BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Slot Exemption Proceeding at Ronald Reagan Washington National Airport pursuant to 49 U.S.C. § 41718(b) Docket DOT-OST-2000-7182

COMMENTS 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) Robert Harvey President and 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, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com For the City of Houston and the Greater Houston Partnership

Dated: December 19, 2012BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Slot Exemption Proceeding at Ronald Reagan Washington National Airport pursuant to 49 U.S.C. § 41718(b) Docket DOT-OST-2000-7182

COMMENTS 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 support of the application of Southwest Airlines Co. (“Sout hwest”) for the two AIR-21 sl ot exemptions available in this proceeding, previously allocated to Spirit, which S outhwest would use to operate greatly needed nonstop flights between William P. Hobby Ai rport (“Hobby” or “HOU”) and Ronald Reagan Washington National Airpor t (“Washington National” or “DCA”). Pursuant to the Department’s Notice dat ed November 13, 2012, only airports designated as medium hub, small hub, or non- hub airports as stat utorily defined are eligible for service using these slots. Houston strongly and enthusiastically su pports Southwest’s application, which presents the Department with a rare opportunity to award hi ghly limited and valuable DCA slots for service to a medium hub airport lo cated in a City and r egion that is at the forefront of the nation’s economic recovery – and as a result of which an extensive array of public benefits would flow that far exceed the benefit s projected by the other applicants. Grant of the awar d requested by Southw est will ensure that the available exemptions are put to their highest possi ble use in best promoting the nation’s airComments of the City of Houston and the Greater Houston Partnership Page 2

transportation system, bringing extensive new benefits to communities, enhancing competition at important hubs, and maximizing the effective ut ilization of precious DCA
slots. It is undisputed that Southwest’s application fu lfills all of the basic criteria for an award of the available slot exemptions; i.e. , Hobby is classified as a medium hub airport pursuant to the applicable standards promulgated at 49 U.S.C. § 41714(h)(9) 1 – and the distance between the two airports is 1,218 m iles, which falls within the Washington National 1,250-mile perimeter. See 49 U.S.C. § 49109. Moreover, by a wide margin Southwest’ s application best fulfills the overall decisional criteria set forth in 49 U.S.C. § 41718(b) and s upplemented by Departmental precedent. As the Department recently reit erated, an application for within-perimeter DCA slot exemptions need not satisfy all or even most of the statutory criteria, if it is found by the Department to have the best relative merits. See Order 2012-7-26, at 16. In this case, not only does Southwest satisf y more of the decisional criteria than do either of the other applicants, but the pending application with the best relative merits – based not just on the statute bu t also on other factors historically considered by the Department in DCA slot proceedings – is, by far, Southwest’s HOU-DCA application. In further support of Southwest, the Houston Parties state as follows:

1 The Department previously has established that, for the purposes of DCA slot proceedings, the technical criteria are fulfilled based on the size of an airport for which an application is submitted. See, e.g. , Order 2000-7-2, at 18 (stating that MDW and DA L are defined as medium hub airports for DCA slot allocation purposes).Comments of the City of Houston and the Greater Houston Partnership Page 3

I. SOUTHWEST NOT ONLY AMPLY SA TISFIES THE STATUTORY CRITERIA FOR AWARD OF THE AIR-21 SLOT EXEMPTIONS AT ISSUE IN THIS PROCEEDING, IT ALSO OFFERS BY FAR THE SUPERIOR PROCOMPETITION/MAXIMUM BENEFITS CHOICE The underlying statute, 49 U. S.C. § 41718(b), sets out five criteria for the award of within-perimeter slots at Washington National, two of which are mutually exclusive. Thus, no carrier can ever meet more than four of the criteria; in this case, Southwest fulfills three of them, exceeding the totals of both of the other applicants. (It should be noted that no applicant asserts that it meets t he “service to small communities” criterion, and therefore that crit erion is not at issue in this proceeding.) Beyond that, any objective analysis of the three applicati ons demonstrates unequivocally that Southwest’s HOU-DCA proposal offers by far the best relative merits and the greatest overall public benefits in comparison to the other applications. Addressing the applicable statut ory criteria:

 Southwest Is A Limited Incumbent Air Carrier At Washington National. Southwest clearly fulfills this standard. The carrier itse lf only started service at DCA in July 2012 – and even if flights operated by its subs idiary AirTran Airways are counted, it still has one of the smallest presences at the air port (3.5% of total slots), and specifically has a smaller presence than ei ther of the competing applicants. See Southwest Application , at 3-4; Exhibit WN-100. T he Department specifically has recognized that Southwest is a limited incumbent at Washington Nationa l as that term is defined in 49 U.S.C. § 41714(h)(5). See, e.g. , Order 2012-7-26, at 18.Comments of the City of Houston and the Greater Houston Partnership Page 4

 Southwest Would Provide Competitio n On A Monopoly No nstop Route To Washington National. The existing nonstop flights between DCA (as well as IAD) and the greater Houston area (namely to George Bush Intercontinental Air port (“IAH”)) are all provided by a single carrier (United). Southwest would satisfy the “competition on a monopoly nonstop route” criteria by breaking that st ranglehold. The Department previously has recognized the value of inter-carrier co mpetition between Wash ington National and major markets – including the value of competition (and, specifically, low-cost carrier competition) being provided via services to a second airport in such a market. See Order 2000-7-2, at 19 (grantin g slots to ATA Airlines fo r MDW-DCA services, which would compete with existing ORD-DCA servic es). Similarly, Southwest now would compete by providing a new linkage – at much lower fares – between two multi-airport markets (Houston and Washi ngton, D.C.), with project ed DCA-HOU fares 38% lower
than United’s current aver age DCA-IAH fares. See Southwest Application , at 4; Exhibit WN-103. Moreover, even when only one airport in a des tination city has been at issue, the Department repeatedly has recognized the importance of enablin g competition on nonstop DCA routes dominated by a single carrier. For example, another original recipient of AIR-21 slots was Midway Airlines, which the Department selected in order to ensure competition in the RDU market agains t US Airways, “the dominant incumbent airline at DCA”; the Departm ent noted that the award woul d “maximiz[e] competitive benefits between the Southeast r egional area and DCA.” See Order 2000-7-2, at 21.Comments of the City of Houston and the Greater Houston Partnership Page 5

See also Order 2007-5-12, at 14 (awarding slots to Ai rTran for its fifth daily flight to ATL, in order to enable greater competition against Delta).

