# Q XI-100 3 16-00 1

U.S . Departmen t Assistan t Secretar y 1200 Ne w Jerse y Avenue . S E o f Transportatio n wasnmsion. D C 2059 0 Offic e o f th e Secretar

y o f Transportatio n K^ y 2 6 201 0



### Mr . Edwar

dP . Faberma

n Wile y Rein . LL P 177 6 K Stree t N W Washington , D C 2000 6 ' ^ Dea r Mr . F^remiah ; Than k you fo r your letter concernin g agran

t awar dunder th e Department' s Smal

l Communit y Ai r Servic e Development

Progra m("Smal l Communit

y Program" ) to Huntsville , Alabama . You r letter make s referenc e to aMarc h 1 lette r fromUnite dAirline s ("United") , which offers nonsto p servic e betwee n Huntsvill e an dWashingto n Dulle s airport . Amon g othe r points , United' s lette r

asserte dtha

t Huntsvill e shoul dno t

b e permitte dto us e grant

funds to extendservic e t o an y o f th e Baltimore/Washingto n airports , a s doin g s o woul db e anti

competitiv e andinconsisten t wit h th e Department' s policies . You r letter contende dtha

t Baltimor e i s adifferen

t marke t tha n the tw o Washington-are aairport s andtha t United' s positio n wa s therefore incorrect . I hav e responde dt o United' s letter , notin g tha t Huntsvill e wa s specificall y targetin g Thurgoo dMarshal l Baltimore/Washingto n Internationa l (BWI ) airpor

t i n it s proposal , an dtha t the Department' s selectio n o f Huntsvill e an

dus e o f grant fund s fo r BWI

Huntsvill e servic e wer e consisten t wit h ihe relevan

t statutor y criteri aan

dDOT' s policies . A cop y o f m y letter t o Unite di s enclosed . A s i s our norma l practice , I a

mplacin g acop

y o f your lette r an dthi s respons e i

n Docke t OST-2009-014 9 a s acontac t outsid e th e recor

do f thi s matter . I appreciat e your interes t i n th e Smal l Communit

y Ai r Servic e Developmen

t Program . Sincerel y yours .

Susa n L . Kurlan d Assistant Secretar y fo r Aviatio n an

dInternational Affair s Enclosur e

# H< i XI-100316-OO I

177 6 KSTREE T N W WASHTNGTOH , D C 2000 6 PHON E J02.719.7OO O F M 202.719.70* 9 792 5 JONE S BRANC H DRIV E McLEAN , V

A 2210 2 PHON E 703.905.280 0 FA X 703.905.282 0 www.wileyrein.co m Edwar d P . Faberma n 202.719.740 2 efaberman@wileyreiri.co m Marc h 15,201 0 Susa n Kurlan d Assistan t Secretar y for

Aviatio n an d Internationa l Affair s U.S . Departmen t

o f Transportatio n 120 0 Ne w Jerse y Avenue , S E Washington , D C 2059 0 Re : Smal l Communit y Ai r Servic e Developmen t

Program , Orde r 2010-2-12 (Docke t

DOT-OST-2009-0149 ) Dea r Assistan t Secretar y Kurland : O n Februar y 18 , 2010 , th e Departmen t o f Transportatio n issue da

n Orde r Awardin g Grant s unde r

th e Smal l Communit y Ai r Servic e ("SCAS" ) Developmen t Grants . Th e Orde r

wa s issue dunde r

th e "Wendel l H . For dAviatio n Investmen t an dRefor

m Ac t fo r th e 21 " Centur y ("ArR-21). " Th e Ac t wa s issue dt o hel p smalle r commimitie s enhanc e thei r ai r servic e an daddres s issue s relate dt o hig h airfares . A s multipl e governmen t

studie s hav e found , whe n lo w fare s ar e brough t t o a market , tha t

marke t see s asignifican t

increas e i n servic e an dpassengers . On e o f th e communitie s tha t

receive dagran t

wa s Huntsville , Alabama . Huntsvill e presente dinformatio n t o th e Departmen t showin g tha t

th e curren t

fare s offere di n certai n market s includin g th e Huntsville-Washingto n marke t limite dflight

options . Huntsvill e demonstrate dtha t wit h agran t unde r th e AIR-2 1 program , i t

