BEFORE THE

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

_____________________________________

)

Applications of )

)

SOUTHWEST AIRLINES CO. )

JETBLUE AIRWAYS CORP. ) Docket DOT-OST-2000-7182

US AIRWAYS, INC. )

)

For Inside Perimeter Slot Exemptions )

pursuant to 49 U.S.C. § 41718(b) )

_____________________________________ )

CONSOLIDATED REPLY OF SOUTHWEST AIRLINES CO.

AND MOTION FOR LEAVE TO FILE

Communication with respect to this 

 document should be addressed to:

Ron Ricks Robert W. Kneisley

 Executive Vice President -- Associate General Counsel

 Chief Legal and Regulatory Officer Leslie C. Abbott

Madeleine Johnson Senior Attorney

 Vice President General Counsel SOUTHWEST AIRLINES CO.

SOUTHWEST AIRLINES CO. 1901 L Street, NW

2702 Love Field Drive Suite 640

Dallas, TX 75235-1611 Washington, DC 20036

 bob.kneisley@wnco.com

 (202) 263-6284

December 31, 2012
1

BEFORE THE

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

_____________________________________

)

Applications of )

)

SOUTHWEST AIRLINES CO. )

JETBLUE AIRWAYS CORP. ) Docket DOT-OST-2000-7182

US AIRWAYS, INC. )

)

For Inside Perimeter Slot Exemptions )

pursuant to 49 U.S.C. § 41718(b) )

_____________________________________ )

CONSOLIDATED REPLY OF SOUTHWEST AIRLINES CO.

AND MOTION FOR LEAVE TO FILE

Southwest Airlines 1files this Consolidated Reply in order to address certain 

inaccurate, misleading, and in some cases completely false statements contained in the 

responses filed by JetBlue and US Airways on December 19, 2012 in this proceeding.

Good cause exists for leave to file this document under Rule 6 of the Department‟s 

Rules of Practice (14 CFR §302.6) because this Reply will correct the record in several 

important respects and thereby contribute to a more accurate and informed basis for the 

Department‟s decision. 

REPLY TO JETBLUE

1. JetBlue’s Interpretation of the AIR-21 Criteria Is Contradicted by 

Unambiguous Statutory Language and Department Precedent. 

Ignoring both explicit statutory language and contrary Department precedent, 

JetBlue has advanced a completely fallacious argument that granting Southwest‟s 

 

1 Common names of airlines are used herein.
2

application to provide DCA-HOU service would be “inconsistent with the statutory 

direction” of AIR-21 and that Houston Hobby Airport is somehow ineligible because it 

serves a large metropolitan area.2 

JetBlue‟s characterization of AIR-21 is incorrect. The slot exemptions at issue in 

this proceeding are authorized for service to “medium hub and smaller airports.” 

Pursuant to 49 U.S.C. § 41714(h)(7), (8) and (9) hub classifications are based on the 

FAA‟s Primary Airport Enplanement Activity Summary for Calendar Year 1997. 

Consistent with this requirement, Houston Hobby Airport (HOU) is designated as a 

medium hub airport on the FAA‟s 1997 list, a fact that JetBlue does not dispute.3

Beyond this, JetBlue does not even acknowledge, much less address, the 

Department‟s AIR-21 slot exemption decision in 2000 that directly contradicts JetBlue‟s 

claim. In Order 2000-7-2, served July 5, 2000, the Department awarded American 

Trans Air, Inc. (ATA) four slot exemptions designated for “medium hub and smaller 

airports” to serve Chicago Midway Airport (MDW). In so doing, the Department rejected 

arguments that are essentially the same as JetBlue is making here, i.e., that the 

Department could not consider ATA‟s proposal to serve Chicago Midway, or Legend 

Airlines‟ application to serve Dallas Love Field, since both carriers “propose to serve 

„large markets.‟”4: The Department summarily dismissed this argument:

“We disagree. Chicago-Midway and Dallas Love Field are defined as 

medium hub airports for purposes of this proceeding. 49 U.S.C. 

§41714(h)(9).”5

 

2

JetBlue Consolidated Reply, Dec. 19, 2012, pp. 18-19.

3

In fact Hobby is still classified as a medium hub today (based on 2011 FAA data, the most recent 

available).

4 Order 2000-7-2, at 18.

5

Id. 
3

It is troubling that JetBlue would advance essentially the same argument in this 

proceeding without even mentioning the Department‟s prior rejection of it. 

