o 

• '^ Office of Airport Compliance and Field Operations 800 Independence Ave., S.W. 

of Transportation Washington, D.C. 20591 

Federal Aviation 

Administration 

AUG 1 9 2008 

Complainants, Respondents and Counsel 

on Attached Service List 

Re: FAA Docket No. 16-07-04 

Dear Parties: 

Enclosed is a copy of the Director's Determination in accordance with 14 CFR §16.31 with 

respect to the above referenced Docket. 

Based on the record in this proceeding regarding the Indianapolis Airport Authority's 

alleged violations of economic discrimination, exclusive rights, fee and rental structure, and 

airport revenues, the Federal Aviation Administration finds that the Indianapolis Airport 

Authority is not in violation of Federal obligations with regard to grant assurances 22, 23, 24 

and 25 or Federal law. 

Accordingly, the Complaint is dismissed. The reasons are set forth in the enclosed Director's 

Determination. 

Sincerely, 

Randall S. Fiertz 

Director, Airport Compliance and 

Field Operations 

Enclosure 
UNITED STATES DEPARTMENT OF TRANSPORTATION 

FEDERAL AVIATION ADMINISTRATION 

WASHINGTON, DC 

Northwest Airlines, Inc., Delta Airlines, Inc. 

AirTran Airways Inc., Continental Airlines, Inc., 

Southwest Airlines, Inc. 

Complainants 

V. 

Indianapolis Airport Authority, Indianapolis 

International Airport, BAA-Indianapolis 

Respondents. FAA Docket 16-07-04 

DIRECTOR'S DETERMINATION 

I. INTRODUCTION 

This matter is before the Federal Aviation Administration (FAA) based on the Complaint 

filed under 14 Code of Federal Regulations (14 CFR) Part 16, by Northwest Airlines, 

Inc., Delta Air Lines, Inc., AirTran Airways Inc., Continental Airlines, Inc., and 

Southwest Airlines, Inc. (Airlines/Complainants). The Complaint was filed against the 

following Respondents, Indianapolis Airport Authority, Indianapolis International 

Airport, BAA-Indianapolis (Authority). 

In this Part 16, Complainants allege that the Authority is violating 49 U.S.C. § 47101 et 

seq., and Grant Assurances 22, 23, 24, and 25 as well as the FAA's Policy Regarding 

Airport Rates and Charges and the FAA's Policy and Procedures on the Use of Airport 

Revenue. Complainants argue that the violations stem fi-om an already executed 

amendment to an agreement between the Authority and Federal Express Corporation 

("FedEx"), involving the development and financing of a new aircraft parking apron at 

Indianapolis International Airport (IND) for FedEx's exclusive use. The amendment in 

question is known dis Amendment No. 3 to the Airport-FedEx Land Lease Agreement 

(Amendment No. 3), dated April 14, 2006. 

As part of this Complaint, Complainants request that the FAA (i) find Amendment No. 3 

to be unlawful in so far as it affords FedEx Landing Fee Rent Credits that result in a 

fiinding shortfall compared to the total cost of the FedEx Cargo Apron, (ii) prohibit the 

Authority from adding any funding shortfall related to the FedEx Cargo Apron to the 

airfield cost center or otherwise include the cost of the FedEx Cargo Apron in the 

computation of landing fees at the Airport, and (iii) award such further relief and take 
such fiirther action as the FAA deems necessary or appropriate, including, but not limited 

to, seeking civil penalties.' 

The Authority denies all allegations that it violated its Federal obligations and asks 

the FAA to dismiss the Complaint.^ Specifically, and as affirmative defenses, the 

Authority answers that (1) "as a result of the settlement offer made by the 

Authority, the Complaining Airlines are not directly and substantially affected as a 

result of Amendment No. 3" (2) "the Authority did not unjustly discriminate against 

the Complaining Airlines," (3) "the Authority did not grant an exclusive right to 

FedEx," (4) the "the Authority did not violate the Rates and Charges Policy," (5) 

"the Authority did not violate the Revenue Use Policy," and (6) "the Authority did 

not violate its self-sustainability obligations."^ 

The FAA's decision in this matter is based on the applicable Federal law and FAA 

policy, and review of the pleadings and supporting documentation submitted by all the 

parties, which comprise the administrative record reflected in the attached FAA 

Exhibit 1. 

II. THE COMPLAINANTS 

The Complainants, Northwest Airlines, Inc., Delta Air Lines, Inc., AirTran Airways Inc., 

Continental Airlines, Inc., and Southwest Airlines, Inc., in this case are referred to as 

"Airlines" or "Complainants." Northwest is a U.S. certificated air carrier providing 

scheduled passenger air service to airports throughout the United States, including IND, 

and the world. AirTran is a U.S. certificated air carrier providing scheduled passenger air 

service to airports throughout the United States, including IND, and the Bahamas. Delta 

is a U.S. certificated air carrier providing scheduled passenger air service to airports 

throughout the United States, including IND, and the world. Continental is a US 

certificated air carrier providing scheduled passenger air service to airports throughout 

the United States, including IND, and the world." Southwest is a US certificated air 

carrier providing scheduled passenger air service to airports throughout the United States, 

including IND.' 

Each of the Complaining Airlines is a signatory to the Agreement and Lease of Premises 

at Indianapolis International Airport (Lease Agreement), which sets landing fee rates at 

the Airport on a residual basis until the Lease Agreement expires by its own terms at the 

end of December 2010.* 

' FAA Exhibit 1, Item 1, Page 2 

^ FAA Exhibit 1, Item 10, Page 48 

' See FAA Exhibit 1, Item 10, Page 12 

" FAA Exhibit 1, Item 2, Page 2 

' FAA Exhibit 1, Item 6, Page 2 

* FAA Exhibit 1, Item 10, Page 2 The Airport admits that each of the Complaining Airlines is a signatory to 

the Airport Lease Agreement; see FAA Exhibit 1, Item 10, page 9 
III. THE AIRPORT AND ITS FEDERAL OBLIGATIONS 

The Indianapolis Airport Authority (Authority) owns and operates the Indianapolis 

International Airport (IND) in Indianapolis, Indiana.^ FND is a commercial service 

airport that holds a 14 CFR Part 139 Operating Certificate. The Airport occupies 

approximately 7,700 acres, about 12 square miles of land in Wayne and Decatur 

Townships of Marion County, all within the city of Indianapolis, Indiana.' IND is the 

base for more than 74 based aircraft and serves a wide spectrum of aeronautical activities 

totaling over 213,000 annual operations, over 96,000 of which are air carrier operations.' 

The airport is the largest in Indiana and a major hub for FedEx. The 1.9 million square 

foot FedEx hub at IND is FedEx's second largest facility.'" FedEx is also a signatory to 

the Lease Agreement." The Airport is completely managed by a private firm through a 

management contract with the airport operator. Respondent BAA.'^ 

FAA records indicate that the planning and development of IND has been financed, in 

part, with funds provided by the FAA under the Airport Improvement Program (AIP) 

and, between 1982 and 2007, the Airport received more than $355 million in federal 

airport development assistance in AIP grants.'^ In addition, part of IND was conveyed by 

the War Assets Administration (WAA) to the City of Indianapolis as surplus property. As 

a result, the Airport incurred obligations in the form of restrictive deed covenants arising 

from conveyances of land under the powers and authority contained in the provisions of 

the Surplus Property Act (SPA) of 1944 as amended, 49 U.S.C. § 47151-153.'" 

IV. ISSUES UNDER INVESTIGATION 

The issues under investigation before the FAA are whether the Amendment No. 3 to the 

lAA-FedEx Land Lease Agreement (Amendment No. 3), dated April 14, 2006'^ is 

consistent with 

• Grant Assurance 22 Economic Nondiscrimination, 49 U.S.C. § 47107 (a)(1) through 

(6), which requires the airport sponsor to make the Airport available to all types, 

kinds, and classes of aeronautical activity on reasonable terms, and without unjust 

discrimination. 

^ The Director notes that the airport sponsor in this case is the Airport Authority. It is that entity that is 

responsible for compliance with the applicable Federal obligations. However, the term Airport is also used 

to describe the Respondents and therefore, in these proceedings Authority and Airport refer to the airport 

sponsor. See FAA Exhibit 1, Item 10, Pages 12-13 

* http://www.indyindiana.com/indianapolis_airport.htm 

'FAA Exhibit 1, Item 16 

"'http://imaps.indygov.org/edj3ortal/template.asp?page=trans_air 

" FAA Exhibit 1, Item 10, Page 2 

'^ http://www.indyindiana.com/indianapolis_airport.htm 

'^ FAA Exhibit 1, Item 18 

'" FAA Exhibit 1, Item 16 

'' FAA Exhibit 1, Item 1, Pages 1 -2 
• 

Grant Assurance 23 Exclusive Rights, 49 U.S.C. § 47107(a) (4), which prohibits the 

granting of an exclusive right for the use of the airport. 

Grant Assurance 24, Fee and Rental Structure, 49 U.S.C. § 47107(a)(13) which 

requires, in pertinent part, that the owner or sponsor to maintain a fee and rental 

structure for the facilities and services being provided to airport users which will 

make the airport as self-sustaining as possible under the circumstances existing at the 

airport.'* 

• Grant Assurance 25 Airport Revenues, 49 U.S.C. §§ 47107(b) and 47133, which 

requires the airport sponsor to ensure that all revenues generated by the airport will be 

expended by it for the capital or operating costs of the airport; the local airport 

system; or other local facilities which are owned or operated by the owner or operator 

of the airport and directly and substantially related to the actual air transportation of 

passengers or property; or for noise mitigation purposes on or off the airport.'^ 

V. BACKGROUND 

Since 1993, FedEx and the Authority have had an operating lease agreement. The 1993 

Amended and Restated Land Lease Agreement is one of two leases currently in effect 

between FedEx and the Authority and has been amended three times. It was first amended 

as Amendment No.l in October 21, 1994, a second time as Amendment No. 2 on June 16, 

2000, and finally, by Amendment No. 3 on April 14, 2006. Amendment No. 3 is at issue 

here.'* 

In the spring 2006, the Authority informed the designated carrier-representative for the 

Signatory Airlines (Northwest Airlines)" that the Authority had been discussing with 

FedEx the expansion of its domestic cargo facilities and operations at the Airport.^" On 

April 5, 2006, the Authority provided Northwest Airlines a summary of the terms of an 

agreement, and provided the other airlines with written information about the FedEx 

agreement. The Authority indicated that Amendment No. 3 would be signed by FedEx 

within two weeks, on April 14, 2006. As planned, on April 14, 2006, the Authority and 

FedEx executed Amendment No. 3 for the financing and development of new cargo 

facilities and an adjacent apron at IND for FedEx's exclusive use. 

'* Includes claims related to the Policy Regarding Airport Rates and Charges, 61 Fed. Reg. 31944 (June 

21, 1996) 

" Includes claims related to the Policy and Procedures Concerning the Use of Airport Revenue, 64 Fed. 

Reg. 7696 (February 16, 1999) 

'* FAA Exhibit 1, Item 10, Page 2 

" An airline that enters into an agreement that is substantially similar to the Airport Use Agreement is 

considered to be a "Signatory Airline." See FAA Exhibit 1, Item 10, Page 2 

^'' However, it is noted that the Authority denies that representatives of the Signatory Airlines were not 

informed until the Spring of 2006 that there were ongoing discussions with FedEx regarding the expansion 

of the cargo facilities and that the Authority introduced the cargo expansion project to the Signatory 

Airlines as early as the Summer of 2005 during the Airport's capital budget review process. See FAA 

Exhibit 1, Item 10, p. 11. The Director notes that the Authority failed to include in the record the reference 

to validate this claim despite a note in its Answer, but whether the Complainants were notified in the Spring 

of 2006 or a few months earlier in the Summer 2005 is not critical, the issue is left as represented here. 
Specifically, Amendment No. 3 facilitates a major expansion of FedEx's operations at the 

Airport, including the financing and construction of a 400,000 square foot expansion of its 

existing sort building, a new 175,000 square foot secondary sort building, a 40,000 square 

foot aircraft maintenance building, and an 8,000 square foot facility for ground support 

equipment, all of which will belong to the Authority upon completion of construcfion. The 

Authority expects FedEx to invest approximately $162 million in expanding those 

facilities.^' The Complainants allege that under Amendment No. 3, the Authority will 

build the FedEx Cargo Apron at a cost to the Authority of approximately $49 million.^^ 

On May 3, 2006, the Authority sent an email to the members of the TND AirlineAuthority Affairs Committee Members (Airlines/Complainants) announcing that the 

negotiations for the FedEx expansion at IND had been successfially completed. The 

Authority notified the Airlines that the agreement would be presented to the Airport's 

Board for approval on May 5, 2006. On May 5, the Airlines sent the Authority a letter 

objecting to the Special Facility Rent Credit, also called the Landing Fee Credit or the 

Rent Credit ("Credit" or "Rent Credit"), which is part of Amendment No. 3. That same 

day, the Airport Board approved Amendment No. 3.^^ 

Throughout 2006 and 2007, Complainants and the Authority attempted unsuccessfully to 

resolve the dispute and in February 2007, the Authority provided Complainants with an 

actual copy of Amendment No. 3.^" On April 13, 2007, Complainants filed a 14 CFR Part 

16 Complaint with the FAA. It was docketed as FAA Docket No. 16-07-04. ^' On April 

20, 2007, Continental Airlines, Inc. submitted a motion to join the Complaint as a Joint 

Complainant.^* An Answer to this motion was filed on May 1, 2007." On May 1, 2007, 

the Authority submitted a Motion Requesting Extension of Time.^' An Answer by 

Complainants to this mofion was filed on May 2, 2007.^' 

On May 4, 2007, FAA issued an Order extending the due date for the Answer until 

June 4, 2007.^° Also on that day. Southwest Airlines Co., filed a mofion to join the 

Complaint as a Joint Complainant^' to which on May 9, 2007, the Authority filed an 

Answer. ^^ On June 4, 2007, an Answer and Motion to Dismiss was filed by the 

Authority." This was followed on June 8, 2007, by an Unopposed Motion for Extension 

of Time.^" On June 22, 2007, Complainants filed a Reply and Answer to the Authority's 

^' FAA Exhibit 1, Item 10, Pages 2-3 

^^ FAA Exhibit 1, Item 1, Page 2 

^' FAA Exhibit 1, Item 1, Pages 18-19 

^* FAA Exhibit 1, Item 1, Page 19 

^^ FAA Exhibit 1, Item 1 

^* FAA Exhibit 1, Item 2 

" FAA Exhibit 1, Item 3 

^* FAA Exhibit 1, Item 4 

"FAA Exhibit 1, Item 5 

^^ FAA Exhibit 1, Item 7 

^'FAA Exhibit 1, Item 6 

^^ FAA Exhibit 1, Item 8 

"FAA Exhibit l,Item 10 

^^ FAA Exhibit 1, Item 11 
Motion to Dismiss." This was followed by the Authority's Rebuttal on July 16, 2007.^* 

On July 30, 2007, Complainants filed a Mofion for Leave to File and Response" which 

was followed on August 9, 2007 by the Respondent's Answer to Complaining Airlines' 

Mofion for Leave to File and Response.^* On December 5, 2007, the FAA issued a Nofice 

of Extension of Time.^' 

On March 28, 2008, the FAA issued a request for addifional informafion with six (6) 

questions from the Respondent (FAA Questions). The FAA requested the following 

information: 

(1) Provide a layout of the FedEx facilities located on the Airport; (2) Is the FedEx Apron 

subject to the Credit located within the Airport Cost Center known as the "Airfield Area" 

under the Agreement and Premises Lease; (3) Were the provisions of secfions 8.01 and 

8.03 applied to the FedEx Apron subject to the Credit; (4) How are the funds representing 

the Credit applied to the Special Facilities Debt of the FedEx Apron; (5) Does the 

Agreement and Lease of Premises explicitly provide for increasing the Airfield Area 

requirement to account for the Credit under the FedEx Amendment No 3; (6) What other 

types of credits have been claimed by Signatory Airlines under the provisions of the 

Agreement and Premises Lease."" 

