Federal Register / Vol. 76, No. 145 / Thursday, July 28, 2011 / Notices 45313 

1Operating Limitations at New York LaGuardia 

Airport, 71 FR 77,854 (Dec. 27, 2006); 72 FR 63,224 

(Nov. 8, 2007) (transfer, minimum usage, and 

withdrawal amendments); 72 FR 48,428 (Aug. 19, 

2008) (reducing the reservations available for 

unscheduled operations); 74 FR 845 (Jan 8. 2009) 

(extending the expiration date through Oct. 24, 

2009); 74 FR 2,646 (Jan. 15, 2009) (reducing the 

peak-hour cap on scheduled operations to 71); 74 

FR 51,653 (Oct. 7, 2009) (extending the expiration 

date through Oct. 29, 2011); 76 FR 18,616 (Apr. 4, 

2011) (extending the expiration date until the 

effective date of the final Congestion Management 

Rule for LaGuardia Airport, John F. Kennedy 

International Airport, and Newark Liberty 

International Airport but not later than Oct. 26, 

2013). 

2The Order presently expires upon the effective 

date of the final Congestion Management Rule at 

LaGuardia Airport, John F. Kennedy International 

Airport, and Newark Liberty International Airport, 

but not later than October 26, 2013. 

3 14 CFR part 93, subparts K and S. 

4See, e.g., South Dakota v. Dole, 483 U.S. 203, 

208 (1987). 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

[Docket No. FAA–2010–0109] 

Petition for Waiver and Other Relief 

ACTION: Notice of a petition for waiver 

and solicitation of comments on grant of 

petition with conditions. 

SUMMARY: On May 23, 2011, Delta Air 

Lines, Inc. (Delta) and US Airways, Inc. 

(US Airways) (together, the Joint 

Applicants or the carriers) submitted a 

joint request for the Department of 

Transportation (the Department) to 

waive a prohibition on purchasing 

operating authorizations (slots) at 

LaGuardia Airport (LGA). The carriers 

requested the waiver to allow them to 

consummate a transaction in which US 

Airways would transfer to Delta 132 slot 

pairs (265 slots) at LGA. In exchange, 

Delta would transfer to US Airways 42 

slot pairs (84 slots) at Ronald Reagan 

Washington National Airport (DCA), 

convey route authority to operate 

certain flights to Sao Paulo, Brazil, and 

make a cash payment to US Airways. 

The Department (the Office of the 

Secretary and the Federal Aviation 

Administration, or FAA) has evaluated 

the proposed transaction and tentatively 

determined that it affords significant 

benefits to the public. At the same time, 

we recognize that the transaction will 

result in an increase in market 

concentration that could negatively 

impact consumers. As a result, we have 

tentatively determined that the 

divestiture of a number of slots by the 

carriers is necessary for us to allow the 

transaction to proceed. We have 

tentatively concluded that the 

divestiture of 32 slots at LGA and 16 

slots at DCA will reduce adverse 

impacts on consumers at DCA and LGA 

to a degree sufficient for us to conclude 

that the requested waiver is in the 

public interest. This Notice prescribes 

rules and procedures for the divestiture 

of those slots by the carriers to new 

entrant and limited incumbent carriers. 

DATES: Comments on the FAA’s 

proposed grant of the petition for waiver 

with conditions must clearly identify 

the docket number and must be received 

on or before August 29, 2011. 

ADDRESSES: You may send comments 

identified by Docket Number FAA– 

2010–0109 using any of the following 

methods: 

FOR FURTHER INFORMATION CONTACT: 

Rebecca MacPherson, Assistant Chief 

Counsel for Regulations, by telephone at 

(202) 267–3073 or by electronic mail at 

Rebecca.macpherson@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Introduction 

The FAA limits the number of 

scheduled and unscheduled operations 

during peak hours at LGA pursuant to 

an Order that was originally published 

in December 2006 and that has been 

extended several times since (the 

Order).1 The Order allocates operating 

authorizations (commonly known as 

‘‘slots’’) to carriers and establishes rules 

for the use and operation of slots. The 

Order allows temporary leases and 

trades of slots between carriers, 

provided that they do not extend 

beyond the duration of the Order.2 Most 

importantly for purposes of this waiver 

request, the Order does not permit the 

purchase and sale of slots at LGA. The 

only way for a carrier to sell or purchase 

a slot at LGA is through a waiver of the 

Order. 

A different legal regime governing 

slots exists at DCA. The High Density 

Rule (HDR) 3 limits scheduled and 

unscheduled operations there. The HDR 

permits carriers to sell or purchase slots 

at DCA with FAA confirmation of the 

transaction. 

On May 23, 2011, Delta and US 

Airways submitted a joint request for a 

limited waiver from the prohibition on 

purchasing slots at LGA. The carriers 

requested the waiver to allow them to 

consummate a transaction in which US 

Airways would transfer to Delta 132 slot 

pairs (265 slots) at LGA, and Delta 

would transfer to US Airways 42 pairs 

(84 slots) at DCA, together with route 

authority to operate certain flights to 

Sao Paulo, Brazil, and make a cash 

payment to US Airways. The proposed 

transaction is described in more detail 

below. 

We tentatively conclude that a waiver 

of the Order is warranted because the 

potential benefits of the proposed 

transaction, as modified by the 

conditions discussed below, outweigh 

its potential harms. 

Standard of Review; Legal Authority 

Because the proposed transaction 

involves the purchase of slots at LGA, 

we must determine whether a limited 

waiver of the Order is warranted. The 

FAA Administrator may grant an 

exemption from a rule (or an order) only 

‘‘when the Administrator decides the 

exemption is in the public interest.’’ 49 

U.S.C. 40109(b). The Administrator is 

also authorized to ‘‘modify or revoke an 

assignment [of the use of airspace] when 

required in the public interest.’’ 49 

U.S.C. 40103(b)(1). Our determinations 

on requests for waivers or exemptions 

are based on our ‘‘public interest’’ 

findings. 75 FR 7,307 and 75 FR 26,325. 

Accordingly, in reviewing the carriers’ 

petition for a waiver, we will consider 

the impacts of the overall transaction as 

part of our ‘‘public interest’’ analysis 

and determination. 

The term ‘‘public interest’’ 

encompasses, at a minimum, the policy 

objectives listed by Congress in Section 

40101 of Title 49 U.S. Code. Among 

other things, these include maximizing 

reliance on competitive market forces, 

avoiding unreasonable industry 

concentration and excessive market 

domination, and encouraging entry into 

air transportation markets by new 

carriers. 49 U.S.C. 40101(a)(4), (6), (9), 

(10), (12)–(13) and (d). These objectives 

are not exclusive; they are factors to be 

considered (‘‘among others’’) by the 

Secretary in carrying out his 

responsibilities and authorities. 

Moreover, these objectives are included 

in the policies embodied in the Airline 

Deregulation Act of 1978, Public Law 

No. 95–504 (92 Stat. 1705). The 

Administrator may take these factors— 

including the fostering of competition— 

into account when making his public 

interest determination. 

In the context of our public interest 

analysis, we will balance the economic 

benefits of the transaction against any 

potential resulting adverse economic 

consequences. Our standard does not 

require that we determine that a 

transaction threatens no economic 

impairment, but rather that any 

resulting adverse consequences are 

outweighed, in our judgment, by the 

transaction’s promised benefits. 

In granting a waiver or exemption, we 

may impose conditions to achieve our 

public interest objectives.4 Congress 

gave the FAA Administrator broad 

powers to fashion orders to carry out 

aviation programs. The Administrator’s 


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5The FAA implemented a ‘‘reverse lottery’’ to 

reallocate slots to new entrants and limited 

incumbents, just after enacting the Buy-Sell Rule. 

51 FR 8,632 (Mar. 12, 1986). In 1992, the FAA 

amended the Buy-Sell Rule to expand protections 

afforded new entrant and limited incumbent 

carriers. 57 FR 37,308 at 37,309 (Aug. 18, 1992); in 

2000, in the context of phasing out the HDR at LGA, 

the FAA specifically identified new entrant and 

limited incumbent carriers to be eligible for a 

lottery for certain slot exemptions. 65 FR 75,765 

(Dec. 4, 2000). The FAA, in the past O’Hare 

Congestion and Delay Reduction Rule, granted 

preferential treatment to new entrant and limited 

incumbent airlines in assigning new or withdrawn 

slots interests. 14 CFR part 93, subpart B; 71 FR 

51,400 (Aug. 29, 2006). 

6The 2009 waiver request, our proposed 

response, all comments on our response, and our 

final order with respect to that waiver request are 

available in Regulations.gov, Docket FAA–2010– 

0109. 

7Notice of a Petition for Waiver of the Terms of 

the Order Limiting Scheduled Operations at 

LaGuardia, 75 FR 7306 (Feb. 18, 2010). 

8Such upgauging could result in a significant 

increase in passenger throughput without 

increasing congestion and delay. 

9Notice on Petition for Waiver of the Terms of the 

Order Limiting Scheduled Operations at LaGuardia 

Airport, 75 FR 26,322 (May 11, 2010). 

10 Delta Air Lines, Inc. and US Airways, Inc. v. 

Federal Aviation Administration and U.S. 

