BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Application of DELTA AIR LINES, INC. for a frequency allocation (Detroit-Sao Paulo, Brazil) ) ) ) ) ) ) ) Docket DOT-OST-2010-0090

Application of AMERICAN AIRLINES, INC. for an allocation of 11 U.S.-Brazil frequencies ) ) ) ) ) ) ) Docket DOT-OST-2010-0088

CONSOLIDATED REPLY OF DELTA AIR LINES, INC. Communications with respect to this document should be addressed to:

Glen Hauenstein Executive Vice President – Network Planning and Revenue Management Robert J. Cortelyou Senior Vice President – Network Planning Andreas Renner Director – International Network Planning Chris Kennedy General Manager – International Network Analysis DELTA AIR LINES, INC. 1030 Delta Boulevard Atlanta, Georgia 30320 Andrea Fischer Newman Senior Vice President – Government Affairs DELTA AIR LINES, INC. 1212 New York Avenue, N.W. Washington, D.C. 20005

Alexander Van der Bellen Managing Director – Government Affairs & Associate General Counsel Jeff Morgan Regional Director – Government Affairs DELTA AIR LINES, INC. 1212 New York Avenue, N.W. Washington, D.C. 20005 (202) 842-4184 sascha.vanderbellen@delta.com

May 4, 2010BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Application of DELTA AIR LINES, INC. for a frequency allocation (Detroit-Sao Paulo, Brazil) ) ) ) ) ) ) ) Docket DOT-OST-2010-0090

Application of AMERICAN AIRLINES, INC. for an allocation of 11 U.S.-Brazil frequencies ) ) ) ) ) ) ) Docket DOT-OST-2010-0088

CONSOLIDATED REPLY OF DELTA AIR LINES, INC. This case presents the Department with an important public interest opportunity to fully fund all pending requests for U.S.-Brazil frequencies – while simultaneously promoting the highest and best long-term use of these valuable bilateral rights. Thanks to the Department’s recent grant of exemption authority, Delta will be able to begin nonstop service on the Detroit-Sao Paulo route effective October 21, 2010 -- but unfortunately Delta is restricted to offering just two weekly flights. No interested party questions the significant public benefits that would be achieved by expanded service on this important new route -- and the route case solution proposed by Delta will fully fund all current requests for service while also enabling the expansion of Detroit-Sao Paulo in

the future. Delta believes that the Department should maximize the public interest opportunities from these important rights by allocating them in the most prudent and efficient manner possible under the bilateral agreement with Brazil. The requests of American and Delta for U.S.-Brazil frequencies are not mutually exclusive, butReply of Delta Page 2 regrettably American has attempted to create a false conflict in an effort to usurp Sao Paulo-eligible frequencies, preserve American’s dominant position at Sao Paulo, and foreclose additional competitive service by Delta. 1 The frequencies available for allocation in th is proceeding are, by their own terms, and the express terms of the Department’s Noti ce, eligible for service “at any point in Brazil that U.S. carriers may serve ,” including Sao Paulo. Notice at 1. While the introduction of services at Sao Paulo’s Guarulhos International Airport is subject to resolution of the infrastructure-related constraints, that is no reason, as American would have it, to intentionally consign these fr equencies to permanent, sub-optimal use by the largest and dominant U.S.-Brazil carrier on a route that does not require Sao Paulo frequencies. 2 Delta respectfully submits that such a result would be contrary to the public interest, Department precedent, and well-settled carrier selection criteria.

1 As previously explained, the Department can achieve a public interest maximizing result that will promote the full implementati on of American’s current services and Delta’s future expansion through the prudent allocation and redistribution of existing frequencies. American has requested a total of 11 frequencies – 7 for New York-Rio de Janeiro service and 4 for Miami-Brasilia. The Miami-Brasilia flights are eligible for service using the lower category of northern/regional Brazil frequencies – and do not require high value Rio/Sao Paulo rights. There is a strong expectation that the U.S. Government will be able to negotiate substantial further liberalization of northern/regional frequencies – but that securing future Sao Paulo frequencies from the Government of Brazil will be more difficult. Accordingly, Delta proposed that 4 of Delta’s 10 northern/regional frequencies be reallocated to American for Miami-Brasilia service – and that Delta receive 4 replacement frequencies eligible for future Sao Paulo service from the currently available pool of 14 frequencies. Delta will immediately use these replacement frequencies to fund its existing northern/regional services. This provides American with all the authority necessary to implement its cu rrent service plans, provides Delta with the ability to fund 4 daily Detroit-Sao Paulo flights, leaving 3 Sao Paulo-eligible frequencies available to any carrier in the unallocated pool.

