BEFORE THE FEDERAL AVIATION ADMINISTRATION WASHINGTON, D.C.

________________________________________________ ) Application of ) ) AMERICAN AIRLINES , INC. ) ) Docket No. FAA

- 2015

- 3491 for an exemption ) pursuant to 14 C.F.R. Part 11. 1 5 ) (Lansing, Michigan

– Washington, DC) ) ________________________________________________) ANSWER OF JETBLUE AIRWAYS CORPORATION Communications with respect to this document should be addressed to:
James G. Hnat Evelyn D. Sahr Executive Vice President Jonathan T. Linde

General Counsel & Government Affairs Reese Davidson Drew M. Derco Robert C. Land Eckert Seamans Cherin & Mellott, LLC Senior Vice President Government 1717 Pennsylvania Ave., N.W. Affai rs & Associate General Counsel Twelfth Floor Washington, D.C. 20006 Adam L. Schless Tel: (202) 659

- 6600 Director, Aircraft Transactions & Fax: (202) 659

- 6699 International Counsel Counsel for JetBlue Airways Corporation JetBlue Airways Corporation 1212 New York Avenue , N.W. September 17, 2015 Suite 1212 Washington, D.C. 20005 Tel: (202) 715

- 2557BEFORE THE FEDERAL AVIATION ADMINISTRATION WASHINGTON, D.C.

________________________________________________ ) Application of ) ) AMERICAN AIRLINES , INC. ) ) Docket No. FAA

- 2015

- 3491 for an exemption ) pursuant to 14 C.F.R. Part 11. 1 5 ) (Lansing, Michigan

– Washington, DC) ) ________________________________________________)

ANSWER OF JETBLUE AIRWAYS CORPORATION JetBlue Airways Corporation (JetBlue) opposes American Airlines Inc.’s (American) opportunistic effort to consolidate its leading position at Ronald Reagan Washington National Airport (DCA) by requesting that the Federal A viation Administration (FAA) issue it a slot exemption, allowing it to provide service between DCA and Lansing, Michigan (LAN), beginning on November 5, 2015. 1 American’s attempt to mix

- and

- match statutes and regulations in order to obtain additional DCA access and increase its already

- high market concentration is contrary to FAA precedent and should promptly be denied. If, however, the FAA decides to change its policy and issue DCA slot exemptions to carriers under new criteria, then due process and prec edent demand that all carriers, including JetBlue, be invited to petition for exemptions in order to obtain additional DCA access.

1 Although American styled its filing as an “Application of American Airlines, Inc. for an Exemption,” it is in fact merely a petition , and JetBlue will refer to it as such in this response.In its petition, American argues that it would be “unfair” to the city of Lansing and Mid

Michigan in general if the FAA wer e to allow DCA

- LAN service to lapse. 2 While seemingly altruistic, American’s request for a slot exemption is, in actuality, a self

- interested and inappropriate attempt to exploit the FAA’s 2012 decision to issue a DCA slot exemption to Sun Country under e xceptionally unusual circumstances and gain another slot pair for its already dominant position at DCA. American, with control of nearly 60% of DCA slots, has a long history of such incremental slot acquisitions that ultimately lead to market concentratio n that harms the traveling public. American’s petition conveniently ignores the express limitations imposed by the FAA on Sun Country’s DCA

- LAN exemption and invokes decisional standards that the Office of the Secretary of Transportation (OST) uses in com petitive route proceedings that are completely inapposite here. 3 At the end of the day, American’s petition for an exemption represents nothing more than a backdoor effort by American to tighten its chokehold on DCA by acquiring additional slots without a ny comparative selection proceeding. For these reasons, as more fully described below, JetBlue strongly opposes and urges the FAA to deny American’s petition or to immediately initiate a competitive proceeding.

