Order 201 4

- 3

- 3 Served: March 4 , 201 4



### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the 4 th day of March , 201 4

ORDER GRANTING SLOT SLIDE EXEMPTION S

SUMMARY

By this O rder

, the Department is granting the request of Republic Airline Inc. (Republic) for exemption s to permit it to reassign certain slots at Ronald Reagan Washington National Airport ( DCA ) to alternative times.

BACKGROUND

On January 6, 2014, Republic and Shuttle America Corporation requested 1 our approval for Shuttle America to operate three slot slide exemptions issued previously to Republic for nonstop service by Republic’s affiliate Frontier Airlines to Madison, Wisconsin, and Omaha, Nebraska

. In the joint request , as later amended, 2 Republic states that, due to the sale of Frontier and the conclusion of Frontier’s service to Madison and Omaha, Republic and its affiliate carriers Shuttle America and/ or Chautauqua Airlines seek to continue to provide the

nons top service utilizing the previously

- issued slot slide exemptions . The service would be

1 Joint Notice of Republic Airline Inc. and Shuttle America Corporation Concerning Slot Slide Exemption Authority , DOT

- OST

- 1999

- 6240, January 6, 2014.
2 Subsequently, Republic amended the initial joint submission to note that, for the period from February 1, 2014 through March 2, 2014, Republic’s affiliate carrier Chautauqua will operate the servic e. Shuttle America will take over the service thereafter. See Amendment to Joint Notice of Republic Airline Inc. and Shuttle America Corporation Concerning Slot Slide Exemption Authority , DOT

- OST

- 1999

- 6240, January 8, 2014.

Application of:

REPUBLIC AIRLINE INC.

For an exemption from 14 C.F.R. Part 93, under 49 U.S.C. § 41714(d) Docket DOT

- OST

- 1999

- 6240 Docket DOT

- OST

- 2013

- 0086- 2

-

marketed under the Delta Connection brand pursuant to an existing fee

- for

service/codesharing agreement with Delta Air Lines

. Republic asserts that, because Republic, Chautauqua, and Shuttle America are under common ownership, 3 the utilization of the slot exemptions by Shuttle America or Chautauqua would not constitute a prohibited transfer under 49 U.S.C. § 41714(j). Alternatively, Republic argues that the carriers’ use of the slot exemptions continues to satisfy the statutory requirements of 49 U.S.C. § 41714(d).

The three slot slide exemptions at issue are Slot Numbers 4124 for service to Omaha, Slot Numbers 4137 for service to Omaha, 4 and Slot Numbers 4126 for service to Madison. The Department originally granted these slot slide exemptions to Midwest Express Airlines (Midwest). 5 In 2011, after Republic Airways Holdings Inc. acquired Midwest

, the Department approved Republic’s request to retain the slot slide exemptions. In 2013, the Department further approved Republic’s request for authority to use Slot Numbers 4126 and 4124 for service to Omaha (4124) and to Madison (4126), rather than for service to Milwaukee, Wisconsin.

Regarding the Madison service, R epublic uses one of the slot slide exemption s granted by the Department for one leg of the round trip; Republic provides the other leg of the Madison service utilizing Slot Number 1497/ Exemption Number 7370G from the Federal Aviation Administration (FAA). 6 On January 6, 2014, Republic and Shuttle America petitioned the FAA, requesting confirmation that the carriers may continue to use Exemption Number 7370G for the service, notwithstanding a condition of the exemption requiring that it be used “only by Rep ublic for a flight marketed under one of the Republic brands.” Alternatively, Republic requests an amendment to the condition to allow its continued use of the FAA exemption, arguing that it is “necessary to allow the continuation of Madison’s only nonsto p service to DCA and, indeed, to the entire Washington, D.C. Metropolitan area.” 7

In the request filed with the Department regarding the slot slide exemptions, Republic contends that the Shuttle America/Chautauqua service, provided under the Delta Connection brand, meets Section 41714(d)’s “exceptional circumstances” requirement as well as its operational requirements. 8 R epublic argues that, “[w]ithout Chautauqua and Shuttle America operating these slot slide exemptions, two small Midwestern communities will lose all nonstop service to DCA and, indeed, to the entire Washington, D.C./Baltimore Metropolitan

3 See 14 C.F.R. § 93.123(c). Republic Airline

, Chautauqua Airlines

, and Shuttle America are under common ownership by the holding company Republic Airways Holdings Inc

