BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRAN S PORTATION

WASHINGTON D

. C

.

________________________________ _____ _____ ) Application of ) ) AIRTRAN AIRWAYS, INC. ) ) Docket No. OST - 2012 - f or an exemption pursuant to 49 U.S.C § 40109 ) t o engage in foreign scheduled air transportation ) of persons, property and mail between Denver , ) Colorado (DEN ) and San Jose del Cabo , ) Mexico (SJD )

. )

_____________________________________ _____ )

APPLICATION OF AIRTRAN AIRWAYS, INC

. Communications with respect to this document should be sent to:

Bob Jordan Robert W. Kneisley President Associate General Counsel AIRTRAN AIRWAYS, INC. Leslie C. Abbott 9955 AirTran Boulevard Senior Attorney Orlando, FL 32827 SOUTHWEST AIRLINES CO. 1901 L Street, N.W. , Suite 640 Washington, D.C. 20036 bob.kneisley@wnco.com (202) 263

- 6284

November 2 , 2012 NOTICE : ANY PERSON MAY FILE AN ANSWER TO THIS APPLICATION IN THIS DOCKET AND SERVED ON THE PERSONS LISTED ABOVE ON OR BEFORE NOVEMBER 1 9 , 2012

.1 BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRAN S PORTATION

WASHINGTON D

. C

.

________________________________ _____ _____ ) Application of ) ) AIRTRAN AIRWAYS, INC. ) ) Docket No. OST - 2012 - f or an exemption pursuant to 49 U.S.C § 40109 ) to engage in foreign scheduled air transportation ) of persons, property and mail between Denver , ) Colorado (DEN) and San Jose del Cabo , ) Mexico (SJD). )

_____________________________________ _____ )

AP PLICATION OF AIRTRAN AIRWAYS, INC

. Pursuant to 49 U.S.C. § 40109 and Subpart C of the Department’s Rules of Practice, AirTran Airways , Inc. ( AirTran ) hereby applies for an exemption from 49 U.S.C. § 41101 authorizing AirTran to engage in scheduled foreign air transportation of
persons, property, and mail between Denver, Colorado (DEN ) and San Jose del Cabo , Mexico (SJD)

. Currently three U.S. carriers are designated to provide scheduled service
in this market : United Air Lines, Frontier Airlines, and Republic Airline s

. 1 For the reasons given in this application, AirTran requests that the Department act as quickly as possible
to : (1) revoke Republic’s authority in this market, and (2) grant authority to AirTran to

serve this market , as proposed herein

. Republic has not provided service between DEN and SJD since April 14, 2008 , and has no published service in the market through the end of its current schedule in

1 Common air carrier names and designator codes are used herein.2

May 2013

. 2 Moreover, Republic has repeatedly made clear that the sole reason for its
interest in the DEN

- SJD market is to provide service “on behalf of, and under the trade name and designator code of, Frontier Airlines

. ” 3 Republic and Frontier are under

common ownership of Republic Airways Holdings , and Frontier already holds a separate designation in the DEN

- SJD market. Thus, not only has Republic failed for several years to use the valuable route authority that the Department granted to it , but its arrangement with Frontier means that two U.S. designations in th is market are being
used on behalf of one U.S. carrier. In contrast, AirTran would be an independent new
entrant in the DEN

- SJD market that will provide robust competitio n to both Frontier and United. AirTran is prepared to commence flying in the DEN

- SJD market as soon as all regulatory approvals are received , and will provide year - round, large jet service that will offer additional seats and new travel options for consume rs. Under these circumstances, there is no justification for allowing Republic to continue to hold separate and unused authority that would block AirTran’s competing

– and far superior

– service

. Indeed, Republic has a multi

- year history of not serving this market

. Republic initially requested DEN

- SJD authority on February 2, 2007 to “operate regional jet service on behalf of, and under the trade name of, Frontier Airlines.” 4 It cancelled all flights a little more than a year later on April 14, 2008 and filed a dormancy notice shortly thereafter stating that “[a]ll services operated by Republic Airline Inc. (“Republic”) pursuant to an Airline Services Agreement with Frontier Airlines, Inc. have terminated

. ” 5 Two years later Republic reapplied for DEN

– SJD authority “to introduce new U.S.