2 American repeatedly and erroneously asserts that “Sao Paulo frequencies are not an issue.” (AA Ans. at 3, 6, 7). But, “mere repetition of arguments . . . is insufficient,” Reliance Steel Products Co. v. National Fire Ins. Co ., 880 F.2d 575, 577 (1st Cir. 1989), and “no amount of pure repetitive assertion can make it so,” United States v. Lynch , 499 F.2d 1011, 1039 (D.C. Cir. 1974) (MacKinnon, C.J., dissenting). Of course, if it were true that Sao Paulo is not an issue, American would have no objection to Delta’s proposedsolution, which fully funds both of American’s New York-Rio de Janeiro and MiamiBrasilia proposals – neither of which require Sao Paulo rights

.Reply of Delta Page 3 The benefits-maximizing solution proposed by Delta is available to the Department as a direct result of Delta’s prior efforts to develop northern/regional Brazil services. Delta’s proposed allocation and redistribution of frequencies is fully consistent with DOT precedent and is expressly allowed under the terms of the U.S.-Brazil bilateral agreement. Contrary to American’s protestation s, this is neither “alchemy” nor a “shell game” 3 -- it is sound decision-making that will serve and promote the public interest. The June 26, 2008 U.S.-Brazil MOU contains a number of carefully specified categories of frequencies, including: (i) frequencies that can be used only for northern/regional services; (ii) frequencies that can be used northern/regional services, and/or Belo Horizonte and/or Rio de Janeiro, and (iii) frequencies that may be used at any point in Brazil (including Sao Paulo – once the airport infrastructure constrains are resolved). See MOU, Section II (2). There is no question that the frequencies available in this proceeding are of the latter, most flexible category. Having negotiated separate, distinct, categories of rights, Delta does not believe the Department would intend to allocate these rights without regard to their highest and best use. Delta’s proposal is fully consistent with the Department’s Notice, the bilateral agreement, and the temporary airport infrastructure constraints at Sao Paulo. American is far and away the dominant U.S. flag carrier serving Brazil, with 47 Sao Paulo-eligible frequencies to Delta’s 23. In fact, American alone holds nearly half the entire U.S. pool of 105 unrestricted U.S.-Brazil frequencies. In these circumstances Delta does not believe there is any legitimate public interest basis in awarding American further Sao Paulo-eligible frequencies, which are unnecessary to fund its proposed services. In recent similar circumstances, the Department reallocated northern/regional frequencies returned by Delta to American -- and denied American’s request for more unrestricted frequencies than were necessary for its proposal:

3 AA Reply at 3, 4.Reply of Delta Page 4 Delta returned to the Department one of the Brazil gateway-restricted combination service frequencies it was recently awarded. Delta states that because the returned frequency may be allocated to American for its additional Miami-Belo Horizonte service, each of the competing service proposals may now be satisfied. . . . We instituted the instant proceeding because we had competing requests for three U.S.-Brazil combination service frequencies when only two were available. In instituting this proceeding, we stated that we would expeditematters so that the selected carrier(s) could use, to the fullest extent, the limitedentry bilateral route rights available. We further stated that our principal objective would be to maximize the public benefits that would result from such an award and provide the most beneficial use of the bilateral rights. As a result of the described subsequent events, three frequencies are now available for immediate allocation and use. Specifically, two combination service frequencies are available to support Delta’s Los Angeles-Sao Paulo service proposal, and one combination service frequency is available to support American’s proposal for additional Miami-Belo Horizonte service. Under these circumstances, we conclude that the applications of American and Delta are no longer mutually exclusive and that we can immediately award the frequencies available, enabling both carriers to commence promptly their proposed services and make maximum use of the available bilateral rights . . .We have considered American’s argument that the Department should split the two unrestricted Brazil frequencies by granting American and Delta one each. However, we do not find that doing so would be in the public interest . . .