In fact, in selecting ATA‟s proposal to serve MDW, the Department found that:

“[c]ompared to the other proposals in this docket, ATA‟s proposal 

potentially promotes air transportation to the most passengers and 

produces the maximum consumer benefits, since the Washington, D.C.-

Chicago market is the largest market under consideration in this 

proceeding” (emphasis added).6

Similarly in this proceeding, Southwest‟s DCA-HOU service will benefit the most 

passengers and generate the maximum consumer benefits of the three applicants by a 

wide margin due to the large size of the greatly overpriced monopoly DCA-Houston 

market. Moreover, in the 2000 proceeding the Department selected MDW for the slot 

exemptions over a competing proposal to serve JAX – the same city that JetBlue has 

proposed in this proceeding – due in large part to the much greater size of the Chicago 

market compared to JAX.7 A similar disparity in size in the current proceeding strongly 

favors Southwest‟s HOU proposal over both JetBlue‟s JAX proposal and US Airways‟ 

OKC proposal.

JetBlue is equally misguided in asserting that Southwest‟s proposal does not 

“fully satisfy” the AIR-21 criterion of providing service on a “monopoly nonstop route to 

[DCA]” since Southwest‟s DCA-Houston Hobby service would compete with United‟s 

DCA-Houston Intercontinental service.8 Not only has the Department rejected similar 

arguments in the past, but this claim is illogical and contradicted by the DOT‟s own data. 

Specifically, in Order 2000-7-2, the Department found that since “American and United 

dominate the Washington, D.C.-Chicago market” via their service between DCA and 

 

6

Id. 

7

Id. at 19 (“The Jacksonville market is not as large as the Chicago or Raleigh/Durham market.”)

8

JetBlue Consolidated Response at 21.
4

Chicago O’Hare, granting slot exemptions to ATA for DCA-Chicago Midway service 

would ensure “low-fare competition in a market that is now dominated by two of the 

largest domestic airlines.”9

Moreover, all of the available published data, as well as the evidence in the 

record, make clear that HOU and IAH serve the same economic market and compete 

actively with one another for passengers in the greater Houston region. For example, 

Southwest has submitted ample evidence in this proceeding documenting that United 

lowers its fares substantially in the BWI-IAH market in direct response to Southwest‟s 

BWI-HOU service.

10

 Consequently, JetBlue‟s argument is both inconsistent with 

Department precedent and contrary to economic reality. 

2. JetBlue’s After-the-Fact Traffic Forecast and Fare Proposal

Are Improper, Contrived and Not Credible.

JetBlue failed to offer a traffic forecast or a proposed DCA-JAX fare in its 

December 5 Application. Instead it allocated only a single sentence – with no 

supporting analysis – to its proposed market impact: 

“Accordingly, with the introduction of new low fare competitive service, 

JetBlue expects that traffic in the DCA-JAX market will grow by 50%, with 

average fares falling by at least 30% in the first year of service” 

(emphasis added). 11

Because JetBlue offered no analytical support for its “expectations,” Southwest applied 

its own forecasting model to the above JetBlue assumptions to calculate JetBlue‟s 

estimated traffic stimulation and passenger fare savings in order to facilitate an applesto-apples comparison between the two proposals (Exhibits WN-R-2-4 and WN-R-8-10). 

 

9 Order 2000-7-2, pp. 19-20.

10 See, e.g., Application of Southwest Airlines, filed Dec. 5, 2012, p. 4 and Exhibits WN-103 and WN-104.

11 JetBlue Application, p. 4.
5

However, two weeks later, and having Southwest‟s extensive forecast for DCAHOU in hand, JetBlue presented new, significantly higher, stimulation factors for its own 

proposal for the first time in its December 19 Consolidated Response. In a transparent 

effort to artificially enhance its DCA-JAX proposal, JetBlue simply increased its 

stimulation to 79% instead of the 50% it originally “expected” in its Application, without 

explanation or supporting evidence.

12

 JetBlue‟s Response also claims that it would 

stimulate 109,726 passengers, rather than the 69,315 calculated by Southwest based 

on JetBlue‟s original assertions.13 JetBlue‟s new estimate is, of course, coincidentally 

slightly higher than Southwest‟s DCA-HOU projected stimulation of 105,382

passengers.

14

Notwithstanding these after-the-fact and unsupported revisions, JetBlue‟s newly 

estimated consumer fare savings are $10.6 million (which JetBlue calculated using 

Southwest‟s model),

15 or 45% less than Southwest’s unchallenged fare savings of $19.1 

million.

