Order 20 1 2

- 1

- 4

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Departme nt of Transportation

on the 9 th day of January , 20 1 2

Served: January 9 , 201 2

Dockets:

DOT

- OST

- 2011

- 0214

DOT

- OST

- 2011

- 0225

ORDER INSTITUTING PROCEEDING

Summary

By this order we institute a proceeding to select one carrier to provide direct carrier (own

aircraft), scheduled combination air services between Chicago , Illinois, and Canc un , Mexico.

Background

Under the U.S.

- Mexico air services agreement, three carriers may be designated to provide scheduled foreign air transportation of persons, property, and mail between Chicago and Cancun. Currently, American Airlines, Inc. (America n); United Air Lines, Inc. (United); and Brendan Airways, LLC d/b/a USA 3000 Airlines ( USA 3000 ) are designated to provide these services and all do so from Chicago’s O’Hare International Airport . USA 3000 has advised the Department

that it will cease its U.S.

- Mexico service s on January 30, 2012 , leaving one designation available for Chicago

- Cancun service beginning January 31, 2012. We received competing applications from Frontier Airlines, Inc. (Frontier) and AirTran Airways, Inc. (AirTran), seeking exe mption authority and a designation for the one available opportunity to serve the Chicago

- Cancun route

. T herefore, we are required to engage in carrier selection , and we are instituting this proceeding

to do so. 2012 CHICAGO

- CANCUN COMBINATION SERVICE PROCEEDING

DOCKET

- DOT

- OST

- 201 2

- 0001

Applications of

FRONTIER AIRLINES, INC.

AIRTRAN AIRWAYS, INC.

For an exemption pursuant to 49 U.S.C. Section 401092 Applications

On November 21, 2011, Fronti er filed an application in Docket DOT

- OST

- 2011

- 0214. Frontier proposes to institute service between Chicago’s O’Hare International Airport and Cancun, Mexico beginning on or about January 31, 2012. 1 Frontier states that it will operate year

- round

service up to seven times per week, with 164

- 168 seat Airbus A

- 320 aircraft. Frontier further states that it has entered into an agreement with Apple Vacations to replace the capacity that is currently being provided by USA 3000.

AirTran filed a competing appli cation in Docket DOT

- OST

- 2011

- 0225, and an answer opposing

Frontier’s application, on December 6, 2011. AirTran proposes to institute service between Chicago’s Midway International Airport and Cancun, Mexico no later than March 11, 2012.

AirTran states t hat it will operate year

- round daily service with 137 seat Boeing 737

- 700 aircraft.

On December 15, 2011, Frontier filed a consolidated reply and answer opposing the December 6, 2011, filings of AirTran. AirTran filed a reply on December 22, 2011, to F rontier ’s answer

. 2

Proceeding

In light of the competing applications and responsive pleadings filed, w e are institut ing the 2012 Chicago

- Cancun Combination Service Proceeding to select one carrier to provide scheduled foreign air transportation of person s, property, and mail between Chicago, Illinois, and Cancun, Mexico. To ensure that we have a complete record in this matter, we request that each of the captioned applicants amend and/or supplement their existing applications, as specified below,

and fil e those amendments and/or supplements in this Docket.

Our principal objective in this proceeding will be to maximize public benefits

. In this regard, we will consider which applicant will be most likely to offer and maintain the best service for the

trav eling and shipping public. We will also consider the effects of the applicants’ service proposals on the overall competitive environment, including effects on the market structure and

on competition in the U.S.

- Mexico market , and any other market shown to be relevant . In addition, we will consider other factors historically used for carrier selection, where relevant.

We intend to issue Chicago

- Cancun exemption authority for a two

- year period, subject to our standard startup condition for U.S.

- Mexico serv ices and subject also to certain dormancy requirements routinely imposed on U.S.

- Mexico air transportation services. 3 Applicants should, as appropriate,

1 In that same application, Frontier applied for, and was granted, exemption authority to provide Chicago

Puerto Vallarta and Chicago

- San Jose del Cabo services. See Notice of Action Taken dated December 9, 2011, in Docket DOT

- OS T

- 2011

- 0214.

2 The Southwest Airlines Pilots’ Association (SWAPA) filed a brief in support of AirTran’s application on December 23, 2011. SWAPA also requested leave to file, which we will grant.

3 Under the dormancy conditions, if, once service has been i nstituted, a city

- pair market is not served for 90 days, for reasons other than seasonal service, the authority to serve that city

- pair becomes dormant and cannot be used. Any exemption authority granted in this proceeding will also contain a notice provi sion whereby the carrier will be required to notify the Department if it fails to meet the startup condition, if it discontinues service in the market, or if the market remains dormant for 90 days.3 amend/supplement their respective applications to indicate a revised startup date if the originally

pr oposed date is no longer practicable or feasible.

We believe that written, non

- oral procedures under Part 302 of our regulations (14 CFR 302) are appropriate in adjudicating this case, and that by using these procedures we can establish a complete

evide ntiary record and make our selection with the least possible delay and without unnecessary costs to the applicants. In the interest of expediting the award of these valuable route rights, we will reserve the right to go directly to a final order, should t he complete record in this proceeding justify such action. We find no material issues of fact that would warrant an oral evidentiary hearing. We intend to resolve issues and award the subject authority on the basis of pleadings filed in this proceeding. If, however, upon review of the record, we determine that additional information is required and/or modified procedures are necessary for the adjudication of this case, we reserve the right to request additional information and/or to modify our proceeding in th is matter.

Backup Authority

Based on the material in the record, we will consider whether it is in the public interest to award backup exemption authority , which could be implemented if the selected primary carrier does not operate the proposed ser vices. If granted, the backup exemption authority awarded would expire after one year, unless that authority is activated, in which case it will continue in effect for two years, subject to the

conditions described above.