 Southwest Would Produce The Maximum Competiti ve Benefits, Including Low Fares. The implementation of Sout hwest’s service proposal w ould significantly benefit consumers traveling between Houston and Washington, as well as to/from beyond points connecting via Houston, both quantitat ively and qualitatively. The “Southwest Effect” – by which the carrier’s entry into a market significantly drives down overall prices and dramatically expands traffic as a result – is both well-known and real. This “effect” is especially needed here because, as discussed infra in Section II, fare premiums at IAH continue to be among the highest in th e U.S. Southwest would challenge the current high fares for nonstop H ouston-DCA flights, offering average oneway fares of $207 and gen erating $19 million in annual consumer savi ngs, in addition to stimulating 105,000 new ann ual passengers. See Southwest Application , at 2; Exhibits WN-103, WN-105 – WN-106.By analogy, Southwest already has succeeded in mitigating fares for HoustonBWI flights; United’s aver age BWI-IAH one-way nonstop fare is almost 30% less than its DCA-IAH fare. See Southwest Application , at 4-5; Exhibit WN-104. 2 This “effect” has
been and continues to be seen nationwide. For example, Southwest’s recent entry into

2 Although DCA is not the only airport that serves the greater Washington area, the Department has recognized “the uniqueness of service to DCA, even wh en other area airports may have nonstop service to the same ... destination.” See Order 2012-5-12, at 20. See also Notice on Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia Airport, Grant of Petition with Conditions , 75 Fed. Reg. 26322, 26332 (May 11, 2010) (“it is qui te clear that the airports are not economic substitutes”).Comments of the City of Houston and the Greater Houston Partnership Page 6

Charleston, South Caro lina and Greenville-Spartanbur g, South Carolina has dramatically lowered fares (as well as stim ulated traffic), including to/from Houston. See Exhibit HOU-101. Passengers travelin g between Houston and DCA are equally deserving of low fares; enabling those low fare s through an award to Southwest in this proceeding would maximize the public benefits and ensure the most beneficial use of these highly valuable slots. As Sout hwest has shown, HOU has a strong base of domestic nonstop O&D passengers, with almo st as many as does IAH. See Exhibit WN-109. As discussed infra in Section III, the benefits flo wing from implementation of Southwest’s HOU-DCA proposal also would extend beyond the greater Houston area to other areas of Texas and the southwest regi on. Compared with ot her Texas airports, Hobby has the largest number of low-cost carrier seats and flights within the U.S. domestic market. See Exhibit HOU-102. With round-trip LCC connectivity from HOU to seven other Texas communities (as well as four communities in other states), 3 new Southwest nonstop service to DCA would pr ovide consumer benefi ts to one of the fastest growing state economies in the United States. See Exhibit HOU-104. Thus, Southwest would not only fulf ill the statutory maximum benef its/low fares standard, but would fulfill it extraordinarily well by utilizing rare DCA slots for services that will bring benefits not only to the target ed nonstop market but also to communities that will gain from Southwest’s extensive network services.

3 The destinations in Texas are Austin, Corpus Christi, Dallas Love Field, El Paso, Harlingen, Midland/Odessa, and San Antonio, and in neighboring states are Albuquerque, New Orleans, Oklahoma City, and Tulsa. See Exhibit HOU-103.Comments of the City of Houston and the Greater Houston Partnership Page 7

The Department long has recognized the va lue of introducing a second carrier to provide low-fare competition to a monopoly airline in DCA ma rkets – just as Southwest proposes to do for Houston. See, e.g. , Order 2004-4-2, at 17 (finding that the introduction of Spirit would enable low-fare competition against Northwest in the DTWDCA market); Order 2004-8-3, at 6 (finding t hat the introduction of Spirit would enable low-fare competition agai nst US Airways in the MY R-DCA market). See also Order 2000-7-2, at 19 and 21; Order 20 07-5-12, at 14 (endorsing low-fa re carrier competition). An award to Southwest for Hobby would be fully consistent with these and similar precedents, and would advance t he Department’s laudable goal of providing significant public benefits by introducing low-fare competition into a high-fare monopoly DCA
market.

II. HOUSTON’S HOBBY AIRPORT IS LO CATED IN THE HEART OF ONE OF THE NATION’S MOST VIBRANT AND DYNAMIC COMMUNITIES, BUT LACKS NONSTOP SERVICE TO THE HEART OF THE NATION'S CAPITAL. OTHER DCA SERVICE FROM HOUSTON IS PROVIDED ON A MONOPOLY BASIS AT SOME OF THE HIGHEST F ARE PREMIUMS IN THE NATION. SOUTHWEST’S NEW LOW-FARE COMPET ITIVE SERVICE OFFERS BY FAR THE GREATEST PUBLIC BENEFITS In DCA exemption decisions in which none of the pr oposed destinations was a statutory small market, as is the case here, 4 the Department has indicated that market size is an important decisional factor in a within-perimeter slot proceeding. See, e.g ., Order 2000-7-2, at 19 and 21 (sta ting that a reason for the se lection of ATA Airlines’ Chicago proposal was that t he city was the largest mark et under consideration – and

4 There is no suggestion in the JetB lue and US Airways applications that either Jacksonville or Oklahoma City should be preferred as a statutory “small ” community pursuant to 49 U.S.C. § 41718(b)(3).Comments of the City of Houston and the Greater Houston Partnership Page 8

that a reason Atlant ic Southeast’s Jacksonville proposal was not selected was its small market size); 5 Order 2008-2-28, at 9 (preferring Ai rTran and Spirit applications because they would “servic[e] a larger pool of potential passengers”). In this proceeding, it is indisputable that the market Southwest proposes to serve is larger and would generate greater public benefits than the others at issue. The City of Houston and its surrounding region are collectively an economi c powerhouse, and one of the driving forces in the recovery of the U.S. economy and in job growth in particular. Houston is the nation’s fourth-most populous city , and the metropolitan area population is the nation’s fifth-largest, more t han four times that of Oklahoma City or Jacksonville – and growing at a faster rate. See Exhibits HOU-105 – HOU-106. 6 Notably, the greater Houston area is home to the hea dquarters of twenty-five Fortune 500 companies – the third-largest total in the nation, see Exhibits HOU-108 – HOU-109, and four times more than the other two cities at issue in this proceeding combined . See Exhibit HOU-110. Of these twenty-five co mpanies, approximately half also maintain operations in the Washington, D.C. metropolitan area. See Exhibit HOU-111. Similarly, of the twenty Fortune 500 companies with headquarters in the Washington, D.C. metropolitan area, three-quarters also maintain operations in the Houston metropolitan area. See Exhibit HOU-112.

5 Notably, in granting slots to ATA Airlines for MD W-DCA services, the Department looked to the size of the overall Chicago (MDW and ORD) – Washington (D CA and IAD) market – not that of the MDW-DCA market, which necessarily had been limited by the lack of nonstop service. See Order 2000-7-2, at 19. 6 In addition, the Houston metropolitan area’s number of households is more than four times that in each of the Jacksonville and Oklahoma City metropolitan areas. See Exhibit HOU-107.Comments of the City of Houston and the Greater Houston Partnership Page 9