Department of Transportation, Case #10–1153 (DC 

Cir. filed Jul. 2, 2010). 

general authority empowers him to 

‘‘take action [the Administrator] 

considers necessary to carry out this 

part [49 U.S.C. chapters 401–501], 

including conducting investigations, 

prescribing regulations, standards, and 

procedures, and issuing orders.’’ 49 

U.S.C. 40113(a). In furtherance of this 

authority, Congress expressly allowed 

the Administrator to ‘‘amend, modify, or 

suspend an order’’ and to do so ‘‘in the 

way * * * the Administrator decides.’’ 

49 U.S.C. 46105(a). Accordingly, the 

Administrator may impose conditions 

on grants of waivers or exemptions. 

Additionally, the Secretary of 

Transportation may require 

conditions—such as divestitures of slots 

and/or other assets, including route 

authority—on the approval of certain 

transactions between airlines. 

The FAA has regularly relied on procompetitive policy goals in carrying out 

its slot programs.5 The FAA consistently 

has considered the pro-competitive 

features of the Airline Deregulation Act 

in exercising its slot allocation 

authority. Conditioning the grant of the 

petition upon divestitures of slots in 

order to alleviate significant airline 

market concentration (at DCA for US 

Airways and at LGA for Delta) and 

dominance is consistent with past FAA 

policies. 

2009 Transaction and Waiver Request 

This petition for waiver and other 

relief follows a prior waiver request by 

the same carriers. On August 24, 2009, 

US Airways and Delta requested a 

waiver of the Order to allow a similar 

transaction to proceed.6 As in this case, 

in the 2009 transaction, Delta and US 

Airways proposed to transfer a 

substantial proportion of their 

respective slot holdings at DCA and 

LGA to the other carrier. In 2009, Delta 

proposed to transfer 84 slots at DCA to 

US Airways, in exchange for which US 

Airways proposed to transfer 250 slots 

at LGA to Delta, as well as an option to 

acquire an additional 30 slots in 2015. 

As in the current proposed transaction, 

the 2009 proposal involved other, nonslot considerations—including a transfer 

to US Airways of certain international 

route authorities as well as gate, 

ticketing, and operations facilities at 

LGA’s Terminal C. 

The Department carefully evaluated 

the carriers’ 2009 petition and 

responded on February 18, 2010.7 In our 

initial response, we related the carriers’ 

assertion that the transaction would 

facilitate Delta’s establishment of a 

domestic hub at LGA and US Airways’ 

enhancement of its network at DCA; 

produce more efficiencies at LGA 

(including Delta’s plans to upgauge from 

US Airways’ turboprops to jet aircraft; 8

provide new and enhanced service to 

small communities; and benefit 

consumers through enhanced network 

connectivity. Despite the transaction’s 

asserted benefits, we did not believe 

that the 2009 transaction should go 

forward unless the carriers made more 

slots available for new entrants. Without 

a divestiture of slots by the carriers at 

both airports, we found that the 

transaction could generate adverse 

economic consequences—particularly 

due to the resulting decrease in 

competition between Delta and US 

Airways and the barriers to entry that 

limited the penetration of low cost 

competition at the two airports. 

Balancing the benefits of the proposed 

transaction against its potential adverse 

impact on competition, we proposed to 

approve the transaction subject to the 

condition that the carriers dispose of 20 

slot pairs (40 slots) at LGA and 14 pairs 

(28 slots) at DCA. We proposed that the 

slots be transferred to carriers whose 

access to DCA and LGA was otherwise 

limited. We established a procedure that 

would allow eligible carriers to compete 

to purchase the slots being sold by US 

Airways and Delta and permit the 

carriers to retain the cash proceeds of 

the disposition. 

We published our February 2010 

notice for public comment. We received 

extensive comments from Delta, US 

Airways, other carriers, air carrier labor 

unions, airport authorities, public 

officials, and members of the public. 

After reviewing those comments, we 

published our final notice regarding the 

prior transaction on May 11, 2010 (May 

2010 Notice).9

In our May 2010 Notice, we granted 

the waiver request, subject to a number 

of conditions, as set forth in our initial 

notice from February of that year. 

Principally, we found that the public 

interest required that the carriers divest 

themselves of 20 slot pairs (40 slots) at 

LGA and 14 pairs (28 slots) at DCA. 

Moreover, we laid out a basic set of 

requirements that should characterize 

any effective remedy involving a 

disposition of slots at the two airports. 

We said that an effective remedy must: 

(1) Provide a sufficient number of slots 

to allow other carriers to mount an 

effective competitive response; (2) 

define the pool of eligible carriers to 

include those with the greatest 

economic incentive to use the slots as 

intensively as possible and exert 

competitive discipline; (3) ensure that 

the bundles of divested slots are suitable 

for a commercially viable service 

pattern and structured proportionate to 

the slots that are part of the slot swap; 

and (4) not cede slot distribution 

decisions to the parties themselves, who 

would minimize the competitive impact 

on themselves and thereby reduce 

consumer benefits. Our proposed order 

today follows these same principles. 

Delta and US Airways did not choose 

to go forward with the transaction 

subject to our proposed conditions. 

Instead, in a July 2, 2010 filing, the 

carriers notified the Department of their 

intention to appeal our decision to the 

DC Circuit Court of Appeals. They later 

did so.10

2011 Transaction; Changed Economic 

and Industry Conditions 

The transaction as now proposed by 

the carriers is structurally similar to the 

transaction proposed in 2009. Under the 

transaction, Delta would acquire 132 

slot pairs (265 slots) at LGA from US 

Airways and US Airways would acquire 

42 slot pairs (84 slots) at DCA from 

Delta and the rights to operate 

additional daily service to Sao Paulo, 

Brazil in 2015. Delta would also make 

a cash payment of $65 million to US 

Airways. 

In their waiver petition, the carriers 

have presented the Department with an 

analysis of the transaction’s benefits. As 

outlined below, many of the benefits 

they assert will accrue from the 

transaction are the same as those that 


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11Additionally, the FAA finds that the grant of 

the waiver would not adversely affect safety. 14 

CFR part 11. 

12AirTran also received two slots from the FAA 

for Saturday only operations. 

13The arrangement also included a transfer, by 

JetBlue to American, of 24 slots at JFK. The FAA 

limits the number of scheduled operations at JFK 

and, under an Order, permits only leases, trades or 

transfers through the duration of the Order. See 76 

FR 18,620, extending the duration of the Order from 

October 29, 2011 to the effective date of a final 

congestion management rule at the three New York 

City airports (JFK, LGA, and Newark Liberty 

International Airport), or October 26, 2013. 

14The May 2010 Notice noted the pending 

American-JetBlue agreement, stating that, if 

Continued 

we analyzed in 2009 and 2010. The 

carriers have also claimed that changes 

in the economy and structure of the 

aviation industry at DCA and LGA, 

since 2010, dramatically reduce the 

economic harms that we viewed as 

potential adverse consequences of the 

transaction. 

The carriers assert that the transaction 

will benefit consumers. At LGA, they 

claim, it will enable Delta to create a 

new domestic hub by consolidating its 

operations into an expanded main 

terminal facility, increasing its LGA 

destinations, shifting short-haul service 

from John F. Kennedy International 

Airport (JFK) to LGA, and improving 

connectivity there. Delta states that it 

would add nonstop service and replace 

US Airways’ turboprop operations at 

LGA with larger aircraft, which it argues 

would significantly expand output and 

increase efficiency. At DCA, the carriers 

assert, the transaction would enable US 

Airways to commence daily nonstop 

service to at least 15 new destinations, 

improve connectivity, and utilize larger 

aircraft. Additionally, the transaction 

would relieve US Airways of its 

unprofitable flying obligations at LGA 

and allow it to transfer its LGA facilities 

to Delta, resulting in a more efficient use 

of the terminal facilities at LGA. 

The carriers also highlight the fact 

that, since the time of our review of 

their last proposed transaction, low-cost 

carriers (LCC) have significantly 

increased their market penetration at 

both DCA and LGA. The carriers state 

that JetBlue, AirTran, and Frontier have 

increased the number of LCC slots at 

DCA by 46, thereby increasing the LCC 

slot share percentage at that airport. 

They maintain that these holdings 

increase the slot share of LCCs from 

3.3% to 8.6% at DCA, exceeding the 

6.5% LCC slot share that would have 

obtained under the divestiture terms of 

our May 2010 Notice. At LGA, the 

carriers point out that Frontier, AirTran, 

and Southwest recently acquired slots, 

for a net increase of 18 LCC slots. They 

maintain that these holdings increase 

the slot share of LCCs from 6.8% to 

8.5% at LGA, closer to the 10.3% LCC 

slot share sought in our May 2010 

Notice. The carriers assert that an 

economic analysis demonstrates that the 

proposed remedy, coupled with the 

increased number of LCC slot holdings, 

would exceed the competitive effects of 

the Department’s May 2010 proposed 

divestitures of 20 LGA slot pairs and 14 

DCA slot pairs. They say that the 

Southwest/AirTran merger will 

intensify competition in the 

Washington, DC, and New York City 

areas. 