On May 12, 2008, the FAA received the response to the FAA Questions fi-om the 

Authority."' 

On June 11'*", 2008, the FAA received the response to the Authority's response to the 

FAA Questions from the Complainants."^ 

VI. APPLICABLE LAW AND POLICY 

The federal role in civil aviafion has been augmented by various legislative acfions that 

authorize programs for providing federal funds and other assistance to local communities 

for the development of Airport facilifies. In each such program, the Airport sponsor 

assumes certain obligations, either by contract or by restrictive covenants in property 

deeds and conveyance instruments, to maintain and operate its Airport facilities safely 

and efficiently and in accordance with specified conditions. Commitments assumed by 

Airport sponsors in property conveyance or grant agreements are important factors in 

maintaining a high degree of safety and efficiency in airport design, construcfion, 

operation and maintenance, as well as ensuring the public fair and reasonable access to 

the Airport. 

"FAA Exhibit I, Item 12 

^* FAA Exhibit 1, Item 13 

" FAA Exhibit 1, Item 14 

" FAA Exhibit 1, Item 15 

''FAA Exhibit 1, Item 17 

""FAA Exhibit 1,Item 22 

"'FAA Exhibit 1, Item 20 

"^ FAA Exhibit 1, Item 21 
Title 49 U.S.C. § 47101, e/ seq., provides for federal airport financial assistance for the 

development of public-use airports under the Airport Improvement Program (AIP) 

established by the Airport and Airway Improvement Act of 1982, as amended. Title 49 

U.S.C. § 47107, et seq., sets forth assurances to which an airport sponsor agrees as a 

condition of receiving federal financial assistance. Upon acceptance of an AIP grant, the 

assurances become a binding contractual obligation between the airport sponsor and the 

federal government. The assurances made by airport sponsors in AIP grant agreements 

are important factors in maintaining a viable national airport system. 

Airport Sponsor Assurances 

As a condition precedent to providing airport development assistance under the Airport 

Improvement Program, 49 U.S.C. § 47107, et seq., the Secretary of Transportation and, 

by extension, the FAA must receive certain assurances from the airport sponsor. Title 49 

U.S.C. § 47107(a) sets forth the statutory sponsorship requirements to which an airport 

sponsor receiving federal financial assistance must agree. 

The FAA has a statutory mandate to ensure that airport owners comply with these 

sponsor assurances."^ FAA Order 5190.6A, Airport Compliance Requirements (FAA 

Order 5190.6A), issued on October 2, 1989, provides the policies and procedures to be 

followed by the FAA in carrying out its legislatively mandated functions related to 

federally obligated airport owners' compliance with their sponsor assurances. The FAA 

considers it inappropriate to provide federal assistance for improvements to airports 

where the benefits of such improvements will not be fully realized due to inherent 

restrictions on aeronautical activities. The grant assurances relevant to the issues raised 

in the Complaint are the following: 

Grant Assurance 22, Economic Nondiscrimination 

The owner of any airport developed with federal grant assistance is required to operate 

the airport for the use and benefit of the public. Federal grant assurance 22, Economic 

Nondiscrimination, (Assurance 22) deals with both the reasonableness of airport access 

and the prohibition of adopting unjustly discriminatory conditions as a potential for 

limiting access. Assurance 22 of the prescribed sponsor assurances implements the 

provisions of 49 U.S.C. § 47107(a)(1) through (6), and requires, in pertinent part: 

[The airport owner or sponsor] will make the airport available as an airport for 

public use on reasonable terms and without unjust discrimination to all types, 

kinds and classes of aeronaufical activities, including commercial aeronautical 

activifies offering services to the public at the airport. [Assurance 22(a).] 

"^ See, e.g., the Federal Aviation Act of 1958, as amended and recodified, Title 49 U.S.C. §§ 40101, 

40113, 40114,46101, 46104, 46105, 46106, 46110; and the Airport and Airway Improvement Act of 

1982, as amended and recodified, Title 49 U.S.C. §§ 47105(d), 47106(d), 47107(k), 47107(1), 47111(d), 

47122 
Each fixed-base operator at the airport shall be subject to the same rates, fees, 

rentals, and other charges as are uniformly applicable to all other fixed-base 

operators making the same or similar uses of such airport and utilizing the same 

or similar facilities. [Assurance 22(c).] 

[The airport owner or sponsor] will not exercise or grant any right or privilege 

which operates to prevent any person, firm, or corporation operating aircraft on 

the airport from performing any services on its own aircraft with its own 

employees (including but not limited to maintenance, repair, and fueling) that it 

may choose to perform. [Assurance 22(f).] 

The sponsor may establish such reasonable, and not unjustly discriminatory, 

conditions to be met by all users of the airport as may be necessary for the safe 

and efficient operafion of the airport. [Assurance 22 (h).] 

The sponsor may prohibit or limit any given type, kind or class of aeronautical 

use of the airport if such action is necessary for the safe operation of the airport or 

necessary to serve the civil aviafion needs of the public. [Assurance 22(i).] 

Subsection (h) qualifies subsection (a), and subsection (i) represents an exception to 

subsection (a) to permit the sponsor to exercise control of the airport sufficient to 

preclude unsafe and inefficient condifions that would be detrimental to the civil aviation 

needs of the public. 

In all cases involving restrictions on airport use imposed by airport owners for safety and 

efficiency reasons, the FAA will make the final determinafion on the reasonableness of 

such restrictions when those restricfions deny or limit access to, or use of, the airport. 

[FAA Order 5190.6A, Secfion 4-8.] 

Assurance 23, Exclusive Riehts 

Federal grant assurance 23, Exclusive Rights, (Assurance 23) implements the provisions 

of 49 U.S.C. §§ 40103(e) and 47107(a)(4), and requires, in pertinent part, that the owner 

or sponsor of a federally obligated airport: 

"...will permit no exclusive right for the use of the airport by any persons 

providing, or intending to provide, aeronautical services to the public." 

"...will not, either directly or indirectly, grant or permit any person, firm, 

or corporation, the exclusive right at the airport to conduct any 

aeronaufical activities..." 

"...will terminate any exclusive right to conduct an aeronautical activity 

now existing at such an airport before the grant of any assistance under 

Title 49 United States Code." 
In FAA Order 5190.6A, the FAA discusses its exclusive rights policy and broadly 

identifies aeronautical activifies as subject to the statutory prohibition against exclusive 

rights. While public-use airports may impose qualifications and minimum standards 

upon those who engage in aeronautical activities, FAA has taken the position that the 

application of any unreasonable requirement or any standard that is applied in an unjustly 

discriminatory manner may consfitute the constructive grant of an exclusive right. Courts 

have found the grant of an exclusive right where a significant burden has been placed on 

one competitor that is not placed on another. [See e.g. Pompano Beach v FAA. 774 F2d 

1529 (11"^ Cir, 1985).] An owner or sponsor is under no obligafion, however, to permit 

aircraft owners to introduce onto the airport equipment, personnel, or practices which 

would be unsafe, unsighfiy, detrimental to the public welfare, or which would affect the 

efficient use of airport facilities. [See FAA Order 5190.6A, Section 3-9 (e).] 

Leasing all available airport land and improvements planned for aeronautical activities to 

one enterprise will be construed as evidence of intent to exclude others unless it can be 

demonstrated that the entire leased area is presently required and will be immediately 

used to conduct the activities contemplated by the lease. [See FAA Order 5190.6A, 

Secfion 3-9(c).] 

FAA Order 5190.6A provides additional guidance on the application of the statutory 

prohibition against exclusive rights and FAA policy regarding exclusive rights at publicuse airports. [See FAA Order 5190.6A, Chapter 3.] 

Assurance 24. Fee and Rental Structure 

Grant Assurance 24, "Fee and Rental Structure," of the prescribed sponsor assurances 

safisfies the requirements of 49 U.S.C. § 47107(a)(13). It provides, in pertinent part, that 

the airport sponsor: 

"will maintain a fee and rental structure for the facilities and services at 

the airport which will make the airport as self-sustaining as possible under 

the circumstances existing at the particular airport, taking into account 

such factors as the volume of traffic and economy of collection. No part 

of the Federal share of an airport development, airport planning or noise 

compatibility project for which a grant is made under Title 49, United 

State Code, the Airport and Airway Improvement Act of 1982, the Federal 

Airport Act or the Airport and Airway Development Act of 1970 shall be 

included in the rate basis in establishing fees, rates, and charges for users 

of that airport." 

FAA's Policy and Procedures Concerning the Use of Airport Revenues (Revenue Use 

Policy)"" provides, among other things, the FAA's policy on the maintenance of a selfsustaining rate structure by federally-assisted airports. It provides, in relevant part, that: 

44 See 64 FR 7696, February 16, 1999. 
"Airport proprietors must maintain a fee and rental structure that in the 

circumstances of the airport makes the airport as financially selfsustaining as possible. [Secfion VII(B)(1)] 

If market conditions or demand for air service does not permit the airport 

to be financially self-sustaining, the airport proprietor should establish 

long term goals and targets to make the airport as financially selfsustaining as possible. [Secfion VII(B)(2)] 

.. .the FAA does not consider the self-sustaining requirement to require 

airport sponsors to charge fair market rates to aeronautical users. Rather, 

for charges to aeronautical users, the FAA considers the self-sustaining 

assurance to be satisfied by airport charges that reflect the cost to sponsors 

of providing aeronautical services and facilities to users. [Section 

VII(B)(5).] 

.. .the FAA interprets the self-sustaining assurance to require that the 

airport receive fair market value for the provision of nonaeronautical 

facilities and services, to the extent practicable considering the 

circumstances at the airport. [Section VII(C).]" 

Most of the principles of the FAA's Policy Regarding Airport Rates and Charges (Rates 

and Charges Policy)"^ including the prohibition on unjust economic discrimination and 

the requirement to be financially self-sustaining, are based on the statutory grant 

assurances found at 49 U.S.C. § 47107, et seq., in existence since before 1982. In 

addition to the unjust discrimination prohibition"* and the self-sustainability 

requirement,"^ rates, fees, rentals, landing fees, and other service charges imposed on 

aeronautical users for aeronautical use of airport facilities must be reasonable."' In 

accordance with relevant Federal statutory provisions governing the use of airport 

revenue, airport proprietors may expend revenue generated by the airport only for 

statutorily allowable purposes."' 

Under the terms of grant agreements administered by the FAA, all aeronautical users are 

entitled to airport access on fair and reasonable terms without unjust discrimination. 

Therefore, the FAA considers that the principles and guidance set forth in the Rates and 

Charges Policy apply to all aeronautical uses of the airport. The FAA recognizes, 

however, that airport proprietors may use different mechanisms and methodologies to 

establish fees for different facilities, e.g., the airfield. The FAA takes these differences 

into account when called upon to resolve a dispute over aeronautical fees or otherwise 

"^ See 61 FR 31994, Sections of the policy, not applied herein, were vacated in Air Transport Association v 

DOT. 119 F 3d. 38 (DC Cir. 1997), amended 129 F.3d 625. 

"* See Paragraph 3 of the Rates and Charges Policy, Page 32021; see also 49 U.S.C. § 47107(a)(1) 

"' See Paragraph 4 of the Rates and Charges Policy, Page 32021; see also 49 U.S.C. § 47107(a)(13)(A) 

"* See Paragraph 2 of the Rates and Charges Policy, Page 32019; see also 49 U.S.C. § 47107(a)(1) 

"'See 49 U.S.C. §47107(b) 

10 
consider whether an airport sponsor is in compliance with its obligation to provide access 

on reasonable terms without unjust discriminafion.'" 

A Federally obligated airport owner's obligation to make the airport available for public 

use does not preclude the owner from recovering the cost of providing facilities and 

services at the airport through the imposition of reasonable fees, rents, and other user 

charges designed to make the airport as self-sustaining as possible under the airportspecific circumstances." Neither Federal law nor FAA policy requires a single approach 

to airport rate-setting. Airport fees, rents, and other charges may be set according to a 

methodology, e.g., residual or compensatory, or a combination thereof, at the discretion 

of the airport sponsor, as long as the methodology and cost-allocafion formula selected is 

transparent, reasonable, and not unjustly discriminatory." 

Airport proprietors must employ a reasonable, consistent, and transparent (i.e., clear and 

fully justified) method of establishing the airport fees and adjusting the fees on a timely 

and predictable schedule. Airport proprietors are advised to establish fees with due 

regard for economy and efficiency." The airport proprietor must apply a consistent 

methodology in establishing fees for comparable aeronautical users of the airport 

(similarly situated). The prohibition on unjust discrimination does not prevent an airport 

proprietor from making reasonable distinctions among aeronautical users (e.g., signatory 

and non-signatory carriers, tenants and non-tenants, commercial and non-commercial 

users) and assessing higher fees on certain categories of aeronautical users based on those 

disfinctions (e.g., higher fees for non-signatory carriers, as compared to signatory 

carriers).'" 

Assurance 25, Airport Revenues 

Grant Assurance 25, "Airport Revenues," of the prescribed sponsor assurances 

implements provisions of 49 U.S.C. § 47107(b), et seq., and requires, in pertinent part, 

that: 

"a. All revenues generated by the airport and any local taxes on aviation 

fuel established after December 20, 1987, will be expended by it for the 

capita] or operating costs of the airport; the local airport system; or other 

local facilities which are owned or operated by the owner or operator of 

the airport and which are directly and substantially related to the actual air 

transportation of passengers or property; or for noise mitigation purposes 

on or off the airport. Provided, however, that if covenants or assurances in 

debt obligations issued before September 3, 1982, by the owner or 

operator of the airport, or provisions enacted before September 3, 1982, in 

^^ See Section A of the Rates and Charges Policy, Page 32017 

"5e e Order, Sec. 4-14(a) 

" See 49 U.S.C. § 47129(a)(2) and paragraph 2 of the Rates and Charges Policy, Page 32019 

" See Paragraph 2.4.3 of the Rates and Charges Policy, Page 32020 

'" See Paragraph 3.1 of the Rates and Charges Policy, Page 32021 

11 
governing statutes controlling the owner or operator's financing, provide 

for the use of the revenues from any of the airport owner or operator's 

facilities, including the airport, to support not only the airport owner or 

operator's general debt obligations or other facilities, then this limitafion 

on the use of all revenues generated by the airport (and, in the case of a 

public airport, local taxes on aviation fuel) shall not apply. 

b. As part of the annual audit required under the Single Audit Act of 

1984, the sponsor will direct that the audit will review, and the resulfing 

audit report will provide an opinion concerning, the use of airport revenue 

and taxes in paragraph (a), and indicating whether funds paid or 

transferred to the owner or operator are paid or transferred in a manner 

consistent with Tifie 49, United States Code and any other applicable 

provision of law including any regulation promulgated by the Secretary or 

Administrator. 

c. Any civil penalties or other sanctions will be imposed for violation of 

this assurance in accordance with the provisions of Section 47107 of Title 

49, United States Code. 

The Revenue Use Policy provides, among other things, the FAA's policy on the use of 

airport revenue. It provides, in relevant part, that: 

"Unlawful revenue diversion is the use of airport revenue for purposes 

other than the capital and operating costs of the airport, the local airport 

system, or other local facilities owned and operated by the airport owner 

or operator and directly and substantially related to the air transportation 

of passengers or property. [Section 11(C).] 

Prohibited uses of airport revenue include but are not limited to: (1) Direct 

or indirect payments that exceed the fair and reasonable value of services 

provided to the airport. The FAA generally considers the cost of 

providing the services or facilities to the airport as a reliable indicator of 

value. (12) Direct subsidy of air carrier operations. Direct subsidies are 

considered to be payments of airport funds to carriers for air service. 

Prohibited direct subsidies do not include waivers of fees or discounted 

landing or other fees during a promotional period. [Section VI(B)(1) and 

(12).]" 

The FAA Airport Compliance Prosram 

The FAA discharges its responsibilifies for ensuring airport ovraers' compliance with 

their federal obligations through its Airport Compliance Program. The FAA's airport 

compliance efforts are based on the contractual obligations an airport owner accepts 

when receiving federal grant funds or the transfer of federal property for airport purposes. 

