BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION

WASHINGTON, D.C.

_____________________________________ In the Matter of the Petition of ) ) AIRTRAN AIRWAYS, INC. ) Docket No. FAA

- 2003

- 14563; ) Exemption No. 81 12 D For exemption from 14 C.F.R. Section 93.123 )

_____________________________________ )

PETITION OF AIRTRAN AIRWAYS, INC. FOR EXTENSION OF SLOT EXEMPTION

Communications with respect to this document should be sent to:

Bob Jordan Robert W. Kneisley President Associate General Counsel AIRTRAN AIRWAYS, INC. Leslie C. Abbott 9955 AirTran Boulevard Senior Attorney Orlando, FL 32827 SOUTHWEST AIRLINES CO. 1901 L Street, N.W., Suite 640 Washington, D.C. 20036 bob.kneisley@wnco.com (202) 263

- 6284

April 23

, 20121 BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION

WASHINGTON, D.C.

_____________________________________ In the Matter of the Petition of ) ) AIRTRAN AIRWAYS, INC. ) Docket No. FAA

- 2003

- 14563; ) Exemption No. 81 1 2D For exemption from 14 C.F.R. Section 93.123 )

_____________________________________ )

PETITION OF AIRTRAN AIRWAYS, INC. FOR EXTENSION OF SLOT EXEMPTION

AirTran Airways, Inc. (“AirTran” or “the Company”) 1 hereby petitions the Federal

Aviation Administration (“FAA”) for a n extension of E xemption No. 8112, as amended,

for an additional two

- ye ar period. Originally awarded in 2003, this exemption from 14

C.F.R. § 93.123 grants AirTran the authority to conduct three scheduled inside

perimeter operations at Ronald Reagan Washington National Airport ( “ DCA ” ). If not

renewed the current exemption will expire on September 30, 2012

. 2

Coupled with AirTran’s other modest slot holdings at DCA, these three slot

exemptions facilitate AirTran’s current level of service between DCA and Atlanta

(“ATL”), Milwaukee (“MKE”) and Fort Myers (“RSW”) Airports

. AirTran’s service in these

markets has provided consumers with high

- quality, low

- cost travel option s , and

passenger traffic has increased in all th ree market s significantly since AirTran ’s entry

. Accordingly, AirTran seeks renewal of Exemption No. 8112 for a minimum of two years

.

1 AirTran Airways, Inc. is a wholly owned subsidiary of Southwest Airlines Co.

2 AirTran relies upon the automatic extension provisions of 5 U.S.C. § 558(c) to maintain the subject authorities in effect beyond the expiration date, pending FAA’s action on this petition.2

I. AirTran’s Operations Under Exemption 8112 Clearly Satisf y the FAA’ s Public Interest Standard and Should Therefore Be Extended

As stated in the FAA’s 2003 decision originally awarding Exemption 8112 to

AirTran

, the FAA determine s if an exemption should be granted or extended by

evaluating “ how [ the exemption ] would be in the public interest, that is, how it would

benefit the public as a whole...

, ” quoting from 14 CFR §11.81

. 3 In this case, the FAA

defines “public interest” as the term is stated in 49 U.S.C. § 40101(a)(1) , which codifies

Section 102 (a)(7) of the Federal Aviation Act of 1958: “ avoiding unreasonable industry

concentration, excessive market domination, monopoly powers, and other conditions

that would tend to allow at least one air carrier or foreign air carrier unreasonably to

increase prices, reduce services, or exclude competition in air transportation." 4

In 2003, t he FAA concluded that allocating the three slot exemptions to AirTran

“would complement recent Department action under AIR

- 21 and provide [AirTran] with

[a] meaningful opportunity to conduct service at DCA.” 5 Moreover, Congress and the

Department of Transportation (“ DOT ” or “the Department”) have consistently recognized

the importance of enabling new entrant and limited incumbent carrier access to high

fare slot

- controlled airports such as DCA. For example, in the recent US/DL Slot Swap

proceeding

, the DOT/ FAA stated:

“In considering what is in the public interest in this instance, the FAA is guided by the policy goals prescribed for the Secretary in 49 U.S.C. §§ 40101(a)(4), (6), (10

- 13) and the pro

- competition policies followed by Congress in adopting legislation on m atters such as slot exemptions and airport grant programs....These pro

- competitive policies derive from the Airline Deregulation Act of 1978 and direct the Secretary to consider, as in

3 Exemption No. 8112, p. 5 (August 14, 2003) in this docket (quotations in original)

. 4 Id . at 6, fn. 9 (quotations in original)

. 5 Id. a t 7.3

the public interest, placing maximum reliance on airline competition and opportunities for new entrant airlines.” 6

Following the initial award of the exemption in 2003 , FAA granted AirTran four

consecutive extensions in 2005, 2007, 2009 and 2010. In each case the FAA found

that “the justification for the issuance of exemptio n number 8112, as amended, remains

valid and is in the public interest

. ” 7 There ha ve been no material change s in

circumstances that would affect the FAA’s public interest findings that were the basis for

granting the original exemption and the four subsequent extensions

. Accordingly,

AirTran respectfully requests that FAA, consistent with past practice and precedent,

renew Exemption No. 8112 for a minimum of two years to September 30, 2014.

