\\DC - 036787/000001 - 3391512 v1

BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

Applications of

FRONTIER AIRLINES, INC.

AIR CANADA

ALASKA AIRLINES, INC.

JETBLUE AIRWAYS CORPORATION

SUN COUNTRY AIRLINES

SOUTHWEST AIRLINES CO.

VIRGIN AMERICA INC.

For “beyond-perimeter” slot exemptions at

Ronald Reagan Washington National Airport

)

)

)

)

)

)

)

)

)

)

)

)

)

Docket DOT-OST-2012-0029

MOTION FOR LEAVE TO FILE AND

RESPONSE OF FRONTIER AIRLINES, INC.

TO SECOND UNAUTHORIZED FILING BY SOUTHWEST AIRLINES CO.

Communications with respect to this document should be addressed to:

Daniel Shurz

Senior Vice President, Commercial

FRONTIER AIRLINES, INC.

Frontier Center One

7001 Tower Road

Denver, CO 80249

Robert E. Cohn

Patrick R. Rizzi

HOGAN LOVELLS US LLP

Columbia Square

555 Thirteenth Street, NW

Washington, DC 20004

+1 202 637 4999/5659

robert.cohn@hoganlovells.com

patrick.rizzi@hoganlovells.com

Counsel for

FRONTIER AIRLINES, INC.

April 11, 2012
\\DC - 036787/000001 - 3391512 v1

BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

Applications of

FRONTIER AIRLINES, INC.

AIR CANADA

ALASKA AIRLINES, INC.

JETBLUE AIRWAYS CORPORATION

SUN COUNTRY AIRLINES

SOUTHWEST AIRLINES CO.

VIRGIN AMERICA INC.

For “beyond-perimeter” slot exemptions at

Ronald Reagan Washington National Airport

)

)

)

)

)

)

)

)

)

)

)

)

)

Docket DOT-OST-2012-0029

April 11, 2012

MOTION FOR LEAVE TO FILE AND

RESPONSE OF FRONTIER AIRLINES, INC.

TO SECOND UNAUTHORIZED FILING BY SOUTHWEST AIRLINES CO.

True to form and consistent with its sense of entitlement as the largest domestic

U.S. carrier to strive to have the last word in any DOT proceeding,1 Southwest Airlines

has once again defied the Department’s established briefing schedule by filing a

second unauthorized document.2This time, Southwest regurgitates arguments it

previously made in trying to convince the Department that (i) its wholly unrealistic fare

proposal for DCA-AUS is consistent with “its historic pricing philosophy” and (ii) nonstop

frequencies, services, and traffic at other “Washington DC Area Airports”3should be

1

See, e.g., Southwest pleadings in Dockets DOT-OST-2000-7182 and 2012-0001.

2

Frontier requests leave to file this response. If Southwest’s second unauthorized Reply is accepted by the

Department (even though it adds nothing new to the record), it is only fair to give Frontier the opportunity to respond

to Southwest’s incorrect assertions. Frontier’s brief Response will ensure that the Department has an accurate and

complete record before it and does not base its decision in this proceeding on misinformation or speculation.

3

This is the term used by Southwest itself on its website for its large hub at Baltimore/Washington

International Airport and Washington Dulles when passengers are searching for service to the Nation’s Capital.
Motion and Response of Frontier Airlines, Inc.

Page 2

\\DC - 036787/000001 - 3391512 v1

disregarded in evaluating the various competing applications. WN Second Reply at 1-

4. Southwest doth protest too much (and too often).

1. Southwest tries to defend its unrealistic estimated DCA–Austin average

fare of $169 by now claiming that “the main driver in Southwest’s pricing strategy is

distance – not the number of competitors, or the identity of competitors” and by

invoking, yet again, its use of a system-wide average fare for comparable distances.

WN Second Reply at 3 (emphasis in original). Southwest provides no evidence to

support this statement in its latest unauthorized reply, just a bald statement from its

paid consultant.4In stark contrast, Frontier and other carriers have presented

substantial evidence to the Department that shows the fallacy of the claim that only

distance and not the competitive landscape is the “main [pricing] driver” for Southwest.

Using specific city-pair examples and DOT data, Frontier and Virgin America

have demonstrated two basic points that eliminate any doubt about the unrealistic

nature of Southwest’s “estimated” fare:

First, Southwest’s average fares in markets of approximately equal stage lengths

are significantly higher where Southwest faces little to no competition than in markets

where it faces competition.

Second, Southwest’s average fares in nonstop monopoly markets of

approximately equal stage length to DCA–AUS and DCA–SAN are substantially higher

than Southwest’s estimated fares for its proposed DCA–AUS and DCA-SAN services.

