BEFORE THE

OFFICE OF THE SECRETARY

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

_____________________________________

)

Applications of )

)

SOUTHWEST AIRLINES CO. )

JETBLUE AIRWAYS CORP. ) Docket DOT-OST-2000-7182

US AIRWAYS, INC. )

)

For Inside Perimeter Slot Exemptions )

pursuant to 49 U.S.C. § 41718(b) )

_____________________________________ )

ANSWER OF

SOUTHWEST AIRLINES CO.

Communication with respect to this 

 document should be addressed to:

Ron Ricks Robert W. Kneisley

 Executive Vice President -- Associate General Counsel

 Chief Legal and Regulatory Officer Leslie C. Abbott

Madeleine Johnson Senior Attorney

 Vice President General Counsel SOUTHWEST AIRLINES CO.

SOUTHWEST AIRLINES CO. 1901 L Street, NW

2702 Love Field Drive Suite 640

Dallas, TX 75235-1611 Washington, DC 20036

 bob.kneisley@wnco.com

 (202) 263-6284

December 19, 2012
1

BEFORE THE

OFFICE OF THE SECRETARY

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

_____________________________________

)

Applications of )

)

SOUTHWEST AIRLINES CO. )

JETBLUE AIRWAYS CORP. ) Docket DOT-OST-2000-7182

US AIRWAYS, INC. )

)

For Inside Perimeter Slot Exemptions )

pursuant to 49 U.S.C. § 41718(b) )

_____________________________________ )

ANSWER OF

SOUTHWEST AIRLINES CO.

On November 13, 2012, the Department of Transportation (“DOT” or 

“Department”) established a slot exemption proceeding pursuant to 49 U.S.C. § 

41718(b) requesting applications from carriers for two AIR-21 slot exemptions 

previously held by Spirit Airlines. These slot exemptions authorize service to a medium 

hub or smaller airport within the 1,250-mile perimeter established for civil operations at 

Ronald Reagan Washington National Airport (DCA) under Title 49 U.S.C. § 49109. 

Southwest Airlines, JetBlue Airways, and US Airways filed responsive 

applications.1 Southwest, a limited incumbent carrier at DCA, proposes to initiate largejet, low-fare service between DCA and Houston Hobby Airport (HOU), in direct 

competition with United Airlines’ monopoly between Houston Intercontinental Airport 

(IAH) and DCA, one of DCA’s largest and most over-priced monopoly markets.

 

1 Common names of airlines are used.
2

A review of the key aspects of each carrier’s application makes clear that 

Southwest’s service proposal for DCA-HOU is materially superior to those of both 

JetBlue to serve Jacksonville (JAX) and US Airways to serve Oklahoma City (OKC):2

Southwest

HOU

JetBlue

JAX

US Airways

OKC

1. Number of AIR-21 criteria 

satisfied (maximum of four)

3

 3 2 1

2. Proposed aircraft type and size B737-700

143 seats

A320

150 seats

E-190 (RJ)

99 seats

3. Total new passengers

generated annually4105,382 69,315 8,919

4. Annual consumer fare savings5$19.1 

Million

$10.4

Million

$0

5. Proposed DCA nonstop fare 

and fare per mile6

 

$207

17.0¢

$141

22.2¢

$270

23.3¢

6. Connecting and one-stop cities

to be served7

11 1 0

7. Current DCA slots held by 

applicant830 36 472

 

2

Southwest retained the Campbell-Hill Aviation Group, LLC to perform economic analysis of its DCAHOU proposal, as set forth in Southwest’s Application. Campbell-Hill has also estimated fares, traffic and 

consumer benefits for JetBlue (Appendix 2 & Appendix 3) and US Airways (Exhibit R-20 and Appendix 1) 

based on information contained in each of those carriers’ applications. 

3

Exhibit WN-R-1. Applicants are only able to satisfy a maximum of four of the five AIR-21 criteria 

because providing “competitive nonstop air transportation on a monopoly nonstop route to DCA,” is 

mutually exclusive with providing nonstop DCA service to a community “without existing nonstop air 

transportation to DCA.”

4

Exhibit WN-R-2

5

Exhibit WN-R-3

6

Exhibit WN-R-4 

7

Exhibit WN-R-5

8

Exhibit WN-R-6
3

When scored against the AIR-21 selection criteria as well as considered side-byside for substance and public benefits, Southwest’s proposal stands out as by far the 

strongest and most beneficial to consumers. JetBlue proposes service to JAX, a market 

that is already well-served with nonstop service from DCA today in relation to its size. 

Moreover, current average fares in the DCA-JAX market are only slightly above the 

DCA average for routes of the same distance, whereas fares between DCA and 

Houston average 44% above the DCA average for the same distance. US Airways

proposes high fare, small aircraft service to OKC. Its proposal meets only one AIR-21 

factor, and because US Airways proposes no fare savings its traffic stimulation is 

negligible. 

Southwest has provided detailed economic analysis and forecasts to the 

Department and the parties that estimate the public benefits of its proposed DCA-HOU

service. These analyses demonstrate that Southwest’s proposal will generate over $19 

million in annual consumer savings for local DCA-Houston passengers while stimulating 

the markets by an additional 105,000 annual passengers.9 With service on its 143-seat 

B737-700 aircraft, Southwest forecasts that it will carry over 88,000 passengers 

between HOU and DCA in the first normalized year.10 By contrast, neither JetBlue nor 

US Airways provided economic analysis or traffic forecasts relevant to the DOT’s 

evaluation, which renders their claims of public benefits impossible to substantiate and 

therefore unpersuasive. In any case, the large public benefits and consumer savings 

that are fully explained and documented in Southwest’s proposal dwarf any reasonable 

estimate of benefits that JetBlue or US Airways could conceivably generate.

