BEFORE THE

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

___________________________________________

)

Application of )

)

SOUTHWEST AIRLINES CO. )

)

For exemptions from 14 C.F.R. Part 93, Subparts ) Docket DOT-OST-2012-0029

K and S, pursuant to 49 U.S.C. § 41718(g)(2) )

(BEYOND-PERIMETER SLOT EXEMPTIONS) )

)

For service between Ronald Reagan )

Washington National Airport (DCA) and )

Austin-Bergstrom International Airport (AUS) )

___________________________________________)

APPLICATION OF 

SOUTHWEST AIRLINES CO. 

Communications with respect to this 

 document should be addressed to:

Ron Ricks Robert W. Kneisley

 Executive Vice President -- Associate General Counsel

 Chief Legal and Regulatory Officer Leslie C. Abbott

Madeleine Johnson Senior Attorney

 Vice President General Counsel SOUTHWEST AIRLINES CO.

SOUTHWEST AIRLINES CO. 1901 L Street, NW

2702 Love Field Drive Suite 640

Dallas, TX 75235-1611 Washington, DC 20036

 bob.kneisley@wnco.com

 (202) 263-6284

March 12, 2012
1

BEFORE THE

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

___________________________________________

)

Application of )

)

SOUTHWEST AIRLINES CO. )

)

For exemptions from 14 C.F.R. Part 93, Subparts ) Docket DOT-OST-2012-0029

K and S, pursuant to 49 U.S.C. § 41718(g)(2) )

(BEYOND-PERIMETER SLOT EXEMPTIONS) )

)

For service between Ronald Reagan )

Washington National Airport (DCA) and )

Austin-Bergstrom International Airport (AUS) )

___________________________________________)

APPLICATION OF 

SOUTHWEST AIRLINES CO. 

On February 24, 2012, the Department of Transportation issued Order 2012-2-21 

establishing a beyond-perimeter slot exemption proceeding pursuant to 49 U.S.C. § 

41718(g)(2) in response to the recent passage of the FAA Modernization and Reform Act 

of 2012 (“FAA Act”). The Department’s Order invites applications from new entrant and 

limited incumbent carriers for eight additional slot exemptions created by the FAA Act 

for service between Ronald Reagan Washington National Airport (DCA) and airports 

beyond the 1,250 mile DCA perimeter. 

The statutory criteria applicable to these exemptions, as laid out in the FAA Act 

and reiterated in the Department’s Order, directs the Secretary to distribute the 

additional eight beyond-perimeter slot exemptions in a manner that will: 
2

(A) provide air transportation with domestic network benefits beyond the 

1,250 mile perimeter; 

(B) increase competition in multiple markets; 

(C) not reduce travel options for communities served by small hub airports 

and medium hub airports within the 1,250 mile perimeter; 

(D) not result in meaningfully increased travel delays; 

(E) enhance options for nonstop travel to and from the beyond-perimeter 

airports that will be served; 

(F) have a positive impact on the overall level of competition in the markets 

that will be served; or 

(G) produce public benefits, including lower fares, higher capacity, and a 

variety of service options. 

Consistent with these criteria, Southwest Airlines Co. (“Southwest”) hereby 

applies for two of the eight available slot exemptions to initiate first-time capital-tocapital nonstop service between DCA and Austin-Bergstrom International Airport (AUS), 

with continuing single-plane service to San Diego (SAN). As shown below, Southwest’s 

DCA-AUS-SAN application meets all of the above decisional criteria and will produce 

enormous consumer benefits in the form of fare savings, new service options, and 

increased competition in multiple beyond-perimeter travel markets. 
3

DETAILS OF SOUTHWEST’S

BEYOND-PERIMETER SERVICE PROPOSAL

ROUTE: DCA-AUS -SAN

SCHEDULE WESTBOUND DCA-AUS 1740-1955

(All times local) AUS-SAN 2035-2125

SCHEDULE EASTBOUND SAN-AUS 0720-1210

AUS-DCA 1250-1700

START DATE: Within 90 days of the Department’s Final Order

AIRCRAFT TYPE: Stage III Boeing 737-800 aircraft (175 seats)1

I. Southwest’s Service Proposal Meets All Statutory Criteria For 

Beyond-Perimeter Slot Exemptions 

Southwest’s DCA-AUS-SAN application clearly satisfies all seven decisional 

criteria set forth in the FAA Act for the award of beyond-perimeter slot exemptions. As 

specified in the FAA Act as well as Order 2012-2-12, the Department must consider the 

extent to which the exemptions will: 

A. “Provide air transportation with domestic network benefits in areas

beyond the perimeter” 

Southwest’s proposed service will link close-in DCA to numerous beyondperimeter cities on Southwest’s network. Southwest’s proposal will provide (1) the only 

nonstop service to DCA-AUS travelers, (2) single-plane service to DCA-SAN 

passengers, and (3) new connecting service options between DCA and markets beyond 

AUS. All of these new services will create significant domestic network benefits in 

beyond-perimeter markets. 

 

1

Southwest may begin DCA-AUS-SAN service with B737-700 model aircraft having 137 seats, but will convert to 

B737-800 aircraft with 175 seats by November 2012, in accordance with the delivery schedule for that aircraft. 
4

B. “Increase competition in multiple markets”

Southwest’s proposal will provide the only DCA nonstop service to Austin, the 

capital of Texas, and will compete in multiple markets including United’s service 

between AUS and Washington Dulles that produces average fares over 50% higher 

than Southwest’s projected average DCA-AUS fare. Beyond that, Southwest will offer 

convenient one-stop same-plane service to DCA-SAN passengers with the shortest 

elapsed time among competing one-stop flights, and at significantly reduced fares. 

Southwest's proposal will also provide immediate connecting service (via AUS) for DCADallas Love Field (DAL) and DCA-Houston Hobby Airport (HOU) passengers, offering 

low-fare competitive alternatives to passengers who prefer the close-in airports in Dallas 

and Houston. In addition, many other Southwest markets at AUS are likely to gain 

convenient connecting service to/from DCA in the future. Southwest’s competition in 

these markets will come not only from reduced fares but also by virtue of its “no-fees” 

policy for checked baggage and reservations changes, its popular Rapid Rewards 

frequent flyer program, and its award-winning customer service. 

C. “Not reduce travel options at small and medium hub airports within the 

perimeter”

Southwest’s service will be additive to its system schedule, i.e., Southwest will 

not reduce service in any of its four current inside-perimeter markets in order to provide 

the DCA-AUS-SAN service. Furthermore, as stated above, DCA service to/from 

DAL and HOU – both medium hub airports within the perimeter – would be significantly 

improved under Southwest’s proposal. Neither of these airports has nonstop service to 

DCA today, and both would gain convenient connecting opportunities to DCA via AUS.
5

D. “Not result in meaningfully increased travel delays”

Southwest’s proposed once daily DCA-AUS-SAN round trip will not increase 

delays at any of the airports involved. DCA, of course, is a slot controlled airport that 

will not be affected by Southwest’s proposed once-daily flight, and AUS has no major 

operational issues that would cause this flight to negatively impact the airport’s on-time 

performance. Nor will single-plane service between DCA and SAN create any new 

travel delays, as Southwest already operates connecting service between AUS and 

SAN today. It is also worth noting that Southwest is the industry leader in on-time 

performance since DOT record keeping began in 1987. 

E. “Enhance options for nonstop travel to and from beyond-perimeter 

airports”

Southwest will offer the only nonstop service in the DCA-AUS market. This 

significant new option not only will compete with United’s monopoly service at Dulles, 

but will do so at greatly reduced fares. Current fares between AUS and DCA are 57% 

higher than Southwest’s average fare for the same distance (Exhibit WN-121), enabling 

Southwest to offer sharply lower fares on this currently un-served beyond-perimeter 

nonstop route. 

F. “Have a positive impact on the overall level of competition in the beyondperimeter markets that will be served”

Southwest’s proposal will have an extremely positive impact on the overall level 

of competition in beyond-perimeter markets. In fact, Southwest has calculated that it 

will generate approximately 92,000 new passengers (traffic stimulation) in the DCA-AUS 

market, plus an additional 54,000 passengers in the DCA-SAN market, assuming 

competing carriers match Southwest’s low fares (see Exhibit WN-124). As the only 

provider of nonstop DCA-AUS service, Southwest will significantly improve beyond-
6

perimeter air service to and from Washington DC, and will do so at sharply reduced 

fares. 

