## BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC 20590

)

Establishment of Slot Exemption Proceeding )

At Ronald Reagan Washington National Airport ) Docket

Pursuant to 49 USC §41718 ) DOT

- OST

- 2000

- 7182

)

Application of JetBlue Airways Corporation

Communications with respect to this document should be addressed to:

James Hnat Jona than B. Hill

Executive Vice President Corporate Affairs, J. Parker Erkmann

General Counsel & Secretary Benjamin M. Berlin

JetBlue Airways Corporation Cooley LLP

27

- 01 Queens Plaza North 1299 Pennsylvania Ave., NW

Long Island City, NY 11101 Suite 7 00

Washington, D.C. 200 04

- 2400

(202) 962

- 8356

jhill@ cooley .com perkmann@ cooley .com

Robert C. Land bberlin@cooley.com

Senior Vice President for Government

Affairs & Associate General Counsel Counsel for

JetBlue Airways Corporation JetBlue Airways Corporation

1212 New York Avenue, N.W.

Suite 1212

Washington, DC 20005

March 25, 2014

## 1 BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC 20590

________________________________________________ )

Establishment of Slot Exemption Proceeding )

At Ronald Reagan Washington National Airport ) Docket

Pursuant to 49 USC §41718(b) ) DOT

- OST

- 2000

- 7182

________________________________________________)

Application of JetBlue Airways Corporation

In response to the Notice 1 

## of the Department of Transportation (“Department) , JetBlue

Airways Corporation (“JetBlue”) hereby applies for the pair of slot exemptions to be reallocated

for service at Ronald Reagan Washington National Airport (“DCA”) to Jacks onville, Florida

(“JAX”), pursuant to th e provisions of the Wendell H. Ford Aviation Investment and Reform Act

for the 21 st 

## Century (“AIR

- 21”). 2 

## JetBlue propose s to introduce sorely needed competitive

service using Stage 3 Embraer E190 jets on a monopoly market presently operated by the

dominant carrier at DCA, American Airlines (formerly US Airways )

. 3 

## JAX is a medium hub

airport within DCA’s 1250

- mile perimeter that is currently served by a single carrier from DCA.

Accordingly, JetB lue’s application responds directly to the Notice and satisfies the criteria

Congress has directed the Secretary of Transportation to consider in awarding slot exemptions at

DCA.

The Department should award the pair of slot exemptions to JetBlue because its

Application provides the maximum competitive benefits for the traveling public. JetBlue’s

Application to provide service to a medium hub, Jacksonville , on a high fare, monopoly nonstop

1 

## See Notice, Establishment of Slot Exemption Proceeding Pursuant to 49 U.S.C. § 41718(b),

Docket DOT

- 2000

- 7182 (March 5, 2014) (the “Notice”).

2 

## See 49 U.S.C. § 41718(b).

3 

## Unless indicated, references to American Airlines refer to US Airways.

## 2 route meets two 4 

## of the f ive congressionally

- established decisional criteria. As the Department

stated in the Notice, the award of Air 21 slots is not the product of adding up the statutorily

enumerated criteria, but is the result of critical eva luation of those criteria by the Department to

arrive at a decision that provide s the maximum benefit to the traveling public

. 5



## The maximum benefit for the traveling public will be realized by the procompetitive

benefits of JetBlue service that have long been recognized and documented by the Department

and others . The renowned Massachusetts Institute of Technology International C enter on Air

Transportation recent ly completed a study conduct ed by co

- authors Michael Wittman and

William Swelbar entitled “Evo lving Trends of U.S. Domestic Airfares: The Impact of

Competition, Consolidation, and Low

- Cost Carriers” (the “MIT Study”). This study look ed at,

among other things, the impact of particular air carrier s on pricing in various markets and

assess e d the relative impacts of JetBlue ’s and other air carriers ’ pricing actions (such as

Southwest Airlines) on medium hubs such as JAX

. 6 

## The findings are directly applicable to the

decision presently before the Department in this docket.

4 

## JetBl ue meets a third statutory criterion: that the Department award the slot exemption to a

limited incumbent air carrier. 49 U.S.C. § 41718(b). E ven though JetBlue’s DCA slot portfolio

is increasing, it remains a limited incumbent carrier. Congress has defined a limited incumbent

a s an air carrier that holds or operates fewer than 40 slots at DCA. See 49 U.S.C. § 41714(h)(5),

as amended by the FAA Modernization and Reform Act of 2012. JetBlue will not exceed that 40

slot threshold until June 2014. Moreover, even as JetBlue expand s its DCA service

, it will

maintain the low

- fare orientation commensurate with the offerings of any new entrant or limited

incumbent carrier.

5 

## The Notice indicates that the Department has the discretion to premise an award of slot

exemptions on the satisf action of less than the greatest number of criteria

, or even one of the

criteri a, based on the Department’s analysis of the relative merits of each carrier’s proposal.

Notice at 2.

6 

## JetBlue hereby requests that the Department incorporate the MIT Study in to the record of this

proceeding. The MIT Study is attached as Exhibit B6

- 2014

- 103.

## 3 As the independent MI T S tudy establishes, “the presence of JetBlue is one of the most

important explanatory factors behind which airports have lower fares than others.” 7 

## The MIT

Study found that, by 2012, “the presence of JetBlue Airways reduced average one

- way airport

fares by about $32,” while the “ Southwest effect” had weakened to about $17

. 8 

## The dramatic

difference in fare impacts is vitally important in this proceeding because markets, like JAX,

which are “medium

- hub airports [,] have been the hardest hit by increases in fares as airlines

[have] removed service and connectivity” due to mergers and capacity discipline. 9 

## Although

rising air fares in medium

- hub markets like JAX are a perfect example of the negative consumer

impact s of the recent wave of airline consol i da t ion , the remedy is at hand

– the introduction of

service from JetBlue

.

Indeed, t he independent MIT S tudy found that uniquely JetBlue “is now the airline whose

presence is associated with the largest decrease in average fare s .” 10 

## The Department should

recognize that the “JetBlue effect” will deliver the greatest competitive benefits.

Ano ther major competitive benefit realized by an award to JetBlue is the significant

stimulation of traffic in the city pair where service is provided . T riple digit increases in traffic

have been routinely experienced upon JetBlue’s entry. After JetBlue entered the JAX

- SJU and

BOS

- EWR markets, passengers per day, measured from YE 1Q11 to YE 3Q13, increased 410%

and 175%, respectively. 11 

## Additional e xample s of the JetBlue effect can be seen in DCA to

7 

## Michael D. Wittman & William S. Swelbar, Mass

. Inst

. of Tech

. Int ’l C enter on Air Transp.,

Evolving Tre nds of U.S. Domestic Airfares: T he Impacts of Competition, Consolidation, and

Low

- Cost Carriers , Report No. ICAT

- 2013

- 07 at 3

- 4 (Aug. 2013)

. 8 

## Id. at 20 (emphasis added).

9 

## Id. at 4.

10 

## Id. at 20.

11 

## See DOT O& D Survey, as provided by Diio.

## 4 Boston (“BOS”) and DCA to Orlando (“MCO”)

, where passenger counts increased 90 % and

70 % between year

- end 2010 and the 12

- months ending September 30, 2013

, respectively.

In addition to lowering fares and growing markets, JetBlue also has introduced its

award

- winning customer service to DCA. Created after deregulation, JetBlue has achieved

consistent profitability and customer loyalty through its commitment to customer ser vice. Since

its first flight more than fourteen years ago, its commitment to bring humanity back to air travel

has proven far more than a marketing slogan.

JetBlue’s relentless focus on award

- winning customer service has been widely acclaimed.

The loya lty of its customers, more than 30 million last year

, and the dedication of our 15,000

Crewmembers, has enabled JetBlue to receive the prestigious JD Power Award for Customer

Satisfaction for an unprecedented ninth year in a row. JetBlue’s customer

- centri c approach has

enabled its profitable growth and allowed JetBlue to become the fastest airline in United States

aviation history to achieve the ranks of “major” airline as classified by the Department. A list of

JetBlue’s awards is attached as Exhibit B6

- 2014

- 101. Because of JetBlue’s documented record

of lowering fares, growing markets and providing award

- winning customer service, the

Department should award the available AIR

- 21 slot exemption pair to JetBlue Airways because

it will maximiz e the competit ive benefits from the reassignment of these slot exemptions

.

## 5 I. JetBlue’s Proposal

JetBlue proposes to utilize the two available AIR

- 21 slot exemptions at DCA to compete

on the American monopoly route DCA

- JAX . JetBlue, within ninety days of a final order

awarding such slot exemptions, will begin daily roundtr ip nonstop service u sin g the Embraer

E190, with 1 0 0 seats

.

JetBlue’s Proposed Schedule

Origin Destination Depart Arrive Frequency Aircraft Seats Distance

DCA JAX 09:15 11:15 Daily E190 10 0 634

JAX DCA 13:10 15:00 Daily E190 1 0 0 634

Although the proposed departure and arrival times do not fall within the same hour s as the

Republic slot exemptions being reallocated

, JetBlue will work with the Department and the FAA

on available slot exemption times, consider trades within its slot portfolio, or consider trades

with other carriers as needed to operate the DCA

- JAX service without imposing any delays at

DCA.

II. JetBlue Will Initiate Competitive Service in the DCA

- JAX Market Where American

Currently Operates a Monopoly.

Since JetBlue’s first flight in 2000, JetBlue has always maintained a very simple formula

for de ciding which markets to serve

— the market needs to be e ither ( 1) under

- served; ( 2) over

priced; or ( 3) both under

- served and over

- priced . Once JetBlue decides to enter a market, it

introduces a meaningful level of service at lower fares than the market has previously

experienced. In turn, with the introduction of l ower fares

, market siz e increases

. The DCA

- JAX

market will perfectly fit this model.

## 6 JetBlue’s model has a demonstrabl y successful history of stimulating demand rather than

merely shifting existing traffic. When JetBlue enters a new market, the new capacity generally

causes fares to decrease and enplanements to rise. As traffic increases, rather than following the

legacy model of increasing fares, JetBlue instead adds capacity, sat isfying demand. This

historical pattern has been replicated time and time again.

As depicted in the chart s below, JetBlue’s entry in the DCA

- BOS market, then a legacy

carrier , high fare duopoly served by Delta and US Airways , was followed by a 28% reduction in

the average one

- way fare level from $173 to $125 . There has been a corresponding increase in

the amount of traffic on the route , already one of the nation’s busiest ; the number of passengers

per day has nearly doubled from 761 to 1,444, an increase of almost 90%.

JetBlue’s DCA Entry Increased Traffic and Reduced F ares 12

12 

## See DOT O&D Survey, as provided by Diio.

## 7 The procompetitive impact of JetBlue’s entry can be observed even before the new

service begins. JetBlue recently announced that it will use four of its new slot pairs acquired

from the American

- US Airways divestiture to serve both Bradley International Airport

, which

serves Hartford, Connecticut and Springfield, Massachusetts (“BDL”)

, and Charleston , South

Carolina (“CHS”) twice daily from DCA. T he reaction of American , the monopoly operator of

the only current service, was immediate and t o the significant benefit of consumers . As the

charts below indicate

, advanced purchase fares offer ed by American immediately dropped 52%

in the Bradley market and as much as 73% in the Charleston market.

American Lowered Fares Significantly When JetBlue

Entered DCA

- BDL and DCA

- CHS 13

13 

## Source: ATPCO GFS System (captured Mar. 17, 2014), lowest fare in each advance purchase

bucket shown.

## 8 JetBlue expects a similar result following its entry into the DCA

- JAX market

.

American’s adjusted average fare for DCA

- JAX as of year

- end 3Q 2013 was $ 185

. 14 

## As a

result, JetBlue’s low fare stimulation model will serve as a powerful catalyst for lower fares and

increased enplanements. Accordingly, with the introduction of new low fare competitive

service, JetBlue expect s that average fares will fall by more than 41 % and traffic in the DCA

JAX market will grow by 134,060 p assengers in the first year of service.

A. The DCA

- JAX Market Is Currently Underserved and Underperforming Due

to American ’ s Monopoly.

Today in the DCA

- JAX market, American operates five daily nonstop flights in each

direction

. Although this may appear to be a sufficient level of service, an analysis of American ’ s

DCA

- JAX commercial strategy demonstrates that the market needs competition. American has

served the DCA

- JAX market for decades. Historically, this service included three daily nonstops

operated with Airbus 319 (124 seats) and Boeing 737 (144 seats), along with occasional regional

14 

## DOT O&D Survey via Diio

. This calculation of American’s average fare, which is explained

in detail in columns D

- F of Exhibit B6

- 2014

- 10 2, excludes zero fared passengers and includes an

estimate of ancillary fees likely charged and collected by American. While American charges

$25 for a first checked bag, JetBlue does not charge for a passenger’s first checked bag. While

American charges a ticket change fee of $200, JetBlue charges $75 to change/cancel any ticket

more than 60 days prior to departure date and from $75 to $150 to change/cancel a ticket less

than 60 days prior to departure, depending on the total cost of the original ticket.

## 9 aircraft. Since 2008, American had operated four daily nonstops, but with regional jet Embraer

170 ( 69

- 76 seats) and Airbus 319 (124 seats) equipment. American experienced brief interludes

of competition when Delta flew the route, first during 2003

- 2004 and then again in 2010

- 2012,

all with small 50

- sea t regional jets. 15 

## Since Delta ’s exit from the market in early 2012

, turning a

legacy carrier duopoly into a high fare legacy monopoly route, American has continued

operating smaller regional aircraft in a market in which daily nonstop capacity has fallen by

nearly 40%

. Today, American only operates regional aircraft on this route, flying Embraer 170

(69 seats) and 175 aircraft (80 seats). Considering that the Jacksonville metropolitan area is

home to more than 1.3 million people 16 

## and has a hi gh concentration of government/military

installations with a natural nexus to the nation’s capital , the level of service and enplanements in

this market should be much higher.

Nonstop Seats Per Day in the DCA

- JAX Market Have Fallen by 39% Since Delta Exited

Service from other airports in the greater Baltimore

- Washington metropolitan area is not

a substitute for service from DCA. Although United Airlines offers 3 daily regional jet nonstops

15 

## For American and Delta aircraft configurations flown on the route, see historical OAG

schedules, as provided by Diio.

16 

## U.S. Census Bureau, Metropolitan and Micropolitan Statistical Areas

, https://www.census.gov/popest/data/metro/totals/2012/ (last vi sited Mar. 25, 2014). 504

310

YE 3Q11 YE 3Q13

AA DL 

### DL exits

## 10 from Dulles International Airport (“IAD”) to JAX, service f rom IAD is not an adequate

substitute for DCA for travelers due to its distance (approximately 30 miles) from Washington,

DC’s city center. Indeed, in its recent complaint against the merger of US Airways and

American Airlines, the United States Departmen t of Justice concluded that: “Airlines do not

view service at other airports as adequate substitutes for service offered at Reagan National for

certain passengers . . .

. ” 17 

## Moreover, the Department also has concluded that “BWI and IAD are

not economically interchangeable with DCA.” Order 2012

- 7

- 26 at 18 (July 24, 2012).

B. The Lack of Competition Has Resulted in Higher Than Average Fares and

Lower Capacity

.

When competition existed in the DCA

- JAX market, as described above, there were

nearly 200 more seats available per day. American is presently fl ying smaller aircraft to babysit

its mainline, large jet slots and take advantage of this monopoly route to the detriment of the

traveling public

. 18 

## Although the average DCA

- JAX fare just recently returned to levels present

when Delta competed against American, the fare is still well above the average fare for routes of

similar distance from DCA with meaningful competition.

A comparison of fares in the DCA

- JAX market to competitive DCA routes of a similar

distance demonstrates the monopoly premium that American charges on the route. Further, on

other JetBlue nonstop DCA

- Florida markets of similar , and even longer, stage length such as

DCA to Fort La uderdale

- Hollywood (“FLL”), Orlando (“MCO”) and Tampa (“TPA”), JetBlue’s

coach fare structures are significantly lower, in all categories, than incumbent carrier American

17 

## Complaint at ¶ 31, United States v. US Airways Group, Inc.

, Case No. 1:13

- cv

- 01236 (D.D.C.

Aug 13, 2013).

18 

## Slots at DCA are divided into two categories: “air carrier” slots available to any type of

aircraft, and “commuter” slots that are restricted to smaller aircraft. Since the Delta

- US Airways

slot swap, American has increasingly used commuter

- sized aircraft in its “air carrier” slots,

greatly reducing capacity and wasting these scarce resources.

## 11 on the DCA

- JAX route, as demonstrated in the chart below. Furthermore, compared to

A merican’s pricing model of requiring round

- trip travel, JetBlue offers its lowest fares even to

customers who choose to purchase one

- way tickets.

American (AA) JetBlue (B6)

Fare Type 19 

## DCA

- JAX

(634 mi) % higher

than

B6 average DCA

- MCO

(759 mi) DCA

- TPA

(814 mi) DCA

- FLL

(899 mi) Average

14 day Advance

Purchase $179 1 

## 85% $111 $78 $100 $96

7 day Advance

Purchase $352 1 

## 148% $124 $135 $166 $142

0 day Advance

Purchase $509 1 

## 93% $283 $235 $272 $263

1 

### Only sold as round

- trip



## Worse yet, American's filed fares for government travel are up to 60% higher than the

average fare JetBlue offers for government business on other DCA

- Florida routes of longer stage

lengths. Given the numerous governmental ties between Jacksonville and the nation's capital,

allowing JetBlue to serve DCA

- JAX will not only lower fares for the general public, but also

reduce taxpayer expense. As further evidence, JetBlue’s entry into the DCA

- Florida markets has

stimulated traffic and reduced average fares. For example , when JetBlue entered the DCA

- TPA

market, fares fell by 19% and traffic grew by 36%.

19 

## Source: ATPCO GFS System (captured Mar. 24, 2014).

## 12 JetBlue’s Entry Has Reduced Fares and Stimulated Traffic Between DCA and Tampa

III. Granting JetBlue’s Application to Serve DCA

- JAX Will Produce the Maximum

Competitive Benefits

.

A. JetBlue’s Proposed DCA

- JAX Service Will Generate $ 14.8 Million

Annually in Consumer Fare Savings and Stimulate 134,060 New DCA

JAX Passengers

.

In keeping with its model of introducing high quality, low fare competition on monopoly

routes, JetBlue proposes an average one

- way, nonstop fare of $1 10 , which is approximately 41 %

lower than A merican’s current average one

- way fare of $ 1 8 5

. 20

20 

## DOT O&D Survey via Diio, trailing four quarter data (captured March 22, 2014).

## 13 JetBlue’s Pr ojected DCA

- JAX Fare

Will Be 41 % Less Than American’s Current Fare 21



## Consistent with JetBlue’s experience in other markets, JetBlue’s traffic model predict s that its

lower fares will stimulate a total of 134,060 new passengers ( 58,400 on JetBlue and 75,600 on

American ) in the first year of service

. As JetBlue has done in many other marke t s, JetBlue will

upgauge its equipment to right size its aircraft as demand warrant s.

JetBlue’s Proposed DCA

- JAX Service Will

Stimulate Over 134,060 New Enplanements

21 

## DOT O&D Survey via Diio, trailing four quarter data as of YE 3Q 2013 (captured March 22,

2014). Average fare excludes zero fare passengers, taxes, and governmental fees, and includes an

estimate of baggage and rebooking/change fees. 58,400 75,660

1 New Passengers in DCA

- JAX AA pax

B6 pax Total: 134,060

## 14 The introduction of low fare competition in the DCA

- JAX market will result in significant

consumer benefit, an estimated $ 14. 8 million annually in consumer fare saving s

.

JetBlue’s DCA

- JAX Service Will Generate

$ 14.8 Million Annually in Consumer Fare Savings 22



## As the MIT Study demonstrat ed, no other air carrier presently has the ability to lower fares like

JetBlue.