16

 Thus Southwest‟s proposal provides the maximum consumer benefits in this 

proceeding by a wide margin even with JetBlue‟s artificially contrived forecasting 

mulligan. 

Recognizing this fact, JetBlue attempts to repackage its smaller benefits on a 

“per capita” basis, arguing that it should actually be rewarded for generating a lower 

level of public benefits.

17

 However, this fabricated measurement is irrelevant to this 

 

12 JetBlue Consolidated Response, p. 8; See also Exhibit WN-SR-1 and SR-2.

13 Id.

14 JetBlue also now states that it will carry 78,840 local DCA passengers instead of the 67,104 estimated 

by Southwest, which is also coincidentally much closer to Southwest‟s forecast of DCA-HOU and beyond 

traffic of 81,317 passengers (Exhibit WN-105). 

15 JetBlue Consolidated Response, p. 9. 

16 Southwest Application, Exhibit WN-106. 

17 JetBlue Consolidated Response, p. 20 (“JetBlue‟s Consumer Cost Savings Are Greater on a Per 

Capita Basis”).
6

proceeding. The applicable AIR-21 selection criterion refers to “maximum competitive 

benefits,” not “maximum per capita benefits” (see 49 U.S.C. § 41718(b)(5)). JetBlue 

should be grateful for this, for otherwise it would probably have lost the recent beyondperimeter slot exemption case to Frontier at the smaller Colorado Springs market.

18

Regardless, JetBlue‟s revised projections are procedurally improper and lack any 

credibility. They should be disregarded by the Department. 

3. JetBlue’s Attacks on Southwest’s Economic Analysis are Baseless.

JetBlue‟s Consolidated Response makes a series of criticisms of Southwest‟s 

proposal, and the economic analysis supporting it that are demonstrably misleading 

and/or false. These attacks require correction to ensure a complete and accurate

record. 

a. JetBlue’s Criticism of the Average DCA-IAH Fare 

that Southwest Used in its Forecast is Unfounded.

JetBlue Claim: “The $334 Average Fare in the DCA-IAH Market Cited by 

Southwest in Its Application is Overstated.” – p. 10 of JetBlue Consolidated Response. 

Southwest Response: This is incorrect. United passengers do indeed pay an 

average of $334 one-way in the nonstop DCA-IAH market.19 Contrary to the figure on 

page 11 of JetBlue‟s Consolidated Response, United‟s reported fare paid by paying 

passengers in the DCA-IAH market was $317.23, and the average baggage and 

cancellation fees paid by United/Continental passengers were $16.47. The total of 

these amounts is $334.20 The average per-passenger baggage and cancellation fees 

are calculated from DOT Form 41 data and are part of the passenger‟s full cost of air 

 

18 DOT Order 2012-5-12 (issued May 14, 2012), p. 22.

19 Southwest Application, p.4, Exhibits WN-101 and WN-102.

20 Id., Exhibit WN-103.
7

travel. There is nothing misleading about this data; in fact it is the most accurate 

reflection of what a consumer has actually paid for air transportation, and for that reason 

Southwest included these fees in its analysis for all carriers. 

In addition, Southwest indicated clearly in its exhibits that it used only the fares 

paid by fared passengers (i.e., not diluted by frequent flyer redemptions), and 

Southwest‟s passenger traffic numbers are likewise limited to fare-paying passengers. 

In fact, JetBlue adopted Southwest‟s methodology to estimate the consumer benefits of 

its own proposal.

21

 To ensure an apples-to-apples comparison, Southwest calculated 

benefits for all three applicants in this proceeding using only the reported fare paid by 

paying passengers plus the average baggage and cancellation fees paid by those 

passengers. Thus, JetBlue‟s criticism is completely unfounded and should be 

disregarded. 

b. JetBlue’s Claims Regarding United’s Matching

 of Southwest Fares are Incomplete and Misleading.

JetBlue Claim: “United historically does not match Southwest‟s prices and 

continues to charge a premium 38 percent higher than Southwest‟s fares.” – p. 14 of 

JetBlue Consolidated Response. 