G. “Produce public benefits, including the likelihood that the service to

airports located beyond the perimeter...will result in lower fares, higher 

capacity, and a variety of service options” 

Southwest’s proposal will provide 175 seats each way per day as the only 

nonstop capacity in the DCA-AUS market. Southwest’s DCA-AUS fares will be 36% 

lower than the current average DCA-AUS fare. In addition, significant fare reductions 

will be offered to one-stop DCA-SAN passengers and to all Southwest DCA passengers 

connecting at AUS. In total, Southwest’s low fares and new services will produce more 

than $23 million in fare savings to consumers annually (Exhibit WN-120). As explained 

in the attached exhibits, this amount is comprised of $12.4 million in annual fare savings 

to local DCA-AUS passengers; $8.9 million in fare savings for DCA-SAN travelers; and 

$1.7 million in fare savings for DCA passengers connecting to DAL and HOU at AUS. 

Detailed analyses supporting the above aspects of Southwest’s application are 

provided in the attached exhibits, including a full forecast of newly-generated traffic and 

calculations of expected consumer benefits. 

II. Austin Is An Ideal Market For Selection In This Case 

Southwest Airlines has served Austin since 1977. Over the many years of 

Southwest’s service, Austin has not only been an important air travel market in its own 

right but has also served as a significant gateway to Dallas Love Field (DAL) from 

markets outside of Texas. In the June, 2012 schedule Southwest will operate 364 

weekly departures and 49,829 seat-departures to/from 20 AUS nonstop cities (Exhibit 

WN-108). The DCA-AUS nonstop route will integrate well in Southwest’s system, 
7

providing one-stop single-plane service between DCA and SAN, and connecting service 

in AUS-beyond markets, ten of which are less than 30% circuitous for DCA O&D 

passengers and two of which currently connect to the proposed DCA-AUS flight (Exhibit 

WN-206). 

With approximately 77,000 annual O&D passegers to DCA, AUS is the fourth 

largest beyond-perimeter market without nonstop service today (Exhibit WN-104). 

Significantly for this case, AUS is the most over-priced of the top 10 beyond-perimeter 

markets without nonstop service to DCA today (Exhibit WN-105). Southwest’s low fares 

in this market will therefore produce major consumer savings for travel between Austin 

and the Nation’s Capital. 

Numerous corporations headquartered in the Washington area have offices 

and/or plants in Austin (Exhibit WN-109). Moreover, the federal government has 

several major offices and facilities in Austin covering a wide variety of agencies (Exhibit 

WN-110). There are at least 12 national associations headquartered in Austin (Exhibit 

WN-111). All of these organizations, in addition to the Texas state government, have 

significant community of interest with the federal government, and generate 

considerable business travel to/from Washington, D.C. 

The campuses of 12 universities and colleges and 410,000 students are located 

within 100 miles of Austin (Exhibit WN-112). Students and their families represent a 

significant component of leisure travel and generate considerable travel to and from the 

Washington DC area. Southwest expects that leisure travel will represent more than 

50% of its forecast traffic on-board its DCA-AUS flights. 
8

Austin is a robust air travel market that will strongly support nonstop service to 

DCA. Notwithstanding the current high DCA-AUS fares referred to above, this market 

has grown 13% over the past year (Exhibit WN-107). In fact, AUS has experienced 24 

consecutive months of air travel growth (Exhibit WN-113), and its unemployment rate 

has been significantly below the national average for the past five years (Exhibit WN114). The local Austin economy is strong in comparison to national averages.

III. Despite Being the Nation’s Largest Passenger Airline,

Southwest is Severely Under-Represented at DCA

Southwest Airlines is the nation’s largest domestic airline in terms of passenger 

traffic carried. For YE Q3, 2011 Southwest carried 101.4 million domestic O&D 

passengers. Delta was second with 78.9 million, and the other limited incumbents 

ranged from 20.4 million (JetBlue) to 5.5 million (Spirit). See Exhibit WN-115. Using 

four common metrics of size, Southwest ranges from 1.6 to 2.0 times the size of all new 

entrants and limited incumbents combined (Exhibit WN-116), yet operates far fewer 

slots.

In fact, Southwest operates only 2.9% of DCA slots today, all through its AirTran 

subsidiary (Exhibit WN-115). Despite carrying over five times more passengers than 

the next largest limited incumbent (JetBlue), Southwest has about a third fewer DCA 

slots than JetBlue (25 vs. 34 slots respectively) (Exhibit WN-117). Looking at the matter 

another way, Southwest holds by far the smallest share of DCA slots and slot 

exemptions among limited incumbents relative to the number of passengers each airline 

carries. As Exhibit WN-118 shows, JetBlue and Republic hold more than seven and 

eight times more slots respectively than Southwest in relation to the number of 

passengers they carry. 
9

By any reasonable measure it is clear that Southwest is severely underrepresented at DCA in relation to its size and importance in the U.S. airline industry. An 

award to Southwest of additional slot exemptions in this proceeding would not only fully 

satisfy the statutory criteria discussed above, but advance the public interest by

enabling the nation’s largest airline to expand its tiny presence at DCA and provide

more effective low-fare access to travel markets across the country. 

IV. Southwest’s Proposal Will Generate Significant Public Benefits

In Numerous Beyond-Perimeter Markets

Southwest’s proposal will provide a wide range of public benefits in numerous 

beyond-perimeter air travel markets. Austin has no nonstop service to/from DCA today. 

Southwest will provide the only nonstop flights in the DCA-AUS market, a far superior 

service option than United’s service to IAD as a monopoly carrier. 

Not only will Southwest’s service enhance the competitive structure in the DCAAUS local market, it will also provide excellent passenger choice alternatives in the 

Washington DC - San Diego market by providing single-plane one-stop service. In fact, 

Southwest’s same-plane SAN-AUS-DCA service will be the quickest flight option 

available between SAN and DCA (Exhibit WN-207). In addition, Southwest’s proposal

will generate immediate on-line connecting competition in two significant markets 

beyond AUS – DAL and HOU – and offer potential connecting opportunities for other 

beyond-AUS cities in the future. All markets in which Southwest’s service will be a 

competitive force will be impacted positively by the injection of Southwest Airlines’ low 

fares as well as its “no fees” policy – virtually unique in the U.S. industry today –

whereby Southwest does not charge fees for checking up to two articles of baggage or

for making changes to passenger reservations. 
10

One of the primary carrier selection criteria articulated by the Department is 

which carrier proposals will “produce public benefits, including lower fares, higher 

capacity, and a variety of service options.”2 With respect to this factor, Southwest 

projects significant traffic stimulation and consumer fare savings as a direct 

consequence of its low fares and significant service improvements in beyond-perimeter 

markets. 

Southwest engaged the Campbell-Hill Aviation Group to estimate the public 

benefits of its proposed DCA-AUS-SAN service, including a fully documented forecast 

of new traffic and a calculation of expected fare savings to consumers. As detailed in 

the attached exhibits, Campbell-Hill projects that Southwest’s proposed DCA-AUS-SAN 

service will generate more than $23 million annually in consumer fare savings (Exhibit

WN-120). This total amount is comprised of $12.4 million in the local DCA-AUS market,

$8.9 million in the DCA-SAN market, and $1.7 million in connecting markets between 

DCA and points beyond AUS (Exhibit WN-120). These projected savings stem primarily 

from the fact that current DCA fares to AUS and SAN are much higher than Southwest’s 

average fares for markets of the same distance – 57% higher in DCA-AUS and 32% 

higher in DCA-SAN. See Exhibits WN-121 and WN-122. These savings will benefit 

both the existing passengers in these markets (by reducing fares below previous levels) 

as well as newly-generated passengers (by creating previously unexpected savings or 

“consumer surplus”). See Exhibits WN-205 and -209.

As a consequence of Southwest’s low fares and the fact that it will have the only 

nonstop in the DCA-AUS market, a significant amount of new traffic will be generated. 

Campbell-Hill projects that Southwest’s service will stimulate approximately 146,000 

 

2 DOT Order 2012-2-21 at p. 3.
11

new passengers over the entire DCA-AUS-SAN route. See Exhibits WN-124, -204 and 

-208. This large level of stimulation will occur due to both lower fares and new service 

improvements in the DCA-AUS and DCA-SAN markets. Southwest will carry many of 

these new passengers of course, while competing carriers that lower their fares in 

response to Southwest will also carry some of these passengers. As a result, the 

markets as a whole will grow significantly, and passengers will benefit both directly by 

flying on Southwest’s new flights, and indirectly by travelling on competing airlines that 

are forced to reduce fares in response to Southwest’s competition.