B. JetBlue Is Dedicated to Competing Against American, Still DCA’s

Dominant Carrier

Despite a decade’s worth of failed attempts to enter the artificially

- constrain ed DCA

market, JetBlue ’s presence today reflects its willingness to persevere and compete head

- to

- head

with the domina nt carrier at DCA and with other carriers such as Southwest. JetBlue began its

DCA operations in November 2010, when it obtained a limited number of slots through a

commercial transaction with American (prior to the US Airways merger) . JetBlue later

expanded that service by spending more than $40 million to acquire 8 slot pairs in a Department

mandated and supervised auction ordered in connection with the US Airways

- Delta Air Lines

22 

## JetBlue calculated consumer fare savings in accordance with the consumer surplus method

outlined by the FAA in “FAA Airport Benefit

- Cost Analysis Guidance,” Offi ce of Aviation

Policy and Planning, Federal Aviation Administration (Dec. 15, 1999). $10.0

$4.8 $14.8

Savings to Existing

Passengers Savings to New

Passengers Total Passenger

Savings

## 15 “slot swap.” 23 

## JetBlue’s winning bid of more than $40 million was nearly 24% more than the

next highest bidder

, demonstrating JetBlue’s commitment to grow its low fare, award

- winning

service at DCA. 24 

## Since then

, JetBlue has expanded s ervice at DCA modestly until recently

,

when it entered into an agreement to obtain 12 n ew slot pairs from American as a result of the

divestiture ordered in connection with American’s merger with US Airways

.

As JetBlue has made significant capital investments to grow its presence at DCA, JetBlue

has used its DCA slot portfolio to introduc e meaningful competition, e specially against DCA’s

dominant legacy carrier, American

, rather than fly to market s that that have no competition

.

JetBlue recently announced that it planned to use 6 of its 12 new forthcoming slot pairs to

compete head

- to

- head with American in the DCA

- CHS and DCA

- BDL market s , serving both

twice daily; to backfill service to Nassau, Bahamas 25 

## that American canceled; and to meet

growing market demand by adding a second daily flight to Tampa, Florida

. 26



## As a result of this newly

- announced service, by mid

- 2014 JetBlue will offer 24 daily

roundtrip flights from DCA to the following eight cities: Boston, Charleston, Hartford, Fort

Lauderdale/Hollywood, Nassau, Orlando, and Tampa, as well as the only nonstop service to San

Juan, Puerto Rico. The charts below show JetBlue’s growing presence at DCA before and after

it obtained the 12 new slot pairs as a result of the divestiture from American

.

23 

## See Petition f or Waiver of the Terms of the Order Limiting Scheduled Operations at

LaGuardia Airport, 76 Fed. Reg. 63,702 (Oct. 13, 2011).

24 

## Federal Aviation Administration, Slot Reallocation Final Bid Information with Bidder ID

Assignments for DCA Bundle (Nov. 22, 2011),

http://www.faa.gov/about/office_org/headquarters_offices/agc/ReAllocation/DCABids/ (last

visited Mar. 25, 2014).

25 

## S ubject t o receipt of government operating authority

. 26 

## Press Release, JetBlue Airways Corp., JetBlue Adds Three Nonstop Destinations for

Customers at Ronald Reagan Washington Nat’l Airport, Offers Introductory One

- Way Fares as

Low as $30 (Mar. 6, 2014 ), available at
http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol

newsArticle&ID=1906649&highlight=.

## 16 JetBlue DCA Service Prior to June 2014 JetBlue DCA Service Beginning in June 2014

The proposed service to JAX 27 

## is a continuation of JetBlue’s carefully planned growth strategy

that will specifically address a market sorely in need of low fare competition

.

C. JetBlue’s Entry and Expanding Service Has Benefited DCA Travelers.

JetBlue’s entry and expansion at DCA has significantly benefited DCA cons umers.

Indeed, in announcing the settlement of the US Airways

- American merger litigation, William

Baer, the Assistant Attorney General for Antitrust, expressly referred to the procompetitive

impact of JetBlue’s entry at DCA: “A few years ago, when JetBlu e started service from Reagan

National, prices to Boston dropped 30 percent and consumers saved $50 million per year.” 28



## The Department has similarly recognized the benefits:

JetBlue recently began operations at DCA via a lease of slots from American and

one pair of allocated slots from FAA, in 2010, and plans to expand its operations

27 

## In addition to another 6 daily frequencies from DCA to markets yet to be announced.

28 

## Press Release, Remarks as Prepared for Delivery by Assistant Attorney General Bill Baer at

Conference Call Regarding the Justice Department’s Proposed Settlement with US Airways and

American Airlines (Nov. 12, 2013), available at

http://www.justice.gov/atr /public/press_releases/2013/301626.htm

. DCA BOS (10)

TPA (1)

FLL (3) MCO (3)

SJU (1) 

### DCA

MCO (3) TPA (2)

FLL (3) NAS (1)

SJU (1) BOS (10) BDL (2)



### JAX

CHS (2)

## 17 in June, utilizing the slots it purchased from Delta in 2011. Although its time in

DCA has bee n short and its scope of nonstop services is limited, initial data

indicate that JetBlue, an established low

- fare carrier, has generated positive

competitive discipline in the DCA markets it serves, as it has rapidly gained

passenger share, while at the sa me time recording average fares below the

respective incumbent carriers. 29



## Similarly, JetBlue’s entry into DCA

- MCO and DCA

- FLL also has led to increases in traffic on

the routes. As depicted below, traffic has increased by 70% on the DCA

- MCO route a nd 8 % on

the DCA

- FLL route.

JetBlue’s Entry Has Stimulated Traffic Between DCA and Florida 30



## Low fare new entry, especially on monopoly routes held by legacy carriers , is unquestionably

beneficial to the travelling public and precisely what the Department should be, as Congress

directed, focusing on with scarce resources such as AIR

- 21 slots. As the Department has

29 

## Order 2012

- 5

- 12 at 19

- 20 (May 14, 2012) (awarding JetBlue beyond

- perimeter slot

exemptions to serve San Juan).

30 

## See DOT O &D Survey via Diio

, YE 3Q 2013 data

.

## 18 recognized, the addition of “competitive nonstop air transportation on a monopoly nonstop route

to DCA . . . would be expected to have an immediate competitive impact on fares in that market

. . . . ” 31 

## JetBlue seeks to expand at DCA with its proposed Jacksonville service. 32 

## As the MIT

Study explained, no other air carrier lowers air fares to the degree JetBlue does

, nor can any

other carrier provide the benefits to the traveling public as documented with JetBlue service

.

IV. Jacksonville Is a Growing, Diversified Metropolitan Area Requiring More

Frequent and Affordable Service to DCA.

Jacksonville, with a metropolitan population of over 1,377,000 people, 33 

## is a growing

and thriving market with a diversified economy. With a steadily increasing population,

Jacksonville is a major intermodal transportation hub. Jacksonville has a thriving port for both

domestic and inter national shipping and the cruise ship industry. Many major colleges and

universities, including the University of Florida, Florida State University, Florida A & M and

Bethune

- Cookman University, which serve more than 230,000 students, fall within

Jackson ville’s catchment area. These institutions include research universities with government

grants requiring interface with federal agencies. Jacksonville is also a major East Coast center of

military operations, including the Jacksonville Naval Air Station , Mayport Naval Base, Kings

Bay Submarine Base and the Florida National Guard Headquarters, as well as other military

31 

## DOT Order 2010

- 12

- 16 at 11 (Dec. 10, 2010)

. 32 

## See Notice on Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at

LaGuardia Airport, 75 Fed. Reg. 26

, 322, 26

, 330 (May 11, 2010) (“DOT believes that, as a

general rule, in the aviation industry more competitive pressure and pricing di scipline can be

exerted by low

- cost carriers than by incumbent legacy carriers. This view is supported by the

Department of Justice, as well as in the academic literature cited in the Notice and by DOJ in its

Appendix A. . . . As stated in the Notice, stu dies indicate that entry by low

- cost carriers

dramatically lowers fares and increases the v olume of passengers in a market . . . . ”) (citing

Comments of the United States Department of Justice, FAA Docket No. 2010

- 0109 ( Mar

. 24,

2010 ), at 4 & the studies cited therein).

33 

## U.S. Census Bureau, Metropolitan and Micropolitan Statistical Areas

, https://www.census.gov/popest/data/metro/totals/2012/ (last visited Mar. 25, 2014).

## 19 installations. These multifaceted connections between the Jacksonville area and the federal

government require travel between the region and the preferred airport in the nation’s capital,

DCA

, and the U

. S

. tax payer deserves to see the documented benefit of lower fares that comes

with JetBlue service

.

Jacksonville is also a regional medical hub, a center for financial and professional

servi ces, and a tourist destination. Golf is major attraction in the Jacksonville area, and the city

is home to the Professional Golfers Association (“PGA”) Tour Headquarters. Based on this

diversified economy, Jacksonville enjoys a higher median household in come and a lower

unemployment rate than the rest of the state of Florida. Traffic at the Jacksonville International

Airport is very stable with minimal seasonality. All of these attributes suggest a strong need for

additional service to DCA, yet quite the opposite has happened as American has consistently

downsized and decreased capacity since Delta’s exit from the market.

V. JetBlue’s Application Satisfies the Statutory Criteria of 49 U.S.C. § 41718(b)

That the Department Must Consider in Exemption Proceedings.

In 49 U.S.C. § 41718(b), Congress established statutory criteria to direct the

Department’s decision in slot exemption proceedings. The Notice provided the following

statement of those five criteria:

the Secretary [shall] distribute withi n

- perimeter slot exemptions in a manner that

promotes air transportation: (1) by new entrant air carriers and limited incumbent

air carriers; (2) to communities without existing nonstop air transportation to

DCA; (3) to small communities; (4) that will pro vide competitive nonstop air

transportation on a monopoly nonstop route to DCA; or (5) that will produce the

maximum competitive benefits, including low fares.

## 20 Notice at 2. Je tBlue’s proposed DCA

- JAX service satisfies the fourth and, most importantly, the

fifth of these criteria in a manner that provides maximum public benefits

. 34 

## Indeed, the Notice

contemplates that the Department may premise an award of slot exemptions on the satisfaction of

less than the greatest number of criteria, or even one of the criteria, based on the Department’s

analysis of the relative merits of each c arrier’s proposal. 35



## A. JetBlue Will Provide Competitive Nonstop Air Transportation on a Monopoly

Nonstop Route.

As discussed at length in Section I I, the grant of JetBlue’s application will introduce

competition on a significant route where American has a m onopoly. In Department proceedings,

the introduction of competition in a monopoly market has been a primary justification for the

award of slot exemptions. 36



## B. JetBlue Will Maximize Competitive Benefits and Low Fares.

As discussed in Sectio n I I I, JetBlue’s proposed DCA

- JAX service will have significant

competitive benefits. The Department has explained that “maximum competitive benefits,

including low fares” means to exert downward pressure on fares. 37 

## JetBlue forecasts that fares

will be reduced by 41 % and traffic will be stimulated by 9 3 %. As the Department stated in its

most recent slot exemption order , Order 201 3

- 5

- 6, the most significant criterion in awarding

those slots was the promotion of maximu m competitive benefits, including low fares . The

American monopoly service inflicts a significant cost on the traveling public in the form of

higher fares and reduced service. This harm can only be remedied by facilitating more

34 

## As discussed in footnote 4, supra , JetBlue technically satisfies the first criterio n that the

Department consider awarding the slot exemptions to a limited incumbent air carrier. JetBlue’s

slot p ortfolio at DCA does not presently exceed 40 slots and will not do so until June of 2014.

35 

## Notice at 2.

36 

## See, e.g., Order 2000

- 7

- 2 at 20 (Jul. 5, 2000) (awarding slot exemptions to Spirit to facilitate

its proposal to provide “competitive nonstop air transportation on DCA monopoly nonstop routes

by offering low

- fare service to compete with US Airways ’ monopoly”).

37 

## Order 2008

- 12

- 22 at 4 (2 008).

## 21 competition , which the Department has the opportunity to do in this proceeding by selecting

JetBlue

.

C. The Criteria JetBlue Does Not Satisfy A re of Secondary Importance Given the

Benefits of JetBlue’s Proposed DCA

- JAX Service.

C riterion 2 (service to communities without DCA service) is mutually exclusive with

criterion 4 (introducing competition on a monopoly route). Giv en the potential size of the DCA

JAX market, where JetBlue proposes to introduce in i tial service with a 1 0 0

- seat aircraft and

upgauge as demand warrants , the public benefit will be maximized by introducing more

capacity, more choice

, and more service at a lower cost. A lthough JetBlue does not propose to

serve a small community, that factor is outweighed by the fact that JetBlue will introduce

competition on a route where a significant number of travelers will benefit.

VI. Conclusion

For all the foregoing reasons, JetBlue respectfully request s that the Department grant its

application for two slot exemptions to facilitat e its new competi tive service between DCA and

JAX

.

Dated: March 25 , 2014 Respectfully submitted,

Robert C. Land

Senior Vice President for Government Affairs

And Associate General Counsel

# EXHIBIT B6

- 2014

- 101

LIST OF JETBLUE AWARDS

Year Award Source

2014 Airline Technology Leader of the Year Air Transport World

2013 International Airline Award

– Best Service Jamaica Hotel & Tourist Association

2013 Most Innovative Users of Business

Technology Information Week

2013 Top Low Cost Airline for Customer

Satisfaction JD Power and Associates

2013 Best Terminal Experience / Friendliest

Terminal / Best Terminal for Cleanliness and

Condition / Best Concessions

– JFK T5 Port Authority of New York & New Jersey

Customer Care Awards

2012 Best Places to Work Glassdoor

2012 Best Domestic Airline Porthole Cruise Magazine award

2012 Best Innovative Consumer Experience

Concept or Practice

- Live From T5 Concert

Series Airports Council International

- North America

(ACI

- NA)

2012 Ten Best Travel Apps of 2012 SmarterTravel

2012 The new jetblue.com

– Best in Class, Gold

Aware W 3 

## Awards, The Interactive Media Awards

2012 Best of the Web Mobile Leaders Compuware

2012 Top Low Cost Airline for Customer

Satisfaction JD Power and Associates

2011 Best Airline Logo TV’s NewNowNext Travel Awards

2011 Best Airline Website Booking Experience U.S. Air Travelers’ Choice Award

2011 Best U.S. Budget Airline About.com

2011 Excellent Web Service 2010 Compuware Gomez Web & Mobile Performance

Awards

2011 Best Value Airline (Domestic), Most

Customer Friendly Airline, and Best Coach

Class Experience Travel 2011 Editor's Choice Awards

2011 Top Low Cost Airline for Customer

Satisfaction JD Power and A ssociates

2010 Top Low Cost Airline for Customer

Satisfaction JD Power and Associates

## Exhibit B6

- 2014

- 101

Page 2 of 7



# Year Award Source

2010 Spot on list of Top Technology Innovators

Across America Information Week 500

2010 Top Rated Large Domestic Airline' for

Economy and 'Best In

- flight Entertainment'

for Domestic Flights Zagat Airline Survey

2010 Best Cabin Ambiance Passenger Choice Awards, Airline Passenger

Experience Association (APEX)

2010 #1 Airline Brand 2010 Brand Keys Customer Loyalty

Engagement Index

2010 CIO 100 Award Honoree CIO Magazine

2010 Best Concessions Program Design (T5/JFK) ARN's Best Airport and Concessionaires Awards

2010 Most Unique Services (T5/JFK) ARN's Best Airport and Concessionaires Awards

2010 Best Overall Concessions Program (T5/JFK) ARN's Best Airport and Concessionaires Awards

2010 Best Concessions Management Team

(T5/JFK) ARN's Best Airport and Concessionaires Awards

2010 Best Coach

- Class Experience SmarterTravel Editors' Choi ce Awards

2010 Most Customer

- Friendly Airline SmarterTravel Editors' Choice Awards

2010 Most Pet

- Friendly Airline for Carry

- on Pets SmarterTravel Editors' Choice Awards

2009 Best Airline Brand 2009 Brand Keys Customer Loyalty

Engagement Index

2009 Best Environmental Campaign

- Jetting to

Green Cause Marketing Forum

2009 Best Rated Large Domestic Airline in the

Economy Category Zagat Airline Survey

2009 #1 Airline Brand 2009 Brand Keys Customer Loyalty

Engagement Index

2009 Richard A. Griesbach Award of Excellence

Winner ACI

- NA 2009 Airport Concessions

2009 #1 U.S. Routes/Single

- Class Service Airline Condé Nast Traveler

2009 Top

- Rated Large Domestic Airline

- Economy

Seating Zagat Airline Survey

2009 Best In

- Flight Entertainment

- Domestic Zagat Airline Survey

2009 5th Annual Extra Miles Awards Budget Travel Magazine

2009 CIO 100 Award Honoree CIO Magazine

2009 Top Low Cost Airline for Customer

Satisfaction J.D. Power and Associates

2009 AIGA Corporate Leadership Award AIGA

- The Professional Association for Design

2008 Best Large U.S. Economy Class Zagat Airline Survey

2008 Best Inflight Entertainment Zagat Airline Survey

2008 Most Eco

- Friendly Zagat Airline Survey

2008 Silver Halo

- Best Environmental Campaign

- Jetting to Gr een Cause Marketing Forum

2008 Best In

- Seat Comfort SmarterTravel Readers' Choice Awards

## Exhibit B6

- 2014

- 101

Page 3 of 7



# Year Award Source

2008 Best Onboard Entertainment, Domestic

Airline SmarterTravel 2008 Readers' Choice Awards

2008 Top Low Cost Airline for Customer

Satisfaction J.D. Power and Associates

2007 Best Domestic Airline Condé Nast Traveler Readers' Choice Awards

2007 Top Low Cost Airline for Customer

Satisfaction J.D. Power and Associates

2007 Best North American Low Cost Airline Skytrax World Airline Awards

2007 World's Most Reliable A320 Fleet Airbus Operational Excellence Awards

2007 #1 Airline Brand 2007 Brand Keys Customer Loyalty

Engagement Index

2007 Best Low Cost/No Frills Airline OAG, 2007 Airline of the Year Awards

2007 Leading Provider of Domestic Airfare Deals Travelzoo Awards

2007 Best U.S. Airline Airline Quality Ranking Survey

2007 #2 rated airline University of Nebraska at Omaha Aviation

Institute and W. Frank Barton School of

Business at Wichita State University

2007 Best Domestic Airline for Value Travel + Leisure, World's Best Values Awards

2007 Most Admired Companies Fortune magazine, #3 rated airline

2007 Best Airline for Customer Satisfaction Market Metrix

2006 Best Domestic Airline Condé Nast Traveler, Readers' Choice Awards

2006 Extra Mile Award (shut

- eye/snack bar

services) Frommer's Budget Travel

2006 Top U.S. Airline for Consumer Demand Kanbay Research Institute 2006 Travel Demand

Today Report

2006 Best Domestic Airline Travel + Leisure World's Best Values Awards

2006 Best Domestic Airline for Value Travel + Leisure, 2006 World's Best Values

Awards

2006 #1 Airline Brand 2006 Brand Keys Customer Loyalty

Engagement Index

2006 Highest Low

- Cost Carrier Customer

Satisfaction J.D. Power and Associates

2006 Best U.S. Airline Airline Quality Ranking Survey, University of

Nebraska at Omaha Aviation Institute and W.