4

Even Southwest’s consultant – in the excerpt quoted by Southwest – is less than definitive about

Southwest’s strategy: “Campbell-Hill expects Southwest to be more price aggressive in order to create patronage

and capture loyalty . . . .” WN Second Reply at 3 (emphasis added).
Motion and Response of Frontier Airlines, Inc.

Page 3

\\DC - 036787/000001 - 3391512 v1

See F9 Consol. Answer, Exhibit F9-A-4 (BWI-AUS); VX Consol. Comments at 29-30

(MCO-SAT, HOU-ONT, HOU-SNA, BWI-SAN, BWI-ONT, BWI-RNO); F9

Motion/Response at 6-7 (MDW-SLC, LAS-LIT, MSY-PHX, HOU-SAN, HOU-PHL, AUSBWI). In addition to these numerous examples, Frontier presents additional evidentiary

support to drive these points home covering short-haul, medium-haul, and long-haul

Southwest markets.

Short-Haul. Albuquerque-Denver (349 miles) has more than one carrier

offering competitive nonstop service, while San Jose-Orange County (342

miles) has only Southwest. The average one-way net fare in the SJCSNA market is 45% higher than the competitive ABQ-DEN market,

despite the almost identical distance.

Medium-Haul. Austin-Denver (775 miles) is not a monopoly nonstop

Southwest market, but Nashville-Ft. Lauderdale (793 miles) is. The

average one-way net fare in the BNA-FLL market is 67% higher than the

competitive AUS-DEN market, despite the almost identical distance.

Long-Haul. Hartford-Orlando (1,050 miles) is a highly competitive

nonstop market, but Boston-St. Louis (1,046 miles) is a monopoly nonstop

Southwest route. The average one-way net fare in the BOS-STL market

is 64% higher than the competitive BDL-MCO market, despite the almost

identical distance.

See Exhibits F9-R1-1, F9-R1-2, F9-R1-3 attached hereto.

Given that Southwest’s proposed nonstop DCA-AUS service would be a monopoly

route, these two basic points made by Frontier and Virgin America (and supported by

data and specific examples) are particularly relevant here – certainly far more so than

Southwest’s consultant-contrived weighted system-wide average fare for “comparable”

distances.
Motion and Response of Frontier Airlines, Inc.

Page 4

\\DC - 036787/000001 - 3391512 v1

In short, Southwest’s proposed fares are unrealistic and contrary to the

substantial data and comparisons presented by Frontier and other carriers.

Accordingly, those proposed fares should not be given any consideration by the

Department.

2. Southwest also once again urges the Department to focus solely on

Washington National and not on the portfolio of air services, frequencies, and traffic of

the entire Washington, D.C. metropolitan area (where Southwest is 2,856% larger than

Frontier and from which Austin will have five nonstop flights this summer). WN

Second Reply at 2-3. In reiterating this view,

 Southwest ignores the geographic reality of the Washington, D.C.

metropolitan area;

 Southwest ignores what it tells its own passengers looking for service

to/from Washington, D.C. about BWI and IAD (i.e., offering BWI and IAD

as reasonable “alternative airport locations” and “Washington DC Area

Airports”);

 Southwest disregards the unfounded inconsistency of its position on the

30-mile distance between BWI and the Nation’s Capital vis-à-vis the 90-

mile over-mountain roadtrip between Colorado Springs and DEN; and

 Southwest conveniently overlooks its unexplained lack of participation in

fourteen prior DCA slot exemption proceedings over more than a decade

before its recent epiphany about the indispensability of Washington

National as the one-and-only airport alternative for access to the Nation’s

Capital.

F9 Motion/Response at 2-6.

Instead, Southwest points to select snippets from the FAA’s comments in

granting a waiver to Delta/US Airways permitting them to consummate their slot

exchange at LaGuardia and Washington National. WN Second Reply at 2. Of course,
Motion and Response of Frontier Airlines, Inc.

Page 5

\\DC - 036787/000001 - 3391512 v1

the context is readily distinguishable. Here, the Department is faced with route-specific

applications among competing carriers vying for a handful of beyond-perimeter slot

exemptions under a distinct set of statutory criteria. The references cited by Southwest

from the Delta-US Airways transaction waiver were in the context of a slot exchange of

only within-perimeter slots to address remedies the FAA found were necessary to

resolve the significantly reduced competition and increased concentration at DCA that

would otherwise have resulted from the slot exchange; and, even there, the Department

of Justice noted that the “other [area] airports may be acceptable substitutes for some

passengers (particularly price-sensitive passengers),”5such as Southwest’s DCA–AUS

passengers who it claims will be more leisure, lower-fare passengers than it serves on

its nonstop BWI–AUS flights. Exhibit WN-200 at 3.