These obligations are incorporated in grant agreements and instruments of conveyance in 

12 
order to protect the public's interest in civil aviation and to ensure compliance with 

federal laws. 

The FAA Airport Compliance Program is designed to ensure the availability of a national 

system of safe and properly maintained public-use airports operated in a manner 

consistent with the airport owners' federal obligations and the public's investment in civil 

aviafion. 

The Airport Compliance Program does not control or direct the operation of airports. 

Rather, it monitors the administration of the valuable rights pledged by airport sponsors 

to the people of the United States in exchange for monetary grants and donations of 

federal property to ensure that the public interest is being served. FAA Order 5190.6A 

sets forth policies and procedures for the FAA Airport Compliance Program. The Order 

is not regulatory and is not controlling with regard to airport sponsor conduct. Rather, it 

establishes the policies and procedures to be followed by FAA personnel in carrying out 

the FAA's responsibilities for ensuring airport compliance. It provides basic guidance 

for FAA personnel in interpreting and administering the various continuing commitments 

made to the United States by airport owners as a condifion of receiving a grant of federal 

fiands or the conveyance of federal property for airport purposes. The Order analyzes the 

various obligations set forth in the standard airport sponsor assurances, addresses the 

nature of those assurances, addresses the application of those assurances in the operation 

of public-use airports, and facilitates interpretation of the assurances by FAA personnel. 

The FAA Compliance Program is designed to achieve voluntary compliance with federal 

obligations accepted by owners and/or operators of public-use airports developed with 

FAA-administered assistance. Therefore, in addressing allegations of noncompliance, the 

FAA will make a determination as to whether an airport sponsor is currently in 

compliance with the applicable federal obligations. Consequently, the FAA will consider 

the successful action by the airport to cure any alleged or potential past violafion of 

applicable federal obligation to be grounds for dismissal of such allegations. [See e.g. 

Wilson Air Center v. Memphis and Shelby County Airport Authority. FAA Docket No. 

16-99-10, (August 30, 2001) (Final Decision and Order)] 

Enforcement of Airport Sponsor Assurances 

FAA Order 5190.6A, Airport Compliance Requirements, dated October 2, 1989, covers 

all aspects of the airport compliance program except enforcement procedures. 

Enforcement procedures regarding airport compliance matters may be found at FAA 

Rules of Practice for Federally Assisted Airport Enforcement Proceedings (14 CFR Part 

16). These enforcement procedures were published in the Federal Register (61 FR 

53998, October 16, 1996) and became effective on December 16, 1996. 

The Complaint and Appeal Process 

Pursuant to 14 CFR, Part 16, § 16.23, a person directly and substantially affected by any 

alleged noncompliance may file a complaint with the FAA. The Complainant shall 

13 
provide a concise but complete statement of the facts relied upon to substanfiate each 

allegation. The complaint shall also describe how the Complainant was directly and 

substantially affected by the things done or omitted by the Respondents. [14 CFR, Part 

16,§16.23(b)(3,4).] 

If, based on the pleadings, there appears to be a reasonable basis for fiirther investigation, 

the FAA will investigate the subject matter of the complaint. In rendering its initial 

determination, the FAA may rely entirely on the complaint and the responsive pleadings 

provided. Each party shall file documents that it considers sufficient to present all 

relevant facts and arguments necessary for the FAA to determine whether the sponsor is 

in compliance. [14 CFR, Part 16, § 16.29.] 

The proponent of a motion, request, or order has the burden of proof A party who has 

asserted an affirmative defense has the burden of proving the affirmative defense. This 

standard burden of proof is consistent with the Administrative Procedure Act (APA) and 

federal case law. The APA provision states, "[ejxcept as otherwise provided by statute, 

the proponent of a rule or order has the burden of proof." 5 U.S.C. § 556(d). [See also, 

Director. Office of Worker's Compensation Programs. Department of Labor v. 

Greenwich Collieries. 512 US 267, 272 (1994); Air Canada et al. v. Department of 

Transportation, 148 F3d 1142, 1155 (DC Cir, 1998).] Tifie 14 CFR § 16.229(b) is 

consistent with 14 CFR §16.23, which requires the complainant to submit all documents 

then available to support his or her complaint. Similarly, 14 CFR § 16.29 states that 

"[e]ach party shall file documents that it considers sufficient to present all relevant facts 

and argument necessary for the FAA to determine whether the sponsor is in compliance." 

VII. ANALYSIS AND DISCUSSION 

The Complainants filed this Part 16 Complaint to argue against a Special Facility Rental 

Credit (Credit) to FedEx on its apron rent." The Complainants asked the FAA to ensure 

the airlines will not bear the cost of the Authority's $49 million expenditure'* to expand 

the FedEx cargo-apron." The Complainants seek relief to (i) the extent the Credit causes 

funding shortfalls compared to the total cost of the FedEx Cargo Apron, (ii) keep any 

fiinding shortfalls out of the airfield cost center, and (iii) award further relief, including 

civil penalties.'* 

" FAA Exhibit 1, Item 1, Exhibit 1, Page 18 

'* FAA Exhibit 1, states the expansion will cost $49 million, while the Answer states the expansion will 

occur in 3 phases and cost $46.5 million ($14.4+$20.5+$12.0) such a difference has no impact on the 

analysis or the FAA Determination 

" FAA Exhibit 1, Item 10, Exhibit L, Page 1 

"FAA Exhibit l,Item I 

14 
In their Answer and Motion to Dismiss,^^ the Authority argues that "The Complaining 

Airlines object to the landing fee rate effects of one aspect of a major ground lease 

amendment entered into by the Authority and [FedEx]. However, the Complaining 

Airlines nonetheless seek to retain all of the benefits resulting from that amendment. By 

seeking to have their landing fee rates based upon the additional rental revenue and 

addifional landed weights resulting from FedEx's expansion, but not upon the rent credit 

that was necessary to obtain them, the Complaining Airlines wrongly claim an 

entitlement to the benefits of an agreement more advantageous than the one that the 

Authority actually was able to negotiate with FedEx."^" 

In their Reply to the Answer, the Complainants further request the FAA to: (i) deny the 

Respondents' Mofion to Dismiss, (ii) find the Credits of the Amendment No. 3 to be 

unlawful because they will burden other airlines with the costs of FedEx's exclusive 

Cargo Apron, (iii) prohibit the Respondents from adding any funding shortfall related to 

the FedEx Cargo Apron to the airfield cost center or otherwise including the cost of the 

FedEx Cargo Apron in the computation of landing fees at IND throughout the duration of 

Amendment No. 3, and (iii) award such further relief and take such further action as the 

FAA deems necessary or appropriate, including, but not limited to, imposing civil 

penalties upon the Respondents.*' Specifically, the Complainants stress that "If the 

Landing Fee Rent Credits work the way FedEx and the Respondents intend for them to 

work, the Joint Complainants will pay higher landing fees than they would pay absent the 

Landing Fee Rent Credits. Burdening the other carriers at IND with tens of millions of 

dollars in costs for an exclusive facility to be built by the Airport for the exclusive use by 

another carrier is unreasonable, unjustly discriminatory, and unlawful for the reasons set 

forth in the Joint Complaint."*^ 

The Authority asserts that, "...the rent credit arrangements and landing-fee rate 

calculations have been implemented in such a way that the shifting of responsibility for 

cost recovery to FedEx occur earlier in time than any increase in the Airport System 

requirement resulting from the credit. Thus, the other Signatory Airlines obtain a timevalue benefit from the reduced landing-fee rates before any offsetting increase in the 

Airport System requirement would occur. Also, because of an impending switch to fixed 

landing-fee rates for the balance of the term of the current Signatory Agreement (which 

expires December 31, 2010), the credit-related increase in the Airport System 

requirement may never occur."*^ 

' ' The Authority requested the FAA dismiss the complaint because the Joint Complainants misnamed the 

responsible party. FAA Exhibit 1, Item 10, pages 12-13. The Complainants listed the Authority, the 

Airport and BAA-Indianapolis, the airport operator as parties to the complaint. The FAA agrees its 

enforcement authorities under Part 16.1 are generally limited to actions taken by the sponsor, especially 

with regard to the Grant assurances, but the FAA will not dismiss the Complaint based on this assertion by 

the Authority. Under Part 16, the Authority is generally responsible for the actions taken by the Airport 

and BAA-Indianapolis, and FAA will hold the Authority responsible for actions taken by the Airport and/or 

BAA-Indianapolis 

*" FAA Exhibit 1, Item 10, Page 2 

''' FAA Exhibit 1, Item 12, Pages 5 - 6. 

" FAA Exhibit 1, Item 12, page 3 

" FAA Exhibit 1, Item 20, Page 7-8 

15 
The docket reflects that the Authority and FedEx entered into Amendment No. 3 under 

which FedEx would spend $162 million to expand its sort and maintenance facilities.*'* 

The parties dispute whether the apron is Special Purpose Facility.*^ 

The Authority argues in their answer that the Complainants have not met the burden of 

proof standard required in a Part 16 proceeding. The Authority claims the economic 

discrimination standard is "persuasive evidence that a similarly situated user ... received 

preferential treatment vis-a-vis the Complainant." They continue, it is "incumbent upon 

the Complainant to prove its allegations of unjust discrimination by providing evidence 

that similar terms and conditions were requested and were subsequently denied, without 

adequate justificafion.** 

In their Reply, the Complainants argue that, "Although Respondents have taken great 

pains to point out the burden of proof on the Joint Complainants (which has been ftilly 

met). Respondents have failed to acknowledge, much less satisfy, their own burden. It is 

well established that the 'proponent of a motion.. .has the burden of proof. A party who 

has asserted an affirmative defense has the burden of proving the affirmative defense." 

[Martyn, FAA Docket 16-02-03, DD at 44]. *' 

As stated in the Applicable Law and Policy Section, the proponent of a motion, request, 

or order has the burden of proof A party who has asserted an affirmative defense has the 

burden of proving the affirmative defense. This standard burden of proof is consistent 

with the Administrative Procedure Act (APA) and Federal case law. The APA provision 

states, "[ejxcept as otherwise provided by statute, the proponent of a rule or order has the 

burden of proof." 5 U.S.C. §556(d). See also. Director, Office of Worker's Compensation 

Programs, Department of Labor v. Greenwich Collieries, 512 US 267, 272 (1994); Air 

Canada et al. v. Department of Transportation, 148 F3d 1142, 1155 (DC Cir, 1998). Tifie 

14 CFR § 16.229(b) is consistent with 14 CFR §16.23, which requires that the 

complainant must submit all documents then available to support his or her complaint. 

Similarly, 14 CFR §16.29 states that "[e]ach party shall file documents that it considers 

sufficient to present all relevant facts and argument necessary for the FAA to determine 

whether the sponsor is in compliance." 

The FAA does not concur with the Authority that the Complainants have failed to meet 

the burden of proof standard. The FAA notes the Complainants base their arguments on 

known facts contained in Amendment No. 3 and the Lease Agreement; these are 

*" FAA Exhibit 1, Item 10, Exhibit L, Page 1 

*' FAA Exhibit 1, Item 10, Lease Agreement, page 11. The Lease Agreement defines a Special Purpose 

Facility as "any specific improvement undertaken by AUTHORITY for the benefit of one or more airlines 

or any other Airport System tenant pursuant to the terms of a separate agreement that provides for, among 

other things, (1) the payment of rentals or fees for the use or occupancy thereof in sufficient amounts to 

permit the financing of such improvement and payment of all costs thereof solely from such rentals or fees, 

and (2) the payment of the maintenance and operating cost of such improvement by the tenant or tenants 

thereof" 

** FAA Exhibit 1, Item 10, page 16 

" FAA Exhibit 1, Item 12, Page 14 

16 
documents that will determine if the Authority violated its grant assurances. There is a 

sufficient record to proceed with the Part 16 proceeding. 

Therefore, the analysis and discussion below is set up to address allegations by the 

Complainants that the Respondents violated Grant Assurance Nos. 22, Economic 

Nondiscrimination, 23, Exclusive Rights, 24, Fee and Rental Structure and 25, Revenue 

Use. 

1. Whether the Amendment No. 3 to the lAA-FedEx Land Lease Agreement 

(Amendment No. 3), dated April 14, 2006 is consistent with Grant Assurance 22 

Economic Nondiscrimination, 49 U.S.C. § 47107 (a)(1) through (6), which requires 

the airport sponsor to make the Airport available to all types, kinds, and classes of 

aeronautical activity on reasonable terms, and without unjust discrimination. 

The Complainants present several allegations of unjust economic discrimination by the 

Respondents. These allegations are addressed in the following subtopics: Amendment 

No. 3, the Agreement and Lease of Premises, Rent Credit, Adverse Impact and Similarly 

Situated. 

Amendment No. 3 

The Complainants assert "Amendment No. 3 begins by appearing to require FedEx to pay 

a rental, called the Additional Special Facilifies Rent, calculated to reimburse for 100% 

of the project cost over twenty years (including financing costs and capitalized 

interest)."^^ The Complainants state the Special Facilifies Credit cause other airlines to 

bear a very substantial part of the FedEx Cargo Apron.^^ "But FedEx will not actually 

pay that full amount in rent. In fact, FedEx may not pay anything for the apron project. 

This is because for the next 20 years or so, through 2028, Amendment No. 3 gives FedEx 

credits, essentially rent reductions, of up to 100% of the Additional Special Facilities 

Rent."'° 

According to the Complainants, the Authority is attempting through Amendment No. 3 to 

do indirectly what it cannot do directly, stating, "Obviously, the lAA is free to build a 

facility for FedEx's exclusive use as long as it or FedEx pays the cost and no portion of 

the costs are borne by other airlines".'' 

In its Answer, the Authority states that Amendment No. 3 allows FedEx to expand its sort 

and maintenance facilities at its own cost, and the Authority agrees to finance expansion 

of the FedEx apron as a Special Purpose Facility. FedEx will then rent the expanded 

apron from the Authority and will pay the Authority rent (Additional Special Facilities 

** FAA Exhibit 1, Item 1, Page 8 

*' FAA Exhibit 1, Item 1, Page 8 

TM FAA Exhibit 1, Item 1, Pages 8-9 

^' FAA Exhibit 1, Item 1, Page 9 

17 
Rental). If FedEx achieves certain landed weight incentives, the Authority will grant it a 

Credit on a portion of the Additional Special Facilities Rental for the expanded apron.'^ 

The Authority notes that the Credit shall be equal to a maximum 75% of the incremental 

landing fee revenue of FedEx (above a 5 billion pound annual base, increased by 3% 

annually beginning in 2011), and the annual Credit will remain at 75% as long as all three 

phases of the apron expansion are completed within the five year expansion term 

provided by Amendment 3. Otherwise, the Credit shall be 70% if Phases 1 and 2 are 

completed or 65% if only Phase 1 is completed.'^ 

The Authority will calculate the incremental addifional landed weight as follows: 

• Create an (annual) adjusted base (5 billion pounds) and increase it 3 percent 

annually beginning in 2011. 

• Compute the incremental landed weight by deducting the actual landed weight 

from the adjusted base. 

• Compute the incremental landing revenue by multiplying the incremental 

landed weight by the landing fee (not to fall below $1.62 per 1,000 pounds of 

landed weight for Credit calculation purposes). 

• Divide the incremental landing fee revenue between the airport system and the 

Credit amount, with 25 percent to the Airport System and 75 percent to the 

Credit, but limiting the Credit to 75 percent of the Addifional Special Facilities 

Rental.''* 

The Complainants claim that "[a]nnual funding deficiencies for the construction 

of FedEx's Cargo Apron are forecast to range from $1,387,000 per year to 

$2,688,000 per year, starting in 2010. The projected funding deficiency due to the 

Landing Fee Rent Credits totals over $37,000,000 for the years between 2008 and 

2026, all of which would be borne as additional cost by the airlines doing 

business at TND in the form of increased landing fees."'^ 

The Complainants maintain that "under Article V.B(2) of Amendment No. 3, FedEx's 

Additional Special Facilities Rental will be reduced by the amount of an Additional 

Special Facilities Rental Credit. That section provides that: 

"Beginning January 1, 2007, the Lessee shall earn a Credit 

against the Additional Special Facilities Rentals otherwise 

'^ FAA Exhibit 1, Item 10 

'^ FAA Exhibit 1, Item 1, Page 9 

'" FAA Exhibit 1, Item 10, page 23 - (reference to footnote 35 - which refers to Article II or Amendment 

No. 3) [FAA Exhibit 1, Item 1, Exhibit 1] 

"" FAA Exhibit 1, Item I, Page 9 
due pursuant to Subsection (1) above, calculated in the 

manner described in this paragraph (2). 