There are also extensive “Federal ” connections between Houston and Washington, highlighted by t he City being the home of NASA’s Johnson Space Center and the Michael E. DeBakey Veterans Affa irs Medical Center. Indeed, there are considerably more Federal workers and es tablishments in the Houston metropolitan area than in either of the Jacksonville or Oklahoma City metropolitan areas. See Exhibits HOU-113 – HOU-114. The Houston metropolitan ar ea’s overall employment also is more than four times that of both Jacksonville and Oklahoma City, see Exhibit HOU-115, and its Gross Regi onal Product is more t han that of both citi es by a factor of six. See Exhibit HOU-116. Thus a broad range of passengers, entitie s and industries would benefit from Southwes t’s new HOU-DCA service. The extent of the pro-cons umer benefits that would flow from such service is further reflected in the ov erall depth and breadth of Hous ton’s economic strengths. While not immune to the global economic downturn, Houston has proven much more resilient than most regions in the United States, and its economy has continued to grow despite the challenges that have been felt wo rldwide: (i) Houston has already regained nearly 170% of jobs lost due to the downturn, leading all major U.S. metropolitan

areas; 7 (ii) job growth in t he Houston 10-county MSA r eached nearly 4% between September 2011 and September 2012; and (iii) the region’s industrial market remains one of the top five in t he United States. See Exhibit HOU-117. Similarly, Houston’s foreign trade was up by 5.1% in September 2012 year-to-dat e over the same period a

7 Notably, the Washington, D.C. area regained the se cond highest percentage of jobs lost due to the downturn – 125% – further supporting the merits of ad ditional air service between these two economically strong communities. See Exhibit HOU-117.Comments of the City of Houston and the Greater Houston Partnership Page 10

year earlier. 8 The Gross Regional Product of t he greater Houston area totaled $442 billion in 2011; if Houston were a sovere ign nation, it would have the 26th largest economy in the world, ahead of the GDP of count ries such as Austria, South Africa, the United Arab Emirates, and Thailand. See Exhibit HOU-118. A center for global trade, Houston is a major, multi-cultural, multi-faceted international business center, hosting the nation’s third-highest concentration of foreign consular and trade offices (94), see Exhibit HOU-119, and home to the third-largest (and fastest-growing) trade district for international trade. See Exhibit HOU-120. The City also has a highly diverse economic bas e. While energy rema ins a cornerstone of the economy (11 of the top 25 publicly-traded oil and gas fi rms are based in Houston), the metropolitan area also incl udes significant manufacturing facilities, especially in the aerospace and chemical industrie s; over 190 life science co mpanies; and 100 hospitals and health clinics, including the world’s lar gest medical facility, the Texas Medical Center. See Exhibit HOU-121. In addition, the Houston region anticipat es significant additional growth and job creation stemming from the Panama Canal expansion, which is scheduled for completion in 2015. Conservative estima tes project a 10% increase in cargo coming through the Port of Houston from the Pacifi c Rim due to the expan sion, which will likely place Houston among the world’s top three busiest ports. See Exhibit HOU-122. Hobby is located at the very heart of this activity, a short distance from the center of downtown Houston, and only twenty miles fr om the Port of H ouston. The City’s

8 See Greater Houston Partnership, H ouston: The Economy at a Glance , at 4 (vol. 21, no. 12; December 2012), http://www.houston.org/pdf/research/eag.pdf

.Comments of the City of Houston and the Greater Houston Partnership Page 11

original airport, first estab lished in 1927 and Cit y-owned since 1937, the airport today plays a key role in the Cit y and region’s economy and in th e national air transportation system. 9 As an economic engine in its own right, Hobby alone supports 52,000 jobs and contributes $4.4 billion annu ally to the local economy. 10 Hobby is the 33rd largest airport in the U.S., based on CY 2011 passenger enplanements (4.7 million). 11 With four state-of-the-art runways and fully-updated terminal facili ties, it has for forty years played a key role for Southwest and is now it s largest Texas gateway, in addition to serving four other carriers. See Exhibit HOU-123. New or expanded services to six destinations have been implemented by Southw est since the start of the year, with two additional new markets recently announced. 12 Hobby also serves as an essential mid- continent connecting point – which means that HOU services benefit not just the greater Houston area but also many other communities, both in Texas and several other states. By next summer, Southwest will

9 Hobby enjoys a rich history that reflects Houston’s impressive growth throughout the 20th century and to the present. Originally named Houston Municipal Air port, it was the City’s primary commercial airport until the opening of IAH in 1969, and was home base for many years to Houstonian Howard Hughes, who was involved in developing various infrastructure enhance ments. In 1950, Hobby saw its first international flights, via Pan Am to Mexico City, and in 1957 Dutch carrier KLM inaugurated flights to Hobby from Europe via Montreal. The airport was renamed in 1967 after William P. Hobby, the 27th Governor of Texas and publisher of the Houston Post; Hobby was the spouse of Oveta Culp Hobby, Parliamentarian of the Texas House of Representatives, the first U.S. Secretary of Health, Education and Welfare (as a Democratic cabinet member in the Eisenhower Administration), and a recipient of the Army’s Distinguished Servic e Medal for her efforts du ring World War II. Today Ho uston’s 1940 Air Terminal Museum, located in Hobby’s original art deco terminal, celebrates the airport’s history and welcomes visitors and aviation enthusiasts from around the world. 10 Houston Airport System Economic Impact Study, Final Report , at 5 (June 30, 2011), http://system.gocampaign.com/file/511462

. 11 Calendar Year 2011 Primary Airports Enplanements (September 27, 2012), http://www.faa.gov/ airports/planning_capacity/passenger_allcargo_st ats/passenger/media/cy11_p rimary_enplanements.pdf

. 12 Southwest Airlines Continues Ho uston Growth (November 5, 2012), http://www.fly2houston.com/ 0/3920522/0/83280D83283/

.Comments of the City of Houston and the Greater Houston Partnership Page 12
offer 1,055 nonstop flights to 42 cities each week from Hobby. See Southwest Application , at 6. Many of these cities are located outside the DCA perimeter, and would gain new connecting opportunities to Washington National, as discussed infra in Section III. 13 In addition, Hobby is on the cusp of a major expansion that will significantly enhance the many service opportunities already available, includi ng new international flights. In May 2012, Houston’s City Coun cil approved plans for a new international terminal at Hobby and a stat e-of-the-art Federal Inspecti on Services facility to be completed in 2015. See Exhibit HOU-123; Southwest Application , at 6. Inauguration of new international services – primarily to destinations in Mexico, the Caribbean, and Central America – by Southwest and other lo w-fare carriers is planned, which will further expand the DCA connect ing opportunities availabl e at Hobby and add even more value to the two DCA slots Southwest seeks in this proceeding. 14 However, Hobby lacks much-needed nonstop service to the heart of the nation’s capital, and nonstop fares to DCA from IA H are among the highest DCA fares in the nation. The average DCA-IAH fa re for nonstop passengers is $334, 43% above average DCA fares for comparable distances , the fourth most overpriced DCA market.

