BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON D

. C

.

________________________________ ___ _ _ ) 2012 C HICAGO

- C ANCUN ) Docket DOT

- OST

- 2012

- 0001 COMBINATION S ERVICE P ROCEEDING )

____________________________________ _ )

_____________________________________ ) Application s of ) ) AIRTRAN AIRWAYS, INC ) Docket DOT

- OST

- 2011

- 0225 ) FRONTIER AIRLINES , INC. ) Docket DOT

- OST

- 201 1

- 02 14 ) For an exemption pursuant to ) 49 U.S.C. § 40109 )

_____________________________________ )

A NSWER OF AIRTRAN AIRWAYS, INC

.

Communications with respect to this document should be sent to:

Bob Jordan Robert W. Kneisley President Associate General Counsel AIRTRAN AIRWAYS, INC. Leslie C. Abbott 9955 AirTran Boulevard Senior Attorney Orlando, FL 32827 SOUTHWEST AIRLINES CO. 1901 L Street, N.W. , Suite 640 Washington, D.C. 20036 bob.kneisley@wnco.com (202) 263

- 6284

J anuary 26 , 20121 BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON D

. C

.

_____________________________________ ) 2012 C HICAGO

- CANCUN ) Docket DOT

- OST

- 2012

- 0001 COMBINATION SERVICE PROCEEDING )

_____________________________________ )

_________

____________________________ ) Application s of ) ) AIRTRAN AIRWAYS, INC ) Docket DOT

- OST

- 2011

- 0225 ) FRONTIER AIRLINES , INC. ) Docket DOT

- OST

- 201 1

- 02 14 ) For an exemption pursuant to ) 49 U.S.C. § 40109 )

___________________________________ _ _ )

ANSWER O F AIRTRAN AIRWAYS, INC.

Pursuant to the schedule set forth in Order 2012

- 1

- 4 establish ing this

proceeding, AirTran hereby submits this Answer in response to Frontier’s “Amendment

and Supplement” filed January 19, 2012 in this docket. 1 AirTran’s previous pleadings 2

have described in detail the profound flaws in Frontier’s application for a scheduled U.S.

carrier designation in the ORD

- CUN market, and nothing in Frontier’s January 19

submission cures those flaws. Stripped of its rhetoric and baseless claims, Frontier’s

application involves nothing more than a dressed

- up charter program masqu erading as

a scheduled service that would needlessly block AirTran/Southwest ( and Chicago

Midway Airport ) from the CHI

- CUN market. AirTran’s proposal to serve MDW

- CUN, on

1 Common names of the carriers are used.

2 Answer to Frontier, December 6, 2011; Reply to Frontier, December 22, 2011; and Supplement to Application, January 19, 2012.2

the other hand, would generate sorely needed competition and enormous public

benefit s for the Chicago region, while still allowing Frontier to participate in the market.

I. FRONTIER’S PROPOSAL WOULD DISSERVE THE CHICAGO PUBLIC AND WASTE A VALUABLE U.S. SCHEDULE D DESIGNATION.

Beginning with its initial application for exemption on November 21, 2011,

Frontier made abundantly clear that its entire motivation in seeking ORD

- CUN authority

was to provide capacity for Apple Vacations, so that Apple would not suffer disruption

due to USA 3000’s planned termination of service at the end of January 2012. As

Frontier put it, “ Frontier has entered into an agreement with Apple Vacations to replace

[its] current allocation of seats on USA 3000’s flights...and ensure Apple Vacation’s

customers a seamless transition from USA 3000’s service...” 3 Accordingly, Frontier’s

service proposal reflected its assumption of USA 3000’s contract with Apple, proposing

to operate one round

- trip charter between ORD and CUN approximately 321 days per

year. 4 Since then, Frontier has even acquired the USA 3000 aircraft to satisfy Apple’s

requirement for 168 seats. 5

So

, the transition from USA 3000 to Frontier is already well underway, and is

confirmed by Frontier’s recent disclosure that it “will commence pub lic charters with

Apple Vacations on or about January 31, 2012...” 6 In fact, e verything Frontier proposed

in its original application c an be operated with charter authority , as the market ing of the

seats by Apple does not require Frontier to hold scheduled authority. This is fully

consistent with past practice, since neither Apple nor USA 3000 (despite holding

3 Frontier Application for Exemption, November 21, 2011 at p. 2.

4 Id

. and Frontier’s Reply and Answer, December 15, 2011.

5 Acco rding to AeroTransport Data Bank, USA 3000’s A320 (N261AV) was delivered to Frontier on or about January 8, 2012.
6 Frontier’s Amendment and Supplement to Application, January 19, 2012, at p. 11.3

scheduled authority) has historically sold scheduled seats directly to the public i n the

Chicago

- Cancun market.