Frank Barton School of Business at Wichita

State University

2006 Best Low Cost/No Frills Airline OAG Airline of the Year Awards

2006 Best Airline Value Entrepreneur Magazine

2006 Passenger Service Award Air Transport World Magazine

2005 Best Value for Cost Condé Nast Traveler Business Travel Awards

2005 Best Low

- Cost Carrier Condé Nast Traveler Business Travel Awards

2005 Best Domestic Airline Condé Nast Traveler Readers' Choice Awards

2005 Best Airline for Economy Class Global Traveler magazine

## Exhibit B6

- 2014

- 101

Page 4 of 7



# Year Award Source

2005 Best Low

- Cost Carrier Global Traveler magazine

2005 #1 Airline Brand 2005 Brand Keys Customer Loyalty

Engagement Index

2005 #2 Domestic Airline Zagat Airline Survey

2005 Great Gay Marketing Award Out & About Travel Magazine Travel Awards

2005 #10 Top Performing Medium Airline Aviation Week & Space Technology Magazine

Top

- Performing Companies

2005 #17 Most Improved Medium Airline Aviation Week & Space Technology Magazine,

2005 Top

- Performing Companies

2005 #47 & 48 Reasons to Love Your Country GQ Magazine, "62 Reasons to Love Your

Country"

2005 Silver Award (JetBlue's Self

- Service Check

In Kiosk) Business Week Magazine, 2005 Annual Design

Awards

2005 #25 JetBlue/Sky's The Limit Wired Magazine, The Wired 40 "masters of

technology and innovation"

2005 Best Branding The Association of Travel Marketing Executives

(ATME), 2005 Atlas Awards

2005 World's Best Low

- Cost Airline Skytrax Airline of the Year Survey

2005 #2 Airline in North America Skytrax Airline of the Year Survey

2005 Top

- Hospitality Airline Market Metrix Hospitality Index

2005 Best Airline Quality The Wall Street Journal Airline Quality Survey

2005 Best Airline Service The Associated Press, 2005 Annual Survey

2005 Corporate Community Partnership Award American Red Cross

2005 Best U.S. Airline Customer Satisfaction J.D. Power and Associates

2005 Best Domestic Airline North American Travel Journalists Association

2005 Best Value for Cost Condé Nast Traveler Business Travel Awards

2005 Great Gay Marketing Award Out & About Travel Magazine Travel Awards

2005 #10 Top Performing Medium Airline Aviation Week & Space Tech nology Magazine

Top

- Performing Companies

2005 #17 Most Improved Medium Airline Aviation Week & Space Technology Magazine

Top

- Performing Companies

2005 Silver Award (JetBlue's Self

- Service Check

In Kiosk) Business Week Magazine Annual Design

Awards

2005 JetBlue/Sky's The Limit Wired Magazine, The 40 "masters of technology

and innovation"

2005 Best Branding The Association of Travel Marketing Executives

(ATME) Atlas Awards

2005 World's Best Low

- Cost Airline Skytrax Airline of the Year Survey

2005 #2 Airline in North America Skytrax Airline of the Year Survey

2005 Top

- Hospitality Airline Market Metrix Hospitality Index

2005 Best Airline Quality The Wall Street Journal Airline Quality Survey

2005 Best Airline Service The Associated Press Annual Survey

2005 Corporate Community Partnership Award American Red Cross

## Exhibit B6

- 2014

- 101

Page 5 of 7



# Year Award Source

2005 Best U.S. Airline Airline Quality Ranking Survey, University of

Nebraska at Omaha Aviation Institute and W.

Frank Barton School of Business at Wichita

State University

2005 Best U.S. Airline Customer Satisfaction J.D. Power and Associates Reports, 2005 Airline

Satisfaction Index Study

2005 Best Domestic Airline North American Travel Journalists Association

2004 #1 Airline Brand 2004 Brand Keys Customer Loyalty

Engagement Index

2004 Best U.S. Service Business 2.0, 2004 Omaha Aviation Institute's

Quality Ranking Survey

2004 Best Corporate Service USTA/Eastern Corporate Service

2004 Best U.S. Airline Airline Quality Ranking Survey, University of

Nebraska at Omaha Aviation Institute and W.

Frank Barton School of Business at Wichita

State University

2004 Best Domestic Airline Condé Nast Traveler, 2004 Readers' Choice

Awards

2004 Best Domestic Airline Condé Nast Traveler Business Travel Awards

2004 Best Value for Cost Condé Nast Traveler Business Travel Awards

2004 #2 Domestic Airline Travel & Leisure World's Best Awards

2004 #2 Domestic Airline Service Travel & Leisure World's Best Service Readers'

Poll Awards

2004 Best Domestic Airline North American Travel Journalists Association,

5

- Star Award

2004 North America's Leading Budget Airline 11th Annual World Travel Awards

2004 Top 5 Domestic Airline Departures Readers' Favorite Survey

2004 Best Low Cost Carrier in the World Global Traveler Magazine

2004 Best Low Cost Carrier (Second Place) Executive Travel Magazine

2004 Best in Executive Travel Executive Travel Magazine

2004 Airline Excellence Award, North America Skytrax, 2004 Airline of the Year Survey

2004 Best Low Cost Airline Skytrax Airline of t he Year Survey

2004 Best Cabin Staff, North America Skytrax Airline of the Year Survey

2004 Best Airline New York Press, Best of Manhattan Readers'

Poll

2004 Favorite U.S. Airline Salon.com, Readers' Choice

2004 Most Wanted List Gotham

2004 Best Company in North America Global Finance Magazine

2004 Best CFO (John Owen) Institutional Investor Magazine

2004 Airline Customer Loyalty Award Brandweek

2004 Corporate Service Award United States Tennis Association, Eastern

Corporate Service Award

2003 Best Domestic Airline Condé Nast Traveler, 2003 Readers' Choice

Awards

## Exhibit B6

- 2014

- 101

Page 6 of 7



# Year Award Source

2003 Best Value for Cost Condé Nast Traveler, 2003 Readers' Choice

Awards

2003 Best Domestic Airline North American Travel Journalists Association,

Five

- Star Award

2003 #1 Airline B rand Brand Keys Customer Loyalty Engagement

Index

2003 #2 Domestic Airline Travel & Leisure World's Best Awards

2003 Top 5 Domestic Airline Departures, Readers' Favorite Survey

2003 #3 World's Best Low Cost Airline (Best U.S.

Low Cost Airline) Business Traveler World's Best Airlines Awards

2003 Best Budget Airline 10th Annual World Travel Awards

2003 Best US Airline (Non

- Major) Business Travel News Airline Survey

2003 Best Low Cost Airline Entrepreneur Magazine

2003 Best Low Cost Airline Skytrax Airline of the Year Survey

2003 Best Cabin Staff, North America Skytrax Airline of the Year Survey

2003 Airline of the Year Airfinance Journal Deal of the Year

2003 North American Corporate Finance Deal of

the Year Airfinance Journal Deal of the Year

2003 Airline Customer Loyalty Award Brandweek

2003 IPO of the Year Corporate Finance Magazine

2003 Marketing Award Airline Business Strategy Award

2003 Editors' Choice Travel

- Holiday

2003 Outstanding Inflight Entertainment Onboard Services Onboard Services Awards

2003 Outstanding Safety Video Onboard Services Onboard Services Awards

2002 Best Domestic Airline Condé Nast Traveler, 2002 Readers' Choice

Awards

2002 Best Domestic Airline, coach Condé Nast Traveler, 2002 Readers' Choice

Awards

2002 Best Domestic Airline, Value For Cost Condé Nast Traveler, 2002 Readers' Choice

Awards

2002 Best Domestic Airline North American Travel Journalists Association,

Five

- Star Award

2002 #2 Domestic Airline Travel and Leisure, 2002 World's Best Awards

2002 Best Low

- Cost Carrier (Runner

- Up) Business Traveler Best in Business Travel

Awards

2002 "It" Airline Entertainment Weekly It List

2002 Editor's Choice Worth

2002 Marketer of the Year Advertising Age

2002 #4 Brand of the Year brandchannel.com, 2002 Rea ders' Choice

2002 Finance Award Airline Business Airline Strategy Awards

2002 Market Development Award Air Transport World Industry Achievement

Awards

2002 Best Overall Airline Onboard Services Onboard Service Awards

## Exhibit B6

- 2014

- 101

Page 7 of 7



# Year Award Source

2002 Best Inflight or Onboard Service Onboard Services Onboard Service Awards

2002 Best Onboard Entertainment Onboard Services Onboard Service Awards

2002 Best Uniforms (2nd Place) Onboard Services, 2002 Onboard Service

Awards

2001 Best Domestic Airline, Coach Condé Nast Traveler Business Travel Awards

2001 Best Domestic Airline North American Travel Journalists Association,

Five

- Star Award

2001 #2 Domestic Airline Condé Nast Traveler Reader's Choice Awards

2001 #2 Domestic Airline Zagat Airline Survey

2001 Best New Airline Money

2001 Favorite U.S. Airline Orange County Register/Knight Ridder

2001 Seal of Approval Diversion

2001 "A" Rating Planetfeedback

2001 #2 Airline Epinions.com

2000 "It" Airline Vanity Fair It List

## EXHIBIT B6

- 2014

- 102

Fare Stimulation Calculations

(A) Nonstop miles

(B) Total fared passengers as of YE 3Q 2013 (DOT O&D Survey via Diio), excludes 4.3% of passengers on zero fare tickets

(C) Conservative estimate of market revenue stimulation based on JetBlue's track record

(D) Total DCA

- JAX revenue as of YE 3Q 2013 (DOT O&D Survey via Diio) / (B)

(E) 9.1% estimate of ancillary baggage and cancellation fees (DOT Form 41 via Diio) * (D)

(F) (D) + (E)

(G) Projected JetBlue average fare in yea r 1 based on comparable DCA markets , includes 4.4% ancillary fee estimate (DOT Form 41 via Diio

(H) (G)

- (F)

(I) (H) / (F)

(J) (B) * (F) * (1+ (C))

(K) (J)

- (B)

(L) (B) * [(F)

- M

e 

## ], where M

e 

## is the new equilibrium price of $113, assuming AA matches B6 fare, weighted by expected market share, plus

ancillary fee estimate (DOT Form 41 via Diio)

(M) (K) * [(F)

- M

e 

## ] * 0.5, follows method outlined by the FAA in "FAA Airport Benefit

- Cost Analysis Guid ance", Office of Aviation Policy

and Planning, FAA, Dec. 15, 1999

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

Fare Change

Market Miles Passengers Before

Stimulation Predicted Service

Stimulation (revenue) Base Fare Fees Total Projected

B6 Fare Absolute % Pax After

Stimulation New Pax Existing

Pax New

Pax Total

Consumer

Surplus

DCA-JAX 634 140,419 20% $169.28 $15.40 $184.68 $110 ($75) (41%) 274,479 134,060 $10.0M $4.8M $14.8M Fare Stimulation

Average Fare Before B6 Consumer Surplus

## EXHIBIT B6

- 2014

- 103

MIT International Center for Air Transportation White Paper

# EVOLVING TRENDS OF U .S. DOMESTIC AIRFARE S:

THE IMPACTS OF COMPE TITION, CONSOLIDATIO N,

AND LOW

- COST CARRIERS

Michael D. Wittman and William S. Swelbar

MIT International Center for Air Transportation



## MIT Small Community Air Service White Paper No. 3

Report No. ICAT

- 20 13

- 07

August 2013

MIT International Center for Air Transportation (ICAT)

Department of Aeronautics & A stronautics

Mas sachusetts Institute of Technology

Cambridge, MA 02139 USA

## Evolving Trends of U .S. Domestic Airfares 

## 2



# Introduction to paper series

This report

, Evolving Trends of U.S. Domestic Airfares: The Impacts of Competition, Consolidation, and

Low

- Cost Carriers

, is the third in a series of papers written under the umbrella of the MIT Small

Community Air Service White Paper series. The aim of the paper series is to examine an d analyze the

past, current, and anticipated future trends of small community air service in the United States. The

series is intended for a general audience of airline and airport executives, aviation policy makers, the

news media, and anyone with an inte rest in the evolution of commercial air service at the nation’s

smaller airports. The authors of this paper series hope that these reports will serve to inform the policy

debate with relevant and accurate statistical analysis, such that those responsible f or deciding the future

of small community air service will do so armed with factual basis for their actions.

The authors of the MIT Small Community Air Service White Paper series are members of the

Massachusetts Institute of Technology’s International Cent er for Air Transportation, one of the nation’s

premier centers for aviation, airline, and airport research. Financial support for study authors has been

provided in part by the MIT Airline Industry Consortium, an interdisciplinary group of airlines, airpor t

councils, manufacturers, suppliers, policy makers, and advocacy groups dedicated to improving the state

of the practice of air transportation research in the United States. However, any views or analyses

presented in this and all future reports are the s ole opinions of the authors and do not reflect the

positions of MIT Airline Industry Consortium members or MIT.



# Acknowledgements

The authors wish to thank Peter Belobaba and the members of the MIT Airline Industry Consortium for

their helpful comments and suggestions during the completion of this study.

## Evolving Trends of U .S. Domestic Airfares 

## 3



# Executive Summary

Economic theory suggest s that prices of goods and services may rise as a result of “supply shock s ” such

as increase s in net input prices. In the U.S., the airline industry has met with a number of such “shocks”

since 2007, from high and volatile fuel prices (which increased by 57% from 2007

- 2012, according to the

MIT Airline Data Project) to a global economic downturn. Additionally, airlines have pursued

conservative capacity strategies in r ecent years in an attempt to regain profitability, putting further

upward pressure on prices. In all, these supply shocks and disciplined capacity management resulted in a

14.3% reduc tion in scheduled domestic flights in the U.S. from 2007

- 2012. Theoretically, we would

expect airfares to also increase over the same period, adjusting for inflation. The purpose of this paper is

to investigate whether average airfares have indeed increase d at U.S. airports over the last six years.

Through an analysis of ticket data, we find that average one

- way airfares at the 29 largest airports in the

U.S. increa sed by 8.7% on average from 2007

- 2012 , adjusting for inflation . A verage inflation

- adjusted

one

- way airfares at 35 mid

- sized airports increased by 11.9 % on average over the same period . Some

airports saw increases in airfares of over 20%, while others saw net decreases in average fares. As

economic theory would suggest, airports that gained many new flights over the study period were more

likely to see their average fares fall. For instance, at San Francisco International Airport (SFO)

— where

domestic departures inc reased by 20.9% from 2007

- 2012

— fares decreased by 4% over the same period.

We also i nvestigate how airfares changed in regions with multiple airports. In our earlier report on

domestic capacity 1 

## , we found that airlines were consolidating service at larger airports in multi

- airport

regions while restricting capacity at the smaller airports in those regions. Similarly, in many multi

- airport

regions, we find that average fares at smaller airports increased by a greater percentage than fares at

the larger airports in those regions. This behavior is likely explained in part by recent capacity reduction

decisions by Southwest Airlines, which has a significant presence at many secondary airports, as well as

network carriers cutting redundant flying to secondary hubs.

Finally, we examine the effect of the presence of low

- cost carriers on average f ares at 445 U.S. airports.

Much research has been done on the famous “Southwest effect,” which suggests that passenger traffic

increases and fares decrease once Southwest Airlines enters a market. Previous r esearch has shown that

entry by Southwest (or eve n the threat of entry) has the potential to decrease fares in both directly

competing and adjacent markets. 2



## However, recent work 3 

## has suggested that the Southwest effect has started to weaken , and no longer

provides the same degree of downward pressure on fares in city

- pair markets in which mergers of other

1 

### Wittman and Swelbar (2013) “Trends and Market Forces Shaping Small Community Air Service in the U.S.”

2 

### cf. Morrison, S.J. 2001 . Actual, adjacent, and potential competition: Estimating the full effect of Southwest

Airlines. Journal of Transport Economics and Policy 35(2).239

- 256; Vowles, T.M. 2001. The “Southwest

Effect” in Multi

- Airport Regions. Journal of Air Transport Management 7(4). 251

- 258; Goolsbee, A. and C.

Syverson. 2008. How Do Incumbents Respond to the Threat of Entry? Evidence from t he Major Airlines.

Quarterly Journal of Economics 123(4). 1611

- 1633; and others.

3 

### bin Salam, S. and B.S. McMullen. 2013. Is There Still a Southwest Effect? Transportation Research Record:

Journal of the Transportation Research Board 2025. 1

- 8.

## Evolving Trends of U .S. Domestic Airfares 

## 4

carriers have occurred. Similarly, we find that while a Southwest effect on average fares still exists at

U.S. airports, it has diminished over time . The presence of Southwest Airlines at an airport in 2007 was

associated with a decrease in the airport’s average one

- way fare of about $3 6 , controlling for average

itinerary distance and other low

- cost carrier competition; in 2012, that effect had decreased to $1 7

.

A verage one

- way fares at Southwest have increased by about 25% over the same period

, we ighted by

passenger itineraries and adjusting for inflation.

Figure E S

- 1: Effect of LCC/ULCC presence on an airport’s inflation

- adjusted average one

- way fare

The effects of other low

- cost and ultra

- low

- cost carriers on average airfares at U.S. airports now exceed

the Southwest effect. In 2012, t he presence of JetBlue Airways, another low

- cost carrier, was associated

with a decrease of a bout $3 2 in average one

- way fare , controlling for average itinerary distance and

other low

- cost carrier competition. In the same year, Al legiant Air service was associated with an

average one

- way fare decrease of about $ 29 , and Spirit Airlines service wa s associated with a decrease

of ab out $2 2 . However, it is important to note that these latter carriers often charge ancillary fees in

addition to the base airfare , so a comparison of changes in base airfares alone does not fully capture

differences in total travel price

.

In summary, we fin d that average one

- way airfares at most U.S. airports have increased from 2007

-

2012, adjusting for inflation. As with capacity discipline, medium

- hub airports have been the hardest hit

by increases in fares as airlines remove d service and connectivity from those airports. With increasing

prices and lower levels of connectivity than nearby larger airports, these smaller airports face

considerable challenges in convincing passengers and airlines alike to select them over their la rger

competitors . However, if these airports can attract low

- cost carriers like JetBlue Airways, average fares

are likely to drop and passengers can experience an increase in both connectivity and affordability. As

managers of smaller airports have realize d , attracting additional service from these carriers is a top

priority if these airports wish to be competitive in a U.S. airline industry landscape marked by

widespread consolidation.

-$40 -$35 -$30 -$25 -$20 -$15 -$10 -$5 $0 Southwest JetBlue Allegiant Spirit Effect of Airline Presence on Average One - Way Fares



### 2007

2012

## Evolving Trends of U .S. Domestic Airfares 

## 5



# Introduction

Starting in 2008, the U.S. air transportation market experienced a series of supply and demand shocks.

First, high and volatile fuel prices raised the operating costs of most U.S. carrier s . At the same time, an

economic recession took hold in the United St ates, reducing the demand for air travel. The effect of

each of these events on airfares is unclear; since a supply shock can cause prices to rise and a demand

shock can cause prices to fall, further investigation is necessary to see which effect outweighs the other

when both occur simultaneously. However, we can be sure that capacity will be reduced in such a

scenario; indeed, scheduled domestic flights fell by 14.3% from 2007

- 2012.

I n 2012 and 2013, the U.S. economy started to recover. With the country no longer in recession,

demand for goods and services, including air transportation, began to increase . Yet even as demand for

air transportation rose , U.S. airlines kept capaci ty conservatively low in a strategy that has been called

“capacity discipline.” That is, even though demand for air transportation is returning to its normal level,

airlines have kept the supply of available seats from growing quickly . Due to these capacit y restrictions

, we would generally expect to see higher airfares, adjusting for inflation, in 2012 than in 2007.

This paper investigates trends in average airfares at U.S. airports from 2007

- 2012. We examine airfares

for domestic service at various indivi dual airports and airport types, along with trends in airfares at

various airlines. Since there is a relationship between average fare and the length of a given flight, we

also examine changes in average passenger itinerary distance at each of 445 U.S. air ports. A detailed

summary of average fares and passenger itinerary distances for these airports are given in appendices.

W hile an analysis of average airport fares is a relatively straightforward method for comparing changes

over time in the passenger cost s of air travel in the United States, it is important to understand some of

the limitations to this approach. First, the average fares in this report reflect prices across a variety of

markets for all types of tickets, including first

- class and business

- cl ass seats. These premium seats which

are sold at higher prices are not removed from the average fare calculations. Additionally, average fares

for travel from an airport include hundreds of different itineraries with varying distances and other

characteris tics. For instance, we would expect routes with heavy business traffic to have higher average

fares than routes with heavy leisure traffic due to differences in passenger mix. These nuances are

somewhat obscured when examining average fares alone.