13 Hobby is also a major gateway for corporate and private aviation. In CY 2011 there were 45,090 air taxi and 63,617 general aviation operations at HOU. See Houston Airport System Statistical Report, Calendar Year 2011 , http://system.gocam paign.com/file/512012 . Hobby facilities include five FBOs and 42 aircraft hangars; there are also approximately 250 Hobby-based airc raft, including more than 90 jets. 14 The restoration of international se rvices at HOU is anticipated to lead to lower fares in such markets, attract 1.3 million new passengers per year, create 14,000 jobs, and have an annual economic impact of $1.2 billion. See The Economic Impact of International Air Service at William P. Hobby Airport , (May 9, 2012), http://system.gocampaign.com/file/514947

.Comments of the City of Houston and the Greater Houston Partnership Page 13

See Southwest Application at 4; Exhibits WN-101 – WN-102. 15 Indeed, IAH is DCA’s third-largest domestic nonstop monopoly O& D passenger market, and DCA is IAH’s fourth-largest such market, with the dominant carrier in that market enjoying an overwhelming 86% share of all IAH-DCA O&D traffic. See Exhibits HOU-124 – HOU126. Southwest, of course, is known for its powerful fare-lowering and traffic-stimulating “Southwest Effect”, 16 an effect that is greatly needed in the DCA-Houston market and that would bring extensive public benefits to a broad range of passengers, industries,
and communities. Thus the Department has a unique opportunity in this proceeding to ensure the utilization of rare DCA slot exemptions for the widest and be st possible use – providing a new nonstop link between the heart of the nat ion’s capital and the heart of one of its most important business and re sidential centers, helping to ensure the future growth and prosperity of both of those communities and the U.S. as a whole. Where, as here, no small communities are at issue, Departm ent precedent fully supports an award to the market that by virtue of its size, depth and breadth, will produce the most wide-ranging public benefits. Just as in the Departm ent’s decision to award DCA slots to ATA Airlines’ Chicago service – the largest market under consideration for the allocation of

15 The Department’s most recent report on domestic ai rline fares found that the overall “premium” paid by IAH passengers was 33.2%. See Domestic Airlines Consumer Fare Report (Second Quarter 2012) , http://www.dot.gov/sites/dot.dev/files/docs/Co nsumer%20Airfare%20Report%20June%202012.pdf

. 16 The term was first coined in a Department study, The Airline Deregulation Evolution Continues: The Southwest Effect (May 1993), but remains valid today. For ex ample, the year after Southwest’s entry into Minneapolis-St. Paul, the average ticket prices at M SP – not limited to markets specifically served by Southwest – were reported to have fallen by nearly 32%. See The “Southwest Effect” , (May 21, 2010), http://www.journalwatchdog.com/business/666-the-southwest-effect . See also Exhibits HOU-101 and HOU-127 (highlighting effects of new Southwest service at Charleston and Greenville-Spartanburg).Comments of the City of Houston and the Greater Houston Partnership Page 14

slots not reserved for small communities (see Order 2000-7-2, at 19) – and in its 2008 decisional preference for AirT ran and Spirit because they would serve a larger pool of potential passengers (see Order 2008-2-28, at 9) , so too here a decision in favor of Southwest for Hobby service would ensure t he most beneficial use of these rare and
valuable slots.

III. THE STATUTORY FACTORS APPLIE D BY THE DEPARTMENT IN OTHER DCA SLOT PROCEEDINGS OVERWHELMINGLY FA VOR SOUTHWEST; NO OTHER APPLICANT CAN GENERATE EVEN REMOTELY COMPARABLE BENEFITS The other applicants – JetBl ue Airways Corporation (“Jet Blue”) and US Airways, Inc. (“US Airways”) – also ar e carriers that operate services to Houston airports, and Houston greatly appreciates th e benefits that they provide. But in this case the Department must choose betw een competing applications for an extremely rare opportunity. The statutory factors and Depa rtment precedent heavily favor an award to Southwest for Hobby service based on any objec tive comparison of the relative benefits offered.

 Southwest’s HOU-DCA Proposal Would Deliver Far More Public Benefits Than JetBlue’s JAX-DCA Proposal, Based On The Size Of The Houston Market; The Establishment Of A New DC A Gateway Airport In Houston; And The Network Benefits Beyond Houston. Southwest’s proposal offers significant ly greater public benefits than does JetBlue’s. While JetBlue’s a pplication meets certain of the statutory criteria, the facts demonstrate indisputably that the benefits Je tBlue offers are extremely limited in comparison to those that would be genera ted by Southwest’s HOU-DCA proposal, which would utilize these precious slot s to bring the widest public benefits.Comments of the City of Houston and the Greater Houston Partnership Page 15
Although both Southwest and JetBlue woul d compete with an incumbent carrier in a DCA market, only Sout hwest would do so by est ablishing a new DCA gateway within the destination metropo litan area, which would be far more convenient for a significant number of passengers, as well as introducing new competit ion and low fares. See Southwest Application , at 7; Exhibits WN-107 – WN-108. As discussed supra in Section I, HOU has a strong base of domestic nonstop O&D passengers. See Exhibit WN-109. In contrast, JetB lue would serve Jacksonville vi a the same airport as the existing US Airways services. The Department has recognized the value of allocating limited-entry authority so as to ensure a choice of gateways wi thin a metropolitan area. See Order 2000-7-2, at 19 (granting slots to ATA Airlines for MDW-DCA services, which would compete with existing OR D-DCA services). See also Order 2000-12-13, at 9 (by providing Argentina service from EWR instead of JFK, Continental would “provide competition between the airpor ts”); Order 97-4-13, at 6 (likewise, for Brazil). Additionally, the greater H ouston area has a population that is more than four times as large as the population of the greater Jacksonville area, see Exhibit HOU-106, and the Houston-DCA O&D market is more t han twice as large as the Jacksonville-DCA market. See Exhibit HOU-128. As discussed supra (see, e.g. , Order 2000-7-2, at 19 and 21; Order 2008-2-28, at 9), the Department previously has indicated that market size is a relevant factor to be considered in the allocation of DCA within-perimeter slot exemptions – especiall y if none of the proposed destinations is a statutory small market, as is the case in this proceeding.Comments of the City of Houston and the Greater Houston Partnership Page 16

Regrettably, JetBlue did not submit pa ssenger/load forecasts with its application, thereby depriving interested parties and the Department of a comp arison with those of Southwest and US Airways. Although the notice that opened this proceeding did not specifically require such fore casts, the Department has stated that if a carrier submits a vague DCA slots proposal, the D epartment will assume that th e proposal “would tend to least satisfy the statutory criteria.” See Order 2004-12-6, at 6 (noting that “Spirit having structured its proposal in that fashion makes it difficult to make a comparative analysis”). In light of JetBlue’s omission, that standard must be applied here. Furthermore, Southwest would offer netwo rk benefits that cannot be matched by JetBlue. By JetBlue’s own admission, the only plausible se rvice beyond JAX is to SJU, a destination that JetBlue already serves from DCA on a nonst op basis, using other valuable DCA slots. See JetBlue Application , at 2. 17 In contrast, if Southwest were authorized to operate HOU-DCA services, eleven destinations would benefit from new competitive round-trip connecting opportunities via HOU. See Exhibit HOU-103. See
also Southwest Application , at 7; Exhibit WN-105. Alth ough not a specific statutory factor for within-perimeter sl ots, the Department previous ly has recognized that the existence of network benefits is indeed a factor to be preferred in allocating such slots. See, e.g. , Order 2004-4-2, at 16 (noting that in addition to hub bene fits, AirTran and Spirit also would benefit surroundi ng geographic regions and communities).

