BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

____________________________________ ) Applications of ) ) HAWAIIAN AIRLINES, INC. ) ) Docket DOT

- OST

- 2010

- 0018 UNITED AIRLINES, INC. ) ) in the matter of 2010 U.S.

- Haneda ) Combination S ervices ) Allocation Proceeding )

____________________________________ )

CONSOLIDATED REPLY OF HAWAIIAN AIRLINES, INC.
Communications with respect to this document should be addressed to: Mark B. Dunkerley President & Chief Executive Officer Hoyt H. Zia Senior Vice President, General Counsel & Corporate Secretary Hoyt.Zia@hawaiianair.com Mark K. Arimoto Associate General Counsel Mark.Arimoto@hawaiianair.com Hawaiian Airlines, Inc. P.O. Box 3000 8 Honolulu, HI 96820

- 0008 Jonathan B. Hill J. Parker Erkmann Benjamin Berlin Dow Lohnes LLP 1200 New Hampshire Ave., NW Suite 800 Washington, DC 20036 (202) 776

- 2000 (202) 776

- 4725 (fax) jhill@dowlohnes.com perkmann@dowlohnes.com b berlin @dowlohnes.com Counsel for Hawaiian Airlines, Inc.

December 16 , 2013DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 1 of 13

BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

____________________________________ ) Applications of ) ) HAWAIIAN AIRLINES, INC. ) ) Docket DOT

- OST

- 2010

- 0018 UNITED AIRLINES, INC. ) ) in the matter of 2010 U.S.

- Haneda ) Combination S ervices ) Allocation Proceeding )

____________________________________ ) December 16 , 2013 CONSOLIDATED REPLY OF HAWAIIAN AIRLINES, INC. In its Answer , United makes an appeal to the Department’s sense of fairness, arguing that it should receive the award because “United is the only applicant in this proceeding that has not been given the opportunity to serve Tokyo Haneda.” 1 This is not a reason to award the si ngle available slot pair to serve Tokyo International Airport (“Haneda” or “HND” ) to United. In the order instituting this proceeding, the Department stated that its “ principal o bjective [is] to maximize public benefits.” 2 In response, United has made the same inferior proposal ( San Francisco (“ SFO ”)

- to HND) that the Department has rejected in two prior proceedings. Not surprisingly, scrutiny of the arguments in United’s application and answer demonstrates that the

1 In re 2010 U.S.

- Haneda Combination Services Allocation Proceeding, Docket DOT

- OST

2010

- 0018, Answer of United Airlines, Inc., at 1 (Dec. 9, 2013) (“United Answer”) 2 In re 2010 U.S.

- Haneda Combination Services Allocation Proceeding, Docket DOT

- OST

2010

- 0018, Order 201 3

- 11

- 9 , at 6 (Nov. 1 4 , 201 3 )

.DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 2 of 13

purported benefits of its proposed S FO

- Haneda service are illusory and that only Hawaiian’s proposal to serve Haneda from Kona will maximize the public benefits. 3 The reasons for this stem from the fact that the size of the Hawaii

- Tokyo market overwhelms the size of the market between Tokyo and California and the Bay Area in particular.

HA

- 2013A

- 306 . T he introduction of service between Haneda and Kona will attract many more passengers than United’s proposal to add yet another daily nonstop between Tokyo and SFO, a

3 As the DOT has concluded before, consistently high load factors on a route clearly make that route “the most certain to be able to economically sustain additional service.” U.S.

- Japan Serv. Case, DOCKET 46438, 1990 WL 308304, *19 (DO T Feb. 8, 1990).DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 3 of 13

market that is both overwhelmed with capacity and already dominated by United and its Star Alliance partner ANA

. United’s answer makes a number of illogical or misleading claims, including that its proposed SFO service will introduce competition, that Kona

- Tokyo is “much

sma ller” than SFO

- Tokyo and that its proposed connecting services will generate public benefits. None of these arguments hold water.
I. The Tokyo
- Kona Market is Significant and Will Attract More Passengers than United’s Proposed Haneda Service. Because Kona on the Island of Hawaii has a small population compared to San Francisco, United attempts to characterize the Tokyo

- Kona market as small by focusing its analysis on
U.S.