–

2 Diio, inquiry on November 2 , 2012; Republic and Frontier’s current schedule s are open through May 15, 2013. 3 Docket OST

- 2010

- 0152; Notice of Seasonal/Intermittent Service by Republic Airlin e Inc ., June 23, 2011. 4 Docket OST

- 2007

- 27199 ; Application of Republic Airline Inc. for an Exemption, p. 2, February 2, 2007. 5 Docket OST

- 2007

- 27199; Dorm ancy Notice of Republic Airline Inc. , p. 1, (U.S.

– Mexico Routes), June 23, 2008.3

Mexico service under the Frontier brand and designator code” beginning “on or about December 16, 2010

. ” 6 However, Republic did not initiate service on that date but instead requested a waiver of th e Department’s dormancy requirements stating that “in light of ongoing economic uncertainty and recent increases in fuel costs....Republic now anticipates that its first [DEN

- SJD] ERJ

- 190 flight will take place on April 3, 2011.” 7 The Department approved Republic’s waiver request subject to a requirement that “ the carrier [ ] institute service in the Denver

- San Jose del Cabo market no later than April 3,
2011 .” 8 Yet , Republic did not begin service by that date and instead notified the Department on June 23, 2011 that : “its Denver

- San Jose del Cabo ...service on behalf of, and under the trade name and designator code of, Frontier Airlines, Inc., will be operated on a seasonal/intermittent basis ...to provide Republic with the necessary flexibility to add ress demand fluctuations, the difficult operating environment and oil at $100

- plus per barrel, change

- of

- gauge determinations, and aircraft substitutions by Frontier.” 9
Even with this further desired flexibility , Republic still did not operate a single D EN

- SJD flight

. Notwithstanding its lack of any s ervice in the market, Republic filed an application on April 19, 2012 to renew its exemption authority so it could “ continue to provide sched uled foreign air transportation .....under the Frontier Airlines, Inc. (“Frontier”) brand and designator code

. ” 10 The Department granted the renewal application and Republic’s authority now extends through May 14, 2014. 11

6 Docket OST

- 2010

- 0152; Joint Application of Republic Airline Inc. and Frontier Airline s , Inc. for Exemptions, pp. 1 and 4, June 11, 2010. 7 Docket OST

- 2010

- 0152; Motion of Republic Airline Inc. for Dormancy Waivers, p. 2, March 14, 2011. 8 Docket OST

- 2010

- 0152; Approval of Motion of Republic Airline Inc. for Dormancy Waivers, p. 1, March 17, 2011. 9 Docket OST

- 2010

- 0152; Notice of Seasonal/Intermittent Service by Republic Airline Inc

. ; June 23, 2011 (emphasis added)

. 10 Docket OST

- 2010

- 0152; Application to Renew E xemption Authority of Republic Airline Inc., p. 1, April 19, 2012. 11 Docket OST

- 2010

- 0152; Notice of Action Taken (NOAT) , May 14, 2012.4

However, Republic is on notice , consistent with the Department’s longstanding policy to ensure limited

- entry U.S.

- Mexico authority is fully utilized that : “...should another carrier apply to serve a city

- pair market served intermittently with a proposal to serve on a regular basis, [the Department] would have to reconsider whether, in the circumstances presented, award of the intermittent authority continues to be in the public interest.” 12
Indeed the Notice of Action Taken ( NOAT ) granting Republic’s renewal specifically reference d the Order contai n ing this language. 13 Significantly, all of the Department’s various grants of DEN

- SJD authority to Republic took place in the context of unopposed applica tions. At the time, therefore, the
D epartment’s approvals of Republic ’s applications were understandable and in the public interest . Now that AirTran is filing this competing application and is prepared to promptly begin year

- round, large jet service in the market, however, a continuation of Republic’s authority for yet

- to
- be

- provided “seasona l/intermittent” service is no longer in the public interest

. Moreover, even if Republic were to begin provid ing such service, it obviously would not compete with that of its affiliated carrier Frontier. Instead, Republic and Frontier would together utilize two U.S. designations in a limited

- entry market to provide consumers with a single carrier option. For all these reasons we request that the Department act expeditiously to revoke Republic’s authority and grant AirTran’s application. 14

12 Order 96

- 11

- 24, at 5 (Dec. 2, 1996)

. 13 See NOAT issued May 14, 2012 , conditions p. 1

. 14 DOT withdrawal and reallocation of unused authorities on limited entry routes to new entrant carriers is not without recent precedent. See, e.g. , Order 2008

- 5

- 27 in Docket No. OST

- 2007

- 006 ( 2007/2008 U.S.