Virtuall y all a irlines sell seats on a given flight at a variety of different prices. Average fare data does not

provide information about the distribution of prices on a given flight and may mask some of these

trends. Therefore, average fares shown in this report should not be used by passengers to form

expectations of how much they should expect to pay for a given flight; prices vary based on seasonality,

time

- of

- day, the number of days before the flight that the ticket is purchased, and many other factors.

Final ly, the average fare data given here includes only the base fare and does not include ancillary fees

for baggage or other service s . Many carriers have started to rely on ancillary fees as a significant portion

of their operating revenues, and the impact of these fees on passenger travel costs should not be

ignored. However, collected data on ancillary fees is scarce and incomplete; due to these limitations, we

examine only average base fares in this report.

## Evolving Trends of U .S. Domestic Airfares 

## 6



# Data and Methodology

As with most studies of airfares in the United States, this report uses data from the U.S. Department of

Transportation (DOT)’s Bureau of Transportation Statistics (BTS). The BTS’ DB1B ticket sample provides a

10% sample of domestic passenger itineraries that were purchased in th e relevant time period. 4



## Information is provided about the marketing and operating carrier, the number of coupons (individual

flight legs) in each itinerary, the origin and destination of the itinerary, whether the itinerary was non

stop or one

- way, and th e fare paid for the itinerary, among many other characteristics.

The BTS itself tracks airfares closely and regularly releases reports of average airfares at a variety of U.S.

airports. These reports are often used in the media to rank the “most

- expensive” airports in the United

States. The BTS also releases information about airfares for the 1,000 most popular air travel routes in

the United States in their “Domestic Airline Fares Consumer Report” publications

. 5 

## Fares in the Domestic

Airline Fares Consumer Reports are aggregated by metro region and not by airport.

A careful reader will observe that the average fares given in this white paper do not match the BTS

average airfares for the same period, even though both use BTS DB1B data as the source for their

analysis. This is because this report employs a different methodology for aggregating average fares than

the BTS. For instance, consider two passengers flying from BOS

- SFO. Suppose that o ne passenger

purchases a round

- trip ticket for $400, and another pur chases a one

- way ticket for $200. In this case,

the average (one

- way) fare out of BOS should clearly be $200, since we can divide the round

- trip ticket

price by two to obtain the average one

- way fare.

However, the BTS calculations of average fares do not d istinguish between on e

- way and round

- trip

fares. In our example, both passengers’ itineraries would be treated as equal

. That is, using the BTS

calculation methodology , the “ average fare ” for the BOS

- SFO route wou ld be $300 = ($200+$400)/2 . The

BTS methodology appears to skew the actual airfares and present s an inaccurate picture of airfares at

U.S. airports, particularly with the rising popularity of one

- way tickets.

As such, the average airfares in this report are calculated to control for the di fferences in one

- way and

round

- trip itineraries. The fare data in this report is sourced from aviation data provider Diio Mi, which

also uses DB1B data. The Diio Mi data provides average one

- way net fares, adjusting for round

- trip

itineraries as necessary and removing ticket taxes from the fare s reported in the BTS data

.

Average fares at each airport or for each airline are weighted by the number of passengers that flew

each itinerary over the given time period. This data processing method results in a mor e representative

calculation of average fares that can be better used to compare prices across airports or airlines.

Passenger

- weighted data on average itinerary distances have also been sourced from the BTS DB1B data

via Diio Mi.

4 

### The DB1B sample contains information about all itineraries whose ticket numbers end in ‘0’.

5 

### These reports are available at http://www.dot.gov/policy/aviation

- policy/d omestic

- airline

- fares

consumer

- report

## Evolving Trends of U .S. Domestic Airfares 

## 7



# Overview: Average Fares b y Airport Type and by Region

Figure 1 shows the average one

- way fares paid (in 2012 dollars) at each FAA airport hub type. 6 

## Fares

have been adjusted for inflation using the U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) for

2007 and 2012. A verage one

- way fares in constant dollars increased at each hub type from 2007

- 2012.

Fares at the 29 large

- hub airports increased by 8.7% on average during the study period, compared to

an 11.9% increase at the 35 medium

- hub airports and adjusting for infla tion . Small

- hub and non

- hub

airports, as well as airports that were part of the Essential Air Service (EAS) program 7



## , saw lower

increases in average fares over the last six years

— average fares at small hubs increased by 5.7% and

fares at non

- hub and EAS ai rports rose by 3.2% , adjusting for inflation

.

Figure 1 : Average one

- way fares by airport hub type (in 2012 dollars)

, adjusted for inflation

The increases in average fares at each hub type should be put in context by the changes in average

passenger itinerary distance over the study period. All things equal, we would expect to see a

correlation between a longer average passenger itinerary dista nce and a higher fare; passengers flying

cross

- country will often pay more than passengers flying shor ter trips . Later in this report, we will show

that this correlation holds when controlling for airline competition and has remained relatively

unchanged o ver the last six years. As such, if average itinerary distances had increased significantly over

the last six years at each hub type, we could attribute the increases in fares to the longer distances

instead of economic supply shocks or capacity discipline

.

6 

### The FAA classifies each primary commercial service airport in the United States into one of four “hub types”

based on their level of enplanements in the previous year. The hub types are large

- hub, medium

- hub, small

h ub, and non

- hub. Note that in this context, “hub” refers only to the airport’s position as an important link in

the air transportation network and does not reflect an airport’s status as a connecting hub for a major airline.

For instance, Indianapolis Inte rnational Airport (IND) is defined as a “medium

- hub,” even though IND is not a

connecting hub for any major airline.

7 

### The Essential Air Service program provides federal subsidies to air carriers to offer a minimum level of

service to small or rural airpor ts to connect those airports to the national air transportation system. Airports

receiving EAS funding must be located at least 70 miles from the nearest large

- or medium

- hub airport.

$0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00 $160.00 $180.00 $200.00

LARGE HUB MEDIUM HUB SMALL HUB NON HUB/EAS Average Fare (2012 dollars)



### 2007

2012

## Evolving Trends of U .S. Domestic Airfares 

## 8

Hub Type Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change in Avg.

Fare (07

- 12) % Change in Avg.

Distance (07

- 12) % Change in

Flights (07

- 12)

Large Hub $164.52 $178.76 8.7% 2.1%

- 8.8%

Medium Hub $155.13 $173.63 11.9% 1.5%

- 26.2%

Small Hub $178.63 $188.83 5.7% 0.9%

- 18.2%

Non

- hub/EAS $184.44 $190.34 3.2% 9.8%

- 13.9%

Table 1: Percent changes in average one

- way fare, itinerary distance, and domestic flights, 2007

- 2012

Table 1 summarizes the percentage change in inflation

- adjusted average fares, passenger itinerary

distance, and number of scheduled domestic flights at each airport hub type over the last six years. On

average, the changes in passenger itinerary distances were relatively small in comparison to the changes

in fares. Therefore, it does not appear that the increases in fares over the last six years can be attributed

to longer itinerary lengths alone

.

Airport City 2007 Fare

(2012 $) 2012

Fare % Change

Avg. Fare % Change

Avg. Distance % Change

Flights

HNL Honolulu, HI $173.57 $218.78 + 26% 6%

- 24.0%

MDW Chicago, IL $113.95 $140.00 + 23% 0%

- 13.6%

IAH Houston, TX $185.64 $223.17 + 20% 1%

- 20.3%

PHL Philadelphia, PA $156.01 $186.79 + 20% 5%

- 8.7%

DTW Detroit, MI $154.34 $182.07 + 18% 2%

- 7.8%

BOS Boston, MA $179.18 $178.89 0% 3%

- 11.5%

DCA Washington, DC $182.01 $179.41

- 1% 5% + 1.7%

DEN Denver, CO $152.65 $149.65

- 2%

- 1% + 0.6%

ATL Atlanta, GA $170.80 $165.28

- 3% 0%

- 6.0%

SFO San Francisco, CA $207.42 $198.50

- 4%

- 4% + 20.9%

Table 2: Large

- hub airports with largest/smallest increase in average one

- way fares, 2007

- 2012

Examining the data at individual airports, we begin to see some trends emerge on which airports saw

large increases or decreases in fares. Table 2 shows the percentage changes in average fares, itinerary

distances, and flights at 10 large

- hub airports

— five airports with the highest percentage increases in

average fares and the five airports with the low est percentage increases in average fares. The changes in

fares, itinerary distances, and flights for all 445 U.S. airports in this study are available in several

appendices at the end of the report.

For large

- hub airports, there appears to be a relationship between changes in service and change in

fares. Specifically, airports that gained new service from 2007

- 2012 were more likely to see their

average fares drop over that period. DCA, DEN, and SFO ar e each examples of airports that both gained

new service and saw average one

- way fares drop over the last six years. On the other hand, HNL, MDW,

## Evolving Trends of U .S. Domestic Airfares 

## 9

IAH, and PHL each saw increases in average fares of at least 20% from 2007

- 2012. These airports each

lost serv ice over the study period.

Airport City 2007 Fare

(2012 $) 2012

Fare % Change

Avg. Fare % Change

Avg. Distance % Change

Flights

DAL Dallas (Love), TX $97.28 $133.21 37% 22%

- 13.5%

HOU Houston (Hobby), TX $124.89 $157.94 26% 12%

- 2.2%

OGG Kahului, HI $169.90 $214.26 26% 8%

- 1.7%

CMH Columbus, OH $144.01 $174.62 21%

- 2%

- 21.2%

PIT Pittsburgh, PA $144.84 $173.35 20% 4%

- 39.7%

OAK Oakland, CA $127.54 $134.90 6%

- 12%

- 36.6%

PDX Portland, OR $161.70 $170.07 5% 2%

- 15.7%

CVG Cincinnati, OH $224.62 $224.01 0% 3%

- 64.4%

SJU San Juan, PR $185.79 $175.65

- 5%

- 2%

- 3.3%

MKE Milwaukee, WI $165.36 $153.53

- 7% 4%

- 36.9%

Table 3 : Medium

- hub airports with largest/smallest increase in average one

- way fares, 2007

- 2012

However, for medium

- hub airports, the links between losses in service and changes in airfares are much

more tenuous. As Table 3 shows, some airports like Houston Hobby (HOU) and Kahului, HI (OGG), which

had only minimal losses in flights over the last six years, each saw average one

- way fares increase by

26%. Meanwhile, Cincinnati, OH (CVG), which lost 64.4% of its flights from 2007

- 2012

— the largest loss

in the country amongst all large

- , medium

- , and small

- hubs

— saw average fares remain essentially

unchanged. Milwaukee, WI (MKE), which was one of only two medium

- hubs to see fares decrease over

the last six years, lost over a third of its domestic flights over the same period and saw its average

passenger itinerary distance increase by 4%.

This suggests that other factors besides changes in aver age itinerary distance or number of flights help

to explain the changes in fares. For instance, note that three of the airports with the largest increase s in

average fare

— Chicago Midway International Airport in Chicago, IL (MDW), Love Field in Dallas, TX ( DAL)

and William P. Hobby Airport in Houston, TX (HOU)

— each have a significant percentage of their flights

operated by Southwest Airlines. Since changes in capacity were relatively low at these airports, a

widespread pattern of price increases by Southwest Airlines could explain the increases i n average fare

at these airports

. However, it is important to note that two of these airports saw large increases in

average passenger itinerary distance as Southwest expanded the types of markets served from Houston

Hobby and Love Field from 2007

- 2012. Nevertheless, average fares increased by 23% at Chicago Midway

with a negligible change in passenger itinerary distance.

Additionally, MDW, DAL, and HOU could be each considered “secondary airports” in large metro regi ons

that are also served by a large hub. O’Hare International Airport (ORD) in the Chicago area is one of the

busiest airports in the world, Dallas/Fort Worth International Airport (DFW) is the largest airport in the

Dallas metro region, and George Bush In tercontinental Airport in Houston (IAH) is a major hub for

## Evolving Trends of U .S. Domestic Airfares 

## 10

United Airlines that is also classified as a large hub by the FAA. In each case, a large

- hub airport in the

metro region saw fares increase by a smaller percentage than the secondary airport(s) in the region.

Figure 2 : Changes in fares at airports in the Boston metro region, 2007

- 2012

This pattern repeats itself in metro regions throughout the country. Figure 2 shows the major airports in

the Boston metropolitan region. Besides Boston Logan International Airport (BOS), the Boston metro

region is also served by Manchester

- Boston Regional Airport (MHT) in Manchester, NH, and T.F. Green

Airport (PVD) in Providence, RI. While infla tion

- adjusted average fares dropped by 0.2% at BOS, fares

increased by 15.5% and 13.5% at MHT and PVD, respectively. Thus, as airlines consolidate service at

large

- hub airports in multi

- airport regions, secondary airports are not only seeing fewer flights

, but also

larger increases in average fares. This makes it more challenging for these airports to attract passengers

away from large

- hub airports, since they are unable to compete on frequency or price.

## Evolving Trends of U .S. Domestic Airfares 

## 11 Figure 3 : Changes in fares at airports in the San Francisco metro region, 2007

- 2012

Similarly, in the San Francisco metro region, fares at the largest airport in the region, San Francisco

International Airport (SFO)

, decreased by 4.3% from 2007

- 2012. At the same time, fares increased at

secondary airports in Oakland (OAK) and San Jose (SJC). Note that the average fares themselves at the

secondary airports in the region are still lower than the fares at SFO. This is partially due to the

differences in types of airlines typically serving s econdary airports versus large

- hub airports (low

- cost

carriers versus network carriers) as well as the differences in average itinerary distance and the types of

itineraries being flown at each airport. Larger airports also are more likely to enplane more business or

first

- class passengers purchasing more expensive itineraries, which could also explain this difference.

Nevertheless, the growing convergence in fares at primary and secondary airports in multi

- airport

regions is a new phenomenon

.

The Los Ange les metro region, which is served by no fewer than five large

- hub, medium

- hub, and small

hub airports, also exhibits th is pattern, as shown in Figure 4 . While fares at Los Angeles International

Airport (LAX) increased by 5.4%, the increase was less than at surrounding airports in Burbank (BUR;

+ 9.0%), Ontario (ONT; + 13.3%), and Santa Ana (SNA; + 7.1%). The sole exception to this trend was Long

Beach Airport (LGB), at which average fares fell by 22%. This airport saw increased service from low

- cost

carrier Je tBlue Airways, helping to explain its competitive position relative to other airports in the Los

Angeles area. As we will show later, the presence of JetBlue is one of the most important explanatory

factors behind which airports have lower fares than other s.

## Evolving Trends of U .S. Domestic Airfares 

## 12 Figure 4 : Changes in fares at airports in the Los Angeles metro region, 2007

- 2012

Table 4 summarizes the changes in fares at primary and secondary airports in various metro regions in

the U.S. from 2007

- 2012. The table confirms that in many regions, fares increased at secondary airports

by a greater percentage than primary airports in multi

- airport regions over the last six years. However,

average fares themselves remained l ower at secondary airports, due in large part to differences in

average itiner ary lengths as well as the types of airl ines and passengers that fly out of larger airports. For

instance, the average itinerary distance at LGB was nearly half that of LAX. This regional analysis also

highlights the importance that individual airline beha vior can play in determining the average fare at a

particular airport. The next section examine s in greater detail the trends in airfares at 12 U.S. airlines

over the last six years to better identify which airlines are most closely associated with lower f ares.

Region Primary

Airport Avg. Fare

(2012) % Change in

Avg. Fare 07

- 12 Secondary

Airport(s) Avg. Fare

(2012) % Change in

Avg. Fare 07

- 12

Boston BOS $178.89 0% MHT, PVD $166.99 +14%

Chicago ORD $175.80 +10% MDW $140.00 +23%

Houston IAH $223.17 +20% HOU $157.94 +26%

Dallas DFW $194.65 +9% DAL $133.21 +37%

San Francisco SFO $198.50

- 4% OAK, SJC $149.64 +11%

Los Angeles LAX $191.31 +5% BUR, SNA, ONT, LGB $143.71 +2%

Phoenix PHX $159.85 +10% TUS $174.17 +9%

Table 4 : Changes in fares at primary and secondary airports for selected U.S. metro regions, 2007

- 2012

## Evolving Trends of U .S. Domestic Airfares 

## 13



# Trends in Average Domestic Fares at Major U.S. Carriers

Table 5 : Average domestic fares and passenger itinerary distances for 12 major U.S. airlines, 2007

- 12

Table 5 shows the changes in average one

- way fares 8 

## and average passenger itinerary distances for 12

U.S. air carriers from 20 07

- 2012. The airlines in Table 5 are grouped by category: the first four airlines

(American, Delta, United, and US Airways) are generally classified as “network carriers;” the second four

airlines (AirTran, Frontier, JetBlue, and Southwest) are typically referred to as “low

- cost carriers;” Alaska

and Hawaiian are both “specialty” carriers with unique network structures clustered around spec ific

regions; and Allegiant and Spirit are two of a new breed of “ultra

- low

- cost carriers” that have primarily

focused on serving tertiary airports and airports in small communities, offering customers in these

communities flights to vacation destinations with very low base fares. We will examine the trends in

airfares in each of these groups of carriers separately.

Average network carrier fares have increased as available capacity and itinerary lengths change

Due in part to changes in capacity and average passenger itinerary distances, average one

- way fares at

network carriers rose between 6

- 11% from 2007

- 2012. Many of the network carriers struggled

financially at times from 2007

- 2012, with several declaring bankruptcy over the study period. Delta and

8 

### Average f

ares shown include domestic itineraries only, have been adjus ted for inflation using the Consumer

Price Index

, and are shown in 2012 dollars.

## Evolving Trends of U .S. Domestic Airfares 

## 14

Unit ed both completed mergers with other iconic network carriers; American and US Airways proposed

to merge in 2013.

These carriers emerged from this tumultuous period of bankruptcy and mergers with leaner operations

and reduced frequencies across their netw orks. The network carriers have continued to keep capacity

low over the last several years as they practice a disciplined capacity management strategy that

emphasize s flying profitable routes over gaining market share. As capacity is reduced, increases in

average fares have less of an adverse effect on load factors. This strategy has led the network carriers to

post their first consistent profits in nearly a decade. For these reasons, the increases in average fares

seen at the network carriers from 2007

- 201 2 can largely be attributed to the effects of capacity

discipline strategies and to the differences in these carriers’ networks following a round of mergers

.

Low

- cost carriers aren’t quite as low

- cost for passengers any more

T he types of domestic flights flown by network carriers

— a mix of short

- haul regional service and long

haul transcontinental options

— differ from the service provided by low

- cost carriers

— a significant

portion of which involves travel to leisure destinations

. Hence, it is not surprising that the average fares

of low

- cost carriers have remained at least 25% lower than network carriers. Yet despite this , several of

the low

- cost carriers saw dramatic increases in their average one

- way fares over the last six years.

Average fares increased at AirTran Airways, which was acquired by Southwest Airlines in 2011, by about

15% from 2007

- 2012. Southwest Airlines itself saw an increase in average fares of 25% over the same

period. Meanwhile, average fares at JetBlue Airways increased by just 3% over t he last six years.

There are several possible explanations for Southwest Airlines’ significant increase in average fares.

Southwest itself practiced some capacity discipline over the last six years, particularly in smaller and

mid

- sized airports. Southwes t cut scheduled domestic flights by 10% at smaller airports in the U.S. from

2007

- 2012; if there is indeed a link between cuts in service and increases in fares (as economic theory

would predict), this could explain why some smaller airports dominated by S outhwest Airlines, such as

Dallas Love Field (DAL) and Houston Hobby (HOU), saw large increases in average fares coupled with

deep cuts in service over the study period.

The last six years have also seen dramatic changes in Southwest’s well

- established n etwork strategy. In

the 1990s and early

- 2000s, Southwest found a niche in operating point

- to

- point flights from secondary

airports in multi

- airport regions, often at lower fares than could be found at primary airports in those

regions. However, over the la st six years, Southwest has started to move into those same larger airports

that it had previously forsaken. Southwest has moved into Boston Logan (BOS), New York

- LaGuardia

(LGA), and Newark Liberty International Airport (EWR) over the last six years, and it now serves 23 of the

29 largest airports in the United States. Its merger with AirTran Airways will give the combined airline a

larger presence at Hartsfield

- Jackson Atlanta International Airport (ATL)

— the busiest airport in the

United States by passeng er enplanements

.

