BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

------------------------------------------------------------------------ Application of : : SOUTHWEST AIRLINES CO. : : Docket DOT

- OST

- 2014

- 0222 for an exemption pursuant to 49 U.S.C. § 40109 : to engage in foreign scheduled air transportation : of persons, property and mail between Houston : Hobby International Airport and Cancun, Mexico City, : Pu erto Vallarta, and San Jose del Cabo, Mexico :

------------------------------------------------------------------------ ANSWER OF UNITED AIRLINES, INC. AND S KYWEST AIRLINES, INC. Communications with respect to this document should be sent to: Steve Morrissey Vice President

- Regulatory & Policy UNITED AIRLINES, INC. 1225 New York Avenue, NW Suite 1100

– DCAIZ Washington, DC 20005 (202) 521

- 4373 steve.morrissey@united.com Daniel A. Weiss Managing Director

- International Affairs and Regulatory UNITED AIRLINES, INC. 233 South Wacker Drive 10th Floor

– HDQIZ Chicago, IL 60606 (872) 825

- 6828 dan.weiss@united.com

December 29 , 2014 Thomas Newton Bolling Vice President and Deputy General Counsel Abby L. Bried Associate General Counsel

- Regulatory, Alliances & International James Conneely Counsel

- Regulatory UNITED AIRLINES, INC. 233 South Wacker Drive 11th Floor

– HDQLD Chicago, IL 60606 (872) 825

- 8068 (872) 825

- 7415 (872) 825

- 8311 thomas.bolling@united.com abby.bried@united.com james.conneely@united.com Gerald F. Murphy Steven J. Seiden CROWELL & MORING LLP 1001 Pennsylvania Avenue, NW Washington, DC 20004 (202) 624

- 2500 gmurphy@crowell.com sseiden@crowell.com Counsel for United Airlines, Inc. and SkyWest Airlines, Inc.BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

------------------------------------------------------------------------ Application of : : SOUTHWEST AIRLINES CO. : : Docket DOT

- OST

- 2014

- 0222 f or an exemption pursuant to 49 U.S.C. § 40109 : to engage in foreign scheduled air transportation : of persons, property and mail between Houston : Hobby International Airport and Cancun, Mexico City, : Puerto Vallarta, and San Jose del Cabo, Mexico :

------------------------------------------------------------------------ ANS WER OF UNITED AIRLINES, INC. AND SKYWEST AIRLINES, INC.

I. INTRODUCTION United 1 and SkyWest object to the above

- captioned application of Southwest inso much as Southwest seeks to begin providing foreign air transportation between Houston , on the one hand, and Mexico City and San Jose del Cabo, Mexico, on the other hand, on or around October 15, 2015 and have the Department withdraw U.S.

- Mexico operating carrier designations for those routes from United and/or SkyWest at that time

. 2 United and SkyWes t base their object ion on the following key points :

 While Southwest alleges that its proposed services will benefit consumers and competition in the Houston

- Mexico City/San Jose del Cabo markets , it conveniently downplays that it also propos es to limit consumer choice by taking away rights held

1 Common names are used for airlines. 2 The Houston

- San Jose del Cabo designation currently held by ExpressJet will transition to SkyWest effective January 6, 2015. Notice of Action Taken dated Jul. 29, 2014 in Dockets DOT

- OST

- 2014

- 0100 and DOT

- OST

- 2014

- 0 101

. United and SkyWest take no position on the remainder of Southwest’s application.A nswer of United and SkyWest

Page 2 of 9 by United and/or its United Express partner SkyWest

– both of which operate these

routes and provide important network connecting opportunities and time

- of

- day travel choices to the benefit of United’s cu stomers, coworkers and communities.

 Contrary to Southwest’s assertion , long standing Department precedent and due process require a carrier selection proceeding before limited

- entry rights can be withdrawn and reallocated under these circumstances

. A s United and SkyWest note below, however, instituting such a proceeding is a distant second best option and not a valuable use of Department and airline resources .

