BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

---------------------------------------- ---------------------------- : Motion of : : DELTA AIR LINES, INC. : Docket DOT

- OST

- 2010

- 0018 IN THE MATTER OF THE 2010 COMBINATION : SERVICE S ALLOCATION PROCEEDING : :

-------------------------------------------------- ------------- ----- OBJECTION S OF UNITED AIR LINES , INC. Communications with respect to this document should be sent to: Hershel I. Kamen Senior Vice President

- Alliances, Regulatory and Policy Daniel A. Weiss Managing Director

- International Affairs and Regulatory UNITED AIR LINES, INC. 77 West Wacker Drive HDQIZ Chicago, IL 60601 (312) 997

- 7573 hershel.kamen@united.com dan.weiss@united.com Steve Morrissey Managing Director

- Regulatory Affairs and Policy Karine R. Faden Managing Counsel

- Regulatory, Antitrust & Competition UNITED AIR LINES, INC. 1225 New York Avenue, N.W. Suite 1100 DCAIZ/DCALD Washington, DC 20005 (202) 521

- 4373 (202) 521

- 4363 steve.morrissey@united.com karine.faden@united.com November 26 , 201 2 Thomas Newton Bolling Vice President and Deputy General Counsel Jonathan T. Linde Senior Counsel

- Regulatory, Antitrust & Competition UNITED AIR LINES, INC. 77 West Wacker Drive HDQLD Chicago, IL 60601 (312) 997

- 8341 thomas.bolling@united.com jonathan.linde@united.com Lorraine B. Halloway Gerald F. Murphy Steven J. Seiden CRO WELL & MORING LLP 1001 Pennsylvania Avenue, N.W. Washington, DC 20004 (202) 624

- 2500 lhalloway@crowell.com gmurphy@crowell.com sseiden@crowell.com Counsel for United Air Lines, Inc.BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

---------------------------------------- ---------------------------- : Motion of : : DELTA AIR LINES, INC. : Docket DOT

- OST

- 2010

- 0018 IN THE MATTER OF THE 2010 COMBINATION : SERVICES ALLOCATION PR OCEEDING : :

-------------------------------------------------- ------------------ OBJECTION S OF UNITED AIR LINES, INC.
I. INTRODUCTION United 1 objects to the Department’s tentative decision to allow Delta to move its Detr oi t
Tokyo Haneda slot pair to the small Seattle gateway , rather than grant United’s application to initiate first

- ever U.S.

- flag nonstop serv ice to Haneda in the much large r San Francisco

- Tokyo market and enhance competition for Tokyo Haneda service . United’s propo sal to offer service from its San Francisco hub gateway should be selected under the Department’s well

- established public interest standards. United also objects to the Department’s failure to award United back

up authority in the event the tentative deci sion granting Delta’s motion is not reversed. Setting aside its tentative decision and selecting United’s proposed San Francisco

- Tokyo Haneda service would be consistent with the Department ’s long established policy for awarding valuable limited entry rights that has served consumers, communities and the industry well. The Department should select United at San Francisco over Delta at Seattle because United : (1) offer s a prop osal that will benefit the greatest numb er of consumers ; (2) will introduce new U.S.

- flag competition at a highly restricted airport; (3) will provide a meaningful amount of online beyond connecting service; (4) will be accountable for its capacity and frequency commitments ;

1 Common names are used for airlines.Objections of United

Page 2
and ( 5 ) has be en for thright about potential service reductions that may result if its proposal is selected. Had the Department adhered to its longstanding policy and precedent, there would have been no basis for its tentative selection of Delta at Seattle over United at San Francisco :

 United’s proposed San Francisco

- Tokyo Haneda service will reach nearly three times the number of consumers and provide first

- time one

- stop service to virtually the same number of U.S. communities and Tokyo Haneda passengers as Del ta at Seattle , thus maximizing public benefits
.
 Selecting United would level the competitive playing field among U.S. carriers by allowing United to compete with Delta and American, which already have Haneda access, and by establishing first

- ever U.S. flag

- operated nonstop service to Haneda from San Francisco.