Lastly, Southwest tries to obfuscate the clear import of the Department’s

decision in the 2006 within-perimeter case. In that case, where neither destination had

nonstop DCA service (as is the case with both Austin (Southwest) and Colorado

Springs (Frontier) here), the Department discussed and took account of the service and

capacity the proposed destinations had to the Washington, D.C. metropolitan area,

concluding:

Savannah already receives three nonstops a day to the Washington area

(Dulles) with a total of 150 nonstop seats per day each way, versus

Sarasota/Bradenton, which has only one nonstop with 117 nonstop seats

per day each way to the Washington area (BWI). Thus, while each

applicant is proposing the first nonstop service from DCA, the Savannah

market today has better access to the greater Washington region, by

virtue of more service and greater capacity, at airports other than

5 Comments of U.S. Department of Justice [Public Version], at 16 (March 24, 2010, Docket FAA-2010-0109);

75 Fed. Reg. 26322, 26333 (May 11, 2010).
Motion and Response of Frontier Airlines, Inc.

Page 6

\\DC - 036787/000001 - 3391512 v1

DCA. Thus, the margin of public benefits created by an award of

additional service favors Sarasota/Bradenton.”

(DOT Order 2006-6-17, at 8; emphasis added.)

Quoting from a footnote in the first Delta-US Airways waiver discussion, Southwest

asserts that this case does not demonstrate that BWI and IAD are interchangeable with

Washington National. WN Second Reply at 2. But that misses the whole point. What

the 2006 Sarasota/Bradenton decision unequivocally shows is that in slot exemption

proceedings where the destinations at issue have no nonstop DCA access, it is not only

appropriate – but critically important – for the Department to take into account the

service, capacity, and frequency those destinations receive from the Washington, D.C.

metropolitan area or, as Southwest tells its passengers, from “Washington DC Area

Airports”, including BWI and IAD. And, applying that precedent here, Austin will be

receiving five nonstop flights from the Washington, D.C. metropolitan area with 1,189

daily seats on two competing carriers, whereas Colorado Springs will only have a single

nonstop regional jet service from IAD with 66 daily seats.
Motion and Response of Frontier Airlines, Inc.

Page 7

\\DC - 036787/000001 - 3391512 v1

For the reasons stated above, in its Application, its Consolidated Answer, and its

Reply, the Department should award two of the beyond-perimeter slot exemptions to

Frontier for daily nonstop roundtrip service between DCA and Colorado Springs.

Respectfully submitted,

______________________________________

Robert E. Cohn

Patrick R. Rizzi

HOGAN LOVELLS US LLP

555 Thirteenth Street, NW

Washington, DC 20004

+1 202 637 4999/5659

Counsel for

FRONTIER AIRLINES, INC.
\\DC - 036787/000001 - 3391512 v1

CERTIFICATE OF SERVICE

I hereby certify that a copy of the foregoing Motion and Reply of

Frontier Airlines, Inc. has been served this 11th day of April 2012, upon each of the

following addressees:

bob.kneisley@wnco.com; megan.lawrence@alaskaair.com; marshall.sinick@squiresanders.com;

anita.mosner@hklaw.com; jhill@dowlohnes.com; john.fredericksen@suncountry.com;

john.varley@virginamerica.com; jegillick@zsrlaw.com; info@airlineinfo.com;

brian.ctr.meehan@faa.gov; Phil.Sunderland@mwaa.com; Leslie.Abbott@wnco.com;

Robert.Land@jetblue.com

Mayor Stephen Bach

Colorado Springs

sbach@springsgov.com

/s/ Patrick Rizzi

_____________________________

Patrick Rizzi
Exhibit F9-R1-1 : Southwest’s Average Fares on Short-Haul Routes without Nonstop

Competition are Substantially Higher than Those Where Southwest Faces Nonstop

Competition

• ABQ-DEN = 349 Miles, Competitive Nonstop Market

• SJC-SNA = 342 Miles, Southwest Monopoly Nonstop Market

Source: DOT Data YE 3Q11, Diio schedule data YE3Q11
Exhibit F9-R1-2: Southwest’s Average Fares on Medium-Haul Routes without

Nonstop Competition are Substantially Higher than Those Where Southwest Faces

Nonstop Competition

• AUS-DEN = 775 Miles, Competitive Nonstop Market

• BNA-FLL = 793 Miles, Southwest Monopoly Nonstop Market

Source: DOT Data YE 3Q11, Diio schedule data YE3Q11
Exhibit F9-R1-3: Southwest’s Average Fares on Long-Haul Routes without Nonstop

Competition are Substantially Higher than Those Where Southwest Faces Nonstop

Competition

• BDL-MCO = 1050 Miles, Competitive Nonstop Market

• BOS-STL = 1046 Miles, Southwest Monopoly Nonstop Market

Source: DOT Data YE 3Q11, Diio schedule data YE3Q11