# Paul

# Hastings ATTORNEYS

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### (213) 683-6253 robertspan@paulhastings.com May 19,2006 VIA FACSIMILE AND FEDERAL EXPRESS 

### CarleneV. Mcintyre, Esq. Chief, Opinions and Appeals Division Paul, Hastings, Janafsky &Walker LLP 515 South Flower Street· 25th Floor· LusAnoeles, GA 90071-2228 lelephone 213 683 6000 •facsimile 213 627 0705 •I'Nm.paulhastlngs.com



### 19978.00005

The PortAuthority ofNewYork and NewJersey 225 ParkAvenue South, 15thFloor NewYork, NY 10003 Re: EWR Rates and Charges Dear Carlene: Thank you for your letter dated 

### May 3, 2006. I appreciate and acceptyout offer to schedule a meetingregarding Continental.Airlines' concerns about the flight fee calculation at NewarkLiberty InternationalAitpott ("EWR"). I 

### will call you to discuss avaihble dates. I notethough that it is unclear from your letter whether the PortAuthority is prepared to provide any further information or detail regarding the flight fee calculation. You state thatyou "remain willing to ... review the information [Continental] have received" and that the meeting could be ofassistance "inunderstanding the information youhave." In order to make the meeting meaningful, however, Continental really needs more detail than has beenprovided in the pastby the PortAuthority. Inmy prior correspondence, I have outlined the type ofinformation we need- and which has not been provided, either by your office or through the Freedom ofInformation Aclroinistrator. With regard to the flight fee calculation, we would like to have the following (for the years 2000-2005):
• For the Airport Services Charge Factorportion ofthe flight fee, please provide a description ofeach ofthe costitems represented by the Airport Setvices Charge Factor, with detail provided for each category ofcosts; and, for each such category, a detailed description ofthe costs and amounts includedwithin such category (including for fixed charges, a description ofthe interest rateused to calculate such fixed charges).

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## PaulHastings ATIOIINEYS Carlene V. Mcintyre, Esq. May 19,2006 Page2

• For d1e PAF Charge Factor portion of the flight activity fee, please provide a description ofeach ofdle cost items represented by dle PAF Charge Factor, widl detail provided for each category ofcosts; and, for each such category, a detailed descdption ofdle costs and amounts included widlin such category (including for fixed charges, a descdption ofdle interest rate used to calculate such fixed charges).
• For the Phase 1A Charge Factorpottion ofdle flight activity fee, please provide a description ofeach ofthe cost itetns represented 

### by dle Phase 1A Charge Factor, with detail provided for each category ofcosts; and, for each such category, a detailed description of dle costs and amounts included within such category (including for fixed charges, a descdption ofthe interest rate used to calculate such fixed charges).
• What pcrccntllge ofthe total direct costs ofproviding the PAF is represented by the "major elements ofcosts" used to calculate the PAF charge factor? What percentage ofthe total indirect costs ofproviding the PAF is represented by the "major eletnents ofcosts" used to calculate theAirport Services Charge Factor that is allocated to dle PAF? Whatpercentage ofthe total costs ofproviding Airport Setv:ices at 

### EWR is represented by the "major elements ofcosts" used to calculate the Airport Services Charge Factor? What were these percentages for dle calendar year 1973?
• Whatis the amount/ rate ofthe· fixed charges cover factor included in dle flight activity fee? How is the amount calculated? To what charges is the cover factor applied? Howis the interest rate to calculate the fixed charges determined?