 

9

See Exhibits WN-117 and WN-121. 

10 See Exhibit WN-117. Includes zero fare passengers in all onboard passenger comparisons in this 

Answer. 
4

I. Southwest’s HOU Service Will Stimulate Vastly More Traffic and Produce 

Millions More in Annual Consumer Benefits than JetBlue’s JAX Proposal. 

Houston suffers from dramatically higher DCA nonstop fares than Jacksonville. 

United currently charges monopoly fares in the DCA-Houston nonstop market that 

average 44% more than the DCA average fare for that distance (Exhibit WN-R-7). On 

the other hand, the average nonstop fare in DCA-JAX by the incumbent carrier is only 

5% above the DCA average fare for that distance (Exhibit WN-R-7). Because the 

monopoly fare in the DCA-Houston market is so much higher than in the DCA-JAX 

market, Southwest’s proposal will lower fares to a much greater extent – and in turn will 

stimulate 52% more traffic than JetBlue (Exhibit WN-R-8). 

In the first normalized year of service Campbell-Hill estimates that Southwest will 

stimulate traffic by more than 105,000 new passengers (Exhibit WN-R-8). In 

comparison, JetBlue’s fare proposal would generate approximately 69,000 new 

passengers, 34% less than Southwest (Exhibit WN-R-8). In terms of its own traffic, 

Southwest will carry 88,392 local DCA passengers in the first normalized year. Based 

on JetBlue’s stated assumptions, Campbell-Hill estimates that it would carry 67,104 

local on-board DCA passengers. 11 Southwest will therefore carry 32% more 

passengers in the DCA local market than JetBlue (Exhibit WN-R-9). 

Most significant to this proceeding, Campbell-Hill estimates that Southwest will 

generate annual consumer benefits (fare savings) of $19.1 million for DCA-HOU local 

O&D passengers (Exhibit WN-105). These passenger benefits would be $8.7 million, or 

 

11 Campbell-Hill estimates that with a 30% fare reduction and 50% traffic response (undocumented 

assumptions from JetBlue’s Application), it will carry a total of 67,104 passengers and produce a load 

factor of 61%. 
5

84% more, than JetBlue’s expected benefits (Exhibit WN-R-10). JetBlue’s Application 

suggests there may be some one-stop flow traffic in the DCA-SJU market available to 

support its DCA-JAX proposal. However, this is unlikely since JetBlue already serves 

San Juan nonstop from DCA (Exhibit WN-R-11). In contrast, Southwest would provide 

one-stop, same plane through service to Albuquerque, New Mexico (ABQ), a beyond 

perimeter city without current nonstop service to DCA.

12

 In addition, Southwest would 

provide convenient connecting service to ten additional cities in four states, only two of 

which have nonstop access to DCA today. Clearly the consumer benefits of 

Southwest’s HOU proposal are far greater than those of JetBlue’s JAX proposal. 

II. Houston Currently Has Less Nonstop DCA Service than JAX Based on 

Population and Suffers from Vastly Higher Fares, Making HOU Much More 

Deserving of New DCA Service. 

Southwest’s proposal is also far superior to JetBlue’s based on a comparison of 

the two markets. First, the Greater Houston region is huge, with a metropolitan 

population of 6.1 million residents – the 9

th largest in the United States. 13

 By 

comparison, the Jacksonville metropolitan area has 1.4 million residents – 41st largest in 

the U.S.14 Second, despite its size, the Washington-Houston market has fewer flights

and seats by a wide margin than Jacksonville in relation to the respective populations of 

Houston and Jacksonville (Exhibit WN-R-12). Specifically, Houston has 125% more 

residents per DCA aircraft departure than JAX. Similarly, Houston has 41% more 

residents per DCA seat departure than JAX. Therefore, Southwest’s proposed service 

 

12 Service would begin in 2013; the consumer benefits from the ABQ one-stop service will be significant 

but are not included in Campbell-Hill’s public benefits calculation. 

13 U.S. Census Bureau statistics (2010).

14 Id. 
6

would benefit a significantly larger population and one that is more disadvantaged in 

terms of nonstop access to DCA than JetBlue’s proposed service. 

Furthermore, even though high monopoly fares in the DCA-Houston market have 

undoubtedly suppressed demand, that market is still more than twice the size of the 

DCA-JAX market (Exhibit WN-R-13). Southwest’s service to Houston will therefore best 

leverage the two slot exemptions at issue for the benefit of the traveling public by 

serving a much larger market with greater unmet needs than JetBlue’s proposal. 

III. Southwest’s DCA-HOU Service Proposal is Far Superior to US Airways’ 

High-Fare, Small Aircraft Proposal to Serve OKC.

US Airways’ proposal for DCA-OKC regional jet service meets only one of the 

four relevant AIR-21 criteria. Further and not surprisingly, US Airways concedes that it 

does not intend to reduce fares. Therefore, its high-fare, small aircraft proposal will 

produce only minimal competitive benefits and no low fares. 

Consistent with US Airways’ business model for DCA, it proposes service with a 

99-seat regional jet (RJ). Southwest, on the other hand, proposes to use a 143-seat 

B737-700 mainline aircraft that will provide 44% more seat capacity than US Airways 

(Exhibit WN-R-14). Spirit had operated a 145-seat A319 with the slot exemptions at 

issue in this proceeding (DCA-FLL), so US Airways’ proposal would eliminate 32% of 

the seat capacity previously operated by Spirit (Exhibit WN-R-15). 