Moving into larger airports could have increased Southwest’s costs. Larger airports are more likely to be

congested, leading to more costs in delays and cancellations. On the other hand , larger airports are

## Evolving Trends of U .S. Domestic Airfares 

## 15

more likely to attract business passengers, who often have a higher willingness

- to

- pay for airline tickets.

Either or both of these factors could have given Southwest leverage to raise average fares. Southwest’s

operating costs may have also increased for other reasons. The advantages from the airline’s famous

fuel hedge have evaporated with constantly high fuel prices, and the seniority levels of the airline’s

emp loyees have started to increase , requiring higher pay and retirement benefits. These increases in

operating costs could have also led to Southwest’s increase in average fares

.

Finally, it is worth noting that Southwest, unlike its network carrier competition, does not rely on

checked baggage fees as a source of ancillary revenue. It is possible th at Southwest could have raised its

base fares to make up for the lost revenue potential of offering free checked baggage. However, JetBlue

Airways, which also does not charge fees for checked baggage, had only a modest increase in its aver age

fares in the last six years

.

Whatever the reason for Southwest’s increase in average fare, low

- cost carriers are starting to behave

more like traditional network carriers. As their brands and their workforces both become more mature,

the LCCs have entered into larger markets at slightly higher average fares. While the low

- cost carriers

are not quite as low

- cost for passengers any more, we do not expect t o see a complete convergence in

fares at network carriers and low

- cost carriers. LCCs still offer lower fares to pass engers in many

markets, and we expect that these carriers will continue to maintain unique networks with a heavy

focus on leisure travel in the next decade

— this alone will continue to keep the average fares at these

carriers lower than at the network carri ers.

Specialty carriers are adjusting fares as their networks change

Airline analysts often have difficulty classifying Alaska Airlines and Hawaiian Airlines. Both airlines serve

a targeted area of the United States that remain s relatively unserved by oth er carriers. Traditionally,

Alaska and Hawaiian generally provided a mix of short

- haul service linking together small communities

and long

- haul service connecting the rest of the United States to hubs in Seattle and Honolulu.

However, these airlines

— Alask a in particular

— have started to change their networks over the last six

years. Alaska’s average itinerary distance increased by 29% from 2007

- 2012, reflecting a new

commitment to longer

- haul service. The airline has bolstered its presence at Seattle

- Tacoma

International Airport (SEA) while also building new cross

- country service . As a result of these longer

itinerary distances and stage lengths, Alaska’s average one

- way fares have increased by 15%. Hawaiian’s

fares have risen by 12% over the study period, b ut its average itinerary distance has fallen by 7% as it

has cut unprofitable long

- haul service to focus more on inter

- island and international service. We should

expect to see further adjustments in fares from these carriers as their networks continue to change over

the next decade.

A new breed of ultra

- low

- cost carriers is picking up where the traditional LCCs left off

The latter half of the 2000s saw the emergence of a new breed of low

- cost airlines with a very different

business model than that of the “traditional” low

- cost carriers. These carriers, such as Allegiant Air,

Spirit Airlines, Sun Country Airlines, and othe rs, focused on providing infrequent service to tertiary

## Evolving Trends of U .S. Domestic Airfares 

## 16

airports in multi

- airport regions, or to airports at which there was no currently existing commercial air

service. At these airports, the “ultra

- low

- cost” carriers step ped in to provide service to vac ation

destinations at heavily discounted base fares, often packaging a flight with a hotel, rental car, or

vacation package. Flights to the smallest airports in these airlines’ networks may only be operated a few

times per week.

Allegiant Air and Spirit A irlines have been two of the most successful ultra

- low

- cost carriers. Targeting

an exclusively leisure audience, we would expect that their average fares to be lower than network

carriers or even the existing low

- cost carriers, which do serve some business routes. Indeed, average

fares at LCCs were nearly twice as high as ULCC fares in 2012; average network carrier fares were nearly

three times as high as ULCC fares in the same year. Additionally, while network carriers, LCCs, and

specialty carriers alike w ere all increasing average fares from 2007

- 2012, fares at ULCCs decreased over

the study period by as much as 33%.

While the decreases in base fares at the ULCCs are impressive, it is important to note that these fare

decreases occurred at the same time a s these carriers started to rely more on ancillary revenues as a

significant portion of the full travel price. That is, while the base fare of a ULCC ticket is often very low,

passengers may need to pay additional fees to check

- in, check bags, access custo mer service personnel,

or even carry

- on a bag on some airlines. Hence, looking only at the base fare may present a skewed

picture of the total passenger cost on ULCCs if ancillary fees are not taken into account.

D ata on ancillary revenues is currently c ollected and defined inconsistently and not tied to individual

itineraries. That is, we currently do not know how much an average Spirit Airlines passenger pays in

ancillary services. Adding ancillary fees to average fares would assist in making apples

- to

- apples

comparisons in total passenger itinerary cost between the ULCCs and other airlines. Absent that data,

however, we are only able to make comparisons of base fares alone.

The ultra

- low

- cost carriers have unabashedly targeted extremely price sensitive passengers. Spirit

Airlines CEO Ben Baldanza has suggested that these customers are likely to choose his airline repeatedly

if it offers the lowest base fare, even if passengers have to pay substantially more in additional ancillary

fees. 9 

## The business mo del of Spirit is still relatively new and its sustainability remains to be seen, but

both Spirit and Allegiant Air have experienced robust financial success, even in challenging periods for

airline profitability. However, these airlines’ pricing strategies and competitive advantages could be

eroded if consumer advocates succeed in passing legislation to require airlines to display full costs of

travel

— base fares and ancillary fees combined

— on popular distribution systems and travel booking

websites.

9 

### Maxon, T. 2013. “Spirit Airlines CEO: We have the lowest prices, and that’s what customers care about.”

Dallas Morning News . May 22 2013.

## Evolving Trends of U .S. Domestic Airfares 

## 17



# Determinants of Average Fares at U.S. Airports

— the Effects of LCCs

Since the rise of the low

- cost and low

- fare carrier s in the late 1990s and early 2000s, r esearchers have

been interested in identifying the effects of these carriers on average airfares. Mo st early work focused

on the largest and most popular low

- cost carrier: Southwest Airlines. Specifically, researchers were

interested in investigating whether the presence of low

- cost carri ers like Southwest Airlines has a

dampening e ffect on the fares on a given route

.

Past research on the “Southwest effect” has shown that either direct competition (competition on the

same route) or adjacent competition (competition in a city

- pair market between alternative airports in a

multi

- airport region) by Southwes t Airlines tends to be associated with an increase in traffic on that

route and a decrease in average fare. That is, once Southwest Airlines enters a market directly or

adjacently, existing network carriers typically lower their fares to match Southwest’s lower prices. 10



## However, with Southwest Airlines ’ average fares increasing by 25% from 2007 to 2012, it is unclear

whether Southwest still holds the same degree of price leadership as it once did. Recent work by bin

Salam and McMullen 11 

## found that the Southwest effect had weakened between 2005 and 2010 in

markets in which mergers had occurred between network carriers, such as United

- Continental or Delta

Northwest. That is, the presence of Southwest Airlines on merger

- affected routes did l ess to lower

average fares than previous research would have suggested. Since the competitive effects of Southwest

on network carrier airfares are often used by merger advocates as an argument in antitrust reviews, bin

Salam and McMullen question whether S outhwest can still be relied upon as a protection against

monopolistic competition on air travel routes.

Meanwhile, the effects of other low

- cost carriers like JetBlue Airways and the impacts of ultra

- low

- cost

carriers like Allegiant Air and Spirit Airli nes on airfares have not been explor ed individually in detail.

While these airlines have smaller route networks than Southwest Airlines, they are important players in

the U.S. air transportation system, particularly at smaller airports. This section invest igates whether the

presence of these low

- cost carriers at U.S. airports reduces average fares at those airports, and how

those effects have changed over time. We will also explore the effects of capacity discipline on average

airfares, and examine if there is a statistically significant link between changes in capacity and changes in

fares.

10 

### Studies investigating the Southwe st effect include: Morrison, S.J. 2001. Actual, adjacent, and potential

competition: Estimating the full effect of Southwest Airlines. Journal of Transport Economics and Policy

35(2).23

- 256; Vowles, T.M. 2001. The “Southwest Effect” in Multi

- Airport Region s. Journal of Air Transport

Management 7(4). 251

- 258; Goolsbee, A. and C. Syverson. 2008. How Do Incumbents Respond to the Threat

of Entry? Evidence from the Major Airlines. Quarterly Journal of Economics 123(4). 1611

- 1633; Hofer, C., R.J.

Windle, and M.E. Dresner. 2008. Price premiums and low

- cost carrier competition. Transportation Research

Part E 44(5). 864

- 882; and Brueckner, J.K., D. Lee, and E.S. Singer. 2012. Airfare competition and domestic US

airfares: A comprehensive reappraisal. Economics of Tran sportation 2(1). 1

- 17.

11 

### bin Salam, S. and B.S. McMullen. 2013. Is There Still a Southwest Effect? Transportation Research Record:

Journal of the Transportation Research Board 2025. 1

- 8.

## Evolving Trends of U .S. Domestic Airfares 

## 18

Econometric model

Following the research approaches of previous w ork, we will use a simple econometric model to identify

the effects of LCC competition on average one

- way airfares at U.S. airports. In this case, the econometric

model is a linear equation that allows us to isolate the effects of one or more in dependent variables

( e.g. , LCC compe tition and other a irport characteristics) on a dependent variable (in this case, the

average airfare at an airport). Using statistical techniques, we can test whether the coefficients of this

linear equation are significantly different from zero (or not) a t a given level of confidence. If a n

in dependent variable’s coefficient is significantly different from zero, we can conclude that there is a

relationship between the independent variable and the dependent variable. Otherwise, no such

conclusion can be dra wn.

The linear equation used in our econometric model of average airport airfares is shown below. Table 6

describes in detail each of the variables in the equation.

Equ ation 1: Econometric model of average airport airfare

Variable Description

FARE Avg. fare at the airport

DIST Avg. itinerary distance

WN Presence of Southwest

B6 Presence of JetBlue

FL Presence of AirTran

F9 Presence of Frontier

G4 Presence of Allegiant

NK Presence of Spirit

VACATION Vacation destination

(airports in FL and NV)

Table 6 : Description of variables in Equation 1

As Table 6 describes, we are postulating that the average one

- way fare at an airport will be a function of

the average it inerary distance at the airport; the number of airlines competing at the airport; the

presence of low

- cost like Southwest, JetBlue, AirTran, and Frontier; the presence of ultra

- low

- cost

carriers like Allegiant and Spirit; and whether the airport is a vacation destination or not (here, following

Hofer et al. (2008) , airports in Florida and Nevada are designated as vacation destinations for simplicit y ).

Passenger enplanements are not included in the regression equation since there is a possibility that the

number of passengers using an airport could itself be a function of airfares. Equation 1 also contains an

error term , which is a common economet ric practice to capture effects that are not directly specified

by the model.

## Evolving Trends of U .S. Domestic Airfares 

## 19

Data on average fares, itinerary distances, and airlines providing service were gathered from Diio Mi for

445 U.S. airports for the years 2007 and 2012. We estimate d the coefficients of Equation 1 for each of

these years, allowing us to see how the effects of Southwest or other low

- cost or ultra

- low

- cost carriers

have changed over time. Table 7 shows the results of the econometric model for these years.

Variable (1)

2007 Fares (2)

2012 Fares

Constant 92.72 ***

( 4.488 ) 94.58 ***

(5. 203 )

Avg. Itinerary

Distance 0.122***

(0.005) 0.122***

(0.006)

Southwest - 35.78 ***

( 7.105 ) - 16.65 * *

( 6.692 )

JetBlue - 29.84 ***

(7. 514 ) - 32.20 ***

(7. 595 )

AirTran - 15.51**

(7.033) 2.04

(7.353)

Frontier - 2.53

(7.517) 7.14

(6.522)

Allegiant - 20.47 ***

(5.374 ) - 28.52 ***

(5. 364 )

Spirit - 27.48 * * *

( 9.726 ) - 22.10 **

(9.3 84 )

Vacation Destination - 3.81

(9. 122 ) - 22.57 * *

(9. 810 )

N 445 445

Adjusted R 2 

### 0. 5800 0.5 267

Coefficients are presented wi th standard errors in parenthese s

* = 9 0 % signi ficance, ** = 9 5% significance, *** = 99 % significance



## Table 7 : Regression Results

– Fares on Distance and Competition

The top number of each row in Table 7 is the coefficient for that variable in Equation 1 as estimated

using a standard ordinary least

- squares (OLS) regression technique. The number in parenthesis beneath

each estimated coefficient is the standard error for that coefficient’s estimate. The significance of each

coefficient (how sure we are that the coefficient is statistically different from zero) is shown using

asterisks. A single asterisk indicates that we can be 90% confident that the coefficient is different from

zero, two asterisks indicates a confidence level of 95%, and three asterisks in dicates a confidence level

of 99%. Finally, the adjusted R 2 

## value is a measure (ranging from 0

- 1) of how well the variables we

selected explain the variations in average fares between airports.

Discussion of regression results: Should we be more focused o n the JetBlue effect?

As expected, the average itinerary distance at an airport has a positive and significant relationship wi th

average airfares; airports from which passengers fly longer distances have generally higher fares. This

## Evolving Trends of U .S. Domestic Airfares 

## 20

relationship has remain ed essentially unchanged over time. It is also interesting to note that while the

number of airlines that provide ser vice at a given airport did not have a significant relationship with

airfares in 2012 , the presence of specific competitors is associated w ith lower average airfares. The

presence of an LCC like Southwest, JetBlue, Allegiant, or Spirit is associated with a decrease in average

one

- way fare of between $15

- $36 , depending on the airline and the year and controlling for distance

and other airport characteristics. 12 

## However, the presence of AirTran and Frontier no longer have a

significant effect on average one

- way fares once other LCC competition is taken into account.

In 2007, the Southwest effect was highly significant . The presence of Southwest Airlines at an airport in

2007 was associated with a decrease that airport’s average fare of about $3 6 , controlling for average

itinerary distance and other competition. However, by 2012, that effect had declined to about $17 . That

is, the presence of Sout hwest Airlines no longer is associated with as much of a reduction in average

airport fares as has been previously shown by other researchers. Indeed, the presence of some other

low

- cost carriers now outpaces the Southwest effect. In 2012, the presence of JetBlue Airways reduced

average one

- way airport fares by about $32

, Allegiant Air service reduced average one

- way airport fares

by about $ 29

, and the presence of Spirit reduced average one

- way fares by about $2 2

.

JetBlue is now the airline whose presence is associated with the largest decrease in average fares. As

such, we would not be surprised to see airports, particularly small community airports or secondary

airports in large multi

- airport regions, work particularly hard to attract JetBlue service. Ga ining service

from an airline like JetBlue not only attracts customers through a decrease in average fare, but also

through an increase in connectivity and the number of destinations that can be reached through both

non

- stop and connecting service. As Sout hwest begins to focus its expansion efforts internationally

instead of domestically, we would expect the “JetBlue effect” to become part of the business

development and academic lexicon surrounding low

- cost carriers.

On the other hand, the recently diminished nature of the Southwest effect is not surprising given the

scale of Southwest’s fare increases over the last six years. It should be noted, however, that Southwest

Airlines does not charge fees for checked baggage, as opposed to many of its comp etitors who charge

upwards of $25 for a checked bag. 13 

## It is possible that Southwest decided to raise base fares in lieu of

charging bag fees in an attempt to separate themselves from competing airlines.

On the other end of the spectrum, Allegiant Air and Spirit Airlines have chosen strategies of offering the

lowest possible base fare and gaining a large portion of revenue through ancillary sources. While

passengers often see only the base fares when selecting which ticket to purchase, the ULCCs are offeri ng

a fundamentally different service coupled with their base fare as opposed to the “full

- service” LCCs like

Southwest and JetBlue, which offer free checked baggage, on

- board amenities, and other features.

12 

### We also tested if an airport’s designation as a hub for a network carrier and/or an LCC had an effect on

average one

- way airfares at that airport; this variable was found to be insignificant in all years and was

removed from the model.

13 

### As of July 2013, Southwest Airlines offered two free checked bags, JetBlue Airways offered one free checked

bag, and Allegiant Air and Spirit Airlines both charged for checked baggage.

## Evolving Trends of U .S. Domestic Airfares 

## 21

Therefore, it may not be appropriate to directly c ompare the “Southwest effect” with the “Spirit effect,”

given that these two airlines are offering different packages of products and services as part of their

base fares.

Capacity discipline and changes in airfares

Economic theory suggests that restricti ons in supply will result in higher prices. Capacity discipline

strategies on the part of the airlines have restricted the number of available flight s and seats in most

markets. However, is there a direct correlation between capacity discipline and higher airfares? In other

words, is there a negative correlation between percent changes in flights and seats and percent changes

in fares? We can test the answer to this question by performing a Pearson’s correlation test on percent

changes in flights, seats, an d airfares ( from 2007

- 2012) for the 445 airports in our sample.

Variable Correlation p

- value R 2



## % change in flights

- 0.1988 <0.001 0.0373

% change in seats

- 0.1488 <0.001 0.0199

Table 8 : Correlation coefficients: % change in fares and % change in capacity, 2007

- 2012

Table 8 shows the Pearson’s correlation coefficients for percent changes in fares and percent changes in

capacity at 445 U.S. airports from 2007

- 2012. The correlation coefficient ranges between

- 1 and 1; a

value of

- 1 suggests that the variables are perfectly negatively correlated; a value of 1 suggests that the

variables are perfectly positively correlated; and a value of 0 suggests the variables are uncorrelated.

The p

- value tells us how certain we can be that the given correlation coefficient is statistically different

from 0

— in this case, we can be 99.9% sure that the coefficients are different from zero. Finally, as

before, the R 2 

## value tells us how well the percent change in capacity explains the variations in percent

changes in fares.

As expected, there is a negative correlation between percent changes in capacity and percent changes in

fares. This means that as capacity increases, fares generally fall; conversely , decreases in capacity are

associated with increases in fares. This suggests that the theoretical relationship between capacity

discipline and fare increases does indeed exist in practice. However, it should be noted that the

explanatory power of capacity discipline alone is very low

— the R 2 

## values are very low, and the

correlation coefficients themselves are fairly close to zero. Thus, other factors, such as the presence of

low

- cost carriers or changes in the average passenger itinerary distance at an airp ort, do a better job of

explaining changes in fares than capacity discipline alone.

## Evolving Trends of U .S. Domestic Airfares 

## 22



# Conclusion : Future Changes in Airfares in an Environment of Capacity Discipline

There is no evidence that the current airline strategy of capacity discipline will be reversed in the near

future. Airlines are experiencing profitability for the first time in years, and the equilibrium in which

each of the largest airlines continues to keep capacity low (compared to historical levels and gr owth in

GDP) seems to be stable in the short run. In the long run, an airline could deviate from the capacity

discipline equilibrium in an attempt to gain market share

— this theoretical increase of capacity would

likely be associated with lower fares, parti cularly if other airlines match this strategy. Meanwhile, we

should expect JetBlue Airways and the ultra

- low

- cost carriers to continue their pattern of steady growth.

If the levels of available domestic capacity follow the trends described above, we would expect average

one

- way domestic airfares to remain flat or increase slightly over the next five years, assuming that

there is no shock to the price of fuel or another local or global economic downturn. In this scenario,

major airlines would keep capacity at current levels (without cutting it further), and base fares would

remain level as airlines continue their shift to ancillary revenues to bolster earnings. The growth of

JetBlue and the other ULCCs could result in even lower average fares at airports ser ved by these airlines

.