The Additional Special Facilities Rental Credit shall equal the difference 

in Actual Revenues and Base Revenues, multiplied by the applicable 

Percentage Credit; provided however, if Actual Revenues are less than 

Base Revenues, no Credit shall apply." '^ 

The Authority states that, "The Complaining Airlines object to the rent credit 

notwithstanding that Amendment No. 3, taken as a whole, will benefit them financially 

by lowering their landing fees. Amendment No. 3's beneficial impact exists by design, 

as the magnitude of the rent credit given to FedEx will always be smaller, by definition, 

than the additional landing fees to be paid by FedEx above the negotiated threshold 

amounts. In addition, so long as the Airport's landing fees are set on a residual basis, the 

Complaining Airlines fiirther benefit from the additional rental revenues produced by 

Amendment No. 3. Amendment No. 3's net benefits presumably explain why the 

Complaining Airlines are at such pains to stress that they are not seeking to "unwind" the 

FedEx transaction."'' 

The Complainants and the Authority use different durations to represent the impacts of 

Amendment No. 3. The Authority stops its analysis at 2028, when Amendment No. 3 

ends, while the Complainants use 2036, the year the financing of the apron is complete. 

The Complainants state the difference is significant because the Authority does not 

consider the f\ill impact of the financing costs. It stops its calculations at 2028, while the 

actual financing costs continue through 2036. '^ 

On March 28, 2008, the Director issued the FAA Questions to assist in clarifying some 

details and allegations raised in the pleadings. The Complainants in their response to the 

FAA Questions responded that the "Rent Credit increases the Airport System 

Requirement paid for by the Complainants and other airlines at IND in the form of 

increased landing fees. This is precisely what the Joint Complaint is about... "'^ The 

Complainants insist, "(i) Any carrier growing at the Airport has to pay the landing fees on 

all of its incremental landed weight and (ii) the carriers' landing fees would be lower if 

there were no FedEx Landing Fee Rent Credit factored into the Airport System 

Requirement. Consequently, as lAA concedes, the amount of Airport System Operating 

Revenue will be less on a dollar-for-dollar basis, and therefore the Airport System 

Requirement on which the airline's landing fees are based will be higher on a dollar-fordollar basis than what those fees would be in the absence of the Rent Credit. Simply put, 

the incremental landing fees paid by FedEx cannot validate an arrangement that burdens 

other airlines for many years with the substantial cost of a Rent Credit granted to one 

carrier on its exclusive facility."^*' 

'* FAA Exhibit 1, Item 10, Page 21-22 

" FAA Exhibit 1, Item 10, page 4 

^* FAA Exhibit 1, Item 12, Page 24 

" FAA Exhibit 1, Item 21, Page 6 

*" FAA Exhibit 1, Item 21, Pages 7-8 

19 
While, the Authority presents a contrary view in their response to the FAA Questions, "to 

the extent that FedEx lands sufficient weight to generate incremental landing fee revenue 

and to produce a rent credit, there are two offsetting rate effects. One is that the Airport 

System requirement will be increased. The other is that FedEx will pay a greater 

percentage of that Airport System requirement. The rent credit is designed in such a way 

that the second effect will outweigh the first, thus holding other Signatory Airlines 

harmless against any rate impacts of FedEx rent credit and, in fact, reducing the other 

Signatory Airlines' landing fees". The Authority goes on to argue that, "The bottom line 

is that...any increase of the Airport System requirement caused by the rent credit is more 

than offset by an increase in FedEx's landing fees. Ultimately, once the Additional 

Special Facilities Rental Credit is applied, the debt associated with the cargo apron 

expansion is serviced by a combination of Additional Special Facilities Rent and FedEx's 

incremental landing fees, and not, as the Complaining Airlines claim, from the landing 

fees paid by them. Amendment No. 3 has no negative financial impact on the other 

Signatory Airlines."^' 

The Director developed Table 1 below to note by way of illustration, the Credit for 2012 

would be taken in 2013 by crediting the $1,416,247 against the Additional Special 

Facilities Rental. This in turn lowers Airport System Operating Revenue under the 

separate Lease Agreement, resulting in a higher Airport System Requirement of 

$1,416,247 and a higher landing fee. 

Table 1 

Calculation of Rent Credit 

For 2012 

Actual Landed Weight 6,182,793 

Year Rate Adjustment Adjusted Base 

2010 5,000,000 

2011 3 5,150,000 

2012 3 5,304,500 

Less Adjusted Landed Weight Base 5,304,500 

Equal: Additional Landed Weight Attributable to Expansion 878,293 

Landing Fee Rate $ 2.15 

Incremental Landing Fee Revenue $1,888,330 

Less 25% Retained for Airport System $ 472,082 

Equals 75% of Incremental Landing Fee Available for Credit $1,416,247 

The Director in the FAA Questions specifically asked the parties to "describe the flow of 

funds from the Airfield Area Cost Center once the Credit is claimed by FedEx."*^ The 

Authority advised that it "has offered and the Signatory Airlines have indicated 

unanimously that they wish to accept, a negotiated fixed landing fee rate for the balance 

of the term of the Signatory Agreement based on 2008 levels." ^ The gravaman of the 

*' FAA Exhibit 1, Item 20, page 7-8 

*^ FAA Exhibit 1, Item 22 

83 FAA Exhibit 1, Item 20 

20 
Complaint is that the Complainants allege that the rent Credit to FedEx will result in 

increased landing fees in the ftiture, after the end of the current contract, while the 

Authority argues that there is no negative impact to the Complainants under their current 

contract. The Authority stress that the airlines will have their landing-fee rates frozen at 

the 2008 levels through December 31, 2010. 

While the Complainants counter that they have not signed any agreement to reflect this 

proposal, the Respondents represent that the Airlines will have their landing-fee rates 

frozen at the 2008 levels through December 31, 2010.^"* 

The Lease Agreement is a separate stand- alone agreement between the Authority and the 

Signatory Airlines, including the Complainants and FedEx, and that Amendment No. 3 is 

a stand- alone agreement between the Authority and FedEx. The Director notes that the 

Lease Agreement, could not and did not specifically reference Amendment No. 3, he 

nonetheless recognized that the terms of Amendment No. 3 can influence the landing fee 

calculation of the Lease Agreement. 

If FedEx claims the Credit against its Additional Special Facilities Rental and the Airport 

System Operating Revenue under the Lease Agreement decreases by the amount of the 

Credit, it could cause the Airport System Requirement to rise, resulting in a higher 

landing fee than would otherwise be the case without the Credit. Under the existing 

Lease Agreement, the FedEx Credit cannot be imposed unilaterally on the Complainants. 

This is true even if the Airlines benefit from additional FedEx operations because airfield 

costs are spread over more operations and the Complainants actually pay less as a result. 

Agreement and Lease of Premises. 

The Complainants stated that the Authority did not obtain Majority-In-Interest (Mil) 

approval for the apron expansion, as the Agreement and Lease of Premises (Lease 

Agreement) requires. In accordance with the Lease Agreement, the Authority must 

consult with the Signatory Airlines and receive two-thirds approval prior to committing 

to certain capital improvements. This requirement is in Article 8, Capital Improvements: 

• Section 8.01, Capital Improvements, 

A. "[0]n or before August 1st each year, AUTHORITY shall 

notify Signatory Airlines of the purchase price/construction cost 

of Capital Improvements and the amortization schedule to be 

added to the rate base, pursuant to Article 6, for Capital 

Improvements for which amortization is to be included in the 

next appropriate rental period... 

B. Within a reasonable time, but no sooner than 30 days after 

distribution of the report, AUTHORITY shall convene a 

meeting of the Signatory Airlines to discuss and obtain 

FAA Exhibit 1, Item 21 

21 
concurrence of the Signatory Airlines to any proposed Capital 

Improvement requiring such concurrence... [emphasis added] 

C. If concurrence on a Capital Improvement is specifically 

withheld following the first meeting, AUTHORITY shall have 

the opfion to convene a second meeting of the Signatory 

Airlines. The second meeting shall be held within 30 days after 

the receipt of notice of nonconcurrence from the Signatory 

Airlines, upon nofice by AUTHORITY. At the second meefing 

AUTHORITY shall respond to questions raised during the first 

meeting and shall ask for reconsideration of the Capital 

Improvement or consideration of the amended Capital 

Improvement. Upon reconsideration, of the Original Capital 

Improvement or consideration to the amended Capital 

Improvement, the proposed Capital Improvement shall be 

deemed concurred in unless, within 30 days after such second 

meeting, concurrence is specifically withheld in writing, by two 

thirds (2/3) of the Signatory Airlines. If concurrence is 

withheld, the Capital Improvement will be deferred until the 

next Fiscal Year... 

D. After providing notice to the Signatory Airlines, 

AUTHORITY may, without complying with the provisions of 

subsection (B) hereof, proceed with any of the following 

Capital Improvements [emphasis added] and include the cost of 

such Capital Improvement in that Fiscal Year's calculation for 

the Landing Fee and rentals of the Signatory Airlines, if such 

Capital Improvement is necessary or prudent to: (1) Assure or 

facilitate compliance with a rule, regulation, or order of any 

federal. State, or other governmental agency (excluding 

AUTHORITY) that has jurisdicfion over the operation of the 

Airport. (2) Maintain, operate, or create Airport System 

functional capability and capacity at a level that is required (a) 

by public health, safety, access, security or welfare or (b) by the 

trustee for the security of the Bonds. (3) Satisfy judgments or 

fines against AUTHORITY imposed by an agency of federal or 

state government rendered by a court of competent jurisdiction. 

(4) Repair casualty damage net of insurance proceeds to Airport 

System property. (5) Develop a Special Purpose Facility. 

[emphasis added\ (6) Acquire land to preserve, protect, or 

enhance the Airport system. (7) Expenditures for architectural, 

engineering, or economic studies or other professional services 

of planned Airport System facilities. "^^ 

85 FAA Exhibit I, Item 10, Exhibit B, Pages 50-53 

22 
The Complainants argued the expansion of the apron is not a Special Purpose Facility 

because other airlines will pay its financing costs. The Complainants charge "[T]he 

execufion of the Lease Agreement (i.e. Amendment No. 3) without approval violates the 

Mil provisions of each of the carrier's respective leases. The Respondents incorrectly 

claim that the contemplated expansion of FedEx's Cargo Apron at IND was a Special 

Purpose Facility Transaction not requiring Mil approval fi-om the Signatory Carriers. 

lAA is wrong. A Special Purpose Facility is one which provides for 'the payment of 

rentals or fees for the use or occupancy thereof in sufficient amounts to permit the 

financing of such improvement and payment of all costs thereof solely from such rentals 

or fees...' As explained above. Amendment No. 3—with its Landing Fee Rent Credits to 

FedEx—shifts millions of dollars of costs to other carriers at IND, so this capital project 

cannot possibly meet the definition of a Special Purpose Facility."^^ 

The Complainants confirm their position in their response to the FAA Questions that the 

cargo apron project required Mil approval because it was not a Special Purpose Facility. 

"[T]he FedEx Cargo Apron is exclusively for FedEx's use, but as a result of the Rent 

Credit, its construction and maintenance are not paid for 'solely from [FedEx] rentals' as 

required by the Airline Lease. By virtue of the Rent Credit, a substantial portion of the 

cost burden is to be imposed on other carriers through higher landing fees. Thus, the 

on 

FedEx Cargo Apron is not a Special Purpose Facility." 

The Authority disagrees and states in its response to the FAA Questions: 

The Authority complied with the provisions of Section 8.01 and 8.03 with 

regard to the FedEx apron subject to the Credit. Specifically, on June 30, 

2005, by letter from lAA's Marsha Stone, Finance Director, to the Airline 

Technical Committee, Airline Properties Representatives, and Airline 

Station Managers, the Authority transmitted a summary of the 2006 

Capital Improvement Program, in which the cargo apron expansion was 

expressly noted as being exempt from Mil approval. See Response Exhibit 

C; see also Response Exhibit D (individual responses from Signatory 

Airlines). Thereafter, on May 3, 2006, Patrick Dooley, the Airport 

Director, sent a letter to Erin Heitkamp, the designated representative for 

the Signatory Airlines, in which he described the scope of the proposed 

project, including sources of fiinds, and included a rent credit. Answer 

Exhibit L. In that letter, Patrick Dooley reiterated that the "Federal 

Express' expansion is a Special Purpose Facility as defined in the... 

Signatory Agreement and is therefore not subject to a Majority In Interest 

vote of the Signatory Airlines. ^^ 

The cargo apron expansion is a Special Purpose Facility because it was 

'undertaken by the Authority for the benefit of one or more 

*^ FAA Exhibit 1, Item 1, Pages 17-18 

'•' FAA Exhibit 1, Item 21, Page 11 

88 FAA Exhibit 1, Item 20, Page 3-4 

23 
airlines.. .pursuant to the terms of a separate agreement," Amendment No. 

3, 'that provides for, among other things (1) the payment of rentals or fees 

for the use or occupancy thereof in sufficient amounts to permit the 

financing of such improvement and payment of all costs thereof solely 

from such rentals or fees, and (2) the payment of the maintenance and 

operating cost of such improvement by the tenant or tenants thereof.' 

Amendment No. 3 ensures that FedEx will pay the full debt service 

associated with the cargo apron expansion through the rents and fees it 

pays to the lAA. Moreover, pursuant to the terms of Amendment No. 3, 

FedEx is responsible for maintenance and operation of the enfire cargo 

II 89 

apron. 

