FEDERAL AVIATION ADMINISTRATION UNITED STATES DEPARTMENT OF TRANSPORTATION 

### ----------------------------------------------------------------------------------:X: UNITED AIRLINES, INC., DocketNo. Complainant, FAA-16-14-13
v. THE PORT AUTHORITY OF NEWYORKANDNEWJERSEY, Respondent. 

### ----------------------------------------------------------------------------------:X:
MOTION OF RESPONDENT THEPORT AUTHORITY OF NEWYORKAND NEWJERSEY FORSUMMARYJUDGMENT DISMISSING THE COMPLAINT (VOLUME 1 OF 2) Communications with respectto this document should be addressed to:. CarleneV. Mcintyre ArnoldD. Kolikoff Faith Tabafunda LawDepartment The PortAuthority ofNewYork andNewJersey 225 ParkAvenue South, 14thFloor NewYork, N.Y. 10003 Telephone: (212) 435-3503 Attorneys for Respondent The PortAuthority ofNewYorkandNewJerseyFEDERAL AVIATION ADMINISTRATION UNITED STATES DEPARTMENT OF TRANSPORTATION 

### ----------------------------------------------------------------------------------)( UNITED AIRLINES, INC., Complainant,
v. THEPORTAUTHORITY OF NEWYORKAND NEWJERSEY, Respondent. 

### ----------------------------------------------------------------------------------)( DocketNo. FAA-16-14-13

MOTION FOR SUMMARYJUDGMENT DISMISSING THE COMPLAINT RespondentThe PortAuthority ofNew York andNewJersey ("the Port Authority"), herebymoves for summaryjudgmentdismissing the Complainthereinpursuantto 14 C.P.R. 

### § 16.26 (c) based uponthe annexedMemorandum OfPointsAndAuthorities In Support Of MotionTo For Summary JudgmentDismissing Complaint, Statement OfRespondent The Port Authority OfNewYork AndNewJerseyPursuantTo 14 C.P.R.§ 16.26(c)(2) In SupportOfits MotionFor SummaryJudgmentDismissing The Complaint, andtheDeclarations ofJoseph R. Garcia, Fred Longemecker and Carlene V. Mcintyre, and the Exhibits annexedthereto. Dated: February 10,2015 Respectfully submitted,

ArnoldD. Kolikoff Faith Tabafunda LawDepartment ThePortAu1hority ofNewYorkandNewJersey 225 Park Avenue South, 14thFloor NewYork,N.Y. 10003 Telephone: (212) 435-3503 Attorneys for Respondent The PortAuthority ofNewYork and NewJerseyTO: Office ofthe ChiefCounsel Attention: FAAPart 16 AirportProceedings Docket, AGC-600 FederalAviationAdministration 800 IndependenceAvenue, SW Washington D.C. 20591 KeithJ. Harrison Gerald F. Murphy StevenJ. Seiden Crowell & Moring LLP I00I PennsylvaniaAvenue, NW Washington, DC 20004 (202) 624-2500 RobertS. Span AlanK. Steinbrecher Sophy Chen Steinbrecher & Span LLP 1155 F Street,N.W., Suite 1050 Washington, DC 20004 (202) 559-8680 rspan@steinbrecherspan.com Attorneys for Complainant

2BEFORE THE FEDERAL AVIATION ADMINISTRATION WASHINGTON, D.C.

UNITED AIRLINES, INC., Complainant, 

### v. THE PORTAUTHORITYOF NEWYORK AND NEWJERSEY, Respondent. Docket FAA-16-14-13

RESPONDENT PORT AUTHORITY'S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARYJUDGMENT DISMISSING THE COMPLAINT

Carlene V. Mcintyre Arnold D. Kolikoff Faith Tabafunda THE PORT AUTHORITY OF NEW YORK AND NEW JERSEY 225 Park Avenue South New York, New York, 10003 Telephone: 212.435.3503

### Table of Contents PRELIMINARY STATEMENT .................................................................................................... 1 STATEMENT OF FACTS ........................................................................................................... 8 ARGUMENT................................................................................................................................ 12 THE SUMMARY JUDGMENT STANDARD....................................................................... 12 I. THE FAA SHOULD NOT ENTERTAIN JURISDICTION OVER THE INSTANT COMPLAINT..................................................................................................... 13 II. THE COMPLAINT DOES NOT STATE SUFFICIENT GROUNDS TO WARRANT AN EXAMINATION AS TO WHETHER THE FLIGHT FEE VIOLATES GRANT ASSURANCES............................................................................... 20 A. Complainant Fails to Meet Its Burden of Proof...............................20 B. The Flight Fee Is Not Unreasonable or Violative ofApplicable Law
...21 Ill. THE FLIGHT FEES ARE NOT UNJUSTLY DISCRIMINATORY
..................... 33 IV. THERE IS NO UNLAWFUL DIVERSION OF REVENUE
................................. 34 CONCLUSION ............................................................................................................................37

ITable of Authorities Page(s) CASES Aerodynamics ofReading, Inc. Complainant/Aerodynamics v. Reading Regional AirportAuthority, (Docket FAA 16-00-03, 2001 WL 1085346 July23 2001 )................................................5 AirCanada v. Department ofTransportation, 148 F.3d 1142 (D.C. Cir. 1998)...........................................................................................30 Brendan Airways, LLC, eta/., v. PortAuthority, Instituting Order, Docket OST-05- 20407 Order2005-3-21, 2005 WL 4747012 (March 16, 2005) ........................................6, 26 Continental Micronesia v. Commonwealth ofthe Northern Marianas Islands (Docket50191, Order95-4-14, 1995WL 156451 (D.O.T.1995)
.............................. 19 Delta AirLines, Inc. v. Lehigh-Northampton Airport, (Docket OST-95-80, Order 95-5-8, 1995 WL 17057418)...........................................................................20 Desert Wings Jet Center v. CityofRedmond, (Docket FAA 16-09-07, 2010 WL 4723466 Nov. 10, 201 0) ...........................................33 Long IslandJet CenterEast, Inc. v. CountyofSuffolk, New York, (Docket FAA 16-04-05, 2005 WL 428889 Jan. 21, 2005) .............................................33 Lujan v. Defenders ofWildlife, 504 U.S. 555 (1992) .............................................................12 NorthwestAirlines, Inc., Delta Airlines, Inc. AirTran Airways, Inc., Continental Airlines, Inc., SouthwestAirlines, Inc., v. Indianapolis AirportAuthority, Indianapolis InternationalAirport, BAA-Indianapolis, (Docket FAA 16-07-04, 2009 WL 3976461 Aug. 19, 2008) ........................................2,14 NorthwestAirlines v. CountyofKent, 510 U.S. 355 (1994) ............................................................................................................. 30 PenobscotAirServices, Ltd v. FAA, 164 F.3d 713 (1 51 Cir. 1999).............................................................................................3, 17 PortAuthorityofNew York & NewJersey v. DepartmentofTransportation, 479 F.3d, 21 D.C. Cir. 2007.................................................................................................34 Roadhouse Aviations, LLC v. CityofTulsa & The Tulsa Airports Improvement Trust, (Docket FAA 16-05-08,2007WL 1966160 June 26, 2007)........................................3,17

11Union Flights, Inc. v. San Francisco InternationalAirport, Docket FAA. 16-99-11, 2000 Westlaw 311170 (Feb. 15, 2000)....................................18 STATUTES 49 U.S.C. 47129(b) ..................................................................................................................... 21 49 U.S.C. § 47129.......................................................................................................................19 49 U.S.C.§ 47129(e)..................................................................................................................19 49 U.S.C. § 47129 (e)(1 )............................................................................................................ 21 Airport and Airway Improvement Act of 1982 .........................................................................29 Airport and Airway Improvement Act of 1982, 49 U.S.C. 47107(b)
....................................33 Aviation Authorization Act of 1994 .................................................................................. 3 Federal Aviation Authorization Act of 1994, § 113, 49 U.S.C. 47129
...........................17, 21 OTHERAUTHORITIES 14 C.F.R. Part 16 ..................................................................................................................19, 22 14 C.F.R. §16.29 ...........................................................................................................................9 61 Fed. Reg. 31994 (June 21, 1996).................................................................................13, 21 78 Fed. Reg. 55330 (Sept. 10, 2013) ..............................................................................passim Airport Compliance Manual (FAA Order 5190.68) ................................................................24

111BEFORE THE FEDERAL AVIATION ADMINISTRATION WASHINGTON, D.C.
UNITED AIRLINES, INC., Complainant, 

### v. THE PORTAUTHORITYOF NEWYORK AND NEWJERSEY, Respondent. Docket FAA-16-14-13

RESPONDENT PORT AUTHORITY'S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARYJUDGMENT DISMISSING THE COMPLAINT The respondent, The Port Authority of New York and New Jersey (the "Port Authority'' or "Respondent") respectfully submits this memorandum of law in support of its motion for summary judgment dismissing the complaint of United Airlines, Inc. ("Complainant") with prejudice. PRELIMINARY STATEMENT 1. Stripped of its excessive hyperbole, inapposite statements of fact and reliance on press clippings and other extraneous materials, Complainant makes one key assertion of law- that the Federal Aviation Administration ("FAA") should, pursuant to its authority under Part 16, investigate the flight fees Complainant pays at Newark Liberty International Airport ("Newark", "EWR" or "Newark Liberty") because the flight fee is "unreasonable", "discriminatory" and lacks transparency. (Complaint at pg. 55)Remarkably, what the Complaint does not do is come to grips with the fatal flaw in this assertion -thatthe flight fee is set pursuant to agreements to which United is a party. In fact, as conclusive evidence of Complainant's attempt to avoid this fundamental defect in its case, Complainant conspicuously fails to append any of those governing lease agreements (or any oftheir provisions) to its Complaint, despite appending forty exhibits (Complaint Exhs. A-NN). Under long-standing statutes and policy, Department of Transportation ("DOT") and FAA jurisdiction does not exist over an air carrier's challenge to the terms of an airport agreement to which the air carrier is a party. The current Rates and Charges Policy states unambiguously that "the Department will not entertain a complaint about the reasonableness of a fee set by agreement filed by a party to the agreement setting the disputed fee." 78 Fed. Reg. at 55332 (2013) (emphasis added). In fact, this point of the Rates and Charges Policy is grounded in the FAA's established position that rates and charges, including flight fees, should ideally be matters resolved by the airport and the airline through agreement. The FAA has, therefore, encouraged agreement between those parties as the preferred method of establishing such fees. 

### /d. at 55331. Consistent with this position, the FAA has made plain on numerous occasions that the Part 16 proceeding is not intended to provide a mechanism for adjudicating the respective rights of the parties to a contractual fee dispute. Rather, "[s]uch issues are matters of state contract law and are not reviewable in a Part 16 proceeding". Northwest Airlines, Inc., Delta Airlines, Inc. AirTran Aitways, Inc., Continental Airlines, Inc., SouthwestAirlines, Inc., v. Indianapolis AirportAuthority, Indianapolis International

2Airport, BAA-Indianapolis, (Docket FAA 16-07-04, 2009 WL 3976461 August 19, 2008), at * 37. (collecting cases); see also, PenobscotAir Services, Ltd v. FAA, 164 F.3d 713, 726 (1st Cir. 1999). "[T]he grant assurances and the FAA compliance process are not devices by which a commercial aeronautical tenant can abrogate an otherwise valid commercial lease with a sponsor because the operations under the lease are less profitable than the tenant anticipated." Roadhouse Aviations, LLC v. City of Tulsa & The Tulsa Airports Improvement Trust, (Docket FAA 16-05-08, 2007 WL 1966160, *17, June 26, 2007). This statement of policy, which is clear and unequivocal, applies equally to claims brought under the expedited procedures ofthe Aviation Authorization Act of 1994 or, as here, under Part 16 (78 Fed. Reg. at 55332), and mandates dismissal of the instant Complaint. Simply stated, the Complainant is party to the contractual agreements setting the fee, which is challenged in the Complaint. The Complainant was created in 2013 as a result of a merger between United Airlines Inc., ("United") and Continental Airlines Inc., ("Continental"), leaving Continental as the surviving corporation, which then changed its name to United Airlines, Inc

.. (Longernecker Decl. at 1]12; Complaint at 1]13)1 While Complainant argues that it never "negotiated" the "Master Lease" terms regarding the fees in dispute. /d. In fact, the undisputed record indicates that Continental time and time again extended its lease agreements at the airport, including the flight fee, as part of its successful efforts to obtain a dominant position at Newark and build its hub there.

