26322 Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 

1The HDR is codified at 14 C.F.R. Part 93, 

Subparts K and S. 

2 49 U.S.C. 41715(a)(2). 

3 49 U.S.C. 41715(b)(1). 

4Operating Limitations at New York LaGuardia 

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

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

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

2008) (reducing the reservations available for 

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

(extending the expiration date through Oct. 24, 

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

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

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

date through Oct. 29, 2011). 

5 49 U.S.C. 40103(b) directs the FAA to develop 

plans and policy for the use of the navigable 

airspace and, by order or rule, to regulate the use 

of the airspace as necessary to ensure its efficient 

use. 

encourage the public’s participation and 

feedback in developing or amending 

new and existing policy, guidance, and 

rulemaking. Specifically, we would like 

feedback from manufacturers, pilots, 

owners, mechanics, instructors and 

anyone else with an interest in the small 

airplane industry. 

The Small Airplane Directorate is 

responsible for 14 CFR part 23, the 

design standard for small airplanes. 14 

CFR part 23 contains the design 

standards for small airplanes in the 

normal, utility, acrobatic, and commuter 

categories, with a maximum gross 

weight of 19,000 pounds. 

The FAA’s Small Airplane Directorate 

plans to host this second meeting to 

review the part 23 requirements June 8– 

9, 2010. The meeting will not follow a 

fixed agenda, but the discussions will 

generally follow the findings from a 

recent two-year study. That study, the 

‘‘Part 23 Small Airplane Certification 

Process Study,’’ addressed the following 

areas: 

• Structure and Process of Part 23 

• Design Certification 

• Continued Airworthiness 

• Data Management 

• Pilot Interface 

The report is available on-line at: 

http://www.faa.gov/about/office_org/ 

headquarters_offices/avs/offices/air/ 

directorates_field/small_airplanes/. 

Included in the study are 

recommendations associated with 

certification, maintenance, 

modifications, and pilot training. Also 

included in the report is the 

recommendation to revise part 23 such 

that requirements are based on airplane 

performance and complexity. Since the 

beginning, small airplane certification 

requirements have been based on 

propulsion and weight. Many previous 

assumptions for small airplanes are no 

longer accurate. This is discussed in 

detail in the Certification Process 

Report. 

The FAA plans to open this meeting 

with a detailed presentation from the 

Certification Process Study findings 

followed by opening the floor for 

discussions. There will be an official 

recorder participating at the meeting. 

The meeting minutes, as well as any 

comments, feedback, recommendations 

or action items will become public 

record. 

Attendance is open to the interested 

public but limited to space availability. 

Since seating is limited, we ask anyone 

interested in attending to RSVP (notify) 

Lowell Foster at the phone or e-mail 

address listed in the FOR FURTHER

INFORMATION CONTACT section. 

Issued in Kansas City, Missouri, on May 3, 

2010. 

Wes Ryan, 

Acting Manager, Small Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. 2010–11080 Filed 5–10–10; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration (FAA) 

[Docket No. FAA–2010–0109] 

Notice on Petition for Waiver of the 

Terms of the Order Limiting Scheduled 

Operations at LaGuardia Airport 

ACTION: Grant of petition with 

conditions. 

SUMMARY: The Secretary and the FAA 

are granting, subject to conditions, the 

joint waiver request of Delta Air Lines 

and US Airways from the prohibition on 

purchasing operating authorizations 

(‘‘slots’’ or ‘‘slot interests’’) at LaGuardia 

Airport (LGA). The grant permits the 

carriers to consummate a transaction in 

which Delta would transfer 42 pairs of 

slot interests to US Airways at Ronald 

Reagan Washington National Airport 

(DCA), international route authorities to 

Sa ̃o Paulo and Tokyo; and terminal 

space at the Marine Air Terminal at 

LGA. US Airways would transfer 125 

pairs of slot interests to Delta at LGA, 

and would lease an additional 15 pairs 

of LGA slot interests with a purchase 

option, together with terminal space in 

LGA’s Terminal C. The grant is subject 

to the conditions that the carriers 

dispose of 14 pairs of slot interests at 

DCA and 20 pairs of slot interests at 

LGA to eligible new entrant and limited 

incumbent carriers, pursuant to 

procedures set out in this Notice, and 

achieve a mutually satisfactory 

agreement regarding gates and 

associated facilities with any such 

purchaser. 

If you wish to review the background 

documents or comments received in this 

proceeding, you may go to http:// 

www.regulations.gov at any time and 

follow the online instructions for 

accessing the electronic docket. You 

may also go to the U.S. Department of 

Transportation’s Docket Operations in 

Room W12–140 on the ground floor of 

the West Building at 1200 New Jersey 

Avenue, SE., Washington, DC between 9 

a.m. and 5 p.m. Monday through Friday, 

except Federal holidays. 

DATES: The waiver is effective upon 

Delta and US Airways satisfying the 

conditions required by this Notice. On 

February 9, 2010, the FAA issued the 

Notice of petition for waiver and 

solicited comments through March 22, 

in this Docket, on the grant of the 

petition with conditions. (75 FR 7306, 

Feb. 18, 2010). On March 30, 2010, the 

FAA reopened the comment period and 

solicited rebuttal comments through 

April 5, 2010. (75 FR 16574, Apr. 1, 

2010). 

FOR FURTHER INFORMATION CONTACT: 

Rebecca MacPherson, Assistant Chief 

Counsel for Regulations, by telephone at 

(202) 267–3073 or by electronic mail at 

Rebecca.macpherson@faa.gov; or 

Jonathan Moss, Deputy Assistant 

General Counsel for Operations, by 

telephone at (202) 366–4710 or by 

electronic mail at 

jonathan.moss@dot.gov. 

SUPPLEMENTARY INFORMATION: 

The Proposed Transaction and the 

Waiver Request 

In the Wendell H. Ford Aviation 

Investment and Reform Act for the 21st 

Century (AIR–21), Public Law 106–181 

(2000), Congress required a phase out 

and termination of the High Density 

Rule (HDR) 1 at LGA by January 1, 

2007.2 Congress expressly retained the 

FAA’s authority for ‘‘safety and the 

movement of air traffic.’’ 3 The FAA 

eliminated the terms of the HDR 

applicable at LGA; however, the 

demand for flights at LGA and resultant 

severe congestion prompted the FAA to 

re-impose quotas by means of an order 

published in 2006 and subsequently 

amended (‘‘LGA Order’’ or ‘‘Order’’).4

The LGA Order, issued under the FAA’s 

authority to regulate the use of 

navigable airspace,5 assigned to the 

incumbent carriers at LGA their slot 

interest holdings and authorized them 

to lease or trade authorizations for any 

consideration for the duration of the 

Order. The Order, originally scheduled 

to expire October 24, 2009, was 

extended through October 29, 2011. The 

Order does not allow for the purchase 

or sale of slot interests at LGA, and the 


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Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 26323 

6 49 U.S.C. 49109. Slot exemptions specifically 

authorized by Congress have allowed 24 slots to be 

used for beyond-perimeter nonstop operations, with 

US Airways holding 6 for service to Phoenix and 

2 for Las Vegas, and Delta holding 2 for Salt Lake 

City. 49 U.S.C. 41718. 

7The United States Court of Appeals for the 

Second Circuit upheld the right of the Port 

Authority of New York and New Jersey, as airport 

proprietor, to adopt perimeter rule under the 

circumstances at the time. Western Air Lines v. Port 

Authority of N.Y. and N.J., 817 F.2d 222 (2d Cir. 

1987). 

8The transaction affects almost 10% of the total 

number (832) of DCA slots and more than 20% of 

the total number (1147) of LGA slots. 

9 14 CFR 93.221. 

10 75 FR 7308 (Feb. 18, 2010). 

11Following the issuance of the Notice, JetBlue 

received eight slot pairs at DCA from American 

Airlines in a temporary slot transfer that will expire 

October 29, 2011. JetBlue announced on April 28, 

2010 that it planned to initiate service using those 

slot pairs beginning November 1, 2010. Including 

these temporary slots, LCCs will have 5.2% of the 

slot interests at DCA. 

12 DOT calculated that, at DCA, US Airways 

charged on average 124% of the Standard Industry 

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

Department has used historically to assist in its 

evaluation of pricing. However, in markets where 

it held a 95 to 100% share of nonstop departures, 

US Airways charged substantially more. Delta, 

having a less strong position at LGA than US 

Airways at DCA, tends to price more competitively, 

averaging only 89% of the index figures with its 

current slot interest holdings. However, we 

anticipate that Delta’s increased market share after 

the transaction would permit it to increase the 

percent of SIFL associated with its service at LGA. 

In comparison, at Washington Dulles International 

Airport (IAD), the average of all carriers’ fares vs. 

SIFL is 77%, and at Thurgood Marshall BaltimoreWashington Airport (BWI) the figure is 65%. The 

fares of the largest carrier at IAD, United Airlines, 

average 90% of SIFL, while those of the largest 

carrier at BWI, Southwest Airlines, average 65%. At 

Newark Liberty International (EWR), the average of 

all carriers’ fares vs. SIFL is 71%, and at JFK the 

figure is 57%. The fares of the largest carrier at 

EWR, Continental Airlines, average 71% of SIFL, 

while those of the largest carrier at JFK, JetBlue, 

average 57%. The NYC/Washington airports that 

have the largest proportion of low-cost carriers 

consistently provide lower fares. A further 

discussion of our SIFL methodology appears below. 13Specifically, yield at DCA is 27 cents per mile, 

vs. 17 cents at Dulles and 14 cents at BWI, while 

yield at LGA is 20.5 cents per mile, vs. 18.7 cents 

at EWR and 14.7 cents at JFK. 

only way for a carrier to purchase or sell 

such interests is therefore through 

obtaining a waiver of the Order. The 

FAA is authorized to grant waivers 

when it determines that ‘‘the exemption 

is in the public interest.’’ 49 U.S.C. 

40109. 

In addition to limitations on the 

number of operations, both airports also 

are subject to ‘‘perimeter rules’’ that 

prohibit nonstop flights to and from 

airports beyond an established 

perimeter. DCA’s, at 1,250 miles, is set 

by Federal statute.6 The perimeter rule 

at LGA was imposed by the Port 

Authority of New York and New Jersey.7

Banning flights to cities more than 1,500 

miles away, the Rule was imposed in 

1984 in an effort to ease ground 

congestion at the airport. 

Two air carriers, Delta and US 

Airways, have proposed an exchange of 

slot interests at these two airports. This 

exchange, which could potentially 

impact as many as 182 round-trip 

operations at the two airports,8 would 

qualify as a purchase under both the 

Order and the HDR.9 The carriers 

consider the slot interest exchanges to 

be part of an integrated transaction 

because the sale of US Airways’ slot 

interests to Delta at LGA is conditional 

upon the purchase by US Airways of 

Delta’s slot interests at DCA. 

FAA’s Tentative Determination 

On February 9, 2010, we issued a 

Notice for publication in the Federal 

Register that we had received from US 

Airways and Delta a petition for waiver 

of the LGA Order, and tentatively 

approved the proposed transaction 

subject to certain conditions.10 In 

conditionally approving the transaction, 

we stated our tentative determination 

that, while the proposed transaction had 

a number of benefits, a grant of the 

waiver in its entirety would result in a 

substantial increase in market 

concentration that would harm 

consumers. The public interest would 

best be served, we tentatively found, by 

creating new and/or additional 

competition at the airports to 

counterbalance that harm, specifically 

through divestiture of 14 pairs of slot 

interests at DCA and 20 pairs of slot 

interests at LGA to new entrant and 

limited incumbent carriers. We 

proposed the divestiture of two slot-pair 

bundles at DCA with Bundle A 

containing 8 pairs and Bundle B 

containing 6 pairs; and four slot-pair 

bundles at LaGuardia, with Bundle A 

containing 8 pairs and Bundles B–D 

containing 4 pairs per bundle. 

In the Notice, we noted that if the 

proposed transaction were approved as 

presented, it would lead to significantly 

increased concentration at DCA for US 

Airways and at LGA for Delta. Based on 

their February 2010 schedules, US 

Airways would raise its share of 

departures at DCA from 47 to 58%, with 

its share of slots (including regional 

affiliates) increasing from 44 to 54%. 

This increase would make it three times 

the size of its closest competitor 

(American Airlines). At LGA, Delta 

(with its affiliates) would ascend to a 

dominant position, raising its share of 

departures from 26 to 51% and its share 

of slots from 24 to 49%. Delta would 

become two and one-half times the size 

of its closest competitor (also 

American), and LGA would transition 

from an airport with three competing 

carriers of similar size to one having a 

single dominant carrier. 

The Notice stated concern that due to 

a dominance of this magnitude, other 

incumbent carriers would be limited in 

exerting competitive pressures and 

disciplining fares. This concern was 

further compounded by the fact that 

low-cost carriers (‘‘LCCs’’)—which create 

the most competitive impact by the 

ability to dramatically lower fares and 

increase the volume of passengers in a 

market—had only a limited presence at 

DCA and LGA. Together, they have only 

3.3% of slot interest holdings at DCA, 

and 6.8% at LGA.11

Another concern raised in the Notice 

was that, if the proposed transaction 

were approved as submitted, more 

markets would be served on a monopoly 

or dominant basis. In a number of 

instances either US Airways or Delta 

would depart a market in which they 

both compete, leaving the other in a 

monopoly position. In others, where 

only one of the two currently compete, 

the serving carrier would depart the 

market and the other would enter it, 

assuming a monopoly or dominant 

position in which it would have even 

greater pricing power by virtue of its 

increased concentration at DCA or LGA. 

We tentatively concluded that the 

transaction would produce higher fares 

for consumers in certain domestic 

markets, as the fewer the number of 

carriers competing in a market the more 

likely it is that the fares will be higher. 

Moreover, our analysis of US Airways’ 

and Delta’s fares at DCA and LGA 

showed that they tended to charge 

higher fares when they operate 

monopoly or dominant routes from 

those airports.12

We also considered whether the three 

airports in the New York area, and the 

three in the Washington area, effectively 

disciplined fares at one another, such 

that if fares are perceived to be rising 

too high at one airport, the harm would 

be mitigated by consumers simply 

shifting to the other two. In analyzing 

both overlap and all markets at the 

airports, we found that yields (i.e., 

revenue per passenger mile) were 

substantially different among the 

airports.13 The average yield in all 

markets at BWI is 48% less than DCA, 

and the average yield in all markets at 

Dulles is 37% less than DCA. Similarly, 

the average yield at JFK is 28% less than 

at LGA, and Newark is 9% less than at 

LGA. We reasoned that if the airports 

were effective economic substitutes for 

all passengers, the yield spreads would 

not differ so significantly. 

We also found that these differences 

in the level of yields at area airports 


emcdonald on DSK2BSOYB1PROD with NOTICES
26324 Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 

14US Airways and Delta also filed a notification 

and report with the Antitrust Division of the 

Department of Justice (DOJ) under the Hart-ScottRodino Act, 15 U.S.C. 18a (HSR). Under the HSR 

process, DOJ reviews the transaction to determine 

whether it would substantially lessen competition 

or have other significant anticompetitive effects. 

Documents relevant to the HSR review were 

submitted to DOJ by the carriers, with access 

provided also to DOT, which independently assists 

DOJ in its analysis of the transaction. DOJ is 

continuing its review under HSR and has 

participated with comments in support of the 

Department’s tentative determination in this 

proceeding. 

15To ensure the integrity of the 5% proposal, we 

also tentatively determined that carriers eligible to 

receive divested slots not code share with any 

carrier that has 5% or more slot holdings, and are 

not subsidiaries, either partially or wholly-owned, 

of a company whose combined slot interest 

holdings are equal to or greater than 5% at LGA 

and/or DCA. Carriers that would not qualify include 

those who are involved in a code-share relationship 

at DCA/LGA with carrier(s) that also would not 

qualify as of the date of the Notice. 

16We have also placed in the docket a number 

of other letters the Department received in 

connection with the Delta-US Airways proposal, 

which were generated before the docket was 

established. These were typically general letters of 

support for the proposal. 

17Petition for Waiver of the Terms of the Order 

Limiting Scheduled Operations at LaGuardia 

Airport, 75 FR 7306 at 7307 (Feb. 18, 2010). The 

tended to correlate with the level of low 

cost carrier operations. Thus, passengers 

paid more for nonstop service of 

equivalent distance at DCA and LGA 

than at alternative airports that have 

sizable LCC competition. For example, 

for trips out to 1000 miles, passengers 

at LGA pay 23% more on average than 

those at JFK ($147 vs. $120 each way). 

Passengers at DCA pay 64% on average 

more than those at BWI ($184 vs. $113 

each way). 

We also noted that Delta and US 

Airways were not committed to any 

markets for defined periods, and were 

free to discontinue those that were being 

proposed as part of the transaction and 

initiate routes elsewhere. We expressed 

concern that, given their added slot 

holdings, they could use those to target 

smaller competitors, for example by 

increasing their roundtrips in 

competitive markets and ‘‘sandwiching’’ 

competitor flights. The competitive 

harm, we feared, would occur not just 

at the city-pair level, but at the network 

or airport level as well, particularly 

given the finding that the other area 

airports did not serve as effective 

substitutes for each other. 

These concerns—the combination of 

increased airport concentration, the 

increase in the number of monopoly or 

dominant markets in which increased 

pricing power could be exercised, and 

the potential for use of transferred slot 

interests in an anticompetitive 

manner—led us to propose that a 

relatively limited number of slots be 

divested as a condition for approving 

the transaction. At DCA, we proposed 

that 14 pairs be divested, to new entrant 

or limited incumbent carriers—enough 

to initiate and/or increase service in one 

large market or multiple smaller 

markets. At LGA, we proposed a 

divestiture of 20 pairs to such carriers, 

in combinations that would allow new 

competition in three or four new 

markets. We reasoned that the relatively 

modest divestitures would allow the 

parties to realize almost all of their 

purported benefits, while limiting the 

increase in concentration at the airports 

and providing opportunities for greater 

competition.14

We also tentatively determined that 

the divestitures be made to U.S. or 

Canadian air carriers having fewer than 

five percent of the total slot holdings at 

the airport in question.15 This approach 

was designed to exclude carriers that 

already offer a level of service sufficient 

to affect pricing in the market, and 

include both limited incumbents that 

with few slots were most vulnerable to 

anticompetitive strategies, and new 

entrants that could bring the prospects 

of increased efficiencies and capacity, as 

well as vigorous price competition to 

the markets. 

We also proposed that the proceeds of 

the divestiture sales be collected and 

retained by the divesting carriers; that 

the divesting carriers be required to take 

their actions within a 60-day period; 

that carriers purchasing the slot 

interests be precluded from re-selling or 

leasing them to carriers that were 

ineligible to participate as purchasers in 

the divestiture proceeding; that the slot 

interests be sold in identified ‘‘bundles’’ 

(with specific times we indicated) so as 

to enable the purchasers of the slots to 

operate competitive service with them 

with times spread across the day. We 

also solicited comments on the specific 

means by which the carriers might sell 

the slot interests, noting such options as 

through private sales after FAAmonitored outreach efforts; through a 

blind, cash-only, process over an FAA 

Web site; and through an FAA Web sitebased outreach process that allowed the 

carriers to negotiate the consideration 

and terms of sale with eligible 

purchasers. 

The Notice invited interested parties 

to submit their comments by March 22, 

2010, to the docket management office 

at DOT, identifying them by docket 

number FAA 2010–0109. The comments 

that were received are summarized in 

Appendix A.16

US Airways-Delta Divestiture 

Counterproposal 

On March 22, in their comments, US 

Airways and Delta stated that, as they 

were ‘‘mindful of the concerns 

expressed by FAA’’ and desiring of a 

solution that would permit them to 

move forward, they had entered into 

provisional divestiture agreements with 

four carriers that were eligible under the 

terms of the Notice for 15 slot pairs at 

LGA and 4.5 slot pairs at DCA. The 15 

slot pairs at LGA would be transferred, 

five each, to AirTran Airways, Inc., 

Spirit Airlines, Inc., and WestJet, Inc. 

over periods of up to 28 months; the 4.5 

pairs at DCA would be transferred to 

JetBlue Airways, Inc. The carriers added 

that these more limited divestitures, 

‘‘while diminishing the benefits of the 

transaction,’’ would preserve enough of 

the benefits to permit them to go 

forward. As explained in their joint 

filing with the new entrant/limited 

incumbent carriers to which they would 

divest slots under their counterproposal: 

(1) At DCA, JetBlue would acquire 4.5 

pairs of slots (JetBlue intends otherwise 

to add one off-peak hour slot to 

complete a 5-roundtrip service pattern); 

(2) at LGA, AirTran, Spirit, and WestJet 

would acquire 5 pairs of slots each, 

respectively, for a total of 15 pairs; (3) 

in all cases, the acquisition would be 

conditioned on FAA’s grant of the LGA 

Waiver request; (4) the JetBlue transfer 

would take place relatively soon, but 

Delta would continue service with the 

slots under a lease from JetBlue for a 

period; (5) the AirTran and Spirit 

transactions would occur over a 24- 

month period at dates of their choosing; 

and (6) the WestJet transaction would 

occur at a date of its choosing within 28 

months, and WestJet and Delta will be 

negotiating other commercial 

arrangements as well. 

