BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC 20590

 )

Establishment of Slot Exemption Proceeding )

At Ronald Reagan Washington National Airport ) Docket 

Pursuant to 49 USC §41718 ) DOT-OST-2000-7182

)

Motion for Leave to File Unauthorized Pleading And

Consolidated Sur-Reply of JetBlue Airways Corporation

Communications with respect to this document should be addressed to:

James Hnat Jonathan B. Hill

Executive Vice President Corporate Affairs, J. Parker Erkmann

 General Counsel & Secretary Benjamin M. Berlin

JetBlue Airways Corporation Cooley LLP

27-01 Queens Plaza North 1299 Pennsylvania Ave., NW

Long Island City, NY 11101 Suite 700

Washington, D.C. 20004-2400

(202) 962-8356

jhill@cooley.com

perkmann@cooley.com

Robert C. Land bberlin@cooley.com

Senior Vice President for Government

 Affairs & Associate General Counsel Counsel for 

JetBlue Airways Corporation JetBlue Airways Corporation

1212 New York Avenue, N.W.

Suite 1212

Washington, DC 20005

April 9, 2014
1

BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC 20590

________________________________________________

)

Establishment of Slot Exemption Proceeding )

At Ronald Reagan Washington National Airport ) Docket 

Pursuant to 49 USC §41718(b) ) DOT-OST-2000-7182

________________________________________________)

Motion for Leave to File Unauthorized Pleading And

Consolidated Sur-Reply of JetBlue Airways Corporation

JetBlue Airways Corporation (“JetBlue”) hereby respectfully requests leave to file an 

otherwise unauthorized document pursuant to 14 CFR § 302.6(b), namely this Sur-Reply to the 

competing applications and answers of Southwest Airlines Co. (“Southwest”) and American 

Airlines (“AA” or “American”) in this proceeding to reallocate a pair of slot exemptions for 

service at Ronald Reagan Washington National Airport (“DCA”) pursuant to the provisions of 

the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR-21”).1

 

Good cause exists to allow this Sur-Reply because:

1. Southwest’s failure to include its estimate of consumer savings in its application 

deprived competing air carriers of the opportunity to rebut Southwest’s estimate 

in their respective answers; and

2. Southwest’s failure to include the savings to existing consumers in its estimate of 

consumer savings provides the Department of Transportation (“Department”)

with an inaccurate comparison of consumer savings2

;

3. Misstatements by American and Southwest must be corrected.

 1 49 U.S.C. § 41718(b).

2 Southwest’s failure to include savings to existing consumers in its current application and 

answer is misleading. Indeed, Southwest calculated, included, and relied on savings to existing 

passengers in its 2012 application for slot exemptions to serve DCA-HOU. Moreover, 

Southwest’s “after-the-fact traffic forecast and fare proposal are improper, contrived and not 

credible.” Consolidated Reply of Southwest Airlines Co. and Motion for Leave to File at 4.
2

In contrast to Southwest’s proposal to continue serving the DCA – Kansas City, MO 

(“MCI”) market, JetBlue’s proposal to introduce low-fare competition in the DCA –

Jacksonville, FL (“JAX”) market will result in greater consumer savings, an assertion that is 

supported by JetBlue’s demonstrable history of stimulating lower fares in American Airlines’

(“AA”) monopoly markets, especially at DCA. JetBlue not only has the strong support of the 

Jacksonville community,

3 but is also prepared to introduce additional capacity through the use of 

larger gauge 150-seat Airbus A320 and 190-seat Airbus A321 jets as the “JetBlue effect” grows 

demand. JetBlue’s ability to bring about the maximum procompetitive effect has been widely 

recognized, most recently in a study conducted by the Massachusetts Institute of Technology. 

Based on the foregoing, an award of two AIR-21 slots to JetBlue would most strongly 

demonstrate the Department’s ongoing commitment to maximizing consumer benefit and 

introducing competition into markets that have long suffered under the dominance of a single 

carrier, such as DCA-JAX.