Details of Southwest’s traffic forecast and fare benefits calculations, including a 

full explanation of the methodology and economic models used by Campbell-Hill, are 

set forth in the 200 series of exhibits attached to this Application. 

CONCLUSION

For the reasons stated above, Southwest urges the Department to grant it two 

beyond-perimeter slot exemptions to enable it to provide the only nonstop capital-tocapital service between Austin and Washington National Airport, with single plane 

service beyond AUS to San Diego, as specified in this Application. 

Respectfully submitted,

__________________________

Robert W. Kneisley

March 12, 2012
CERTIFICATE OF SERVICE

I hereby certify that on March 12, 2012, a copy of the foregoing was served via email on the following persons:

msinick@ssd.com (Alaska Airlines)

carl.nelson@aa.com (American Airlines)

sascha.vanderbellen@delta.com (Delta Air Lines)

jeff.morgan@delta.com (Delta Air Lines) 

robert.cohn@hoganlovells.com (Frontier Airlines)

patrick.rizzi@hoganlovells.com (Frontier Airlines

jhill@dowlohnes.com (JetBlue Airways)

perkmann@dowlohnes.com (JetBlue Airways)

dkirstein@yklaw.com (Spirit Airlines)

jyoung@yklaw.com (Spirit Airlines)

John.Fredericksen@suncountry.com (Sun Country Airlines)

dan.weiss@united.com (United Air Lines)

howard_kass@usairways.com (US Airways)

benjamin.slocum@usairways.com (US Airways)

pmurphy@lopmurphy.com (USA3000)

barbara.russell@virginamerica.com (Virgin America)

john.varley@virginamerica.com (Virgin America) 

susan.kurland@dot.gov

todd.homan@dot.gov

brian.ctr.meehan@faa.gov

Jim Smith

Director of Aviation

Austin-Bergstrom International Airport

jimsmith@ci.austin.tx.us

John E. Potter

President and Chief Executive Officer 

Metropolitan Washington Airports Authority

john.potter@mwaa.com

info@airlineinfo.com

__________________________

Leslie C. Abbott
Southwest’s Proposal Satisfies All

of the Carrier Selection Criteria

Docket OST-2012-0029

Exhibit WN-100

Satisfied by

Carrier Selection Criterion1 Southwest Proposal

A. Provide air transportation with domestic network benefits beyond the 1250 

mile perimeter;

YES

B. Increase competition in multiple markets; YES

C. Not reduce travel options for communities served by small hub airports and 

medium hub airports within the 1250 mile perimeter;

YES

D. Not result in meaningfully increased travel delays; YES

E. Enhance options for nonstop travel to and from the beyond-perimeter 

airports that will be served;

YES

F. Have a positive impact on the overall level of competition in the markets that 

will be served as a result of the exemptions;

YES

G. Produce public benefits, including lower fares, higher capacity, and a variety 

of service options.

YES

1/ DOT Order 2012-2-21, page 3.
Southwest Airlines Service Proposal
Southwest’s DCA-AUS Proposal with

Single-Plane Service to SAN

Docket OST-2012-0029

Exhibit WN-101

Note: Southwest’s current DCA routes include routes served by its wholly owned subsidiary AirTran Airways.

Source: OAG Schedules for the week of June 11th through the 17th, 2012

 The DCA-OKC route is 1,158 nonstop 

miles and is inside the DCA perimeter

MKE

SAN

DCA

AUS

ATL

MCO

RSW

WN Current DCA Routes

WN Proposed DCA Route

WN Current AUS Route 

DCA -AUS is 1,315 miles

and is outside the perimeter
Southwest’s DCA-AUS-SAN B737-800 Nonstop Service Proposal

1700

1250

1210

0720

Washington

(DCA)

Austin

(AUS)

San Diego

(SAN)

1740

1955

2035

2125

Daily Daily

Note: All Times Local.

Freq/Wk

Docket OST-2012-0029

Exhibit WN-102
AUS

DCA

SAN

Southwest’s System Route Map

Docket OST-2012-0029

Exhibit WN-103

Source: OAG Schedules for the week of June 11th through the 17th, 2012

Weekly Departures 27,690

Weekly Seat-Departures 3,737,079

Airports Served 103

 
Austin is One of the Largest

Beyond-Perimeter Markets Without 

Nonstop DCA Service, and Suffers

from Extremely High Fares
AUS is the Fourth Largest DCA- Beyond Perimeter 

Market Without Nonstop Service

Top DCA O&D Markets

By Fared Passengers

117,143

99,544

85,294

76,995

65,177 63,506

56,598

51,061 47,011 43,334

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

SAN SAT PDX AUS TUS SNA ABQ SJU SJC SMF

Docket OST-2012-0029

Exhibit WN-104

Source: US DOT O&D Survey YE Q3 2011, via Diio, LLC.
DCA – AUS is the Most Overpriced of the

Top 10 Beyond Perimeter DCA Markets Without Nonstop Service

Percentage Market

Yield Above DCA 

Market Yield Curve

11%

7%

5%

4%

2%

-3%

-4%

-6%

-10% -11%

-15%

-10%

-5%

0%

5%

10%

15%

AUS ABQ SMF PDX SAN TUS SNA SAT SJC SJU

Docket OST-2012-0029

Exhibit WN-105

Page 1 of 2

1/ Regression curve shown in Exhibit WN-105 page 2.

Source: US DOT O&D Survey YE Q3 2011, via Diio, LLC.

Current 

DCA Yield 20.1¢ 15.8¢ 11.3¢ 11.3¢ 11.4¢ 12.3¢ 10.6¢ 16.3¢ 9.5¢ 13.9¢

Market Yield 

Curve Yield1 18.0¢ 14.8¢ 10.7¢ 10.8¢ 11.1¢ 12.7¢ 11.1¢ 17.3¢ 10.5¢ 15.6¢
y = 10,244x-0.883

0.0¢

5.0¢

10.0¢

15.0¢

20.0¢

25.0¢

1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 2500

DCA – AUS is the Most Overpriced of the

Top 10 Beyond Perimeter DCA Markets Without Nonstop Service

Nonstop Miles

YE Q3 2011 

Market Yield

1/ Curve derived from all DCA beyond perimeter markets with 50 or more fared passenger per day each way. Only the top 10 markets without nonstop service are shown.

Note: Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fees.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.

Yield Curve for DCA Beyond

Perimeter Markets1

Top 10 DCA Beyond Perimeter

AUS Market Without Nonstop Service

SAT

ABQ

SJU

TUS

SAN

SNA

PDX SMF

SJC

Docket OST-2012-0029

Exhibit WN-105

Page 2 of 2
Source: U.S. DOT Origin & Destination Survey, via Diio, LLC.

Note: Includes fared passengers only.

Docket OST-2012-0029

Exhibit WN-107

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000 2000 Q4 2001 Q1 2001 Q2 2001 Q3 2001 Q4 2002 Q1 2002 Q2 2002 Q3 2002 Q4 2003 Q1 2003 Q2 2003 Q3 2003 Q4 2004 Q1 2004 Q2 2004 Q3 2004 Q4 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3

The DCA-AUS Local Market Grew by 13% in the Past Year

DCA-AUS O&D Passengers

12-Month Moving Total

Average Annual Growth

1-Year: 13.2%

2-year: 3.8%
AUS

SAN

LAX

TPA

LAS

DEN

LBB

DCA

BWI

ELP

BNA

PHX

SJC

OAK

ATL

CUN

DAL

FLL

HOU

HRL

MCO

MDW

Southwest Operates 52 Departures per Day 

At AUS to 20 Important Markets

Docket OST-2012-0029

Exhibit WN-108

Source: OAG Schedules for the week of June 11th through the 17th, 2012

Weekly Departures 364

Weekly Seat-Departures 49,829

Airports Served 20

 

Current WN Routes

Proposed WN Route
AUS Growth and Business

Linkages to Washington DC
Austin Companies With DC-Area Headquarters 

Company Name Industry

AAI Corp. IT & software related services

Akin Gump Strauss Hauer & Feld Law firm

Arkane Studios Austin Computer Games

Austin Title Co. Title company

BAE Systems Defense & aerospace equipment mfg.

Borland Software Corp. IT & software related services

Capital One Banking

CFAN Aerospace equipment mfg.

CSC Financial Services Group IT & software related services

DLA Piper Law firm, IP law specialty

GXS B2B e-commerce services

Harris Connect Directory publisher

Intific IT & software related services

Maxim Healthcare Services Healthcare

Maximus Social services program administrator

Moore & Associates Real estate, commercial

Morning Glory Division of Carpenter Co. Household furnishings mfg.