- Columbia Combination Frequency Allocation Proceedi ng) , where DOT reallocated seven unused Columbian authorities held by American Airlines to Spirit Airlines.5

In prior pleadings Republic asserted that its proposed DEN

- SJD service w ould
allow Frontier to make “ efficient use of large regional jets operated by Republic.” 15 But,
if Frontier wish es to change aircraft gauge or frequencies in this market in response to seasonal demands, it already has the ability to do so under its own designation

. Further,
if Republic wish es to gain access to the market in its own name at some point in the future, it can do so via a code

- share designation on flights provided by its affiliated
carrier Frontier. 16
AirTran has an established track record of providing low

- fare competition in both
domestic and international markets and would be a vigorous competitor to both Frontier and United

. As a wholly

- owned subsidiary of Southwest Airlines, AirTran’s service
would benefit from Southwest’s large presence in Denver. Combined, the two carriers

serve 55 nonstop destinations with 164 weekday departures and carry 28.3% of the
D enver passengers. 17
A side

- by

- side comparison illustrates the far greater public benefits that AirTran’s service would provide compared to Republic ’s unused authority

.

AirTran Republic

Service Proposal Year round (with seasonal

frequency adjustments) 18 No service

15 Docket OST

- 2010

- 0152; Application to Renew Exemption Authority of Republic Airline Inc., p. 2, April 19, 2012

.

16 It should be noted that the Department has previously selected new entrant carriers in contested U.S.

– Mexico route proceedings over applicants with access to the market via code

- share relationships. See, e.g. , 2005 Los Angeles

- Mexico City Combination S ervice Proceeding , Docket OST

- 2005

- 20406 (Order 2005

- 05

- 01)(selecting Alaska Airlines due, in part, to its new entrant status and greater public benefits than airlines with existing code

share relationships in the market); see also Los Angeles

- San Jose de l Cabo Exemption Proceeding , Docket OST

2000

- 8361 (Order 2001

- 1

- 11) (selecting Alaska over Continental and American, in part, due to the greater public benefits that would result from its new entrant status versus carriers with an existing code

- share pres ence )

. 17 YE 1Q 2012; Source: Diio Mi and US DOT O&D, includes International. 18 Service will be provided daily from November through April and twice

- weekly from May through October.6

Aircraft Type Boeing 737

- 700 (137 seats);

two classes of service No service

Start - up Date As soon as all required

regulatory approvals are received No service

Current Access to M arket No , n ew entrant carrier Yes, sister company Frontier currently provides service

Service to be Provided by Carrier Applicant Yes, service would be

operated and marketed by Air T ran No, service would only be provide d under Frontier’s brand and code; no Republic service in the ma rket

In further s upport of this application, AirTran states the following : 1. AirTran is a wholly owned subsidiary of Southwest Airlines Co. (Southwest) , a Texas corporation with its principal place of business at 2702 Love Field Drive, Dallas, Texas, 75235 . AirTran maintains its principal place of business at 9955 AirTran Boulevard, Orlando, Florida , 32827 . AirTran and Southwest were granted a Single Operating Certificate by the FAA on March 1, 2012.
2. Southwest is a citizen of the United States as defined by Section 40102(a)(15) of Title 49 of the United States Code and Section 204.2(c) of the Depa rtment’s Economic Regulations. Southwest ’s p resident and at least two

- thirds of its b oard of d irectors and other managing officers are citizens of the United States

. Southwest is under the actual control of citizens of the United States and more than 75 percent of its voting interest is owned or controlled by persons that are citizens of the United States. Additionally , AirTran’s president and other managing officers are citizens of the United States and AirTran is under the actual control of citizens of the United States.7

3. AirTran is prepared to commence year
- round service as soon as all required government approvals are received

. The service would be offered daily from November through April and twice weekly from May through October. AirTran will provide this service using Stage III Boeing 737

- 700 aircraft configured for 137 seats and offer two classes of service

. 4. AirTran is fit, willing and able to conduct the services described in this application. AirTran holds a Certificate of Public Convenience and Necessity to engage in interstate scheduled air transportation of persons, property and mail. See Order 97

- 11

- 28 , reissued by Order 2000

- 9

- 10 and transferred to Southwest Airlines Co. and AirTran Airways, Inc. by Order 2011

- 11

- 17

. AirTran also holds current exemption authority from the Department to serve numerous U.S.