- originating traffic , the current size of the market and population

. 4 See United Answe r at 2

- 3; UA

- A

- 107, 108. The Department should not be misled by United’s mischaracterizations. Because Tokyo

- Kona currently lacks nonstop service , the Department must consider the size of the Tokyo

- Kona market after nonstop service and the size of the ov erall Tokyo

- Hawaii market in assessing the passenger potential for Hawaiian’s proposed service. 5 This market is huge and dwarfs the Tokyo

- California market of which the Tokyo

- SFO market is only a fraction

– and not even the largest fraction at that

.

4 Moreover, in evaluating competing route proposals for service to Japan, the DOT has concluded that “considerations of traffic nationality are not relevant to the relative service and fare benefits and competitive impact offered by the applicants in the markets in which each proposes service.” U.S.

- Japan Serv. Case, DOCKET 46438, 1990 WL 308304, a t *22 (DOT Feb. 8, 1990). 5 It is also important to note that there are more Japanese visitors to the Big Island alone than to the Bay Area (see Exhibit HA

- 2013A

- 509 )

.DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 4 of 13

HA

- 2013A

- 303. The Department must account for the fact that the introduction of the first
Kona

- Haneda service will stimulate the market 6 and that the addition of another SFO

- Haneda frequency into an already saturated market will have minimal, if any, stim ulative effects . Kona will be underserved relative to the Bay Area. Indeed, Hawaiian projects that the gap in O&D

6 As shown in Exhibit HA

- 2013A

- 510, the projected stimulation in the KOA

- TYO market is based on KOA’s share of the Hawaii

- TYO market when JAL operated directional nonstop service in the past. This total stimulation is conservative given the share of Japanese travelers that go to the Big Island (See Exhibits HA

- 2013A

- 506

- 509).DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 5 of 13

passengers per flight will be significan t

— Kona will have 2.3 times as many or 132 percent more O&D passengers than SFO : 7

HA

- 2013R

- 2. Even without stimulation, Kona

- Haneda flights will have more O&D passengers per flight than the Bay Area with United’s proposed service. See HA

- 2013R

- 1.

7 As discu ssed below, United would attract very limited flow passengers and far fewer than would be needed to overcome Hawaiian ’s huge local market superiority.DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 6 of 13

Under United’s own standard for measuring the public benefits, the Haneda frequency must be award ed to Hawaiian. United concedes that the Department should “maximize the number of passengers who will benefit from the introduction of nonstop Tokyo Haneda service at the gateway supporting the largest traffic volume. ” United Answer at 2

- 3 . There is no question that Hawaiian’s proposed HND

- KOA service will generate higher traffic volume than United’s proposal to inject more service into the already saturated SFO

- HND market. See HA

2013A

- 512 , 613

. In apparent desperation to support its fla gging application, United astonishingly interjects ethnicity and ancestry into these proceedings. In doing so, it paints an eloquent picture of profound ignorance of geography, race and ethnicity in Asia which, if anything, adds weight and credibility to Hawaiian’s application. United points out that the Asian population of San Francisco and California are larger than the Asian population of Kona and Hawaii

. See UA

- A

107 , 1 08. For this statistic to have so much as a scintilla of relevance in this procee ding (and graciously to United we would be happy to stipulate that it does not), implies that those of Asian ancestry living in San Francisco have a greater propensity to travel to Japan than do the residents of Hawaii. However, Asia and Japan are not synonymous , as is readily discernible with reference to a map,

— there being many other countries with many ethnic and cultural groups of the ir own in what constitutes Asia. Americans of Filipino, Korean, Chinese, Vietnamese, Indian, Nepalese, Pakistani, o r Thai descent, for example, are no more likely to visit Tokyo than are Italians likely to visit Copenhagen, Egyptians to visit Cape Town and Brazilians to visit Tegucigalpa. Nor does United explain why it assumes Americans of Asian descent who seDOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 7 of 13

families have lived in the United States for generations would have a strong desire to visit Tokyo. Assuming arguendo that the size of the Asian

