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 ) DOT-OST-2000-7182

)

Consolidated Response Of JetBlue Airways Corporation

Communications with respect to this document should be addressed to:

James Hnat Jonathan B. Hill

Executive Vice President for J. Parker Erkmann

Corporate Affairs & General Counsel Dow Lohnes PLLC

JetBlue Airways Corporation 1200 New Hampshire Ave., NW

27-01 Queens Plaza North Suite 800

Long Island City, NY 11101 Washington, D.C. 20036

(202) 776-2000

jhill@dowlohnes.com

perkmann@dowlohnes.com

Robert C. Land

Senior Vice President for Government Counsel for 

Affairs & Associate General Counsel JetBlue Airways Corporation

JetBlue Airways Corporation

P.O. Box 1927

Rockville, Maryland 20849-1927

(301) 279-9727

December 19, 2012
2

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

________________________________________________)

Consolidated Response Of JetBlue Airways Corporation

JetBlue Airways Corporation (“JetBlue”) hereby submits the following Consolidated 

Response to the competing applications for the pair of slot exemptions to be reallocated 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

 In 

light of the Congressionally-established criteria for awarding AIR-21 slot exemptions, JetBlue’s 

application to introduce low fare competitive service in the DCA-Jacksonville, FL (“JAX”) 

market with continuing service to San Juan, Puerto Rico (“SJU”) stands alone. As restated in the 

Notice, 2 these criteria are:

the Secretary [shall] distribute within-perimeter slot exemptions in a manner that 

promotes air transportation: (1) by new entrant air carriers and limited incumbent 

air carriers; (2) to communities without existing nonstop air transportation to 

DCA; (3) to small communities; (4) that will provide competitive nonstop air 

transportation on a monopoly nonstop route to DCA; or (5) that will produce the 

maximum competitive benefits, including low fares.

Notice at 1-2. The applications of US Airways and Southwest both undermine important 

directives in AIR-21. First, because three of the statutory criteria are directed at fostering 

competitive service at DCA, an award of slot exemptions to US Airways, which is DCA’s 

dominant carrier, contravenes Congressional intent and exceeds the Department’s discretion. 

Second, because AIR-21 seeks to promote service to small communities, granting Southwest’s 

application to serve Houston, the fifth-most populous metropolitan area in the country, also 

would be inconsistent with a fundamental Congressional directive. 

 1 See 49 U.S.C. § 41718(b).

2

 Notice, Establishment of Slot Exemption Proceeding Pursuant to 49 U.S.C. § 41718(b), 

Docket DOT-OST-2000-7182 (Nov. 13, 2012) (the “Notice”).
3

Section 41718 does not provide the Department with guidance on how the criteria are to 

be weighted, and the Department has interpreted this lack of direction as providing it with the 

discretion to determine how much weight each factor deserves on a case-by-case basis. The 

Department reinforced this interpretation in Order DOT-OST-2012-7-26 (July 24, 2012), in 

which it rejected any requirement to award the slot exemptions to the application meeting the 

greatest number of statutory criteria and retained discretion to weight the criteria as it saw fit. 

Instead, the Department has claimed discretion to decide which of the five criteria are most 

important on a case by case basis. Accordingly, JetBlue submits that in this proceeding it is the 

only limited incumbent carrier to propose competitive service on a true monopoly route between 

a medium-hub airport and DCA, and only JetBlue’s proposal will produce the maximum 

competitive benefits, including the greatest reduction in fares in the proposed markets. In 

contrast, Southwest proposes to serve one of the nation’s largest markets but will have 

comparatively little impact on average fares. Because, as will be discussed below, JetBlue best 

satisfies the statutory criteria established for awarding AIR-21 slot exemptions, JetBlue 

respectfully requests that the Department reallocate the available slot exemptions for its proposed 

DCA-JAX service. 

I. The Department Should Not Award Additional Slot Exemptions To US 

Airways.

A fundamental Congressional goal in AIR-21 is the promotion of competition at DCA. 

Indeed, the statute directs the Department to favor: (1) new entrants and limited incumbent air 

carriers, (2) the introduction of competitive service on monopoly routes, and (3) the service that 

provides the maximum competitive benefits, including low fares. The Department has 

repeatedly stated that promotion of competition is a critical goal in the allocation of slot 

exemptions. See Order DOT-OST-2000-7-2 (July 5, 2000), at 20 (allocating slot exemptions 

because the “proposals would meet the statutory criteria of providing competitive nonstop air 

transportation on DCA monopoly nonstop routes by offering low-fare service to compete with 

US Airways’ monopoly”); Order DOT-OST-2004-8-3 (Aug. 9, 2004), at 12 (allocating slot 

exemptions because proposal “provide[d] competitive nonstop air transportation on a monopoly 

nonstop route to DCA” and “produce[d] the maximum competitive benefits, including low 
4

fares.”). Given the Congressional directive, the award of additional slot exemptions to an air 

carrier with unequalled market dominance at DCA is untenable. 