I. A GRANT OF AMERICAN’S PETITION IS CONTRA RY TO FAA PRECEDENT American’s petition does not meet FAA precedent for granting slot exemptions. The FAA has historically approved slot exemption requests only in the rarest of circumstances, and such extreme remedies are used, typically, only to redres s the loss of a slot allocation that was beyond

2 When American threatened to, and ultimately did, end service to several communities from DCA following the slot divestures required as a condition of its 2013 merger with US Airways, it did not petition the FAA to remedy the “unfair” situation. 3 FAA and OST are both part of the U.S. Department of Transportation (DOT o r Department).the carrier’s control. See FAA Exemption No. 100063 , Docket No. FAA

- 2010

- 0101, May 10, 2010 (applicant must show “subsequent events, beyond the control of [the carrier], have removed the slots that it curren tly leases from the slot pool at DCA.”). Clearly, American, as the largest slot holder at DCA, is not petitioning the FAA in the context of a loss of slots that was beyond its control. In prior instances where the FAA has been asked to reallocate slot ex emptions being abandoned by a carrier, the agency has taken a firm position that, in examining the public interest prong under 14 C.F.R. Part 11.81, it: “cannot consider the specific route plans of the petitioners in determining where the public interest lies...FAA decisions on slot allocation or exemption authority have never been predicated on route selection but rather on access by specific carriers to s pecif ic airports, in this case, DCA... e xcept as authorized by statute or regulation, the agency cannot condition an award of slots or an exemption to conduct operations without slots on a carrier’s promise to use its s lots to serve specific routes .” 4 Such clear unambiguous language is controlling today. To the extent the FAA is being asked to reallocate a slot exemption issued to another carrier that is ceasing service, the FAA cannot take into account American’s plan to serve Lansing when evaluating Amer ican’s petition. Rather, the FAA must evaluate American’s petition in light of the factors it has repeatedly identified as crucial to public interest determinations for such exemptions, which include whether issuance of the exemption will foster new entry and assist limited incumbent carriers to compete more effectively with larger DCA slot holders. American’s petition would clearly fail to achieve either of those public interest objectives.

4 Exemption No. 8112, Dockets FAA

- 2003

- 14563, FAA

- 2003

- 14827 and FAA

- 2003

- 14975, August 14, 2003. This case involved 3 out of the original 4 so

- called Braniff exemptions. The public interest test is the same now as it was in 2003.II. AMERICAN’S PETITION EXCEEDS FAA’S MANDATE Although JetBlu e would welcome a competitive proceeding to allocate additional DCA exemptions, JetBlue notes that the FAA’s mandate has never been understood to empower it to create slot exemptions to address the kind of competition concerns raised by American. 5
Moreove r, in the past, when Congress has authorized the Department to issue exemptions in order to expand access at DCA, OST has awarded the exemptions, not FAA, under a different set of statutory criteria. The FAA has traditionally addressed the allocation of s lots at DCA as an operational matter only. Furthermore, the FAA’s 2012 decision to issue Sun County an exemption for DCA

- LAN service lacks precedential significance, as that decision was undertaken reluctantly by the agency in response to a DC Circuit dec ision that had the practical impact of stripping Sun Country of slot exemptions earlier awarded to it by OST. In that unique proceeding, the only option available to Sun Country to continue operating its DCA

- LAN service

– for which it had been selling tic kets when the DC Circuit issued its decision

– was to petition the FAA for an exemption. 6 There, the FAA took the highly unusual step of issuing an exemption to redress the inequities that would have resulted had Sun County lost its ability to serve DCA t hrough no fault of its own and absent due process. American’s petition does not raise similar concerns and should therefore be denied.

5 See “C omments of Delta Air Lines, Inc. and US Airways, Inc.,” Docket FAA

- 2010

- 0109, March 22, 2010 (arguing that FAA consideration of competition concerns when evaluating the public interest exceeds statutory authority). US Airways and Delta also noted that “[i ]t could not be clearer that while Congress gave the Secretary authority to grant slot exemptions in a way that would promote competition, Congress envisioned that the FAA’s authority over the allocation of slots would be aimed solely at the safe and effic ient movement of air traffic.” Id. at 14. 6 It is notable that OST lacked the statutory or regulatory tools to correct the inequities that it created in the first place.When FAA issued the DCA slot exemption currently being sought by American, it not only cited the extremely limited circ umstances under which it would issue DCA slot exemptions, it stated explicitly that the exemption was exclusive to Sun Country and that the slot allocations associated with the exemption were neither permanent nor to be considered part of the larger pool of DCA slots available to all carriers. FAA Exemption No. 10466 , Docket No. FAA