"The Authority provided nofice to the Signatory Airlines regarding (a) the 

anticipated costs of the FedEx apron expansion and (b) the Authority's 

determination that the apron expansion was a Special Purpose Facility not 

requiring an Mil vote. Response Exhibit C, Answer Exhibit L, and the 

Signatory Airlines raised no objections to that determination. Response, 

Exhibit D. In other cases, when the Signatory Airlines have disagreed 

with the Authority's determination that a project should be treated as 

Special Purpose Facility, they have expressly objected to that 

determination in writing. See, e.g., Response Exhibit E (2003 letters 

transmitting Mil ballots from Northwest, Delta, Continental, Southwest, 

and other Signatory Airlines)."^° 

The Complainants state "lAA's Response contains letters from certain carriers to support 

the ertoneous claim that the Complainants had agreed that the FedEx Cargo Apron 

project was a Special Purpose Facility not requiring Mil approval...however, those letters 

provide no such evidence."^' 

"First, none of the letters expressly concedes that the FedEx Cargo Apron was a 

Special Purpose Facility outside the Mil approval requirement." ^ 

"Second, at the time those airline letters were written in mid-2005. Respondent lAA 

had merely informed the airlines at IND about the general outlines of a potential 

project to expand the FedEx Cargo Apron facility, not the illegal plan to pay for the 

project on the backs of other carriers at IND. ... Thus, to the extent one stretches to 

read those letters as somehow indicating some form of acquiescence with respect to a 

FedEx Cargo Apron project, it was - at most - with respect to the general concept of 

the project, not how the project was going to be funded as provided for in Lease 

Amendment No. 3. Indeed, it was not until the following year (Spring 2006) that the 

Joint Complainants were for the first time presented with the funding details of 

*' FAA Exhibit 1, Item 20, Page 4-5 

'" FAA Exhibit 1, Item 20, Pages 5 

" FAA Exhibit 1, Item 21, Page 11 

'^ FAA Exhibit 1, Item 21, Page 12 

24 
Amendment No. 3, including the Rent Credit, and then only at the last moment as a 

fait accompli."^^ 

"Third, even back in 2005, Northwest Airlines clearly indicated its position that the 

proposed FedEx Cargo Apron must be subject to a cost recovery agreement with 

FedEx. Northwest's comment stated: "Project #36 Cargo Apron Construction -

Contingent Approval Subject to cost recovery agreement with FedEx.' Northwest's 

position was clear. The Cargo Apron project could be a Special Purpose Facility only 

if all of its costs were recovered by FedEx. Since FedEx does not fiilly pay for the 

Apron project, it is not a Special Purpose Facility and Mil approval was required."^'* 

"Fourth, upon learning in mid-2006 of the details for the funding of the Cargo Apron 

with a FedEx Landing Fee Rent Credit, the Joint Complainants fiirther made clear -

immediately and in writing - that the Project was not a Special Purpose Facility 

exempt from Mil approval."^^ 

The Complainants summarized that, "Amendment No. 3 - with its Landing Fee Rent 

Credit for FedEx - shifts tens of millions of dollars of costs onto other carriers at IND, so 

this capital project cannot possibly meet the definition of a Special Purpose Facility."^^ 

The Complainants assert that the Lease Agreement does not explicitly provide for the 

Rent Credit because the Lease Agreement predated by many years FedEx Amendment 

No. 3. Therefore, it could not have "explicitly" referred to the FedEx Landing Fee Rent 

Credit.^' 

The Complainants state, "[Tjhere is no dispute that the Airport System Expense includes 

the FedEx Cargo Apron project and its corresponding debt service. As lAA's Response 

states, the FedEx Cargo Apron project has 'been financed, thus far, from the proceeds of 

Series 2006 [General Airport Revenue Bonds] GARBs,' and the 'debt service for those 

GARBs is included as an Airport System Expense for purposes of calculating the Airport 

System Requirement.'... There is also no dispute that the Airport System Operating 

Revenue includes all of the rental fees paid by FedEx (reduced by the Landing Fee Rent 

Credit).... "^^ 

Consequently, according to the Complainants, "the FedEx Cargo Apron project increases 

the Airport System Requirement and the resulting cost burden of landing fees for other 

carriers at IND on both the expense and revenue side of the equation-by increasing the 

Airport System Expense to account for apron costs and debt service and by reducing the 

Airport System Operating Revenue as a result of the Rent Credit. This arrangement -

" FAA Exhibit 1, Item 21, Page 12 

'" FAA Exhibit 1, Item 21, Page 13 

'^ FAA Exhibit 1, Item 21, Page 12 

'* FAA Exhibit 1, Item 21, Page 13 

'^ FAA Exhibit 1, Item 21, Page 2 

'* FAA Exhibit I, Item 21, Page 3 

25 
whereby the burden of the Rent Credit for FedEx's exclusive Cargo Apron will be borne 

by the other airlines at IND over many years - is unlawfial...."^^ 

The Authority holds that the FedEx apron expansion does not require Mil approval under 

the terms of the Lease Agreement because it is a Special Purpose Facility. Article 8 of 

the Lease Agreement provides for the development of a Special Purpose Facility'^" 

without Mil approval. The Complainants disagree. They state the Authority has not 

followed the terms of the Lease Agreement because the FedEx apron project is not a 

Special Purpose Facility, as defined by Article 8 of the Lease Agreement. The 

Complainants hold that the definition in the Lease Agreement of a Special Purpose 

Facility requires the tenant, as in this case FedEx, to pay for all of the financing and costs 

of the Special Purpose Facility. In the Complainants view, the use of the Credit transfers 

some of these costs (and possibly all the costs) to the Complainants in their landing fee. 

Therefore, the Complainant asserts that the FedEx project cannot be considered a Special 

Purpose Facility and Mil approval is required before the FedEx project could be 

developed. 

The Authority on the other hand states it did notify the Complainants through letters to 

the Airline Technical Committee, Airline Properties Representatives, and Airline Station 

Managers of the apron expansion project, and it stated the letters explained the projected 

rents and the use of the Credit. The Complainants state they were not aware of the use of 

the Credit until just before approval of the FedEx project by the Authority. Once they 

learned of the intent to use the Credit, they have protested the project since that time. 

The Director notes that the Lease Agreement provides the processes the Authority and 

the Signatory Airlines have agreed to for the development of capital improvements on 

FND. The Director agrees that if the apron is a Special Purpose Facility as defined in the 

Lease Agreement, the payment for its use or occupancy, maintenance and operating costs 

would be solely from payments by FedEx. Accordingly, under the existing agreement 

which is set to expire on December 30, 2010, no fee resulting from the construction of the 

Special Purpose Facility would be able to be imposed on the Complainants, even if the 

other carriers benefit from FedEx additional operations because airfield costs are spread 

over more operations and the Complainants actually pay less as a result. There is 

presently no compliance problem here since the Respondents have committed to freeze 

the Complainants' landing-fee rates at the 2008 levels through the 2010 expiration date. 

Adverse Impact 

The Authority argues the Complainants will not be adversely affected at all by the FedEx 

apron expansion during the term of their existing leases, "lAA made an offer to remove 

from the rates and charges calculation, the principal and interest payments on the airports 

capital investment in the apron expansion and the lease payments for that facility through 

99 FAA Exhibit 1, Item 21, Page 3-4 

""^ FAA Exhibit 1, Item 10, Exhibit B, Page 53 

26 
December 31, 2010."'°' The Authority goes on to state that, "lAA has offered to exclude 

from the Complaining Airlines' landing fee rates both the cost and facility rents 

associated with the cargo apron expansion (while continuing to give them the benefit of 

FedEx's incremental landed weight), and because there is no demonstrated basis for 

assuming that there will be any rate impact at all after the current Airport Use Agreement 

expires in 2010, the Complaint should be dismissed for failure to satisfy the requirements 

ofl4C.F.R. § 16.23(a)."'°^ 

In their Reply, the Complainants stated the offer to hold harmless "protects the Joint 

Complainants from nothing, because it ends before the cost impacts are expected to 

begin...lAA's 'offer' to hold the Carrier's harmless from the effects of the Landing Fee 

Rent Credit was a "cynical and illusory gesture because it was limited to a period before 

the adverse impacts of the Landing Fee Rent Credits will be incurred." Therefore, the 

Complainants state the FAA should reject the "Respondents' absurd contention that the 

Complainants have no "standing" ... under Part 16.1."'°^ 

The Complainants stated that "insofar as they use the runways/taxiways at IND and pay 

landing fees, the Landing Fee Rent Credits for FedEx and the increased FedEx operations 

at IND envisioned by Lease Amendment No. 3 will directly and substanfially affect each 

of them,"'"'* which establishes their standing to pursue the Complaint. The Complaints 

cited Bombardier Aerospace Com, v. City of Santa Monica. FAA 16-03-11, DD (Jan. 3, 

2005), where two large aircraft operators had standing to contest landing fees where both 

"have operated and continue to operate at SMO in addition to having paid landing fees on 

several occasions." ^ 

The Complainants also claim standing "in light of their well-substantiated claim of 

revenue diversion. For such claims there is a presumption of standing... regardless of 

whether there is a substantive showing of detrimental effect. Jim Martyn v. Port of 

Anacortes. FAA Docket 16-02-03, DD (April 14, 2003) ("a complainant presenfiy 

engaged in a business arrangement with the airport in question would be assumed to 

"" FAA Exhibit 1, Item 10, Item 1, Pages 13, 19 and 20. The ftill text of paragraph 44 is, "[T]he lAA and 

BAA-IND have refused to remedy, in any substantive manner, the concerns outlined by the Joint 

Complainants, and, at this point, there is no reasonable prospect for timely resolution of the dispute. 

Although lAA made an offer to remove from the rates and charges calculation the principal and interest 

payments on the airport's capital investment in the apron expansion and the lease payments for that facility 

through December 31, 2010, that offer utterly fails to resolve this dispute because it ignores the burden on 

the other airlines of the Landing Fee Rent Credits which extend well beyond 2010 and which total tens of 

millions of dollars." 

'"^ FAA Exhibit 1, Item 10, Page 14 

'"^ FAA Exhibit 1, Item 12, Page 6 

'"" FAA Exhibit 1, Item 12, Page 7 

'"^ FAA Exhibit 1, Item 12, Page 7. In the Response of the lAA to FAA's Request for Additional 

Information, it states, "However, the Authority has offered, and the Signatory Airlines have indicated 

unanimously that they wish to accept, a negotiated fixed landing fee rate for the balance of the term of the 

Signatory Agreement based on 2008 levels. [See Response Exhibit 1, and Response Exhibit J] As a result, 

the Signatory Airlines will have 'frozen' in place the advantages stemming from the timing of the landing 

fee calculations for 2008." FAA Exhibit 1, Item 20, page 9 

27 
suffer from a direct and substantial effect when revenue diversion is alleged without 

having to demonstrate that effect. ..that presumption fially applies here.")"'"^ 

The Complainants also argue the Authority's argument must be rejected because "...it 

would severely undermine the Part 16 process. Allowing a respondent to defeat a 

complainant's standing under Part 16 merely by proffering a meaningless settlement 

offer." The Complainants cited, Miami International Airport Rates Proceeding. DOT 

Order 97-3-26, that "reject[ed the] airport's reliance on an 'impracticable' settlement offer 

would create a giant loophole and allow respondents to become the 'gatekeepers; of Part 

16 claims.. .Such a result would be contrary to the public interest because it would reduce 

the ability of complainants to pursue relief and the FAA's ability to remedy 

noncompliance." 

The Complainants additionally hold that the FedEx apron expansion is not a Special 

Purpose Facility as defined by the Lease Agreement because it is not solely paid for by 

FedEx but its cost is shared by the Complainants because of the application of the Credit 

and the impact on the landing fee. The Complainants believe the FedEx apron expansion 

requires Mil approval under Article 8 of the Lease Agreement. The Authority holds that 

the FedEx apron expansion is a Special Purpose Facility and therefore does not require 

Mil approval of the Signatory Airlines under the Lease Agreement. As discussed earlier, 

the interaction of two separate agreements, the Lease Agreement and Amendment No. 3, 

has yet to adversely affect the Complainants and is therefore a confract dispute and will 

not be adjudicated under Part 16. 

The Authority fiirther states, "FAA should not allow the Complaining Airlines 

opportunistically to reap the incremental rent and landing fee benefits of FedEx's 

expansion without accepting the limited rent credit that was necessary to facilitate the 

expansion.""^^ The pertinent issue here is if the Authority's premise that it is 

contractually able to apply the Credit to the calculations of the landing fees in the Lease 

Agreement is not sustained, then it is left with attempts to unilaterally impose, through 

the Credit mechanism, a higher landing fee on the Complainants that would otherwise be 

the case without their express approval. 

The FAA notes that Martyn and the Complainant significanfiy differ. In Martyn, the 

complainant was in fact being denied access to the airport. In this Complaint, the 

Complainants are on the airport but arguing against a potential future event, which is 

uncertain considering the differing analyses submitted by the Complainants and the 

Authority. 

The Director agrees with the Authority that Amendment No. 3 has yet to adversely affect 

the Complainants, however, the Director disagrees that the Complainants do not have 

standing under Part 16.23(a). The Complainants do have standing under Part 16, but the 

issue is not yet ripe for review since the rent Credit has not been applied and the 

'"* FAA Exhibit 1, Item 12, Page 9 

'"^ FAA Exhibit 1, Item 12, Pages 9-10 

108 FAA Exhibit 1, Item 10, Page 33 

28 
Complainants have not been harmed. The Authority has agreed not to apply the Credit 

during the term of the Lease Agreement which expires on December 31, 2010. The 

Director will not speculate regarding the future rate making methodology that the 

Complainants and the Authority may negotiate for the replacement of the Lease 

Agreement. 

Moreover, the Director concludes that the claim regarding adverse impact involves a 

contract dispute between the Authority and the Complainants and that Part 16 is not the 

proper venue to adjudicate contract disputes when no action has yet to be taken to 

implement the contract terms that are in a manner contrary to the grant assurances. 

It is paramount that the Complainants and the Respondents understand that the FAA does 

not arbitrate or mediate negotiations through a formal Part 16 complaint process. Nor 

does the FAA enforce lease terms between parties to an agreement. Rather, the FAA 

enforces contracts between an airport sponsor and the federal government. [See AmAv 

V. Maryland Aviation Administrafion. FAA Docket No. 16-05-12. (March 20, 2006) 

(Director's Determination).] Whether or not an airport tenant has breached the terms of 

its lease agreement with the airport sponsor is a matter to be resolved in state court. The 

FAA is not a party to litigation proceedings between complainants and respondents 

involving contract disputes; nor does the FAA have jurisdiction over matters of confract 

law between airport tenants and sponsors. [See Rick Aviation, Inc., v. Peninsula Airport 

Commission, FAA Docket No. 16-05-18, (November 6, 2007) (Final Decision and 

Order.)] 

There is presently no grant assurance violation since there is no adverse impact to the 

Airlines without the FedEx Credit. 

Rent Credit 

The Complainants argue that the Rent Credit provisions, if applied, would be 

unreasonable and constitute unjust economic discrimination against the carriers. '°^ 

According to the Complainants, "[T]he critical point at the heart of the Joint Complaint is 

simple: that the Landing Fee Rent Credit provided to FedEx for its exclusive facility will 

require the Joint Complainants and other airlines at IND to pay higher landing fees over 

many years then they otherwise would pay in the absence of the Rent Credit." ''° 

The Complainants argue that the Authority is shifting FedEx costs to the Complainants, 

which is unjust economic discrimination. They state, "[ajssuming ... that FedEx exceeds 

the baseline levels and enjoys the benefit of the Landing Fee Rent Credit, FedEx's rental 

payments will not fiilly cover the cost of the Apron facility, and those costs not covered 

by rent will be borne by other airlines on a dollar-for-dollar basis in higher landing fees 

than they would otherwise pay...."'" 

"" FAA Exhibit 1, Item 12, Page 16 

''" FAA Exhibit 1, Item 21, Page 4 

' " FAA Exhibit 1, Item 12, Page 16 

29 
To fiirther their argument, the Complainants cited several cases they believe support their 

allegafion of unjust economic discrimination including: 

• Miami International Airport Rates Proceeding. DOT Order 97-3-26 

• LAWA-2007. DOT Order 2007-6-8 

• Bombardier Aerospace, FAA Docket 16-03-11 

• Wilson Air Ctr.. LLC v. FAA. 372 F.3d 807 (6th Cir. 2004) 

• Penobscot Air Services. Ltd. v. FAA. 164 F.3d 713 (1st Cir. 1999) 

• Rick Aviation Inc. v. Peninsula Airport Commissioners. FAA Docket 16-05-18 

From the Miami International Airport Rates Proceeding, DOT Order 97-3-26, the 

Complainant cites the following, "The Department also raised warning flags about 

arrangements similar to this one in the Miami Intemafional Airports Rates Proceeding. In 

that proceeding, the Department emphasized that it would be concerned, however, if an 

airport built facilities demanded and used by a hub airline and charged much of their cost 

to other airlines in circumstances where the latter airlines would not have comparable 

facilities needed to replace outmoded facilities...That concern is front and center 

here.""^ 

In their Answer, the Authority stated the Rent Credit does not harm the Complainants and 

argued they did not freat FedEx more advantageously than it freated the Complainants, so 

there is no unjust discrimination. Additionally, the Authority states, "Although the 

Complaining Airlines style their Complaint as one alleging unjust discrimination...the 

relief they seek is not typical of such claims... instead they ask for rate relief, but the rate 

adjustment they seek goes beyond asking to be held "harmless" from the FedEx 

transaction."'' 

