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

_____________________________________ ) Application of ) ) Docket DOT

- OST

- 1999

- 6240 REPUBLIC AIRLINE INC. ) Docket DOT

- OST

- 2013

- 0086 ) For an exemption from 14 CFR Part 93 )

u nder 49 U.S.C. § 41714(d) )

_____________________________________ )

JOINT ANSWER OF SOUTHWEST AIRLINES AND JETBLUE AIRWAYS

Communication s with respect to this document should be addressed to:

Ron Ricks James Hnat Executive Vice President

-- Executive Vice President Chief Legal and Regulatory Officer JetBlue Airways Corporation Mark Shaw 27

- 01 Queens Plaza North Vice President General Counsel & Long Island City, NY 11101 Corporate Secretary SOUTHWEST AIRLI NES CO. Robert C. Land 2702 Love Field Drive Senior Vice President Dallas, TX 75235

- 1611 JetBlue Airways Corporation 1212 New York Ave., N.W. Robert W. Kneisley Suite 1212 Associate General Counsel Washington, DC 20005 Leslie C. Abbott Senior Attorney Jonathan B. Hill SOUTHWEST AIRLINES CO. J. Parker Erkmann 919 18 th Street, N.W. Cooley LLP Suite 600 1299 Pennsylvania Ave., N.W. Washington, DC 20006 Washington, DC 20004 bob.kneisley@wnco.com jhill@cooley.com (202) 263

- 6284 perkmann@cooley.com

Counsel for JetBlue Airways Corporation

January 15 , 201 41 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

_____________________________________ ) Application of ) ) Docket DOT

- OST

- 1999

- 6240 REPUBLIC AIRLINE INC. ) Docket DOT

- OST

- 2013

- 0086 ) For an exemption from 14 CFR Part 93 )

u nder 49 U.S.C. § 41714(d) )

_____________________________________ )

JOINT ANSWER OF SOUTHWEST AIRLINES AND JETBLUE AIRWAYS

Southwest Airlines and JetBlue Airways submit this Joint Answer to the ―Notice‖

filed January 6, 2014 by Republic Airline and its corporate affiliate Shuttle America and
the Amendment to the Joint Notice filed January 8, 2014 (the ―Amendment‖) filed by
Republic and its affiliated carriers including Chautauqua Airlines

. 1 The Notice state s
that Republic plan s to transfer three Ronald Reagan Washington National Airport

( ― DCA ‖ ) slot slide exemptions to Shuttle America , and, pursuant to the Amendment to
Chautauqua, to allow Chautauqua, for the period from February 1 st through March 2 nd

, and thereafter, Shuttle America to provide service exclusively under the Delta

Connection brand to Madison, Wisconsin ( ― MSN ‖ ) and Omaha, Nebraska ( ― OMA ‖ )

. For

the reasons given below, this p roposed use of the slot slide exemptions is contrary to

the governing statute and would reduce competition at DCA. It should not be permitted.
Under 49 U.S.C. § 41714(d) , the Secretary may grant exemptions to carriers

allowing them to move their allocated slot times from less desirable hours to more

1 Common names of carriers are used.2

commercially viable times du ring the day if certain criteri a are met including a finding of

―exceptional circumstances.‖ As the Department stated in describing its original grant of

the exemptions in question to Midwest Express:

There the Department cited Congress’s intent that the perti nent exemption authority apply only to meet the specific needs of carriers holding a limited number of slots at Reagan National and to enhance competition

.
Order 99

- 11

- 4, November 4, 1999 at p. 2 (emphasis added).‖ 2 The congressional intent

of this unusual authority , as well as consistent DOT practice over two decade s , clearly

is to limit these exemptions to new entrants and limited incumbent carriers holding a

small number of slots at DCA to facilitate their ability to compete effectively a t the

airport

. T he exemptions thereby benefit carriers that are at a competitive disadvantage

because of their limited flexibility to move flight times given their small slot holdings and

lack of access to additional slots

. Granting small carriers the ability to move their flights

to more preferred times enables them to provide more effective competition to large r

incumbent carriers at this heavily concentrated and constrained airport.

In this case, however, Republic and Shuttle America /Chautauqua are not
proposing to use the slot slide exemptions to provide more effective competition at
DCA. To the contrary, the benefit of the slides would inure entirely to Delta Airlines

, the

largest airline in the world and the second largest DCA incumbent with a portfolio of

more than 100 slots

. Shuttle America /Chautauqua will not provide competition and

options for consumers under its own brand or even Republic’s brand. Instead, the

service would be marketed, priced

, distributed , and otherwise wholly controlled by Delta

Airlines

. Shuttle America /Chautauqua w ill be invisible to consumers

, and the slides will

2 DOT Order 99

- 11

- 4 at 4 (Nov. 4, 1999).3

do nothing to enhance competition

. Indeed, grant of this application would transfer

these routes from a low cost to a lega cy carrier. Delta would never qualify for the

exemptions in its own right , yet will receive the benefit of the slides that were awarded

to Midwest Express , then a limited incumbent at DCA, to enable it to more effectively

compete with larger carriers

.
I. Congressional Intent and Department Precedent are Clear that Only Carriers with Small Slot Portfolios are Eligible for Slot Slide Exemptions

