BEFORE THE FEDERAL AVIATION ADMINISTRATION

WASHINGTON, D.C.

--------------------------------------------------- ------------------ : UNITED AIRLINES, INC., :

: Complainant, : v. : Docket FAA-16-14-________

: THE PORT AUTHORITY OF NEW YORK : AND NEW JERSEY, :

: Respondent. :

--------------------------------------------------- ------------------:



## E XPERT 

## R EPORT OF 

## D ANIEL 

## M. K ASPER

## I. I DENTIFICATION

1. I am a Senior Consultant for Compass Lexecon. I ha ve over 30 years of consulting experience at Compass Lexecon, LECG, Coopers & Lybr and, L.L.P., and Harbridge House, Inc. My work has dealt extensivel y with issues involving economics, finance, and competition involving airli nes and airports, among other
economic sectors. I have also served for a total o f ten years on the faculties of the Harvard Business School and the University of South ern California School of
Business Administration.

2. Between 1979 and 1983, I served at the United State s Civil Aeronautics Board (“CAB”), first advising the Vice-Chair of the Board on all matters pending before the agency and then as the Director of Internationa l Aviation. In the latter capacity, I was the Board’s primary advisor and chi ef line officer for all matters involving international aviation.

3. In 1993, I was one of 15 members of the National Co mmission to Ensure a Strong and Competitive Airline Industry, a body created by Congress and appointed by the President and the Congressional leadership to e valuate and make recommendations on how to improve the performance o f the U.S. airline and aerospace industries. In addition, I have served a s a consultant to the U.S. Departments of Transportation, State and Defense on various aviation industry matters, and have also testified as an expert on ai rline and aviation industry matters —including airport rates and charges—before courts and federal administrative agencies, as well as legislative bodies and antitru st authorities both in the United States and abroad. I earned my M.B.A. and J.D. deg rees from the University of Chicago. My curriculum vitae is attached to this r eport as Appendix A.

4. I have been retained by Steinbrecher & Span LLP, co unsel for United Airlines, Inc. (“United”) to provide an independent economic analysis of whether the Port Authority of New York and New Jersey (“Port Authori ty”) has monopoly power over airlines in the provision of airport facilitie s in New York City metropolitan2 area. I have also been asked to compare the airpor t access fees charged by the Port Authority to airlines at Newark Liberty Internation al Airport (“EWR”) relative to other large New York City area airports it manages (specifically LaGuardia Airport (“LGA”) and John F. Kennedy International A irport (“JFK”)) as well as other major U.S. airports, and to provide an indepe ndent analysis of whether the disparity in airport charges at EWR vis-à-vis these other New York City airports places United at a competitive disadvantage versus other U.S. airlines.

5. This report contains my opinions as well as the bas es for those opinions. In preparing this analysis, I have been assisted by ec onomists on the staff of Compass Lexecon. The opinions set forth in this report are based upon my review and analysis of: (i) relevant articles and publicly av ailable information and data sources routinely relied upon by economists and oth er airline industry analysts including the Official Airline Guide (“OAG”) schedu le database, the U.S. Department of Transportation’s (“DOT”) Survey of Or igin and Destination passengers (“DB1B”) database, airline annual report s and other filings made with the U.S. Securities and Exchange Commission (“SEC”) , press releases, academic publications, as well as airline and financial trad e press sources; (ii) information provided by Company officials, and (iii) my own kno wledge and more than 30 years of experience from working with, researching and/or regulating the airline and aerospace industries. 1 My investigation and consideration of the issues in this matter is ongoing. Accordingly, my opinions are su bject to revision based on the work I may complete in the future and further docum ents, data, testimony, and other materials I may review.

1 A list of documents and information sources consid ered is included as Appendix B.3



## II. O VERVIEW AND 

## S UMMARY OF 

## O PINIONS

6. Based on my analysis of the issues to date, I have formed the following opinions:

• The Port Authority is not a normal commercial landl ord and EWR is not a normal piece of commercial real estate. On the con trary, the Port Authority enjoys de facto monopoly power in the provision of airport service s in the New York City (“NYC”) metropolitan area. 2 Thus, unlike typical commercial tenants who can move to another building with a different landlord, airlines have no realistic alternative to the Port Authority’s facilities if they want to compete for the overwhel ming majority of passengers that travel by air to or from the NYC me tropolitan area.

• The NYC metropolitan area is—by a wide margin—the l argest U.S. origin and destination (“O&D”) market for both domestic an d international
travel. 3 As a result, for most airlines—and particularly t he large network
carriers 4 whose business model depends on providing passenge rs with convenient and frequent access to key business and leisure destinations— access to the NYC metropolitan area is critical. I n addition, the three large network carriers and one LCC operate hubs in the NY C metropolitan area

2 For the purposes of this report, I refer to the NY C metropolitan area as the geographic area that inc ludes New York City, Long Island, the lower Hudson River valley and the North-Eastern counties of New Jersey (i.e., Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, and Union).

3 O&D (“origin and destination”) passengers are coun ted based on the starting and ending point of each passenger’s journey, regardless of whether or not t hey make a connection. For example, a passenger traveling from New York City to Los Angeles making a connection in Chicago is counted as an O&D passenger for New York City and Los Angeles (but no t for Chicago).

4 Throughout this report, I use the term “large netw ork carriers” to refer to American (recently merged with US Airways), Delta (recently merged with Northwest) and United (recently merged with Continental). These carriers are the surviving set of legacy carr iers that operate on a “hub-and-spoke” traffic mode l, service a wide variety of both domestic and interna tional destinations using multiple aircraft types, and have workforces relatively more senior than the new er entrants. I use the term “LCC” to refer to the category of generally lower-cost air carriers such as Southwest, JetBlue, Spirit, Virgin America, Fron tier and Allegiant. Most (but not all) of the LCCs’ ope rating models make use of point-to-point services, and utilize a simplified fleet of one or two types of n arrowbody aircraft, lower average fares, more flexi ble work rules, quick turn-around times, and (because o f their relatively recent vintage) an employee population of lesser seniority than the large netwo rk carriers.4 (United at EWR, American at JFK, Delta at both JFK and LGA, and JetBlue at JFK).

• The Port Authority controls all three major commerc ial airports serving the NYC metropolitan area (LGA, JFK and EWR) 5 , giving the Port Authority an effective monopoly in the provision of commercia l airport facilities in the NYC metropolitan area. This monopoly gives the Port Authority substantial market power vis-à-vis airlines that us e (or want to use) the airports under its control.

• Like other monopolies and public utilities, airport s have long been subject to heightened levels of public scrutiny and regulat ory oversight designed to prevent them from abusing their market power by inc reasing prices above competitive levels, restricting output, or engaging in price discrimination. These concerns (among others) led Congress to subje ct airports and their rates and charges to federal regulatory review.

• The Port Authority has used its market power to imp ose fees for airlines at EWR well above those of its other large NYC metropo litan airports (e.g., LGA and JFK). For example, the weight-based landin g fee at EWR for a typical Boeing 737-800 flight is $1,722 compared to only $981 at JFK and $1,358 at LGA.

• Higher landing fees at EWR vis-à-vis its other larg e NYC metropolitan area airports are not justified by higher costs at EWR. While the Port Authority’s landing fees at EWR are 75% higher than those at JFK (for a comparable 737-800 flight), the Port Authority’s cost per enplaned passenger at EWR is 8% less than its cost at JFK.

• The Port Authority’s ability to set landing fees at EWR well above costs (enabled by the Port Authority’s de facto monopoly power) has resulted in

5 As discussed below, the Port Authority also contro ls Stewart International (“SWF”) and Teterboro (“TEB”) airports.5 the Port Authority consistently earning profit marg ins of over 20% at
EWR.

• Because JFK, LGA and EWR are “slot-constrained” air ports operating at full capacity throughout most of the day, it would not be possible for
United to secure sufficient slots at either JFK or LGA to relocate its hub from EWR in order to take advantage of the lower la nding fees at those airports. Likewise, there are no other airports in the NYC metropolitan area that have the capacity (e.g., terminals, gate facilities and runway length) to accommodate the hubbing operations of a large network carrier
such as United.

