BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Application of

SOUTHWEST AIRLINES CO. for an exemption purs uant to 49 U.S.C. § 40109 to engage in foreign schedul ed air transportation of persons, property a nd mail between Houston Hobby Airport and Cancun, Mexico City, Puerto Vallarta, and San Jose del Cabo, Mexico (HOU-CUN) (HOU-MEX) (HOU-PVR) (HOU-SJD) Docket DOT-OST-2014-0222

Application of

SOUTHWEST AIRLINES CO. for an exemption purs uant to 49 U.S.C. § 40109 to engage in scheduled foreign air transportation of persons, property and mail between the United States and Belize Docket DOT-OST-2014-0223

ANSWER OF THE CITY OF HOUSTON Communications with respect to this document should be sent to: Mario C. Diaz

Director Ian Wadsworth

Chief Commercial Officer Department of Aviation CITY OF HOUSTON 16930 John F. Kennedy Blvd. Houston, TX 77032 (281) 233-3000 (281) 233-1859 (fax) Rachel B. Trinder ZUCKERT, SCOUTT &

RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com For the City of Houston Dated: December 29, 2014BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Application of

SOUTHWEST AIRLINES CO. for an exemption purs uant to 49 U.S.C. § 40109 to engage in foreign schedul ed air transportation of persons, property a nd mail between Houston Hobby Airport and Cancun, Mexico City, Puerto Vallarta, and San Jose del Cabo, Mexico (HOU-CUN) (HOU-MEX) (HOU-PVR) (HOU-SJD) Docket DOT-OST-2014-0222

Application of

SOUTHWEST AIRLINES CO. for an exemption purs uant to 49 U.S.C. § 40109 to engage in scheduled foreign air transportation of persons, property and mail between the United States and Belize Docket DOT-OST-2014-0223

ANSWER OF THE CITY OF HOUSTON The City of Houston (“Houston” or the “City”) respectfully subm its this answer to the applications filed on Decembe r 11, 2014 by Southwest Airlin es Co. (“Southwest”) for the bilateral designations and other authority necessary to ope rate scheduled foreign air transportation between Houston’s William P. Hobby Airport (“Hob by” or “HOU”), on the one hand, and Cancun, Mexico City, Puerto Vallarta, and San Jos e del Cabo, Mexico, on the other hand – commencing in October 2015, with sales of t he flights to begin inAnswer of the City of Houston Page 2

2 the first quarter of 2015 – as well as for the authority necess ary to operate scheduled foreign air transportation bet ween Hobby and Belize City. 1 Houston’s air service to Mexico is a key component of the vibra nt economic and cultural relationship between t hem. Houston is already the nat ion’s largest air transportation gateway to Mexico, and its international air tra ffic overall is growing at a record pace. Since the year 2000 Houston’s international passe nger count has increased by an impressive 60%, and as of the end of October 20 14 its year-to-date international traffic was up 10% over the same period in 2013. This remarkable air traffic growth reflects Houston’s role as o ne of the key engines of the U.S. economy. If the greater Houston Metropolit an Statistical Area (“MSA”) were a State, it would rank eighteenth in population, a head of Missouri and Maryland. 2 Indeed, with a gross product of $533 billion in 2013, the reg ion has a GDP that exceeds that of all but 21 foreign countries. A significant component in Houston’ s ever-growing international traffic is the region’s strong position as a le ading location for major compan ies that have a global presence. The Houston region i s home to the headquarters of 26 of the 2014 Fortune

1 Because the U.S.-U.K. “Bermuda 2” agreement, which is applicab le to this service, provides for unlimited U.S. carrier services be tween the U.S. and Belize, Ho uston believes that grant of the Belize authority requested by Southwest in docket DOT-OST-2014-0223 sh ould not be controversial. Nevertheless, Houston wishes to confirm its strong support for Southwest’s HOU-BZE application, as well as for the carrier’s recent announcement that it will operate H OU-SJO services starting in October 2015 pursuant to its existing U.S.-Costa Rica authority in docket DO T-OST-2014-0162. Both Belize City and San Jose are important destinations for leisure and business pa ssengers from Houston and the south central U.S., and Southwest will in troduce important new compet ition into both of those markets.