It was not until Frontier’s January 19 filing, more than eight weeks after its initial

application, and six weeks after AirTran’s competing application was filed , that Frontier

“amended” its service proposal to reveal a new

- fou nd interest in selling individual tickets

to the public outside of providing lift for Apple charters. Further, Frontier has now

increased its proposed frequency to year

- round daily service, matching the schedule

proposed by AirTran in its competing application. Frontier also claims that it will operate

122,640 annual seats in its newly

- expanded proposal

. 7 However, for 321 days the

seats will be contracted to and marketed by Apple. This represents 107,856 seats , or

a bout 88% of the total capacity F rontier proposes to operate

. A ll of these 107,856 seats

will be sold not by Frontier or its GDS partners, but by Apple as a minor component of a

bundled fare package that includes hundreds of dollars of ground services and

accommodations the passenger mus t purchase.

At most, therefore, Frontier would be able to sell the remaining 14,784 seats

( only 12% of its total capacity ) to the public. With such a miniscule presence in the

“public” market, Frontier will have no meaningful impact on competition, and its claim to

be the “low

- fare” alternative in the market is absurd

. AirTran/Southwest would exert

significantly more pricing pressure on the incumbents United and American th an

Frontier , especially since most of its fares will be buried within an all

- inclusive tour

package price

.

7 168 seats x 2 x 365 days.4

In fact, even assuming Frontier’s 14,784 seats “public” seats materialize

, 8 they

represent less than 15% of AirTran/Southwest’s initial schedule o f 100,010 seats

, and

only 12.7% of the 116,038 seats Southwest could provide in the future using the B737

-
800 (175 seats) during p eak periods , along with the 143 seats in its reconfigured B737

- 700’s (Exhibit FL

- R

- 1). Of course 100% of the AirTran/Southwest seats will be available

to the general public without any requirement to purchase an expensive ground

package.

The expanded Frontier proposal presents the carrier with a new dilemma

– Frontier has no presence at ORD; no online ORD connec ting routes; and little or no

market awareness in Chicago. In a desperate attempt t o plug this gaping hole Frontier

now argues it will obtain interline connections at ORD from its direct competitors

, namely United and American. It supports this claim by reference to interline

agreements it has with several carriers (Frontier, Exhibit 11). However, Frontier makes

no mention of code share or joint fare agreements with United and American. Indeed,

w hy would UA or AA offer joint fares to a head

- to

- head competitor that would make

interlining easier and less expensive ? The answer is they wouldn’t

. So, Frontier’s

hypothetical interline connecting passenger would be charged the (more expensive)

sum of the local fares , making it significan tly cheaper for the passenger to travel the

whole route entirely on UA or AA.

AirTran does not recall another limited entry route case where an applicant

alleged it will obtain interline traffic support from its incumbent direct competitors that

operate in the same market that is at issue. Yet, in Exhibit 10 Frontier proudly touts the

8 It is also possible th at Frontier has negotiated an expanded contract with Apple and that none of these incremental seats will be available to the public. Frontier has hidden from view all details of its Apple contract.5

extensive scheduled service network s of United and American at O’Hare. Even apart

from the expense and inconvenience of Frontier’s dubious interline concept , many of

the r outings shown are patently impractical

. Frontier implies , for example, that a United

passenger from Honolulu will fly to ORD on United and then connect to a Frontier flight

to Cancun. Honolulu is already on the same latitude as Cancun. W hy wouldn’t the

passenger simply travel online United connecting at LAX? Similarly, w hy would a

passenger from Miami, Atlanta, Houston, or Dallas fly to ORD (a virtual backhaul) to

make an interline connection on Frontier to Cancun and pay the sum of the local fares

to boot, when the same passenger could go nonstop to/from Cancun. Frontier’s

interline connection theory is absurd on its face, and Exhibit 10 is replete with similarly

preposterous passenger routings.

Further, Frontier’s claim of robust int erline traffic support in this case is

contradicted by its own experience in other Mexico markets. At Denver, Frontier’s

largest market, which would be expected to generate a relatively high number of

interline connections, Frontier captures only a minisc ule volume of interline bookings. In

the DEN

- CUN market, for example, only 0.7% of Frontier bookings represent interline

connections to/from United. In DEN

- PVR and DEN

- SJD, United connecting passengers

on Frontier were similar ly minimal at 0.9% and 1.2% respectively (Exhibit FL

- R

- 2). This

volume of connecting traffic is so insignificant that it likely represents passengers

transferred by United to Frontier due to cancellations or overs ales on its own flights.

In sum , Frontier’s hoped

- for support from interline traffic simply is not credible , as

l ogic combined with Frontier’s own experience at the Denver hub exposes the fallacy of

this proposition. This underscores what AirTran has been saying for weeks

– that6

Fronti er has no legitimate need for scheduled authority in this market. Frontier’s

application for ORD

- CUN was predicated entirely on stepping into the shoes of USA

3000 to provide lift for Apple Vacations without disruption, and it has already

accomplished tha t objective under the unrestricted charter provisions of the U.S.