• Given the size and importance of the NYC metropolit an area and the disparity in airport access costs for airlines acro ss the three major NYC area airports, airlines that rely on EWR for the bu lk of their NYC area operations (e.g., United) are placed at competitive disadvantage vis-à-vis airlines that rely primarily on LGA and/or JFK to s erve the NYC metropolitan area market.

7. The remainder of this report is organized as follow s. Section III shows that the Port Authority is not a normal commercial landlord with regards to EWR, but in fact, holds a monopoly position for the provision o f airport services in the NYC metropolitan area. Section IV shows that the Port Authority has used its monopoly power to impose landing fees at EWR that are the hi ghest in the country, and substantially higher than landing fees at JFK. Sec tion IV also demonstrates that as a result of EWR’s excessively high fees, the Port A uthority has been earning excessive profits at EWR over the past five years, which have been diverted by the Port Authority for non-aeronautical projects. Sect ion V describes how the unreasonably high landing fees at EWR have put Unit ed at a competitive disadvantage vis-à-vis other U.S. airlines serving the NYC metropolitan area. Section 0 contains a brief summary of my conclusion s.6



## III. T HE 

## P ORT 

## A UTHORITY HAS 

## M ONOPOLY 

## P OWER 

## O VER 

## A IRLINE 

## A CCESS THE 

## N EW 

## Y ORK 

## C ITY 

## M ETROPOLITAN 

## A REA

A. The NYC Metropolitan Area is the Largest Origin/Des tination Market in the United States by a Wide Margin

8. The NYC metropolitan area is—by a wide margin—the l argest airline “market” 6 as measured by O&D passengers in the United States, bo th for domestic and international travel. As shown in Exhibit 1, over 57 million domestic passengers traveled to or from the NYC metropolitan area in 20 13, approximately 40% more than Los Angeles, the second largest domestic O&D m arket. Exhibit 1 also shows that the NYC metropolitan area accounted for approx imately $12.7 billion in
domestic airline revenues—48% more than second rank ed Los Angeles—and
6.9% of all domestic O&D revenue nationwide in 2013

.

6 Although “city-pairs” (i.e., passengers traveling between one city or metropolitan area and another) are a standard method of defining a market in the airline industry when conducting traditional competition analysis between airlines, the focus of my analysis in this declaration is on competition (or the lack thereof) for airport facilities in a particular city (i.e., the NYC metropolitan area). Thus, throughout this declaration, I use the term “market” to refer to the aggregation of all of the individual city-pairs that are eithe r to/from the metropolitan area of interest.7

E XHIBIT 1: L ARGEST 15 D OMESTIC O&D M ARKETS IN THE U NITED S TATES (R ANKED BY R EVENUES )

9. For international air travel, the NYC metropolitan area is the largest market in the United States by an even wider margin. As shown in Exhibit 2, the NYC metropolitan area accounted for over 13.7 million i nternational passengers in 2013 (approximately twice that of Miami, the second larg est market for international passenger traffic). Exhibit 2 also shows that inte rnational travel to/from New York City accounted for $7.2 billion in U.S. airline rev enues in 2013—as much as San Francisco, Los Angeles and Chicago combined —and approximately 15% of all
U.S. carrier international revenues. 7

7 For international tickets, the U.S. DOT DB1B inter national data set reflects a 10% sample of all tick ets for which at least one segment was operated by a U. S. carrier. Thus, part of the revenues for some of the tickets in the data set will be shared with foreign carriers based on upon pro-rate or revenue sharing agreements between carriers. Source: US DOT DB1B, FY2013. Notes: Airports in the following domestic metropoli tan areas are grouped: Chicago (ORD, MDW), Cincinna ti (CVG, DAY), Cleveland (CLE, CAK), Dallas (DFW, DAL), Houston (HOU, IAH), Los An geles Basin (LAX, BUR, LGB), Miami (MIA, FLL), New York (LGA, JFK, EWR), San Francisco/Bay Area (SFO, OAK), Washington DC/Baltim ore (DCA, IAD, BWI), and Tampa (TPA, PIE). Metropolitan Area Millions % of US Total Billions % of US Total 1 New York 57.8 6.3% $12.7 6.9% 2 Los Angeles 40.5 4.4% $8.6 4.7% 3 Washington 39.2 4.3% $7.7 4.2% 4 Chicago 40.0 4.4% $7.6 4.1% 5 San Francisco 34.3 3.8% $7.5 4.1% 6 Dallas/Ft.Worth 27.5 3.0% $5.6 3.0% 7 Atlanta 25.5 2.8% $5.1 2.8% 8 Las Vegas 29.2 3.2% $5.1 2.8% 9 Miami 27.5 3.0% $5.1 2.8% 10 Denver 27.6 3.0% $4.7 2.6% 11 Boston 22.9 2.5% $4.7 2.5% 12 Houston 20.4 2.2% $4.6 2.5% 13 Orlando 26.5 2.9% $4.6 2.5% 14 Seattle 20.9 2.3% $4.4 2.4% 15 Phoenix 22.2 2.4% $4.1 2.2% Passengers Revenue8

E XHIBIT 2: L ARGEST 15 I NTERNATIONAL O&D M ARKETS IN THE U NITED S TATES (R ANKED BY R EVENUES )

B. Airports are Natural Monopolies

10. Monopoly power arises when a factor or factors, bro adly described as barriers to entry, effectively prevent or severely limit the ab ility of other producers to enter a market. These factors include governmentally impos ed restrictions on entry ( e.g ., strict licensing requirements) as well as large eco nomies of scale or scope that sharply limit the number of economically viable pro ducers. The latter case is sometimes described as a “natural monopoly.”

11. The market for commercial airport services in gener al, and in the NYC metropolitan area in particular, is characterized b y exceptionally high barriers to entry. To begin with, commercial airports exhibit significant economies of scale and scope. Airport scale economies ( i.e ., decreasing unit costs over a wide range of outputs) arise principally from “the necessity o f making a large investment merely in order to be in a position to serve custom ers on demand.” 8 These investments in the case of airports include the acq uisition of large parcels of land (typically requiring the use of eminent domain) and the construction of runways,

8 Alfred Kahn, The Economics of Regulation, John Wil ey & Sons, 1970, Vol. II, p. 119. Source: US DOT DB1B, FY2013. Notes: Airports in the following domestic metropolit an areas are grouped: Chicago (ORD, MDW), Cincinnat i (CVG, DAY), Cleveland (CLE, CAK), Dallas (DFW, DAL), Houston (HOU, IAH), Los An geles Basin (LAX, BUR, LGB), Miami (MIA, FLL), New York (LGA, JFK, EWR), San Francisco/Bay Area (SFO, OAK), Washington DC/Baltimo re (DCA, IAD, BWI), and Tampa (TPA, PIE). Metropolitan Area Millions % of US Total Billions % of US Total 1 New York 13.7 15.8% $7.2 14.7% 2 Miami 6.8 7.8% $2.8 5.7% 3 Los Angeles 4.6 5.3% $2.4 5.0% 4 San Francisco 3.8 4.4% $2.6 5.2% 5 Washington 3.7 4.3% $2.3 4.7% 6 Chicago 3.7 4.3% $2.2 4.6% 7 Houston 2.7 3.1% $2.0 4.1% 8 Atlanta 2.6 3.0% $1.5 3.0% 9 Orlando 2.5 2.9% $1.2 2.4% 10 Boston 2.5 2.8% $1.3 2.7% 11 Dallas/Ft.Worth 2.4 2.7% $1.3 2.6% 12 Honolulu 1.9 2.3% $1.7 3.4% 13 Philadelphia 1.7 2.0% $0.9 1.9% 14 Detroit 1.6 1.9% $1.1 2.3% 15 Minneapolis/St. Paul 1.5 1.8% $0.9 1.9% Passengers Revenue9 taxiways, access roadways, terminal facilities, tow ers, runway lighting and other systems—all investments for which the minimum effic ient scale is large relative to
demand. As the Federal Aviation Administration has observed:

[G]iven the high cost of airport construction (e.g. , more than $4 billion for the new Denver International Airport), building a new airport is not a common capacity enhancement techni que. 9

12. Given the high barriers to entry for airports, it i s not surprising that the need to protect airport users from the potential abuse of m onopoly power by airports has been widely recognized 10 or that it underlies the Department’s Policy Regar ding Airport Rates and Charges because, unlike non-aeron autical services and facilities, airport revenues derived from aeronautical rates an d charges are typically not subject to effective market discipline. 11 In order to prevent entities with such market power from abusing that power, governments b oth in the United States and abroad have subjected monopolies and other public u tilities to heightened levels of public scrutiny and regulatory oversight—as did Con gress when it subjected airport rates and charges to federal regulatory rev iew.