 United ’s proposal offers the proven benefits of its San Francisco hub gateway, while Delta’s underutilization of valuable Haneda slots at Detroit

– a hub airport with geographic attributes arguab ly far superior to Seattle

– raises serious questions about the viability of Delta’s proposed Seattle

- Haneda service
. The Department’s tentative decision is inconsistent with its analysis in similar limited

- entry route
cases . R eexamination of the benefits offered by United’s San Francisco

- Tokyo Haneda service relative to Delta at Seattle compels the Department to select United at San Francisco.
II. THE ADVANTAGES OFFER ED BY UNITED AT SAN FRANCISCO OUTWEIGH THE FACTORS ON WHICH THE DEPARTM ENT BASES ITS TENTATIVE SELECTION OF DELTA AT SEATTLE A. United’s San Francisco - Haneda Service Will Maximize Public Benefits By Reach ing Far More Consumers and Offering Just As Many First One - Stop Connecting Opportunities As Delta at Seattle At nearly three times the size of the Tokyo

- Seattle market, new Haneda service at United’s San Francisco hub gateway will offer far more public benefits than Delta at Seattle. San Francisco is not only the “second largest U.S.

- Tokyo O& D market in this case” (Order 2012

- 11

- 12 at 6) , but also is the second largest West

- Coast Tokyo market overall and the biggest West Coast

- Tokyo market without U.S. flag

- operated nonstop service. Exhibit UA

- R

- 100
. TheObjections of United

Page 3 Department’s well

- established precede nt in limited

- entry route cases consistently supports selection of a larger O&D market like San Francisco over a smalle r market like Seattle, which the Department recognizes is only the “sixth largest O&D market
. ” See, e.g. , Order 2005

- 2

- 14 (tentatively s electing American’s proposed Chicago

- Shanghai service as a second carrier in that larger market over Delta’ s proposed new

- gateway Atlanta

- Beijing service ) ; and Order 96

- 5

- 21 at 7 (“The selection of Continental also offers the competitive benefit of introdu cing a new U.S. flag carrier that does not now serve the U.S.

- Toronto market with its own aircraft...[and]...provides competi ti ve U.S. flag service at the largest local U.S.

- Toronto market currently unserved by U.S. flag carriers.”)
. Instances in which the Department has chosen a smaller O&D market are also distinguishable from this case, and do not support giving Delta more Haneda slots to be used at the small Seattle gateway over United at the larger San Francisco gateway while United remains locked out of Haneda. See, e.g., Order 2001

- 1

- 14 (selecting Delta’s proposed new

- entrant, new
- gateway service to Argentina in the smaller Atlanta

- Buenos Aires market over United’s proposed first U.S.

- flag service in the larger Los Angeles

- Buenos Aires market where en try was highly restricted and United was already operating several U.S.

- Argentina routes). The Department should select the largest U.S.

- Tokyo market to maximize the number of passengers who will benefit from the introduction of nonstop Tokyo Haneda servi ce at the gateway supporting the largest traffic volume to meet its “principal objective” in allocating slots to “maximize public benefits...that will likely result in service that best meets the needs of the traveling and shipping public.” Order 2012

- 8

- 20 at 3. The Department’s tentative decision also overestimates the connecting benefits of Delta’s proposed Seattle

- Tokyo Haneda service. The Department’s recognition that “United’s San Francisco hub might arguably reach more passengers than the combined hub at Seattle” (OrderObjections of United

Page 4
2012

- 11

- 12 at 6

- 7) is an understatement. Even considering Delta’s codesharing with Alaska, 2 United’s San Francisco

- Haneda service would reach more than 600,000 more consumers than would Delta at Seattle ; that figure jumps to 1.5 millio n when points that connect to Delta’s existing Los Angeles

- Haneda service are excluded . Exhibit UA

- R

- 108. In terms of unique points , Delta/Alaska at Seattle would only reach 2,511 more Tokyo passengers (of 13,954 total) than United at San Fr ancisco. Exhibit UA

- R

- 108; and Reply of Delta, Exhibit DL

- R

- 201
. Yet, t hat figure drops by approximately 1, 400 (1 0%) pas sengers when Orange County and Burbank are removed from the list

– as they should surely be, since both airports are less than an hour’s drive t o Los Angeles where Delta already offers nonstop service to Haneda. Further, 4,223 (30%) of the Tokyo passengers reached by Delta at unique points would also be served by United via San Francisco. Id
. That means that the Department’s finding that “other cities that now enjoy one

- stop connections over more southerly gateways would gain the option of service over a less circuitous northwest gateway” would not apply to 4 0% of the Tokyo connecting passengers that would purportedly benefit from Delta’s propos al at Seattle. B. Preserving the Competitive Balance of U.S. - Japan Services Compels Selection of United at San Francisco and Serves the Public Interest The record shows that the Department’s tentative decision would produce negative competitive effects among U.S. carriers , and why a ssigning appropriate weight to the enhanced intergateway and intragateway competition that would flow from United’s proposed San Francisco

- Tokyo Haneda service will lead the Department to set aside its tent ative decision. Del ta already holds the highest West Coast