I. Southwest’s Consumer Savings Claims Fall Short of JetBlue’s When Savings to 

Existing Consumers are Considered

As presented in its Answer,

4 Southwest’s calculation of its consumer fare savings takes 

the overly simplistic view that only its own passengers benefit from the fare stimulation that 

results from the disruption of a monopoly market. In fact, as Southwest’s own analysis in a 

previous application5 demonstrates, it is well aware that the total surplus to consumers is 

composed of (a) savings to existing passengers and (b) savings to new passengers. Viewed in this 

 3 JetBlue’s application has the strong support of the Jacksonville community and Florida’s 

legislators, including U.S. Senator Bill Nelson, U.S. Representatives Corrine Brown, Ander 

Crenshaw, Ron DeSantis, and Ted Yoho. See Exhibit B6-2014R-101 to the Sur-Reply for 

Senator Nelson’s letter of support and Exhibit B6-2014A-104 in JetBlue’s Answer dated April 1, 

2014 for the letter of support from Representatives Brown, Crenshaw, DeSantis, and Yoho. 4 See Answer of Southwest Airlines dated April 1, 2014

5 See Application of Southwest Airlines dated December 5, 2012
3

light, Southwest’s calculation of the fare savings that its DCA-MCI service offers is both flawed 

and misleading.

Southwest’s claim that its DCA-MCI service saves consumers $900,000 more than 

JetBlue’s proposed DCA-JAX service is a deliberate attempt to distract the Department from an 

apples-to-apples comparison of the extent each market as a whole benefits from each of 

Southwest’s and JetBlue’s proposals. JetBlue performed an analysis6 consistent with 

Southwest’s previous approach and found that Southwest’s proposed DCA-MCI service would 

save existing passengers under an AA monopoly $4.4 million and new passengers carried on 

Southwest $1.8 million, for a total of $6.1 million. Interestingly, this figure is greater than the 

$5.3 million in savings that Southwest has given itself credit for. 

When this same methodology is applied to JetBlue’s proposal, it becomes evident that 

Southwest has conveniently omitted the fare savings to existing passengers because its proposed 

DCA-MCI service results in a total consumer savings that is far less than that of JetBlue’s, as 

shown below.

 6 See Exhibit B6-2014A-102 in JetBlue’s Response dated April 1, 2014 for calculations of 

Southwest’s consumer savings. Calculations of JetBlue’s estimated consumer savings can be 

found in Exhibit B6-2014A-103.
4

JetBlue’s Proposed DCA-JAX Service Produces

$8.4 Million More In Consumer Savings7

II. Southwest Has Failed to Demonstrate That It Can Deliver on its Promises in the DCAMCI Market

JetBlue’s ability to generate higher consumer savings is in large part due to the fact that 

incumbent carriers react far more strongly by lowering fares when JetBlue enters a market than 

when Southwest does, a pattern that has repeated itself time and time again. In fact, the 

Department need look no further than pricing trends in DCA-MCI for evidence that the 

purported “Southwest Effect” is no longer a force for lowering fares. Since Southwest entered 

the DCA-MCI market, American has raised its average fare from $186 to $188, while 

Southwest’s own fare is $7 more than the average fare charged by Frontier—the carrier whose 

service it replaced. By virtue of its existing pendente lite authority, Southwest has been afforded

ample (though temporary) opportunity to demonstrate that its presence in the DCA-MCI market 

can stimulate demand and lower fares for consumers, a crucial litmus test that it has failed. Thus, 

 7 See O&D Survey, as provided by Diio (YE 3Q13). Includes estimate of baggage and 

cancellation fees consistent with Southwest’s Application (Exhibit WN-2).
5

the Department should view Southwest’s claim that its service will result in $5.3 million savings 

for its own customers with significant skepticism, given its current market performance.

Nonstop DCA-MCI Fares Before8 And After Southwest’s Entry9

On the other hand, JetBlue’s proposed service in DCA-JAX will result in nearly $4.8 

million in savings to new consumers alone, as well as up to an additional $10 million in savings 

to existing consumers. As outlined in JetBlue’s Application, recent pricing trends in two 

domestic markets provide incontrovertible proof that American responds far more aggressively 

in lowering fares when JetBlue enters markets in which American holds a monopoly, unlike 

when Southwest does. Following JetBlue’s announcement in March 201410 of its intent to serve 

DCA-CHS and DCA-BDL, American immediately matched JetBlue’s substantially lower fares 

in both markets, lowering fares by as much as 74%. Thus, there is good reason to believe that 

American will respond similarly to JetBlue’s presence in the DCA-JAX market and ultimately 

 8 See O&D Survey, as provided by Diio (YE 3Q13). Includes estimate of baggage and 

cancellation fees consistent with Southwest’s Application (Exhibit WN-2).