The US Airways proposal offers no savings whatsoever from the prevailing 

average one-way fare in the DCA-OKC market of $270

15 and no corresponding 

consumer benefits (Exhibit WN-R-16). In contrast, Southwest proposes to reduce the 

 

15 Excludes all taxes and government charges but includes average per-person checked baggage and 

rebooking/change fees based on DOT Form-41 data.
7

average nonstop, one-way fare in the DCA-Houston market from $334 to $207, a 38% 

fare reduction for consumers. As shown in Exhibit WN-R-17, Southwest’s proposal will 

produce over $19 million per year in fare savings to consumers, compared to zero fare

savings for US Airways. US Airways’ high fare proposal in this case is entirely 

consistent with its general pattern of monopoly pricing at DCA. Exhibit WN-R-18 plots 

US Airways’ average fares in each of its DCA monopoly markets against Southwest’s 

BWI fare curve. As shown, all of US Airways’ monopoly fares are higher than the 

Southwest fare curve, and some of them are more than double Southwest’s BWI fares. 

It is not surprising, therefore, that US Airways would seek to provide monopoly RJ 

service on yet another DCA route and charge consumers its prevailing high fares. 

IV. Southwest’s Low-Fare, Large Aircraft Proposal Will Stimulate Over Five 

Times More New Traffic than US Airways’ High-Fare, Small Aircraft 

Proposal. 

Unlike US Airways and JetBlue, Southwest prepared a detailed traffic forecast for 

this proceeding. Because the other applicants did not do so, Campbell-Hill combined 

their stated assumptions with the model it used to derive Southwest’s forecasts, in order 

to estimate the traffic and benefits from the proposals and compare them to Southwest 

on an applies-to-apples basis. Because US Airways proposes no reduction in fares and 

service with only a small aircraft, Campbell-Hill estimates that it will achieve traffic 

stimulation of only 8,919 annual passengers, less than 9% of Southwest’s traffic 

stimulation in the DCA-HOU market of 105,382 annual passengers (Exhibit WN-R-19).16 

 

16 In the Department’s most recent inside-perimeter slot exemption proceeding, Southwest submitted an 

application to serve DCA-OKC with a low-fare, large aircraft proposal that would have produced 54,834 

annual new passengers and $8.2 million in fare savings. See Application of Southwest Airlines Co., filed 

in this docket on March 5, 2012. In contrast, US Airways now offers no fare savings and only small aircraft 

(RJ) service to serve the same city pair. 
8

Furthermore, Southwest will carry 88,392 passengers onboard its DCA-HOU 

flights, while US Airways’ proposal assumes it will carry only 56,000 passengers (Exhibit 

WN-R-20). However, this figure significantly overstates the number of local DCA 

passengers US Airways would likely carry. That is because, on average, 37% of US 

Airways’ DCA traffic consists of connecting or through passengers who are merely 

transiting DCA on their way to or from a different airport (Exhibit WN-R-20). This means 

that only 63%, or 35,280, of US Airways’ total OKC-DCA passengers would actually be 

DCA O&Ds. The other 37%, or 20,720 passengers, that US Airways would carry from 

OKC would only be passing through DCA on their way to other destinations. In 

contrast, all of Southwest’s 88,392 passengers will be local to and from DCA (Exhibit 

WN-R-20). 

Finally, US Airways’ reference to a “conditional” OKC-CLT roundtrip is totally 

irrelevant to this case. US Airways has been free to initiate service between OKC and 

CLT at any time, but has not done so. Moreover, due to the geographic location of OKC 

and CLT, any future OKC-CLT service would produce no traffic to support the DCAOKC route (Exhibit WN-R-21). Thus, US Airways’ suggestion of a possible OKC-CLT 

service has nothing whatsoever to do with this proceeding. 

V. US Airways Wastes an Enormous Amount of Scarce Capacity at DCA, and 

Does Not Need or Deserve Slot Exemptions.

US Airways has a massive holding of 472 DCA slots, constituting 54.3% of the 

airport’s total. It does not need, or deserve, an allocation of valuable AIR-21 slot 

exemptions to operate DCA-OKC service. To the contrary, if US Airways really wants to 

serve the OKC-DCA market, it can easily do so with its existing cache of slots. Not only 

 
9

could US Airways serve this route using a mere 0.4% of its holdings (Exhibit WN-R-22)

but it operates many high frequency RJ routes that could easily be converted to larger 

jet service with slightly fewer flights to free up numerous slot pairs without impacting its

market share or product offering. 

US Airways has been a major incumbent carrier at DCA for several decades. 

Over time it has increased its position of dominance through mergers, slot trades and 

the acquisition of slot exemptions. This ever-increasing accumulation of slots, boosted 

especially by its DCA/LGA “slot swap” with Delta Airlines in 2011, has enabled US 

Airways to convert DCA into a hub, making it even more difficult for other carriers to 

provide meaningful competition. DCA is a vital airport within the national aviation 

system, yet the slot regime has sheltered US Airways from competition by other 

carriers. More seriously, it has permitted US Airways to squander hundreds of slots by 

operating a defensive hub for connecting passengers and by using undersized airplanes 

to operate slots in this critical aviation market. This transparent “slot sitting” wastes 

valuable public assets, inhibits effective competition, and imposes artificially high fares 

on consumers. 

These trends and the harmful consequences to the public can be seen 

graphically. Exhibit WN-R-23 shows the trend in US Airways average aircraft size since 

the year 2000, during which the average number of seats per departure operated by US 

Airways at DCA has declined by 15%, to a dismal average of only 77 seats. This is 

lower than the average aircraft size operated by every other airline at every other 

domestic hub (Exhibit WN-R-24). Even US Airways’ average aircraft size for its “Air 
10

Carrier Slots”17 is only 86 seats (Exhibit WN-R-25). By contrast, Southwest is proposing 

to use a 143-seat aircraft in this proceeding, significantly larger than US Airways’ 

average aircraft at DCA. 