2 See “2014 Houston Facts”, http://www.houston.org/economy/#HoustonFactsPublication (June 2014).Answer of the City of Houston Page 3

3 500 companies and 28 of the 2014 Forbes Global 2000 companies, 3 and the Houston metroplex is the leading job creator among U.S. cities. 4 This remarkable economic strength provides ongoing new o pportunities for carriers, passe ngers and shippers, and ever-growing potential for additional air services to meet the community’s increasing needs. These needs are especially vital – and growing – where Mexico is concerned. Indeed, more than 600, 000 members of the greater Houston commun ity – comprising over 44% of Houston’s foreign-born population – were born in Me xico. As a result, Houston is very fortunate that m ultiple U.S. and Mexican carrie rs already are serving or

wish to serve Mexico markets fr om Houston. Notably, United tod ay serves 26 destinations in Mexico from its hub at Houston’s George Bush In tercontinental Airport (“IAH”) – a transborder network unmatched by any other U.S. car rier. In light of the growing demand for additional Houston-Mexico ai r services, Houston is extremely pleased t hat the U.S. and Mexico recently initialed an important update to their bilateral air se rvices agreement; the City hope s that the procedures necessary for the agreement’s implementation will be completed as soon as possible. In particular, the new provisions allowing for unlimited design ations in transborder citypair markets for third- and four th-freedom passenger services w ill finally enable U.S.- Mexico services to expand commensurate with market needs.

3 Additionally (based on data provided by the Greater Houston Pa rtnership), more than 1,200 Houston companies currently do business with Mexico; 44 have subsidiari es in Mexico; and numerous Mexican companies have subsidiaries in Houston.

4 See, e.g., “18 Facts That Make Houston The Best City In Americ a”, http://www. businessinsider.com/houston-best-city-in-america-2014-6 (July 1, 2014) (noting that among the twenty most populous U.S. metropolitan statistical areas, Houston has – by far – achieved the highest percentage of jobs rec overed since the end of the economic down turn).Answer of the City of Houston Page 4

4 This development will be especia lly critical for Houston and Ho bby; extensive

new international facilities are under construction at Hobby, a nd are on schedule for an October 2015 opening. These facilit ies, financed in significan t part through a partnership with Southwest, wil l enable not only new internatio nal services from

Southwest but also from other U .S. and foreign carriers, with s ervices to Mexico as the key component. These services not only will significantly expa nd Houston’s overall access to Mexico, but also will provide important competition t o existing and future Mexico services from IAH, and ar e anticipated to expand the opp ortunities for all carriers. A City study on the impact of opening Hobby to inter national services

concluded that once the services are fully developed they will generate 1.3 million new passengers (primarily in Houston-Mexico markets) – including no t just new traffic at HOU but also stimulated net gro wth at IAH; additional benefits will include significant overall fare savings for local and connecting passengers using IAH and HOU as gateways to Mexico. Furthermore, Hobby’s new role as an intern ational gateway is expected to create 14,000 new jobs and have a total economic im pact of $1.2 billion in the greater H ouston area. As the Department knows, while t he U.S. and Mexico anticipate i mplementation of the new bilateral in early 20 16, that is not soon enough to ensure open access to all markets by the time the new Hobby international facilities open in 2015, and as

Southwest has indicated in its a pplication, it needs to begin m arketing the new services very soon. In two of the four cit y-pair markets in which South west seeks designations –

Houston-Cancun and Houston-Puerto Vallarta – there currently ar e unallocated designations available for services by a U.S. carrier. But in the other two markets –Answer of the City of Houston Page 5