Netspend Credit card processing & marketing services

Optimization Alternatives IT & software related services

Owens & Minor Medical & surgical supplies distribution center

Reznik Group Business & accounting consultant services

SAIC IT & software related services, govt contractor

Sheshunoff Information Services Financial data & publishing

Sodexho Facilities management services

Teksystems IT Staffing

TidalTV Video advertising

URS Federal Services Defense & NASA contractor

XO Communications Data center with web hosting services 

Zenoss IT & software related services

Source: Austin Chamber of Commerce.

AUS Companies with DC-Area Headquarters

Docket OST-2012-0029

Exhibit WN-109

Source: ABIA
A Selection of Austin – Washington DC Links

The Austin Information Technology Center, which began as a data center for the 

Department of Veterans Affairs, now provides IT services to federal agencies 

including Department of Justice, General Accountability Office, National Archives, 

NASA, General Services Administration and the Federal Highway Administration

DC and Austin both fare well in quality of life and business rankings, suggesting 

similarity in attributes

“Next Hot Youth Magnet Cities” (DC #1, Austin #5) (WSJ)

“10 Best Cities For the Next Decade” (Austin #1, DC #3) (Kiplinger)

“The Next Boom Town” (Austin #1, DC #6) (Forbes)

“America’s Smartest Cities (DC #1, Austin #6)

"Cities on the Edge" (Austin #5, DC #7) (Spearling's)

One of the IRS’s five regional service centers is in Austin

The DC chapter of the University of Texas-Austin alumni association is the 2nd

largest outside Texas (after the California state chapter)

Select AUS – Washington Travel Links

Docket OST-2012-0029

Exhibit WN-110

Source: ABIA
National Associations Headquartered in Austin

1

5

Association Name

American Academy of Nurse Practitioners 

Association of Certified Fraud Examiners 

Automotive Parts & Services Association 

Clean Technology & Sustainable Industries Organization 

Delta Kappa Gamma Society International 

Hospitality, Financial and Technology Professionals 

National Alliance for Insurance Education & Research 

National Center for Educational Accountability 

Silicon Integration Initiative 

Social Media Business Council 

United States Business Council for Sustainable Development

Wi-Fi Alliance

Source: Austin Chamber of Commerce.

National Associations Headquartered in Austin

Docket OST-2012-0029

Exhibit WN-111

Source: ABIA
A Selection of Austin – Washington DC Links There Are Over 410,000 Students Within 100 Miles of Austin

Docket OST-2012-0029

Exhibit WN-112

Source: Austin Chamber of Commerce.

Four-Year Institutions

 The University of Texas, Austin 51,195

 Texas State University, San Marcos 32,572

 St. Edward’s University, Austin 5,454

 University of Mary Hardin-Baylor, Belton 2,956

 Concordia University, Austin 2,573

 Southwestern University, Georgetown 1,373

 Texas Lutheran University, Seguin 1,340

 Huston-Tillotson College, Austin 901

Community Colleges

 Austin Community College, Austin 44,100

 Central Texas College, Killeen 26,055

 Temple College, Temple & Taylor 5,966

Austin Region Total* 181,152

TOTAL WITHIN 100 MILES 410,725
5.5

1.6

10.7

4.2

6.6

2.5

5.9

2.5

3.6

4.1

8.8

6.7

5.7

9.8 9.9

3.1

11.7

4.9

1.9

4.7

5.8

3.0

2.0

1.5

0.0

4.0

8.0

12.0

16.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 2011

24 Consecutive Months of Growth

% Change in YOY Enplanement Traffic

Source: ABIA

AUS Has Experienced 24 Consecutive Months of Enplanement Growth

Docket OST-2012-0029

Exhibit WN-113

Source: ABIA.

% Change YOY
Austin Continues to Outperform the 

U.S. Unemployment Rate

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

2007 2008 2009 2010 2011

Austin

Source: Texas Workforce Commission.

United States

Austin’s Unemployment Rate Has Been 

Consistently Below the U.S. Average 

Docket OST-2012-0029

Exhibit WN-114

December 

2011

Source: ABIA
Southwest, the Nation’s Largest Domestic

Carrier, is Severely Under-Represented at DCA
Despite Carrying More Domestic O&D Passengers than

Any Other Carrier Southwest Has Only 2.9% of DCA Slots

Source: FAA Slot Reports, Current and Future, dated 2-13-2012 and OAG schedules June 2012.

460

109 97

76

18

6

34 25 20

6 2

0

50

100

150

200

250

300

350

400

450

500

US DL AA UA AC AS B6 WN F9 NK SY

Legacy/Foreign Flag Carriers Low Cost Carriers

DCA Slots

Total Slots = 853

Percent of 

Airport Total 53.9% 12.8% 11.4% 8.9% 2.1% 0.7% 4.0% 2.9% 2.3% 0.7% 0.2%

Total 

Domestic O&D 

Passengers 

(Millions) 41.6 78.9 46.2 64.2 N/A 15.1 20.4 101.4 10.7 5.5 1.1

Docket OST-2012-0029

Exhibit WN-115
Southwest Is Nearly Twice The Size of All Other 

New Entrants and Limited Incumbents Combined

Ratio of Southwest to 

All Other New/Limited 

Incumbents Combined

2.0

1.9

1.6 1.6

0.0

0.5

1.0

1.5

2.0

2.5

Domestic Mainline Departures per

Week

Domestic Mainline Seats per Week Domestic Annual O&D Passengers Domestic Annual Revenue

Docket OST-2012-0029

Exhibit WN-116

Source: US DOT O&D Survey, YE Q3 2011, via Diio, LLC; OAG schedules, YE Q3 2011, and 

FAA Slot Reports, Current and Future, dated 2-13-2012 and OAG schedules June 2012.
Southwest Carries Five Time More Passengers Than

the Next Largest Limited Incumbent

Annual Domestic

O&D Passengers

(Millions)

Source: US DOT O&D Survey YE Q3 2011, via Diio, LLC.

Docket OST-2012-0029

Exhibit WN-117

101.4

20.4

15.1

10.7

5.5 5.6 4.3 1.1

62.7

0

20

40

60

80

100

120

WN B6 AS F9 NK G4 V X SY New/Limited

Incumbent

Combined
Southwest’s Share of DCA Slots is 

Disproportionately Small Among Limited Incumbents 

DCA Slots per 

100,000 Domestic

O&D Passengers

8

13

38

59

66 68

0

10

20

30

40

50

60

70

80

WN AS NK B6 F9 SY

Docket OST-2012-0029

Exhibit WN-118

Source: US DOT O&D Survey, YE Q3 2011, via Diio, LLC; and 

FAA Slot Reports, Current and Future, dated 2-13-2012 and OAG schedules June 2012.
Consumer Benefits of 

Southwest’s DCA-AUS-SAN Proposal
Note: First Normalized Year

1/ From WN-202

2/ From WN-205, WN-209, WN-210, WN-211.

71,269

10,067

16,653

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

97,989

Fared Passengers1

Carried by Southwest

$12.4

$8.9

$1.7

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$22

$24

$23.1

million

Annual Consumer Fare Savings2

(Millions)

Summary of Consumer Benefits of 

Southwest’s DCA-AUS-SAN Proposal

Docket OST-2012-0029

Exhibit WN-119

DCA-AUS

DCA-SAN

DCA-Cx Beyond AUS
$8.0

$4.4

$12.4

$7.3

$1.7

$8.9

$1.7

$1.7

$0

$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

Savings to Existing Passengers Savings to New Passengers Total Passenger Savings

Docket OST-2012-0029

Exhibit WN-120

Southwest’s DCA-AUS-SAN Proposal Will Generate 

Over $23 Million Annually In Total Consumer Fare Savings

$17.0

Million

$6.1

Million

Total

Consumer Fare 

Savings (Millions)

$23.1

Million

Note: First Normalized Year.

Source: Sum of Exhibits WN-205, WN-209 and WN-210.

DCA-AUS

DCA-SAN

DCA-Cnx Beyond AUS
$265

$169

$0

$50

$100

$150

$200

$250

$300

Current Southwest

Current DCA-AUS Fares Are 57% Higher than 

Southwest’s Average Fare Levels

+57%

1/ Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fees.

2/ Based on Southwest Yield Curve (Appendix 6)

Source: US DOT O&D Survey YE Q3 2011; US DOT Form 41, via Diio, LLC.

