Order 20 1 4

- 12

- 9 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the 15 th day of December , 20 1 4

Served: December 15 , 201 4

ORDER INSTITUTING PROCEEDING AND INVITING APPLICATIONS

Summary

By this order, the Department institute s a proceeding to determine the disposition of the U.S.

- Haneda slot pair currently allocated to Delta Air Lines, Inc. (Delta) for services between Seattle

, Washington, and Tokyo’s Haneda Airport

.
Background

Under the Memorandum of Understanding between the United States and Japan signed on October 25, 2010, four daily slot pairs are available to carriers from each country to provide scheduled combination services between the United State s and Tokyo’s Haneda Airport. 1 As a result of three prior proceedings, by Orders 2010

- 7

- 2, 2013

- 2

- 4, and 2014

- 4

- 6, the Department has now allocated the four slot pairs as follows: 1) one slot pair to Hawaiian Airlines, Inc. (Hawaiian) for Honolulu

- Haneda service; 2) two slot pairs to Delta, one for Los Angeles

- Haneda

1 The scheduled operations are subject to the following conditions: 1) U.S. operations at Haneda are permitted between 2200 and 0700 hours local time; 2) departures from Haneda to a point in the 48 contiguous U.S. states are not permitted prior to midnight; and 3) extra sections are not permitted. Motion and application of

AMERICAN AIRLINES , INC. ; and

Motion of

HAWAIIAN AIRLINES, INC.

in the matter of the 2010 U.S.

- Haneda Combination Services Allocation Proceeding Docket DOT

- OST

- 2010

- 00182 and one for Seattle

- Haneda services; and 3) one slot pair to United Airline s, Inc. ( United ) for San Francisco

- Haneda service. 2

Motion and Application of American

On October 2, 2014, American Airlines, Inc. (American) filed (1) a motion requesting that the Department withdraw Delta’s daily U .S.

- Haneda slot pair that was award ed for Seattle

- Haneda services; and (2) an application for reallocation of that slot pair to American for Los Angeles

Haneda services

. American points out that Delta intends to operate limited winter season service in the Seattle

Haneda market

, with only 17 planned operation s over a 182 day period

. 3 American asserts that Delta plans to serve the market for one week every 90 days

, which is just enough to prevent the slot pair from automatically reverting to the Department based on the dormancy co ndition imposed by the Department on the slot pair

. 4

In support of its motion, American states that in 2012 Delta, “ having over

- promised the Department of the consumer benefits it would deliver with a daily Detroit

- Haneda service, ” 5 ask ed for a second chance by proposing to move the service to Seattle. 6 American notes that it and others voiced concerns , at that time, that Seattle was the smallest market proposed in the proceeding and question ed the viability of the service . American poin ts out that Delta promised the Department significant competition and transportation benefits

, and that the Department, relying on Delta’s submissions, allowed the Detroit gateway to be moved to Seattle . American contends that “ Delta has again failed in i ts promises by operating only a seasonal service in the Seattle

- Haneda market

, ” 7 and that its Seattle

- Haneda slot pair should be reallocated. 8

American urge s the Department to restore the public benefits of Haneda service for which the U.S. Government negotiated

. American argues that it would make better use of the opportunity than Delta by offering daily, year

- round service to Haneda from its Los Angeles hub , and states that it is prepared to begin service in the Los Angeles

- Haneda market on January 1 5, 2015, using

2 F ollowing a carrier route selection proceeding, t he Department initially allocated the f our U.S.

- Haneda slot pairs as follows: Delta at Detroit, Delta at Los Angeles, Hawaiian at Honolulu, and American at New York (JFK). See Order 2010

- 7

- 2. In 2012, Delta applied to relocate its Detroit

- Haneda service to the Seattle

- Haneda market

. Followin g a second carrier selection proceeding, in which competing proposals were submitted by American, Hawaiian, and United, the Department awarded Delta authority to provide service between Seattle and Haneda. See Order 2013

- 2

- 4. Subsequently, in 2013, Ameri can ended its New York

- Haneda service, and returned the slot pair to the Department for reallocation. Following a carrier selection proceeding involving United and Hawaiian, the Department selected United for Haneda service from San Francisco. See Order 2014

- 4

- 6.
3 American Motion and Application , at 3.
4 The allocation of the U.S.