17 Additionally, the connection is of questionable value because JetBlue’s proposed DCA-JAX flight departs at 8:00 AM – the exact same departure time as JetBlue’s current DCA-SJU nonstop flight – but passengers would arrive in SJU, after stopping in JAX, nearly two hours later than does the nonstop flight from DCA.Comments of the City of Houston and the Greater Houston Partnership Page 17

In short, the statutory criter ia applicable to this proceed ing, the ext ensive benefits offered by Southwest relative to those offered by JetBlue, the deficiencies in JetBlue’s application, and a plethora of Department precedent overwhel mingly favor Southwest’s application to that of JetB lue and would produce signific antly greater benefits for the traveling public.

 Southwest’s HOU-DCA Pr oposal Would Deliver Much More Extensive Public Benefits Than Would US Airw ays’ OKC-DCA Proposal, Based On US Airways’ Existing Dominant, High-Fare Position At DCA; The Size Of The Houston Market; And The Network Benefits Beyond Houston. Southwest’s application also is far super ior to that of US Airways and would generate significantly gr eater public benefits. Indeed, the only argument in favor of US Airways is that it would est ablish service to a city that does not presently have nonstop access to DCA – and while t he Houston Parties acknowledge that this satisfies one of the statutory factors, any me rits that it may have are fa r outweighed by the overall deficiencies of US Airways’ proposal, which does not fulfill any other statutory factor – or fulfill other criteria previously prioritized in DCA slot cases. As the Department knows, US Airways is by far th e dominant carrier at DCA, now holding over 54% of the airport’s slots – unlike Southwest, which is a limited incumbent pursuant to 49 U. S.C. § 41718(b)(1). See Southwest Application , at 4. 18 Moreover, US Airways could start OKC-DCA se rvice today by re-allocating some of its

18 US Airways recently solidified its position at Wash ington National through a “swap” of LGA slots with Delta, through which US Airways obtained a net 34 additional slot-pairs at DCA. See Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia Airport, Notice of Grant of Petition with Conditions , 76 Fed. Reg. 63702 (October 13, 2011). Notably, the Department recognized the importance of other carriers obtaining a “critical mass” of slots in order to effectively compete, including against US Airways at DCA. See id. at 63706, 63708. See also Southwest Application , at 4.Comments of the City of Houston and the Greater Houston Partnership Page 18

extensive slot portfolio. By contrast, Southwest, which holds only 3.5% of DCA slots, simply does not have that luxury at DCA. This alone is sufficient to warrant rejection of US Airways’ proposal. See Order 2008-2-28, at 10 (noting that “US Airways could elect to serve Pensacola with [its] existing slot holdings, if the commercial merits ... were compelling”). See also Order 2010-12-16, at 11; Order 2003-1-16, at 9 and 11 (similarly rejecting US Airways applications). Nor would US Airways offer consumers the benefit of low fares. While its application acknowledges that low fares are a component of one of the statutory decisional factors, see US Airways Application , at 4, US Airways does not assert that it can or will fulfill that factor by actually offering low fares – only so-called “competitive” fares that would not be an improvement over current OKC-DCA fares. See id. at 3. This represents a significant deficiency in US Airways’ application. Although the “maximum competitive benefits” factor also can be fulfilled through other means, the Department has emphasized that “specifics, not speculation, must be offered to support such an argument.” See Order 2008-12-22, at 4 (concluding that Midwest had not shown that it would offer any competitiv e benefits); Order 2008-2-28, at 11 (rejecting another Midwest application and not ing the carrier’s failure to show that it would offer low fares). Looking beyond the statut e, it is amply evident that the selection of Southwest’s HOU-DCA proposal woul d be far superior to the sele ction of US Airways and its Oklahoma City proposal based merely on the gr eater public benefits that would flow from HOU service, given re lative population and O&D data. The greater Houston areaComments of the City of Houston and the Greater Houston Partnership Page 19

has a population that is nearly four times as large as the popul ation of the greater Oklahoma City area, see Exhibit HOU-106, and the Houst on-DCA O&D market is more than eight times as large as t he Oklahoma City-DCA market. See Exhibit HOU-128. 19 As discussed supra (see, e.g. , Order 2000-7-2, at 19 and 21; Order 2008-2-28, at 9), the Department previously has i ndicated that the size of a market should be considered when a statutory small community is not at issue, a principl e that must be applied here. Indeed, based on the forecasts in the record , US Airways has predicted that it would transport only 56,000 passengers annually in the OKC-DCA mark et, using regional jets. See US Airways Application , at 3. Even if this prediction is accepted at face value – i.e. , it is unclear to what ext ent that number includes conn ecting traffic between OKC and
third cities that is me rely using DCA as a hub 20 – US Airways predicts carrying little
more than two-thirds the num ber of passengers that Southw est anticipates transporting to/from DCA, using mainline aircraft. See Exhibit WN-105. Finally, any benefits of US Airways’ Ok lahoma City proposal would be entirely limited to the local market. US Airways does not propose to operate any plausible connecting services beyond OKC. 21 As discussed supra (see, e.g. , Order 2004-4-2, at 16), the Department recognizes the value of network benefits – and Southwest would

19 Indeed, even without nonst op service, the Hobby-Washi ngton National O&D market today is larger than the Oklahoma City-Washington National O&D market. See Exhibit HOU-127. 20 US Airways has stated that it will offer “convenien t connections to cities throughout the Northeast” via DCA but has not provided quantitative data. See US Airways Application , at 4. 21 US Airways has stated that if – and only if – it is aw arded the AIR-21 slots available in this proceeding, it will also start service in the OKC-CLT market. But US Airways does not appear to anticipate any connecting traffic, and has not explained why it ca nnot start OKC-CLT service today, independent of the Department’s decision in this proceeding. See Order 2000-7-1, at 6-7 and 23 (citing connecting services – but not asserted general “catalyst for developing an integrated LAX network” and intra-gateway competition at LAX – as basis for award of DCA slots to TWA).Comments of the City of Houston and the Greater Houston Partnership Page 20

offer a network of connections beyond Hobby , which would provide competitive new connecting opportunities beyond HOU. See Exhibit HOU-103. As for any argument that US Airways would offer network benefits to passengers traveling between OKC and third cities vi a DCA, it must be re jected outright. US Airways is by far the dominant carrier at DCA, and both the nonstop and connecting services it proposes could be implemented by US Airways today without an award. 22 By contrast, an award to Southwest would prov ide far superior network benefits at HOU, and would help build Southwest’s existing small DCA slot shar e (only 3.5% compared to US Airways’ 54%, see Exhibit WN-100) towards the cr itical mass of slots that the Department recognizes is so vital for effective competition at DCA. 23 As in the case of JetBlue, Southwest’s appl ication is by far the superior choice in terms of satisfaction of the statutory criteria, Department precedent, and the extent of public benefits that would be generated from the services it proposes. The Department would significantly benefit t he traveling public by selectin g Southwest’s application over that of US Airways.