This position is especially true given the recent rulings by the Department that have 

allowed US Airways to strengthen its position at the airport. US Airways’ already dominant 

position at DCA was further enhanced when the Department approved the US Airways – Delta 

Air Lines “slot swap” whereby US Airways acquired an additional 42 slot pairs.3

 Since that 

transaction closed, US Airways has only solidified its leading position. As shown in the charts 

below, before the slot swap, US Airways and its affiliated regional carriers operated 46 percent 

of all flights at DCA, and this has increased to 55 percent since the acquisition of Delta’s slots.4

The Slot Swap Strengthened US Airways’ Market Position At DCA

Source: OAG Schedule, as provided by Diio.

As described in JetBlue’s Application, this consolidation in DCA slot holdings has resulted in 

US Airways operating more monopoly routes and, as the preliminary data indicates, higher fares

for consumers. See JetBlue Application at 11. US Airways’ DCA dominance has resulted in the 

airport earning a dubious distinction: of the nation’s slot-controlled airports, DCA has the most 

regional jet (or smaller) aircraft serving the airport.

 3 See Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia 

Airport, 76 Fed. Reg. 63,702 (Oct. 13, 2011).

4 The 55 percent figure actually understates US Airways’ dominance at DCA. Through its 

codeshare with United, US Airways sells additional seats on United’s flights to Denver (“DEN”) 

and Chicago O’Hare (“ORD”), meaning that it sells seats on a full 58 percent of flights from 

DCA.

US 

Airways

46%

DL

22%

AA

12%

UA

8%

Other

12%

DCA Departures Share: 

Pre-slot swap

Data for 4Q2011

US 

Airways

55%

DL

11%

AA

12%

UA

8%

Other

13%

DCA Departures Share:

Post slot swap

Data for 4Q2012
5

Small Aircraft Dominate The Sky At DCA

Source: OAG Schedule for 1Q2013, as provided by Diio.

By operating limited and valuable DCA slots, including many of its air-carrier (non-commuter 

designated) slots allocated for large jets with small aircraft, US Airways has effectively restricted 

capacity by limiting the number of seats in a given market. Because of the constraints on supply, 

the limited slots and the artificial limitation of the number of seats through the use of smaller 

aircraft, fares at DCA are very high.5

 As will be discussed in Section II.A, DCA-JAX is a 

perfect example of this use of dominant market share at a capacity-restricted airport. In light of 

the use of smaller-capacity aircraft and higher fares, the award of additional DCA authority to 

US Airways should not be considered seriously.

Independent of the broader considerations of competition at DCA overall, US Airways’ 

application to serve Oklahoma City (“OKC”) offers fewer benefits than does JetBlue’s proposed 

service to Jacksonville. First, JetBlue proposes to serve JAX with its 150-seat A320 aircraft, 

 5

 The Department has repeatedly found that fares at DCA are higher than at other airports. See, 

e.g., Notice on Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at 

LaGuardia Airport, 75 Fed. Reg. 26,322, 26,323 n.12 (May 11, 2010) (“DOT calculated that, at 

DCA, US Airways charged on average 124% of the Standard Industry Fare Level (SIFL), a costbased index that the Department has used historically to assist in its evaluation of pricing. 

However, in markets where it held a 95 to 100% share of nonstop departures, US Airways 

charged substantially more.”).
6

which is more than 50 percent larger than the 99-seat E-190 proposed for OKC by US Airways. 

Second, US Airways’ offer to start service between OKC and its hub in Charlotte, NC (“CLT”) 

should be dismissed for what it is: an irrelevant gimmick that requires no Departmental action if 

US Airways were interested in starting such service. See Order DOT-OST-2004-12-6 at 7-8 

(awarding slot exemptions to Atlantic Southeast Airlines over Northwest because Northwest 

would use the slot exemptions to “backfill for slots it elected to lease out to others”). Given US 

Airways’ DCA slot portfolio of approximately 470 slots and exemptions and its dominant hub 

operations at CLT, US Airways has the resources to start its proposed OKC service at any time.

6

 

If such service is economical, US Airways should start it and not ask the Department to induce 

the service through the award of scarce DCA slot exemptions.

II. JetBlue’s DCA-JAX Application Is Superior To Southwest’s Proposal to 

Serve Houston.