The Joint Applicants also stated that 

if the FAA grants the waiver subject to 

the proposed divestiture conditions, 

they would not consummate the 

transaction, and reserved the right to 

seek judicial review. 

Given the issues raised by the Joint 

Applicants’ counterproposal, the FAA 

determined that it was in the public 

interest to reopen the comment period 

through April 5. The rebuttal and 

supplemental comments are also 

summarized in Appendix A. We grant 

all motions for leave to file late 

comments, and all comments to date 

were accepted into the docket. 

Statutory Authority To Grant Waiver 

Subject to Slot Interest Divestitures 

The FAA and the Secretary have 

authority to grant the requested waiver 

of the LaGuardia Order, and to grant the 

waiver subject to certain conditions.17


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Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 26325 

LaGuardia Order was issued under the FAA’s 

authority to ‘‘develop plans and policy for the use 

of the navigable airspace and assign by regulation 

or order the use of the airspace necessary to ensure 

the safety of aircraft and the efficient use of 

airspace.’’ 49 U.S.C. 40103(b)(1). Operating 

Limitations at New York LaGuardia Airport, 71 FR 

77,854 (Dec. 27, 2006); 72 FR 63,224 (Nov. 8, 2007) 

(transfer, minimum usage, and withdrawal 

amendments); 72 FR 48,428 (Aug. 19, 2008) 

(reducing the reservations available for 

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

(extending the expiration date through Oct. 24, 

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

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

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

date through Oct. 29, 2011). 

18See South Dakota v. Dole, 483 U.S. 203, 208 

(1987) (‘‘The Federal Government may establish and 

impose reasonable conditions relevant to Federal 

interest * * * and to the over-all objectives 

thereto’’); N.Y. Cent. Sec. Corp. v. United States, 287 

U.S. 12 (1932) (upholding Interstate Commerce 

Commission order approving the acquisition of the 

‘‘Big Four’’ railroad companies by N.Y. Central upon 

the condition that it also acquire short line railroads 

on certain terms). 

19Neither the Joint Applicants nor other carriers 

arguing against the waiver conditions cite any cases 

prohibiting the FAA or the Secretary from 

considering competitive goals in the public interest. 

N.Y., op cit., upheld an agency’s public interest 

conditions to an acquisition, despite the industry’s 

opposition to the conditions. That decision affirmed 

the Interstate Commerce Commission’s conditions 

to the New York railroad’s acquisition of the ‘‘Big 

Four’’ railroads on the asserted ‘‘burdensome’’ 

condition of acquiring the short-lines. Similarly, 

our conditions to the waiver are intended to 

promote the public interest by fostering and 

promoting competition in the airline industry and 

to benefit the traveling public. 

The fact that the Supreme Court vacated a 

National Highway Traffic Safety Administration 

rescission of its ‘‘passive restraint’’ rule on the 

grounds that NHTSA relied on a factor Congress 

had not intended it to consider has no bearing on 

the fact that the FAA may legitimately consider 

public interest factors in carrying out the slot 

program. Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. 

State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 44 

(1983). 

20Reliance on United States v. Oberle, 136 F.3d 

1414, 1423–34 (10th Cir. 1998), for the proposition 

that Congress should have included procompetitive factors in Section 40101(d), is 

misplaced. That case held the Government did not 

need to reach a burden-of-proof level of ‘‘beyond a 

reasonable doubt’’ in applying the ‘‘three strikes’’ 

enhanced sentencing statute. 

21See Eileen M. Gleimer, Slot Regulation at High 

Density Airports: How Did We Get Here and Where 

Are We Going?, 61 J. Air L. & Com. 877, 883, fn. 

25 (1996), stating that the court determined the 

action was within the agency’s statutory authority 

and ‘‘was consistent with the pro-competitive 

policies of the Airline Deregulation Act.’’ 

22 In creating an administrative mechanism to 

lottery new and withdrawn slots with a preference 

for new entrants, the Buy-Sell Rule was informed 

by the Airline Deregulation Act to expressly give 

‘‘special consideration’’ to new entrants. 50 FR at 

52185. 

23The Buy-Sell Rule’s major objective was to 

achieve the policy goals of the Airline Deregulation 

Act, that is, to maximize competition at the 

congested airports, by giving new entrant carriers 

an opportunity to purchase slots: 

[T]he ability to buy and sell slots also removes 

existing artificial barriers to entry into high density 

airport markets. The elimination of barriers to entry 

is essential for the optimal operation of a 

competitive market. The rule accomplishes this by 

placing new entrants in the same position as 

incumbent carriers desiring additional slots. 50 FR 

at 52186. 

The FAA is authorized to grant an 

exemption when the Administrator 

determines the ‘‘exemption is in the 

public interest.’’ 49 U.S.C. 40109. The 

Administrator may ‘‘modify or revoke an 

assignment [of the use of airspace]’’ 

when required in the public interest. 49 

U.S.C. 40103(b)(1). Courts have upheld 

the conditions an agency may place on 

its approval of a transaction to meet 

public interest standards.18

Further, our consideration of Delta’s 

and US Airways’ request to waive the 

terms of the LaGuardia Order complies 

with and carriers out AIR–21’s mandate 

to instill competition at slot-controlled 

airports and doing so in conjunction 

with considering the Secretary’s Section 

40101(a)’s pro-competitive public 

interest factors.19 Congress did not 

exclude the Administrator from 

considering the ‘‘public interest’’ to 

include factors beyond ‘‘safety,’’ 

‘‘national defense’’ and ‘‘security.’’ 

Rather, Congress expressly directed the 

Administrator to consider those matters 

‘‘among others.’’ Accordingly, as we 

articulated in our February Notice, it is 

rational for the FAA to consider, as 

being in the ‘‘public interest,’’ ‘‘other 

factors’’ including the fostering of 

competition in the context of the slot 

program. The ‘‘public interest’’ includes 

policies furthering airline competition, 

as provided in 49 U.S.C. 40101(a)(4), (6), 

(9), (10), (12)–(13) and (d). These goals 

have been public policy since at least 

the time of adoption of the Airline 

Deregulation Act of 1978, Public Law 

95–504 (92 Stat. 1705), and they include 

(among others) maximizing reliance on 

competitive market forces; avoiding 

unreasonable industry concentration 

and excessive market domination; and 

encouraging entry into air transportation 

markets by new carriers.20

The FAA Consistently Exercises Its Slot 

Allocation Authority in a ProCompetitive Fashion 

None of the commenters dispute the 

fact that the FAA has the authority to 

limit flight operations at congested 

airports and to distribute and allocate 

landing and takeoff reservations (slot 

interests) to designated air carriers at 

controlled airports. The FAA holds this 

power due to its authority to manage 

and control the ‘‘efficient use of 

airspace,’’ to assign the use of airspace 

and to modify or revoke such an 

assignment in the public interest. 49 

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

Managing slot allocations is a subset 

of controlling the navigable airspace; 

and courts are clear that the FAA may 

consider pro-competitive policies in 

carrying out its powers to manage the 

efficient use of navigable airspace. In 

Northwest Airlines, Inc. v. Goldschmidt, 

645 F.2d 1309, 1315–16, 1318 (8th Cir. 

1981), the Court found that the FAA 

may allocate slots, divest them from 

incumbent carriers and reallocate them 

to requesting new entrants, mindful of 

the pro-competitive policy of the Airline 

Deregulation Act of 1978. That case 

analyzed the FAA’s reallocation of slots 

under the HDR, 14 CFR part 93, subpart 

K. At the time, the HDR limited flight 

operations at congested airports in order 

to reduce landing and takeoff delays and 

permitted airline scheduling committees 

to allocate the slots among interested 

carriers. (The committees operated 

under antitrust immunity, granted by 

the then-operative Civil Aeronautics 

Board.) When the scheduling committee 

refused to provide slots to a new entrant 

at Washington National Airport, the 

allocation process broke down and the 

FAA attempted to resolve the 

distribution process by requiring 

incumbent carriers to yield slots or 

move slot times to new entrants. 

The United States Court of Appeals 

for the Eighth Circuit rejected arguments 

that the HDR was limited to safety 

functions only and that the operative 

statute (Section 40103) did not 

authorize slot allocation by the FAA. 

The holding in that case—that the 

power to manage the efficient use of 

airspace comprises the power to allocate 

slots and that the FAA may validly 

divest slots, in consideration of the procompetitive policy of the Airline 

Deregulation Act—should suffice to 

resolve concerns about our statutory 

authority to condition a waiver of a slot 

transfer transaction on a divestiture of 

slot interests to foster a competitive 

environment.21

The FAA also relied in large part on 

the Airline Deregulation Act’s procompetition policies when it issued the 

‘‘Buy-Sell’’ amendment to the HDR. The 

Buy-Sell Rule provided a secondary 

market in slots and imposed a minimum 

utilization requirement and an 

administrative lottery mechanism giving 

preference to new entrants.22 The BuySell Rule, 14 CFR part 93, subpart S, 

High Density Traffic Airports; Slot 

Allocation and Transfer Methods, 50 FR 

52,180 (Dec. 20, 1985). The preamble 

specifically stated that the rule relies on 

the FAA’s ‘‘statutory responsibilities 

including the need to place maximum 

reliance on market forces’’ in allocating 

slots. 50 FR at 52,182.23 That regulation 

opened up a secondary market for slot 

interests by permitting holders to buy or 


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24Were we unable to consider pro-competitive 

factors in implementing our authority over 

navigable airspace, it is very likely we would not 

have issued the Buy-Sell Rule in the first place. In 

that event, it would not have been possible for the 

petitioners to seek approval for the transaction 

before us. The Airline Deregulation Act, which 

‘‘replaced the old form of regulation with a new 

economic regime that relied heavily on free-market 

mechanisms,’’ (Delta Air Lines, Inc. v. C.A.B., 674 

F.2d 1, 3 (D.C. Cir. 1982) spawned new entrant 

airlines clamoring to enter the highly-regulated slotconstrained airports. 

In this regard, we note, as does the U.S. 

Department of Justice in its comments in this 

docket, that the petitioners’ arguments about lack of 

FAA authority over pro-competitive slot 

divestitures are in stark contrast with their previous 

assertions that the FAA has the authority to reimplement the Buy-Sell provision at LaGuardia and 

that this provision ‘‘has worked to promote new 

entry and enhance competition at ‘capped airports’ 

for more than two decades.’’ Comments of Delta Air 

Lines at 3, Docket No. FAA–2006–25755 (July 14, 

2009), Reply Comments of the United States 

Department of Justice, Public Version, at 12. 

25 In the context of the slot program, ensuring the 

‘‘efficient’’ use of airspace means making productive 

use of the slots including operating larger aircraft 

with lower costs and offering lower fares to 

consumers, resulting in more passengers per flight. 

New entrant and limited incumbent carriers 

typically use larger aircraft and offer lower fares 

and ‘‘would most likely be more efficient, from a 

consumer benefit standpoint.’’ See Department of 

Justice Reply Comment at 6–7. 

26Without the slot divestiture conditions, the 

transaction would lead to significantly increased 

airline concentration at DCA and LGA; the carriers 

would increase the number of markets they serve 

on a monopoly or dominant basis and charge 

premium airfares, thus negating the purpose of the 

prohibition on exclusive rights at Federally-assisted 

facilities. See 40 U.S.A.G. 71 (1941), stating that the 

purpose of the provision is to ‘‘promote and 

encourage competition in civil aeronautics.’’ 

27Congress directed the FAA to ensure that each 

airport and airway program be carried out 

‘‘consistently’’ with Section 40101(a) to ‘‘foster 

competition, prevent unfair methods of competition 

in air transportation [and] prevent unjust and 

discriminatory practices.’’ 49 U.S.C. 47101(d). 

28Some commenters assert that 49 U.S.C. 

40113(a) and 46105(a), by referring to ‘‘aviation 

safety duties and powers,’’ limit the Administrator’s 

administrative powers to those involving safety 

only. Reading the ‘‘aviation safety duties and 

powers’’ clause, however, to authorize the 

Administrator to take action over not only ‘‘aviation 

safety duties’’ but also over the Administrator’s 

other, more extensive ‘‘powers’’ conforms to the text 

of the statutory provision before it was recodified 

without substantive change: ‘‘The Administrator 

shall be responsible for the exercise of all powers 

and the discharge of all duties of the 

Administration.’’ 49 U.S.C. 1341(a). It does not 

divest the Administrator of pro-competitive, public 

interest policy considerations. See, the 

recodification of Title 49, Public Law 103–272 

(1994), H.R. Rep. 103–180 at 262 (1993). ‘‘The 

purpose of H.R. 1758 is to restate in comprehensive 

form, without substantive change, certain 

permanent and general laws related to 

transportation.’’ 

29See 49 U.S.C. 102 and 106. 

30 49 U.S.C. 41715(a)(2) directs the Secretary to 

terminate the HDR at LGA as of January 1, 2007. 

See H. Rept. 106–167 (106th Cong., 1st Sess. 1999) 

at 37–42. 

31 75 FR 7306 at 7308. 

sell slots for any consideration from or 

to any person.24

The following year, the FAA further 

carried out an administrative 

mechanism giving a preference to new 

entrants at slot-controlled airports by 

implementing a ‘‘reverse lottery’’ 

withdrawing up to 5% of slots from 

incumbent carriers and reallocating 

them to new entrant and limited 

incumbent carriers. Special Slot 

Withdrawal and Reallocation 

Procedures, 51 FR 8632 (Mar. 12, 1986). 

The FAA considered pro-competitive 

public interest factors in justifying the 

preferential nature of the lottery by 

noting that there had been ‘‘very little 

opportunity for new entry by air 

carriers’’ at the HDR-controlled airports 

and that providing ‘‘immediate access’’ 

for them would ‘‘serve the procompetitive principles of the Airline 

Deregulation Act.’’ 51 FR at 8633, 8635. 

The FAA has consistently relied on 

pro-competitive policy goals in carrying 

out its slot programs. For example, in 

1992, the FAA amended the Buy-Sell 

Rule to expand protections and 

treatment afforded to new entrant and 

limited incumbent carriers at airports 

regulated by the HDR, explaining that 

the amendments ‘‘enhance competition 

by affording new entrant and limited 

incumbent carriers greater access.’’ High 

Density Traffic Airports; Slot Allocation 

and Transfer Methods, 57 FR 37,308 at 

37,309 (Aug. 18, 1992). During 2000, 

when instituting the phase-out of the 

HDR at LaGuardia, the FAA issued a 

notice of intent to conduct a lottery of 

the AIR–21 slot exemptions granted at 

LaGuardia, specifically identifying new 

entrant and limited incumbent carriers 

to be eligible for the lottery. Further, the 

temporary ‘‘slot’’ regulation at O’Hare 

International Airport applied procompetitive policies from the Airline 

Deregulation Act in granting preferential 

treatment to new entrant and limited 

incumbent airlines in assigning new or 

withdrawn slot interests. Congestion 

and Delay Reduction Rule at Chicago 

O’Hare International Airport, 14 CFR 

part 93, subpart B; 14 CFR 93.30. 

The FAA has the authority to consider 

pro-competitive factors under several 

statutory sources, notably Sections 

40101(d) (as described above), 40103(b) 

(authorizing the FAA to manage the 

‘‘efficient’’ use of airspace),25 40103(e) 

(directing the FAA to prohibit the 

exclusive use of air navigation 

facilities),26 and 47107(d) (requiring the 

FAA to carry out its airport and airway 

program in a manner fostering 

competition).27 It is appropriate for the 

FAA to use these tools in response to 

the request before us, to approve a 

significant slot interest transaction that 

would affect the competitive structure 

of the aviation industry at two 

important, slot-controlled airports. By 

conditioning the waiver on slot 

divestitures, the FAA is carrying out 

Congressional intent to ensure the 

provision of opportunities for 

competition in the slot program.28

Furthermore, we disagree with the 

argument made by some commenters 

that the FAA regulations in 14 CFR part 

11 allow the FAA to consider only 

safety matters in deciding whether or 

not to grant an exemption or waiver 

request. The FAA regulations require 

the applicant for a waiver to address, in 

addition to safety concerns, why the 

request ‘‘would be in the public interest, 

that is, how it would benefit the public 

as a whole’’ and to provide any 

additional information supporting the 

request. 14 CFR 11.81(d), (g). As 

indicated in the body of this Notice, we 

do not find that petitioners satisfied the 

‘‘public interest’’ concern showing how 

the transaction—without our proposed 

divestiture remedy—would benefit the 

public as a whole. 

Moreover, in a situation such as this, 

where two major domestic airlines seek 

the approval of a dramatic market shift 

with significant economic and 

competitive impact on the aviation 

industry and the traveling public, the 

Administrator does not act without 

input and guidance from the Secretary. 

As the head of the Department, the 

Secretary has broad oversight of 

significant FAA decisions.29 In 

evaluating the waiver request, the 

Secretary considers the public interest 

in furthering airline competition, as 

provided in 49 U.S.C. 40101(a)(4), (6), 

(9), (10), (12) and (13). The waiver of the 

LGA Order on the conditions set forth 

in this Notice carries out the 

Congressional intent of AIR–21 to allow 

for new airline entry, to increase 

competition, and lower inflated prices 

at the slot-controlled airports.30 The 

Secretary has previously conditioned air 

carrier route transfers and grants of 

antitrust immunity on the divestiture of 

slots and/or other assets for the 

purposes of ensuring competitive 

opportunities for other airlines.31

Accordingly, the Secretary (i) has the 

authority to waive the terms of the 

LaGuardia Order to further the 

Secretary’s public interest goal of 

maximizing airline competition, among 

other things; and (ii) may condition the 

waiver on carriers taking specific 

actions that foster competition at slotcontrolled airports. 


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32Continental referred to Verizon 

Communications v. Law Offices of Curtis V. Trinko, 

540 U.S. 398, 407–08 (2004) for the proposition that 

our action ‘‘compelling’’ US Airways and Delta to 

divest their slot interests may undermine their 

incentives to invest in beneficial infrastructure. We 

repeat that we are not, however, directing a slot 

divestiture. Rather, we are granting a waiver 

request, which is subject to a finding that it is in 

the public interest, subject to pro-competitive 

remedies. The two regulatory actions are of a 

different nature. 

33Continental claims that we have not proven 

that the carriers’ practices would rise to a Sherman 

Act Section 2 offense; we are not invoking or 

attempting to enforce antitrust laws. Rather, we are 

asserting our authority to protect the traveling 

public by fostering competition in the context of the 

requested waiver. 

34United overstates the import of our waiver 

condition when it asserts that we are re-regulating 

the industry contrary to the Congressional directive 

in the Airline Deregulation Act. Conditions at slotconstrained airports are not reflective of a free, 

competitive market. The fact is that the FAA placed 

limits on flight operations that may be carried out 

at LGA and DCA due to congestion in the airspace; 

in the context of those flight limits, only certain 

airlines may operate at designated times. These 

airports thus are regulated by the Government and 

are in a different position than the vast majority of 

the other airports that are not slot-controlled. The 

FAA, in this instance, actually is instilling the 

opportunity for more competition at DCA and LGA, 

in reliance on the Airline Deregulation Act. By 

placing these conditions on the waiver grant, the 

FAA also is protecting against exclusive rights at 

the airports under 49 U.S.C. 40103(e) and is 

fostering competition at the Federally-assisted LGA 

and DCA. 49 U.S.C. 47107(d). 

35 75 FR at 7307, citing Starr v. Federal Aviation 

Administration, 589 F.2d 307, 311 (7th Cir. 1978). 

36 In the context of an air carrier’s bankruptcy 

proceeding, it has been held that the FAA’s control 

over slots substantially encumber a carrier’s 

property interest: ‘‘A carrier possesses a proprietary 

right in allocated slots, [ ] limited as to the superior 

rights of the FAA.’’ In re Gull Air, Inc. 890 F.2d 

1255, 1260 (1st Cir. 1989). 

The Slot Divestiture Conditions Do Not 

Violate Other Laws or Regulations 

Continental in its comments claims 

that our slot divestiture conditions 

constitute unauthorized market-based 

pricing and an unauthorized withdrawal 

of slots under the LaGuardia Order and 

the HDR. Continental’s concerns reflect 

a misunderstanding of our action. For 

purposes of the requested waiver, we 

are not asserting any FAA right to 

collect monies by monetizing slot 

interests through an auction. Rather, in 

responding to a request for a waiver 

from the LaGuardia Order prohibition 

on a permanent transfer of slots, we 

simply are conditioning the waiver on a 

divestiture of some of the slot interests 

to new entrant and limited incumbent 

carriers. Those slot interests would not 

be divested to the FAA; they would be 

sold by the respective petitioning 

carriers to eligible purchasers and the 

petitioning carriers would retain the 

proceeds of the sales. Nor are we 

affirmatively withdrawing slot interests. 