. See Form 10

- Q, Quarterly Report for the
p eriod e nded September 30, 2013, filed by Republic Airways Holdings Inc. on November 8, 2013, available at http://www.republicairways.com/en/Investor_Relations/SEC_Filings.aspx.
4 This slot slide exemption was also used for service to Kansas City International Airport (MCI) before Frontier discontinued its service between MCI an d DCA effective February 1, 2014

. 5 See Order 1994

- 9

- 49 (DOT Sep. 30, 1994); Order 1999

- 11

- 4 (DOT Nov. 4 , 1999); DOT Notice dated April 19, 2011 (Docket DOT

- OST

- 49741); DOT Notice dated April 14, 2011 (Docket DOT

- OST

- 1999

- 6240); and DOT Notice dated Aug ust 13, 2013 (Docket DOT

- OST

- 2013

- 0086).
6 FAA Exemption Number 7370G (FAA Docket FAA

- 2002

- 13734).
7 Joint Petition of Republic Airline Inc. and Shuttle America Corporation for Confirmation that No Amendment to FAA Exemption No. 7370G is Needed, or, in the alternative, to Amend Exemption No. 7370G (FAA Docket FAA

- 2002

- 13734), January 6, 2013. 8 See 49 U.S.C. § 41714(d)(1)(A)

- (E).- 3

-

area.” 9 Republic states that it holds a limited number of DCA slots

– four DCA air carrier slot exemptions and four DCA commuter slot exemptions, and Republic argues that we have granted slot slide exemptions to similarly

- situated carriers Colgan Air Inc. and Chautauqua that, like Republic, held a limi ted number of slots and operated service under a fee

- for

service/codeshare arrangement. 10

Republic cites to our original O rders granting the slot slide exemptions to Midwest and contends that the exceptional circumstances presented by Midwest

– that the ex emptions would help address the needs of small and mid

- sized Midwestern communities, enhance service and competition, and improve connecting options

– support a favorable finding here

. 11 According to Republic, “the exceptional circumstances and public inte rest benefits underlying the original awards of these slot slide exemptions remain as compelling today as they were when the Department granted them.” 12

Republic asserts that the Midwestern communities of Madison and Omaha have come to rely on these fl ights for access to the Nation’s capital, and that the flights have consistently high load factors. Republic contends that the load factors and connecting ratios indicate that not all passengers are able to get on the nonstop flights and are indicative of the need to preserve the nonstop se rvices. Republic argues in the Joint N otice and the R eply that continuation of nonstop service to Madison and to Omaha is compelling, because the flights operated by Republic represent the only nonstop service into the Washington, D. C./Baltimore metropolitan area for Madison, and soon for Omaha

. 13 Republic also attaches letters of support from the Madison and Omaha communities asserting the strong need for the nonstop DCA service and urging the Department to help ensure it s continuation. Republic contends that both Madison and Omaha would “face severe economic and commercial repercussions if the nonstop service ended,” and Republic compares the importance of maintaining nonstop service to these smaller communities to the ca se raised by Ja ckson, Mississippi, in a recent slot exemption proceeding under 49 U.S.C. § 41718(b)

. 14 Republic further argues that the nonstop service to both Madison and Omaha enhances competition, offering competition to the one

- stop services, and the n onstop services operated under Delta Connection will enable competitive one

- stop options from behind

- and beyond

- DCA points on Delta’s network.

Southwest Airlines (Southwest) and JetBlue Airways (JetBlue) filed a j oint a nswer and s ur

reply

, arguing that Sh uttle America’s operation of the slot slide exemptions under a codeshare arrangement with Delta is a prohibited transfer of the exemptions. The carriers further assert that Republic’s continued use of the sl ot slide exemptions would be contrary to

9 Joint Motion for Leave to File and Reply of Republic Airline Inc., Shuttle American Corporation, and Chautauqua Airlines, Inc., January 22, 2014 , at p. 3 (Reply)

. 10 See Order 2003

- 9

- 30 (DOT Sept. 30, 2003).
11 See Order 1994

- 9

- 49 (DOT Sep. 30, 1994); Order 1999

- 11

- 4 (DOT Nov. 4 , 1999).
12 Joint Notice, at p. 4. 13 On January 15, 2014, American Airlines announced it would cease nonstop service to Omaha . The effective date of the discontinued service will be announced in the coming weeks