Southwest Response: This is incorrect. The closest empirical example to 

DCA-Houston is BWI-Houston where Southwest and United compete via nonstop 

service to HOU and IAH respectively. The average fare for United in BWI-IAH is $240 

compared to $207 for Southwest in BWI-HOU - a 16% premium. This market is not only 

the most relevant predictor of Southwest‟s probable impact on United‟s price response 

after Southwest enters the DCA-HOU market, but it shows how United has been 

 

21 JetBlue Consolidated Response, p. 9 and 20, fn. 27.
8

sheltered from competition in the DCA - Houston market. In the DCA-IAH and IAD-IAH 

markets where United has no nonstop competitors, its average fares are $334 and $327

respectively (Exhibit WN-SR-3) - almost $100 higher than its BWI-IAH fare. While

United does charge a fare premium over Southwest in the BWI-Houston market, it is 

only 16%, while US Airways‟ fare premium over JetBlue in the sample Boston markets 

cited by JetBlue in its Response averages 21% (Exhibit WN-SR-4). Based on JetBlue‟s

own analysis, Southwest does a better job of disciplining legacy carrier fares than

JetBlue. 

The critical point is that Southwest‟s projection that United will reduce its fares in

the DCA-Houston market by 28% (from $334 to $240) is entirely consistent with 

numerous recent examples of markets where Southwest‟s entry has caused United to 

lower its fares by 25% to 48% (Exhibit WN-SR-5). However, in domestic Houston 

markets where Southwest does not compete with United, passengers pay nearly $50 

more one-way on United (Exhibit WN-SR-6). 

Finally, JetBlue has handpicked three B6/US markets and three UA/WN markets 

in an attempt to show that average B6/US fares are below the domestic industry fare 

curve while average UA/WN fares are slightly above the curve.22 This analysis is flawed 

on several levels and therefore meaningless. First, JetBlue selected only six markets 

between the two carriers and compared them to an industry fare curve comprised of 

thousands of markets. This is superficial at best and does not provide any meaningful 

data relevant to this proceeding. Second and more important, JetBlue‟s so-called 

critique does not challenge the fact that Southwest would deliver over $19 million of 

 

22

 JetBlue Consolidated Response, p. 13.
9

annual consumer fare savings while JetBlue by its own analysis would produce only 

$10.6 million, barely more than one-half that of Southwest. 

c. Southwest’s Benefits Calculation is Empirically Sound

 And in Fact Conservative.

JetBlue Claim: “Southwest‟s claimed benefits also are overstated because 

United is unlikely to follow Southwest‟s lead and price its fares at Southwest‟s level.” –

p. 14 of JetBlue Consolidated Response.

Southwest Response: This is false. In fact, JetBlue undermines this claim in

stating on page 21 of its Consolidated Response “Southwest competes with United 

between BWI and Houston, but again flies to HOU while United flies to IAH. The 

differentiation in services results in a price difference of $33. See WN-104. If the same 

effect is observed at DCA, similar fare differences will be expected.” (Emphasis added). 

United‟s BWI-IAH fare is $240 and Southwest‟s BWI-HOU fare is $207, hence the $33 

differential. Southwest proposes a DCA-HOU average fare of $207,

23 equalizing its 

DCA-HOU fares with its BWI-HOU fare. United‟s DCA-IAH nonstop monopoly fare is 

$334. JetBlue agrees that a similar $33 differential will occur at DCA and this is 

precisely what Southwest predicated will occur – that United will reduce its DCA-IAH 

fare to $240 (as it did at BWI), and the new weighted average market fare for all carriers 

will decline from $292 currently, to $235 after Southwest enters the market at $207 and 

United responds with an average fare of $240.24

To estimate passenger consumer benefits (fare savings), Southwest used 

average market fares of $292 before WN entry, and $235 after WN entry, as was 

explained clearly in Appendix 1 of Southwest‟s Application. As shown there, 

 

23 Exhibits WN-103 and WN-104. 

24 See Exhibit WN-SR-3 and SR-7.
10

Southwest‟s analysis was both rigorous and conservative. Contrary to JetBlue‟s 

assertion, it did not use United‟s $334 DCA-IAH nonstop monopoly fare to represent the 

“before entry” market fare in the benefits calculation, nor did it use $207 as the market 

fare “after entry.” Nor did Southwest assume that United would fully match Southwest‟s 

fare of $207. Instead Southwest assumed that United would charge the same fare to 

DCA-IAH passengers that it charges BWI-IAH passengers ($240) (Exhibit WN-SR-7). 

By comparison, JetBlue‟s Application presented neither a traffic forecast nor a proposed 

fare. JetBlue simply assumed, without any analysis or evidence, that DCA-JAX fares 

would decline by 30% and traffic would increase by 50% (Exhibit WN-SR-8). These 

assertions are entirely arbitrary and should be given no weight by the Department. 

