BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRAN S PORTATION

WASHINGTON D

. C

.

________________________________ _____ _____ ) Joint Application of ) ) UNITED AIRLINES, INC. and ) Docket DOT - OST - 2014 - 0158 SKYWEST AIRLINES, INC. ) and ) Docket DOT - OST - 2014 - 0159 f or exemption pursuant to 49 U.S.C § 40109 and ) designations (Houston

- Monterrey , Mexico) )

_____________________________________ _____ )

ANSWER OF SOUTHWEST AIRLINES CO

. Communications with respect to this document should be addressed to:

Ron Ricks Robert W. Kneisley Executive Vice President

-- Associate General Counsel Chief Legal and Regulatory Officer Leslie C. Abbott Mark Shaw Senior Attorney Vice President General Counsel & SOUTHWEST AIRLINES CO. Corporate Secretary 919 18 th Street, NW SOUTHWEST AIRLINES CO. Suite 600 2702 Love Field Drive Washington, DC 20006 Dallas, TX 75235

- 1611 bob.kneisley@wnco.com (202) 263

- 6284

September 25 , 20141 BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRAN S PORTATION

WASHINGTON D

. C

.

________________________________ _____ _____ ) Joint Application of ) ) UNITED AIRLINES, INC. and ) Docket DOT - OST - 2014 - 0158 SKYWEST AIRLINES, INC. ) and ) Docket DOT - OST - 2014 - 0159 f or exemption pursuant to 49 U.S.C § 40109 and ) designations (Houston

- Monterrey , Mexico) )

_____________________________________ _____ )

AN SWER OF SOUTHWEST AIRLINES CO

.
On September 10 , 2014, United Airlines and SkyWest Airlines (d/b/a United Express) (the “Joint Applicants”) filed an application , pursuant to 49 U.S.C. § 40109 and Subpart C of the Department’s Rules of Practice , for an exemption from 49 U.S.C. §
41101 authorizing SkyWest to provide scheduled foreign air transportation between
Houston (IAH) , on the one hand, and Monterrey, Mexico ( MTY ) on the other hand, beginning on or about March 5, 2015

. SkyWest proposes to operate the IAH

- MTY service under the Unit ed Express brand pursuant to a capacity purchase agreement with United. Under the terms of the U.S.

– Mexico Air Transport Services Agreement (“U.S.

– Mexico Agreement”), as amended, the United States may designate up to three airlines to provide scheduled service on this route . United and its partner carrier , ExpressJet (d/b/a United Express) , currently hold two of the three available U.S. carrier designations. In the Joint Application , United proposes to substitute SkyWest’s UnitedAnswer of Southwest Airlines

2 Express service for the United mainline service on th is route

. However, judging from the language of the Joint Application, the timing of United ’s return of its designation is not entirely clear , and solely within United’s discretion. The Joint Application states in a footnote as follows: United will r etain its operating designation until the Department has taken action on the Joint Application, the Joint Applicants have begun providing the service requested herein, and United has giv en notice to the Department that its operating designation is no longer required. 1 Thus, United appears to contemplate that it and its partner carriers may h old or control all three designations for an unspecified period of time while it decides, in its discretion, when to return its designation to the DOT

. Southwest does not oppose the grant of the Joint Application at this time, as Southwest is not currently seeking authority to serve
the Houston

- MTY market , 2 but we do request that the Department make clear that United and its affiliated carriers may not control all three designations for any period of time, as this would leave no designations available for new entry and competing
service

. Southwest’s request is entirely consi stent with the Department’s recent actions to promote competition on limited

- entry U.S.

- Mexico routes. Less than three months ago, the Department addressed a similar issue in the IAH

- Puerto Vallarta (PVR) and
IAH

- San Jose del Cabo (SJD) markets when Uni ted and SkyWest filed a similar joint application proposing to substitute SkyWest’s United Express service for the United

1 Joint Application of United Airlines , Inc. and SkyWest Airlines , Inc. , p. 3, n. 4 , filed in this docket

. 2 Construction of an international terminal at Houston Hobby, which will enable Southwest to offer a broad range of competitive U.S. carrier services from Houston to points in Mexico as well as destinations in the Caribbean and South America, is well underway. The facility is projected to open in the beginning of fourth quarter 2015.Answer of Southwest Airlines