22 As another carrier observed in a prior DCA slots pr oceeding: “Washington National’s close-in proximity, and its convenience for traveling to downtown Wash ington, D.C. – coupled with it[s] operational constraints on the number of flights it can handle – yield the inescapable conclusion that Washington National is uniquely valuable as an airport primarily for travelers to/from the Nation’s Capital – not as a connecting hub....” Answer of Comair , at 12 (February 12, 2007). See also Order 2004-4-1, at 22 (in beyond-perimeter slot case, Department noted that 88% of predicted connecting passengers in market unsuccessfully proposed by US Airways could be served by the carrier other than via DCA). 23 See Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia Airport, Notice of Grant of Petition with Conditions , 76 Fed. Reg. 63702, 63706 (October 13, 2011).Comments of the City of Houston and the Greater Houston Partnership Page 21

Conclusion The case presented by Southwest for HOU-DCA service is compelling. The new nonstop, low-fare, traffic-stim ulating service linking the heart of the nation’s capital with the heart of one of the nat ion’s most vibrant cities and r egions would generate by far the most extensive benefits and r epresents an unparalled opportunity for the Department to ensure optimal utilization of rarely available DCA slot exempt ions in a manner that will “promote[] air transportation” consistent with 49 U.S.C. § 41718(b), best fulfill the specific statutory criteria, and also fulfill other important goals previously recognized by the Department. WHEREFORE, for the reasons stated in th ese comments – and in the letter from Houston Mayor Annise D. Parker that previ ously was submitted al ong with Southwest’s application, and the letters from t he Greater Houston Partnership (see Exhibit HOU129), the Bay Area Houston Ec onomic Partnership (see HOU-130), and the Governor of Texas, Rick Perry (see HOU-131), that are being f iled concurrently with these comments – the Houston Part ies urge the Department to promptly grant the pending application filed by Southwest fo r the available DCA slot exem ptions, so that the carrier may commence nonstop service between H ouston’s William P. Hobby Airport and Ronald Reagan Washington National Airport as soon as possible.Comments of the City of Houston and the Greater Houston Partnership Page 22

Respectfully submitted,

Rachel B. Trinder Jol A. Silversmith ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com For the City of Houston and the Greater Houston Partnership Dated: December 19, 2012(i) Houston Exhibits HOU-101 – Recent Entry By Southwest Lower ed Fares And Stimulated Traffic At Both Charleston, South Carolina (CHS ) And Greenville-Spartanburg, South Carolina (GSP), Including For Passengers Traveling To/From Houston HOU-102 – Hobby Offers the Largest Number of Low-Cost Carrier Seats And Flights Among Texas Airports HOU-103 – Eleven Communities Behind/Bey ond Hobby Would Benefit From A New Round-Trip Connecting Opportunity To/From DCA Via Hobby HOU-104 – Texas Overall Has Excelled In the Post-Recession Economic Recovery HOU-105 – Houston Is The Fifth Largest U.S. Metropolitan Area HOU-106 – The Population Of The Houston Me tropolitan Area Far Exceeds That of The Other Metropolitan Areas To Which Se rvice Has Been Proposed In This Proceeding – Jacksonville and Okl ahoma City – And Houston Also Is Growing More Quickly HOU-107 – The Number Of Households In T he Houston Metropolitan Area Far Exceeds That of The Other Metropolitan Ar eas To Which Service Has Been Proposed In This Proceeding – Jacksonville and Oklahoma City HOU-108 – Twenty-Five Fortune 500 Comp anies Are Headquartered in Houston HOU-109 – Houston Hosts The Third-Lar gest Concentration Of Fortune 500 Headquarters in the U.S. HOU-110 – The Number of Fo rtune 500 Headquarters in Hous ton Exceeds By A Factor of Four The Number In Jacksonville And Oklahoma City Combined HOU-111 – Approximately Half Of The Hous ton-Based Fortune 500 Companies Have Operations In The Washington, D.C. Area And Thus Could Benefit From Southwest’s HOU-DCA Proposal HOU-112 – Three-Quarters Of The Washington, D.C.-Bas ed Fortune 500 Companies Have Operations In The Houston Ar ea And Thus Could Benefit From Southwest’s HOU-DCA Proposal HOU-113 – The Number Of Federal Employees In Houston Exceeds The Number In Both Jacksonville And Oklahoma City By A Significant Factor HOU-114 – The Number Of Federal Establis hments In Houston Exceeds The Number In Both Jacksonville And Oklahoma City(ii) HOU-115 – The Employment Figures for Hous ton Exceed By A Factor of Four The Figures For Both Jacksonville And Oklahoma City HOU-116 – Houston’s Gross Regi onal Product (GRP) Exceeds By A Factor of Six The Figures For Both Jacksonville And Oklahoma City HOU-117 – Among U.S. Metropolit an Areas, Houston’s Recovery From The Recession Has Been The Fastest And Most Substantial HOU-118 – If Houston Were A Sovereign Nati on, It Would Rank As The World’s 26th Largest Economy HOU-119 – Houston Has The Third-Larges t Concentration Of Consulates And International Trade Offices In The U. S., Reflecting Its Role As An International Business Center HOU-120 – Houston’s Role As An International Business Center Is Also Demonstrated By The Significant Volume of Internat ional Trade – $268 Billion in CY 2011 – Through the Houston Customs District HOU-121 – Houston Has a Highl y Diverse Economic Base Wh ich Is A Cornerstone Of Its Economic Success HOU-122 – Expansion Of The Panama Canal Will Stimulate Additional Economic Growth Through The Port of Houston, Which Is Located Close to Hobby HOU-123 – Hobby Plays A Key Role In the H ouston Economy, And Is A Major Domestic And Future International Gateway For Southwest And Other Airlines HOU-124 – DCA-IAH Is The Third-Largest Ex -DCA O&D Market In Which A Single Carrier Has A Monopoly, And Competition Is Lacking HOU-125 – IAH-DCA Is The Fourth-Largest Ex-IAH O&D Market In Which A Single Carrier Has A Monopoly, And Competition Is Lacking HOU-126 – The DCA-IAH Market Is Today Do minated By A Single Carrier; Its Nonstop Flights Attract More Than 86% Of Total Passengers HOU-127 – The “Southwest Effect” Continues to Lower Fares and Stimulate Traffic: At Greenville-Spartanburg, South Carolina (GSP), After Entry By Southwest, The Overall Average Fares Fell By 14% While Passenger Traffic Increased By 38% HOU-128 – The Houston-DCA O&D Market Is More Than Twice As Large As The Jacksonville-DCA Market And More Than Eight Times As Large As The Oklahoma City-DCA Market; Hobby-DCA Alone Is A Larger Market Than Oklahoma City-DCA(iii) HOU-129 – Letter Of Support From T he Greater Houston Partnership HOU-130 – Letter Of Support From The Ba y Area Houston Economic Partnership HOU-131 – Letter Of Support From The Governor of TexasExhibit HOU-101

Recent Entry By Southwest Lowered Far es And Stimulated Traffic At Both Charleston, South Carolina (CHS) And Greenville-Spartanburg, South Carolina (GSP), Including For Passengers Traveling To/From Houston

Charleston (CHS) Greenville-Spartanburg (GSP) Average Fare Passengers Average Fare Passengers Nashville (BNA) Before Southwest $261 13,093 $295 3,300 After Southwest $117 53,361 $111 29,961 Change -$144 +40,268 -$184 +26,661 % Change -55% + 308% -63% + 808%