Southwest’s application to serve Houston’s Hobby Airport relies on inconsistent claims 

about its proposed service to mask the fact that it does not satisfy one of the important 

Congressionally-established statutory criteria. To be eligible to apply for the slots to be 

reallocated in this proceeding, Southwest has proposed service to a medium-hub airport, 

Houston’s William P. Hobby Airport (“HOU”). Southwest Application at 1, 3. The greatest 

purported benefits of Southwest’s application do not stem from the benefits of serving HOU, but 

from its impact on the Houston market and more specifically its claim that the proposed service 

will compete against United’s service between DCA and Houston’s George Bush 

Intercontinental Airport (“IAH”), which “is a large hub and therefore ineligible for service in this 

proceeding.” Southwest Application at 3. The Department has long considered HOU and IAH 

to be the same market. Not only are IAH and HOU reported as a single market on Form 41 data 

provided to the Bureau of Transportation statistics, but as Southwest points out in its application, 

the U.S.-Mexican Bilateral Aviation Agreement, as amended, designates Houston as a “single 

point, which can be served by either airport.” Southwest Application at 2 n.1. Accordingly, 

Southwest’s proposal is inconsistent with the statutory direction that the Department foster 

 6 Indeed, this week US Airways loaded changes to its DCA schedule, cancelling twice daily 

service to Ottawa, CA and six times weekly service to Northwest Arkansas effective February 2, 

2013. See OAG Schedule. This action freed up almost three slot pairs that could be used to start 

OKC service without an AIR-21 slot exemption. 
7

service to small communities. Because JetBlue proposes to serve a smaller community than 

Houston and the DCA-JAX service will have a proportionately larger competitive impact than 

Southwest’s proposal, JetBlue submits that its application best satisfies the intent of Congress 

and offers the greatest consumer benefit within the scope of the Congressionally mandated 

criteria. 

A. JetBlue’s DCA-JAX Service Will Provide Significant Competitive And 

Consumer Benefits. 

JetBlue’s proposed service to Jacksonville will result in significant competitive and 

consumer benefits for travelers between JAX and DCA. US Airways’ average annualized fare in 

DCA-JAX is $214.

7

 JetBlue projects that its average fare will be $125, which is $89 or 41

percent less than the current average US Airways DCA-JAX annualized fare.

 7

 The $214 fare is the annualized average US Airways has charged to all fared passengers in the 

DCA-JAX market. See O & D Survey, as provided by Diio for YE 2Q2012. Since Delta’s exit 

from the market halfway through this period in January 2012, US Airways’ fares have increased 

16 percent. See id; Part II.C, infra. This calculation excludes taxes and other government fees 

and includes an estimate of baggage and rebooking/change fees. See O & D Survey, as provided 

by Diio for YE 2Q2012. For the purpose of this comparison, JetBlue attempted to replicate 

Southwest’s calculation of the average United fare in the DCA-IAH market. See Southwest 

Application Exhibit WN-103.
8

JetBlue’s Projected DCA-JAX Fare

Will Be 41% Less than US Airways’ Current Fare8

Consistent with JetBlue’s experience in other markets, see JetBlue Application at 4, 9-10, the 

lower fares will increase traffic in the market by an estimated 109,726 passengers. JetBlue will 

carry most of this traffic, but the lower fares also will stimulate additional passengers on US 

Airways’ flights.

JetBlue’s Proposal Will Grow The JAX-DCA Market By Over 100,000

 8

 See O & D Data, as reported by Diio. The average fare used in the chart is the average fare 

charged by US Airways for nonstop service DCA-JAX and excludes fares sold for connecting 

service on other airlines.

$214

$125 

$0

$50

$100

$150

$200

$250

US DCA-JAX Fare Assumed B6 DCA-JAX Fare

Average Fare

(41%)

($89)

78,840 

30,886 

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1

US pax

B6 pax

Total: 109,726
9

The introduction of competition in the DCA-JAX market will result in considerable consumer 

benefit, an estimated $10.6 million in fare savings.

JetBlue’s DCA-JAX Service Will Generate

$10.6 Million Annually In Consumer Fare Savings 

In making these estimates, JetBlue used the same methodology employed by Southwest in 

Appendix 1 of its Application. See Exhibit B6-R-101. The results of that methodology reflect 

estimates based on conservative assumptions and JetBlue’s long track record of adding capacity 

and lowering fares when entering markets dominated by US Airways.9 

JetBlue’s proposal also adds more capacity to DCA than does Southwest’s proposal. 

Southwest proposes to use a Boeing 737-700 aircraft with 143 seats, Southwest Application at 3, 

while JetBlue has proposed to serve DCA-JAX on its 150-passenger A320.

B. Southwest’s Claims Of Consumer Benefits Are Inflated.

Southwest’s Application makes aggressive claims about the amount of consumer benefit 

that will result from its proposed service to greater Houston. In particular, Southwest’s claims 

about United’s average fare in the DCA-IAH market is the result of an elaborate calculation

intended to inflate the average fare. When the same calculations are made in the JAX-DCA 

market, it is apparent that JetBlue will have a proportionately larger impact on the average fare 

 9 Indeed, JetBlue’s estimate made the very conservative assumption that its DCA-JAX service 

would have no competitive impact on United’s JAX service from Dulles International Airport 

(“IAD”). 

