A an d4. 5 slo t

pair s a t DCA . Th e 1 5 slo t pair s a t LG A woul db e transferred , fiv e each , t o AirTra n Airways , Inc. , Spiri t Airlines , Inc. , an d WestJet , Inc . ove r

period s o f

u p t o 2 8 months ; th e 4. 5 pair s a t DC A woul db e transferre dt o JetBlu e Airways , Inc . Th e carrier s adde dtha t thes e mor e limite ddivestitures , "whil e diminishin g th e benefit s o f th e transaction, " woul dpreserv e enoug h o f th e benefit s t o permi t the mt o g o forward . A s explaine di n thei r join t filin g with th e ne w entrant / limite dincumben t carrier s t o whic h the y woul ddives t slot s unde r

thei r counterproposal : (1 ) a

t DCA , JetBlu e woul d acquir e 4. 5 pair s of

slot s (JetBlu e intend s otherwis e t o ad don e off-pea k hou r slo t t o complet e a 5-roundtri p servic e pattern) ; (2 ) a t LGA , AirTran , Spirit , an dWestJe t woul dacquir e 5 pair s o f slot s each , respectively , for atota l of

1 5 pairs ; (3 ) i n al l cases , th e acquisitio n woul db e DCA . Carrier s that

woul dno t

qualif y includ e thos e wh o ar e involve di n acode-shar e relationshi p a t DCA/LG A wit h carrier(s ) that

als o woul dno t

qualif y a s o f th e dat e o f

th e Notice . '^ W e hav e als o place din th e docke t anumbe r

o f othe r letter s th e Departmen t

receive di n connectio n wit h th e Delta

U S Airway s proposal , whic h wer e generate dbefor e th e docke t wa s established . Thes e wer e typicall y genera l letter s o f support fo r th e proposal .conditione do n FAA' s gran t of th e LG A Waive r

request ; (4 ) th e JetBlu e transfe r woul dtak e plac e relativel y soon , bu t Delt awoul dcontinu e servic e with th e slot s unde r aleas e fro mJetBlu e for aperiod ; (5 ) th e AirTra n an dSpiri t transaction s woul doccu r ove r a24-iTiont

h perio da

t date s of thei r choosing ; an d(6 ) th e WestJe t transactio n woul doccu r at adat e o f it s choosin g withi n 2 8 months , an dWestJe t

an dDelt awil l b e negotiatin g othe r commercia l arrangement s a s well . Th e Join t Applicant s als o state dtha t i f th e FA A grant s th e waive r subjec t t o th e propose d divestitur e conditions , the y woul dnot consummat e th e transaction , an dreserve d th e righ t t o see k judicia l review . Give n th e issue s raise db y th e Join t Applicants ' counterproposal , th e FA A determine dtha t i t wa s i n th e publi c interes t

t o reope n th e commen t

perio dthroug h Apri l 5 . Th e rebutta l an d supplementa l comment s ar e als o summarize di n Appendi x A . W e gran t al l motion s for

leav e t o fil e lat e comments , an dal l comment s t o dat e wer e accepte dint o th e docket . STATUTOR Y AUTHORIT Y T O GRAN T WAIVE RSUBJEC T T O SLO T INTERES T DIVESTITURE S Th e FA A an dth e Secretar y hav e authorit y t o gran t th e requeste dwaive r

o f th e LaGuardi aOrder , an dt o gran t

th e waive r

subjec t t o certai n conditions . Th e FA A i s authorize dt o gran t a n exemptio n whe n th e Administrato r determine s th e "exemptio n i s i n th e publi c interest. " 4 9 U.S.C . § 40109 . Th e Administrato r ma y "modif

y o r revok e a n assignmen t

[o f th e us e of airspace] " whe n require di n th e publi c interest . 4 9 U.S.C . § 40103(b)(1) . Court s hav e uphel d th e condition s a

n agenc y may plac e o n it s approva l o f atransactio n t o mee t

publi c interes t standards.' ^ Further , ou r

consideratio n o f

Delta' s an dU S Airways ' reques t t o waiv e th e term s o f

th e LaGuardi aOrde r

complie s with an dcarrier s ou t AIR-2r s mandat e t o instil l competitio n a t slot

controlle dairport s an ddoin g s o i n conjunctio n with considerin g th e Secretary' s Sectio n

'^ Petitio n fo

r Waive r o f th e Terms o f

th e Orde r

Limitin g Schedule dOperation s at LaGuardi aAirport , 7 5 Fed . Reg . 730 6 at 730 7 (Feb . 18 , 2010) . Th e LaGuardi aOrde r wa s issue dunde r

th e FAA' s authorit y t o "develo p plan s an d polic y fo r th e us e o f

th e navigabl e airspac e an dassig n b y regulatio n o r orde r th e us e o f

th e airspac e necessary t o ensur e th e safet

y o f aircraf t an dth e efficien t

us e o f airspace. " 4 9 U.S.C . § 40103(b)(1) . Operatin g Limitation s at Ne w Yor k LaGuardi aAirport , 7 1 Fed . Reg . 77,85 4 (Dec . 27 , 2006) ; 7 2 Fed . Reg . 63,22 4 (Nov . 8 , 2007 ) (transfer , minimu musage , an dwithdrawa l amendments) ; 7 2 Fed . Reg . 48,42 8 (Aug . 19 , 2008 ) (reducin g th e reservation s availabl e fo

r unschedule doperations) ; 7 4 Fed . Reg . 84 5 (Jan . 8 , 2009 ) (extendin g th e expiratio n dat e throug h Oct . 24 , 2009) ; 7 4 Fed . Reg . 2,64 6 (Jan . 15 , 2009 ) (reducin g th e peak-hou r cap o n schedule doperation s t o 71) ; 7 4 Fed . Reg . 51,65 3 (Oct . 7 , 2009)(extendin g th e expiratio n dat e throug h Oct . 29 , 2011) . ' * Se e Sout

h Dakot av . Dole , 48 3 U.S . 203 , 20 8 (1987 ) ("Th e Federa l Governmen t ma y establis h an dimpos e reasonabl e condition s relevan t t o federal interest.. . an dt o th e over-al l objective s thereto") ; N.Y . Cent . Sec . Corp . v . Unite dStates , 28 7 U.S . 1 2 (1932 ) (upholdin g Interstat e Commerc e Commissio n orde r approvin g th e acquisitio n o f th e "Bi g Four " railroa dcompanie s b y N.Y . Centra l upo n th e conditio n that it als o acquir e short

lin e railroad s o n certai n terms) .40101(a)' s pro-competitiv e publi c interes t factors.'" * Congres s di dno t exclud e th e Administrato r fromconsiderin g th e "publi c interest " t o includ e factor s beyon d"safety, " "nationa l defense " an d "security. " Rather , Congres s expressl y directe dth e Administrato r t o conside r

thos e matter s "amon g others. " Accordingly , a s w e articulate di n ou r February Notice , it

i s rationa l for

th e FA A t o consider , a s bein g i n th e "publi c interest, " "othe r factors " includin g th e fosterin g o f competitio n i n th e contex t of th e slo t program . Th e "publi c interest " include s policie s furtherin g airlin e competition , a s provide di n 4 9 U.S.C . § § 40101(a)(4) , (6) , (9) , (10) , (12 ) - (13 ) an d(d) . Thes e goal s hav e bee n publi c polic y sinc e a t leas t th e tim e o f

adoptio n o f

th e Airlin e Deregulatio n Ac t

of 1978 , Pub . L . No . 95-50 4 (9 2 Stat . 1705) , an dthe y includ e (amon g others ) maximizin g relianc e o n competitiv e marke t forces ; avoidin g unreasonabl e industr y concentratio n an dexcessiv e marke t

domination ; an dencouragin g entry int o ai r transportatio n market s b y ne w 2 0 carriers . Th e FA A Consistentl y Exercise s it s Slo t Allocatio n Authorit y i n aPro-Competitiv e Fashio n Non e of th e commenter s disput e th e fac t tha t th e FA A ha s th e authorit y t o limi t flight operation s a t congeste dairport s an dt o distribut e an dallocat e landin g an dtakeof f reservation s (slo t interests ) t o designatedai r carrier s a

t controlle dairports . Th e FA A hold s thi s powe r du e t o it s authority t o manag e an dcontro l th e "efficien t us e of airspace, " t o assig n th e us e of airspac e an d t o modif y o r revok e suc h a

n assigimien t

i n th e publi c interest . 4 9 U.S.C . § 40103(b)(1) . Managin g slo t

allocation s i s asubse t

o f controllin g th e navigabl e airspace ; an dcourt s ar e clear tha t th e FA A may conside r

pro-competitiv e policie s i n carryin g ou t it s power s t o manag e th e efficient us e of navigabl e airspace . In Northwes t Airlines , Inc . v . Goldschmidt , 64 5 F.2 d1309 , 1315-16 , 131 8 (8 * Cir . 1981) , th e Court foun dtha t

th e FA A ma y allocat e slots , dives t the mfro m incumben t

carrier s an dreallocat e the mt o requestin g ne w entrants , mindfu l o f th e pro competitiv e polic y o f

th e Airlin e Deregulatio n Ac t o f 1978 . Tha t

cas e analyze dth e FAA' s reallocatio n o f

slot s unde r

th e HDR , 1 4 C.F.R . Par t 93 , Subpar t

K . A t th e time , th e HD Rlimite d fligh t operation s at

congeste dairport s i n orde r t o reduc e landin g an dtakeof f delays an d

" Neithe r th e Join t Applicant s no r

othe r carrier s arguin g agains t

th e waive r

condition s cit e an y case s prohibitin g th e FA A o r th e Secretary fro mconsiderin g competitiv e goal s i n th e publi c interest . N.Y. . o p cit. , uphel da n agency' s publi c interes t

condition s t o a

n acquisition , despit e th e industry' s oppositio n t o th e conditions . That decisio n affirme dth e Interstat e Commerc e Commission' s condition s t o th e Ne w Yor k railroad' s acquisitio n o f

th e "Bi g Four " railroad s o n th e asserte d"burdensome " conditio n o f acquirin g th e short-lines . Similarly , ou r condition s t o th e waive r ar e intende dt o promot e th e publi c interes t b y fosterin g an dpromotin g competitio n in th e airlin e industry an d t o benefi t th e travelin g public . Th e fac t that th e Suprem e Court

vacate daNationa l Highwa y Traffi c Safet y Administratio n rescissio n of it s "passiv e restraint " rul e o n th e ground s that NHTS A relie do n afacto r Congres s hadno t

intende dit

t o conside r

ha s n o bearin g o n th e fac t

that th e FA A ma

y legitimatel y conside r

publi c interes t

factor s in carryin g ou t

th e slo t program . Moto r Vehicl e Mfrs . Ass' n o f

U.S. . Inc . v . Stat e Far mMut . Auto . Ins . Co. , 46 3 U.S . 29 , 4 4 (1983) . ^ ° Relianc e o n Unite dState s v . Oberle , 136F.3 d1414 , 1423-3 4 (10 * Cir . 1998) , fo r th e propositio n tha

t Congres s shoul dhav e include dpro-competitiv e factor s i n Sectio n 40101(d) , i s misplaced . That cas e hel dth e Governmen t di d no t nee dto reac h aburden-of-proo f leve l o f "beyon dareasonabl e doubt " i n applyin g th e "thre e strikes " enhance d sentencin g statute. 8permitte dairlin e schedulin g committee s t o allocat e th e slot s amon g intereste dcarriers . (Th e

committee s operate dunde r antitrus t immunity , grante db y th e then-operativ e Civi l Aeronautic s Board. ) Whe n th e schedulin g committe e refuse dt o provid e slot s t o ane w entran t a t Washingto n Nationa l Airport , th e allocatio n proces s brok e dow n an dth e FA A attempte dt o resolv e th e distributio n proces s b y requirin g incumben t carrier s t o yiel dslot s o r

mov e slo t

time s t o ne w entrants . Th e Unite dState s Court

of Appeal s for

th e Eighth Circuit

rejecte dargument s tha t

th e HD Rwa s limite dt o safet

y function s onl y an dtha t th e operativ e statut e (Sectio n 40103 ) di dnot authoriz e slo t allocatio n b y th e FAA . Th e holdin g i n tha t cas e - that

th e powe r

t o manag e th e efficien t

us e of airspac e comprises th e powe r t o allocat e slot s an dthat th e FA A may validl y dives t slots , i n consideratio n o f

th e pro-competitiv e polic y of th e Airlin e Deregulatio n Ac t - shoul dsuffic e t o resolv e concern s abou t

ou r statutory authorit y t o conditio n awaive r of aslo t transfe r transactio n o n adivestitur e of

slo t interest s t o foste r

acompetitiv e environment.^ ' Th e FA A als o relie di n larg e part o n th e Airlin e Deregulatio n Act' s pro-competitio n policie s whe n it issue dth e "Buy-Sell " amendmen t t o th e HDR . Th e Buy-Sel l Rul e provide dasecondary marke t i n slot s an dimpose daminimu mutilizatio n requiremen t an da n administrativ e lottery mechanis mgivin g preferenc e t o ne w entrants.^ ^ Th e Buy-Sel l Rule , 1 4 C.F.R . Par t 93 , Subpart S , Hig h Densit y Traffi c Airports ; Slo t Allocatio n an dTransfe r

Methods , 5 0 Fed . Reg . 52,18 0 (Dec . 20 , 1985) . Th e preambl e specificall y state dtha t th e rul e relie s o n th e FAA' s "statutor y responsibilitie s includin g th e nee dt o plac e maximu mrelianc e o n marke t forces " i n allocatin g slots . 5 0 Fed . Reg . a

t 52,182 . " Tha t

regulatio n opene du p asecondar y marke t for slo t interest s b y permittin g holder s t o bu y o r sel l slot s for

an y consideratio n fro mo r t o an y person.^ ^

^ ' Se e Eilee n M . Gleimer , Slo t Regulatio n a t

Hig h Density Airports : Ho w Di dW e Ge t Her e an dWher

e Ar e W e Going? , 6 1 J . Ai r

L . & Com . 877 , 883 , fn . 2 5 (1996) , statin g that th e court determine dth e actio n wa s withi n th e agency' s statutory authority an d"wa s consisten t wit h th e pro-competitiv e policie s o f th e Airlin e Deregulatio n Act. " ^ ^ I n creatin g an administrativ e mechanis mt o lottery ne w an dwithdraw n slot s wit h apreferenc e for

ne w entrants , th e Buy-Sel l Rul e wa s informe db y th e Airlin e Deregulatio n Ac t t o expressl y giv e "specia l consideration " t o ne w entrants . 5 0 Fed . Reg . at 52185 . ^ ^ Th e Buy-Sel l Rule' s majo r objectiv e wa s t o achiev e th e polic y goal s o f th e Airlin e Deregulatio n Act , that is , t o maximiz e competitio n at

th e congeste dairports , b y givin g ne w entran t carrier s an opportunit y t o purchas e slots : [T]h e ability t o bu y an dsel l slot s als o remove s existin g artificia l barrier s t o entry int o hig h density airport markets . Th e eliminatio n o f barrier s t o entry i s essentia l for th e optima l operatio n o f acompetitiv e market . Th e rul e accomplishe s thi s b y placin g ne w entrant s in th e sam e positio n a s incumben t carrier s desirin g additiona l slots . 5 0 Fed . Reg . a t 52186 . ^' * Wer e w e unabl e t o conside r pro-competitiv e factor s i n implementin g ou r

authority ove r

navigabl e airspace , i

t i s ver y likel y w e woul dno t

hav e issue dth e Buy-Sel l Rul e in th e firs t place . In tha

t event , i t woul dno t

hav e bee n possibl e fo

r th e petitioner s to see k

approva l for

th e transactio n befor e us . Th e Airlin e Deregulatio n Act , whic h "replace dth e ol dfor

mo f regulatio n wit

h ane w economi c regim e that relie dheavil y o n free-marke t mechanisms, " (Delt aAi r

Lines . Inc . v . C.A.B. . 67 4 F.2 d1 , 3 (D.C . Cir. 1982 ) spawne dne w entran t airline s clamorin g t o ente r th e highly-regulate dslot-constraine dairports . I n thi s regard , w e note , a s doe s th e U.S . Departmen t o f Justic e in it s comment s in thi s docket , that th e petitioners ' argument s abou t lac k o f FA A authority ove r

pro-competitiv e slo t

divestiture s are in star

k contras t wit h thei r previou s assertion s that

th e FA A ha s th e authority t o re-implemen t th e Buy-Sel l provisio n at LaGuardi aan d that thi s provisio n "ha s worke dto promot e ne w entry an denhanc e competitio n a t 'cappe dairports ' fo

r mor e thanTh e followin g year , th e FA A further carrie dou t

a n administrativ e mechanis mgivin g a preferenc e t o ne w entrant s a t slot-controlle dairport s b y implementin g a"revers e lottery " withdrawin g up t o 5 % of slot s fro mincumben t

carrier s an dreallocatin g the mt o ne w entran t an d limite dincumben t

carriers . Specia l Slo t

Withdrawa l an dReallocatio n Procedures , 5 1 Fed . Reg . 863 2 (Mar . 12 , 1986) . Th e FA A considere dpro-competitiv e publi c interes t factor s i n justifyin g th e preferentia l natur e of

th e lottery b y notin g tha t ther e ha dbee n "very littl e oppoitunit y for ne w entry b y ai r

carriers " a

t th e HDR-controlle dairport s an dthat providin g "immediat e access " for the mwoul d"serv e th e pro-coinpetitiv e principle s of th e Airlin e Deregulatio n Act. " 5 1 Fed . Reg . a t 8633 , 8635 . Th e FA A ha s consistentl y relie do n pro-competitiv e polic y goal s i n carryin g ou t it s slo t programs . Fo r

example , i n 1992 , th e FA A amende dth e Buy-Sel l Rul e t o expan dprotection s an d treatmen t afforde dt o ne w entran t

an dlimite dincumben t

carrier s a

t airport s regulate db y th e HDR , explainin g tha t

th e amendment s "enhanc e competitio n b y affordin g ne w entran t an d limite dincumben t

carrier s greate r

access. " Hig h Densit y Traffi c Airports ; Slo t Allocatio n an d Transfe r Methods , 5 7 Fed . Reg . 37,30 8 a t 37,30 9 (Aug . 18 , 1992) . Durin g 2000 , whe n institutin g th e phase-ou t

of th e HD Rat

LaGuardia , th e FA A issue danotic e o f inten t t o conduc t

a lottery o f th e AIR-2 1 slo t

exemption s grante da

t LaGuardia , specificall y identifyin g ne w entran t an dlimite dincumben t

carrier s t o b e eligibl e fo r th e lottery . Further , th e temporar y "slot " regulatio n a

t O'Har e Internationa l Airport applie dpro-competitiv e policie s fro mth e Airlin e Deregulatio n Ac t

i n grantin g preferentia l treatmen t t o ne w entran t

an dlimite dincumben t

airline s i n assignin g ne w o r

withdraw n slo t

interests . Congestio n an dDela y Reductio n Rul e a t Chicago O'Har e hitemationa l Airport , 1 4 C.F.R . Part 93 , Subpart

B ; 1 4 C.F.R . § 93.30 . Th e FA A ha s th e authority t o conside r pro-competitiv e factor s unde r severa l statutory sources , notabl y Section s 40101(d ) (a s describe dabove) , 40103(b ) (authorizin g th e FA A t o manag e th e "efficient " us e o f

airspace) , 40103(e ) (directin g th e FA A t o prohibi t th e exclusiv e us e of

ai r navigatio n facilities), an d47107(d ) (requirin g th e FA A t o carry ou t it s airport

an dairwa y

tw o decades. " Comment s o f Delt aAi r

Line s at 3 , Docke t

No . FAA-2006-2575 5 (Jul y 14 , 2009) , Repl y Comment s o f th e Unite dState s Departmen t o f Justice , Publi c Version , at 12 . ^ ^ In th e contex t

o f th e slo t program , ensurin g th e "efficient " us e o f airspac e mean s makin g productiv e us e o f th e slot s includin g operatin g large r aircraf t wit h lowe r cost s an dofferin g lowe r fare s t o consumers , resultin g in mor e passenger s pe r

flight . Ne w entran t

an dlimite dincumbent

carrier s typicall y us e large r aircraf t an doffe r lowe r fare s an d"woul dmos t

likel y b e mor e efficient , fro maconsume r benefi t standpoint. " Se e Departmen t o f Justic e Repl y Commen t at 6-7 . ^ ^ Withou t th e slo t divestitur e conditions , th e transactio n woul dleadt o significantl y increase dairlin e concentratio n at DC A an dLGA ; th e carrier s woul dincreas e th e numbe r o f market s the y serv e o n amonopol y o r dominan t

basi s an dcharg e premiu mairfares , thu s negatin g th e purpos e o f th e prohibitio n o n exclusiv e right s at federally-assiste d facilities . Se e 4 0 U.S.A.G . 7 1 (1941) , statin g that th e purpos e o f

th e provisio n i s to "promot e an dencourag e competitio n i n civi l aeronautics. " 1 09 7

progra min amanne r

fosterin g competition). " I t i s appropriat e for

(h e FAA t o us e thes e tool s i n respons e t o th e reques t

befor e us , t o approv e asignifican t slo t interes t transactio n that

woul d affec t th e competitiv e structur e of th e aviatio n industry a

t tw o important , slot-controlle dairports . B y conditionin g th e waive r o n slo t divestitures , th e FA A i s carryin g ou t Congressiona l inten t

t o ensur e th e provisio n of

opportunitie s for

competitio n i n th e slo t

program . Furthermore , w e disagre e with th e argumen t mad e b y som e commenter s that th e FA A regulation s i n 1 4 C.F. RPart 1 1 allo w th e FA A t o conside r onl y safet

y matter s i n decidin g whethe r o r no t t o gran t an exemptio n o r

waive r request . Th e FA A regulation s requir e th e applican t for awaive r t o address , i n additio n t o safety concerns , wh y th e reques t "woul db e i n th e publi c interest , tha t

is , ho w i t

woul dbenefi t

th e publi c a s awhole " an dt o provid e an y additional informatio n suppoitin g th e request . 1 4 C.F.R . § § 11.81(d) , (g) . A s indicate di n th e bod y o f thi s Notice , w e d o not

fin dtha t petitioner s satisfie dth e "publi c interest " concern showin g ho w th e transactio n - withou t ou r propose ddivestitur e remed y - woul dbenefi t th e publi c a s awhole . Moreover , i n asituatio n suc h a s this , wher e tw o majo r domesti c airline s see k

th e approva l o f

a dramati c marke t

shif t wit h significan t

economi c an dcompetitiv e impac t o n th e aviatio n industry an dth e travelin g public , th e Administrato r doe s no t ac t withou t inpu t an dguidanc e fro mth e Secretary . A s th e hea dof th e Department , th e Secretar y ha s broa doversigh t of significan t

FA A decisions . In evaluatin g th e waive r request , th e Secretar y consider s th e publi c interes t i n furtherin g airlin e competition , a s provide di n 4 9 U.S.C . § § 40101(a)(4) , (6) , (9) , (10) , (12 ) an d (13) . Th e waive r

o f th e LG A Orde r

o n th e condition s se t

fort h i n thi s Notic e carrie s out th e Congressiona l inten t

o f ArR-2 1 t o allo w for

ne w airlin e entry , t o increas e competition , an dlowe r inflate dprice s a

t th e slot-controlle dairports . Th e Secretar y ha s previousl y conditione dai r carrie r rout e transfer s an dgrant s of antitrus t immunity o n th e divestitur e o f slot s and/o r

othe r asset s for th e purpose s of

ensurin g competitiv e opportunitie s for othe r airlines.'^ ' Accordingly , th e Secretary (i ) ha s th e authorit y t o waiv e th e term s o f th e LaGuardi aOrde r

t o further th e

^ ^ Congres s directe dth e FA A t o ensur e that eac h airport

an dairway progra mb e carrie dou t "consistently " wit

h Sectio n 40101(a ) t o "foste r competition , preven t

unfai r method s o f

competitio n i n ai r

transportatio n [and ] preven t unjus t an ddiscriminator y practices. " 4 9 U.S.C . § 47101(d) . ^ ^ Som e commenter s assert that 4 9 U.S.C . § § 40113(a ) an d46105(a) , b y referrin g t o "aviatio n safet y dutie s an d powers, " limi t

th e Administrator' s administrativ e power s t o thos e involvin g safet y only . Readin g th e "aviatio n safet y dutie s an dpowers " clause , however , t o authoriz e th e Administrato r t o tak e actio n ove r

no t onl y "aviatio n safet y duties " bu t

als o ove r th e Administrator' s other , mor e extensiv e "powers " conform s t o th e tex t o f th e statutory provisio n befor e i

t wa s recodifie dwithou t

substantiv e change : "Th e Administrato r shal l b e responsibl e for

th e exercis e o f

al l power s an dth e discharg e o f al l dutie s o f

th e Administration. " 4 9 U.S.C . § 1341(a) . It doe s no t dives t th e Administrato r

o f pro-competitive , publi c interes t polic y considerations . See , th e recodificatio n o f Titl e 49 , Pub . L . No . 103-27 2 (1994) , H.R . Rep . 103-18 0 at 26 2 (1993). " Th e purpos e o f H.R . 175 8 i s t o restat e i

n comprehensiv e form , withou t

substantiv e change , certai n permanen t an dgenera l law s relate dt o transportation. " ^ ^ Se e 4 9 U.S.C . § § 10 2 an d106 . ^ ° 4 9 U.S.C . § 41715(a)(2 ) direct s th e Secretary t o terminat e th e HD Rat LG A a s o f