II. T he Three Slot Exemptions at Issue Here are Essential to AirTran’s Limited Service at DCA

AirTran is a “limited incumbent” at DCA and currently operates only 25 slots, or

2.9% of the airport total

. 8 With an average of only 1 2 daily flights to four destinations

,

AirTran’s DCA slot holdings are miniscule in comparison to th ose of the dominant

carrier

, US Airways

, which controls 460 DCA slots , 54% of the airport total, and

operates 2 37 daily departures to 67 destinations

. 9 To state the obvious, i t is extremely

difficult for a limited incumbent like AirTran to mount an effective competitive response

to US Airways, restrain DCA fares, and produce meaningful consumer b enefits. The

loss of three slot exemptions would make that challenge much more difficult.

The three operations at issue here account for 12% o f AirTran’s DCA flights and

are therefore critical to its ability to provide effective low

- fare competition at DCA.

6 Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia Airport, 75 Fed. Reg. 7306, 7307 (Feb. 18, 2010)( internal citations omitted).
7 See, e.g.

, Exemption No. 8112D, p. 2, issued June 14, 2010. 8 See 14 C.F.R. § 93.213(a)(5) as amended by 49 U.S.C. § 41714(h)(5).
9 Official Airline Guide (OAG), July 2012 , Weekday Average.4

Consistent with FAA ’s public interest findings in its original 2003 grant, extending

Exemption 8112 will “allow[ ] a carrier to maintain or achieve access to the airport.” 10

Moreover, as FAA acknowledged in 2003

, and as confirmed more recently

, “ successful

entry at DCA requires more than a few operations.” 11 Therefore, continuing to allow

AirTran use of these slot exemptions is in the public interest because it will enable a

limited incumbent carrier to maintain a viable minimum presen ce , continue to produce

effective competition, and provid e consumers with valuable

, low

- fare service options

. It is also in the public interest to maximize the utilization of the scarce public

r esources these slot exemptions represent

. AirTran ’s service at DCA is provided with

large, mainline Boeing 737

- 700 and 717 aircraft, configured for 137 and 117 seats

respectively. AirTran’s average number of seats per departure is 120

, compared to only

78 for US Airways

. 12 AirTran’s use of larger aircraft makes a much greater number of

seats and low fares available to the traveling public per slot

, thereby increasing access

to DCA and making better use of these valuable public assets

.

III. AirTran Uses the Three Slots at Issue to Provide Critical Low

- Fare Service and Public Benefits in Three Distinct DCA Markets

Relying in part o n the three slot exemptions authorized by Exemption 8112,

AirTran operate s nonstop service in the DCA

- ATL market, competing with Delta Air

Lines ; in the DCA

- MKE market, competing with Frontier Airlines ; and in the DCA

- RSW

market , competing with US Airways (see Exhibit FL

- 1)

. 13 AirTran’s participation in these

10 Exemption 8 1 12, p. 7. 11 See, e.g. , 76 Fed. Reg. 63702, 63708 (Oct. 13, 2011) (US/DL Slot Swap) ( larger slot bundles will provide “a sufficient array of slots to operate and maintain competitive service throughout the day” and “is the best approach to optimize competitive discipline.”
12 Official Airline Guide (OAG), July 2012.
13 US Airways has announced that it will terminate nonstop DCA

- RSW service in M ay 2012 , after which AirTran will provide the only nonstop service in the market

.5

markets has restrained fares and grown passenger traffic. Continuation of these

service s is clearly in the public interest.

DCA

– Atlanta

AirTran entered the DCA

- ATL market in 2003

, and one year later the average

market fare dropped 28 % and O&D passengers increased 89% (Exhibit FL

- 2 ). From

2003 to the most recent 12 month period (YE Q3, 2011) the average fare in the DCA

ATL market d eclined 15% and total passengers increased 126% (Exhibit FL

- 3 ). AirTran

discipline s pricing in this market by offering a viable schedule for both business and

leisure travelers. Continuation of this service is in the public interest.

DCA

– Milwaukee

When AirTran entered the DCA

- MKE market in 2009 the average fare declined

by $30, or 22%, and O&D passengers increased 17% (Exhibit FL

- 4 ). From the time of

AirTran’s entry in 2009 until the most recent 12 month period , traffic in the DCA

- MKE

local market increased 67% while the average market fare decline d 18% (Exhibit FL

- 5 ).

AirTran’s service in this market is critical to t he continued provision of low fares and

significant consumer savings.