1 "Longernecker Decl." refers to the Declaration of Frederick Longernecker filed in support of Respondent's Motion for SummaryJudgment. 3Also during the same time period, Continental invested hundreds of millions of dollars in Terminal C at Newark and other facilities at the airport and negotiated its financial arrangements concerning such investments with the Port Authority - again, never choosing to do anything except continue to accept the very flight fee formula about which it now complains. As recently as December of 2012, Complainant committed to extend its Terminal C agreement and to the expenditure of more than one hundred and fifty million dollars in its hub operations at the airport. (Longernecker Decl. at ,-r32, ,-r 33). Both United and Continental had the opportunity to obtain relief from the operation of the flight fee formula during bankruptcy proceedings, but each chose not to do so. (Longernecker Decl.. at ,-r,-r 34-37). In short, the subject matter of the complaint is the product of agreements between sophisticated parties, which Complainant and its predecessor airlines confirmed again and again. Although under the applicable regulatory guidelines an airline may decide not to sign a fee agreement, and challenge any unilateral imposition of fees, an airline is 

### not allowed to enter into and extend a fee agreement, and at the same time, challenge that agreement when the airline finds that it does not like the bargain it has struck. Accordingly, the Complaint should be dismissed. 2. Alternatively, even if the agency decides to examine the allegations in the Complaint, it should dismiss the Complaint or issue a determination finding no merit to the Complaint because Complainant has not met its burden of proof. Complainant's claim is that the Newark flight fee "violates federal law" because it is "not reasonable", is not "transparent", and is "discriminatory" (Complaint at pgs. 53-71 ). A basic

4requirement of Part 16 is that "a complainant show with evidence that the sponsor is violating its commitments to the Federal government to serve the interests of the public by failing to adhere to its grant assurances ..." Aerodynamics of Reading, Inc. Aerodynamics v. Reading RegionalAirportAuthority, (Docket FAA 16-00-03, 2001 WL 1085346, *13 July 23, 2001 ). In the first instance, Complainant cannot begin to sustain its burden on these points, because it fails to include the lease Agreement language containing the flight fee in its Complaint or Exhibits, so it does not tie its arguments to the specific language in that formula. The Complainant's tactical decision to omit the governing lease agreements and flight fee provisions from its Complaint should not work in its favor, and the burden to prove its allegations should plainly rest and stay with Complainant.
a. Complainant has not demonstrated that the flight fee formula violates the applicable grant assurances. First and foremost, the jurisdictional points setforth above also bear directly on the issue of reasonableness under the grant assurances. As noted, the Rates and Charges Policy encourages agreement between aeronautical users and airports on fees. Complainant focuses on what they characterize as an impermissible profit generated by the flight fee (Complaint

**~** 132) to support their claim of unreasonableness. Although the Rates and Charges policy provides that "[r]evenues from fees imposed for the use of the airfield ('airfield revenues') may not exceed the cost to the airport proprietor of providing airfield services," the Policy goes on to state that such rule applies "unless
... [o]therwise agreed to by the affected aeronautical

5users." In this case, the "affected aeronautical user" - Complainant
- has "otherwise agreed." Complainant also overlooks that although the revenue produced by the flight fee exceeds certain costs upon which the flight fee is based, certain plainly reimbursable costs were simply left out of the formula. Such costs include numerous overhead costs, including the executive salaries and other Port Authority activities which support the public airfield as well as the rental payments the Port Authority pays to the City of Newark for the airport facilities. b. Equally unconvincing is Complainant's allegations that the flight fee is unreasonable because "it includes unreasonable expenditures." On this point it largely relies on the more recent costs related to the Aircraft Rescue and Fire Fighting functions implemented at the airport ("ARFF"). However, ARFF services which constitute the delivery of "emergency services" to the airfield are covered by the flight fee formula. Further, while the Complaint (at pgs. 28-33) argues at length about excessive labor costs at the Port Authority as a whole, it ignores the fact that the agreed-to Newark flight fee is based solely on designated Newark costs, and neither off-airport indirect overhead costs of operating Newark, such as executive salaries, nor any other Port Authority off-airport expenditures, has any effect on the flight fee formula. 3. Complainant's emphasis on surplus revenues diverted from the airport to other Port Authority uses disregards the fact that flight fees are only one revenue source for the airport as a whole. Many non-flight fee revenues are those for which, under longstanding rates and charges policy, airlines have no right to claim credit, under any circumstances. See, Brendan Airways, LLC, eta/., v. PortAuthority, (Docket OST-05-

62040, 2005 WL 4747012, *21 Instituting Order, March 16, 2005). To the extent that the claim is that the flight fee is unreasonable because the airport as a whole is generating excessive surpluses (Complaint at pgs. 15-18), the issue of accumulated surpluses is one which the FAA and DOT will examine in the context of reviewing complaints concerning revenue diversion. Brendan Airways, LLC, eta/., supra, at *22. However, in this context, such allegations are: 1) irrelevant to Complainant's challenge to the flight fee, and 2) Complainant has not demonstrated in any event that the Port Authority has unlawfully diverted revenue. 4. The allegation in the complaint that the flight fee violates federal law because its calculations are not transparent (Complaint at pgs. 68-70) is wrong both factually and as a matter of law. The Complaint relies on Rates and Charges Policy provisions, which govern disclosure of information in negotiation over rates between airports and aeronautical users and challenges to rates and charges which are unilaterally imposed. (Complaint at pgs. 68-70). Moreover, the Complainant fails to mention the fact that it participates in meetings with the airport during the year in which the flight fee costs and estimates are discussed and extensive financial information is shared with airlines serving the airport. (Garcia Decl. at 111134-38). 5. Finally, Complainant's claims of the Port Authority's exercise of "monopoly" power is another red herring. This Complaint is about the reasonableness of charges in the flight fees charged to the Complainant that is the product not of unilateral imposition of a fee by the Respondent but rather, of an agreement between the parties.

7However, in all events, Complainant's protests about monopoly power ring hollow. Those protests should be evaluated and measured against the decision of the predecessor, Continental to invest hundreds of millions of dollars to increase and sustain its operations at the airport to the point where it is now one of the largest airlines in the New York and New Jersey region and its well documented use of slots or operational limitations to sustain its dominant market share at the airport (Mcintyre Decl. Exh.1 ). Rather than an airline who, as the Complaint would have it, is held hostage by the practices of a monopoly airport, what comes across from Complainant's history at the airport is an airline which in its own words, has "built on a commitment nearly three decades old to expand and modernize Newark Liberty and establish a hub operation that would attract passenger revenue and economic growth to the region." (Longernecker Decl. Exh. W). STATEMENT OF FACTS The Port Authority is a bi-state entity created in 1921 by Compact between the States of New York and New Jersey, consented to by Congress. The Port Authority operates several facilities of commerce in the bi-state Port District, including Newark Liberty, John F. Kennedy International Airport, LaGuardia Airport, Teterboro Airport as well as Stewart International Airport. It has also entered into an agreement to perform certain management services under the direction of the South Jersey Transportation Authority for Atlantic City International Airport. Complainant is United Airlines, Inc., a corporation organized under the laws of the State of Delaware having a principal place of business in Chicago, Illinois. Complainant was created on March 31, 2013, after Continental merged with United

8leaving Continental as the surviving corporation, which then changed its name to United Airlines, Inc. (Statement at 11 2). 2 In this motion, Respondent will refer to the merged entity as Complainant, and as United and Continental respectively when discussing each entity's history with the Respondent prior to the merger. Newark is a public-use airport operated by the Port Authority, as airport sponsor, pursuant to a lease agreement with the City of Newark, New Jersey. (Statement at 11 6, 11 7). Complainant currently operates out of all three terminals that comprise Newark. (Statement at 1111 9, 10) Newark is comprised ofthree terminals designated A, B and C. Terminals A, B and C are each sub-divided into three sub-terminals which are designated A-1, A-2, A-3, B-1, B-2, B-3, C-1, C-2 and C-3. (Statement at 118). Complainant operates out of sub-terminals A-1 and A-2 in Terminal A in accordance with Leases AN-535 and ANB-056, and sub-terminals C-1, C-2 and C-3 in Terminal C in accordance with Lease ANA-170. (Statement at 119). Complainant refers to Lease ANA-170 as the "Master Lease." (Compl. at 1133). Complainant also operates out of Terminal B, which is the designated terminal for international flight arrivals. (Statement at 1110). Prior to the merger creating Complainant, United and Continental each entered into lease agreements with Respondent to operate out of Newark. United entered into Lease AN-535, which became effective as of October 7, 1969. (Statement at 11 13). Continental began operating out of Newark effective as of August 15, 1987, when it accepted Lease ANA-170 from People Express Airlines, Inc., pursuant to an Assignment and Assumption of Lease ANA-170 agreement ("Assignment and

2 "Statement" refers to Statement Of Respondent The Port Authority Of New York And New Jersey Pursuant To 14 C.F.R. § 16.26(C)(2) In Support Of Its Motion For Summary Judgment Dismissing The Complaint filed with this Motion. 

### 9Assumption"). People Express Airlines, Inc., entered into Lease ANA-170 with Respondent for a 25-year term effective as of January 11, 1985. (Statement at

# ,m 17, 18). Once the Assignment and Assumption was effective, Continental began operating out of Newark in accordance with Lease ANA-170's provisions. United's Lease AN-535 and Continental's Lease ANA-170 each contains a requirement to pay flight fees, the basis for Complainant's instant action. Leases AN535 and ANA-170 each contains a description of the two components of the flight fee and a Schedule C that sets forth the methodology for calculating the flight fee charged to United and Continental, respectively. The flight fee formula, except for the addition of the Phase 1A Charge Factor (as discussed more fully below), has remained unchanged since the effective dates of Lease AN-535 and Lease ANA-170. Both Leases ANA-170 and AN-535 set a specific expiration date for the flight fee and its formula. 3 Both United and Continental entered into multiple supplements that specifically extended the application of the flight fee formula without ever modifying the formula or its components other than adding the Phase 1A Charge Factor. (Statement at 

### 111114, 15, 21, 22, 25). United extended the application of the flight fee formula twice by entering into Supplement Nos. 4 and 24 effective on March 1, 1972 and April 18, 1995, respectively.

3 In Supplement No. 17 to ANA-170 Continental agreed that the flight fee provisions contained in Schedule C would remain in effect through December 31, 2018. Under Supplement 17, after that time, Continental and Port Authority agreed to negotiate in "good faith to establish provisions covering the determination of flights fees payable by the Lessee." In the event the parties could not reach an agreement Continental agreed that it "shall pay flight fees in accordance with the Port Authority's Schedule of Charges[

...] commencing January 1, 2019." (Longernecker Decl. at 1]1]26-27). Supplement No. 24 to Lease ANA-170 set the lease term expiration forTerminals C-1 and C-2 for March 31 , 2033 and Terminal C-3 is set to expire on March 31, 2028. (Longernecker Decl. at 1]1]32-33). In Supplement No. 24 to Lease AN-535 for Terminal A United agreed to have the lease terms and provisions including those regarding the payment of flight fees expire on December 31, 2018. (Longernecker Decl. at 

### 11 20). In Lease ANB-056 for Terminal A Continental agreed to have the lease term and the provisions regarding payment offlight fees expire on December 31, 2018. (Longernecker Decl. at 1]29). 10In Supplement No. 24, United agreed to add the Phase 1A Charge Factor to the flight fee without modifying any other provisions of the flight fee. Supplement No. 24 also added the separate Monorail Fee and extended the term of the lease. (Statement at

**~~** 14, 15,16). Continental extended the application of the flight fee formula twice with Supplement Nos. 15 and 17, effective January 1, 1995 and September 1, 1999. With Supplement No. 15, Continental also agreed to add the Phase 1A Charge Factor to the flight fee and the separate Monorail Fee for the costs associated with the Newark Air Train. (Statement

**at~** 24). Supplement No. 17 is especially significant because it reflects the extensive construction and expansion program for Terminal C that Continental in part financed in cooperation with Respondent through a bond issuance that raised approximately $730,360,000. (Statement

**at~** 30). Not only did they extend the flight fee formula when Continental expanded its operations to include space within Terminal A with Lease ANB-056 in 1999, it agreed again to abide by the flight formula contained in Lease ANA170. (Statement

**at~** 27). As recently as December 2012, during the merger process with United, Continental extended the lease term for Terminals C-1 and C-2 and provided for an investment of $150,000,000 in those terminals with Supplement No. 28. (Statement at