- 2012

- 0089, March 2, 2012 (explaining that the DCA slots issued to Sun Country would be “rescinded if Sun Country discontinues scheduled operations at Ronald Reagan Washington National Airport” and emphasizing that the slots allocated to Sun Country were “not part of the pool of permanent slots at the airport”). There was no expectation that Sun Country, or the FAA, would be permanently creating a new slot exemption if Sun Coun try ever ceased DCA

- LAN service. Simply put, as of October 1, 2015, the date that Sun Country is scheduled to discontinue its DCA

- LAN service, the DCA slot exemption American is seeking to inherit via its petition will, as a practical and administrative m atter, no longer exist.

II I . A GRANT WOULD BE INCONSISTENT WITH ASHBACKER

Under the Ashbacker doctrine, if the FAA nonetheless decides to issue an exemption for service from DCA to a specific community, the FAA must invite all interested carriers to ap ply for that service and then evaluate and choose among competing service proposals. 7 Delta Air Lines, Inc. (Delta), itself relying on the principles of Ashbacker , has already submitted a petition to the FAA in connection with this proceeding asking that FAA issue it the same DCA slot exemption sought by American. A decision by the FAA to grant American or Delta’s petition

7 See Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945 ).without inviting all applications and evaluating the independent merits of other competing applications would violate the most basic t enets of procedural due process under the Administrative Procedure Act. 8 If the FAA is willing to conclude that it will now issue DCA slot exemptions to carriers on a regular basis and/or re

- issue slot exemptions previously issued to carriers that are cea sing that particular service, it must clearly state so and invite carriers to apply on equal terms. JetBlue would, of course, be eager to apply for additional DCA slots if such a process were in place. 9

IV. AMERICAN HOLDS THE MOST DCA SLOTS AND DELTA RECENTLY ABANDONED MANY DCA SLOTS Given American’s leading position at DCA and its already extensive slot holdings there, a decision by the FAA to depart from precedent and allocate a slot exemption to American would be fundam entally inequitable. This is especially true given the administrative hurdles JetBlue, and other low

- cost carriers like Southwest Airlines, Virgin America, and Alaska Airlines, have historically been forced to overcome when attempting to gain access to DC A via legitimate channels and the costs incurred by JetBlue and other low

- cost carriers when acquiring DCA slots on the secondary market. 10 American (specifically US Airways before the recent merger) has long been the dominant holder of DCA slots and many of the slots in its current portfolio were acquired

8 A grant of American’s petition would be a complete reversal of 30 years of FAA precedent. The United States Court of Appeals for the District of Columbia Circuit’s (DC Circuit) 3

- 0 decision in 2012 in Republic Airline Inc. v. U.S. Department of Transport ation is a clear reminder that the Department faces a heightened standard when it departs from precedent with respect to DCA slot allocation. 9 Although JetBlue did not submit a separate petition as Delta has, it stands ready to do so if and when the Dep artment opens a competitive selection proceeding to reallocate Sun Country’s slots. 10 Such legitimate channels include participating in competitive selection proceedings with innovative service proposals when Congress has specifically authorized slot exemp tions at DCA.free of cost

– in contrast, JetBlue itself only gained access to DCA in 2010 through a temporary slot trade with (pre

- merger) American that required JetBlue to exchange valuable JFK slots in return for ac cess to DCA. 11 JetBlue was able to purchase DCA slots for the first time after US Airways and Delta finally, after seeking judicial review in a federal court, agreed to a DOT competitive remedy to divest a certain number of slots to limited incumbents as a condition of their proposed swap of LGA and DCA slots. The cost of these slots to JetBlue was high, as they were in 2014 when JetBlue purchased additional divested slots as a result of the American

- US Airways
merger. Although Delta has now submitted a separate petition for a similar DCA exemption, the FAA should be mindful that Delta recently chose to sell many of its DCA slots to US Airways/American. Around the same time that Delta decided to retreat from DCA and abandon many communities that relied on its service, JetBlue introduced new service to DCA with larger planes and lower fares. Although Delta now only operates around 50 daily departures a day at DCA, it is still the second largest DCA slot holder. Delta’s petition should be viewed in a sim ilar light as American’s. Regardless, as mentioned above, if the Department is prepared to grant either American or Delta’s petition, it is compelled by law to conduct a competitive selection proceeding.