 As it has done on several prior occasions , t he Department should grant extra

- bilateral aut hority to allow Southwest to operate in the Houston

- Mexico City/San Jose del Cabo markets alongside United, SkyWest and Spirit for the short, two and one

- half month period until the new U.S.

- Mexico air transport agreement goes into effect on January 1, 201 6. This alternative will truly benefit all carriers, consumers, and communities on both sides of the border, and is supported not only by United and SkyWest, but by the Chairman of the Subcommit t ee on Trade of the House Ways and Means Committee as well. To argue otherwise would be contrary to maximizing consumer choice and competition in the marketplace.

 Southwest hastily directs the Department to eliminate existing air service options without providing any indication that Houston’s William P. Hobby Ai rport (“HOU”) will be ready for Southwest’s proposed operations on October 15, 2015. The Department should not even consider Southwest’s application until it has demonstrated that HOU’s new international terminal will be completed and appropriately staffe d with the Customs and Border Protection (CBP) Officers and other personnel necessary for its operation.
I I

. T HE DESIGNATIONS HELD BY UNITED AND SKYWEST CANNOT BE WITHDRAWN WITHOUT A CARRIER SELECTION PROCEEDING
T he designations held by Unite d and SkyWest can only be withdrawn following a carrier selection proceeding. The y canno t simply be taken away. Southwest’s request is contrary to longstanding Department policy applicable to U.S.

- Mexico routes: “[w]here there are directly competing requests f

or a route or for city

- pair markets within a route, [DOT] would institute carrier selection proceedings.” Order 1988

- 7

- 43 at 7 (finalized by Order 1988

- 10

- 30). Southwe st does not allege that United or SkyWest have plans to discontinue service on these
routes

. Department precedent only supports foregoing carrier selection proceedings and withdrawing one carrier’s limited

- entry rights in favor of another’s proposed service when theA nswer of United and SkyWest

Page 3 of 9
first carrier has allowed its rights to go unused or has no firm plans to resume services. See, e.g. , Order 2007

- 11

- 23 at 2 (U.S.

- Colombia frequencies); Notice of Action Taken dated Sep. 28, 2007 in Docket DOT

- OST

- 2007

- 29103 (U.S.

- Philippines designation); and Notice of Action Taken dated Feb. 13, 2004 in Docket DOT

- OST

- 2003

- 1 6444 (Phoenix

- Puerto Vallarta/San Jose del Cabo designations)

. Accordingly, Southwest’s “competing proposal to provide scheduled [Houston

- Mexico City/San Jose del Cabo] service[s]” means only that the Department “ would be prepared to consider whether...awar d of the [United and United Express carrier ] authority...continues to be in the public interest.” Notice of Action Taken dated Sep. 3, 2014 in Dockets DOT

- OST

- 2014

- 0129 and DOT

- OST

- 2014

- 0130, at 2 ( emphasis added ) (responding to Southwest’s assertion that United’s and SkyWest’s designations “ are subject to being rescinded if Southwest were to actively seek competing authority to serve the Houston

- Mexico City market”); see also Notice of Action Taken dated Jul. 29, 2014 in Dockets DOT

- OST

- 2014

- 0100 and DOT

- OST

- 2014

- 0101 (awarding Houston

- Puerto Vallarta/ San Jose del Cabo operating designation s to SkyWest )

. It is also unclear why Southwest argue s that the Department should withdraw United ’s or SkyWest’s designation in the Houston

- San Jose del C abo market , for which Spirit also holds a designation

. See Notice of Action Taken dated Sep. 18, 2014 in Docket DOT

- OST

- 2014

- 0154. Presumably, Southwest would rather handpick its competition

– and eliminate carriers with a different business model , superior international and domestic connecting opportunities, and more flexible service offerings

– rather than rely on a carrier selection proceeding

. While United and SkyWest support longstanding D epartment precedent requiring carrier selection proceed ings as a matter of due process, instituting such a proceeding is a distant second best option given the unique circumstances of this case. A s described below, withdrawing theA nswer of United and SkyWest

Page 4 of 9 designations would not be in the public interest and carrier s election proceedings are not necessary for Southwest, United, SkyWest and Spirit to be able to serve the Houston

