BEFORE THE

OFFICE OF THE SECRETARY

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON D.C.

__________________________________________

)

Joint Application of )

) 

UNITED AIRLINES, INC. and ) Docket DOT-OST-2014-0129

SKYWEST AIRLINES, INC. ) and 

) Docket DOT-OST-2014-0130

for an exemption pursuant to 49 U.S.C § 40109 and )

designations (Houston-Mexico City, 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 18th 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

August 14, 2014
1

BEFORE THE

OFFICE OF THE SECRETARY

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON D.C.

__________________________________________

)

Joint Application of )

) 

UNITED AIRLINES, INC. and ) Docket DOT-OST-2014-0129

SKYWEST AIRLINES, INC. ) and 

) Docket DOT-OST-2014-0130

for an exemption pursuant to 49 U.S.C § 40109 and )

designations (Houston-Mexico City, Mexico) )

__________________________________________ )

ANSWER OF SOUTHWEST AIRLINES CO.

On July 30, 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) and Mexico City, Mexico (MEX) beginning on or about January 6, 2015 for a 

period of at least two years. SkyWest proposes to operate the IAH-MEX flights under 

the United 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 two airlines to 

provide scheduled service on this route. United and its code-share partner, ExpressJet 

(d/b/a United Express) currently hold the two available U.S. carrier designations. The 

Joint Application states that SkyWest will be substituted for ExpressJet upon the 
2

“receipt of all necessary approvals.”1 Thus, if the Joint Application is granted, the two

U.S. designations in this market will continue to be used on behalf of a single carrier. 

Southwest does not oppose the grant of the Joint Application at this time, as 

Southwest is not currently seeking authority to serve the Houston-MEX market. 

However, for the reasons detailed below, Southwest urges the Department to put the 

Joint Applicants on notice that their authority and corresponding U.S. carrier 

designations in this market are subject to being rescinded if Southwest were to actively

seek competing authority to serve the Houston-MEX market, which it plans to do in 

2015 – prior to the expiration of the two-year exemption the Joint Applicants are 

seeking. 

Southwest believes that no single U.S. carrier should be permitted to occupy two 

(or more) U.S. designations in limited-entry U.S. - Mexico city-pair markets when 

another U.S. carrier has filed a competing application to serve the same market. To 

allow one carrier to occupy two or more designations under those circumstances would 

be plainly anti-competitive, as it would block a new entrant carrier from entering and 

competing on that route. The Department has many times recognized the public 

benefits generated from competition by new entrant carriers on limited-designation 

routes, particularly to Mexico.2

Moreover, to allow a single carrier to control two or more designations in a U.S. -

Mexico market would undermine the route rights that the United States fought long and 

 

1

Joint Application, p. 2 and n. 5.

2

See, e.g., 2005 Los Angeles-Mexico City Combination Service Proceeding, Docket OST-2005-20406 

(Order 2005-05-01), where the Department selected Alaska Airlines due, in part, to its new entrant status 

and greater public benefits than airlines with existing code-share relationships in the market. Similarly, 

the Department selected Alaska over Continental and American, in part, due to the greater public benefits 

that would result from its new entrant status, Los Angeles-San Jose del Cabo Exemption Proceeding, 

Docket OST-2000-8361 (Order 2001-1-11).
3

hard to achieve in negotiations with the Mexican government. Despite the fact that 

Mexico is the United States’ third largest trading partner,

3

progress in liberalizing transborder commercial aviation has been exceedingly slow. It took the U.S. several 

decades to achieve the current two or three U.S. carrier designations per city-pair.

Having fought so long for these rights, the Department should not now permit a single 

U.S. carrier to occupy two or more designations with its affiliates and/or partner carriers

when to do so would preclude the very competition and new service options that the 

U.S. sought to achieve. 

We are of course aware that the two governments are currently engaged in talks 

to consider, inter alia, a liberalization of the limits on carrier designations on Third and 

Fourth Freedom flights for both countries. If these talks produce a near-term 

liberalization of designation limits for Third and Fourth Freedom services, our concern 

with the Joint Application might cease to exist. However, there is no assurance of such 

a result, particularly in time for Southwest to initiate Houston – MEX service in 2015,

and thus the concern remains. 