Consequently, the provisions in the 

LGA Order and the HDR governing 

withdrawals of slots by the FAA are 

inapplicable to our action.32

We also do not accept the comments 

of the Joint Applicants, Continental or 

United, that the Department of Justice, 

not the Secretary (or FAA), is the sole 

source of competition authority over 

slot transactions. While DOJ has the 

authority under Section 7 of the Clayton 

Act to reject anticompetitive 

transactions, that does not remove 

DOT’s responsibility to carry out its 

programs consistently with the procompetitive public interest criteria 

contained in Section 40101(a)(4), (6), 

(9), (10), (12) and (13). In considering 

the petitioners’ waiver request in the 

public interest, the DOT is not asserting 

antitrust jurisdiction or implementing 

Clayton Act authority. Neither the FAA 

nor the Secretary is exercising the 

former ‘‘Section 408’’ authority over 

airline transactions. Petitioners are 

ignoring the fact that they petitioned the 

FAA for a waiver from a validly issued 

Order that prohibits permanent slot 

interest transfers at LaGuardia. The FAA 

is considering the waiver, not exercising 

antitrust authority nor intruding on the 

Department of Justice’s jurisdiction.33

As the DOJ indicated in its reply 

comments, the FAA’s proposed decision 

‘‘does not usurp’’ the DOJ’s investigative 

authority under Section 7 of the Clayton 

Act (at p. 13). See Bowman Transp. Inc. 

v. Arkansas-Best Freight System, Inc., 

419 U.S. 281, 298–99 (1974) (‘‘A policy 

in favor of competition embodied in the 

laws has application in a variety of 

economic affairs.’’) 

Conditioning the waiver on slot 

interest divestitures is consistent—and 

does not interfere—with the competitive 

structure of the airline industry, or the 

statutory policy goal of ‘‘placing 

maximum reliance on competitive 

market forces,’’ as asserted by United 

and some other commenters. The 

conditions mitigate the competitive 

burdens of the transaction and ensure 

that the transaction will not result in 

undue industry concentration, the 

impediment of new entry, or otherwise 

disadvantage the traveling public. The 

policy goals direct us not only to place 

‘‘maximum’’ reliance on competitive 

market forces but also to rely on ‘‘actual 

and potential competition’’ to avoid 

‘‘unreasonable industry concentration,’’ 

and to encourage ‘‘entry into 

transportation markets by new and 

existing air carriers.’’ Section 

40101(a)(6), (10), (12). Our action on the 

waiver request responds aptly to these 

policy directives.34

Our slot divestiture conditions do not 

withdraw slot exemption service 

authorized under 49 U.S.C. 41714(c), 

41716(b), 41718. We do not mandate the 

divestitures of any slot exemptions that 

US Airways or Delta may hold. 

We also are not bound to allocate the 

divested slots without charge, as Spirit 

prefers. The slot exemptions provisions 

directing the Secretary to grant slot 

exemptions from the HDR to new 

entrant and limited incumbent carriers 

under specified provisions are not 

applicable here. The FAA is under no 

statutory obligation to have the divested 

slot interests allocated to eligible 

carriers free of charge. Although Spirit 

as noted in its comments is concerned 

that it may lose out in any attempt to 

purchase slot interests due to its 

relatively small share of revenues 

compared to that of the other eligible 

carriers, a sale of the slot interests 

allows the petitioners to maximize the 

value of their slot interests as originally 

intended as part of the larger 

transaction. 75 FR at 7311. 

The Slot Divestiture Conditions Are Not 

‘‘Takings’’ 

The petitioners claim we cannot 

legitimately require the slot divestitures 

because that constitutes taking without 

just compensation. We do not agree 

with this assertion. As we indicated in 

the Notice, the FAA has the authority to 

condition the grant of a waiver.35See 

also, South Dakota v. Dole, 483 U.S. 

203, 208 (1987) (‘‘The Federal 

Government may establish and impose 

reasonable conditions relevant to 

Federal interest * * * and to the overall objectives thereto.’’). The FAA 

expressly has the power to modify 

assignments of use of navigable airspace 

when in the ‘‘public interest’’ and to 

grant waivers only in the ‘‘public 

interest.’’ As we discuss above, it is in 

the public interest for us to condition 

the waiver request of the transfer of 167 

slot pairs on the divestiture of certain 

slots to carriers with no or little 

presence at the constrained airports. 

This condition produces efficiencies, 

fosters competition, prevents 

unreasonable industry concentration, 

and protects the traveling public. 

In any event, the takings claim is 

inapposite because slot interests are not 

property subject to the takings clause. 

Slot interests are subject to pervasive 

Federal encumbrances that limit any air 

carrier’s property right or interest 

associated with them.36 The HDR 

provides that ‘‘[s]lots do not represent a 

property right but represent an 

operating privilege subject to absolute 

FAA control.’’ 14 CFR 93.223(a). 

Accordingly, any ‘‘proprietary interest’’ 


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37See 14 CFR 93.211–229. At DCA, where slots 

are subject to the HDR, these encumbrances 

include, for example, the ability to withdraw slots 

for essential air services, operational needs, and 

non-use. 14 CFR 93.219, 93.223 & 93.227. At 

LaGuardia, slot interests are subject to the terms of 

the Order which grants only a temporary interest in 

the slots to carriers, providing for only leases or 

temporary transfers through the duration of the 

Order. 71 FR 77,854 at 77,860, as amended 74 FR 

51,653 (Oct. 7, 2009). They are subject to the terms 

of the January 2009 Order on voluntary retirements. 

74 FR 2646 (Jan. 15, 2009). Also, slot interests at 

LaGuardia are subject to minimum utilization 

requirements. 71 FR 77,854 at 77,860. 

38See discussion of DOT Orders requiring such 

divestitures in the public interest. 75 FR 7306 at 

7308. 

39The Port Authority of New York and New 

Jersey commented that slot interests are licenses, 

not Federal property. We need not address, in this 

Notice, the Port Authority’s arguments in this 

regard. 

40The United States Court of Appeals for the First 

Circuit held that it ‘‘need not decide [whether slots 

constituted part of a bankrupt carrier’s estate].’’ In 

re Gull Air, 890 F.2d 1255, 1261, 1262 fn. 8. Unlike 

the situation in Ruckleshaus v. Monsanto, 467 U.S. 

986, 1002–1003 (1984), where the Court determined 

that intangible property (a trade secret) exhibited 

characteristics of more tangible forms of property, 

slots lack many of those characteristics. For 

example, there is no state law recognizing a slot 

interest as a property right, as was the case in 

Monsanto. Additionally, unlike the cases relied on 

in Monsanto, a slot interest does not convert the 

carrier to the position of a creditor, such as a 

mechanic’s lien does to a contractor, in Armstrong 

v. United States, 364 U.S. 40 (1960); or a mortgage 

to a bank mortgagee, in Louisville Joint Stock Land 

Bank v. Radford, 295 U.S. 555, 596–602 (1935). Nor 

is a slot interest a contract subject to the Takings 

Clause as a war risk insurance contract is to a 

beneficiary, in Lynch v. United States, 292 U.S. 571, 

579 (1934). 

41Nollan struck down, as an unlawful ‘‘taking,’’ a 

State condition on a building permit to replace a 

small beachfront bungalow with a larger house with 

a public easement across the beach. The Court held 

that the permit condition did not substantially 

advance legitimate State interest related to land-use 

regulation. The Court did find, however, that a 

legitimate permit condition would have been a 

height limitation, a width restriction, or a ban on 

fences. 483 U.S. at 836. 

42 Lingle v. Chevron U.S.A. Inc., 554 U.S. 528 

(2005), cited by Continental for a takings test, is not 

apposite. That case reversed and remanded the 

Ninth Circuit Court of Appeals’ holding that a 

Hawaii statute which responded to concerns of oil 

companies’ market concentration by limiting the 

rent that oil companies charged to dealers, effected 

an unlawful taking. 

43See, for example, America West Holdings 

Corporation Form 10–K for the Fiscal Year Ending 

December 31, 2003 (at 11): 

At New York City’s John F. Kennedy 

International Airport and LaGuardia Airport, and at 

Washington DC’s Ronald Reagan National airports, 

which are designated ‘‘High Density Airports’’ by 

the FAA, there are restrictions on the number of 

aircraft that may land and take-off during peak 

hours. At the New York airports, slot restrictions 

are abolished after January 1, 2007. In the future 

these takeoff and landing time slot restrictions and 

other restrictions on the use of various airports and 

their facilities may result in further curtailment of 

services by, and increased operating costs for, 

individual airlines, including AWA, particularly in 

light of the increase in the number of airlines 

operating at such airports. In general, the FAA rules 

relating to allocated slots at the High Density 

Airports contain provisions requiring the 

relinquishment of slots for non-use and permit 

carriers, under certain circumstances, to sell, lease 

or trade their slots to other carriers. All slots must 

be used on 80% of the dates during each two-month 

reporting period. Failure to satisfy the 80% use rate 

will result in loss of the slot which would revert 

to the FAA and be reassigned through a lottery 

arrangement. 

claimed by an air carrier in a slot is 

subject to the encumbrances placed on 

those slots by FAA regulation.37 The 

Department, as we pointed out in the 

February Notice, has conditioned 

international aviation route transfers 

and antitrust immunity grants on 

divestitures of slots or route certificates 

in the past, and, because these are not 

‘‘property,’’ they do not constitute Fifth 

Amendment compensable takings.38 A 

carrier’s interest in slots is subject to 

extensive FAA regulation and 

Congressional direction.39

There is no definitive judicial holding 

that slots are ‘‘property’’ subject to the 

Takings Clause.40 In any event, a slot 

interest is substantially fettered and 

encumbered by FAA requirements, as 

explained above, and therefore a holder 

does not have the attributes of an 

unfettered right to ‘‘use the property, 

receive income produced by it, and to 

exclude others from it’’ as a tenant by 

entirety does under Michigan State law. 

United States v. Craft, 535 U.S. 274, 282 

(2002). Rather, a carrier’s use of a slot 

interest is subject to FAA minimum 

utilization requirements and any right to 

‘‘exclude others’’ is subject to FAA 

operational control, withdrawal rights, 

and congressional directives. 

Further, we disagree with petitioners’ 

claims that the conditions on the waiver 

do not serve the government interest 

and are tantamount to ‘‘extortion.’’ 

Nollan v. California Coastal 

Commission, 483 U.S. 825, (1987).41

Our grant of the waiver permitting the 

petitioners to proceed with the slot 

interest transaction, subject to slot 

divestitures to new entrant and low-cost 

carriers, substantially advances the 

FAA’s legitimate objectives of more 

efficient use of constrained airspace and 

of fostering airline competition at 

airports. A ‘‘broad range of governmental 

purposes and regulations satisfies’’ the 

requirements for considering a 

condition to a waiver as substantially 

advancing a governmental interest. 

Nollan at 834–35. Accordingly, we find 

that the conditions to the waiver do not 

deprive petitioners of property without 

just compensation. 

Even assuming slots are property for 

purposes of the Takings Clause, the 

divestiture as a condition to the FAA 

waiver simply regulates the carriers’ use 

of the slot interests and does not 

constitute a taking. The Supreme Court 

has identified several factors for 

consideration of when a government 

taking has occurred under the Fifth 

Amendment: ‘‘The character of the 

government action, its economic impact, 

and its interference with reasonable 

investment-backed expectations.’’ See 

Penn Central Transportation Co v. New 

York City, 438 U.S. 104, 125 (1978) (City 

Landmarks Preservation Commission 

disapproval of construction of a 50-story 

office building over Grand Central 

Terminal held not to be a ‘‘taking’’ of the 

owners’ right to exploit the 

superadjacent airspace). 

Here, our waiver condition of slot 

divestiture would constitute a 

regulatory, not a takings, action.42 By 

conditioning the transfer of a large 

portion of slot interests on the sale of 

some of the slot interests, the FAA 

effectively is regulating the ability of the 

petitioning carrier to transfer slot 

interests in a manner that results in 

unreasonable industry concentration. 

Divesting some slot interests to 

petitioners’ competitors will ensure that 

the traveling public does not experience 

a degradation of fares, service or routes 

at the affected airports. 

With respect to reasonable 

investment-backed expectations, 

carriers have been on notice for decades 

that the FAA has considered slots to be 

an operating privilege not a property 

right. 14 CFR 93.223(a). As discussed 

above, not only have the FAA 

regulations been clear about the 

tentative nature of slots and the 

duration of slot interests, the FAA 

retired the slot system at Chicago 

O’Hare airport in 2008. 14 CFR Part 93, 

Subpart B, Congestion and Delay 

Reduction at Chicago O’Hare 

International Airport, § 93.21(e). In AIR– 

21 (2000), Congress legislated a phaseout of the HDR at the New York airports 

and at O’Hare. Accordingly, the carriers 

and those banks and financing firms 

holding slots as collateral were aware of 

the FAA/Congress’ right to change the 

slot system, withdraw slots, etc. The 

Securities and Exchange Commission 

filings recognize the Federal 

encumbrances to slot holdings.43

Consequently, the ability of the FAA to 

condition the waiver allowing the 

transfer of massive amounts of slots on 

divestitures of a small percentage is a 

‘‘burden we all must bear in exchange 

for ‘the advantage of living and doing 

business in a civilized community.’ ’’ 

Monsanto, 467 U.S. 986, 1007. 

Because we may condition the grant 

of the waiver, and the conditions do not 

effect a ‘‘taking’’ of ‘‘property,’’ we 

disagree with petitioners’ contention 


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44The HHI for a particular market is calculated 

by squaring the market share of each firm 

competing in the market and then summing the 

resulting numbers. The HHI takes into account the 

relative size and distribution of the firms in a 

market and approaches zero when a market consists 

of a large number of firms of relatively equal size. 

The HHI increases both as the number of firms in 

the market decreases and as the disparity in size 

between those firms increases. See U.S. Department 

of Justice and Federal Trade Commission, 

Horizontal Merger Guidelines. 

45Comments of the United States Department of 

Justice, March 24, 2010, p. 5. 

46U.S. Department of Justice and Federal Trade 

Commission, Horizontal Merger Guidelines § 1.51 

(1992). 

that the conditions adversely affect the 

asserted ‘‘just compensation’’ to be 

derived from their slot interests under 

United States v. 50 Acres of Land, 469 

U.S. 24, 29 (1984). In any event, the 

process we will institute provides for 

the sale of the slot interests, subject to 

certain rules to maintain competition, 

for a bundle of slot interests. 

The FAA May Condition the Waiver on 

DCA Slot Interest Divestitures 

The petitioners assert that we have no 

jurisdiction over the DCA slot interest 

sale by Delta and purchase by US 

Airways, because the High Density Rule 

permits an unfettered sale of slots at 

DCA. They claim a forced divestiture of 

DCA slots conflicts with the HDR. 

As we explained in the Notice, we 

find that the slot swap between US 

Airways and Delta at both LaGuardia 

and DCA are a single transaction, such 

that the LGA purchase and sale would 

not occur without the DCA purchase 

and sale. Accordingly, we review both 

transactions as part of a single, unified 

transaction and may condition our 

waiver to the LGA Order on divestitures 

of slots at both airports. 

In the petition before us, the carriers 

seek a waiver from the buy-sell 

prohibition in the LGA Order for the 

purpose of exchanging slot interests at 

both LGA and DCA airports. We are not 

‘‘bound by legal formalisms’’ in 

discharging its duty but instead will 

‘‘take account of the economics of the 

transaction under investigation.’’ See 

Reves v. Ernst & Young, 494 U.S. 56, 61 

(1990); The Shoshone Indian Tribe of 

the Wind River Reservation, Wyoming v. 

United States, 58 Fed. Cl. 77, 86 (2003) 

(‘‘must examine the underlying 

economic reality’’ of the transaction). 

The fact that the slot swap concerns 

two airports does not compel us to 

segregate the transactions; rather, it is 

clear that the transactions are contingent 

on each other. The joint application of 

US Airways and Delta, filed August 24, 

2009, before the U.S. Department of 

Transportation for approval of the 

transfer of U.S.-Brazil frequencies is 

expressly termed ‘‘contingent joint 

application,’’ made dependent on 

completion of the Mutual Asset 

Purchase and Sale Agreement, which 

involves the slot interest transfer at 

issue here. As stated in the joint 

application: 

The Joint Applicants are submitting this 

application on a strictly contingent basis. The 

proposed transfer of the Joint Applicants’ 

U.S.-Brazil frequencies is part of the larger 

transaction described herein. The Joint 

Applicants will proceed with the larger 

transaction only if all transaction 

components * * * occur. (Joint application, 

fn. 2). 

The joint application explains that the 

larger transaction includes the swap of 

the slot interests at both LaGuardia and 

Reagan National airports: 

The [Mutual Asset Purchase and Sale] 

Agreement further involves the transfer of 

certain slots and real estate at LaGuardia 

Airport to Delta from US Airways, and the 

transfer of slots from Delta to US Airways at 

Reagan Washington National Airport, 

allowing the Joint Applicants to expand their 

respective operations at these points.’’ (Joint 

application, at 2–3). 

In such a situation, the agreements 

concerning each airport constitute ‘‘a 

single actual transaction.’’ See SEC v. 

M&A West, Inc., 583 F.3d 1043, 1052– 

3 (9th Cir. 2008) (holding that the 

‘‘existence of multiple agreements bears 

little effect when the agreements 

collectively constitute a single 

transaction.’’) The fact that the slot 

purchase and sale agreements at both 

DCA and LGA were entered into 

simultaneously and were linked 

together creates a necessary nexus 

between the agreements for purposes of 

conditioning our approval of the 

petition on certain remedies. Shoshone 

Indian Tribe, 53 Fed. Cl. at 88–89. 

Further, considering the DCA and LGA 

slot swaps as a single transaction 

justifies the remedies at both LGA and 

DCA, which effectuate the statutory goal 

of maximizing competitive 

opportunities for airlines and assuring 

that the traveling public receives the 

service and fare benefits provided by 

competitive airline service. 

The Proposed Transaction Would Lead 

to a Reduction in Competition at DCA 

and LGA 

In their filings, US Airways and Delta 

have not challenged the calculations 

stated in the Notice that, if the 

transaction were approved as proposed, 

the proportion of US Airways’ share of 

slots and departures at DCA, and Delta’s 

share of slots and departures at LGA, 

would increase substantially. DOT had 

calculated that US Airways’ share of slot 

interests at DCA (including regional 

affiliates) would increase from 44% to 

54%, and its share of departures would 

increase from 47 to 58%. Similarly, 

DOT’s calculations for Delta’s share of 

slot interests at LGA, including 

affiliates, would rise from 24 to 49%, 

and its share of departures would rise 

from 26 to 51 percent. In both cases, the 

increases would have the effect of 

making US Airways by far the dominant 

carrier at DCA, and Delta by far the 

dominant carrier at LGA. 

Rather than challenging the 

calculations of concentration, the 

carriers argued that the Notice fails to 

articulate the level of concentration that 

causes concern. 

The common metric used in antitrust 

analysis for market concentration levels 

is the Herfindahl-Hirschman Index, 

(HHI).44 Under the Horizontal Merger 

Guidelines issued by the U.S. 

Department of Justice and the Federal 

Trade Commission, transactions that 

increase the HHI by more than 100 

points in concentrated markets 

(concentrated markets are defined as 

those in which the HHI is in excess of 

1800 points) presumptively raise 

antitrust concerns. In its comments to 

the docket in this case, the United States 

Department of Justice stated that it had 

calculated that, if the transaction were 

approved as proposed, the HHI at will 

increase at LGA by 600 from 2394 to 

2994, and at DCA will increase by 626 

from 2756 to 3382.45 Under the 

Guidelines, such increases in highly 

concentrated markets are presumptively 

likely to create or enhance market 

power or facilitate its exercise.46

As the methodology for the 

calculation of the HHI indicates, it is not 

simply the market share of the largest 

competitor that raises potential 

competitive concerns, but its magnitude 

relative to the market shares of others. 

As the Notice pointed out, if the 

transaction were approved as submitted, 

at DCA US Airways would become three 

times the size of its closest competitor, 

while at LGA, Delta would become twoand-one-half times the size of its closest 

competitor. (Moreover, LGA would 

transition from an airport with three 

competing carriers of similar size to one 

with a single dominant carrier.) As also 

cited in the Notice, carriers with 

relatively weak minority positions have 

limited abilities to exert competitive 

pressure and discipline the fares of the 

dominant carriers, a point that neither 

US Airways nor Delta chose to dispute. 