5 Houston-Mexico City and Houston-S an Jose del Cabo – all the ava ilable designations have been allocated, including i n each market two that are held by United and a regional affiliate, one of which Southwest seeks in each city-p air. Houston greatly values all of t he services provided by carriers at both HOU and IAH, and has no desire to lose of any of its existing services, even during the interim period prior to implementation of the new agreem ent. Both Unit ed and Southwest are important partners wit h the City. Both have made substantial c ommitments to and generate extensive air transporta tion benefits for the City, an d major expansion and development projects are underway at both IAH and HOU to accomm odate the carriers’ current and future growth. But a t the same time, the City’s in terest and obligation is to promote additional air services a nd competition, and in seeing that new entrant carriers desirous of providing Mexico ser vices from Houston can obtain t he authority that they need. Houston hopes that the Depar tment will explore all oppor tunities available to approve and secure additional ri ghts from Mexico so that all ca rriers wishing to serve

these markets are able to obtai n the authority they need on a t imely basis. As Southwest has indicated, it needs to receive the authority as s oon as possible so that it can begin selling flights by t he first quarter of 2015, given t he Hobby international facilities’ opening date and the October 2015 start date for So uthwest’s services. Houston asks the Department to ens ure that whatever action is t aken, it is concluded

consistent with that timeframe. Accordingly, Houston asks the D epartment to take the steps nece ssary to ensure that Southwest receives the authority it seeks and on the timef rame it seeks, withAnswer of the City of Houston Page 6

6 respect to both the Houston-Mexico markets at issue in docket D OT-OST-2014-0222

and the Houston-Belize authority requested in docket DOT-OST-20 14-0223. Respectfully submitted,

__________________ ______________ Rachel B. Trinder ZUCKERT, SCOUTT &

RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com For the City of Houston Dated: December 29, 2014CERTIFICATE OF SERVICE I certify that on this 29th day of December 2014, a copy of the foregoing was served on the parties named below in accordance with the Depart ment’s Rules of Practice.

Rachel B. Trinder

rsilverberg@sgbdc.com, jjohnson@sgbdc.com, and mgoldman@sgbdc.com (Counsel for ABX Air) chuck.hill@airtransport.cc (Air Transport International) msinick@ssd.com (Counsel for Alaska Airlines) agoerlich@ggh-airlaw.com (Counsel for Allegiant Air) robert.wirick@aa.com , francis.heil@aa.com , and howard.kass@aa.com (American Airlines) jcanny@amerijet.com (Amerijet) jrichardson@johnlrichardson.com (Counsel for Amerijet) rpommer@atlasair.com (Atlas Air) john@mietuslaw.com (Counsel for Centurion Air Cargo) sascha.vanderbellen@delta.com , chris.walker@delta.com , and sametta.c.barnett@delta.com (Delta Air Lines) cefelts@fedex.com and nssparks@fedex.com (Federal Express) matwood@cozen.com and slachter@cozen.com (Counsel for Frontier) jhill@cooley.com and perkmann@cooley.com (Counsel for JetBlue Airways) robert.land@jetblue.com (JetBlue Airways) kevin.montgomery@polaraircargo.com and peter.beckett@polaraircargo.com (Polar Air Cargo) robert.cohn@hoganlovells.com and patrick.rizzi@hoganlovells.com (Counsel for Republic Airlines) ethan.blank@rjet.com (Republic Airlines) temerson@skywest.com (SkyWest Airlines) bob.kneisley@wnco.com and leslie.abbott@wnco.com (Southwest Airlines) dkirstein@yklaw.com and jyoung@yklaw.com (Counsel for Spirit Airlines)john.fredericksen@suncountry.com and thomas.ting@suncountry.com (Sun Country) hershel.kamen@united.com , dan.weiss@united.com , steve.morrissey@united.com , thomas.bolling@united.com , and abby.bried@united.com (United Airlines) sseiden@crowell.com and gmurphy@crowell.com (Counsel for United Airlines) anita.mosner@hklaw.com and jennifer.nowak@hklaw.com (Counsel for UPS) dsmalls@ups.com (UPS) john.varley@virginamerica.com and barbara.russell@virginamerica.com (Virgin America) paul.gretch@dot.gov , susan.kurland@dot.gov , brian.hedberg@dot.gov , brett.kruger@dot.gov , reese.davidson@dot.gov , todd.homan@dot.gov , peter.irvine@dot.gov , laura.remo@dot.gov , and robert.finamore@dot.gov (DOT) john.s.duncan@faa.gov (FAA) ronald.williams@ustranscom.mil (USTRANSCOM) englets@state.gov and cristinasa@state.gov (State Department) info@airlineinfo.com pjackson@swapa.org (Southwest Airlines Pil ots’ Association)