9 Federal Aviation Administration, 1998 Capacity Enh ancement Plan, Chapter 3, p. 45.

10 See Comments of the Federal Trade Commission Staff of the Bureau of Economics to U.S. Department of Transportation, September 14, 1994, at 11-12: “[ A]irport services generally are not produced in competitive markets.... Accordingly, incumbent airpor t operators might possess market power in the pricing of airport services. In this instance it ma y be possible for the FAA to regulate the pricing o f airport services in ways that reduce the welfare loss arisi ng from monopoly pricing, yet allow airports to cov er their costs.” See also , “Proposal for a Council Directive on Airport char ges,” 97/C 257/03, Official Journal of the European Communities, 22/8/97, Para. 12, whi ch described airport services as “a monopoly situation.” Likewise, the EC’s Economic and Social Committee noted that “...the airport management body is in a monopoly situation as regard to the pr ovision of airport facilities and services.” 98/C73 /08, Ibid, 9/3/98 Para. 1.1.1 and Leonardo J. Basso and Anming Zhang, “An Interpretative Survey of Analytic al Models of Airport Pricing”, Chapter 4 in Advances i n Airline Economics, Volume 2, Darin Lee, Editor, a t page 90: “It has usually been accepted that airport s enjoy a local monopoly position because they have a captive market.”

11 “Over time, the DOT assumes that the limitations o n airport revenue use, combined with effective mark et discipline for non-aeronautical services and facili ties, will be effective in holding aeronautical cos ts to airport revenues while providing reasonable aeronau tical fees for services and facilities.” U.S. Depa rtment of Transportation Federal Aviation Administration O rder 5190.6B at page 18-10.10

C. The Port Authority is a De Facto Monopolist for the Provision of Airport Services in the NYC Metropolitan Area

13. By virtue of the fact that the Port Authority contr ols all three major airports in the New York City metropolitan area (LGA, JFK and EWR) as well as two smaller area airports (SWF and TET), it is a de facto monopolist in the provision of airport services in the New York City metropolitan area. E xhibit 3 shows the location and average scheduled daily departures in 2014 by all c ommercial passenger airlines (both domestic and foreign) at each of the main air ports in the NYC metropolitan

area. 12

E XHIBIT 3: A VERAGE D AILY S CHEDULED D EPARTURES BY C OMMERCIAL P ASSENGER

A IRLINES AT NYC M ETROPOLITAN A REA A IRPORTS , 2014

14. Given the proximity of LGA, EWR and JFK airports to one another and to the central core of New York City, these three airports are substitutes for many passengers wanting to travel by air to and from the NYC metropolitan area. Consequently, it should come as no surprise that mo st government agencies,

12 Teterboro airport, which is also controlled by the Port Authority is currently used only for general aviation and thus had no scheduled commercial passe nger flights in 2014.11 including the U.S. DOT, 13 U.S. Department of Justice (“DOJ”) 14 and U.S. Government Accountability Office (“GAO”) 15 have frequently grouped the three into a single market when conducting competition an alyses.

15. The substitutability among the three largest airpor ts in the NYC metropolitan area (all of which are Port Authority controlled) for ma ny passengers is also confirmed by an examination of United’s frequent flyer plan ( “Mileage Plus”) data. Exhibit 4 shows the number of Mileage Plus members by zip cod e who flew to/from EWR at least once during the year ending June 30, 2014 and illustrates that a substantial number of Mileage Plus members use EWR despite the fact that their zip codes are closer (or equal distance) to LGA and JFK than to E WR. The implication of this behavior is clear: airlines at EWR, LGA and JFK co mpete with one another for many of the same passengers.

13 See , for example, The Low-Fare Evolution, Part II –Third Quarter 2002
, U.S. Department of Transportation, Office of Aviation and Internationa l Affairs, Aviation Analysis Domestic Aviation Competition Issue Brief Number 19, Appendix A, trea ting EWR, JFK and LGA as one of their “Composite Cities”.

14 See , for example, Public Comments of the Department of Justice on the Show Cause Order, Joint Application of Air Canada, The Austrian Group, Brit ish Midland Airways Ltd, Continental Airlines, Inc.
, Deutsche Lufthansa Ag, Polskie Linie Lotniecze Lot S.A., Scandinavian Airlines System, Swiss International Air Lines Ltd., Tap Air Portugal, Uni ted Air Lines, Inc. to Amend Order 2007-2-16 under 49 U.S.C. §§ 41308 and 41309 so as to Approve and Conf er Antitrust Immunity, Docket OST-2008-0234, (June 26, 2009), noting that DOJ “agree[d] with th e [DOT] Order that the competitive structure of transborder routes is very similar to U.S. domestic routes” (page 27) and that “[t]he New YorkMontreal/Toronto markets are currently served by fo ur carriers on a non-stop basis – American [from LG A and JFK], Delta [from JFK] and the two Applicants [ from EWR].” (footnote 71).

15 See , for example, “AIRLINE MERGERS: Issues Raised by the Proposed Merger of United and Continental Airlines”, U.S. GAO, May 27, 2010, at f ootnote 22: “It is generally preferable, time permitting, to assess city-pair, rather than airpor t-pair, changes in competition. Some larger U.S. c ities (New York, Chicago, Los Angeles, Washington D.C.) h ave more than one commercial airport that can compete for passenger traffic.”12

E XHIBIT 4: N UMBER OF U NITED ’ S M ILEAGE P LUS M EMBERS WHO U SE EWR BY Z IP C ODE

16. Because of the commercial importance for airlines o f providing service to the NYC metropolitan area and the paucity of viable air port alternatives, airlines have no choice but to deal with the Port Authority. Lar ge network carriers with hubs in the NYC metropolitan area, in particular, must do business with the Port Authority because, given the required proximity to traffic as well as the combination of runway, gate and terminal facility capacity needed to sustain a viable network of services, there are no other airports in the area t hat could serve as substitutes for EWR, JFK and LGA. 16 As shown in Exhibit 5, passenger facilities at IS P, HPN and SWF are each limited to a single terminal. Lik ewise, the runway lengths at both ISP (7,006 feet) and HPN (6,549 feet) are insu fficient to accommodate the

16 As described in Section V below, all three of the large network carriers (United, Delta and American) in addition to LCC JetBlue operate hubs in the New Yor k City metropolitan area. United currently utilizes 72 gates at EWR to support its approximately 800 avera ge daily operations (take-offs and landings) at tha t airport during peak months. Source: OAG, FY 2014 and United Airlines.13 widebody aircraft types typically used for long-hau l international flights. 17 Simply put, JFK, EWR and LGA—all Port Authority controlled —are the only airports in the NYC metropolitan area that have sufficient faci lities to sustain the hubbing operations by United or the other large network car riers.

