Q 

XI-1003 16-001 

U.S. Department Assistant Secretary 1200 New Jersey Avenue. SE 

of Transportation wasnmsion. DC 20590 

Office of the Secretary 

of Transportation K^y 2 6 2010 

Mr. Edward P. Faberman 

Wiley Rein. LLP 

1776 K Street NW 

Washington, DC 20006 '^ 

Dear Mr. F^remiah; 

Thank you for your letter concerning a grant award under the Department's Small 

Community Air Service Development Program ("Small Community Program") to 

Huntsville, Alabama. 

Your letter makes reference to a March 1 letter from United Airlines ("United"), which 

offers nonstop service between Huntsville and Washington Dulles airport. Among other 

points, United's letter asserted that Huntsville should not be permitted to use grant funds 

to extend service to any of the Baltimore/Washington airports, as doing so would be anticompetitive and inconsistent with the Department's policies. Your letter contended that 

Baltimore is a different market than the two Washington-area airports and that United's 

position was therefore incorrect. 

I have responded to United's letter, noting that Huntsville was specifically targeting 

Thurgood Marshall Baltimore/Washington International (BWI) airport in its proposal, 

and that the Department's selection of Huntsville and use of grant funds for BWIHuntsville service were consistent with ihe relevant statutory criteria and DOT's policies. 

A copy of my letter to United is enclosed. 

As is our normal practice, I am placing a copy of your letter and this response in Docket 

OST-2009-0149 as a contact outside the record of this matter. I appreciate your interest 

in the Small Community Air Service Development Program. 

Sincerely yours. 

Susan L. Kurland 

Assistant Secretary for 

Aviation and International Affairs 

Enclosure 
H<i 

XI-100316-OOI 

1776 K STREET NW 

WASHTNGTOH, DC 20006 

PHONE J02.719.7OOO 

F M 202.719.70*9 

7925 JONES BRANCH DRIVE 

McLEAN, VA 22102 

PHONE 703.905.2800 

FAX 703.905.2820 

www.wileyrein.com 

Edward P. Faberman 

202.719.7402 

efaberman@wileyreiri.com 

March 15,2010 

Susan Kurland 

Assistant Secretary for Aviation and 

International Affairs 

U.S. Department of Transportation 

1200 New Jersey Avenue, SE 

Washington, DC 20590 

Re: Small Community Air Service Development Program, 

Order 2010-2-12 (Docket DOT-OST-2009-0149) 

Dear Assistant Secretary Kurland: 

On February 18, 2010, the Department of Transportation issued an Order Awarding 

Grants under the Small Community Air Service ("SCAS") Development Grants. 

The Order was issued under the "Wendell H. Ford Aviation Investment and Reform 

Act for the 21" Century ("ArR-21)." The Act was issued to help smaller 

commimities enhance their air service and address issues related to high airfares. 

As multiple government studies have found, when low fares are brought to a 

market, that market sees a significant increase in service and passengers. 

One of the communities that received a grant was Huntsville, Alabama. Huntsville 

presented information to the Department showing that the current fares offered in 

certain markets including the Huntsville-Washington market limited flight options. 

Huntsville demonstrated that with a grant under the AIR-21 program, it would be 

able to expand opportunities for residents of the Huntsville area to travel to the 

important Washington-Baltimore market and residents of the Washington-Baltimore 

market to travel to Huntsville. 

In various letters including one dated March 1, 2010 (submitted to this docket). 

United Airlines claims that a grant to Huntsville Airport allowing the addition of 

service to Baltimore is inconsistent with Department policies since it would 

subsidize additional service to Washington/Baltimore. In the letter. United states it 

is "concerned with the anti-competitive use of SCAS funds." 

As to Washington/Baltimore market, on behalf of AirTran Airways, we note that 

when the Department amended the US-Mexico aviation agreement in October 2005, 

it specifically stated, "The amended agreement also provides that, for designation 

purposes, (1) Washington, D.C. and Baltimore, Maryland, shall be regarded as 

separate points." The Federal Aviation Administration again emphasized that 
Xi-1003 16-001 

Susan Kurland 

March 15,2010 

Page 2 

Baltimore is a different market than the two Washington area airports in the "Notice 

of a Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at 

LaGuardia Airport," dated February 9, 2010, when it stated: 

The Department also considered whether the three airports in the 

New York area, and the three in the Washington area, effectively 

constitute the same market for all passengers, such that if fares 

are perceived to be rising too high at one airport, the harm would 

be mitigated by consumers simply shifting to the other two. 

Department analysts, evaluating passenger ticket data that 

contained actual fare information, looked at whether the three 

airports at New York and the three in Washington were effective 

substitutes for each other, and concluded that they were not. 

The Department also found that the differences in the level of 

yields at area airports tended to correlate with the level of low 

cost carrier operations. 

Apparently United has accepted the Department's decision to consider Washington 

and Baltimore as separate markets since it did not raise this "concern" regarding 

services to Cancun even though five carriers have authority to operate between 

Cancun and the Baltimore and Washington markets.' 

Apparently, United Airlines believes that despite the fact that the Department has 

specifically determined that Baltimore (BWI International Airport) is a separate 

market from the Washington, DC market (Ronald Regan Washington National 

Airport/Dulles International Airport), all of these airports must be considered as a 

single market for awards under AIR-21. 

' United, US Airways, and Delta Airlines have authority to serve Dulles-Cancun and AirTran 

Airways and USA 3000 have authority to serve BWl-Cancun. 
XI-100316-001 

i[«-v • 

Susan Kurland 

March 15, 2010 

Page 3 

For these reasons, it is important that the Department immediately dismiss United's 

incorrect claims. The Department should advise United that although United would 

like to limit competition in the entire Maryland/District of ColumbiaA/^irginia area, 

there is no question that Baltimore (BWI) is a different market from Washington, 

D.C. (DCA and IAD). 

It is time to allow the residents and businesses of Huntsville to enjoy the benefits of 

low fares. 

Sincerely, 

Edward P. Faberman