- American population has any relevance to the number of passengers who would fly to Japan, it would seemingly make more logical sense to count the number of Asian Americans of Japanese ancestry in those population areas. On that

score, more than two times as many Americans of Japanese ancestry liv e in Hawaii than in the San Francisco Bay Area. 8 In terms of California’s p opulation, Americans of Japanese ancestry rank a distant fifth behind those of Chinese, Filipino, Korean and Vietnamese ancestry. This perhaps explains why United chose to highlight all Asians in making its case. But highlighting the overall number of pe ople of Asian ancestry makes no sense in an application to serve HND, as passengers will not be flowing beyond HND to other Asian points. Such traffic flows occur at NRT where United already has service and does not require an HND slot. Instead, the Depar tment should rely of the verifiable fact that the 13 million residents of the Tokyo metropolis and more than 35 million residents of the greater Tokyo catchment area 9
have demonstrated a strong preference for traveling to Kona over San Francisc o

— as Kona, without nonstop service, already attracts more visitors than the Bay Area

. See HA

- 2013A

- 50 9

. II. United’s Contention that It Will Bring New Competition to Tokyo is Absurd. United’s Answer contains the remarkable assertion that grant of its application “can bring new competition to Tokyo Haneda.” United Answer at 1. This contention reflects a fundamental failure to understand the competitive dynamic between Tokyo and the Un ited States. As Hawaiian pointed out at length in its Answer, United and its immunized Star A lliance

8 See U.S. Bureau of the Census, 2012 American Community Survey 1

- Year Estimates. 9 See Statistics Japan, Statistical Handbook of Japan, Table 2:10.DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 8 of 13

partner ANA have the highest Tokyo

- U.S. market share and dominate approximately half the capacity at Haneda. See HA

- 2013A

- 704, 706. ANA already has two Haneda slot pair s, which ANA and its Star Alliance partners have elected to use to serve Honolulu and Los Angeles. In this proceeding, United proposes to introduce service on a route to Tokyo that the Star Alliance already serves 28 times per week and on which Star Alliance already has an 80 percent market share:

HA

- 2013A

- 110; see HA

- 2013A

- 905 (depicting Star Alliance’s 21 weekly roundtrips to SF O and 7 to nearby San Jose). Far from increasing competition, grant of United’s application would strengthen the dominant alliance in the Tokyo

- SFO market. This additional capacity may be sufficient to drive JAL, which already has taken down its NRT

- SFO service and down

- gaugedDOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 9 of 13

HND

- SFO to its smallest t ranspacific aircraft, from the market compl etely, leaving United /Star with a monopoly in the entire Bay Area

– Tokyo (Japan) market

. 10 Instead, awarding the available frequency to Hawaiian would bring Hawaiian to parity with the S tar Alliance’s two Haneda slots and actually reduce concentration in the U.S.

- Japan market. In other proceedings, United has assured the Department of the benefits of its immunized alliances and that those flights will be “metal neutral.” United cannot have it both ways. If the alliance flights are metal neutral, th a n th e Department must attribute ANA’s significant existing Toky o - SFO service to United , and an award to United will not increase competition

. III. The Purported Public Benefits of United’s Connections Are a Myth. As Hawaiian predicted, United has attempted to tout the benefits of its connecting service at SFO. Hawaiian’s Answer dispels the notion that the public will benefit from these connections. See Hawaiian Answer at 45

- 47. First, United proposes few connect ions that are not offered by Delta through its existing LAX and SEA service. See HA

- 2013A

- 90 8

. Second, the HND traffic between the unique connecting points is minimal and does not warrant any consideration in the Department’s analysis. See HA

- 2013A

- 909. At bottom, three years of experience have demonstrated that successful Haneda service depends on the origin and destination market with connecting service being of little value . Delta did not succeed at its gateway hub in Detroit, nor American in New Yo rk. Here, United simply proposes to repeat what already has failed twice before

.