Furthermore, the carriers assert, the 

United/Continental merger, 

consummated on September 30, 2010, 

enhanced United’s competitive profile 

at both Newark Liberty International 

Airport (EWR) and Washington Dulles 

International Airport, as well as at LGA 

and DCA. Moreover, Delta states that 

this transaction would enable it to 

establish a domestic hub at LGA, secure 

corporate accounts, shift short-haul JFK 

service to international service, and 

thereby address the competitive 

advantage secured by American 

Airlines/British Airways through their 

antitrust immunity alliance. 

Summary of Proposed Findings and 

Conditions 

As described in more detail below, we 

tentatively find that the proposed 

transaction, like the prior 2009 

transaction, offers important benefits to 

the public.11 At the same time, as 

before, we believe that the proposed 

transaction could have an adverse 

impact on competition, because of the 

reduction in competition between the 

two carriers and their increased market 

share at the two airports, among other 

things. In evaluating the public interest 

in this transaction, we have carefully 

weighed and balanced the benefits and 

possible adverse consequences of the 

transaction. While we remain 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 last review—are sufficient for us to 

conclude that the requested waiver is in 

the public interest. Accordingly, we 

have tentatively found that the 

transaction should be approved, subject 

to the conditions set forth below, 

including requirements that the carriers 

dispose of 16 pairs (32 slots) at LGA and 

8 pairs (16 slots) at DCA pursuant to the 

sale mechanisms described in detail 

below and that they transfer the 265 

LGA slots and 84 DCA slots in two 

phases so as to attenuate the impacts of 

their new operations on their smallersized competitors at the airports. 

We note that the Department is 

evaluating this transaction under its 

statutory authority alone. As described 

above, we are required to determine 

whether or not, on balance, waiving the 

terms of the LGA Order to allow the 

proposed transaction to proceed is in 

the public interest. Our standard of 

review in this transaction is 

substantively different from that of the 

Department of Justice, which acts under 

a different statutory and regulatory 

framework. Our tentative conclusions 

presented here are not binding on the 

Department of Justice, which must 

evaluate the transaction under its own 

statutory authority. 

Discussion 

Developments at DCA 

Since the Department last evaluated 

carrier slot holdings in connection with 

the issuance of the May 2010 Notice, 

various service changes have occurred 

at DCA, some of which involved an 

expansion of service by low-cost 

carriers. 

• Low-cost carrier AirTran, which 

held 16 slots and slot exemptions at 

DCA at the time of our earlier analysis, 

received 6 slots from Continental as part 

of an exchange for operating 

authorizations at EWR. The transfer was 

designated as temporary in nature, to 

expire October 29, 2011, and 

Continental remains the slot holder of 

record. It added a pair of off-peak slots 

allocated by the FAA 12 and now 

operates a total of 24 weekday slots from 

DCA. AirTran utilized the additional 

slots from Continental to add 

frequencies to its Atlanta and Orlando 

services. 

• On March 31, 2010, JetBlue and 

American Airlines announced an 

agreement for commercial collaboration 

that involved, inter alia, a transfer of 16 

slots at DCA from American to JetBlue. 

The transfer was designated as 

temporary in nature, to expire October 

29, 2011, and American remains the slot 

holder of record.13 JetBlue also was 

allocated one slot each in the 0600 and 

2200 hour periods by FAA (which 

periods are not fully subscribed and so 

still available to new entry). Beginning 

November 1, 2010, JetBlue initiated 

service from DCA with these slots, with 

seven daily nonstops to Boston Logan 

International Airport (BOS) and one 

daily nonstop each to Fort LauderdaleHollywood International Airport (FLL) 

and Orlando International Airport 

(MCO).14 JetBlue’s new service 


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implemented, LCC’s would increase their interests 

to 5.2% of the DCA slots. 62 FR at 26,323. We also 

noted that the transaction did not affect the 

concentration level of US Airways at DCA, as the 

slots were being transferred to JetBlue not by US 

Airways but by American, which would be its 

nearest rival at the airport if the transaction were 

approved. 75 FR at 26,336. 

15 It should also be noted that, on June 13, 2011, 

it was reported that Republic was seeking to shrink 

its holdings in Frontier Airlines to a minority stake 

by the end of 2014, based on a tentative agreement 

with Frontier pilots. Associated Press, Republic 

Airways Seeking New Investors for Frontier, Aims 

for Minority Stake by End of 2014, Washington Post, 

June 13, 2011. 

16Through analysis of 2010 DOT Form 41 Origin 

and Destination Data, we have confirmed that 

Midwest passenger traffic declined and that 

Frontier traffic correspondingly increased in these 

markets reflecting this reassignment from Midwest/ 

Republic to Frontier. Moreover, we have confirmed 

that Frontier has marketed these flights at average 

yields that are consistent with LCC operations. 

Accordingly, the 16 slots reassigned to Frontier 

have been recorded by the Department as slots 

flown by LCCs. 

17 DOT Order 2010–12–16 (December 10, 2010). 

18Petition for Waiver and Other Relief, May 23, 

2011 at 13. 

19 DOT Form 41 Origin and Destination Survey 

data. 

20Petition for Waiver and Other Relief, May 23, 

2011, Appendix A at 10. 

competes primarily against US Airways 

and Delta on the DCA–BOS and DCA– 

MCO routes, and against US Airways 

and Spirit on the DCA–FLL route. 

• Another transaction affecting LCC 

presence at DCA came in the wake of 

the 2009 acquisition of both Midwest 

Airlines and LCC Frontier Airlines by 

Republic Airways Holdings Inc. 

Subsequent to the Final Notice, 

Republic assigned 16 of Midwest’s 18 

slots to operations marketed by Frontier 

(although Republic remains the holder 

of record of the slots).15 Frontier utilizes 

these slots to provide service from DCA 

to Milwaukee, Kansas City, and 

Omaha.16 The other two, which were 

slot exemptions, were reallocated to 

LCC Sun Country Airlines by DOT, 

where they are used to provide service 

to Lansing, MI.17

• In another development at DCA, on 

September 27, 2010, Southwest Airlines 

and AirTran Airways announced their 

intention to merge their operations 

through Southwest’s acquisition of 

AirTran in a stock and cash transaction. 

As noted above, at the time the 

Department was analyzing the prior 

application, AirTran held and operated 

16 slots and slot exemptions at DCA, 

which it used to provide service to 

Atlanta, Orlando, Milwaukee, and Ft. 

Myers, FL. Southwest is an LCC that has 

grown dramatically since 1990 to 

become the largest U.S. domestic carrier 

when measured by DOT Form 41 

segment transported passengers. The 

acquisition of AirTran will bring to DCA 

Southwest’s brand recognition, 

passenger loyalty, and access to its route 

network, which together should have a 

strong positive and tangible effect on 

overall competition at DCA. Although 

entry into AirTran’s Atlanta hub 

appears to be Southwest’s main 

objective in pursuing the deal, the 

acquisition also expands Southwest’s 

network in one consolidated move, 

adding a number of additional 

unconnected city pair markets into 

which it could expand its presence. The 

combined carrier therefore provides an 

expanded LCC capability at DCA to 

provide passengers with additional 

travel opportunities on new online 

routes through a larger overall network. 

• The Joint Applicants also argue that 

the merger between United and 

Continental, as well as the immunized 

American Airlines/British Airways 

alliance, will intensify competition.18

Considering first the UA/CO merger and 

its impacts at DCA, it should be noted 

that the merged carrier has only a 5% 

share of Origin & Destination (‘‘O&D’’) 

passengers at that airport, which, with 

a legacy cost structure, gives it limited 

ability to seriously impact competition 

there.19 Moreover, while there is limited 

data from which to reach conclusions at 

this point, our review of departures and 

average seats at DCA since the UA/CO 

merger shows a decline in the carrier’s 

overall departures, while its yields 

dropped very slightly between 2009 and 

2010. We do not see from these 

indicators that the merger has been as 

relevant to the slot swap competition 

issues before us as the other 

developments noted above. Similarly, 

we do not see the AA/BA alliance as 

significantly impacting competition at 

DCA, which of course is essentially 

domestic in character. As shown in 

Table 3, American’s share of departures 

at DCA declined from 15.2% to 12.2% 

percent from first quarter 2010 to first 

quarter 2011, and its seats from 15.5% 

to 13.9%, figures that do not suggest 

increasing competitiveness. 

Developments at LGA 

As at DCA, various service changes 

have recently occurred at LGA, some of 

which involved an expansion of service 

by low-cost carriers. However, these 

changes were not as significant as those 

at DCA. 

• Late in 2009, AirTran Airways 

began offering LGA–Indianapolis and 

increased LGA–Orlando flights with 4 

LGA slots it acquired from Continental, 

although it now only operates LGA– 

MCO on Saturdays and Sundays. This 

acquisition was another part of the 

agreement, also noted above, by which 

it transferred to Continental 13 slots at 

EWR, as well as its lone gate at that 

airport. The Indianapolis and Orlando 

flights compete with offerings from 

Delta; JetBlue also has LGA–MCO 

flights. 

• The Compass Lexicon study, 

attached to the Petition for Waiver as 

Appendix A, notes that ‘‘Southwest 

acquired one slot from the FAA.’’ 20

They appear to be referring to the 

allocation by FAA, in mid-2009, of one 

0600 LGA departure slot, which 

increased Southwest’s operating 

authorizations there from 14 to 15. 