**~~** 31' 32). Not once during the forty years of operating at EWR, and the many times each airline supplemented its respective lease agreements with Respondent, did Continental or United ever seek to modify the flight fee formula other than adding the Phase 1A

11Charge Factor. Rather, Continental and United each chose to continue to repeatedly extend the flight fee formula. Even in bankruptcy, when both Continental and United could have rejected their leases with Respondent, they chose to reaffirm those leases and modified other components such as rental terms, surrender of space or assignment of their interest to another airline. (Statement

**at~~** 35, 36, 38, 39). Over the course ofthe last forty years of operating at EWR, both Continental and United, as separate entities and then as a merged company, entered into significant supplements to Leases ANA-170, ANB-056 and AN-535 that never modified the flight fee formula. Now Complainant asserts in the instant action that the very same flight fee formula, contained in those Leases ANA-170, ANB-056 and AN-535, is unreasonable and violates grant assurances.
ARGUMENT THE SUMMARY JUDGMENT STANDARD This motion is filed under Section 16.26(c) of the Rules of Practice on the grounds that there is no genuine issue of material fact for adjudication and the complaint when viewed in the light most favorable to complainant should be dismissed as a matter of law. That dismissal should be with prejudice. To survive summary judgment, a complainant is obligated to provide specific grounds supporting its entitlement to relief that are more than mere allegations, conjecture and speculation. Lujan v. Defenders ofWildlife, 504 U.S. 555,561 (19927) 4

4 Respondent submits that this matter should be dismissed for the reasons stated -there is no jurisdiction to review a claim concerning the reasonableness of a flight fee set by agreement when such claim is filed by a party to the agreement. Accordingly, a Motion to Dismiss would have been entirely adequate to 12

### I. THE FAA SHOULD NOT ENTERTAIN JURISDICTION OVER THE INSTANT COMPLAINT. The FAA's longstanding position that it will not entertain a challenge to an airport fee to which an airline has agreed is a principle underpinning the FAA Rates and Charges Policy. On June 21, 1996, the FAA "Policy Regarding Airport Rates" ("the Policy") was published in the Federal Register. The current Rates and Charges Policy states unambiguously "the Department will not entertain a complaint about the reasonableness of a fee set by agreement filed by a party to the agreement setting the disputed fee." 78 Fed. Reg. at 55332 (2013) (emphasis added}. In fact, as originally promulgated, the airport Rates and Charges Policy listed as the first of five fundamental principles
- "the Department's preference for direct negotiation and resolution" of rates and charges issues. 61 Fed. Reg. 31994 (June 21, 1996}. The current Policy was issued and republished in the Federal Register on September 10, 2013, to reflect the 1997 vacatur of portions of the Policy by the United States Court of Appeals for the District of Columbia Circuit, and 2008 amendments to the Policy issued by the FAA. 78 Fed. Reg. 55330. However, there was no change effected in this fundamental point and the current policy states that "[i]t is the fundamental position of the Department that the issue of rates and charges is best addressed at the local level by agreement between users and airports." In fact, the policy also indicates that its chief purpose is to provide guidance to airports and aeronautical users to enable them to enter into agreements. 78 Fed. Reg. 55331 (2013).
demonstrate that dismissal with prejudice should be granted in this instance. However, additional materials are presented in this motion in order to provide a complete record supporting dismissal. The factual points that are presented and are pertinent to the claims herein are undisputed and so summary judgment should be granted. 13The decisions issued by the FAA under procedures governing airport compliance confirm that the agency will not intervene in a dispute regarding rates and charges where there is a written agreement governing such issues, nor will it relieve an aeronautical user from the terms of an agreement which it struck which that user has come to believe is no longer beneficial to it. NorthwestAirlines, Inc., Delta Airlines, Inc., AirTran Aitways, Inc., Continental Airlines, Inc., SouthwestAirlines, Inc. v. Indianapolis AirportAuthority, Indianapolis InternationalAirport, BAA-Indianapolis, (Docket FAA 16- 07-04, 2009 WL 3976461 August 19, 2008) (collecting cases) is illustrative. In that case, several airlines filed a Part 16 Complaint challenging the airport's agreement to provide FedEx a rental credit on certain apron rent and alleged that the credit would result in an increase in the landing fees paid by those airlines for the benefit of FedEx's exclusive facilities. In rejecting the airlines' challenge, the FAA relied on the fact that the Lease Agreements between the airlines and the airport provided that at least until the Lease Agreements expiration, the deal struck with FedEx would have no impact on the complaining airlines. The decision also determined, in language equally applicable here, that: Once the Lease Agreement expires and assuming it is not renegotiated, if the Authority were to unilaterally impose the cost of the Credit on the Airlines serving the Airport, those Airlines could then seek relief under the Rates and Charges Policy because their rates and charges would no longer be set by a written agreement, and the Credit would then be subject to the Policy. The Rates and Charges Policy offers the airlines two significant protections: an airport may not without written agreement include exclusive use facilities in its rate base, and limits costs that can be included in its common use rate base. In addition, the Complainants may have recourse in other venues to adjudicate disputes arising out of the Lease Agreement. 5

5 The "other venues" included "civil proceedings" and stipulations in the Lease agreement incorporating federal and state law. /d. 14/d. at *37 (footnotes omitted). Here, the Complainant seeks to challenge the impact of a flight fee formula which they argue is unreasonable. The Complainant, and each of its predecessors, however, agreed to that formula years ago, and through the years, have agreed to extend it over and over again. The history of the lease agreements between the Port Authority, and Complainant merger partners United and Continental are set forth at length in the Declaration of Mr. Frederick Longernecker. A summary ofthat history is set forth below: Continental's history:
o The Lease Agreement (ANA-170) for Terminal Cat EWR was assigned to and assumed by Continental in 1987 (Longernecker Decl.

**at~** 22, 23) and contains Schedule C, the "Master Lease" provisions (including the flight fee formula provisions). ANA-170 has been supplemented and amended 27 times (Longernecker Decl.

**at~** 23). o ANA-170 set the expiration of the flight fee formula for December 31, 1998 (Longernecker Decl.

**at~** 24). o In Supplement No. 15, effective as ofJanuary 1, 1995, Continental agreed to extend the flight fee methodology in Schedule C to March 31, 2013 and to add a new Phase 1A Charge Factor to the flight fee to recover costs associated with certain airport roadways (Longernecker Decl.

**at~** 25). o In Supplement No. 17, effective as of September 1, 1999, Continental again agreed to extend the flight fee provisions set forth in Schedule C, from March 31, 2013 to December 31, 2018 (Longernecker Decl. at 1']26). o In 1989, Continental added Terminal C-3 to their leasehold and in the 1990's embarked on a major expansion project for Terminal C-3. To finance such expansion, Continental pledged its revenues from such expansion to cover the issuance of over $730 million in bonds (Longernecker Decl.

**at~** 31 ). o In 1992, Continental assumed its lease agreement and reaffirmed and extended ANA-170, containing the flight fee formula complained of here, as part of its reorganization under Chapter 11 of the Bankruptcy Code,

15without modification of the flight fee provisions (Longernecker Decl. at 1111 34-35).
o Continental's investment in its operations at EWR more recently continued when it invested another $150 million in Terminal C to further expand and update its facilities (Longernecker Decl. at 1133). United's history:
o United executed an agreement for operation in Terminal A at EWR in 1969 under AN-535, which has been supplemented or extended 29 times (Longernecker Decl. at 1119). That agreement contains the same "Master Lease" flight fee formula as Schedule C set forth in Continental's agreement- ANA-170 (Longernecker Decl. at 1115, 1120). o In Supplement No. 4, effective March 1, 1972, United extended the term of AN-535 and use of the flight fee formula from December 31, 1996 to December 31, 1998 (Longernecker Decl. at 1120). o Effective as of January 1, 1995, United entered into Supplement 24 to AN535 extending the flight fee formula to December 31, 2018 (Longernecker Decl. at 111120, 21 ). At the same time it agreed to add a Phase 1A Charge Factor to the flight fee to recover certain airport roadway costs and add a Monorail Fee to recover costs for the EWR Air Train. (!d.).
o In 2005, United, in connection with its reorganization under Chapter 11 of the Bankruptcy Code, partially assigned certain facilities under Lease AN535 to Air Canada, reflecting their decision to assume certain leases including AN-535 (Longernecker Decl. at 111136, 37). On September 20, 2010, Continental requested that the Port Authority confirm in writing that its contemplated the merger with United would not trigger termination of certain agreements including lease agreements with the Port Authority for Newark. (Longernecker Decl. at 1114) Beyond cavil, this history demonstrates that the flight fee formula is the product of an agreement between the Complainant and Respondent, which has been affirmed again and again by Complainant's predecessor airlines.

16If the Port Authority were to unilaterally impose the flight fee formula on Complainant after its expiration, then, and only then, could the airline seek relief under the Rates and Charges Policy "because their rates and charges would no longer be set by a written agreement" and the formula would then be subject to the policy. As stated in Roadhouse Aviations, LLC v. City of Tulsa, (Docket 16-05-08, 2007 WL 1966160 June 26, 2007), "the grant assurances and the FAA compliance process are not devices by which a commercial aeronautical tenant can abrogate an otherwise valid commercial lease with a sponsor because the operations under the lease are less profitable than the tenant anticipated." *17; see also, Penobscot Air Services, Ltd v. FAA, 164 F.3d 713, 726 (1 51 Cir. 1999) (finding that the aeronautical user's agreement to new lease terms governing the fees which were the subject of its Complaint formed a sufficient independent basis to uphold the FAA's determination that the disparity in fees were not unjustly discriminatory). To be clear, Section 113 of the Federal Aviation Authorization Act of 1994, 49 U.S.C. 47129, provides for the DOT's review of the reasonableness of certain fees imposed on air carriers by an airport proprietor as long as those fees are not imposed by written agreement. And while the Rates and Charges policy indicates that Part 16 proceedings such as this one, which is not lodged under those expedited review procedures, will be processed under procedures applicable to airport compliance matters, it also makes clear that such compliance proceedings are "not intended to provide a mechanism for adjudicating the respective rights of the parties to a fee dispute" 78 Fed. Reg. at 55331-32.

17In doing so, the Policy recognizes that agreements struck between an airport and an aeronautical user may not follow the Rates and Charges Policy; but rather, for many reasons, two sophisticated parties may agree to a fee methodology which does not conform to the Policy pursuant to a compromise, which serves both oftheir interests. At the same time, once the agreement has been struck and the parties agree, the fact that the agreement may no longer be advantageous to the aeronautical user does not mean that the agreement is unreasonable. See Roadhouse Aviations, LLC, supra. While Complainant maintains, despite the clear statements to the contrary in the Policy, that the FAA will exercise authority under Part 16 to investigate a complaint with respect to airport rates established by a written agreement brought by a party to the agreement, the administrative decisions it cites do not support that proposition. Those decisions in fact support the contrary proposition, i.e., that the FAA will not take jurisdiction under Part 16 to adjudicate a complaint regarding a fee established by agreement brought by a party to the agreement. In Union Flights, Inc. v. San Francisco InternationalAirport, (Docket No. 16-99-11, 2000 WL 311170 Feb. 15, 2000), an air carrier claimed that an airport violated its federal obligations by imposing a landing fee schedule which was unreasonable and excessive and discriminatory. Union Flights did not concern a fee established by an agreement to which the air carrier was a party. Rather, "Union Flights [was] nota signatory to the SFO Airport-Airline Lease and Use Agreement and [was] charged the minimum landing fee for its use ofthe airport." /d. at *7 (emphasis added). United Flights does not state even in dicta that the FAA will entertain a challenge to a fee agreement brought by an airline who is party to the agreement. In fact, to the

18contrary, United Flights states that a party to an agreement establishing a fee is precluded from challenging that fee: When the airport proprietor uses a cost-based methodology, aeronautical fees imposed on any aeronautical user or group may not exceed the costs allocated to that user or user group under a cost allocation methodology adopted by the airport proprietor that is transparent, reasonable and not unjustly discriminatory, unless aeronautical users specifically agree otherwise. /d. at *5 (emphasis added). In Continental Micronesia v. Commonwealth of the Northern Marianas Islands and Commonwealth Ports Authority, (Docket50191, 1995 WL 156451 Order95-4-14, (D.O.T. 1995)), the DOT dismissed an airline challenge to a fee established by agreement under the expedited procedures established by 49 U.S.C. 