January 1 , 2007 . Se e H . Rept . 106-16 7 (106 * Cong. , l " Sess . 1999 ) at 37-42 . ^ ' 7 5 Fed . Reg . 730 6 at

7308 . 1 1Secretary' s publi c interes t goal of maximizin g airlin e competition , amon g othe r things ; an d(ii ) may conditio n th e waive r o n carrier s takm g specifi c action s that foster competitio n a

t slot

controlle daiiports . Th e Slo t Divestitur e Condition s D o No t Violat e Othe r

Law s o r Regulation s Continenta l i n it s comment s claim s that ou r slo t divestitur e condition s constitut e unauthorize d market-base dpricin g an da n unauthorize dwithdrawa l of slot s unde r

th e LaGuardi aOrde r

an d th e HDR . Continental' s concern s reflec t amisunderstandin g o f

ou r action . Fo r

purpose s o f

th e requeste dwaiver , w e ar e no t assertin g any FA A righ t t o collec t monie s b y monetizin g slo t interest s throug h an auction . Rather , i n respondin g t o areques t fo r awaive r fro mth e LaGuardi a Orde r prohibitio n o n apermanen t transfe r o f slots , w e simpl y ar e conditionin g th e waive r o n a divestitur e of

som e of th e slo t interest s t o ne w entran t

an dlimite dincumben t

carriers . Thos e slo t interest s woul dnot

b e diveste dt o th e FAA ; the y woul db e sol db y th e respectiv e petitionin g carrier s t o eligibl e purchaser s an dth e petitionin g carrier s woul dretai n th e proceed s o f th e sales . No r ar e w e affirmativel y withdrawin g slo t interests . Consequently , th e provision s i n th e LG A Orde r an dth e HD Rgovernin g withdrawal s of slot s b y th e FA A ar e inapplicabl e t o ou r action.^ ^ W e als o d o not

accep t th e comment s o f

th e Join t Applicants , Continenta l o r United , that

th e Departmen t

of Justice , no t

th e Secretar y (o r

FAA) , i s th e sol e sourc e o f competitio n authority ove r slo t transactions . Whil e DO J ha s th e authority unde r Sectio n 7 o f

th e Clayto n Ac t

t o rejec t anticompetitiv e transactions , tha t doe s not remov e DOT' s responsibilit y t o carr y ou t it s program s consistentl y wit

h th e pro-competitiv e publi c interes t criteri acontaine di n Sectio n 40101(a)(4) , (6) , (9) , (10) , (12 ) an d(13) . In considerin g th e petitioners ' waive r reques t i n th e publi c interest , th e DO T i s not

assertin g antitrus t

jurisdictio n o r

implementin g Clayto n Ac t authority . Neithe r th e FA A no r

th e Secretary i s exercisin g th e forme r "Sectio n 408 " authorit y ove r airlin e transactions . Petitioner s ar e ignorin g th e fac t that the y petitione dth e FA A for awaive r fro ma validl y issue dOrde r

tha t prohibit s permanen t

slo t interes t transfer s a

t LaGuardia . Th e FA A i s considerin g th e waiver , no t exercisin g antitrus t

authorit y no r

intrudin g o n th e Departmen t o f Justice' s jurisdiction . A s th e DO J indicate di n it s repl y comments , th e FAA' s propose d decisio n "doe s not

usurp " th e DOJ' s investigativ e authority unde r Sectio n 7 o f

th e Clayto n Ac t (a t p . 13) . Se e Bowma n Transp . Inc . v . Arkansas-Bes t Freigh t System , Inc. , 41 9 U.S . 281 , 298

- 9 9 (1974 ) (" A polic y i n favo r of competitio n embodie di n th e law s ha s applicatio n i n avariety of economi c affairs." )

^ ^ Continenta l referre dt o Verizon Communication s v . La w Office s o f Curti s V . Trinko , 54 0 U.S . 398,407-0 8 (2004 ) for th e propositio n that

ou r actio n "compelling " U S Airway s an dDelt at o dives t thei r slo t interest s ma

y undermin e thei r incentive s t o inves t

in beneficial infrastructure . W e repea t that w e ar e not , however , directin g aslo t divestiture . Rather , w e ar e grantin g awaive r request , whic h i s subjec t t o afindin g that

it i s i n th e publi c interest , subjec t to pro competitiv e remedies . Th e tw o regulatory action s ar e o f adifferent

nature . " Continenta l claim s that w e hav e no t

prove n that

th e carriers ' practice s woul dris e t o aSherma n Ac t Sectio n 2 offense ; w e ar e no t

invokin g o r

attemptin g t o enforc e antitrus t laws . Rather , w e ar e assertin g ou r authority t o protec t th e travelin g publi c b y fosterin g competitio n i n th e contex t o f th e requeste dwaiver . 1 2Conditionin g th e waive r o n slo t interes t divestiture s i s consisten t - an ddoe s not

interfer e - wit

h th e competitiv e structur e of th e airlin e industry , o r

th e statutory polic y goal of "placin g maximu mrelianc e o n competitiv e marke t forces, " a s asserte db y Unite dan dsom e othe r commenters . Th e condition s mitigat e th e competitiv e burden s of th e transactio n an densur e that th e transactio n wil l not

resul t i n undu e industry concentration , th e impedimen t o f ne w entry , o r otherwis e disadvantag e th e travelin g public . Th e polic y goal s direc t u s not onl y t o plac e "maximum " relianc e o n competitiv e marke t force s but

als o t o rel y o n "actua l an dpotentia l competition " t o avoi d"unreasonabl e industry concentration, " an dt o encourag e "entr y int o transportatio n market s b y ne w an dexistin g ai r carriers. " Sectio n 40101(a)(6) , (10) , (12) . Ou r actio n o n th e waive r

reques t respond s aptl y t o thes e polic y directives.'" ' Ou r slo t divestitur e condition s d o not withdra w slo t

exemptio n servic e authorize dunde r 4 9 U.S.C . § § 41714(c) , 41716(b) , 41718 . W e d o no t mandat e th e divestiture s o f an y slo t exemption s that

U S Airway s o r

Delt ama y hold . W e als o ar e no t

boun dt o allocat e th e diveste dslot s withou t charge , a s Spiri t

prefers . Th e slo t exemption s provision s directin g th e Secretar y t o gran t slo t exemption s fro mth e HD Rt o ne w entran t an dlimite dincumben t

carrier s unde r

specifie dprovision s ar e not applicabl e here . Th e FA A i s unde r

n o statutory obligatio n t o hav e th e diveste dslo t interest s allocate dt o eligibl e carrier s fre e o f

charge . Althoug h Spiri t a s note di n it s comment s i s concerne dtha t i t may los e ou t i n an y attemp t

t o purchas e slo t

interest s du e t o it s relativel y smal l shar e o f revenue s compare dt o tha t

o f th e othe r eligibl e carriers , asal e of th e slo t interest s allow s th e petitioner s t o maximiz e th e valu e of

thei r slo t interest s a s originall y intende da s part of th e large r

transaction . 75Fed . Reg . at7311 . Th e Slo t Divestitur e Condition s Ar e No t "Takings " Th e petitioner s clai mw e canno t legitimatel y requir e th e slo t divestiture s becaus e tha t constitute s takin g withou t

jus t compensation . W e d o not agre e with thi s assertion . A s w e indicate di n th e Notice , th e FA A ha s th e authority t o conditio n th e gran t o f awaiver.^ ^ Se e also . South Dakot av . Dole , 48 3 U.S . 203 , 20 8 (1987 ) ("Th e Federa l Governmen t may establis h an dimpose reasonabl e condition s relevan t

t o federal interest.. . an dt o th e over-al l objective s thereto.") . Th e FA A ^•*Unite doverstate s th e import

o f ou r waive r conditio n whe n it

assert s tha t

w e ar e re-regulatin g th e industry contrary t o th e Congressiona l directiv e in th e Airlin e Deregulatio n Act . Condition s at slot-constraine dairport s ar e no t reflectiv e o f

afree , competitiv e market . Th e fac t i s that th e FA A place dlimit s o n fligh t operation s that

may b e carrie dou t

at LG A an dDC A du e t o congestio n i n th e airspace ; i

n th e contex t

o f thos e fligh t

limits , onl y certai n airline s ma

y operat e at

designate dtimes . Thes e airport s thu s ar e regulate db y th e Governmen t an dar e i n adifferen t positio n than th e vas t

majority o f

th e othe r airport s that

ar e no t slot-controlled . Th e FAA , i n thi s instance , actuall y i s instillin g th e opportunit y for mor e competitio n at

DC A an dLGA , in relianc e o n th e Airlin e Deregulatio n Act . B y placin g thes e condition s o n th e waive r grant , th e FA A als o i s protectin g agains t exclusiv e right s at

th e airport s unde r 4 9 U.S.C . § 40103(e ) an di s fosterin g competitio n a t th e federally-assiste dLG A an dDCA . 4 9 U.S.C . § 47107(d) . " 7 5 Fed . Reg . a

t 7307 , citin g Star

r v . Federa l Aviatio n Administration , 58 9 F.2 d307 , 31 1 (7* ^ Cir . 1978) . 1 3expressl y ha s th e powe r t o modif y assignment s o f

us e of navigabl e airspac e whe n i n th e "publi c interest " an dt o gran t

waiver s onl y in th e "publi c interest. " A s w e discus s above , it i s in th e publi c interes t

for u s t o conditio n th e waive r reques t of th e transfe r

o f 167 slo t pair s o n th e divestitur e of

certai n slot s t o earner s with n o o r littl e presenc e a

t th e constraine dairports . Thi s conditio n produce s efficiencies , foster s competition , prevent s um-easonabl e industry concentration , an dprotect s th e travelin g public . In an y event , th e taking s clai mi s inapposit e becaus e slo t interest s ar e no t

propert y subjec t

t o th e taking s clause . Slo t

interest s are subjec t

t o pervasiv e federal encumbrance s that limi t any ai r carrier' s propert y righ t

o r interes t associate dwit h them."'' ' Th e HD Rprovide s that "[sjlot s d o not represen t apropert y righ t

bu t represen t a n operatin g privileg e subjec t t o absolut e FA A control. " 1 4 C.F.R . § 93.223(a) . Accordingly , an y "proprietar y interest " claime db y an ai r carrie r i n aslo t i s subjec t t o th e encumbrance s place do n thos e slot s b y FA A regulation.^ ^ Th e Department , a s w e pointe dou t

i n th e Februar y Notice , ha s conditione dinternationa l aviatio n rout e transfer s an d antitrus t immunity grant s o n divestiture s of slot s o r rout e certificate s i n th e past , and , becaus e thes e ar e not

"property, " the y d o no t

constitut e Fift

h Amendmen t

compensabl e takings.^ ^ A carrier' s interes t

i n slot s i s subjec t

t o extensiv e FA A regulatio n an dCongressiona l direction.^ ^ Ther e i s n o definitiv e judicia l holdin g tha t slot s ar e "property " subjec t t o th e Taking s Clause.'* " I n an y event , aslo t

interes t i s substantiall y fettere dan dencumbere db y FA A requirements , a s explaine dabove , an dtherefor e aholde r doe s not hav e th e attribute s of

a n unfettere drigh t

t o "us e th e property , receiv e incom e produce db y it , an dt o exclud e other s fro mit " a s atenan t b y entirety doe s unde r

Michiga n Stat e law . Unite dState s v . Craft . 53 5 U.S . 274 , 28 2 (2002) . Rather , a

' ^ I n th e contex t

o f an ai r carrier' s bankruptc y proceeding , i t ha s bee n hel dthat

th e FAA' s contro l ove r

slot s substantiall y encumbe r

acarrier' s propert y interest : " acarrie r possesse s aproprietar y righ t in allocate dslots , [ ] limite da s t o th e superio r

right s o f th e FAA. " In r e Gul l Air . Inc . 890 F.2 d1255 , 126 0 (1s t Cir . 1989) . • Se e 1 4 C.F.R . § § 93.211-229 . A t DCA , wher e slot s ar e subjec t t o th e HDR , thes e encumbrance s include , fo r example , th e ability t o withdra w slot s for essentia l ai r

services , operationa l needs , an dnon-use . 1 4 C.F.R . § § 93.219 , 93.22 3 & 93.227 . A t LaGuardia , slo t

interest s ar e subjec t

t o th e term s o f

th e Orde r

whic h grant s onl y a temporary interes t

i n th e slot s t o carriers , providin g fo r onl y lease s o r

temporary transfer s throug h th e duratio n o f th e Order . 7 1 Fed . Reg . 77,85 4 at 77,860 , a s amende d7 4 Fed . Reg . 51,65 3 (Oct . 7 , 2009) . The y ar e subjec t t o th e term s o f th e Januar y 200 9 Orde r

o n voluntary retirements . 7 4 Fed . Reg . 264 6 (Jan . 15 , 2009) . Also , slo t interest s a

t LaGuardi aar e subjec t

to minimu mutilizatio n requirements . 7 1 Fed . Reg . 77,85 4 at 77,860 . ^ ^ Se e discussio n o f

DO T Order s requirin g suc h divestiture s in th e publi c interest . 7 5 Fed . Reg . 730 6 at 7308 . ^ ^ Th e Por t

Authority o f

Ne w York

an dNe w Jerse y commente dthat slo t interest s ar e licenses , no t federal property . W e nee dno t

address , in thi s Notice , th e Por t Authority' s argument s in thi s regard . '*" Th e Unite dState s Cour t o f Appeal s for

th e Firs t Circui t hel dthat i t "nee dno t

decid e [whethe r

slot s constitute d par t o f abankrup t

carrier' s estate]. " In r e Gul l Air . 890 F.2 d1255 , 1261 , 126 2 fn . 8 . Unlik e th e situatio n i n Ruckleshau s v . Monsanto . 46 7 U.S . 986 , 1002-100 3 (1984) , wher e th e Cour t determine dthat

intangibl e propert y ( a trad e secret ) exhibite dcharacteristic s o f mor e tangibl e form s o f

property , slot s lac k

man y o f thos e characteristics . Fo r example , ther e i s n o stat e law recognizin g aslo t interes t a s aproperty right , a s wa s th e cas e i n Monsanto . Additionally , unlik e th e case s reliedo n i n Monsanto , aslo t interes t doe s no t conver t th e carrie r

t o th e positio n o f

a creditor , suc h a s amechanic' s lie n doe s to acontractor , in Aimstron g v . Unite dStates , 36 4 U.S . 4 0 (1960) ; o r a mortgag e t o aban k

mortgagee , i

n Louisvill e Join t

Stoc k Lan dBan k

v . Radford . 29 5 U.S . 555 , 596-60 2 (1935) . No r i s aslo t interes t acontrac t

subjec t t o th e Taking s Claus e a s awa r ris k insuranc e contrac t

i s t o abeneficiary , in Lync h V . Unite dStates . 29 2 U.S . 571 , 57 9 (1934) . 1 4carrier' s us e of aslo t interes t i s subjec t

t o FA A minimu mutilizatio n requirement s an dany righ t t o "exclud e others " i s subjec t t o FA A operationa l control , withdrawa l rights , an dcongressiona l directives . Further , w e disagre e with petitioners ' claim s tha t th e condition s o n th e waive r d o no t serv e th e governmen t

interes t an dar e tantamoun t

t o "extortion. " Nolla n v . Californi aCoasta l Commission , 48 3 U.S . 825 , (1987)." " Ou r gran t o f th e waive r

permittin g th e petitioner s t o procee dwith th e slo t

interes t transaction , subjec t

t o slo t divestiture s t o ne w entran t an dlow-cos t carriers , substantiall y advance s th e FAA' s legitimat e objective s of mor e efficient

us e o f constraine dairspac e an dof fosterin g airlin e competitio n a t airports . A "broa drang e o f governmenta l purpose s an dregulation s satisfies " th e requirement s for considerin g aconditio n t o awaive r a s substantiall y advancin g agovernmenta l interest . Nolla n a t 834-35 . Accordingly , w e fin dtha t th e condition s t o th e waive r d o no t depriv e petitioner s o f

propert y withou t

jus t compensation . Eve n assumin g slot s ar e propert y for puqDose s o f

th e Taking s Clause , th e divestitur e a s a conditio n t o th e FA A waive r simpl y regulate s th e carriers ' us e of th e slo t interest s an ddoe s no t constitut e ataking . Th e Suprem e Court ha s identifie dsevera l factor s for consideratio n of

whe n a governmen t

takin g ha s occurre dunde r th e Fift h Amendment : "th e characte r o f th e governmen t action , it s economi c impact , an dit s interferenc e with reasonabl e investment-backe d expectations. " Se e Pen n Centra l Transportatio n C o v . Ne w Yor k City , 43 8 U.S . 104 , 125(1978 ) (City Landmark s Preservatio n Commissio n disapprova l o f constructio n o f

a50-story offic e buildin g ove r

Gran dCentra l Termina l hel dnot t o b e a"taking " of

th e owners ' righ t

t o exploit

th e superadjacen t

airspace) . Here , ou r waive r conditio n of

slo t divestitur e woul dconstitut e aregulatory , no t atakings , action . B y conditionin g th e transfe r o f alarg e portio n o f

slo t interest s o n th e sal e o f

som e o f th e slo t interests , th e FA A effectivel y i s regulatin g th e ability of th e petitionin g carrie r

t o transfe r slo t interest s i n amanne r

tha t result s i n unreasonabl e industry concentration . Divestin g som e slo t interest s t o petitioners ' competitor s v/il l ensur e tha t th e travelin g publi c doe s no t experienc e adegradatio n of

fares , servic e o r

route s at th e affecte dairports .

" ' Nolla n struc k

down , a s a

n unlawfu l "taking, " aStat e conditio n o n abuildin g permi t t o replac e asmal l beachfron t bungalow wit

h alarge r hous e wit

h apubli c easemicn

t acros s th e beach . Th e Court hel dthat th e permi t

conditio n di d no t substantiall y advanc e legitimat e Stat e interes t relate dt o land-us e regulation . Th e Court di dfind , however , that

a legitimat e permi t

conditio n woul dhav e bee n aheigh t limitation , awidt

h restriction , o r

aba n o n fences . 48 3 U.S . a

t 836 . " ^ Lingl e v . Chevro n U.S.A . Inc. . 55 4 U.S . 52 8 (2005) , cite db y Continenta l fo r ataking s test , i s no t

apposite . That cas e reverse dan dremande dth e Ninth Circui t Cour t o f Appeals ' holdin g that

aHawai i statut e whic h responde dt o concern s of

oi l companies ' marke t

concentratio n b y limitin g th e ren t that oi l companie s chargedt o dealers , effecte d a n unlawfu l taking . 1 5Wit

h respec t t o reasonabl e investment-backe dexpectations , carrier s hav e bee n o n notic e for decade s that

th e FA A ha s considere dslot s t o b e a n operatin g privileg e no t

aproperty right . 1 4 C.F.R . § 93.223(a) . A s discusse dabove , no t otil y hav e th e FA A regulation s bee n clear abou t th e tentativ e natur e of

slot s an dth e duratio n of slo t interests , th e FA A retire dth e slo t syste ma t Chicag o O'Har e airport

in 2008 . 1 4 C.F.R . Part

93 , Subpart

B , Congestio n an dDela y Reductio n a t Chicago O'Har e Internationa l Airport , § 93.2 1 (e) . In AIR-2 1 (2000) , Congres s legislate da phase-ou t o f th e HD Ra

t th e Ne w Yor

k airport s an da

t O'Hare . Accordingly , th e carrier s an d thos e bank s an dfinancin g firm s holdin g slot s a s collatera l wer e awar e o f th e FAA/Congress ' righ t t o chang e th e slo t

system , withdra w slots , etc . Th e Securitie s an dExchang e Commissio n filing s recogniz e th e federa l encumbrance s t o slo t holdings.'' ^ Consequently , th e ability of th e FA A t o conditio n th e waive r allowin g th e transfe r

o f massiv e amount s of

slot s o n divestiture s of asmal l percentag e i s a"burde n w e al l mus t bear i n exchang e for

'th e advantag e o f

livin g an d doin g busines s i n acivilize dcommunity.' " Monsanto , 46 7 U.S . 986 , 1007 . Becaus e w e ma y conditio n th e gran t of th e waiver , an dth e condition s d o no t effec t a"taking " of "property, " w e disagre e with petitioners ' contentio n that th e condition s adversel y affec t th e asserte d"jus t

compensation " t o b e derive dfro mthei r slo t interest s unde r

Unite dState s v . 5 0 Acre s o f Land , 46 9 U.S . 24 , 2 9 (1984) . In an y event , th e proces s w e wil l institut e provide s for th e sal e o f

th e slo t interests , subjec t

t o certai n rule s t o maintai n competition , for abundl e o f

slo t interests . Th e FA A Ma y Conditio n th e Waive r o n DC A Slo t

Interes t Divestiture s Th e petitioner s assert

tha t w e hav e n o jurisdictio n ove r th e DC A slo t

interes t sal e b y Delt aan d purchas e b y U S Airways , becaus e th e Hig h Density Rul e permit s a n unfettere dsal e of

slot s a t DCA . The y clai maforce ddivestitur e of DC A slot s conflict s with th e HDR . A s w e explaine di n th e Notice , w e fin dtha t th e slo t swap betwee n U S Airway s an dDelt aat both LaGuardi aan dDC A ar e asingle transaction , suc h that th e LG A purchas e an dsal e woul dno t occu r withou t th e DCA purchas e an dsale . Accordingly , w e revie w both transaction s a s part of a

* ^ See , for example , Americ aWes t Holding s Corporatio n Form10- K for th e Fisca l Year

Endin g Decembe r

31 , 200 3 (a t 11) : At Ne w Yor k City' s Joh n F . Kenned y Internationa l Airport an dLaGuardi aAirport , an da t Washingto n D.C.' s Ronal dReaga n Nationa l airports , whic h ar e designate d"Hig h Densit y Airports " b y th e FAA , ther e ar e restriction s o n th e numbe r o f aircraf t that ma y lan dan dtake-of

f durin g peak

hours . A

t th e Ne w Yor

k airports , slo t

restriction s ar e abolishe dafter Januar y 1 , 2007 . I

n th e future thes e takeof

f an dlandin g tim e slo t restriction s an dothe r

restriction s o n th e us e o f variou s airport s an dthei r facilitie s may resul t

i n further curtailmen t

o f service s by , an dincrease doperatin g cost s for , individua l airlines , includin g A WA , particularl y in ligh t

o f th e increas e in th e numbe r o f airline s operatin g a

t suc h airports . I

n general , th e FA A rule s relatin g t o allocate dslot s a t th e Hig h Density Airport s contai n provision s requirin g th e relinquishmen t o f slot s fo r non-us e an dpermi t

carriers , unde r

certai n circumstances , t o sell , leas e o r trad e thei r

slot s t o othe r carriers . Al l slot s mus t

b e use do n 80 % o f

th e date s durin g eac h two-month reportin g period . Failur e t o satisf y th e 80 % us e rat e wil l resul t in los s o f th e slo t whic h woul drevert

t o th e FA A andb e reassigne d throug h alottery arrangement . 1 6single , unifie dtransactio n an dmay conditio n ou r waive r t o th e LG A Orde r

on divestiture s of slot s a t both airports . I n th e petitio n before us , th e carrier s see k awaive r fro mth e buy-sel l prohibitio n i n th e LG A Orde r for th e purpos e o f

exchangin g slo t

interest s a

t both LG A an dDC A airports . W e ar e not "boun db y legal formalisms " i n dischargin g it s duty bu t instea dwil l "tak e accoun t o f th e economic s of

th e transactio n unde r

investigation. " Se e Reve s v . Erns t & Young , 49 4 U.S . 56 , 6 1 (1990) ; Th e Shoshon e India n Trib e of th e Win dRive r