- Mexico

agreement

. Under the circumstances, Frontier’s demand for the only available scheduled

carrier designation in the market is outrageous . Frontier’s proposal would not only

squander a valuable authority for which the U.S. government strongly negotiated , it

w ould unnecessarily block AirTran/Southwest from the market , and worst of all would

preclude the new competition and public benefits that AirTran/Southwest would provide

for Chicago consumers by serving Midway

- Cancun

. Unlike Frontier, AirTran does not base its p roposal on imaginary interline

connections from direct competitors. Instead AirTran will rely on Southwest’s huge

presence and demonstrable popularity in Chicago for the generation of local

passengers in the MDW

- CUN market, supported by numerous on

- line connections from

AirTran/Southwest’s extensive network that are based on actual flight schedules that

mesh with AirTran’s proposed MDW

- CUN flights

. Also unlike Fro ntier, AirTran does not

seek to block its competitor from the market. Awarding scheduled authority to AirTran

in the MDW

- CUN market will in no way inhibit Frontier from fully serving Apple

Vacations in the ORD

- CUN under its charter authority.

Finally, Fr ontier’s attack on an alleged “lack of connectivity” between AirTran and

Southwest is completely misguided. Southwest acquired AirTran precisely for the

purpose of integrating that carrier’s services into Southwest’s system. The acquisition7

closed in May 2011, and the integration of the two carriers’ operations is proceeding

apace. Southwest and AirTran expect to receive a Single Operating Certificate from the

FAA in the first quarter of 2012 (the quickest SOC issuance of any large airline m erger),

and expect to achieve full connectivity later this year. It is for that very reason that

AirTran has focused so much attention in this case on the public benefits that will be

achieved by a combined AirTran and Southwest. Frontier’s denial of thi s obvious fact is

inexplicable and cannot be taken seriously.

II. HISTORY SHOWS THAT AIRTRAN/SOUTHWEST’S MIDWAY

CANCUN SERVICE WILL COMPETE VIGOROUSLY WITH O’HARE

CANCUN SERVICE.

Beginning in 1985, when Southwest entered its first nonstop Midway market

(STL), until its present day service to 57 nonstop MDW routes, Southwest’s experience

has shown consistently that air service at Midway compete s vigorously with air service

at O’Hare. Throughout this long history, whenever Southwest entered new markets

from MDW, fares fell and traffic rose at both MDW and ORD

. This phenomenon was

demonstrated in our earlier Exhibits FL

- 120 through FL

- 122 for the MDW

- LGA, MSP

, and BWI markets respectively. Seve ral a dditional examples are provided in attached

Exhibits FL

- R

- 3 through FL

- R

- 9 (involving Southwest’s entry into MDW

- CLE, PVD, BDL,

CMH, OMA, OAK, and SDF )

. Ignoring this obvious reality

, Frontier b o ldly claims that “Midway is not an

economic substitute for O’Hare and does not discipline fares at O’Hare, as reflected in

significantly (22%) higher average fares at O’Hare in common markets.” 9 T his is at best

misleading

. Fares are naturally higher at ORD for several reasons, including key

9 See Frontier January 19 Amendment and Supplement, at p. 2.8

differences betw een the services and costs at ORD vs. MDW. These differences

include, but are not limited to

, the following:

The re is a much different mix of traffic at ORD compared to MDW. The ORD

airlines carry a higher share of business traffic than Southwest carries at

MDW. ORD is a key hub in both AA’s and UA’s global alliance networks,

which naturally leads to a disproportionate share of corporate accounts and

high er

- fare passengers

. M DW

, on the other hand, is known for its

convenience and wide array of low

- cost t ravel options

. Beyond this, the ORD carriers have always had a bias toward charging the

maximum that the market will bear. Southwest and AirTran, on the other

hand, have tended to price as low as possible consistent with their return on

investment objecti ves. Southwest has historically viewed the automobile and

other forms of surface transportation as its primary competitors, whi ch requires

its a ir fares to be kept low independent of airline competition.

At ORD, a irport costs per enplaned passenger are ap proximately $10 to $15

higher for a small operator like Frontier compared to AirTran/Southwest ’s

costs at MDW . Further, the disparity between ORD costs and MDW costs is

increasing

. 10

The massive network of commuter and RJ flights at ORD (but not at MDW)

has the effect of raising local ORD fares to cover the much higher unit cost s of

10 During the FAA’s deliberations over federal funding for the now

- underway O’Hare Modernization Program (OMP), evidence was presented that the cost per enplaned passenger at ORD would increase from approximately $9 in 2003 to n early $30 after completion of the OMP. See A Critical Assessment of the Draft Environmental Impact Statement for the O’Hare Modernization Program (OMP) , pp. 61

- 62, submitted to the Federal Aviation Administration on behalf of Bensenville and Elk Grove Vil lage, Illinois, April 6, 2005.9 the small aircraft, compared to much lower unit costs of 137

- seat full

- sized jets

operated by AirTran/Southwest at MDW.

In addition, MDW’s fare discipline on ORD and the econ omic substitutability of

services at the two airports is convincingly demonstrated by the high degree to which

Southwest fares at MDW have caused the ORD carriers, especially United and

American , to lower their fares in response . A summary of the individual route examples

shown in the AirTran exhibits is presented in Exhibit FL

- R

- 10

. T he ORD fare reductions

in these examples range d from 12% to 60%, and th at measures only the short term fare

impacts

– from the year before AirTran/Southwest entered the market to the year after

entry. Consequently, it is naïve and uninformed to argue that AirTran/Southwest pricing

at MDW does not impact fares at ORD. It clearly does

, and it has deliver ed billions of

dollars in savings to Chicago consumers.