### § 47129 on the grounds that 49 U.S.C. 

### § 47129 (e)(1) excludes from consideration under those expedited procedures a complaint challenging a fee established by agreement brought by a complainant who is party to that agreement. /d. at *1 0. Further, contrary to the assertion of the Complainant, see Complaint at 

## 11 16, Continental Micronesia does not state that the complainant had the option of challenging the fees set forth in the agreement under the predecessor to the current 14 C.F.R. Part 16 even though that the complainant was a party to the agreement. Rather, Continental Micronesia states that among the alternatives open to the complainant to challenge the fee in question priorto becoming a party to the agreement was filing a complaint under the predecessor to the current 14 C.F.R. Part 16, 

### /d. at *10. Continental Micronesia does not state that the complainant had the same option after becoming a party to that agreement.

19inally, Delta Air Lines, Inc. v. Lehigh-Northampton Airport, (Docket OST-95-80, Order 95-5-8, 1995 WL 17057418 (D.O.T. 1995)), also concerned dismissal of a challenge to a fee established by agreement brought by an airline that was party to that agreement under the expedited procedures established by 49 U.S.C. 

### § 47129 because ofthe exclusion in 49 U.S.C. 

### § 47129(e). Contrary to Complainant's assertion herein, see Complaint

**at~** 16, Delta Airlines does not state that the challenge to the fee established by the agreement would be referred to the FAA for determination under the predecessor to 14 C.F.R. Part 16. Rather, the issue referred to the FAA was a different one, namely, the legality of air carrier subsidies paid by the airport authority to airlines other than Delta. /d. at *1. The air carrier subsidy program concerned payments to a number of different airlines, not including the complainant, Delta. /d. at *4 to*5. The fee dispute, which was not referred to the FAA under the predecessor to 14 C.F.R. Part 16, concerned the schedule of landing fees and lease rental rates, set forth in the agreement to which the complainant was a party. /d. at *5. The obvious inference to be drawn from the disparate treatment of the airline subsidy issue, which was referred to the FAA for determination under the predecessor to 14 C.F.R. Part 16, and the fee issue, which was simply dismissed, is that there is no Part 16 jurisdiction over a complaint challenging a fee set by an agreement brought by a complainant which is a party to that agreement. II. THE COMPLAINT DOES NOT STATE SUFFICIENT GROUNDS TO WARRANT AN EXAMINATION AS TO WHETHER THE FLIGHT FEE VIOLATES GRANT ASSURANCES. A. Complainant Fails to Meet Its Burden of Proof

20Complainant's lengthy submission does not mask the fact that the central issue raised by the Complaint may be reduced to its contention (Complaint at pg. 55)
- that the Newark Liberty flight fee violates federal law. Complainant however, is not able to meet its burden of proof on this claim because it has agreed to the formula about which it now complains and the rates and charges guidance and policies it relies upon presumes that parties will take into account those policies and guidance when they reach an agreement. Moreover, even if they are able to overcome this impediment to their claims, the burden of proving a violation ofthe grant assurances which would warrant investigation rests solidly on the shoulders ofthe Complainant. It is difficult to see how Complainant could ever be determined to have met that burden when Complainant does not even bother to include the agreements in its Complaint and so, cannot connect its arguments to the language in those agreements. A basic requirement of Part 16 is that a complainant bears the burden of proof. In essence "[a] complainant, as initiator of an action, becomes the proponent of an order from the FAA when [it] files the Part 16 complaint" Aerodynamics ofReading, Inc., supra at *14. However, in order to put these claims to rest, Respondent will address each of Complainant's assertions. B. The Flight Fee is Not Unreasonable orViolative ofApplicable Law. Complainant asserts that the flight fee is not reasonable because: 1) it generates a profit; 2) it includes unreasonable expenditures; 3) it is the result of the Port Authority's monopoly power; 4) it is unjustifiably high compared to other airports; and 5) it is excessive when compared to the benefits conferred (Complaint at pgs. 56-68). We will address each point in turn.
211. Complainant asserts that the flight fee is not reasonable "because it generates a profit." (Complaint at pg. 56). "Under the terms of grant agreements administered by FAA for airport improvement, all aeronautical users are entitled to airport access on fair and reasonable terms without unjust discrimination." (Rates and Charges Policy, 78 Fed. Reg. at 55331). When Congress promulgated Section 113 of the Federal Aviation Authorization Act of 1994, it directed the Secretary of the DOT to promulgate "regulations, policy statements, or guidelines establishing

... the standards or guidelines that shall be used by the Secretary in determining

... whether an airport fee is reasonable." 49 U.S.C. 47129(b). In 1997, the DOT promulgated a Rates and Charges policy which provided detailed guidance as to how fees should be established and how costs were to be determined and applied to fees. 61 Fed. Reg. 31994 (June 21, 1996). Notably, the DOT set forth its decision "not to consider complaints about the reasonableness of fees set by agreement if filed by parties to the agreement." /d. at 31998. The Rates and Charges Policy was republished in 2013. 78 Fed. Reg at 55330.While Complainant asserts a violation ofthe Policy prescriptions that fees should be reasonable and are not reasonable if the airport derives a "profit", the Policy provides not only that challenges by parties to a fee agreement are jurisdictionally defective, but that the standards set forth in the Policy to determine reasonableness do not apply where there is agreement. Speaking directly to flight fees and cost recovery, the Policy states:2.2 Revenues from fees imposed for the use of the airfield ("airfield revenues") may not exceed the costs to the airport proprietor of providing airfield services and airfield assets currently in aeronautical use unless:

22(a)Otherwise agreed to bythe affected aeronautical users. * * * * 78 Fed. Reg at 55333; see also FAA Airport Compliance Manual (FAA Order 5190.6B) ("Unless users agree otherwise, airfield fees generally may not exceed the airfield capital and operating costs of existing airfield facilities and services
...")(emphasis added). (quoted at Complaint at ,-r128)), cf, Rates and Charges Policy, 78 Fed. Reg. 55334, 

### § 2.6.1 ("Reasonable methodologies may include, but are not limited to, historic cost valuation, directnegotiation with aeronautical users, or objective determination of fair market value). (emphasis added). In essence, the bar against a challenge to a flight fee for use of a public airfield set by agreement is not simply a matter ofjurisdiction, but much more - it provides the answer as to whether such an agreement will be determined to have violated law, as set forth in governing policy. So while Complainant asserts that the flight fee formula recovers revenues that exceed the costs in violation ofthe law, their ability to prove that such an outcome violates law is cut short by their agreement to such charges consistent with the law on which they rely. 6 Here the Declaration of Joseph Garcia and the Declaration of Fred Longernecker, demonstrate that the fees about which the Complainant would have the

6 Seeking to bolster its argument that revenues have been diverted from the airport and have been used to support other "losses" (Complaint at pg. 26), the Complaint, quoting from a Report to a Special Committee of the Port Authority's Board Commissioners, states that "draining of revenue from airports is causing" "the hampering of 'runway safety areas at both ends of every runway ... Ten of the Port Authority airports' 26 runways ends still must be made complaint [with safety regulations]". What the Complainant fails to include is the statement in the Report indicating that: "The Aviation Department expects to invest nearly $500 million system-wide to meet Part 139 criteria for RSAs by the FAA's 2015 deadline" (Complaint Exh. N at 38). 23FAA investigate are the subject of an agreement between Complainant and the Respondent. The Newark Liberty flight fee formula as originally set forth in Continental's Lease ANA-170 and in United's Lease AN-535 has two components: A Public Airport Facilities Charge Factor ("PAF Factor") and an Airport Services Charge Factor ("Airport Services Factor"). The two factors are combined and multiplied by an airline's total maximum take-off weight of aircraft for a year, in thousands of pounds, to determine that airline's flight fee for the year. (Garcia Decl.

**at~** 12). The PAF Factor and Airport Services Factor continue to be components of the flight fee to this day (Longernecker Decl. at

**~** 15). An additional factor was added to the flight fee calculation effective in 1995 pursuant to Lease ANA-170 Supplement No. 15, dated March 20, 1995, and agreed to by other EWR airlines pursuant to similar lease and agreement supplements and amendments. 7 This factor, known as the Phase 1A Charge Factor, recovers costs associated with the construction of certain Newark Liberty roadways. The Phase 1 A Charge Factor has minimal impact on the flight fee. For example, in 2013, the last year for which the flight fee was calculated with actual, rather than projected, data, the PAF Factor was $3.1248 per thousand pounds of maximum take-off weight, the Airport Services Factor was $3.6582, and the Phase 1A Charge Factor was $0.0605 (Garcia Decl.

**at~~** 13-14).

7 United itself agreed to payment ofthis component ofthe flight fee in Lease No. AN-535, Supplement No. 24, dated April, 18, 1995. Other leases for EWR airport terminal property and in flight fee agreements with airlines that do not lease space at EWR were also amended to provide for payment of the Phase 1A Charge Factor. See accompanying Declaration of Frederick Longernecker. 24Airlines that pay flight fees are also given a credit for revenues received from the collection of aircraft parking fees. This credit against the PAF Factor is issued to airlines that pay flight fees because aircraft parking fees are Port Authority revenue directly related to the operation of the Public Aircraft Facilities whose direct costs are reflected in the PAF Factor (Garcia Decl.

**~** 15). The annual flight fee for each airline per number of thousand pounds of maximum take-off weight of that airline for a calendar year is equal to: PAF Factor - airport parking fees credit+ Airport Services Factor+ Phase 1A Charge Factor. (Garcia Decl.

**~** 16). As set forth in the Garcia Declaration, the flight fee has varied over time, increasing from year to year at times, and decreasing from year to year at other times. Such fluctuations are the result of changes in the costs upon which it is based and on the volume (by weight) oftraffic at Newark Liberty (Garcia Decl.

**~~** 18-19). As for the contention that the flight fee "reaps a 38% profit on many costs, and a 14% profit on others" (Complaint at pg. 60, para 132), Complainant does not explain or substantiate how it comes to this conclusion (Garcia Decl. 24). A computation of the difference between the revenue from the PAF factor (less credits issued to the airlines from parking fees) and the costs included in the PAF Factor for 2013 does derive a ratio of28.14% (Garcia Decl.

**at~** 25). However, as Complainant knows, the flight fee formula does not recover all allowable costs attributable to the PAF. For example, the formula does not include reimbursement for off-airport indirect overhead costs, including the costs ofthe Aviation Department services, the Executive Director's Office, the Secretary's office, Comptroller Department, Law Department, Treasury Department, Human Resources Department,

25and Engineering Department. Further, and significantly, it does not include any portion ofthe rent paid by the Port Authority to the City of Newark (Garcia Dec!.

**at~** 28). Complainant seeks to bolster its claims challenging the flight fee by arguing that surplus revenues are diverted from the airport to other Port Authority uses. However, flight fees constitute but 27% ofthe airport's revenue (Garcia Dec!.

**at~** 32). Such other airport revenue includes food, beverage and retail revenues, telecommunication fees, advertising rentals and vehicular parking. (Garcia Dec!. at

**~** 31 ). Under rates and charges policy airlines have no right (absent agreement) to credits for such revenues. See, Brendan Airways, LLC, eta/., v. The Port Authority, 2005 WL 4747012 (Docket OST-05-20407 at *21; Instituting Order, March 16, 2005), see also, Rates and Charges Policy, 78 Fed. Reg. at 55333, 2.1.1 ("Aeronautical users may receive a cross-credit of nonaeronautical revenues onlyifthe airportproprietoragrees") (emphasis added}. To the extent that the Complainant charges that the flight fee is unreasonable because the airport as a whole is generating excessive surpluses (Complaint at. pgs. 15-18), the issue of accumulated surpluses is one, which the FAA and DOT will examine in the context of reviewing complaints concerning revenue diversion. /d. at *22. However, in this context, such allegations are: 1) irrelevant to its complaint about the flight fee and 2) Complainant has not demonstrated in any event that the Port Authority has unlawfully diverted revenue. 2. Complainant supports its claim of an unreasonable level of expenditures not by arguing that certain airport charges should not be included in the flight fee formula, but rather, that the level of those airport charges are too high (Complaint at pgs. 61-64).



### 26Objecting to the level of charges to recover the costs of implementation of the ARFF cadre, the Complaint takes aim at the levels of staffing, the training provided and the salaries paid (Complaint at pgs. 62-63). It makes similar claims as to the staffing levels for certain security costs (id. at pg. 63), costs which have increased at least in part due to increased security demands in the New York/New Jersey region post-9/11. Significantly though, it is not able to show that any of these costs are not recoverable under the flight fee formula. Indeed, they are explicitly recoverable. ARFF services are encompassed under the recovery of costs for "emergency services" in the formula. (Garcia Decl.

