Order 2010

- 12

- 16 Served: December 10 , 2010



### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the 10 th day of Dec em ber , 20 10

D ocket DOT

- OST

- 2000

- 7182

ORDER RE ALLOCATING WITHIN

- PERIMETER SLOT EXEMPTIONS AT RONALD REAGAN WASHINGTON NATIONAL AIRPORT

SUMMARY

By this O rder, the Department is reallocating the two within

- perimeter slot exemptions at Ronald Reagan Washington National Airport (DCA) previously awarded to Midwest Airlines, Inc. (Midwest) by Order 2004

- 4

- 2 to MN Airlines, LLC d/b/a Sun Country Airlines ( Sun Country ) . Sun Country will provide a daily nonstop round trip to Lansing

, Michigan

, utilizing 129

- seat or 162

- seat Boeing B737 aircraft

.
BACKGROUND

On April 1, 2004, pursuant to the provisions of the Vision 100

— Century of Aviation Reauthorization Act, P.L. 108

- 176 (Vision 100), the Department issued Order 2004

- 4

- 2, which awarded a total of 1 0 “within perimeter” slot exemptions at DCA, to be operated with Sta ge 3 aircraft. Among the awards were two slot exemptions to Midwest, to provide a daily nonstop round trip to Kansas City, Missouri, a medium hub . Midwest initiated service in the DCA

- Kansas City market using tho se two slot exemptions on October 31, 2004

. Application s of

AIRTRAN AIRWAYS, INC. MN AIRLINES, LLC d/b/a SUN COUNTRY AIRLINES REPUBLIC AIRLINE , INC. SOUTHWEST AIRLINES CO. US AIRWAYS, INC.

For exemptions from 14 C.F.R. Part 93, Subparts K and S, pursuant to 49 U.S.C. § 41718(b), Special rules for Ronald Reagan Washington National Airport (within

- perimeter slot exemptions)- 2

-

On July 31, 2009, Republic Airways Holdings, Inc., the parent of Republic Airline Inc. (Republic), acquired 100% of the stock of Midwest Air Group, Inc., which became a wholly owned subsidiary of Republic Airways Holdings, Inc. In turn, Midwest became a wholly

- owned subsidy of Republic Airways Holdings, Inc.

By letter to the Department dated September 30, 2009, Republic announced its plans to begin operating all of Midwest’s schedules and become holder and operator of Midwest’s Vision 100 “within perime ter” slot exemptions at DCA awarded to serve Kansas City, effective November 3, 2009.

By letter dated November 25, 2009, the Department informed Republic and Midwest that the transfer of the slot exemptions under the circumstances described in Republic’s September 30, 2009, letter would contravene the statutory proscription against slot

exe mptions being “bought, sold, leased or otherwise transferred by the carrier to which it is granted.” 1 The letter explained that Midwest, the party to which the awards were granted, would be relinquishing its F ederal Aviation Administration (F AA ) and Depar tment certificates and ceasing all scheduled operations under those certificates, thu s ceasing to exist as a carrier, and that Republic had no claim to the exemptions other than through its transaction with Midwest. The Department’s letter also informed R epublic that , as a result of the Department’s determination, we would withdraw the two slot exemptions and conduct a proceeding to reallocate them to an airline in accordance with Title 49 U.S.C. § 41718(b). To minimize any inconvenience to Republic and i ts passengers, the Department also informed Republic that it would be allowed to operate the two “within perimeter” slot exemptions between DCA and Kansas City pendente lite until a final determination is made with regard to these slot exemptions. The let ter also informed Republic that it could submit an application for Kansas City (or for any other service it believed would best satisfy the statutory criteria).

On March 3, 2010, counsel for JetBlu e Airways Corporation (JetBlue) submitted a letter reitera ting the air carrier’s desire to gain access to DCA and urging the Department to immediately initiate a slot exemption proceeding to redistribute these two slot exemptions. The JetBlue letter also questioned the legality of Republic’s utilization of the f ive additional slot slide exemptions discussed in the Department’s November 25, 2009, 2 letter and requested that the Department initiate a proceeding to reallocate all seven DCA slot holdings. 3

1 See letter dated November 25, 2009, to Republic’s counsel from Assistant Secretary Susan L. Kurland for a full discussion as to why the Department found that the proposed transfer would violate Title 49 U.S.C. 41714(j).
2 The Department instructed Republi c to submit an application to retain its five slot slides with in 60 days of the November 25, 2009