- Tokyo capacity share of any carrier (Exhibit UA

- R

-

2 Even to the extent Delta’s “marketing relationship [with Alaska] is more comprehensive than traditional codesharing arrangements, and...Alaska and Delta regularly adjust their schedules to facili t ate effective connections” (Order 2012

- 11

- 12 at 6), they cannot coordinate with each other on pricing and revenue management. See Order 87

- 10

- 10 at 4 (“Any [such] agreement between [Delta and Alaska] would be a per se violation of antitrust laws.” Id
. ( emph asis in original )).Objections of United

Page 5
106 ) , and is the only U.S. carrier currently permitted to serve Haneda from the West Coast. Delta and its SkyTeam immunized partner Korean also already hold the larg est West Coast

Tokyo capacity share among global alliances
. Exhibit UA

- R

- 107
. Y et United remains the only U.S. carrier serving Japan that is unable to operate at Tokyo Haneda with its own aircraft and coworkers
. Rather than providing intergateway compet ition f or Haneda service with Delta/SkyTeam at Los Angeles and American/oneworld at New York (JFK) and intragateway competition with JAL/oneworld at San Francisco, selecting Delta at Seattle would perpetuate an imbalance among U.S. carriers in the West Coast

- Tokyo market. The Department’ s failure to account for the intergateway and intragateway competi ti on that would flow from United’s proposed San Fran cisco

- Tokyo Haneda service is also at odds with longstanding precedent and the Departme nt’s own policy criteria for selecting carriers in limited

- entry markets. See 51 Fed. Reg. 43180 (Dec. 1, 1986). Indeed, the Department has previously used these criteria to reverse its tentative decision in a route proceeding on the basis that the tenta tively selected carrier’s behind

- gateway services did not outweig h the advantages the ultimately

- selected carrier had to compete more effectively in the local market. See Order 87

- 7

- 53; aff’d by Horizon Air Industries, Inc. d/b/a Horizon Air, v. U.S. Dept . of Transp ., 850 Fed. Reg. 775 (D.C. Cir. 1988). To evaluate market structure , a “primary criterion” in route selection cases (50 Fed. Reg. 38539, 38545 ( Sep. 23, 1985 ) , “the Department looks at potential intergateway competition

– the competitive effect of the proposed service on flights offered to the same destination at possible alternative gateways. [It] also examine[s] the degree to which each applicant might increase competition with existi ng services at the same gateway.” 51 Fed. Reg. at 43186

- 4318 7. As the Department has properly recognized, a U.S. carrier with the highest current West Coast

- Tokyo capacity share (Exhibit UA

- R

- 106 ) and sole rights to serve Haneda from the West Coast beingObjections of United

Page 6 given expanded and “exclusive authority to serve [the only] two [West Coast] gateways...would be under far less pressure to offer competitive fares and services.” 50 Fed. Reg. at 38546. In formulating it s policy on consideration of market structure, the Department also recognized that “the Board sought to increase competition...through increasing the number of U.S. carriers operating to a particular country or region,” and that “[i]njecting a new carrier was deemed most likely to enhance competition in [the] broader market.” Id . (“[O]ne reason for Continental’s selection...was that it was the only viable applicant not already providing service in the U.S.

- South America market.” Id . ( citing Order 83

- 4

- 49). T he Department in limited

- entry route cases has maintained a consistent policy of enhancing competition, favoring new entrants, and benefiting the largest number of passengers
. See, e.g. , Order 2008

- 5

- 27 ( “Delta’s New York (JFK)

- Bogota proposal would add U .S.

- flag nonstop service in the large but underserved New York (JFK)

- Colombia market, and would furnish meaningful competition with the daily JFK

- Bog o ta services offered by the Colombian carrier, Avianca, as well as competition with the Newar k

- Bogo ta services of Continental.” Id . at 8 ) N one of these objectives will be achieved by selecting Delta’s proposed Seattle

- Tokyo Haneda service. Moreover, t he Department stated that its decision in the 2010 U
. S
. - Haneda Combination Services Allocation Proce eding would “ address [] a variet y of important public interest objectives” by: “introduc[ing] new competition in the U.S.

- Tokyo market, address [ing] the need for U.S.

- Haneda service in the largest mainland U.S.

- Tokyo O&D markets, and enhanc[ing] competition in the U.S.

- Tokyo and U.S.