Should it be approved, the merger of American Airlines and US Airways will bring about further

consolidation o f the U.S. air transportation industry and could result in some capacity being removed

from the system. As economic theor y and our analysis suggests, a reduction in available capacity could

result in higher fares in some markets. Our work and the work of others suggest that it is unclear

whether low

- cost carrier competition will temper the upward pressures of capacity discipline and

mergers on prices ; the Southwest effect has diminished in past years, although the effects of carriers

like JetBlue, Allegiant, and Spirit on average one

- way fares at U.S. airports remain strong.

At smaller airports and secondary airports i n multi

- airport regions, increases or decreases in average

airfares will likely continue to outpace the changes at larger airports. These airports will face increasing

pressure to obtain service from low

- cost or ultra

- low

- cost carriers

— as network carriers continue to exit

smaller airports, those airports that have not implemented a contingency plan to replace this service

with LCC or ULCC flights could see average fares rise as daily departures fall. This is a challenging

combination for a smaller airport, as passengers will often choose to fly out of a nearby larger airport to

take advantage of lower fares and more flight options, even if this means a significant drive from the

passenger’s origin point. We have already started to see this pattern take hold in some metro areas at

which average fares increased substantially more at secondary airports than a t primary airports

.

Finally, t he total system impact of this continued consolidation of flights and connectivity at large hubs,

coupled with a growing convergence in fares between primary and secondary airports, will be important

to monitor. R isk s of congestion and flight delays increase as passengers and departures cluster at larger

airports. If current t rends of consolidation continue and result in future growth in traffic at large

- hub

airports, improved air traffic management approaches m ay be necessary to avoid costly periods of

increased delays in the National Airspace System.

## Evolving Trends of U.S. Domestic Airfares 

## 23



# Appendix A : Summary of Changes in Fares for Large

- Hub Airports

Notes: Tables show enplaned passengers (2012 data) from the FAA, as well as passenger

- weighted one

- way average domestic fares and average

itinerary distances (in miles) for each airport for 2007 and 2012. All fare, itinerary distance, and capacity data was sourced from Diio Mi. 2007

fares have been adjusted for inflation and are displayed in constant 2012 dollars. Airports are ranked in order of highest change in average one

way fare to lowest change in average one

- way fare. All hub definitions are current as of June, 2013.

Airport Enplaned Pax

(201 2 ) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 A vg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