, date of the letter. On January 20, 2010, Republic, d/b/a Midwest Airlines submitted its application to retain its slot slide exemptions at DCA and permanent ly reti me one slot exemption in Docket s DOT

- OST

- 2000

- 7189, DOT

- OST

- 1999

- 6240 and DOT

- OST No. 49741 , arguing exceptional circumstances

. 3 T he Department will c onduct a separate proceeding with regard to Republic ’ s five slot slide exemptions at DCA.- 3

-

On August 30
, 2010, the Department initiated a reallocation proceeding

, soliciting applications from air carriers for the two Vision 100 slot exemptions previously held by Midwest

. As explained below, the solicitation was made for service between DCA and
any medium hub or smaller airport within the 1,250

- mile peri meter established for civil operations at DCA under Title 49 U.S.C. § 49109.

The selection criteria currently applicable to award the exemption s are contained in Title 49 U.S.C. § 41718(b) , which directs the Secretary to distribute within

- perimeter slot exemptions 4 in a manner that promotes air transportation: (1) by new entrant air carriers and limited incumbent air carriers ; 5 (2) to communities without existing nonstop air transportation to Ronald Reagan Washington National Airport; (3) to small commun ities; (4) that will provide competitive nonstop air transportation on a monopoly nonstop route to Ronald Reagan Washington National Airport; or (5) that will produce maximum competitive benefits, including low fares.

Further, 49 U.S.C. § 41718(c)(3) specifies additional requirements governing the award of within

- perimeter slot exemptions : “ Of the exemptions granted under Title 49 U.S.C. § 41718: (A) without regard to the criteria contained in subsection (b)(1), six shall be for air transportation to small hub airports and nonhub airports ; 6 (B) ten shall be for air transportation to medium hub and smaller airports; and (C) four shall be for air transportation to airports without regard to their size .” Under that provision, then, a maximum of four slo t exemptions may be used to serve large hubs.

Midwest used the two slot exemptions for service between DCA and the Kansas City International Airport, a medium hub

. 7 The f our slot exemptions allotted under § 41718(c)(3)(C) are used by AirTran Airways, Inc . (AirTran) to serve Hartsfield

- Jackson Atlanta International Airport (a large hub airport)

. Therefore, to be responsive to this request and eligible for award, carriers must have propose d service with Stage 3 aircraft
to a medium hub or smaller airport within the 1,250

- mile perimeter. Applicants were advised that proposal s should also include the aircraft type, a schedule showing proposed times, and an approximate start

- up date.

4 AIR

- 21 , which mandated the award of 12 within

- perimeter slot exemptions as noted above, was amended in 2003 by P.L. 108

- 176, the Vision 100

– Century of Aviation Reauthorization Act. Section 425(b)(1) of Vision 100 increased the number of within

- perimeter slot exemptions to 20.
5 A new entrant carrier is an air carrier that does not hold a slot at DCA and has never sold or given up a slot at the airport after December 16, 1985. 49 U.S.C. § 41714(h)(3 ) ; a limited incumbent carrier is defined as an air carrier or commuter operator that holds or operates (or held or operated, since December 16, 1985) fewer than 20 slots and slot exemptions at DCA. 49 U.S.C. § 41714(h)(5 )

. 6 Because six of the twenty slot exemption s are used for service to small hub and nonhub airp orts, the new entrant/limited incumbent criterion must apply in this proceeding. See 49 U.S.C. 41718(c)(3)(A).
7 49 U.S.C. § § 41714(h)(7), (8) and (9) require that hub classifications be based on the Federal Aviation Administration’s Primary Airport Enplanement Activity Summary for Calendar Year 1997.- 4

-

APPLICATIONS

The Department received applications from AirTran

, Republic, Southwest Airlines Co. (Southwest), Sun Country and US Airways, Inc. (US Airways)

. The proposals

, summarized below, would be wi th Stage 3

- compliant aircraft

. Each carrier’s entire proposal , as well as the responses and additional comments filed, may be accessed online through the Federal Docket Management System at: http://www.regulations.gov by doing a “ search” on docket number DOT

- OST

- 2000

- 7182

.
AirTran

AirTran applied for two slot exemptions to operate one daily nonstop round trip between DCA and either Fort Myers or Sarasota
, Florida, at its discretion, using 117