It is easy to calculate the degree of slot wastage that is embedded in the current 

US Airways scheduling practices. Exhibit WN-R-26 shows that 48 equivalent 

Commuter Slots are utilized to carry connecting passengers through the DCA hub.18 

These passengers only change planes; they have no other reason to be in Washington

DC; and they receive no benefit from having access to DCA; yet they consume valuable 

capacity at DCA. Congress created slot exemptions at DCA for the stated purpose of 

providing greater access to passengers who actually desire to fly to or from DCA, not 

connect through the airport to other destinations. Since 37% of US Airways’ DCA traffic 

is connecting, that amounts to 127 Air Carrier Slots that are wasted on connecting 

passengers.19 In addition, because there is no practical constraint on “Air Carrier”

aircraft sizes, US Airways wastes additional capacity using numerous small 

regional/commuter aircraft instead of mainline jets for its Air Carrier Slots. If US 

Airways’ average seat size for its Air Carrier operations were the same as Southwest 

proposes in this case (143 seats), US Airways could operate the same aggregate Air 

Carrier seat capacity with 85 fewer slots. Adding the components together shows that 

US Airways’ current schedule wastes the equivalent of 260 slots. This is a shocking 

55% of US Airways’ entire pool of 472 slots (Exhibit WN-R-26). 

 

17 Unlike Commuter Slots, which are limited to aircraft of 76 seats or less, Air Carrier Slots are authorized 

for use by aircraft of any size.

18 37% x 130 Commuter Slots held by US. 

19 37% x 342 Air Carrier Slots. 
11

Given this severe (and growing) problem of underutilization of DCA slots, the 

Department should take whatever opportunities are available to rectify this unfortunate 

situation. Awarding slot exemptions in a way that will inject vigorous and sustained lowfare competition at DCA with efficient large-aircraft flights – such as Southwest is 

proposing in this case for HOU-DCA – would be a small but important step toward 

achieving this critical public policy goal. Above all, the Department should avoid making 

the DCA slot underutilization problem even worse by awarding rare slot exemptions to 

the dominant carrier that is primarily responsible for the underutilization problem in the 

first place. 

CONCLUSION

For the reasons given above and in Southwest’s Application, we urge the 

Department to grant the two slot exemptions at issue in this proceeding to Southwest 

Airlines to enable it to initiate large jet, low-fare service between DCA and HOU. 

Granting Southwest’s Application will not only best fulfill the AIR-21 criteria but will have 

by far the greatest impact on competition, generate the most public benefits, and 

produce the most efficient use of scarce DCA slot exemptions. 

Respectfully submitted,

__________________________

Robert W. Kneisley 

Washington DC

December 19, 2012
CERTIFICATE OF SERVICE

I hereby certify that on December 19, 2012, a copy of the foregoing was served 

via e-mail or U.S. mail on the following persons:

msinick@ssd.com (Alaska Airlines)

francis.heil@aa.com (American Airlines)

robert.wirick@aa.com (American Airlines)

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

robert.cohn@hoganlovells.com (Counsel for Frontier Airlines)

patrick.rizzi@hoganlovells.com (Counsel for Frontier Airlines)

robert.land@jetblue.com (JetBlue Airways)

jhill@dowlohnes.com (Counsel for JetBlue Airways)

perkmann@dowlohnes.com (Counsel for JetBlue Airways)

dkirstein@yklaw.com (Counsel for Spirit Airlines)

jyoung@yklaw.com (Counsel for Spirit Airlines)

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

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

howard_kass@usairways.com (US Airways)

Benjamin.slocum@usairways.com (US Airways)

pmurphy@lopmurphy.com (Counsel for USA3000)

barbara.russell@virginamerica.com (Virgin America)

jegillick@zsrlaw.com (Counsel for Virgin America)

susan.kurland@dot.gov

todd.homan@dot.gov

robert.letteney@dot.gov

James.dann@dot.gov

esta.rosenberg@dot.gov

brian.ctr.meehan@faa.gov

Mario C. Diaz

Director of Aviation

Houston Airport System

16930 JFK Boulevard

Houston, Texas 77032

John Potter

President and CEO

Metropolitan Washington Airports Authority

1 Aviation Circle 

Washington, DC 20001 

info@airlineinfo.com

__________________________

 Leslie C. Abbott
3

1

2

0

1

2

3

Southwest DCA-HOU Proposal JetBlue DCA-JAX Proposal US Airways DCA-OKC Proposal

Number of AIR-21 

Criteria Met

Southwest's DCA-HOU Proposal Satisfies More 

AIR-21 Criteria than Either JetBlue at JAX or US Airways at OKC

Docket OST-2000-7182

Exhibit WN-R-1

• Limited Incumbent • Community w/o Nonstop Service

• Monopoly Route

• Maximum Competitive Benefits

• Limited Incumbent

• Monopoly Route

AIR-21 

Criteria

Satisfied
105,382

8,919

69,315

0

20,000

40,000

60,000

80,000

100,000

120,000

Southwest DCA-HOU Proposal JetBlue DCA-JAX Proposal US Airways DCA-OKC Proposal

1/ From Southwest Application at Appendix 1, Column L

2/ From Exhibit WN-R-8

3/ From Exhibit WN-R-19

Newly Stimulated Passengers

Southwest's DCA-HOU Proposal Will Stimulate Far More

New Passengers than Either JetBlue at JAX or US Airways at OKC

1

Docket OST-2000-7182

Exhibit WN-R-2

2 3
$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Southwest DCA-HOU Proposal JetBlue DCA-JAX Proposal US Airways DCA-OKC Proposal

1/ Fared passengers only. 