- Mexico routes , as well several other international markets

. See , e.g., Dockets OST

- 2012

- 0001 (MDW

- CUN), OST

2005

- 21134 (BWI

- CUN and ATL

- CUN) , OST

- 2011

- 0205 (SAT

- MEX, SAT

- CUN, SNA

MEX, SNA

- SJD) , OST

- 2009

- 0201 (U.S.

– Montego Bay, Jamaica), and OST

- 2009

- 0200 (U.S.

– Aruba )

. Pursuant to Rule 24 of the Department’s Rules of Practice, AirTran asks the Department to take official notice of all data on file necessary to establish AirTran’s fitness.
5. The requested exemption authority is fully consistent with the terms of the U.S.

- M exico Air Transport Agreement (Agreement) as amended by the two governments on December 12, 2005. The Agreement a uthorizes carriers designated by the U.S. to operate “[f]rom a point or points in the United States to a point or points in Mexico.” Annex I(A) (1)(a). Pursuant to the amended Agreement, t hree U.S. carrier designations
are authorized on U.S.

– SJD routes . Annex I(B)(4

- 5). As noted previously, the three8

available designations are currently held by United Air Lines, Frontier Airlines, Inc. and Republic Airline , Inc

. 6. The environmental impacts of AirTran ’s propose d services are de minimis , and
will therefore not lead to a near

- term annual increase in aircraft fuel consumption of 10 million gallons or more. Accordingly , grant of this application will not constitute a “major regulatory action” within the meaning of the Energy Policy and Conservation Act of 1975 or Part 313 of the Department’s Economic Regulations.
7. AirTran is prepared to accept and comply with the terms and conditions that the Dep artment routinely imposes on exemption authority for scheduled foreign air transportation.
WHEREFORE, AirTran’s proposed DEN

- SJD service will provide independent competition and significant new low

- cost travel option s for passengers and shippers in both the United States and Mexico

. Accordingly, AirTran r equests that the Department act as quickly as possible to : (1) revoke Republic’s authority in th e DEN

- SJD market , and (2) grant the exemption authority requested by AirTran to enable it to provide servic e between DEN and SJD as proposed herein, as soon as all regulatory approvals
are received. Respectfully submitted,

______________________ Robert W. Kneisley

November 2 , 2012CERTIFICATE OF SERVI CE

I hereby certify that on November 2 , 2012, a copy of the foregoing was served via e

- mail on the following persons:

msinick@ssd.com (Alaska Airlines) francis.heil@aa.com@aa.com (American Airlines) sascha.vanderbellen@delta.com (Delta Air Lines) robert.cohn@hoganlovells.com (Frontier Airlines & Republic Airline ) patrick.rizzi@hoganlovells.com (Frontier Airlines & Republic Airline robert.land@jetblue.com (JetBlue Airways) jhill@dowlohnes.com (JetBlue Airways) dkirstein@yklaw.com (Spirit Airlines) jyoung@yklaw.com (Spirit Airlines) John.Fredericksen@suncountry.com (Sun Country Airlines) dan.weiss@united.com (United Air Lines) howard_kass@usairways.com (US Airways) Benjamin.slocum@usairways.com (US Airways) pmurphy@lopmurphy.com (USA3000) barbara.russell@virginamerica.com (Virgin America) jegillick@zsrlaw.com (Virgin America) susan.kurland@dot.gov paul.gretch@dot.gov brian.hedberg@dot.gov brett.kruger@dot.gov todd.homan@dot.gov esta.rosenberg@dot.gov john.allen@faa.gov urskr@state.gov Kim Day Manager of Aviation Denver International Airport kim.day@diadenver.net info@airlineinfo.com

__________________________ Leslie C. Abbott