Southwest had acquired the original 14 

slots at LGA in its acquisition of ATA 

Airlines, and with the 0600 departure 

and an arrival in the 2200 hour that 

does not require a slot, it is able to offer 

a total of 8 roundtrips from LGA. 

Southwest utilizes these slots to provide 

service to Midway and BWI airports. 

• As part of an arrangement already 

described above, in November 2009 

Republic Airways acquired Midwest 

and began operating Midwest’s slots. In 

2010, Frontier, another Republic 

Airways Holdings LCC, began operating 

13 slots at LGA that had formerly been 

operated by Midwest. With these 13 

slots, Frontier markets flights to 

Milwaukee and Kansas City. We have 

confirmed that Midwest passenger 

traffic declined in those markets and 

that Frontier traffic correspondingly 

increased during the fourth quarter of 

2010, and that Frontier has marketed 

those flights at average yields that are 

consistent with LCC operations. 

Accordingly, the 13 slots reassigned to 

Frontier are being treated by the 

Department as slots flown by LCCs. 

• The Southwest-AirTran merger 

should also, as the joint applicants 

claim, intensify competition at LGA. 

Prior to the merger, AirTran had a 5.7% 

LGA seat share and Southwest a 2.6% 

share. As at DCA, the merger will bring 

to LGA Southwest’s brand recognition, 

passenger loyalty, and access to its route 

network, which together should have a 

positive and tangible effect on overall 

competition at the airport. Also, if 

Southwest chooses to upgauge to its B– 

737s in some markets, it can increase 

seat capacity per flight by 15 seats over 

AirTran’s average aircraft seating. 

• As noted above, the Joint 

Applicants claimed that the UA/CO 

merger and the immunized AA/BA 

alliance will strengthen competition at 

New York as well as in Washington. 

Again, there is not much yield data 

available to support this contention, and 

whatever impacts there are in New York 

will be felt more at EWR and JFK than 

at LGA. A review of American, United, 


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21Republic Airways Holdings holds 113 total 

slots at DCA, as the result of a sale/licensing 

transaction with US Airways. Its subsidiaries 

largely operate from these slots under pay-forservice arrangements with US Airways. All 113 are 

commuter slots, rather than air carrier slots. 

Republic’s operations from these are included 

within US Airways’ results in the tables for DCA. 

and Delta departures at LGA indicate 

that over the last two years it is Delta 

that has most expanded departures at 

LGA, while American’s departures have 

risen to a much lesser degree and 

United’s have remained essentially the 

same. As above, we do not see from 

these indicators that these 

developments have been as relevant to 

the slot swap competition issues at LGA 

before us as the other factors noted 

above. 

The tables below capture the changed 

circumstances described above, by 

depicting ‘‘original’’ and ‘‘current’’ 

competitive positions in both slots and 

number of departures, seats, and 

passengers for the carriers serving DCA 

and LGA: 21

BILLING CODE 4910–13–P 


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22 In a 2009 press release addressing the intended 

new service under the previous petition, US 

Airways identified 15 new destinations as 

Cincinnati, Des Moines, Grand Rapids, Madison 

(WI), Montreal, Miami, and Ottawa (all of which 

then had daily nonstop service from DCA), and 

Birmingham (AL), Islip (NY), Ithaca (NY), Little 

Rock, Myrtle Beach (SC), Pensacola, Savannah, and 

Tallahassee (all of which at that time had no daily 

nonstop service from DCA). ‘‘US Airways 

announces slot transaction with Delta Air Lines,’’ 

August 12, 2009. The present petition reiterates the 

commitment to serve at least 15 new destinations, 

but does not specify whether those will be the same 

as the ones identified in 2009. 

23 Delta’s seven hubs are New York/JFK, Atlanta, 

Memphis, Detroit, Minneapolis/St Paul, Cincinnati, 

and Salt Lake City. 

24 Delta states it would serve its ‘‘AIR–21 routes.’’ 

Delta was awarded 2 slot exemptions under AIR– 

21 for service to Salt Lake City; in addition, 

however, Atlantic Southeast flies as Delta 

Connection to Jackson, MS, with 2 DCA slot 

exemptions awarded under AIR–21, and Comair 

flies as Delta Connection to Lexington, KY, with 2 

Vision-100 slot exemptions. 

The Effects of the Proposed Swap: US 

Airways at DCA 

If the planned transaction is approved 

without change (i.e., the additional 16 

slot divestitures offered by the carriers 

are not required as a condition for 

approval), US Airways’ slots at DCA 

would increase from the 254 held at the 

time of the Department’s earlier analysis 

to 347. An additional 113 slots are held 

by Republic Airways Holdings under a 

financing deal with US Airways and 

operated by it for US Airways on a feefor service basis. US Airways states that 

with the new slots at DCA it will 

provide service to at least 15 

destinations it currently does not serve, 

some of which currently have no 

nonstop service from that airport.22 It 

also plans to increase the number of 

seats offered at DCA by filling the new 

capacity with larger regional jets and 

mainline jets, claiming that it can gain 

over 1 million new seats without adding 

to congestion at the airport. Delta states 

that with the slots it retains it will 

continue to serve its seven hubs,23

maintain its shuttle service to LGA, and 

continue service on its AIR–21 slot 

exemption routes.24

US Airways would increase its 

dominance at DCA in terms of slot 

holdings with the addition of the 84 

slots. Table 5 below shows comparative 

slot interests of the carriers serving 

DCA, were DOT to grant the petition 

without requiring any additional 

divestitures. In this scenario, the slot 

holdings of US Airways would increase 

to 40.8% (54.1% if those held by 

Republic Airways Holdings but 

operated for US Airways are included), 

while those held by Delta (plus 

commuter affiliates) would decline to 

13.6% and those held by LCCs would 

stay at 8.5%. 


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The Effects of the Proposed Swap: Delta 

at LGA 

Delta states that, with 265 new slots, 

it would almost double its nonstop 

destinations from LGA to more than 70 

cities. Further, it would create a 

domestic hub at that airport, and 

increase the number of customers 

served without increasing congestion by 

using larger capacity aircraft than US 

Airways currently uses with the slots. It 

would achieve this through use of an 

all-jet fleet, replacing the turboprops 

that are currently utilized by US 

Airways. With the slot swap Delta will 

likely focus on expanding its domestic 

network out of the enhanced LGA hub 

and concentrate its JFK operations on 

international and long-haul domestic 

service. 


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25 Delta, US Airways Announce New Agreement 

to Transfer Flying Rights in New York and 

Washington, DC, Delta, and US Airways Press 

Release, May 23, 2011. 

Delta states that it would also offer 

service to many destinations that are not 

currently served nonstop by either Delta 

or US Airways. US Airways will retain 

its shuttle service to Boston’s Logan 

Airport and DCA and continue flights to 

Charlotte, Philadelphia, and Pittsburgh. 

US Airways claims that its smaller 

aircraft operations at LGA have been 

unprofitable. It contends that swapping 

assets from there to enhance its 

successful operations at DCA will 

improve its profitability by more than 

$75 million. 

Delta would operate a total of 18 of 20 

gates in US Airways’ Terminal C, and 

add one additional gate to its existing 

ten at Delta’s Terminal D, for a total of 

29 gates in the two terminals. Delta 

would then build a 600-foot connector 

between the two terminals so that it can 

operate as a single terminal from a 

passenger perspective. A ‘‘significant 

number of construction jobs’’ would be 

created in connection with this work. 

Delta will take over the current US 

Airways Club in Terminal C and convert 

it into a Sky Club to complement the 

existing club in Terminal D. 

US Airways on the other hand, will 

have 6 gates once the terminal is 

reconfigured to add more ramp 

positions, plus 3 parking positions for 

regional jets. US Airways would 

continue to offer high-frequency 

schedules from LaGuardia to its 

Charlotte, NC, and Philadelphia hubs 

and Pittsburgh with more than 60 

weekday flights. All US Airways flights 

from LaGuardia would continue to 

arrive and depart from nine gates and 

parking positions in Terminal C. US 

Airways will build a new, 5,000-square 

foot US Airways Club.25 Delta and US 

Airways will continue to compete with 

Shuttle Services to Boston and DCA 

(Delta at its 6 gates in the Marine Air 

Terminal). Finally, subject to 

Government approvals and to other 

conditions, Delta will convey to US 

Airways, for purposes of intended US 

Airways flights to Brazil beginning in 

2015, certain Brazilian route authorities 

and slots at Sao Paulo, Brazil. 

Delta would accede to a dominant 

position in terms of slot holdings at 

LGA, with the addition of the 265 slots 

(even were the 32 slots required by the 

Department to be divested). Table 6 

below shows comparative slot holdings 

of the carriers serving LGA, without any 

additional divestitures. As can be seen, 

under the proposal Delta’s slot share 

would almost double, from 24.2% to 

47.5%. American would remain second, 

at 20.6%. US Airways’ share would 

decrease from 34.8% to 11.7%. The 

table also reflects the increase in LCC 

share, due to the developments noted 

above, from 6.9% to 8.2%. 


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26While Delta and US Airways have made public 

some of their new intended services, including 

service to small communities, the carriers have not 

released all intended service changes and are not 

obligated to implement or retain over the longerterm any of the proposed services in new markets. 