E XHIBIT 5: F ACILITIES AT NYC M ETROPOLITAN A REA A IRPORTS

17. Because of their central location within the NYC me tropolitan area as well as their capacity (in terms of runways, terminals, gates, et c.), the three largest Port Authority airports account for the overwhelming maj ority of passengers traveling to and from the NYC metropolitan area. As shown in Exhibit 6, airports controlled by the Port Authority account for 96.1% of O&D pass engers traveling to/from the New York City metropolitan area. 18

17 At maximum takeoff weight, a Boeing 777-200 requir es a runway of approximately 11,000 feet (at sea level) to take off. See http://www.boeing.com/assets/pdf/commercial/airport s/acaps/7772sec3.pdf . LGA’s runway length of approximately 7,000 feet does not constrain the types of aircraft airlines would want to fly to/from that airport in light the FAA’s so-call ed “perimeter rule” that restricts flights to/from that airport (with a small handful of exceptions) to less than 1 ,500 miles. Although SWF has a runway of sufficien t length (11,817 feet) to support the widebody aircra ft used by U.S. carriers on long-haul international flights, it only has seven gates.

18 The percentages in Exhibit 6 actually understate the share of total O&D passengers that use Port Authority airports. This is because the U.S. DOT D B1B data does not include itineraries that do not h ave at least one segment operated by a U.S. carrier.

Sources: flightstats.com, globalair.com, ifly.com, macarthurairport.com, PANYNJ.gov. * Controlled by Port Authority. **Airport Number of Passenger** 

**Terminals Number of Gates**  **Maximum Runway Length (ft)**  JFK* 6 111 14,511 EWR* 3 109 11,000 LGA* 4 78 7,003 ISP 1 16 7,006 HPN 1 6 6,549 SWF* 1 7 11,81714

E XHIBIT 6: 96.1% OF O&D P ASSENGERS (D OMESTIC AND I NTERNATIONAL ) T RAVELING TO / FROM THE NYC M ETROPOLITAN A REA U SE A IRPORTS C ONTROLLED BY THE P ORT A UTHORITY

18. Likewise, Exhibit 7 shows that airports controlled by the Port Authority have a dominant share of commercial passenger airline depa rtures. Airports controlled by the Port Authority account for 96.1% of all commerc ial passenger flights from the NYC metropolitan area.15

E XHIBIT 7: 96.1% OF A LL C OMMERCIAL P ASSENGER A IRLINE D EPARTURES (D OMESTIC AND I NTERNATIONAL ) IN THE NYC M ETROPOLITAN A REA ARE FROM

A IRPORTS C ONTROLLED BY THE P ORT A UTHORITY

19. In sum, the Port Authority is a de facto monopolist in the provision of airport facilities in the NYC metropolitan area. As a resu lt, airlines seeking to provide service to passengers traveling to/from the NYC met ropolitan have no viable alternative to dealing with the Port Authority. Mo reover, there is no realistic prospect for entry of new airport facilities indepe ndent of the Port Authority into the market for airport facilities in the NYC metrop olitan area particularly at the scale that would be required for a large network ca rrier such as United to relocate its hub from EWR. Consequently, the Port Authority has monopoly power vis-àvis airlines that serve EWR (as well as LGA and JFK ).16



## IV. M ONOPOLY 

## P OWER HAS 

## E NABLED THE 

## P ORT 

## A UTHORITY TO 

## I MPOSE 

## L ANDING 

## F EES AT 

## EWR THAT ARE THE 

## H IGHEST IN THE 

## C OUNTRY AND 

## G ENERATE 

## H UGE 

## P ROFITS FOR THE 

## P ORT 

## A UTHORITY

20. Landing fees at EWR are the highest in country. As shown in Exhibit 8, landing fees for a Boeing 737-800 at EWR are more than doub le the landing fees at comparably sized airports in other cities such as S an Francisco International (“SFO”) or Boston Logan International (“BOS”), both of which also have limited geographic footprints for expansion and are located in a metropolitan area with a high cost of living.

E XHIBIT 8: 737-800 L ANDING /T AKE - OFF F EES AT M AJOR U.S. A IRPORTS , 2013

21. The high fees at EWR do not appear to be cost-justi fied. It is well-understood that prices for the factors of production required to op erate and maintain an airport (labor, land, construction, etc.) tend to be higher in the NYC metropolitan area than in most other parts of the country, yet the Po rt Authority charges lower landing fees at JFK and LGA ( substantially lower in the case of JFK ) than it does $981

$684 $673 $663 $658 $565 $527 $515 $437 $386 $257 $120 $1,722

$1,358

$1,086

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000

EWR LGA JFK ORD DEN BOS LAX SFO IAD DCA PHL IAH DFW MIA ATL

Non-Port Authority Airports Port Authority Airports

Sources: Boeing.com, United Airlines. Notes: All landing fees are calculated by taking th e product of the airport fee per 1,000 lbs. reporte d in the Complaint of United Airlines and the aircraft’s Maximum Landing Weight (MLW). The MLW is 146,300 lbs.17 at EWR notwithstanding the fact that the Port Autho rity’s cost per enplanement (“CPE”) at EWR ($33.66) is 10% lower than the CPE at JFK ($37.20). 19

22. The Port Authority earns revenues substantially in excess of its costs at all three airports. In 2013, for example, the Port Authority had net income of $19 million, $170 million and $177 million at LGA, JFK and EWR, respectively. 20 Moreover, although the absolute dollar profits at EWR and JFK were similar in 2013, JFK handled 50% more passengers and twice as much cargo as did EWR that year. 21 Consequently, the Port Authority’s profit per passe nger at EWR in 2013 was 49% higher than at JFK (and seven times higher than at LGA), as shown in Exhibit 9.

E XHIBIT 9: P ORT A UTHORITY P ROFIT PER P ASSENGER AT EWR, JFK AND LGA, 2009-2013

19 Source: FAA CATS database, 2013. The FAA’s airpo rt financial reports are contained in the Compliance Activity Tracking System, commonly refer red to as “CATS”. Landing fees are not airports’ only source of revenue. For example, airports also receive revenue from rentals and non-aeronautical users (concessions, car rentals, etc.).

20 Source: The Port Authority of NY & NJ Financial S tatements and Appended Notes for the Year ended December 31, 2013, at page 90. Moreover, 2013 did not represent an abnormal year in terms of the Port Authority’s profitability at these airports. For e xample, in 2012, the Port Authority earned a combin ed profit of $400 million from EWR, JFK and LGA. Sour ce: Ibid.

21 Source: The Port Authority of NY & NJ Financial St atements and Appended Notes for the Year ended December 31, 2013, at page 92. Sources: Port Authority 2009-2013 Annual Financial St atements, Port Authority 2013 Annual Traffic Report. Notes: “Profits” are defined on the Port Authority financial statements as “income from operations” min us “interest & other expenses” plus “PFCs Grants & O ther”. Passengers are the total of domestic, Puerto Rico, C anada, Bermuda & Caribbean, Mexico, Latin America, T rans-Atlantic, and Trans-Pacific.

$5.30

$4.63 $5.17 $5.26 $5.05

$3.69 $4.03

$2.75 $3.86 $3.38

$2.00 $1.77
$1.22 $1.20 $0.72

$0 $1 $2 $3 $4 $5 $6

2009 2010 2011 2012 2013 EWR JFK LGA18

23. The Port Authority’s ability to charges prices well in excess of its costs (thereby earning high profits, particularly at EWR) is a dir ect result of the fact that it enjoys a monopoly position for the provision of airport fa cilities in the New York City metropolitan area. The Port Authority’s average pr ofit margin at EWR over the past five years (i.e., 2009-2013) has exceeded Unit ed Airlines’ system-wide net profit margin by a factor of nearly ten.

E XHIBIT 10: P ORT A UTHORITY “P ROFIT ” M ARGIN AT EWR VS . U NITED A IR L INES

N ET P ROFIT M ARGIN : 2009 TO 2013 22

24. Unlike most other U.S. airport operators, the Port Authority’s portfolio of assets extends well beyond the six airports it operates. For example, in addition to operating JFK, LGA, EWR, SWF, TET, and Atlantic Cit y Airport (“ACY”), the Port Authority also operates the World Trade Center and manages a large amount of transportation infrastructure (including the Lin coln Tunnel and the George Washington Bridge), as well as substantial seaport facilities throughout the region. And there is clear evidence that the Port Authority has been diverting a substantial

22 The Port Authority’s “profit” margins at JFK and L GA averaged 16.1% and 10.3%, respectively, substantially lower than its margin at EWR over thi s period (i.e. 2009-2013). Source: Port Authority Annual Financial Reports, 2009-2013.