- Haneda slot pair to Delta is subject to the Department’s standard condition pertaining to dormancy, whereby the slot pair will be deemed dormant and will revert automatically to the Department if it is not used for a period of 90 days. See Order 2013

- 2

- 4, at 5.
5 American Motion and Application , at 4.
6 Id

. 7 Id

. 8 Id

.3 B

- 777 aircraft. 9 American states that

, as a new entrant into Haneda, it would provide important
compe ti tion benefits , n ot only by competing head

- to

- head with Los Angeles

- Haneda incumbents Delta and All Nippon Airways (ANA) , but by also enha ncing overall competition in the U.S.

- Tokyo market, as Los Angeles is the largest continental U.S. gateway to Tokyo. It asserts that
t he demand in the Los Angeles

- Tokyo market is robust enough that six carriers today operate Los Angeles

- Narita flights

, and a new U.S. entrant into Haneda will provide important competition in the Tokyo market.

Motion and Answer of Hawaiian

On October 9, 2014, Hawaiian filed a motion to reopen Order 2013

- 2

- 4, and an answer to the motion and application of American. Hawa iian specifically requests that the Department (1) reopen the case where Delta was awarded Seattle

- Haneda authority and modify the dormancy condition to require meaningful year

- round service; (2) grant American’s motion to withdraw the Seattle

- Haneda slot pair from Delta; and (3) institute a new proceeding to develop a factual record before reallocating the slot pair

.

Hawaiian also opposes American’s Los Angeles

- Haneda application and states that

, if the Department were to institute a proceeding to real locate the slot pair , Hawaiian would apply to provide year

- round service to Haneda with full utilization of the slot pair.

Hawaiian also argues that when Delta requested a transfer of its Detroit

- Haneda slot to Seattle in 2012 , Hawaiian and others pointed out that Seattle was the smallest market proposed in the proceeding and w arn ed that it would not succeed. Hawaiian notes that Delta’s approach is in contrast to American’s decision to return its Haneda frequency to the Department for reallocation

once American concluded that continued operations from New York were uneconomic. 10

Hawaiian states that b y reducing its service to the minimum level to avoid the impact of the dormancy condition, Delta’s unilateral action violates the spirit, if not the letter, of Order 2013

- 2

- 4 , and the Department should award this opportunity to a carrier, such as Hawaiian, that will use it. Hawaiian argues that Delta’s Haneda strategy is not about providing service or competition

, but “ playing keep away ” with valuable air se rvice rights

– all to protect Delta’s Narita hub. 11

Responsive Pleadings

Delta, the Delta Master Executive Council of the Air Line Pilots Association International ( Delta MEC ), and the Port of Seattle each filed answers in opposition to the motions of American and Hawaiian. American subsequently filed an answer and reply to the motion and answer of Hawaiian and a reply to the answer of Delta. Hawaiian then filed a sur

- reply to American

. 12

9 American Motion and Application , at 5.
10 Hawaiian Motion and Answer , at 1

- 3.
11 Hawaiian Motion and Answer , at 3.
12 Hawaiian’s response was accompanied by a motion for leave to file an otherwise unauthorized document. The Department will grant the motion.4 Delta argues that it is operating in full compliance with the D epartment’s conditions co ncerning its Haneda authority. Delta states that it is using its Seattle

- Haneda slot pair at least every 90 days ; that the slot pair is not dormant by definition, and, therefore, is “ not subject to arbitrary withdrawal. ” 13 Delta s tates that

, due to low forecast demand this winter and the not

- yet

- mature Seattle hub, it was commercially necessary to make seasonal reductions this winter. Delta contends that t he Department has never stripped limited entry frequencies from a bona fide holder due to a temporary reduction over a single traffic season.