V. INEQUITIES WOULD RESULT FROM A GRANT OF AMERICA N’S PETITION Against this backdrop, it would be fundamentally inequitable for FAA to permit American to obtain additional DCA access at essentially no cost and for FAA to do so without providing

11 The vast majority of American’s DCA slot holdings are historic slot holdings dating back decades that include the remnants of many former carriers past DCA operations such as Eastern. It is worth noting that many of these slots, some of wh ich are decades old, were initially granted to carriers at no cost and allowed to be monetized over the years.other carriers like JetBlue with an opportunity to compete f or the slot exemptions. Congress never intended that the FAA issue DCA slot exemptions pursuant to the criteria cited by American in its petition; if the FAA were to grant American’s petition, it would establish harmful precedent and legitimize American’s effort to sidestep the traditional slot allocation process and open the door to similar petitions involving other slot controlled airports such as John F. Kennedy International Airport (JFK) in New York. Were the FAA to grant American’s petition , it woul d also risk undermining the recent U.S. Department of Justice (DOJ) American/US Airways merger settlement. Under DOJ’s Final Judgment, the parties agreed to provide DOJ with advance notice prior to acquiring additional slots at DCA and imposed Hart

- Scott

- Rodino (HSR) waiting periods wit h respect to such acquisitions. American’s petition fails to mention whether it intends to abide by its requirements to notify DOJ of its attempted slot acquisition and comply with the terms of its court

- approved merger set tlement. After the incredible amount of effort and resources expended by DOJ to attempt to rectify the competitive imbalance at DCA, it would be a travesty if the FAA then turned around and simply created new slots to once again bolster American’s already

- ample DCA portfolio.

VI. CONCLUSION Finally, it should be noted that there is nothing preventing American

– the carrier with the most significant DCA slot holdings

– from initiating its own DCA

- LAN service today without obtaining an additional allocati on of slots from the FAA. 12 American has ample DCA slots, both

12 JetBlue notes that Lansing is the recipient of a 2010 DOT Small Community Air Service Development Program (SCASDP) grant with the specific purp ose of obtaining service to Washington, D.C. Because Lansing has a federal grant that could result in $1,400,000 at its disposal to obtain air service to Washington, D.C., the public interestair carrier and commuter, with which it could launch DCA

- LAN service if it so desired. 13 In fact, American controls nearly 60 percent of all slots at DCA and remains the dominant carrier at the airport. If American is as concerned about the development of air service to Lansing as it appears to be in its petition, it could have made plans to initiate DCA

- LAN service effective October 1, 2015 on its own recognizance, and fund the service with DC A slots from its current allocation. WHEREFORE, for the reasons described above, JetBlue strongly urges the FAA to deny American’s petition for an exemption. Respectfully submitted,

Evelyn D. Sahr Jonathan T. Lin d e Reese Davidson Drew Derco Eckert Seamans Cherin & Mellott, LLC September 1 7 , 2015 Counsel for JetBlue Airways Corporation

especially does not warrant an exemption for American in these circumstances. JetBlue also wishes to note that Lansing is an hour drive from DTW, a large hub with dozens of flights a day on multiple airlines to the Washington, D.C. area. 13 In response to a 2003 Comair/Delta petition, the FAA noted that Delta operated nearly 20% of the slots at DCA and had “adequate slots to commence the proposed service today [without an FAA exemption].” Exemption No. 8112, August 14, 2003. Certainly American, with over 50% of the slots at DCA, could also start service immediately wi thout administrative relief from the FAA.