Southwest is currently constructing an international terminal at Houston Hobby 

Airport 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. The facility is projected to open in the fourth quarter of 2015, and 

Southwest plans to offer competitive service on Houston-Mexico routes thereafter, 

 

3

 U.S. Census Bureau, statistics for 2014 year-to-date, available at: http://www.census.gov/foreigntrade/statistics/highlights/top/top1402yr.html.
4

including Houston-Mexico City.

4

 Accordingly, we request that the Department make 

clear that the exemption and designation requested by United/SkyWest are subject to 

revocation if another U.S. carrier files an application to provide competing service with 

its own aircraft on that route. 

This request is in fact entirely consistent with the Department’s longstanding 

policy to promote competition on limited-entry U.S. - Mexico routes. For example, 

earlier this year, the Department addressed a similar issue when United and SkyWest 

filed a joint application for the second of two available designations in the IAH-Leon 

(BXJ) market. Southwest answered that application in a similar manner as here. DOT 

granted the joint application but stated that:

should a competing U.S. carrier present a firm proposal to provide 

scheduled Houston-Leon/Guanajuato service, we would be prepared to 

reconsider whether, in those circumstances, award of the authority 

granted here continues to be in the public interest.

5

The Department made similar findings in 2005 when United and Frontier raised 

concerns that Delta’s regional partner ASA was applying for the second (and final) U.S. 

carrier designation on the Salt Lake City – San Jose del Cabo, Mexico route6and in a 

2004 proceeding where America West and its code-share affiliate Mesa Airlines held 

 

4

For more information on the new Houston Hobby Airport International Facility, see, e.g., 

http://aviationblog.dallasnews.com/2013/09/southwest-airlines-houston-officials-break-ground-on-newhobby-international-terminal.html/.

5 Notice of Action Taken, May 27, 2014 (Dockets DOT-OST-2014-0058 and DOT-OST-2014-0059), at 2. 

In addition, the Department addressed a variation of this issue when United and SkyWest recently filed a 

joint application for designations in the Houston – Puerto Vallarta (PVR) and San Jose del Cabo (SJD) 

markets. There, the Department took steps to ensure that at least one designation would remain 

available for a new entrant carrier in each market by requiring that the grant of SkyWest’s designation 

coincide with the withdrawal of ExpressJet’s designation. See Notice of Action Taken, May 27, 2014 

(Dockets DOT-OST-2014-0058 and DOT-OST-2014-0059), at 2.

6 Notice of Action Taken, Docket OST-2005-20927, issued May 11, 2005, at 3.
5

the two available exemption authorities to serve the Phoenix-Puerto Vallarta/San Jose 

del Cabo markets.7 

~~~~~~~~~~~~~~~~~~~~~~~~

Southwest requests that the Department take a similar pro-competitive approach 

in the Houston – MEX market that is at issue in this proceeding, putting the Joint 

Applicants on notice that the authority granted may no longer “be in the public interest” if 

another U.S. carrier seeks to provide competing service with its own aircraft. 

Respectfully submitted,

______________________

Robert W. Kneisley

August 14, 2014

 

7 Notice of Action Taken, Docket OST-2003-16444, issued Feb. 13, 2004, at 3-4.
6

CERTIFICATE OF SERVICE

I hereby certify that on August 14, 2014, a copy of the foregoing was served via 

e-mail on the following persons:

msinick@ssd.com

howard.kass@aa.com

bob.wirick@aa.com

sascha.vanderbellen@delta.com

chris.walker@delta.com

sametta.c.barnett@delta.com

chris.walker@delta.com

matwood@cozen.com

stephen.lachter@lachterlaw.com

robert.cohn@hoganlovells.com

patrick.rizzi@hoganlovells.com

jhill@cooley.com

perkmann@cooley.com

dkirstein@yklaw.com

jyoung@yklaw.com

john.frederickson@suncountry.com

thomas.ting@suncountry.com

dan.weiss@united.com

gmurphy@crowell.com

sseiden@crowell.com

temerson@skywest.com

pmurphy@lopmurphy.com

john.varley@virginamerica.com

barbara.russell@virginamerica.com

anita.mosner@hklaw.com

jennifer.nowak@hklaw.com

rbtrinder@zsrlaw.com

paul.gretch@dot.gov

brian.hedberg@dot.gov

brett.kruger@dot.gov

reese.davidson@dot.gov

cristinasa@state.gov

john.s.duncan@faa.gov

info@airlineinfo.com

__________________________

Leslie C. Abbott