24.2%

20.5% 22.5% 22.9% 22.1%

-0.8% 4.6% 3.9% 1.6% 2.9%

-5% 0% 5% 10% 15% 20% 25% 30%

2009 2010 2011 2012 2013

Port Authority EWR Profit Margin United Airlines Net Profit Margin

Sources: United Airlines Q4 Earnings Reports 2010-2 013, Port Authority Annual Financial Reports 2009-2 013. Note: Profit margin is the ratio of Net Income to R evenues. United Airlines’ net income excludes spec ial charges. United Airlines’ profit margins in 200 9 and 2010 reflect Pro Forma consolidated results for UAL and Continental Airlin es.19 portion of the excess revenues it earns from EWR to non-aeronautical uses. For example, in 2012, a Port Authority consultant repor ted that “Over the past five years, the Aviation line department has been the on ly positive free cash flow contributor to the Port Authority.” 23 Likewise, as shown in Exhibit 11, between 2009 and 2013, the Port Authority generated positiv e free cash flows of $3.4 billion from its airport operations, while generati ng $8.1 billion in negative cash flows on its non-airport related projects.

E XHIBIT 11: P ORT A UTHORITY A NNUAL C ASH F LOWS BY O PERATING S EGMENT , 2009-2013

25. Simply put, the Port Authority has been using the e xcess profits generated by the exceedingly high landing fees at EWR (and to a less er extent, JFK) to fund nonairport related projects. 24 Moreover, the ability of the Port Authority to ef fectively

23 Navigant, Phase II Report to the Special Committee of the Port Authority of New York and New Jersey, September 2012, at page 5.

24 See Mitchell L. Moss and Hugh O’Neill, “A Port Authori ty that Works,” NYU Wagner Rudin Center for Transportation Policy and Management, March 2014, p age 6 “[T]he Port Authority has, year by year, become more reliant on the revenues generated by it s money –making facilities – its network of interst ate bridges and tunnels, most notably the George Washin gton Bridge, and John F. Kennedy, LaGuardia and Newark Liberty airports – to subsidize the operatio n of, and investment in, those that can’t cover the ir costs, and to help finance state capital projects t hat provide no return to the Port Authority.”

Source: Port Authority 2009-2013 Annual Financial S tatements. Notes: “Free Cash Flow” are defined as “net income ” plus “interest grant & other expenses” plus “depr eciation and amortization” less “net capital expend iture.” See Navigant, “Phase II Report to the Special Committee of the Port Authority of New York and New Jersey,” September 2012 at page 14.

$366 $592 $865 $811 $774

$(1,096)

$(1,826) $(2,054) $(1,472) $(1,660)

-$2,500 -$2,000 -$1,500 -$1,000 -$500 $0 $500 $1,000 $1,500

2009 2010 2011 2012 2013Millions

Air Terminal Free Cash Non-Air Terminal Port Authority Free Cash20 force airlines—particularly those using EWR—to subs idize the Authority’s nonairport related projects is indicative of its monop oly power over airlines in the NYC metropolitan area.



## V. U NREASONABLY 

## H IGH 

## A IRPORT 

## C OSTS FOR 

## A IRLINES AT 

## EWR P UT 

## U NITED AT A 

## C OMPETITIVE 

## D ISADVANTAGE VS


## . O THER 

## U.S. C ARRIERS

26. Because of the size and economic significance of th e NYC metropolitan area, 25 every significant U.S. airline provides service to one or more of the area’s airports, and all three U.S. large network carriers plus JetB lue operate hubs in the NYC metropolitan area: United at EWR, American at JFK, Delta at both JFK and LGA, 26 and JetBlue at JFK. Multiple hubs in the NYC area result in vigorous competition among these (and other) carriers for bo th passengers traveling to/from the NYC metropolitan area as well as the millions o f passengers each year who make connections at EWR, JFK or LGA en route to the ir final destinations. 27
Exhibit 12 shows the number of destinations served non-stop from the NYC metropolitan area by each of the four airlines oper ating a NYC-area hub.

25 See Exhibit 1 and Exhibit 2 above.

26 In 2014, Delta offered an average of 169 daily dep artures to 108 destinations from JFK and 236 daily departures to 73 destinations from LGA. Source: O AG.

27 As noted in Exhibit 1 above, there were over 57 mi llion domestic O&D passengers traveling to/from the NYC metropolitan area in 2013, accounting for over $12 billion in revenues for U.S. carriers.21

E XHIBIT 12: N UMBER OF N ON -S TOP D ESTINATIONS S ERVED FROM EWR, LGA AND JFK, 2014

27. Given the size of the NYC metropolitan area market for both domestic and
international air travel and the fact that it has b ecome a focal point in the respective networks of United, 28 Delta, 29 American 30 and JetBlue, 31 it should come as no surprise that each of these carriers generates a su bstantial proportion of its total

28 See, for example, Impacts of Continental Airlines Operations on the N ew York-New Jersey Regional Economy , NERA Economic Consulting, November 2009. United and Continental merged in 2010.

29 See , for example, Delta’s 2013-Q3 Earnings Conference Call: “If you look at the New York market, it is a huge market. And what we've been able to do at La Guardia has been pretty remarkable in terms of turning that to a fully-allocated profitable busine ss.”

30 See , AMR 2014 Form 10-K, page 53: “The Company has pri mary hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York Cit y, Philadelphia, Phoenix and Washington, D.C.”

31 JetBlue is headquartered in New York City and has trademarked the term “New York’s Hometown Airline”. Source: OAG, 2014. Notes: Includes destinations served from JFK, EWR, and LGA 10 or more times during the year. 76 57

24 22 103

84

45 43 179

141

69 65

0 20 40 60 80 100 120 140 160 180 200

United Delta American JetBlue
International Domestic22 passenger revenues from traffic traveling to or fro m the NYC metropolitan area.
This is shown in Exhibit 13. 32

E XHIBIT 13: P ERCENTAGE OF C ARRIERS ’ P ASSENGER R EVENUE G ENERATED BY

T RAFFIC T RAVELING TO / FROM NYC

A. United is Uniquely Exposed to the Port Authority’s Excessively High Access Charges at EWR

28. As the Port Authority itself has acknowledged, the NYC “metropolitan area is served by a single airport system operated by the P ort Authority to serve one travel region. ... The market area of one airport overlaps the market areas of others so that air service at one of the Port Authority airpo rts competes with the air service of one or more other airports.” 33 Likewise, from an airline perspective United’s

32 Including passengers connecting at New York raises the share of revenue generated to 54% for JetBlue, 27% for United, 19% for Delta, and 17% for American

. 33 The Port Authority noted that “The New York / New Jersey metropolitan area airport system includes LGA, John F. Kennedy International Airport (“JFK”), Newark Liberty International Airport (“EWR”), and Teterboro Airport. TEB is solely a General Aviation airport.” See In the matter of Petition for Waiver of the Terms of the Order Limiting Scheduled Operation s at LaGuardia Airport. DOCKET NO. FAA-2010- 0109. Comment of the Port Authority of New York an d New Jersey at page 3.

Source: US DOT DB1B, FY2013. Note: Includes both domestic and international pass engers. 

### 50.2%

18.4% 14.9% 14.3%

0% 10% 20% 30% 40% 50% 60%

JetBlue United Delta American23 EWR services compete with other airlines whose serv ices operate from JFK and/or LGA. And because LGA, JFK and EWR are owned by a s ingle entity, there are no competitive forces to constrain the Port Authority’ s ability to charge excessively high landing fees. In the present case United is u niquely harmed by the excessively high landing fees charged by the Port A uthority at EWR. This is
because United is the only U.S. carrier that focuses its NYC metropolitan area operations at EWR. Consequently, and as shown in E xhibit 14, 87.1% of United’s flight operations in the NYC area are at EWR, compa red to only 5.7% for Delta,
11.5% for American and 9.8% for JetBlue.