Reservation , Wyomin g v . Unite dStates , 5 8 Fed . CI . 77 , 8 6 (2003 ) ("mus t examin e th e underlyin g economi c reality " o f th e transaction) . Th e fac t tha t th e slo t swap concern s tw o airport s doe s no t compe l u s t o segregat e th e transactions ; rather , i t

i s clear tha t th e transaction s are contingen t o n eac h other . Th e join t applicatio n of

U S Airway s an dDelta , file dAugus t 24 , 2009 , befor e th e U.S . Departmen t o f Transportatio n for

approva l of

th e transfe r

of U.S.-Brazi l frequencie s i s expressl y terme d "contingen t

join t application, " mad e dependen t o n completio n of

th e Mutua l Asse t

Purchas e an d Sal e Agreement , whic h involve s th e slo t interes t transfe r a t issu e here . A s state di n th e join t application : Th e Join t Applicant s ar e submittin g thi s applicatio n o n astrictl y contingen t basis . Th e propose dtransfe r

o f th e Join t Applicants ' U.S.-Brazi l frequencie s i s part of th e large r transactio n describe dherein . Th e Join t Applicant s wil l procee dwith th e large r transactio n onl y i

f al l transactio n component s .. . occur . (Join t application , fn . 2) . Th e join t applicatio n explain s tha t th e large r

transactio n include s th e swap of th e slo t interest s at both LaGuardi aan dReaga n Nationa l airf)orts : Th e [Mutua l Asse t

Purchas e an dSale ] Agreemen t further involve s th e transfe r

of certai n slot s an drea l estat e a

t LaGuardi aAirport

t o Delt afro mU S Airways , an dth e transfe r of slot s fro mDelt at o U S Airway s a t Reaga n Washingto n Nationa l Airport , allowin g th e Join t Applicant s t o expan dthei r respectiv e operation s a

t thes e points. " (Join t

application , a t 2-3) . In suc h asituation , th e agreement s concernin g eac h airport constitut e " asingl e actua l transaction. " Se e SE C v . M& A West , Inc. , 58 3 F.3 d1043 , 1052- 3 (9" " Cir . 2008 ) (holdin g tha t th e "existenc e of

multipl e agreement s bear s littl e effec t whe n th e agreement s collectivel y constitut e asingle transaction." ) Th e fac t that th e slo t purchas e an dsal e agreement s a t both DC A an dLG A wer e entere dint o simultaneousl y an dwer e linke dtogethe r create s anecessar y nexu s betwee n th e agreement s for puipose s of

conditionin g ou r

approva l of

th e petitio n o n certai n remedies . Shoshon e India n Tribe , 5 3 Fed . CI . at 88-89 . Further , considerin g th e DCA an dLG A slo t

swap s a s asingle transactio n justifie s th e remedie s at both LG A an dDCA , whic h 1 7effectuat e th e statutory goal of maximizin g conipetitiv e opportunitie s for airline s an dassurin g tha t th e travelin g publi c receive s th e servic e an dfar e benefit s provide db y competitiv e airlin e service. TH E PROPOSE D TRANSACTIO N WOUL D LEA D T O A REDUCTIO N I N COMPETITIO N A T DC A AN D LG A I n thei r filings , U S Airway s an dDelt ahav e no t challenge dth e calculation s state di n th e Notic e that , i f th e transactio n wer e approve da s proposed , th e proportio n o f U S Airways ' shar e o f

slot s an ddeparture s a

t DCA , an dDelta' s shar e o f slot s an ddeparture s a

t LGA , woul dincreas e substantially . DO T ha dcalculate dtha t U S Airways ' shar e o f

slo t interest s a

t DC A (includin g regiona l affiliates ) woul dincreas e fro m44 % t o 54% , an dit s shar e o f departure s woul dincreas e fro m4 7 t o 58% . Similarly , DOT' s calculation s for Delta' s shar e o f

slo t interest s a

t LGA , includin g affiliates , woul dris e fro m2 4 t o 49% , an dit s shar e o f departure s woul dris e fro m2 6 t o 5 1 percent . In both cases , th e increase s v/oul dhav e th e effec t of makin g U S Airway s b y fa r th e dominant carrie r at DCA , an dDelt ab y fa

r th e dominan t

carrie r at LGA . Rathe r tha n challengin g th e calculation s of concentration , th e carrier s argue dtha t th e Notic e fail s t o articulat e th e leve l o f

concentratio n that

cause s concern . Th e commo n metri c use di n antitrus t analysi s for

marke t concentratio n level s i s th e Herfindahl

Hirschma n Index , (HHI).'" ' Unde r th e Horizonta l Merge r

Guideline s issue db y th e U.S . Departmen t

of Justic e an dth e Federa l Trad e Commission , transaction s that increas e th e HH I b y mor e than 10 0 point s i n concentrate dmarket s (concentrate dmarket s ar e define da s thos e i n whic h th e HH I i s i n exces s o f 180 0 points ) presumptivel y rais e antitrus t concerns . In it s comment s t o th e docke t

i n thi s case , th e Unite dState s Departmen t o f Justic e state dtha t

it ha d calculate dthat , i

f th e transactio n wer e approve da s proposed , th e HH I at wil l increas e at

LG A b y 60 0 fro m239 4 t o 2994 , an dat DCA wil l increas e b y 62 6 fro m275 6 t o 3382."^ ^ Unde r th e Guidelines , suc h increase s i n highl y concentrate dmarket s ar e presumptivel y likel y t o creat e o r enhanc e marke t

powe r o r facilitat e it s exercise.'* ^ A s th e methodolog y for

th e calculatio n o f

th e HH I indicates , i t

i s not simpl y th e marke t

shar e of th e larges t

competito r

tha t raise s potential competitiv e concerns , bu t it s magnitud e relativ e t o th e marke t share s o f others . A s th e Notic e pointe dout , i f th e transactio n wer e approve da s submitted , a

t DCA U S Airway s woul dbecom e thre e time s th e siz e of it s closes t

competitor . '*" Th e HH I fo

r aparticular

marke t i s calculate db y squarin g th e marke t shar e o f eac h fir mcompetin g in th e marke t an dthe n summin g th e resultin g numbers . Th e HH I take s int o accoun t th e relativ e siz e an ddistributio n o f th e firm s in amarke t

an dapproache s zer o whe n amarke t consist s o f

alarg e numbe r

o f firm s o f relativel y equa l size . Th e HH I increase s bot

h a s th e numbe r

o f firm s in th e marke t

decrease s an da s th e disparit y in siz e betwee n thos e firm s increases . Se e U.S . Departmen t o f Justic e an dFedera l Trad e Commission , Horizonta l Merge r Guidelines . " ' Comment s o f

th e Unite dState s Departmen t o f Justice , Marc h 24 , 2010 , p . 5 . ' ^ U.S . Departmen t

o f Justic e an dFedera l Trad e Commission , Horizonta l Merge r Guideline s §1.5 1 (1992) . 1 8whil e a

t LGA , Delt awoul dbecom e two-and-one-hal f time s th e siz e of

it s closes t

competitor . (Moreover , LG A woul dtransitio n fro ma n airport wit h thre e competin g carrier s of similar siz e t o on e wit h asingl e doininant

carrier. ) A s als o cite din th e Notice , carrier s with relativel y wea k minorit y position s hav e limite dabilitie s t o exert competitiv e pressur e an ddisciplin e th e fare s of th e dominan t

carriers , apoin t

tha t neithe r U S Airway s no r

Delt achos e t o dispute . I n it s comments , th e Departmen t of Justic e concurre dwith ou r tentativ e vie w of

th e increase d concentratio n levels . It

emphasize danothe r

importan t

poin t - that th e transactio n woul dreduc e competitio n betwee n U S Airway s an dDelta : ''^ "Th e transactio n als o wil l reduc e competitio n betwee n Delt aan dU S Airway s a t DC A an dLGA . U S Airway s an dDelt aar e principa l rival s a t th e airports . Pos t transaction , however . Delt awil l shrin k substantiall y a

t DCA , reducin g it s ability t o compet e effectivel y with U S Airways . Similarly , U S Airway s wil l shrin k substantiall y at

LGA , reducin g it s abilit y t o compet e effectivel y with Delta.""* ^ Whil e no t a n issu e directl y addresse di n th e HHI , DO T believe s that , a s agenera l rule , i n th e aviatio n industry mor e competitiv e pressur e an dpricin g disciplin e ca n b e exerte db y low-cos t carrier s tha n b y incumben t legac y carriers . Thi s vie w i s supporte db y th e Departmen t o f Justice,'' ^ a s wel l a s i n th e academi c literatur e cite di n th e Notic e an db y DO J i n it s Appendi x A . A t both LG A an dDCA th e secon dlarges t carrie r woul db e th e legac y carrie r America n Airlines . Moreover , low-cos t

carrier s hav e onl y avery limite dpresenc e a t both airports , with a3.3 % shar e o f slo t interes t holding s a

t DCA^ ° an da6.8 % shar e at LGA , an dthe y fac e substantia l barrier s t o increasin g thei r

presence , becaus e entry t o both airport s i s governe db y slo t regimes . A s state di n th e Notice , studie s indicat e tha t entr y b y low-cos t

carrier s dramaticall y lower s fare s an d increase s th e volum e o f

passenger s i n amarket,^ ' apoin t reinforce db y Southwest' s assertio n i n it s comment s that , wer e i t t o operat e th e slot s t o b e divested , empirica l dat aindicate dtha t i t woul darmuall y carry mor e tha n 340,00 0 additiona l passenger s t o an dfro meac h o f th e tw o airport s an dtha t

it s fare s woul daverag e 33 % lowe r tha n Delta' s averag e fare at LG A an d49 % lowe r tha n U S Airways ' averag e fare at DCA.^ ^

" ^ DO T calculate s tha t

at DC A ther e woul db e asharp decreas e in servic e b y Delta , reducin g i t fro mamajo r competito r

o n DC A route s wit

h U S Airway s t o on e holdin g fewer than 5.5 % o f

th e O& D passengers . Similarly , a t LG A U S Airways ' shar e o f O& D passenger s woul dfall t o jus t 6 percent . In thes e cases , w e fea r that th e diminishe d presenc e o f

Delt aat DC A an do f

U S Airways ' at

LG A wil l lesse n thei r

abilitie s t o competitivel y pric e thei r remainin g flight s at

th e respectiv e airports . '' ^ Comment s o f

th e Unite dState s Departmen t o f Justice , Marc h 24 , 2010 , p . 4 . '* ^ Se i Comment s o f

th e Unite dState s Departmen t o f Justice , Appendi x A . ' " I f th e temporary slot s interest s acquire db y JetBlue'fro mAmerica n were included , th e LC C percentag e a t DC A woul dris e to 5. 2 pe r

cent . ^'Notice , p . 12 . ' ^ Comment s o f

Southwes t

Airline s Co. , p . 11-12 . 1 9In addition , th e Departmen t of Justice , in it s comments , state dthat Delt ahas , i n th e past , assume dinconsisten t

position s o n th e competitiv e effect s of slo t share s an dconcentration s a t DC A an dLGA : Durin g Delta' s bankruptc y thre e year s ago , U S Airway s considere dacquirin g Delta . Delt aresiste dU S Airways ' overtures , arguin g tha t th e merge r

woul dcaus e competitiv e harma

t DCA an dLGA . A t

that time . Delt aargue dthat

slo t share s resultin g fro mth e merge r level s tha t

ar e approximatel y th e sam e a s th e share s tha t woul dresul t

fro mth e presen t

propose dtransactio n raise dsubstantial competitiv e concerns . Delta' s curren t positio n i s precisel y th e opposite.^' ' [citation s omitted] . Althoug h U S Airway s an dDelt aquestione dth e concern expresse din th e Notic e regardin g th e potentiall y anticompetitiv e effect s resultin g fro mincrease dairport concentratio n levels , the y nonetheles s offere dacounterproposa l unde r whic h the y woul dvoluntaril y dives t 1 5 slo t pair s a t LG A an d4. 5 slo t

pair s a t DCA . Th e slo t

pair s woul db e diveste dt o four differen t carrier s tha t wer e eligibl e unde r

th e term s of

th e Notice , with n o carrie r receivin g mor e tha n 5 slo t pairs . Th e carrier s hav e no t

demonstrate dthat

tlies e voluntar y divestiture s shoul do r woul dreasonabl y assuag e th e competitiv e concern s w e expresse di n ou r February 9 Notice . In particular , th e divestitur e o f

onl y 4. 5 pair s of

slot s a t DC A - wher e th e Notic e clearl y indicate dther e wer e seriou s concentratio n an dcompetitio n concern s - an dth e inability o f th e four low-cos t beneficiarie s t o moun t

thei r ow n competin g servic e i n th e near-ter mwer e disappointin g element s t o th e counterproposal . A s discusse dmor e full y below , w e conclud e tha t th e counterproposa l fall s significantl y short

o f what w e believ e th e minimu mlevel s o f divestitur e mus t

b e t o adequatel y protec t

th e publi c interest . Ou r Concern s Abou t

Potentia l Anticompetitiv e Har mar e Weil-Founde dan dFull y Justifiabl e In th e Notice , w e se t

ou t concern s that

U S Airway s an dDelt acoul dincreas e th e numbe r of market s the y serv e o n amonopol y o r dominan t

basis , an dtha t

consumer s a

t thes e airport s may b e harme db y th e los s o f

nonsto p service , th e los s of anonsto p competitor , o r th e transfe r

o f nonsto p monopol y servic e t o amor e dominan t carrier .

^ ^ Comment s o f

th e Unite dState s Departmen t o f Justice , Marc h 24 , 2010 , p . 5 , n.8 , citin g Hearin g o n th e Stat e o f th e Airlin e Industry : Th e Potentia l Impac t o f Airlin e Merger s an dIndustry Consolidatio n Befor e th e S . Comm . o n Commerce , Scienc e an dTransportation , 110t h Cong . (Jan . 24 , 2007 ) (testimon y o f Geral dGrinstein , CE O o f Delt a Ai r Lines ) ("Th e combine dcarrie r woul doverwhelmin g [sic ] dominat e a t thes e uniqu e airport s wit h restricte dentry du e t o slo t

controls.. . At

Washingto n National , amerge dU S Airways-Delt awoul doperat e nearl y fou r time s mor e slot s a s it s nex t

larges t competito r

.. . At Ne w York-LaGuardia , th e combine dcarrie r woul doperat e almos t

twic e a s man y slot s a s th e nex t

larges t competito r

....") . 2 0W e als o tentativel y conclude dtha t th e propose dtransactio n wa s likel y to resul t i n highe r fare s for consumer s in certai n domesti c markets , a s th e carrier s coul drel y o n thei r increase d dominanc e t o inaintai n o r enhanc e thei r

premiu mfar

e structur e i n market s serve da t both airports . Furthermore , w e expresse dconcern s that becaus e slo t

restriction s a

t both airport s substantiall y hinde r

proportiona l increase s i n competitio n b y othe r carriers , highe r

fare s coul db e sustainabl e du e t o th e carriers ' increase dmarke t powe r a t both airports . In reachin g thes e tentativ e conclusions , w e relie do n statistica l informatio n indicatin g that U S Airway s an dDelt aalread y charg e highe r relativ e fare s wher e the y operat e monopol y o r dominan t route s fro mairport s wher e the y hav e astron g presence , suc h a s DCA an dLGA . That informatio n include drelatin g U S Airways ' an dDelta' s averag e fare s a t DCA an dLG A t o th e Standar dIndustry Far e Leve l (SIFL) , acost-base dinde x that w e hav e use dhistoricall y t o assis t i n it s evaluatio n of

pricing . Tha t

informatio n indicate dtha t th e averag e fare s charge db y U S Airway s a

t DCA an dDelt aat

LG A substantiall y exceede dnot onl y th e average fare s at th e othe r DC-are aan dNYC-are aairports , bu t of th e larges t

carrier s a

t eac h of thos e airports . It i s tellin g tha t

U S Airway s an dDelt ahav e not urge din respons e tha t

thei r fare s ar e a

t o r belo w averages , no r

provide ddat ashowin g tha t the y d o no t

utiliz e thei r

pricin g powe r

t o charg e premiu mfare s i n market s tha t the y dominate . Rather , the y asserte dtha t FAA' s concern s abou t potentia l anticompetitiv e action s wer e mer e speculation , a s w e di dnot poin t t o specifi c instance s of harm ; argue dthat

th e SIF L wa s effectivel y obsolet e a s ausefu l measur e o f cost ; an durge d that th e benefit s o f

th e transaction , whic h the y assesse da t $44. 3 millio n les s i n consume r cost s for trave l o n affecte droute s an d$15 3 millio n if increase dflyin g du e t o improve dcormectivity an dservic e wer e included , woul doutweig h th e conceivabl e harms . A s t o th e concern s abou t

harmi n specifi c markets , thos e concern s ar e real an ddemonstrable . I f th e transactio n i s consummate da s finall y proposed . Delt aplan s t o withdra w fro manumbe r of DC A nonsto p route s o n whic h it compete s with U S Airways , an dU S Airway s plan s t o withdra w fro mothe r

LG A nonsto p route s o n whic h i t compete s with Delta . Unles s ne w servic e i s institute db y carrier s othe r tha n D L an dUS , thes e route s wil l becom e ne w monopol y route s for th e remainin g carrier . Moreover , a

t variou s othe r

communitie s Lf

S Airway s wil l depart

market s at

whic h it i s th e sol e o r dominan t

provide r o f LG A nonsto p service , an dDelt awil l ente r thos e sam e market s an d becom e th e sol e o r

dominan t

provide r o f service . A t

severa l more . Delt awil l depart ainarke t a t whic h i t i s th e sol e provide r

of DC A nonsto p service , an dU S Airway s wil l ente r tha t sam e marke t an dbecom e th e sol e provide r of suc h service . Whil e replacin g on e dominan t carrie r with anothe r i n amarke t

migh t a t firs t glanc e see mt o hav e aneutra l overal l impact , suc h aconclusio n woul dignor e th e greate r

economi c dominanc e tha t th e succeedin g carrie r

woul dhav e a s aresul t of th e transaction . Althoug h th e carrier s pla n t o ad dnonsto p servic e t o anumbe r of ne w communities , that

servic e i s likel y t o b e provide do n amonopol y basi s an da s aresul t can b e 2 1price da

t apremium . A s discusse dals o below , ther e i s n o assuranc e that suc h servic e wil l continu e for

th e longe r

term . Delt aha s alread y notifie dth e airport a t Roanoke , V A that

i t doe s no t pla n t o continu e it s servic e fro mthat airport t o LGA , leavin g tha t

communit y withou t

an y nonsto p servic e t o Ne w Yor k City aiiports , an dit s intention s for servic e t o othe r

Virgini a communitie s ha s als o bee n questioned . Whil e som e of

th e consume r

benefit s cite di n support of thi s transactio n may prov e t o b e short

lived , th e consequence s o f carrie r dominance , i

f no t effectivel y remediated , wil l likel y b e mor e persistent . In thi s regard , DO J note dthat : Th e FA A ha s conclude dtha t th e increase dconcentratio n resultin g fro mth e transactio n wil l lea dDelt aan dU S Airway s t o 'rel y o n thei r increase ddominanc e t o maintai n o r

enhanc e thei r

premiu mfare structur e i n market s serve dat both airports ' [citin g th e Notic e a

t 7,309] . Thi s i s consisten t with a n extensiv e bod y of

empirica l wor k findin g tha t

airport concentratio n i s associate dwith highe r fares.^^ DO J als o asserte dthat : Th e parties ' transactio n wil l mak e LC C entry a t LG A an dDC A les s likely , deprivin g consumer s of

th e lowe r

fare s an dvigorou s competitio n tha t LCC s brin g t o th e marketplace . I t

wil l increas e th e shar e of slot s hel db y Delt aan dU S Airways , givin g the mmor e revenu e an dprofit s a t ris k du e t o entry , mor e market s for whic h i t wil l b e i n thei r

interes t t o forestal l entry , an dthus , les s incentiv e t o sel l o r leas e slot s t o apotentia l entrant . An dalso : LG A an dDCA slot s ar e highl y concentrate di n th e hand s of Delt aan dU S Airways , both of

whic h hav e littl e incentiv e t o sel l o r leas e slot s t o othe r

carrier s tha t woul dcompet e with them . [Cjonce mabou t

LC C entr y i s especiall y great a t DCA an dLGA , wher e limite d LC C presenc e an dslo t

control s protec t

hig h fare s for

incumben t

carriers . 5 7 A s note dabove , i n th e Notic e w e ha dprovide ddat at o th e effec t tha t U S Airway s maintaine da n average fare that

was hig h relativ e t o SIF L a t DCA . Th e carrier s challenge dth e us e o f SIF L i n thi s context , arguin g tha t

it wa s calibrate dt o regulat e airlin e fare s i n th e 1970's , ha s limite d

'" ' Lette r o f Marc h 25 , 201 0 fromJi mWeb b an dMark Warner , Unite dState s Senator s fro mVirginia , t o DO T Secretary Ray LaHood , Docke t FA A 2010-0109 . ^ ^ Comment s o f

th e Unite dState s Departmen t o f Justice , Marc h 24 , 2010 , p . 6-7 . ^ * Id. , p . 4 . " Id. , pp . 8-9 . 2 2curren t

use , fail s t o contro l fo

r certai n factors , an di s biase din favo r of longe r route s a t th e expens e of

shorte r ones.''* ^ A mileag e cost-base dfar e benchmark , SIF L i s calculate dever y quarte r basedo n airlin e operatin g cost s reporte dt o DO T b y 1 7 majo r airline s (compose dof

6 legacy , 4 LCC s an d7 othe r carriers) . Far

fro mbein g obsolete , a s th e partie s suggest , SIF L ha s bee n utilize db y th e Interna l Revenu e Service , th e Governmen t Accountabilit y Office , th e Department , othe r governmen t agencies , th e airlin e an dairlin e consultin g industries , an dacademic s for fare analysi s for

man y years . Mor e importantly , th e result s achieve di n ou r SIFL-base danalysi s mirro r thos e of othe r tests . Th e firs t o f thes e othe r

test s o f airpoi t fare ranking s i s foun di n ou r "Domesti c Airlin e Fare s Consume r

Report, " whic h i s publishe dquarterly . Tabl e 7 of thi s repor t

currentl y contain s average fare premium s for 12 1 city markets , sorte db y fare premiu mpercentage s i n descendin g order . Fo r

th e Thir dQuarter

2009 , DCA rank s numbe r 3 with a27.7 % fare premium , whil e LG A appear s a s numbe r

1 6 with apercen t

fare premiu mof

9% . Thes e fare premiu m calculation s includ e distanc e an ddensit y adjustments , an dclearl y substantiat e ou r concern tha t DCA an dLG A ar e high-far e airport s - eve n befor e th e additional concentratio n an dresultan t increas e i n pricin g powe r tha t woul dresul t

fro mth e carriers ' propose dtransaction . Furthermore , a

n analysi s of

comparativ e yield s - als o discusse di n th e Notice , but i n th e contex t o f comparin g th e thre e D C an dthre e NY C airport s - produce dth e sam e conclusions . W e foun d tha t th e averag e yiel d(i.e. , revenu e pe r passenge r

mile ) i n al l market s a

t BWI i s 48 % les s tha n DCA , an dth e averag e yiel di n al l market s a t Dulle s i s 37 % les s tha n DCA.^ ° Similarly , th e averag e yiel da

t JF K i s 28 % les s tha n a

t LGA , an dNewark

i s 9 % les s tha n a

t LGA.^ ' Moreover , usin g mileage-base dcalculation s tha t shoul dallay th e carriers ' concern s abou t long-hau l bia s i n th e SIF L figures , w e determine dthat for trip s ou t t o 100 0 miles , passenger s a t LG A pay 23 % mor e o n average tha n thos e a t JF K ($14 7 vs . $12 0 eac h way) , whil e passenger s a t DCA pa y 64 % o n averag e mor e tha n thos e at BW I ($18 4 vs . $11 3 eac h way) .