2/ From Southwest Application at Appendix 1, Column O

3/ From Exhibit WN-R-10

4/ From Exhibit WN-R-17

Annual Consumer Fare Savings1

(Millions)

Southwest's DCA-HOU Proposal Will Produce Far More 

Consumer Fare Savings than Either JetBlue at JAX or US Airways at OKC

2 3

Docket OST-2000-7182

Exhibit WN-R-3

4

$19.1 Million

$10.4 Million

$0
17.0¢

23.3¢

22.2¢

0.0¢

2.0¢

4.0¢

6.0¢

8.0¢

10.0¢

12.0¢

14.0¢

16.0¢

18.0¢

20.0¢

22.0¢

24.0¢

Southwest DCA-HOU Proposal JetBlue DCA-JAX Proposal US Airways DCA-OKC Proposal

1/ Southwest Application. $207 ave. fare / 1,218 miles.

2/ Appendix 2. Calculated assuming a 30% fare reduction (JetBlue Application at page 11). $140.56 ave. fare / 634 miles.

3/ Appendix 1. $270.01 ave. fare / 1,158 miles.

Fare per Mile

(cents)

Southwest Proposes the Lowest Fare per Mile of All Applicants

1 2

Docket OST-2000-7182

Exhibit WN-R-4

3

(Estimated by Campbell-Hill) (Estimated by Campbell-Hill)
Southwest Will Provide One-Stop Connecting Services to

Many Other Markets While JetBlue and US Airways Would Not

Minimum Connect time = 25 minutes, Maximum Connect time = 3 hours.

Source: Innovata Schedules for the week of December 14h, 2012.

Docket OST-2000-7182

Exhibit WN-R-5

OKC

DCA

DCA Nonstop Route 1 1 1

Roundtrip Connections 10 0 0

 DCA One-Stop Route 1 1 0

WN B6 US

JetBlue US Airways

Southwest

JAX

SJU

DCA

TUL

MAF

SAT HOU

DCA

MSY

CRP HRL

AUS

ELP DAL

ABQ OKC
30

36

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

US Airways JetBlue Southwest

Southwest Has the Fewest DCA Slots of Any Applicant

Docket OST-2000-7182

Exhibit WN-R-6

472

Note: Totals include slot exemptions.

Source: FAA Slot Reports, Current and Future, dated 10-25-2012 and Innovata Schedule data.

472

DCA Slots
$0

$50

$100

$150

$200

$250

$300

$350

500 750 1000 1250 1500 1750 2000 2250 2500

Nonstop Miles

Q2 2012 

Fare for 

Nonstop Passengers/1

1/ Curve derived from all nonstop passengers in DCA nonstop markets with 50 or more fared passengers per day each way. 

Fares are derived from a yield curve with the following equation: Yield (cents) = 5,289.5 (miles) -.788, R2=0.79.

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

Source: U.S. DOT, O&D Survey and Schedule data, YE Q2 2012, via Diio, LLC.

United’s 

DCA-Houston

Ave. Fare

($343)

+44%

DCA-JAX

Ave. Fare

($218)

+5%

Docket OST-2000-7182

Exhibit WN-R-7

Note: This curve uses Q2 2012 to reflect the monopoly pricing in the DCA-JAX market since DL left the market in January 2012. Exhibit WN-101 in Southwest’s 

Application used YE Q2 2012 data (UA’s premium over DCA average fares using YE Q2 2012 was 43%)

DCA-Houston Passengers Suffer From Very High Monopoly Prices

While DCA-JAX Fares Are Close to Average DCA Levels

DCA Average 

Nonstop Fare
105,382

69,315

0

20,000

40,000

60,000

80,000

100,000

120,000

Southwest DCA-HOU Proposal JetBlue DCA-JAX Proposal

+52%

1/ Fared passengers only. 

2/ From Southwest Application at Appendix 1, Column L

3/ On page 11 of its Application JetBlue assumes that DCA-JAX traffic would increase by 50% with its service. Campbell-Hill used this B6 assumption only for purposes of 

this exhibit. See Appendix 2, attached for the calculation.

Source: US DOT O&D Survey YE Q2 2012; US DOT Form 41, via Diio, LLC.

Newly Stimulated Passengers1

Southwest’s DCA-HOU Proposal Will Stimulate 52% 

More New Passengers Than JetBlue’s DCA-JAX Proposal

2

Docket OST-2000-7182

Exhibit WN-R-8

3

(Estimated by Campbell-Hill)
1/ Southwest’s Application, Exhibit WN-105. Includes zero fare passengers calculated at Southwest’s system average (1.087 x 81,317 fared passengers).

2/ Estimated by Campbell-Hill using JetBlue’s assumed traffic stimulation of 50% (page 11 of JetBlue’s Application). See Appendix 3 for calculation details.

Local 

Onboard Passengers

Southwest Will Carry 32% More

DCA Local Passengers Than JetBlue

1

2

+32%

Docket OST-2000-7182

Exhibit WN-R-9

(Estimated by Campbell-Hill)

88,392

67,104

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

DCA-Houston DCA-JAX
$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Southwest DCA-HOU Proposal JetBlue DCA-JAX Proposal

+84%

1/ Fared passengers only. 

2/ From Southwest Application at Appendix 1, Column O

3/ See Appendix 2 attached. Campbell-Hill used the unsupported B6 fare and stimulation assumptions (30% drop in fares, 50% increase in passengers) from page 11 of its application 

solely for purposes of this exhibit. 

Source: US DOT O&D Survey YE Q2 2012; US DOT Form 41, via Diio, LLC.

Annual Consumer Fare Savings1

(Millions)

Southwest’s DCA-HOU Proposal Will Produce Nearly Twice 

The Consumer Savings As JetBlue’s DCA-JAX Proposal

2 3

Docket OST-2000-7182

Exhibit WN-R-10

$19.1 Million

$10.4 Million
JetBlue’s Continuing Service to SJU Will be of Little Benefit

Since It Already Offers Nonstop Service to SJU From both DCA and JAX

JAX

DCA

SJU

Current B6 Route

Proposed B6 Route

Docket OST-2000-7182

Exhibit WN-R-11
760,254

337,550

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Houston Jacksonville

Houston is Significantly Underserved From DCA Relative to Jacksonville

+125%

Source: U.S. 2010 Census; Innovata Schedule December 14, 2012.