- seat Boeing 717 or 137

- seat Boeing 737 aircraft , and would be willing to operate new flights at 1100 and 1400 . AirTran asserts that its proposal will provide maximum benefits for consumers and communities

. T he carrier states that it is a limited in cumbent carrier, hold ing fewer than twenty slots at DCA. It also provides a summary of the growth of its passenger traffic and flights operated , along with the types and names of markets it serves. It details the impact it has had on lowering fares by citing several specific statistics relating to its entry into the Atlanta market. As further example of the type of service it provides, AirTran highlights it s ranking s on the Airline Quality Rating. The carrier e xplains that business class sections are included on its aircraft, an amenity not offered on many aircraft operated at DCA to small and medium markets. It contends that it would provide additional low

- fare options between DCA and Fort Myers , and summarizes the

con nections it offer s at Fort Myers. Similarly, the carrier also details the existing service it provides at Sarasota and states that it would offer first time low

- fare ser vice between DCA and Sarasota. Lastly, AirTran argues that its proposal would increase competition and is in the public interest.

Republic

Republic seeks to obtain the two available within

- perimeter slot exemptions at DCA to maintain its minimum service pattern of three daily nonstop flights to Kansas City. The carrier would continue to utilize 99

- seat Embraer 190 aircraft

, 8 and operate as Frontier Airlines branded service through FY 2011

. Republic argues that it has provided a consistent presence in the DCA

- Kansas City market and that many of the f inding s the Department made in awarding the slot exemptions to Midwest in April 2004 hold true today, including the importance of Kansas City as a mid

- country community and business li nkages the city shares with the Washington

, D.C. Metropolitan Area. Similar to AirTran, Republic also provides a summary of the growth of its passenger traffic, flights operated, and a list of the markets it serves from Kansas City. The airline details t he competitive service currently offered

8 Republic notes that effective December 1, 2010, all three of Republic’s nonstop DCA

- Kansas City services will be operated with this type aircraft.- 5

-

by other carrier s at DCA, Baltimore/Washington International Thurgood Marshall Airport (BWI) and Washington Dulles International Airport (IAD). The carrier also highlights it s ranking as the “lowest fare carrier” i n the two most recent periods (4 th Quarter 2009 and 1 st Quarter 2010) of the Domestic Airline Fare Consumer Report and mentions that its DCA

- Kansas City service is part of the General Service Administration (GSA) City

- Pair Program. Republic insists that t his proceed ing is atypical and if the slot exemptions are awarded to another carrier and city combination it would result in the elimination of service in the DCA

- Kansas City market and cause significant harm to both the Washington

, D.C. and Kansas City Metropolitan Area s

. Lastly, Republic also argued that its acquisition of Midwest did not constitute a prohibited transfer of slot exemptions warranting our reallocation.

Southwest

Southwest applied for two slot exemptions to initia te its first ever service at DCA . The carrier proposes to provide a daily nonstop round trip between DCA and Kansas City

, using 1 3 7

- seat Boeing 737 aircraft , and is willing to operate new flights at 1100 and 1400

. Southwest asserts that its proposed serv ice would advance the goals of AIR

- 21 and Vision 100 by facilitating entry by a new low

- fare carrier at DCA and enable low

- fare competition on a high

- fare route

. In support of its claims

, the carrier provides detailed traffic forecasts, fare savings estim ates and quantifies the network benefits associated with adding service in the DCA

- Kansas City market

. 9

Sun Country

Sun Country applied for two slot exemptions to operate a daily nonstop round trip between DCA and Lansing, Michigan, utilizing 129

- seat or 162

- seat Boeing 737 aircraft

, with two

- class seating

. T he carrier affirms its status as a new entrant at DCA , and states that its service would be to a small community that currently does not have nonstop service to DCA

. Sun Country asserts that its pro posal will provide substantial benefits for passengers traveling between DCA and Central Michigan, by substantially reducing the elapsed travel time between Washington

, D.C. and Lansing and offer ing significantly lower fares. In support of its claims, the carrier provides detailed traffic forecasts and fare savings estimates. The carri er also highlights several key attributes and statistics unique to Central Michigan. The airline explains that it s proposal would include

co ntinuing service to Minneapolis/ St. Paul and therefore provides associated traffic forecasts and fare savings estimates . Sun Country argues that its proposal achieves all of the Vision 100 statutory criteria applicable to the proceeding and provide s the traveling public with substantial competi tive benefits

.