' * An y bia s that

may exis t

betwee n long-hau l an dshort-hau l markets , a s argue db y th e parties , doe s no t appl y t o th e SIF L analysi s use di n thi s case , whic h i s base do n averag e passenge r tri p length at

eac h o f th e thre e Washingto n or Ne w Yor k airport s (whic h ar e al l in exces s o f 50 0 miles) . ^ ' Thes e cost s ar e reporte dt o DO T in "For m4 1 Financia l data " by certificate dai r carrier s a s aconditio n o f thei r holdin g aU.S . air

transport certificat e o f

publi c convenienc e an dnecessity . U.S . air carrier s submi t

thes e dat a accompanie db y sworn statement s attesting , unde r penalty o f

law , a s t o a s t o th e accurac y an dtimelines s o f th e data . * Yiel dat

DC A i s 2 7 cent s pe r

mile , vs . 1 7 cent s at

Dulle s an d1 4 cent s at

BWI . ^ ' Yiel da t LG A i s 20. 5 cent s pe r

mile , vs . 18. 7 cent s at

EW Ran d14. 7 cent s at

JFK . ^ ^ Thes e difference s i n th e leve l o f yield s at are aairport s tende dto correlat e wit h th e leve l o f

lo w cos t carrie r operations . Passenger s pay mor e for nonsto p servic e o f

equivalen t

distanc e a

t DC A an dLG A tha n a

t alternativ e airport s tha

t hav e sizabl e LC C competition . 2 3Marke t

Analysi s Confirm s th e Reasonablenes s o f Ou r Concern s o n Fare s A revie w o f

both U S Airways ' an dDelta' s historica l pricin g i n siinilar market s indicate s that absen t th e opportunit y for

additional competitio n afforde db y slo t divestiture , consume r

saving s a t DCA an dLG A a s aresul t of thi s transactio n woul db e negligible . I n assessin g U S Airways ' an dDelta' s claim s a s t o potential consume r saving s that

woul daris e a s aresul t

of th e propose d transaction , w e considere dmaterial s presente db y U S Airway s tha t provide dbas e perio dan d forecas t perio destimate s of

marke t tota l passengers , projecte dloa dfactors , an dothe r data . W e compare dth e forecaste dfare s agains t U S Airways ' historica l pricin g i n comparabl e markets , " an dgive n thei r

poo r correlatio n w e believ e th e forecast s understat e th e average fare s likel y t o actuall y prevai l longe r

ter mi n th e particular

markets . It

ma y b e tha t

th e prospectiv e fare s liste d i n th e documen t

ar e introductor y fares , o r othe r short-ter mo r

promotiona l fares . In an y event , give n th e divergenc e betwee n thes e claime dfare s an dU S Airways ' histori c pricing , w e wer e unabl e t o corroborat e U S Airways ' claim s of saving s i n th e DCA market . Rather , projecting th e histori c pricin g trends , i t

i s reasonabl e t o assum e tha t U S Airway s a

t DCA would , especiall y ove r time , utiliz e it s increase dpricin g powe r t o exac t premiu mfare s i n man y of th e market s impacte db y th e transaction . W e di dnot

hav e asimilar

documen t

fro mDelt athat

projecte dit s fare s i n eac h propose d market . However , i n orde r t o asses s th e potential impac t o f Delta' s pricin g policie s o n th e travelin g publi c w e als o examine dprobabl e Delt afare s base do n th e carrier' s histori c pricin g performanc e a

t LGA.^^ A s with DCA , w e wer e unabl e t o coiToborate th e carrier' s claim s of potentia l consume r

saving s and , a s with DCA a s well , th e dat aindicate dalikelihoo dthat , especiall y ove r

time . Delt awoul dutiliz e it s pricin g powe r t o exac t premiu mfare s i n man y of th e market s affecte db y th e transaction . Eve n i f greate r support migh t b e mustere dfor

th e carriers ' claim s o f

consume r

cos t savings , w e compare dthos e claim s with th e saving s tha t migh t occu r unde r adivestitur e scenario . Base d

* ^ I n this , w e compare dth e existin g averag e fare s fro mth e O& D wit h th e Standar dIndustry Far e Leve l (SIFL ) metri c fare for

eac h o f 3 9 DC A market s an dstratifie dth e market s base do n U S Airways ' marke t share , int o monopoly , dominant , competitive , an dnon-competitiv e markets . Thes e result s provide dameasur e agains t whic h U S Airways ' forecas t

fare s wer e compare dt o thei r historica l pricin g performanc e an dagains t th e SIF L metric . " DO T di dreques t

that Delt aprovid e an y document s it hadthat wer e equivalen t

t o what U S Airway s hadprovided , bu t th e numbe r

o f market s fo

r whic h the y wer e abl e t o offe r informatio n wa s limite dt o 1 0 ou t o f approximatel y 3 6 market s wher e servic e i s proposed . Whil e useful , th e limite ddat aprevente dth e Departmen t fromfully analyzin g th e leve l o f

forecas t fare s an drequire dth e Departmen t to independentl y revie w Delta' s apparen t pricin g strategie s in th e markets . * ^ Staf f calculate dpassenger-weighte daverag e fare s tha t reflecte dDelta' s histori c pricin g in thei r existin g markets , wit h whic h the y estimated , togethe r wit h othe r dat a(suc h a s currentl y prevailin g fare s in th e marke t an dinformatio n o n th e competitiv e environmen t t o b e expecte din th e market ) likel y Delt afare range s a s apercen t o f SIF L in variou s city-pai r

markets . O f

particular

importanc e i n thi s assessmen t wa s consideratio n for

Delta' s future potentia l marke t shar e an dth e competitiv e positio n tha t woul denhanc e o r

diminis h Delta' s pricin g power . 2 4upo n a

n analysi s conducte db y th e Departmen t o f Justice,^ ^ w e ar e persuade dtha t additiona l LC C presenc e a

t a n airport i s associate dwith significantl y lowe r average fare s an dhighe r passenge r volume s a

t tha t airport an dconsequentl y greate r publi c benefi t

fro mcompetition.^ ^ Moreover , ther e i s convincin g evidence , als o base dupo n th e Depaitmen t o f Justic e findings , tha t a s additiona l LC C presenc e grow s a t a n airport ove r time , it i s associate dwith larg e an d statisticall y significan t

pric e decrease s an dpassenge r volum e increase s a

t that airport . Thi s demonstrate s precisel y wh y th e divestitur e of slot s t o LCC s can ameliorat e th e competitiv e concern s raise db y th e applicants ' propose dtransaction.^ ^ Th e Thre e D C Are aan dThre e NY C Are aAirport s ar e no t "Interchangeable " In ou r Februar y Notice , w e tentativel y foun dtha t othe r airport s i n th e Ne w Yor

k an d Washington , D C area s di dnot significantl y impac t

th e ability of

carrier s t o exert

pricin g powe r

a t LG A an dDCA , respectively . U S Airway s an dDelt adisput e thi s conclusio n an dmaintain , a s a ke y elemen t

i n support

of thei r application , that

th e thre e majo r

metropolita n airport s i n Washington , an dth e thre e majo r metropolita n airport s i n Ne w York , respectivel y constitut e singl e produc t

markets , implyin g tha t

if fare s wer e perceive dt o b e risin g to o hig h at on e airport , th e har mwoul db e mitigate db y consumer s simpl y shiftin g t o th e othe r two . Thei r

argumen t heavil y relie do n astud y performe do n thei r behal f b y Compass/Lexecon , entitle d"Analysi s of Relevan t Airport Groupings, " whic h wa s submitte dt o th e docket . Th e stud y addresse d"whethe r th e relevan t

origi n (destination ) point s i n Ne w York an dWashingto n ar e individua l airport s o r group s o f airport s tha t

passenger s ar e willin g t o us e interchangeably. " Whil e th e stud y neve r

conclude dpe r

s e tha t th e airport s wer e "interchangeable, " i t conclude d that ther e wer e "statisticall y significan t relationship s betwee n fare s a t th e thre e majo r

Ne w Yor

k airports , an dseparately , betwee n fare s a t th e thre e majo r

Washingto n are aairports.. . [indicating ] tha t fare s a t eac h airport.. . ar e affecte db y competitiv e condition s a t th e othe r airports " i n th e sam e metropolita n area.^ °

^ ^ Here , w e place drelianc e o n an analysi s conducte db y th e Departmen t o f Justice , whic h that

foun dthat

1 0 extr a percentag e point s o f

low-cos t carrie r shar e at an airport

reduce s o n averag e th e airport-wid e pric e premiu mo r discoun t b y 4 t o 9 percentag e points , an dincrease s th e total numbe r o f passenger s at

th e airport

b y 7. 7 t o 14.8% , dependin g o n th e sampl e used . ^ ^ DO J Appendi x A a

t A-7 . Thei r analysi s showed , fo

r example , that

a s LC C presenc e a t

a n airport increase s b y 2 0 percentag e point s (fro m zer o t o 20% , say) , th e averag e airport-wid e far e premiu mfall s b y a

n averag e o f

8 t o 1 8 percentag e points , dependin g o n th e sampl e o f

airport s examined . Similarly , a2 0 percentag e poin t increas e i n LC C presenc e i s associate dwit h a 1 5 t o 30 % increas e i

n th e numbe r

o f passenger s a

t that airport . ** ' Id . at A-6 . TM U S Airway s an dDelt aals o asserte dthat th e Departmen t

o f Transportatio n an dth e Departmen t o f Justic e hav e effectivel y treate dth e thre e Washingto n are aairport s a s economi c substitutes . Comment s o f Delt aan dU S Airway s at p . 3 4 an d35 . With regar dt o DOT , the y cite dOrde r 2006-6-1 7 (Jun e 12 , 2006 ) a s evidencin g suc h aposition . I n that case , thre e applicant s compete dfor a n awardo f

tw o slo t exemption s at

DC A t o serv e acommunit y withi n th e 1250-mil e perimeter . DO T foun dth e cas e t o b e "extremel y close " betwee n Comair' s proposa l t o serv e Savanna h 2 5W e hav e both reviewe dth e Compass/Lexeco n study , a s wel l a s comment s offere dt o th e docke t

o n thi s issue , an dw e ar e confiden t i n concludin g that , whil e fare s a t on e o f th e thre e DC-are ao r NYC-are acan exert

amino r influenc e o n fare s a

t th e other s i n som e markets , it i s quit e clear

that th e airpoit s ar e no t

economi c substitutes . W e further conclud e tha t

th e presenc e o f

les s costl y servic e alternative s fro mBW I an dIA D i n Washingto n an dEW Ran dJF K i n Ne w Yor

k are not sufficient t o mitigat e th e harmt o consumer s tha t can occu r

fro msignificantl y reduce d competitio n a

t DCA an dLGA . Th e Compass/Lexeco n analytica l approac h wa s t o compar e fare trend s ove r tim e betwee n th e thre e Ne w Yor

k an dthre e Washingto n are aairport s an dcommo n destinations . The y foun dthe m t o b e systematicall y linke dove r time , suc h tha t

achang e i n fare level s at on e Ne w York

airport i s associate dwith an increas e i n th e fare a t othe r are aairports . Fro mthes e observe d"pric e linkages " the y conclude dtha t th e Ne w York

an dWashingto n are aairport s ar e "commonl y accepte dt o b e substitutes. " W e believ e th e methodolog y of th e stud y was flawe di n anumbe r o f fundamenta l respects . Mos t significantly , whil e th e stud y claime darelationshi p i n th e movemen t of fares , i t effectivel y admitte dthat

th e degre e of

relationshi p i n th e actua l o f leve l o f fare change s wa s small . Th e result s indicate dtha t

an increas e i n th e fare s a t on e Ne w York

airport o f 10 % i s associate dwith a n increas e i n th e fare a

t anothe r Ne w Yor

k airport o f onl y abou t

2.8% . A t

Washington , th e correspondin g figur e was onl y 2.1% . I f th e majo r

Ne w York

an dWashingto n airport s ar e "economi c substitutes, " a s th e author s contended , tha t appear s t o b e a

t odd s with th e fac t

that a pric e chang e a

t on e woul dproduc e achang e a t th e other s o f

onl y on e quarte r

o r on e fift h a s much.^ '

an dU S Airway s t o serv e Sarasot aBradenton , a s eac h satisfie dtw o o f th e statutory criteri aan doffere dsimilar benefit s t o th e respectiv e communities . I n weighin g th e advantage s an ddisadvantage s o f th e proposals , w e ultimatel y selecte dth e U S Airway s proposa l becaus e th e populatio n in th e Sarasot aMS A wa s large r than Savannah's , U S Airways ' proposa l include daright-sizin g o f aircraf t t o reflec t th e seasonalit y o f

th e Sarasot a market , an dSavannah ha dbette r acces s t o th e Washingto n are awit h thre e nonstop s t o IA D versu s Sarasota' s on e t o BWI . I n n o wa

y wa s th e Departmen t

b y doin g s o statin g o r

implyin g that

servic e betwee n DCA , IA D an dBW I wa s interchangeable . Orde r

2006-6-1 7 at

7 , 8 . With regar dt o DOJ , Delt aan dU S Airway s cite daDO J 200 1 pres s releas e an da199 6 speec h b y an Assistan t Attorne y General . I n thes e instance s concern s wer e raise dabou t prospectiv e transaction s that woul dincreas e concentratio n b y carrier s at DC-are aairports . Again , thes e di dno t stat e that th e airport s wer e economi c substitute s for on e another . DOJ' s positio n o n th e issu e i s clearl y se t fort h i n it s filing s i n thi s matter , whic h support DOT' s propose daction . ^ ' Th e study als o faile dt o contro l fo r changin g macr o o r

eve n regiona l economi c trends . Moreover , i n testin g whethe r commo n airport

market s ar e competitive , relianc e shoul dno t mad e simpl y o n change s i n fare trend s alon e ove r time , bu t rathe r shoul dals o examin e whethe r passenge r

level s at eac h airport

pai r respond s t o change s in pric e ove r tim e a t othe r are aairport

pair s i n th e sam e city-pai r market . Finally , th e stud y attempt s to .sho w that populations i n th e Ne w Yor k an dWashingto n area s ar e disperse di n suc h amanne r

that man y coul ddriv e roughl y equa l distance s to "competing " airports . However , in doin g s o it faile dto reflec t

th e driv e tim e effect s o f congestion , o r

difference s i n th e availability o r cos t o f parking , accessibilit y to mas s transi t an dairport

amenities , althoug h thes e factor s clearl y alte r th e practica l substitutabilit y (cost/valu e t o consumers ) o f differen t airport s t o consumers . 2 6Also , in it s comment s th e Departmen t of Justic e expresse dcriticis mof th e Compas s Lexeco n study , observin g that

th e stud y faile dt o defin e th e leve l of correlatio n i n fare s that

woul dplac e th e airport s i n th e sam e relevan t market , suc h that

marke t powe r coul dnot

b e exercise da

t DCA (o r LGA ) independentl y of

BW I an dIAD (o r

JF K an dEWR).^ ^ However , give n th e issue s raise db y th e Compass/Lexeco n analysis , w e als o independently considere dwhethe r

th e thre e airport s i n th e Ne w York area , an dth e thre e i n th e Washingto n area , effectivel y constitut e th e sam e marke t for al l passengers . Comparativ e yields . Standar d Industry Far e Levels , an dFare/Deman ddat awer e al l studie dfor th e D C an dNe w York

airports . In ou r revie w o f

eac h o f thes e metrics , w e foun dtha t for alarg e portio n o f

passengers , especiall y time-sensitiv e passenger s i n eac h respectiv e metropolita n area , th e Ne w Yor k an dWashingto n are aairport s ar e not

effectiv e substitute s for

eac h other . a . Yiel dAnalysi s In analyzin g both overlap an dal l market s a t th e airports , w e foun dthat yield s (i.e. , revenu e pe r passenge r mile ) wer e substantiall y differen t amon g th e airports . Specifically , w e foun dth e average yiel di n al l market s at DC A i s 2 7 cent s pe r

mile , vs . 1 7 cent s at

Dulle s an d1 4 cent s a

t BWI . Similarly , th e averag e yiel da t LG A i s 20. 5 cent s pe r

mile , vs . 18. 7 cents a

t EW Ran d14. 7 cent s a t JFK . I f th e airport s wer e effectiv e economi c substitute s for al l passengers , w e woul d expec t t o se e agreate r

self-equalizin g o f

yield s an dth e yiel dspread s woul dnot differ s o significantly . b . Standar dIndustry Far e Level s DO T conducte da

n analysi s o f

th e leve l of

passenge r

weighte dfare s a s apercen t o f SIF L a t Washingto n an dNe w York City airport s t o tes t

th e propositio n that

fare s at thes e airport s ar e essentiall y undifferentiated . Th e result s ar e summarize da t Appendi x B .

^ ^ It i s no t surprisin g that

ther e i s som e correlatio n amon g fare s at nearb y airports , an dmor e correlatio n tha n on e woul dfindamon g thre e rando mairports . DO J asserte dthat suc h correlatio n alon e doe s no t sho w whethe r

fare s at DC A o r LG A ar e constraine db y fare s at nearb y airports . ^ ^ I n it s comments , Unite dAirline s contende dthat th e differential s in yiel daffectin g LG A an dDC A may b e du e simpl y t o th e adde dcost s o f slot s an dproblem s wit

h delays . A s ageneral point , airlin e fare s ar e market-base drathe r than cost-based(a s evidence di n th e varianc e in SIF L ratio s discusse dabove) . However , th e thre e Washingto n an d thre e Ne w Yor

k airport s largel y shar e th e sam e weather , amajo r caus e for delays , an dDO T Ontim e Performanc e dat afo r th e fourt h quarte r 200 9 indicate s that

delays ar e mor e commo n a t IA D tha n DC A o r

BWI , an dmor e commo n a

t EW Rthan at

LG A o r JFK . (Th e percentag e o f delaye dflight s wer e 17.7 % for DCA , 17.4 % a

t BWI , an d 19.4 % at IAD , a s wel l a s 24 % for

LGA , 198.8 % for

JFK , an d29.1 % fo

r EWR.) . Further , th e cos t fo r slot s coul dno t explai n th e wid e disparit y betwee n yield s at DCA , IAD , an dBWI o n on e han dan dLGA , EWR , an dJF K o n th e other . A s note dabove , DCA' s al l market s yiel di s 37 % abov e IA D an d48 % abov e BWI , whil e LGA' s comparabl e figur e i s 8 % highe r

tha n EW Ran d28 % highe r tha n JFK . Th e valu e o f

aon e cen t

yiel ddifferenc e pe r

quarte r o n al l schedule dpassenger s a

t DC A i s estimate dat

$28. 9 million , an d$4 1 millio n at LG A - man y time s th e valu e o f aslo t at thos e airports . 2 7DO T foun dthat th e relationshi p of

actua l fare s t o th e SIF L fare benchmark i s very differen t

a t th e respectiv e are aairports . A t th e Washingto n airports , actua l fare s ar e 65 % of SIF L a t BWI , 77 % a t IA D an d101 % a

t DCA . A t

Ne w York , th e actua l fare s ar e 71 % o f SIF L a t EWR , 57 % o f SIF L a t JFK , an d82 % of

SIF L a t LGA . Thes e disparitie s i n weighte dfares , consisten t wit h ou r finding s o n yields , implie s that pric e competitio n amon g th e airpoit s doe s not appear pervasiv e enoug h t o disciplin e individua l airport price s an dthereb y eliminat e substantia l pric e differentials . c . Fare/Deman dDat a I f th e thre e D C an dthre e NY C airport s wer e economi c substitutes , achang e i n th e fare level s a t on e shoul dproduc e acorrespondin g chang e i n passenge r level s both at

tha t airport an dth e other s i n it s area . (On e woul dexpec t tha t passenger s woul dboo k

les s trave l at

an airport

wher e fare s wer e increase dan dmor e trave l at th e others , if

th e airport s wer e indee d"competitors.")^' ^ W e foun dn o evidenc e of any significan t

substitutabilit y existin g amon g Ne w York an d Washingto n are aairports . Substantia l yiel ddisparitie s an dsubstantia l difference s i n SIF L ratio s wer e foun dt o exis t

amon g th e airport s i n both commo n an dnon-commo n markets , an dther e wer e very lo w level s o f

correlatio n betwee n th e fare difference s an dth e traffi c volum e difference s a

t th e airports . Th e Departmen t

of Justic e als o supporte dth e propositio n that mos t passenger s d o no t

conside r th e airport s t o b e interchangeable.^ ^ DO J note dtha t th e sometime s significan t difference s i n average fare s a

t th e variou s airports , an dth e hig h value s attache dt o th e slot s an dth e carrier' s effort s t o protec t

thes e slots , "sho w ther e i s differentiatio n betwee n LG A an dDC A an dothe r are aairports. " I

t furthe r observe dtha t

"Althoug h othe r

airport s may b e acceptabl e substitute s for

'' * In orde r

t o tes t thi s propositio n w e conducte datim e serie s analysi s usin g O& D dat afor th e sam e perio da s use di n th e Compass/Lexeco n study . Th e regression s produce dcorrelatio n coefficient s (R^ ) for eac h se t o f airport s that were very low , wit

h level s no t

significantl y differentiate dfromzer o - indicatin g th e lac k o f arelationshi p betwee n fare difference s at

DCA/LG A an dtraffi c difference s at th e othe r metropolita n are aairports . Eve n whe n regression s wer e performe dfocusin g o n overlap market s wher e th e fare differenc e betwee n th e referenc e airport marke t an dth e bas e airport

marke t wer e th e greates t

an dwher e highes t

fare s exis t

at th e bas e airport

- wher e consumer s woul db e mos t likel y t o see k

lowe r fare s b y turnin g to an alternativ e o r substitut e airport

- th e correlatio n coefficient s wer e no t substantiall y differentiate dfro mzero . ' ^ Althoug h supportin g divestmen t o f Delt aslot s a

t LG A i n orde r

to expan dopportunitie s fo r ne w entrant s an d limite dincumbent s in th e NY C metropolita n area , th e Por t Authorit y o f

Ne w Yor k an dNe w Jerse y contende dthat ther e were flaw s i n DOT' s analysi s o f airport substitutabilit y an dstate dtha t it operate s it s airport s to serv e on e trave l region , wit

h eac h airport

havin g overlappin g marke t areas . Whil e marke t

area s ma y "overlap, " that

doe s no t mean that passenger s withi n th e marke t area s ar e indifferent

a s to whic h airport

the y utilize , o r

tha t fare s a t on e disciplin e thos e at

others . W e believ e th e further discussio n a s presente dabov e addresse s th e Por t Authority' s othe r concerns . 2 8som e passenger s (particularl y price-sensitiv e passengers ) the y clearl y ar e no t clos e substitute s for othe r passengers , an dcompetitio n amon g carrier s a t DC A an dLG A matters."''' ^ I n conclusion , w e believ e tha t th e evidenc e presente db y th e partie s i n support o f thei r contentio n that Washingto n an dNe w Yor k are aairport s ar e effectiv e substitute s i s unconvincing . An y lo w leve l o f substitutio n that

may b e demonstrate di s inadequat e t o effectivel y disciplin e price s amon g th e are aairports , leavin g th e travelin g publi c vulnerabl e t o hig h fare s arisin g fro mlac k of competitio n an dhig h marke t concentration . Th e Repute dBenefit s of th e Transactio n D o No t Mitigat e th e Potentia l Harm s Th e Join t Applicant s hav e asserte dtha t th e FA A faile dt o conside r th e benefit s of

th e propose d transaction , includin g improvement s i n servic e an dincrease dcompetitio n amon g th e parties . Specifically , th e Join t