$7.6M

$3.0M

$10.6M

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

Savings to Existing

Passengers

Savings to New

Passengers

Total Passenger

Savings

DCA-JAX

Consumer Fare 

Savings ($M)
10

than will Southwest’s proposed service. Moreover, as will be discussed below, Southwest’s

claims about the amount of consumer benefit are based on assumptions that are inconsistent with 

United’s response to competition from Southwest in other markets. More than likely, United’s 

conduct in other markets will be replicated in the IAH/HOU-DCA market, and Southwest’s 

proposed benefits will hardly be realized to the extent claimed. 

1. The $334 Average Fare In The DCA-IAH Market Cited By Southwest In 

Its Application Is Overstated.

Southwest claims significant competitive benefits because its proposed $207 average fare 

in the DCA-HOU market will be less costly than the current $334 average fare charged by 

United on its DCA-IAH route. See Southwest Application at 5, WN-101. JetBlue’s analysis of 

the average fare in this market, however, suggests that Southwest’s number is significantly 

inflated. When JetBlue calculates the average fare in a market, it divides the passenger revenue 

as reported to DOT by the total number of local passengers as reported to DOT. Using that 

methodology for United’s flights in the DCA-IAH market results in an average fare of $272.

10 

The average fare for all carriers in the DCA-IAH market, which includes connecting traffic, is 

$242.11 Reaching the $334 average fare requires multiple calculations. First, Southwest 

apparently has increased the average fare by removing zero-fare passengers (such as loyaltyprogram redemption tickets) from the denominator of the average calculation. See Southwest 

Application at WN-103 n.1. Second, Southwest has included an adjustment to account for 

baggage and change fees,12 which necessarily is a generalized estimate because the Form 41 data 

apparently used to calculate it is not available at the route level. See id. Properly adjusting for 

 10 See O & D Data, as provided by Diio. Data is for YE 2Q2012.

11 See O & D Data, as provided by Diio. Data is for YE 2Q2012. 

12 At first glance, Southwest’s inclusion of an estimate of these fees makes some intuitive sense. 

Because of its “bags fly free” policy, passengers have not paid these fees when they fly 

Southwest. But Southwest recently announced that it will begin charging more fees, including 

increasing fees for third and overweight bags, fees tied to the sale of open and premium boarding 

positions and a no-show fee for restricted tickets that passengers fail to cancel. See Southwest 

Air Sets New Fees To Add $100mln To Revenue, Reuters (Dec. 14, 2012) (available at: 

http://www.reuters.com/article/2012/12/17/uk-southwestair-fees-idUSLNE8BD01O20121217). 

JetBlue does not charge a fee for the first checked bag. 
11

these factors results in a much reduced average United fare in the DCA-IAH market and hence a 

lower difference between Southwest’s fare and United’s fare.

United’s Average DCA-IAH Fare Is Only $27213

The difference in the average fare calculation results in a meaningful difference in the 

evaluation of the competing proposals in this proceeding. Southwest’s estimate of the post-slot 

award DCA-IAH/HOU fare is only 19 percent lower than the current average fare in the DCAHouston market. Using the adjusted assumptions to analyze JetBlue’s fare differential, it is clear 

that JetBlue’s proposed service will have a much larger impact on the DCA-JAX market than 

Southwest will have on the Houston market. JetBlue’s estimate of the post-slot award average 

DCA-JAX fare is a full 28 percent lower than the current DCA-JAX average fare, as depicted in 

the chart below: 

 13 See O & D Data, as provided by Diio. Data is for YE 2Q2012.

$272

$42

$20

$0

$50

$100

$150

$200

$250

$300

$350

UA Estimated Fare

WN estimates fare 

@ $334

Base Fare, as reported in 

DOT O&D Survey

Adjustment for zero-fared 

passengers

Bag and change fees, estimate
12

JetBlue’s DCA-JAX Service Will Reduce Average Fares By More Than Southwest14

2. When Southwest and United Compete Head-to-Head in a Market, Fares 

Remain Above the Average Domestic Fare Curve.

Based on past examples of head-to-head competition between Southwest and United, it is 

apparent that Southwest’s promises of average market fares below the DCA market fare curve

will not be realized. Southwest claims that it will charge an average fare for DCA-HOU equal to 

the average fare level of $207 for its BWI-HOU service. Southwest Application Exhibit WN103. This would be $26 below the nonstop fare curve value of $233. See id. Exhibit WN-102. 

Prior examples of head-to-head competition between Southwest and United suggest, however, 

that average market fares will remain consistently higher than the average fare curve.

