Paul Hastings 

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October 11, 2005 

VIA OVERNIGHT DELIVERY 

Darrell Buchbinder, Esq. 

General Counsel 

The Port Authority ofl~ew York and Nevi Jersey 

225 l'ark Avenue South, 15th 'Floor 

New York, NY .10003 

Re: EWR Rates and Changes 

Dear Mr. Buchbinder 

19978.00005 

We have been retained by Continental A.iJ:I.ines, Inc. ("Continental'') in connection with its 

review of rates and charges at Newark Liberty Interoational AU:port ("EWR"). · 

As you know, on numerous occasions h1 recent years, Continental, as well as the Newark 

Aitline AU:port Affairs Conunittee, has expressed serious and continuing conceros that the 

flight activity fee at EWR 1s not jU?tified by costs and is unfair and unreasonably high 

compared with such fees at other U.S. airports, mcluding other airports operated by lb.e 

Port Authority of New York and New Jersey (the "P01t Authority"). In fact, EWR's 

flight activity fee is the highest flight activity fee m the country and, withhl the New 

· York/Newark area, is approximately 60% higher than the flight activity fee at John F. 

Kennedy Intemational AU:port. · 

Continentars ·concern is heightened by the fact that EWR has generated substantial 

surplus revenue m recent years. In 2004, for example, the Port Authority reports that 

EWR had a smplus of approximately $150 million; for 2005, the .. budget forecasts a 

surplus of$141 million. · · 

Federal4w requires that aeronautical rates and charges be fair and reasonable, and 

calculated in a consistent and transparent manner. For airfield fees, the appropriate 

measure of reasonableness is the cost of operating and mamtaining the airfield. A.iJ:field 

revenue should not exceed airfield costs: For the airport as a ·whole, the existence of a net 

surplus of tcvcnue over expenses could .indicate unreasonably high charges. 

LEGAL_ US_ \V tl 52803906.1 

EXHIBIT RR 
Paul Hastings ATTORNEYS 

Darrell Buchbinder, Esq. 

· October 11, 2005 

Page 2 

Continental has attempted for years, with limited success, to obtain from the Port 

Authority details of EWR's costs and revenue. ·This information is needed so that 

Continental can determine whether (1) the flight activity fee at EWRis being established 

in conformance with Continentars lease agreement with the Port Authority, and (2) the 

flight activity fee is fair and reasonable in accordance with federal law. · 

To enable us to evaluate EWR rates and charges on behalf of Continental, please provide 

the following information for EWR (actual amounts by year for each year from 2000 

through 2004, and budgeted amounts for 2005): 

(1) Totalievenue received ftom fees and charges imposed for the use of the Public . 

Aircraft Facilities ("PAF"), with. detail of the subtotals for each charge or fee, including, 

but not limited to, flight fees and fees or charges relating to FBO operation, fuel flowage 

or fuel sales, aircraft parking, ground handling, and aircraft cateting (including as a 

separateitem any fees assessed brthe Port Authority with respect to the PAF where such 

fee is determined on the basis of gross receipts received). 

(2) To the extent not included in (1), all other aeronautical revenue received for EWR, 

with detail of the subtotals by category. 

(3) Total nonaeronautical revenue received for EWR, with detail of the subtotals by 

category. 

(4) Total non-operating revenue received for EWR; with detail of the subtotals by 

category. · 

(5) Any otherrevenue received for EWR; to the extent not included in (1) through (4), 

with detalls by subcategory. 

(6) Total costs to the Port Authority of providing the PAF servi~es and ~ssets, with detail 

of the subtotals for each category of cost, including, but nat limlted to, direct costs,. 

allocated indirect costs, debt service, and depreciation. 

!J) For the Aitport Services Charge Factor portion of the flight activity fee, please 

provide a description. of each of the cost items represented by the Airport Services Charge 

Factor, with detail pr0vided for each category of costs; and, for each such category, a 

detailed description of the ·costs and amounts included within such category (including for 

fixed charges, a description of the interest rate used to calculate such fixed charges). 

Please also provide details of any revenue received by the Port Authority from fees and 

charges in respect of the Aitport Services Charge Factor other than from the flight activity 

fee. 

LEGAL_US_W# 52il03906.1 
Paul Hastings IITTOIINM 

Darrell Buchbinder, Esq. 