In its comments, the Department of 

Justice concurred with our tentative 

view of the increased concentration 

levels. It emphasized another important 

point—that the transaction would 


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47 DOT calculates that at DCA there would be a 

sharp decrease in service by Delta, reducing it from 

a major competitor on DCA routes with US Airways 

to one holding fewer than 5.5% of the O&D 

passengers. Similarly, at LGA US Airways’ share of 

O&D passengers would fall to just 6 percent. In 

these cases, we fear that the diminished presence 

of Delta at DCA and of US Airways’ at LGA will 

lessen their abilities to competitively price their 

remaining flights at the respective airports. 

48Comments of the United States Department of 

Justice, March 24, 2010, p. 4. 

49See Comments of the United States Department 

of Justice, Appendix A. 

50 If the temporary slots interests acquired by 

JetBlue from American were included, the LCC 

percentage at DCA would rise to 5.2 per cent. 

51Notice, p. 12. 

52Comments of Southwest Airlines Co., p. 11–12. 

53Comments of the United States Department of 

Justice, March 24, 2010, p. 5, n.8, citing Hearing on 

the State of the Airline Industry: The Potential 

Impact of Airline Mergers and Industry 

Consolidation Before the S. Comm. on Commerce, 

Science and Transportation, 110th Cong. (Jan. 24, 

2007) (testimony of Gerald Grinstein, CEO of Delta 

Air Lines) (‘‘The combined carrier would 

overwhelming [sic] dominate at these unique 

airports with restricted entry due to slot controls 

* * * At Washington National, a merged US 

Airways-Delta would operate nearly four times 

more slots as its next largest competitor * * * At 

New York-LaGuardia, the combined carrier would 

operate almost twice as many slots as the next 

largest competitor * * *.’’). 

reduce competition between US 

Airways and Delta: 47

The transaction also will reduce 

competition between Delta and US Airways 

at DCA and LGA. US Airways and Delta are 

principal rivals at the airports. Post 

transaction, however, Delta will shrink 

substantially at DCA, reducing its ability to 

compete effectively with US Airways. 

Similarly, US Airways will shrink 

substantially at LGA, reducing its ability to 

compete effectively with Delta.’’ 48

While not an issue directly addressed in 

the HHI, DOT believes that, as a general 

rule, in the aviation industry more 

competitive pressure and pricing 

discipline can be exerted by low-cost 

carriers than by incumbent legacy 

carriers. This view is supported by the 

Department of Justice,49 as well as in the 

academic literature cited in the Notice 

and by DOJ in its Appendix A. At both 

LGA and DCA the second largest carrier 

would be the legacy carrier American 

Airlines. Moreover, low-cost carriers 

have only a very limited presence at 

both airports, with a 3.3% share of slot 

interest holdings at DCA 50 and a 6.8% 

share at LGA, and they face substantial 

barriers to increasing their presence, 

because entry to both airports is 

governed by slot regimes. As stated in 

the Notice, studies indicate that entry by 

low-cost carriers dramatically lowers 

fares and increases the volume of 

passengers in a market,51 a point 

reinforced by Southwest’s assertion in 

its comments that, were it to operate the 

slots to be divested, empirical data 

indicated that it would annually carry 

more than 340,000 additional 

passengers to and from each of the two 

airports and that its fares would average 

33% lower than Delta’s average fare at 

LGA and 49% lower than US Airways’ 

average fare at DCA.52

In addition, the Department of Justice, 

in its comments, stated that Delta has, 

in the past, assumed inconsistent 

positions on the competitive effects of 

slot shares and concentrations at DCA 

and LGA: 

During Delta’s bankruptcy three years ago, 

US Airways considered acquiring Delta. 

Delta resisted US Airways’ overtures, arguing 

that the merger would cause competitive 

harm at DCA and LGA. At that time, Delta 

argued that slot shares resulting from the 

merger levels that are approximately the 

same as the shares that would result from the 

present proposed transaction raised 

substantial competitive concerns. Delta’s 

current position is precisely the opposite.53

[citations omitted]. 

Although US Airways and Delta 

questioned the concern expressed in the 

Notice regarding the potentially 

anticompetitive effects resulting from 

increased airport concentration levels, 

they nonetheless offered a 

counterproposal under which they 

would voluntarily divest 15 slot pairs at 

LGA and 4.5 slot pairs at DCA. The slot 

pairs would be divested to four different 

carriers that were eligible under the 

terms of the Notice, with no carrier 

receiving more than 5 slot pairs. 

The carriers have not demonstrated 

that these voluntary divestitures should 

or would reasonably assuage the 

competitive concerns we expressed in 

our February 9 Notice. In particular, the 

divestiture of only 4.5 pairs of slots at 

DCA—where the Notice clearly 

indicated there were serious 

concentration and competition 

concerns—and the inability of the four 

low-cost beneficiaries to mount their 

own competing service in the near-term 

were disappointing elements to the 

counterproposal. As discussed more 

fully below, we conclude that the 

counterproposal falls significantly short 

of what we believe the minimum levels 

of divestiture must be to adequately 

protect the public interest. 

Our Concerns About Potential 

Anticompetitive Harm are WellFounded and Fully Justifiable 

In the Notice, we set out concerns that 

US Airways and Delta could increase 

the number of markets they serve on a 

monopoly or dominant basis, and that 

consumers at these airports may be 

harmed by the loss of nonstop service, 

the loss of a nonstop competitor, or the 

transfer of nonstop monopoly service to 

a more dominant carrier. 

We also tentatively concluded that the 

proposed transaction was likely to result 

in higher fares for consumers in certain 

domestic markets, as the carriers could 

rely on their increased dominance to 

maintain or enhance their premium fare 

structure in markets served at both 

airports. Furthermore, we expressed 

concerns that because slot restrictions at 

both airports substantially hinder 

proportional increases in competition 

by other carriers, higher fares could be 

sustainable due to the carriers’ 

increased market power at both airports. 

In reaching these tentative 

conclusions, we relied on statistical 

information indicating that US Airways 

and Delta already charge higher relative 

fares where they operate monopoly or 

dominant routes from airports where 

they have a strong presence, such as 

DCA and LGA. That information 

included relating US Airways’ and 

Delta’s average fares at DCA and LGA to 

the Standard Industry Fare Level (SIFL), 

a cost-based index that we have used 

historically to assist in its evaluation of 

pricing. That information indicated that 

the average fares charged by US Airways 

at DCA and Delta at LGA substantially 

exceeded not only the average fares at 

the other DC-area and NYC-area 

airports, but of the largest carriers at 

each of those airports. 

It is telling that US Airways and Delta 

have not urged in response that their 

fares are at or below averages, nor 

provided data showing that they do not 

utilize their pricing power to charge 

premium fares in markets that they 

dominate. Rather, they asserted that 

FAA’s concerns about potential 

anticompetitive actions were mere 

speculation, as we did not point to 

specific instances of harm; argued that 

the SIFL was effectively obsolete as a 

useful measure of cost; and urged that 

the benefits of the transaction, which 

they assessed at $44.3 million less in 

consumer costs for travel on affected 

routes and $153 million if increased 

flying due to improved connectivity and 

service were included, would outweigh 

the conceivable harms. 

As to the concerns about harm in 

specific markets, those concerns are real 

and demonstrable. If the transaction is 

consummated as finally proposed, Delta 

plans to withdraw from a number of 

DCA nonstop routes on which it 

competes with US Airways, and US 

Airways plans to withdraw from other 

LGA nonstop routes on which it 

competes with Delta. Unless new 

service is instituted by carriers other 

than DL and US, these routes will 


emcdonald on DSK2BSOYB1PROD with NOTICES
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54Letter of March 25, 2010 from Jim Webb and 

Mark Warner, United States Senators from Virginia, 

to DOT Secretary Ray LaHood, Docket FAA 2010– 

0109. 

55Comments of the United States Department of 

Justice, March 24, 2010, p. 6–7. 

56 Id., p. 4. 

57 Id., pp. 8–9. 

58Any bias that may exist between long-haul and 

short-haul markets, as argued by the parties, does 

not apply to the SIFL analysis used in this case, 

which is based on average passenger trip length at 

each of the three Washington or New York airports 

(which are all in excess of 500 miles). 

59These costs are reported to DOT in ‘‘Form 41 

Financial data’’ by certificated air carriers as a 

condition of their holding a U.S. air transport 

certificate of public convenience and necessity. U.S. 

air carriers submit these data accompanied by 

sworn statements attesting, under penalty of law, as 

to the accuracy and timeliness of the data. 

60 Yield at DCA is 27 cents per mile, vs. 17 cents 

at Dulles and 14 cents at BWI. 

61 Yield at LGA is 20.5 cents per mile, vs. 18.7 

cents at EWR and 14.7 cents at JFK. 

62These differences in the level of yields at area 

airports tended to correlate with the level of low 

cost carrier operations. Passengers pay more for 

nonstop service of equivalent distance at DCA and 

LGA than at alternative airports that have sizable 

LCC competition. 

63 In this, we compared the existing average fares 

from the O&D with the Standard Industry Fare 

Level (SIFL) metric fare for each of 39 DCA markets 

and stratified the markets based on US Airways’ 

market share, into monopoly, dominant, 

competitive, and non-competitive markets. These 

results provided a measure against which US 

Airways’ forecast fares were compared to their 

historical pricing performance and against the SIFL 

metric. 

become new monopoly routes for the 

remaining carrier. 

Moreover, at various other 

communities US Airways will depart 

markets at which it is the sole or 

dominant provider of LGA nonstop 

service, and Delta will enter those same 

markets and become the sole or 

dominant provider of service. At several 

more, Delta will depart a market at 

which it is the sole provider of DCA 

nonstop service, and US Airways will 

enter that same market and become the 

sole provider of such service. While 

replacing one dominant carrier with 

another in a market might at first glance 

seem to have a neutral overall impact, 

such a conclusion would ignore the 

greater economic dominance that the 

succeeding carrier would have as a 

result of the transaction. Although the 

carriers plan to add nonstop service to 

a number of new communities, that 

service is likely to be provided on a 

monopoly basis and as a result can be 

priced at a premium. As discussed also 

below, there is no assurance that such 

service will continue for the longer 

term. Delta has already notified the 

airport at Roanoke, VA that it does not 

plan to continue its service from that 

airport to LGA, leaving that community 

without any nonstop service to New 

York City airports, and its intentions for 

service to other Virginia communities 

has also been questioned.54

While some of the consumer benefits 

cited in support of this transaction may 

prove to be short-lived, the 

consequences of carrier dominance, if 

not effectively remediated, will likely be 

more persistent. In this regard, DOJ 

noted that: 

The FAA has concluded that the increased 

concentration resulting from the transaction 

will lead Delta and US Airways to ‘rely on 

their increased dominance to maintain or 

enhance their premium fare structure in 

markets served at both airports’ [citing the 

Notice at 7,309]. This is consistent with an 

extensive body of empirical work finding that 

airport concentration is associated with 

higher fares.55

DOJ also asserted that: 

The parties’ transaction will make LCC 

entry at LGA and DCA less likely, depriving 

consumers of the lower fares and vigorous 

competition that LCCs bring to the 

marketplace. It will increase the share of slots 

held by Delta and US Airways, giving them 

more revenue and profits at risk due to entry, 

more markets for which it will be in their 

interest to forestall entry, and thus, less 

incentive to sell or lease slots to a potential 

entrant.56

And also: 

LGA and DCA slots are highly 

concentrated in the hands of Delta and US 

Airways, both of which have little incentive 

to sell or lease slots to other carriers that 

would compete with them. 

* * * * * 

[C]oncern about LCC entry is especially 

great at DCA and LGA, where limited LCC 

presence and slot controls protect high fares 

for incumbent carriers.57

As noted above, in the Notice we had 

provided data to the effect that US 

Airways maintained an average fare that 

was high relative to SIFL at DCA. The 

carriers challenged the use of SIFL in 

this context, arguing that it was 

calibrated to regulate airline fares in the 

1970’s, has limited current use, fails to 

control for certain factors, and is biased 

in favor of longer routes at the expense 

of shorter ones.58

A mileage cost-based fare benchmark, 

SIFL is calculated every quarter based 

on airline operating costs reported to 

DOT by 17 major airlines (composed of 

6 legacy, 4 LCCs and 7 other carriers).59

Far from being obsolete, as the parties 

suggest, SIFL has been utilized by the 

Internal Revenue Service, the 

Government Accountability Office, the 

Department, other government agencies, 

the airline and airline consulting 

industries, and academics for fare 

analysis for many years. More 

importantly, the results achieved in our 

SIFL-based analysis mirror those of 

other tests. 

The first of these other tests of airport 

fare rankings is found in our ‘‘Domestic 

Airline Fares Consumer Report,’’ which 

is published quarterly. Table 7 of this 

report currently contains average fare 

premiums for 121 city markets, sorted 

by fare premium percentages in 

descending order. For the Third Quarter 

2009, DCA ranks number 3 with a 

27.7% fare premium, while LGA 

appears as number 16 with a percent 

fare premium of 9%. These fare 

premium calculations include distance 

and density adjustments, and clearly 

substantiate our concern that DCA and 

LGA are high-fare airports—even before 

the additional concentration and 

resultant increase in pricing power that 

would result from the carriers’ proposed 

transaction. 

Furthermore, an analysis of 

comparative yields—also discussed in 

the Notice, but in the context of 

comparing the three DC and three NYC 

airports—produced the same 

conclusions. We found that the average 

yield (i.e., revenue per passenger mile) 

in all markets at BWI is 48% less than 

DCA, and the average yield in all 

markets at Dulles is 37% less than 

DCA.60 Similarly, the average yield at 

JFK is 28% less than at LGA, and 

Newark is 9% less than at LGA.61

Moreover, using mileage-based 

calculations that should allay the 

carriers’ concerns about long-haul bias 

in the SIFL figures, we determined that 

for trips out to 1,000 miles, passengers 

at LGA pay 23% more on average than 

those at JFK ($147 vs. $120 each way), 

while passengers at DCA pay 64% on 

average more than those at BWI ($184 

vs. $113 each way).62

Market Analysis Confirms the 

Reasonableness of Our Concerns on 

Fares 

A review of both US Airways’ and 

Delta’s historical pricing in similar 

markets indicates that absent the 

opportunity for additional competition 

afforded by slot divestiture, consumer 

savings at DCA and LGA as a result of 

this transaction would be negligible. In 

assessing US Airways’ and Delta’s 

claims as to potential consumer savings 

that would arise as a result of the 

proposed transaction, we considered 

materials presented by US Airways that 

provided base period and forecast 

period estimates of market total 

passengers, projected load factors, and 

other data. We compared the forecasted 

fares against US Airways’ historical 

pricing in comparable markets,63 and 

given their poor correlation we believe 


emcdonald on DSK2BSOYB1PROD with NOTICES
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64 DOT did request that Delta provide any 

documents it had that were equivalent to what US 

Airways had provided, but the number of markets 

for which they were able to offer information was 

limited to 10 out of approximately 36 markets 

where service is proposed. While useful, the limited 

data prevented the Department from fully analyzing 

the level of forecast fares and required the 

Department to independently review Delta’s 

apparent pricing strategies in the markets. 

65Staff calculated passenger-weighted average 

fares that reflected Delta’s historic pricing in their 

existing markets, with which they estimated, 

together with other data (such as currently 

prevailing fares in the market and information on 

the competitive environment to be expected in the 

market) likely Delta fare ranges as a percent of SIFL 

in various city-pair markets. Of particular 

importance in this assessment was consideration for 

Delta’s future potential market share and the 

competitive position that would enhance or 

diminish Delta’s pricing power. 

66Here, we placed reliance on an analysis 

conducted by the Department of Justice, which 

found that 10 extra percentage points of low-cost 

carrier share at an airport reduces on average the 

airport-wide price premium or discount by 4 to 9 

percentage points, and increases the total number 

of passengers at the airport by 7.7 to 14.8%, 

depending on the sample used. 

67 DOJ Appendix A at A–7. 

68Their analysis showed, for example, that as 

LCC presence at an airport increases by 20 

percentage points (from zero to 20%, say), the 

average airport-wide fare premium falls by an 

average of 8 to 18 percentage points, depending on 

the sample of airports examined. Similarly, a 20 

percentage point increase in LCC presence is 

associated with a 15 to 30% increase in the number 

of passengers at that airport. 

69 Id. at A–6. 

70US Airways and Delta also asserted that the 

Department of Transportation and the Department 

of Justice have effectively treated the three 

Washington area airports as economic substitutes, 

Comments of Delta and US Airways at p. 34 and 

35. With regard to DOT, they cited Order 2006–6– 

17 (June 12, 2006) as evidencing such a position. 

In that case, three applicants competed for an award 

of two slot exemptions at DCA to serve a 

community within the 1,250-mile perimeter. DOT 

found the case to be ‘‘extremely close’’ between 

Comair’s proposal to serve Savannah and US 

Airways to serve Sarasota Bradenton, as each 

satisfied two of the statutory criteria and offered 

similar benefits to the respective communities. In 

weighing the advantages and disadvantages of the 

proposals, we ultimately selected the US Airways 

proposal because the population in the Sarasota 

MSA was larger than Savannah’s, US Airways’ 

proposal included a right-sizing of aircraft to reflect 

the seasonality of the Sarasota market, and 

Savannah had better access to the Washington area 

with three nonstops to IAD versus Sarasota’s one to 

BWI. In no way was the Department by doing so 

stating or implying that service between DCA, IAD 

and BWI was interchangeable. Order 2006–6–17 at 

7, 8. With regard to DOJ, Delta and US Airways 

cited a DOJ 2001 press release and a 1996 speech 

by an Assistant Attorney General. In these instances 

concerns were raised about prospective transactions 

that would increase concentration by carriers at DCarea airports. Again, these did not state that the 

airports were economic substitutes for one another. 

DOJ’s position on the issue is clearly set forth in 

its filings in this matter, which support DOT’s 

proposed action. 

the forecasts understate the average 

fares likely to actually prevail longer 

term in the particular markets. It may be 

that the prospective fares listed in the 

document are introductory fares, or 

other short-term or promotional fares. In 

any event, given the divergence between 

these claimed fares and US Airways’ 

historic pricing, we were unable to 

corroborate US Airways’ claims of 

savings in the DCA market. Rather, 

projecting the historic pricing trends, it 

is reasonable to assume that US Airways 

at DCA would, especially over time, 

utilize its increased pricing power to 

exact premium fares in many of the 

markets impacted by the transaction. 

We did not have a similar document 

from Delta that projected its fares in 

each proposed market.64 However, in 

order to assess the potential impact of 

Delta’s pricing policies on the traveling 

public we also examined probable Delta 

fares based on the carrier’s historic 

pricing performance at LGA.65 As with 

DCA, we were unable to corroborate the 

carrier’s claims of potential consumer 

savings and, as with DCA as well, the 

data indicated a likelihood that, 

especially over time, Delta would utilize 

its pricing power to exact premium fares 

in many of the markets affected by the 

transaction. 

Even if greater support might be 

mustered for the carriers’ claims of 

consumer cost savings, we compared 

those claims with the savings that might 

occur under a divestiture scenario. 

Based upon an analysis conducted by 

the Department of Justice,66 we are 

persuaded that additional LCC presence 

at an airport is associated with 

significantly lower average fares and 

higher passenger volumes at that airport 

and consequently greater public benefit 

from competition.67

Moreover, there is convincing 

evidence, also based upon the 

Department of Justice findings, that as 

additional LCC presence grows at an 

airport over time, it is associated with 

large and statistically significant price 

decreases and passenger volume 

increases at that airport.68 This 

demonstrates precisely why the 

divestiture of slots to LCC’s can 

ameliorate the competitive concerns 

raised by the applicants’ proposed 

transaction.69

The Three DC Area and Three NYC 

Area Airports Are Not 

‘‘Interchangeable’’ 

In our February Notice, we tentatively 

found that other airports in the New 

York and Washington, DC areas did not 

significantly impact the ability of 

carriers to exert pricing power at LGA 

and DCA, respectively. US Airways and 

Delta dispute this conclusion and 

maintain, as a key element in support of 

their application, that the three major 

metropolitan airports in Washington, 

and the three major metropolitan 

airports in New York, respectively 

constitute single product markets, 

implying that if fares were perceived to 

be rising too high at one airport, the 

harm would be mitigated by consumers 

simply shifting to the other two. Their 

argument heavily relied on a study 

performed on their behalf by Compass/ 

Lexecon, entitled ‘‘Analysis of Relevant 

Airport Groupings,’’ which was 

submitted to the docket. The study 

addressed ‘‘whether the relevant origin 

(destination) points in New York and 

Washington are individual airports or 

groups of airports that passengers are 

willing to use interchangeably.’’ 