Population per Daily DCA Aircraft Departure

Docket OST-2000-7182

Exhibit WN-R-12

2010 Population: 6,082,028 1,350,198

Current 

Daily Departures : 8 4

6,143

4,370

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Houston Jacksonville

+41%

Population per Daily DCA Seat-Departure

2010 Population: 6,082,028 1,350,198

Current Daily

Seat-Departures : 990 309
284,104

138,629

0

50,000

100,000

150,000

200,000

250,000

300,000

DCA-Houston DCA-JAX

+105%

Source: U.S. DOT, O&D Survey, via Diio, LLC.

Fared O&D Passengers

(YE Q2 2012)

The DCA-Houston Market is 105% Larger Than the DCA-JAX Market

Docket OST-2000-7182

Exhibit WN-R-13
143

99

0

20

40

60

80

100

120

140

160

Southwest DCA-HOU Proposal US Airways DCA-OKC Proposal

+44%

1/ From Southwest Application, page 2.

2/ From US Airways Application, page 2.

Proposed Aircraft Size (Seats)

Southwest Will Operate 44% More Seats Per Slot Than US Airways

1 2

B737-700 E190

Docket OST-2000-7182

Exhibit WN-R-14
Southwest’s Proposed 143-Seat B737-700

Will Maintain DCA Seat Capacity While US Airways Would 

Decrease DCA Capacity by 32% for the Slots at Issue

Source: Innovata Schedule data from NK (NK last operated August 2012 so August 17, 2012 was used for NK). Southwest and US Airways aircraft sizes are provided in their 

applications.

145 143

99

0

25

50

75

100

125

150

Spirit-FLL Proposed Southwest-HOU Proposed US Airways-OKC

Mainline Aircraft

(A319)

Regional Jet

(E190)

Aircraft Size (Seats)

Mainline Aircraft

(B737)

Docket OST-2000-7182

Exhibit WN-R-15

-32%
$334

$270

$207

$270

$0

$50

$100

$150

$200

$250

$300

$350

$400

Average Fare

 % WN Lower: -38% 

Docket OST-2000-7182

Exhibit WN-R-16

 % US Lower: 0%

Southwest

DCA-Houston Proposal1

UA Fare

Before WN

Nonstop

Proposed

WN Fare

US Airways

DCA-OKC Proposal2

Market Fare

Before US 

Nonstop

US

Fare

1/ From Southwest Application, Exhibit WN-103 and Appendix 1.

2/ From US Airways Application, page 3. US Airways indicates that its fares will be “competitive” with the high current fares (YE Q2 2012 Ave. = $270).

Southwest’s Proposed Fares are 38% Below Current Nonstop

Fares While US Airways is Proposing No Fare Decrease
$0

$5

$10

$15

$20

$25

Southwest DCA-HOU Proposal US Airways DCA-OKC Proposal

1/ Fared passengers only. 

2/ From Southwest Application at Appendix 1, Column O

3/ Uses US Airways statement that fares will remain “competitive” with current fares and there will be no fare reductions (See page 3 of US Airways’ Application). See 

Appendix 1, Column O of this filing for the calculation.

Source: US DOT O&D Survey YE Q2 2012; US DOT Form 41, via Diio, LLC.

Southwest’s Proposal Will Produce $19.1 Million Annual Consumer Savings 

While US Airways’ Proposal Would Produce None

2 3

Annual Consumer Fare Savings1

(Millions)

Docket OST-2000-7182

Exhibit WN-R-17

 $19.1 Million

$0
$0

$50

$100

$150

$200

$250

$300

0 250 500 750 1000 1250

Nonstop Miles

YE Q2 2012 

Average Fare

1/ From US Airways Application, page 3. US Airways indicates that its fares will be “competitive” with the high current fares (YE Q2 2012 Ave. = $270).

2/ Calculated from the following yield curve based on Southwest’s Yield in nonstop markets it serves from BWI: Yield (cents) = 1,767.2 (miles) -.667, R2=0.92.

Source: U.S. DOT, O&D Survey and Schedule data, YE Q2 2012, via Diio, LLC.

Docket OST-2000-7182

Exhibit WN-R-18

US Airways Charges Very High Fares In Its

DCA Nonstop Monopoly Markets

WN at BWI2

US DCA

Nonstop 

Monopoly 

Markets

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

monopoly routes with 50 or more roundtrips for YE Q2 2012.

Proposed US 

OKC Fare1

($270)
105,382

8,919

0

20,000

40,000

60,000

80,000

100,000

120,000

Southwest DCA-HOU Proposal US Airways DCA-OKC Proposal

+96,463

1/ Fared passengers only. 

2/ From Southwest Application at Appendix 1, Column L

3/ Estimated by Campbell-Hill using the same model as used to calculate passengers stimulated by Southwest. See Appendix 1, Column L of this filing for the calculation. 

US Airways makes no estimate in its Application.

Source: US DOT O&D Survey YE Q2 2012; US DOT Form 41, via Diio, LLC.

Newly Stimulated Passengers1

Southwest’s DCA-HOU Proposal Will Stimulate Over 105,000 New Passengers 

Compared to Less Than 9,000 for US Airways’ DCA-OKC Proposal

2

3

Docket OST-2000-7182

Exhibit WN-R-19

(Estimated by Campbell-Hill)
88,392

35,280

20,720

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Southwest DCA-HOU Proposal US Airways DCA-OKC Proposal

1/ From Exhibit WN-105 in Southwest’s Application. Includes zero fare passengers calculated at Southwest’s system average (1.087 x 81,317 fared passengers).