Delta asserts that it has firm plans to resume its Seattle

- Haneda service on March 29, 2015. Delta further asserts that the public interest case for Seattle

- Haneda authority is even stron ger today than when the Department originally allowed Delta to move its Haneda gateway from Detroit to Seattle. Delta a rgues that the Department’s 2013 decision remains correct and that there is no reason to revisit that case. Delta states that it is working hard to make its Seattle

Haneda service a permanent, year

- round success

, and that by the start of the next winter season Delta will have the support of 35 additional Delta/Delta Connection flights providing feed into its Seattle hub. 14

Delta questi ons American’s attempt to seek Haneda access, because American recently relinquished its New York/JFK

- Haneda route, and did not at that time seek Los Angeles authority instead. Delta asserts that American could have reapplied for its own relinquished Hane da slot pair just a few months ago, and that American enjoys the benefit of two U.S.

- Haneda slot pairs through its joint venture with Japan Airlines ( JAL )

. 15

With respect to Hawaiian, Delta note s that the Department has three times rejected Hawaiian’s bid to add a fourth daily Hawaii

- Haneda flight on top of the existing three flights operated by Hawaiian itself, JAL, and ANA. Delta argues that Seattle, in contrast, is the only Haneda gateway in the Pacific Northwest, providing the geographic and comme rcial diversity the Department has prioritized in distributing Haneda slots.

The Delta MEC and the Port of Seattle oppose the motions of American and Hawaiian, each stating that Delta’s service would benefit the traveling and shipping public in Seattle an d the entire Pacific Northwest region.

In responding to Delta, American asserts that the Department should ignore Delta’s argument that its Seattle

- Haneda cutbacks reflect a seasonal adjustment, as there is little seasonality in U.S.

- Japan markets. Inde ed, American notes that Delta made no seasonal cutbacks to its Seattle

Narita service. 16 American contends that

, in light of all the service Delta has eliminated

, Delta is providing no public benefits with its Seattle allocation

, and the Department has the legal right and duty to withdraw Delta’s Seattle

- Haneda authority. 17

13 Delta Answer , at 3.
14 Delta Answer , at 4

- 6.
15 Delta Answer , at 1

- 2 and 8

- 9.
16 Consolidated Reply of American , at 6

- 8.
17 Consolidated Reply of American , at 1

- 2.5 In responding to Hawaiian, American agree s that the Department should withdraw Delta’s Seattle

- Haneda frequency and reallocate it to another carrier , but argues that Hawaiian’s
stateme nt of future intent to apply is not the same as an application

, and therefore that American’s application for Los Angeles

- Haneda authority is uncontested. Under those circumstances, American urges the Department to immediately withdraw Delta’s Seattle

- Han eda authority and reallocate it to American for Los Angeles

- Haneda service.

In its sur

- reply to American, Hawaiian refutes American’s view that its Los Angeles

- Haneda proposal is uncontested. Hawaiian asserts that it stands ready to file an application as soon as the Department calls for competing applications to be filed.

Decision

In light of Delta’s extensive winter

- season Seattle

- Haneda service cutbacks, the submissions of American and Hawaiian and the responses thereto, the Department believe s that the public interest requires a fresh examination of whether the best use of the Seattle

- Haneda opportunity is
to allow Delta to retain the slot pair for Seattle

- Haneda service , or whether the public interest would be better served by reallocating the slot pair for service from another U.S. city by another U.S. carrier or by Delta

.