When C ongress enacted 49 U.S.C. § 41714(d) authoriz ing slot slide exemptions

at DCA , it did so with the express intent of providing flexibility to carriers with limited slot

portfolios. In referring to the provision, the Conference Managers stated that

[T] his section should be used in limited circumstances to meet the needs of carriers holding a limited number of slots. Carriers holding numerous slots should be able to adjust their schedules, and thus the flexibility permitted by this section should not be available to such carriers. 3

Clearly

, a llowing Delta Airlines

, the carrier with the second largest slot portfolio at DCA

to control and benefit from Republic ’s slot slides would be contrary to the intent of the

statute. 4

The Department’s actions under this statute over the past two decades have

been faithful to this congressional intent. I n the orig inal or der that granted Midwest

Express the slot slides for service to Omaha that are at issue here , DOT affirmed its
understanding of the congressional intent behind the limited exemption authority :
We find that Midwest Express’s particular circumstances meet the exceptional

- circumstances criterion of the Act and that granting the exemption will not violate any of the provisions of the Act. In this regard, we note the accompanying language of the Con ference Report which

3 H.R. Conf. Rep. 103

- 677 at p. 49.

4 See, e.g. , DOT Order 2004

- 5

- 6 at 5 (May 4, 2004), denying American Airlines’ application to retime various slots ―Nothing we have found in our review indicates that American, as an incumbent with numerous DCA slots, satisfies the very high bar required to show exceptional circumstances .‖4

provided additional information regarding the intent of the legislation. Specifically, it is clear that the Secretary’s authority to grant exemptions under this provision would apply only in limited circumstances to meet the specific needs of carriers holding a limited number of slots at Washington National

. 5

Likewise, the Department’s orders granting slot slides have made clear that the purpose

and value of these exemptions is to enable the recipients to compete more effectively at

DCA . In the case of Midwest Express, the carrier argued that the slides would address
a ―competitive disadvantage because its lack of well

- timed slots prevents it from

meeting demand between its principal hub [Milwaukee] and Reagan National.‖ 6 In

grantin g slot slide exemptions to Spirit Airlines in 2003, the Department noted that
applicant proposed to ―offer DCA passengers new, low fare service‖ and ―argued that
due to its limited DCA slot holdings it operates at a significant competitive disadvantage

at DCA...‖ 7 Similarly, in granting slide exemptions to Southwest Airlines in 2012

, the

Department found that ―Southwest is a limited incumbent at DCA with a constrained

ability to trade slots within its own portfolio to create a viable schedule between DCA

and STL.‖ 8

Republic argues that the limited size requirement of the statute will be met
because the exemptions in question will be used by Shuttle America /Chautauqua

,
themselves limited incumbent s at DCA. But this elevates form over substance. The

substance , and indeed the entire purpose, of Republic’s plan is to cede to Delta Airlines

the marketing and control of the DCA flights in question as a Delta Connection service

. This will in no way pro mote competition by Shuttle America /Chautauqua at DCA since

5 DOT Order 94

- 9

- 49 at 3 (Sept. 30, 1994)(emphasis added). 6 DOT Order 99

- 11

- 4 at 1

- 2 (Nov. 4, 1999). 7 DOT Order 2006

- 3

- 9 at 2 (March 9, 2006). 8 DOT Order 2012

- 7

- 29 at 3 (July 25, 2012).5

either airline would be acting entirely under contract as a Delta Connection carrier, not

an independent competitor. This renders the original purpose of the slot slides

meaningless. 9

While Re public claims that this arrangement would enable Delta to serve MSN
and OMA, the reality is that Delta can easily serve those markets using i ts own large

portfolio of slots i f it w ishes to do so

. 10 If fact, Delta did serve DCA

- MSN until it

terminated that service in January 2012 following Delta’s ―slot swap‖ with US Airways

. Delta can reinstate that service at any time with its own slots . It should not , however, be

given the benefit of slot sli des that the Department granted under ―exceptional

circumstances‖ to a small carrier for the purpose of enhancing competition with large

incumbents

- like Delta.
Republic’s proposal would also have the perverse effect of increasing the
concentration of DCA slots among legacy carriers. The Department has long
recognized that the competitiveness of DCA increases as the percentage of slots held

by low cost carriers increases. Indeed, the Department pointed to the increasing share

of D CA slots held by low cost carriers as justification for approving Delta’s own slot
swap with US Airways. 11 The Republic proposal re verses this positive trend.