woul db e abl e t o expan dopportunitie s fo r resident s o f

th e Huntsvill e are at o trave l t o th e importan t Washington-Baltimor e marke t an dresident s o f

th e Washington-Baltimor e marke t t o trave l t o Huntsville . I n variou s letter s includin g on e date dMarc h 1 , 201 0 (submitte dt o thi s docket) . Unite dAirline s claim s tha t agran t to Huntsvill e Airpor t

allowin g th e additio n o f servic e t o Baltimor e i s inconsisten t wit h Departmen t

policie s sinc e i t

woul d subsidiz e additiona l servic e to Washington/Baltimore . In th e letter . Unite dstate s i t i s "concerne dwit

h th e anti-competitiv e us e o f SCA S funds. " A s t o Washington/Baltimor e market , o n behal f o f AirTra n Airways , w e not e tha t whe n th e Departmen t

amende dth e US-Mexic o aviatio n agreemen t i n Octobe r

2005 , i t specificall y stated , "Th e amende dagreemen t als o provide s that , for

designatio n purposes , (1 ) Washington , D.C . an dBaltimore , Maryland , shal l b e regarde da s separat e points. " Th e Federa l Aviatio n Administratio n agai n emphasize dthat

### Xi-100 3 16-00 1

Susa n Kurlan d Marc h 15,201 0 Pag e 2 Baltimor e i s adifferen t

marke t than th e tw o Washingto n are aairport s i n th e "Notic e o f aPetitio n for

Waive r o f th e Term s o f

th e Orde r

Limitin g Schedule dOperation s a t LaGuardi aAirport, " date dFebruary 9 , 2010 , whe n i t stated : Th e Departmen t

als o considere dwhethe r

th e thre e airport s i n th e Ne w York

area , an dth e thre e i n th e Washingto n area , effectivel y constitut e th e sam e marke t for al l passengers , suc h tha t i f fare s ar e perceive dt o b e rising to o hig h a t on e airport , th e harmwoul d b e mitigate db y consumer s simpl y shiftin g t o th e othe r two . Departmen t

analysts , evaluatin g passenger ticke t dat atha t containe dactua l fare information , looke dat whethe r th e thre e airport s a t Ne w Yor k an dth e thre e i n Washingto n wer e effectiv e substitute s for

eac h other , an dconclude dtha t the y wer e not . Th e Departmen t

als o foun dtha t

th e difference s i n th e leve l o f yield s at are aairport s tende dt o correlate with th e leve l o f lo w cos t carrie r operations . Apparentl y Unite dha s accepte dth e Department' s decisio n t o conside r Washingto n an dBaltimor e a s separat e market s sinc e i t di dno t rais e thi s "concern " regardin g service s t o Cancu n eve n thoug h fiv e carrier s hav e authorit y to operat e betwee n Cancu n an dth e Baltimore an dWashingto n markets. ' Apparently , Unite dAirline s believe s tha t despit e th e fac t

tha t th e Departmen t

ha s specificall y determine dthat Baltimor e (BW I Internationa l Airport ) i s aseparat e marke t fro mth e Washington , D C marke t (Ronal dRega n Washingto n Nationa l Airport/Dulle s Internationa l Airport) , al l o f thes e airport s mus t

b e considere da s a singl e marke t

for award s unde r

AIR-21 .

' United , U

S Airways , an

dDelt aAirline s hav e authorit

y t o serv e Dulles-Cancun an

dAirTra n Airway s an

dUS A 300 0 hav e authorit

y t o serv e BWl-Cancun .

### XI-100316-00 1 

# i[«- v •

Susa n Kurlan d

Marc h 15 , 201 0 Pag e 3 Fo r thes e reasons , i t

i s importan t

tha t th e Departmen t

immediatel y dismis s United' s incorrec t claims . Th e Departmen t shoul dadvis e Unite dtha t althoug h Unite dwoul d lik e t o limi t

competitio n i n th e entir e Maryland/Distric t o f ColumbiaA/^irgini aarea , ther e i s n o questio n that

Baltimor e (BWI ) i s adifferen t marke t fro mWashington , D.C . (DC A an dIAD) . I t i s tim e t o allo w th e resident s an dbusinesse s o f Huntsvill e t o enjo y th e benefit s o f lo w fares . Sincerely ,

Edwar dP . Faberma n