The Authority disputed the conclusions reached by the Complainants in the above cited 

cases. Specifically, the Authority cited the Miami International Airport Rates 

Proceeding, in support of their position; stating, "Both DOT and the D.C. Circuit rejected 

exactly the per se rule advocated by the Complaining Airlines here: that 'fees cannot be 

reasonable when one airline subsidizes renovations to benefit another'...They rejected 

the claim even though the amounts at issue in Miami were far greater than the amount of 

FedEx' s Rent Credit at IND and even though, unlike here, the MIA complainants were in 

direct competition with the beneficiary of the alleged discrimination. Because the 

Authority's actions here are squarely within the circumstances under which it is 

permissible to charge airlines the same fees (be they non-discriminatory landing fees, as 

at IND, or equalized rents as at MIA), FAA should dismiss the complaint." "'* 

"^ FAA Exhibit 1, Item 12, Page 17 

"^ FAA Exhibit 1, Item 10, Pages 4-5 

114 FAA Exhibit 1, Item 13, Pages 28-29 

30 
In addition, the Authority states the Complainants should not have ignored ground rent 

when computing potential adverse impacts."^ The Complainants state that every airline 

pays ground rent and all must pay the fixed rate, therefore they properly excluded ground 

rent when computing the adverse impact of the Credit. "^ The Authority states the 

Complainants used outdated landed weights, which dramatically increased the amount of 

the Credit. The Complainants disagreed with the new data stating that it was for only 

a 4- month period, however using the Authority's projections the landed weights would 

continue to support their calculation of their revised adverse impact. "^ 

The Authority charges that "the Complaining Airlines' premise is false because FedEx's 

additional rent and landing fees exceed the amount of any rent forgone because of the 

credit, and because the Complaining Airlines are benefited, not harmed, by Amendment 

No. 3 as a whole.""^ The Authority asserts that, "Because FedEx and the Complaining 

Airlines pay the same landing fee rate, the Complaining Airlines are forced to claim that 

it is unjustly discriminatory to charge the same landing fee rate when that rate includes 

the costs of facilifies that only FedEx uses. However, that claim has neither factual nor 

legal support. First, the Complaining Airlines are mistaken when they argue that the 

combination of the FedEx rent credit and the residual landing fee rate methodology 

means that they, rather than FedEx, will be paying the cost of FedEx's apron...the credit 

was designed from the outset to ensure that FedEx will pay the fiill cost of the facilities. 

Second, even if there were a net cost included in the landing fee calculation, that would 

not be unjustly discriminatory.. .there is no per se rule prohibiting residual landing fee 

rates that include the cost of facilities that benefit some airport users and not others." '^° 

The Authority fiirther asserts that, "The Complaining Airlines do not challenge the 

Authority's residual rate methodology. On the contrary, they indicate that "any such 

change [from the residual method] to a compensatory methodology would likely be 

strongly resisted by the Carriers." But residually-calculated rates almost always include 

some costs for facilities that are not used by all of the airport users paying the residual 

rates. That is true regardless of whether the formula is a cost-center residual, an airport 

residual, or an airport-system residual. In a cost-center residual, landing fee rates for the 

airfield cost center may well include net costs of general aviation facilities that passenger 

airlines do not use. ... These arrangements are reasonable because any one airport user's 

chances of'subsidizing' the cost of another user's facilities is balanced by its chances of 

being subsidized by other users' revenues." 

In summary, the Authority states that it carefully negotiated Amendment No. 3 so that the 

FedEx Rent Credit would not negatively impact other Airlines. The Authority notes that, 

"By insisting that the maximum amount of Additional Special Facility Rental Credit 

" ' FAA Exhibit 1, Item 10, Page 27 

"* FAA Exhibit 1, Item 12, Page 19-20 

"^ FAA Exhibit 1, Item 10, Page 27-28 

"" FAA Exhibit 1, Item 12, Page 21 

' " FAA Exhibit 1, Item 10, Page 33 

'^" FAA Exhibit 1, Item 13, Page 15 

'^' FAA Exhibit 1, Item 13, Page 22 

31 
eamable in any one year be limited to no more than 75% of the incremental landing fees 

paid by FedEx that year (up to the level of Additional Special Facilities Rent that year), 

the Authority ensured that: (1) FedEx will only qualify for a rent credit in those years in 

which it generates sufficient incremental landing fee revenues to cover the credit, (2) the 

Complaining Airlines will always share in the benefits resulting from FedEx' s 

incremental landed weight and landing fees, and (3) the Complaining Airlines' benefits 

will continue to increase in each of the out-years after the Additional Special Facility 

Rental Credit reaches its negotiated cap. In other words, by its own terms. Amendment 

No. 3 will protect the Complaining Airlines if FedEx fails to generate additional landing 

fee revenues for the Authority, and will benefit the Complaining Airlines once the 

threshold is surpassed."'^^ 

The Complainants and the Authority argue over the impact of the Credit on the airlines 

doing business at IND. The Complainants first claimed the carriers would pay 

approximately $37 million through increased landing fees. '^ The Authority argues the 

Credit would not adversely impact the carriers, in fact, the Authority states the Credit will 

have a net benefit of $10 million from increased revenues that FedEx will generate for 

the airport from its increased number of landings and additional facilities rental.'^'* After 

considering new information from the Authority, the Complainants later reduced the 

cumulative negative impact on the air carriers to $23 million through 2028.' ^ 

The Director finds that in this case, it is clear that under the terms of Amendment No. 3, 

FedEx will not be solely responsible for "the payment of the rentals or fees for the use or 

occupancy thereof in sufficient amounts to permit the financing of such improvement and 

payment of all costs thereof solely from such rentals or fees. " Credits given back to 

FedEx in return for landed weight will serve to dilute the costs of the improvements to 

FedEx and will spread them out, through the residual agreement, to all Signatory Airlines 

at the Airport. It is not reasonable to impose one carrier's special facility costs on other 

carriers where there will not be a reciprocal benefit, as in the blended rates in the Miami 

terminal, where all the carriers would eventually have their facilities upgraded. 

Furthermore, it is contrary to the express terms of the Lease Agreement. 

The FAA finds the Complainants' argument that they will incur additional costs as a 

result of Amendment No. 3 could be valid if the Authority imposes this arrangement on 

the Airlines without their concurrence. For the present, as noted, the FAA views the 

Credit arrangement as a contract dispute for which Part 16 is not the proper venue to 

resolve. If the Airlines and the Authority do not come to terms in a subsequent 

agreement, and the Authority unilaterally imposes the Credit, the matter may then be 

appropriate for FAA review. Absent a written agreement, the taking of "common use" 

'^^ FAA Exhibit 1, Item 13, Page 19 

'^^ FAA Exhibit 1, Item 1, Page 9 

'^" FAA Exhibit 1, Item 10, Page 32 

'-' FAA Exhibit 1, Item 12, Page 18 

126 FAA Exhibit 1, Item 10, Exhibit C, definitions 

32 
revenue and using it for an "exclusive use" FedEx apron could amount to a violation of 

Grant Assurance #22. 

The responsibility for resolving the dispute over a Credit that has yet to be applied rests 

first with the Authority and the Complainants, not the FAA. 

• If the Complainants agree to include the Credit in a future methodology, it would 

not violate the FAA grant assurances or the Rates and Charges Policy. 

• If the Authority imposes landing fees on the carriers, those fees will be subject to 

the reasonableness principle of the Rates and Charges Policy. 

• If the Complainants agree to extend the Lease Agreement and not amend it to 

recognize the Credit, This matter would continue to be a contract dispute and Part 

16 would not be the appropriate venue. 

The Director agrees there is significant variation and uncertainty with the projections 

presented by both parties in their pleadings as well as in their respective responses to the 

FAA Questions. However, the issue that is the basis of this complaint is not the presence 

of a surplus or shortfall resulting from the Credit, or what components of the rents should 

be or not be considered. The principal issue in this complaint is whether the application 

of the Credit results in the unilateral imposition of extra costs added to the Airport 

System Requirement requiring a higher landing fee than would otherwise be the case in 

order to compensate for the Credit. 

Since the FAA does not know the form of the future agreement, or whether there will 

even be an agreement, it is not appropriate at this time to rule on the Authority's possible 

future application of the Credit for the FedEx apron. The Director finds that if the 

Complainants and the Authority do not come to terms in a replacement agreement and the 

Authority unilaterally imposes the Credit on the Complainants (and all airlines) such an 

action would be subject to the Rates and Charges Policy. The Policy would not permit 

the Authority to unilaterally impose the costs of one carrier on all other carriers by adding 

such costs to its common rate base unless approved by those carriers.'^^ 

Similarly Situated 

The parties to this instant complaint disagree on whether the passenger carriers and the 

cargo carrier, FedEx, are similarly situated although the Complainants did not raise this 

issue in their Complaint. The Authority argues that the Complainants are not similarly 

situated with FedEx, so there could be no unjust discrimination. The Authority noted 

several points of difference that make FedEx and the other airlines dissimilar: 

• "FedEx, unlike the passenger carriers, has invested hundreds of millions of dollars 

in tenant-financed improvements at IND that belong to lAA or will revert to lAA 

' Policy Regarding Airport Rates and Charges, F.R. Vol. 61, No. 121, Section C. 

33 
ownership. These investments include ...FedEx's current $162 million expansion 

of its sorting facilities at IND."'^* 

• "FedEx is the only airport tenant in position to lease and use that much space in 

that location. Accordingly, leasing that land to FedEx benefits the Authority and 

the Signatory Airlines... without substantial opportunity cost to the Airport or 

other Airport users." '^^ 

• "[T] he only similarity between FedEx and the complainants is that they are all 

airlines doing business at IND. Virtually everything else is different. FedEx and 

the Complaining Airlines provide different services using different business 

models, different facilities (the FedEx-built sorting facility versus the Airportconstructed Terminal) and leased premises (e.g., ground and apron) located in 

substantially different parts of the Airport." '^ 

The Complainant's argue that, "Respondents seek to avoid the prohibitions on unjust 

discrimination...by arguing that FedEx and the Joint Complainants are not similarly 

situated. According to Respondents, these differences include the time and 

circumstances when the leases were negotiated, the lease durations, the amount of tenant 

investment at issue, the size/location of the relevant facilities....This argument is without 

merit." The Complainant's state that they recognize that the prohibition on unjust 

discrimination does not prevent an airport proprietor from "making reasonable 

distinctions among aeronautical users...." However, they note that, "that prohibition bars 

airport proprietors from charging air carriers making similar use of the airport's facilities 

fees which are not substantially comparable...as Respondents seek to do." '^' 

The Complainant also argue that, "The Joint Complainants and FedEx are all large 

airlines providing air transportation services with large aircraft at IND and making 

comparable use of the runways, taxiways, and the other airside facilities that are essential 

components of the airfield cost center. Accordingly, the Joint Complainants are similarly 

situated to FedEx regarding landing fees and leases."'^^ 

FAA policy provides that if an airport sponsor can justify that different rates are 

nondiscriminatory and if the rates are substantially comparable, it may charge airport 

tenants different rates for similar airport users. For example, the rental rates for similar 

tenants may vary because of differences in debt and physical layout of rental and public 

space.'^^ 

In this case, the FAA finds that FedEx and all of the Signatory Airlines are similarly 

situated under the terms of the Lease Agreement, which they all signed. It is the 

'^' FAA Exhibit 1, Item 10, Page 37 

TM FAA Exhibit 1, Item 10, Page 37 

'^" FAA Exhibit 1, Item 10, Page 38 

'^' FAA Exhibit 1, Item 12, Pages 24-25 

'^^ FAA Exhibit 1, Item 12, Page 25 

' " FAA Order 5190.6A, Section 4, 4-14 (c) and (d) 

34 
interpretation of the terms of the Lease Agreement that is the basis for the Complaint at 

issue. While the different Signatory Airlines may occupy different leased premises under 

different agreements with the Authority, may serve different types of markets, or may 

make different investments on the Airport, they are all tied together under this Complaint 

by the terms of the Lease Agreement herein and thus similarly situated for purposes of 

reviewing grant compliance. Accordingly, since the Complainants and FedEx are 

similarly situated, if the Authority were to implement Amendment No. 3 at this time 

contrary to the terms of the Lease Agreement, it could amount to a violation of Grant 

Assurance 22, Economic Nondiscrimination. However, as stated the Respondent has 

frozen the Complainants' landing-fee rates at the 2008 levels through December 31, 

2010, and there is no current noncompliance. 

In closing, the Director emphasizes that the FAA's role in a Part 16 Complaint is to 

determine whether the Respondent is in current compliance with its federal obligations. 

[See Section VI, "Applicable Law and Policy," FAA Airport Compliance Program.] The 

FAA Airport Compliance Program is designed to achieve voluntary compliance with 

federal obligations accepted by owners and/or operators of public-use airports developed 

with federal financial assistance. Therefore, in addressing allegations of noncompliance, 

the FAA will make a determination as to whether an airport sponsor is currently in 

compliance with the applicable federal obligations. As stated above, there is no current 

noncompliance. 

2. Whether the Amendment No. 3 to the lAA-FedEx Land Lease Agreement 

(Amendment No. 3), dated April 14, 2006 is consistent with Grant Assurance 23 

Exclusive Rights, 49 U.S.C. § 47107(a) (4), which prohibits the granting of an 

exclusive right for the use of the airport. 

The Complainants allege the Rent Credit is a violation of Grant Assurance 23, Exclusive 

Rights.'^ The Complainants allege that the Authority, "by granting FedEx an exclusive 

right... is discriminating against the other carriers by providing more favorable terms and 

conditions to FedEx and by shifting the cost of the exclusive facility to other airlines. 

The Complainants also argue that the grant assurances prohibit airports from granting 

exclusive rights and, "FAA has made clear that the application of any unreasonable 

requirement or standard that is applied in an unjustly discriminatory manner would 

constitute a constructive grant of a prohibited exclusive right."'^^ 

In their Reply, the Authority disagrees with the Complainants' position and states that, 

"The constructive exclusive right claim is merely a derivative of their economic 

discrimination claim and fails for the same reasons. It also fails for the obvious reason 

that none of the Complaining Airlines has been excluded from the Airport. Each is 

135 

'^" FAA Exhibit 1, Item 1, Page 12 

'^^ FAA Exhibit 1, Item 1, Page 13 

'^* The FAA has since recognized that providing dual analysis of unjust economic discrimination and a 

constructive granting of an exclusive right is redundant. [See Skydive Paris v. Henry County, TN, FAA 

Docket No. 16-05-06, Director's Determination, p. 19.] 

35 
providing scheduled passenger transportation service to END, and none has identified any 

service it has been prevented from providing."'^' 

The Complainants content that, "...Lease Amendment No. 3... grants an actual exclusive 

right because the Cargo Apron expansion is being undertaken for FedEx's sole use as part 

of the expansion of its IND hub. Respondents protest that this does not constitute an 

exclusive right because the Carriers have not "been delayed from gaining access to the 

Airport, or prevented from operating at the Airport or...in actual competition with FedEx. 

However, Respondent's crimped view of an exclusive right is misplaced." '^* 

In its Rebuttal, the Authority states there was no conferring of an exclusive right because, 

"...constructive and actual exclusive rights both require that there be some degree of 

exclusion - some showing of an aeronautical activity that the complainant was 

constructively or actually prevented from providing." ' Rather, the Authority states 

that,"The Complaining Airlines, however, point to no provision of Amendment No. 3, or 

the underlying 1993 Amended and Restated Land Lease Agreement, that grants FedEx 

exclusive use of the cargo apron... As a practical matter, the Complaining Airlines and 

other passenger airlines are unlikely to use the FedEx cargo apron, but that is not the 

result of FedEx's right to exclude others. Rather, it is a function of the airport layout, the 

location of the respective facilities, and the ample availability of apron space adjacent to 

the passenger terminal building and elsewhere at the Airport.. .in years past, the existing 

cargo apron has been used by other aeronautical users to park aircraft at no charge to 

those aeronautical users...." ''° 

Additionally, the Authority argues that, "it is well established that in order to show the 

constructive grant of an exclusive right, a claimant must show that it actually has been 

barred from conducting a 'particular aeronautical activity' at the airport. City of Pompano 

V. FAA, 11A F.2d 1529, 1541 (11th Cir. 1985), through the imposition of unreasonable 

standards. Here, the Complaining Airlines do not claim that they have been denied the 

right to self-service aircraft or any other opportunities to provide aeronautical services at 

the Airport.""" 