 14 For the purpose of this comparison, JetBlue used the average fare charged by all air carriers 

(as opposed to just United’s $272 average fare) on the DCA-IAH/HOU route, excluding 

passengers who did not pay a fare from the calculation. See O & D Data, as provided by Diio for 

YE 2Q2012. JetBlue also used the $200 average fare charged by all carriers (as opposed to the 

$214 average fare charged by US Airways) in the DCA-JAX market, excluding passengers 

carried who did not pay a fare from the calculation. See id. JetBlue also used each carrier’s 

respective estimate of the impact of its entry on the average fare in each market. See Southwest 

Application, Appendix 1.

$292

$235 

$0

$50

$100

$150

$200

$250

$300

DCA-HOU* fare today DCA-HOU* fare with

WN entry

Impact on Market Fare in DCA-IAH

(19%)

$200

$145 

$0

$50

$100

$150

$200

$250

$300

DCA-JAX fare today DCA-JAX fare with B6

entry

Impact on Market Fare in DCA-JAX

(28%)
13

United-Southwest Competition Results In High Fares15

Metro Market Carriers YE 2Q2012

Avg. Fare

Fare Curve

Expected Avg. Fare

Dollar Diff.

from Fare Curve

% Diff.

from Fare Curve

HOU-ABQ UA, WN $186 $181 $5 3%

HOU-RDU UA, WN $227 $199 $28 14%

HOU-STL UA, WN $196 $175 $21 12%

In stark contrast, in markets where JetBlue competes head-to-head with US Airways, the 

average market fares are consistently well below the average fare curve. This phenomenon is 

depicted in the chart below:

B6 Competition Against US Results In Fares Below The Average Fare Curve;

WN Competition Against UA Results In Fares Above The Average Fare Curve16

 15 The average fare curve is derived from all domestic nonstop routes for all fared passengers and 

can be expressed with the following equation: Fare = 56.2 ln(miles) - 191.3. This calculation 

includes fared passengers only and does not include bag or change fee estimates. See DOT O&D 

Survey for data YE 2Q2012, as provided by Diio. The HOU* metro market includes both IAH 

and HOU.

16 See DOT O&D Survey for data YE 2Q2012, as provided by Diio. The data depicted for the 

UA-WN markets in this chart is the same as the data used in the previous chart.

$0

$100

$200

$300

$400

300 500 700 900 1100 1300

Average fare

Nonstop miles

US Domestic Average Fare Curve

metro nonstop markets, YE 2Q2012

HOU*-ABQ

HOU*-RDU

HOU*-STL

BOS-RIC BOS-CLT

BOS-BUF

AVERAGE

UA and WN only

AVERAGE

US and B6 only
14

3. United Is Unlikely To Match Southwest’s Fare Levels.

Southwest’s claimed benefits also are overstated because United is unlikely to follow 

Southwest’s lead and price its fares at the Southwest level. In markets where United and 

Southwest compete, United historically does not match Southwest’s prices and continues to 

charge a premium 38 percent higher than Southwest’s fares.

17 In contrast, the premium that US 

Airways charges when it competes head-to-head against JetBlue is significantly lower, 

approximately 21 percent. See Exhibit B6-R-102 (depicting the premium charged by US 

Airways and United when competing against JetBlue and Southwest respectively in certain 

representative markets).

JetBlue Has A Larger Impact On US Airways’

Fares Than Southwest Has On United’s Fares.18

There are a number of reasons to believe this conduct will be replicated in the DCA-Houston 

market. First, Southwest’s and United’s flights will not compete head-to-head against each 

other. They serve two different airports that appeal to different segments of the population of 

 17 Southwest’s application acknowledges this fact, stating that United “historically lowers its 

fares in response to direct Southwest competition” rather than stating that United matches 

Southwest’s fares. See Southwest Application at 5 (emphasis added).

18 This chart summarizes the data contained in Exhibit B6-R-102.

21%

38%

0%

10%

20%

30%

40%

US premium over B6 UA premium over WN
15

Houston. Second, even if Southwest is awarded these slot exemptions, United will continue to 

fly more frequencies, offering a far more attractive schedule to business and leisure travelers

alike. Third, the market profile of DCA-HOU is similar to the market profile of EWR-HOU 

(large metropolitan areas, slot controlled airports) where United’s average fares are 58 percent 

higher than Southwest’s. See Exhibit B6-R-102. Fourth, the services offered by United and 

Southwest are different and compete in a number of ways other than price such as cabin 

configuration, the ability to reserve seats, connecting options and frequent flyer programs. As 

this data demonstrates, JetBlue’s service will have a more pronounced impact on fares than will

Southwest; thereby fulfilling the fifth statutory criteria that the proposed service make a 

significant impact on competition, including lower fares.

4. JetBlue’s DCA-JAX Service Will Have A Larger Competitive Impact 

Because It Reflects The Entry Of A Genuinely New Competitor.