Applicant s clai mtha t

th e transactio n wil l resul t i n amor e efficien t utilizatio n o f

slot s an dfacilitie s throug h upgaugin g o f aircraf t siz e a t both LG A an dDCA , thereb y increasin g throughpu t an dcompetitio n whil e reducin g congestio n an ddelay . In addition , th e Join t Applicant s argu e tha t

th e facilitie s transfe r

wil l enabl e Delt at o creat e aseamless hu b a t LG A an dwil l facilitat e enhance dcompetitio n an dpreserv e an denhanc e smal l communit y acces s a t both LG A an dDCA . B y decidin g t o tentativel y gran t th e waive r

a s conditione di n th e Notice , w e no t onl y carefull y considere dthes e efficiencies , w e als o conclude dtha t the y woul dlikel y b e realize dif th e transactio n wer e implemente da s remedied . It i s clear fro mth e recor di n thi s proceedin g tha t th e slot s a t issu e i n thi s transactio n ar e currentl y bein g use dsub-optimall y an dinefficiently , both fro mth e perspectiv e o f

th e carrier s holdin g the ma s wel l a s fro mth e perspectiv e o f th e publi c interest . W e concu r

that th e transactio n woul dprovid e agreate r economi c incentiv e t o both carrier s t o achiev e mor e efficien t

utilizatio n of

slot s an dfacilitie s at

both airport s throug h upgaugin g aircraf t siz e an dtha t

tha t woul dproduc e publi c benefits . However , w e als o concu r with th e Departmen t

o f Justic e i n notin g that , "th e parties ' benefit s estimation s us e incorrec t baselines , o r 7 7 'but-for-world, ' agains t

whic h t o compar e thei r

promise dcapacity an dtraffi c gains. " Rathe r tha n comparin g th e projecte dincreas e i n capacit y an dtraffi c a t curren t levels , th e appropriat e compariso n i s agains t

alternative s t o th e curren t commercia l situatio n face db y U S Airway s a t LG A an dDelta' s plaime doperation s absen t th e transactio n a

t DCA.^^ A s such , w e believ e that th e Join t Applicant s hav e overstate dth e publi c benefit s an dunderstate dth e potentia l harm s fro m th e transaction . Indeed , i n man y airport-pai r markets , th e Join t

Applicant s are merel y replacin g eac h other' s service s at

th e tw o respectiv e airports . Give n tha t Delt aan dU S Airway s ar e ^ ^ Comment s o f

th e Unite dState s Departmen t o f Justice , Marc h 24 , 2010 , p . 16 . ^ ' Repl y Comment s o f

th e Unite dState s Departmen t o f Justice , Apri l 5 , 2010 , p 4 , footnot e 7 . ^ ^ Comment s o f

th e Unite dState s Departmen t o f Justice , Marc h 24 , 2010 , p . 18 . 2 9currentl y priinary competitor s for eac h othe r

a t eac h o f thes e aiiports , th e los s in potential competitio n i n th e market s the y both currentl y serv e i s particularl y important . In addition , Delta' s claime dpubli c benefit s o f creatin g ahu b a

t LG A ar e als o overstated . Fo r example , a s Southwes t

notes , creatin g ahu b a

t LG A woul dlikel y necessitat e relianc e o n regiona l jets , a s Delt ause s a

t othe r hubs , potentiall y erodin g th e benefit s of upgauging . Further , ahu b a t LG A woul dutiliz e asignifican t amoun t of it s scarc e capacity t o accommodat e passenger s wh o hav e n o nee do r

desir e t o b e a

t LG A but are onl y stoppin g ther e o n ajourne y elsewhere. ^ Th e Join t Applicant s assert

that on e of th e mai n benefit s of

th e transactio n i s increase do r enhance dservic e t o smal l communities . Whil e Delt aan dU S Airway s hav e mad e publi c som e of thei r ne w intende dservices , includin g servic e t o smal l communities , th e carrier s hav e not release dal l intende dservic e change s an di n n o way ar e boun dt o implemen t an y o f th e propose d service s i n ne w markets . Also , i f servic e t o smal l communitie s with a n establishe dhistor y of nonsto p servic e t o thes e slo t controlle dairport s i s eliminated , whil e servic e i s armounce dt o othe r smal l communitie s with ahistor y of unsustainabl e nonsto p service , i t i s questionabl e a s t o whethe r th e propose dservic e i s reall y beneficia l t o smal l communitie s a s awhole , o r i s merel y beneficia l t o som e smal l communitie s a t th e expens e o f

others . Th e Join t Applicant s hav e th e flexibility t o provid e servic e t o smal l communities , eve n whe n face dwith th e propose dremedies , b y eliminatin g margina l ne w frequencie s i n existin g mediu m an dlarg e market s and/o r

b y upgaugin g existin g frequencie s t o releas e slot s t o allocat e t o smal l communities . Whil e ther e ar e competitiv e reason s for allocatin g ase t

numbe r o f frequencie s t o a particular market , if

servic e t o smalle r

coimmunitie s i s a s importan t a s th e partie s contend , th e carrier s wil l allocat e th e necessar y resource s t o serv e them . In fact , despit e thei r threat s that smal l communit y servic e i s a t ris k i n aremedie dtransaction , th e carrier s may determin e tha t it i s financiall y beneficia l t o serv e smal l communitie s at th e expens e of

fewer frequencie s i n large r market s becaus e yield s i n smalle r market s ar e les s susceptibl e t o th e dilutiv e effect s of LCCs . DOT , o n multipl e occasions , ha s state di n DC A slo t exemptio n proceeding s tha t U S Airways , with it s larg e portfoli o of DCA slo t

holdings , ha s ha dth e ability t o ad dne w servic e t o smalle r 0 1 communitie s fro mDCA , bu t ha s chose n not

t o d o so . Unles s mitigated , th e potentia l harm s i n th e propose dtransactio n ar e substantial . First , a s explaine dabove , th e transactio n wil l reduc e competitio n betwee n Delt aan dU S Airway s an d competitio n fro mnearb y airport s wil l not completel y offset

los t competitio n betwee n th e tw o

TM Comment s o f

Southwes t

Airlines , p . 5 . ^ ° Indeed , amarket-by-marke t analysi s usin g th e carriers ' ow n metric s o f propose dservice s in ne w market s fo r Delt aa t LG A an dU S Airway s a t DC A give s ris e t

o concer n that , i n som e o f th e smalle r

markets , som e o f

thei r service s may no t

b e sustainabl e ove r

th e longe r

term . ^ ' See , e.g. , DO T Orde r

2008-2-2 8 Grantin g Within-Perimete r Slo t Exemption s a

t Ronal dReagan Washingto n Nationa l Airport , February 22 , 2008 , p . 10 ; an dDO T Orde r 2007-5-1 2 Grantin g Within-Perimete r Slo t Exemption s at Ronal dReaga n Washingto n Nationa l Airport , Ma y 23 , 2007 , p . 15 . 3 0carrier s a

t DC A an dLGA . Th e Join t Applicant s currentl y compet e o n anumbe r of LG A an d DC A nonsto p route s an dhav e compete do n man y other s in th e past . Schedulin g plan s submitte d i n th e recor dindicat e tha t Delt aplan s t o withdra w fro mDC A nonsto p route s o n whic h i t currentl y compete s with U S Airways , an dU S Airway s plan s t o withdra w fro mcertai n LG A nonsto p route s wher e i t

compete s with Delta . W e agre e with DO J that , "I n th e longe r run , competitio n betwee n Delt aan dU S Airway s wil l b e los t acros s anumbe r

o f routes. " Thi s los t competitio n i s unlikel y t o b e replace db y othe r incumben t

competitor s becaus e the y hav e significantl y fewe r

slot s an dtherefor e focu s thei r service s a

t thes e airport s o n cor e markets , particularl y larg e hu b o r

focu s citie s wher e the y can comiec t passenger s t o additiona l destinations . A s DO J concludes , "th e transactio n wil l reduc e th e numbe r of carrier s with 'excess ' slot s t o disciplin e afare increas e b y th e dominan t carrier s fro mtw o t o on e at LG A an d fro mon e t o zer o at

DCA."^ ^ Second , evidenc e i n th e recor destablishe s that th e transactio n wil l inhibi t ne w entry a

t LG A an d DCA . Th e recor dshow s tha t ther e i s apatter n of

slo t hoardin g b y incumben t

carrier s at

both LG A an dDC A i n orde r

t o preven t

ne w entrant s an dlimite dincumbent s fro mobtainin g o r expandin g competitiv e servic e a t thos e airports . In it s Notice , th e FA A note dth e lac k of robus t entry b y ne w entrant s o r

expansio n b y limite dincumbent s at thes e airports . DO J conclude s that slot s at both airport s ar e "highl y concentrate di n th e hand s o f Delt aan dU S Airways , both o f whic h hav e littl e incentiv e t o sel l o r leas e slot s t o othe r

carrier s that

woul dcompet e with them."^' * Notin g tha t

fare s ar e especiall y hig h at DCA du e t o limite dpresenc e o f low-cos t carrier s an dslo t

controls , DO J cite s evidenc e i n th e recor dtha t show s tha t

both U S Airway s an d Delt abeliev e tha t

competitiv e entry b y low-cos t carrier s "woul dsubstantiall y lowe r thei r protecte dfare s an dprofit s at thes e airports."^ ^ DO J further note s tha t

incumben t

carrier s ar e hoardin g an dbabysittin g slot s a t thes e airport s b y flyin g excessiv e frequencie s usin g smal l airplanes . In a

n effor t t o discourag e thes e anti-competitiv e practice s th e 80 % use-or-los e rule s wer e established . Legac y carriers , however , hav e effectivel y develope dmethod s tcfbypas s th e use-or-los e provisio n b y usin g thei r regiona l affiliate s t o downgaug e equipmen t o n existin g route s whil e increasin g frequency . Whil e th e carrier s ma y clai mthat highe r frequenc y servic e i n amarke t can benefi t

consumers , th e motivatio n for tha t may b e simpl y coverin g mor e slot s a t a lowe r pe r departur e tri p cos t

an dpreventin g th e mor e efficien t us e of afinit e numbe r

of slots . Fo r example , i n th e LGA-Raleigh/Durhar n market , U S Airways , Delt aan dAmerica n offer atota l of 2 3 weekda y departure s with averag e se^at s pe r departur e equalin g jus t

4 9 (May 201 0 schedules) .

^ ^ Comment s o f

th e Unite dState s Departmen t o f Justice , Marc h 24 , 2010 , p . 13 . "W.,p.l6 . 8 5 'Ud.,p.% . Id. , p.9 . 7rf.,p.lO,fn . 24 . 3 1Also , th e large r th e slo t portfoli o of

agive n carrier , th e greate r th e flexibility th e carrie r ha s t o abus e th e system , t o bypas s th e provision s o f th e use-or-los e rules , an dt o bloc k ne w entrant s o r limite dincumbent s fro mgainin g ne w o r improve dacces s t o thes e slo t controlle dfacilities . Th e propose dtransactio n woul dgiv e D L an dU S exactl y tha t - large r slo t holding s acros s man y hour s o f th e day , allowin g thes e tw o carrier s greate r flexibility t o bypas s th e 80 % use-or-los e rule s an dt o cove r

a s man y slot s a s possibl e b y maintainin g smal l regiona l aircraf t operations . Fuithermore , w e agre e with DO J tha t th e transactio n wil l reduc e th e availabilit y o f slots , give n that U S Airway s an dDelt awil l have : (1 ) substantiall y increase dslo t share s at DCA an dLG A respectively ; (2 ) greate r

marketin g an dschedulin g "presence " a t both airport s that

wil l allo w the mt o exac t

apric e premiu mi n both existin g an dne w markets ; and , (3 ) agreate r interes t i n maintainin g th e pric e premium s tha t exis t a t thos e airport s b y forestallin g ne w entry.^ ^ In orde r t o disciplin e th e increase dconcentratio n an dadditional pricin g powe r fo r bot h U S Airway s an dDelt aan dthereb y mitigatin g th e reductio n i n competitio n du e t o th e transaction , significan t

additional competitio n i s necessary . A s analyse s b y both th e Department , DOJ , an d Southwes t

conclude , competitio n b y ne w entrant s an dlimite dincumbents , particularl y LCCs , wil l no t onl y maximiz e th e economi c efficienc y o f th e slot s a

t both airport s throug h th e operatio n of mor e seat s a

t lowe r fare s pe r slo t tha n b y Delt ao r

U S Airways , bu t

wil l als o minimiz e th e tota l numbe r

o f slo t divestiture s require dto remed y th e anticompetitiv e effect s o f th e transaction . W e agre e tha t

ther e ca n b e importan t

benefit s provide da s aresul t o f th e propose dtransaction , but i t i s a t th e margins , wher e thos e potentia l benefit s ar e a t thei r least , tha t

divestiture s hav e bee n proposed . U S Airway s an dDelt ahav e claime dthat , overall , th e propose dtransactio n woul dgenerat e $15 3 millio n i n savings . Yet , astud y commissione dfro mCampbel l Aviatio n Consultant s for

Southwes t

Airline s claim s that , i

f Southwes t

operate dth e 2 0 slo t

pair s a t LG A an dth e 1 4 slo t

pair s a t DCA , th e passenge r

fare saving s pe r

year woul dtota l $19 3 millio n compare dt o th e us e of

thos e slot s b y Delt aan dU S Airways . Th e Campbel l stud y assert s that Southwest' s average far e woul db e 33 % lowe r tha n Delta' s a

t LG A an d49 % lowe r

tha n U S Airways ' fare at

DCA . In addition , i t

estimate s that

Southwes t

woul dcarry mor e tha n 340,00 0 additiona l passenger s t o an dfro meac h airport annually . W e not e tha t th e thrus t

o f thi s stud y i s supporte db y th e analysi s performe db y DOJ , discusse dabove , whic h foun dtha t increase dlow

cos t carrie r shar e a t airport s significantl y reduce s pric e premium s an dsignificantl y increase s ridership . W e hav e conclude dthat

th e benefit s of

th e Delta-U S Airway s transactio n a s propose dwoul dnot outweig h it s potential for har mt o th e travelin g public , but that th e divestiture s w e hav e propose d *'W.,p . 12 . * ^ Comment s o f

Southwes t

Airlines , p . 10 . 3 2wil l brin g significan t additional consume r

benefit s tha

t woul dassur e overal l ne t benefi t t o th e public . TH E COUNTERPROPOSA L OFFERE D B Y TH E PARTIE S FAIL S T O MEE T TH E ESSENTIA L REQUIREMENT S FO RA SUITABL E REMED Y Th e divestiture s propose db y th e FA A wer e designe dt o mitigat e th e competitiv e har mresultin g fro mth e transactio n a

t th e leas t cos t t o th e transactio n itself

. Whil e th e Join t

Applicants ' counterproposa l include s divestiture s o f 1 5 slot s a

t LG A an d4. 5 a

t DCA , Southwes t

argue s that th e FAA' s propose ddivestitur e of 2 0 slo t pair s a t LG A an d1 4 pair s a

t DC A i s not

enough , an d that eve n greate r

divestiture s shoul db e required.^ ^ W e hav e conclude dthat

th e divestitur e of

2 0 slo t pair s at LG A an d1 4 slo t

pair s a t DC A ar e th e minimu mnecessar y t o remed y th e reductio n i n competitio n resultin g fro mth e transactio n whil e preservin g legitimat e efficiencie s obtaine dfro mit . Whil e th e divestitur e of mor e slot s tha n propose di n th e Notic e woul dmak e th e marke t mor e competitive , w e see k t o minimiz e th e number s o f

slo t pair s require dt o remed y th e transactio n b y maximizin g th e competitiv e potentia l of th e divestitur e packages . Thi s objectiv e i s accomplishe dunde r th e specifi c circumstance s of thi s cas e b y balancin g four essentia l component s o f a n effectiv e slo t

remed y package . Th e firs t componen t

i s asufficien t

numbe r of diveste dslot s t o allo w othe r carrier s t o moun t

a n effectiv e competitiv e respons e t o th e increase ddominanc e an dreductio n of competitio n that

woul doccu r a s aresul t of th e transaction . Th e secon dremed y componen t i s t o defin e th e poo l o f

competitor s eligibl e t o tak e u p th e remed y base do n th e carrier s tha t woul dhav e th e greates t

economi c incentiv e t o us e slot s obtaine da s intensivel y a s possible , thereb y exertin g th e mos t competitiv e disciplin e pe r

slo t (b y operatin g large r

capacity aircraf

t an dofferin g th e mos t

pric e competitio n a t th e affecte dairports) . A s DO J point s ou t i n th e Appendi x t o it s comments^ ° it i s widel y recognize di n th e literatur e tha t lo w cos t carrier s exer t

maximu mcompetitiv e pressur e i n th e market s the y serv e b y sellin g mor e seat s a t lowe r fares . Th e thir dremed y componen t i s t o ensur e tha t

th e bundle s o f

slot s for divestitur e ar e both suitabl e for acommerciall y viabl e patter n o f schedule dservic e i n th e type s o f market s affecte db y th e transactio n an dar e constructe d proportionat e t o th e slot s tha t wer e bein g transferre dbetwee n th e partie s t o th e transaction . Th e fourth componen t

i s t o ensur e tha t

aproces s fo r

distributin g th e diveste dslo t package s i s no t

lef t t o th e partie s themselves , give n th e overv/helmin g incentiv e for the mt o structur e th e divestiture s t o minimiz e th e competitiv e impac t o n themselve s an dthereb y th e benefit s t o consumers.^ ' Th e counterproposa l offere db y th e partie s fail s t o satisf y eac h an devery on e o f

thes e four

essentia l remed y components , an dtherefor e fail s t o mee t th e essentia l requirement s for asuitabl e remedy .

* ' Comment s o f

Southwes t

Airlines , p.7 . * Comment s o f

th e Unite dState s Departmen t o f Justice , Appendi x A a

t A-2 . ^ ' Repl y Comment s o f

th e Unite dState s Departmen t o f Justice , Apri l 5 , 2010 , p.8 . 3 3Furthermore , whil e Delt aan dU S Airway s hav e offere dacounterproposa l for fewer divestitures , the y hav e neithe r

demonstrate dtha t

ou r numbe r i s arbitrary no r

hav e the y show n tha

t thei r numbe r bette r suit s th e publi c interes t

o r addresse s th e competitiv e harmresultin g fromth e transaction . W e hav e note dtha t w e agre e with th e Departinen t o f Justic e tha

t ther e wil l b e a significan t

reductio n i n competitio n betwee n U S Airway s an dDelt ao n anumbe r o f overlap routes , base do n thei r

confidentia l post-transactio n plans . Remedyin g thi s los s o f competitio n alon e substantiate s th e numbe r o f divestiture s pu t

forwar db y th e FAA , eve n befor e othe r anticoinpetitiv e effect s ar e considered , suc h a s th e effect s of increase dcity an dairport carrie r "presence " factor s whic h impac t capacity an dpricin g i n othe r market s a

t th e tw o airports . Th e Join t Applicants , Continenta l an dth e Delt aMaste r Executiv e Counci l o f

ALP A argu e that th e remed y propose dfor

thi s transactio n i s substantiall y mor e onerou s whe n compare dwith DOT' S tentativ e decisio n i n th e oneworl dantitrus t immunit y cas e involvin g America n Airlines , Britis h Airways , an dIberia^ ^ o r th e fina l decisio n i n th e recen t

Sta r Allianc e immunit y case.^^ However , th e case s ar e not comparable . Antitrus t

immunit y application s ar e governe db y different statute s (4 9 U.S.C . § § 4130 8 an d41309 ) an dstandard s than thos e applicabl e t o th e transactio n befor e us . Further , th e fact s an dcircumstance s of eac h cas e ar e very different . Delt a an dU S Airway s see k

awaive r fro ma n Orde r allowin g the mt o consummat e aslo t transactio n involvin g asignifican t

numbe r o f slot s a t tw o constraine ddomesti c airport s tha t woul dhav e a substantia l impac t

o n domesti c competition . Th e antitrus t immunity cases , o n th e othe r hand , involv e cooperatio n o n long-haul , inter-continenta l itineraries , i n acontex t o f inter-allianc e competitio n for

globa l traffi c flows . Ther e i s n o immunit y gran t possibl e for

cooperatio n betwee n tw o U.S . carrier s o n domesti c routes.^" ^ Foreig n carrier s partne r with on e o r

mor e domesti c carrier s t o expan dcode-sharin g an dallianc e opportunitie s t o compet e with othe r alliance s o f

foreig n an ddomesti c carriers , man y o f whic h are alread y exemp t fro mth e antitrus t laws . I f th e Departmen t

determine s tha t

a n exemptio n fro mth e antitrus t law s i s necessary , th e Departmen t

nex t consider s whethe r

thos e benefit s can b e achieve d"b y reasonabl y availabl e alternative s tha t

ar e materiall y les s anticompetitive. " 4 9 U.S.C . § 41309(b)(1)(B) . Th e Departmen t

therefor e consider s th e substantial benefit s that ma y resul t

fro mth e airlin e alliance s

' ^ Join t Applicatio n o f

America n Airlines , Inc. , Britis h Airway s PLC , FinnAi r OYJ , Iberi aLinea s Aerea s d e Espan a an dRoyal Jordania n Airline s unde r 4 9 U.S.C . §§4130 8 an d4130 9 for approva l of

, an dantitrus t

immunity for , agreements ; DOT-OST-2008-0252 ; DO T Sho w Caus e Orde r 2010-2-8 ; cas e no w pendin g DO T fina l disposition . ' ^ Final Orde r

2009-7-1 0 (Docke t

OST-2008-0234) . '• * Evaluatin g th e competitiv e impac t i n internationa l market s differ s substantiall y fro msuc h a n evaluatio n i n domesti c markets . I t

i s widel y accepte din th e airlin e industry that connectin g competitio n i s muc h mor e effectiv e at disciplinin g fare s o n long-hau l route s tha n o n short hau l routes , du e t o muc h longe r journe y time s an dth e rati o o f th e non-sto p elapse djourne y tim e t o th e elapse djourne y tim e o f aconnectin g itinerary . Furthermore , factor s suc h a s circuity pla y amuc h mor e importan t rol e in th e efficac y o f

connectin g competitio n o n short

- an dmedium-hau l route s an dthereb y o n acompetitiv e assessmen t o f areductio n in competitio n o n suc h routes . Th e relevan t market s in thi s cas e ar e therefor e considerabl y different , resultin g in afundamentall y differen t competitiv e impact , an d typicall y requirin g differen t remedies . 3 4an ddetermine s th e exten t of require dslo l divestiture s o r othe r remedie s a s aconditio n t o th e gran t of immunity . A s propose di n th e Notice , ou r remed y i s designe dt o allo w non-aligned , ne w entrant s an d limite dincumbent s t o establis h ne w o r complemen t

existin g pattern s o f

service s that

ar e commerciall y viabl e a

t both slot-constraine dairports . Th e Notic e issue dFebruar y 9 , 2010 , se t fort h aproposa l unde r

whic h slo t

interest s at

DC A an dLG A woul db e bundle di n adivestiture . Th e purpos e of

bundlin g th e slo t

interest s wa s t o ensur e that apurchase r

woul dobtai n a sufficient numbe r of slo t interest s that

woul dinak e i t

possibl e t o initiat e servic e i n away that provide s meaningfu l ne w competition . V/e continu e t o believ e that bundlin g provide s th e bes t opportunit y t o achiev e thi s goal . However , afte

r reviewin g th e comment s submitte do n th e Notic e an dfurthe r consideration , w e hav e slightl y adjuste dth e four propose dbundle s a

t LG A fro mon e bundl e o f eigh t slo t pair s an d thre e bundle s o f

four slo t pair s each , t o tv/o bundle s of si x slo t pair s eac h an dtw o bundle s o f four slo t pair s each . W e note dtha t Delt aan dU S Airways ' counterproposa l a t LG A indicate da

n interes t fro mtw o limite dincumbent s (AirTra n an dSpirit ) an don e prospectiv e ne w entran t (WestJet ) for

fiv e slo t pair s each . Th e 6-6-4- 4 arrangemen t may bette r

accommodat e th e interes t the y demonstrated , a s th e individua l bundle s woul dallo w existin g slo t portfolio s an d correspondin g pattern s o f servic e t o b e expande do r ne w servic e t o b e launche dwith moderat e frequenc y service . B y makin g availabl e for purchas e fro mth e existin g slo t holde r tw o bundle s o f slot s a t DCA an dfour

bundle s of

slot s a t LGA , limite dincumben t carrier s wil l hav e th e opportunit y t o buil do n thei r limite dpresenc e a

t th e slo t constraine dairport s b y addin g frequencie s t o existin g market s for bette r schedul e coverag e throughou t th e day , ake y benefi t

t o thei r customers , an dake y defens e agains t adominan t

carrie r that ma y choos e t o inundat e market s i n whic h it

compete s with ne w entrant s an dlimite dincumbent s with exces s capacity i n orde r t o forc e th e smalle r

carrie r fro mth e market . Both ne w entran t an dlimite dincumbent s coul dals o establis h ne w servic e t o othe r focu s citie s i n thei r

networks . Bundle s o f

slot s wil l als o allo w carrier s with limite doperation s t o improv e efficiencie s a t thes e constraine dairport s i n term s of bette r utilizatio n of

groun dstaff

, equipmen t

an dfacilities . Efficiencie s wil l als o b e gaine di n th e for

mof increase dthroughput , a s ne w entrant s an dlimite dincumbent s wil l offe r o n average mor e seat s pe r

departur e tha n propose db y U S Airway s an dDelt awith thei r relianc e o n regiona l affiliate s for

ove r 80 % of thei r propose dne w flyin g fro mDCA an dLGA .