9 Campbell

- Hill Aviation Group prepared t he majority o f analysis detailed in Southwest’s application and reply comments.- 6

-

US Airways

US Airways applied for two slot exemptions to launch daily nonstop service between DCA and the Pensacola Regional Airport utilizing 7 6

- seat Embraer E

- 170 aircraft from September through February , and 86

- seat E mbraer E

- 175 aircraft from March through August

. 10 This is the third recent slot allocation proceeding in which US Airways has sought slot exemptions to serve the DCA

- Pensacola market. T he airline states that its proposed service would bring convenient service and competitive benefits to consumers throughout the Florida

- Alabama Gulf Coast Region

– including Mobile, Pensacola, and Ft. Walton Beach

– and highlights the importance that Congress has placed on maintaining convenient air service to small communities. US Airways argues that an award to it at Pensacola would benefit more passengers than currently benefit from any other award of AIR

- 21 small community slot exemptions

. US Airways also notes that the Pensacola region’s economy is divers e and home to several military bases and defense installations, indicat ing that the economic ties between Pensacola and Washington

, D.C. are strong. The carrier also explains that neither Pensacola nor any of the Pensacola region’s other airports have non stop air service to DCA , requiring travelers to drive in excess of th ree hours for nonstop service.

RESPONSIVE PLEADINGS The applicants submitted their responsive pleadings on October 15 . Southwest and Republic also filed late comments

. The additional comments filed by each applicant are summarized below.

Concerning AirTran ’s Application

In its response comments, AirTran paraphrases the key attributes of its application as discussed above, including the proposed aircraft type (includi ng its provision of both business and coach class), markets to be served, departure and arrival schedules, connecting opportunities, passenger demand and airfare impacts associate with its entrance into Atlanta and other markets, along with its public inte rest arguments. The carrier makes note of the many recent accolades and high ranking s that Sarasota County has received from many popular business and travel publications, and details its impact on passenger demand and fare levels when it began service in the BWI

- Sarasota market. AirTran reasserted its status as a limited incumbent and belief that its proposed service will provide the greatest benefits to consumers while allowing it to strength en its service and increase low

- fare travel options at DCA and popular Florida markets.

O ther applicants argue that the Department should reject AirTran’s application because it
proposes two markets as alternatives for service

, giving itself the discretion to choose between them

, and making note of the Department’s statements in previous slot exemption cases where a carrier has submitted multiple market applications. The competitors also argue that AirTran’s service commitment to Fort Myers has been inconsistent and question the applicability of many of the traffic

- demand and fare

- saving

10 Aircraft will be operated by US Airways or US Airways Express carriers.- 7

-

statistics used by AirTran by arguing that Atlanta and F ort Myers are not comparable markets . Similarly, other carriers assert that Sarasota, Atlanta and Milwaukee are not comparable either and therefore it is unlikely that AirTran’ s proposal to serve Sarasota

w ould offer similar increases in passenger demand or the fare savings experience d in Atlanta and Milwaukee

. O ther parties state that AirTran has ignored US Airw ay s ’
presence in the DCA

- F ort Myers and Sarasota markets and that AirTran’s application will only offer duplicative service. The new entrant carriers also argue that an award to AirTran would not add new DCA competition. The competitors in this proceeding further make note of Southwest’s proposed acquisition of AirTran and argue that an award to AirTran may result in another proceeding shortly after the completion of this case as Vision 100 and AIR

- 21 slot exemption s are not transferable between carriers.

Concerning Republic’s Application

In submitting its additional comments, Republic review s the key characteristics (aircraft type, proposed schedule, consistency of its commitment to and status as the “lowest fare carrier” on DCA

- Kansas City route, etc.) of it s application as discussed above. The carrier also includes a letter of support for its proposal from the Kansas City Aviation Department
, and summarizes many of the key statements the Airport Director makes in comparing its proposal to Southwest’s. Republic also claims that continuation of its third daily round trip between DCA and Kansas City would maximize the public interest and competitive benefits, particularly low fares. The carrier asserts it s status as a limited incumbent stating that it controls and operates only 15 DCA slot holdings w ithin the controll ed hours of 0700 and 2159, which include the slot exemptions that are the subject of this proceeding. It explains that the award of these two slot exemptions will support the on

- going development of its network and facilities at Kansas City, arguing that the loss of these two slot exemptions will significantly harm Kansas City.