In addition, JetBlue states on page 12 of its Response that Southwest proposes 

to charge DCA-HOU fares that will average $207 but the industry fare curve for DCA

would suggest a fare of $233. JetBlue is wrong again. The $233 it refers to is the 

industry fare if DCA-HOU were priced at the average for ALL nonstop passengers 

carried by ALL airlines in ALL DCA markets at the DCA-HOU nonstop distance (see 

Exhibit WN-101, footnote 1). This fare is entirely irrelevant. Southwest has shown that 

it will charge the same fares for DCA-HOU passengers as it does for BWI-HOU 

passengers, and that Southwest expects United‟s response at DCA will be the same as 

it is at BWI. What is relevant about the fare curve shown in Exhibit WN-101 is that 

United‟s current DCA-IAH fare is 43% higher than the industry DCA fare curve and 

Southwest‟s competition will cause United to reduce its fare significantly. JetBlue‟s 

misguided DCA-HOU fare analysis is based on an incorrect data set and the

Department should therefore disregard it as irrelevant. 
11

REPLY TO US AIRWAYS

1. US Airways’ Claim that Southwest’s Stimulation is Too High

Is Incorrect and Disproved by DOT Data.

First of all, whenever US Airways competes with Southwest in slot exemption 

cases it predictably tries to discredit Southwest‟s ability to reduce fares, increase 

passengers and benefit consumers. In truth, US Airways‟ motive in repeatedly flogging 

this self-serving theory is to deflect attention from its own dismal record at DCA 

employing small, high-cost aircraft in an inefficient hub network, which enables US 

Airways to charge extremely high fares while wasting large numbers of slots. 

US Airways claim: “Southwest Cannot Achieve Its Projected Stimulation” – p. 

11 of Consolidated Answer of US Airways.

Southwest Response: This is demonstrably false. In an attempt to show that 

Southwest will not achieve its projected DCA-Houston stimulation rate of 37%, US 

Airways creates a misleading metric that combines multiple airports together into “metro 

areas,” rather than focusing on the DCA-Houston market that is at issue in this 

proceeding. This approach, while analytically flawed, does not undermine Southwest‟s 

analysis but simply represents an apples-to-oranges comparison between a multiairport metro area and the DCA-Houston market. As shown in Exhibit WN-SR-9,

Southwest‟s estimated stimulation of 105,382 passengers is the same whether it is 

compared to the DCA-Houston market or US Airways‟ larger combined Washington 

“metro area.” Of course combining all three Washington area airports into one market is 
12

analytically flawed, as US Airways well knows, since the Department has found 

repeatedly that DCA is the correct relevant market for all slot-related cases.25 

US Airways Claim: “Southwest Exaggerates its Projected Fare Decrease.” – p. 

12 of Consolidated Answer of US Airways.

Southwest Response: This is incorrect. US Airways claims that Southwest 

“exaggerates” its projected DCA-HOU fare decrease and then cherry-picks just two citypairs, MDW-SNA and MDW-ONT, in the January 2009 through June 2011 time period

as so-called evidence for this proposition.26 However, DOT data from the same time 

frame cited by US Airways demonstrates that the “Southwest Effect” of significant fare 

reductions and large traffic increases due to Southwest‟s entry into new markets is alive 

and well. For example, Exhibit WN-SR-10 shows the traffic response to Southwest‟s 

lower fares in Greensville-Spartanburg (GSP) and Charleston (CHS) South Carolina 

O&D after Southwest initiated service to both cities on March 13, 2011. Southwest‟s 

fare reductions ranged from 13% to 63% in these markets, while traffic increased by an 

extraordinary 56% to 1106%. In particular, the GSP-Houston market experienced a 

25% fare reduction and a corresponding 152% passenger increase as a direct result of 

Southwest‟s new low-fare service. These results are consistent with Southwest‟s 

experience throughout its entire 41 year history, and US Airways‟ transparent attempt to 

divert attention from its anti-consumer record at DCA should be disregarded.

 

25 See e.g., Order 2012-5-12, at 20 (The Department recognized “the uniqueness of service to DCA, even 

when other area airports may have nonstop service to the same ... destination”); See also DL/US Slot 

Swap, Docket No. FAA-2010-0109, DOT Grant of Waiver with Conditions, 75 Fed. Reg. 26322, 26323-24 

(May 11, 2009). 