2/ From page 3 of US Airways’ Application. Since not specified assumes US Airways’ number includes zero fare passengers. Local passengers are calculated by using the 

current (Q2 2012) US DCA average of 63% locals/37% connecting/thru.

3/ From Exhibit WN-105 in Southwest’s Application

4/ From page 3 of US Airways’ Application.

Projected Onboard

Passengers

Southwest Will Carry 150% More 

Local DCA Passengers Than US Airways

1 2

Estimated Load Factor: 86% 78%

3 4

Docket OST-2000-7182

Exhibit WN-R-20

56,000

Local 

Passengers

Connecting/Thru Pax

+150%
DCA

OKC CLT

US Airways’ Possible OKC-CLT Service Is

Irrelevant to its OKC-DCA Application

Source: Innovata Schedules for the week of December 10th through the 16th

DCA-CLT Nonstop Weekly Departures 76

DCA-CLT Nonstop Weekly Seat-Departures 8,192

DCA-CLT Nonstop Distance 330

DCA-CLT Distance via OKC 2,099

Circuity 536%

Docket OST-2000-7182

Exhibit WN-R-21

Zero Flow Support
US Airways Could Easily Serve DCA-OKC Today

Without AIR-21 Slot Exemptions 

By Using One Slot Pair From its Huge DCA Portfolio

1/Assuming US operates the E-190. See US Airways Application at page 2.

Source: FAA Slot Reports, Current and Future, dated 10-28-2012 and Innovata Schedules for the week of December 10th through 16th, 2012.

Slots

December 2012 Weekly DCA Departures

December 2012 Weekly Seat-Departures1

Current

472

1,578

119,615

Proposed

OKC Service

2

7

693

OKC Service

As % of Current

Slots/Operations

0.4%

0.4%

0.6%

Docket OST-2000-7182

Exhibit WN-R-22
US Airways Wastes Enormous DCA Operating Capacity

And the Trend Has Worsened Significantly In Recent Years

91 91

77 77

86 90 87 86 87 85 87

78 77

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Seats 

per Departure /1

1/ The data for 2001 uses mid-May schedules because of the impact of 9/11 on the December schedule. All other years use the mid-December schedule.

Source: Innovata Schedules for mid-December Fridays, 2000-2012

Down 12%

Since 2010

US 

RJ or Commuter

Percent

Of Departures 

US 

RJ or Commuter

Percent

Of Seats 

39%

17%

45%

20%

59%

29%

57%

30%

54%

31%

55%

35%

57%

36%

60%

40%

63%

44%

67%

50%

64%

46%

73%

55%

76%

59%

Southwest B737-700 Aircraft Capacity-143 Seats

Docket OST-2000-7182

Exhibit WN-R-23
US Airways’ Aircraft Size at DCA is Smaller 

Than Any Carrier at Any Other Hub

Average Aircraft Size on

Domestic Flights (Seats)

80 81 82 87 89 90 90 92 93 94

99 100 101 101

109 110

117 120

125

133

139

77

0

20

40

60

80

100

120

140

160

US-DCA

US-PHL

UA-IAD

AA-ORDUA-ORD

DL-DTW

UA-EWR

DL-LGA

UA-DEN

UA-IAH

DL-SLC

UA-LAX

US-CLT

DL-MSPUA-SFO

DL-JFK

AA-DFW

AA-LAXUS-PHX

DL-ATLAA-MIA

DL-LAX

Source: Innovata Schedule Data, December 14, 2012.

Docket OST-2000-7182

Exhibit WN-R-24
The Average Size of Aircraft Used for US Airways’ 

Air Carrier Slots at DCA is Only 86 Seats

1/ From Innovata schedule data, December 14, 2012.

2/ From Innovata schedule data, December 14, 2012. Includes US aircraft with fewer than 76 seats only.

3/ From FAA Slot Reports As of October 25, 2012 (Current and Future) and Innovata schedule data. US Has 342 air carrier slots and 130 commuter slots.

4/ From FAA Slot Reports As of October 25, 2012 (Current and Future) and Innovata schedule data. US Has 342 air carrier slots and 130 commuter slots.

5/ (Line 1 – (Line 2 x Line 3) )/ (Line 4). Assumes that commuter slots are operated at the US’s commuter aircraft average aircraft size at DCA. 

1. US Airways Average DCA Aircraft Size 77

2. US Airways Average DCA Commuter Aircraft Size 55

3. US Airways Commuter Slots as % of Total Slots 27.5%

4. US Airways Unrestricted Air Carrier Slots as % of Total Slots 72.5%

5. Average Aircraft Size for US Airways Air Carrier Slots 86

Docket OST-2000-7182

Exhibit WN-R-25
127

212

48

48

0

50

100

150

200

250

300

Connecting Traffic at DCA Small Aircraft Size Total

Commuter Slots

Air Carrier Slots

1/ See page 2 for calculations.

DCA Slots Wasted

by US Airways Due to: /1

Docket OST-2000-7182

Exhibit WN-R-26

Page 1 of 2 US Airways’ Current DCA Schedule Wastes

260 Slots or 55% of Its Total Slot Portfolio

175

85

260
US Airways’ Current DCA Schedule Wastes

260 Slots or 55% of Its Total Slot Portfolio

Air 

Total Carrier Commuter

1. US Airways Slots /1 472 342 130

2. Percent US Connecting Traffic at DCA 37% 37% 37%

3. Slots Wasted on Connecting Traffic /2 175 127 48

4. Remaining Air Carrier Slots /3 215

5. US Average Aircraft Size (Seats) /4 86

6. Southwest Aircraft Size 143

7. US Slots Required at 143 Seats

per Operation /5 130

8. Slots Wasted By Small Aircraft Size /6 85

9. Total Slots Wasted by US Airways /7 260 212 48

1/ From FAA Slot Reports dated 10-25-12 and Innovata Schedule data.

