# Paul Hastings An:oRN1:.YS

Atlanta Belling Brussels Hono Kong London Los Anoules Milan New York Orange County Palo Alto Parls San Dieoo San francisco Shanghai Stamford Tokyo Washington, DC Paul. Hastings, Janofsky &Walker LLP 515 South Flower Street •25th Floor •Los Angeles, CA 90071·222B lelophone 2t3 683 6000 • facsimile 2t3 627 0705 •www.paulhasllngs.corn

(213) 683-6253 wbertspan@paulhastings.com October 11, 2005
VIA OVERNIGHT DELIVERY
Darrell Buchbinder, Esq. General Counsel The PortAuthority



### ofl~ew York and NeviJersey 225 l'arkAvenue South, 15th'Floor NewYork, NY .10003 Re: EWR Rates and Changes Dear

### Mr. Buchbinder 19978.00005

We have been retained by ContinentalA.iJ:I.ines, Inc. ("Continental'') in connection with its review ofrates and charges at NewarkLiberty 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 notjU?tified by costs andis unfair and unreasonably high comparedwith such fees at other U.S. airports, mcluding other airports operated by lb.e PortAuthority ofNew York and NewJersey (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 atJohn F.

Kennedy IntemationalAU:port. · Continentars ·concern is heightened by the fact that EWRhas generated substantial surplus revenue m recent years. In 2004, for example, the PortAuthority reports that EWR had a smplus ofapproximately $150 million; for 2005, the

..budget forecasts a surplus of$141 million. · · Federal4wrequires that aeronautical rates and charges be fair and reasonable, and calculated in a consistent and transparent manner. Forairfield fees, the appropriate measure ofreasonableness is the cost ofoperating and mamtaining the airfield. A.iJ:field revenue should not exceed airfield costs: For the airport as a ·whole, the existence ofa net surplus oftcvcnue over expenses could .indicate unreasonably high charges.

LEGAL_US_ \Vtl 52803906.1 EXHIBIT RR

## Paul

# Hastings ATTORNEYS
Darrell Buchbinder, Esq.

· October 

### 11, 2005

Page 2
Continentalhas attempted for years, with limited success, to obtain from the Port Authority details ofEWR'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 agreementwith the PortAuthority, and 

### (2) the flight activity fee is fair and reasonable in accordance withfederal law. · To enable us to evaluate EWR rates and charges on behalfofContinental, 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 ofthe subtotals for each charge or fee, including, but notlimited 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 PortAuthoritywith respect to the PAFwhere such fee is determined on the basis ofgross receipts received). 

### (2) To the extentnotincluded 

### in 

### (1), all other aeronautical revenue received for EWR, with detail ofthe subtotals by category. 

### (3) Total nonaeronauticalrevenue received for EWR, with detail ofthe subtotals by category. 

### (4) Total non-operating revenue received for EWR; with detail 

### ofthe 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 PortAuthority ofprovidingthe PAF



### servi~es and



### ~ssets, with detail ofthe subtotals for each category ofcost, including, but nat limlted to, direct costs,. allocated indirect costs, debt service, and depreciation. 

## !J) For the Aitport Services Charge Factorportion ofthe flight activity fee, please provide a description. ofeach ofthe cost items represented by the Airport Services Charge Factor, with detail pr0vided for each category ofcosts; and, for each such category, a detailed description ofthe ·costs and amounts included within such category (including for fixed charges, a description oftheinterest rate used to calculate such fixed charges). Please also provide details ofany revenue received by thePort Authority from fees and charges in respect ofthe Aitport Services Charge Factor other than from the flight activity fee.

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## PaulHastings IITTOIINM


### Darrell Buchbinder, Esq. October 11, 2005 Page3 (8) For the PAF Charge Factor portionofthe flight activity fee, !'lease provide a description ofeach ofthe cost items represented by the PAF Charge Factor, with detail provided for each category ofcost•; and, for each such categoty, a detailed description of · the costs and amounts illcluded within

**~uch** 

### categoty (illcludlng for fixed charges, a description ofthe illterest rate used to calculate such flxed charges). Please also provide details ofany revenue received by the PortAuthority 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 ofthe flight activity fee, please provide a description ofeach ofthe cost items represented by the Phase 1A Charge Factor, with detail provided for each categoty ofcosts; and, for each such categoty, a detailed description ofthe costs' and amounts included withln such categoty (includlng for fixed charges, a description ofthe interest rate used to calculate such fixed charges): Please also provide details ofany revenue received by the PortAuthority from fees and charges ill respect of the Phase 1A Charge Factor other than from the flight activity fee. (10) 

# Whatpercentage ofthe total direct costs ofprovldillg the PAF ls represented by the "major elements ofcosts" 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 ofthe total costs ofprovidlng Ahport Services at EWR

### is represented by · the "major elements ofcosts" 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 ofthe subtotals by category. (12) Total non-operating expenses incurred for EWR, with detail ofthe subtotals by categoty. (13) Any other expenses illcuned for EWR, to the extent notillcluded above, with details by snbcategory.
. (14) Are any portions ofany payments by the Port Anthority to any other governmental entity allocated as an expense ofthe PAF? Ifso, please provide details ofsuch payments, and how the amount allocated to the P AF was dete!lllined. (15) Are any portions ofany payments by the PortAuthority to any other. governmental entity allocated as an expense ofthe ahport? If

### so, please provide details ofsuch payments, and how the amount allocated was determined.

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## Paul

# Hastings ATIO!INE'IS
Darrell Buchbinder, Esq. October 11, 2005 Page4 (16) Netrevenue from the PAF. (17) How was and is the netPAF revenue used? Please provide enough specificity so thatwe may determine all uses to which the surplus revenue was and is applied. (18) Net revenue from EWR. (19) Howwas and is the net EWRrevenue 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 ofthe PortAuthority thatprovides that the revenue from any ofthe Port Authority facilities.be used to support the general debt obligations or other facilities ofthe PortAuthority? 

### Ifso, please specify the provision or ptovisions. (21) What is the amount/rate ofthe.fixed charges cover factor included in the flight activity fee? Howis 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? Ifso, 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? 

### Ifso, 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 ofthe 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 ofEWR rates and charges on behalfofContinental.

LEGAL_US_W# 52803906.1

## Paul

# Hastings

**Al10~Nev$**
Darrell Buchbinder, Esq. October 11, 2005 PageS
Please letme know ifyou have questions or need clarification about the informationwe are seeking from the PortAuthority.



# ~7~ RobertS. Span

**of~AUL,** 

### HASTINGS,JANOFSKY &WALKERILP · RSS:mc

cc: Carlene V. Mcintyre, Esq. SholemFriedman, Esq:

. LEGAL_.US_ W# 52803906.1