Finally

, t o further demonstrate the market power of AirTran/Southwest in

disciplining competitive fares it is instructive to examine the fare history at Denver.

Frontier challenged United at DEN before Southwest entered , and succeeded in

lowering fares somewhat below United’s levels. However, a fter Southwest entered

DEN markets that were already served by both United and Frontier, the average market

fare declined by an additional 25% (Exhibit FL

- R

- 11 )

. Further, Southwest’s prices to passengers at DEN are lower than Frontier’s in

two

- thirds of nonstop markets where they compete head

- to

- head (18 out of 27 such

markets)

, once taking into account not just airfares but the checked baggage and

reservation change fees that Frontier charges but Southwest does not (Exhibit FL

- R

-10

12 ). 11 Southwest’s average price over all 27 markets combined is 2. 7 % lower than

Frontier’s. This comparison is conservative ( i.e

. , biased in favor of Frontier ) because

the checked bag fees used are based on system averages even though trav elers in

leisure markets check more bags than the average of all routes in the carrier’s system.

III. PASSENGER DEMAND FOR SERVICE AT MIDWAY IS EQUAL TO THE DEMAND AT O’HARE.

Contrary to Frontier’s disparaging (and uninformed) description of Midway

Airport, AirTran has already shown that Midway and O’Hare are equally effective in

attracting traffic when the level of services offered at each airport is similar

. Exhibit FL

117 , submitted with AirTran’s January 19 Supplement, shows that in large Chicago

market s with similar nonstop service at both MDW and ORD, the volume of MDW

passengers is 99.4% as great as the ORD volume. This is unsurprising since, as

Exhibit FL

- 105 demonstrates

, the population within a 60

- minute drive of MDW is 94% as

great as the populat ion within 60 minutes of ORD. Beyond this, there is also evidence

that MDW is more effective tha n ORD in attracting passengers when services are

similar at both airports. F or the 12 months ended September 30, 2011 Midway’s O&D

traffic share exceeded its seat share in 26 of the top 30 markets where both MDW and

ORD had nonstop service , demonstrating t he strength of Midway relative to O’Hare

(Exhibit FL

- R

- 13 ).

In fact

, Midway Airport is more convenient than O’Hare for major segments of the

Chicago market, and in some respects is clearly preferred by Chicago travelers. First,

Midway is only 10 miles from downtown Chicago while O’Hare is 18 miles from

11 The average of such fees per fared passenger is $8.80 for Frontier but only $0.38 for Southwest. These amounts have been included in the prices charged by both carriers and the percentage differences are shown in Exhibit FL

R

- 12.11

downtown. 12 This 8 mile difference is highly significant to many passengers in this very

large and congeste d urban market.

Second, t he experience of connecting passengers is much better at MDW than

ORD

. At ORD, d omestic

- to

- domestic minimum connecting time is 50 minutes

, but only

25 minutes at MDW; domestic

- to

- international minimum connecting time is 75 minutes

at ORD and 60 minutes at MDW; and international

- to

- domestic minimum connecting

time is 90 minutes at ORD and 60 minutes at MDW. 13

Third, air traffic congestion creates a much higher incidence of delayed flights at

ORD than MDW. According to DOT r eports, the average percentage of arrivals delayed

beyond 15 minutes was 28.4% at ORD and 19.1% at MDW for the 12 months ended

November 30, 2011. 14

So, Frontier’s insinuation that Chicago

- Cancun passengers prefer ORD over

MDW by a factor of 30 to 1 for Canc un service 15 is self

- serving and patently false . As

AirTran/Southwest pointed out i n its January 19 Supplemental fil i ng , today’s CHI

- CUN

traffic is at ORD because that is where all the nonstop service is operated. Connecting

service is obviously not a competitive substitute for nonstop flights ( see Exhibit FL

- 116).

As AirTran demonstrated previously, MDW’s share of Chicago traffic dramatically

increases whenever Southwest inaugurate s new service that competes with ORD. In

the case of Chicago

- Washingt on Dulles (IAD)

, for example, MDW passengers jumped

from only 2.5% of ORD’s volume before Southwest’s entry to 122% after entry (Exhibit

FL

- 118). In the MDW

- BUF market, MDW traffic expanded from o nly 2.9% of ORD

12 Official Airline Guide , January 2012

. 13 Id.

14 DOT Air Travel Consumer Report , latest 12 monthly issues.
15 See Frontier’s January 19 Amendment and Supplement, at p p. 2 and 4.12

traffic prior to Southwest’s entry to 73% a fter Southwest entered (Exhibit FL

- 119). For

both markets the total Chicago traffic increased significantly due to Southwest’s new

service at MDW

– 65% in the case of Chicago

– IAD , and 131% for Chicago

- Buffalo.