- Mexico City/San Jose del Cabo markets prior to January 1, 2016

. I II

. RIGI D ENFORCEMENT OF THE DESIGNATION REQUIREMENTS IS NOT APPROPRIATE UNDER THESE CIRCUMST ANCES If indeed H OU is ready for international service on October 15, 2015, as discussed below, the Department will be faced with only two and one

- half months of operational overlap between Southwest’s proposed start up date and the l iberalization of transborder services under the new aviation agreement set for January 1, 2016. And with the Department reporting informally that the new agreement could take effect even earlier , it makes little sense to United, SkyWest , and the Chairman of the Subcommit t ee on Trade of the House Ways and Means Committee for the Department to eliminate competitive service options for a period that will not exceed 11 weeks

. Of particular concern in this case is that t he Department’s standard 90

- day startup dormancy condition for U.S.

- Mexico routes would perversely allow Southwest to bump United and/or SkyWest from the market without Southwest ever having to commence operations on its actual target da te

. See, e.g., Notice of Action Taken dated Sep. 3, 2014 i n Dockets DOT

OST

- 2014

- 0129 and DOT

- OST

- 2014

- 0130 ( Southwest would not be required to begin service until January 15, 2016 ). Such a result would be anathema to an aviation agreement tha t promises to “ expand opportunities for passenger and cargo carriers to provide service between the United States and Mexico, and strengthen the economic ties between the two countries. ” Press Release, U.S. Dep’t of Transp., United States, Mexico Reach Modernized Aviation Agreement , (Nov. 21, 2014) at 1.A nswer of United and SkyWest

Page 5 of 9
I V

. GRANTING EXTRA

- BILATERAL AUTHORITY TO SOUTHWEST WOULD PRESERVE EXISTING UN ITED AND UNITED EXPR ESS SERVICES, AND IS IN THE PUBLIC INTEREST The Department should grant extra

- bilateral authority to Southwest to cover the short period during which sufficient designa tions would not be available for both Southwest’s proposed operations and the existing services provided by United , SkyWest and Spirit under the
current U.S.

- Mexico aviation agreement

. T he Department has granted such extra

- bilateral authority time and again in the past for U.S.

- Mexico services:

 The Department used extra

- bilateral authority to provide six U.S. and Mexican carriers with early utilization of codeshare opportunities covered by the 1999 U.S.

- Mexico air transport agreement. See Ord er 1999

- 6

- 6 ( granting applications of American/Aero California, Delta/Aer o mexico, and United/Mexicana). In so doing, the D epartment determined that the proposed services were “consistent with [the new U.S.

- Mexico agreement], will use valuable rights for w hich the United States has exchanged valuable operating rights, and will expand the service options in the U.S.

- Mexico market.” Id

. at 4 ( internal citations omitted ) . The Department also found that “[t]he exercise of these rights will benefit travelers, shippers, business es , cities, airlines, and airports, and grant of the authority is clearly in the public interest.” Id

.

 T he Department has also used extra

- bilateral authority with respect to U.S.

- Mexico transborder operations several times in the past three years

– to the benefit of Mexican carriers

– allowing Volaris and Interjet to use Mexicana’s desi gnations on 12 separate routes:

o Chicago

- Mon terrey and Los Angeles/Las Vegas

- Mexico City

. See Notice of Action Taken dated Jul

. 12, 2011 in Docket DOT OST

- 2011

- 0117

.

o Orlando

- Mexico City. See Notice of Action Taken dated Jun. 21, 2012 in Docket DOT

- OST

- 2012

- 0097

.

o San Francisco/Denver

- Mexico City. See Notice of Action Taken dated Jun. 15, 2012 in Docket DOT

- OST

- 2012

- 0083

.

o San Antonio/New York/Miami

- Mexico City. See Notice of Action Taken dated Aug. 31, 2011 in Docket DOT

- OST

- 2011

- 0159.

o Las Vegas

- Guadalajara and Chicago

- Zacatecas. See Notice of Action Taken dated Aug. 24, 2011 in Docket DOT

- OST

- 2011

- 0156.A nswer of United and SkyWest

Page 6 of 9

o Chicago

- Mexico City

. See Notice of Action Taken dated Aug. 2 5 , 20 11 in

Docket DOT

- OST

- 2011

- 015 5. The same rationale by which the Department used extra

- bilateral authority to allow for early implementation codeshare opportunities under the 1999 U.S.