9 Application of Southwest Airlines (Exhibit WN-2).

10 Press Release, JetBlue Airways Corp., JetBlue Adds Three Nonstop Destinations for Customers 

at Ronald Reagan Washington Nat’l Airport, Offers Introductory One-Way Fares as Low as $30 

(March 6, 2014), available at http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irolnewsArticle&ID=1906649&highlight=.

$186

$140 $147

$188

Before WN (YE 3Q13) After WN (current)

 
6

enable consumers to realize savings of $14.8 million, or $8.4 million more than Southwest’s 

proposal.

American Lowered Fares11 Significantly When JetBlue

Entered DCA-BDL and DCA-CHS in March 201412

 11 Source: ATPCO GFS System (captured Mar. 17, 2014), lowest fare in each advance purchase 

bucket shown.

12 Press Release, JetBlue Airways Corp., JetBlue Adds Three Nonstop Destinations for Customers 

at Ronald Reagan Washington Nat’l Airport, Offers Introductory One-Way Fares as Low as $30 

(March 6, 2014), available at http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irolnewsArticle&ID=1906649&highlight=.

$91

$136 $136

$192

$55 $65

$110

$155

21 days 14 days 7 days 3 days

Advance Purchase

AA Fare Before B6 Entry AA Fare After B6 Entry

DCA-BDL

$201 $201 $220

$368

$53 $63

$113

$263

21 days 14 days 7 days 3 days

Advance Purchase

AA Fare Before B6 Entry AA Fare After B6 Entry

DCA-CHS
7

III. Southwest’s Presence No Longer Correlates with Lower Fares

Southwest, in its Answer, contests the findings of an objective, academic study conducted 

by the Massachusetts Institute of Technology13 (“MIT Study”) that concluded that JetBlue was 

“the airline whose presence is associated with the largest decrease in average fares.”14 In spite of 

its bald-faced attempt to “correct” the results of the MIT Study, Southwest refuses to 

acknowledge the reality that its presence in a market is no longer the primary correlating factor 

behind lower fares. As even a simple “back-of-the-napkin” analysis would illustrate, Southwest’s 

transformation into a “bigger, mainstream airline has generally meant higher fares,”15 especially 

at airports where it has grown its presence the most over the past five years. 

Growth Of Southwest’s Fares At Its Top 10 Airports Exceeds The Average Fare Growth16

 13 Michael D. Wittman & William S. Swelbar, Mass. Inst. of Tech. Int’l Center on Air Transp., 

Evolving Trends of U.S. Domestic Airfares: The Impacts of Competition, Consolidation, and 

Low-Cost Carriers, Report No. ICAT-2013-07 at 3-4 (Aug. 2013).

14 Id. at 20. 

15 Jack Nicas, As Southwest Goes Mainstream, Will Direct Flights Go Extinct?, Wall St.

J.Corporate Intelligence Blog (April 2, 2014, 5:17 PM), http://blogs.wsj.com/corporateintelligence/2014/04/02/as-southwest-goes-mainstream-will-direct-flights-go-extinct/. 16 See O&D Survey, as provided by Diio (YE 4Q08 vs. YE 3Q13).

24%

27%

19%

31%

19%

24%

19%

29%

23%

29%

15%

11%

8%

24%

13% 14%

16% 17% 18%

15%

BWI DAL/DFW DEN HOU/IAH LAS LAX MDW/ORD OAK PHX SAN

WN Average
8

Southwest argues that the MIT Study fails to account for cross-airport competition in 

markets served by more than one airport, such as Chicago O’Hare (ORD) and Midway (MDW). 