The Director reminds the parties that FAA considers it inappropriate to provide federal 

funds for improvements to airports where the benefits of such improvements will not be 

fiilly realized due to the inherent restrictions of an exclusive monopoly on aeronautical 

activities. Under FAA Order 5190.6A, the existence of an exclusive right to conduct any 

aeronautical activity at an airport limits the usefulness of the airport and deprives the 

public of the benefits of competitive enterprise. 

However, this is not the case here. Even if Amendment No. 3 grants FedEx the exclusive 

use of the Apron, the Director finds the Authority is within its rights to make such a 

' " FAA Exhibit 1, Item 10, Page 6 

'^* FAA Exhibit 1, Item 12, Page 29 

'^' FAA Exhibit 1, Item 13, Page 29 

'"" FAA Exhibit 1, Item 13, Pages 30-31 

141 FAA Exhibit 1, Item 13, Page 29 

36 
grant, provided it does not deny other airlines the opportunity for similar treatment under 

a similar situation.''*^ It is in denying others a similar right that creates a violation of 

Grant Assurance 23; here the Complainants have not shown the Authority has denied 

them a similar right in using the Airport. 

As noted above. Amendment No. 3 has yet to be implemented or adversely affect the 

Complainants and is not ripe for review under Part 16. If the parties have a dispute 

regarding their Lease Agreement, Part 16 is not the proper venue for resolving a pure 

contract dispute. 

3. Whether the Amendment No. 3 to the lAA-FedEx Land Lease Agreement 

(Amendment No. 3), dated April 14, 2006 is consistent with Grant Assurance 24, Fee 

and Rental Structure, 49 U.S.C. § 47107(a)(13) of 49 U.S.C. which requires, in 

pertinent part, that the owner or sponsor to maintain a fee and rental structure for 

the facilities and services being provided to airport users which will make the 

airport as self-sustaining as possible under the circumstances existing at the airport. 

The Complainants reference the "self-sustaining" requirement ''*•' and state, "the long 

duration of the Landing Fee Rent Credit also violates Assurance 24 requiring the Airport 

to be as self-sustaining as possible."''*'' 

The Authority rebuts this in its response stating the Complainants', "introduce[d] no 

evidence to show that the Airport will not be as self-sustaining as possible as a result of 

entering into Amendment No. 3."'"*^ The Authority went on to state, "the Additional 

Special Facilities Rental Credit does not violate the Airport's self-sustainability 

obligations. First, the rent credits were negotiated at arms length with FedEx, and reflect 

the state of market conditions at the time. Second, although an important part of the fee 

structure negotiated with FedEx, the rent credits are part of the broader contractual 

commitments made by FedEx. In fact. Amendment No. 3 was carefully structured so that 

the rent credits would accrue only under circumstances specifically designed to prevent 

revenue shortfall to the Airport.""*^ 

It appears that the Authority negotiated an agreement with FedEx that contributes to its 

ability to be self-sustaining. The Director acknowledges that the Complainants do not 

wish to 'unwind' the agreement with FedEx, but want assurances that the Complainants 

based at IND will not directly or indirectly bear the cost of the improvements to FedEx's 

'"^ In Jim Martvn v. Port of Anacortes. FAA Docket No. 16-02-03, (April 14, 2003) (Director's 

Determination), the FAA found the Complainant had requested to lease space for the same purpose and 

under similar conditions as another similarly situated aeronautical tenant, but was denied. The Director 

found the airport sponsor in noncompliance. In the current case. Complainants have not demonstrated 

they requested to lease space for the same purpose and under similar conditions as another similarly 

situated aeronautical tenant. 

'"' FAA Exhibit 1, Item 1, Page 13 

'"" FAA Exhibit 1, Item 1, Page 16 Footnote 11 

'"^ FAA Exhibit 1, Item 10, Page 46 

'"* FAA Exhibit 1, Item 10, Page 47 

37 
leasehold.''*' The Director agrees that it is not necessary to undo the agreement 

especially in light of the fact that the Credit does not violate the requirement to be selfsustaining. The record supports the Respondent's assertion that the Credit was integral to 

the FedEx expansion of upwards of $420 million in leasehold improvements, all of which 

will revert to Authority ownership.''*^ 

Grant Assurance 24 requires the airport sponsor to establish a fee and rental structure that 

will make the airport as self-sustaining as possible under the circumstances existing at the 

particular airport. The intent of the assurance is for the airport operator to charge fees 

that are sufficient to cover as much of the airport's costs as is feasible. There has been no 

showing that the Respondent is not meeting this Grant Assurance requirement. 

4. Whether the Amendment No. 3 to the lAA-FedEx Land Lease Agreement 

(Amendment No. 3), dated April 14, 2006 is consistent with Grant Assurance 25 

Airport Revenues, 49 U.S.C. §§ 47107(b) and 47133, which requires the airport 

sponsor to ensure that all revenues generated by the airport will be expended by it 

for the capital or operating costs of the airport; the local airport system; or other 

local facilities which are owned or operated by the owner or operator of the airport 

and directly and substantially related to the actual air transportation of passengers 

or property; or for noise mitigation purposes on or off the airport. 

The Complainants alleged violations of Grant Assurance No. 25 and the Revenue Use 

Policy by the Respondents. These allegations are addressed in the following subtopics: 

Subsidy and Landing Fees. 

Subsidy 

The Complainants allege that the Credit violates the Revenue Use Policy because the 

Credit in effect subsidizes FedEx, which the Revenue Use Policy prohibits. The 

Complainants recognize that an exception in the Revenue Use Policy does permit the use 

of airport revenue for short promotional periods, sometimes for up to 2 years, but the 

Authority allows the Credit for 20 years, which according to the Complainants is really a 

subsidy for FedEx. ''*^ The Complainants state the Credit is a subsidy because the apron 

will be for the exclusive use of FedEx and FedEx will pay for only a portion (if any) of 

the cost of constructing the Apron.'^° 

The Authority avers the Credit is not a prohibited subsidy, but rather is a carefully 

constructed business transaction tied to FedEx's $420 million in leasehold improvements, 

which will eventually revert to the Airport.'^' In addition, the Authority asserts it has 

given incentives to other carriers, so the Credit offered to FedEx is not unique.'^^ The 

'"•' FAA Exhibit 1, Item 1, Page 20 

'"* FAA Exhibit 1, Item 10, Page 46 

'"' FAA Exhibit 1, Item 1, Page 16 

''" FAA Exhibit 1, Item 1, Page 17 

' " FAA Exhibit 1, Item 10, Page 46 

' " FAA Exhibit 1, Item 10, Page 46 
Authority states that Chautauqua Airlines and Northwest Airlines have also received 

Credits. Northwest has received two Credits for $226,114 and $133,285; Respondent did 

not provide the amount of Credit for Chautauqua Airlines.'^^ 

The Complainants state the Credits offered to Northwest Airlines are readily 

distinguishable from Credits offered to FedEx because they are smaller amounts and were 

for durations of just one year.'^'* 

The Complainants claim, "Respondents contend that the rent Credits in Lease 

Amendment No. 3 do not contravene the FAA's Airport Revenue Diversion Policy for 

three reasons: the rent credits are not direct subsidies and therefore the Revenue 

Diversion Policy does not apply; they are not part of a promotional "incentive" but rather 

are an economic "concession;" and the Airport has given rent credits to other airlines for 

tenant improvements. None of these contentions withstands scrutiny."'^^ 

The Complainants allege "the rent credits are clearly offsets to the costs of FedEx's 

Cargo Apron expansion, regardless of whether the subsidy is 'direct' or not..." the rent 

credits are part of a broad incentive program to induce FedEx to expand its hub and 

increase its flight operations at IND," and "The lAA's incentive scheme fails the FAA's 

Revenue Diversion requirement for promotional incentive programs."'^^ 

The Respondents maintain in their Rebuttal that, "The Complaining Airlines 

misunderstand Federal law and FAA policy in this area, and mischaracterize the 

Respondent's arguments. Respondents did not assert that the Revenue Use Policy 'does 

not apply' but rather, that since no airport funds will be transferred to FedEx, 'the 

revenue use sections of the Revenue Division Policy are not implicated." The 

Respondents additionally argued that, "...because there is no evidence to establish that as 

a result of the Additional Special facilities [sic] Rental Credit the Airport would not be as 

self-sustaining as possible under the circumstances, the Revenue Diversion Policy was 

not violated." 

Respondents contend "that the Additional Special Facilities Rental Credit is not a direct 

subsidy to FedEx, and thus the revenue use sections of the Revenue Diversion Policy are 

not implicated....The rent credits in this case are not subsidies; they are credits that, if and 

when they are earned, would have the effect of reducing one of the components of the 

rent that FedEx is required to pay...."'^^ 

The Director notes that the Revenue Use Policy does prohibit direct subsidy of air carrier 

operations, as stated in the Applicable Law and Policy Section. Direct subsidies are 

considered to be payments of airport funds to carriers for air service. Prohibited direct 

' " FAA Exhibit 1, Item 20, Page 11 

''" FAA Exhibit 1, Item 21, Pages 14-15 

' " FAA Exhibit 1, Item 12, Page 30 

' " FAA Exhibit 1, Item 12, Page 32 

' " FAA Exhibit 1, Item 13, Page 31 

" ' FAA Exhibit 1, Item 10, Page 43 

39 
subsidies do not include waivers of fees or discounted landing or other fees during a 

promotional period. 

The Director agrees with the Authority that technically the Credit is not a subsidy within 

the meaning of the Revenue Use Policy because the Authority is not directiy paying 

airport fiinds to FedEx to operate. Nonetheless, the Authority cannot impose the cost of 

FedEx's rent Credit on other carriers even if the other carriers benefit from the additional 

operations by FedEx, as a result of having the airfield costs spread over more operations, 

and even if the other carriers actually pay less as a result of the overall deal. Moreover, 

the FAA has made clear it is not reasonable for the costs of even a one- or two-year 

promotional fee waiver to be borne by other carriers. Thus it would clearly be 

unreasonable to impose the much longer-term facility rent Credit for FedEx at IND on 

., . 160 

Other carriers. 

The record reflects that FedEx is spending $162 million to add "a 400,000 square foot 

expansion to its existing sort building, a 175,000 square foot secondary sort building, a 

40,000 square foot aircraft maintenance building, and an 8,000 square foot building for 

ground support equipment."'^' As discussed in Table 1 [see page 20], the Credit for 2012 

would be taken in 2013 by crediting the $1,416,247 against the Additional Special 

Facilities Rental. This in turn lowers Airport System Operating Revenue under the 

separate Lease Agreement, resulting in a higher Airport System Requirement of 

$1,416,247 and a higher landing fee. 

Accordingly, based on these facts, the Director finds the Credit is not a subsidy because it 

is a part of a committed financial agreement. Amendment No. 3, for the development and 

lease of airport facilities, with the proviso that the costs of the Credit cannot be imposed 

on other aeronautical users in contravention of the Revenue Use Policy. 

Landing Fees 

In addition, the Complainants allege the rent Credit causes them to pay for the FedEx 

apron through higher landing fees. The carriers claim, "lAA's arrangement with FedEx 

will burden the other airlines at IND with paying for all or a very substantial part of the 

cost of building a cargo facility for FedEx's exclusive use, because costs left 

unreimbursed due to the rent credits will be added to the airfield cost center requirement, 

and hence will require the other airlines to pay higher landing fees than would be the case 

in the absence of the rent credit arrangement. The amount of this unlawfiil cost burden 

will equal, the difference between (1) the sum of the Additional Special Facilities Rent 

and lAA's financing profit and (2) the Landing Fee Rent Credits."'^^ 

'^' Revenue Use Policy, Section VI (B)(12) 

'*" The FAA evaluates promotional fee waiver programs to ensure the programs are not unjustly 

discriminatory and that the costs of a fee waiver are not in any way passed on to other operators. See 69 

F.R. 61544-04, October 19, 2004 

'*' FAA Exhibit 1, Item 10, Page 2 

' " FAA Exhibit 1, Item 1, Page 15 

40 
The Complainants allege that this is a violation the Rates and Charges Policy. They state, 

"[a] fundamental statutory principle underlying FAA's Rates/Charges Policy is that 

airlines cannot be required to pay for facilities used exclusively by others." 

The Complainants cite, "Jet 1 Center; Inc. v Naples Airport Authority, FAA Docket No. 

16-04-03, "If... the Authority is making up that lost revenue by spreading the associated 

cost among the remaining tenants, it could be in violation of the FAA's Policy Regarding 

Airport Rates and Charges, which states: Common costs (costs not directly attributable to 

a specific user group or cost center) must be allocated according to a reasonable, 

transparent and not unjustly discriminatory cost allocation methodology that is applied 

consistently, and does not require any aeronautical user or user group to pay costs 

properly allocable to other users or user groups."'^'* 

The Authority in its Answer states the Complainants will not be burdened by Amendment 

No. 3, and that therefore, it did not violate the Rates and Charges Policy. "On the 

contrary, the self-correcting mechanisms built into Amendment No. 3 were expressly 

intended to ensure that all of the Signatory Airlines, including the Complaining Airlines, 

would be protected from any downside and would benefit from the upside of the FedEx 

agreement No. 3." '^^ 

The Authority contends this case is different from Jet 1. In Jet I, according to the 

Authority, the argument centered around the Naples Airport Authority's failure to enforce 

contract terms. The Authority counters that the "lost revenue" in Jet 1 Center constituted 

fijel-flowage fees that the sponsor had a contractual right to update each year, which it 

failed to exercise."'^^ 

The Authority claims that an "airport sponsor's failure to exercise existing contract rights 

and its spreading of resulting losses among other airport tenants is a far cry from what the 

Complaining Airlines object to here: the Authority's failure to negotiate an even better 

agreement with FedEx than the one it actually was able to negotiate." '^^ 

The Complainants in their Reply state they will not benefit from the terms of Amendment 

No. 3. The Airlines maintain that "The Landing Fee Rent Credit scheme will impose 

substantial additional burdens on the Carriers, with a cumulative net cost reaching nearly 

$38,000,000, to subsidize the expansion of the Cargo Apron for FedEx's exclusive use" 

In addition, according to the Complainants, "[i]t is irrelevant because whether or not 

FedEx's increased operations reduce the percentage of landing fees paid by other airlines 

or the landing fee rate declines, other airlines will be paying costs associated with 

building FedEx's exclusive use facility through higher landing fees than in the absence of 

the Rent Credits, and under FAA policy they cannot be forced to do so."'^^ 

' " FAA Exhibit 1, Item 1, Page 14 

'*" FAA Exhibit 1, Item 1, Page 14 

'*^ FAA Exhibit 1, Item 10, Page 39 

'** FAA Exhibit 1, Item 10, Page 39 

'*' FAA Exhibit 1, Item 10, Page 39 

'*' FAA Exhibit 1, Item 12, Pages 34 

'*' FAA Exhibit 1, Item 12, Page 34 

41 
The Authority rebuts this and states the Complainants are unrealistic in their projected 

increases in landing fees.'^ Since landing fees reflect airfield costs, it is unlikely landing 

fees would increase sevenfold during the 20-year term of Amendment No. 3. 

The Complainants state their projection is conservative because the increased FedEx 

acfivity would accelerate airfield expenditures."' The Complainants state the addifional 

landing fees that FedEx would pay is not the point. It is the Credit they object to not the 

additional fees that FedEx would pay. They state that any carrier with a growing 

operation would pay additional landing fees from their additional frights, and FedEx 

should not have their additional fees reduced by the Credit.'^^ The Authority states the 

Complainants did not consider the benefits to the other airlines from the additional 

landing fees FedEx would pay from its additional flights to IND.'^^ 

The Complainants cited from earlier FAA decisions to support their allegation that 

Amendment No. 3 violates the Rates and Charges Policy. The Complainants cited 

Naples and Bombardier for propositions that, 

• "airlines cannot be required to pay for facilities used exclusively by others; '''* 

• "aeronautical fees may not exceed the costs allocated to that user or user group" 

• "the airport cannot require any user to pay costs properly allocable to another 

user." '^' 

The Complainants conclude that, "[h]ere, the beneficiary is FedEx, which effectively gets 

to use and enjoy an exclusive facility, while the other airlines at IND will pay for a very 

substantial part of the cost of that facility, because each dollar of Landing Fee Rent Credit 

will be added to the airfield cost center requirement, and hence paid by the other airlines 

through higher landing fees than would be the case in the absence of the Landing Fee 

Rent Credits. In sum, that scheme violates the FAA's Rates/Charges Policy, and 

Respondents' ineffective rebuttal on this point does not alter that conclusion." "^ 

The Authority in its Rebuttal restated its contention that Amendment No. 3 will benefit, 

not haim the Complainants by reducing the landing fee rate they will be required to pay. 