**~** 20). Moreover, Complainant is not able to demonstrate that there are any caps or other limits on the recovery of these types of costs in their existing agreement, and so Complainant's claim about the levels of recovery once more comes down to one about the formula to which they agreed. Further, the staffing and training for those individuals serving in the ARFF cadre should be placed in the appropriate context. The settlement agreement between the FAA and the Port authority established certain parameters for the ARFF cadre and provided that "the FAA and the [Port Authority] agree[d) that it [was] in the best interest of safety and the public interest for the [Port Authority] to implement certain additional corrective measures identified in [the Settlement Agreement]" to implement the AARF cadre. (Complaint at Exh. FF. at pg. 2). Thus while Complainant complains about the levels of staffing, training and the amount of costs for the ARFF cadre, the cadre was implemented to make sure that going forward the aircraft fire and rescue functions served those vital public interests.

273. Complainant also misfires when it contends that the flight fee is the result of the exercise of monopoly power (Complaint at pg. 64}. Such claims overlook the fact that Complainant itself has a dominant market share of EWR traffic and itself exercises dominant market power at the airport. It bears re-emphasis that this argument should be measured against Continental's decision to stake out a dominant market share at this airport and its decision to invest millions of dollars to support that decision. In fact, while the Complainant argues that the Port Authority has exploited its monopoly power at all the airports it operates in support of its claim, on the other hand it cites to a lower flight fee at the New York Airports - a product of a more recent agreements negotiated by airlines serving those airports. (Complaint Exh. D at pg. 11-19). Further, commercial airports were traditionally considered natural monopolies with high barriers to entry and significant economies of scale. However, the dynamics ofthe civil air transport industry changed substantially in the 21st Century creating a shift in the economics of civil aviation. This shift highlights that airports differ from natural monopolies and that airlines enjoy considerable market strength. First, large airports quickly lose economies of scale because airport costs are largely fixed and not directly scalable to traffic or demand. Next, airlines enjoy substantial and real market strength against airports (Mcintyre Decl. Exh. 1 ("Report")). In fact, Complainant, with more than 70 percent ofthe traffic at Newark, exercises real market strength at Newark. Further evidence of Complainant's exercise of market dominance lies in its utilization of slots at EWR. Complainant controls an average of 73% of all arrival and departure slots at the airport, with the next largest slot holders - Delta Airlines holding



### 285% and American holding 4% -far behind (Report at pgs. 10-11)a Complainant also "babysits" 10% of the slots it holds, thereby prohibiting their use by other carriers (/d. at pg. 11). United schedules 796 flights during the effective slot hours while holding all slots, thereby not using 13% of their allocated slots. ld. Moreover, the Complainant's use of market power has a real impact on consumer pricing at the airport, with it being reported by DOT, Bureau of Transportation Statistics, that passengers who use Newark Liberty pay some of the highest fares in the country.e Finally, Complainant's argument that the flight fee has left them at a "competitive disadvantage" (Complaint at 1111 70-76) should be measured against the fact that from 1996 through 2013, landing fees and other rents average 6.2% of Complainant's (formerly Continental's) key operating costs, the other such costs being salaries and aircraft fuel (Report at pg, 1 0). Complainant exercises significant dominant market power at Newark Liberty. 4. Faring no better are Complainant's assertions about the level of labor costs and expenditures on other non-airport facilities incurred by the Port Authority (Complaint at pgs. 28-32, 66-67). Focusing on the facts relevant to this matter, rather than the litany of newspaper articles and headlines, the simple fact is that off-airport indirect overhead costs of operating Newark, such as executive salaries and any other off-airport expenditures, such as for bridges, tunnels or PATH, do not have any effect on the flight fee calculation (Garcia Decl. 111110, 28-30). For this reason, and reasons previously stated, the Complainant's related point that the flight fee is unreasonable because it is excessive in relation to the benefits

8 See also, Notice of Proposed Rulemaking, Slot Management and Transparency; LaGuardia, John F. Kennedy International and Newark Liberty Airports, 80 Fed. Reg. 1274 (Jan. 8, 2015). Section II.


### 29conferred (Complaint at pg. 65) in reliance on dormant Commerce Clause jurisprudence is misplaced. First, the flight fee does not include costs for such expenditures in its flight fee formula as noted above. Further, the fact that a user fee generates a surplus does not make it per se unreasonable much less violative ofthe Commerce Clause. As to this issue, the Complainant's reliance on the Supreme Court's decision in Northwest Airlines v. County ofKent, 510 U.S. 355 (1994) provides no support for their argument. In that case, the Supreme Court affirmed the lower court's finding that the airport user fees at issue were for the most part not unreasonable (under the Anti-Head Tax Act (AHTA}) and discriminatory (even assuming the dormant Commerce Clause applied}. Significantly, in so doing, the Court noted that it was open to the Secretary "utilizing his Department's capacity to comprehend the details of airport operations across the country, and the economics of the air transportation industry" to determine whether user fees are reasonable under the Anti-Head Tax Act. /d. at n. 14. Of course, this is exactly what the Secretary did when promulgating the Rates and Charges Policy. Air Canada
v. Department ofTransportation, 148 F.3d 1142 (D.C. Cir. 1998). As noted, Complainant, having agreed to the flight fee formula, has not met its burden of demonstrating that the surplus generated by the flight fee violates this policy. Moreover, Complainant's argument also fails because Congress has seen fit to provide carefully crafted exemptions from the airport revenue diversion requirements requiring that all airport revenues be expended on local facilities substantially related to the airport. It follows therefore, that there is no statutory or dormant Commerce Clause impediment to the generation of some surplus revenues by a grandfathered airport when crafting an aeronautical fee. See, Northwest Airlines, 510 U.S. at 372 (resisting

30an inference of a limit on airport surpluses from the AHTA because the statute does not mention surpluses
- rather such surpluses are directly addressed by the revenue diversion provisions in the Airport and Airway Improvement Act of 1982 (AAIA)). 5. Also untenable is Complainant's position that the flight fee lacks transparency. Yet again, the Complainant emphasizes the principles that apply when an airline unilaterally imposes fees after consultation with an aeronautical user (Complaint at 11160), including where airports and airlines attempt to negotiate fees, and an airport imposes fees after such negotiations reach impasse. In such cases, the Rates and Charges Policy clearly provides guidelines for the imposition offees. See 78 Fed. Reg. 55336 (Appendix 1 to the Rates and Charges Policy which provides information which the Department "ordinarily expects" "to be available to aeronautical users in connection with consultations over changes in airport rates and charges including "Historic Financial Information"; "Justification" for the changes"; "Traffic Information"; "Planning and Forecasting Information"). When as is the case here, airlines and an airport agree to the flight fee formula, the logical presumption is that they do so only after having shared such information to ensure that the parties are in accord with the deal they are making. Further, as set forth in the Longernecker Declaration, Continental and United agreed to the flight fee formula and repeatedly agreed to extend that formula to its present expiration, foregoing obvious opportunities to walk away from the formula, including those opportunities presented by the airlines' respective reorganizations under the bankruptcy laws. Additionally, of particular note, is "Continental's decision in 1999 to issue[] over $700 million in bonds to fund the construction of C-3, and new

31international concourse at Terminal C." PortAuthority v. Department of Transportation, 479 F.3d at 207 (Longernecker Dec!. 

# ,m 31 ,32; Longernecker Dec!, Exh. U, excerpts from Offering Statement for New Jersey Economic Development Authority Issuance of Special Facility Revenue Bonds in connection with the issuance of $730,360,000 to support the development of Continental's Global Gateway Development project including the construction of a new Terminal C concourse at EWR.). Continental therefore decided to develop and expand its operations at Newark Liberty with an original goal of making it "the only carrier with a New York-area hub." 10 In so doing, Continental made a deliberate business decision to build a dominant market share at Newark Liberty, and therefore exercise market power at the airport. It defies credulity to conclude that the flight fee formula is, as Complainant now contends, an impediment to its ability to compete and that Complainant made such significant business and investment decisions, without understanding that formula. Further, undermining Complainant's allegations that it does not understand the "opaque" flight fee formula because of a lack of transparency, as stated in the Garcia Declaration, the airlines at Newark Liberty are provided with detailed information each year supporting the flight fee calculations (Garcia Dec!. at 111133-39). The estimated and final calculations supporting the flight fee formula are provided to the airlines in writing and in person four times a year, twice in the Spring and twice in the Fall. In each Fall presentation, detailed information concerning the projections upon which the flight fee will be charged in the next calendar year is presented. (Garcia Dec!. at 11 34). In each Spring presentation, detailed information concerning the actual costs figures and the actual total maximum take-off for Newark upon which the prior year adjustments are
10 See Exhibit 1 to Mcintyre Declaration at Fn. 28. 32based is shared with the airlines. (Garcia Decl. at 

### 11 35). The detailed financial information shared with the airlines concerning revenues and costs at Newark (over 45 pages long) is appended to the Declaration. (Garcia Decl. at 

### 1111 36-37). Additionally, upon request airlines are provided with underlying Excel spreadsheets which form the basis for the financial documents shared with the airlines. (Garcia Decl. at 

### 11 38). Finally, airport staff responds to airline questions regarding the information presented at these sessions. (Garcia Decl. at 1139). Ill. THE FLIGHT FEES ARE NOT UNJUSTLY DISCRIMINATORY. In addition to its contention that the flight fee charged at Newark is not reasonable, Complainant argues that it is unjustly discriminatory because it differs from the flight fee charged at the New York airports operated by the Port Authority. This argument once again ignores the history of the agreements, since the flight fee for the New York airports, as is the case for the fee at Newark Liberty, was the subject of negotiation, negotiations in which United participated. It has long been recognized that "an airport sponsor is not assumed to have engaged in unjust discrimination simply by adjusting its rates or terms over time, even when that adjustment results in imposing different lease rates and terms at different points to otherwise similarly situated tenants." Long Island Jet CenterEast, Inc. v. County ofSuffolk, New York, 2005 WL 428889 *22 (FAA Docket No. 16-04-05; Jan. 21, 2005); Desert Wings Jet Center v. City of Redmond, 2010 WL 4723466 (Docket FAA 16-09-07; November 10, 2010). Moreover, Complainant is unable to make out a claim of unjust discrimination because it has not met its burden of demonstrating that the tenants at the New York airports and at Newark are similarly situated. See, PortAuthority ofNew York and New Jersey v. Department

33ofTransportation andBrendan Airways, LLC, 479 F.3d 21 (holding that airlines failed to carry their burden of persuasion concerning the degree to which fees at Newark Terminal B and Terminal C could reasonably differ when they put forward "no evidence detailing the value to the Port ofAuthority of Continental's signatory or lessee status" at Terminal C). Federal law does not require that airlines serving Newark, be given the New York agreement. 11 IV. THERE IS NO UNLAWFUL DIVERSION OF REVENUE. In one ofthe longest stretches in its Complaint, Complainant claims that the Port Authority illegally diverts aeronautical revenues because it uses surplus revenues to fund what it terms "Non-Port Authority facilities" (Complaint at pg. 72). This argument fails because it is based on a misunderstanding of the applicable statutory language and a mischaracterization of the expenditures it challenges. Starting with the statute, the Airport and Airway Improvement Act of 1982, 49 U.S.C. 471 07(b) provides as follows: (b) Written assurances on use of revenue - (1) The Secretary of Transportation may approve a project grant application under this subchapter for an airport development project only if the Secretary receives written assurances, satisfactory to the Secretary, that local taxes on aviation fuel (except taxes in effect on December 30, 1987) and the revenues generated by a public airport will be expended for the capital or operating costs of11 Complainant also contends that the flight fee is not reasonable because it is unjustifiably high when compared to the landing fees charged by airports outside of New York/New Jersey (Complaint at pgs. 13, 64-65). However, even where there is no written agreement, and there is jurisdiction to review such fees, whether fees are higher or lower than those charged at other airports has been held to be "irrelevant" because the issue is whether the fees being challenged are reasonable. Los Angeles International Airport Rates Proceeding" Order 95-4-5, at 25 (April 3, 1995); see also, Brendan Airways, LLC, et a/., v. PortAuthority, Instituting Order, supra at *22 (In determining whether certain charges imposed on carriers using Terminal B at Newark are reasonable, the ALJ need not examine whether "the Port Authority fees at EWR are higher or lower than those charged at other airports"). Even Complainant's flight fees were not governed by a written agreement, Complainant could not meet its burden by showing that flight fees in Newark are higher than flight fees at other airports. 34(A) the airport; (B) the local airport system; or (C) other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property. (2) Paragraph (1) of this subsection does not apply if a provision enacted not later than September 2, 1982, 