Further evidence of the fact that MDW and ORD effectively serv e the same

Chicago market is found in a comparison of airline schedules in the multi

- airport

metropolitan areas of Chicago

, New York /Newark

, and Baltimore/ Washington (see

Exhibit FL

- R

- 1 4 ) . In New York/Newark

, there are 49 destinations that are served by the

same carrier at more than one New York area airport (Exhibit FL

- R

- 15 ). For example,

Delta serves Atlanta from all three New York area airports

– JFK, EWR and LGA. This

is just one of the total 49 carrier

- destination co mbinations in New York/Newark

. Why

does this occur? Because the carriers serving the New York /Newark area know that

JFK, LGA and EWR serve different portions of the region and no single airport serves

the entire area.

The same phenomenon occurs in the Ba ltimore/Washington area. Exhibit FL

- R

16 shows th at there are 31 destinations where a carrier serves more than one of the

three Baltimore/Washington airports. Again, the carriers serving that area know that

BWI, DCA, and IAD primarily serve different par ts of region, and it is necessary to serve

more than one of th ose airports to effectively access the entire market

. However, in the case of Chicago, there are only three carrier

- destination

combinations where the same carrier serves the market from both Chicago airports

(Exhibit FL

- R

- 17 ). This is because major Chicago airlines like United, American and

Southwest know they can access the same domestic traveler population at either MDW13

or ORD , and there is no need to duplicate services at two airports and incur

unnecessary costs.

IV. AIRTRAN/SOUTHWEST’S CUSTOMER SERVICE , CONVENIENCE, AND VALUE ARE FAR SUPERIOR TO FRONTIER’S.

Despite Frontier’s claims that it provides a better product with “substantially more

amenities,” a look at objective industry rankings and onboard product offerings show s
conclusively that AirTran / Southwest provide far superior customer service and value

than Frontier. For exampl e, the 2011 Airline Quality Rating (“AQR”) study ranked

AirTran and Southwest first and fifth respectively for Overall Quality, while Frontier

placed a distant ninth. Similarly, this same study revealed that Frontier had 1.23

consumer complaints per 100,0 00 passengers, five times the number for Southwest

(0.27). 16

Further, regarding onboard “ amenities ,” Frontier fails to mention that it requires

customers to pay additional fees for all of its so

- called “enhanced” products. For

example, Frontier charges $6 to watch TV, 17 $8 to watch a movie, 18 and up to $14 for

food and beverage items. 19 Similarly, its so called “STRETCH” seating and advanced

seat assignments come at an additional cost to the consumer based on fare class. 20

These features and other inflight sal es options should be considered sources of

supplemental fare revenue rather than disguised as consumer “ benefits. ”

Moreover, the value of any of these product offerings decreases significantly

when airfare is bundled into packaged vacations. In this conte xt, consumers focus less

16 See http://www.airlineinfo.com/public/2011aqr.pdf

17 See “Frontier Airlines

– Inflight Entertainment”, www.frontierairlines.com/flight

- info/inflight

- entertainment
18 Id

. 19 See “Frontier Airlines

– Inflight Catering”, www.frontierairlines.com/flight

- info/inflight

- catering
20 See “Frontier Airlines

– STRETCH Seating”, www.frontierairlines.com/flight

- info/stretch

- seating14

on the airline experience and more on the entirety of the vacation package when

making purchasing decisions. One wonders what the actual value of Frontier’s

“competitively attractive service product” is when Frontier intends to sel l 88% of its seats

via Apple Vacations and not directly to the public (Exhibit FL

- R

- 1, p. 2).

By comparison, Southwest provide s an array of benefits to passengers at no

additional charge . Southwest’s policy is to provide a high

- value, no

- hassle, product

delivered with exceptional customer service and without “ nickel

- and

- dim ing” customer s

. Significantly , Southwest does not charge passengers for their first or second checked

bag, a benefit that is particularly important to international travelers who have a high

proportion of luggage to check. Southwest also does not impose a reservation change

fee, affording travelers flexibility and confidence in making and adjusting their travel

plans. Frontier, on the other hand, charges $20 for the first checked bag, another $20
for the second checked bag, and $50 for changing a reservation. 21

Finally, Frontier’s claims about the superiority of its distribution channels are

flawed on several levels. For starters, to suggest that Southwest

- the largest and most

su ccessful low fare airline in the country

- ha s an ineffective distribution system is

laughable. Southwest’s ability to connect directly with Chicago consumers is

unsurpassed, via its website

, www.southwest.com (the m ost popular U.S. airline

website by a large margin ), 22 as well as telephone reservation centers and award

winning advertising and mar keting efforts . Furthermore, despite Frontier’s claim to the

contrary, Southwest also distributes its fares through two of the largest GDSs

, Sabre

21 See http://www.frontierairlines.com/

22 Nielsen, YE Nov 2011.15

and Travelport (which itself includes Apollo and Worldspan)

. Collectively, these GDSs

account for 90% of both the U.S. and Mexico GDS markets.