- Asia markets.” Order 2010

- 5

- 7 at 8
. With only one Haneda slot pair available in this proceeding, selecting United at San Francisco is the only way for the Department to further these goals

– none of which would be realized by leaving United as the only U.S. carrier serving Japan that cannot operate at Haneda with its own aircraft and crews
. T he significant consumer benefits and enhanced competition that will result fromObjections of United

Page 7 United’s new entrant Haneda service in the large San Fran cisco

- Tokyo market must be given considerable weight under the Department’s longstanding policy and precedent and compel the selection of United in this proceeding. C. The Proven Benefits Of United’s San Francisco Hub Gateway Will Fully Utilize These Valuabl e Haneda Slots

– Unlike Delta at Detroit or Seattle The Department’s tentative decision leaves the impression that its central “public interest goal [] ” is “promoting geographic diversity of U.S.

- Haneda gateways
. ” Order 2012

- 11

- 12 at 6
. The proper implementation of that policy , however, would be requiring Delta to maintain its existing service at Detroit. U nder this criterion, Delta’s much

- lauded Detroit hub is in a better position to serve significantly more states, more destinations and mo re consumers. Exhibit UA

R

- 108; Reply of Delta, Exhibit DL

- R

- 102; and Application of Delta dated Feb. 16, 2010, Exhibit DL

- 112, in this docket
. Yet Delta’s request to transfer its Haneda slots from Detroit to Seattle, a major hub gateway where it is unab le to sustain service ( see Motion of Delta dated July 30 , 2012 in this docket) , illustrates why the Department employs interdependent criteria in evaluati ng limited

- entry route cases. The Department’s tentative decision would also paradoxically reward Delta for failing to fulfill its promises for Detroit

- Haneda service. Just as Delta’s inability to sustain its Detroit

Tokyo Haneda service at a hub gateway that serves 17 more states, 58 destinations and 467,000 more Tokyo passengers than Delta/Alaska at Seattle ( Exhibit UA

- R

- 108; Reply of Delta, Exhibit DL

- R

- 102; and Application of Delta dated Feb. 16, 2010, Exhibit DL

- 112, in this docket ) , the Department must we igh Delta’s adherence to the commitments it made wi th respect to its Detroit

- Tokyo service more generally. Delta promised to operate daily flights from Detroit to both Tokyo Narita and Haneda with B

- 7 4 7 aircraft ( s ee Application of Delta dated February 26, 2010 in this docket) , n one of which happened at Haneda as promised in the 2 2 months since Delta was required to be g in operating its Detroit

- Han eda service
. Exhibit UA

- R

- 110 ; see alsoObjections of United

Page 8
OAG 2012
. Delta has also provided only 40% of the capacity it promised with its Los Angeles

Haneda service (by downg auging from B

- 747 to A

- 330 aircraft). Exhibit UA

- R

- 111. Yet, Delta criticize s United for being up front about service levels for its current year

- round San Francisco

Tokyo Narita operation in the event the Department selects United’s proposal. See Appli cation of Delta at 6. United believes that it is necessary to be forthright with respect to the operational realities of carrier service proposals , as it has recently demonstrated in this proceeding and in seeking startup extensions for its San Francisco

- Guangzhou service. See Motion of United dated Jun. 14, 2011 in Docket DOT

- OST

- 2007

- 28567. Examination of Delta’s operating history at Haneda and questions as to the sustainability of its Seattle

- Tokyo services as described in this proceeding caution against finalizing the Department’s tentative decision and instead support the selection of United. III. UNITED SHOULD BE AWARDED BACK - UP AUTHORITY IN THE EVENT THE DEPARTMENT MAKES FINAL ITS TENTATIVE SELECTION OF DELTA AT SEATTLE The Department should, at the very least, award back

- up authority to United in the event that it refuses to set aside its tentative selection of Delta’s Seattle

- Tokyo Haneda proposal and Delta fails to institute as promised or terminates its Seattle

- Haneda flights
. The Depar t ment has already recognized that United’s proposed San

- Francisco Haneda service is superior to either American ’s at Los Angeles or Hawaiian ’s at Kona. See Order 2012

- 11

- 12 at 6

- 7
. Even if the Department elects to finalize its tentative selection o f Delta’s Seattle

- Haneda proposal, these valuable Haneda slots wil l have been squandered for more than two years. 3 Without a back

- up
carr ier in place, if Delta again seeks to abandon its Haneda service, there will be a significant

3 Delta filed its motion seeking the transfer of its Detroit

- Tokyo Haneda slot pair nearly four months ago, on July 30, 2012. See Motion of Delta dated July 30, 2012 in this docket. These valuable slots had previously gone unused for approximately 11 of the pr e ceding 20 months since Delta was first required to begin service, and were underutilized for the rest of the time. A final order confirming the Department’s tentative selection of Delta’s Seattle

Haneda proposal would not re quire Delta to begin service until at least March 2013.