10 JAL withdrew from the SFO

- NRT market when it began HND service. Delta has announced that it will discontinue SFO

- NRT service in March 2014.DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 10 of 13

United also disparage s Hawaiian’s proposal by pointing out that Hawaiian’s prop osed Haneda service would be its first As ian service from Kona , touting the fact that United is supposedly growing its Asia/Pacific operations from SFO. See United Answer at 3, UA

- A

- 105. Hawaiian gladly embrace s this comparison . Hawaiian has led U.S. carriers in growing capacity to Asia, while United’s capacity to A sia has remained flat or even declined. Indeed, in the last year, Hawaiian has grown its ASMs to Asia by 19.4 percent and United has decreased capacity by almost 1 percent. See HA

- 2013R

- 3. To the extent the Department considers which applicant is commit ted to growing capacity to Asia, that factor overwhelmingly favors Hawaiian.
IV. The Department Cannot Grant the Relief Requested by Delta in this Proceeding. In a pleading styled an “Answer”, Delta again requests the relief it initially sought in its Petiti on for Reconsideration of Order 2013

- 11

- 9

— t he flexibility to ignore the Department’s prior decisions to award Haneda slots to serve particular gateways. See In re 2010 U.S.

- Haneda Combination Services Allocation Proceeding, Docket DOT

- OST

- 2010

- 0018, Answer of Delta Air Lines, Inc. (Dec. 9, 2013) (“Delta Answer”)

. Should the Department determine to consider this issue in this proceeding, Hawaiian files the following as a contingent response to the issue: The Department cannot grant Delta the requeste d relief in this proceeding for a number of independent reasons . First, the Department has given no indication that it will consider Delta’s roaming proposal, so granting Delta’s requested relief would be without notice to the participants in this proceed ing and in violation of the Administrative Procedure Act.DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 11 of 13

Se cond, any change in the conditions applicable to previously

- awarded slot pairs requires that the Department give notice to those carriers and reconsider the carriers it chooses to receive those awards. In prior proceedings, the Department awarded Haneda slot pairs in consideration of the public benefits it expected would be derived from service to a particular gateway. Delta seeks to brush aside the Department’s carefu l consideration of these i ssues and leave the decision to the slot holder

. If the Department decides to pursue that approach, it should do so, as Hawaiian has previously argued, in a new, separate proceeding. In that proceeding , following consultations with the Government of Japa n, the Department should reallocate all the Haneda slots free of other restrictions , such as on the hours of op er a t ion , and all prior awards should be

re - allocated by the Department. Third, Delta’s reliance on the Department’s decision in the Br azil proceeding is misplaced. A s Hawaiian has noted, that case is distinguishable because the Department sought to correct a competitive imbalance among U.S. carriers. Here, there is no competitive imbalance among U.S. carriers, which all have the same s lot rights at Haneda. Moreover, the Department took care in order 2004

- 6

- 25 to confine its precedential effects to the specific facts at issue in that case: While we would not necessarily be prepared to follow this same approach in other markets, we belie ve that the disparate treatment of otherwise similarly

- situated carriers in the Brazil market, along with the particularities of the current market environment, call for our according a greater degree of flexibility here than might be the case in other cir cumstances or settings. Thus, limited to the specific circumstances and context before us, we find that our decision here is consi stent with the public interest.DOT

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- 0018 2013 Reply of Hawaiian Airlines, Inc. Page 12 of 13

U.S. Passenger Carriers, DOT

- OST

- 2003

- 15021 , Order 2004

- 6

- 25 at 2 (Jun . 28, 2004)

_ (footn ote omitted). Hawaiian also has found no indication that Order 2004

- 6

- 25 was appealed, and it therefore does not stand for the proposition that changing the conditions on previously granted authority complies with the Administrative Procedure Act.
Fourth, Delta cannot seek relief in this adjudicatory proceeding to allocate one available Haneda slot pair because it has not submitted an application. Order 201 3

- 11

- 9 set forth the criteria for submitting an application and participating in this proceed ing. Delta elected not to submit a compliant application, yet seeks relief related to authority issued by the Department in prior pro ceedings. Without a compliant application, Delta’s requested relief is beyond the scope of this proceeding, and any relie f granted to Delta would be improper.DOT

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Conclusion Because the award of the Haneda frequency to Hawaiian’s proposed Kona service will generate the most traffic and the most public benefits, the Department should grant Hawaiian’s application as quickly as possible.