3 Express service being provided by ExpressJet

. 3 As in this case, United

- affiliated carriers already held two of the three available de signations in each market and the joint

a pplication did not provide a firm date by which United would return the third designation on each route . Southwest answered that application in a similar manner as here. DOT granted United’s joint application but noted Southwest’s answer and stated
that: [w]e will withdraw the designations of ExpressJet effective upon the departure of its last scheduled flights in the Houston

- Puerto Vallarta and Houston

- San Jose del Cabo markets respectively but in no case effective later than 11:59 PM on October 31, 2014, and designate SkyWest for the Houston

- Puerto Vallarta and Houston

- San Jose del Cabo services effective November 1, 2014. 4
Thus the DOT recognized the issue that Southwest raised and took concrete steps to ensure that one designation remained available for a new entrant carrier. Southwest requests that the Department take a similar pro

- competitive approach in this proceeding by ensuring that the Joint Applicants do not occupy all th ree designations for any period of time so that one designation remains open for entry by a competing
carrier. The issue presented in this case is similar to the problem raised in sever a l recent applications filed by United for Houston

- Mexico route authority, namely the request to occupy or control more than one U.S. carrier designation per route in order to
accommodate both United ’s own service and that of its partner /affiliate carriers

. 5 This is problematic and anti

- competitive because t he holding of multiple designations in the

3 Joint Application of United Airlines , Inc. and SkyWest Airlines , Inc ., June 10, 2014, Dockets DOT

- OST

2014

- 0100 and 2014

- 0101. 4 Notice of Action Taken , July 29, 2014 , Dockets DOT

- OST

- 2014

- 0100 and 2014

- 0101, p. 2. 5 See, e.g. , Answer of Southwest Airlines , filed Aug. 27, 2014 in Dockets DOT

- OST

- 2014

- 0129 and

- 0130 ( IAH

- MEX) ; Answer of Southwest Airlines , filed June 24, 2014 in Dockets DOT

- OST

- 2014

- 01 00 and

- 0 101 (IAH

- PVR/SJD ); Answer of Southwest Airlines , filed May 5, 2014 in Dockets DOT

- OST

- 2014

- 005 8 and

- 0059 (IAH

- BJ X )

.Answer of Southwest Airlines

4 currently restricted U

. S

. - Mexico trans
- border market has the potential to block new entry and competition from other U

. S

. carriers, including Southwest.
We believe that the guiding principle for the Department should be th at no single airline should be permitted to hold or control more than one designation per route when a competing application is filed for service on that route. In the present case, United and its partner carriers propose to hold two of the maximum three U

. S

. designations on the Houston

– MTY route in question

– and possibly even all three for a n unspecified period of time. This clearly is an unacceptable situation in a restricted

- entry market. For the reasons given above , Southwest requests that the Department make clear that (1) United and its partner carriers will not be permitted to occupy more than one designation if doing so would block a competing U

. S

. carrier application, and (2) United and its partner carriers may n ot occupy all three U.S. carrier designations for any period of time on this route

. Southwest is of course aware that the U

. S

. and Mexican gover nments are currently in discussions over a possible easing of restrictions on trans

- border air service. If these discussions are successful, the measures discussed above might become unnecessary. At present, however, there is no agreement in place for
li ber a lization of current regime, and thus the Department must take steps to protect the limited opportunities that are currently available for new entry and competition in these important m a rkets. Respectfully submitted,

______________________ Robert W. Kneisley1 C ERTIFICATE OF SERVIC E I hereby certify that on September 25 , 201 4, a copy of the foregoing was served via e

- mail on the following persons: msinick@ssd.com (Alaska Airlines) howard.kass@aa.com (American Airlines) robert.wirick@aa.com (American Airlines) chris.walker@delta.com (Delta Air Lines) sascha.vanderbellen@delta.com (Delta Air Lines) robert.cohn@hoganlovells.com (Republic Airways) patrick.rizzi@hoganlovells.com (Republic Airways) robert.land@jetblue.com (JetBlue Airways) jhill@dowlohnes.com (JetBlue Airways) perkmann@dowlohnes.c om (JetBlue Airways) dkirstein@yklaw.com (Spirit Airlines) jyoung@yklaw.com (Spirit Airlines) thomas.ting@suncountry.com (S un Country Airlines) dan.weiss@united.com (United Air l ines) john.varley@virginamerica.com (Virgin America) susan.kurland@dot.gov brian.hedberg@dot.gov brett.kruger@dot.gov reese.davidson@dot.gov todd.homan@dot.gov peter.irvine@dot.gov cristinasa@state.gov info@airlineinfo.com

__________________________ Leslie C. Abbott