. See American Airlines to Implement Network Changes as a Result of DOJ

- Mandated Slot Divestitures , American Airlines Press Release dated January 15, 2 014.
14 Reply, at p. 6. See also Order 2012

- 7

- 26 (DOT July 24 , 2012).- 4

-

the gov erning statute and would reduce competition at DCA. 15 They a ssert that the C ongressional intent, as well as the Department ’s practice, has been to limit such exemptions
to “ new entrants and limited incumbent carriers holding a small number of slots at DCA to facilitate their ability to compete effectively at the airport.” 16 They contend that , because the Madison and Omaha se rvice would be “marketed, priced, distributed, and otherwise wholly controlled ” by Delta

, the “benefits of the slides would inure entirely to Delta,” a major carrier with the second largest DCA slot portfolio

. 17 Southwest and JetBlue argue that, with Delta controlling the marketing of the flights, a grant of slot slide exemptions to Republic would not promote competition by Shuttle America or Chautauqua at DCA ; instead, the domination of large incumbent carriers will increase. They assert that a grant of slot exemptions in this

case will have the further consequence of eliminating the usefulness of Section 41714(d) as a “vehicle for enabling smaller carriers to compete more effectively at the airport.” 18 Moreover, they argue, Delta

– with its large slot portfolio

– could choose to serve both markets without any need for exemptions . Southwest and Je tBlue note that Delta served Madison until January 2012, when Delta terminated the service after a slot trade with US Airways.

DECISION

As a threshold matter, we find that, because the service will now be operated by Shuttle America under a codeshare arrangement with Delta, rather than by Frontier under its own brand, it reflects an effective transfer of control of the previously

- granted slot slide exemptions, 19 and the Depart ment is required to undertake a new review under 49 U.S.C. § 41714(d) to determine whether Republic ’s request for three slot slide exemptions meets the statutory requirements. We further find that , under the totality of the circumstances, Republic’s reque st to slide the times of the slots i t holds to continue to provide viable service to Madison and Omaha, two communities that otherwise would risk losing their nonstop service to DCA, satisfies the statutory requirements. Accordingly, we grant Republic’s

r equest

. Under 49 U.S.C. § 41714(d)

, the Department may, under circumstances that it finds to be exceptional, grant exemptions to an air carrier that holds s lots at DCA to enable it to slide the operating times to different times. In addition to the e xceptional circumstances requirement, no exemption may be granted if it would (1) result in an increase in the total number of slots per day at DCA ; (2) result in an increase in the total number of slots at DCA from 0700 to 2159; (3) increase the number of operations at DCA in any one

- hour period by more than two operations; (4) result in the withdrawal or reduction of slots operated by an air carrier; or (5) result in a net increase in noise impact on surrounding communities resulting from changes in timin g of the exempted operations.

15 Joint Answer of Southwest Airlines and Jet B lue Airways

, DOT

- OST

- 1999

- 6240, DOT

- OST

- 2013

- 0086, January 15, 2014 (Joint Answer) ; Joint Motion of Southwest Airlines and JetBlue Airways fo r Leave to File and Sur

- Reply, DOT

- OST

- 1999

- 6240, DOT

- OST

- 2013

- 0086, January 24, 2014. 16 Joint Answer, at p. 2.
17 Id. 18 Id., at p. 6; Sur

- Reply, at p. 5. 19 See 49 U.S.C. § 41714(j) (prohibiting slot exemptions from being bought, sold, leased or otherwise transferred, except through an air carrier merger or acquisition ); see also Order 2002

- 10

- 33 (DOT Oct. 25, 2002)

.- 5

-

In determining what circumstances qualify as “exceptional,” the Department is guided by the usual meaning of the term, as well as the legislative history of Section 41714 (d)

. Exceptional circumstances are those not generall y e ncountered

– circumstances clearly different from most other ones. During the deliberation of Section 41714(d), Congress discussed its intent behind the provision. The Conference Committee for the 1994 legislation creating the slides reported that:

The Managers believe this should be used in limited circumstances to meet the needs of carriers holding a limited number of slots. Carriers holding numerous slots should be able to adjust their schedules, and thus the flexibility permitted by this section should not be available to such carriers. 20

A prior Senate colloquy offers, as an example of exceptional circumstances, the situation of a new entrant carrier with a limited number of slots that, with an ability to slide two slots, could bring timely acce ss to a community currently lacking nonstop service to DCA and stimulate job growth there. 21