HNL

- Honolulu/Oahu, HI 9,210,270 $173.57 $218.78 26% 1845 1956 6%

- 24%

- 20%

MDW

- Chicago

- Midway, IL 9,431,796 $113.95 $140.00 23% 897 896 0%

- 14%

- 10%

IAH

- Houston

- Intercontinental, TX 19,038,958 $185.64 $223.17 20% 1091 1102 1%

- 20%

- 15%

PHL

- Philadelphia, PA 14,587,631 $156.01 $186.79 20% 1121 1173 5%

- 9%

- 15%

DTW

- Detroit, MI 15,599,877 $154.34 $182.07 18% 986 1008 2%

- 8%

- 16%

BWI

- Baltimore, MD 11,183,965 $133.59 $155.00 16% 996 975

- 2%

- 3%

- 3%

IAD

- Washington

- Dulles, VA 10,785,683 $190.02 $220.24 16% 1295 1455 12%

- 20%

- 20%

TPA

- Tampa, FL 8,216,153 $134.20 $153.42 14% 1040 1047 1%

- 24%

- 18%

EWR

- Newark, NJ 17,035,098 $188.71 $208.77 11% 1337 1345 1%

- 9%

- 11%

ORD

- Chicago

- O'Hare, IL 32,171,743 $159.33 $175.80 10% 977 991 1%

- 7%

- 16%

SLC

- Salt Lake City, UT 9,579,836 $166.56 $183.31 10% 1037 1042 1%

- 23%

- 16%

PHX

- Phoenix, AZ 19,556,189 $145.62 $159.85 10% 1135 1165 3%

- 14%

- 14%

DFW

- Dallas/Fort Worth, TX 28,022,877 $177.85 $194.65 9% 1020 1030 1%

- 6%

- 5%

SAN

- San Diego, CA 8,686,592 $157.42 $171.33 9% 1273 1311 3%

- 20%

- 12%

MCO

- Orlando, FL 17,159,425 $135.06 $145.63 8% 1069 1083 1%

- 19%

- 13%

MSP

- Minneapolis/St. Paul, MN 15,943,751 $182.70 $196.98 8% 1043 1021

- 2%

- 7%

- 12%

CLT

- Charlotte

- Douglas, NC 20,032,426 $174.35 $187.19 7% 864 836

- 3% 10% 13%

MIA

- Miami, FL 18,987,488 $169.91 $180.64 6% 1212 1233 2% 1% 6%

JFK

- New York

- JFK, NY 24,520,943 $184.76 $196.27 6% 1525 1640 8%

- 19%

- 11%

LAS

- Las Vegas, NV 19,941,173 $140.80 $149.44 6% 1208 1200

- 1%

- 19%

- 17%

LAX

- Los Angeles, CA 31,326,268 $181.53 $191.31 5% 1513 1568 4%

- 7%

- 2%

SEA

- Seattle/Tacoma, WA 16,121,123 $176.05 $184.20 5% 1406 1425 1%

- 11%

- 6%

FLL

- Fort Lauderdale, FL 11,445,101 $136.91 $141.98 4% 1144 1184 3%

- 8%

- 4%

LGA

- New York

- La Guardia, NY 12,818,717 $159.98 $165.53 3% 909 944 4%

- 9%

- 2%

BOS

- Boston, MA 14,293,675 $179.18 $178.89 0% 1227 1264 3%

- 12%

- 4%

DCA

- Washington

- National, DC 9,462,206 $182.01 $179.41

- 1% 895 938 5% 2%

- 1%

DEN

- Denver, CO 25,799,832 $152.65 $149.65

- 2% 1031 1021

- 1% 1% 3%

ATL

- Atlanta, GA 45,798,809 $170.80 $165.28

- 3% 867 870 0%

- 6%

- 1%

SFO

- San Francisco, CA 21,284,224 $207.42 $198.50

- 4% 1665 1604

- 4% 21% 22%

Grand Total (Large

- Hubs) 518,041,829 $164.52 $178.76 8.7 % 1559.5 1183.6 2.1 %

- 8.8%

- 7.2%

## Evolving Trends of U.S. Domestic Airfares 

## 24



# Appendix B : Summary of Changes in Fares for Medium

- Hub Airports

Airport Enplaned Pax

(201 2 ) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

DAL

- Dallas

- Love, TX 3,902,521 $97.28 $133.21 37% 478 583 22%

- 14%

- 7%

HOU

- Houston

- Hobby, TX 5,043,708 $124.89 $157.94 26% 730 821 12%

- 2%

- 1%

OGG

- Kahului/Maui, HI 2,861,278 $169.90 $214.26 26% 1677 1819 8%

- 2%

- 12%

CMH

- Columbus, OH 3,095,360 $144.01 $174.62 21% 915 898

- 2%

- 21%

- 18%

PIT

- Pittsburgh, PA 3,889,997 $144.84 $173.35 20% 906 943 4%

- 40%

- 28%

CLE

- Cleveland, OH 4,325,353 $165.64 $195.29 18% 945 938

- 1%

- 26%

- 24%

BNA

- Nashville, TN 4,796,868 $145.67 $171.66 18% 862 841

- 2%

- 8%

- 10%

IND

- Indianapolis, IN 3,585,246 $155.97 $183.71 18% 957 950

- 1%

- 21%

- 18%

JAX

- Jacksonville, FL 2,579,021 $148.53 $174.55 18% 932 947 2%

- 26%

- 22%

RNO

- Reno, NV 1,685,333 $138.91 $162.37 17% 974 984 1%

- 31%

- 35%

BUF

- Buffalo, NY 2,588,660 $131.84 $153.44 16% 920 947 3%

- 9%

- 5%

SMF

- Sacramento, CA 4,357,899 $140.23 $163.19 16% 1034 1101 6%

- 24%

- 24%

RSW

- Fort Myers, FL 3,630,737 $139.29 $161.52 16% 1130 1139 1%

- 15%

- 13%

SJC

- San Jose, CA 4,077,644 $142.39 $164.38 15% 1029 1084 5%

- 33%

- 28%

MCI

- Kansas City, MO 4,866,850 $143.44 $162.97 14% 884 894 1%

- 30%

- 25%

PVD

- Providence, RI 1,808,317 $147.60 $167.58 14% 1111 1117 0%

- 38%

- 36%

ONT

- Ontario, CA 2,142,387 $141.25 $160.09 13% 1007 1020 1%

- 49%

- 43%

PBI

- West Palm Beach, FL 2,796,324 $143.50 $162.38 13% 1092 1079

- 1%

- 25%

- 21%

MEM

- Memphis, TN 3,359,622 $198.39 $223.17 12% 797 834 5%

- 41%

- 42%

MSY

- New Orleans, LA 4,293,538 $160.10 $179.83 12% 908 937 3% 4% 9%

OMA

- Omaha, NE 2,018,526 $157.93 $175.84 11% 944 932

- 1%

- 19%

- 14%

RDU

- Raleigh/Durham, NC 4,489,097 $147.92 $163.68 11% 885 867

- 2%

- 23%

- 16%

BUR

- Burbank, CA 2,027,197 $123.92 $135.08 9% 767 716

- 7%

- 25%

- 28%

ANC

- Anchorage, AK 2,249,475 $238.61 $259.62 9% 1864 1733

- 7%

- 12%

- 13%

BDL

- Hartford, CT 2,647,064 $176.59 $191.00 8% 1228 1217

- 1%

- 24%

- 24%

AUS

- Austin, TX 4,606,143 $164.65 $178.07 8% 1005 1085 8%

- 11%

- 3%

SAT

- San Antonio, TX 4,036,598 $166.58 $179.34 8% 983 1037 6%

- 14%

- 10%

SNA

- Orange County, CA 4,381,956 $156.09 $167.17 7% 1071 1105 3%

- 24%

- 20%

ABQ

- Albuquerque, NM 2,630,570 $153.98 $164.88 7% 950 968 2%

- 26%

- 26%

STL

- St. Louis, MO 6,200,252 $154.62 $164.57 6% 855 879 3%

- 27%

- 20%

OAK

- Oakland, CA 4,923,435 $127.54 $134.90 6% 1011 894

- 12%

- 37%

- 36%

PDX

- Portland, OR 7,142,610 $161.70 $170.07 5% 1251 1278 2%

- 16%

- 9%

CVG

- Cincinnati, OH/ Northern KY 2,927,218 $224.62 $224.01 0% 859 886 3%

- 64%

- 62%

SJU

- San Juan, PR 4,204,478 $185.79 $175.65

- 5% 1627 1599

- 2%

- 3%

- 20%

MKE

- Milwaukee, WI 3,707,890 $165.36 $153.53

- 7% 972 1011 4%

- 37%

- 8%

Grand Total (Medium

- Hubs) 127,879,172 $155.13 $173.63 11.9 % 1016.1 1030.9 1.5 %

- 26.2 %

- 21.4 %

## Evolving Trends of U.S. Domestic Airfares 

## 25



# Appendix C : Summary of Changes in Fares for Small

- Hub Airports

Airport Enplaned Pax

(201 2 ) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

ITO

- Hilo/Hawaii, HI 641,904 $68.42 $111.70 63% 527 582 10%

- 37%

- 25%

LIH

- Lihue/Kauai, HI 1,308,549 $149.14 $210.97 41% 1348 1715 27%

- 13%

- 15%

PHF

- Newport News, VA 314,139 $140.14 $187.80 34% 743 1095 47%

- 30%

- 46%

MAF

- Midland/Odessa, TX 497,193 $135.53 $180.10 33% 624 658 6%

- 5%

- 12%

KOA

- Kona/Hawaii, HI 1,367,091 $156.51 $205.84 32% 1390 1620 17%

- 8%

- 19%

LBB

- Lubbock, TX 475,680 $128.67 $169.09 31% 605 659 9%

- 17%

- 24%

AMA

- Amarillo, TX 389,284 $138.21 $175.04 27% 651 680 4%

- 19%

- 18%

ISP

- Long Island

- Macarthur, NY 667,573 $112.12 $141.22 26% 1080 966

- 10%

- 46%

- 47%

GPT

- Gulfport/Biloxi, MS 394,056 $176.82 $220.42 25% 883 985 12%

- 25%

- 30%

TUL

- Tulsa, OK 1,324,175 $158.87 $196.07 23% 822 815

- 1%

- 26%

- 20%

BOI

- Boise, ID 1,307,505 $144.18 $175.59 22% 843 919 9%

- 40%

- 34%

FNT

- Flint, MI 409,401 $136.95 $166.47 22% 953 958 1%

- 34%

- 29%

MLI

- Moline, IL 396,460 $160.46 $194.71 21% 956 964 1%

- 19%

- 21%

SAV

- Savannah, GA 789,256 $173.47 $207.51 20% 903 979 8%

- 19%

- 23%

SDF

- Louisville, KY 1,642,697 $157.80 $185.78 18% 832 845 2%

- 23%

- 18%

ELP

- El Paso, TX 1,442,100 $163.69 $191.85 17% 918 966 5%

- 11%

- 18%

ALB

- Albany, NY 1,220,286 $166.12 $194.50 17% 1173 1192 2%

- 18%

- 19%

GEG

- Spokane, WA 1,456,275 $143.71 $166.80 16% 938 990 6%

- 26%

- 20%

SRQ

- Sarasota/Bradenton, FL 637,260 $143.48 $166.32 16% 1023 1051 3%

- 38%

- 24%

MHT

- Manchester, NH 1,209,987 $144.09 $166.39 15% 1102 1137 3%

- 41%

- 45%

JAN

- Jackson, MS 611,592 $176.99 $203.25 15% 850 820

- 4%

- 20%

- 22%

OKC

- Oklahoma City, OK 1,801,613 $169.70 $193.91 14% 892 887

- 1%

- 15%

- 4%

RIC

- Richmond, VA 1,581,617 $170.30 $192.31 13% 910 961 6%

- 20%

- 17%

HPN

- Westchester County, NY 893,064 $156.06 $174.17 12% 979 1008 3%

- 12%

- 11%

LIT

- Little Rock, AR 1,111,381 $164.35 $183.41 12% 817 848 4%

- 20%

- 12%

CAK

- Akron/Canton, OH 910,313 $138.19 $154.00 11% 897 942 5%

- 4% 16%

BTV

- Burlington, VT 615,005 $178.90 $198.84 11% 1181 1091

- 8%

- 24%

- 18%

BHM

- Birmingham, AL 1,412,481 $163.52 $181.49 11% 845 814

- 4%

- 18%

- 15%

SYR

- Syracuse, NY 968,644 $177.40 $196.11 11% 1082 1071

- 1%

- 22%

- 21%

TUS

- Tucson, AZ 1,710,638 $159.49 $174.17 9% 1116 1127 1%

- 26%

- 23%

ROC

- Rochester, NY 1,199,194 $152.26 $165.49 9% 942 943 0%

- 21%

- 20%

PNS

- Pensacola, FL 740,852 $179.92 $195.33 9% 909 934 3%

- 16%

- 14%

FAI

- Fairbanks, AK 450,436 $245.15 $265.91 8% 1481 1300

- 12%

- 2%

- 6%

ORF

- Norfolk, VA 1,649,123 $176.72 $189.53 7% 1093 1059

- 3%

- 19%

- 13%

XNA

- Northwest Arkansas, AR 546,845 $237.51 $253.13 7% 896 887

- 1%

- 14%

- 15%

MSN

- Madison, WI 798,789 $195.56 $208.24 6% 992 998 1%

- 21%

- 15%

DAY

- Dayton, OH 1,288,541 $161.53 $171.22 6% 874 929 6%

- 21%

- 13%

ABE

- Allentown, PA 348,905 $176.93 $186.42 5% 1003 1005 0%

- 25%

- 18%

## Evolving Trends of U.S. Domestic Airfares 

## 26 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

ILM

- Wilmington, NC 391,969 $178.02 $186.51 5% 886 911 3% 3%

- 2%

GRR

- Grand Rapids, MI 1,063,151 $190.77 $198.97 4% 1024 1052 3%

- 9% 3%

CID

- Cedar Rapids, IA 491,651 $197.41 $205.31 4% 996 1026 3%

- 17%

- 16%

PWM

- Portland, ME 794,468 $182.77 $189.74 4% 1131 1091

- 4%

- 19%

- 7%

BTR

- Baton Rouge, LA 406,093 $202.67 $208.47 3% 946 918

- 3%

- 18%

- 24%

CHS

- Charleston, SC 1,283,952 $185.53 $190.55 3% 878 914 4%

- 4% 6%

CAE

- Columbia, SC 487,255 $224.05 $229.13 2% 931 958 3%

- 28%

- 23%

GSO

- Greensboro, NC 888,257 $178.72 $181.34 1% 851 850 0%

- 28%

- 21%

MDT

- Harrisburg, PA 652,843 $210.13 $211.39 1% 1115 1103

- 1%

- 7%

- 2%

FAT

- Fresno, CA 640,350 $197.38 $196.83 0% 1105 1239 12%

- 25%

- 17%

SBA

- Santa Barbara, CA 370,600 $205.13 $203.24

- 1% 1225 1382 13%

- 25%

- 21%

DSM

- Des Moines, IA 1,018,004 $197.16 $194.88

- 1% 987 991 0%

- 22%

- 4%

HSV

- Huntsville/Decatur, AL 578,993 $230.64 $226.83

- 2% 932 913

- 2%

- 18%

- 2%

COS

- Colorado Springs, CO 836,924 $181.07 $177.94

- 2% 1013 1008 0%

- 24%

- 14%

LEX

- Lexington, KY 535,347 $200.20 $196.47

- 2% 839 820

- 2%

- 19%

- 4%

PSP

- Palm Springs, CA 867,718 $185.66 $181.89

- 2% 1247 1222

- 2%

- 11%

- 9%

ICT

- Wichita, KS 734,647 $193.02 $188.10

- 3% 959 948

- 1%

- 26%

- 18%

STT

- St. Thomas, VI 649,691 $222.15 $215.89

- 3% 1585 1527

- 4%

- 9%

- 8%

TYS

- Knoxville, TN 846,189 $201.24 $194.53

- 3% 891 888 0%

- 19%

- 17%

BIL

- Billings, MT 440,275 $199.46 $190.85

- 4% 992 990 0%

- 15%

- 9%

GUM

- Guam, TR 1,477,926 $639.57 $606.27

- 5% 4259 3897

- 9%

- 4% 0%

BGR

- Bangor, ME 239,908 $230.61 $217.22

- 6% 1283 1261

- 2%

- 31% 3%

VPS

- Fort Walton Beach, FL 373,542 $228.96 $215.35

- 6% 945 983 4%

- 4%

- 9%

SFB

- Orlando

- Sanford, FL 865,768 $87.99 $82.63

- 6% 790 842 7% 49% 52%

EUG

- Eugene, OR 407,098 $184.04 $171.58

- 7% 1099 1140 4%

- 20%

- 4%

PIE

- St. Petersburg, FL 436,024 $95.67 $88.26

- 8% 891 871

- 2%

- 1%

- 6%

FSD

- Sioux Falls, SD 453,057 $211.75 $194.59

- 8% 1011 998

- 1% 4% 0%

GSN

- Saipan, TR 411,735 $165.98 $151.73

- 9% 895 732

- 18% #N/A #N/A

BZN

- Bozeman, MT 434,038 $228.65 $201.99

- 12% 1180 1138

- 4%

- 9% 4%

MYR

- Myrtle Beach, SC 722,775 $140.75 $121.07

- 14% 727 723

- 1%

- 15%

- 9%

GSP

- Greenville/Spartanburg, SC 936,288 $205.33 $176.15

- 14% 839 803

- 4%

- 15% 10%

BLI

- Bellingham, WA 574,287 $149.87 $124.24

- 17% 1086 1282 18% 20% 108%

LGB

- Long Beach, CA 1,554,844 $144.24 $112.52

- 22% 1365 856

- 37% 1% 1%

ACY

- Atlantic City, NJ 663,277 $105.65 $62.05

- 41% 947 876

- 8%

- 5% 23%

Grand Total ( Small

- Hubs) 60,058,848 $ 178.63 $ 188.83 5.7 % 1026.7 1035.4 0.9 %

- 18.2 %

- 13.5 %

## Evolving Trends of U.S. Domestic Airfares 

## 27



# Appendix D : Summary of Changes in Fares for Non

- Hub and Essential Air Service Airports

Airport Enplaned Pax

(201 2 ) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

LWT

- Lewistown, MT 343 $80.72 $226.37 180% 176 97

- 45% 0% 0%

JLN

- Joplin, MO 24,489 $114.24 $221.21 94% 454 803 77%

- 49% 29%

VEL

- Vernal, UT 7,252 $122.75 $226.12 84% 290 928 220% 46% 46%

DEC

- Decatur, IL 7,753 $110.82 $202.21 82% 409 880 115% 29%

- 36%

SOW

- Show Low, AZ 3,852 $94.31 $164.04 74% 217 645 197% 29% 29%

GRO

- Rota, TR 13,206 $71.88 $118.82 65% 217 698 222% #N/A #N/A

MCK

- Mc Cook, NE 1,623 $124.71 $205.28 65% 276 914 231% 65% 65%

MOD

- Modesto, CA 14,739 $114.24 $181.02 58% 951 1341 41%

- 58%

- 58%

MLS

- Miles City, MT 360 $80.47 $127.04 58% 143 412 188%

- 8%

- 8%

IPL

- El Centro/Imperial, CA 5,491 $110.54 $172.30 56% 649 975 50%

- 44%

- 44%

CNY

- Moab, UT 4,035 $141.17 $219.70 56% 418 968 131% 51% 51%

ROW

- Roswell, NM 34,598 $161.25 $249.26 55% 611 911 49%

- 11% 57%

PRC

- Prescott, AZ 5,152 $119.08 $182.62 53% 494 760 54%

- 28%

- 28%

IGM

- Kingman, AZ 924 $113.63 $172.26 52% 357 933 161%

- 25%

- 25%

HVR

- Havre, MT 1,186 $101.62 $150.02 48% 193 295 53% 0% 0%

FOD

- Fort Dodge, IA 5,625 $144.22 $209.37 45% 549 910 66% 7%

- 23%

MAZ

- Mayaguez, PR 5,856 $78.51 $113.80 45% 355 353 0%

- 6%

- 6%

FKL

- Franklin, PA 1,319 $165.36 $239.59 45% 693 1112 60% 56% 56%

ISN

- Williston, ND 40,658 $209.08 $301.34 44% 573 957 67% 123% 142%

ACV

- Eureka/Arcata, CA 61,705 $170.64 $243.93 43% 822 1130 37%

- 25%

- 45%

ART

- Watertown, NY 16,988 $166.42 $236.90 42% 570 1420 149%

- 70%

- 31%

ESC

- Escanaba, MI 13,480 $175.98 $248.87 41% 805 1023 27% 24% 226%

HON

- Huron, SD 1,705 $148.28 $207.66 40% 562 630 12%

- 4%

- 26%

BKW

- Beckley, WV 2,533 $143.86 $201.41 40% 349 711 104%

- 35% 5%

DIK

- Dickinson, ND 23,729 $180.01 $251.57 40% 503 986 96%

- 14%

- 14%

MCE

- Merced, CA 3,724 $111.53 $155.68 40% 383 1077 181%

- 17%

- 17%

KSM

- St. Mary's, AK 12,711 $88.07 $122.14 39% 156 287 84%

- 3% 27%

CIC

- Chico, CA 19,269 $117.64 $162.40 38% 1023 1254 23%

- 6%

- 6%

PGA

- Page, AZ 23,462 $155.74 $213.82 37% 460 1095 138% 67% 62%

SAW

- Marquette, MI 38,294 $197.18 $266.85 35% 911 993 9% #N/A #N/A

GRI

- Grand Island, NE 56,122 $107.02 $144.73 35% 312 959 207%

- 43% 113%

SWF

- Newburgh, NY 185,389 $130.70 $176.33 35% 1072 1092 2%

- 49%

- 65%

HOM

- Homer, AK 39,167 $91.37 $122.89 34% 338 325

- 4%

- 15%

- 9%

CEC

- Crescent City, CA 12,547 $134.90 $181.41 34% 834 928 11%

- 4%

- 4%

COU

- Columbia, MO 41,357 $140.78 $188.53 34% 438 811 85%

- 26% 94%

CRQ

- Carlsbad, CA 48,474 $114.07 $151.77 33% 1016 1609 58% #N/A #N/A

IMT

- Iron Mountain, MI 8,755 $169.37 $223.01 32% 741 552

- 26%

- 45% 45%

GRB

- Green Bay, WI 282,870 $191.44 $251.73 31% 1032 970

- 6%

- 32%

- 39%

## Evolving Trends of U.S. Domestic Airfares 

## 28 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

BPT

- Beaumont/Pt. Arthur, TX 5,571 $225.09 $294.66 31% 897 917 2%

- 60%

- 63%

CRP

- Corpus Christi, TX 313,939 $166.71 $217.65 31% 808 843 4%

- 21%

- 19%

LAR

- Laramie, WY 8,131 $170.29 $222.20 30% 493 780 58%

- 9%

- 5%

VQS

- Vieques, PR 56,266 $97.04 $126.57 30% 408 550 35% 21%

- 9%

ELY

- Ely, NV 534 $118.61 $154.41 30% 229 1265 453% 4% 4%

MCW

- Mason City, IA 6,027 $189.05 $244.05 29% 956 854

- 11%

- 30%

- 53%

GGW

- Glasgow, MT 1,975 $89.11 $114.93 29% 241 236

- 2%

- 7%

- 7%

GBD

- Great Bend, KS 943 $138.25 $177.82 29% 315 998 217%

- 18%

- 18%

SHD

- Shenandoah Valley, VA 15,179 $155.43 $197.79 27% 423 1016 140% 32% 107%

IFP

- Bullhead City, AZ 109,405 $128.14 $162.40 27% 1181 1114

- 6%

- 100%

- 100%

DBQ

- Dubuque, IA 32,389 $179.15 $226.51 26% 969 1029 6%

- 28%

- 34%

BMI

- Bloomington, IL 240,153 $144.83 $182.99 26% 882 897 2%

- 25%

- 22%

MVY

- Martha's Vineyard, MA 50,464 $96.16 $121.41 26% 241 248 3% 3% 4%

HRL

- Harlingen, TX 375,472 $130.59 $164.68 26% 679 701 3%

- 27%

- 28%

ATY

- Watertown, SD 6,296 $183.43 $228.68 25% 443 905 104%

- 27%

- 48%

OME

- Nome, AK 59,807 $153.67 $190.86 24% 499 547 10% 15%

- 1%

RDD

- Redding, CA 29,175 $166.05 $205.47 24% 714 1224 71%

- 46%

- 70%

VIS

- Visalia, CA 3,354 $120.22 $147.58 23% 402 1555 287% 17% 17%

HOT

- Hot Springs, AR 2,452 $90.36 $110.63 22% 241 225

- 6%

- 12%

- 59%

SHR

- Sheridan, WY 12,889 $186.88 $228.36 22% 649 1036 60%

- 50%

- 47%

VCT

- Victoria, TX 4,597 $212.06 $258.71 22% 912 1030 13%

- 40%

- 50%

DDC

- Dodge City, KS 5,784 $166.16 $202.30 22% 481 876 82%

- 24%

- 24%

JHW

- Jamestown, NY 3,173 $190.28 $230.71 21% 761 807 6% 3%

- 42%

CWA

- Wausau, WI 120,449 $209.27 $252.68 21% 1011 1018 1%

- 37%

- 21%

CVN

- Clovis, NM 1,694 $152.97 $184.60 21% 332 775 133%

- 16%

- 16%

FMN

- Farmington, NM 16,337 $178.15 $214.19 20% 507 913 80%

- 25%

- 25%

AOO

- Altoona, PA 3,256 $160.74 $193.22 20% 561 1022 82%

- 16% 11%

VDZ

- Valdez, AK 16,087 $110.92 $133.22 20% 305 273

- 10% 74% 18%

GCK

- Garden City, KS 17,998 $175.06 $209.54 20% 561 948 69%

- 34% 9%

DVL

- Devils Lake, ND 2,976 $292.76 $350.19 20% 683 1045 53% 53%

- 14%

SJT

- San Angelo, TX 56,301 $204.63 $244.23 19% 941 964 2%

- 45%

- 29%

GDV

- Glendive, MT 746 $114.60 $136.68 19% 220 231 5%

- 13%

- 13%

AZO

- Kalamazoo, MI 127,517 $214.22 $254.20 19% 944 937

- 1%

- 38%

- 39%

NYL

- Yuma, AZ 81,371 $213.77 $253.25 18% 1039 1238 19% #N/A #N/A

ABI

- Abilene, TX 74,521 $199.60 $236.04 18% 933 928

- 1%

- 33%

- 26%

RST

- Rochester, MN 105,365 $190.25 $224.79 18% 907 881

- 3%

- 37%

- 45%

JMS

- Jamestown, ND 3,544 $224.69 $265.27 18% 651 902 39% 84% 37%

CDV

- Cordova, AK 16,061 $174.38 $205.35 18% 711 754 6%

- 2%

- 12%

CLL

- College Station, TX 70,352 $195.93 $228.82 17% 991 942

- 5%

- 30%

- 8%

HIB

- Hibbing, MN 11,771 $205.69 $240.12 17% 900 1157 29%

- 25% 11%

DUT

- Dutch Harbor, AK 30,735 $501.63 $582.52 16% 1478 1812 23%

- 60%

- 82%

## Evolving Trends of U.S. Domestic Airfares 

## 29 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

LBL

- Liberal, KS 5,816 $175.66 $203.83 16% 522 772 48% 14% 14%

LNK

- Lincoln, NE 134,772 $198.36 $229.35 16% 868 832

- 4%

- 25%

- 30%

SDY

- Sidney, MT 11,858 $137.68 $158.88 15% 259 381 47% 7% 7%

BRO

- Brownsville, TX 85,416 $218.10 $251.53 15% 1074 1087 1%

- 1% 3%

CMI

- Champaign, IL 86,287 $197.20 $227.19 15% 933 1025 10%

- 35%

- 34%

OGS

- Ogdensburg, NY 5,033 $109.18 $125.69 15% 440 340

- 23%

- 15%

- 60%

WRL

- Worland, WY 2,795 $173.62 $199.70 15% 444 981 121%

- 2%

- 2%

BFL

- Bakersfield, CA 152,431 $220.32 $253.29 15% 1160 1356 17%

- 27%

- 23%

IPT

- Williamsport, PA 25,960 $223.48 $256.66 15% 1076 1148 7%

- 40%

- 43%

CDR

- Chadron, NE 2,037 $157.93 $181.22 15% 448 961 114% 34% 34%

MTJ

- Montrose, CO 75,296 $207.91 $237.54 14% 1199 1182

- 1%

- 34%

- 16%

TXK

- Texarkana, AR 28,080 $250.75 $286.43 14% 879 879 0%

- 44%

- 36%

ACT

- Waco, TX 59,706 $189.15 $215.30 14% 977 943

- 3%

- 39%

- 10%

TVC

- Traverse City, MI 179,879 $210.56 $239.44 14% 1014 1023 1%