T o make the necessary public int erest determinations, a complete evidentiary record will need to be established

. The Department has therefore decided to institute a proceeding to develop such a record

. Interested parties will be free to argue in favor of maintaining the allocation to Delta for Seattle

- Haneda service

, or in favor of allocating the slot pair to a different U.S. carrier

, or to Delta for a different U.S. c ity

. The principal objective in this proceeding will be to maximize public benefits with this scarce resource

. The Department does not need to decide whether Delta’s current level of Seattle

- Haneda service triggers the dormancy condition. W here frequency allocations are not being operated effectively, the Department has the authority to reallocate them to ensure that they are used effectively and in a manner that promotes competition and otherwise best serves the public interest

. 18 The Department find s that the public interest warrants a proceeding to determine whether it remains in the public interest to allow th is limited Haneda opportunity to remain with Delta for service at Seattle , or whether the public interest favors an alternative use of the authority

. 19

Proceeding and Eviden tiary Requ irements

The Department is instituting this proceeding to determine , based on a fresh evidentiary record, whether the public interest would be best served by allowing Delta to retain the currently

-

18 Order 95

- 2

- 30, at 5 and Order 94

- 12

- 7, at 8.
19 W e note the possibility that this pr oceeding will not be completed by March 29, 2015, the date on which Delta plans to resume a full pattern of daily service in the Seattle

- Haneda market. It is therefore likely that Delta will have sold tickets for Seattle

- Haneda services scheduled to occur on or after that date. Were the Department to ultimately decide in this proceeding to reallocate the Seattle service to another gateway, the Department would expect Delta to re accommodate

, either on its own or another carrier’s services

, any passenger who might hold tickets for Delta’s Seattle

- Haneda nonstop service

.6 allocated Seattle

- Haneda slot pair or , instead, by an alternative disposition of the Seattle

- Haneda slot pair

.
As noted above, the principal objective in this proceeding will be to maximize public benefits

. In this regard, consideration will be given to the proposal most likely to result in service that best meets the needs of the traveling and shipping public

. The Department will also consider the effects of each service proposal on the overall competitive environment, including effects on the market structure and on competition in the U.S.

- Japan market . In addition, consideration will be given to other factors historically used for carrier selection, where relevant.

Should there be a decision to select an alternative gateway to Haneda, the Department would expect to allocate the slot pair for an indefinite term, subject to a start

- up condition and the standard 90

- day dormancy condition. 20 For any slot pair not used for a period of 90 days, the allocation with respect to that slot pair would expire automatically and revert to the Department for reallocation.

The Department has decided to use written, non

- oral show

- cause procedures under Rule 210 of the Department’s regulations (14 CFR 302.210) in deciding this case. The Department find s no material issues of fact that would warrant an oral evidentiary hearing in this case. The Department is also simplifying its procedures and evidentiary requirements, consistent with securing an adequate decisional record with the least possible delay and without unnecessary cost to the interested parties

. Except for procedural dates, all responsive pleadings should conform to Part 302, Subpart C of the Department’s regulations (14 CFR Part 302). All s ubmissions should be filed with the Department of Transportation, 1200 New Jersey Avenue, S.E., West Building Ground Floor, Room W12

- 140, Washington, D.C. 20590, in the captioned Docket

. 21 For each application the Department would expect to see the following infor mation for the forecast year, defined as the 12 months ending December 31, 201 5 :

1. Complete service proposals including proposed routing, date for instituting service, and single

- plane schedules. If a carrier is relying upon connecting traffic, it should
p rovide proposed nonstop

- to

- nonstop connecting schedules. If a carrier intends to offer seasonal service, it must so state and specify the period during which the seasonal services would be offered.