BILLING CODE 4910–13–C 

Description of the Claimed Benefits of 

the Swap 

As noted above, the Joint Applicants 

contend that approval of the slot swap 

would enable both carriers to more 

efficiently operate at the airports and 

permit more passengers and 

destinations to be served. They argue 

that efficiencies will occur through 

upgauging of aircraft size at both LGA 

and DCA, thereby increasing throughput 

and competition while reducing 

congestion and delay. In addition, they 

contend that the facilities transfer will 

enable Delta to create a seamless hub at 

LGA and facilitate enhanced 

competition and preserve and enhance 

small community access at both LGA 

and DCA. 

For the reasons stated below, we 

tentatively agree with the Joint 

Applicants’ claimed benefits discussed 

below, and find that these claimed 

benefits likely would be realized if the 

transaction were implemented as 

remedied. Our tentative view derives in 

large part from concerns that some of 

the slots at issue in this transaction are 

currently being used sub-optimally and 

inefficiently, both from the perspective 

of the carriers holding them as well as 

from the perspective of the public 

interest. 

Benefits at DCA: 

• Expanded US Airways Service— 

With the addition of 84 slots, US 

Airways will be able to initiate daily 

nonstop service to at least 15 new 

destinations from DCA. Some of these 

routes are currently served by other 

carriers from other Washington area 

airports and some of these routes do not 

currently have any daily nonstop 

service. These destinations include 

several small, medium-sized, and larger 

communities.26 The airline anticipates 

an increase of approximately 20 to 25 

percent in passenger enplanements at 

DCA as a result of new flights and 

schedule improvements. This projected 

service would not be affected by the 


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27While it is true that Delta is proposing to 

expand its operations significantly at LGA, many of 

the new flights would represent backfills in markets 

being vacated by US Airways as it moved 

operations to DCA. Thus, while it might be ‘‘new’’ 

service on Delta, it may not be ‘‘new’’ service for 

the communities affected. 

28The benefits data and analyses referenced in 

the Waiver Application are derived from the study 

prepared by Compass Lexecon in November 2009 

and submitted to the Department on March 22, 

2010. See Consumer Benefits from the Proposed US 

Airways Delta Slot Transaction, included in Joint 

Appendix to Comments of Delta Air Lines, Inc., and 

US Airways, Inc., Docket No. FAA–2010–0109, 

dated March 22, 2010. That study was based on 

Delta and US Airways schedules from a peak day 

(Thursday) in Summer 2009. 

29Our analysis found that US Airways and Delta 

tended to charge higher relative fares where they 

operate monopoly or dominant routes from airports 

where they have strong presence. While Delta 

tended to price more competitively at LGA (where 

its position was less dominant than US Airways at 

DCA), US Airways, holding the highest current 

share of slot interests and departures at DCA, 

charged on average 124 percent of the Standard 

Industry Fare Level (SIFL), a cost-based index that 

the Department has used historically to assist in its 

evaluation of pricing. However, in markets where 

it held a 95 to 100 percent share of nonstop 

departures, US Airways charged substantially more. 

75 FR at 7,309–7,310. 

30Under their proposal, Delta and US Airways are 

not committing to any particular markets for 

defined periods. As we noted earlier, they would 

be free, as is any other carrier, to discontinue routes 

that are being proposed and to initiate new routes 

elsewhere. With that freedom, they could, if they 

so chose, use additional slots to target smaller 

competitors. We expressed concern that 

competitors, especially low-cost carriers at DCA 

that are tied to specific markets through slot 

exemption awards, might be unable to successfully 

respond. 

31Our analysis cited studies of the domestic U.S. 

airline industry demonstrating that entry by lowfare carriers dramatically lowers fares and increases 

the volume of passengers carried in a market. See, 

75 FR at 7,309. 

proposed divestitures if they come from 

Delta’s complement. 

• Improved connectivity—US 

Airways contends that it will afford 

DCA originating passengers more 

nonstop destination service and provide 

additional connecting passenger service 

through an expanded network. 

• Up-gauging and up-grading 

service—US Airways plans to up-gauge 

aircraft and offer customers more dual 

class service. It will use larger aircraft, 

including more large regional and 

mainline aircraft with first-class service 

on large regional jets, on many routes by 

2012. 

Benefits at LGA: 

• New domestic hub at LGA—With 

the additional slots and facilities it will 

acquire under the proposal, Delta will 

establish a new domestic hub at LGA. A 

hub presence will allow increased 

connecting opportunities, improving 

travel options for passengers across 

Delta’s network. It will also permit 

increased operations to smaller 

communities, which are often only able 

to sustain service through hub-andspoke operations. Delta submitted a 

study by Compass Lexecon that asserted 

that Delta’s expansion at LGA would 

produce more than 6,000 new 

connecting opportunities for their 

passengers at that airport. 

• Consolidation of LGA operations in 

one main terminal facility—As noted 

above, Delta will link its Terminal C and 

Terminal D gates with a 600 foot 

connector. This will provide added 

convenience to many passengers, 

particularly ones with connecting 

flights, and allow shorter connecting 

times on some flights. 

• Improved Competition against US 

Airways at Philadelphia and United/ 

Continental at Newark—The carriers 

claim that Delta’s development of a hub 

at LGA will create ‘‘important’’ new 

competition against US Airways’ hub at 

Philadelphia and United/Continental’s 

at Newark. Philadelphia International 

Airport is approximately 100 miles from 

LGA and constitutes a distinct market. 

However, the operation of a stronger 

hub for Delta at LGA will provide 

additional options for travelers in the 

greater New York area, and should 

provide some competitive 

counterweight to the strong UA–CO hub 

at Newark. 

• Delta Will Expand Service at LGA— 

Delta will approximately double the 

number of within perimeter nonstop 

destinations served from LGA and shift 

short haul service from JFK to LGA, 

freeing up JFK for longer-haul flights.27

• Delta Will Increase the Available 

Seat Capacity of New York Airports— 

US Airways currently operates 39% of 

its flights with turboprop aircraft 

configured with 37 or fewer seats. Delta 

plans to utilize an all-jet fleet at LGA. 

Replacing US Airways’ turbojets with 

larger jets will increase available 

capacity, estimated to equate to a 2% 

overall increase in New York seat 

capacity. 

The Joint Applicants’ Compass 

Lexecon study estimates the magnitude 

of capacity benefits in terms of 

roundtrip seat capacity increases of 2.5 

million at DCA and 4.4 million at 

LGA.28 The study further estimates that 

the consumer benefits from the 

increased flying generated by improved 

network connectivity and service at 

approximately $126 million annually 

for passengers flying to and from LGA 

and at approximately $27 million for 

passengers flying to and from DCA, for 

a total of approximately $153 million at 

both airports combined. They cite 

another $33 million in estimated 

benefits to consumers flowing from 

increased airport operational efficiency 

resulting from upgauging from 

turboprop aircraft to jet aircraft at LGA. 

In addition, the Joint Applicants argue 

that the facilities transfer will enable 

Delta to create a seamless hub at LGA 

and will facilitate enhanced competition 

and preserve and enhance small 

community access at both LGA and 

DCA. While these estimates are of 

course subject to customary 

assumptions and estimations, we do not 

believe they are unreasonable for the 

purposes here. 

Perceived Costs and Risks of the 

Transaction 

Although there are clearly consumer 

benefits that would result from the 

proposed transaction, as we pointed out 

in the Final Notice there are also aspects 

that could pose economic risks to 

consumer interests. In particular, the 

Department must remain mindful of 

concerns regarding the potential for 

higher fares due to increased market 

concentration of the dominant carriers 

at both DCA and LGA. 

In their filings, US Airways and Delta 

have not challenged the calculations 

stated in the May 2010 Notice that, if 

the transaction were approved as now 

proposed, the proportion of US 

Airways’ share of slots and departures at 

DCA, and Delta’s share of slots and 

departures at LGA, would significantly 

increase. 

In the Department’s earlier analysis, 

we determined that there were 

increased levels of airport 

concentration, which together with (1) 

An increase in the number of monopoly 

or dominant markets in which increased 

pricing power could be exercised,29 (2) 

the prospect for higher fares in some 

markets, and (3) the potential for use of 

transferred slot interests in an anticompetitive manner,30 warranted a 

conditioning of approval on the carriers’ 

agreement to divest a number of slots. 

Given all of these concerns, we asserted 

that limited divestitures at both airports 

would cause an injection of additional 

competition from other carriers, which 

could be effective in mitigating these 

prospective harms. 

Our analysis also noted the very low 

levels of LCC operations then prevailing 

at DCA and LGA, calculating that LCCs 

had only a 3.3 percent share of slot 

interest holdings at DCA and a 6.9 

percent share of slot interest holdings at 

LGA. Because LCC’s created the most 

competitive impact at the airports,31 we 

required that, in order to minimize the 

overall number of divestitures required 

while maximizing the competitive 

impact of those divestitures, the carriers 


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32For example, in the second quarter of 2010, US 

Airways carried almost 70% of the passengers in 

this market, trailed by Delta at 18%. 33 DCA–BOS nonstop fare for travel on July 29, 

2011, per ORBITZ Web site information as of June 

29, 2011. 

