U.S. Department 

of Transportation 

Office ot the Secretary 

of Transportation 

Ms. Julie Oettinger 

Managing Director 

Intel11ational & Regulatory Affairs 

United Airlines 

Assistant Secretary 

MAy 2 6 2010 

1025 Connecticut Avenue, NW Suite J 21 0 

Washington, DC 20036 

Dear Ms. Oettinger: 

;,,~.. C' i) 2 23 j:i'! - "} \- : 

X 1-1 00316-00 1 

1200 New Jersey Avenue. SE 

Washington. DC 20590 

Thank. you for your letters to the U. S. Department of Transportatiol1 ("the Department") 

of October 2 and March 1, concerning applications under the Small Community Air 

Service Development Program ("Small Community Program," or "SCASDP") from 

Huntsville, Alabama ("Huntsville" or "HSV"), Greenville/Spartanburg, South Carolina 

("Greenville/Spartanburg"), and Knoxville, Tennessee ("Knoxville" or "TYS"). 

Your letters expressed concern over whether these three proposals were consistent with 

the Department's policies on award, as you believed they sought grant funds to subsidize 

additional service in a market that was already served by another carrier 0)' carriers. Your 

March 1 letter, sent after DOT selected the Huntsville and Knoxville proposals for 

award, I requested that we clarify that the communities would not be authorized to utilize 

the grant funds for service to any airport in the "Washington/Baltimore market." 

Underlying your request is the fact that United serves Huntsville and Knoxville from 

Washington Dulles International Airp011 (lAD), and the premise that the 

"WashingtonIBaltimore market" is a single market that includes lAD, Ronald Reagan 

Washington National Airport (DCA), and Thurgood Marshall Baltimore-Washington 

Airport (BWI). 

As background, the Small Community Program was established to help smaller 

communities address air service deficiencies, particularly issues related to high airfares 

and insufficient service. Congress appropriated $8 million for grant awards under this 

program in Fiscal Year 2009. In order to provide communities with latitude in 

developing solutions to their air service problems, the statute provides significant 

flexibility in how the financial assistance may be used. 

In their applications, Huntsville and Knoxville set out in detail their reasoning for seeking 

assistance under the Small Community Program. Their proposals were focused on 

I In February 2010. the Department announced its SCASDP awards fol' 2009. As you are aware, Huntsville 

and Knoxville were recipients of grant awards of$I,OOO,OOO and $500,000, respectively. Greenville! 

Spartanburg was not selected for an award for 2009. 
X 1-100316-001 

lowering airfares at the airports, and their applications demonstrated that their airfares are 

significantly higher than the national average (#1 highest and #3 highest in the nation, 

respectively). 

Huntsville specifically targeted the HSV -BWI market and the HSV - Orlando market 

because those markets are the number two and number three markets, respectively, that 

do not have nonstop service. The HSV - BWI market is approximately 54 passengers per 

day each way ("PDEW")~ while the HSV - lAD market is 32 PDEW and currently has 

multiple nonstop flights via United Express. Knoxville's application targeted the TYSBWI market. The proposals sought revenue guarantees and start-up cost offsets to assist 

their targeted carriers in establishing service. 

Turning to the question as to whether the Washington and Baltimore airports constitute a 

single domestic market, the Department has found strong evidence that the three major 

airports serving the Washington/Baltimore market (lAD, DCA, and BWI) are not 

economic substitutes. In several tests we performed, domestic price competition among 

the airports did not appear to be pervasive enough to discipline individual airport prices 

and eliminate the substantial price differentials that exist. 

Following that reasoning, the grant funds will not be utilized to subsidize service in the 

"same market" that United serves. The Department's selection of these communities for 

grants is consistent with the statutory criteria for award recommendations, and I find no 

reason to find the selections otherwise prohibited by our policies. Had the two 

communities proposed service to lAD in direct competition with United, the applications 

would have been materially different and evaluated on different grounds. 

As is our normal practice, I am placing a copy of your letter and this response in Docket 

OST-2009-0149 as a contact outside the r~cord of this matter. I appreciate your interest 

in this program. 

Sincerely yours, 

Susan L. Kurland 

Assistant Secretary for 

Aviation and International Affairs