Respectfully submitted,

___________________________ __________ /s/

_________________ Jonathan B. Hill J. Parker Erkmann Benjamin Berlin Dow Lohnes LLP 1200 New Hampshire Ave., NW Suite 800 Washington, DC 20036 (202) 776

- 2000 (202) 776

- 4725 (fax) jhill@dowlohnes.com perkmann@dowlohnes.com bberlin@dowlohnes.com Hoyt H. Zia Senior Vice President, General Counsel & Corporate Secretary Hawaiian Airlines, Inc. P.O. Box 30008 Honolulu, HI 96820

- 0008 Hoyt.Zia@hawaiianair.com

Counsel for Hawaiian Airlines, Inc.C ERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Reply of Hawaiian Airlines, Inc. was served this 16 th day of Dec ember 201 3 via email transmission or U.S. mail on the following: francis.heil@aa.com Robert.wirick@aa.com sascha.vanderbellen@delta.com chris.walker@delta.com dan.weiss@united.com Thomas.bolling@united.com steve.morrissey@united.com lhalloway@crowell.com gmurph y@crowell.com esta.rosenberg@dot.gov robert.finamore@dot.gov brett.kruger@dot.gov paul.gretch@dot.gov todd.homan@dot.gov john.s.duncan@faa.gov urskr@state.gov cristinasa@state.gov info@airlineinfo.com Ambassador Kenichiro Sasae Embassy of Japan 2520 Massachusetts Ave., NW Washington, DC 20008

_ /s/

____________________ Benjamin Berlin

### REPLY EXHIBITS OF HAWAIIAN AIRLINES

### THE KONA
- TOKYO MARKET BEFORE STIMULATION IS 25% LARGER PER FLIGHT THAN THE BAY AREA
- TOKYO MARKET

87 109

0 20 40 60 80 100 120

Kona (Excludes Stimulation) Bay Area (Excludes Stimulation) YE September 2013 Tokyo* Adjusted MIDT Passengers per Flight

Adjusted MIDT Passengers/1: 79,443 341,446 Passengers per Day Each Way/2: 109 468 Daily Roundtrips (Including Proposed)/3: 1.0 5.4 Ave. Passengers per Flight: 109 87 Exhibit HA

- 2013

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- 0018 Page 1 of 1

• Includes HND and NRT

. 1/ MIDT has been expanded by 35% to account for direct bookings. This factor has been used in all Haneda proceedings. 2/ Annual One

- Way Passengers / (365 days * 2 directions) 3/ Includes proposed United and Hawaiian service and announced schedule changes in 2014. Base annual flights from U.S. DOT, T

- 100, YE April 2013. Source : MIDT, via Travelport. 

### +25%

### THE KONA
- TOKYO MARKET AFTER STIMULATION WILL BE 132% LARGER PER FLIGHT THAN THE BAY AREA
- TOKYO MARKET

95 220

0 50 100 150 200 250

Kona (Includes Stimulation) Bay Area (Includes Stimulation) YE September 2013 Tokyo* Adjusted MIDT Passengers per Flight

Adjusted MIDT Passengers/1: 79,443 341,446 Including Stimulation/2: 160,664 374,022 Passengers per Day Each Way/3: 220 512 Daily Roundtrips (Including Proposed)/4: 1.0 5.4 Ave. Passengers per Flight: 220 95 Exhibit HA

- 2013

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- 2 Docket OST

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• Includes HND and NRT

. 1/ MIDT has been expanded by 35% to account for direct bookings. This factor has been used in all Haneda proceedings. 2/ See Exhibits HA

- 2013

- A

- 619

- 20 for stimulation calculations. 3/ Annual One

- Way Passengers / (365 days * 2 directions) 4/ Includes proposed United and Hawaiian service and announced schedule changes in 2014. . Base annual flights from U.S. DOT, T

- 100, YE April 2013. Source : MIDT, via Travelport. 

### +132%

### HAWAIIAN IS GROWING RAPIDLY TO ASIA MARKETS WHILE UNITED’S CAPACITY IS REMAINING FLAT

19.4%

-0.9%

-10%

-8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Hawaiian United 2012 - 2013 ASM Change from U.S. to Asia

. Source : Innovata Schedule Data. Exhibit HA

- 2013 R

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