34 Delta and US Airways’ Comments of March 22, 

2010, Appendix B, Analysis of Relevant Airport 

Groupings. Docket No. FAA–2010–0109. 

divest slots to qualified new entrants 

and limited incumbents, which are 

largely LCCs. Through this mechanism, 

we believed the economic efficiency of 

the slot utilization at both airports 

would be maximized through the 

operation of more seats at lower fares 

per slot than by Delta or US Airways, 

and would also minimize the total 

number of slot divestitures required to 

remedy the anticompetitive effects of 

the transaction. 

Accordingly, in the May 2010 Notice, 

we approved the prior waiver 

application subject to the condition that 

40 LGA and 28 DCA slots be divested 

via a DOT-approved process. 

Changed Conditions Since the May 2010 

Notice Was Issued Have Not Eliminated 

Competitive Concerns 

As discussed above, the Joint 

Applicants have claimed that the 

Department’s earlier competitive 

concerns have already been addressed 

as a result of significant increases in 

LCC penetration that have occurred at 

both airports since the May 2010 Notice 

was issued. (Notwithstanding that 

claim, they have offered to divest up to 

32 slots at LGA and 16 slots at DCA 

through a DOT process if necessary to 

alleviate any ‘‘lingering’’ competitive 

issues.) 

LCC entry and increased presence at 

both airports have not addressed all of 

our competitive concerns. While we 

have found evidence that increased LCC 

presence at both airports has a positive 

impact on the competitive structure at 

these airports, additional remedies, 

including divestiture of slots and the 

implementation of the slot transfer 

between the applicants in tranches, are 

necessary to further address competitive 

concerns. 

We agree that, at DCA, recent 

developments have added 44 slots to the 

LCC listings, increasing their percentage 

of slot operations from 3.3% to 8.5%. 

Similarly, recent developments at LGA 

have added 15 slots to LCC listings, 

increasing their percentage from 6.9% to 

8.2%. LCC departures, seats, and 

passengers have, with one exception, all 

increased as well at DCA and LGA. At 

DCA, LCC departures from first quarter 

2010 to first quarter 2011 increased from 

4.7% of the total to 7.1%; seats over the 

same period increased from 6.8% to 

9.2%; and passengers over the same 

period increased from 7.6% to 10.3%. 

At LGA, the comparable statistics are 

departures, 9.9% increasing to 10.0%; 

seats, 15.2% declining to 14.9%; and 

passengers, 17.0% increasing to 18.2%. 

See Tables 3 and 4. 

In addition, we looked at the 

competitive impact of the added LCC 

services, particularly at DCA. There, the 

entry of JetBlue into the DCA–Boston 

market in the fourth quarter of 2010 was 

especially helpful in gauging the impact 

of new LCC entry into a major market 

in which US Airways was by far the 

dominant carrier.32

During the first three quarters of 2010, 

the average passenger weighted yields 

in DCA –BOS were 62 cents, 59 cents, 

and 53 cents respectively, with US 

Airways’ averages being 68 cents, 63 

cents, and 55 cents. With an average 

weighted yield over all DCA markets for 

these quarters at 22 cents, this was 

clearly a lucrative market for carriers, 

and especially so for US Airways. 

JetBlue entered the market aggressively 

in October 2010, carrying over 48,000 

passengers that quarter with highly 

competitive fares that yielded only 24 

cents per mile. US Airways’ yield that 

same quarter—the last for which we 

have data—dropped from 55 cents to 44 

cents, with overall average passenger 

weighted yields in the market falling 

from 52 to 38 cents. Removing 

seasonality concerns, US Airways’ 

passenger weighted yield fell 37% from 

4th quarter 2009 to 4th quarter 2010— 

from 70 cents to 44 cents. This data 

demonstrates JetBlue’s entry enhanced 

competition and significantly reduced 

fares. Its presence continues to have a 

disciplining effect on fares: our check of 

available one-month advance purchase 

economy fares showed JetBlue charging 

$69 one-way, with US Airways, Delta, 

and United all matching.33

A similar, although less significant, 

demonstration of LCC competitive 

influence appears in the LGA–IND 

market. In 2009, US Airways carried 

approximately 39% of passengers in this 

market at an average yield of 27 cents, 

while Delta/Northwest carried 47% of 

passengers at an average yield of 28 

cents. AirTran initiated service on 

November 4, 2009 following its 

acquisition of 6 slots from Continental, 

four of which were utilized in the LGA– 

IND market. After AirTran’s entry into 

the market, the average passenger 

weighted yield dropped from 29 cents to 

22 cents and remained at approximately 

19 cents through 2010. AirTran’s 

passenger share rose from 8% in 2009 

to 35% in 2010 while Delta/Northwest’s 

yields declined from 28 cents to 19 

cents, and US Airway’s yields declined 

from 27 cents in 2009 to 20 cents in 

2010. Overall, with the entry of AirTran 

in the LGA–IND market the average 

passenger weighted yield in the market 

declined 29% between 2009 and 2010. 

These two impacts illustrate the 

potential beneficial effects that other 

LCCs may be able to bring to DCA and 

LGA markets if afforded entry by slots 

being divested in the present case. 

While the Department considers these 

developments very encouraging, they do 

not persuade us that our original 

concerns regarding the transaction are 

no longer valid or that additional 

remedies are no longer appropriate or 

necessary. First, many of the 

incremental LCC slots are being 

operated under temporary or potentially 

reversible circumstances. At DCA, the 

slots noted as being transferred from 

legacy carrier American to LCC JetBlue 

remain technically held by American on 

FAA’s listing, and their agreement could 

expire as early as this fall. The same is 

true for the slots transferred between 

AirTran and Continental. The former 

Midwest slots at both airports that were 

‘‘reassigned’’ by Republic to Frontier 

marketed flights can presumably be 

‘‘reassigned’’ back to Republic if 

appropriate conditions presented 

themselves. In addition, some of the 

other slots shown as transferred to LCCs 

are during the early or late hours when 

slots are not fully subscribed and so 

their use by LCCs does not present as 

much a competitive discipline as better 

timed slots might. Moreover, the 

Department’s objective here is not to 

simply increase the shares of LCCs, but, 

as we set out at various points in the 

May 2010 Notice, also to protect against 

the use of market power by dominant 

carriers in a potentially anticompetitive 

manner. 

Claims That Nearby Metropolitan 

Airports Have a Disciplining Effect 

Remain Unpersuasive 

In addition to pointing to LCC growth 

at DCA and LGA, the Joint Applicants 

reassert that competition among the 

three airports in the Washington area 

and the three in the New York City area 

exerts a disciplining influence on the 

respective fares at DCA and LGA.34

Thus, in the New York City market, they 

argued that, while flights at LGA are 

generally closer substitutes for one 

another than are flights at EWR or JFK, 

flights from EWR and JFK ‘‘are still 

relevant’’ to a discussion of competition 

at LGA. In an effort to address the 

specific situations at hand, they offered 

a modified version of the earlier study 

they presented to attempt to measure 

the impact of competition from 


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35Why, for example, would JetBlue have a much 

stronger competitive effect than Air Tran at the 

same airport (a 0.635 factor vs. a 0.247 factor), but 

a significantly lower effect than AirTran from an 

adjacent airport? (0.091 vs. 0.164). 

36That said, we can say as we did in the May 

2010 Notice that yields (i.e., revenue per passenger 

mile) remain substantially different among these 

airports, and that if the airports were effective 

economic substitutes for all passengers, there would 

result a greater self-equalizing of yields and the 

yield spreads would not differ so significantly. We 

also recognized that there does exist a low level of 

competition among the Washington and New York 

City area airports, but at an insufficiently low level 

such that one airport can exert enough competitive 

influence on the fares at another airport to 

substantially reduce yield disparities among the 

airports and constitute a true substitute for it. We 

continue to believe that is the case. 

37With Republic’s holdings included, US 

Airways would hold 54% of the slots, with its 

closest competitor, American, holding 12.3%. At 

LGA, Delta’s share would be 47.5% without further 

divestitures, with its closest competitor (also 

American) at 20.6%. See Table 6. 

38An anomaly in this regard appears to be 

Frontier, which is wholly owned by Republic but 

yet has a discretely different LCC business plan. As 

we discussed above, Frontier’s operations at DCA 

and LGA have been consistent with LCC yields, and 

have had useful competitive impacts at both 

airports. Moreover, with the acquisition of AirTran 

by Southwest, the number of LCCs has diminished, 

and Frontier has become the third largest LCC after 

Southwest and JetBlue. DOT’s Form 41 Origin and 

Destination Passengers for 2010 shows Southwest/ 

AirTran with a total of 87,025,480 domestic 

passengers, JetBlue with 18,548,950, and Frontier 

with 5,317,150. Anticipating that Frontier’s 

presence as an eligible bidder will help to stimulate 

and maintain competition at these airports, we will 

tentatively exempt Frontier from the ‘‘no 

subsidiaries’’ requirement, subject to any slots it 

might purchase being held and operated by Frontier 

and Frontier retaining its LCC business plan. 

Southwest and other LCCs at DCA/LGA 

and at adjacent airports. Normalizing 

the ‘‘competitive effect’’ of Southwest at 

the same airport to a value of 1.0, the 

modified version went on to specify the 

relative competitive effect of service by 

other LCCs at the same airport, as well 

as the effects of Southwest and of the 

LCCs from adjacent airports. A summary 

table indicated that, for example, the 

competitive effect of an AirTran flight at 

the same airport was 0.247, while that 

of JetBlue at an adjacent airport was 

0.091. 