Unlike Southwest’s proposed Houston service, JetBlue’s DCA-JAX service represents 

the introduction of genuine competition from the greater Washington metropolitan area. JetBlue 

currently does not serve JAX from any of the three Washington-area airports, DCA, IAD or 

BWI. In contrast, Southwest has three daily flights from HOU to BWI in competition with 

United’s considerable service between the greater Washington-area and Houston. 

Southwest Already Competes With United

On Routes Between The Washington Metro Area And Houston19

Airport Carrier Frequency Daily Seats

BWI-HOU WN 3x daily 438

BWI-IAH UA 3x daily 404

DCA-IAH UA 8x daily 949

IAD-IAH UA 6x daily 501

Accordingly, the fare structure of the Washington-Houston market described in Southwest’s 

Application already reflects some level of competition from Southwest. In contrast, JetBlue’s 

service will be first of its kind and compete head-to-head on the same airport pair as US 

Airways’ monopoly route.

 19 See OAG, as provided by Diio, (reflecting March 2013 OAG schedule).
16

C. JetBlue’s Proposal Addresses The Biggest Competitive Problem At DCA

While Southwest’s Fails To.

JetBlue’s proposal provides the greatest public benefit because it takes on the core 

competitive problem at DCA: the dominance of US Airways. In contrast, Southwest’s proposal 

seeks to compete against DCA’s fourth-largest carrier, United, which serves only its hubs from 

DCA. In approving the 2011 slot swap transaction, the Department implicitly embraced US 

Airways’ argument that a larger network at DCA resulted in efficiencies and consumer benefits 

despite the Department’s reservations that “the transaction d[id] raise concerns as to levels of 

airport concentration [and] the number of monopoly or dominant markets in which increased 

pricing power can be exercised.”20 The Department concluded that limited divestitures would 

“address the competitive harm caused by the transaction.”21

Unfortunately, because the divestitures were so limited, the Department’s concerns have 

come to fruition in markets like DCA-JAX and fares have increased significantly. Since Delta 

exited the market after the slot swap, fares have increased and service has been cut:

US Airways Has Raised Fares 

And Cut Capacity On DCA-JAX22

 20 See 76 Fed. Reg. at 63,705.

21 See id. at 63,706.

22 See O & D Survey, as provided by Diio.

$50

$100

$150

$200

200

350

500

650

2004 2005 2006 2007 2008 2009 2010 2011 2012

Average fare

Nonstop seats per day

Historical Capacity vs. Fare in DCA-JAX

Daily NS Seats Avg fare

DL 

exits

DL 

enters
17

This phenomenon is observable across US Airways’ network at the airport. US Airways has 

acquired a monopoly in seven markets since the slot swap closed, DCA-Columbus (“CMH”), 

DCA-JAX, DCA-Providence (“PVD”), DCA-Hartford (“BDL”), DCA-Charleston (“CHS”), 

DCA-Indianapolis (“IND”), and DCA-New Orleans (“MSY”). In three of them, DCA- CMH, 

DCA- JAX, and DCA- PVD, there is sufficient data to analyze the competitive impact. As one 

would expect, prices have increased in these markets by an average of 19 percent as depicted in 

the chart below:

Fares Have Increased In US Airways Monopoly Markets23

Market Remaining carrier YOY fare ∆

DCA-CMH US Airways 4%

DCA-JAX US Airways 16%

DCA-PVD US Airways 40%

US Airways average 19%

Only JetBlue has taken on the consumer-friendly task of going head-to-head against DCA’s 

dominant carrier. In contrast, as depicted in the chart below, Southwest uses the slots it holds to 

serve markets that US Airways does not.

 23 See O & D Survey, as provided by Diio.
18

JetBlue Competes Aggressively Against US Airways At DCA24

Having made the decision to allow US Airways to expand at DCA, JetBlue submits that 

the Department must use the other policy tools at its disposal to promote competition and reign 

in the dominant carrier. This is just such an opportunity, and the Department should exercise its 

discretion to grant the slot exemptions to JetBlue, the only carrier willing to compete directly 

against US Airways.

D. Southwest’s Proposed Service to Houston is Inconsistent with Congress’s 

Direction In AIR-21 To Facilitate Service To Medium-Sized And Small 

Communities. 

Granting Southwest’s application would undermine a critical Congressional mandate 

when enacting AIR-21. In passing this statute, Congress sought to increase capacity at slotconstrained airports but was concerned that larger cities would enjoy all of the benefits of those 

capacity increases. See 146 Cong. Rec. S1247-07 (Mar. 8, 2000) (statement of Sen. Grassley), 

2000 WL 255797 (expressing concern that “we would only see increased flights between major 

cities, to the exclusion of smaller airports.”); 146 Cong. Rec. H1002-01 (Mar. 15, 2000) 

(statement of Rep. Costello), 2000 WL 278237 (“This legislation serves to increase competition 

and aid small communities.”). As a result Congress created the AIR-21 slot exemptions with 

attributes designed to promote service to small communities. There is a requirement that 

 24 See OAG Survey, as provided by Diio.

0

5

10

15

20

25

30

35

40

B6 WN

Total Slots

in Usage against other against US
19

exemptions be allocated to medium-hub and smaller airports, and an express direction that the 

Department consider service to: “distributing slot exemptions for flights within the perimeter to 

such airports . . . in a manner that promotes air transportation . . . to small communities. . . .”25 

Southwest’s application is directly at odds with this Congressional directive. Southwest

itself touts the fact that Houston is the “fifth largest metro in the U.S.” Southwest Application at 

7. The application also points out that IAH and HOU are operated together: “IAH and HOU are 

both owned by the City of Houston and operated by the Houston Airport System (“HAS”).