While the study never concluded per 

se that the airports were 

‘‘interchangeable,’’ it concluded that 

there were ‘‘statistically significant 

relationships between fares at the three 

major New York airports, and 

separately, between fares at the three 

major Washington area airports * * *

[indicating] that fares at each airport 

* * * are affected by competitive 

conditions at the other airports’’ in the 

same metropolitan area.70

We have both reviewed the Compass/ 

Lexecon study, as well as comments 

offered to the docket on this issue, and 

we are confident in concluding that, 

while fares at one of the three DC-area 

or NYC-area airports can exert a minor 

influence on fares at the others in some 

markets, it is quite clear that the airports 

are not economic substitutes. We further 

conclude that the presence of less costly 

service alternatives from BWI and IAD 

in Washington and EWR and JFK in 

New York are not sufficient to mitigate 

the harm to consumers that can occur 

from significantly reduced competition 

at DCA and LGA. 

The Compass/Lexecon analytical 

approach was to compare fare trends 

over time between the three New York 

and three Washington area airports and 

common destinations. They found them 

to be systematically linked over time, 

such that a change in fare levels at one 

New York airport is associated with an 

increase in the fare at other area 

airports. From these observed ‘‘price 

linkages’’ they concluded that the New 

York and Washington area airports are 

‘‘commonly accepted to be substitutes.’’ 

We believe the methodology of the 

study was flawed in a number of 

fundamental respects. Most 

significantly, while the study claimed a 

relationship in the movement of fares, it 

effectively admitted that the degree of 

relationship in the actual level of fare 

change was small. The results indicated 


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71The study also failed to control for changing 

macro or even regional economic trends. Moreover, 

in testing whether common airport markets are 

competitive, reliance should not be made simply on 

changes in fare trends alone over time, but rather 

should also examine whether passenger levels at 

each airport pair responds to changes in price over 

time at other area airport pairs in the same city-pair 

market. Finally, the study attempts to show that 

populations in the New York and Washington areas 

are dispersed in such a manner that many could 

drive roughly equal distances to ‘‘competing’’ 

airports. However, in doing so it failed to reflect the 

drive time effects of congestion, or differences in 

the availability or cost of parking, accessibility to 

mass transit and airport amenities, although these 

factors clearly alter the practical substitutability 

(cost/value to consumers) of different airports to 

consumers. 

72 It is not surprising that there is some 

correlation among fares at nearby airports, and more 

correlation than one would find among three 

random airports. DOJ asserted that such correlation 

alone does not show whether fares at DCA or LGA 

are constrained by fares at nearby airports. 

73 In its comments, United Airlines contended 

that the differentials in yield affecting LGA and 

DCA may be due simply to the added costs of slots 

and problems with delays. As a general point, 

airline fares are market-based rather than cost-based 

(as evidenced in the variance in SIFL ratios 

discussed above). However, the three Washington 

and three New York airports largely share the same 

weather, a major cause for delays, and DOT Ontime 

Performance data for the fourth quarter 2009 

indicates that delays are more common at IAD than 

DCA or BWI, and more common at EWR than at 

LGA or JFK. (The percentage of delayed flights were 

17.7% for DCA, 17.4% at BWI, and 19.4% at IAD, 

as well as 24% for LGA, 198.8% for JFK, and 29.1% 

for EWR.). Further, the cost for slots could not 

explain the wide disparity between yields at DCA, 

IAD, and BWI on one hand and LGA, EWR, and JFK 

on the other. As noted above, DCA’s all markets 

yield is 37% above IAD and 48% above BWI, while 

LGA’s comparable figure is 8% higher than EWR 

and 28% higher than JFK. The value of a one cent 

yield difference per quarter on all scheduled 

passengers at DCA is estimated at $28.9 million, 

and $41 million at LGA—many times the value of 

a slot at those airports. 

74 In order to test this proposition we conducted 

a time series analysis using O&D data for the same 

period as used in the Compass/Lexecon study. The 

regressions produced correlation coefficients (R2) 

for each set of airports that were very low, with 

levels not significantly differentiated from zero— 

indicating the lack of a relationship between fare 

differences at DCA/LGA and traffic differences at 

the other metropolitan area airports. Even when 

regressions were performed focusing on overlap 

markets where the fare difference between the 

reference airport market and the base airport market 

were the greatest and where highest fares exist at 

the base airport—where consumers would be most 

likely to seek lower fares by turning to an 

alternative or substitute airport—the correlation 

coefficients were not substantially differentiated 

from zero. 

75Although supporting divestment of Delta slots 

at LGA in order to expand opportunities for new 

entrants and limited incumbents in the NYC 

metropolitan area, the Port Authority of New York 

and New Jersey contended that there were flaws in 

DOT’s analysis of airport substitutability and stated 

that it operates its airports to serve one travel 

region, with each airport having overlapping market 

areas. While market areas may ‘‘overlap,’’ that does 

not mean that passengers within the market areas 

are indifferent as to which airport they utilize, or 

that fares at one discipline those at others. We 

believe the further discussion as presented above 

addresses the Port Authority’s other concerns. 

76Comments of the United States Department of 

Justice, March 24, 2010, p. 16. 

that an increase in the fares at one New 

York airport of 10% is associated with 

an increase in the fare at another New 

York airport of only about 2.8%. At 

Washington, the corresponding figure 

was only 2.1%. If the major New York 

and Washington airports are ‘‘economic 

substitutes,’’ as the authors contended, 

that appears to be at odds with the fact 

that a price change at one would 

produce a change at the others of only 

one quarter or one fifth as much.71

Also, in its comments the Department 

of Justice expressed criticism of the 

Compass/Lexecon study, observing that 

the study failed to define the level of 

correlation in fares that would place the 

airports in the same relevant market, 

such that market power could not be 

exercised at DCA (or LGA) 

independently of BWI and IAD (or JFK 

and EWR).72

However, given the issues raised by 

the Compass/Lexecon analysis, we also 

independently considered whether the 

three airports in the New York area, and 

the three in the Washington area, 

effectively constitute the same market 

for all passengers. Comparative yields, 

Standard Industry Fare Levels, and 

Fare/Demand data were all studied for 

the DC and New York airports. In our 

review of each of these metrics, we 

found that for a large portion of 

passengers, especially time-sensitive 

passengers in each respective 

metropolitan area, the New York and 

Washington area airports are not 

effective substitutes for each other. 

a. Yield Analysis 

In analyzing both overlap and all 

markets at the airports, we found that 

yields (i.e., revenue per passenger mile) 

were substantially different among the 

airports. Specifically, we found the 

average yield in all markets at DCA is 

27 cents per mile, vs. 17 cents at Dulles 

and 14 cents at BWI. Similarly, the 

average yield at LGA is 20.5 cents per 

mile, vs. 18.7 cents at EWR and 14.7 

cents at JFK. If the airports were 

effective economic substitutes for all 

passengers, we would expect to see a 

greater self-equalizing of yields and the 

yield spreads would not differ so 

significantly.73

b. Standard Industry Fare Levels 

DOT conducted an analysis of the 

level of passenger weighted fares as a 

percent of SIFL at Washington and New 

York City airports to test the proposition 

that fares at these airports are essentially 

undifferentiated. The results are 

summarized at Appendix B. 

DOT found that the relationship of 

actual fares to the SIFL fare benchmark 

is very different at the respective area 

airports. At the Washington airports, 

actual fares are 65% of SIFL at BWI, 

77% at IAD and 101% at DCA. At New 

York, the actual fares are 71% of SIFL 

at EWR, 57% of SIFL at JFK, and 82% 

of SIFL at LGA. 

These disparities in weighted fares, 

consistent with our findings on yields, 

implies that price competition among 

the airports does not appear pervasive 

enough to discipline individual airport 

prices and thereby eliminate substantial 

price differentials. 

c. Fare/Demand Data 

If the three DC and three NYC airports 

were economic substitutes, a change in 

the fare levels at one should produce a 

corresponding change in passenger 

levels both at that airport and the others 

in its area. (One would expect that 

passengers would book less travel at an 

airport where fares were increased and 

more travel at the others, if the airports 

were indeed ‘‘competitors.’’) 74

We found no evidence of any 

significant substitutability existing 

among New York and Washington area 

airports. Substantial yield disparities 

and substantial differences in SIFL 

ratios were found to exist among the 

airports in both common and noncommon markets, and there were very 

low levels of correlation between the 

fare differences and the traffic volume 

differences at the airports. 

The Department of Justice also 

supported the proposition that most 

passengers do not consider the airports 

to be interchangeable.75 DOJ noted that 

the sometimes significant differences in 

average fares at the various airports, and 

the high values attached to the slots and 

the carrier’s efforts to protect these slots, 

‘‘show there is differentiation between 

LGA and DCA and other area airports.’’ 

It further observed that ‘‘Although other 

airports may be acceptable substitutes 

for some passengers (particularly pricesensitive passengers) they clearly are 

not close substitutes for other 

passengers, and competition among 

carriers at DCA and LGA matters.’’ 76

In conclusion, we believe that the 

evidence presented by the parties in 

support of their contention that 

Washington and New York area airports 

are effective substitutes is 

unconvincing. Any low level of 

substitution that may be demonstrated 

is inadequate to effectively discipline 

prices among the area airports, leaving 

the traveling public vulnerable to high 

fares arising from lack of competition 

and high market concentration. 


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26334 Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 

77Reply Comments of the United States 

Department of Justice, April 5, 2010, p 4, footnote 

7. 

78Comments of the United States Department of 

Justice, March 24, 2010, p. 18. 

79Comments of Southwest Airlines, p. 5. 

80 Indeed, a market-by-market analysis using the 

carriers’ own metrics of proposed services in new 

markets for Delta at LGA and US Airways at DCA 

gives rise to concern that, in some of the smaller 

markets, some of their services may not be 

sustainable over the longer term. 

81See, e.g., DOT Order 2008–2–28 Granting 

Within-Perimeter Slot Exemptions at Ronald 

Reagan Washington National Airport, February 22, 

2008, p. 10; and DOT Order 2007–5–12 Granting 

Within-Perimeter Slot Exemptions at Ronald 

Reagan Washington National Airport, May 23, 2007, 

p. 15. 

82Comments of the United States Department of 

Justice, March 24, 2010, p. 13. 

83 Id., p. 16. 

The Reputed Benefits of the 

Transaction Do Not Mitigate the 

Potential Harms 

The Joint Applicants have asserted 

that the FAA failed to consider the 

benefits of the proposed transaction, 

including improvements in service and 

increased competition among the 

parties. Specifically, the Joint 

Applicants claim that the transaction 

will result in a more efficient utilization 

of slots and facilities through upgauging 

of aircraft size at both LGA and DCA, 

thereby increasing throughput and 

competition while reducing congestion 

and delay. In addition, the Joint 

Applicants argue that the facilities 

transfer will enable Delta to create a 

seamless hub at LGA and will facilitate 

enhanced competition and preserve and 

enhance small community access at 

both LGA and DCA. 

By deciding to tentatively grant the 

waiver as conditioned in the Notice, we 

not only carefully considered these 

efficiencies, we also concluded that they 

would likely be realized if the 

transaction were implemented as 

remedied. It is clear from the record in 

this proceeding that the slots at issue in 

this transaction are currently being used 

sub-optimally and inefficiently, both 

from the perspective of the carriers 

holding them as well as from the 

perspective of the public interest. 

We concur that the transaction would 

provide a greater economic incentive to 

both carriers to achieve more efficient 

utilization of slots and facilities at both 

airports through upgauging aircraft size 

and that that would produce public 

benefits. However, we also concur with 

the Department of Justice in noting that, 

‘‘the parties’ benefits estimations use 

incorrect baselines, or ‘but-for-world,’ 

against which to compare their 

promised capacity and traffic gains.’’ 77

Rather than comparing the projected 

increase in capacity and traffic at 

current levels, the appropriate 

comparison is against alternatives to the 

current commercial situation faced by 

US Airways at LGA and Delta’s planned 

operations absent the transaction at 

DCA.78 As such, we believe that the 

Joint Applicants have overstated the 

public benefits and understated the 

potential harms from the transaction. 

Indeed, in many airport-pair markets, 

the Joint Applicants are merely 

replacing each other’s services at the 

two respective airports. Given that Delta 

and US Airways are currently primary 

competitors for each other at each of 

these airports, the loss in potential 

competition in the markets they both 

currently serve is particularly 

important. In addition, Delta’s claimed 

public benefits of creating a hub at LGA 

are also overstated. For example, as 

Southwest notes, creating a hub at LGA 

would likely necessitate reliance on 

regional jets, as Delta uses at other hubs, 

potentially eroding the benefits of 

upgauging. Further, a hub at LGA would 

utilize a significant amount of its scarce 

capacity to accommodate passengers 

who have no need or desire to be at LGA 

but are only stopping there on a journey 

elsewhere.79

The Joint Applicants assert that one of 

the main benefits of the transaction is 

increased or enhanced service to small 

communities. While Delta and US 

Airways have made public some of their 

new intended services, including 

service to small communities, the 

carriers have not released all intended 

service changes and in no way are 

bound to implement any of the 

proposed services in new markets.80

Also, if service to small communities 

with an established history of nonstop 

service to these slot controlled airports 

is eliminated, while service is 

announced to other small communities 

with a history of unsustainable nonstop 

service, it is questionable as to whether 

the proposed service is really beneficial 

to small communities as a whole, or is 

merely beneficial to some small 

communities at the expense of others. 

The Joint Applicants have the 

flexibility to provide service to small 

communities, even when faced with the 

proposed remedies, by eliminating 

marginal new frequencies in existing 

medium and large markets and/or by 

upgauging existing frequencies to 

release slots to allocate to small 

communities. While there are 

competitive reasons for allocating a set 

number of frequencies to a particular 

market, if service to smaller 

communities is as important as the 

parties contend, the carriers will 

allocate the necessary resources to serve 

them. In fact, despite their threats that 

small community service is at risk in a 

remedied transaction, the carriers may 

determine that it is financially 

beneficial to serve small communities at 

the expense of fewer frequencies in 

larger markets because yields in smaller 

markets are less susceptible to the 

dilutive effects of LCCs. DOT, on 

multiple occasions, has stated in DCA 

slot exemption proceedings that US 

Airways, with its large portfolio of DCA 

slot holdings, has had the ability to add 

new service to smaller communities 

from DCA, but has chosen not to do 

so.81

Unless mitigated, the potential harms 

in the proposed transaction are 

substantial. First, as explained above, 

the transaction will reduce competition 

between Delta and US Airways and 

competition from nearby airports will 

not completely offset lost competition 

between the two carriers at DCA and 

LGA. The Joint Applicants currently 

compete on a number of LGA and DCA 

nonstop routes and have competed on 

many others in the past. Scheduling 

plans submitted in the record indicate 

that Delta plans to withdraw from DCA 

nonstop routes on which it currently 

competes with US Airways, and US 

Airways plans to withdraw from certain 

LGA nonstop routes where it competes 

with Delta.82 We agree with DOJ that, 

‘‘In the longer run, competition between 

Delta and US Airways will be lost across 

a number of routes.’’ This lost 

competition is unlikely to be replaced 

by other incumbent competitors because 

they have significantly fewer slots and 

therefore focus their services at these 

airports on core markets, particularly 

large hub or focus cities where they can 

connect passengers to additional 

destinations. As DOJ concludes, ‘‘the 

transaction will reduce the number of 

carriers with ‘excess’ slots to discipline 

a fare increase by the dominant carriers 

from two to one at LGA and from one 

to zero at DCA.’’83

Second, evidence in the record 

establishes that the transaction will 

inhibit new entry at LGA and DCA. The 

record shows that there is a pattern of 

slot hoarding by incumbent carriers at 

both LGA and DCA in order to prevent 

new entrants and limited incumbents 

from obtaining or expanding 

competitive service at those airports. In 

its Notice, the FAA noted the lack of 

robust entry by new entrants or 

expansion by limited incumbents at 

these airports. DOJ concludes that slots 

at both airports are ‘‘highly concentrated 

in the hands of Delta and US Airways, 

both of which have little incentive to 


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84 Id., p .8. 

85 Id., p. 9. 

86 Id., p. 10, fn. 24. 

87 Id., p. 12. 88Comments of Southwest Airlines, p.10. 

89Comments of Southwest Airlines, p.7. 

90Comments of the United States Department of 

Justice, Appendix A at A–2. 

91Reply Comments of the United States 

Department of Justice, April 5, 2010, p.8. 

sell or lease slots to other carriers that 

would compete with them.’’ 84 Noting 

that fares are especially high at DCA due 

to limited presence of low-cost carriers 

and slot controls, DOJ cites evidence in 

the record that shows that both US 

Airways and Delta believe that 

competitive entry by low-cost carriers 

‘‘would substantially lower their 

protected fares and profits at these 

airports.’’ 85 DOJ further notes that 

incumbent carriers are hoarding and 

babysitting slots at these airports by 

flying excessive frequencies using small 

airplanes. In an effort to discourage 

these anti-competitive practices the 

80% use-or-lose rules were 

established.86 Legacy carriers, however, 

have effectively developed methods to 

bypass the use-or-lose provision by 

using their regional affiliates to 

downgauge equipment on existing 

routes while increasing frequency. 

While the carriers may claim that higher 

frequency service in a market can 

benefit consumers, the motivation for 

that may be simply covering more slots 

at a lower per departure trip cost and 

preventing the more efficient use of a 

finite number of slots. For example, in 

the LGA–Raleigh/Durham market, US 

Airways, Delta and American offer a 

total of 23 weekday departures with 

average seats per departure equaling just 

49 (May 2010 schedules). 

Also, the larger the slot portfolio of a 

given carrier, the greater the flexibility 

the carrier has to abuse the system, to 

bypass the provisions of the use-or-lose 

rules, and to block new entrants or 

limited incumbents from gaining new or 

improved access to these slot controlled 

facilities. The proposed transaction 

would give DL and US exactly that— 

larger slot holdings across many hours 

of the day, allowing these two carriers 

greater flexibility to bypass the 80% 

use-or-lose rules and to cover as many 

slots as possible by maintaining small 

regional aircraft operations. 

Furthermore, we agree with DOJ that 

the transaction will reduce the 

availability of slots, given that US 

Airways and Delta will have: (1) 

Substantially increased slot shares at 

DCA and LGA respectively; (2) greater 

marketing and scheduling ‘‘presence’’ at 

both airports that will allow them to 

exact a price premium in both existing 

and new markets; and, (3) a greater 

interest in maintaining the price 

premiums that exist at those airports by 

forestalling new entry.87

In order to discipline the increased 

concentration and additional pricing 

power for both US Airways and Delta 

and thereby mitigating the reduction in 

competition due to the transaction, 

significant additional competition is 

necessary. As analyses by both the 

Department, DOJ, and Southwest 

conclude, competition by new entrants 

and limited incumbents, particularly 

LCCs, will not only maximize the 

economic efficiency of the slots at both 

airports through the operation of more 

seats at lower fares per slot than by 

Delta or US Airways, but will also 

minimize the total number of slot 

divestitures required to remedy the 

anticompetitive effects of the 

transaction. 

We agree that there can be important 

benefits provided as a result of the 

proposed transaction, but it is at the 

margins, where those potential benefits 

are at their least, that divestitures have 

been proposed. US Airways and Delta 

have claimed that, overall, the proposed 

transaction would generate $153 million 

in savings. Yet, a study commissioned 

from Campbell Aviation Consultants for 

Southwest Airlines claims that, if 

Southwest operated the 20 slot pairs at 

LGA and the 14 slot pairs at DCA, the 

passenger fare savings per year would 

total $193 million compared to the use 

of those slots by Delta and US Airways. 

The Campbell study asserts that 

Southwest’s average fare would be 33% 

lower than Delta’s at LGA and 49% 

lower than US Airways’ fare at DCA. In 

addition, it estimates that Southwest 

would carry more than 340,000 

additional passengers to and from each 

airport annually.88 We note that the 

thrust of this study is supported by the 

analysis performed by DOJ, discussed 

above, which found that increased lowcost carrier share at airports 

significantly reduces price premiums 

and significantly increases ridership. 

We have concluded that the benefits 

of the Delta-US Airways transaction as 

proposed would not outweigh its 

potential for harm to the traveling 

public, but that the divestitures we have 

proposed will bring significant 

additional consumer benefits that would 

assure overall net benefit to the public. 