In our May 2010 Notice, we addressed 

the findings of the earlier study, 

expressing concerns that its 

methodology was flawed in a number of 

fundamental respects. The modified 

version put forward here does not 

appear to have corrected these flaws. 

Moreover, not only are the statistical 

bases for the new conclusions not 

presented, but the results show 

anomalies that are not explained.35 In 

sum, as with the earlier presentation, we 

are not prepared to accept the 

conclusions as submitted and to agree 

with the Joint Applicants that existing 

or potential competition from adjacent 

airports would satisfactorily address the 

need for remedies in this case.36

Evaluation of Risks and Benefits 

As discussed above, the proposed 

transaction, like the prior 2009 

proposal, offers important benefits to 

the public. Nonetheless, we found 

earlier that the potential for harm was 

substantial, particularly in the increased 

levels of concentration at the two 

airports. Accordingly, we placed 

conditions for approval on the 

divestiture of 40 slots at LGA and 28 

slots at DCA. The primary issue before 

us is whether, because of the increased 

penetration by LCCs at the airports since 

the time of our last review, the public 

interest can be adequately protected at 

this time with no or fewer divestitures 

being required. 

In evaluating the public interest in 

this transaction, we have carefully 

weighed the benefits and possible 

adverse consequences of the transaction. 

We do not believe that the transaction 

can be approved without divestitures 

being required. The transaction may 

give rise to very different levels of 

competitive harm at each airport, and 

the post-transaction market share levels 

are high, particularly at DCA.37

Accordingly, we have tentatively found 

that conditions for approval remain 

necessary. These include a requirement 

that the carriers not only dispose of 32 

slots at LGA and 16 slots at DCA 

pursuant to the sale mechanisms 

described in detail below, but that they 

begin operations of the transferred slots 

in two phases so as to attenuate the 

impacts of their new operations on their 

smaller-sized competitors at the 

airports. 

Remedies 

Divestiture 

For these reasons, notwithstanding 

the favorable impacts of increased LCC 

competition at both airports, we 

tentatively condition the grant of the 

requested waiver on the divestiture of 

the slots as set out below. These total 32 

slots at LGA (16 arrival and 16 

departure) and 16 slots at DCA. 

We propose that the slots be sold by 

the carriers and that the proceeds of the 

sales be collected and retained by the 

carriers. We tentatively select this 

method, rather than one whereby the 

FAA would withdraw the slots and 

reallocate them by lottery (or similar 

means) to new entrant and limited 

incumbent carriers. A sale would 

facilitate the Joint Applicants’ 

intentions to maximize the value of 

their slots as they initially intended and 

conforms to the High Density Rule 

provisions at DCA, which permit slots 

to be purchased or sold. 14 CFR 

93.221(a). 

These slots would be divested, in 

accordance with the procedures 

proposed below, to limited incumbent 

and new entrant carriers having fewer 

than five percent of the total slot 

holdings at DCA and LGA respectively, 

and that do not code share to or from 

DCA or LGA with any carrier that has 

five percent or more slot holdings. We 

also propose that carriers eligible to 

participate in the purchase of divested 

shares not be subsidiaries, either 

partially or wholly owned, of a 

company whose combined slot holdings 

are equal to or greater than 5 percent at 

DCA or LGA, respectively.38 The effects 

of these additional divestitures are as set 

forth below: 

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The impacts of the divestitures at 

LGA are shown in Table 8: 


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39These limitations apply to the operation of the 

slots by the acquiring carrier or by any other carrier 

on behalf of the acquiring carrier. 

40As noted above, Frontier qualifies as an eligible 

bidder due to its unique business plan and 

relationship in the Republic structure. 

BILLING CODE 4910–13–C 

Implementation in Tranches 

We are concerned that, were US 

Airways and Delta to immediately 

commence service with the full 

complement of the newly transferred 

slots at DCA and LGA, respectively, the 

successful start-up or expanded service 

offered by the new entrant or limited 

incumbent receiving the divested slots 

could be placed at competitive risk. 

We believe that the ability of these 

new services to establish a market 

foothold on any new routes that the 

carriers receiving the divested slots 

choose to serve from either DCA or LGA 

would be facilitated by a requirement 

that the slots being transferred between 

the applicants be spread over a period 

of time following the completion of the 

mandated slot divesture. 

As a result, we are proposing to 

further condition our approval of the 

transaction on the Joint Applicants’ 

agreement that the transferee Joint 

Applicant will operate 39 none of the 

newly acquired slots included in their 

Agreement during the first 90 days after 

the closing date for the sale of the 

divested slots. Furthermore, no more 

than 50 percent of the total number of 

slots included in the Agreement could 

be operated by the transferee Joint 

Applicant between the 91st and the 

210th day following the closing date for 

the sale of the divested slots, after 

which time the transferee would be free 

to operate the remainder of the slots. 

We believe that these restrictions will 

afford the services that result from the 

sale of the divested slots a limited, but 

reasonable, period of time to advertise 

their presence in any new markets in 

which they are planning to offer service, 

begin selling tickets, and commence 

operations. Limiting the resources by 

which the applicants could immediately 

challenge any service using divested 

slots during the initial months of the 

transition will, in our view, provide 

greater assurance that the remedial 

competitive services that we sought to 

encourage by requiring the slot 

divestiture in the first place will prove 

to be successful. 

Eligible ‘‘Bidders’’ for Divested Slots 

We tentatively find that the eligible 

bidders for the divested slots must be 

carriers having fewer than five percent 

of total slot holdings at DCA and/or 

LGA, do not code share to or from DCA 

or LGA with any carrier that has five 

percent or more slot holdings or are 

involved in a code-share relationship at 

DCA/LGA with carrier(s) that also 

would not qualify as eligible bidders, 

and are not subsidiaries, either partially 

or wholly-owned, of a company whose 

combined slot interest holdings are 

equal to or greater than five percent at 

LGA and/or DCA.40 Based on FAA slot 

holding data, incumbent carriers at DCA 

that would qualify under these 

limitations are AirTran, Spirit, Sun 


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41See also, 75 FR at 7,311 and 75 FR at 26,337. 

42See 75 FR at 26,337. 

Country, JetBlue and Frontier. At LGA, 

incumbent carriers that would qualify 

are AirTran, Southwest, Frontier, 

JetBlue, and Spirit. In addition, of 

course, any carrier not currently holding 

slot interests at the respective airports 

and otherwise meeting the criteria 

would be eligible under our proposal. 

Bundles for Divested Slots 

We tentatively find that bundling the 

packages of slots for sale will enable an 

eligible carrier to purchase sufficient 

slots to operate competitive service, 

with times spread across the day. 

Bundling assists a purchasing carrier to 

initiate or increase service in a way that 

meets its operational needs and 

enhances competition.41

Because the number of overall 

divested slots is now fewer than we 

originally proposed in the Final Notice 

and competitive concerns remain, we 

believe it appropriate to maximize the 

potential competitive discipline of the 

slots by packaging more slots in fewer 

bundles, rather than fewer slots in more 

bundles, as compared to the bundles we 

adopted in the May 2010 Notice.42 We 

propose to bundle for sale 8 slot pairs 

at each airport, meaning that there 

would be one bundle at DCA and two 

bundles at LGA. In addition to 

maintaining high competitive discipline 

levels, we tentatively believe this 

arrangement would be preferable to 

dividing the slots into smaller packages 

that could cause underutilizations or 

inefficiencies—at gates and terminal 

facilities, with aircraft and in staffing. 

We seek comment on this approach. 

More specifically, at DCA the single 

bundle would include the following 

slots: 0700, 0800, 0800, 0900, 1000, 

1000, 1100, 1200, 1300, 1400, 1600, 

1700, 1800, 1800, 2000, and 2100. 

At LGA, Bundle A would consist of: 

0600D, 0630D, 0730A, 0830D, 0830A, 

0930D, 1100A, 1230D, 1300A, 1400D, 

1500A, 1600D, 1700A, 1830D, 2000A, 

and 2100A 

LGA’s Bundle B would be: 

0630D, 0700D, 0800A, 0930D, 1000A, 

1030D, 1230A, 1330D, 1430A, 1600D, 

1630A, 1730D, 1830A, 1930D, 2030A, 

and 2130A. 

Procedures for Transferring Divested 

Slots 

We propose that the slots be sold to 

the new entrant/limited incumbent 

carriers, which have necessary DOT and 

FAA operating authorities, on a cashonly basis, through a Web site managed 

by the FAA. Under this proposal, the 

FAA would specify a bid closing date 

and time and the bidder’s identities 

would not be revealed. 

We also propose that an eligible 

carrier may purchase only one slot 

bundle at each airport, except at the 

seller’s option as discussed later. This 

limitation would balance the 

Department’s interest in maximizing the 

competitive discipline of the slots with 

creating an opportunity for at least two 

carriers to obtain the slots. We propose 

to permit an eligible carrier to register 

for each slot interest bundle that it 

wishes to buy, and assign it a random 

number for each registration so no 

information identifying the bidder is 

available to the seller or public. A 

bidder would be allowed to indicate its 

preference ranking for each slot interest 

bundle as part of its offer. Finally, the 

FAA would review the offers for each 

bundle in order. 