E XHIBIT 14: P ERCENTAGE OF NYC M ETROPOLITAN A REA D EPARTURES BY A IRPORT , 2014

29. In industries that are not characterized by monopol y suppliers of key inputs of production, firms can respond to differential input costs by switching from one supplier to another. In the case of the excessivel y highly landing fees set by the Port Authority at EWR, however, United cannot simpl y switch to the other NYC24 area airports to take advantage of the lower landin g fees at those airports. This is because all three major NYC area airports (EWR, JFK and LGA) are subject to “slot-controls” that limit the number of operations (i.e., takeoffs and landings) that can be performed each hour so as to prevent excessi ve congestion and delays. 34 And since JFK and LGA are already effectively opera ting at capacity, it would be impossible for United to shift its hub operations i n the NYC metropolitan area to either JFK or LGA without Delta, American and/or Je tBlue leaving those airports. 35

B. As a Result of the Port Authority’s Excessively Hig h Landing Fees at EWR, United is Competitively Disadvantaged vis-à-vi s Other U.S. Airlines

30. Exhibit 15 shows that for a typical domestic flight operated using a 737-800, the landing fee per enplaned passenger 36 at EWR is 75% higher than at JFK and 38% higher than at LGA. Because United has no practica l alternative to EWR for its hub in the NYC metropolitan area, it has no choice but to pay the excessive fees the Port Authority charges for access to EWR, even though these fees put United at a disadvantage vis-à-vis other carriers—particularl y Delta, American and
JetBlue 37 —that are competing for many of the same passengers via their hubs at
JFK and/or LGA. 38

34 These slot constraints are in effect between 6:00 AM and 10:59 PM each day of the week at EWR and JFK, and at LGA between 6:00 AM and 9:59 PM Monday- Friday, and 12:00 PM and 9:59 PM SaturdaySunday. Source: Slot Controlled Airports: FAA’s Rul es Could be Improved to Enhance Competition and Use of Available Capacity, United States Government Accountability Office, Report to the Subcommittee on Commerce, Science, and Transportation, U.S. Sena te, September 2012, page 10.

35 Moreover, as discussed above, it would be impossib le for United to switch its EWR hub operations to any of the other NYC metropolitan area airports due to the lack of adequate terminal, gate and runway facilities.

36 An enplaned passenger counts each passenger on eac h flight separately.

37 In addition to JetBlue, United competes with other LCCs that serve JFK and LGA, including Southwest, Virgin America, Frontier and Sun Country, as well a s a host of foreign carriers that use JFK.

38 United’s services at LGA are limited to an average of 37 daily flights to its other hubs in Chicago, Denver, Washington, Houston, and Cleveland, while i ts services from JFK are limited to an average of 1 7 daily flights to Washington, Los Angeles and San F rancisco. In contrast, from EWR, United operate an average of 380 daily flights to 176 destinations wo rldwide. Source: OAG.25

E XHIBIT 15: L ANDING F EES PER E NPLANED P ASSENGER AT EWR, LGA, AND JFK (B ASED ON 737-800 WITH 154 S EATS AND AN 80% L OAD F ACTOR )

31. Similarly, Exhibit 16 shows that for a typical long -haul international flight operated using a 777-200, the landing fee per enpla ned passenger at EWR is 75% higher than from JFK. 39 This puts United at a competitive disadvantage vi s-à-vis Delta, American, and a variety of foreign carriers that use JFK as the base of their long-haul international services to/from the NYC me tropolitan area. 40

39 As noted earlier, the perimeter rule and runway le ngths at LGA prevents carriers from operating longhaul international flights from that airport.

40 In fact, if the Port Authority charged the same la nding fees at EWR as it does at JFK, United would p ay approximately $81 million less in landing fees in 2 014. Sources: IATA and OAG. Source: United Airlines. Note: Cost per passenger calculated based on Boein g 737-800 with 174,200 lbs. take-off weight, 154 s eats and 80% load factor.

$13.98

$11.02

$7.97

$0 $2 $4 $6 $8 $10 $12 $14 $16

EWR LGA JFK26

E XHIBIT 16: L ANDING F EES PER N ON - STOP I NTERNATIONAL E NPLANED P ASSENGER AT EWR AND JFK (B ASED ON 777-200 WITH 266 S EATS AND AN 80% L OAD F ACTOR )

32. Because Delta, American and JetBlue each operate hu bs at NYC airports with lower costs than EWR, the scope of competitive harm is far reaching. As shown in Exhibit 17, there are more than 100 destinations worldwide that United serves from the NYC metropolitan area exclusively from EWR in competition with U.S. carriers serving the same destinations from JFK and /or LGA. 41

41 Exhibit 17 excludes the destinations United also s erves from either LGA or JFK (i.e., Houston, Chicag o, Washington, Cleveland, Los Angeles, San Francisco a nd Denver). Source: United Airlines. Note: Cost per passenger calculated based on Boein g 777-200 with 545,000 lbs. take-off weight, 266 s eats and 80% load factor. $24.61

$14.03

$0 $5 $10 $15 $20 $25 $30

EWR JFK27

E XHIBIT 17: D ESTINATIONS S ERVED BY U NITED FROM THE NYC M ETROPOLITAN A REA E XCLUSIVELY FROM EWR THAT A RE S ERVED BY O THER U.S. C ARRIERS FROM JFK AND / OR LGA

33. The cost disadvantage United confronts because it o perates its NYC area hub at EWR is magnified for passengers making connections, since for each round-trip passenger United connects via EWR, United is effect ively required pay the Port Authority’s landing fees per passenger twice (once on their outbound flight and again when they return to their destination). This is particularly relevant in light of the fact that United competes with both American an d Delta (as well as a host of foreign carriers) for many of the same internationa l connecting passengers that use the NYC metropolitan area (i.e., EWR or JFK) as the ir connecting gateway. For example, as shown in Exhibit 18, a substantial prop ortion (26% overall) of all transoceanic international connecting passengers or iginating from or destined to points in the eastern U.S. use either EWR or JFK as their international gateway.28

E XHIBIT 18: P ROPORTION OF U.S. C ARRIER I NTERNATIONAL C ONNECTING T RAFFIC FROM THE E ASTERN U.S. C ONNECTING THROUGH E ITHER JFK OR EWR

34. Thus, because United (via EWR) competes directly wi th American and Delta (via JFK) for many of the same transoceanic connecting p assengers who use a NYC metropolitan airport as their connecting point, 42 the substantially higher costs imposed by the Port Authority at EWR vis-à-vis JFK (which are magnified for connecting passengers as mentioned above) put Unite d at a further competitive disadvantage.

42 For example, in 2013, United carried approximately 2.6 million passengers that made a connection to a transoceanic flight at EWR, whereas American and De lta carried 0.6 million and 1.3 million passengers, respectively, who made a connection to transoceanic flight at JFK. Source: U.S. DOT DB1B.29



## VI. C ONCLUSIONS

35. The Port Authority’s control of the three major com mercial airports serving the NYC metropolitan area provides it with what is effe ctively a monopoly in the provision of commercial airport services in the NYC metropolitan area. Because the NYC metropolitan area is the largest U.S. O&D a irline market, all three of the large network carriers (plus LCC JetBlue) operate o ne or more hubs there. United and the other carriers that operate hubs in the NYC metropolitan area have no alternative to the Port Authority’s facilities beca use there are no other airports in the NYC metropolitan area with the capacity to serv e as a hub. Moreover, the “slot-constraints” that limit operations at JFK, LG A and EWR enhance the Port Authority’s market power by preventing United from relocating its hub from the Port Authority’s highest cost airport (i.e., EWR) t o its relatively lower cost airports (i.e., JFK or LGA).