October 11, 2005 

Page3 

(8) For the PAF Charge Factor portion of the flight activity fee, !'lease provide a 

description of each of the cost items represented by the PAF Charge Factor, with detail 

provided for each category of cost•; and, for each such categoty, a detailed description of · 

the costs and amounts illcluded within ~uch categoty (illcludlng for fixed charges, a 

description of the illterest rate used to calculate such flxed charges). Please also provide 

details of any revenue received by the Port Authority from fees and charges ill respect of 

the PAF Charge Factor other than from the flight activity fee. 

(9) For the Phase 1A Charge Factor portion of the flight activity fee, please provide a 

description of each of the cost items represented by the Phase 1A Charge Factor, with 

detail provided for each categoty of costs; and, for each such categoty, a detailed 

description of the costs' and amounts included withln such categoty (includlng for fixed 

charges, a description of the interest rate used to calculate such fixed charges): Please also 

provide details of any revenue received by the Port Authority from fees and charges ill 

respect of the Phase 1A Charge Factor other than from the flight activity fee. 

(10) What percentage of the total direct costs of provldillg the PAF ls represented by the 

"major elements of costs" used to calculate the PAF charge factor? What percentage of 

the total indirect costs of provi~g the P AF is represented by the "major elements of 

costs" used to calculate the Airport Services Charge Factor that is allocated to the PAF? 

What percentage of the total costs of providlng Ahport Services at EWR is represented by · 

the "major elements of costs" used to calculate the Airport Services Charge Factor? What 

were these percentages for·the calendar year 1973? 

(11) To the extent not inclnded above, all other operating expenses illcurred for EWR, 

with detail of the subtotals by category. 

(12) Total non-operating expenses incurred for EWR, with detail of the subtotals by 

categoty. 

(13) Any other expenses illcuned for EWR, to the extent not illcluded above, with details 

by snbcategory. . 

(14) Are any portions of any payments by the Port Anthority to any other governmental 

entity allocated as an expense of the PAF? If so, please provide details of such payments, 

and how the amount allocated to the P AF was dete!lllined. 

(15) Are any portions of any payments by the Port Authority to any other. governmental 

entity allocated as an expense of the ahport? If so, please provide details of such 

payments, and how the amount allocated was determined. 

LEGAL_US_ W # 52803906,1 
Paul Hastings ATIO!INE'IS 

Darrell Buchbinder, Esq. 

October 11, 2005 

Page4 

(16) Net revenue from the PAF. 

(17) How was and is the net PAF revenue used? Please provide enough specificity so 

that we may determine all uses to which the surplus revenue was and is applied. 

(18) Net revenue from EWR. 

(19) How was and is the net EWR revenue used? Please provide enough specificity so 

that we may determine all uses 'to which the surplus revenue was and is applied. 

(20) Is there a provision enacted not later than September 2, 1982, in a law controlliag 

financing of the Port Authority that provides that the revenue from any of the Port 

Authority facilities.be used to support the general debt obligations or other facilities of the 

Port Authority? If so, please specify the provision or ptovisions. 

(21) What is the amount/rate of the. fixed charges cover factor included in the flight 

activity fee? How is the amount calculated? To what charges is the cover factor applied? 

How is the interest rate to calculate the fixed charges determined? 

(22) In calculating the flight activity fee, is a .6 (zero point six) fixed charge cover factor 

applied? If so, to what fixed charges is tltis cover factor applied? 

(23) In calculating the tentative flight activity fee for the colendar year 1973, was a .6 (7ero 

point six) fixed charge cover factor applied? If so, to what charges was this cover factor 

applied? 

Your earliest possible attention and response to these questions will_be most appreciated. 

This letter provides a list of the information that we need as quickly as possible for our 

initial review. After the opportunity to review you~ response and the infottnation 

provided in it, we anticipate our likely need to ask additional questions and secure 

additional information, to the extent necessary for us to understand and to evalqate the 

lawfulness of EWR rates and charges on behalf of Continental. 

LEGAL_US_W# 52803906.1 
Paul Hastings Al10~Nev$ 

Darrell Buchbinder, Esq. 

October 11, 2005 

PageS 

Please let me know if you have questions or need clarification about the information we 

are seeking from the Port Authority. 

~7~ RobertS. Span 

of~AUL, HASTINGS,JANOFSKY &WALKERILP · 

RSS:mc 

cc: Carlene V. Mcintyre, Esq. 

Sholem Friedman, Esq: 

. LEGAL_.US_ W # 52803906.1