It stated,"... the Complaining Airlines will not be burdened with paying for FedEx' s 

facilities because FedEx will pay for its own facilities." ''''' 

The Authority further explained that the Complainants, so far, have benefited from the 

Amendment No. 3 financial arrangements, "the 2008 landing fee rate calculations were 

performed in July of 2007, in such a way that they gave the Signatory Airlines the benefit 

'TM FAA Exhibit 1, Item 10, Page 30 

' " FAA Exhibit 1, Item 12, Page 21 

"^ FAA Exhibit 1, Item 12, Page 23 

' " FAA Exhibit 1, Item 10, Page 30-31 

"" FAA Exhibit 1, Item 12, Page 34 

'^^ FAA Exhibit 1, Item 12, Page 34 

'TM FAA Exhibit 1, Item 12, Page 36 

'^' FAA Exhibit 1, Item 13, Page 33 

42 
of increased FedEx landed weight but did not include in 2008 landing fee rates any 

FedEx rent reduction resulting from the rent credit. Specifically, when the Authority 

staff budgeted the landing fee rates for 2008, staff conservatively assumed that FedEx 

would not qualify for the credit and, thus, would pay the ftill amount of the Additional 

Special Facilities Rent in 2008. In other words, the 2008 Airport System requirement 

was not increased to account for rent credit reductions to FedEx's rent. On the other hand, 

the landed weight projections used by the Authority staff (for purposes of estimating 

2008 landing fee rates) were based on, among other things, FedEx's increased landed 

weight (the very same incremental landed weight that resulted in FedEx's qualifying for 

the credit in the first place)."'^^ 

The Respondents maintain that "The net result is that, in 2008, the Signatory Airlines, 

including the Complaining Airlines, are receiving the benefit—through lower landing fee 

rates—of an estimated Airport System requirement (numerator) that does not reflect 

FedEx' s reduced Additional Special Facilities Rent caused by the rent credit, but does 

reflect FedEx's increased landed weight in the total landed weight (denominator). The 

reconciliation to the actual Airport System requirement, as adjusted by the effect of 

FedEx's rent credit, would normally be included in the landing fee rate estimates for 

2009. However, the Authority has offered, and the Signatory Airlines have indicated 

unanimously that they wish to accept, a negotiated fixed landing fee rate for the balance 

of the term of the Signatory Agreement based on 2008 levels...As a result, the Signatory 

Airlines will have "frozen" in place the advantages stemming from the timing of the 

landing fee rate calculafions for 2008.""^ 

The Director concludes that the benefits of FedEx's landing fees for the new operations 

do not cancel out the issue of charging FedEx's facility costs to the other carriers. 

FedEx's additional operations will impose costs on the airfield proportionate to the 

additional fees it is paying in the form of pavement wear and airport operations cost. 

The Rates and Charges Policy recognizes that the FAA will apply the policy guidance in 

all cases in which the agency is called upon to determine if an airport sponsor is carrying 

out its obligation to make the airport available on reasonable terms. The FAA's role in 

matters in which such a dispute is processed under Part 16 is to determine whether the 

airport proprietor is in compliance with its grant obligations and statutory obligations 

relating to airport fees. The FAA proceeding is not intended to provide a mechanism for 

adjudicating the respective rights of the parties to a fee dispute.' ° Nor is it the forum for 

review of contractual disputes. Such issues are matters of state contract law and are not 

reviewable in a Part 16 proceeding. This is consistent with the position the FAA has 

taken on prior cases raising state contract claims. See Consolidated Services v. City of 

Palm Springs. FAA Docket No. 16-03-05 (June 10, 2004). Boca Airport. Inc. v. Boca 

Raton Airport Authority. FAA Docket No. 16-00-10 (April 26, 2001), and Morris Waller 

and M&M Transportation v. Wichita Airport Authority, FAA Docket No. 16-98-13 

(March 12, 1999). 

TM FAA Exhibit 1, Item 20, Pages 8-9 

'TM FAA Exhibit 1, Item 20, Page 9 

180 Rates and Charges Policy, Section C 

43 
Once the Lease Agreement expires and assuming it is not renegotiated, if the Authority 

were to unilaterally impose the cost of the Credit on the Airlines serving the Airport, 

those Airlines could then seek relief under the Rates and Charges Policy because their 

rates and charges would no longer be set by a written agreement, and the Credit would 

then be subject to the Policy. The Rates and Charges Policy offers the airlines two 

significant protections: an airport may not without written agreement include exclusive 

use facilities in its rate base,'^ and limits costs that can be included in its common use 

rate base.'^^ In addition, the Complainants may have recourse in other venues to 

adjudicate disputes arising out of the Lease Agreement. 

Summary 

The dispute in this Complaint is whether the Authority was required to obtain the 

approval of the Signatory Airlines prior to entering into Amendment No. 3. The 

Complainants state they did not give their approval, which the Authority disputes. Under 

the master Lease Agreement, approval is not required for a Special Use Facility where 

the sole cost is at the expense of the aeronautical tenant that will use the facility. If costs 

are to be passed on, then it does not appear that the requirements for a Special Use 

Facility are met and the Airlines must agree to any additional costs. 

The Director concludes that the Authority has yet to impose a financial requirement to 

cover the cost of the FedEx Credit on the Complainants. The Director finds the Airlines 

do not need Part 16 to determine the Respondents' grant compliance as the Authority has 

yet to unilaterally impose the provisions of Amendment No. 3 on the terms of the Lease 

Agreement. Moreover, section 8.01(D) and 8.03 of the Lease Agreement provide the 

Complainants with substantial protection in a civil proceeding as well as under section 

17.04, which stipulates the laws of the State of Indiana and Federal law govern the Lease 

Agreement. 

As discussed extensively herein, the evidence does not support a finding of a violation of 

Grant Assurance Nos. 22, 23, 24, and 25. In this case, the costs for the Credit will not be 

imposed, it at all, until at least the expiration of the Lease Agreement in December 2010 

so there is no controversy ripe for review by FAA. If the parties have a dispute regarding 

their signatory Lease Agreement, Part 16 is not the proper venue for resolving these types 

of contract disputes; other civil remedies are available to the Complainants to address 

disputes related to the Lease Agreement and the FedEx Credit. 

VIII. FINDINGS AND CONCLUSIONS 

The Director finds the Authority did not violate: 

• Grant Assurance 22 Economic Nondiscrimination, because (i) the Authority has 

yet to impose the cost of the Credit in calculating the landing fee rate under the 

'*' Rates and Charges Policy, Section D. 

'^^ Rates and Charges Policy, Sections C & D and subsection 2 

44 
• 

Lease Agreement and has offered not to impose such a cost during the term of 

the Lease Agreement. 

Grant Assurance 23 Exclusive Rights, as the Credit does not exclude 

Complainants from any permitted aeronautical activity, and the Authority has 

not denied the Complainants similar opportunities to earn rental Credits. 

Grant Assurance 24, Fee and Rental Structure, because the Complainants are not 

currently paying the costs for a facility which will be exclusively used by FedEx. 

Grant Assurance 25 Airport Revenues, because the Credit is not a subsidy; no 

showing of unlawful revenue diversion has been established since all Airport 

System Operating Revenues remain on the Airport regardless of the imposition 

of the Credit, which has yet to occur. 

ORDER 

ACCORDINGLY, it is ordered that: 

1. The Complaint is dismissed. 

2. All motions not specifically granted herein are denied. 

RIGHT TO APPEAL 

This Director's Determination is an initial agency determination and does not constitute 

final agency action subject to judicial review under 49 U.S.C. § 46110.'^' A party to this 

proceeding adversely affected by the Director's Determination may appeal this initial 

determination to the FAA Associate Administrator for Airports pursuant to 14 CFR § 

16.33(b) within thirty (30) days after service of the Director's Determination. 

Randall S. Fiertz Date 

Director 

Airport Compliance & Field Operations 

183 See also 14 CFR § 16.247 

45 
Exhibit 1 

Northwest Airlines, Inc., Delta Airlines, Inc. 

AirTran Airways Inc., Continental Airlines, Inc. 

Southwest Airlines, Inc. 

Indianapolis Airport Authority, Indianapolis 

International Airport, BAA-Indianapolis 

Docket No. 16-07-04 

INDEX OF THE ADMINISTRATIVE RECORD 

The following items constitute the administrative record in this proceeding: 

FAA Exhibit 1 

Iteml 

Complaint No. 16-07-04 dated April 13,2007, including appendices containing the following 

documents: 

a Exhibit 1 Amendment No. 3 to Amended and restated Land Lease Agreement 

Between Indianapolis Airport Authority and Federal Express 

Corporation, dated April 14, 2006. 

Q Exhibit 2 IND FedEx Sort Facility Apron-Airport Lease Deal - Projections. 

• Exhibits Declaration of Erin L. Heitkamp, April 12, 2007. 

• Exhibit 4 Letter from Erin L. Heitkamp, Chairperson IND AAAC to Mr. Lacy 

Johnson, Board President, Indianapolis Airport Authority, May 5, 

2006. 

Item 2 

Motion of Continental Airlines, Inc to Join Complaint as a Joint Complainant, April 20, 2007. 

Item 3 

Answer to Motion of Continental Airlines, Inc. to Join Complaint as a Joint Complainant May 1 

2007. 

Item 4 

Motion Requesting Extension of Time, May 1, 2007. 

Item 5 

'"''Time, May 2,2007 
Item 6 

Motion of Southwest Airlines Co. to Join Complaint as a Joint Complainant, May 4, 2007. 

Item 7 

FAA Order to grant Continental's Motion to join Complaint as a Joint Complainant, 

May 4, 2007. 

Items 

Answer to Motion to Southwest Airlines Co. to Join Complaint as a Joint Complainant, May 9, 

2007. 

Item 9 

Notice to All Parties to delete Ron Ricks and Deborah Ackerman as representatives of Southwest 

Airlines, Co., June 4, 2007. 

Item 10 

Answer and Motion to Dismiss, June 4, 2007, including the following exhibits: 

a Exhibit A Affidavit of John J. Kish, June 1, 2007. 

• Exhibit B Federal Express Apron Expansion (Draft), April 3, 2006, Letter from 

Patrick F. Dooley, SCMD, Airport Director, BAA Indianapolis LLC to 

Mr. Dan Hindes, Northwest Airlines, Inc, April 5, 2006, and 

Agreement and Lease of Premises at Indianapolis International Airport 

with Indianapolis Airport Authority, Indiana, March 15, 2001. 

• Exhibit C Amended and Restated Land Lease Agreement and exhibits, August 

19, 1993, Amendment No. 1 to Amended and Restated Land Lease 

Agreement and exhibits, October 26, 1994, and Amendment No. 2 to 

Amended and Restated Land Lease Agreement and exhibits, June 5, 

2000. 

• Exhibit D Amendment No. 3 to Amended and restated Land Lease Agreement 

Between Indianapolis Airport Authority and Federal Express 

Corporation, dated April 14, 2006. 

• Exhibit E Airline Activity Report, December 2006. 

a Exhibit F E-mail Heitkamp, Erin to Patrick Dooley, February 8, 2007. Includes 

table attachment. 

• Exhibit G E-mail exchange between Heitkamp, Erin and Patrick Dooley, January 

31,2007. Includes table insert. 

a Exhibit H None, 

a Exhibit I Indianapolis Airport Authority Analysis of FEDEX Amendment Jun 

2007. (Table). 

• Exhibit J Indianapolis Airport Authority Analysis of FEDEX Landed Weights 

For the Period 2005 through March 2007. (Table). 

• Exhibit K Affidavit, John George, June 1, 2007. 

• Exhibit L Letter from Patrick F. Dooley, SCMD, Airport Director, BAA 

Indianapolis LLC to Erin Heitkamp, Northwest Airlines, Inc., May 3, 

47 
2006, and Lease Synopsis Federal Express [13 pages]. Report dated 

January 31, 2007. 

a Exhibit M IND Landed Weights, Passenger v. cargo, 1990-2005. 

Q Exhibit N Letter from David L. Bennett, Assistant Chief Counsel for Airports 

and Environmental Law, FAA, to Joseph R. Niemann, General 

Counsel, City of St. Louis Airport Authority, December 2, 1993. 

a Exhibit H News Article entitled Adding Multimedia FedEx Express, Indianapolis 

Airport Authority Unveil Plans for Expansion of Carrier's Hub, May 4, 

2006. 

Item 11 

Unopposed Motion for Extension of Time, June 8, 2007. 

Item 12 

Reply and Answer to Motion to Dismiss of Northwest Airlines, Inc., Delta Air Lines, Inc., 

Airtran Airways, Inc., Continental Airlines, Inc., and Southwest Airlines, Inc., June 25, 2007. 

Included Declaration of Erin L. Heitkamp, June 22, 2007. 

Item 13 

Rebuttal, July 16, 2007, including the following exhibits: 

a Exhibh A Rebuttal Affidavit of John J. Kish, July 12, 2007. 

a Exhibit B Financial tables, numbered Exhibits C through G. 

a Exhibit C Indianapolis International Airport, Memo from Jeannie Weiss to Bob 

Duncan, (undated) 

Q Exhibit D Signatory Airline Rates and Charges for the Last Ten Years Ended 

December 31. 

a Exhibit E Letter from John J. Kish, Midfield Project Director, New Indianapolis 

Airport, to Erin Heitkamp, Northwest Airlines, Inc., June 13, 2007. 

Includes two financial tables. 

Item 14 

Motion for Leave to File and Response of Northwest Airlines, Inc., Delta Air Lines, Inc., Airtran 

Airways, Inc., Continental Airlines, Inc., and Southwest Airlines Co., July 30, 2007. 

Item 15 

Respondent's Answer to Complaining Airlines' Motion for Leave to File and Response, 

August 9, 2007. 

Item 16 

FAA Form 5010, dated November 14, 2007 

Item 17 

Notice of Extension of Time, December 5, 2007. 

48 
CERTIFICATE OF SERVICE 

I HEREBY CERTIFY that on AUG 1 

, I caused to be placed in the 

United States mail (first class mail, postage paid) a true copy of the Director's 

Determination dated <g | \q |QS and addressed to: 

Pablo O. Niiesch 

Jeffrey A. Schwarz 

Spiegel & McDiarmid 

1333 New Hampshire Ave., NW 

Washington, DC 20036 

Gary Bunce, Assistant General Counsel 

Erin Heitkamp, Reg'l Director/Airport Affairs 

Northwest Airlines, Inc. 

2700 Long Oak Parkway 

Eagan,MN 55121 

Joseph Zang, Assistant General Counsel 

Rebecca Bays, General Attorney 

Delta Air Lines, Inc. 

1030 Delta Boulevard 

Atlanta, GA 30320 

Richard P. Magunp 

Senior Vice President & General Counsel 

AirTran Airways, Inc 

9955 Airtran Boulevard 

Oriando,FL 32827 

Thomas Newton Boiling 

Managing Attorney, Regulatory Affairs 

Continental Airlines, Inc. 

P.O. Box 4607 - HQSLG 

Houston, TX 77210-4607 

Robert W. Kneisley, Associate Gen. Counsel 

Leslie Carr, Attorney 

Southwest Airlines Co. 

1901LSn-eet,N.W. 

Suite 640 

Washington, DC 20036 

Lorraine B. Halloway 

Crowell & Moring LLP 

1001 Pennsylvania Avenue, NW 

Washington, DC 20004-2595 

Robert E. Cohn 

Jonathan L. Abram 

Patrick R. Rizzi 

Hogan & Hartson, L.L.P. 

555 Thirteenth Street, NW 

Washington, DC 20004 

FAA Part 16 Airport Proceedings Docket 

Airport Compliance and Field Operations