60881742.DOCX -1- UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY Washington, D.C. ALASKA AIRLINES, INC., et al ., v. LOS ANGELES WORLD AIRPORTS, et al . Docket No. OST-2007-27331



### COMPLAINANTS’ AND RESPON DENTS’ SEPTEMBER 7, 2012 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS AND JOINT MOTION TO EXTEND THE STAY IN THIS PROCEEDING TO JANUARY 28, 2013

M. Roy Goldberg SHEPPARD MULLIN RICHTER & HAMPTON LLP 1300 I Street, NW Suite 1100 East Washington, DC 20005-3314 Phone: (202) 218-0007 Fax: (202) 218-0020 rgoldberg@sheppardmullin.com Counsel for: AirTran Airways, Inc. ATA Airlines, Inc. Frontier Airlines, Inc. Midwest Airlines, Inc. Southwest Airlines Co. US Airways Group, Inc. Steven S. Rosenthal J.D. Taliaferro K AYE S CHOLER LLP 901 Fifteenth Street, NW Washington, DC 20005 Phone (202) 682-3500 Fax: (202) 682-3580 email: srosenthal@kayescholer.com jtaliaferro@kayescholer.com Carmen A. Trutanich Los Angeles City Attorney Raymond S. Ilgunas, General Counsel, Los Angeles World Airports
L OS A NGELES C ITY A TTORNEY ’ S O FFICE Los Angeles World Airports One World Way Los Angeles, CA 90045 Phone: (424) 646-5010 Counsel for RespondentsCOMPLAINANTS’ AND RESPONDENTS’ SEPTEMBER 7, 2012 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS AND JOINT MOTION TO EXTEND THE STAY IN THIS PROCEEDING TO JANUARY 28, 2013

60881742.DOCX -2- Robert W. Kneisley Associate General Counsel Leslie Abbott Attorney SOUTHWEST AIRLINES CO. 1901 L Street, N.W. Suite 640 Washington, DC 20036 Howard Kass Vice President, Legal and Government Affairs US AIRWAYS GROUP, INC. 1401 H Street, N.W. Suite 1075 Washington, DC 20005 Jacqueline Peter Counsel FRONTIER AIRLINES, INC. 7001 Tower Road Denver, Colorado 80249 DATED: September 7, 2012COMPLAINANTS’ AND RESPONDENTS’ SEPTEMBER 7, 2012 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS AND JOINT MOTION TO EXTEND THE STAY IN THIS PROCEEDING TO JANUARY 28, 2013

60881742.DOCX -1- The T1/T3 Airlines 1 and Los Angeles World Airports 2 (“LAWA”) (collectively, the “Parties”) hereby jointly file this status report and motion to extend time, in response to the DOT’s “Fifth Order Granting an In terim Stay of Proceedings and Extending Deadline To File Procedural Comments,” Or der 2012-6-24 (“Fifth Orde r”), regarding the efforts to settle the remanded issues set forth in DOT’s Order 2009-11-24 (“November 24 Notice”) and Order 2009-12- 17 (“First Order”).

BACKGROUND On November 24, 2009, following remand of certain issues by the United States Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”), DOT issued the November 24 Notice in this case. The November 24 Notice directed the T1/T3 Airlines and LAWA “to advise the Department . . . whether there is a possibility of settlement on the issues remanded” by the D.C. Circuit. November 24 Notice, at 5. The November 24 Notice further directed another submission on procedural issues at a later date. Id

. Following LAWA’s and the T1/T3 Airlines ’ initial submissions on December 2, 2009 and December 4, 2009, respectively, the Partie s held a conference call with DOT on December 16, 2009. During that call, the Partie s discussed additional procedural issues, and DOT subsequently issued the First Order, directing the Parties to file, no later than

1 The T1/T3 Airlines are six air carriers th at on February 16, 2007, filed with DOT's Office of the Secretary a “Joint Complaint in Opposition to New Terminal Charges at Los Angeles International Airport.” Although Alaska Airlines, Inc. was a Complainant in this matter, by Order dated Februa ry 15, 2012, Alaska was dismissed from this proceeding with prejudice. 2 Respondents in this case are LAWA, the Los Angeles Board Of Ai rport Commissioners (“BOAC”), and the City Of Los Angeles, Cali fornia (“City”). As used herein, LAWA refers to all Respondents.COMPLAINANTS’ AND RESPONDENTS’ SEPTEMBER 7, 2012 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS AND JOINT MOTION TO EXTEND THE STAY IN THIS PROCEEDING TO JANUARY 28, 2013

