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 C hief 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 , 20121 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 1 files this Consolidated Reply in order to address certain inaccurate , misleading , and in some case s 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

. T he slot exemptions at issue in this proceeding are authorized for service to “medium hub an d smaller airports. ” Pursuant to 49 U.S.C. § 41714(h)(7) , (8) and (9) hub classifications are based on the F AA‟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 directl y contradicts JetBlue ‟s claim. In Order 2000

- 7
- 2, served July 5, 2000, the Department award ed 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 argu ments 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 (b ased 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 t o 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 procee ding

” (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 overprice d 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 Sou thwest‟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 H obby service would compete with United‟s DCA

- Houston I ntercontinental service. 8 Not only has the Department rejected similar arguments in the past , but this claim is illogical and cont radicted 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.

- Chi cago 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. Je tBlue’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

. In stead it allocated only a single sentence

– with no supporting analysis

– to its proposed market impact: “Accordingly, with the introduction of new low fare competit ive 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 apples

to
- 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 DCA

HOU in hand , JetBlue presented new, significantly higher, stimulation factors for its own proposal fo r the first time in its December 19 Conso lidated R esponse . I n 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 A pplication , w ithout explanation or supporting evidence

. 12 JetBlue ‟s Response also claims that it would stimulate 109,726 passengers , rather than the 69,31 5 calculated by Southwest based on J etBlue‟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 the se 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 t han 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

pro ceeding . Th e applicable AIR

- 21 selection c riterion 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 o therwise it would probably have lost the recent beyond

perimeter slot exemption case to Frontier at the smaller Colorado Springs market

. 18 Regardless, JetBlue‟s revised projections are procedural ly improper and lack any credibility. They should be disregarded by the Department. 3. JetBlue ’s Attacks on Southwest’s Economic Analysis a re 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. S outhwest 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 $31 7 .23 , and the average baggage and cancellation fees paid by United/Continental pas senger s were $16.47 . The total of these amounts is $334. 20 The average per - passenger baggage and cancellation fees

are ca l culated fro m DOT Form 41 data and are part o f 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 b y frequent flyer redemptions) , and Southwest‟s passenger traffic n umbers ar e 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 a n apples

- to
- apples comparison , Southwest calculated benefits for all three applicants in this proceeding us ing only the reported fare paid by paying passeng ers 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 $1 00 higher tha n its BWI

- IAH fare. While United does charge a fare premium over Southwest in the BWI

- Hous ton market , i t 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 S outhwest‟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 pa y 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 le v els and therefore meaningless. First, JetBlue selected only six markets between the two carriers and compared them to an industry fare curve com prised of thousand s of markets. This is superficial at best and does not provide any meaningful data relevant to this proceeding

. Second and mo re 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 whi le JetBlue by its own analysis would produce only $10.6 million , barely more than one

- half that o f Southwest.

c. Southwest’s Benef its Calculation is Empirically Sound A nd 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 f alse

. In fact, JetBlue undermine s 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. I f 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 equali zing it s DCA

- HOU fares with its BWI

- HOU fare . United‟s DCA

- IAH nonstop monopoly fare is $334. JetBlue agrees that a similar $33 differential w ill occur at DCA and this is precisel y 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 e ntry, 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 an alysis was b oth 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 far e in the benefits calculation , n or did it use $207 as the market fare “after entry.” Nor did Southwest assume that United would fully m atch Southwest‟s fare of $207. Ins tead Southwest assumed that United would charge the same fare to DCA

- IAH passengers that it char ges BWI

- IAH passengers ($240) (Exhibit WN

- S R

- 7)

. By comparison, JetBlue‟s Application presented neither a traffic forecast n or 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 ). Th ese 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 ( s ee Exhibi t W N

- 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 wil l 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‟ m otive in repeatedly flogging this se lf

- serving theory is to deflect attention from its own dismal record at DCA employ ing 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 clai m: “Southwest Cannot Achieve Its Projected Stimulation”

– p. 11 of Consolidated Answer of US Airways. Southwest Response: This is dem onstrably 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 multi

airport 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 is12

a nalytically 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 city

pairs , 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 t raffic increases due to Southwest‟s entry into new market s 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 f are reductions ranged from 13% to 63% in these markets, while traf fic 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 r esult of Sou thwest‟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 (T he 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, 263 23
- 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 propos al 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. Kneis ley December 31, 2012CERTIFICATE OF SERVI CE

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@usairwa ys.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 Airport s 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%.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- $94 ( - 28%)

1/ Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fee s
. 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. /21/ 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 Fare 1

## 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 Fare 1 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 , R 2 =0.92 United Yield with WN Competition (cents ) = 3,370(miles )
- . 712 , R 2 =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 fee s . Includes all nonstop routes with 300 or more roundtrips for YE Q2 2012. 

### + $46 + $49 Docket OST

- 2000 - 7182 Exhibit WN - SR - 61/ Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fee s
. 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%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 SilentPercent Stimulation

US Airways’ Misleading Examples

Projected by Campbell - Hill 1

Wtd . Average = 13%

Projected by Campbell - Hill Annual Fared Passengers 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 - 9Southwest 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 808% 1106% Change in Market O&D Passengers