### in a Jaw controlling financing by the airport owner or operator, or a covenant or assurance in a debt obligation issued not later than September 2, 1982, by the owner or operator, provides that the revenues, including local taxes on aviation fuel at public airports, from any of the facilities of the owner or operator, including the airport, be used to support not only the airport but also the general debt obligations or other facilities ofthe owner or operator. Complainant does not deny that the Port Authority falls within Paragraph (2) of the statute and is, therefore, grandfathered. What the Complainant does allege is that the Port Authority is expending monies on projects which exceed the limits of the grandfather provision because it does not own or operate those projects (Complaint at 

# ,m 17s, 176). First, the language 

### in Paragraph (2) plainly anticipates that expenditures of "grandfathered" airports include those "used to support
... other facilities of the owner or operator" 49 U.S.C. 47107(b) (emphasis supplied). Second, neither sets of examples of expenditures Complainant cites support its claims because those expenditures, as made by Respondent, were related to or 

### in support of Port Authority facilities and/or operations. Complaint Exh. D at 

### 11-11; 11-13, Preliminary Official Statement for 183'd Consolidated Bond Series) (describing Port Authority facilities 

### in its Interstate Transportation Network and explaining Lincoln Tunnel Access Infrastructure Improvements included work on Route 1&9, Pulaski Skyway, the Wittpenn Bridge 

### "[i]n recognition ofthe ongoing needs ofthe Port Authority's facilities for 

### 35efficient transportation access and egress for goods and people"); (Complaint Exh. D, supra at 11-46; Complaint Exh. K) (Other expenditures mentioned in Complaint12 were part of the Regional Economic Development Program undertaken in support of Port Authority facilities or operations at "the request of the respective Governors consistent with existing legislation."): see also, Complaint Exh. K at 2; (Jersey City Medical Center states that funding "was helpful in establishing a regional trauma center that services Port Authority facilities in the region.")

12 New Brunswick Civic Center, Stevens Institute of Technology, the Jersey City Medical Center and Independence Park (Complaint

**at~** 176). 

### 36CONCLUSION For these reasons, it is respectfully sulmlitted that the

**~mplaint** should be dismissed in its entirety, with prejudice.

February 10, 2015



### 37 

# ~ **f&dt~--** Carlene V. Mcintyre Arnold D. Kolikoff Faith Tabafunda THE PORTAUTHORITY OF NEWYORK AND NEWJERSEY 225 Park Avenue South NewYork, New York, 10003 Telephone: 212.435.3503FEDERAL AVIATION ADMINISTRATION UNITED STATES DEPARTMENT OF TRANSPORTATION 

### ----------------------------------------------------------------------------------)( UNITED AIRLINES, INC., Complainant,


### v. THE PORTAUTHORITY OF NEW YORKANDNEWJERSEY, Respondent. 

### ----------------------------------------------------------------------------------)( DocketNo. FAA-16-14-13

STATEMENT OF RESPONDENT THEPORTAUTHORITY OF NEWYORKAND NEWJERSEYPURSUANT TO 14 C.F.R. 

### § 16.26(c)(2) IN SUPPORT OF ITS MOTION FORSUMMARYJUDGMENT DISMISSING THE COMPLAINT Pursuantto 14 C.F.R. 

### § 16.26( c)(2), Respondent The PortAuthority ofNewYork and NewJersey ("the Port Authority") respectfully submitsthis statementofmaterial facts as to whichthe Port Authority contends there is no genuine issue ofmaterialfact. A. COMPLAINANT 1. ComplainantUnited Airlines Inc., is a corporationorganized under the laws ofthe State ofDelaware having aprincipal place ofbusiness at233 South Wacker Drive, Chicago, Illinois 60606. Ex. D, 1Form 

### 8-K United Continental Holdings Inc., Report March 31,2013. 2. Complainantwas created onMarch 31, 2013, when ContinentalAirlines Inc. ("Continental"), merged withUnited Airlines Inc. ("United") leaving Continental as the surviving corporation whichthenchanged its nameto UnitedAirlines Inc.

**Complaint~** 33; Ex. D, Form 

### 8-K United Continental Holdings Inc., Report March 31, 2013.
1References to "Ex. [Letter]" are to Exhibitstothe Declaration ofFrederick Longemecker, dated February 9, 2015, annexed hereto.B. RESPONDENT 3. The PortAuthority is a bi-state governmental agency createdby a 1921 Compact betweenthe States ofNewYork andNewJerseywiththe consent ofCongress ofthe United States. Complaint'1[ 18; 42 U.S. Stat. 174 (1921), consenting to 1921 N.J. Laws Ch. 151 (codified atN.J. Stat. Ann. §§32:1-1 to -24 (West2015)) and 1921 N.Y. Laws Ch. 154 (codified atN.Y. Unconsol. L. §§6401-6423 (McKinney 2014)). 4. Pursuantto the 1921 Compact and subsequentbi-State legislation, thePort Authority owns and/or operatesthirty-three (33) suchfacilities, including airports, bus depots, marineterminals, interstatebridges andtunnels and, throughits wholly-owned subsidiary, the PortAuthority Trans-Hudson Corporation (PATH), aninterstate railway. GarciaDec!. '1[ 4. 5. The PortAuthority operates thefollowing airterminals pursuantto bi-state legislation: JohnF. Kennedy International Airport, LaGuardiaAirport, NewarkLiberty International Airport, and StewmtInternational AirportandTeterboro Airport. Complaint'1[ 18; N.Y. Unconsol. Law §§6631 etseq. (McKinney2014); N.J. Stat. Ann. §32:1-35.1 etseq., (West 2015). C. NEW ARKINTERNATIONAL AIRPORT 6. NewarkLiberty International Airport ("EWR") is leasedto the PortAuthority by the City ofNewark,NewJersey. Complaint'1[ 19; GarciaDec!. '1[ 5. 7. The PortAuthority is the "sponsor" for EWRwithinthe meaning of 14. C.F.R. 

### § 16.3. The PortAuthorityreceives federal financial funds for EWR. Complaint'1[ 20.

28. EWRis comprised ofthree terminals designatedA, B, and C. Terminals A, B and Care each sub-divided into three terminals which are designatedA-1, A-2, A-3, B-1, B-2, B-3, C-1, C-2 and C-3. GarciaDec!.

**~** 6. 9. Complainant operates out ofsub-terminals A-1 andA-2inTerminal A in accordance withLeaseAN-535 and ANB-056, and sub-terminals C-1, C-2, C-3 inTerminal C in accordance withLeaseANA-170. Complainantrefers to Lease ANA-170 as the "MasterLease."

**Complaint~** 33; Longemecker

**Dec!.~~** 8-10; Garcia

**Dec!.~~** 6-7. 10. Complainant also operates outofTerminal B. TerminalB is the designated terminal for internationalflight arrivals.

**Complaint~** 33; Longernecker

**Dec!.~~** 8-10; Garcia

**Dec!.~~** 6-7. 11. Complainant operates outofTerminals A, BandC pursuantto lease agreements withthe PortAuthoritybearingthe following numbers ANA-170 (Terminal C), ANB-056 (TerminalA), AN-535 (TerminalA) and space permit SpacePermitANC-184 (Terminal B). Ex. A- Lease ANA-170; Ex. B -LeaseANB-056; Ex. C, Lease AN-535; Longemecker Dec!.

**~** 

### 11 ; GarciaDec!.

**~7.** 12. Eachlease agreementincludes a description ofthe two components ofthe flight fee and a Schedule C that sets forth themethodologyfor calculating the flight fee chargedto Complainant. Longemecker

**Dec!.~~** 15,16, 20, 24, 29; GarciaDec!.

**~8.** D. COMPLAINANT'S LEASEAGREEMENTS AT EWR 1. United's Lease for EWRTerminalA 13. Unitedentered into LeaseAN-535 made as ofOctober 7, 1969, withthePort Authority for use ofTerminal A facilities at EWR. December31, 1996 was the scheduled

3expiration date for LeaseAN-535 and the obligationto payflight fees. Effective as ofMarch I, 1972, with SupplementNo.4,United extendedtheterm ofthe lease and the flight fee formula from December 31, 1996 to December 31, 1998. Ex. F, Lease AN-535 § 16 and Schedule C; and See Ex. G, Lease AN-535 

### §7(b); Ex. H, Lease AN-535, SupplementNo.4 § 5 (03/1/1972); Longemecker

**Dec!.~** 20. 14. Effective as January I, 1995, United enteredinto SupplementNo. 24to AN-535, whichextendedtheterm ofthelease, modifiedbase rentals, added two newfees andextended the applicability ofthe flight fee formula from its expiration ofDecember 31, 1998 to December 31,2018. Ex. I, LeaseAN-535, SupplementNo. 24 § 13 (04/18/1995); Longernecker

**Dec!.,~** 20. 15. SupplementNo. 24 added the Phase lACharge Factorto the flight fee permitting thePortAuthorityto recover costs associatedwithconstruction ofcertain EWRroadways. Ex. J, Lease AN-535 SupplementNo. 24 §§ 2, 6 (a), 9 (a), Schedule M Part I, (04/18/1995); Longemecker

**Dec!.,~** 21; Garcia

**Dec!.~~** 14-15. 16. SupplementNo. 24 also addedthe separate EWRMonorailFee permittingthe Port Authority to recoverthe costs ofconstructing the EWRAirTrain. Ex. J, Lease AN-535, SupplementNo. 24 §§ 2, 6 (a), 9 (a), Schedule M Part I (04/18/1995); Longernecker

**Dec!.~** 21; Garcia

**Dec!.~** 15 n. 9. 2. Continental's Lease for EWR- Terminals C, B and A
a. Terminal C 17. Effective as ofJanuary 11,1985, People Express Airlines Inc. ("People Express") entered into Lease ANA-170 withthe PortAuthorityfor a term of(25)twenty-five yearsfor its operations out ofAreas C-1 and C-2 ofTerminal C.

**Complaint~33;** Ex. A, Lease ANA-170; Longemecker

**Dec!.~** 22.

418. People Express assigned its leaseto Continental, whichexecutedthe Assignment and Assumption ofLease ANA-170, madeas ofAugust 15, 1987 (Assignment and Assumption) withthe PortAuthority consenting. Ex. K, Lease ANA-170 Assignment andAssumption ofLeaseANA-170 (08/15/1987); LongemeckerDec!.

**~** 22. 19. Continental operated outofEWRpursuantto Lease ANA-170 for overtwentyyears before itmergedwithUnited. LongemeckerDec!.

**~** 23. 20. ThePortAuthority and Continentalhave amended (or "supplemented") Lease ANA-170 twenty-seven times during thepasttwenty-years. Ex. L, Lease ANA-170 SupplementNo.6§§ 4, 5 (a), 8 (a)-(c), 13 (08/15/1987); LongemeckerDec!.

**~** 23. 21. Section 53 ofANA-170 describes the flight fee and incorporates by reference Schedule C that describes flight fee formula's calculation. Section 53 ofANA-170 setthe expirationfor the flight fee formula for December 31, 1998. Theparties agreedto negotiate in good faith for "theestablishment ofprovisions coveringthe determination offlight fees"payable
onJanuary 

### I, 1999. Ex. M, Lease ANA-170 § 53 and Schedule C; Longemecker

**Dec!.~** 24; Garcia Dec!. 

## F 22. Effective as ofJanuary 1, 1995, Continental entered into SupplementNo. IS to Lease ANA-170. SupplementNo. 15 extendedthe effective date ofSchedule C to March 31, 2013. Ex. O,LeaseANA-170 SupplementNo.15 §§2, 8 (a)-(d), 16(a),(b) ScheduleM(I), (03/20/1995); Longemecker

**Dec!.~** 25.

523. SupplementNo. 15 also extendedthe lease term for AreaC-3, includednewbase rentals, addedthe EWRMonorail Feepermitting the PortAuthority to recover the costs of constructionfor the EWR AirTrain and also added thenewcharge Phase !AChargeFactorto
recover costs associated with the construction ofcertainEWRroadways. Ex. 

### 0, Lease ANA-170 SupplementNo. 15 §§ 2, 

### 8 (a)-(d), 

### 11, 16(a),(b) ScheduleM Part I (03/20/1995); LongemeckerDec!.

**~** 25; GarciaDec!.

**~** 13-14. 24. Continental entered into SupplementNo. 17 to Lease ANA-170 effective as of September 1, 1999. SupplementNo. 17 extendedthe lease term for Area C-3, andmodifiedbase rentals.Ex. P, Lease ANA-170 SupplementNo. 17 § 30 (09/0111999); Ex. T, ANA-170 § 2(a), LongemeckerDec!.