Baltimore (BWI) Before Southwest $201 32,304 $212 6,180 After Southwest $135 131,785 $119 74,509 Change -$66 +99,481 -$93 +68,328 % Change -33% + 308% -44% + 1106%

Chicago (MDW, ORD) Before Southwest $212 68,791 $237 33,776 After Southwest $172 137,308 $154 112,001 Change -$40 +68,517 -$83 +78,225 % Change -19% + 100% -35% + 232%

Houston (HOU, IAH) Before Southwest $223 39,605 $259 25,643 After Southwest $193 61,597 $193 64,726 Change -$29 +21,993 -$66 +39,083 % Change -13% + 56% -25% + 152%

Before Period = CY 2010; After Period = YE Q1 2012 Note: Includes fared O&D passengers; fares exclude taxes and fees Source: U.S. DOT O&D Survey via DiioExhibit HOU-102 (Page 1 of 2)

Hobby Offers the Largest Number of Lo w-Cost Carrier Seats And Flights Among Texas Airports



### LCC Seats at Six Major Texas Airports - CY 2012

5.8

2.4 1.5 1.4 2.9 6.9

0 1 2 3 4 5 6 7 8

HOU DAL AUS SAT DFW ELPAnnual Seats (Millions)

Source: OAG via DiioExhibit HOU-102 (Page 2 of 2)

Hobby Offers the Largest Number of Lo w-Cost Carrier Seats And Flights Among Texas Airports



### LCC Flights at Six Major Texas Airports - CY 2012

42.4

17.3 10.5 10.2 50.7

21.7

0 10 20 30 40 50 60

HOU DAL AUS SAT DFW ELPAnnual Flights (000)

Source: OAG via DiioExhibit HOU-103 (Page 1 of 2)

Eleven Communities Behind/Beyond Hobb y Would Benefit From A New RoundTrip Connecting Opportuni ty To/From DCA Via Hobby



## Behind Houston/Hobby – Washington National

1420 1025 

# HOU DCA CRP 0800 MAF 0800 HRL 0840 MSY 0915 DAL 0930 AUS 0940 SAT 0940 ABQ 0950 ELP 0950 OKC 0950 TUL 0950

Source: December 2012 OAGExhibit HOU-103 (Page 2 of 2)

Eleven Communities Behind/Beyond Hobb y Would Benefit From A New RoundTrip Connecting Opportuni ty To/From DCA Via Hobby



## Washington National – Beyond Houston/Hobby

1500 1720 

# HOU DCA ABQ 1755 AUS 1755 ELP 1755 OKC 1755 SAT 1755 TUL 1755 DAL 1800 MSY 1815 MAF 1835 CRP 1905 HRL 2030

Source: December 2012 OAGExhibit HOU-104 (Page 1 of 2)

Texas Overall Has Excelled In the Post-Recession Economic RecoveryExhibit HOU-104 (Page 2 of 2)

Texas Overall Has Excelled In the Post-Recession Economic RecoveryExhibit HOU-105

Houston Is The Fifth Largest U.S. Metropolitan AreaExhibit HOU-106

The Population Of The Houston Metropolit an Area Far Exceeds That of The Other

Metropolitan Areas To Which Service Has Been Proposed In This Proceeding – Jacksonville and Oklahoma City – And Hous ton Also Is Growing More Quickly



### Houston's Population Dwarfs The Other Two Markets

1.4 1.3 6.1

0 1 2 3 4 5 6 7

Houston Jacksonville Oklahoma CityPopulation (Millions)

Source: U.S. Census Bureau (July 1, 2011 Estimate) 

### Houston’s 2010/2011 Growth of 2.35% was Larger Than Both Jacksonville (1.09%) and Oklahoma City (2.00%)Exhibit HOU-107

The Number Of Households In The Hous ton Metropolitan Area Far Exceeds That

of The Other Metropolitan Areas To Wh ich Service Has Been Proposed In This Proceeding – Jacksonville and Oklahoma City



### Houston's Households Dwarf The Other Two Markets

0.5 0.5 2.1

0.0 0.5 1.0 1.5 2.0 2.5

Houston Jacksonville Oklahoma CityHouseholds (Millions)

Source: U.S. Census Bureau (July 1, 2011 Estimate) 

### Houston’s Household Total was More Than Four Times as Large as Both

Jacksonville and Oklahoma CityExhibit HOU-108

Twenty-Five Fortune 500 Companies Are Headquartered in HoustonExhibit HOU-109

Houston Hosts The Third-Largest Concen tration Of Fortune 500 Headquarters in the U.S.



### Houston Has The 3rd Most Fortune 500 Headquarters

29 20 19 18 18 16 14 13 25 67 0 15 30 45 60 75

New Y

o

r k Chicag o Housto n Wa sh

ing

t o

n Lo s

A

n g eles D allas Minn e ap

o l i s

S

an Fr a

nc

i s c o S a n Jose At l a

n ta

Source: Fortune Magazine (May 2012) 

### Over Half of the For tune 500 Companies Headquartered in the Houston Metropolitan Area are Involved With The Energy IndustryExhibit HOU-110

The Number Of Fortune 500 Headquarters In Houston Exceeds By A Factor Of Four the Number In Jacksonville And Oklahoma City Combined



### Houston Has More Fortune 500 Headquarters

4 2 25

0 5 10 15 20 25 30

Houston Jacksonv ille Oklahoma City

Source: Fortune Magazine (May 2012) 

### Houston has More th an Four Times the Number of Headquarters as Jacksonville and Oklahoma City CombinedExhibit HOU-111

Approximately Half Of The Houst on-Based Fortune 500 Companies Have Operations In The Washington, D.C. Area And Thus Could Benefit From Southwest’s HOU-DCA ProposalExhibit HOU-112

Three-Quarters Of The Washington, D. C.-Based Fortune 500 Companies Have Operations In The Houston Area And Thus Could Benefit From Southwest’s HOUDCA ProposalExhibit HOU-113

The Number Of Federal Employees In H ouston Exceeds The Number In Both Jacksonville And Oklahoma City By A Significant FactorExhibit HOU-114

The Number Of Federal Establishments In Houston Exceeds The Number In Both Jacksonville And Oklahoma CityExhibit HOU-115

The Employment Figures for Houston Ex ceed By A Factor of Four The Figures For Both Jacksonville And Oklahoma City



### Houston's Employment Dwarfs The Other Two Markets

0.6 0.6 2.8

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Houston Jacksonville Oklahoma CityEmployment (Millions)

Source: U.S. Census Bureau (July 1, 2011 Estimate) 

### Houston’s Employment was More Than Four Times as Large as Both

Jacksonville and Oklahoma CityExhibit HOU-116

Houston’s Gross Regional Product (GRP) E xceeds By A Factor of Six The Figures For Both Jacksonville And Oklahoma City



### Houston's Gross Regional Product Is The Largest

$60.3 $58.3 $384.6

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450

Houston Jacksonville Oklahoma CityGRP (Billions)

Source: U.S. Department of Commerce, Bureau of Economic Analysis (2010) 