Frontier, on the other hand, needs to rely heavily on expensive GDS’s for

bookings sin ce it has such a limited presence in many of the cities that it serves

- especially Chicago. This is not so much a consumer benefit as it is a carrier weakness

.
O nly about 45% of Frontier’s passengers traveling system

- wide book directly on

frontierairlin es.com , 23 indicating that Frontier’s GDS booking ratio to/from Mexico is

simply in line with how it chooses to distribute its product. With Southwest’s long history

and enormous presence in Chicago, customers are thoroughly experienced in booking

travel di rectly with the airline and will undoubtedly do so for its future MDW

- Cancun

service.

V. CONCLUSION

F or the reasons stated above and in its prior submissions, AirTran r equests that

the Department grant its A pplication for E xemption and designate AirTran to provide

scheduled foreign air transportation of persons, property and mail between MDW and

CUN

.

Respectfully submitted,

______________________ Robert W. Kneisley

January 26 , 2012

23 From Republic ’s 3Q 2011 Earnings Call.16 CERTIFICATE OF SERVI CE
I hereby certify that on January 26, 2012, a copy of the foregoing was served via

e

- mail on the following persons:

ro bert.cohn@hoganlovells.com (Frontier Airlines) patrick.rizzi@hoganlovells.com (Frontier Airlines
susan.kurland@dot.gov paul.gretch@dot.gov brian.hedberg@dot.gov brett.kruger@dot.gov todd.homan@dot.gov esta.rosenberg@dot.gov john.allen@faa.gov ursk@dos.gov

Rosemarie S. Andolino Commissioner City of Chicago Department of Aviation rosemarie.sandolino@cityofchicago.org

Erin O’Donnell Managing Deputy Commissioner City of Chicago Department of Aviation, Midway Airport Erin@cityofchicago.org

i n f o @ a i r l i n e i n f o

. c o m

__________________________ Leslie C. Abbott

### Frontier 2

1/ In the future Southwest will have the ability to upguage to the B737

- 800 during the peak season and on peak days of the week . This estimate of annual seats assumes 50% of all flights are operated with the B737

- 800 (175 seats) and 50% with the re

- configured B737

- 700 (1 43 seats). 2/ See page 2 107,856 Seats 

## AirTran/Southwest Would Offer Far 

# More Seats to the Public Than Frontier

14,784 Seats 

### AirTran/Southwest Proposed Schedule

100,010 Seats 116,038 Seats 

### AirTran/Southwest (Future Up

- gauged Schedule) 1



### Seats Offered to the Public

Seats Contracted to Apple Vacations Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 1 Page 1 of 2

### 45,696
35,280

18,144
8,736
107,856 136

123

76

30

365

1/ Reply and Answer of Frontier Airlines, Inc., December 15, 2011, Page 7. 2/ [Column (1) ÷ 7] x Column (2). 3/ Column (3) x 168 x 2. 

# AirTran/Southwest Would Offer Far More Seats to the Public Than Frontier

A. Frontier Schedule for Apple Vacations Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 1 Page 2 of 2



### Period of the Year 1 

### Mid Dec. thru April
May thru August
Sept. thru early Nov.

Mid Nov. thru Mid Dec.

Total

B . Public Seats Frontier Schedule Revised to “Daily” (Assumed to be Outside the Apple Contract) No. of Days Weekly

Freq

. No. of

Days Served 2 One

- Way

Seats 3


### 7

6

5

6 136

105

54

26

321

44
365 14,784

122,640 (1) (2) (3) (4)

## Frontier Obtains Virtually No Interline Traffic From United on Mexico Service from Denver

UA Passengers Connecting to/from F9 as a Percentage of Annual F9 Seats

Source: Adjusted Marketing Information Data Tapes (MIDT), YE Q3 2011; OAG Schedules YE Q3 2011 Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 2