**~** 26; GarciaDec!.

**~** 8, n. 2. 25. SupplementNo. 17 also extended the expiration ofthe flight fee Schedule C from March 31,2013 to December 31,2018. Ex. P, Lease ANA-170 SupplementNo. 17 

### § 30 (09/01/1999); Longemecker

**Dec!.~** 27. 

### b. Terminal B 26. Terminal 

### Bis the terminal designated for international arrivals atEWR. In SupplementNo. 17 Continentalreservedtherightto use its slots atTerminal B. Continental also has apermitwiththe Port Authority allowingitto use space in connection withits operations withinthatterminal. Complainant submits its Terminal 

### Boperationsto the PortAuthority ina monthly activityreport and the corresponding flightfees are calculated andpaid inaccordance withthe provisions ofLeases ANB-056 andANA-170. Ex. R, Lease ANA-170 SupplementNo. 17 § 49 (b) (09/01/1999); Longemecker Decl.,n 10, 30.

6c. TerminalA 27. Effective as ofAugust 1, 1999, Continental enteredinto LeaseANB-056 and agreedto lease five (5) gates andaccompanying spacewithinTerminalA. Lease ANB-056 expires onDecember 31,2018. Ex. Q, LeaseANB-056 §7, § 14 and Schedule C; LongerneckerDec!.-,[ 29. 3. Continental and United's Investment in EWR 28. WithSupplementNo. 8 dated June 2, 1989, Continental added Area C-3 to Terminal C renamedTerminal C-3. Ex. S, Lease ANA-170 SupplementNo. 8 (06/02/1989) §§ 1-2; LongemeckerDec!. -,[ 31. 29. SupplementNo. 17 to LeaseANA-170 describes the extensive construction program for developing Terminal C-3. Ex. T, Lease ANA-170 SupplementNo. 17 

### §§ 6 (a), (b) (I) (i)-(xiii) (09/01/1999); LongerneckerDec!. -,[ 32. 30. SupplementNo. 17 also describes Continental's financial investmentin developing Terminal C-3. This includes aninvestmentofapproximately $730,360,000.00. Ex. U,NewJerseyEconomic DevelopmentAuthority Special FacilityRevenueBonds (Continental Airlines Inc., Project) Series 1999 09/15/1999, at 1-8; Longemecker Dec!. -,[ 32. 31. With SupplementNo. 28, effective as ofDecember 2012, Continental made a commitmentto invest another $150,000,000 inTerminals C-1 and C-2. Ex. V, LeaseANA-170 SupplementNo. 28 §§ 1, 3 (a)(l2/31/2012); Ex. W United Extends NewarkAgreement, commits $150Mto its Hub; LongerneckerDec!. -,[ 33. 32. SupplementNo. 28 provided for upgrading facilities inTerminals C-1 and C-2. SupplementNo. 28 also extendedtheterms ofTerminal C-1 and C-2 until March 31,2033. Ex. V, Lease ANA-170 SnpplementNo. 28 §§ 1, 3 (a) (12/31/2012); Longernecker Dec!. -,[ 33.

74. Continental's TreatmentOfLeases in Bankruptcy 33. On April l, I992, Continental was underreorganizationunder Chapter II ofthe United States Bankruptcy Code. Ex. X, Lease ANA-I70, SupplementNo. 10 (04/0l!I992) §§ 1 (a), (b), 4 (a), (b), 5(a); LongemeckerDec!. '1[ 34. 34. In SupplementNo. 10 Continentalreaffirmed LeaseANA-170. SupplementNo. 10 also extendedthe lease, surrendered certainleases (AN-541), modified rentals and extended the leasetermfor certain areas under the lease. SupplementNo. 10 did notmodify the flightfee components or Schedule C. Ex. X, Lease ANA-170, SupplementNo. IO (04/01/1992) §§ 1(a), (b), 4(a), (b), 5(a); LongemeckerDec!. '1[ 34. 35. On June 1, 1993, Continental and PortAuthority entered into a stipulation addressing Continental's assumptionunder Section 362 ofthe Bankruptcy Code ofcertain leases for its operations atEWRand LaGuardiaAirports. Ex. Y StipulationBetweenContinental Airlines, Inc., andthe PortAuthority ofNew York andNewJerseyfor the Assumption ofCertainUnexpired Leases and Executory Contracts (611/1993); In re ContinentalAirlines, Inc., etal.. Chapter 11 CaseNo. 90-932 through 90-984, OrderPursuantto 11 U.S.C. 

### §365 Approving Assumption ofCertain Executory Contracts andUnexpired Leases Uponthe Effective Date ofthe Plan of Reorganization andApproving Certain Stipulations withLessors (10/1/1993); LongemeckerDec!. '1[ 35. 36. Inthis stipulation, Continental assumed Lease ANA-170, while rejecting others, such as Lease ANA-093 forportions oftheNorthTerminal atEWR. On October 1, 1993, the United States Bankruptcy Courtfor the District ofDelaware enteredits order approving Continental'smotionfor the assumption ofcertain agreements andthe corresponding stipulations including the June 1, 1993 stipulationbetweenthe PortAuthority and Continental.

8Ex. Y StipulationBetween Continental Airlines, Inc., andthe Port Authority ofNew Yorkand NewJersey forthe Assumption ofCertainUnexpiredLeases and Executory Contracts (6/1/1993); In re ContinentalAirlines, Inc., etal., Chapter 11 Case No. 90-932 through 90-984, Order Pursuantto 11 U.S.C. 

### § 365 Approving Assumption ofCertain Executory Contracts and UnexpiredLeases Uponthe Effective Date ofthe Planof Reorganization andApproving Certain Stipulations withLessors (10/1/1993); Longernecker**Dec!.~~** 34,35. 5. United's Treatment OfLeases in Bankruptcy 37. OnJune 17, 2005, United was underreorganization under Chapter 11 ofthe United States Bankruptcy Code. Ex. Z, Partial AssigmnentunderLetterAgreementwith Assumption and ConsentLease AgreementNo. AN-535 (6/17/2005); Longernecker**Dec!.~** 36. 38. OnJune 17, 2005, thePortAuthority, United and Air Canada executed a partial assigmnent ofcertainfacilities underLease AN-535 with assumption and consent ("Assigmnent"). This Assigmncntreflected United's proposed actionto assume certain leases withthe PortAuthority, including AN-535, subjectto thebankruptcy's court approval. The modification included a surrender ofspace and changes to fees and rentals, butdid notinclude a modificationto the flight fee formula. Ex. Z, Partial Assigmnentunder Letter Agreement with Assumption and Consent, Lease AgreementNo. AN-535 (6117/2005); Longernecker**Dec!.~** 36. 39. This document providedfor payments ofcredits to United bythe PortAuthority for investmentbyUnited in the tenninals, and included an agreementfor assigmnent ofcertain gates, and tennination ofcertainrentals,rates and fees for the space assigned. Ex. AA, In re UAL Corporation, etal., Chapter 11 CaseNo. 02 B-48191, Stipulation order Assuming Certain UnexpiredLeases ofNon-ResidentialReal Property and Partial AssigmnentThereofwithrespect to NewarkLibertyInternational AirportPursuantto Section 365(a) ofthe Bankruptcy Code; Longernecker**Dec!.~** 37.



### 9E. EWRFLIGHT FEE 1. EWRFlight Fee In General 40. Theflight fee chargedto Complainantfor use ofEWRis establishedby Schedule C ofLeases ANA-170, ANB-056 and AN-535. GarciaDec!. 'j[ 8; Ex. F, Lease AN-535 § 16 and Schedule C; Ex. M Lease ANA-170 'j[53, 'j[51 and Schedule A, SectionI Schedule C; LongerneckerDec!. 

### 'lf'lf20, 24. 41. The same Schedule C is in other leases for EWRairportterminal property and in flight fee agreements with airlines thatdo not lease space atEWR. Garcia Dec!. 

### 'If 8. 42. The flight fee is separate from payment ofrentfor the use of! eased space. GarciaDec!. 

### 'If 8. 43. The flight fee is separate from the EWRMonorail Fee. The EWRMonorailFee fee recovers capital andoperating coststhatthe PortAuthorityincurred andincurs in constructing, maintaining and operatingthe EWRAirTrain. GarciaDec!. 

### 'If 8; Ex. J Lease AN-535 SupplementNo. 24 §§ 2, 9 (a), 6(a) (04/18/1995), Schedule M Part I;Ex. P, LeaseANA-170 SupplementNo. 17 

### §30 (09/01/1999); LongerneckerDec!. ,['1[21, 26. 44. The EWRflight fee formula as originally setforth inLease ANA-170 has two components: A PublicAirportFacilities ChargeFactor ("PAF Factor") and anAirport Services ChargeFactor ("Airport Services Factor"). The two factors are combined andmultipliedby an airline's total maximumtake-offweight ofaircraft for a year, inthousands ofpounds, to determinethat airline'sflight fee for the year. The PAF Factorand Airport Services Factor continueto be components ofthe flight fee. GarciaDec!. 'If 12; LongerneckerDec!. 'If24.

1045. 

### An additional factor, known as the Phase !ACharge Factor, was addedto the flight fee calculationeffectivein 1995 pursuantto Lease ANA-170 SupplementNo. 15, dated March 20, 1995, and effective in 1995 pursuantto Lease AN-535 SupplementNo. 24 dated April 18, 1995 and agreedto byother EWR airlines pursuantto similar lease and agreement supplements and amendments. Garcia

**Dec!.~~** 13-14; Ex. J, Lease AN-535 SupplementNo. 24 §§ 2,

**~6(a),** 9(a) (04/1811995), Schedule M, Part

### I; Ex. 

### 0, Lease ANA-170 SupplementNo. 15 §§ 2, 8 (a)- (d), 16(a),(b), ScheduleM, PartI (03/20/1995); LongemeckerDec!.

**~~21,** 25. 46. The Phase !A Charge Factorrecovers costs associated withthe constructionof certainEWRroadways. Garcia

**Dec!.~** 14; Longernecker

**Dec!.,~** 21. 47. The Phase !ACharge Factorhas minimal impact onthe flight fee. For example, in 2013, the lastyearfor which the flight fee was calculated with actual, ratherthanprojected, data, thePAF Factorwas $3.1248 perthousandpounds ofmaximumtake-offweight, theAirport Services Factorwas $3.6582, and thePhase !ACharge Factorwas $0.0605. GarciaDec!.

**~** 14. 48. Airlines thatpayflight fees are also given a creditfor revenues receivedfrom the collectionofaircraft parking fees. This credit against the PAF Factoris issuedto airlines that pay flight fees because aircraftparkingfees are PortAuthorityrevenue directlyrelatedto the operationofthe Public AircraftFacilities whose direct costs arereflectedinthe PAFFactor. GarciaDec!.

**~** 15. 49. Algebraically, the annual flight fee for each airline pernumber ofthousand pounds ofmaximumtake-offweight ofthat airline for a calendaryear is equal to: PAF Factorairport parking fees credit+Airport Services Factor+Phase !ACharge Factor.

11Garcia

**Dec!.~** 16. 50. The totalflight fee charge for any one airline during a calendaryearis thatyear's flight fee timesthetotal maximumtake-offweight ofthat airline for the calendaryear dividedby 1,000. GarciaDec!.

**~** 17. 2. PAF Factor CostBasis 51. ThePAF Factoris based onthe costs ofall investmentintheEWRPublic AircraftFacilities andall operating costs ofthe EWRPublicAirportFacilities. These costs include "thePortAuthority's snowremoval operations andprovision, operation, maintenance, servicing, repair and replacement ofandto the PublicAircraftFacilities andAirport emergency services." "Airportemergency services" include Aircraft Rescue andFirefighting ("ARFF") services forthe EWRPublic AirportFacilities. GarciaDec!.