Average Fare 1 DCA-AUS

Docket OST-2012-0029

Exhibit WN-121

2
$258

$196

$0

$50

$100

$150

$200

$250

$300

Current Southwest

Current DCA-SAN Fares are 32% Higher than 

Southwest’s Average Fare Levels

+32%

1/ Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fees.

2/ Based on Southwest Yield Curve (Appendix 6)

Source: US DOT O&D Survey YE Q3 2011; US DOT Form 41, via Diio, LLC.

Average Fare 1 DCA-SAN

Docket OST-2012-0029

Exhibit WN-122

2
$268

$164

$0

$50

$100

$150

$200

$250

$300

Current Southwest

Current DCA Fares in Southwest’s AUS Connecting

Markets Are 63% Higher than Southwest’s Average Fare Levels

+63%

1/ Includes Dallas and Houston. See Exhibit WN-206.

2/ Fared passengers only. Excludes all taxes and government charges. Includes estimated checked baggage and rebooking/change fees.

3/ Based on Southwest Yield Curve (Appendix 6)

Source: US DOT O&D Survey YE Q3 2011; US DOT Form 41, via Diio, LLC and WN-206 and Appendix 5.

DCA-Beyond AUS 

Connecting Markets1

Average Fare 2

Docket OST-2012-0029

Exhibit WN-123

3
Note: First Normalized Year. / Source: Exhibits WN-204 and WN-208

Docket OST-2012-0029

Exhibit WN-124

Southwest’s Low Fares And DCA-AUS Nonstop Service

Will Generate 146,082 New Passengers In the Single-Plane Markets

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

150,000

DCA-AUS Market

Stimulation

DCA-SAN Market

Stimulation

Total New

Passengers

91,806

54,276

Fared O&D

Passengers

146,082

As a result of Southwest’s new nonstop service between DCA and AUS, and first single-plane (one-stop) service between 

DCA and SAN via AUS, Southwest will stimulate the markets and generate new passengers. This stimulation occurs due to 

lower fares and improved service. Assuming competitors respond by lowering their fares, some of the newly generated 

passengers will be carried by Southwest and others will be carried by competing carriers who lower their fares in response 

to Southwest. Southwest’s own traffic will be composed of some newly generated passengers (people who would not have 

traveled at all but for the lower fares and/or improved service), and some passengers diverted from other carriers.
Docket OST-2012-0029

Exhibit WN-200

Page 1 of 7

Narrative Introduction to the Southwest Airlines

Traffic And Consumer Fare Savings Forecast

Introduction

One of the primary carrier selection criteria articulated by Congress is which carriers will . . . “produce public 

benefits, including lower fares, higher capacity, and a variety of service options.”1 Southwest projects significant 

competitive benefits, traffic stimulation, and consumer fare savings as a direct consequence of its low fares and service 

proposal. These benefits will accrue to passengers in the (1) local DCA-AUS nonstop market, (2) DCA-SAN one-stop 

(single-plane) market, and (3) DCA-beyond AUS to points other than SAN.

2

 

In order to support the estimates of consumer savings and traffic stimulation occasioned by Southwest’s low fares 

in the new markets at issue, detailed forecasts have been prepared by Campbell-Hill Aviation Group using several of its 

economic and analytical models. This narrative discusses the forecast methodology and summarizes the results. Exhibit 

WN-201 shows Southwest’s proposed DCA-AUS route that is 1,315 nonstop miles and is outside the perimeter. The data 

on this chart summarize the impact of Southwest on traffic stimulation, as well as the number of local O&D passengers it 

expects to carry. Exhibit WN-206 presents the complete DCA-AUS-SAN routing including the 10 beyond AUS segments

that would be less than 30% circuitous to/from DCA. As mentioned above, Southwest has estimated benefits only for the 

 

1 DOT Order 2012-2-21, page 3. 

2

For purposes of this forecast Southwest has limited its traffic participation in connecting markets to DCA-DAL and DCA-HOU. In reality there will 

be connecting passengers over other AUS segments, particularly those where the DCA trip circuity is relatively modest. AUS connecting markets 

with less than 30% circuity include DCA-ELP, HRL, LAS, LAX, LBB, OAK, PHX and SJC. The current schedules do not provide convenient 

connections in these eight markets. Over time, however, schedules change and it is likely that new connecting markets will evolve and Southwest 

will carry DCA passengers to/from DCA in additional AUS connecting markets.
Docket OST-2012-0029

Exhibit WN-200

Page 2 of 7

two markets (DAL and HOU) that currently connect to the proposed schedule. The base year O&D traffic is also shown for 

each of the three relevant traffic components. 

Campbell-Hill’s forecast follows the DOT tradition of estimating traffic and fare savings in the first normalized year. 

This is the 12 month period following six months of introductory marketing and operational activity. For purposes of this 

case Campbell-Hill assumed a July, 2012 start-up of operations and so the first normalized year would be CY 2013. The 

base year for historical traffic is YE Q3, 2011. 

Total fare savings in the DCA-SAN local market are forecast to be $13.1 million (Exhibit WN-205). In addition,

consumer fare savings in the DCA-SAN and DCA-connecting beyond AUS markets will be $8.9 million and $1.7 million 

respectively (Exhibits WN-209 and WN-210). The total fare savings due to Southwest’s proposal is $23.7 million (Exhibit 

WN-211). This is the same amount of savings that is shown in Exhibits WN-119 and WN-120. 

Total forecast consumer savings that will result from Southwest’s DCA-AUS-SAN service may be summarized as 

follows:

Market

Consumer Savings – First Normalized Year

(Millions)

DCA-AUS $12.4

DCA-SAN 8.9

DCA-Connections beyond AUS3 1.7

 Total $23.1

Note: Total does not add due to rounding.

Source: Exhibits WN-205, WN-209 and WN-210.

 

3

The two connecting markets, AUS-DAL and AUS-HOU.
Docket OST-2012-0029

Exhibit WN-200

Page 3 of 7

The DCA-AUS Local Market

Exhibit WN-202 presents the local traffic forecasts (Lines 1 through 10). Campbell-Hill estimated traffic stimulation 

assuming all market participants reduce their fare to Southwest’s level. For YE Q3, 2011 the DCA-AUS local average fare 

was $265. The expected average fare to be earned by Southwest is $169 (Exhibit WN-121)

4

. 

When the fare values are input to the Campbell-Hill price elasticity model, and using an elasticity coefficient of -1.2 

(Appendix 1), the forecast year base traffic5of 83,735 DCA-AUS annual O&D passengers will increase by 72.4%. Using 

Campbell-Hill’s QSI model6to estimate the additional service stimulation resulting from Southwest’s daily nonstop in the 

DCA-AUS market, traffic is projected to increase by a further 21.6%. The combined stimulation is 109.6%. When the 

base forecast (Exhibit WN-202, Line 2) is increased by 109.6% the resultant market forecast for the first normalized year 

 

4

For YE Q3, 2011 Southwest’s average fare earned in the BWI-AUS local market was $214. BWI is a major focus city for Southwest and seats 

available to the local BWI market are limited due to the significant capacity allocated to passengers connecting at BWI. This has the effect of 

raising the weighted average fare earned for the local BWI segment. In the case of the DCA-AUS market, the share of seats available for the local 

market will be greater and it is expected that a larger share of the market will be leisure at DCA than at BWI. The leisure market books further in 

advance and pays lower fares than the business market. Finally, as a small DCA participant and a relative newcomer, Campbell-Hill expects 

Southwest to be more price aggressive in order to create patronage and capture loyalty as it builds a more significant DCA presence over the long 

run. All factors considered, Southwest’s weighted average fare in the DCA markets will resemble its system average for comparable distances 

(see Appendix 8), rather than the BWI-AUS average fare. 

5 CY 2013 after growth of 3.8% is applied to the base year ended Q3, 2011 passengers.

6

The Campbell-Hill QSI model for estimating service stimulation includes all relevant schedule and capacity characteristics of competing flights, 

including on-line connecting options. 
Docket OST-2012-0029

Exhibit WN-200

Page 4 of 7

is 175,541 passengers (Exhibit WN-202, Line 6). Southwest’s share based on the QSI model will be 40.6%, or 71,269

local DCA-AUS passengers for its nonstop flight (Exhibit WN-202, Line 8). 