Evidentiary Requirements

In lig ht of the upcoming availability of one opportunit y in the Chicago

- Cancun market

, we intend to conduct this proceeding in a manner that will facilitate our reaching a prompt final decision

. As the applications filed are already ripe and all interested part ies have had an opportunity to file competing requests, we will not provide for additional applications here. We will, however, require that the captioned applicants amend and/or supplement their existing applications, as per the schedule set out below, w ith the information requested in this section. Applicants should ensure that their submissions include requests for both exemption authority and for designation.

E xcept for procedural dates, applications should conform to Part 302, Subpart C of the Depar tment’s regulations (14 CFR Part 302). All pleadings should be filed with the Department of Transportation, 1200 New Jersey Avenue, S.E., West Building Ground Floor, Room W12

- 140, Washington, D.C. 20590, in the captioned Docket for the 2012 Chicago

- Cancun Combination Service Proceeding , and should include, at a minimum, the following information for the forecast year, defined as the twelve months ending December 31, 2012. 4 5

4 The original filing should be on 81⁄2" x 11" white paper u sing dark ink (not green) and be unbound without tabs, which will expedite use of our docket imaging system. In the alternative, parties are encouraged to use the electronic submission capability available through the Dockets FDMS Internet site ( http://www.regulations.gov ) by following the instructions on the web site. Additionally, service by

facsimile or electronic mail is authorized. Parties should include their fax numbers and email addresses

on their submi ssions and should indicate the method(s) of service used on their certificates of service.4 1. Firm date for instituting service, and single

- plan e and nonstop

- to

- nonstop connec ting schedules proposed to be operated in the forecast year with a break

- down for peak and off

- peak seasons. If applicants intend to modify their existing proposals to offer seasonal services only, they must so specify, and specify the period during which the seasonal services would be offered.

Proposed schedules should contain flight numbers, complete routings from origin to destination (including behind

- gateway and beyond

- gateway points and elapsed time for services), airports served, departure and arri val times, equipment types (including seat configuration by class of service), days scheduled, and classes of service offered;

2. A brief description of the types of service the applicant currently provides, if any, between the United States and Mexico, incl uding the types of service (state whet h er the services are code

share operations, seasonal or year

- round, charter, and/or scheduled) and include frequency levels by city

- pair market;

3. A statement as to whether or not the aircraft to be used in the proposed schedules are on hand or on order. If on hand, indicate where and the extent to which those aircraft are currently being used. If on order by purchase or lease, indicate when they will be delivered and how the aircraft

will be financed. Indicate whethe r the aircraft to be used comply with FAR

- 36. If not, indicate plans for compliance;

4. Estimated number of gallons of fuel to be consumed by aircraft type in the forecast year as a result of the proposed service, and indicate the availability and method o f obtaining the necessary fuel ; and

5. A statement as to whether or not the applicant, if selected as a backup, will accept conditions in its backup exemption authority which will (1) permit it to implement the backup authority within the first year should t he primary carrier withdraw from the market or the primary carrier’s authority otherwise becomes dormant (as discussed in the text of this order); and (2) cause the backup authority to expire at the end of one year should the backup authority not be activa ted.

To the extent that any of the requested information has already been provided on the record, applicants

may refer to that information in their supplemental pleadings. Applicants may, of course, also submit any additional information beyond that requ ested if they believe it would be useful to us in reaching a

decision.

We view adherence to these directives as critical to our consideration of the proposals in carrier

selection cases. We put the applicants in this case on notice that we expect full co mpliance with the evidence request in this order. Any carrier not in full compliance in any material r espect with our request will be subject to elimination from consideration for an award in this case.

5 Applications and responsive pleadings should contain sufficient detail, including sources, bases, assumptions and methodologies, so that, without further clarific ation, any party can derive the final

results from the basic data.5 Procedural Timetable

In light of our stated goal of reaching a prompt final decision , we intend to process this case on

an accelerated procedural schedule. Therefore, we are establishing the following procedural

schedule for submissions:

Petitions for Reconsideration: January 12, 2012

Answers to P etitions: January 17, 2012 Supplements/Amendments to Applications : January 19, 2012

Answers: January 26, 2012 Replies: January 31, 2012

In consideration of the accelerated schedule, as discussed above, we authorize service by

facsimil e or electronic mail. Parties should include their fax numbers and/or e

- mail addresses on

their submissions and should indicate on their certificates of service the methods of service used. Applicants not using facsimile or electronic mail must provide an original and five copies of all submissions to the Department of Transportation, Dockets, no later than the dates indicated. Please also provide an electronic copy of all responsive pleadings to: Esta.Rosenbe rg@dot.gov

and Brett.Kruger@dot.gov

.

ACCORDINGLY,

1. We institute the 2012 Chicago

- Cancun Combination Service Proceeding in Docket DOT

OST

- 201 2

- 0001 , to be decided by written, non

- oral procedures under Part 3 02 of our regulations (14 CFR Part 302 ), to select one carrier to provide direct carrier (own

- aircraft) scheduled combination air services in the Chicago

- Cancun city

- pair market , and to determine which, if any, carrier should be awarded backup exemption au thority ;

2

. Further submissions should be filed in accordance with the procedural schedule set forth in this order;

3. We grant the motion of The Southwest Airlines Pilots’ Association for leave to file its brief in

Dockets DOT

- OST

- 2011

- 0214 and DOT

- O ST

- 2011

- 0225; and6 4 . We will serve this order on Frontier Airlines, Inc.; AirTran Airways, Inc.; The Southwest Airlines Pilots’ Association; the U. S. Department of State (Office of Aviation Negotiations) ; the

Federal Aviation Administra tion; and the Amb assador of Mexico in Washington, D.C.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at
htt p://www.regulations.gov