Southwest Application at 2 n.1. Southwest even argues that consumer demand for service from 

IAH and HOU is equivalent: “Clearly, the demand for service to HOU is as strong as it is to 

IAH.” Id. at 7. Indeed, all of the purported consumer cost savings from Southwest’s application 

is realized in the market between DCA and the city of Houston, which is a hub for two major 

airlines. In contrast to Houston, Jacksonville is a much smaller community; Houston’s 

population of six million is more than four times the population of Jacksonville.26 Accordingly, 

Jacksonville is a medium-sized city of the type to which Congress sought to promote service 

when creating AIR-21 slot exemptions. 

Because JetBlue proposes to serve a smaller community than Houston, its service will 

have a disproportionately larger impact on the community. Both JetBlue and Southwest project 

cost savings from their respective services. The benefits of JetBlue’s service, however, will be 

realized across a much smaller population. As a result, the average cost savings realized per 

local resident as a result of JetBlue’s proposal are significantly greater.

 25 49 U.S.C. § 41718(b)(3); see 49 U.S.C. § 41718(c) (requiring the Department to award 16 of 

20 AIR-21 slot exemptions to medium-hub or smaller airports).

26 American Fact Finder, Census.gov, 

http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml (ACS Demographic and Housing 

Estimates for 2011 reporting Houston’s population as 6,086,895 and Jacksonville’s as 

1,358,593).
20

JetBlue’s Consumer Cost Savings Are Greater On A Per Capita Basis27

At bottom, Southwest’s proposal will have a small impact on a very large market; JetBlue will 

have a significant impact on a much smaller community. The statute directs the Department to 

consider the interests of smaller communities in this proceeding. By proposing to serve one of 

the nation’s largest cities through a smaller airport, Southwest has attempted a regulatory end 

run, which the Department should not reward. Instead, the Department should award the slot 

exemptions to the only limited incumbent proposing to serve a small or medium-sized 

community consistent with the Congressional directive. 

 27 To make this comparison, JetBlue accepted the consumer cost savings estimates of both 

Southwest ($19.1 million) and JetBlue ($10.6 million) and averaged them across the population 

of each Metropolitan Service Area as reported in the Census. See Southwest Exhibit WN-106; 

American Fact Finder, Census.gov, http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml

(ACS Demographic and Housing Estimates for 2011 reporting Houston’s population as

6,086,895 and Jacksonville’s as 1,358,593).

$3.1

$7.8

$0.0

$3.0

$6.0

$9.0

WN B6

Estimated Saving per Capita
21

E. Southwest Does Not Propose to Serve a Genuine Monopoly Route.

Because Southwest proposes to serve Houston’s Hobby Airport rather than George Bush 

Intercontinental Airport, it does not satisfy completely another of the statutory criteria. AIR-21 

directs the department to select a route where a carrier “will provide competitive nonstop air 

transportation on a monopoly nonstop route to [DCA].” 49 U.S.C. § 41718(b)(4). Southwest’s 

proposal to serve a different airport in Houston than United is logical, as Southwest has 

significant operations at HOU. But as a result, Southwest will not compete as directly with 

United as if it proposed to serve the true monopoly nonstop route, DCA-IAH. This is evident in 

the data that Southwest presented in its own application. Southwest competes with United 

between BWI and Houston, but again flies to HOU while United flies to IAH. The 

differentiation in services results in a price difference of $33. See WN-104. If the same effect is 

observed at DCA, similar fare differences will be expected. In contrast, JetBlue’s JAX-DCA 

proposal takes on the monopoly service of US Airways on the exact same routing in direct 

satisfaction of the statutory criterion with corresponding benefits to competition and the 

consumer.

III. The Department Should Select JetBlue’s Application.

While Congress has directed the Department to consider certain criteria in awarding slot 

exemptions, it retains discretion to make an award based on its evaluation of the relative merits 

of the different applications:

the statute “provides the Department with the essential flexibility it needs in 

comparing these applications, ensuring that its determinations in these matters 

will maximize public benefits.” Order 2000-7-2 at 15. Accordingly, the 

Department has the discretion to premise an award based upon satisfaction of less 

than the greatest number of criteria, or even one criteria, listed in Section 

41718(b), based upon the Department’s analysis of the relative merits of each 

carrier’s proposal when evaluated under the Section 41718(b) criteria.

