BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Essential Air Service at VICTORIA, TEXAS Under 49 U.S.C. § 41731, et seq. Docket DOT-OST-2005-20454

ANSWER OF THE CITY OF HOUSTON AND THE GREATER HOUSTON PARTNERSHIP

Communications with respect to this document should be sent to: Mario C. Diaz Director Ian Wadsworth Chief Commercial Officer Department of Aviation CITY OF HOUSTON 16930 John F. Kennedy Blvd. Houston, TX 77032 (281) 233-3000 (281) 233-1859 (fax) Jeff Moseley Chief Executive Officer GREATER HOUSTON PARTNERSHIP 1200 Smith Street, Suite 700 Houston, TX 77002 (713) 844-3600 (713) 844-0200 (fax) Rachel B. Trinder Jol A. Silversmith ZUCKERT, SCOUTT &

RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, DC 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com Counsel for the City of Houston and the Greater Houston Partnership

Dated: April 5, 2011BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Essential Air Service at VICTORIA, TEXAS Under 49 U.S.C. § 41731, et seq. Docket DOT-OST-2005-20454

ANSWER OF THE CITY OF HOUSTON AND THE GREATER HOUSTON PARTNERSHIP

The City of Houston and the Greater Hous ton Partnership (collectively, “Houston” or the “Houston Parties”) respectfully submit this answer in strong support of the proposal of Colgan Air, Inc. (“Colgan”), a wholly-owned subs idiary of Pinnacle Airlines Corp. and regional partner of Continental, to continue to provide essential air service (“EAS”) pursuant to 49 U.S.C. § 41731, et seq. between Victoria Regional Airport (“VCT”) in Victoria, Texas and Houston’s Geor ge Bush Intercontinental Airport (“IAH”). As the Department is aware, IAH is Houston’s flagsh ip airport, and one of the nation’s premier international gateways. It now ranks as t he seventh-busiest airport in the U.S., measured by passeng er enplanements. In 2010, IAH handled more than 40.4 million passengers, including mo re than 8.5 million internat ional passengers – increases of 1.2% and 8.9%, respectively, over the pr ior year, despite the challenging economy. Today IAH is the largest hub for the wo rld’s largest airline, the combined Continental/United, offering a wide array of fast and efficient connections throughout the

United States and internati onally. Indeed, in 2012 – onc e the carrier has begun its previously-announced services between Houston and both Lagos, Nigeria andAnswer of the City of Houston and the Greater Houston Partnership Page 2

Auckland, New Zealand – Houst on will be the only U.S. city (and just one of four worldwide) to offer flights to all six inhabited continents. In total, IAH is served by 17 scheduled passenger carriers, numerous c harter and cargo carri ers, and offers scheduled passenger flights to a total of 176 domestic and inte rnational points. Indeed, despite the challenging economy, the past year has been a period of expansion at IAH,

with new or enhanced services to destinations ranging from Cedar Rapids to Dubai. Beneficiaries of the many connecting oppor tunities at IAH include the city and county of Victoria, which for more than two decades have been link ed to Houston by regional partners of Continenta l. Through its existing essential air service to IAH, Colgan offers Victoria an unmatched gate way to the world for its passengers, businesses and cargo. Colgan’s nonstop se rvice to Houston offers the Victoria community direct access to the nation’s fourth -largest city as well as the U.S.’s sixthlargest Metropolitan Statistica l Area (“MSA”), with a population of more than 5.9 million. Houston is a dynamic economic powerhouse and award-winning international city, with a highly diverse global business community o ffering assets such as world-class facilities for medical research and treatment (includi ng the world’s largest medical center), aerospace manufacturing, a worldwide ener gy production community , major financial investment houses, large-scale internati onal conferences, and cargo transportation and distribution. Among the many indexes that demonstrate Houston’s significance are the number of Fortune 500 companies that are headquartered in Houst on (25, the third highest total in the U.S.) and the concentration of foreign consular and trade offices in Houston (94, also the third highest total in the U.S.). Indeed, Houston has beenAnswer of the City of Houston and the Greater Houston Partnership Page 3

recognized repeatedly as a leading location in which to live and do business – recent examples being its designation as the top U.S. manufacturing city by Manufacturers’

News ; the best city in which to start a new career by the Daily Beast ; and the best city for young professionals by Forbes. Conversely, the current essential air serv ice provided by Colgan also enables direct access from Houston to Victoria, the economic hub of t he “golden crescent” region of Texas. Victoria is an important multi-modal tr ansportation hub; for example,

the shallow-draft Port of Victoria has si nce 2005 had an agreement with the Port of Houston to coordinate barge traffic, which in addition to its commercial benefits also has

the added environmental benefit of reducing highway traffic and emissions. Victoria is also a regional manufacturing center that is continuing to expand; notably, Caterpillar is constructing a new plant to manufacture hydr aulic excavators in Victoria, which when completed in 2012 will sup port 500 new jobs. Other exam ples of major corporations with significant facilities in Victoria that a ttract air traffic from Houston and points beyond include Alcoa, Dow Chemic al, and Formosa Plastics. Colgan’s proposal in this proc eeding is by far the superior choice for Victoria. In contrast, the competing proposal would link Vi ctoria to an airport that still has limited access to the national air transportation syst em due to continuing Wright Amendmentbased restrictions. SeaPort’s proposal not onl y would fail to enable the vast array of domestic connections that are possible thr ough Colgan’s service, but also would not enable any online domestic connections or any international connections. In contrast,Answer of the City of Houston and the Greater Houston Partnership Page 4