- 2%

- 18%

CIU

- Sault Ste. Marie, MI 19,824 $225.35 $256.24 14% 757 1074 42%

- 10% 32%

GGG

- Longview, TX 18,787 $188.87 $214.23 13% 916 885

- 3%

- 38% 1%

PIR

- Pierre, SD 11,740 $215.12 $243.99 13% 637 961 51%

- 2%

- 23%

MSS

- Massena, NY 4,964 $114.22 $129.54 13% 432 399

- 8% 17%

- 45%

ATW

- Appleton, WI 229,246 $201.80 $228.35 13% 964 1018 6%

- 44%

- 26%

UNV

- State College, PA 133,789 $216.90 $245.07 13% 1058 1147 8% #N/A #N/A

OTZ

- Kotzebue, AK 63,032 $146.55 $165.36 13% 411 387

- 6% 45% 3%

GRK

- Killeen, TX 183,501 $226.02 $254.11 12% 1042 1111 7%

- 17%

- 7%

FSM

- Fort Smith, AR 84,751 $220.27 $247.34 12% 872 901 3%

- 31%

- 24%

UNK

- Unalakleet, AK 13,070 $130.40 $146.03 12% 256 350 37% 102% 178%

TYR

- Tyler, TX 71,841 $195.50 $218.35 12% 937 897

- 4%

- 21% 1%

GUC

- Gunnison, CO 31,181 $191.18 $213.32 12% 1050 974

- 7%

- 53%

- 33%

MLU

- Monroe, LA 101,034 $220.74 $246.04 11% 923 907

- 2%

- 35%

- 15%

HXD

- Hilton Head Island, SC 60,372 $199.38 $222.18 11% 810 818 1% #N/A #N/A

EVV

- Evansville, IN 164,681 $212.46 $236.46 11% 821 827 1%

- 39%

- 35%

LSE

- La Crosse, WI 97,319 $239.72 $265.67 11% 1018 989

- 3%

- 15%

- 29%

SBN

- South Bend, IN 299,482 $169.73 $187.40 10% 973 1015 4%

- 36%

- 25%

DRT

- Del Rio, TX 11,632 $223.11 $246.29 10% 1009 1018 1%

- 29%

- 11%

DLG

- Dillingham, AK 28,521 $206.65 $227.76 10% 651 396

- 39%

- 43%

- 23%

TUP

- Tupelo, MS 8,191 $237.21 $261.38 10% 732 454

- 38%

- 46%

- 34%

SPS

- Wichita Falls, TX 38,836 $249.64 $274.37 10% 933 930 0%

- 44%

- 6%

ALS

- Alamosa, CO 6,959 $172.92 $190.02 10% 548 859 57% 13% 13%

CEZ

- Cortez, CO 7,548 $174.95 $192.14 10% 562 1079 92% 22% 22%

LFT

- Lafayette, LA 226,453 $218.27 $239.35 10% 941 951 1%

- 12% 4%

PVC

- Provincetown, MA 11,577 $71.29 $78.09 10% 146 185 27% 0% 0%

TVF

- Thief River Falls, MN 2,819 $188.92 $206.43 9% 602 765 27% 38% 28%

JAC

- Jackson Hole, WY 274,342 $232.36 $253.89 9% 1349 1286

- 5%

- 10%

- 6%

## Evolving Trends of U.S. Domestic Airfares 

## 30 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

ELM

- Elmira, NY 145,262 $181.58 $197.88 9% 1001 1082 8%

- 6% 29%

SVC

- Silver City, NM 1,363 $125.01 $136.21 9% 256 684 167% 7% 7%

AVP

- Wilkes

- Barre/Scranton, PA 219,540 $201.44 $219.42 9% 1170 1129

- 4%

- 2% 5%

IWD

- Ironwood, MI 2,532 $161.64 $175.93 9% 527 941 78%

- 4% 13%

CYS

- Cheyenne, WY 15,010 $206.31 $223.93 9% 635 814 28%

- 19%

- 21%

OLF

- Wolf Point, MT 2,987 $129.29 $140.09 8% 234 383 64%

- 3%

- 3%

HYS

- Hays, KS 9,328 $198.21 $214.72 8% 602 854 42% 51% 51%

OTH

- North Bend, OR 18,283 $171.30 $185.55 8% 653 775 19% 25%

- 35%

AEX

- Alexandria, LA 189,476 $232.44 $251.07 8% 945 924

- 2%

- 22%

- 11%

BFF

- Scottsbluff, NE 9,839 $172.64 $186.39 8% 504 877 74% 37% 37%

PIB

- Laurel/Hattiesburg, MS 13,857 $235.72 $254.43 8% 758 436

- 43%

- 12% 18%

EAR

- Kearney, NE 12,467 $187.21 $201.91 8% 688 908 32% 33%

- 1%

LCH

- Lake Charles, LA 56,762 $232.43 $250.67 8% 932 938 1% 15% 30%

BRD

- Brainerd, MN 15,630 $218.58 $235.66 8% 954 1051 10%

- 64%

- 47%

MFE

- McAllen, TX 327,615 $199.25 $214.76 8% 1032 1049 2%

- 21%

- 22%

SBP

- San Luis Obispo, CA 127,334 $202.88 $218.59 8% 1179 1385 17%

- 30%

- 31%

AKN

- King Salmon, AK 35,803 $224.23 $240.42 7% 642 434

- 32% 41% 17%

VLD

- Valdosta, GA 37,030 $224.33 $240.32 7% 1014 960

- 5%

- 2%

- 5%

LAW

- Lawton, OK 55,678 $247.63 $265.29 7% 972 979 1%

- 20% 18%

PIA

- Peoria, IL 286,372 $175.51 $187.95 7% 1038 995

- 4%

- 1% 1%

HVN

- New Haven, CT 36,971 $189.27 $202.22 7% 1055 1103 5%

- 40%

- 29%

TLH

- Tallahassee, FL 331,197 $202.56 $216.00 7% 804 877 9%

- 35%

- 31%

LRD

- Laredo, TX 102,222 $201.52 $214.05 6% 980 999 2%

- 14%

- 6%

DAB

- Daytona Beach, FL 290,144 $151.87 $161.26 6% 982 958

- 3%

- 25%

- 22%

MBS

- Saginaw, MI 134,571 $198.02 $209.81 6% 1001 968

- 3%

- 7%

- 32%

ALO

- Waterloo, IA 19,470 $214.45 $226.99 6% 977 948

- 3%

- 50%

- 40%

HDN

- Steamboat Springs, CO 99,969 $190.34 $201.13 6% 1205 1150

- 5%

- 33%

- 20%

SHV

- Shreveport, LA 276,435 $228.95 $241.62 6% 932 952 2%

- 23%

- 15%

LAN

- Lansing, MI 200,703 $180.02 $188.94 5% 996 793

- 20%

- 16%

- 21%

BRW

- Barrow, AK 43,673 $235.39 $246.77 5% 721 835 16% 14% 0%

BIS

- Bismarck, ND 239,014 $229.48 $240.20 5% 1018 1023 0% 24% 6%

RDM

- Redmond, OR 229,736 $164.18 $171.75 5% 933 1014 9%

- 34%

- 14%

ERI

- Erie, PA 106,084 $178.04 $185.63 4% 881 960 9%

- 35%

- 30%

LWS

- Lewiston, ID 62,197 $180.41 $187.80 4% 769 839 9%

- 44%

- 8%

ENA

- Kenai, AK 99,814 $106.17 $110.19 4% 313 287

- 8% 17% 5%

PUW

- Pullman, WA 38,547 $156.09 $161.84 4% 527 637 21%

- 36% 31%

ANI

- Aniak, AK 15,220 $115.67 $119.87 4% 225 241 7%

- 33%

- 25%

STS

- Santa Rosa, CA 105,728 $125.52 $130.00 4% 525 543 3% 92% 97%

JBR

- Jonesboro, AR 4,730 $143.38 $148.42 4% 335 852 154% 50%

- 26%

ADQ

- Kodiak, AK 78,749 $200.27 $207.12 3% 722 784 9% 57%

- 4%

PLN

- Pellston, MI 24,864 $254.25 $262.67 3% 917 996 9%

- 34%

- 19%

## Evolving Trends of U.S. Domestic Airfares 

## 31 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

BGM

- Binghamton, NY 102,436 $195.97 $202.44 3% 1116 1183 6%

- 20%

- 21%

BRL

- Burlington, IA 7,887 $167.40 $172.77 3% 697 899 29% 208% 54%

FHR

- Friday Harbor, WA 7,802 $45.11 $46.55 3% 63 77 22% #N/A #N/A

EGE

- Vail/Eagle, CO 167,901 $223.58 $230.61 3% 1262 1301 3%

- 36%

- 21%

ROA

- Roanoke, VA 315,548 $209.14 $214.65 3% 880 906 3%

- 20%

- 17%

BQK

- Brunswick, GA 31,284 $212.86 $217.18 2% 926 883

- 5%

- 4% 11%

PQI

- Presque Isle, ME 12,412 $270.91 $276.40 2% 1155 878

- 24% 18% 18%

PPG

- Pago Pago, TR 49,213 $611.07 $620.65 2% 3618 3541

- 2% 7% 7%

BFD

- Bradford, PA 2,310 $211.19 $212.83 1% 792 926 17%

- 31%

- 61%

DLH

- Duluth, MN 158,569 $202.92 $204.32 1% 1086 1060

- 2%

- 1%

- 22%

MOB

- Mobile, AL 277,430 $239.54 $241.01 1% 937 952 2%

- 13%

- 11%

RAP

- Rapid City, SD 252,578 $233.34 $234.77 1% 995 986

- 1% 6% 1%

MEI

- Meridian, MS 14,432 $284.48 $286.17 1% 866 400

- 54% 3% 3%

BFI

- Seattle, WA 23,072 $47.27 $47.45 0% 71 74 4%

- 60%

- 62%

MHK

- Manhattan, KS 68,955 $224.76 $225.55 0% 648 822 27% 32% 238%

SPI

- Springfield, IL 64,872 $191.15 $191.63 0% 895 918 3%

- 19%

- 4%

DUJ

- Du Bois, PA 5,074 $209.94 $210.46 0% 898 1060 18% 15% 15%

MOT

- Minot, ND 222,159 $277.20 $277.86 0% 1138 1109

- 3% 268% 144%

PGV

- Greenville, NC 61,968 $190.28 $190.63 0% 818 850 4%

- 1% 6%

CHA

- Chattanooga, TN 313,783 $193.97 $192.67

- 1% 786 776

- 1%

- 8%

- 3%

LMT

- Klamath Falls, OR 15,237 $190.07 $188.79

- 1% 658 1107 68%

- 28%

- 42%

SUX

- Sioux City, IA 27,168 $212.63 $211.19

- 1% 879 827

- 6%

- 63%

- 57%

SUN

- Sun Valley, ID 47,734 $195.93 $194.38

- 1% 789 852 8%

- 49%

- 46%

FLG

- Flagstaff, AZ 62,472 $208.34 $206.45

- 1% 998 972

- 3% 19% 40%

JNU

- Juneau, AK 301,681 $203.18 $200.96

- 1% 1020 938

- 8%

- 26%

- 10%

RKS

- Rock Springs, WY 28,270 $225.46 $222.67

- 1% 654 880 35% 35% 83%

RIW

- Riverton, WY 13,136 $229.72 $226.85

- 1% 704 974 38% 1%

- 9%

FWA

- Fort Wayne, IN 280,732 $207.85 $205.06

- 1% 954 958 0%

- 33%

- 22%

EYW

- Key West, FL 370,637 $197.05 $193.89

- 2% 934 1023 10%

- 28% 12%

ASE

- Aspen, CO 214,892 $255.19 $249.64

- 2% 1143 1116

- 2%

- 2% 16%

FAR

- Fargo, ND 370,099 $232.90 $227.79

- 2% 1057 1112 5% 15% 12%

ACK

- Nantucket, MA 178,918 $87.55 $85.56

- 2% 176 100

- 43%

- 17%

- 13%

PKB

- Parkersburg, WV 8,292 $227.88 $222.37

- 2% 636 727 14% 52%

- 15%

MGM

- Montgomery, AL 182,313 $236.02 $229.80

- 3% 893 922 3%

- 1%

- 5%

CRW

- Charleston, WV 270,537 $212.92 $206.86

- 3% 888 916 3%

- 27%

- 13%

GPI

- Kalispell/Glacier, MT 192,437 $231.82 $225.14

- 3% 1201 1177

- 2% #N/A #N/A

ABY

- Albany, GA 33,494 $254.61 $247.15

- 3% 880 868

- 1%

- 24%

- 10%

SGF

- Springfield, MO 364,665 $211.12 $204.81

- 3% 923 975 6%

- 31%

- 28%

PSE

- Ponce, PR 95,787 $149.55 $144.59

- 3% 1500 1384

- 8%

- 68%

- 29%

AIA

- Alliance, NE 1,592 $155.71 $150.46

- 3% 404 755 87%

- 12%

- 12%

MFR

- Medford, OR 313,638 $180.16 $173.84

- 4% 1021 1007

- 1%

- 39%

- 18%

## Evolving Trends of U.S. Domestic Airfares 

## 32 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

GNV

- Gainesville, FL 190,324 $211.49 $203.83

- 4% 942 959 2% 18% 15%

HLN

- Helena, MT 95,374 $245.95 $236.83

- 4% 978 1154 18%

- 19% 0%

EAT

- Wenatchee, WA 51,347 $172.27 $165.79

- 4% 814 885 9% 0% 40%

EWN

- New Bern, NC 125,873 $204.07 $195.95

- 4% 974 1008 4% 11% 9%

YKM

- Yakima, WA 57,673 $189.42 $181.60

- 4% 956 955 0%

- 14%

- 11%

GTR

- Columbus, MS 38,693 $258.22 $246.60

- 4% 841 849 1% 0% 18%

ITH

- Ithaca, NY 117,045 $203.99 $194.57

- 5% 992 1226 24%

- 5% 7%

IDA

- Idaho Falls, ID 160,454 $213.50 $202.87

- 5% 911 962 6%

- 25%

- 12%

BET

- Bethel, AK 148,168 $154.79 $146.77

- 5% 466 365

- 22% 200% 114%

TOL

- Toledo, OH 78,755 $171.93 $162.74

- 5% 855 886 4%

- 75%

- 64%

YNG

- Youngstown, OH 40,102 $85.89 $81.07

- 6% 861 895 4% 213% 218%

MSL

- Muscle Shoals, AL 4,160 $184.99 $173.83

- 6% 465 232

- 50%

- 35%

- 13%

CNM

- Carlsbad, NM 2,776 $140.03 $131.47

- 6% 263 302 15% 36%

- 34%

SBY

- Salisbury, MD 76,370 $179.13 $167.80

- 6% 920 981 7%

- 19%

- 6%

DHN

- Dothan, AL 46,452 $335.78 $314.00

- 6% 977 996 2%

- 17%

- 15%

SGU

- St. George, UT 53,977 $113.99 $106.58

- 6% 547 569 4%

- 44%

- 19%

IRK

- Kirksville, MO 5,744 $128.45 $119.69

- 7% 349 387 11%

- 12%

- 58%

CHO

- Charlottesville, VA 226,396 $221.26 $205.26

- 7% 926 997 8%

- 10%

- 1%

GJT

- Grand Junction, CO 217,369 $222.32 $206.19

- 7% 832 970 16%

- 12% 18%

TBN

- Ft. Leonard Wood, MO 7,894 $216.01 $199.99

- 7% 725 563

- 22% 319% 99%

BQN

- Aguadilla, PR 215,448 $163.85 $151.67

- 7% 1451 1413

- 3% 3% 6%

MSO

- Missoula, MT 303,886 $217.91 $201.37

- 8% 1088 1076

- 1%

- 28%

- 12%

JST

- Johnstown, PA 6,986 $228.13 $210.47

- 8% 924 1123 21%

- 17%

- 17%

GST

- Gustavus, AK 9,509 $135.36 $123.49

- 9% 605 46

- 92% 11% 27%

LBF

- North Platte, NE 9,017 $220.04 $200.34

- 9% 630 819 30% 1% 1%

MCN

- Macon, GA 843 $248.14 $225.52

- 9% 955 816

- 15% 36%

- 80%

SLK

- Saranac Lake, NY 6,018 $161.58 $146.02

- 10% 550 517

- 6%

- 9%

- 57%

SCC

- Prudhoe Bay/Deadhors e , AK 43,837 $313.11 $282.35

- 10% 626 454

- 28%

- 12%

- 19%

AVL

- Asheville, NC 318,371 $217.80 $196.25

- 10% 878 869

- 1%

- 4% 6%

ALW

- Walla Walla, WA 31,832 $168.17 $151.21

- 10% 676 716 6%

- 41% 25%

MRY

- Monterey, CA 196,268 $220.25 $197.53

- 10% 1184 1148

- 3%

- 30%

- 17%

YAK

- Yakutat, AK 10,100 $186.57 $167.06

- 10% 797 489

- 39% 0%

- 10%

LUP

- Kalaupapa/ Molokai, HI 3,186 $44.37 $39.64

- 11% 41 164 295% 1% 1%

TEX

- Telluride, CO 7,828 $265.65 $236.25

- 11% 828 1052 27%

- 46%

- 53%

COD

- Cody, WY 28,551 $238.79 $212.29

- 11% 958 933

- 3%

- 31%

- 5%

RFD

- Rockford, IL 106,412 $123.57 $109.84

- 11% 1190 1190 0%

- 46%

- 20%

DRO

- Durango, CO 186,567 $220.53 $194.41

- 12% 926 832

- 10% 3% 49%

INL

- International Falls, MN 15,240 $249.56 $219.00

- 12% 880 628

- 29%

- 39%

- 18%

TRI

- Tri

- Cities, TN 206,784 $229.17 $201.10

- 12% 838 879 5%

- 33%

- 20%

PSC

- Pasco, WA 329,833 $211.78 $185.09

- 13% 1079 1077 0%

- 11% 23%

LWB

- Greenbrier, WV 9,566 $247.76 $216.23

- 13% 713 571

- 20%

- 33%

- 10%

## Evolving Trends of U.S. Domestic Airfares 

## 33 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

SAF

- Santa Fe, NM 47,847 $250.57 $218.34

- 13% 857 963 12% 32% 222%

FAY

- Fayetteville, NC 255,247 $257.76 $224.29

- 13% 933 1051 13% 24% 31%

GAL

- Galena, AK 14,563 $131.25 $113.91

- 13% 240 220

- 8% 1%

- 16%

PIH

- Pocatello, ID 22,214 $185.85 $160.88

- 13% 549 572 4%

- 50%

- 41%

SMX

- Santa Maria, CA 44,737 $175.92 $152.24

- 13% 944 1018 8%

- 20%

- 14%

CMX

- Hancock, MI 25,545 $214.07 $184.96

- 14% 1082 974

- 10%

- 32%

- 14%

CLM

- Port Angeles, WA 5,853 $49.83 $42.80

- 14% 69 70 2%

- 66%

- 67%

MWA

- Marion, IL 11,354 $136.79 $117.19

- 14% 390 395 1% 98%

- 6%

KTN

- Ketchikan, AK 103,136 $227.46 $194.40

- 15% 980 575

- 41% 16% 23%

CSG

- Columbus, GA 74,336 $310.53 $264.85

- 15% 958 975 2% 51% 24%

OAJ

- Jacksonville, NC 174,276 $255.14 $217.53

- 15% 1027 1048 2% 16% 22%

HRO

- Harrison, AR 5,347 $131.23 $111.49

- 15% 279 207

- 26% 28%

- 40%

SIT

- Sitka, AK 68,218 $204.80 $173.03

- 16% 971 517

- 47%

- 6%

- 6%

LYH

- Lynchburg, VA 79,889 $253.45 $212.72

- 16% 928 977 5%

- 12% 0%

ELD

- El Dorado, AR 3,059 $137.36 $115.16

- 16% 254 219

- 14% 0%

- 52%

GTF

- Great Falls, MT 186,776 $232.95 $195.17

- 16% 1078 1032

- 4%

- 8%

- 7%

BTM

- Butte, MT 20,895 $223.93 $186.20

- 17% 832 762

- 8%

- 55%

- 63%

APN

- Alpena, MI 13,011 $247.15 $205.21

- 17% 760 654

- 14%

- 43%

- 16%

SCK

- Stockton, CA 63,149 $63.70 $52.79

- 17% 359 564 57% 75% 78%

EAU

- Eau Claire, WI 22,871 $195.84 $161.98

- 17% 980 818

- 17%

- 63%

- 45%

GCC

- Gillette, WY 32,714 $250.65 $206.83

- 17% 695 868 25% 28% 35%

FLO

- Florence, SC 67,745 $230.71 $189.81

- 18% 830 866 4%

- 11% 2%

PBG

- Plattsburgh, NY 112,493 $155.26 $126.31

- 19% 985 1270 29% 186% 1098%

HNH

- Hoonah, AK 9,564 $46.31 $37.55

- 19% 53 41

- 23%

- 27% 5%

GLH

- Greenville, MS 5,181 $242.87 $196.27

- 19% 809 516

- 36% 15% 53%

GFK

- Grand Forks, ND 137,923 $262.41 $211.88

- 19% 1088 1161 7% 33% 16%

AGS

- Augusta, GA 271,691 $252.17 $203.31

- 19% 908 901

- 1% 32% 52%

TWF

- Twin Falls, ID 26,059 $190.59 $153.42

- 20% 591 752 27%

- 46%

- 45%

MLB

- Melbourne, FL 215,300 $204.33 $164.35

- 20% 1069 975

- 9% 19% 30%

CKB

- Clarksburg, WV 8,921 $294.31 $236.00

- 20% 939 768

- 18% 18% 25%

EKO

- Elko, NV 33,308 $202.35 $160.99

- 20% 567 537

- 5%

- 45%

- 45%

MKG

- Muskegon, MI 17,814 $190.03 $150.84

- 21% 874 740

- 15%

- 69%

- 41%

PAH

- Paducah, KY 20,734 $208.01 $164.68

- 21% 687 819 19%

- 33%

- 1%

CPR

- Casper, WY 88,011 $260.47 $204.23

- 22% 901 845

- 6%

- 41%

- 12%

RUT

- Rutland, VT 5,909 $157.98 $123.48

- 22% 460 492 7% 69%

- 8%

PDT

- Pendleton, OR 5,066 $126.68 $99.00

- 22% 342 182

- 47% 16%

- 72%

TNI

- Tinian, TR 10,203 $39.16 $30.48

- 22% 15 14

- 6% #N/A #N/A

SLN

- Salina, KS 2,919 $116.24 $90.00

- 23% 296 161

- 46% 24%

- 41%

CDC

- Cedar City, UT 15,881 $126.67 $97.07

- 23% 435 398

- 9%

- 59%

- 9%

PUB

- Pueblo, CO 9,812 $168.70 $128.80

- 24% 537 864 61% 98% 134%

UIN

- Quincy, IL 10,165 $156.87 $119.75

- 24% 517 368

- 29% 56%

- 26%

## Evolving Trends of U.S. Domestic Airfares 

## 34 Airport Enplaned Pax

(2012) Avg. One

- Way

Fare (2007) Avg. One

- Way

Fare (2012) % Change

Fares 07

- 12 Avg. Itinerary

Dist. (2007) Avg. Itinerary

Dist. (2012) % Change

Dist. 07

- 12 % Change

Flights 07

- 12 % Change

Seats 07

- 12

FNL

- Fort Collins, CO 34,817 $81.31 $61.52

- 24% 628 629 0% 2% 2%

AUG

- Augusta, ME 4,791 $208.50 $157.59

- 24% 764 967 27%

- 20%

- 62%

STX

- St. Croix, VI 200,727 $219.13 $162.47

- 26% 1175 999

- 15%

- 15%

- 17%

BHB

- Bar Harbor, ME 8,862 $239.25 $176.94

- 26% 684 647

- 5%

- 19%

- 15%

MGW

- Morgantown, WV 9,534 $270.35 $198.86

- 26% 760 892 17%

- 2%

- 2%

CGI

- Cape Girardeau, MO 6,226 $173.88 $127.74

- 27% 767 379

- 51% 292% 85%

LEB

- Lebanon, NH 10,189 $173.21 $125.95

- 27% 477 431

- 10% 92%

- 27%

LNS

- Lancaster, PA 5,779 $126.94 $91.05

- 28% 589 416

- 29% 135% 12%

HTS

- Huntington, WV 105,546 $185.34 $128.86

- 30% 767 776 1%

- 5% 41%

EWB

- New Bedford, MA 12,254 $48.36 $33.49

- 31% 50 49

- 3% 29% 29%

BJI

- Bemidji, MN 22,374 $251.08 $170.89

- 32% 1052 715

- 32%

- 60%

- 38%

ABR

- Aberdeen, SD 24,877 $260.38 $175.53

- 33% 882 713

- 19%

- 69%

- 52%

RHI

- Rhinelander, WI 11,119 $209.38 $135.59

- 35% 930 635

- 32%

- 75%

- 58%

HYA

- Hyannis, MA 95,693 $57.74 $35.32

- 39% 53 37

- 30%

- 22%

- 27%

PSG

- Petersburg, AK 18,800 $201.62 $122.52

- 39% 835 351

- 58%

- 27%

- 14%

MKK

- Molokai/Hoolehua, HI 72,421 $72.90 $44.00

- 40% 327 108

- 67%

- 7%

- 18%

BID

- Block Island, RI 10,643 $49.83 $30.00

- 40% 17 17 0% 19% 19%

RKD

- Rockland, ME 8,160 $220.81 $131.13

- 41% 785 565

- 28%

- 22%

- 63%

OWB

- Owensboro, KY 30,795 $165.96 $87.08

- 48% 785 681

- 13% 509% 984%

WRG

- Wrangell, AK 11,434 $193.65 $100.54

- 48% 743 199

- 73% 0%

- 12%

LNY

- Lanai/Lanai, HI 45,692 $193.45 $88.86

- 54% 1038 283

- 73%

- 15%

- 22%

AHN

- Athens, GA 1,694 $248.29 $109.38

- 56% 786 260

- 67% 4%

- 55%

MKL

- Jackson, TN 2,037 $173.78 $75.00

- 57% 519 130

- 75% 539% 214%

HGR

- Hagerstown, MD 10,207 $167.59 $70.93

- 58% 565 767 36% 194% 132%

LBE

- Latrobe, PA 79,531 $175.20 $62.10

- 65% 871 871 0%

- 19% 275%

Grand Total (Non

- Hubs) 22,873,244 $184.44 $190.34 3.2 % 742.2 814.9 9.8 %

- 13.9 %

- 10.6 %

## Certificate of Service

I hereby certify that a copy of the foregoing Application of JetBlue Airways Corporation was

served this 25th day of March, 2014 via email transmission on the following persons:

robert.wirick@aa.com

francis.heil@aa.com

howard.kass@aa.com

sascha.vanderbellen@delta.com

jeff.morgan@delta.com

bob.kneisley@wnco.com

leslie.abbott@wnco.com

Charles.donley@squiresanders.com

marshall.sinick@squiresanders.com

robert.cohn@hoganlovells.com

patrick.rizzi@hoganlovells.com

john.frederic ksen@suncountry.com

thomas.ting@suncountry.com

dan.weiss@united.com

steve.morrissey@united.com

jonathan.linde@united.com

karine.faden@united.com

lhalloway@crowell.com

gmurphy@crowell.com

john.varley@virginamerica.com

jegillick@zsrlaw.com

jhfoglia@zsrlaw.com

anita.mosner@hklaw.com

Jennifer.nowak@hklaw.com

mike.morisi@flypex.com

shawn.voyles@flypex.com

dhernandez@vedderprice.com

nssparks@fedex.com

sllunsford@fedex.com

jyoung@yklaw.com

lgrunewald@yklaw.com

steve.grossman@flyjacksonville.com

q uince.brinkley@mwaa.com Susan.Kurland@dot.gov

Esta.Rosenberg@dot.gov

Todd.Homan@dot.gov

brian.ctr.meehan@ faa .gov

fbavent@airlineinfo.com

info@airlineinfo.com

and via First Class Mail:

Mayor Vincent Gray

Executive Office of the Mayor

1350 Pennsylvania Aven ue, NW

Suite 316

Washington, DC 20004

Mayor Alvin Brown

Mayor’s Office

City Hall at St. James Building

117 W. Duval St Suite 400

Jacksonville, FL 32202

John Potter

President and CEO

Metropolitan Washington Airports Authority

1 Aviation Circle

Washington, DC 20001

Arnaldo Deleo

General Manager Aviation Bureau

Port Authority

Government of Puerto Rico

PO Box 362829

San Juan, PR 00936

- 2829

___________ /s/

______________________ Michael R. Radlick