' ^ Delt aan dU S Airway s further clai mthat

th e recen t

American-JetBlu e transactio n shoul dsatisf y DOT' s concern s wit h regar dt o low-cos t

entry a t DCA . I n that

transaction , JetBlu e wil l leas e 8 slo t pair s a t DCA . However , th e sourc e o f th e slot s i s American , whic h woul dhav e th e secon dlarges t numbe r o f slot s an db e secon din departur e shar e at DC A wer e w e t o approv e th e US-D L proposal . U S Airway s woul dretai n th e sam e leve l o f concentratio n that caus e ou r

concern s here , an deve n obtain s amor e dominan t positio n ove r

it s neares t

riva l a t th e airport . 3 5With onl y tw o limite dincumbent s currentl y servin g DCA , th e creatio n o f tw o slo t bundle s provide s for

diversifie dpenetratio n i n th e for mo f ane w entran t

o r limite dincumben t

launchin g servic e i n eithe r

hig h frequenc y busines s market s o r multipl e smalle r

markets . TERM S O FFINA L WAIVE RNOTICE : Thi s gran t

o f waive r i s conditione don : (1 ) th e divestitur e b y U S Airway s of 2 0 pair s of

slo t interest s a

t LG A i n th e slo t

bundle s identifie dbelow ; (2 ) th e divestitur e b y Delt ao f 1 4 pair s o f slo t interest s a

t DCA i n th e slo t

bundle s identifie dbelo w (thes e slo t interest s wil l b e mad e availabl e fo r

purchas e b y ne w entrant s an dlimite dincumbent s a s discusse dlater) , and ; (3 ) U S Airway s an dDelt amakin g availabl e gate s an dothe r groun dfacilitie s o n reasonabl e term s t o th e purchaser s o f

diveste dslot s i

f requeste db y th e purchaser , an di f suc h gate s an dfacilitie s ar e no t availabl e fro mth e airport authority . Th e followin g discussio n detail s thes e condition s an d establishe s th e procedur e fo r th e purchas e o f

diveste dslo t

interests . A s w e discusse di n th e Februar y Notice , ou r

goa l of maximizin g competitio n an dconsume r benefit s wil l b e realize d mos t effectivel y b y ensurin g tha t th e slo t interes t bundle s are purchase db y limite dincumbent s an dne w entrant s (sometime s referre dt o herei n a s "eligibl e carriers") . A s describe di n th e Februar y 9 , 201 0 Notice , eligibl e carrier s mus t b e U.S . o r

Canadia n ai r

carrier s havin g fewer than fiv e percen t

o f tota l slo t holding s a

t DCA and/o r

LGA , d o not

cod e shar e t o o r

fro mDC A o r LG A with an y carrie r

tha t ha s fiv e percen t

o r mor e slo t

holdings , an dar e not

subsidiaries , eithe r partiall y o r

wholl y owned , o f

acompany whos e combine dslo t interes t holding s ar e equa l t o o r greate r tha n fiv e percen t

at LG A and/o r

DCA . Carrier s tha t

woul dnot

qualif y includ e thos e wh o ar e involve di n acode-shar e relationshi p a t DCA/LG A with carrier(s ) tha t als o woul dnot

qualif y a s of th e dat e of

thi s Notice . A s proposed , diveste dslo t interest s wil l b e bundle dfor reallocation . Thi s bundlin g ensure s a purchase r can obtai n sufficien t

slo t interest s t o initiat e o r

increas e servic e i n amanne r that meet s it s operationa l need s an denhance s competition . Th e seller s ma y not se t areserv e pric e for

th e slo t interes t bundles . A s discusse dabove , w e hav e slightl y adjuste dth e four propose dbundle s a

t LG A fro mon e bundl e o f eigh t slo t pair s an dthre e bundle s o f four slo t pair s each , t o tw o bimdle s of si x slo t pair s eac h an dtw o bundle s o f

four slo t pair s each . Fo r

th e DCA slo t

interests , ther e wil l b e tw o bundle s (on e consistin g o f eigh t pair s an danothe r

of si x pairs) . Fo r

th e LG A slo t

interests , ther e wil l b e four

bundle s (two consistin g of si x pair s an dtw o of

four pairs) . Th e followin g tabl e show s th e slo t

interes t bundle s a s adopted .

3 6A t

DCA : Bundl e A woul dconsist of 8 pair s of

slot s at : 070 0 (2) , 080 0 (1) , 100 0 (2) , 110 0 (1) , 1200(1) , 130 0 (1) , 140 0 (2) , 150 0 (1) , 160 0 (2) , 190 0 (1) , 200 0 (1 ) 210 0 (1) , an d Bundle B woul dconsist

of 6 pair s o f

slot s at : 070 0 (1) , 090 0 (2) , 110 0 (1) , 120 0 (1) , 130 0 (2) , 170 0 (1) , 180 0 (1 ) 190 0 (1) ; 200 0 (1) , 210 0 (1) . A t LGA : Bundl e A woul dconsis t of 6 pair s o f

slot s at : 060 0 (D) , 070 0 (D) , 080 0 (A) , 080 0 (D) , 090 0 (A) , 100 0 (D) , 130 0 (A) , 140 0 (D) , 170 0 (A) , 180 0 (D) , 200 0 (A) , an d210 0 (A) ; Bundle B woul dconsis t

of 6 pair s of

slot s at : 070 0 (D) , 090 0 (A) , 100 0 (D) , 110 0 (A) , 120 0 (D) , 130 0 (A) , 140 0 (D) , 150 0 (A) , 160 0 (D) , 170 0 (A) , 170 0 (D) , an d200 0 (A) ; Bundle C woul dconsis t

of 4 pair s of

slot s at : 060 0 (D) , 080 0 (A) , 090 0 (D) , 110 0 (A) , 120 0 (D) , 150 0 (A) , 160 0 (D) , an d200 0 (A) ; an d Bundle D woul dconsist

o f 4 pair s o f

slot s at : 070 0 (D) , 100 0 (A) , 110 0 (D) , 130 0 (A) , 140 0 (D) , 180 0 (A) , 190 0 (D ) an d210 0 (A) . Eligibl e carrier s ma y b e unabl e t o us e acquire dslo t interest s i

f the y canno t

obtai n acces s t o gates , ticke t counters , baggag e handlin g services , loadin g bridges , an dothe r groun dfacilities . I

f th e purchase r lacks acces s t o gates an dgroun dfacilitie s o r i s unabl e t o obtai n suc h acces s fro mth e airport authority , th e selle r

mus t mak e thes e availabl e t o th e purchase r unde r reasonabl e term s an drates . Th e diveste dslo t

interest s wil l b e subjec t

t o certai n limitation s t o ensur e the y achiev e th e competitio n goal s discusse di n thi s gran t o f waiver . Thes e limitation s o n th e LG A slo t interest s are effectiv e unti l th e terminatio n o f th e LaGuardi aOrde r

(currentl y Octobe r

29 , 2011) , an dthe y d o not expir e for

th e DCA slo t

interests . Th e FA A wil l waiv e th e respectiv e us e o r los e provision s of

th e LaGuardi aOrde r

an dHD Rfo r

6 month s followin g purchas e t o allo w th e purchase r t o begi n service , bu t

th e purchase r

mus t initiat e servic e n o late r

tha n 6 month s followin g purchase . Th e purchase r ma y leas e th e acquire dslot s t o th e selle r unti l th e purchase r i s read y t o initiat e servic e t o maximiz e operation s at th e airports . Th e slo t

interest s ma y not

b e sol do r lease ddurin g th e 1 2 month s followin g purchas e becaus e th e purchase r mus t hol dan dus e th e acquire dslo t

interests . However , purchaser s may engag e i n one-for-on e trade s of thes e slo t interest s for

operationa l needs . Th e slo t interes t limitation s woul dattac h t o th e slo t interes t acquire db y th e eligibl e carrie r i n aone-for-on e trade . An y one-for-on e trade s ar e subjec t t o th e FA A notic e requirement s i n th e LaGuardi aOrde r an dHDR . After

th e initia l 1 2 months , th e slo t interest s may b e sol d(i n th e cas e o f DC A slo t

interests) , traded , o r

lease dt o an y carrie r

tha t a t th e tim e o f

th e sale , trade , o r

leas e woul dhav e me t

th e eligibilit y requirement s t o mak e a n offe r 3 7unde r

thi s Waive r

fo r th e diveste dslo t

interests . Trade s o r

lease s of LG A slo t

interest s ma

y not excee dth e duratio n of

th e LaGuardi aOrde r

a s state din that

Order . An y of

thes e transaction s are reportabl e unde r

th e HD Ran dLaGuardi aOrder . Withi n 3 0 day s of

thi s gran t

of waiver . Delt aan dU S Airway s mus t notif y i n writin g t o th e FA A whethe r the y inten dt o procee dwith th e slo t transfe r transaction . I

f the y inten dt o consummat e th e slo t transfe r transactio n subjec t

t o thi s waiver , tha t

notic e mus t

provid e th e followin g informatio n for

th e diveste dslots : (1 ) Operatin g Authorizatio n numbe r (LGA) o r

slo t numbe r (DCA ) an dtime ; (2 ) Frequency ; (3 ) Effectiv e Date(s) ; (4 ) Othe r pertinen t information , i

f applicable ; an d (5 ) Carrier' s authorize drepresentative . Th e FA A wil l pos t

anotic e of

th e availabl e slo t

interes t bundle s o n th e FA A websit e at http://www.fly.faa.go v anotic e of th e availabl e slo t

interes t bundle s withi n tw o busines s day s of receivin g al l require dinformatio n for th e seller s and , i

f practicable , wil l publis h th e notic e i n th e Federa l Register . Th e notic e wil l provid e seve n busines s day s for purchas e offer s t o b e receive d an dwil l specif

y aclosin g dat e an dtime . Eligibl e carrier s may registe r t o purchas e th e slo t interes t bundle s viaemai l t o 7-awa-slotadmin@faa.gov . Registratio n mus t b e receive d1 5 day s prio r t o th e start

of th e offer perio dan dmus t

stat e whethe r

ther e i s an y commo n ownershi p o r contro l of , by , o r with an y othe r

carrie r an dcertif

y tha t n o purchas e offer

informatio n wil l b e disclose dt o an y perso n othe r tha n it s agent . A n eligibl e carrie r

ma y purchas e onl y on e slo t interes t bundl e a t eac h airport , excep t

a t th e seller' s optio n a s discusse dlater , a s w e see k t o maximiz e th e interes t o f eligibl e carrier s i n participatin g i n th e proceeding . Thi s limitatio n wil l preven t an y on e carrie r

fro macquirin g al l diveste dslots , whic h wa s raise da s aconcer n i n th e comments . W e ar e als o incorporatin g specifi c procedure s t o facilitat e th e sale s proces s o n multipl e slo t interes t bundles . A n eligibl e carrie r wil l registe r

for eac h slo t interes t bundl e tha t

i t wishe s t o buy , an di t

wil l b e assigne da rando mnumbe r

fo r eac h registratio n s o n o informatio n identifyin g th e purchase r i s availabl e t o th e selle r o r public . A purchase r

wil l b e allowe dt o indicat e it s preferenc e rankin g for eac h slo t interes t bundl e a s part

o f it s offer . Finally , a s discusse di n mor e detai l later , th e FA A wil l revie w th e offer s for

eac h bundl e i n orde r

(i.e. , bundle s A an dB for DC A an dA , B , C , an dD for LGA) . Al l offer s t o purchas e slo t bundle s mus t

b e sen t t o th e FA A electronically , viath e emai l addres s above , b y th e closin g dat e an dtime . Th e offe r mus t includ e th e prospectiv e purchaser' s assigne d number , th e monetar y amount , an dth e preferenc e rankin g for tha t slo t interes t bundle . N o extension s of

tim e wil l b e granted , an dlat e offer s wil l not b e considered . Th e FA A wil l pos t al l 3 8offer s o n th e websit e a s soo n a s practicabl e after the y are received . Eac h purchase r can submi t multipl e offer s unti l th e closin g dat e an dtime . Onc e th e sale s perio dcloses , th e FA A wil l determin e th e highes t offer for eac h bundle . I f

eac h bundl e ha s onl y asingl e offer , th e FA A wil l notif y th e selle r

b y forwardin g th e purchaser' s identification . I f

on e eligibl e carrie r

ha s mad e th e highes t

purchas e offer

o n multipl e bundles , th e FA A wil l determin e whic h offe r wil l b e vali dbase do n preferenc e rankin g an dbundl e order . Th e FA A wil l identif

y th e next-highes t

offe r fromacarrie r

tha t remain s eligibl e t o purchas e th e bundl e a s th e successfu l offe r o n th e othe r

bundles . Thi s informatio n wil l b e forwarde dt o th e respectiv e seller . Th e FA A wil l als o provid e informatio n abou t th e amoun t

o f th e highes t

offer , an dth e sellin g carrie r

may choos e t o accep t

th e highes t

offe r instea do f

th e offe r identifie db y th e FAA . Upo n acceptance , th e FA A wil l notif y th e sellin g an dpurchasin g carrier s t o allo w the mt o carry ou t th e transaction , includin g an y gat e an dgroun dfacilitie s arrangements . Th e selle r an d purchase r mus t notif y th e FA A tha t

th e transactio n ha s bee n complete dan dcertif y that onl y monetary consideratio n wil l b e o r ha s bee n exchange dfor

th e slo t interes t bundles . Thi s nodficatio n mus t

occu r withi n five busines s day s o f notificatio n b y th e FA A o f th e winnin g offer . A transactio n i s final, an dth e waive r wil l b e effective , onl y whe n an y issue s relate dt o gate s o r groun dfacilitie s hav e bee n resolved , althoug h no t al l purchaser s may nee dgate s and facilitie s beyon dwha t

the y alread y have . Th e FAA the n wil l approv e th e transactio n an dwil l maintai n an dmak e publicl y availabl e arecor do f th e offer s received , th e identity o f th e selle r an d purchaser , an dth e winnin g price . In th e unlikel y even t

tha t ther e ar e n o offer s for

aslo t interest , thos e slo t

interest s wil l revert automaticall y t o th e FAA . I f necessary , w e wil l announc e a t alate r dat e amean s for

disposin g o f o r retirin g aslo t

interes t tha t attract s n o piiirchas e offer . We d o no t expec t tha t thi s nee dwil l arise . Th e gran t o f waive r become s effectiv e upo n FAA approval o f al l slo t interes t bundl e transactions .

Issue di n Washington , D C o n May 4 , 201 0

Ra y LaHoo d/ I J . Randolp h Babbit t Secretary ^— ^ Administrator , FA A 

## UHM T

3 9offer s o n th e websit e a s soo n a s practicabl e afte r the y are received . Eac h purchase r ca n submi t multipl e offer s unti l th e closin g dat e an dtime . Onc e th e sale s perio dcloses , th e FA A wil l determin e th e highes t offe r for eac h bundle . I

f eac h bundl e ha s onl y asingl e offer , th e FA A wil l notif y th e selle r

b y forwardin g th e purchaser' s identification . I

f on e eligibl e carrie r

ha s mad e th e highes t

purchas e offe

r o n multipl e bundles , th e FA A wil l determin e whic h offe r wil l b e vali dbase do n preferenc e rankin g an dbundl e order . Th e FA A wil l identif

y th e next-highes t

offe r fro macarrie r

that reinain s eligibl e t o purchas e th e bundl e a s th e successfu l offe r o n th e othe r

bundles . Thi s informatio n wil l b e forwarde dt o th e respectiv e seller . Th e FA A wil l als o provid e informatio n abou t th e amoun t

o f th e highes t

offer , an dth e sellin g carrie r

may choos e t o accep t

th e highes t

offe r instea do f

th e offe r identifie db y th e FAA . Upo n acceptance , th e FA A wil l notif y th e sellin g an dpurchasin g carrier s t o allo w the mt o carry ou t th e transaction , includin g an y gat e an dgroun dfacilitie s arrangements . Th e selle r an d purchase r mus t notif y th e FA A tha t

th e transactio n ha s bee n complete dan dcertif y tha t onl y monetar y consideratio n wil l b e o r ha s bee n exchange dfor

th e slo t interes t bundles . Thi s notificatio n mus t

occu r withi n fiv e busines s day s of notificatio n b y th e FA A o f th e winnin g offer . A transactio n i s final , an dth e waive r wil l b e effective , onl y whe n an y issue s relate dt o gate s o r groun dfacilitie s hav e bee n resolved , althoug h no t al l purchaser s may nee dgate s an d facilitie s beyon dwha t

the y alread y have . Th e FA A the n wil l approv e th e treinsactio n an dwil l maintai n an dmak e publicl y availabl e arecor dof th e offer s received , th e identit y o f th e selle r an d purchaser , an dth e winnin g price . I n th e unlikel y even t

that ther e ar e n o offer s fo r

aslo t interest , thos e slo t

interest s wil l revert automaticall y t o th e FAA . I f necessary , w e wil l aimounc e a t alate r dat e ameans for

disposin g of o r retirin g aslo t

interes t tha t attract s n o purchas e offer . W e d o not expec t tha t thi s nee dwil l arise . Th e gran t of waive r become s effectiv e upo n FA A approva l o f al l slo t interes t bundl e transactions .

Issue di n Washinaron , D / o n May 4 , 201 0

J . Randolp h Babbit t Administrator , FA A

3 9Appendi x A Summar y o f

Comment s W e receive dcomment s fro mnumerou s commenter s whic h w e hav e summarize dbelow . U S Airways-Delt aRespons e Delt aan dU S Airway s submitte dcomment s i n oppositio n t o th e FAA' s divestitur e conditions . Th e caiTier s asserte dthat : (1 ) Congres s empowere dFA A onl y t o promot e safety an dth e efficien t us e of airspac e and , thus , i t lack s th e statutory authority t o conside r potentia l effect s o n competitio n i n carryin g ou t it s othe r duties . (2 ) Whil e th e Secretar y of Transportatio n ha s authorit y t o conside r competition-relate dfactors , h e i s prohibite db y 4 9 U.S.C . § 106(f)(2)(D ) fro mdirectin g th e FA A t o us e it s authority t o d o wha t i t canno t d o directly . (3 ) Th e propose ddivestitur e woul dconstitut e an unlawfu l takin g unde r th e Fift h Amendment , becaus e restriction s o n th e sal e ar e impose dtha t woul dmak e it

impossibl e for

th e carrier s t o realiz e full marke t

value . (4 ) DO J i s th e agenc y bes t equippe dt o conside r

whethe r th e transfe r

wil l hinde r

competition , acknowledgin g tha t

DO J i s currentl y undertakin g areview . (5 ) FA A canno t

us e awaive r

applicabl e t o LG A t o forc e adivestitur e at DCA . (6 ) FA A faile dt o analyz e "overwhelmin g evidence " tha t th e propose dtransactio n wil l benefi t competition , suc h a s servic e t o ne w destinations , upgaugin g o f aircraft , ne w connectin g opportunities , etc . (7 ) FAA' s propose ddivestiture s fai l t o conside r th e integrate dnatur e of

th e transaction . (8 ) FAA' s concern s abou t potentia l anticompetitiv e action s are mer e speculation , a s i t di dnot poin t t o specifi c instance s of

harm . (9 ) FA A base dit s analysi s o n a1970 s vintag e measur e (SIFL ) tha t fail s t o tak e int o accoun t th e majo r change s i n th e industr y ove r th e las t 3 0 years , suc h a s industry deregulation , emergenc e of

LCCs , etc . (10 ) FA A faile dt o articulat e an dexplai n th e leve l of airport concentratio n tha t

cause s i t concern . (11 ) Th e thre e DC-are aan dthre e NY C aiirport s ar e competitivel y linked , an dFAA' s contentio n that the y ar e not

substitute s i s inconsisten t with pas t position s o f

DO T an dDOJ . (12 ) FA A di dno t

sufficientl y explai n wh y divestiture s of 1 4 pair s a

t DCA an d2 0 pair s a

t LG A wer e appropriate , an dtha t leve l o f divestitur e i s inconsisten t with DOT' s recen t

actio n i n th e oneworl dcas e i n whic h onl y 4 pair s of slot s wer e require dt o b e lease dfo r te n years . Notwithstandin g thes e objections , U S Airway s an dDelt astate dthat , a s the y wer e "mindfu l of th e concern s expresse db y FAA " an ddesirin g o f asolutio n that

woul dpermi t

the mt o mov e forward , the y ha dentere dint o provisional divestitur e agreement s with four carrier s tha t

wer e 4 0eligibl e unde r Ih e term s of

th e Notic e for

1 5 slo t pair s a t LG A an d4. 5 slo t

pair s a t DCA . Th e 1 5 slo t pair s a t LG A woul db e transferred , fiv e each , t o AirTran , Spirit , an dWestJe t ove r period s o f u p t o 2 8 months ; th e 4. 5 pair s a t DC A woul db e transferre dt o JetBlue . Th e carrier s adde dthat thes e mor e limite ddivestitures , "whil e diminishin g th e benefit s of th e transaction, " woul d preserv e enoug h of

th e benefit s t o permi t

thei n t o g o forward . U S Airway s an dDelt astate dthat i f th e FA A grant s th e waive r subjec t t o th e propose d divestitur e conditions , the y woul dno t consummat e th e transaction , an dreserve d th e righ t t o see k judicia l review . Delt aan dU S Airway s submitte djoin t comment s in anothe r

filing , togethe r

with th e ne w entrant/ limite dincumben t

carrier s t o whic h the y woul ddives t slot s unde r

thei r counterproposal : AirTra n Airways , Inc. , Spiri t

Airlines , Inc. , JetBlu e Airways , Inc. , an dWestJet , Inc . Thes e commenter s urg e th e FA A t o approv e th e pendin g request , a s modifie db y th e slo t transfe r agreements . Additiona l detail s o n th e counterproposa l wer e provided : (1 ) a t DCA , JetBlu e woul dacquir e 4. 5 pair s o f slot s (JetBlu e intend s otherwis e t o ad don e off-pea k hou r slo t t o complet e a5-roundtri p servic e pattern) ; (2 ) a

t LGA , AirTran , Spirit , an dWestJe t woul dacquir e 5 pair s of slot s each , respectively , for

atota l o f

1 5 pairs ; (3 ) i n al l cases , th e acquisitio n woul db e conditione do n FAA' s gran t

o f th e LG A Waive r

request ; (4 ) th e JetBlu e transfe r woul dtak e plac e relativel y soon , but Delt awoul dcontinu e servic e with th e slot s unde r aleas e fro mJetBlu e for

aperiod ; (5 ) th e AirTra n an dSpiri t

transaction s woul doccu r ove r a24-month perio dat

dates o f thei r choosing ; an d(6 ) th e WestJe t transactio n woul doccu r at adat e o f it s choosin g withi n 2 8 months . WestJe t an dDelt awil l b e negotiatin g othe r commercia l arrangement s a s well . Give n th e issue s raise db y th e carriers ' counterproposal , th e FA A determine dthat i t wa s i n th e publi c interes t

t o reope n th e commen t

perio dfor

seve n day s t o giv e al l intereste dpartie s additiona l tim e t o fil e rebutta l comments . Comment s file db y Apri l 5 , 2010 , wer e considered . Fo r convenienc e an dbrevity , th e comment s describe dbelo w includ e response s mad e bot h o n th e initia l Notic e an do n rebuttal . Summar y o f