DOT-OST-Order 2012-7-26 (July 24, 2012), at 16. JetBlue respectfully submits that the 

evaluation of these criteria in light of the Congressional intent requires an award to JetBlue for 

its proposed DCA-JAX. JetBlue’s application will:

• Reduce fares and stimulate traffic, resulting in more than $10 million in consumer 

savings;
22

• Introduce direct, head-to-head competition on an actual monopoly nonstop route;

• Serve a true small community (a medium-sized city), not a major city;

• Increase competition against the network of US Airways, DCA’s dominant high-fare

carrier;

• Reduce fares by the greatest percentage of all the applications in this proceeding;

Southwest’s claims of consumer benefit all derive from the fact that it proposes to serve a larger 

city than JetBlue or US Airways. Its calculations of consumer benefits from its service result in 

larger absolute numbers because of the size of the Houston market, not due to Southwest’s 

proposal. JetBlue will have a much larger impact in the Jacksonville market. Indeed, looking at 

consumer benefits as a percentage of population served, JetBlue’s consumer impact is 

proportionately greater than those assumed by Southwest. Given the statutory direction to 

consider service to smaller communities, the proportionally larger impact of JetBlue’s proposal 

is outcome determinative in this proceeding.

Conclusion

In light of the considerable consumer and the superior competitive benefits of JetBlue’s 

application, the Department should exercise its discretion to select JetBlue’s proposed DCA-JAX 

service.

Dated: December 19, 2012 Respectfully submitted,

Robert C. Land

Senior Vice President for Government Affairs

and Associate General Counsel
23

Certificate of Service

I, J. Parker Erkmann, hereby certify that a copy of the foregoing Consolidated Response

of JetBlue Airways Corporation was served this 19th day of December, 2012 via email 

transmission on the following persons:

dhainbach@ggh-airlaw.com

john.varley@virginamerica.com

jyoung@yklaw.com

bob.kneisley@wnco.com

leslie.abbott@wnco.com

howard.kass@usairways.com

robert.wirick@aa.com

francis.heil@aa.com

Karine.faden@united.com

dan.weiss@united.com

Sascha.vanderbellen@delta.com

john.fredericksen@suncoutry.com

robert.cohn@hoganlovells.com

marshall.sinick@squiresanders.com

charles.donley@squiresanders.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

steve.grossman@flyjacksonville.com

jegillick@zsrlaw.com

jhfoglia@zsrlaw.com

and via First Class Mail:

Arnaldo Deleo

General Manager Aviation Bureau

Port Authority

Government of Puerto Rico

PO Box 362829

San Juan, PR 00936-2829

/s/ Parker Erkmann

J. Parker Erkmann
Exhibit B6-R-101

JETBLUE’S DCA-JAX SERVICE WILL RESULT IN $10.6 MILLION IN CONSUMER BENEFIT

Fare Change

O&D Market Miles Passengers Before 

Stimulation

Predicted Service 

Stimulation (revenue) Base Fare Fees Total Projected B6 Fare

Absolute %

Fare 

Stimulation

Passengers After 

Stimulation

New 

Passengers

Existing 

Passengers

New 

Passengers

Total Consumer 

Surplus

DCA-JAX 634 138,036 30% 186 13.35 200 $125 -$74 -37% n/a 247,762 109,726 $7,602,010 $3,021,457 $10,623,467

Average Fare Before B6

Fare Stimulation

Consumer Surplus
Exhibit B6-R-102

JETBLUE HAS A LARGER IMPACT ON US AIRWAYS FARES

THAN SOUTHWEST HAS ON UNITED FARES

Source: DOT O&D Survey data from YE 2Q2012, as provided by Diio. BOS-DCA and BOSPIT use data from 2Q2012 only because Delta flew in the markets until March 2012. 

Market Carrier Avg. Fare Premium over B6 Market Carrier Avg. Fare Premium over WN

BOS-BUF US $113 13% HOU*-ABQ UA $215 26%

B6 $100 WN $170

BOS-CLT US $139 27% HOU*-CHS UA $228 27%

B6 $110 WN $179

BOS-RIC US $124 17% HOU*-EWR UA $309 58%

B6 $107 WN $196

Data from 2Q2012 only HOU*-IND UA $269 33%

BOS-DCA US $151 19% WN $203

B6 $127 HOU*-RDU UA $288 53%

BOS-PIT US $139 28% WN $189

B6 $108 HOU*-SAN UA $261 27%

WN $204

HOU*-MCI UA $199 24%

WN $161

HOU*-OKC UA $232 53%

WN $151

US average premium over B6 in 

competitive markets

21% UA average premium over WN in 

competitive markets

38%