36. Because United’s operations in the NYC metropolitan area are concentrated at its EWR hub, the excessive landing fees at EWR place Un ited at a competitive disadvantage vis-à-vis American, Delta, JetBlue and other carriers that service the NYC metropolitan area market principally with opera tions at JFK or LGA. These excessive landing fees also allow the Port Authorit y to collect revenues at EWR that are well above its costs and generate hundreds of millions of dollars in free cash flows that the Port Authority uses to fund its non-aviation related activities.

## A PPENDIX 

## A: C URRICULUM 

## V ITAE OF 

## D ANIEL 

## M. K ASPER

O FFICE : Compass Lexecon

200 State Street 9 th Floor Boston, MA 02109 (617) 520-0260 E-mail: dkasper@compasslexecon.com

P ROFESSIONAL E XPERIENCE : Compass Lexecon, Boston, MA Senior Consultant , March 2011-Present Mr. Kasper’s practice focuses on economic, financia l, labor, regulatory and competition policy issues in the transportation industries. Mr . Kasper’s consulting clients have included most major U.S. airlines, several foreign airlines, the Air Transport Association, the American Association of Railroads, among others . In addition to consulting, Mr. Kasper is an experienced expert witness who has tes tified in numerous matters in the U.S. and Canada. His expert testimony includes matters b efore legislative bodies (U.S. and Canada), U.S. Executive Agencies (U.S. Department o f Transportation, U.S. Department of Labor, National Mediation Board), Presidential E mergency Boards, arbitration panels, and courts in the United States and Canada on a ran ge of transportation industry economic issues.

P REVIOUS P ROFESSIONAL E XPERIENCE : November 1997-February 2011: Managing Director & Head of the Transportation Practice , Cambridge, MA Office, LECG (formerly, The Law & E conomics Consulting Group) Mr. Kasper was the founding director of LECG’s Camb ridge office and head of the firm’s transportation practice. LECG was a leading provider of expertise to domestic and international clients in complex matte rs involving economics, finance and accounting.

1993-1997: Partner and Chairman, Transportation Industry Progr am , COOPERS & LYBRAND CONSULTING Mr. Kasper joined Coopers & Lybrand in 1993 (when C &L acquired Harbridge House, Inc.). He headed C&L’s Transportation Indust ry Program and directed a number of engagements involving domestic and intern ational transportation clients in both the private and public sectors including ma jor airlines, railroads (AMTRAK, the MBTA), airports, and turnpike authorit ies in Massachusetts andii

New Jersey. He also led a Congressionally-mandated review of the Federal Aviation Administration's performance and financial requirements.

1993: Member, National Commission to Ensure a Strong and Competitive Airline Industry In 1993, Mr. Kasper was appointed as one of fifteen voting members of the U.S. National Airline Commission, which was created by a n act of Congress to assess the causes and potential cures for the economic tro ubles then plaguing the U.S. airline industry. After conducting extensive public hearings and analyses, the Commission submitted its Report and recommendations to the President and Congress in September of 1993. These recommendation s included a number of proposed changes in Federal regulatory policy.

1983-1993: Vice President and Corporate Director, HABRIDGE HOUSE, Inc. Mr. Kasper managed the firm’s transportation practi ce and was responsible for a wide array of projects involving domestic and inter national transportation issues affecting every mode of transportation. His client s included the U.S. Secretary of Transportation (assistance in preparing the Nationa l Transportation Policy Statement including analyses of issues affecting al l transport modes) and the Office of the Secretary of Defense (analysis of the Civil Reserve Air Fleet Program).

1979-1983: UNITED STATES CIVIL AERONAUTICS BOARD Director of International Aviation : Mr. Kasper served as Director of International Aviation, the Board’s primary advisor and chief lin e officer for all matters involving international aviation. Mr. Kasper freq uently represented the Board at sub-Cabinet meetings and on inter-agency working gr oups responsible for developing trade sanctions and other responses to i nternational aviation disputes.

1976-1981: Faculty, HARVARD BUSINESS SCHOOL While on the faculty of the Harvard Business School , Mr. Kasper focused on the impact of alternative forms of government regulatio n on the management and performance of business organizations and on the st udy of national economic policies and strategies. Mr. Kasper authored a num ber of case studies and articles on various aspects of the transportation and teleco mmunication industries. While at Harvard, Mr. Kasper was also a member and active participant in the Harvard Regulatory Reform Project conducted under t he auspices of the Kennedy School of Government. He also consulted with firms in the telecommunications and computer industries to help them anticipate and prepare for the impact of telecommunications deregulation on their businesses

.

1971-1976: Faculty , UNIV. OF SOUTHERN CALIFORNIA SCHOOL OF BUSINESS ADMINISTRATIONiii

While at USC, Mr. Kasper developed, administered an d taught courses dealing with the control of business activities by means of dire ct government regulation, the enforcement of private contracts, and through the u se of tort law. His research focused on the regulation of transportation, teleco mmunications industries and workplace safety. He also served as a member of th e Faculty Senate.

E DUCATION : Bachelor of Arts, Political Science, University of Kansas Masters in Business Administration, University of C hicago Juris Doctorate, University of Chicago

TESTIMONY SINCE SEPTEMBER 2006

US Airways, Inc., v. Sabre Holdings Corporation; Sa bre Inc.; and Sabre Travel International, Limited. Expert Report regarding the evolution of Global Dis tribution Systems. The United States District Court for the District of Ne w York, Civil Action No. 1:11- cv-02725-MGC.

United States of America, et al. v. US Airways Group, Inc., et al

. Expert Report regarding proposed merger of American Airlines and US Airways. The United States District Court for the District o f Columbia, Civil Action No. 13-1236, 2013.

In re: Pinnacle Airlines Corp., et al ., Debtors. Expert Declaration, deposition and trial testimony regarding airline industry economics, finance and competition. The United Stat es Bankruptcy Court for the Southern District of New York, Chapter 11, Case No. 12-11343 (REG), 2012.

In re: AMR, Corporation, et al ., Debtors. Expert Declaration, deposition and trial testimony in regarding airline industry economics, finance and competition. The United Stat es Bankruptcy Court for the Southern District of New York, Chapter 11, Case No. 11-15463 (SHL), 2012.

Air Transport Association of America, Inc. v. Expor t-Import Bank of the United Statesiv Expert Declaration and Supplemental Declaration reg arding impact of subsidized financing for foreign carriers on U.S. airline comp etitiveness and employment. United States District Court For the District of Co lumbia, Civil Action No. 11-cv2024, November-December 2011.

Horizon Airlines vs. International Brotherhood of T eamsters, Local 1224 Expert testimony before Ira F. Jaffe, Independent A rbitrator, In the Matter of the Interest Arbitration Between International Brotherh ood of Teamsters, Local 1224 and Horizon Air Industries, Inc. Seattle WA, Septe mber 2011.

United Technologies vs. Rolls Royce Expert Report in the Matter of Certain Turbomachine ry Blades, Engines and Components Thereof, United States International Tra de Commission Investigation No. 337-TA-751, June 24, 2011.

Atlas Air Inc. and Polar Air Cargo, Inc. vs. Intern ational Brotherhood of Teamsters, Airline Division Expert testimony before Richard Kasher, Independent Arbitrator, In the Matter of the Interest Arbitration Between Atlas Air Inc. and Polar Air Cargo, Inc. and the International Brotherhood of Teamsters, Airline Div ision. Washington, D.C., December 2010.

Delta/AirTran Baggage Fee Antitrust Litigation Class Certification Expert reports and deposition t estimony in Delta/AirTran Baggage Fee Antitrust Litigation, Civil Action File Number 1:09, md-2089-TCB, United States District Court, Northern District of Georgia, Atlanta Division, 2010-2011.

Allied Pilots Association vs. American Airlines, In c. Expert analysis and arbitration testimony regarding economics of international codesharing and alliances. Grievance No.P-47-08. H ill Presidential: Joint Business Agreement, June 2009.