### • In calculatiog the flight activity fee, is 

### a 0.6 (zero point six) fixed charge cover factor applied? Ifso, to what fixed charges is this cover factor applied?
• In calculatiog the tentlltive flight activity fee for the calendar year 1973, was 

### a 0.6 (zero point six) fixed charge cover factor applied? Ifso, to what charges was this cover factor applied? The fottnula for the annual calculation ofthe flight activity fee is supposed to be based on actual costs incurred 

### in the operation and maintenance ofthe airfield. The infonnation provided by the POitAudlority to Contioental annually contains only the highest-level summary ofthese costs. There is no detail concerning any ofthe individual costitems that make up the totals or the tnethod used to atnortize each such costitem. Thus, there 

### is no way for Contioental to detenninc whether the flight activity fee in fact has been calcuhted accurately based on actual costs incurred in the operation and maintenance of

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## Paul 

## Hastings

**ATIOlUI~** Carlene V. Mcintyre, Esq. May 19,2006 Page3
the airfield orrepresents an appropriate application ofthe fommla. The details requested above 

### will help to enable Continental to make that determination. As you !mow, on behalf ofContinental, I have also requested informationrelating to revenues and expenses for the airfield and for the airport as a whole. I believe that Continentalis entitled to the infom>ation so as tobe able to detennine whetherthe flight activity fee 

### is fair and reasonable and otherwise in accordance with federal law. Tile PortAuthority has given assurances to the federal government and the public thatit 

### will charge reasonable rates for the use ofits aeronautical facilities. Federal law requites aeronauticalrates to be reasonable. See, e.g., 49 U.S.C. 

### § 40116. These requirements of federal law cannotbe waived or abrogated by contract. 

### ("[I]he requirements of any law, including the requirements for use of airport revenue, may not be waived, even by agreementwith the aeronautical users." Federal AviationAdministration Policy Regarding Airpott Rates and Charges, 61 FR 31994, Section 1.3.) There are three simple facts thatwould give any neutral observer concern about the reasonableness ofthe rates and charges atEWR:
• EWR's flight activity fee is the highest flight activity fee in the country and is approximately 60% higher than the flight activity fee atJohn F. Kennedy InternationalAirport.
• Eachyear, EWR generates a substantial revenue surplus. The 2005 budget forecast a surplus of$141 million.
• ThePortAuthority uses the surplus revenue generated from EWR to subsidize other,non-aeronautical operations, such as the PATH train, and may be subsidizing other, non-aeronauticalpurposes currently unknown to Continental. Even ifthe PortAuthority's grandfather exception were to allow such payments (which we do not concede), the generation of substantial surplus revenue still raises tl>e question ofwhether the aeronautical rates and charges are reasonable. The grandfather exception is limited and not a license to generate a surplus, not a basis to deny necessary infonnation to Continental. I understand that you disagree with Continental's position. But though we may disagree on the law, we should atleast share a common interestin the facts. The PortAuth01ity has the facts, ofcourse, but the PortAuthority has elected not to share all ofthe facts with Continental, which is continuingits efforts to obtain them. To that end, and before having to involve the FederalAviation Administration in this effort to obtain all ofthe facts to which Continentalis entitled, I want to make one final effo11: at attempting to

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## Paul

# Hastings ...-rJQRN('J'S Carlene V. Mcintyre, Esq. May 19,2006 Page4
obtain the informacion necessary for Continental to evaluate the reasonableness ofthe aeronautical rates and charges atEWR. Accordingly, I request that at our meeting the PortAuthority provide, ond be prepared to discuss, informacion which would answer the following questions:
e Does EWR generate a net surplus ofrevenue over expenses on the airfield? Ifso, what is the

**~mount** ofthe sntplus, and what ru:e the revenue sources?
• What percentoge ofEWR's onnual revenue surplus is derived from the airfield, andwhat percentage from each ofthe other groundsidc operations? By molting this request, I om not suggesting Continental docs not continue to seek the other infottnacion first requested in my letter dated October 11, 2005. Instead, I do so in the hope that the PortAuthority 

### will reconsider its refusal to provide info1matiou to which Continental is entitled. Given that the PortAuthority, for more than seven mouths, has refused to provide this, or any, informacion tl1at would enable Continental meaningfully to evaluate whether the rates and charges atEWR atereasonable and in accord with federal law, please consider this letter a final attempt atinformal resolution ofthis issue, as contemplated by 

### 14 CFR Part 

### 16.21.
Sincerely,



# g~~ RobertS. Span of

### PAUL, HASTINGS,JANOFSKY & WAUffiR 

### LLP RSS:mc

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