2/ Line 1 x Line 2

3/ Line 1 – Line 3

4/ From Exhibit WN-R-25.

5/ (Line 4 x Line 5) / Line 6

6/ Line 4 – Line 7

7/ Line 3 + Line 8

Docket OST-2000-7182

Exhibit WN-R-26

Page 2 of 2
Appendices
Estimate of Consumer Surplus Benefits From

US Airways’ Proposed DCA – OKC Nonstop Service

Appendix 1

(A) Nonstop Miles

(B) DCA fared passengers for YE Q2 2012

(C) Predicted Service stimulation from Campbell-Hill Aviation Group, QSI model. In the previous Air 21 case, it was estimated that with a 737-700 aircraft , WN’s stimulation of the DCA-OKC market would 

have been 28.2%.

(D) Average Fare for Fared Passengers (excludes passengers using frequent flier miles). Includes nonstop and connecting passengers. Uses YE Q2 2012 U.S. DOT Origin-Destination Passenger Survey 

data via Diio, LLC.

(E) Average checked baggage and rebooking/cancellation fees per passenger derived by Campbell-Hill Aviation Group using DOT Form-41 and DOT data (YE Q1 2012). YE Q1 2012 Fee data was used 

because WN discontinued reporting FL separately in Q2 2012 Form 41 data. 

(F) Column D + Column E

(G) US Airways indicated in its application that it will off fares that are “competitive with current OKC-Washington...fares”. Therefore, we assumed no fare change.

(H) Column G – Column F

(I) Column H / Column F

(J) Calculated using a price elasticity coefficient of -1.2. -1.2 is a standard price elasticity coefficient. See FAA Airport Benefit-Cost Analysis Guidance”, Office of Aviation Policy and Planning, Federal 

Aviation Administration, December 15, 1999.

The arc elasticity formula is: Arc Ep = [(Q2-Q1)/((Q1+Q2)/2)] / [(P2-P1)/((P1+P2)/2)] , where Q1 = passengers before WN service,

Q2 = Passengers after WN service, P1=Fare Before WN service, P2 = Fare After WN service.

(K) Column B x (1+ Column C) x (1+ Column J)

(L) Column K – Column B

(M) Column H x -1 x Column B

(N) Column H x Column L x 0.5 x -1. This follows the consumer surplus method outlined by the FAA in “FAA Airport Benefit-Cost Analysis Guidance”, Office of Aviation Policy and Planning, Federal 

Aviation Administration, December 15, 1999.

(O) Column M + Column N

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

Passengers Predicted Projected Fare Fare Passengers After New Total Consumer

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

Market

DCA-OKC 1,158 36,552 24.4% $255.19 $14.82 $270.01 $270.01 $0.00 0% 0.0% 45,471 8,919 $0 $0 $0

Fare Stimulation

Average Fare Before US Fare Change Consumer Surplus 
Estimate of Consumer Surplus Benefits From

JetBlue’ Proposed DCA – JAX Nonstop Service

(Using B6 Fare and Stimulation Assumptions)

Appendix 2

(A) Nonstop Miles

(B) DCA fared passengers for YE Q2 2012

(C) Average Fare for Fared Passengers (excludes passengers using frequent flier miles). Includes nonstop and connecting passengers. Uses YE Q2 2012 U.S. DOT Origin-Destination Passenger Survey 

data via Diio, LLC.

(D) Average checked baggage and rebooking/cancellation fees per passenger derived by Campbell-Hill Aviation Group using DOT Form-41 and DOT data (YE Q1 2012). YE Q1 2012 Fee data was used 

because WN discontinued reporting FL separately in Q2 2012 Form 41 data. 

(E) Column C + Column D

(F) JetBlue indicated that it expects fares to fall by 30% (JetBlue Application at page 11)

(G) Column F – Column E

(H) Column G / Column E 

(I) JetBlue indicated that it expects passengers to increase by 50% (JetBlue Application at page 11)

(J) Column B x (1+ Column I)

(K) Column J – Column B

(L) Column G x -1 x Column B

(M) Column G x Column K x 0.5 x -1. This follows the consumer surplus method outlined by the FAA in “FAA Airport Benefit-Cost Analysis Guidance”, Office of Aviation Policy and Planning, Federal 

Aviation Administration, December 15, 1999.

(N) Column L + Column M

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

Passengers Projected Fare Estimated Total Passengers After New Total Consumer

O&D Market Miles Before Stimulation Base Fare Fees Total With B6 Absolute % Stimulation by B6 Stimulation Passengers Existing Passengers New Passengers Surplus

Market

DCA-JAX 634 138,629 $186.19 $14.61 $200.80 $140.56 -$60.24 -30% 50% 207,944 69,315 $8,351,016 $2,087,769 $10,438,785

Fare Stimulation

Average Fare Before B6 Fare Change Consumer Surplus 
Estimate of JetBlue DCA-JAX Onboard Passengers

Appendix 3

Comments

1.YE Q2 2012 O&D Passengers 138,629 Fared Passengers from Diio LLC

2.B6 Estimated Traffic Stimulation 50% Assumed by JetBlue in its Application, page 11.

3.Total Passengers After B6 207,944 Line 1 x (1+ Line 2)

4.Estimated B6 Share 31.3% Estimated Using Campbell-Hill QSI Model.

5.Estimated B6 Passengers 65,086 Line 3 x Line 4

6.Adjustment to Include Zero Fared Passengers 1.031 Based on B6 system ratio of total O&D to fared O&D passengers

7.Estimated B6 Onboard Passengers 67,104 Line 5 x Line 6