However, as the analysis above shows, Southwest’s fare growth still outpaces the average even 

on a consolidated basis, most notably at Dallas Love Field (DAL) where the carrier has a 

dominant presence. Despite Southwest’s attempt to spin the results of the MIT Study, the fact 

remains that Southwest’s fares are going up – and at a rate that outpaces all domestic carriers:

Southwest’s Fares Have Risen the Fastest of All Domestic Carriers17

Southwest also contends that the inclusion of baggage and cancellation fees are integral 

to evaluating the cost of air travel, a point with which JetBlue agrees and has incorporated into

all relevant cost and savings calculations. However, even if cancellation and baggage fees were 

included in the MIT Study, these fees are not material and do nothing to undermine the obvious 

 17 See Jack Nicas & Susan Carey, Southwest Airlines, Once a Brassy Upstart, Is Showing Its Age, 

Wall St. J. Bus. (April 1, 2014, 10:38 PM),

http://online.wsj.com/news/articles/SB10001424052702303949704579459643375588678?mg=r

eno64-

wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB1000142405270230394970457945

9643375588678.html. Chart reproduced from the Wall Street Journal.
9

conclusion that Southwest’s presence in a market is no longer the primary catalyzing force 

behind lower fares. It should be noted that as of the year ending third quarter 2013, baggage and 

cancellation fees of major legacy carriers comprised only 5.3% of passenger revenues,

18 which 

makes it all the more surprising that Southwest’s fares have risen 21% from 2008-2013 (as 

shown above), over 7% more than the carrier with the next largest fare growth. This data would 

suggest to even the most casual observer that Southwest’s service does not offer consumers any

additional benefits over and above those offered by other carriers; in fact, Southwest’s aggressive 

fare growth more than compensates for the supposedly “free” bags and cancellations.

Most importantly, the Department should disregard Southwest’s alternative model whose 

conclusions can hardly be considered objective. Unlike the Southwest-commissioned CampbellHill study, the authors of the MIT Study received neither consideration nor influence from one of 

the subjects of the study. JetBlue did not pay the authors of the MIT Study that determined “the 

presence of JetBlue is one of the most important explanatory factors behind which airports have 

lower fares than others.”19 The findings of the MIT Study are not only directly relevant, but 

central to the Department’s decision to award these slots to the carrier that will deliver the 

maximum benefit to the traveling public, which in this case is JetBlue.

IV. JetBlue Can and Will Add Additional Capacity as the DCA-JAX Market Grows

Despite American’s attempt to mischaracterize JetBlue’s proposal to serve the DCA-JAX 

market on an initial basis onboard its mainline 100-seat Stage 3 Embraer E190 (“E190”) jet as a 

sign of decreased market confidence, the opposite is true. The simple fact that JetBlue has 

applied twice to serve DCA-JAX demonstrates its strong belief that this market continues to be 

a prime candidate for low fare competition. 

 18 See DOT Form 41 (via Diio) as of YE 3Q13.

19 MIT Study at 11.
10

Unlike Southwest, JetBlue possesses a diverse fleet of aircraft that allows it to better 

match supply with demand. As demand for low-fare travel in the DCA-JAX market grows in 

response to the “JetBlue Effect,” JetBlue is fully prepared to increase capacity through the use 

of its larger-gauge 150-seat Airbus A320 or 190-seat Airbus A321 jets, which are 5% and 32% 

larger, respectively, than Southwest’s proposed 143-seat B737-700 aircraft. As shown below, 

three of JetBlue’s debut markets at DCA – BOS, FLL, and MCO were upgauged to the A320 

after only 18 months as demand once again warranted. The significantly lower unit costs on the 

A320 and A321 will in turn help to lower fares in the DCA-JAX market even further and 

increase consumer fare savings beyond the $14.8 million that JetBlue expects to achieve even 

on the smaller E190. 

JetBlue Increased Capacity to 3 DCA Markets on A320 After Only 18 Months20

Finally, Southwest appears to have misunderstood the legal definition of regional jet as 

set forth by Congress,

21 which applies to aircraft with a seating capacity of 70 seats or less. 