O ther carriers in the proceeding argue that Republic has a significant existing DCA slot

holding portfolio and could take steps to maintain its existing level of DCA

- Kansas City service without these two slot exemptions. They also note that Republic’s growth over the past six year at Kansas City has been modest but that it is the largest carrier in the DCA

- Kansas City market . The other applicants state that Republic’s attempts to justify the need for three daily round trips in DCA

- Kansas City market by contrasting its own service to the service provided by other carriers in the BWI

- Kansas City and I AD

- Kansas City markets is flawed because there is nothing preventing Republic from operating service between Kansas City and BWI or IAD. The other commenting parties argue that competition already exists in the DCA

- Kansas City market and that Republic’s p roposal will not result in lowered fares on the route. Several other carriers also make note of Republic’s use of smaller capacity aircraft, especially when compared to their respective proposal s . The other applicants call into question several of the co nnecting opportunities touted by Republic at Kansas City. They claim that Republic

, which now owns Midwe st and Frontier Airlines, may offer connecting (through Milwaukee or Denver) and /or direct service to many of the important connection s that Republic c urrently provides at Kansas City

. The other applicant s also question Republic’s arguments regarding government- 8

-

contract airfares by explaining that they do not justify the need for more air servic e in the DCA

- Kansas City market and are inaccessible to the majority of travelers.

In its late filing, Southwest provided additional analysis seeking to refut e Republic’s claims that it offers low fare s on the DCA

- Kansas City route.

In response to Southwest ’s late filing, Republic challenges Southwest ’s arguments and insists that its fares are lower than average in the DCA

- Kansas City market.

Concerning Southwest’s Application

Southwest submitted additional comments

, which include d a summary of its proposal discussed above and a number of detailed exhi bits that claimed to rebut the specific analysis and arguments made by the competing applicants

. It asserts both its status as a new entrant at DCA and as a well

- known low

- fare airline. The carrier claims that its application will produce maximum competi tive benefits and fare savings. If awarded the slot exemptions, Southwest also states that it would intend to grow at DCA, thereby providing additional competition

.

The competitors in this case state that two carriers, providing multiple daily flights,

a lready serve the DCA

- Kansas City market. When comparing Southwest ’s proposal to their own, some applicants note that Southwest serves more domestic passenger s than any other carrier and when compared to Kansas City , their proposals offer service to smaller communities

. C ommenting parties also make note that many of the connecting opportunities Southwest may offer from Kansas City already receive direct Southwest service from BWI or are not feasible due to the limitation associated with the timing of the slot exemptions

. O ther applicants also express doubt that Southwest could successfully operate at DCA with only a single daily ro und trip, and therefore believe the public would be better serve d by their own proposal s

. Other carrie rs also argue that Southwest has had ample opportunity, through the many recent DCA slot exemption proceedings and other industry transactions, to commence ser vice at the airport

. C ommenting parties further assert that Southwest has overstated the benefi t s associated with its proposal, taking particular issue with the fare impact analysis Southwest provided, especially when considering that Southwest would only be able to offer a single round trip with the two slot exemptions. Finally, other carriers make mention of the carrier’s proposed purchase of AirTran , which may provide it an alternative means of entry into DCA

. In its late filing, Southwest challenges the other applicants’ claims that its proposed service may not be viable and reiterates it s intent on expanding service at DCA after gaining entry. The filing also reiterates the claim that Southwest consistently offers low

fares to consumers.- 9

-

Concerning Sun Country’s Application

In a similar manner as the other applicants, Sun Country also submitted additional comments. The carrier repeats many of the same argument s it made in its application as summarized above, including that it qualifies as a new entrant and that its proposal would not only provide service to a small community that curr ently lacks direct DCA service but also offer low fares. It argues that its application meets all of the applicable selection criteria

. Sun Country also provided specific example s of the impact of fares its service has had in the Minneapolis/St. Paul

- Por tland market , and claimed that its continuing service to Minneapolis/St. Paul would also discipline fares in the DCA

- Minneapolis/St. Paul market. Sun Country also argues that an overwhelming majority of Michigan ’s population is within a 90

- minute drive to Lansing, so the benefits of its proposed service would extend beyond the Lansing Metropolitan Area.