9 While Republic suggests at the end of its filing that there is DOT precedent allowing slot slides to be used to fly contract service for mainline carriers (Notice at p. 8), the Department did not specifically discuss contract service in the Order that was cited. Instead the Department based its approval of the slot slides for the four applicant carriers primarily on the uniqueness of the FAA lottery. DOT Order 2003

- 9

- 30 at 6 (Sept. 30, 2003). Furthermore, contract service was not mentioned in the 2013 Notice cited by Republic.

10 In fact, Delta significantly under utilizes its slots at DCA. It flies commuter aircraft on a third of its air carrier slots, and 75% of its commuter flights go to large hub airports that could justify full

- sized aircraft. Delta could easily up

gauge its equipment in some of the large mar kets that it currently serves with regional jets, such as LGA, to keep the same number of seats in the market while freeing up slots for MSN and OMA service.

11 FAA, Petition for Waiver and Other Relief, 76 Fed. Reg. 45313, (Jul. 28, 2011)―(―While we re main concerned about those possible consequences, as laid out in our 2010 notices, we believe the transaction’s promised benefits for the public

— particularly in light of the increased penetration of low cost carriers at the airports since the time of our l ast review

– are sufficient for us to conclude that the requested waiver is in the public interest.‖).6

II. Republic’s Attempt to Transfer the Benefit and Control of its Slot Slides to Delta Would Create a Terrible Precedent that w ill Diminish Competition at DCA

Allowing Republic to use its slide exemptions for the benefit of Delta Airlines not
only contravenes the purpose of a statute designed to benefit small airlines and thereby

enhance competition at DCA , but it would also create a negative precedent that will

reduce competition at DCA . Republic’s proposal would increase the domination of the

airport by large legacy airlines. If Republic and Delta are permitted to use these slides

in this fashion, th ere will be no effective limit on the use of slot slides for any DCA
incumbent, no matter how large. The statute, along with its ―exceptional circumstances‖

limitation, w ould then be gutted as a vehicle for enabling s maller carriers to compete
more effectively at the airport.

As the Department made clear in the original grant , t he slot slide s held by

Republic are explicitly non

- transferable

. 12 Thus, Republic is prohibited from transferring

the slides to Delta Airlines. Yet

, the arra ngement described in Republic’s Notice would

accomplish virtually the same end result, by transferring control and benefit of the slides

to Delta while nominally keeping them in the names of Shuttle America and Chatauqua

. The Department should not tolerat e such a transparent attempt to evade the transfer

prohibition and thereby nullify the pro

- competitive purpose of the se slides.
Within the context of the highly restrictive slot regime at DCA that caps the

number of arriving and departing flights every hour , limited eligibility for slot slide

exemptions is essential. Allowing DCA’s large st slot holders to reassign slots

throughout the day under the cover of ―exceptional circumstances‖ would remove all

12 See DOT Order 99

- 11

- 4 at 5 (Nov. 4, 1999)(―These slots are temporarily allocated to Midwest Express subject to recall by the FAA and are not transferab le ‖ (emphasis added).7

value of the current slide process and risk violat in g the hourly limits. Large slot holders

such as Delta have the ability to make internal slot trades, as well as trades with other

carriers (often involving slots at other airports as well) , to obtain desirable slot times for
their flights. Carriers with limited portfolios have little flexibility or options for self

- help

,
however . The Department should ensure that the slot slides are used for their intended

purpose to benefit only small slot holders and thereby enhance competition

. Accordingly, DOT shoul d deny Republic’s proposal and withdraw the slot slide

exemptions at issue here if Republic is unable to operate them in its own name as an
independent competitor

.

. Respectfully submitted

,

__________________ __________________ Robert W. Kneisley Jonathan B. Hill Leslie C. Abbott J. Parker Erkmann

Southwest Airlines Co. Counsel for JetBlue Airways Corporation

January 15, 20148 C ERTIFICATE OF SERVIC E
I hereby certify that on January 15, 2014, a copy of the foregoing was served via

e
- mail on the following persons:

marshall.sinick@squiresanders.com (Alaska Airlines) robert.wirick@aa.com (American Airlines) francis.heil@aa.com (American Airlines) sascha.vanderbellen@delta.com (Delta Air Lines) robert.cohn@hoganlovells.com ( R e p u b l i c Airlines ) patrick.rizzi@hoganlovells.com ( R e p u b l i c Airlines ) dkirstein@yklaw.com (Spirit Airlines) jyoung@yklaw.com (Spirit Airlines) John.Fredericksen@suncountry.com (Sun Country Airlines) steve.morrissey@united.com (United Air Lines) howard_kass@usairways.com (US Airways) benjamin.slocum@usairways.com (US Airways) pmurphy@lopmurphy.com (USA3000) barbara.russell@virginamerica.com (Virgin America)
susan.kurland@dot.gov todd.homan@dot.gov reece.davidson@ dot.gov cindy.baraban@dot.gov Kevin.schlemmer@dot.gov Dennis.DeVany@dot.gov Rob.hawks@ faa.gov brian.ctr.meehan@faa.gov

info@airlineinfo.com

__________________________ Leslie C. Abbott