Southwest has demonstrated to the Department in many previous proceedings7the significant traffic stimulation 

generated by its low fares. In fact, the DOT has publically characterized this phenomenon as the “Southwest Effect.” In 

this case the additional traffic stimulated as a consequence of Southwest’s low fares and new service at DCA is 91,806

passengers in the local DCA-AUS market and 54,276 passengers in the DCA-SAN market.8 Southwest’s traffic forecast 

conservatively claims no stimulation in the connecting markets beyond AUS, but in reality there would be some. The 

traffic projected to be carried by Southwest has two primary sources: (a) Southwest will carry a significant number of the 

newly generated passengers, and (b) it will divert some traffic from other carriers offering an inferior service. 

Campbell-Hill’s price stimulation model estimates the change in traffic as a result of the change in average fare. 

For the DCA-AUS local market the current average fare is $265 and the expected Southwest average fare, derived from 

its system yield curve,9is $169 (Exhibit WN-121). All fares shown in Southwest’s exhibits exclude taxes and government 

charges, but they include the estimated average amount of checked baggage and reservation re-booking/cancellation 

fees per passenger.10 

 

7

See for example the pending 2012 Chicago-Cancun Combination Service Proceeding, Docket OST-2012-0001. 

8

Exhibits WN-204 and 208. 

9

Appendix 8. 

10 Estimated by analysis of carrier revenues reported in DOT Form 41 filings.
Docket OST-2012-0029

Exhibit WN-200

Page 5 of 7

The Campbell-Hill model is presented in Appendix 1. It incorporates a price elasticity coefficient of -1.2 which is 

consistent with prior FAA findings (Appendix 1, page 3). The model assumes that competitors will reduce their fares to 

match the Southwest level ($169 per DCA-AUS passenger). The estimated fare savings to existing passengers in the 

market is determined by multiplying the difference in average fare11 by the YE Q3, 2011 actual passenger volume. This 

amounts to $8.0 million (Exhibit WN-205 and Appendix 1). 

The next step is to estimate the monetary value of Southwest’s low fares to the newly generated passengers. They 

are consumers who would not have made the trip at all except for the availability of Southwest’s fare, or the matching fare 

by one of Southwest’s competitors. For this purpose Campbell-Hill employs a consumer surplus model as it has been 

utilized by the FAA.12 This benefit amounts to $4.4 million for the newly generated passengers (Exhibit WN-205). Adding 

together the two components of consumer fare savings produces a projected value of $12.4 million in the DCA-AUS local 

market (Exhibit WN-205). 

Campbell-Hill recognizes that all competitors may not match Southwest’s fare precisely. Some carriers may 

charge more than Southwest, and for certain segments of the market some carriers may charge less than Southwest. On 

average, however, the operative assumption about fare-matching is reasonable. If competitors do not reduce fares to the 

same level of Southwest, then Southwest will achieve a higher market share than Campbell-Hill has forecast using only its 

QSI analysis. Either way it is reasonable to conclude that Southwest will achieve its traffic and load factor, as forecast in 

Exhibit WN-202.

 

11 $265 minus $169, or $96 per passenger (Exhibit WN-121). 

12 See Appendix 1, page 4. 
Docket OST-2012-0029

Exhibit WN-200

Page 6 of 7

The DCA – Beyond AUS Markets

To estimate the number of passengers Southwest will generate for markets beyond AUS Campbell-Hill examined 

other comparable market scenarios in the Southwest system. Campbell-Hill utilized Southwest’s traffic experience in the 

comparable ORF-SAN market to estimate Southwest’s expected share of DCA-SAN traffic for its proposed one-stop 

service (Exhibit WN-203 and Appendix 3). Similarly, Southwest’s experience in the PHL-HOU and beyond markets was 

used by Campbell-Hill to estimate the Southwest passengers in the two AUS connecting markets incorporated in the 

forecast (Appendix 2). 

The unconstrained DCA-SAN forecast is 15,942 passengers (Exhibit WN-202, Line 9). This is based on the 

relationship between Southwest’s one-stop and nonstop ORF-SAN passengers (Exhibit WN-203). The unconstrained 

forecast of Southwest passengers connecting at AUS to two beyond markets is 26,370 based on Southwest’s connecting 

experience in the PHL-HOU market (Exhibit WN-202, line 10 and Appendix 2). 

Adding the three unconstrained forecast market components together produces a fared passenger forecast of 

113,581, or 123,350 passengers including zero-fare passengers.13 This produces a load factor of 99%.14 Campbell-Hill 

constrained Southwest’s traffic to a load factor of 85%, or 106,416 on-board passengers, which equates to 97,989 fared 

passengers (Exhibit WN-202). 

 

13 Campbell-Hill estimates that system-wide, Southwest’s zero fare passengers are 8.6% of fared passengers.

14 After making allowance for a 98% completion factor. 
Docket OST-2012-0029

Exhibit WN-200

Page 7 of 7

The final constrained forecasts for the first normalized year are:

Annual O&D

Passengers15

DCA-AUS 71,269

DCA-SAN 10,067

DCA-Cx beyond AUS 16,653

 TOTAL16 97,989

Exhibit WN-209 utilizes the same Campbell-Hill methodology to estimate consumer savings that will accrue to 

existing and newly generated passengers in the DCA-SAN market. The total is $8.9 million in the first normalized year.17 

Exhibit WN-210 shows the projection of annual consumer fare savings for the AUS connecting passengers 

Southwest expects to carry in two markets (Exhibit WN-206). To be conservative Campbell-Hill has made no assumption 

of fare-matching or traffic stimulation in these connecting markets. Consequently, the projection of consumer savings is 

limited to only the savings obtained by the passengers who travel on Southwest. This will amount of $1.7 million in the 

first normalized year (Exhibit WN-210). 

 

15 From Exhibit WN-202, Line 17.

16 This is the total traffic on-board the DCA-AUS segment.

17 See also Appendix 4. 
Southwest’s 

Traffic and Consumer 

Fare Savin

gs Forecast
After Stimulating the Market with Its Low Fares and Nonstop 

Southwest Will Carry 71,269 Local DCA

-AUS Passenge

Southwest Will Carry 71,269 Local DCA AUS Passenge

Li

DCA-AUS 

M kt

Annual

Passengers

1 CY 2013 O&D2 Market After Stimulation3 Newly Generated (stimulation)4 WN Local O&D

83,735

175,541

91,80671 269

Line

Mar

k

et Passengers

123

DD

4 WN Local O&D 71,269

1,315 Nonstop Miles

AUS AUS

Note: First Normalized Year.1/ Assumes historical annual growth rate of 3.8% applied to YE Q3 2011 passengers of 76,995. 2/ Line 2 – Line 13/ Southwest’s share of the total market after stimulation.Source: Exhibit WN-202
Southwest Airlines’ DCA-AUS Passenger Foreca

(First Normalized Year)

Source/Basis

1 Base O&D passengers: DCA-AUS 76,995 YE Q3 2011 from O&D Survey via Diio, LLC.2 Growth to CY 2013 83,735 2-Year Compound Annual Growth Rate for AUS Fared Passengers = 3.83 Fare Stimulation 72.4% See Appendix 1.

4 Service Stimulation 21.6% From Campbell-Hill Aviation Group QSI Model.5 Total Stimulation 109.6% (1+Line 3) x (1+Line 4) -1.6 Passengers After Stimulation 175,541 Line 2 x Line 5.7 Southwest Share 40.6% From Campbell-Hill Aviation Group QSI Model.8 Adjusted Southwest Local Passengers: DCA-AUS 71,269 Line 6 x Line 79 Estimated Unconstrained DCA-SAN One-Stop Southwest Passengers 15,942 See Exhibit 203.

10 Unconstrained Other Beyond AUS Southwest Passengers 26,370 Calculated Based on WN'S PHL-HOU Connecting to Local Ratio = 37% (

11 Total One-Stop SAN and Connecting Passengers Beyond AUS 42,312 Line 9 + Line 10.

12 Subtotal Southwest Fared Passengers - Unconstrained 113,581 Line 8 + Line 11.

13 Adjusted Passengers Including Non Fared 123,350 Calculated at 108.6% of fared passengers derived from WN system-wide 14 Total Seats 125,195 175 seats x 365 days x 2 directions x 98% completion factor.15 Unconstrained Load Factor 99% (Line 13 / Line 14) x 100%.16 Constrained Total Onboard Passengers (DCA-AUS) 106,416 Constrained to an annual average load factor of 85%.