The commenting parties express concern over the stand

- alone status and financial viability of Sun Country’s proposed service. Without any supple mental service at DCA or any other East Coast airports, the other applicants note that passengers would be subject to significant delay and financial risks if Sun Country cancelled or delay ed flights operated using these two exemptions. The other applican ts also argue that Sun Country ’s primary goal is to provide one

- stop service in the DCA

- Minneapolis/St. Paul market

. Concerning US Airways ’ Application

US Airways also submitted a responsive pleading restating many of the basic elements contained in its application . US Airways argues that this proceeding should focus on small community access to DCA and maintains that when compared to other carriers at the airport, it provides the most small community service. It contends that DCA is separate and distin ct from other Washington

, D.C. Metropolitan Area airports, which include BWI and IAD, but that the airport is constrained for all carriers

. The carrier explains that it cannot add service to a new market without reducing service to an existing market. US Airways maintains that intent o f AIR

- 21 was for small communities to receive the maximum amount of service permitted, and confirms that its proposal would provide first ever service to three different small communities in the Florida

- Alabama Gulf Coast Re gion.

In response to US Airways ’ application, the other applicants argue that providing additional slots to the largest slot holder at DCA would not maximize compet itive benefits. They claim that US Airways does not bring low er fares to markets unless th e carrier is faced with low

- fare competition. C ompeting applicants discourage the Department from awarding these slot exemptions to US Airways because it would increase the dominance of the largest slot holder at DCA rather than provide opportunities to s maller DCA carriers. They also observe that the Department has twice rejected US Airways ’ very same proposal and state that the carrier could begin service to Pensacola without the two slot exemptions at issue here by using other slots in its portfolio

. Several other carriers also make note of US Airways’ use of smaller capacity- 10

-

aircraft and note that it could provide its proposed off

- season service utilizing less valuable commuter slots r ather than these slot exemptions.

DECISION

We have decided to reallocate the two within

- perimeter slot exemptions at DCA to Sun Country to enable it to provide nonstop service to Lansing utilizing 129

- seat or 162

- seat Boeing B737 aircraft , conditioned as described below.

A ll of the proposals would provide service to a medium hub and smaller airport within the 1,250

– mile perimeter with Stage 3 aircraft, and so are responsive to the solicitation. T he statutory criteria for assessing the proposals in this docket are set out in 49 U.S.C. § 41718. A s discussed in detail below, Sun Country ’ s proposal meets four out of five selection criteria, the maximum number possible

. 11

N

ew entrant or limited incumbent air carriers : Southwest and Sun Country qualify a s

n ew entrant s under the terms of the statute

, as n either carrier operated at DCA

. US Airways has more DCA slot holdings than any other carrier

. Republic currently operat es o ver 100 DCA slots for US Airways

, and the carrier also has control over more than 25 DCA slot s or slot exemptions through its s ubsidiaries, Midwest, Frontier Airlines, and Chautauqua Airlines. AirTran , one of the smalle r carriers at DCA

, operate s or has returned slightly more than the number of holdings that would qualify it as a limited incumbent air carrier

. 12

C omm unities without existing nonstop DCA service : Both Sun Country’s and US Airways’ application s would pro vide air transportation to a community without existing nonstop DCA service. No commercial airline currently offers non stop service between DCA and Lansing or Pensacola

. Republic ’s proposal would maintain one of five existing nonstop round trips between DCA and Kansas City , while at least one weekday round trip is already provided from DCA to Fort Myers and Sarasota.

Small Communities : The statute does not pr ovide a definition of a small community; however, b y comparison, Lansing and P ensacola are the smallest cities included in the applications

. Republic do es not claim that Kansas City should qualify as a small community under the statute

, and Southwest make s only passing mention that Kansas City is a small community. Rather, both carriers detail the ma ny benefits that may exist by connecting to their respective networks at Kansas City

. Fort Myers and Sara sota have smaller populations than Kansas City

. 13

11 Two of the criteria are mutually exclusive in that c arriers cannot have both the first nonstop service and the second nonstop service in a market. 12 AirTran currently holds 18 DCA slots and slot exemptions and operates 24. This includes 7 slots that are in hours not included for the limited

- incumbent determination. Previous turnback s of slot exemptions push AirTran over the threshold for limited