In seeking to adhere to the statutory language and legislative intent in its application of Section 41714(d), the Department has considered the totality of the cir cumstances surrounding a carrier’s request for slides. An important factor in this review is the utility of the slots held by the carrier and whether significant community or carrier benefits could be achieved by service at a more favorable time

. 22 The De partment has granted slide requests to new entrants or limited slot holders that demonstrated specific needs to slide slots to ensure their utility, including the need to facilitate connecting operations (Order 94

- 9

- 49 (DOT Sept. 30, 1994)), to improve ser vice and strengthen competition (Order 99

- 11

- 4 (DOT Nov. 4, 1999) and Order 2000

- 2

- 26, affirming Order 99

- 11

- 4 (DOT Feb. 22, 2000)), to meet increasing demand in a market (Order 2000

- 7

- 20 (DOT July 14, 2000)), to inaugurate service in a new market (Order 2 000

- 2

- 33 ( DOT Feb. 29, 2000)) ; and to bring low fare competition and facilitate roundtrip connecting opportunities to points beyond (Order 2012

- 7

- 29 (DOT July 25, 2012))

. In this case, Republic seeks slot slide exemptions allowing for the retiming of its underlying 2100 hour slots . Republic argues that its request meets the operating criteria of Section 41714(d)(1)(A)

- (E) and presents exceptional circumstances because the slot slide exemptions

20 Joint Explanatory Statement, H. REP. N O

. 103

- 677 (1994).
21 Mr. EXON: “...[T]he Secretary can use this power only in circumstances determined by the Secretary to be exceptional. Omaha, NE, for example, faces such exceptional circumstances. Presently, Omaha has no nonstop air service to National Airport. If two slots could be slid to accommodate Omah a’s need, a significant package of air service would become secure for the people of Nebraska and western Iowa not only to National Airport but to points west and southeast of Omaha. This package of air service, which hinges on timely access to National A irport, would also be a significant factor in Omaha’s economic development. In addition, exceptional circumstances exist in Omaha’s case because sliding a slot would give a newer carrier with a limited number of slots an opportunity to create jobs in Omah a and Washington and provide new, needed and convenient service to the Nation’s Capital from Omaha....” Mr. FORD: “I appreciate the Senator’s explanation and concur in his interpretation of that section....” 140 CONG. REC. S6997 (daily ed. June 16, 1994) (col loquy between Sen. Wendell Ford, Sen. Charles Robb and Sen. James Exon).
22 See Order 2008

- 3

- 25 (DOT March 25, 2008).- 6

-

would ensure the continuation of the only nonstop service in t he Washington D.C./Baltimore metropolitan area to Madison and soon to Omaha . Republic contends that , without the slot exemptions, the communities would lose the service. Republic further argues that the retiming would allow flight schedules at times conv enient for passengers , helping, according
to Republic , to address the traveling needs of business travelers, government officials, and tourists in these smaller Midwestern communities

.

In Order 2003

- 9

- 30, in which Colgan and Chautauqua sought slot slide exemptions after an award of 2100 hour slots in an FAA slot lottery, we noted that 2100 hour slots have little or no utility to a carrier that ha s no other slots. 23 Like Republic, Shuttle America

, and Chautauqua in this case, Colgan and Chautauqua in 2003 held a limited number of DCA slots and operated under fee

- for

- service/codeshare agreements with incumbent carriers holding large DCA slot portfolios, and we were not persuaded that the contract ca rriers could count on their marketing partners for slot trades or scheduling adjustments within existing slot holdings. We stated i n Order 2003

- 9

- 30 that, “[w]hile other alternatives may exist that could enable these carriers to offer viable service, non e are as practical or sure as the approach they have pursued here

– that of seeking authority under section 41714(d) to move the 2100 hour slots to other available times.”

Here, the fact that Republic contracts with Delta, a major carrier with a large DC A slot portfolio

, does not ensure that Republic, a contract carrier with very limited slot holdings

, could continue to provide the only nonstop service that smaller communities Madison and

soon Omaha have to the Washington, D.C./Baltimore metropolitan area . A grant of slot slide exemptions in this case would help Republic better meet passenger demand and thereby help maintain the commercial viability of the service, circumstances the Department has found to be exception al in past cases. 24 Without these exe mptions, the slots would revert to the 2100 hour and be of limited utility to Republic and the travelers in these smaller M idwestern communities, putting the only nonstop service to these communities at risk. Therefore, we find that Republic’s particular circumstances, together with the significant benefits to the communities of Madison and Omaha of maintaining nonstop service to the Washington, D.C./Baltimore m etropolitan area, meet the exceptional circumstances criterion of Section 41714(d). W e also fin d that Republic meets the five operating criteria in Section 41714(d)(1)(A

- E).