26 Consolidated Answer of US Airways, p. 12.
13

CONCLUSION

For the reasons given above and in its prior pleadings, Southwest urges the 

Department to award it slot exemptions to serve the DCA-HOU market as it has 

proposed. The record of this proceeding conclusively demonstrates that Southwest‟s 

proposal for DCA-HOU-ABQ service will not only best fulfill the AIR-21 criteria but will 

have by far the greatest impact on competition, generate the highest level of public 

benefits, and produce the most efficient use of scarce DCA slot exemptions. 

. Respectfully submitted,

__________________________

Robert W. Kneisley

December 31, 2012
CERTIFICATE OF SERVICE

I hereby certify that on December 31, 2012, a copy of the foregoing was served 

via e-mail or U.S. mail on the following persons:

msinick@ssd.com (Alaska Airlines)

francis.heil@aa.com (American Airlines)

robert.wirick@aa.com (American Airlines)

sascha.vanderbellen@delta.com (Delta Air Lines)

robert.cohn@hoganlovells.com (Counsel for Frontier Airlines)

patrick.rizzi@hoganlovells.com (Counsel for Frontier Airlines)

robert.land@jetblue.com (JetBlue Airways)

jhill@dowlohnes.com (Counsel for JetBlue Airways)

perkmann@dowlohnes.com (Counsel for JetBlue Airways)

dkirstein@yklaw.com (Counsel for Spirit Airlines)

jyoung@yklaw.com (Counsel for Spirit Airlines)

John.Fredericksen@suncountry.com (Sun Country Airlines)

dan.weiss@united.com (United Air Lines)

howard_kass@usairways.com (US Airways)

Benjamin.slocum@usairways.com (US Airways)

pmurphy@lopmurphy.com (Counsel for USA3000)

barbara.russell@virginamerica.com (Virgin America)

jegillick@zsrlaw.com (Counsel for Virgin America)

susan.kurland@dot.gov

todd.homan@dot.gov

robert.letteney@dot.gov

James.dann@dot.gov

esta.rosenberg@dot.gov

brian.ctr.meehan@faa.gov

Mario C. Diaz

Director of Aviation

Houston Airport System

16930 JFK Boulevard

Houston, Texas 77032

John Potter

President and CEO

Metropolitan Washington Airports Authority

1 Aviation Circle 

Washington, DC 20001 

info@airlineinfo.com

__________________________

 Leslie C. Abbott
Without Any Empirical Basis JetBlue Revised Its Fare and Traffic Stimulation 

Assumptions After Seeing Southwest’s Application and Traffic Forecast

Docket OST-2000-7182

Exhibit WN-SR-1

Source

1. JAX-DCA Fared O&D Passengers (YE Q2 2012) 138,629 O&D Survey via Diio LLC.

2. JetBlue Assumed Stimulation Rate in Dec. 5 Application 50% JetBlue Application at p. 11.

3. Passenger Stimulation Based on JetBlue’s Application 69,315 Line 1 x Line 2.

4. JetBlue Assumed Passenger Stimulation in Dec. 19 

Consolidated Response

109,726 Response at p. 8. There is no empirical

 basis for this assumption.

5. Implied Stimulation Rate in JetBlue Dec. 19 Response 79% (Line 4 / Line 1) x 100%.
67,104

109,726

78,840

69,315

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

90,000

95,000

100,000

105,000

110,000

Local DCA

Passengers

Stimulation Local DCA

Passengers

Stimulation

1/ Calculated by Southwest Based on assumptions by JetBlue in its Application (See Southwest Answer, Appendix 3) 

2/ Calculated by Southwest Based on assumptions by JetBlue in its Application (See Southwest Answer, Appendix 2)

3/ JetBlue’s assumed portion of JAX-DCA stimulation that it would capture, from page 8 of JetBlue’s Consolidated Response. 

4/ JetBlue’s assumed JAX-DCA stimulation , from page 8 of JetBlue’s Consolidated Response.

Passengers

Dec. 5 B6 Application

With No Evidentiary Basis JetBlue Increased Its 

Passenger Numbers After Seeing Southwest’s Application

Docket OST-2000-7182

Exhibit WN-SR-2

Dec. 19 B6 Consolidated Response

No Evidentiary 

Basis Provided

1

2

3

4
$334

$207

$327

$240

$0

$50

$100

$150

$200

$250

$300

$350

UA DCA-Houston UA BWI-Houston WN BWI-Houston UA IAD-Houston

-$94 (-28%)

1/ Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fees.