Accordingly, JetBlue’s proposal to operate nonstop DCA-JAX service on board its mainline 100-

seat E190 jets indeed qualifies as large-jet service. In fact, many JetBlue customers prefer the 

 20 See JetBlue schedules for December 2010 and July 2012. Daily seats by equipment.

21 The term “regional jet,” as used in 49 USC 41718, is explicitly defined to mean “a passenger, 

turbofan-powered aircraft with a certificated maximum passenger seating capacity of less than 

71.” 49 USC 41714(h)(6).

700 800

300

Dec-10 Jun-12

DCA-BOS

100 100

300

Dec-10 Jun-12

DCA-MCO

E190 A320

100 100

300

Dec-10 Jun-12

DCA-FLL
11

E190 aircraft on routes of similar stage length because it offers the most legroom in coach, 

complimentary SiriusXM radio and DirecTV, and all-leather seating with no middle seats. The 

competitive schedule set forth, along with JetBlue’s industry-leading Core Experience leaves no

room for doubt that its proposal to serve DCA-JAX will maximize both the convenience and 

comfort of business and leisure customers alike.

JetBlue’s E190 is Superior to Competing Aircraft Proposals22

JetBlue

E190

Southwest

B737-700

American

CRJ-200

Seat pitch Core: 32"

Even More Space: 39"

31" 31"

Seat width 18.25" 17" 17.3"

V. Conclusion

JetBlue requests that the Department accept this Sur-Reply as part of the record in this slot 

exemption proceeding. Based on the strength of the evidence presented throughout JetBlue’s 

initial Application, Answer and the foregoing Sur-Reply, the Department can and should award 

the AIR-21 slot exemptions to JetBlue, in recognition of the significant consumer benefits that 

JetBlue’s proposed nonstop DCA-JAX service would deliver. 

Dated: April 9, 2014 Respectfully submitted,

Robert C. Land

Senior Vice President for Government Affairs

And Associate General Counsel

 22 See http://www.seatguru.com/charts/shorthaul_economy.php
Exhibit B6-2014R-101

Letter of Support from U.S. Senator Bill Nelson

Certificate of Service

I hereby certify that a copy of the foregoing Motion for Leave to File Unauthorized Pleading 

And Consolidated Sur-Reply of JetBlue Airways Corporation was served this 9th day of April, 

2014 via email transmission on the following persons:

robert.wirick@aa.com

francis.heil@aa.com

howard.kass@aa.com

sascha.vanderbellen@delta.com

jeff.morgan@delta.com

bob.kneisley@wnco.com

leslie.abbott@wnco.com

Charles.donley@squiresanders.com

marshall.sinick@squiresanders.com

robert.cohn@hoganlovells.com

patrick.rizzi@hoganlovells.com

john.fredericksen@suncountry.com

thomas.ting@suncountry.com

dan.weiss@united.com

steve.morrissey@united.com

jonathan.linde@united.com

karine.faden@united.com

lhalloway@crowell.com

gmurphy@crowell.com

john.varley@virginamerica.com

jegillick@zsrlaw.com

jhfoglia@zsrlaw.com

anita.mosner@hklaw.com

Jennifer.nowak@hklaw.com

mike.morisi@flypex.com

shawn.voyles@flypex.com

dhernandez@vedderprice.com

nssparks@fedex.com

sllunsford@fedex.com

jyoung@yklaw.com

lgrunewald@yklaw.com

steve.grossman@flyjacksonville.com

quince.brinkley@mwaa.com

Susan.Kurland@dot.gov

Esta.Rosenberg@dot.gov

Todd.Homan@dot.gov

brian.ctr.meehan@faa.gov

fbavent@airlineinfo.com

info@airlineinfo.com

and via First Class Mail on the following:

Mayor Vincent Gray

Executive Office of the Mayor

1350 Pennsylvania Avenue, NW

Suite 316

Washington, DC 20004

Mayor Alvin Brown

Mayor’s Office

City Hall at St. James Building

117 W. Duval St Suite 400

Jacksonville, FL 32202

John Potter

President and CEO

Metropolitan Washington Airports 

Authority

1 Aviation Circle

Washington, DC 20001

___________/s/____________________

 Michael R. Radlick