1

BEFORE THE

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

________________________________________________

)

Application of )

)

SOUTHWEST AIRLINES CO. )

) Docket DOT-OST-2014-0222

For an exemption under 49 U.S.C. § 40109 to engage in )

foreign scheduled air transportation of persons, property )

and mail between Houston Hobby International Airport )

and Cancun, Mexico City, Puerto Vallarta, and )

San Jose del Cabo, Mexico )

)

________________________________________________

COMMENTS OF THE

SOUTHWEST AIRLINES PILOTS’ ASSOCIATION

Communications with respect to this document should be addressed to:

Paul Jackson

Government Affairs

Southwest Airlines Pilots’ Association

1450 Empire Central

Dallas, TX 75247 (800) 969-7972

pjackson@swapa.org
2

I. INTRODUCTION

The Southwest Airlines Pilots’ Association (“SWAPA”) is the exclusive bargaining 

representative for almost 8,000 Southwest Airlines pilots. 

SWAPA strongly supports Southwest Airline’s application for exemption to engage in 

scheduled foreign air transportation between Houston Hobby International Airport and Cancun, 

Mexico City, Puerto Vallarta, and San Jose del Cabo, Mexico. SWAPA believes that this 

represents an opportunity to bring the “Southwest Effect” to several major markets that lack 

effective low fare competition. 

The US – Mexico market is currently artificially constrained by the archaic US Mexico Air 

Transport Agreement. As such low cost carrier penetration significantly lags the domestic US 

market1. While we applaud the US Department of Transportation and Department of State for 

recently negotiating a new treaty that will remove virtually all artificial constraints, until that 

treaty is ratified and in force, this case is about how to ensure the public the greatest gains 

within the context of the existing rules. 

II. SOUTHWEST’S APPLICATION WILL PROVIDE PUBLIC BENEFITS

Southwest’s application2contains several important pieces of economic information 

demonstrating the potential value of the public benefits of the service being proposed. Exhibit

#12 in the Southwest application shows that on average the four local markets will see a 

reduction in average fare of $117 or 25%. In Exhibit #22 Southwest states that the reduction in 

 

1

For the year ending October 2014, Sabre Global Demand showed only 23% of trans-border passenger choose a 

low cost/ultra-low cost carrier compared to almost 38% of US domestic passengers. Only 65% of trans-border 

passengers could have even chosen a low cost carrier compared to 76% of US domestic passengers. 

2

See Application of Southwest Airlines Co. DOT-OST-2014-
3

fare, combined with the benefits of new nonstop service with 143 seat aircraft, will result in the 

traffic in the four local markets being stimulated by over 270,000 O&D passengers. As noted in 

Appendix 1, Page 22 of the Southwest application the reduction in fare will produce over $24 

million in benefits for existing consumers and over $9 million in benefits for new customers in 

the four local markets. SWAPA has examined the study and believes that given Southwest’s 

relative cost structure/yield curve, the limited amount of local market competition (low fare or 

otherwise), and new nonstop Southwest service with large aircraft that the four local markets 

will see benefits in-line with the Southwest forecast. Additionally, SWAPA concurs with 

Southwest’s application that connecting markets beyond Houston will see significant public 

benefits as a result of new low fare access to the four destinations in Mexico. In fact SWAPA 

has found that as a result of geographic location, many of these connecting markets lack any 

low fare carrier option today. (Exhibit #1)

III. SOUTHWEST HAS AN ESTABLISHED TRACK RECORD OF BRINGING LOW FARE 

COMPETITION TO MEXICO

SWAPA believes that Southwest’s recent track record in Mexico is powerful evidence 

that demonstrates the extent of public benefits that can be expected if Southwest is granted 

the exemption. Since May 2011, when Southwest closed its transaction with AirTran Airways, 

Southwest has added 8 new segments to the Mexican market. As of the fall of 2014 all of this 

service is operated under the Southwest brand. The impact of this additional low fare service 

has been substantial. In 6 of the 8 new local markets fares dropped by an average of 19% and 

passenger traffic increased by an average of 722%. (Exhibit #2). In 7 of the 8 local markets,

Southwest’s fare was significantly below the average fare of the other competitors (Exhibit #3). 
4

In the one local market that did not see a drop in average fare, Southwest’s fare was in-line 

with the average fare in the market prior to entry.

IV. ALLOWING ONE BRAND CARRIER TO USE TWO DESIGNATIONS IS NOT IN PUBLIC INTEREST

For all intents and purposes ExpressJet and SkyWest operate as wet-lease providers, 

under capacity purchase agreements, for United Airlines with no independent identities, on the 

routes in question. Under the current aviation agreement, these partner carriers occupy a 

scarce designation and block Southwest from providing large-jet, independent carrier 

competition. Allowing these dual designations to continue is clearly not the best use of scare 

resources

3

, especially in Mexico City4that is also restricted by slot control. On the two routes 

that Southwest and SWAPA are requesting a reallocation of authority, ExpressJet and SkyWest 

operate with 50 seat ERJ-145 and 70 seat CRJ-700 equipment. This equipment is significantly 

smaller and more costly on a unit basis to operate than the 143 seat 737-700 that Southwest 

proposes to operate on the two routes in question. Allowing United to fly small capacity 

regional jets with one of its two designations on the routes in question, especially when it 

would block competitive entry, would result in fewer customers paying higher fares and is 

clearly not in the public interest.

V. CONCLUSION

For the reasons stated above, SWAPA fully supports the Southwest application and 

urges the Department to:

 

3 Based on SWAPA review of US – Mexico routes, whose designations were fully subscribed, slightly over 40% were 

flown by a capacity purchase agreement provider operating RJ equipment and a mainline carrier under the same 

brand.