60881742.DOCX -2- January 18, 2010, additional comments with regard to the five issues remanded by the D.C. Circuit as set forth in the November 24 Notice. On January 11, 2010, the T1/T3 Airlines and LAWA filed a joint motion to extend deadlines in this proceeding in order to attempt to reach agreement on the issues identified in the Notice. In its January 21 Order, DOT granted the Parties’ motion to extend the deadline to provide written submissions on re maining written and evidentiary issues from January 18, 2010 to October 18, 2010, but directed the Par ties to file periodic reports regarding the status of settlement negotiations. The first such report was due March 18, 2010, with successive reports to be filed approximately every 60 days thereafter. By the time of DOT’s January 21 Orde r, the T1/T3 Airlines and LAWA had already reached agreement on one of the five remanded issue identified by the November 24 Notice; namely, the “[t]imeliness of [the] T1 Airlines’ objection to fair market valuation” used by LAWA in setting base re nt (also known as the “Base Charge”) at LAX Terminal 1. November 24 Notice at 2. The four remaining D.C.-Circuit-remanded issues from the DOT’s November 24 are:

• Airfield vs. non-airfield space. “We must therefore grant the Tl/T3 Airlines’ petition and again remand the matter to the DOT either to justify or to abandon its disparate treatment of airfield and non-airfield space.”

• Other aeronautical uses of terminal space. “We grant the City's petition in this respect and direct the DOT on remand, either to justify or to abandon its objection to the City's considering non-aeronautical uses when setting terminal rents based upon FMV.”

• Burden of persuasion on rentable space. “We therefore grant th e City's petition to the extent of directing the DOT on remand to revisit the Tl/T3 Airlines’ complaint of discrimination and to apply to them the burden of persuasion that their disparate treatment is unjust.”COMPLAINANTS’ AND RESPONDENTS’ SEPTEMBER 7, 2012 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS AND JOINT MOTION TO EXTEND THE STAY IN THIS PROCEEDING TO JANUARY 28, 2013

60881742.DOCX -3- • Monopoly power. “On remand the DOT must expl ain why this case does not present the “extraordinary situation” in which alleged monopoly power is relevant to a fee dispute or, if it cannot, then go on to consider whether LAX had monopoly power in a relevant geographic market.” November 24 Notice at 2-3. In a “Second Order” dated November 18, 2010 the DOT ordered th e Parties to file a written status report and invited the pa rties to file, by January 17, 2011, written submissions on: 1. Whether the current record evid ence on the four remaining remanded issues is sufficient or re quires supplementation; 2. What, if any, additional fact finding or evidence is contemplated and for which of the remanded issues; 3. The justification for such a dditional fact finding or evidence; 4. Whether an oral evidentiary hearing is necessary to hear the new evidence, if any; and 5. Any other procedural or evidentiar y issues the parties wish to note. However, in response to a joint submi ssion of the parties dated December 15, 2010, which described efforts being made to re solve the outstanding disputes, DOT, in its Third Order, agreed to stay the remand proceedings until August 1, 2011 to allow the parties additional time to attempt to resolve the remaining issues. DOT also ordered the parties to file periodic Joint Status Reports. On June 22, 2011, Alaska Airlines and LAWA filed a Joint Stipulation for Dismissal, indicating that Al aska and LAWA have resolved their claims against each other. On July 28, 2011, the Parties filed a Joint Motion to Exte nd the Stay until December 1, 2011. On December 1, 2011, the Partie s filed a Joint Motion to Extend theCOMPLAINANTS’ AND RESPONDENTS’ SEPTEMBER 7, 2012 JOINT REPORT ON THE STATUS OF SETTLEMENT DISCUSSIONS AND JOINT MOTION TO EXTEND THE STAY IN THIS PROCEEDING TO JANUARY 28, 2013

60881742.DOCX -4- Stay until June 30, 2012. On February 15, 2012, DOT extended the Stay until June 29, 2012 and also dismissed with prejudice Alas ka’s claims against LAWA. On June 26, 2012, DOT extended the Stay until September 28, 2012 and directed the parties to file a written status report as to the progress of their settlement discussions by September 7,
2012. DESCRIPTION OF SETTLEMENT DISCUSSIONS SINCE JUNE 8, 2012 Since June 8, 2012, the Parties have enga ged in multiple meetings. Southwest Airlines and LAWA continue to be engaged in active settlement discussions and remain hopeful that a settlement can be achieved which will render moot the remaining issues between them (as well as AirTran, which is now a subsidiary of Southwest). In addition, on September 17, 2012, LAWA staff intends to submit to the LAWA Board of Airport Commissioners (“BOAC”) an amendment to the Tariff. The Tariff amendment will include a new rates and charges methodology. If approved by BOAC and then subsequently accepted by any or a ll of the T1/T3 Airlines, the new rates and charges methodology could result in the complete dismissal of this action. Of course, the T1/T3 Airlines reserve their rights to challenge any new rates and charges methodology. The Parties therefore respectfully request that DOT stay further proceedings in this case until January 28, 2013.