## Southwest’s Entry in MDW

- CLE Stimulated Traffic And Lowered Fares at Both ORD and MDW

Before WN Nonstop ORD

. Source: DOT, Origin

- Destination Passenger Survey. MDW Average Fare

After WN Nonstop Before WN Nonstop After

WN Nonstop Before WN Nonstop ORD MDW O&D Passengers

After WN Nonstop Before WN Nonstop After

WN Nonstop Docket DOT

- OST

- 2012

- 0001

Exhibit FL

- R

- 3Before

WN Nonstop ORD

Source : DOT, Origin

- Destination Passenger Survey. MDW Average Fare

After WN Nonstop Before WN Nonstop After

WN Nonstop Before WN Nonstop ORD MDW O&D Passengers

After WN Nonstop Before WN Nonstop After

WN Nonstop Docket DOT

- OST

- 2012

- 0001

Exhibit FL

- R

- 4 

## Southwest’s Entry in MDW

- PVD Stimulated Traffic And Lowered Fares at Both ORD and MDWBefore

WN Nonstop ORD

Source : DOT, Origin

- Destination Passenger Survey. MDW Average Fare

After WN Nonstop Before WN Nonstop After

WN Nonstop Before WN Nonstop ORD MDW O&D Passengers

After WN Nonstop Before WN Nonstop After

WN Nonstop Docket DOT

- OST

- 2012

- 0001

Exhibit FL

- R

- 5 

## Southwest’s Entry in MDW

- BDL Stimulated Traffic And Lowered Fares at Both ORD and MDWBefore

WN Nonstop ORD

Source : DOT, Origin

- Destination Passenger Survey. MDW Average Fare

After WN Nonstop Before WN Nonstop After

WN Nonstop Before WN Nonstop ORD MDW O&D Passengers

After WN Nonstop Before WN Nonstop After

WN Nonstop Docket DOT

- OST

- 2012

- 0001

Exhibit FL

- R

- 6 

## Southwest’s Entry in MDW

- CMH Stimulated Traffic And

Lowered Fares at Both ORD and MDWBefore

WN Nonstop ORD

Source : DOT, Origin

- Destination Passenger Survey. MDW Average Fare

After WN Nonstop Before WN Nonstop After

WN Nonstop Before WN Nonstop ORD MDW O&D Passengers

After WN Nonstop Before WN Nonstop After

WN Nonstop Docket DOT

- OST

- 2012

- 0001

Exhibit FL

- R

- 7 

## Southwest’s Entry in MDW

- OMA Stimulated Traffic And

Lowered Fares at Both ORD and MDWBefore

WN Nonstop ORD

Source : DOT, Origin

- Destination Passenger Survey. MDW Average Fare

After WN Nonstop Before WN Nonstop After

WN Nonstop Before WN Nonstop ORD MDW O&D Passengers

After WN Nonstop Before WN Nonstop After

WN Nonstop Docket DOT

- OST

- 2012

- 0001

Exhibit FL

- R

- 8 

## Southwest’s Entry in MDW

- OAK Stimulated Traffic And

Lowered Fares at Both ORD and MDWBefore

WN Nonstop ORD

Source : DOT, Origin

- Destination Passenger Survey. MDW Average Fare

After WN Nonstop Before WN Nonstop After

WN Nonstop Before WN Nonstop ORD MDW O&D Passengers

After WN Nonstop Before WN Nonstop After

WN Nonstop Docket DOT

- OST

- 2012

- 0001

Exhibit FL

- R

- 9 

## Southwest’s Entry in MDW

- SDF Stimulated Traffic And Lowered Fares at Both ORD and MDW

## O’Hare Fares Declined Significantly After Southwest Entered New Markets at Midway

ORD Fare Decrease (Year Over Year)

$165

$66 $142

$70 $120

$65 $159

$87 $242

$144 $270

$176 $208

$136 $154

$129 $140

$122 $153

$135 Year Before WN Entry at MDW:

Year After WN Entry at MDW: MDW Market

ORD Average Fare

Source : DOT, Origin

- Destination Passenger Survey. Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 10



### ExamplesWeighted Average Fare (All Carriers)



## Southwest’s Entry Into Frontier/United Denver Markets

Lowered Prices by an Average of 25%

- 25%

Note: Includes markets where United & Frontier both had nonstop service before Southwest entered

. Markets included are Albuquerque, Austin, Nashville, Chicago, Houston, Las Vegas, Kansas City, Orlando, Oklahoma City, Phoenix, San Diego, Seattle, Salt Lake City, Tampa. Data include the last 12 months directly prior to, and after

, Southwest service initiation as weighted by O&D volume. Includes f ared passengers only. Source: U.S. DOT Origin & Destination Survey & U.S. DOT T

- 100 Onboard data. Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 11

## Southwest Charges Lower Prices in 18 of the 27 Nonstop

DEN Markets Where It Competes Against Frontier

WN Lower than F9

1 Includes average fares plus baggage and reservation change fees per fared O&D passenger ($0.38 per Southwest passenger, and $8.80 per Frontier passenger). Both fees and fares are calculated using YE Q3 2011 data. Includes all DEN markets with nonstop service from both F9 and WN for the entire 12 month period. Includes fared passengers only. Source : OAG Schedules, YE Q3 2011; US DOT O&D Survey YE Q3 2011, Form 41, YE Q3 2011 for average baggage and change fees per passenge r. F9 Price Charged 1 % WN Lower than F9
139 101 160
122 108 166 132 107
111
112 134 131 85 113 107 94 128
121 181 91 105 89 149
127 108 137
111 151 110
174 131 115
177 140 113 116 118 140 137 89
117 110 97 130 123 181 91 102 85
142
121 100
127 102 - 8.4%

- 8.2%

- 7.6%

- 7.2%

- 6.4%

- 6.2%

- 5.9%

- 5.7%

- 4.9%

- 4.6%

- 4.5%

- 4.5%

- 4.3%

- 3.3%

- 2.5%

- 2.4%

- 1.8%

- 1.5% 0.1% 0.3% 2.1% 4.5% 4.9% 4.9% 7.8% 8.3% 8.6 % WN Price Charged 1
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No No No No No No Market
DTW LAS
FLL PDX LAX MCO
IND MSP SAN SNA SEA SFO TUS SAT AUS OMA SMF GEG
PHL SLC
PHX ABQ
BNA STL OKC
MDW MCI Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 12