4 Per Innovata Schedules as of Dec 15th for January 2015, 39% of all Mexico City departures were operated by 

regional equipment.
5

 Withdraw one of the two authorities held by United and its partner carriers for 

service on the Houston – MEX and Houston – SJD segments

 Quickly grant Southwest exemption authority and requisite designations to 

engage in scheduled foreign air transportation between Houston and four 

points in Mexico.

SWAPA also believes that the Department also has the opportunity to set precedent that would 

eliminate the ability for incumbent carriers to continue to exploit the existing Air Transport 

Agreement provisions.

Respectfully submitted,

_________________________________

Paul Jackson
1 - COMMENTS OF THE SOUTHWEST AIRLINES PILOTS’ ASSOCIATION

Exhibit #1 – Beyond Market Competitive Exposure to Low Cost/Ultra-Low Cost Carriers

Source: Sabre Global Demand Year Ending October 2014. Low cost/ultra-low cost carrier defined as Interjet, Vivaaerobus, Volaris, Southwest(including AirTran), jetBlue, Frontier, Spirit, Sun Country, and Virgin America. 

95.6%

75.0%

65.6%

49.0%

73.3%

22.0%

18.2%

16.7%

33.1%

28.4%

15.0%

5.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

CUN MEX PVR SJD

% of Passengers Exposed to Low Cost/Ultra-Low Cost Carrier

% of Beyond Markets with Exposure to Low Cost/Ultra-Low Cost Carrier

% of Passengers Choosing Low/Ultra-Low Cost Cost Carrier
2 - COMMENTS OF THE SOUTHWEST AIRLINES PILOTS’ ASSOCIATION

Exhibit #2 – Impact of Additional Post - Merger Southwest Service on Local Markets

85.3%

70.3% 66.1%

14.7%

2.8%

(0.9%)

(42.7%)

(22.7%)

(3.5%) (7.6%)

(16.5%) (18.5%)

13.0% 7.3%

(50%)

0%

50%

100%

150%

200%

(50%)

0%

50%

100%

150%

200%

SNA-MEX SNA-SJD SAT-CUN AUS-CUN SAT-MEX DEN-SJD DEN-CUN CHI-CUN

Change in Pax Change in Fare

2759.7%

1335.3%

300%

350%

400%

450%

500%

1000%

1500%

2000%

2500%

3000%

All markets on this chart were added by Southwest Airlines, using AirTran 

equipment, after the acquisition. In almost every example significant 

reduction in fares and stimulation of local demand has occurred when the 

year of data prior to Southwest entry is compared to the first year post 

entry. Even in cases where the overall fare has increased the average net 

fare offered by Southwest at or below the fare offered prior to entry.

Source: Sabre Global Demand
3 - COMMENTS OF THE SOUTHWEST AIRLINES PILOTS’ ASSOCIATION

Exhibit #3 – Impact of Additional Post - Merger Southwest Service on Local Markets, Fare Comparison

103,903 

68,552 

24,593 

21,004 

119,124 

12,363 

4,883 

(3,027)

($102)

($48)

($7)

($16)

($30)

($54)

$32 

$16 

($96)

($50)

($17)

($28)

($78)

($109)

($1)

$0 

($120.00)

($70.00)

($20.00)

$30.00

$80.00

$130.00

$180.00

$230.00

$280.00

(60,000)

(40,000)

(20,000)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

SNA-MEX SNA-SJD SAT-CUN AUS-CUN SAT-MEX DEN-SJD DEN-CUN CHI-CUN

Change in Fare

Change in Passengers

Change in Pax Change in Fare Southwest Fare vs. Original Market Fare

All markets on this chart were added by Southwest Airlines, using 

AirTran equipment, after the acquisition. In almost every example 

significant reduction in fares and stimulation of local demand has 

occurred when the year of data prior to Southwest entry is compared 

to the first year post entry. Even in cases where the overall fare has 

increased the average net fare offered by Southwest at or below the 

fare offered prior to entry.

Source: Sabre Global Demand
CERTIFICATE OF SERVICE

I hereby certify that on December 23, 2014, a copy of the foregoing was served via email on the following persons:

msinick@ssd.com (Alaska Airlines)

howard.kass@aa.com (American Airlines)

robert.wirick@aa.com (American Airlines)

sascha.vanderbellen@delta.com (Delta Air Lines)

chris.walker@delta.com (Delta Air Lines)

matwood@cozen.com (Frontier Airlines)

stephen.lachter@cozen.com (Frontier Airlines)

robert.land@jetblue.com (jetBlue Airways)

jhill@cooley.com (jetBlue Airways)

perkmann@cooley.com (jetBlue Airways)

robert.cohn@hoganlovells.com (Republic Airways)

patrick.rizzi@hoganlovells.com (Republic Airways)

dkirstein@yklaw.com (Spirit Airlines)

jyoung@yklaw.com (Spirit Airlines)

bob.kneisley@wnco.com (Southwest Airlines)

leslie.abbott@wnco.com (Southwest Airlines)

thomas.ting@suncountry.com (Sun Country Airlines)

dan.weiss@united.com (United Airlines)

steve.morrissey@united.com (United Airlines)

gmurphy@crowell.com (United Airlines)

sseiden@crowell.com (United Airlines) 

john.varley@virginamerica.com (Virgin America) 

susan.kurland@dot.gov

brian.hedberg@dot.gov

brett.kruger@dot.gov

reese.davidson@dot.gov

todd.homan@dot.gov

peter.irvine@dot.gov

cristinasa@state.gov

info@airlineinfo.com

 / John Pepper /

__________________________