Constrained Forecast

17 Total DCA-AUS Onboard Fared 97,989 Line 16/ 108.6%

17a. Fared DCA-AUS Local Passengers 71,269 From Line 817b. Fared DCA-SAN One-Stop Passengers 10,067 (Line 17 – Line 17a) x (Line 9 / Line 11)

17c. Fared DCA-Connecting Passengers Beyond AUS 16,653 (Line 19 – Line 19a) x (Line 10 / Line 11)
Southwest Airlines’ DCA-SAN Passenger Foreca

(First Normalized Year)

Source/Ba

1 Base O&D Passengers 117,143 YE Q3 2011 from O&D Survey 2 Fare Stimulation 39.1% Assumes no growth but inclu3 Service Stimulation 5.2% From Campbell-Hill Aviation G4 Total Stimulation 46.3% (1+Line 2) x (1+Line 3) -1.5 Passengers After Stimulation 171,419 Line 1 x Line 4.6 Southwest Share 9.3% ORF-SAN One-Stop Share is 97 Forecast DCA-AUS-SAN Passengers - Unconstrained 15,942 Line 5 x Line 6.
Southwest’s Service Will Generate 91,806 Additiona

DCA-AUS Passengers Assuming Other Carriers Match Its Lo

DCA-AUS 

Annual

P

160,000180,000200,000

assengers

175,541

Potential 

100,000120,000140,000

+110% Stimulation1

91,806

83 735

40,00060,00080,000

83,735

83,735

0

20,000

Market Passengers Before Southwest Service Market Passengers After Southwest 

(First Normalized Year) (First Normalized Year

Source: U.S. DOT Origin & Destination Survey, via Diio, LLC.

Note: First Normalized Year.1/ Includes fare and service stimulation based on QSI. Also includes historical growth to CY 2013 (3.8% annual rate). See Appendix 1 for details of stimula

Note: Includes fared passengers only.

(First Normalized Year) (First Normalized Year
Southwest’s DCA-AUS Service Will Generate More Than $1

Annually In Consumer Fare Savings to Local Passeng

DCA-AUS

Consumer Fare $12 4

$11$12$13$14

Savings (Millions) $12.4

Million

$7$8$9

$10

$11

$8.0

Million

$4 4

$2$3$4$5$6 $4.4

Million

$0$1$2

Savings to Existing

Passengers

Savings to New

Passengers

Total Passenger

Savings

Note: First Normalized Year.Source: Appendix 1.

(Market Stimulation)
Southwest’s DCA-AUS-SAN Single-Plane Service Will Provide 

Connecting Opportunities to Over 690,000 Passengers AnConnecting Opportunities to Over 690,000 Passengers An

SJC SJC SJC SJC

OAK OAK OAK OAK

LAS LAS LAS LAS

ELP ELP ELP ELP

AUS AUS

DAL DAL DAL DAL

SAN SAN

PHX PHX PHX PHX LBB LBB LBB LBB LAX LAX LAX LAX

O&D 

AUS AUS

HRL HRL HRL HRL HRL HRL HRL

HOU HOU HOU HOU DCA-AUS

DCA-SANConnections2Other Beyond AUS3T t lP

Proposed WN Nonstop RouteProposed WN DCA-SAN One-Stop WN ConnectionsOther Beyond AUS Connections

1/ YE Q3 20112/ Includes roundtrip connections for the proposed flight schedules (Dallas and Houston).3/ Other current Southwest markets within 30% circuity.Source: OAG Schedules for June 2012, US DOT O&D Survey YE Q3 2011, via Diio, LLC.

T

otal Passengers 
Southwest’s Proposed Service Will Be the

Fastest Single-Plane Option Between DCA and SAN

SAN-DCA Best 

Round-Trip SinglePlane Elapsed 

Times By Carrier

14:

15:00

13:25

13:55

14:0013:00

11 00

12:00

WN Si l Pl AA Si l Pl UA Si 

11:00

00:00

WN-Single Plane AA-Single Plane UA-Sing

Source: OAG Schedules for June 13, 2012. 
Southwest’s Service Will Generate Over 54,000 New 

DCA-SAN Sin

gle-Plane Passen

gers Due to Fare and Service S

DCA-SAN

Annual

P

140 000160,000180,000

+46%

assengers

171,419

Estimated

Stimulation1

54,276

100,000120,000140,000

117,143

117,143

40,00060,00080,000

0

20,000

Market Passengers Before Southwest Service Market Passengers After Southwest 

(YE Q3 2011) (First Normalized Year

Source: U.S. DOT Origin & Destination Survey, via Diio, LLC.

1/ See Appendix 4 for details of stimulation estimates.Note: Includes fared passengers only.

(YE Q3 2011) (First Normalized Year
Southwest’s DCA-SAN One-Stop Service Will Generate 

Than $8 9 Million 8.9 Million Annually In Consumer Fare Saving

Annually In Consumer Fare Saving

DCA-SAN

Consumer Fare 

Savings

(Milli )

$8$9

$10

$7.3 

Million

(Millions)

$8.9

Million1

$5$6$7$2$3$4

$1.7

Million

$0$1

Savings to Existing

Passengers

Savings to New

Passengers

Total Passenger

Savings

Note: First Normalized Year.1/ Total does not add due to rounding.Source: Appendix 4.

(Market Stimulation)
Southwest’s DCA-AUS Service Will Generate 

$1.7 Million Annually In Consumer Fare Savings to 

Passengers Connecting at AUS

DCA-Beyond AUS

Consumer Fare 

$2.0 $1.7

Million

Savings (Millions)

$1.7

Million

$1.0$1.5$0.5 Conservative 

Assumption

$0.0

Savings to Existing

Passengers

Savings to New

Passengers

Total Passenger

Savings

0

Note: First Normalized Year.Source: Appendix 5.

(Market Stimulation)
DCA-AUS-SAN Proposal Will Generate Over $23 Mil

of Annual Consumer Fare Savings

$22$24

Total

Consumer Fare 

Savings (Millions) $23.1

Million

$$16$18$20$22

$17.0

Million

$8

$10$12

$14

$6.1

Million

$0$2$4$6

Savings to Existing

Passengers

Savings to New

Passengers

Total Passenger

Savings

(Market Stimulation)

This corresponds to the same fare savings shown in Exhibits WN-119 and WN-120.

Note: First Normalized Year.Source: Sum of Exhibits WN-205, WN-209 and WN-210.
Appendices
Summary of Consumer Surplus Benefits from

Southwest Proposed DCA – AUS Nonstop Service

(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) (L) (M) 

Passengers Predicted Projected WN Fare Passengers After New 

O&D Market Miles Before Stimulation Service Stimulation Base Fare Fees Total Fare Absolute % Stimulation Stimulation Passengers Existing Passengers 

MarketDCA-AUS 1315 21.6% $249.94 $14.59 $264.53 $168.63 -$95.90 -36% 72.4% 175,541 83,735 91,806 $8,029,988 

Fare Stimulation

Average Fare Before WN Fare Change Consumer Su
Summary of Consumer Surplus Benefits from

Southwest Proposed DCA – AUS Nonstop Service

(A) Nonstop Miles(B) DCA fared passengers for YE Q3 2011(C) Predicted Service stimulation from Campbell-Hill Aviation Group, QSI model.(D) Average Fare for Fared Passengers (excludes passengers using frequent flier miles). Includes nonstop and conne

YE Q3 2011 U.S. DOT Origin-Destination Passenger Survey data via Diio, LLC.

(E) Average checked baggage and rebooking/cancellation fees per passenger derived by Campbell-Hill Aviation Grou

DOT data (YE Q3 2011) DOT data (YE Q3 2011).

(F) Column D + Column E(G) DCA-AUS fare calculated at Southwest’s yield curve (Appendix 6) for YE Q3 2011, plus checked baggage and reb

(H) Column G – Column F

(I) Column H / Column F(J) Calculated using a price elasticity coefficient of -1.2 (See Appendix 1, page 3). 

The arc elasticity formula is: Arc Ep = [(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)] , where Q1 = passengers bQ2 = Passengers after WN service, P1=Fare Before WN service, P2 = Fare After WN service.

() ( ) ( ) K) Column B x (1+ Column C) x (1+ Column J)(L) Column K – Column B(M) Column H x -1 x Column B(N) Column H x Column L x 0.5 x -1. This is the triangle area in Appendix 1, page 4.(O) C l M C l N (O)

C

olumn 

M + 

C

olumn 

N
Lower Fares Would Increase Passenger Volume

“Total elasticity of demand for air travel is a measure of air travelers’ response variations in the cost of air travel. This parameter measures the percentage chpassenger trips resulting from a one-percent change in trip prices. Total elastinegative because price and quantity demanded are inversely proportional negative because price and quantity demanded are inversely proportional. ...