The Counterproposal Offered by the 

Parties Fails To Meet the Essential 

Requirements for a Suitable Remedy 

The divestitures proposed by the FAA 

were designed to mitigate the 

competitive harm resulting from the 

transaction at the least cost to the 

transaction itself. While the Joint 

Applicants’ counterproposal includes 

divestitures of 15 slots at LGA and 4.5 

at DCA, Southwest argues that the 

FAA’s proposed divestiture of 20 slot 

pairs at LGA and 14 pairs at DCA is not 

enough, and that even greater 

divestitures should be required.89

We have concluded that the 

divestiture of 20 slot pairs at LGA and 

14 slot pairs at DCA are the minimum 

necessary to remedy the reduction in 

competition resulting from the 

transaction while preserving legitimate 

efficiencies obtained from it. While the 

divestiture of more slots than proposed 

in the Notice would make the market 

more competitive, we seek to minimize 

the numbers of slot pairs required to 

remedy the transaction by maximizing 

the competitive potential of the 

divestiture packages. This objective is 

accomplished under the specific 

circumstances of this case by balancing 

four essential components of an 

effective slot remedy package. The first 

component is a sufficient number of 

divested slots to allow other carriers to 

mount an effective competitive response 

to the increased dominance and 

reduction of competition that would 

occur as a result of the transaction. The 

second remedy component is to define 

the pool of competitors eligible to take 

up the remedy based on the carriers that 

would have the greatest economic 

incentive to use slots obtained as 

intensively as possible, thereby exerting 

the most competitive discipline per slot 

(by operating larger capacity aircraft and 

offering the most price competition at 

the affected airports). As DOJ points out 

in the Appendix to its comments 90 it is 

widely recognized in the literature that 

low cost carriers exert maximum 

competitive pressure in the markets 

they serve by selling more seats at lower 

fares. The third remedy component is to 

ensure that the bundles of slots for 

divestiture are both suitable for a 

commercially viable pattern of 

scheduled service in the types of 

markets affected by the transaction and 

are constructed proportionate to the 

slots that were being transferred 

between the parties to the transaction. 

The fourth component is to ensure that 

a process for distributing the divested 

slot packages is not left to the parties 

themselves, given the overwhelming 

incentive for them to structure the 

divestitures to minimize the competitive 

impact on themselves and thereby the 

benefits to consumers.91 The 

counterproposal offered by the parties 


emcdonald on DSK2BSOYB1PROD with NOTICES
26336 Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 

92 Joint Application of American Airlines, Inc., 

British Airways PLC, FinnAir OYJ, Iberia Lineas 

Aereas de Espana and Royal Jordanian Airlines 

under 49 U.S.C. 41308 and 41309 for approval of, 

and antitrust immunity for, agreements; DOT–OST– 

2008–0252; DOT Show Cause Order 2010–2–8; case 

now pending DOT final disposition. 93Final Order 2009–7–10 (Docket OST–2008– 

0234). 94Evaluating the competitive impact in 

international markets differs substantially from 

such an evaluation in domestic markets. It is widely 

accepted in the airline industry that connecting 

competition is much more effective at disciplining 

fares on long-haul routes than on short haul routes, 

due to much longer journey times and the ratio of 

the non-stop elapsed journey time to the elapsed 

journey time of a connecting itinerary. Furthermore, 

factors such as circuity play a much more important 

role in the efficacy of connecting competition on 

short- and medium-haul routes and thereby on a 

competitive assessment of a reduction in 

competition on such routes. The relevant markets 

in this case are therefore considerably different, 

resulting in a fundamentally different competitive 

impact, and typically requiring different remedies. 

95 Delta and US Airways further claim that the 

recent American-JetBlue transaction should satisfy 

DOT’s concerns with regard to low-cost entry at 

DCA. In that transaction, JetBlue will lease 8 slot 

pairs at DCA. However, the source of the slots is 

American, which would have the second largest 

number of slots and be second in departure share 

at DCA were we to approve the US–DL proposal. 

US Airways would retain the same level of 

concentration that cause our concerns here, and 

even obtains a more dominant position over its 

nearest rival at the airport. 

fails to satisfy each and every one of 

these four essential remedy 

components, and therefore fails to meet 

the essential requirements for a suitable 

remedy. 

Furthermore, while Delta and US 

Airways have offered a counterproposal 

for fewer divestitures, they have neither 

demonstrated that our number is 

arbitrary nor have they shown that their 

number better suits the public interest 

or addresses the competitive harm 

resulting from the transaction. We have 

noted that we agree with the 

Department of Justice that there will be 

a significant reduction in competition 

between US Airways and Delta on a 

number of overlap routes, based on their 

confidential post-transaction plans. 

Remedying this loss of competition 

alone substantiates the number of 

divestitures put forward by the FAA, 

even before other anticompetitive effects 

are considered, such as the effects of 

increased city and airport carrier 

‘‘presence’’ factors which impact 

capacity and pricing in other markets at 

the two airports. 

The Joint Applicants, Continental and 

the Delta Master Executive Council of 

ALPA argue that the remedy proposed 

for this transaction is substantially more 

onerous when compared with DOT’s 

tentative decision in the oneworld 

antitrust immunity case involving 

American Airlines, British Airways, and 

Iberia 92 or the final decision in the 

recent Star Alliance immunity case.93

However, the cases are not comparable. 

Antitrust immunity applications are 

governed by different statutes (49 U.S.C. 

41308 and 41309) and standards than 

those applicable to the transaction 

before us. Further, the facts and 

circumstances of each case are very 

different. Delta and US Airways seek a 

waiver from an Order allowing them to 

consummate a slot transaction involving 

a significant number of slots at two 

constrained domestic airports that 

would have a substantial impact on 

domestic competition. The antitrust 

immunity cases, on the other hand, 

involve cooperation on long-haul, intercontinental itineraries, in a context of 

inter-alliance competition for global 

traffic flows. There is no immunity grant 

possible for cooperation between two 

U.S. carriers on domestic routes.94

Foreign carriers partner with one or 

more domestic carriers to expand codesharing and alliance opportunities to 

compete with other alliances of foreign 

and domestic carriers, many of which 

are already exempt from the antitrust 

laws. If the Department determines that 

an exemption from the antitrust laws is 

necessary, the Department next 

considers whether those benefits can be 

achieved ‘‘by reasonably available 

alternatives that are materially less 

anticompetitive.’’ 49 U.S.C. 

41309(b)(1)(B). The Department 

therefore considers the substantial 

benefits that may result from the airline 

alliances and determines the extent of 

required slot divestitures or other 

remedies as a condition to the grant of 

immunity.95

As proposed in the Notice, our 

remedy is designed to allow nonaligned, new entrants and limited 

incumbents to establish new or 

complement existing patterns of 

services that are commercially viable at 

both slot-constrained airports. The 

Notice issued February 9, 2010, set forth 

a proposal under which slot interests at 

DCA and LGA would be bundled in a 

divestiture. The purpose of bundling the 

slot interests was to ensure that a 

purchaser would obtain a sufficient 

number of slot interests that would 

make it possible to initiate service in a 

way that provides meaningful new 

competition. We continue to believe 

that bundling provides the best 

opportunity to achieve this goal. 

However, after reviewing the 

comments submitted on the Notice and 

further consideration, we have slightly 

adjusted the four proposed bundles at 

LGA from one bundle of eight slot pairs 

and three bundles of four slot pairs 

each, to two bundles of six slot pairs 

each and two bundles of four slot pairs 

each. We noted that Delta and US 

Airways’ counterproposal at LGA 

indicated an interest from two limited 

incumbents (AirTran and Spirit) and 

one prospective new entrant (WestJet) 

for five slot pairs each. The 6–6–4–4 

arrangement may better accommodate 

the interest they demonstrated, as the 

individual bundles would allow 

existing slot portfolios and 

corresponding patterns of service to be 

expanded or new service to be launched 

with moderate frequency service. By 

making available for purchase from the 

existing slot holder two bundles of slots 

at DCA and four bundles of slots at 

LGA, limited incumbent carriers will 

have the opportunity to build on their 

limited presence at the slot constrained 

airports by adding frequencies to 

existing markets for better schedule 

coverage throughout the day, a key 

benefit to their customers, and a key 

defense against a dominant carrier that 

may choose to inundate markets in 

which it competes with new entrants 

and limited incumbents with excess 

capacity in order to force the smaller 

carrier from the market. Both new 

entrant and limited incumbents could 

also establish new service to other focus 

cities in their networks. Bundles of slots 

will also allow carriers with limited 

operations to improve efficiencies at 

these constrained airports in terms of 

better utilization of ground staff, 

equipment and facilities. Efficiencies 

will also be gained in the form of 

increased throughput, as new entrants 

and limited incumbents will offer on 

average more seats per departure than 

proposed by US Airways and Delta with 

their reliance on regional affiliates for 

over 80% of their proposed new flying 

from DCA and LGA. 

With only two limited incumbents 

currently serving DCA, the creation of 

two slot bundles provides for diversified 

penetration in the form of a new entrant 

or limited incumbent launching service 

in either high frequency business 

markets or multiple smaller markets. 

Terms of Final Waiver Notice 

This grant of waiver is conditioned 

on: (1) The divestiture by US Airways 

of 20 pairs of slot interests at LGA in the 

slot bundles identified below; (2) the 

divestiture by Delta of 14 pairs of slot 

interests at DCA in the slot bundles 

identified below (these slot interests 

will be made available for purchase by 

new entrants and limited incumbents as 

discussed later), and; (3) US Airways 

and Delta making available gates and 

other ground facilities on reasonable 

terms to the purchasers of divested slots 

if requested by the purchaser, and if 


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such gates and facilities are not 

available from the airport authority. The 

following discussion details these 

conditions and establishes the 

procedure for the purchase of divested 

slot interests. As we discussed in the 

February Notice, our goal of maximizing 

competition and consumer benefits will 

be realized most effectively by ensuring 

that the slot interest bundles are 

purchased by limited incumbents and 

new entrants (sometimes referred to 

herein as ‘‘eligible carriers’’). As 

described in the February 9, 2010, 

Notice, eligible carriers must be U.S. or 

Canadian air carriers having fewer than 

five percent of total slot holdings at 

DCA and/or LGA, do not code share to 

or from DCA or LGA with any carrier 

that has five percent or more slot 

holdings, and are not subsidiaries, 

either partially or wholly owned, of a 

company whose combined slot interest 

holdings are equal to or greater than five 

percent at LGA and/or DCA. Carriers 

that would not qualify include those 

who are involved in a code-share 

relationship at DCA/LGA with carrier(s) 

that also would not qualify as of the 

date of this Notice. 

As proposed, divested slot interests 

will be bundled for reallocation. This 

bundling ensures a purchaser can obtain 

sufficient slot interests to initiate or 

increase service in a manner that meets 

its operational needs and enhances 

competition. The sellers may not set a 

reserve price for the slot interest 

bundles. 

As discussed above, we have slightly 

adjusted the four proposed bundles at 

LGA from one bundle of eight slot pairs 

and three bundles of four slot pairs 

each, to two bundles of six slot pairs 

each and two bundles of four slot pairs 

each. For the DCA slot interests, there 

will be two bundles (one consisting of 

eight pairs and another of six pairs). For 

the LGA slot interests, there will be four 

bundles (two consisting of six pairs and 

two of four pairs). The following table 

shows the slot interest bundles as 

adopted. 

At DCA: Bundle A would consist of 8 

pairs of slots at: 0700 (2), 0800 (1), 1000 

(2), 1100 (1), 1200(1), 1300 (1), 1400 (2), 

1500 (1), 1600 (2), 1900 (1), 2000 (1), 

2100 (1), and 

Bundle B would consist of 6 pairs of 

slots at: 0700 (1), 0900 (2), 1100 (1), 

1200 (1), 1300 (2), 1700 (1), 1800 (1), 

1900 (1), 2000 (1), 2100 (1). 

At LGA: Bundle A would consist of 6 

pairs of slots at: 0600 (D), 0700 (D), 0800 

(A), 0800 (D), 0900 (A), 1000 (D), 1300 

(A), 1400 (D), 1700 (A), 1800 (D), 2000 

(A), and 2100 (A); 

Bundle B would consist of 6 pairs of 

slots at: 0700 (D), 0900 (A), 1000 (D), 

1100 (A), 1200 (D), 1300 (A), 1400 (D), 

1500 (A), 1600 (D), 1700 (A), 1700 (D), 

and 2000 (A); 

Bundle C would consist of 4 pairs of 

slots at: 0600 (D), 0800 (A), 0900 (D), 

1100 (A), 1200 (D), 1500 (A), 1600 (D), 

and 2000 (A); and 

Bundle D would consist of 4 pairs of 

slots at: 0700 (D), 1000 (A), 1100 (D), 

1300 (A), 1400 (D), 1800 (A), 1900 (D) 

and 2100 (A). 

Eligible carriers may be unable to use 

acquired slot interests if they cannot 

obtain access to gates, ticket counters, 

baggage handling services, loading 

bridges, and other ground facilities. If 

the purchaser lacks access to gates and 

ground facilities or is unable to obtain 

such access from the airport authority, 

the seller must make these available to 

the purchaser under reasonable terms 

and rates. 

The divested slot interests will be 

subject to certain limitations to ensure 

they achieve the competition goals 

discussed in this grant of waiver. These 

limitations on the LGA slot interests are 

effective until the termination of the 

LaGuardia Order (currently October 29, 

2011), and they do not expire for the 

DCA slot interests. The FAA will waive 

the respective use or lose provisions of 

the LaGuardia Order and HDR for 6 

months following purchase to allow the 

purchaser to begin service, but the 

purchaser must initiate service no later 

than 6 months following purchase. The 

purchaser may lease the acquired slots 

to the seller until the purchaser is ready 

to initiate service to maximize 

operations at the airports. The slot 

interests may not be sold or leased 

during the 12 months following 

purchase because the purchaser must 

hold and use the acquired slot interests. 

However, purchasers may engage in 

one-for-one trades of these slot interests 

for operational needs. The slot interest 

limitations would attach to the slot 

interest acquired by the eligible carrier 

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

trades are subject to the FAA notice 

requirements in the LaGuardia Order 

and HDR. After the initial 12 months, 

the slot interests may be sold (in the 

case of DCA slot interests), traded, or 

leased to any carrier that at the time of 

the sale, trade, or lease would have met 

the eligibility requirements to make an 

offer under this Waiver for the divested 

slot interests. Trades or leases of LGA 

slot interests may not exceed the 

duration of the LaGuardia Order as 

stated in that Order. Any of these 

transactions are reportable under the 

HDR and LaGuardia Order. 

Within 30 days of this grant of waiver, 

Delta and US Airways must notify in 

writing to the FAA whether they intend 

to proceed with the slot transfer 

transaction. If they intend to 

consummate the slot transfer transaction 

subject to this waiver, that notice must 

provide the following information for 

the divested slots: 

(1) Operating Authorization number 

(LGA) or slot number (DCA) and time; 

(2) Frequency; 

(3) Effective Date(s); 

(4) Other pertinent information, if 

applicable; and 

(5) Carrier’s authorized representative. 

The FAA will post a notice of the 

available slot interest bundles on the 

FAA Web site at http://www.fly.faa.gov 

within two business days of receiving 

all required information for the sellers 

and, if practicable, will publish the 

notice in the Federal Register. The 

notice will provide seven business days 

for purchase offers to be received and 

will specify a closing date and time. 

Eligible carriers may register to 

purchase the slot interest bundles via email to 7-awa-slotadmin@faa.gov. 

Registration must be received 15 days 

prior to the start of the offer period and 

must state whether there is any common 

ownership or control of, by, or with any 

other carrier and certify that no 

purchase offer information will be 

disclosed to any person other than its 

agent. 

An eligible carrier may purchase only 

one slot interest bundle at each airport, 

except at the seller’s option as discussed 

later, as we seek to maximize the 

interest of eligible carriers in 

participating in the proceeding. This 

limitation will prevent any one carrier 

from acquiring all divested slots, which 

was raised as a concern in the 

comments. We are also incorporating 

specific procedures to facilitate the sales 

process on multiple slot interest 

bundles. An eligible carrier will register 

for each slot interest bundle that it 

wishes to buy, and it will be assigned 

a random number for each registration 

so no information identifying the 

purchaser is available to the seller or 

public. A purchaser will be allowed to 

indicate its preference ranking for each 

slot interest bundle as part of its offer. 

Finally, as discussed in more detail 

later, the FAA will review the offers for 

each bundle in order (i.e., bundles A 

and B for DCA and A, B, C, and D for 

LGA). 

All offers to purchase slot bundles 

must be sent to the FAA electronically, 

via the e-mail address above, by the 

closing date and time. The offer must 

include the prospective purchaser’s 

assigned number, the monetary amount, 

and the preference ranking for that slot 

interest bundle. No extensions of time 

will be granted, and late offers will not 


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be considered. The FAA will post all 

offers on the Web site as soon as 

practicable after they are received. Each 

purchaser can submit multiple offers 

until the closing date and time. 

Once the sales period closes, the FAA 

will determine the highest offer for each 

bundle. If each bundle has only a single 

offer, the FAA will notify the seller by 

forwarding the purchaser’s 

identification. If one eligible carrier has 

made the highest purchase offer on 

multiple bundles, the FAA will 

determine which offer will be valid 

based on preference ranking and bundle 

order. The FAA will identify the nexthighest offer from a carrier that remains 

eligible to purchase the bundle as the 

successful offer on the other bundles. 

This information will be forwarded to 

the respective seller. The FAA will also 

provide information about the amount 

of the highest offer, and the selling 

carrier may choose to accept the highest 

offer instead of the offer identified by 

the FAA. Upon acceptance, the FAA 

will notify the selling and purchasing 

carriers to allow them to carry out the 

transaction, including any gate and 

ground facilities arrangements. The 

seller and purchaser must notify the 

FAA that the transaction has been 

completed and certify that only 

monetary consideration will be or has 

been exchanged for the slot interest 

bundles. This notification must occur 

within five business days of notification 

by the FAA of the winning offer. A 

transaction is final, and the waiver will 

be effective, only when any issues 

related to gates or ground facilities have 

been resolved, although not all 

purchasers may need gates and facilities 

beyond what they already have. The 

FAA then will approve the transaction 

and will maintain and make publicly 

available a record of the offers received, 

the identity of the seller and purchaser, 

and the winning price. 

In the unlikely event that there are no 

offers for a slot interest, those slot 

interests will revert automatically to the 

FAA. If necessary, we will announce at 

a later date a means for disposing of or 

retiring a slot interest that attracts no 

purchase offer. We do not expect that 

this need will arise. 

The grant of waiver becomes effective 

upon FAA approval of all slot interest 

bundle transactions. 

Issued in Washington, DC, on May 4, 2010. 

Ray LaHood, 

Secretary. 

J. Randolph Babbitt, 

Administrator, FAA. 

Appendix A 

Summary of Comments 

We received comments from numerous 

commenters which we have summarized 

below. 

US Airways-Delta Response 

Delta and US Airways submitted 

comments in opposition to the FAA’s 

divestiture conditions. The carriers asserted 

that: 

(1) Congress empowered FAA only to 

promote safety and the efficient use of 

airspace and, thus, it lacks the statutory 

authority to consider potential effects on 

competition in carrying out its other duties. 

(2) While the Secretary of Transportation 

has authority to consider competition-related 

factors, he is prohibited by 49 U.S.C. 

106(f)(2)(D) from directing the FAA to use its 

authority to do what it cannot do directly. 

(3) The proposed divestiture would 

constitute an unlawful taking under the Fifth 

Amendment, because restrictions on the sale 

are imposed that would make it impossible 

for the carriers to realize full market value. 

(4) DOJ is the agency best equipped to 

consider whether the transfer will hinder 

competition, acknowledging that DOJ is 

currently undertaking a review. 

(5) FAA cannot use a waiver applicable to 

LGA to force a divestiture at DCA. 

(6) FAA failed to analyze ‘‘overwhelming 

evidence’’ that the proposed transaction will 

benefit competition, such as service to new 

destinations, upgauging of aircraft, new 

connecting opportunities, etc. 

(7) FAA’s proposed divestitures fail to 

consider the integrated nature of the 

transaction. 

(8) FAA’s concerns about potential 

anticompetitive actions are mere speculation, 

as it did not point to specific instances of 

harm. 

(9) FAA based its analysis on a 1970s 

vintage measure (SIFL) that fails to take into 

account the major changes in the industry 

over the last 30 years, such as industry 

deregulation, emergence of LCC’s, etc. 

(10) FAA failed to articulate and explain 

the level of airport concentration that causes 

it concern. 

(11) The three DC-area and three NYC 

airports are competitively linked, and FAA’s 

contention that they are not substitutes is 

inconsistent with past positions of DOT and 

DOJ. 

(12) FAA did not sufficiently explain why 

divestitures of 14 pairs at DCA and 20 pairs 

at LGA were appropriate, and that level of 

divestiture is inconsistent with DOT’s recent 

action in the oneworld case in which only 4 

pairs of slots were required to be leased for 

ten years. 

Notwithstanding these objections, US 

Airways and Delta stated that, as they were 

‘‘mindful of the concerns expressed by FAA’’ 

and desiring of a solution that would permit 

them to move forward, they had entered into 

provisional divestiture agreements with four 

carriers that were eligible under the terms of 

the Notice for 15 slot pairs at LGA and 4.5 

slot pairs at DCA. The 15 slot pairs at LGA 

would be transferred, five each, to AirTran, 

Spirit, and WestJet over periods of up to 28 

months; the 4.5 pairs at DCA would be 

transferred to JetBlue. The carriers added that 

these more limited divestitures, ‘‘while 

diminishing the benefits of the transaction,’’ 

would preserve enough of the benefits to 

permit them to go forward. 