## Weighted by market O&D, Southwest’s price charged across all 27 markets is 2.7% lower than Frontier’s price charged.MDW Share ORD Seats Total CHI Seats 

## MDW’s O&D Traffic Share Exceeds Its Seat Share in 26 of the Top 30 Markets

Where Both MDW and ORD Have Nonstop Service

Source : OAG Schedules, YE Q3 2011; US DOT O&D Survey YE Q3 2011 11% 23% 56% 39% 18% 39% 13% 50% 40% 38% 26% 37% 40% 50% 50% 19% 54% 37% 55% 36% 46% 44% 64% 47% 50% 45% 35% 15% 30% 29% MDW O&D CHI Rank by O&D Total CHI O&D MDW Share
1,761,867 1,265,537 484,897 718,837 1,035,694 848,289 1,098,344 795,385 991,559 723,744 847,580 799,954 353,155 218,785 317,947 767,392 327,719 490,728 442,672 569,952 676,177 393,936 218,134 384,000 345,714 317,321 314,649 334,792 281,178 299,165 2,005,453

1,551,593 927,216 1,164,772 1,275,970 1,452,413 1,233,289 1,399,630 1,563,382 1,058,435 1,131,201 1,081,974 550,572 424,835 545,758 904,940 645,730 676,500 894,563 958,901 1,114,129 702,169 560,046 669,773 652,666 571,294 473,830 384,660 377,743 388,763 1
2 3
4
5 6
7 8 9 10
11
12 13
14 15 16
17 18 19 20
21
22 23
24 25 26
27 28 29 30 936,981 552,049 268,629 362,087 458,048 335,350 479,138 265,451 313,275 310,285 330,411 256,180 240,946 167,316 168,105 244,699 131,940 172,141 119,230 167,092 138,352 125,784 74,872 109,682 101,136 104,793 122,394 155,344 114,158 106,947 117,823 166,706 342,363 231,567 100,956 218,225 69,205 260,779 206,663 189,656 115,253 152,714 158,099 170,206 169,254 57,430 153,648 103,253 147,193 94,164 115,728 98,898 133,831 95,732 102,113 85,961 66,225 26,758 48,701 43,455 12% 18% 48% 38% 19% 42% 11% 43% 37% 32% 25% 26% 36% 49% 42% 15% 49% 27% 51% 41% 39% 44% 61% 43% 47% 44% 34% 13% 26% 23% 1,054,804 718,755 610,992 593,654 559,004 553,575 548,343 526,230 519,938 499,941 445,664 408,894 399,045 337,522 337,360 302,129 285,588 275,394 266,423 261,255 254,080 224,682 208,703 205,414 203,250 190,754 188,618 182,102 162,860 150,402 ORD O&D 243,586 286,056 442,319 445,935 240,276 604,124 134,945 604,245 571,823 334,691 283,621 282,020 197,417 206,050 227,811 137,548 318,011 185,772 451,891 388,949 437,952 308,233 341,912 285,773 306,952 253,973 159,181 49,868 96,565 89,598 Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 13

MDW Seats Market
LGA
LAX MCO LAS BOS
ATL SFO
DEN MSP
PHX PHL IAH/HOU
FLL RSW
TPA SEA
BWI SAN MCI
DTW STL CLE
BNA IAD CMH
PIT RDU SNA AUS
PDX MDW Traffic Share MDW Nonstop Seat Share

## Many Airlines Use Multiple Airports in the New York

And Washington Areas to Serve the Same Destination Because 

# They Regard Each Airport as a Separate Market

Carrier

- Destination Combinations

Example: Delta serves Atlanta from LGA, JFK and EWR. The Delta

- Atlanta market is counted as 1 of 49 carrier

- destination combinations in New York/Newark.

Note: Includes only domestic and Canada routes Source: Official Airline Guide Schedules for the week of January 15

- 21, 2012. Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 14

## Forty

- Nine Destinations Are Served by the Same Carrier Via More Than One New York Area Airport

Service from 3 NYC Airports ( 12 carrier

- destinations) Service from 2 NYC Airports (37 carrier

- destinations)

Note: Includes only domestic and transborder Canada routes Source: Official Airline Guide schedules for the week of January 15

- 21, 2012. Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 15

## Thirty

- One Destinations Are Served by the Same Carrier

Via More Than One Washington Area Airport

Service from 3 WAS Airports ( 17 carrier

- destinations)
Service from 2 WAS Airports (14 carrier

- destinations) Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 16

Note: Includes only domestic and transborder Canada routes Source: Official Airline Guide schedules for the week of January 15

- 21, 2012.

## Only Three Destinations Are Served by the Same Carrier Via Both MDW and ORD

Service from both MDW and ORD (3 carrier

- destinations) Docket DOT

- OST

- 2012

- 0001 Exhibit FL

- R

- 17

Note: Includes only domestic and transborder Canada routes Source: Official Airline Guide schedules for the week of January 15

- 21, 2012.