... FAA sponsored an extensive review of the economic literature regarding toof demand for air travel at a national level. The findings of this review are sum

Chapter 2 and Appendix G of Chapter

2 and Appendix

G of Report to Congress: Child Restraint Systems Report to Congress: Child Restraint Systems, Vo

Vo

May 1995. The elasticity values found in the academic literature range from –0Representative values for business and non-business travelers are presented C.2. Values in Table C.2 can be tailored to the mix of passengers at an airport. weighted values are –0.79 and –1.59 for business and non-business travelers, 

respectively, with an overall average (assuming the 50/50 mix typical of the nalarge) of –1.2. ...”

Source: “FAA Airport Benefit-Cost Analysis Guidance”, Office of Aviation Policy and Planning, Federal Aviation Administration, December 15, 1999.
Consumer Surplus Illustration

Fare Marginal Consumer Surplus to Current Pass

(Measured in this report)Consumer Surplus to New Passengers

(Measured in this report)

Unchanged Consumer Surplus(Not measured in this report)

P1P2

Demand Curve

Passengers

Q1 Q2

Source: “FAA Airport Benefit-Cost Analysis Guidance”, Office of Aviation Policy and Planning, Federal Aviation Administration, December 15, 1999.
Calculation of WN Connecting Percentage for DCA-A

Based on Southwest’s PHL-HOU Ex

perience

Source/Basis

1 WN PHL-HOU Local HOU Local O&D Passengers O&D Passengers 94 428 , From O&D Survey and T From O&D Survey and

T-100 Data via Diio LLC 

100 Data via Diio, LLC., 

2 WN PHL-Beyond HOU Connecting Passengers 62,734 From O&D Survey and T-100 Data via Diio, LLC., 3 Beyond HOU as a % of Local 76% (Line 2 / Line 1) x 100%.

4 Adjustment for AUS size relative to HOU 93% Line 8.5 Adjustment for Markets that Connect to Schedule Times 53% Line 12. 6 Estimated DCA-AUS Unconstrained Beyond Share of Locals 37% Line 3 x Line 4 x Line 5.7 PHL-Beyond HOU Market O&D Passengers within 30% Circuity 1,879,656 From O&D Survey and T-100 Data via Diio, LLC., 8 PHL-Beyond AUS O&D Passengers Within 30% Circuity Beyond AUS O&D Passengers Within 30% Circuity 1,753,633 1,753,633 From O&D Survey and T From O&D Survey and

T-100 Data via Diio, LLC., 

100 Data via Diio, LLC., 

9 Ratio of AUS Beyond to HOU Beyond 93% (Line 8 / Line 7) x 100%.

10 DCA-DAL/DFW and DCA-HOU/IAH O&D Passengers 692,470 From O&D Survey and T-100 Data via Diio, LLC., 

11 Total O&D Passengers to Markets Within 30% Circuity of DCA-AUS 1,312,085 From O&D Survey and T-100 Data via Diio, LLC., 

12 DAL/DFW and HOU/IAH Share of Total AUS within 30% Circuity 53% (Line 10 / Line 11) x 100%
Estimate of Southwest’s Unconstrained Share Using

Southwest’s ORF-SAN Sin

gle Plane Ex

perience

g p

Source/Basis

1 Southwest ORF-SAN Single-Plane Passengers 8,782 From O&D Survey and T-100 Data via Diio, LLC2 Total ORF-SAN Fared O&D Passengers 94,807 From O&D Survey and T-100 Data via Diio, LLC3 Southwest Share of ORF-SAN Single-Plane Passengers 9.3% Line 1 /Line 2
Summary of Consumer Surplus Benefits from

Southwest Pro

posed DCA – SAN Sin

gle-Plane Servic

p

g

(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) (L) (M) 

Passengers Predicted Projected WN Fare Passengers After New 

O&D Market Miles Before Stimulation Service Stimulation Base Fare Fees Total Fare Absolute % Stimulation Stimulation Passengers Existing Passengers 

Market

Fare Stimulation

Average Fare Before WN Fare Change Consum

DCA-SAN 2276 5.2% $244.39 $13.96 $258.35 $196.41 -$61.94 -24% 39.1% 171,419 117,143 54,276 $7,255,855 
Summary of Consumer Surplus Benefits from

Southwest Pro

posed DCA – SAN Sin

gle-Plane Servic

(A) Nonstop Miles.(B) DCA fared passengers for YE Q3 2011.

p

(C) Assumes 0% service stimulation because this is just diversion.(D) Average Fare for Fared Passengers (excludes passengers using frequent flier miles). Includes nonstop and connec

Q3 2011 U.S. DOT Origin-Destination Passenger Survey data via Diio, LLC.

(E) Average checked baggage and rebooking/cancellation fees per passenger derived by Campbell-Hill Aviation Group 

data (YE Q3 2011) data (YE Q3 2011).

(F) Column D + Column E(G) DCA-AUS fare calculated at Southwest’s yield curve (Appendix 6) for YE Q3 2011, plus checked baggage and reboo

(H) Column G – Column F.

(I) Column H / Column F.(J) Calculated using a price elasticity coefficient of -1.2 (See Appendix 1, page 3). 

The arc elasticity formula is: Arc Ep = [(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)] , where Q1 = passengers beQ2 = Passengers after WN service, P1=Fare Before WN service, P2 = Fare After WN service.

() ( ) ( ) K) Column B x (1+ Column C) x (1+ Column J)(L) Column K – Column B(M) Column H x -1 x Column B(N) Column H x Column L x 0.5 x -1. This is the triangle area in Appendix 1, page 4.(O) C l M C l N (O)

C

olumn 

M + 

C

olumn 

N
Summary of Consumer Surplus Benefits from

Southwest’s Connectin

g Service Be

yond AUS

g y

(A) (B) (C) (D) (E) (F) (G) (H) (I) (J) (K) (L) (M) 

Passengers Assumed Projected WN Assumed Fare Passengers After Weighted 

O&D Market Miles Before Stimulation Service Stimulation Base Fare Fees Total Fare Absolute % Stimulation Stimulation Passenger Share Ave. Fare Savings 

Market

1 184 410 214 0 0% $236 4 $13 1 $2 0 0 $163 8 $86 2 3 % 0 0% 410 214 9 2%

Fare Stimulation

Average Fare Before WN Fare Change

DCA-DAL/DF

W 1,184 410,214 0.0% $236.54 $13.51 $250.05 $163.78 -$86.27 -35% 0.0% 410,214 59.2%

DCA-HOU/IAH 282,256 1,218 0.0% $277.72 $16.20 $293.93 $165.08 -$128.85 -44% 0.0% 282,256 40.8%

692,470 100.0% -$103.6

692,470 

This analysis conservatively assumes 

no traffic stimulation or fare matching by other 

carriers in these 2 connecting markets.
Summary of Consumer Surplus Benefits from

Southwest’s Connectin

g Service Be

yond 

AUS

(A) Nonstop Miles(B) DCA fared passengers for YE Q3 2011

g y

(C) Assumed no service stimulation for connecting markets.(D) Average Fare for Fared Passengers (excludes passengers using frequent flier miles). Includes nonstop and connec

Q3 2011 U.S. DOT Origin-Destination Passenger Survey data via Diio, LLC.

(E) Average checked baggage and rebooking/cancellation fees per passenger derived by Campbell-Hill Aviation Group 

DOT data (YE Q3 2011) DOT data (YE Q3 2011).

(F) Column D + Column E(G) DCA-Beyond fare calculated at Southwest’s yield curve (Appendix 6) for YE Q3 2011, plus checked baggage and reb

(H) Column G – Column F

(I) Column H / Column FJ) For Beyond AUS markets Southwest did not estimate traffic stimulation.(K) Column B (no stimulation is assumed)(L) Share of O&D passengers from Column K(M) Fare Change from Column H weighted by O&D share from Column L(N) Forecast WN connecting passengers. Assumes that all are diverted from existing services.(O) Column H x -1 x Column N
Southwest's Yield Curve

100.0¢

YE Q3 2011 Nonstop Market Yield

70.0¢80.0¢90.0¢

y = 2290.2x-0.722

R2 40.0¢ = 0.9174

50.0¢60.0¢

0 0¢

10.0¢20.0¢30.0¢

0.0¢

0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 

Nonstop Miles

Yield is based on fared passengers.Note: Fare curve includes markets with nonstop service and over 600 one-way departures for YE Q3 2011.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q3 2011, via Diio, LLC.