**~** 20; Ex. M to LongemeckerDec!., Lease No. ANA-170, Schedule C, Part I, 

### § (1), at 1. 52. "Public AircraftFacilities" is definedin Section 51 ofLease No. ANA-170 as follows: Forthepurposes ofthis Agreement, the term "Public AircraftFacilities" shall include such ofthe following facilities as nowexist and shall, from time to timebe constructed, provided and maintainedbythe Port Authority attheAirportfor public and commonuseincludingwithout limitationthereto, use byAirline Lessees (including the Lessee) ofthe Central TerminalArea Complex and Aircraft Operators, otherthan said Airline Lessees for the following purposes regardless ofwhether ornot they are actually usedorusable in whole or in partbythe Lessee (except that suchfacilities shall not be deemedto include any area or areas as to whichthe Lessee is grantedrights pursuantto Section

### Ior 

### 3 ofthis Agreement): (a) Public Ramp andApron Space- bywhichis meant space for the purpose ofloading andunloadingpassengers, baggage, mail and supplies to orfrom aircraft, for thepurpose ofservicing aircraft withfuel and lubricants, for thepurpose ofperformingthe operations commonly

12known as "ramp service" and for the purpose ofperforminginspection, minormaintenance and other servicesuponorinconnectionwith aircraft incidental to performing "ramp service" andfor the purpose ofparking of mobile equipment actively usedin connectionwith such operations. (b) Runways

- bywhich is meantthe runways (including aerial approaches and bufferzones and additionally anythingrequired for the effective and safe operation ofaircraft as required bythe Federal Aviation Administration) attheAirport for thepurposes oflanding and taking offof aircraft; (c) AircraftParking and Storage Space

- by whichis meant those public areas ofthe Airport which are designatedbythePort Authority from time to time forusebyanAircraft Operatorfor the parkingor storage ofan aircraft. (d) Taxiways- bywhichis meanttaxiways at the Airportfor the purpose ofthe groundmovement ofaircraftto, from andbetweenthe runways, the Public Ramp and Apron Space, the Aircraft Parking and Storage Space, aircraft maneuvering areas, and otherportions ofthe Airport, not including, however, any taxiways orportions thereofthatare withinthe Lessee'spremises. (e) Facilities incidentalto the runways, the Public Ramp and Apron Space, theAircraftparking and Storage Space and Taxiways- by whichis meant facilities and equipmentfor the monitoring ofaircraft noise decibels andfacilities for thepurpose ofcontrolling or assisting arrivals, departures and operations ofaircraft using the Airport, such as control towers, signals, beacons, wind indicators, floodlights, landing lights, boundarylights, constructionlights, radio and electronic aids or otheraids to operations, navigation or ground control ofAircraft whether ornotofatype hereinmentioned and eventhough located at sites located away from the otherPublicAircraft Facilities or outsidethe Airport. GarciaDec!. 'j21; Ex. M, Lease ANA-170 

### §51. 3. Airport Services Factor CostBasis 53. The Airport Services Factorisbasedupon theratableportionofexpenditures of the PortAuthorityperformedfor the benefitofEWRas a whole, which are attributable to the Public Aircraft Facilities based on geographical area, including investment in non-revenue producing areas, and costs ofoperation, maintenance and administration ofnon-revenue producing areas byPortAuthority staff, includingPortAuthoritypolice, andPortAuthority contractors.


### 13Garcia

**Dec!.~** 22; Ex. M, Lease ANA-170 §§ 51, 53, ScheduleA, Part I. 4. PAF Factor Calculation 54. The PAF Factoris calculated as the product of$0.3130times two ratios: (a) First, the ratio ofthe sum ofthe PortAuthority's fixed charges on investmentin, and annual direct costs for, maintainingthe Public AirportFacilities to the amount ofthatinvestment and costs inthe first year ofLease ANA-170. (b) Second, theratio ofthe total maximumweightfor take-offofall aircraft at EWRinthe first year ofLeaseANA-170 to the.total maximum weightfor take-offofall aircraft atEWRinthe current year. (c) Algebraically, the PAF factor is expressed as: 0.3130 X ((fixed charges
on PublicAircraftFacilities investments+PublicAircraftFacilities maintenance and operation costs) 7 $4,010,000) X (17,734,000,000 7 total scheduledmaximumtake-offweightfor calendaryear). GarciaDec!.

**~** 23; Ex. M, Lease ANA-170, Schedule C, 

### § II (A), at 1-2. 55. In 2013, the ratio ofthe difference betweenrevenue from the PAF Factor less credits issuedto airlines from aircraftparking fees, and the costs included in calculatingthe PAF Factorwas 28.14 percent. GarciaDec!.

**~** 25. 5. Airport Services Charge Factor Calculation 56. The Airport Services Charge Factoris calculated as theproduct of$0.3370 times threeratios. (a) First, the ratio ofthe currentratableportion ofthe investmentinnonrevenue producing areas ofthe entire airport and costs ofmaintenance, operation and

14administration ofthe non-revenue producing areas ofEWRto that sum for the first year ofthe lease. (b) Second, the ratio ofthetotal scheduled maximumtake-offweight of aircraft at EWRfor the first year ofLease ANA-170 to the total scheduled maximumtake-off weight ofaircraft atEWRfor the current year. (c) Third, the ratio ofthepercentage ofthe total developed land area at EWR during the calendaryear occupiedbythe Public AircraftFacilities during the current year to 66.47%, whichwaspercentage ofthetotal developed land area atEWRoccupiedbythe Public AircraftFacilities during the first year ofthe Lease ANA-170. GarciaDec!.,26; Ex. M, Lease ANA-170, Schedule C, PartII,§ (B), at2-3. 57. Algebraically, the Airport Services ChargeFactoris expressed as: 0.3370 X (the currentratable portionofthe investment innon-revenue producing areas ofthe entire airport and costs ofmaintenance, operation and administration ofthe non-revenue producing areas ofEWR

+ 4,625,000) X (17,734,000,000 +thetotal scheduledmaximum aircrafttake-offweight at EWR for the currentyear) X (the percentage ofthe total developed land area at EWRduring the calendaryearbythe PublicAircraft Facilities duringthe currentyear+ 66.47%). Garcia Dec!.,27; Ex. M, Lease ANA-170, Schedule C, PartII,§ (B), at 2-3

156. FlightFeeHistory 58. The flight fee, its components and adjustments for the period2003 through 2013
were: FlightFee Components Adjustments Airport Phase Over/Under PFC Year PAF Parking Airport lA Reported Imputed Flight Services Weights- Carrying Fee Factor Fees Factor Charge Prior Costs3 Credit Factor Years2 2013 $3.1248 ($0.1958) $3.6582 $0.0605 (0.0073) $6.6404 2012 $2.8507 ($0.1954) $3.4856 $0.0599 (0.0026) $6.1982 2011 $3.2053 ($0.1079) $3.2574 $0.0591 (0.0121) $6.4018 2010 $2.9705 ($0.0816) $3.3536 $0.0618 (0.0012) $6.3031 2009 $2.8290 ($0.0900) $3.2873 $0.0606 $6.0869 2008 $2.3740 ($0.0868) $2.8967 $0.0558 $5.2397 2007 $2.3408 ($0.0790) $2.6839 $0.0550 (0.0021) $4.9986 2006 $2.1581 ($0.0791) $2.4977 $0.0557 (0.0063) 0.0119 $4.6380 2005 $2.3990 ($0.0713) $2.8259 $0.0584 (0.0123) 0.1406 $5.3403 2004 $2.3221 ($0.0689) $2.6993 $0.0578 0.0931 $5.1034 2003 $2.4736 ($0.0777) $2.6130 $0.0597 $5.0686 Garcia

**Dec!.~** 18. 59. The flight fee has varied overtime. Attimes, the flight fee has increased from yearto year, and at othertimes has decreased from yearto year. These fluctuations are the result ofchanges inthe EWRcostsuponwhich the flight fee is based, inEWR airtraffic volume, and inthe proportion ofEWRoccupiedby the Public Airport Facilities, and therevenue from airport parkingfees. Garcia

**Dec!.~** 19.

2Adjustmentmadeto reflect incorrectreporting ofaircraft weights byairlines. 3Adjustmentmadeto reflect opportunity costs incurredbythe PortAuthority infunding ofPassenger Facility Charge eligibleprojects whose capital costs were notincludedinfixed charges for flight fee calculationpurposes.

16F. RELATIONSIDP OF FLIGHT FEE REVENUE TO EWR OVERHEAD COSTS 60. The flight fee calculations do notinclude certain on-airport and off-airport overhead costs incurredbythe PortAuthorityin operatingEWR. (a) The on-airport overhead costs in operating EWRwhichare notincludedin the flight fee, includingrental paymentsmade bythe PortAuthorityto the CityofNewark pursuantthe lease for EWR and on-EWRpolice, maintenance and operationadministrative and clerical costs. (b) The off-airportindirect overhead costs ofoperatingEWRwhich are not included inthe flight fee include: the costs ofthe AviationDepartment's services for all Port Authority airports, and the costs ofoperatingthe Executive Director's Office, the Secretary's Office, Comptroller Department, LawDepartment, TreasuryDepartment, HumanResources Department, and Engineering Department, and all otherPortAuthority activities ofthe Port Authority locatedoffofEWRthat support EWRoperations. Garcia Dec!.

**~** 28. 61. The actual amounts ofthese overhead costs ofoperating EWRhave no effect on theflight fee becausethe flight fee isbased on the operation ofthe formula agreedto between thePortAuthority and the signatory airlines, whichisbased solely onthose EWRexpenditures that are enumeratedinthe calculationofthe components ofthe flight fee, theportionofthe airportused as Public AircraftFacilities, andthe level ofEWRflight activity for theyear in whichthe flight fee is established, as setforth intherelevant agreements. Garcia

**Dec!.~** 29.

1762. Similarly, the flight fee in any one year would be the same irrespective ofthe amount ofallPortAuthority off-EWRexpenditures, whether for -airport overhead costs of operating EWR, orfor bridges, tunnels, PATH, or any other off-EWRexpenditures. GarciaDec!. 

## 130. G. EWRREVENUE OTHER THANTHE FLIGHT FEE REVENUE. 63. The Port Authority derivesrevenue atEWRotherthanfrom the flight fees collected from scheduled airlines and other aircraftusingthe PAF. Revenue is derivedfrom telecommunications fees, food and beverage rentals, retailpercentagerentals, advertising fees and rentals, hotelrentals, rental carrentals, cargo handlingpermitfees, public vehicularparking, and aviationfuel gallonage fees. GarciaDec!. 1 31
. 64. In 2013, flight fees from scheduled aircraft using EWRproduced $215,829,770 in revenue, buttotal EWRrevenue was $799,553,000. Thus, scheduled aircraft flight fee revenue constituted only 27percent oftotal EWRrevenue. GarciaDec!. 132. H. EWRFINANCIAL INFORMATION PROVIDED TO AIRLINES 65. The flight fee during a calendar yearis based on aprojection for thatyear ofthe costs upon whichthe PAF Factorandthe Airport Services Factor are based and 

### aprojectionof the total maximumtake-offweightfor EWRfor thatyear. As ofApril30 ofthe following year, the actual costs andthe actual total maximumtake-offweight for EWRfor theprevious year are calculated, and credits or assessments are issued to the extentrequired baseduponthe actual costs and flight activity. GarciaDec!. 133.

1866. The estimated and fmal calculations ofEWRflight fees are presentedto the EWR airlines inwriting andinpersonfour times a year: twice inthe Spring, and twice inthe Fall. The first presentationineach Spring and Fallis to the Finance Committee oftheEWR airlines, and the secondpresentation, given one monthlater, isto the EWR airline communityat large at the EWRAirportAffairs meeting. GarciaDec!.

**~** 34. 67. IneachFallpresentation, detailedinformationconcerningtheprojections up whichthe flight fee willbe chargedinthe next calendaryear are presentedto affected airlines. Ineach Springpresentation, detailed informationconcerning the actual costfigures and actual total maximumtake-offweightfor EWRupon whichthe adjustmentfor theprior yearis based is shared with affected airlines. Theinformationpresentedinthese documents includes the following: calculations ofcomponents ofthe EWRflight fee; calculations ofthe separate EWR Monorail Fee; and detailed description ofcost components oftheEWRflight fee, and ofthe separate EWRMonorail Fee. Informationregarding Passenger Facility Charge revenues and expenditures at EWRand otherPortAuthority airports is also provided. GarciaDec!.

# n35-38; GarciaDec!. Exs. 1 and 2.



### 1968. PortAuthority staffmembers respondto questions from airline representatives regarding the informationpresented atthe Spring and Fallpresentations, and, ifnecessary, at othertimes during the year. Garcia

**Dec!.~** 39. Dated: February 10,2015 Respectfully submitted,

Carlene V. Mcintyre Arnold D. Kolikoff FaithTabafunda LawDepartment The PortAuthority ofNewYork andNewJersey 225 ParkAvenue South, 14thFloor NewYork,N.Y. 10003 Telephone: (212) 435-3503 Attorneys for Respondent The PortAuthority ofNewYork and NewJersey

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