- incumbent status. See 49 U.S.C. § 41714(h)(5), 14 C.F.R. § 93.213(a)(5), (c).
13 U.S. Census Bureau, MSA Population Estimates, July 1, 2008 : Lansing

– 454,035, Pensacola

– 452,992, Fort Myers

– 593,136, Sarasota

– 68 7,823, and Kansas City

– 2,002,047.- 11

-

C om petitive nonstop air transportation on a monopoly nonstop route to DCA : Only AirTran’s alternative proposal to serve Sarasota would provide competition on an existing monopoly nonstop route to DCA. As discussed above, Sun Country and US Airways are proposing to initiate the first nonstop service between DCA and Lansing and Pensacola , respectively. Republic ’s application seek s to maintain its current number of nonstop frequencies on a route where nonstop competition already exist s , while Southwest’s application would add a third carrier providing service on the DCA

- Kansas City route.

Maximum competitive benefits, including low fares : With respect to the criterion that the award produce the maximum competitive benefits, including low fares, we find that AirTran’s , Sun Country’s and Southwest ’s applications would offer more significant competitive benefits than the other applications

. These three proposals include not only
stat ed intention s to offer low fares , but ones supported by well

- esta blished carrier record s of providing low

- fare service . Also

, AirTran’s proposal to add competitive nonstop air transportation on a monopoly nonstop route to DCA (Sarasota) would be expected to have an immediate competitive impact on fares in that market

, if AirTran chose to operate to Sarasota instead of Fort Myers

. Republic goes to great detail to explain that its fares are competitive and references its ranking as the “lowest fare carrier” in the two most recent periods (4 th Quarter 2009 and 1 st Quarter 2010) of the Domestic Airline Fare Consumer Report. US Airways would offer the only nonstop service in the market they have proposed ; it is therefore reasonable to assume that their service would have a more limited competitive impact on existing connecting services.

In other observations, we reiterate that US Airways is the single largest slot holder at DCA and could elect to serve Pensacola with its existing slot holdings. Of the five applicants, US Airways would operate the fewest passenger se ats , because of the aircraft types it has proposed. Likewise, Republic , based on its proposed aircraft type, would offer fewer seats when compared to AirTran, Southwest or Sun Country. Lansing, the seat of Michigan’s state government with Michigan State University situated close

- by

, has a population of over 450,00 0 . It is within a 90

- minute drive of a n overwhelming majority of the State’s entire population and is an important economic center within the DCA perimeter

.
In summary, Sun Country is a new ent rant, would provide nonstop service to a small community that currently does not have nonstop service to DCA
, and has a history of offering low

- fares

. 14

14 As to Republic’s arguments that we lack autho rity to withdraw and reallocate the slot exemptions, we note that we carefully considered, and rejected, these arguments in our September 25, 2009 letter to Republic counsel and in instituting this proceeding. As indicated above, the applicable statute, 49 U.S.C. § 41714(j), authorizes us to take this action.- 12

-

OTHER C ONDITIONS

Start

- up

The Department requires that Sun Country inaugurate full service by no later than April 1
, 20 11 . If, for any reason, Sun Country is not able to use these slot exemptions by April 1
, 2011 , we request that it notify the Department as soon as possible, but not later than ten days after th e date of servic e of this O rder.

Assignment of Slot Times

We are directing Sun Country to file in the Docket

, no later than 10 business days from the service date of this Order

, their proposed flight schedule and effective date for inauguration of operation authorized by this Order

.

As we stated in our Notice of August 30 , 49 U.S.C. Section 41718(c)(2) allows us to assign only one additional slot exemption per one

- hour period, an increase from the original two per hour authorized by the Wendell H. Ford Aviation Investment and Reform Act for the 21 st Century (AIR

- 21). Slot times for these two exemptions are i n the 1 100 and 14 00 hour periods

. Almost all time periods have been fully subscribed and, thus, the Department may not be able to accommodate alternative slot exemption times. Sun Country
, in accordance with statute and Department regulations, may request the FAA ’s Slot Administration Office to approve temporary exchanges of the assigned slot exemption times with other slots or slot exemptions in a different hour for the purpose of conducting operations authorized b y this Order . In acting on such a request, the FAA will employ standard practices in conjunction with applicable statutory and regulatory requirements for the utilization of slot times between and among individual carrier s. Regardless of any subsequent ly approved slot time exchanges, the slot times assigned by the Department or the FAA’s Slot Administration Office pursua nt to t his O rder will be tagged such that, if the service granted by this O rder is either suspended or is not inaugurated in a timely manner, the Department will withdraw the slot exemptions based on their tagged slot time rather than by any subsequent slot time operated.