as a Continental Connection carrier at IAH, Colgan enables a wide array of domestic and international online opport unities for its passengers. 1 Further, in contrast to Colgan’s 34-seat Saab aircraft, SeaPort proposes to operate nine-seat Pilatus PC-12 aircraft, whic h not only lack the basic facilities that Victoria passengers have come to expect – such as a lavatory 2 – but also would result

in a 56% loss of market capacity, based on its operational plan. Yet SeaPort asks the Department for an initial annual subsidy that is 8.4% greater than that requested by Colgan for each contract year – an unju stifiable expenditur e given the general budgetary pressures facing the Department, t he specific deficiencies of SeaPort’s proposal, and Congress’ mandate codifying t he Department’s longstanding policy that the relative subsidy requirements of applicat ions must be a decisional factor in EAS cases – a factor which clearly favors Colgan. 3 Other long-standing statutory factors in EAS cases also favor Colgan, namely whether an applicant has contractual/marketing and inte rline arrangements with a larger

carrier at the hub to be served. 4 These factors plainly suppor t the selection of Colgan’s

1 It also is unclear whether SeaPort’s proposal would enable any interline connections. The only carrier with which SeaPort’s proposal states that it has an interline agreement does not serve DAL. Thus, it appears that SeaPort pas sengers bound for or originating from anywhere but Dallas would be required to re-claim their baggage, check-in again, and re-clear security. 2 Likewise, should SeaPort be selected, passengers with disabilities would discover that SeaPort is not required to comply with many of the access requirements set forth in 14 C.F.R. Part 382 with which they may have become familiar, such as that boarding lifts be available to assist in deplaning and enplaning aircraft and that the carrier make available Complaints Resolution Officials.

3 Order 2011-1-11, at 2 n.1, citing the most recent codification of the subsidy decisional factor in the Consolidated Appropriations Act of 2008, Public Law 110-161, 121 Stat. at 2377. 4 49 U.S.C. § 41733(c)(1)(B) - (C).Answer of the City of Houston and the Greater Houston Partnership Page 5

IAH proposal, as discussed supra . Another historic statutory factor is the preference of actual and potential user s, with special attenti on to the voices of their representatives. 5 In this case, as reported to the Departm ent on April 4, 2011, t he Victoria Regional Airport Commission unanimously has reco mmended – based on public meetings and input as well as Colgan’s willi ngness to address issues of ong oing concern to Victoria – that their community continue to be served by Co lgan. Additionally, Victoria specifically has not waived the community’s right to be served by an aircraft with 15 or more seats. 6 The selection of Colgan in this proceeding t hus would not only be fully consistent with DOT precedent, but in fact is the only course of action consistent with the law and the instituting order in this case. Notabl y, DOT recently denied a similar SeaPort application which lacked community suppor t and was incompatible with the unwaived right of the community at i ssue to continue to receive service with 15+ seat aircraft. 7 WHEREFORE, the Houston Parties urge t he Department to promptly approve Colgan’s proposal for continued essential ai r service between Victoria and Houston.

5 49 U.S.C. § 41733(c)(1)(D). 6 49 U.S.C. § 41732(b)(3)(B).

7 Essential Air Service at Muscle Shoals, Alabama

, Order 2011-3-26, at 3. Cf. Essential Air Service at Athens, Georgia and Macon, Georgia , Order 2008-5-43, at 4 (selecting carrier with community support and interline arrangements, even though competing bid proposed more frequencies); Essential Air Service at Manhattan, Kansas and Salina, Kansas , Order 2006-3-15, at 4 (selecting carrier with community support, interline and code-share arrangements, and lowest subsidy request, as well as disqualifying proposal that would use aircraft with less than 15 seats).Answer of the City of Houston and the Greater Houston Partnership Page 6

Respectfully submitted,

Rachel B. Trinder Jol A. Silversmith ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, DC 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com Counsel for the City of Houston and the Greater Houston Partnership Dated: April 5, 2011CERTIFICATE OF SERVICE I certify that on this 5th day of April 2011, a copy of the foregoing was served on the parties named below in accordance wit h the Department’s Rules of Practice.

Jol A. Silversmith

Jason Milewski Victoria Regional Airport jmilewski@prautes.com The Honorable Judge David R. Pozzi Victoria County, Texas dpozzi@vctx.org Brian T. Hunt Megan Rae Rosia Pinnacle Airlines bthunt@pncl.com mrosia@pncl.com Rob McKinney Charles Hill SeaPort Airlines rob@seaportair.com chuck@seaportair.com Hershel I. Kamen Dan Weiss Continental Airlines hkamen@coair.com dan.weiss@coair.com R. Bruce Keiner, Jr. Lorraine B. Halloway Counsel for Continental Airlines rbkeiner@crowell.com lhalloway@crowell.com Jeffrey Manley United Airlines jeffrey.manley@united.com Esta Rosenberg Dennis DeVany Michael Martin Department of Transportation esta.rosenberg@dot.gov dennis.devany@dot.gov michael.f.martin@dot.gov John M. Allen Federal Aviation Administration john.allen@faa.gov