US Airways and Delta stated that if the 

FAA grants the waiver subject to the 

proposed divestiture conditions, they would 

not consummate the transaction, and 

reserved the right to seek judicial review. 

Delta and US Airways submitted joint 

comments in another filing, together with the 

new entrant/limited incumbent carriers to 

which they would divest slots under their 

counterproposal: AirTran Airways, Inc., 

Spirit Airlines, Inc., JetBlue Airways, Inc., 

and WestJet, Inc. These commenters urge the 

FAA to approve the pending request, as 

modified by the slot transfer agreements. 

Additional details on the counterproposal 

were provided: (1) At DCA, JetBlue would 

acquire 4.5 pairs of slots (JetBlue intends 

otherwise to add one off-peak hour slot to 

complete a 5-roundtrip service pattern); (2) at 

LGA, AirTran, Spirit, and WestJet would 

acquire 5 pairs of slots each, respectively, for 

a total of 15 pairs; (3) in all cases, the 

acquisition would be conditioned on FAA’s 

grant of the LGA Waiver request; (4) the 

JetBlue transfer would take place relatively 

soon, but Delta would continue service with 

the slots under a lease from JetBlue for a 

period; (5) the AirTran and Spirit 

transactions would occur over a 24-month 

period at dates of their choosing; and (6) the 

WestJet transaction would occur at a date of 

its choosing within 28 months. WestJet and 

Delta will be negotiating other commercial 

arrangements as well. 

Given the issues raised by the carriers’ 

counterproposal, the FAA determined that it 

was in the public interest to reopen the 

comment period for seven days to give all 

interested parties additional time to file 

rebuttal comments. Comments filed by April 

5, 2010, were considered. For convenience 

and brevity, the comments described below 

include responses made both on the initial 

Notice and on rebuttal. 

Summary of Comments From the United 

States Department of Justice 

The Department of Justice (DOJ) submitted 

comments in support of the FAA’s tentative 

decision to grant the requested waiver with 

conditions. The Department cited several 

factors in its finding of support, including: 

(1) The availability of slots is a substantial 

barrier to entry at LGA and DCA. Air carriers 

holding large concentrations of slots have 

little incentive to lease or sell slots to lowcost carriers, thus stifling competition and 

depriving consumers of lower fares. 

(2) The slot transaction will reduce 

competition between Delta and US Airways 

at LGA and DCA. The Department contends 

that, post transaction, Delta will shrink 

substantially at DCA and US Airways will 

shrink substantially at LGA, thereby reducing 


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either carrier’s ability to compete with each 

other. 

(3) The transaction will increase the slot 

holdings of the dominant carriers at LGA and 

DCA. US Airways will increase its DCA slot 

holdings from 44% to 54%, and Delta will 

increase its LGA slot holdings from 24% to 

49%, thus producing a highly concentrated 

market and an enhanced premium fare 

structure in markets served by both airports. 

(4) Most low-cost carrier slot acquisitions 

at LGA and DCA have been the result of 

Congressional or DOT/FAA action rather 

than secondary slot market transactions. 

Despite FAA regulations designed to ensure 

that underutilized slots are reallocated to 

carriers that will used them efficiently, 

incumbent carriers continue to hoard slots, in 

part, to keep the slots out of the hands of new 

entrants. 

(5) The proposed slot transaction will 

exacerbate the disincentives of either carrier 

to sell or lease slots to other carriers. With 

increased slot shares at LGA and DCA, the 

carriers will have more revenue and profit at 

risk, and thus even less incentive than exists 

today to sell or lease slots to potential new 

entrants. 

(6) The FAA’s proposed slot divestiture is 

not likely to interfere substantially with the 

purported increase in seat capacity at either 

airport. There is little evidence suggesting 

that a smaller transaction—as would result if 

the parties accepted the terms of the FAA’s 

proposed waiver—would be unprofitable for 

the parties. 

(7) The consumer benefits from LCC entry 

that will likely result from the FAA’s 

proposed divestiture almost certainly will 

outweigh any loss from Delta and US 

Airways making minor modifications to their 

proposed schedules. 

(8) DOJ favors an anonymous, cash-only 

sales of slots in which the FAA forwards the 

highest offer to the seller for acceptance or 

rejection if the method is implemented in a 

sound way. The Department advocates for 

the anonymity of potential buyers, but 

encourages the FAA to clarify what happens 

in the event that a carrier rejects the highest 

purchase offer. The Department also 

recommends expanding the restriction on resales and leases of slots purchased pursuant 

to the selected slot acquisition option. 

(9) The Department recommends 

precluding, for some reasonable period, 

purchasers from selling and leasing any slots 

to carriers not eligible under the terms of the 

final action taken on this proceeding in order 

to ensure that divested slots stay in the hands 

of new entrants or limited incumbents. 

(10) The Department notes that purchasers 

of divested slots will also need access to 

sufficient ground facilities, and recommends 

that the FAA should consider ways to ensure 

that the purchaser will obtain access to these 

facilities. In concluding its comments, DOJ 

finds that the FAA’s proposed waiver with 

conditions will be in the public interest 

because it will free up slots for other carriers, 

facilitate entry at LGA and DCA, increase 

competition, and lower fares for consumers 

without interfering with the purported 

benefits of the transaction. 

Summary of Other Comments 

Southwest Airlines, Inc. filed comments, 

arguing that: 

(1) The consequences for the public of this 

attempted re-allocation of the markets by 

Delta and US Airways will be higher fares, 

less competition, and fewer service options. 

(2) Delta and US Airways have long been 

free to upgauge their aircraft, but they have 

done the opposite over the last decade 

(Delta’s average aircraft size at LGA has 

declined to 105 seats, while US Airways’ 

average aircraft size at DCA has sunk to 92 

seats—reflecting economic inefficiencies at 

both airports). 

(3) FAA’s proposed carve-outs of 20 and 14 

slot pairs are a good start, but are too limited 

to have a significant restraining effect on 

fares, except in a few markets. 

(4) If the divested slots are divided among 

several carriers, the resulting competition 

will be so diluted it will have no effective 

price discipline. A carve-out of at least 40 

pairs at LGA and 20 pairs at DCA should be 

required. 

(5) DOT/FAA has ample legal authority to 

require carve-outs (Since DOT/FAA has the 

authority to grant the waiver request in full, 

it must also have the authority to grant it in 

part), and carve-outs here are ‘‘in the public 

interest.’’ 

(6) Despite multiple efforts, Southwest has 

been unable to acquire DCA slots, or more 

than the 14 slots it has at LGA. Its average 

fares would be 33% lower than Delta at LGA 

and 49% lower than US Airways at DCA. If 

it had 20 pairs at LGA it would generate $84 

million annually in consumer savings, and if 

it had 14 pairs at DCA it would generate $109 

million per year in consumer savings. It 

would also serve 340,000 more passengers at 

each of the airports. 

(7) FAA should allocate the divested slots 

via a transparent sales process to the 

purchaser with the highest cash offer. Other 

options invite a manipulation of the process 

for anti-competitive purposes (e.g., selecting 

the weakest competitors). 

(8) FAA should amend its order to require 

US Airways and Delta, working with the 

respective airport authorities, to make airport 

facilities available on terms no less favorable 

than those now accorded to the two carriers. 

United Air Lines, Inc. opposes the FAA’s 

proposed divestiture conditions. United’s 

major arguments are: (1) FAA lacks the legal 

authority to impose the slot divestiture 

condition under the premise that FAA 

authority is limited to the safety of aircraft 

operations and efficient use of airspace, and 

that the policy goals outlined in § 40101 do 

not apply to the Administrator’s exercise of 

exemption powers; and (2) FAA has not 

shown that the transaction would adversely 

impact competition. United contends that the 

fact that the transaction increases the share 

of slots does not necessarily signify that the 

carriers will gain pricing power in any 

relevant market. 

United believes the FAA has not analyzed 

potential competitive effects in any relevant 

market, that FAA assertions of harm are 

speculation, and that the FAA has relied on 

flawed, outdated data in reaching its 

conclusions. The air carrier states that costs 

are higher at DCA due to the added costs of 

delays and the cost of acquiring slots. 

American Airlines, Inc. supports the FAA’s 

proposed divestiture conditions, but 

expressed concerns regarding the rationale. 

American’s major arguments are: (1) Offers 

reason for the failure of the secondary market 

at DCA and LGA as the current system of 

delegating slots to new entrants. American 

contends that there is no incentive to buy 

new slots when slots are readily distributed 

for free by the government; (2) disagrees that 

the proposed transaction will lead to higher 

fares. The air carrier cites the example of 

Continental Airlines having market 

dominance at EWR but maintaining lower 

fares than US Airways; and (3) supports a 

private sale arrangement for the slot 

divestiture. 

Continental Airlines, Inc. takes no position 

on the proposed transaction or whether other 

remedies are required, but argues that 

imposing conditions of divestiture exceeds 

FAA authority. Continental’s major 

arguments are: (1) FAA has previously 

acknowledged that it lacked the authority to 

impose market-clearing charges for landings 

and takeoffs; (2) FAA slot rules require 

reallocation by lottery, should not be read to 

extend to divestitures for economic reasons, 

nor favor new entrants and limited 

incumbents; (3) requiring divestitures will 

violate carriers’ property rights; (4) FAA’s 

proposal conflicts with the Hart-Scott-Rodino 

review process; (5) DCA and LGA are not 

individual markets, and treating them as 

such is inconsistent with earlier DOJ 

conditions on domestic code-sharing and in 

DOT’s Star Alliance carve-out (where the 

overlap was premised on defining EWR and 

JFK as a common origin and destination 

point); (6) holding a large percentage of slots 

at a carrier’s hub is not inherently 

anticompetitive and is beneficial to 

consumers because it enables airlines to 

achieve economies of scope; and (7) FAA 

should not consider code-share relationships 

when calculating an individual carrier’s slot 

position because code-share carriers are 

independent with respect to domestic 

service. Continental states that it should have 

the ability to acquire withdrawn slots at LGA 

despite its code-share with United Air Lines. 

Virgin America, Inc. commends the FAA 

for taking steps to address the competitive 

situation at slot-controlled airports. Virgin 

believes the government has not only the 

authority but the responsibility to enhance 

competition, and believes that the FAA 

action in this proposed transaction is 

consistent with applicable precedents. The 

air carrier states that the FAA should be more 

proactive by creating a permanent 

mechanism for resolving secondary market 

problems at slot-controlled airports. 

The Delta Master Executive Council of the 

Air Line Pilots Association submitted 

comments in support of the waiver, but 

without the imposition of ‘‘onerous and 

unjustified’’ divestiture conditions. ALPA 

believes that approval of the original petition 

will promote job growth, slot utilization, and 

competition. The commenter contends that 

increased operations at an airport are not 

necessarily harmful, citing the example of 

Continental Airlines having a larger 

percentage of operations at EWR than other 

air carriers, but charges a lower percentage of 


emcdonald on DSK2BSOYB1PROD with NOTICES
26340 Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 

the standard industry fare level (SIFL). ALPA 

believes the FAA’s proposed number of 

divestitures is inconsistent with oneworld, 

where just 4 pairs of slots were required to 

be divested. 

Parties representing two Florida airports 

filed comments in general support of the 

waiver. The airports include the Sarasota/ 

Bradenton International Airport (SRQ) and 

the Tallahassee Regional Airport (TLH). Both 

commenters expressed concern that the 

FAA’s proposal could halt the transaction 

completely, thereby eliminating 

opportunities for expanded air service in the 

two communities. Additionally, the parties 

commented that the FAA proposal favors 

large airports and new entrant carriers over 

smaller communities who rely on network 

carriers. 

The Port Authority of New York and New 

Jersey (PANYNJ) filed a comment in support 

of the proposed divestiture conditions. 

PANYNJ compliments the FAA in its efforts 

to increase the presence of low-cost carriers 

at LGA and preserving small community 

service. PANYNJ supports the proposal to 

suspend use-or-lose provisions for new 

entrants and limited incumbents that would 

obtain the divested slots, but disagrees with 

the FAA on its conclusions regarding airport 

substitutability. The commenter reinforced 

that it would put forth its best efforts to 

ensure that new entrants and limited 

incumbents are accommodated, but believes 

that the Final Order should not impose any 

additional requirements in this regard. 

PANYNJ also believes that any transfer of 

slots should be conditioned on its ability to 

accommodate the new carrier at a 

corresponding gate. Regarding the slot 

transfer process, PANYNJ endorses the 

proposal that would allow the FAA to 

maintain a Web site for offers to purchase 

and transmission of the highest offer to the 

seller. 

The Honorable Henry E. Brown, Jr., U.S. 

Representative of the 1st District of South 

Carolina, submitted a comment in support of 

the original petition submitted by Delta and 

US Airways, but does not support the FAA’s 

proposed divestiture conditions. 

Congressman Brown cites South Carolina’s 

significant tourism industry as a reason to 

expand air service to the State. He notes that 

Horry County, the State’s largest tourism 

revenue generator, is the only major tourist 

destination in the United States that is not 

served by the Interstate System. Congressman 

Brown recognizes the FAA’s responsibility 

under the Airline Deregulation Act to 

maximize airline competition and 

opportunities for new entrants, but pointed 

out that the proposed divestiture of 14 pairs 

of slot interests at DCA would remove the 

possibility of expanded air service at MYR 

for the foreseeable future, which he believes 

is counter to the Act’s directive to encourage 

air service to small communities. 

Congressman Brown also states that 

expanded direct air service to smaller and 

mid-sized communities serves the ‘‘greater 

good’’ of the country more than fostering 

competition between larger cities that already 

enjoy direct air service. 

The Honorable Louise M. Slaughter, U.S. 

Representative of the 28th District of New 

York, submitted a comment in strong support 

of the FAA’s proposal to require the 

divestiture of slot interests at DCA and LGA 

to new entrant and limited incumbent 

carriers. Congresswoman Slaughter 

commented that she would like to see an 

increase in the number of mandated slots to 

be divested, although she concurs that the 

proposal is a good first step to improving 

service to DCA and LGA. The 

Congresswoman expressed concern that the 

proposal does not force either carrier to 

commit to any particular market for a defined 

period of time, thus enabling the carriers to 

discontinue certain routes and use their 

added slot interests to initiate new routes to 

target smaller competitors and stifle 

competition. 

Edward S. Faggen, former Vice President 

and General Counsel of the Metropolitan 

Washington Airport Authority (MWAA), 

commented in a personal capacity expressing 

support for the FAA’s decision not to grant 

the waiver without first imposing conditions 

that protect the competitive environment at 

either airport. Mr. Faggen cites the FAA’s 

High Density Rule as a successful means for 

enabling DCA to manage capacity, promote 

schedule reliability, and allow airport 

officials to effectively plan for airside and 

landside capacity improvements. The 

commenter believes that a waiver, without 

conditions, will lead to a challenge to the 

DCA HDR by new entrants or low-cost 

carriers, who may perceive the HDR to be 

anticompetitive. Mr. Faggen would like to see 

the number of DCA slots to be divested to 

increase from the proposed minimum of 14 

to a number that expands access to other 

incumbents, and commensurate with airfield 

capacity capabilities, if possible. 

Citizens and organizations of the 

Rochester, New York metropolitan area, 

which are represented by the Honorable 

Louise M. Slaughter, U.S. Representative of 

the 28th District of New York, submitted 

eleven comments in general support of the 

proposed waiver. The commenters 

unanimously agree that the proposal would 

increase competition, lower fares, and 

improve air service in the Rochester, New 

York passenger market. A majority of the 

commenters would like to see an increase in 

the number of slots to be divested. 

Three individuals submitted comments in 

support of the FAA position. The 

commenters unanimously agree that the 

proposed waiver would increase competition 

by decreasing excessive market domination, 

lower fares, and improved air service. One 

individual expressed hope that the slot 

divesture will reduce delays, spur economic 

growth, and lead to cheaper access to popular 

vacation destinations. One individual 

expressed support for the public benefit of 

expanded operations by Southwest Airlines 

at LGA. 

One individual submitted a comment in 

opposition to any type of waiver for the 

proposed transaction. The individual 

believes that Delta is anti-competitive in its 

practices and seeks to harm other airlines 

economically. The commenter further cites 

Delta’s decision to transfer its pension 

liability onto taxpayers as reason not to 

reward it with a favorable slot swap 

arrangement. 

Two individuals submitted comments in 

support of the US Airways-Delta Airlines 

position of granting the proposed waiver 

without conditions. One commenter assessed 

that the conditions intrude into the free 

market by forcing the divestiture of slots, and 

stated that it is not the role of government to 

‘‘create additional competition.’’ Another 

commenter was concerned about air carrier 

profitability and the ramifications to jobs and 

air carrier access should either airline seek 

bankruptcy protection. The commenters 

urged DOT to allow the slot swap to proceed 

as originally proposed in order to do 

everything possible to help airlines bolster 

profitability and keep people employed. 

Supplemental and Responsive Pleadings 

The initial comment period closed on 

March 22, 2010. The FAA determined that it 

was in the public interest to reopen the 

comment period until April 5, 2010, to give 

all interested parties additional time to file 

supplemental and rebuttal comments. 

WestJet stated that, in the past, regulatory 

and operational constraints have prevented it 

from sustaining competitive service to LGA. 

As a result of the independently negotiated 

slot transaction with Delta, which provides 

WestJet with 5 slot pairs at LGA, the carrier 

believes that it is now in a good position to 

compete against established carriers in the 

U.S. and Canadian markets. Additionally, 

WestJet cites expanded passenger access to 

Delta’s extensive domestic network, as well 

as Delta’s willingness to provide supporting 

services and facilities as evidence that the 

carrier and its passengers stand to benefit 

from the transaction. Further, the carrier cites 

Section I of Annex II to the Air Transport 

Agreement between the governments of the 

United States and Canada, which specifies 

that Canadian air carriers be afforded equal 

access to slot controlled airports. 

Accordingly, WestJet urged the FAA to 

approve the Delta-US Airways waiver 

request, thus enabling WestJet’s slot 

transaction with Delta to proceed. 

Transport Azumah expressed a belief that 

the LGA slots are being liquidated at belowmarket value and suspects that this is the 

result of air carriers not being allowed to sell 

slots on the open market. The commenter 

believes that ‘‘hoarding’’ of slots will continue 

as long as air carriers are not allowed to 

freely buy and sell slots as needed. 

The Spirit Airlines Master Executive 

Council of the Air Line Pilots Association 

urged the FAA to approve the LaGuardia 

waiver request, as modified by the slot 

transfers to AirTran, Spirit, JetBlue and 

WestJet. The Council believes that such a 

grant will permit the beneficial transaction to 

proceed and to enable Spirit and its pilots to 

benefit from significant new service 

expansions and enhanced job opportunities. 

The Southwest Airlines Pilots Association 

expressed support for the FAA’s proposal to 

require the divestiture of slot interests at 

DCA and LGA to new entrant and limited 

incumbent carriers, and urges the DOT/FAA 

to deny the requested petition unless the 

proposed divestiture of 20 slot pairs and LGA 

and 14 slot pairs at DCA is enforced. The 

Association believes that hubs dominated by 

two legacy carriers would be created at LGA 


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Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 26341 

and DCA, giving them unchecked market and 

pricing power. It also believes the revised 

slot transaction deal announced by Delta and 

US Airways on March 22, 2010 is a meager 

giveaway that would bar Southwest from an 

open, public, transparent proceeding that 

would enable Southwest to operate at these 

airports. The commenter stated that 

Southwest is interested in bidding on the 

slots to expand its low-fare service to 

consumers in a high-fare market, and cited its 

own economic expert as concluding that 

consumers would save approximately $200 

million annually if Southwest were given the 

opportunity to acquire the slots to be 

divested under the FAA proposal. The 

Association added that the public interest is 

not served by allowing dominant carriers to 

distribute a handful of slots to a chosen few 

airline competitors. 

JetBlue Airways, AirTran Airways, Inc. 

(joined by the AirTran Master Executive 

Council of the Air Line Pilots Association) 

submitted comments largely reiterating the 

views they had expressed in their initial 

comments to the docket. 

The Delta Master Executive Council of the 

Air Line Pilots Association submitted 

comments reiterating its earlier support for 

the Delta-US Airways petition, but adding 

that it agreed with the legacy carriers that the 

FAA has no statutory authority to impose the 

divestiture condition and disagreed with 

opposing comments, particularly those of 

Southwest Airlines and the Department of 

Justice, that approval of the LGA waiver 

request will reduce competition. The 

commenter asserted as well that the proposed 

slot transfers to AirTran, Spirit, JetBlue, and 

WestJet adequately address the FAA’s 

competition concerns and demonstrates that 

the FAA should not substitute its regulatory 

judgment for the competitive marketplace. 