Comment s fro mth e Unite dState s Departmen t o f Justic e Th e Departmen t

o f Justic e (DOJ ) submitte dcomment s i n support o f th e FAA' s tentativ e decisio n t o gran t th e requeste dwaive r

with conditions . Th e Departmen t cite dsevera l factor s i n it s findin g .o f support , including : (1 ) Th e availability o f

slot s i s asubstantial barrie r t o entry a

t LG A an dDCA . Ai r

carrier s holdin g larg e concentration s of slot s hav e littl e incentiv e t o leas e o r sel l slot s t o low-cos t carriers , thu s stiflin g competitio n anddeprivin g consumer s o f lowe r fares . (2 ) Th e slo t

transactio n wil l reduc e competitio n betwee n Delt aan dU S Airway s a t LG A an d DCA . Th e Departmen t

contend s that , pos t

transaction . Delt awil l shrin k substantiall y a

t 4 1DC A an dU S Airway s wil l shrin k substantiall y a

t LGA , thereb y reducin g eithe r carrier' s ability t o compet e with eac h other . (3 ) Th e transactio n wil l increas e th e slo t holding s o f

th e dominan t

carrier s a

t LG A an dDCA . U S Airway s wil l increas e it s DCA slo t holding s fro m44 % t o 54% , an dDelt awil l increas e it s LG A slo t

holding s fro m24 % t o 49% , thu s producin g ahighl y concentrate dmarke t an d a n enhance dpremiu mfar e structur e i n market s serve db y both aiiports . (4 ) Mos t low-cos t carrie r slo t acquisition s a

t LG A an dDCA hav e bee n th e resul t o f Congressiona l o r

DOT/FA A actio n rathe r

tha n secondar y slo t

marke t transactions . Despit e FA A regulation s designe dt o ensur e tha t underutilize dslot s are reallocate dt o carrier s tha t wil l use dthe mefficiently , incumben t carrier s continu e t o hoardslots , i n part , t o kee p th e slot s ou t o f th e hand s of

ne w entrants . (5 ) Th e propose dslo t

transactio n wil l exacerbat e th e disincentive s of eithe r carrie r t o sel l o r leas e slot s t o othe r

carriers . With increase dslo t share s a t LG A an dDCA , th e carrier s wil l hav e mor e revenu e an dprofi t at risk , an dthu s eve n les s incentiv e than exist s toda y t o sel l o r leas e slot s t o potentia l ne w entrants; . (6 ) Th e FAA' s propose dslo t divestitur e i s not

likel y t o interfer e substantiall y with th e purporte d increas e i n seat

capacit y a

t eithe r airj:)ort . Ther e i s littl e evidenc e suggestin g that asmalle r transactio n - a s woul dresul t i f th e pcirtie s accepte dth e term s o f th e FAA' s propose dwaive r

- woul db e unprofitabl e for th e parties . (7 ) Th e consume r

benefit s fro mLC C entry tha t wil l likel y resul t

fro mth e FAA' s propose d divestitur e almos t

certainl y wil l outweig h an y los s fro mDelt aan dU S Airway s makin g mino r modification s t o thei r

propose dschedules . (8 ) DO J favor s a

n anonymous , cash-onl y sale s o f slot s i n whic h th e FA A forward s th e highes t offe r t o th e selle r

for acceptanc e o r

rejectio n i

f th e metho di s implemente di n asoun dway . Th e Departmen t

advocate s for

th e anonymit y of

potential buyers , bu t

encourage s th e FA A t o clarif y wha t happen s i n th e even t

tha t acarrie r reject s th e highes t

purchas e offer . Th e Departmen t

als o recommend s expandin g th e restrictio n o n re-sale s an dlease s of slot s purchase dpursuan t

t o th e selecte dslo t

acquisitio n option . (9 ) Th e Departmen t

recommend s precluding , for som e reasonabl e period , purchaser s fro m sellin g an dleasin g an y slot s t o carrier s not eligibl e unde r

th e term s o f

th e final actio n take n o n thi s proceedin g i n orde r t o ensur e tha t

diveste dslot s stay i n th e hand s o f ne w entrant s o r limite dincumbents . (10 ) Th e Departmen t

note s tha t

purchaser s o f

diveste dslot s wil l als o nee dacces s t o sufficient groun dfacilities , an drecommend s tha t th e FA A shoul dconside r way s t o ensur e tha t

th e purchase r wil l obtai n acces s t o thes e facilities . In concludin g it s comments , DO J find s that th e FAA' s propose dwaive r wit h condition s wil l b e i n th e publi c interes t becaus e i t

wil l fre e u p slot s for

othe r cairiers , facilitat e entr y at LG A an dDCA , increas e competition , an dlowe r fare s for consumer s withou t

interferin g with th e purporte dbenefit s o f th e transaction .

4 2Summar y of Othe r Comment s Southwes t

Airlines , Inc . file dcomments , arguin g that : (1 ) Th e consequence s for th e publi c o f

thi s attempte dre-allocatio n o f th e market s b y Delt aan d U S Airway s wil l b e highe r fares , les s competition , an dfewer servic e options . (2) Delt aan dU S Airway s hav e lon g bee n fre e t o upgaug e thei r aircraft , but

the y hav e don e th e opposit e ove r

th e las t decad e (Delta' s averag e aircraf t siz e a t LG A ha s decline dt o 10 5 seats , whil e U S Airways ' averag e aircraf t siz e a t DCA ha s sun k

t o 9 2 seat s - reflectin g economi c inefficiencie s a

t both airports) . (3 ) FAA' s propose dcarve-out s of 2 0 an d1 4 slo t

pair s ar e agoo dstart , bu t ar e to o limite dt o hav e asignifican t

restrainin g effec t

o n fares , excep t

i n afew markets . (4 ) I f th e diveste dslot s ar e divide damon g severa l carriers , th e resultin g competitio n wil l b e s o dilute di t wil l hav e n o effectiv e pric e discipline . A carve-ou t of a t leas t 4 0 pair s a

t LG A an d 2 0 pair s at

DC A shoul db e required . (5 ) DOT/FA A ha s ampl e lega l authority t o requir e carve-out s (Sinc e DOT/FA A ha s th e authority t o gran t

th e waive r

reques t i n full , i t mus t als o hav e th e authorit y t o gran t i t i n part) , an dcarve-out s her e ar e "i n th e publi c interest. " (6 ) Despit e multipl e efforts . Southwes t ha s bee n unabl e t o acquir e DC A slots , o r mor e tha n th e 1 4 slot s i t ha s a t LGA . It s averag e fare s woul db e 33 % lowe r tha n Delt aa

t LG A an d49 % lowe r than U S Airway s at

DCA . I f i t ha d2 0 pair s a

t LG A it woul dgenerat e $8 4 millio n annuall y i n consume r

savings , an di

f i t ha d1 4 pair s a

t DCA i t woul dgenerat e $10 9 millio n pe r yea r i n consume r

savings . It

woul dals o serv e 340,00 0 mor e passenger s at eac h o f th e airports . (7 ) FA A shoul dallocat e th e diveste dslot s vi aatransparen t sale s proces s t o th e purchase r with th e highes t

cas h offer . Othe r

option s invit e amanipulatio n o f th e proces s for

anti

competitiv e purpose s (e.g. , selectin g th e weakes t competitors) . (8 ) FA A shoul damen dit s orde r t o requir e U S Airway s an dDelta , workin g with th e respectiv e airport authorities , t o mak e airport facilitie s availabl e o n term s n o les s favorabl e tha n thos e no w accorde dt o th e tw o carriers . Unite dAi r

Lines , Inc . oppose s th e FAA' s propose ddivestitur e conditions . United' s majo r argument s are : (1 ) FA A lacks th e lega l authorit y t o impos e th e slo t divestitur e conditio n unde r th e premis e that

FA A authorit y i s limite dt o th e safet y o f aircraf t operation s an defficien t

us e o f airspace , an dtha t

th e polic y goal s outline di n § 4010 1 d o no t appl y t o th e Administrator' s exercis e o f

exemptio n powers ; an d(2 ) FA A ha s no t show n tha t

th e transactio n woul dadversel y impac t competition . Unite dcontend s tha t th e fac t tha t th e transactio n increase s th e shar e o f slot s doe s not necessaril y signif

y tha t th e carrier s wil l gai n pricin g powe r i n an y relevan t

market . Unite dbelieve s th e FA A ha s not analyze dpotentia l competitiv e effect s i n an y relevan t market , that FA A assertion s o f

har mare speculation , an dtha t th e FA A ha s relie do n flawed , outdate d dat ai n reachin g it s conclusions . Th e ai r carrie r state s that

cost s ar e highe r

at DCA du e t o th e adde dcost s o f

delays an dth e cos t

of acquirin g slots .

4 3America n Airlines , Inc . support s th e FAA' s propose ddivestitur e conditions , but expresse d concern s regardin g th e rationale . American' s majo r argument s are : (1 ) offer s reaso n for th e failur e o f th e secondar y marke t

at DCA an dLG A a s th e curren t syste mof

delegatin g slot s t o ne w entrants . America n contends that ther e i s n o incentiv e t o bu y ne w slot s whe n slot s are readil y distribute dfor

fre e b y th e government ; (2 ) disagree s tha t th e propose dtransactio n wil l lea dt o highe r

fares . Th e ai r

carrie r cite s th e exampl e o f

Continenta l Airline s havin g marke t dominanc e a

t EWRbu t

maintainin g lowe r

fare s tha n U S Airways ; an d(3 ) support s aprivat e sal e arrangemen t

for th e slo t divestiture . Continenta l Airlines , Inc . take s n o positio n o n th e propose dtransactio n o r whethe r othe r remedie s ar e required , but argue s tha t

imposin g condition s of

divestitur e exceed s FA A authority . Continental' s majo r

argument s are : (1 ) FA A ha s previousl y acknowledge dtha t it lacke dth e authority t o impos e market-clearin g charge s for landing s an dtakeoffs ; (2 ) FA A slo t rule s requir e reallocatio n b y lottery , shoul dno t b e rea dt o exten dt o divestiture s for economi c reasons , no r favo r ne w entrant s an dlimite dincumbents ; (3 ) requirin g divestiture s wil l violat e carriers ' propert y rights ; (4 ) FAA' s proposa l conflict s with th e Hart-Scott-Rodin o revie w process ; (5 ) DC A an dLG A ar e not

individua l markets , an dtreatin g the ma s suc h i s inconsisten t with earlie r DO J condition s o n domesti c code-sharin g an di n DOT' s Star Allianc e carve-ou t

(wher e th e overlap wa s premise do n definin g EW Ran dJF K a s acommo n origi n an ddestinatio n point) ; (6 ) holdin g alarg e percentag e of slot s a t acarrier' s hu b i s not

inherentl y anticompetitiv e an di s beneficia l t o consumer s becaus e i t enable s airline s t o achiev e economie s o f scope ; an d(7 ) FA A shoul dno t

conside r code-shar e relationship s whe n calculatin g a n individua l carrier' s slo t positio n becaus e code-shar e carrier s ar e independen t with respec t

t o domesti c service . Continenta l state s tha t

i t shoul dhav e th e ability t o acquir e withdraw n slot s a t LG A despit e it s code-shar e wit

h Unite dAi r

Lines . Virgi n America , Inc . commend s th e FA A fo r takin g step s t o addres s th e competitiv e situatio n at slot-controlle dairports . Virgi n believe s th e governmen t ha s not onl y th e authorit y bu t

th e responsibilit y t o enhanc e competition , an dbelieve s that th e FA A actio n i n thi s propose d transactio n i s consisten t

with applicabl e precedents . Th e ai r carrie r state s tha t

th e FA A shoul db e mor e proactiv e b y creatin g apermanen t mechanis mfor

resolvin g secondar y marke t problem s a

t slot-controlle dairports . Th e Delt aMaste r

Executiv e Counci l o f

th e Ai r Lin e Pilot s Associatio n submitte dcomment s i n support o f th e waiver , bu t

withou t th e impositio n o f

"onerou s an dunjustified " divestitur e conditions . ALP A believe s tha t approva l o f

th e origina l petitio n wil l promot e jo b growth , slo t utilization , an dcompetition . Th e commente r contends tha t

increase doperation s at

a n airport ar e not necessaril y harmful , citin g th e exampl e o f Continenta l Airline s havin g alarge r percentag e of operation s at

EW Rtha n othe r

ai r carriers , bu t

charge s alowe r

percentag e o f

th e standar d 4 4industry fare leve l (SIFL) . ALPA believe s th e FAA' s propose dnumbe r of divestiture s i s inconsisten t

wit h oneworld , wher e jus t

4 pair s of

slot s wer e require dt o b e divested . Partie s representin g tw o Florid aairport s file dcomment s i n genera l support o f th e waiver . Th e airport s includ e th e Sarasota/Bradento n Internationa l Airport (SRQ ) an dth e Tallahasse e Regiona l Airport

(TLH) . Both coinmenter s expresse dconcern tha t th e FAA' s proposa l coul d hal t th e transactio n completely , thereb y eliminatin g opportunitie s for expande dai r

servic e i n th e tw o communities . Additionally , th e partie s commente dtha t th e FA A proposa l favor s larg e airport s an dne w entran t

carrier s ove r

smalle r communitie s wh o rel y o n network carriers . Th e Por t Authorit y of

Ne w Yor

k an dNe w Jerse y (PANYNJ ) file dacommen t i n support

o f th e propose ddivestitur e conditions . PANYN J compliment s th e FA A i n it s effort s t o increas e th e presenc e o f

low-cos t carrier s at

LG A an dpreservin g smal l communit y service . PANYN J support s th e proposa l t o suspen duse-or-los e provision s for ne w entrant s an dlimite dincumbent s tha t woul dobtai n th e diveste dslots , bu t disagree s with th e FA A o n it s conclusion s regardin g airport substitutability . Th e commente r reinforce dthat

i t woul dput

fort h it s bes t effort s t o ensur e tha t

ne w entrant s an dlimite dincumbent s ar e accommodated , bu t believe s that

th e Fina l Orde r shoul dnot

impose an y additional requirement s i n thi s regard . PANYN J als o believe s that an y transfe r

o f slot s shoul db e conditione do n it s ability t o accommodat e th e ne w carrie r a t a correspondin g gate . Regardin g th e slo t transfe r process , PANYN J endorse s th e proposa l tha t woul dallo w th e FA A t o maintai n awebsit e for offer s t o purchas e an dtransmissio n o f th e highes t offe r t o th e seller . Th e Honorabl e Henr y E . Brown , Jr. , U.S . Representativ e of th e 1^' Distric t

o f South Carolina , submitte dacommen t

i n support

o f th e origina l petitio n submitte db y Delt aan dU S Airways , bu t doe s no t support th e FAA' s propose ddivestitur e conditions . Congressma n Brow n cite s South Carolina' s significan t

touris mindustry a s areaso n t o expan dai r servic e t o th e State . H e note s that Horry County , th e State' s larges t touris mrevenu e generator , i s th e onl y majo r touris t destinatio n i n th e Unite dState s tha t i s not serve db y th e Interstat e System . Congressma n Brow n recognize s th e FAA' s responsibilit y unde r th e Airlin e Deregulatio n Ac t t o maximiz e airlin e competitio n an dopportunitie s for ne w entrants , bu t

pointe dou t

tha t th e propose ddivestitur e of 1 4 pair s o f

slo t interest s a

t DCA woul dremov e th e possibilit y o f expande dai r

servic e a t MY R for th e foreseeabl e future , whic h h e believe s i s counte r t o th e Act' s directiv e t o encourag e ai r servic e t o smal l communities . Congressma n Brow n als o state s tha t expande ddirec t

ai r servic e t o smalle r an dmid-size dcommunitie s serve s th e "greate r good " o f th e country mor e tha n fosterin g competitio n betwee n large r citie s tha t

alread y enjo y direc t

ai r service . Th e Honorabl e Louis e M . Slaughter , U.S . Representativ e o f th e 28 * Distric t

of Ne w York , submitte dacommen t

i n stron g support

o f th e FAA' s proposa l t o requir e th e divestitur e of slo t interest s a

t DCA an dLG A t o ne w entran t an dlimite dincumben t

carriers . Congresswoma n 4 5Slaughte r

commente dtha t

sh e woul dlik e t o se e a

n increas e in th e numbe r

of mandate dslot s t o b e divested , althoug h sh e concur s that th e proposa l i s agoo dfirs t ste p t o improvin g servic e t o DC A an dLGA . Th e Congresswoma n expresse dconcern tha t th e proposa l doe s not

forc e eithe r caiTie r t o commi t

t o an y particular

marke t for adefine dperio dof

time , thu s enablin g th e caiTier s t o discontinu e certai n route s an dus e thei r adde dslo t

interest s t o initiat e ne w route s t o targe t smalle r competitor s an dstifl e competition . Edwar dS . Faggen , forme r Vic e Presiden t

an dGenera l Counse l of

th e Metropolita n Washingto n Airport Authorit y (MWAA) , commente di n apersona l capacit y expressin g support for th e FAA' s decisio n no t

t o gran t th e waive r

withou t firs t imposin g condition s that protec t th e competitiv e environmen t at eithe r airport . Mr . Fagge n cite s th e FAA' s Hig h Densit y Rul e a s a successfu l means for

enablin g DC A t o manag e capacity , promot e schedul e reliability , an dallo w airport official s t o effectivel y pla n for airsid e an dlandsid e capacit y improvements . Th e commente r

believe s tha t

awaiver , withou t

conditions , wil l leadt o achalleng e t o th e DCA HD R b y ne w entrant s o r

low-cos t carriers , wh o may perceiv e th e HD Rt o b e anticompetitive . Mr . Fagge n woul dlik e t o se e th e numbe r o f DCA slot s t o b e diveste dt o increas e fro mth e propose d minimu mo f

1 4 t o anumbe r

that expand s acces s t o othe r

incumbents , an dcommensurat e with airfiel dcapacit y capabilities , i f possible . Citizen s an dorganization s of th e Rochester , Ne w Yor k metropolita n area , whic h ar e represente d b y th e Honorabl e Louis e M . Slaughter , U.S . Representativ e o f th e 28'* ' Distric t

of Ne w York , submitte deleve n comment s i n genera l support o f th e propose dwaiver . Th e cormnenter s unanimousl y agre e tha t

th e proposa l woul dincreas e competition , lowe r fares , an dimprov e ai r servic e i n th e Rochester , Ne w Yor k passenge r

market . A majority o f

th e commenter s woul dlik e t o se e a n increas e i n th e numbe r

o f slot s t o b e divested . Thre e individual s submitte dcomment s i n support o f th e FA A position . Th e commenter s unanimousl y agre e that

th e propose dwaive r

woul dincreas e competitio n b y decreasin g excessiv e marke t domination , lowe r

fares , an dimprove dai r

service . On e individua l expresse dhop e tha t th e slo t divestur e wil l reduc e delays , spu r economi c growth , an dlea dt o cheape r acces s t o popular vacatio n destinations . On e individua l expresse dsupport fo r th e publi c benefi t

of expande doperation s b y Southwes t Airline s a

t LGA . On e individua l submitte dacommen t i n oppositio n t o an y typ e o f waive r for th e propose d transaction . Th e individua l believe s tha t Delt ai s anti-competitiv e i n it s practice s an dseek s t o har mothe r

airline s economically . Th e commente r further cite s Delta' s decisio n t o transfe r it s pensio n liability ont o taxpayer s a s reaso n not t o rewar dit

with afavorabl e slo t

swap arrangement .

4 6Two individual s submitte dcomment s i n sup]Dor t of th e U S Airway s - Delt aAirline s positio n of grantin g th e propose dwaive r withou t conditions . On e commente r assesse dthat

th e condition s intrud e int o th e fre e marke t b y forcin g th e divestitur e of slots , an dstate dthat

it i s no t th e rol e of governmen t

t o "creat e additiona l competition. " Anothe r commente r

wa s concerne dabou t

ai r carrie r profitability an dth e ramification s t o job s an dai r carrie r acces s shoul deithe r

airlin e see k bankruptc y protection . Th e coinmenter s urge dDO T t o allo w th e slo t swap t o procee da s originall y propose din orde r t o d o everythin g possibl e t o hel p airline s bolste r profitability an d kee p peopl e employed . Supplementa l an dResponsiv e Pleading s Th e initia l commen t

perio dclose do n Marc h 22 , 2010 . Th e FA A determine dtha t i t wa s i n th e publi c interes t

t o reope n th e commen t

perio dunti l Apri l 5 , 2010 , t o giv e al l intereste dpartie s additional tim e t o fil e supplementa l an drebutta l comments . WestJe t state dthat , i n th e past , regulator y an doperationa l constraint s hav e prevente dit fro m sustainin g competitiv e servic e t o LGA . A s aresul t o f th e independentl y negotiate dslo t transactio n with Delta , whic h provide s WestJe t with 5 slo t

pair s a t LGA , th e carrie r

believe s that i t i s no w i n agoo dpositio n t o compet e agains t establishe dcarrier s i n th e U.S . an dCanadia n markets . Additionally , WestJe t cite s expande dpassenge r acces s t o Delta' s extensiv e domesti c network , a s wel l a s Delta' s willingnes s t o provid e supportin g service s an dfacilitie s a s evidenc e that th e carrie r

an dit s passenger s stan dt o benefi t fro mth e transaction . Further , th e carrie r cite s Sectio n I o f

Anne x II t o th e Ai r

Transpor t

Agreemen t

betwee n th e government s of th e Unite d State s an dCanada , whic h specifie s tha t Canadia n ai r

carrier s b e afforde dequa l acces s t o slo t controlle dairports . Accordingly , WestJe t urgedth e FA A t o approv e th e Delta-U S Airway s waive r request , thu s enablin g WestJet' s slo t transactio n with Delt at o proceed . Transpor t Azumah expresse dabelie f tha t th e LG A slot s ar e bein g liquidate da t below-marke t valu e an dsuspect s tha t

thi s i s th e resul t

o f ai r carrier s not

bein g allowe dt o sel l slot s o n th e ope n market . Th e commente r

believe s that

"hoarding " o f

slot s wil l continu e a s lon g a s ai r carrier s ar e not allowe dt o freel y bu y an dsel l slot s a s needed . Th e Spiri t

Airline s Maste r

Executiv e Counci l o f

th e Ai r Lin e Pilot s Associatio n urge dth e FA A t o approv e th e LaGuardi awaive r request , a s modifie db y th e slo t transfer s t o AirTran , Spirit , JetBlu e an dWestJet . Th e Counci l believe s tha t suc h agran t

wil l permi t

th e beneficia l transactio n t o procee dan dt o enabl e Spiri t an dit s pilot s t o benefi t

fro msignifican t

ne w servic e expansion s an denhance djo b opportunities . Th e Southwes t

Airline s Pilot s Associatio n expresse dsuppoi t for th e FAA' s proposa l t o requir e th e divestitur e o f

slo t interest s a

t DCA an dLG A t o ne w entran t an dlimite dincumben t

carriers , an durge s th e DOT/FA A t o den y th e requeste dpetitio n unles s th e propose ddivestitur e of 2 0 slo t 4 7pair s an dLG A an d1 4 slo t pair s a t DC A i s enforced . Th e Associatio n believe s that hub s dominate db y tw o legac y carrier s woul db e create da t LG A an dDCA , givin g the munchecke d marke t an dpricin g power . I

t als o believe s th e revise dslo t transactio n deal announce db y Delt a an dU S Airway s o n Marc h 22 , 201 0 i s ameage r giveawa y tha t

woul dbar

Southwes t

fro ma n open , public , transparen t

proceedin g tha t

woul denabl e Southwes t t o operat e a

t thes e airports . Th e commente r

state dthat

Southwes t

i s intereste di n biddin g o n th e slot s t o expan dit s low-far e servic e t o consumer s i n ahigh-far e market , an dcite dit s ow n economi c expert a s concludin g that consumer s woul dsav e approximatel y $20 0 millio n amiuall y i f Southwes t

wer e give n th e opportunit y t o acquir e th e slot s t o b e diveste dunde r th e FA A proposal . Th e Associatio n adde d that th e publi c interes t

i s not serve db y allowin g dominan t carrier s t o distribut e ahandfu l o f slot s t o achose n fe w airlin e competitors . JetBlu e Airways , AirTra n Airways , Inc . (joine db y th e AirTra n Maste r Executiv e Counci l of

th e Ai r Lin e Pilot s Association ) submitte dcomment s largel y reiteratin g th e view s the y ha d expresse di n thei r

initia l comment s t o th e docket . Th e Delt aMaste r

Executiv e Counci l of

th e Ai r Lin e Pilot s Associatio n submitte dcomment s reiteratin g it s earlier

support for th e Delt a- U S Airway s petition , but addin g tha t

i t agree dwith th e legac y carrier s tha t

th e FA A ha s n o statutory authorit y t o impos e th e divestitur e conditio n an ddisagree dwith opposin g comments , particularl y thos e o f Southwes t