Source: US DOT O&D Survey YE Q2 2012; US DOT Form 41, via Diio, LLC.

Average Fare 1

No Competition

from Southwest

Competition 

from Southwest

Competition from Southwest Forces United to Charge a BWI-Houston Fare that is 

$94 Less Than its DCA-Houston Fare and $87 Less Than its IAD-Houston Fare

Docket OST-2000-7182

Exhibit WN-SR-3

-$33 (-14%)

No Competition 

from Southwest
JetBlue’s Consolidated Response Ignores 

The One Market with UA/WN Head-to-Head 

Competition That Is Most Relevant to This Case

Docket OST-2000-7182

Exhibit WN-SR-4

Market US Premium Over B6

BOS-BUF 13%

BOS-CLT 27%

BOS-RIC 17%

BOS-DCA 19%

BOS-PIT 28%

US Premium Over

B6 in Competitive Markets 21%

US Airways Fare 

Premiums Over JetBlue/1

Most Comparable Market for

DCA-Houston

Market UA Premium Over WN

BWI-Houston 16%

1/ According to JetBlue in JetBlue Consolidated Response, Exhibit B6-R-102

2/ U.S. DOT, O&D Survey, YE Q2 2012, via Diio, LLC.

/2
-48%

-43%

-38%

-36%

-33%

-29% -28% -27% -27% -27% -26% -26% -25%

-38%

-34%

-47%

-50%

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

CHI-MSP SFO-SNA CHI-PHL DEN-PHX

HoustonPHL DEN-SLC DEN-MCI ABQ-DENDENOMA

Proposed

DCAHouston LAX-PHL CHI-PIT DEN-LAS DEN-TUSBWIEWR CHI-GSP

1/ Source: Exhibit WN-SR-1

Note: Fared passengers only. Excludes all taxes and government charges. Fares are compared between the full year before nonstop service by Southwest and the full year after 

nonstop service by Southwest. 

Source: U.S. DOT, O&D Survey, via Diio, LLC; Innovata Schedule Data.

Change in UA/CO Fare 

After WN Entered

Southwest’s Estimated Fare Response by United is

Consistent With Many Recent Examples Where Southwest 

Added Nonstop Service in United Markets

Docket OST-2000-7182

Exhibit WN-SR-5

United’s BWI-Houston Fare is 28% 

Below Its Current DCA-IAH Fare1
$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

$220

$240

$260

$280

$300

$320

$340

$360

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000

United Charges Houston Passengers Nearly $50 More Each Way

In Markets Where It Does Not Compete with Southwest

One-Way Miles

United IAH One-Way 

Average Domestic Fare1

United Monopoly 

IAH Markets

United’s

IAH Markets

With Southwest

Competition at HOU

1/ The fare curves are derived from the following yield curves: United Monopoly Yield (cents) = 5,195.5 (miles) -.749, R2=0.92

 United Yield with WN Competition(cents) = 3,370(miles) -.712, R2=0.94.

.Source: U.S. DOT, O&D Survey and Schedule data, YE Q2 2012, via Diio, LLC.

Note: Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fees. Includes all nonstop 

routes with 300 or more roundtrips for YE Q2 2012.

+ $46

+ $49

Docket OST-2000-7182

Exhibit WN-SR-6
$334

$207

$0

$50

$100

$150

$200

$250

$300

$350

UA Current DCA-Houston Fare WN BWI-Houston Fare

1/ Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fees.

2/ DCA-Houston fare estimated as the weighted average of Southwest’s BWI-HOU fare ($207) and United’s BWI-Houston fare ($240). “Houston” always includes IAH and HOU.

 (14.6% WN share from QSI model at $207 and 85.4% share for other airlines at $240). Southwest will have a seat share of approximately 13% while charging lower fares than UA.

Source: Southwest Application, Appendix 1 and Southwest Application, Exhibit WN-104.

Average Fare 1

Projected Southwest 

DCA-HOU Ave. Fare

JetBlue Misrepresents How Southwest Computed Passenger Fare

Savings: Appendix 1 of Southwest’s Application Clearly Describes Southwest’s Method

Docket OST-2000-7182

Exhibit WN-SR-7

Page 1 of 2

Not Directly

Used in

Consumer 

Benefit Estimate

2

How Used

In Consumer

Savings

Benefit 

Calculation

B6 Incorrectly Claims WN Calculated Its 

Consumer Benefits By Comparing These Fares:

-38%
$292

$235

$0

$50

$100

$150

$200

$250

$300

$350

1/ Fared passengers only. Excludes all taxes and government charges. Includes estimated per-passenger checked baggage and rebooking/change fees.

