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 - 0129 SKYWEST AIRLINES, INC. ) and ) Docket DOT - OST - 2014 - 0130 f or 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 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

August 14 , 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 - 0129 SKYWEST AIRLINES, INC. ) and ) Docket DOT - OST - 2014 - 0130 f or an exemption pursuant to 49 U.S.C § 40109 and ) designations (Houston

- Mexico City, Mexico) )

_____________________________________ _____ )

AN SWER 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 , 201 5 for a period of at least two years

. SkyWest proposes to operate the IAH

- MEX flights under
the Un ited 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 the2

“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 designation s 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
b enefit s 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 Un ited 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 sel ected 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 p rogress in liberalizing trans

border 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 th e se 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 desi gnation limits for Third and Fourth F reedom services , our concern with the Joint A pplication 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 ,
a nd 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 Sou th 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, stati stics for 2014 year

- to

- date, available at : http://www.census.gov/foreign

trade/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/SkyW est 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 route 6 and in a
200 4 proc eeding 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 - new hobby

- international

- terminal.html/

. 5 Notice of Action Taken , May 27, 2014 ( Docket s 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 A ction 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 simi lar 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 F eb

. 13, 2004 , at 3

- 4

.6 C ERTIFICATE OF SERVIC E I hereby certify that on August 14 , 201 4, 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 t homas

. ting@suncountry.com dan.weiss@united.com gmurphy@crowell.com sseiden@crowell.com temerson@skywest.com pmurphy@lopmurphy.com john.varley@virginamerica.com b arbara .russell@ virginamerica.com anita.mosner@hklaw.com jennifer.nowak@hklaw.com rbtrinder@zsrlaw.com paul.gretch@dot.gov brian.h edberg@dot.gov brett.kruger@dot.gov reese.davidson@dot.gov cristinasa@state.gov john.s.duncan@faa.gov info@airlineinfo.com

__________________________ Leslie C. Abbott