Airline s an dth e Departmen t

o f Justice , tha t

approva l of

th e LG A waive r

reques t wil l reduc e competition . Th e commente r

asserte da s wel l tha t

th e propose dslo t

transfer s t o AirTran , Spirit , JetBlue , an d WestJe t adequatel y addres s th e FAA' s competitio n concern s an ddemonstrate s tha t th e FA A shoul dno t

substitut e it s regulator y judgmen t for th e competitiv e marketplace . Th e Consume r

Trave l Allianc e submitte dcomment s i n stron g oppositio n t o th e revise dslo t transactio n dea l with AirTran , Spirit , JetBlue , an dWestle t a s announce db y Delt aan dU S Airway s o n Marc h 22 , 2010 . Th e Allianc e support s th e origina l DOT/FA A order , but believe s tha t th e mos t recen t slo t transactio n proposa l i s unacceptabl e an dwoul dserv e onl y t o maintai n th e curren t

statu s o f pricin g i n th e market . Further , th e Allianc e argue s tha t th e proposa l shoul d b e rejecte dout

of hand , o r th e proceedin g shoul db e reopene dfor further investigatio n an d additional comment s shoul db e permitte do n th e ne w proposal . A Notic e of

Communicatio n wa s submitte dt o th e publi c docket , i n accordanc e with 1 4 C.F.R . Par t 300 , statin g tha t

Captai n Dou g Ralp h o f

th e Ai r Line s Pilo t

Associatio n an dJame s Van Woert o f Delt aAi r

Line s expresse dsupport for th e join t petitio n submitte db y Delt aan dU S Airway s whil e attendin g a n aviatio n roundtabl e a

t Stewart Internationa l Airport . Th e roundtabl e include dTransportatio n Secretar y Ra y LaHoo dan dDeput y Assistan t Secretar y for

Aviatio n an d Internationa l Affair s Christ aFomarotto . Captai n Ralp h expresse dhi s hop e tha t th e Departmen t woul dhandl e th e proceedin g expeditiousl y an daske dabou t it s status . Secretar y LaHoo d 4 8responde dthat , becaus e th e matte r wa s unde r

activ e consideration , h e coul dno t commen t o n any aspec t an dfurther

note dthat

an y discussio n of

th e cas e a

t that tim e woul db e inappropriate . Southwes t

Airline s submitte drepl y comment s i n respons e t o th e independentl y negotiate dslo t trarisaction s betwee n Delt aan dU S Airway s an dfour low-cos t carriers , AirTran , Spirit , JetBlue , an dWestJet . Southwes t

strongl y oppose s th e slo t transactio n an dargue s tha t i t i s acalculate d effor t b y Delt aan dU S Airway s t o avoi dth e FAA' s propose ddivestitur e condition s whil e producin g n o meaningfu l competitio n t o eithe r carrie r a t LG A an dDCA . Th e carrie r adde dt o it s earlie r comment s t o th e effec t

that th e splintere dan dminima l slo t transfer s i n th e six-party deal wil l hav e n o meaningfu l impac t o n competitio n o r

concentratio n a

t LG A an dDCA , an dthat th e partie s t o th e dea l wil l likel y serv e at mos t on e o r tw o route s eac h fro mLG A an dDC A with th e transferre dslots . It

furthe r asserte dthat

both Spiri t

an dAirTra n hav e alon g histor y of abandonin g servic e i n bot h market s after unsuccessfu l attempt s t o compet e with incumben t carriers . Contendin g tha t i t woul dgenerat e mor e publi c benefit s tha n al l four slo t transactio n partner s combined , th e carrie r argue dtha t

it s exclusio n fro mth e six-part y transactio n wa s n o acciden t becaus e Delt aan dU S Airway s Icnow tha t Southwes t

ca n leverag e eve n asmal l numbe r of slot s mor e effectivel y tha n th e othe r eligibl e carriers , combined , becaus e o f it s larg e domesti c network . Th e carrie r

believe s that , i n orde r

t o assis t airport s i n exercisin g thei r propert y right s an daccommodatin g slo t

recipients , DOT/FA A shoul dconditio n it s waive r approva l o n th e paralle l divestitur e of

adequat e an dviabl y locate dgroun dfacilitie s b y Delt aan dU S Airways . Assertin g tha t

LG A an dDC A ar e separat e market s tha t ar e effectivel y insulate dfro mth e competitio n a

t surroundin g airports . Southwes t contend s tha t

neithe r airline s no r

passenger s conside r th e thre e Washington/Baltimor e are aairports , o r th e thre e Ne w York/Newark are a airports , t o b e economi c substitute s fo r on e another . Finally , i n decidin g whethe r propose dslo t transfer s ar e i n th e publi c interest . Southwes t urgedth e FA A t o conside r th e potential impac t

o n competitio n i n th e airlin e industry , notin g amon g othe r consideration s tha t

mor e tha n 7 0 years . Congressiona l polic y ha s bee n t o maximiz e competitio n an ddete r anticompetitiv e action s i n th e U.S . Airlin e Industry . Virgi n Americ asubmitte drebutta l comment s i n respons e t o th e modifie dslo t transaction , contendin g tha t

th e tentativ e agreemen t

betwee n th e carrier s fall s short o f th e divestitur e o f

2 0 slo t pair s at LG A an d1 4 slo t

pair s a t DC A tha t

th e FA A tentativel y conclude s t o b e require dof th e publi c interest . Virgi n Americ abelieve s th e petitioners ' argumen t tha t th e FA A lack s legal authority t o conditio n th e approva l o n divestiture s misperceive s th e statutory basi s upo n whic h th e FA A ha s relied , an dexpresse s support for th e variou s legal argument s recite db y th e FA A i n th e Notice . In particular , regardin g th e Join t Applicant s clai mtha t

th e DOT/FA A canno t

rel y o n pro-competitiv e policie s whe n administerin g slots . Virgi n Americ abelieve s tha t suc h argumen t wa s expressl y refute dlon g ag o b y aFedera l appeal s court i n Northwes t

Airline s v . Goldschmidt , 64 5 F.2 d130 9 (8th Cir . 1980) . Similarly , Virgi n Americ abelieve s tha t th e argument s b y th e

4 9Join t

Applicants , an dothe r

legac y can'iers , that

th e FAA' s propose ddivestitur e constitute s a n unlawfu l confiscatio n lac k sufficient merit . Spiri t Airlines , Inc . submitte drebutta l comment s in respons e t o th e "pay-to-play " solutio n for redistributio n o f

slot s a s announce db y th e FA A i n it s Februar y 18 , 201 0 Notice . Spiri t believe s th e FAA' s proposa l i s no t i n th e broadpubli c interest . Spiri t state s tha t

i t was abl e t o obtai n 2 2 slot s a t LG A onl y a s aresul t

o f Congressiona l interventio n vi ath e Wendel l H . FordAviatio n hivestmen t

an dReformAc t

for th e 21s t Century (AIR-21) , whic h wa s enacte di n 2000 . Sinc e then . Spiri t

state s tha t

i t ha s bee n unabl e t o obtai n throug h purchas e o r leas e a n adequat e numbe r of slot s t o efficientl y increas e servic e a t LGA . Th e ai r

canie r contend s that

airline s with asmal l numbe r o f slot s fac e uniqu e operatin g problems , whic h har mthei r inability t o compete , including : (1 ) durin g weathe r an dFAA-impose dgroun ddelays , smal l slo t holder s lik e Spiri t

are force dt o cance l o r

dela y thei r

mos t importan t

flights . In th e even t

of aforce dcancellation , becaus e o f

th e fe w flight s the y ar e abl e t o offer , limite dincumben t low-far e carrier s ma y not b e abl e t o reboo k

passenger s fro mcancele dflight s unti l flight s leavin g th e nex t day , o r may b e force dt o pa y asubstantia l cos t for re-accommodatin g passenger s ont o afligh t o n on e of

th e larg e incumbents . Spiri t

assert s that , not

onl y ar e th e smaller , low-far e airline s disadvantaged , bu t s o to o are thei r

passengers , man y o f

who mrequir e lo w fare s t o travel ; (2 ) carrier s with few slot s hav e difficult

y adjustin g schedules . Slo t trade s ar e criticall y importan t for carrier s t o arrang e fligh t schedule s t o enabl e thei r overal l network s t o functio n efficiently . Ye t i n th e curren t circumstance s th e large r

slo t holder s d o not

nee dt o trad e slo t

time s with othe r

carriers , an dth e smal l slo t holder s d o no t

hav e sufficien t

slot s t o arrang e workabl e trade s with othe r smalle r carriers ; (3 ) low-far e carrier s ar e seriousl y handicappe db y thei r inabilit y t o acquir e anumbe r of slot s sufficient

t o efficientl y utiliz e agate . Th e cos t an ddifficulty o f

operatin g ashare dgat e i f a carrie r ha s onl y afe w pair s of

slots , i n additio n t o staffin g costs , makes i t virtuall y impossibl e for low-far e carrier s t o ad dslot s on e o r tw o pai r a t atime ; an d(4 ) with few slot s it i s particularl y difficul t t o addres s ne w competitio n i n on e marke t withou t reducin g o r

givin g u p servic e i n another . Spiri t

believe s tha t

th e "pay-to-play " proces s i s th e wors t outcom e for

th e carrie r

an dit s passengers , becaus e i t

woul dno t

hav e th e financia l resource s t o compet e with offer s fro mmajo r carrier s for

th e release dLG A slot s regardles s o f ho w efficientl y i t

coul dus e them , th e profi t i t coul dearn , an dth e lo w fare benefi t i t provide s t o consumers . Spiri t argue s tha t

th e alternativ e proposa l o f

allowin g i t

t o consummat e atransactio n i n whic h i t woul dacquir e 5 LG A slo t pair s fro mDelt ai s i n th e bes t

interes t of consumer s becaus e th e slot s woul dprovid e som e flexibility t o respon dt o marke t

change s lik e th e ne w America n Ne w York - For t Lauderdal e servic e whic h i s essentia l i

f Spiri t i s t o remai n aviabl e competito r i n th e Ne w Yor

k - South Florid amarket , an d th e agreemen t

give s i t necessar y flexibility t o integrat e th e slot s int o it s syste mi n conjunctio n with aircraf

t acquisition s an dseasona l rout e realignments , withou t disruptin g it s othe r

service s unde r pressur e of

th e FA A use-or-los e requirement s tha t coul dresul t

i n los s of slots .

5 0Th e Por

t Authorit y of

Ne w Yor

k an dNe w Jerse y (PANYNJ ) file darebutta l addressin g tw o subject s raise db y othe r

partie s i n respons e t o th e Notic e that wer e no t directl y raise db y th e Notice : (1 ) slot s ar e no t

propert y of

th e airline s that

hav e authority t o conduc t operation s authorize db y thos e slots ; an d(2 ) th e Por t Authorit y i s th e entity wit h th e righ t

t o decid e whethe r an dho w t o allocat e groun dfacilitie s at LGA . PANYN J cite s I n r e Branif f Airlines , 70 0 F . 2 d 93 5 (5t h Cir . 1983) , an dothe r

lega l proceedings , i n it s contentio n tha t sufficien t legal preceden t establishe s that

slot s "ar e actuall y th e restrictio n o f th e us e of

propeit y - th e airplane ; not propert y i n themselves. " Th e Port als o cite s 4 9 U.S.C . § 40103(b)(1) , whic h provide s that statute s unde r

whic h th e FA A issue s slo t order s an dwaiver s preclud e slot s fro mbein g property . Regardin g groun dfacilities , PANYN J assert s th e righ t t o determin e t o who man dwhat circumstance s t o authoriz e us e of airport facilitie s i s a

n airport operator' s proprietar y powe r an d right , a s conclude di n Nationa l Busines s Aviatio n Ass'n , Inc . v . City o f Naple s Airport , 16 2 F.Supp.2 d1343 , 134 8 (M.D . Fla . 2001) , a s wel l a s th e airport proprietor' s right s t o determin e whethe r an dunde r

wha t term s an dcondition s acces s shoul db e provide dt o a n airline , a s provide db y 4 9 U.S.C . § 41713(b)(3) . Further , PANYN J believe s that i f th e FA A accept s thes e slo t transfer s a s full o r

partia l satisfactio n o f

FAA' s competitio n concerns , th e benefit s of th e increas e i n th e presenc e o f ne w entrant/limite dincumben t carrier s at

LG A shoul db e maintaine d for th e lif e of thes e slots , i.e. , unti l Octobe r 29 , 2011 . Accordingly , th e Por t believe s that

i f th e FA A issue s an orde r

grantin g th e waive r

petitio n of

Delt aan dU S Airway s basedi n whol e o r in part o n th e transfer s of

slot s t o JetBlue , AirTran , Spiri t an dWe s Jet , suc h a

n orde r shoul d provid e tha t

thos e slot s b e subjec t

t o arestrictio n "precludin g th e carrier s purchasin g th e slo t interest s acquire dpursuan t t o [thos e transfers ] fro mre-selling , o r leasing , the mt o an y carrier s that ar e not eligible " t o receiv e slot s unde r th e Waive r

Proposa l se t

fort h i n th e Notice . Delt aan dU S Airway s submitte djoin t rebutta l corrmient s i n respons e t o comment s o f th e Unite d State s Justic e Departmen t an dSouthwes t

Airline s Co . Th e carrier s reiterate dman y o f th e point s the y mad e earlier , particularl y concernin g thei r belie f tha t th e FA A ha s th e authority t o conside r safet y an defficien t

us e of airspace , not

competition . Th e carrie r argue s tha t

both th e DO J an d Southwes t

Airline s misinterpre t

regulator y guidanc e an dlegal preceden t i n thei r assertio n tha t th e FA A ha s statutory authorit y t o conditio n th e waive r gran t o n th e divestitur e o f

slots . Th e carrier s als o argue dthat : (a ) ther e i s n o evidenc e tha t th e transactio n wil l reduc e th e likelihoo dof low-cos t carrie r entry ; (b ) th e DO J ignore s imdispute devidenc e tha t th e transactio n wil l increase , no t reduce , competition ; (c ) th e DO J offer s n o evidenc e that increase s i n slo t

ownershi p a

t DCA an dLG A woul dproduc e competitiv e harmo r increas e fares ; (d ) th e DOJ' s assertio n relatin g t o marke t definitio n d o not

addres s th e parties ' evidence ; an d(e ) th e DOJ' s assertio n that th e propose ddivestitur e wil l not interfer e with th e transaction' s benefit s suffer s fro mnumerou s flaws . Th e commenter s als o urge dthat thei r privately-contracte dslo t transfer s shoul db e approved , a s th e variou s partie s hav e entere dint o atransactio n tha t satisfie s th e FAA' s an dth e DOJ' s desir e t o se e th e slot s g o t o low-cos t carrier s an dSouthwest' s comment s reflec t a n untenabl e attemp t

t o exploi t

th e waive r

reques t for it s ow n benefit . The y als o asserte dthat 5 1Southwes t

ha s ha dampl e opportunitie s t o obtai n DC A an dLG A slot s bu t ha s chose n Jiot

t o d o so , that i t canno t complai n abou t

marke t concentratio n give n it s near exclusiv e presenc e a

t it s dominan t aiiports , includin g Lov e Fiel dAirport , an dthat ther e i s n o basi s for

Southwest' s suggestio n that

i t woul dmak e mor e beneficia l us e o f th e slot s tha n JetBlue , AirTran , Spirit , an d Westlet . DO J submitte drebutta l comment s in respons e t o publi c comment s challengin g th e FAA' s statutory , factual , an danalytica l basi s for imposin g th e propose ddivestitur e conditions . Th e DO J als o reiterate dit s support for th e FAA' s tentativ e decision . DO J offer s th e followin g comment s i n repl y t o som e o f th e parties ' ke y arguments : (1 ) FA A divestiture s offse t har mwhil e preservin g puiporte defficiencies . Th e Departmen t counter s claim s tha t

th e condition s woul d provid e mor e competitiv e har mtha n benefit , an dfurther s state s that it use dth e sam e analytica l scenari o advance db y th e opposin g parties , whil e als o takin g int o accoun t th e LC C factor , i n conductin g it s analysis . Th e Departmen t state s tha t

i t reache daver y differen t

conclusion , that th e aggregat e impac t

o n consumer s fro mth e propose ddivestitur e woul db e strongl y positive ; (2 ) th e modificatio n proposa l warrant s carefu l examination . Th e DO J believe s th e circumstance s an dlimite ddisclose dterm s of th e propose dtransfer s strongl y sugges t tha t th e divestiture s wer e structure dt o minimiz e th e potentia l competitiv e effec t o n Delt aan dU S Airways , an d consequentl y potential benefit s for consumers . Th e DO J recommend s tha t th e FA A examin e th e detail s o f th e proposals , includin g th e agreement s themselve s an dsurroundin g circumstances , t o evaluat e thei r

likel y effects ; (3 ) competitio n fro mnearb y airport s wil l not completel y offse t

los t competitio n betwee n U S Airway s an dDelt aat DC A an dLGA . Th e DO J contend s tha t nothin g i n th e parties ' variou s submission s refute s th e notio n tha t flight s out

of DCA (o r LGA ) provid e close r competitio n t o othe r

flight s out

o f DC A (o r LGA ) tha n d o flight s out of ID A an dBWI (o r JF K an dEWR) , an dthu s tha t marke t powe r can b e exercise da

t DC A (o r LGA ) agains t

som e passenger s despit e th e presenc e of competitio n fro mth e othe r tw o nearb y airports ; (4 ) DOT/FA A revie w o f

competitio n effect s doe s not interfer e with DO J authority . Th e DO J note s tha t i t i s particularl y ironi c that , befor e th e Notic e wa s issue di n thi s matter . Delt aurge d DOT/FA A t o undertak e abroa danalysi s o f th e competitiv e effect s o f thi s transactio n an donl y raise dobjection s onc e th e carrie r sa w th e result s o f

th e FAA' s competitiv e analysis . Th e DO J conclude s it s repl y comment s b y reiteratin g tha t th e FA A ha s sufficien t

statutory , analytical , an d factual basi s t o impos e th e condition s propose di n it s Notice , an durgedth e FA A t o subjec t th e modifie dtransactio n propose db y th e partie s t o clos e scrutiny. Delt aan dU S Airway s submitte daMotio n for Leav e t o Fil e Comment s o n Apri l 7 , 201 0 i n respons e t o rebutta l comment s o f th e DOJ . Th e carrier s believ e i t i s necessar y t o respon dt o comment s include di n th e DOJ' s rebutta l commen t repl y a s amatte r

o f correctin g th e recor d althoug h th e commen t

perio dha s expired . Th e carrier s offere dth e followin g rebuttals : (1 ) th e DOJ' s puiporte dmisgiving s abou t th e alternativ e slo t

transfer s ar e misplaced . Th e carrier s reiterat e tha t

th e slo t transactio n wil l not

g o forwar dunde r

th e term s propose db y th e FAA , an d 5 2th e modifie dslo t proposa l submitte db y th e si x partie s satisfie s th e FA A concern s whil e preservin g th e transaction . Further , th e carrier s disagre e wit h th e Department' s favore dcash

onl y winner-take-al l proces s that , the y believe , woul dvirtuall y guarante e that al l o f th e slot s woul dg o t o better-capitalize dSouthwest ; an d(2 ) th e DO J ha s abandone dan y defens e o f th e FAA' s consideratio n o f

competition . Th e commenter' s believ e tha t th e DO J ha s abandone dth e vie w that i t expresse di n it s initia l comment s that th e FA A ha s authorit y t o conside r competitio n unde r 4 9 U.S.C . § 40101(a) , an dha s chose n instea dt o defer t o th e FAA' s vie w o f

it s ow n authority . Additionally , th e carrier s argu e that th e Departmen t

fail s t o offe

r an y coheren t explanatio n for

ho w th e FAA' s exercis e of competitio n authority can b e reconcile dwit h Congress' s decisio n t o remov e Sectio n 7 authority fro mth e DO T an dt o delegat e tha t authority exclusivel y t o th e DOJ . Delt aan dU S Airway s conclud e thei r Motio n fo r

Leav e t o Fil e Comment s b y reiteratin g that th e DOJ' s rebutta l comment s confirmth e FA A ha s n o lega l authority t o impose adivestitur e condition , an dtherefor e th e FA A shoul deithe r gran t th e carrier s a n exemptio n fro mth e LG A Order , o r promptl y approv e th e modifie dtransaction . A subsequen t filin g wa s als o received , urgin g tha t th e transactio n betwee n America n an dJetBlue , b y whic h JetBlu e woul dobtai n eigh t slo t pair s a t DCA an dus e the mt o serv e Boston , Orlando , an dFt . Lauderdale , shoul dserv e t o resolv e th e Department' s concern s abou t low-cos t carrie r entry an d competitio n a

t that airport .

5 3Appendi x B Standar dIndustr y Far e Leve l Analysi s Washingto n an dNe w Yor k Are aAirport s Th e figure s for

Washington , depicte di n th e tabl e below , sho w th e percentag e o f tota l are a O& D passenger s usin g eac h of th e WA S are aairports , th e passenge r weighte dpercen t

of fare s a t eac h airport

compare dt o th e mileag e adjuste dSIF L expresse da s apercen t of SIFL , a n identificatio n o f

th e larges t

passenge r

carrie r a t eac h airport , it s percen t

of O& D traffic , an dfinall y an indicatio n o f tha t carrier' s passenge r

weighte dfare a s apercen t of passenge r weighte dSIF L fare s Washingto n Are a Airports ' Percen t o f SIFL , Larges t Carrie rSIF L an d Percen t of Traffi c BW I DC A IA D % of WA S 4 1 % 35 % 23 % Ap t % SIF L

65 % 101 % 77 % Lges t Ca r

W N U S U A % of Traffi c

48 % 33 % 47 % %SIF L

65 % 124 % 90 % Note : I f U S Airway s i s remove d fro m tfi e DC A percen t o f SIF L calculatio n th e airpor t averag e SIF L woul d declin e t o 88 % o f SIFL . A s can b e seen , th e relationshi p of actua l fare s t o th e SIF L fare benchmar k i s very differen t

a t th e thre e Washingto n are aairports . Actua l fare s ar e 65 % of SIF L a t BWI , 77 % a

t IA D an d101 % a

t DCA . Th e comparabl e statistic s for th e NY C airport s ar e summarize di n th e followin g table . Ne w Yor k

Are a Airport s Percen t of SIFL , Larges t Carrie rSIF L an d Percen t of Traffi c EW R JFK LG A % of NY C

30 % 34 % 35 % Ap t % SIF L

7 1 % 57 % 82 % Lges t Ca r

C O B 6 D L % of Traffi c

59 % 46 % 30 % %SIF L

7 1 % 57 % 89 % Note : I f Delt a i s remove d fro m th e DC A percen t o f SIF L calculatio n th e airpor t averag e SIF L woul d declin e t o 79 % o f SIFL . Th e result s sho w tha t

actua l fare s ar e 71 % of

SIF L a t EWR , 57 % of

SIF L a t JFK , an d82 % o f SIF L a t LGA . Delt aAi r

Line s i s th e larges t

carrie r with 30 % of

traffi c an daweighte daverag e fare o f 89 % o f SIFL . W e note dtha t

if Delt ai s exclude dfro mLG A figure s th e airport percen t o f SIF L woul ddeclin e t o 79 % o f SIFL .

5 4

ium i