2/ DCA-Houston fare estimated as the weighted average of Southwest’s BWI-HOU fare ($207) and United’s BWI-Houston fare ($240). “Houston” always includes IAH and HOU.

 (14.6% WN share from QSI model at $207 and 85.4% share for other airlines at $240). Southwest will have a seat share of approximately 13% while charging lower fares than UA.

Source: Southwest Application, Appendix 1 and Southwest Application, Exhibit WN-104.

Average Fare 1

Docket OST-2000-7182

Exhibit WN-SR-7

Page 2 of 2

2

How Used

In Consumer

Savings

Benefit 

Calculation

Fares Actually Used in WN Consumer Benefits 

Analysis in Appendix 1 of WN Application:

Current DCA-Houston

Market Average Fare (All Carriers)

Weighted Average DCA-Houston Fare 

After Southwest Service

-19%

JetBlue Misrepresents How Southwest Computed Passenger Fare

Savings: Appendix 1 of Southwest’s Application Clearly Describes Southwest’s Method

Used in Consumer 

Savings Benefit Estimate

As the “Before Southwest” 

Fare

Used in Consumer 

Savings Benefit Estimate

As the “After Southwest” 

Fare
Southwest Used Actual Data from its BWI-Houston Experience

to Estimate its DCA-Houston Average Fare; 

JetBlue Provides No Basis For Its Assumed Fare

Docket OST-2000-7182

Exhibit WN-SR-8

Basis For: Source

Southwest’s DCA-Houston Fare BWI-Houston Actual Southwest Fares

United’s DCA-Houston Fare

(After Southwest’s Entry)

BWI-Houston Actual United Fares

JetBlue’s DCA-JAX Fare None - Application is Silent

Other Carrier Fares After B6 Service None - Application is Silent
9%

15%

16%

18%

37%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

DEN -

(DCA/IAD/BWI)

(EWR/LGA/JFK)

- STL

DEN -

(EWR/LGA/JFK)

(EWR/LGA/JFK)

- PHX

(DCA/IAD/BWI) -

Houston*

DCA-Houston

Percent Stimulation

US Airways’ Misleading Examples

Projected by

Campbell-Hill

1

Wtd. Average = 13%

Projected by

Annual Fared Passengers Campbell-Hill

Before WN Nonstop Service 886,253 458,015 905,164 739,587 719,730 284,104

After WN Nonstop Service 965,568 503,086 1,049,070 873,991 825,112 389,486

* DCA,IAD and BWI are combined in order to provide a direct comparison with US Airways’ misleading market examples. Southwest’s exhibits did not include any stimulation for 

IAD and BWI. DCA and LGA are unique markets that should not be combined for slot allocation analyses.

1/ From Consolidated Answer of US Airways, page 12, Figure 5. Fared passengers before and after are used to be consistent with Southwest’s analysis.

Source: U.S. DOT, O&D Survey, via Diio, LLC.

US Airways Compares Southwest’s Estimated Stimulation 

for DCA-Houston to Examples that Misleadingly Include All Metro Area Airports

Docket OST-2000-7182

Exhibit WN-SR-9
Southwest estimates DCA-Houston Market Fares (All 

Carriers) will drop by 19% with Southwest nonstop 

service and passengers will increase by 37%. 

1

Note: Fared passengers only. Excludes all taxes and government charges. Before Period = CY 2010, After Period YE Q1 2012.

1/ Southwest Application, Appendix 1. 

.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q2 2012, via Diio, LLC.

The Southwest Effect Is Alive and Well–

Recent New Stations at GSP and CHS Show Dramatic 

Passenger Response to Southwest’s Fares and Service

Docket OST-2000-7182

Exhibit WN-SR-10

Change in Market Average Fare

-33%

-19%

-13%

-63%

-44%

-25%

-35%

-55%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

CHSBNACHSBWI CHS-CHICHSHoustonGSPBNAGSPBWI GSP-CHIGSPHouston

308%

100%

56%

152%

232%

308%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

CHSBNACHSBWI CHS-CHICHSHoustonGSPBNAGSPBWI GSP-CHIGSPHouston

808% 1106%

Change in Market O&D Passengers