20 In its October 9 motion, Hawaiian suggested that the Department modify the standard dormancy condition. We believe that, as this order makes clear, we have adequate means to address our public interest concerns without interfering with our long

- settled dormancy language. However, if Hawaiian holds a different view, it will be free to argue its point on the record of this proceeding, as will any other parties.
21 The origina l filing should be on 81⁄2" x 11" white paper using dark ink (not green) and be unbound without tabs, which will expedite use of our docket imaging system. In the alternative, parties are encouraged to use the electronic submission capability available thro ugh the Regulations.gov Internet site ( http://www.regulations.gov ) by following the instructions on the web site. Additionally, service by facsimile or electronic mail is authorized. Parties should include their fax numbers and email addresses on their submissions and should indicate the method(s) of service used on their certificates of service.7 Proposed schedules should contain flight numbers, complete routings from origin to destination (including behind

- gateway and beyond

- gateway points, if the carrier is relying upon connecting traffic, and elapsed time for services), departure and arrival tim es in local time, equipment types (including seat configuration by class of service and the cargo capacity available), days scheduled, classes of service offered, and the limitations, if any, on the number of seats available for each class of service;

2. A b rief description of the types of scheduled service the carrier currently provides, if any, between the United States and Tokyo, Japan, including whether the services are direct or code

- share operations and whether they are seasonal or year

- round;

3. A statem ent describing the benefits of the carrier’s proposed service to the public interest;

4. A statement as to whether or not the aircraft to be used in the proposed schedules are on hand or on order. If on hand, indicate where and the extent to which those ai rcraft are currently being used. If on order by purchase or lease, indicate when they will be delivered and how the aircraft will be financed. Indicate whether the aircraft to be used comply with FAR

- 36. If not, indicate plans for achieving compliance;

5. Estimated number of gallons of fuel to be consumed by aircraft type on an annual basis as a result of the proposed service, and indicate the availability and method of obtaining the necessary fuel;

6. A statement as to whether the carrier would accept a co ndition requiring i nstitution of service by a date specified by the Department , and, if so, w hat date the Department should specify.

To the extent that any of the requested information has already been provided on the record, carriers may refer to that in formation in supplemental pleadings. Carriers may, of course, also submit any additional information beyond that requested if they believe it would be useful to us in reaching a decision.

Procedural Timetable

In light of the Department’s goal of reaching a prompt final decision, the following procedural schedule for submissions has been established :

Petitions for Reconsideration: December 22, 2014 Answers to Petitions: January 2, 2 015 Applications /Supplements/Amendments : January 5, 2015 Answers: January 12, 2015 Replies: January 20, 2015

In consideration of the procedural schedule, as discussed above, the Department authorize s service by facsimile or electronic mail. Parties should include their fax numbers and/or e

- mail8 address es on their submissions and should indicate on their certificates of service the methods of service used. Applicants not using facsimile or electronic mail must provide an original and five copies of all submissions to the Department of Transportation, Doc kets, no later than the dates indicated. Please also provide an electronic copy of all responsive pleadings to: Brett.Kruger@dot.gov

.
ACCORDINGLY,

1

. The Department institute s a comparative carrier selection proceeding in Docket DOT

- OST

201 0

- 0018 , to be decided by written, non

- oral procedures under Part 302 of our regulations (14 CFR Part 302.210);

2. This proceeding will consider whether the public interest calls for permitting Delta Air Lines, Inc. to ret ain the currently allocated Seattle

- Haneda slot pair for scheduled combination services, or whether the public interest calls for an alternative use of that slot pair;

3

. The motion of Hawaiian Airlines , Inc., for leave to file an otherwise unauthorized document is granted ;

4 . Applications and other responsive pleadings should be filed in accordance with the procedural schedule set forth in this order; and

5

. T his order will be served on Delta Air Lines, Inc.; American Airlines, Inc. ; Hawai ian Airlines, Inc.; United Airl ines, Inc.; the Delta Master Executive Council of the Air Line Pilots Association International ; the Port of Seattle; all certificated U.S. combination carriers operating large aircraft; the U.S. Department of State (Office of Av iation Negotiations) ; the Federal Aviation Administration ; and the Ambassador of Japan in Washington, D.C.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs

(SEAL) An electronic version of this document is available on the World Wide Web at http://www.regulations.gov