ENVIRONMENTAL ISSUES

Although 49 U.S.C. Section 41718(e) specifically exempts our action here from the review under the National Environmental Policy Act

, 15

15 Section 41718(e) states, “Neither the request for, nor the granting of an exemption, under this section shall be co nsidered for the purposes of any Federal law a major Federal action significantly affecting the quality of the human environment.” we remain sensitive to the environmental impact of increased operations at DCA. Consistent with the statute, we will require that all operations authorized by this Order be conducte d with Stage 3 aircraft. Also, under 49 U.S.C. Section 41718(e), the Department will give DCA priority in making grants for airport noise compatibility planning and programs that qualify for Federal financial assistance.- 13

-

ADMINISTRATIVE TERMS

U nder the pr ovisions of 49 U.S.C. Section 41714(j), Sun Country may not sell, trade, transfer, or convey the operating authorities granted by the subject exemptions unless otherwise authorized therein.

Further, granting of these exemptions in no way is to be construe d as allowing a carrier to operate services that it could not otherwise operate. Sun Country must still meet all the requirements of the Department of Transportation, the Federal Aviation Administration

, including but not limited to use

- or

- lose provisions

, and all other statutes and regulations governing air transportation

.

This Order is issued under authority delegated in 49 C.F.R. § 1.56(a).

ACCORDINGLY,

1. The Department reallocates the two slot exemptions to MN Airlines, LLC d/b/a Sun Country Airlines, to enable it to provide one nonstop round trip a day between Ronald Reagan Washington National Airport and Lansing, Michigan;

2. The Department directs MN Airlines, LLC d/b/a Sun Country Airlines, to file in Docket DOT

- OST

- 2000

- 7182, no later t han 10 business days after the service date of this Order, its acceptance or rejection of this award. An acceptance filing should also include proposed flight schedules and effective dates of operations authorized by this Order. Further, MN Airlines, LLC d/b/a Sun Country Airlines must commence its proposed service no later than April 1, 2011. The slot exemptions granted must be conducted with Stage 3 aircraft, may not be used for operations between the hours of 10:00 p.m. and 6:59 a.m., and may not incr ease the number of operations at Ronald Reagan Washington National Airport in any one

- hour period during the hours between 7:00 a.m. and 9:59 p.m. by more than three operations. MN Airlines, LLC d/b/a Sun Country Airlines is advised to exercise maximum fl exibility in their proposed operating times to ensure compliance with these limits;

3. Th e Department directs MN Airlines, LLC d/b/a Sun Country Airlines to keep Republic Holdings, Inc. informed of i t s service plans and schedules, and directs Republic Ho ldings, Inc. to phase out its service under the existing exemptions commensurate with the introduction of service by MN Airlines, LCC d/b/a Sun Country Airlines. The authority of Republic Holdings, Inc. and its subsidiaries to operate under the Department ’s pendente lite exception shall terminate as of 11:59 p.m. on the date prior to the date MN Airlines, LCC d/b/a Sun Country Airlines commences service under this award ;- 14

-

4. The Department prohibits MN Airlines, LLC d/b/a Sun Country Airlines from selli ng, trading, transferring, or conveying the operating authorities granted by the subject exemptions;

5 . The Department grants all motions to file otherwise unauthorized documents and denies motions to strike such documents ;

5

. Except as otherwise granted, we deny all other applications for exemptions from 14 C.F.R. Part 93, Subparts K and S, filed in this docket;

6 . The authorities granted under these exemptions are subject to all of the other requirements delineated in 14 C.F .R. Part 93, Subparts K and S , including, but not limited to, the reporting provisions and use

- or

- lose requirements; and

7 . We will serve this Order on all parties in Docket DOT

- OST

- 2000

- 7182 and the FAA Slot Administration Office. We direct MN Airlines , LLC d/b/a Sun Country Airlines to contact the Federal Aviation Administration’s Slot Administration Office prior to start

- up in Order to complete the assignment of the slot exemption times and identification numbers

.
By:

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs

(SEAL)

An electronic version of this document is available i n the Federal Docket Management System (FDMS) at http://www.regulations.gov