The Consumer Travel Alliance submitted 

comments in strong opposition to the revised 

slot transaction deal with AirTran, Spirit, 

JetBlue, and WestJet as announced by Delta 

and US Airways on March 22, 2010. The 

Alliance supports the original DOT/FAA 

order, but believes that the most recent slot 

transaction proposal is unacceptable and 

would serve only to maintain the current 

status of pricing in the market. Further, the 

Alliance argues that the proposal should be 

rejected out of hand, or the proceeding 

should be reopened for further investigation 

and additional comments should be 

permitted on the new proposal. 

A Notice of Communication was submitted 

to the public docket, in accordance with 14 

CFR Part 300, stating that Captain Doug 

Ralph of the Air Lines Pilot Association and 

James Van Woert of Delta Air Lines 

expressed support for the joint petition 

submitted by Delta and US Airways while 

attending an aviation roundtable at Stewart 

International Airport. The roundtable 

included Transportation Secretary Ray 

LaHood and Deputy Assistant Secretary for 

Aviation and International Affairs Christa 

Fornarotto. Captain Ralph expressed his hope 

that the Department would handle the 

proceeding expeditiously and asked about its 

status. Secretary LaHood responded that, 

because the matter was under active 

consideration, he could not comment on any 

aspect and further noted that any discussion 

of the case at that time would be 

inappropriate. 

Southwest Airlines submitted reply 

comments in response to the independently 

negotiated slot transactions between Delta 

and US Airways and four low-cost carriers, 

AirTran, Spirit, JetBlue, and WestJet. 

Southwest strongly opposes the slot 

transaction and argues that it is a calculated 

effort by Delta and US Airways to avoid the 

FAA’s proposed divestiture conditions while 

producing no meaningful competition to 

either carrier at LGA and DCA. The carrier 

added to its earlier comments to the effect 

that the splintered and minimal slot transfers 

in the six-party deal will have no meaningful 

impact on competition or concentration at 

LGA and DCA, and that the parties to the 

deal will likely serve at most one or two 

routes each from LGA and DCA with the 

transferred slots. It further asserted that both 

Spirit and AirTran have a long history of 

abandoning service in both markets after 

unsuccessful attempts to compete with 

incumbent carriers. Contending that it would 

generate more public benefits than all four 

slot transaction partners combined, the 

carrier argued that its exclusion from the sixparty transaction was no accident because 

Delta and US Airways know that Southwest 

can leverage even a small number of slots 

more effectively than the other eligible 

carriers, combined, because of its large 

domestic network. The carrier believes that, 

in order to assist airports in exercising their 

property rights and accommodating slot 

recipients, DOT/FAA should condition its 

waiver approval on the parallel divestiture of 

adequate and viably located ground facilities 

by Delta and US Airways. Asserting that LGA 

and DCA are separate markets that are 

effectively insulated from the competition at 

surrounding airports, Southwest contends 

that neither airlines nor passengers consider 

the three Washington/Baltimore area airports, 

or the three New York/Newark area airports, 

to be economic substitutes for one another. 

Finally, in deciding whether proposed slot 

transfers are in the public interest, Southwest 

urged the FAA to consider the potential 

impact on competition in the airline 

industry, noting among other considerations 

that more than 70 years, Congressional policy 

has been to maximize competition and deter 

anticompetitive actions in the U.S. Airline 

Industry. 

Virgin America submitted rebuttal 

comments in response to the modified slot 

transaction, contending that the tentative 

agreement between the carriers falls short of 

the divestiture of 20 slot pairs at LGA and 14 

slot pairs at DCA that the FAA tentatively 

concludes to be required of the public 

interest. Virgin America believes the 

petitioners’ argument that the FAA lacks 

legal authority to condition the approval on 

divestitures misperceives the statutory basis 

upon which the FAA has relied, and 

expresses support for the various legal 

arguments recited by the FAA in the Notice. 

In particular, regarding the Joint Applicants 

claim that the DOT/FAA cannot rely on procompetitive policies when administering 

slots, Virgin America believes that such 

argument was expressly refuted long ago by 

a Federal appeals court in Northwest Airlines 

v. Goldschmidt, 645 F.2d 1309 (8th Cir. 

1980). Similarly, Virgin America believes 

that the arguments by the Joint Applicants, 

and other legacy carriers, that the FAA’s 

proposed divestiture constitutes an unlawful 

confiscation lack sufficient merit. 

Spirit Airlines, Inc. submitted rebuttal 

comments in response to the ‘‘pay-to-play’’ 

solution for redistribution of slots as 

announced by the FAA in its February 18, 

2010 Notice. Spirit believes the FAA’s 

proposal is not in the broad public interest. 

Spirit states that it was able to obtain 22 slots 

at LGA only as a result of Congressional 

intervention via the Wendell H. Ford 

Aviation Investment and Reform Act for the 

21st Century (AIR–21), which was enacted in 

2000. Since then, Spirit states that it has been 

unable to obtain through purchase or lease an 

adequate number of slots to efficiently 

increase service at LGA. The air carrier 

contends that airlines with a small number 

of slots face unique operating problems, 

which harm their inability to compete, 

including: (1) During weather and FAAimposed ground delays, small slot holders 

like Spirit are forced to cancel or delay their 

most important flights. In the event of a 

forced cancellation, because of the few flights 

they are able to offer, limited incumbent lowfare carriers may not be able to rebook 

passengers from canceled flights until flights 

leaving the next day, or may be forced to pay 

a substantial cost for re-accommodating 

passengers onto a flight on one of the large 

incumbents. Spirit asserts that, not only are 

the smaller, low-fare airlines disadvantaged, 

but so too are their passengers, many of 

whom require low fares to travel; (2) carriers 

with few slots have difficulty adjusting 

schedules. Slot trades are critically important 

for carriers to arrange flight schedules to 

enable their overall networks to function 

efficiently. Yet in the current circumstances 

the larger slot holders do not need to trade 

slot times with other carriers, and the small 

slot holders do not have sufficient slots to 

arrange workable trades with other smaller 

carriers; (3) low-fare carriers are seriously 

handicapped by their inability to acquire a 

number of slots sufficient to efficiently 

utilize a gate. The cost and difficulty of 

operating a shared gate if a carrier has only 

a few pairs of slots, in addition to staffing 

costs, makes it virtually impossible for lowfare carriers to add slots one or two pair at 

a time; and (4) with few slots it is particularly 

difficult to address new competition in one 

market without reducing or giving up service 

in another. Spirit believes that the ‘‘pay-toplay’’ process is the worst outcome for the 

carrier and its passengers, because it would 

not have the financial resources to compete 

with offers from major carriers for the 

released LGA slots regardless of how 

efficiently it could use them, the profit it 

could earn, and the low fare benefit it 

provides to consumers. Spirit argues that the 

alternative proposal of allowing it to 

consummate a transaction in which it would 

acquire 5 LGA slot pairs from Delta is in the 

best interest of consumers because the slots 

would provide some flexibility to respond to 

market changes like the new American New 

York-Fort Lauderdale service which is 


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26342 Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 

essential if Spirit is to remain a viable 

competitor in the New York-South Florida 

market, and the agreement gives it necessary 

flexibility to integrate the slots into its system 

in conjunction with aircraft acquisitions and 

seasonal route realignments, without 

disrupting its other services under pressure 

of the FAA use-or-lose requirements that 

could result in loss of slots. 

The Port Authority of New York and New 

Jersey (PANYNJ) filed a rebuttal addressing 

two subjects raised by other parties in 

response to the Notice that were not directly 

raised by the Notice: (1) Slots are not 

property of the airlines that have authority to 

conduct operations authorized by those slots; 

and (2) the Port Authority is the entity with 

the right to decide whether and how to 

allocate ground facilities at LGA. PANYNJ 

cites In re Braniff Airlines, 700 F. 2d 935 (5th 

Cir. 1983), and other legal proceedings, in its 

contention that sufficient legal precedent 

establishes that slots ‘‘are actually the 

restriction of the use of property—the 

airplane; not property in themselves.’’ The 

Port also cites 49 U.S.C. 40103(b)(1), which 

provides that statutes under which the FAA 

issues slot orders and waivers preclude slots 

from being property. Regarding ground 

facilities, PANYNJ asserts the right to 

determine to whom and what circumstances 

to authorize use of airport facilities is an 

airport operator’s proprietary power and 

right, as concluded in National Business 

Aviation Ass’n, Inc. v. City of Naples Airport, 

162 F.Supp.2d 1343, 1348 (M.D. Fla. 2001), 

as well as the airport proprietor’s rights to 

determine whether and under what terms 

and conditions access should be provided to 

an airline, as provided by 49 U.S.C. 

41713(b)(3). Further, PANYNJ believes that if 

the FAA accepts these slot transfers as full 

or partial satisfaction of FAA’s competition 

concerns, the benefits of the increase in the 

presence of new entrant/limited incumbent 

carriers at LGA should be maintained for the 

life of these slots, i.e., until October 29, 2011. 

Accordingly, the Port believes that if the FAA 

issues an order granting the waiver petition 

of Delta and US Airways based in whole or 

in part on the transfers of slots to JetBlue, 

AirTran, Spirit and WestJet, such an order 

should provide that those slots be subject to 

a restriction ‘‘precluding the carriers 

purchasing the slot interests acquired 

pursuant to [those transfers] from re-selling, 

or leasing, them to any carriers that are not 

eligible’’ to receive slots under the Waiver 

Proposal set forth in the Notice. 

Delta and US Airways submitted joint 

rebuttal comments in response to comments 

of the United States Justice Department and 

Southwest Airlines Co. The carriers 

reiterated many of the points they made 

earlier, particularly concerning their belief 

that the FAA has the authority to consider 

safety and efficient use of airspace, not 

competition. The carrier argues that both the 

DOJ and Southwest Airlines misinterpret 

regulatory guidance and legal precedent in 

their assertion that the FAA has statutory 

authority to condition the waiver grant on the 

divestiture of slots. The carriers also argued 

that: (a) There is no evidence that the 

transaction will reduce the likelihood of lowcost carrier entry; (b) the DOJ ignores 

undisputed evidence that the transaction will 

increase, not reduce, competition; (c) the DOJ 

offers no evidence that increases in slot 

ownership at DCA and LGA would produce 

competitive harm or increase fares; (d) the 

DOJ’s assertion relating to market definition 

do not address the parties’ evidence; and (e) 

the DOJ’s assertion that the proposed 

divestiture will not interfere with the 

transaction’s benefits suffers from numerous 

flaws. The commenters also urged that their 

privately-contracted slot transfers should be 

approved, as the various parties have entered 

into a transaction that satisfies the FAA’s and 

the DOJ’s desire to see the slots go to lowcost carriers and Southwest’s comments 

reflect an untenable attempt to exploit the 

waiver request for its own benefit. They also 

asserted that Southwest has had ample 

opportunities to obtain DCA and LGA slots 

but has chosen not to do so, that it cannot 

complain about market concentration given 

its near exclusive presence at its dominant 

airports, including Love Field Airport, and 

that there is no basis for Southwest’s 

suggestion that it would make more 

beneficial use of the slots than JetBlue, 

AirTran, Spirit, and WestJet. 

DOJ submitted rebuttal comments in 

response to public comments challenging the 

FAA’s statutory, factual, and analytical basis 

for imposing the proposed divestiture 

conditions. The DOJ also reiterated its 

support for the FAA’s tentative decision. DOJ 

offers the following comments in reply to 

some of the parties’ key arguments: (1) FAA 

divestitures offset harm while preserving 

purported efficiencies. The Department 

counters claims that the conditions would 

provide more competitive harm than benefit, 

and furthers states that it used the same 

analytical scenario advanced by the opposing 

parties, while also taking into account the 

LCC factor, in conducting its analysis. The 

Department states that it reached a very 

different conclusion, that the aggregate 

impact on consumers from the proposed 

divestiture would be strongly positive; (2) the 

modification proposal warrants careful 

examination. The DOJ believes the 

circumstances and limited disclosed terms of 

the proposed transfers strongly suggest that 

the divestitures were structured to minimize 

the potential competitive effect on Delta and 

US Airways, and consequently potential 

benefits for consumers. The DOJ recommends 

that the FAA examine the details of the 

proposals, including the agreements 

themselves and surrounding circumstances, 

to evaluate their likely effects; (3) 

competition from nearby airports will not 

completely offset lost competition between 

US Airways and Delta at DCA and LGA. The 

DOJ contends that nothing in the parties’ 

various submissions refutes the notion that 

flights out of DCA (or LGA) provide closer 

competition to other flights out of DCA (or 

LGA) than do flights out of IDA and BWI (or 

JFK and EWR), and thus that market power 

can be exercised at DCA (or LGA) against 

some passengers despite the presence of 

competition from the other two nearby 

airports; (4) DOT/FAA review of competition 

effects does not interfere with DOJ authority. 

The DOJ notes that it is particularly ironic 

that, before the Notice was issued in this 

matter, Delta urged DOT/FAA to undertake a 

broad analysis of the competitive effects of 

this transaction and only raised objections 

once the carrier saw the results of the FAA’s 

competitive analysis. The DOJ concludes its 

reply comments by reiterating that the FAA 

has sufficient statutory, analytical, and 

factual basis to impose the conditions 

proposed in its Notice, and urged the FAA 

to subject the modified transaction proposed 

by the parties to close scrutiny. 

Delta and US Airways submitted a Motion 

for Leave to File Comments on April 7, 2010 

in response to rebuttal comments of the DOJ. 

The carriers believe it is necessary to respond 

to comments included in the DOJ’s rebuttal 

comment reply as a matter of correcting the 

record although the comment period has 

expired. The carriers offered the following 

rebuttals: (1) The DOJ’s purported misgivings 

about the alternative slot transfers are 

misplaced. The carriers reiterate that the slot 

transaction will not go forward under the 

terms proposed by the FAA, and the 

modified slot proposal submitted by the six 

parties satisfies the FAA concerns while 

preserving the transaction. Further, the 

carriers disagree with the Department’s 

favored cash-only winner-take-all process 

that, they believe, would virtually guarantee 

that all of the slots would go to bettercapitalized Southwest; and (2) the DOJ has 

abandoned any defense of the FAA’s 

consideration of competition. The 

commenter’s believe that the DOJ has 

abandoned the view that it expressed in its 

initial comments that the FAA has authority 

to consider competition under 49 U.S.C. 

40101(a), and has chosen instead to defer to 

the FAA’s view of its own authority. 

Additionally, the carriers argue that the 

Department fails to offer any coherent 

explanation for how the FAA’s exercise of 

competition authority can be reconciled with 

Congress’s decision to remove Section 7 

authority from the DOT and to delegate that 

authority exclusively to the DOJ. Delta and 

US Airways conclude their Motion for Leave 

to File Comments by reiterating that the 

DOJ’s rebuttal comments confirm the FAA 

has no legal authority to impose a divestiture 

condition, and therefore the FAA should 

either grant the carriers an exemption from 

the LGA Order, or promptly approve the 

modified transaction. A subsequent filing 

was also received, urging that the transaction 

between American and JetBlue, by which 

JetBlue would obtain eight slot pairs at DCA 

and use them to serve Boston, Orlando, and 

Ft. Lauderdale, should serve to resolve the 

Department’s concerns about low-cost carrier 

entry and competition at that airport. 

Appendix B 

Standard Industry Fare Level Analysis 

Washington and New York Area Airports 

The figures for Washington, depicted in the 

table below, show the percentage of total area 

O&D passengers using each of the WAS area 

airports, the passenger weighted percent of 

fares at each airport compared to the mileage 

adjusted SIFL expressed as a percent of SIFL, 

an identification of the largest passenger 

carrier at each airport, its percent of O&D 

traffic, and finally an indication of that 


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Federal Register / Vol. 75, No. 90 / Tuesday, May 11, 2010 / Notices 26343 

carrier’s passenger weighted fare as a percent 

of passenger weighted SIFL fares. 

WASHINGTON AREA AIRPORTS’ PERCENT OF SIFL, LARGEST CARRIER SIFL AND PERCENT OF TRAFFIC

% of WAS Apt % SIFL Lgest Car % of Traffic % SIFL 

BWI ...................................................................................... 41 65 WN 48 65 

DCA ...................................................................................... 35 101 US 33 124 

IAD ....................................................................................... 23 77 UA 47 90 

Note: If US Airways is removed from the DCA percent of SIFL calculation the airport average SIFL would decline to 88% of SIFL. 

As can be seen, the relationship of actual 

fares to the SIFL fare benchmark is very 

different at the three Washington area 

airports. Actual fares are 65% of SIFL at BWI, 

77% at IAD and 101% at DCA. 

The comparable statistics for the NYC 

airports are summarized in the following 

table. 

NEW YORK AREA AIRPORTS PERCENT OF SIFL, LARGEST CARRIER SIFL AND PERCENT OF TRAFFIC

% of NYC Apt % SIFL Lgest Car % of Traffic % SIFL 

EWR ..................................................................................... 30 71 CO 59 71 

JFK ....................................................................................... 34 57 B6 46 57 

LGA ...................................................................................... 35 82 DL 30 89 

Note: If Delta is removed from the DCA percent of SIFL calculation the airport average SIFL would decline to 79% of SIFL. 

The results show that actual fares are 71% 

of SIFL at EWR, 57% of SIFL at JFK, and 82% 

of SIFL at LGA. Delta Air Lines is the largest 

carrier with 30% of traffic and a weighted 

average fare of 89% of SIFL. We noted that 

if Delta is excluded from LGA figures the 

airport percent of SIFL would decline to 79% 

of SIFL. 

[FR Doc. 2010–10978 Filed 5–10–10; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF TRANSPORTATION 

Federal Railroad Administration 

Request for Expedited Certification 

and Type Approval of Amtrak 

Advanced Civil Speed Enforcement 

System (ACSES) 

In accordance with Part 211 of Title 

49 Code of Federal Regulations (CFR), 

notice is hereby given that the Federal 

Railroad Administration (FRA) received 

a request for expedited certification and 

type approval of the Amtrak ACSES. 

ACSES has been deployed on the 

Northeast Corridor since December 

2000, in accordance with the FRA Final 

Order of Particular Applicability issued 

on July 22, 1998 [FRA Docket No. 87– 

2, Notice No.7]. The request is described 

below, including the party seeking 

certification and type approval of 

ACSES, the regulatory provisions 

involved, the nature of the request, and 

the petitioner’s arguments in favor of 

the request. 

National Railroad Passenger 

Corporation 

[Docket Number FRA–2010–0029] 

The National Railroad Passenger 

Corporation (Amtrak) is submitting a 

request for expedited certification and 

type approval of ACSES, presently 

installed on the Northeast Corridor, in 

fulfillment of the requirements of and 

compliance with the final rule for 

Positive Train Control systems per 49 

CFR part 236, subpart I (specifically, 

Section 236.1031). The documentation 

supporting this request demonstrates 

that ACSES reliably performs the 

functionalities required by Sections 

236.1005 and 236.1007, and therefore 

conforms to Subpart I. Also, ACSES has 

been recognized by FRA as being 

designed and implemented by Amtrak 

since December 2000, in full accordance 

with the FRA Final Order of Particular 

Applicability issued in July 1998. These 

conditions constitute a legitimate basis 

for expedited certification and type 

approval of ACSES. 

Submission of the request does not 

require the establishment of a formal 

comment period; however, interested 

parties may submit their views, data, or 

comments by any of the following 

methods: 

• Web site: http:// 

www.regulations.gov. Follow the online 

instructions for submitting comments. 

• Fax: 202–493–2251. 

• Mail: Docket Operations Facility, 

U.S. Department of Transportation, 1200 

New Jersey Avenue, SE., W12–140, 

Washington, DC 20590. 

• Hand Delivery: 1200 New Jersey 

Avenue, SE., Room W12–140, 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. 

Communications received during the 

review process of this request will be 

considered by FRA, to the extent 

practicable, before the final decision is 

made. All written communications 

concerning these proceedings are 

available for examination during regular 

business hours (9 a.m.–5 p.m.) at the 

above facility. All documents in the 

public docket are also available for 

inspection and copying on the Internet 

at the docket facility’s Web site at 

http://www.regulations.gov. 

Anyone is able to search the 

electronic form of any written 

communications and comments 

received into any of our dockets by the 

name of the individual submitting the 

document (or signing the document, if 

submitted on behalf of an association, 

business, labor union, etc.). You may 

review DOT’s complete Privacy Act 

Statement in the Federal Register 

published on April 11, 2000 (Volume 

65, Number 70; Page 19477) or at 

http://www.dot.gov/privacy.html. 

Issued in Washington, DC, on May 4, 2010. 

Grady C. Cothen, Jr., 

Deputy Associate Administrator for Safety 

Standards and Program Development. 

[FR Doc. 2010–11030 Filed 5–10–10; 8:45 am] 

BILLING CODE 4910–06–P 


emcdonald on DSK2BSOYB1PROD with NOTICES