DCA

– Ft. Myers

AirTran entered the DCA

- RSW market in 2003 and its low

- fare service has been

well received by passengers

. AirTran’s service resulted in a remarkable 106% increase

in local DCA

- RSW passengers in the year after AirTran entered the market (Exhibit FL

6 ) , and a 129% increase since AirTran began service in 2003 (Exhibit FL

- 7)

. The t raffic6

response in the DCA

- RSW market significantly exceeded the U.S. national and total

DCA benchmark comparisons. 14

For the foregoing reasons , AirTran Airways respectfully requests that FAA,

consistent with past practice and precedent

, renew Exemption No. 8112 for a minimum

of two years to September 30, 2014. To facilitate a timely decision with out uncertainty

or interruption to current scheduled service at DCA , AirTran respectfully requests that

this petition be processed expeditiously.

Respectfully submitted

,

____________________ Robert W. Kneisley

April 23 , 2012

14 Over the same period in which DCA

- RSW traffic increase d 129%, U.S. domestic traffic increased 11% and DCA traffic increased 29%

. Source: U.S. DOT, O&D Survey and Schedule data, via Diio, LLC , YE Q3 2003 to YE Q3 2011

.7 C ERTIFICATE OF SERVIC E

I hereby certify that on April 23 , 2012 , a copy of the foregoing was served via e

mail on the following persons:

Louis Miller Aviation General Manager City of Atlanta Department of Aviation Hartsfield

- Jackson Atlanta International Airport Louis.Miller@atlanta

- airport.com

Barry Bateman Airport Director General Mitchell International Airport bbateman@mitchellairport.com

Robert M. B all Executive Director Lee County Port Authority Southwest Florida International Airport rmball@swfia.com

John E. Potter President and Chief Executive Officer Metropolitan Washington Airports Authority john.potter@mwaa.com

Kathryn B. Thomson, FAA Chief Counsel kathryn.thomson@faa.gov

Marc L. Warren, FAA Deputy Chief Counsel

marc

. warren @ faa .gov

Rebecca MacPherson, FAA Assistant Chief Counsel, Regulations Division rebecca

. macpherson @ faa .gov

Brian Meehan, Director FAA Office of Slot Administration brian.ctr.meehan@faa.gov

__________________________ Leslie C. Abbott

## AirTran Requires the Slot Exemptions at Issue for Three of Its Four DCA Routes Exhibit FL

- 1

Source : OAG Schedules for the week of June 11 th through the 17 th , 2012 Routes with slots at Issue
Other DCA route FL Weekly FL Weekly Departures Seat

- Departures

ATL 42 4,954

MKE 27 3,159

RSW 7 819

## When AirTran Entered the DCA

- ATL Market Fares Dropped 28% and O&D Passengers Increased 89%

DCA

- ATL Market O&D Passengers

Year Before FL Nonstop (YE Q3 2003) Year After FL Nonstop (CY 2004) DCA

- ATL Market Average Fares Exhibit FL

- 2

+89% - 28%

Year Before FL Nonstop (YE Q3 2003) Year After FL Nonstop (CY 2004)

Note: Fared passengers only. Excludes all taxes and government charges.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.

## DCA

- ATL Passengers Increased 126% and Fares

Declined 15% Since AirTran Began Nonstop Service in 2003

% Change Since AirTran Began DCA

- ATL Nonstop Service 1

O&D Passenger Change Fare Change

1/ Compares YE Q3 2003 to YE Q3 2011. Exhibit FL

- 3

Note: Fared passengers only. Excludes all taxes and government charges.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.

## When AirTran Entered the DCA

- MKE Market Fares Dropped 22% and O&D Passengers Increased 17%

DCA

- MKE Market O&D Passengers

Year Before FL Nonstop (YE Q1 2009) Year After FL Nonstop (YE Q2 2010) DCA

- MKE Market Average Fares Exhibit FL

- 4

+17%

- 22%

Year Before FL Nonstop (YE Q1 2009) Year After FL Nonstop (YE Q2 2010)

Note: Fared passengers only. Excludes all taxes and government charges.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.

## DCA

- MKE Passengers Increased 67% and Fares

Declined 18% Since AirTran Began Nonstop Service in 2009

% Change Since AirTran Began DCA

- MKE Nonstop Service 1

O&D Passenger Change Fare Change

1/ Compares YE Q1 2009 to YE Q3 2011. Exhibit FL

- 5

Note: Fared passengers only. Excludes all taxes and government charges.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.

## When AirTran Entered the DCA

- RSW Market O&D Passengers Increased 106%

DCA

- RSW Market O&D Passengers

Year Before FL Nonstop (YE Q3 2003) Year After FL Nonstop (CY 2004) DCA

- RSW Market Average Fares Exhibit FL

- 6

+106%

Year Before FL Nonstop (YE Q3 2003) Year After FL Nonstop (CY 2004)

Note: Fared passengers only. Excludes all taxes and government charges.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.

## DCA

- RSW Passengers Increased 129%

Since AirTran Began Nonstop Service in 2003

% Change Since AirTran Began DCA

- RSW Nonstop Service 1

O&D Passenger Change Fare Change

1/ Compares YE Q3 2003 to YE Q3 2011. Exhibit FL

- 7

Note: Fared passengers only. Excludes all taxes and government charges.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.