As the FAA slot regulation in 14 C.F.R. Section 93.223(a) makes clear, “slot(s) do not represent a property right but represent an operating privilege subject to absolute FAA control (and) slots may be withdrawn at any time to fulfill the Department’s oper ating needs.”

T he exemptions authorized by this Order must be used by Republic only to provide nonstop service between Madison, Wisconsin and DCA, and between Omaha, Nebraska and DCA. We are authorizing the movement of the slot operations on the basis that the services proposed by Republic meet the statutory requirements of 49 U.S.C. § 41714(d). We reserve

23 See also Order 2012

- 7

- 29 ( July 25, 2012).
24 See Order 94

- 9

- 49 (DOT Sept. 30, 1994); Order 2003

- 9

- 30 (DOT Sept. 30, 2003); Order 2006

- 3

- 9 (DOT March 9, 2006)

.- 7

-

the right to modify or terminate the slot slide exemption if we determine that, due to changed circumstances, these criteria are no longer satisfied by Republic’s use of the authority. Under the provision of 49 U.S.C. § 41714(j), Republic may not sell, lease, or otherwise transfer the operating authorizations granted by these slot slide ex emptions , except through an air carrier merger or acquisition

. This Order is issued under authority delegated in in 49 C.F.R. § 1.25a(b)(4)(ii)(D).

ACCORDINGLY,

1. We grant an exemption from 14 C.F.R. Part 93, S ubpar ts K and S, to Republic Airline Inc. , to the extent that Republic will be allowed to move the operation of Slot Number 1236 at Ronald Reagan Washington National Airport from the 2100 hour to the 2000 hour (Slot Exemption Number 4126)

.

2. We grant an exemption from 14 C.F.R. Part 93, S ubpar ts K and S, to Republic Airlines, to the extent that Republic will be allowed to move the operation of Slot Number 1087 at Ronald Reagan Washington National Airport from the 2100 hour to the 1100 hour coinciding with the current schedule (Slot Exemption Number 4124)

.

3. We grant an exemption from 14 C.F.R. Part 93, S ubparts K and S, to Republic Airlines, to the extent that Republic will be allowed to move the operation of Slot Number 1001 at Ronald Reagan Washington National Airport from the 2100 hour t o the 1900 hour (Slot Exemption Number 4137)

.

4. Th e exemption related to Slot Numbers 1236 is granted only to the extent that Republic is allowed to move the operation of Slot Numbers 1236 for the purpose of providing nons top service between Madison, Wi sconsin, and Ronald Reagan Washington National Airport. Should Republic operate these slots to provide service to a community other than Madison, Wisconsin, this exemption will expire and the operation of these slots will revert to the 2100 hour.

5. T h e exemption s related to Slot Numbers 1087 and 1001 are granted only to the extent that Republic is allowed to move the operation of Slot Numbers 1087 and 1001 for the purpose of providing nonstop service between Omaha , Nebraska, and Ronald Reagan Washingt on National Airport. Should Republic operate these slots to provide service to a community other than Omaha, Nebraska , this exemption will expire and the operation of these slots will revert to the 2100 hour.

6. These exemptions are granted only to th e extent that Republic is allowed to move the operation of the slots identified above by the Order and, therefore, Republic continues to be subject to all of the other requirements of 14 C.F.R. Part 93, Subparts K and S, including, but not limited to, the reporting provisions and use or lose requirements.

7. These exemptions may not be bought, sold, leased, or otherwise transferred by Republic, except through an air carrier merger or acquisition.- 8

-

8. We direct Republic to contact the Federal Aviation Administration’s Slot Administration Office to obtain the allocation authorized under this Order.

9. These exemptions are effective as of March 4, 2014 ;

10. We grant all motions to file otherwise unauthorized documents; and

1 1 . The Department will service a copy of this Order on the parties in Docket s DOT

- OST

1999

- 6240 and DOT

- OST

- 2013

- 0086

. By:

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs

An electronic version of this document is available online at www.regulations.gov