Order 2008-11-21. American’s reliance Order 2006-6-17, which dismissed AirTran’s request for medium hub service from DCA using small/nonhub slots, is inapposite. AirTran’s DCA proposal involved the forced and involuntary confiscation and redistribution of unrestricted DCA slots from another unwilling applicant to AirTran. The Department correctly concluded that such confiscatory action was outside the scope of the proceeding and would be fundamentally unfair. But that is not at all the case here. Delta is voluntarily making available northern/regional frequencies that can be redistributed to American, while simult aneously providing Delta the replacement frequencies it needs from the current Sao Paulo-eligible pool to fund future Detroit service. This is squarely in line with DOT precedent. Order 2008-11-21. American has no pre-existing claim or interest in any of the incremental frequencies it is seeking – and it is up to the Department, not American, whet her American receives northern/regional or Sao Paulo-eligible frequencies for its Miami-Brasilia proposal. Furthermore, unlike theReply of Delta Page 5 DCA slots which were permanently ineligible for medium-hub service, here, the frequencies available for allocation are eligible for service at Sao Paulo once the airport infrastructure constraints are resolved. The Department’s Notice and the bilateral agreement both expressly say so. American’s attempt to analogize this proceeding to the 2007/2008 Colombia frequency proceeding is even less availing. As American knows, the rules applicable to U.S.-Brazil and U.S.-Colombia frequencies are very different. As a general matter, allocated U.S.-Brazil frequencies may be used at any eligible gateway where the carrier holds underlying authority. See , Order 2004-6-24; see also , NOAT dated August 8,

2008 dockets OST-2008-0227 & 0229 (allocating northern/regional Brazil frequencies to both American and Delta for service between any eligible U.S.-Brazil points). While Brazil frequencies can be freely moved among any eligible gateways, the Department has imposed stricter conditions on Colombia frequencies. Delta was denied the flexibility to move its JFK-Bogotá frequencies to Atlanta. And, after the Department put American on notice that it would reexamine American’s Colombia frequencies if not used as proposed, American moved its frequencies which were subsequently reallocated by the Department. See Order 2008-5-27.

American has made extensive use of the fr equency flexibility available to it in Brazil, and shuffles its 47 unrestricted Brazil frequencies about at will among its multiple gateways. This is at least the third time American has sought frequencies for JFK-Rio

de Janeiro service. See Order 1996-3-47 (awarding 7 JFK-Rio de Janeiro frequencies to American); Order 2000-10-6 (awarding 7 JFK-Rio de Janeiro frequencies to American after American improperly moved them without notice -- prior to the DOT’s stated new policy on gateway flexibility). Last year, despite its huge cache of unrestricted U.S.- Brazil frequencies, American operated sporadic, less than daily service on JFK-Rio de Janeiro just two out of twelve months. See, Exhibit DL-R-1. While Delta does not object to the grant of additional JFK-Rio de Janeiro frequencies to American, or the grantReply of Delta Page 6 of northern/regional frequencies to American for Miami-Brasilia, Delta submits that both carriers’ requests – and in particular Delta’s request for future Sao Paulo-eligible frequencies – be viewed in the context of the carriers’ existing frequency holdings and existing gateway flexibility. Delta’s request does not conflict with American’s and can be readily accommodated in a way that will maximize public interest benefits. Accordingly, Delta respectfully urges the Department to conclude this proceeding by redistributing four of Delta’s northern/regional frequencies to American, and allocating Delta four of the 14 frequencies which become available for service in October, 2010.

Respectfully submitted,

_________________________________ Alexander Van der Bellen Managing Director, Government Affairs & Associate General Counsel DELTA AIR LINES, INC.Exhibit DL-R-1Org Dst Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09DFW GRU 7 7 7 7 7 10 10 10 7 7 7 7MIA GRU 28 19 19 21 21 21 19 19 16 16 20 23JFK GRU 7 7 7 7 7 7 7 7 7 7 7 7JFK GIG 4 3MIA GIG 12 12 12 7 7 7 11 11 7 7 8 1158 48 45 42 42 45 47 47 37 37 42 48Source: Schedules via APGdatTotalAmerican Airlines GRU/GIG Scheduled Weekly FrequenciesDespite Holding 47 Unrestricted U.S.-Brazil Frequencies,A Route Where it Received Two Prior Frequency AwardsAmerican Operates Only Sporadic Service Between JFK and Rio de Janeiro -CERTIFICATE OF SERVICE A copy of the foregoing Reply has been served this 4th day of May, 2010, upon the following persons via email:

carl.nelson@aa.com howard_kass@usairways.com benjamin.slocum@usairways.com hkamen@coair.com dan.weiss@coair.com rbkeiner@crowell.com (for Continental) mrosia@crowell.com (for Continental) jeffrey.manley@united.com julie.oettinger@united.com robert.land@jetblue.com jhill@dlalaw.com (for JetBlue) dkirstein@yklaw.com (for Spirit) jyoung@yklaw.com (for Spirit) paul.gretch@dot.gov esta.rosenberg@dot.gov brian.hedberg@dot.gov byerlyjr@state.gov john.allen@faa.gov lester.robinson@wcaa.us emily.neuberger@wcaa.us joe.cambron@wcaa.us mike.orr@airlineinfo.com