### Houston’s GRP in 2010 was More Than

Six Times Larger Than Those of Both Jacksonville and Oklahoma CityExhibit HOU-117 (Page 1 of 2)

Among U.S. Metropolitan Areas, Houst on’s Recovery From The Recession Has Been The Fastest And Most SubstantialExhibit HOU-117 (Page 2 of 2)

Among U.S. Metropolitan Areas, Houst on’s Recovery From The Recession Has Been The Fastest And Most SubstantialExhibit HOU-118

If Houston Were A Sovereign Nation, It W ould Rank As The World’s 26th Largest EconomyExhibit HOU-119

Houston Has The Third-Largest Concentr ation Of Consulates And International Trade Offices In The U.S., Reflecting Its Ro le As An International Business CenterExhibit HOU-120

Houston’s Role As An International Busi ness Center Is Also Demonstrated By The Significant Volume of International Trade – $268 Billion in CY 2011 – Through the Houston Customs District



### Houston Was The 3rd Largest Trade District In CY 2011

$387 $244 $234 $216 $177 $128 $126 $120 $388 $268 $0 $50 $100 $150 $200 $250 $300 $350 $400 $450

N

ew

Y

o

r k

Los Angeles H ou

s t o

n Detroit

N

ew

Or

lean s Laredo C hica go S e attle Savann a h

S

a n Francis c oInternational Trade value (Billions)

Source: Wiser LLC 

### Houston had the Highest Year-Over-Year Growth Rate of International Trade Among the 20 Largest U.S. Trade DistrictsExhibit HOU-121 (Page 1 of 2)

Houston Has A Highly Diverse Economic Base Which Is A Cornerstone Of Its Economic SuccessExhibit HOU-121 (Page 2 of 2)

Houston Has A Highly Diverse Economic Base Which Is A Cornerstone Of Its Economic SuccessExhibit HOU-122

Expansion Of The Panama Canal Will Stimulate Additional Economic Growth Through The Port of Houston, Whic h Is Located Close to HobbyExhibit HOU-123

Hobby Plays A Key Role In the Houston Economy, And Is A Major Domestic And Future International Gateway For Southwest And Other AirlinesExhibit HOU-124

DCA-IAH Is The Third-Largest Ex-DCA O&D Market In Which A Single Carrier Has A Monopoly, And Competition Is Lacking



### IAH Is DCA's 3rd Largest Monopoly Market

0.0 0.2 0.4 0.6 0.8 1.0 1.2BOSORDATLMCOFLLMIADFWLGADENMSPIAHTPAMKESEALAXMCIDTWLASMSYSTLPHXSFOINDJAXOMAAnnual O&D Passengers (Millions)

Source: U.S. DOT OD1B (YE 2Q 2012) and December 2012 OAG 

### DCA Competitive Market DCA Monopoly MarketExhibit HOU-125

IAH-DCA Is The Fourth-Largest Ex-IAH O&D Market In Which A Single Carrier Has A Monopoly, And Competition Is Lacking



### DCA Is IAH's 4th Largest Monopoly Market

0 100 200 300 400 500 600ORDLAXLGAEWRDENLASSFOATLSEAPHLDCABOSMCODFWMSYMIAPHXDTWSANMSPPITBWIFLLSLCSNAAnnual O&D Passengers (000)

Source: U.S. DOT OD1B (YE 2Q 2012) and December 2012 OAG 

### IAH Competitive Market IAH Monopoly MarketExhibit HOU-126

The DCA-IAH Market Is Today Dominated By A Single Carrier; Its Nonstop Flights Attract More Than 86% Of Total Passengers



### United Dominates The DCA - IAH Market

86.2%

8.1% 3.4% 2.2% 0% 20% 40% 60% 80% 100%

United US Airways American Delta

Source: U.S. DOT OD1B (YE 2Q 2012) 

### United Offers The Only Nonstop DCA-IAH ServiceExhibit HOU-127 (Page 1 of 3)

The “Southwest Effect” Continues to Low er Fares and Stimulate Traffic: At Greenville-Spartanburg, South Carolina (GSP), After Entry By Southwest, The Overall Average Fares Fell By 14% While Passenger Traffic Increased By 38%Exhibit HOU-127 (Page 2 of 3)

The “Southwest Effect” Continues to Low er Fares and Stimulate Traffic: At Greenville-Spartanburg, South Carolina (GSP), After Entry By Southwest, The Overall Average Fares Fell By 14% While Passenger Traffic Increased By 38%Exhibit HOU-127 (Page 3 of 3)

The “Southwest Effect” Continues to Low er Fares and Stimulate Traffic: At Greenville-Spartanburg, South Carolina (GSP), After Entry By Southwest, The Overall Average Fares Fell By 14% While Passenger Traffic Increased By 38%Exhibit HOU-128

The Houston-DCA O&D Market Is More Than Twice As Large As The JacksonvilleDCA Market And More Than Eight Times As Large As The Oklahoma City-DCA Market; Hobby-DCA Alone Is A Larg er Market Than Oklahoma City-DCA



### Houston - DCA Dwarfs The Other Two Markets

145.6

39.7 323.3

0 50 100 150 200 250 300 350

Houston Jacksonville Oklahoma CityAnnual O&D Passengers (000)

Source: U.S. DOT OD1B (YE 2Q 2012) 

### HOU-DCA Alone (46,290 Passengers) Is Larger Than OKC-DCAExhibit HOU-129 (Page 1 of 2)

Letter Of Support From The Greater Houston PartnershipExhibit HOU-129 (Page 2 of 2)

Letter Of Support From The Greater Houston PartnershipExhibit HOU-130

Letter Of Support From The Bay Area Houston Economic PartnershipExhibit HOU-131

Letter Of Support From The Governor of TexasCERTIFICATE OF SERVICE I certify that on this 19th day of Dece mber 2012, a copy of the foregoing was served on the parties named below in a ccordance with the Depar tment’s Rules of Practice.

Jol A. Silversmith

Robert W. Kneisley Executive Vice President – Associate General Counsel Leslie Abbott Senior Attorney Southwest Airlines Co. bob.kneisley@wnco.com leslie.abbott@wnco.com Howard Kass Vice President, Legal and Government Affairs Benjamin Slocum Director, Legal and Government Affairs US Airways, Inc. howard.kass@usairways.com benjamin.slocum@usairways.com Jonathan B. Hill J. Parker Erkmann Counsel for JetBlue Airways Corporation jhill@dowlohnes.com perkmann@dowlohnes.com Dan Weiss Managing Director, In ternational and Regulatory Affairs United Continental Holdings, Inc. dan.weiss@united.com John E. Potter President and Chief Executive Officer Quince Brinkley Vice President and Secretary Metropolitan Washington Airports Authority john.potter@mwaa.com quince.brinkley@mwaa.com Steve Grossman Executive Director-Chief Executive Officer Jacksonville Aviation Authority steve.grossman@flyjacksonville.com Mark Kranenburg Director Oklahoma City Department of Airports mark.kranenburg@okc.gov todd.homan@dot.gov susan.kurland@dot.gov esta.rosenberg@dot.gov info@airlineinfo.com