We propose to require all offers to 

purchase slot bundles to be sent to the 

FAA electronically. The offer would 

have to include the prospective 

purchaser’s assigned number, the 

monetary amount, and the preference 

ranking for that slot interest bundle. The 

FAA would post all offers on the Web 

site as soon as practicable after they are 

received. Each purchaser would be able 

to submit multiple offers until the 

closing date and time. 

Once the sales period closes, we 

propose that the FAA would determine 

the highest offer for each bundle. If each 

bundle had only a single offer, the FAA 

would notify the seller by forwarding 

the purchaser’s identification. If one 

eligible carrier had made the highest 

purchase offer on multiple bundles, the 

FAA would determine which offer will 

be valid based on preference ranking 

and bundle order. The FAA would 

identify the next-highest offer from a 

carrier that remains eligible to purchase 

the bundle as the successful offer on the 

other bundles. This information would 

be forwarded to the respective seller. 

The FAA would also provide 

information about the amount of the 

highest offer, and the selling carrier may 

choose to accept the highest offer 

instead of the offer identified by the 

FAA. Upon acceptance, the FAA would 

notify the selling and purchasing 

carriers to allow them to carry out the 

transaction, including any gate and 

ground facilities arrangements. The full 

amount of the proceeds could be 

retained by the selling carrier. The seller 

and purchaser would be required to 

notify the FAA that the transaction has 

been completed and certify that only 

monetary consideration will be or has 

been exchanged for the slot interest 

bundles. 

In the unlikely event that there are no 

offers for a slot interest, we propose that 

those slot interests will revert 

automatically to the FAA. If necessary, 

we would announce at a later date a 

means for disposing of or retiring a slot 

interest that attracts no purchase offer. 

We do not expect that this need will 

arise. 

We propose the option of a cash-only, 

FAA ‘‘blind’’ Web site, because it has 

the capability of maximizing the 

competitive potential of the divestiture 

packages because that sale method 

would target the potential competitors 

with the greatest economic incentive to 

use slots as intensively and efficiently 

as possible. We seek comments on this 

proposal. 

Other Considerations 

We also tentatively find that eligible 

carriers may be unable to use the slots 

if they cannot obtain access to gates, 

ticket counters, baggage handling 

services, loading bridges, and other 

ground facilities at either DCA or LGA. 

Accordingly, we propose to require the 

selling carrier to make these available to 

the purchaser under reasonable terms 

and rates if the purchasing carrier lacks 

access to gates and ground facilities and 

is unable to obtain such access from 

either the Port Authority of New York 

and New Jersey, the operator of LGA, or 

from the Metropolitan Washington 

Airports Authority, the operator of DCA. 

We propose to subject the slots to the 

same minimum usage requirements as 

provided in the LGA Order and HDR. 

However, we propose to waive the 

respective use or lose provisions of the 

LGA Order and HDR for 6 months 

following purchase to allow the 

purchaser to begin service in new 

markets or add service to existing 

markets. The purchaser must initiate 

service no later than 6 months following 

purchase. We seek comment on the 

conditions described above. 

We further propose that the purchaser 

may lease the acquired slots to the seller 

until the purchaser is ready to initiate 

service to maximize operations at the 

airports. However, we tentatively would 

require that the slots not be sold or 

leased to other carriers during the 12 

months following purchase because the 

purchaser must hold and use the 

acquired slots. 

Purchasers could engage in one-forone trades of these slots for operational 

needs. The limitations would attach to 

the slot acquired by the eligible carrier 

in a one-for-one trade. Any one-for-one 

trades would be subject to the FAA 

notice requirements in the LGA Order 

and HDR. We further propose that the 

duration of any trades or leases of LGA 


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slots may not exceed the duration of the 

LGA Order. 

We additionally propose that, after 

the initial 12 months, and for four years 

thereafter, the slots may be sold, traded, 

or leased (as authorized by the HDR at 

DCA and otherwise as authorized at 

LGA) to any carrier that at the time of 

the sale, trade, or lease would have met 

the eligibility requirements to make an 

offer under this proposed waiver for the 

divested slot interests. These proposed 

restrictions would increase the 

probability that the divested slots are 

used and operated by carriers that will 

enhance competition at LGA and DCA, 

lower fares, and benefit the traveling 

public. We recognize, however, that 

restrictions on alienation of these slots 

may depress their value for the carriers 

holding them. In order to balance the 

need and desire of those carriers to 

maximize the value of the divested slots 

with the Department’s desire to afford 

the traveling public a broad array of 

competitive service, we propose that the 

alienation restrictions on the divested 

slots terminate after a total of five years 

following initial sale. 

Tentative Findings 

We have carefully evaluated the risks 

and potential benefits of the proposed 

transaction, focusing our public interest 

analysis on the effects arising from that 

transaction as a whole. We tentatively 

conclude that, on balance, the potential 

benefits of the proposed transaction, as 

modified by the required slot 

divestitures to new entrant and limited 

incumbent carriers and by 

implementation in tranches, outweigh 

its potential harms. This tentative 

decision would also allow us to 

preserve the other important benefits 

resulting from the transaction, such as a 

more efficient use of slots at both 

airports and a potential for enhanced 

service benefits to passengers. 

Invitation for Comment 

The agency has placed a copy of the 

waiver request in the docket. The FAA 

invites all interested members of the 

public to comment on the waiver 

request, proposed grant of the waiver, 

proposed conditions to the waiver, and 

proposed divestiture remedy. Several 

commenters, including JetBlue Airways 

Corporation, Spirit Airlines, Inc., and 

the Air Carrier Association of America, 

have filed comments in the Docket to 

the waiver request. We will review all 

previously-filed comments (unless 

withdrawn), with all comments 

submitted within this comment period, 

in making our final determination on 

the waiver request. 

Issued in Washington, DC, on July 21, 

2011. 

Ray LaHood, 

Secretary. 

J. Randolph Babbitt, 

Administrator, FAA. 

[FR Doc. 2011–18939 Filed 7–27–11; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Pipeline and Hazardous Materials 

Safety Administration 

Office of Hazardous Materials Safety; 

Notice of Applications for Modification 

of Special Permit 

AGENCY: Pipeline and Hazardous 

Materials Safety Administration 

(PHMSA), DOT. 

ACTION: List of Applications for 

Modification of Special Permits. 

SUMMARY: In accordance with the 

procedures governing the application 

for, and the processing of, special 

permits from the Department of 

Transportation’s Hazardous Material 

Regulations (49 CFR part 107, subpart 

B), notice is hereby given that the Office 

of Hazardous Materials Safety has 

received the applications described 

herein. This notice is abbreviated to 

expedite docketing and public notice. 

Because the sections affected, modes of 

transportation, and the nature of 

application have been shown in earlier 

Federal Register publications, they are 

not repeated here. Requests for 

modification of special permits (e.g. to 

provide for additional hazardous 

materials, packaging design changes, 

additional mode of transportation, etc.) 

are described in footnotes to the 

application number. Application 

numbers with the suffix ‘‘M’’ denote a 

modification request. These 

applications have been separated from 

the new application for special permits 

to facilitate processing. 

DATES: Comments must be received on 

or before August 12, 2011. 

ADDRESSES: Record Center, Pipeline and 

Hazardous Materials Safety 

Administration, U.S. Department of 

Transportation, Washington, DC 20590. 

Comments should refer to the 

application number and be submitted in 

triplicate. If confirmation of receipt of 

comments is desired, include a selfaddressed stamped postcard showing 

the special permit number. 

FOR FURTHER INFORMATION CONTACT: 

Copies of the applications are available 

for inspection in the Records Center, 

East Building, PHH–30, 1200 New 

Jersey Ave., SE, Washington, DC or at 

http://regulations.gov. 

This notice of receipt of applications 

for modification of special permit is 

published in accordance with part 107 

of the Federal hazardous materials 

transportation law (49 U.S.C. 5117(b); 

49 CFR 1.53(b)). 

Issued in Washington, DC, on July 21, 

2011. 

Donald Burger, 

Chief, General Approvals and Permits. 

Application 

No. Docket No. ApplicantRegulations affected Nature of special permits thereof 

MODIFICATION SPECIAL PERMITS 

9168–M ....... All-Pak Dangerous Goods, a 

Berlin Packaging (Former 

Grantee All-Pak, Inc.), 

Bridgeville, PA.

49 CFR Part 172; Subpart 

E; 173.118; 173.244; 

173.345; 173.346; 

173.359; 173.370; 

173.377; 175.3; 175.33; 

172.504; 173.3.

To modify the special permit to authorize an 

additional mode of transportation (cargo vessel.) 

12092–M ..... KMR Industries, LLC, Columbia, MD.49 CFR 173.34(e) ............... To modify the special permit to authorize additional modes of transportation (rail and cargo 

vessel). 

14743–M ..... TIER Environmental Services, 

Inc. (Former Grantee TIER 

DE, Inc.), Gap, PA.

49 CFR 173.24b and 

173.244.

To modify the special permit to authorize onetime, one-way transportation in commerce of 

an additional non-DOT specification metal 

tank containing approximately 1320 lbs. of 

sodium by motor vehicle. 


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