Northwest Airlines, Inc., vs. Association of Flight Attendants, CWA. Expert analysis and arbitration testimony regarding the value of certain scope clause changes to the Northwest-Air Line Pilots Ass ociation (ALPA) collective bargaining agreement, April 2009.v

Midwest Airlines, Inc. vs. Air Line Pilots Associat ion and Association of Flight Attendants, CWA. Expert analysis and arbitration testimony regarding use of regional codeshare partners in U.S. airline industry, November 2008 an d December 2009.

United Air Lines, Inc. vs. Lisa Stout, individually and the marital community comprised of Lisa and Ray C. Stout Expert report and deposition testimony regarding po tential economic damages resulting from termination of employment. United S tates District Court, Western District of Washington at Seattle, Civil Action No. CV07-3682-JCC. March 2009.

United Air Lines, Inc vs. Air Line Pilots Associati on Expert report (with Darin N. Lee) and testimony reg arding impact of pilot job actions. United States District Court, Northern Di strict of Illinois, Eastern Division, September 2008.

Innovative Solutions and Support, Inc. vs. J2, Jose ph Caesar, James Zachary, Zachary Technologies, Inc and Kollsman, Inc. Expert report and testimony regarding damages arisi ng from alleged misappropriation of intellectual property contained in aircraft components. United States District Court, Western District of Tennesse e Western Division, Case No: 05-2665-MIP. July 2007.

Alaska Airlines, Inc., et al v. Los Angeles World A irports, et al Expert analysis of economic claims arising in a dis pute over rates and charges imposed or airport tenants by Los Angeles World Air ports. U.S. DOT, DocketOST-2007-27331, February 16, 2007. City of Baton Rouge et al vs. American Home Assuran ce Company And J. Calderera & Company, Inc. Expert analysis of claim for damages arising from d elays in completion of an airport terminal project. January 2007. District19 th Judicial District Court, Number 493,788 Div: “D” State of Louisiana, January 2007.

Comments on Proposed Operating Limits at New York L aGuardia Airport Written comments on proposed operating limits at LG A. FAA Docket No. 2006- 25709, December 2006 and June 2008 (with Darin N. L ee).

Comments on Notice of Proposed Rulemaking Congestio n Management for John F. Kennedy International Airport And Newark Liberty In ternational Airportvi

Written comments (with Darin N. Lee) on proposed ch anges in operating limits and slot allocations at JFK and EWR Docket No. FAA-200 8-0517, July 2008.

In Re Delta Air Lines, Inc. et al., Bankruptcy Liti gation Expert analysis and trial testimony regarding airli ne industry economics, finance and competition. The United States Bankruptcy Court for the Southern District of New York, Chapter 11 Case No. 05-17923 (PCB), 2005-2006

.
In Re Northwest Airlines, et al., Bankruptcy Litiga tion Expert analysis and trial testimony regarding airli ne industry economics, finance and competition. The United States Bankruptcy Court for the Southern District of New York, Chapter 11 Case No. 05-17930 (ALG), 2005- 2006.

BOOKS 1) Deregulation and Globalization: Liberalizing Intern ational Trade in Air Services , Ballinger Publishers, Cambridge, MA, 1988.

2) The U.S. Regional Airline Industry to 1996: Markets , Competition, and the Demand for Aircraft , The Economist Publications, London & New York, 19 87.vii



## Appendix B: List of Documents and Information Sour ces

Relied Upon

PUBLICLY AVAILABLE DATA AND DOCUMENTS
1. OAG database.
2. U.S. DOT DB1B database.
3. CATS database.
4. United Mileage Plus data, 2014.

CONFIDENTIAL DOCUMENTS
5. United Airlines Landing Fee data.

GOVERNMENT DOCUMENTS
6. “In the matter of Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia Airport,” DOCKET NO. FAA-20 10-0109, Comment of the Port Authority of New York and New Jersey, March 22, 201 0.
7. “Order 5190.6B,” U.S. Department of Transportation Federal Aviation Administration Order 5190.6B, September 30, 2009.
8. “Comments of the Federal Trade Commission Staff of the Bureau of Economics to U.S. Department of Transportation,” September 14, 1994.

BOOKS
9. Alfred Kahn, The Economics of Regulation, John Wile y & Sons, 1970, Vol. II.
10. Leonardo J. Basso and Anming Zhang, “An Interpretat ive Survey of Analytical Models of Airport Pricing”, Chapter 4, Darin Lee, Editor, Adv ances in Airline Economics, Elsevier, 2007, Volume 2.

PRESS RELEASES, NEWS ARTICLES, JOURNAL ARTICLES AND OTHER PUBLIC SOURCES
11. “Proposal for a Council Directive on Airport charge s,” 97/C 257/03, Official Journal of the European Communities , August 8, 1997.
12. “Capacity Enhancement Plan,” Federal Aviation Administration , 1998.
13. Comments of the Federal Trade Commission Staff of t he Bureau of Economics to U.S. Department of Transportation, September 14, 1994.viii

14. “The Low-Fare Evolution, Part II – Third Quarter 20 02 ,” U.S. Department of Transportation, Office of Aviation and International Affairs , Aviation Analysis Domestic Aviation Competition Issue Brief Number 19, Appendix A, 2002

. 15. “Public Comments of the Department of Justice on th e Show Cause Order, Joint Application of Air Canada, The Austrian Group, British Midland Airways Ltd, Continental Airlines, Inc., Deutsche Lufthansa Ag, Polskie Linie Lotniecze Lot S.A., Scandinavian Airlines System, Swiss International Air Lines Ltd., Tap Air Portuga l, United Air Lines, Inc. to Amend Order 2007-2-16 under 49 U.S.C. §§ 41308 and 41309 so as to Approve and Confer Antitrust Immunity,” Docket OST-2008-0234, June 26, 2009.
16. “AIRLINE MERGERS: Issues Raised by the Proposed Me rger of United and Continental Airlines”, U.S. GAO , May 27, 2010.
17. “Phase II Report to the Special Committee of the Po rt Authority of New York and New Jersey,” Navigant , September 2012.
18. Mitchell L. Moss and Hugh O’Neill, “A Port Authorit y that Works ,” NYU Wagner Rudin Center for Transportation Policy and Management , March 2014.
19. “Impacts of Continental Airlines Operations on the New York-New Jersey Regional Economy,” NERA Economic Consulting , November 2009.
20. Delta Air Lines Q3 2013 Earnings Conference Call Tr anscript, October 22, 2013.
21. “Slot Controlled Airports: FAA’s Rules Could be Imp roved to Enhance Competition and Use of Available Capacity,” United States Government Accountability Office , Report to the Subcommittee on Commerce, Science, and Transportati on, U.S. Senate, September 2012.
22. Port Authority 2013 Annual Traffic Report.

WEB PAGES
23. “3.0 Airplane Performance,” Boeing Co, July 1998, accessed September 7, 2014, http://www.boeing.com/assets/pdf/commercial/airport s/acaps/7772sec3.pdf

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U.S. SEC FILINGS
24. AMR Corporation, Form 10-K for the Fiscal Year Ende d December 31, 2013.
25. United Airlines 2013 Fourth Quarter Earnings Releas e, January 23, 2014.
26. United Airlines 2012 Fourth Quarter Earnings Releas e, January 24, 2013.
27. United Continental Holdings 2011 Fourth Quarter Ear nings Release, January 26, 2012.
28. United Continental Holdings 2010 Fourth Quarter Ear nings Release, January 26, 2011.

FINANCIAL STATEMENTSix

29. The Port Authority of NY & NJ Financial Statements and Appended Notes for the Year ended December 31, 2009.
30. The Port Authority of NY & NJ Financial Statements and Appended Notes for the Year ended December 31, 2010.
31. The Port Authority of NY & NJ Financial Statements and Appended Notes for the Year ended December 31, 2011.
32. The Port Authority of NY & NJ Financial Statements and Appended Notes for the Year ended December 31, 2012.
33. The Port Authority of NY & NJ Financial Statements and Appended Notes for the Year ended December 31, 2013.