- Mexico aviation agreement clearly applies here. And while United and SkyWest acknowledge that the extra

- bilateral

a uthority supporting the operations of Volaris and Interjet w as granted when Mexicana was in bankruptcy and not operating, the fact remains that the U.S. and Mexican g overnment s agreed (twelve different times) to help Mexican carriers during a u nique situation in the history of U.S.

- Mexico aviation relations

. Similarly faced with unique circumstance s in the development of air services between both nations , the Department should once again exercise extra

- bilateral authority to serve the public interest , and in this case to the benefit of U.S. carriers

. United and SkyWest cannot think of any reason both the U.S. and Mexican governments would not see the merits of enhancing competition and preserving existing U.S. carriers ’ s ervices in the Houston

Mexico City/San Jose del Cabo markets by allowing Southwest to operate alongside United , SkyWest and Spirit for just two and one

- half months. Simply put, using extra

- bilateral authority to allow Southwest to b egin its proposed
opera tions without disrupting existing United and/or United Express service options is “the best alternative on the table for consumers

. ” See Letter from Congressman Kevin Brady (TX

- 8) to Anthony Foxx, Sec’y, U.S. Dep ’ t of Transp. (Dec. 29, 2014) , attached as Exhibit A.
V. THE DEPARTMENT SHOULD NOT CONSIDER SOUTHWEST’S APPLICATION UNTIL SOUTHWEST HAS DEMONSTRATED THAT HOBBY WILL BE READY FOR INTERNATIONAL OPERATIONS BY OCTOBER 15, 2015 In addition to common startup issues related to new foreign scheduled service, Southwest’s proposed operations assume the on

- time completion of the construction of the new $156 million Houston Hobby International Terminal, which includes five new gates and a newA nswer of United and SkyWest

Page 7 of 9 Federal Inspection Services (FIS) facility. Concern s have also been voiced regarding availability of adequate CBP staffing and resources. See, e.g., Houston Will Need More Customs Agents, But Where’s the Money?, H OUSTON C HRONICLE (Mar. 6, 2013), available at http://www.chron.com/opinion/editorials/article/Houston

- will

- need

- more - customs

- agents

- but

4334369.php

. Indeed, there is no certainty regarding the availability of CBP funding for October 2015

– or any indicati on that those circumstances are about to change. See Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113

- 235; see also Press Release, The White House, Statement by the Press Secretary on H.R. 83 (De c. 16, 2014) (announcing that the legislation provides full FY2015 appropriations through September 30, 2015 for all agencies except the Department of Homeland Security , for which funding has instead only been provided through February 27, 2015). Public r eports indicate that the new HOU facility would require 20
CBP Officers , 21 Houston Police Department (HPD) officers and three HPD sergeants, among other staffing requirements. See Houston Airport System, Houston Hobby International Terminal Project , F LY 2 H OUSTON (Jun. 14, 2014), available at http://www.fly2houston.com/0/3921751/0/83280/

. Fully training a new CBP Officer takes 9 to 12 months

– after the Officer has passed extensive back

- ground checks. It can also take several months to complete the transfer of CBP Officers between postings. Sourcing Officers from the field is also a time

- consuming and difficult task, particularly when taking into consideration the already acute budgetary and staffing constraints at existing airport gateways across the country. United and SkyWest are not aware of any decision having been made on how and when to staff HOU to support Southwest’s proposed operations, or that would support stripping away an operator’s existing service rights.A nswer of United and SkyWest

Page 8 of 9 Houston Airport Systems Director Mario Diaz is on record stating that the city does not support staffing HOU to the degradation of service and passenger processing times at George Bush Intercon tinental Airport (“IAH”): “That is not the right way to handle this. That does not make any sense. That would be a degradation of s ervice at Intercontinental. It’s something we’ re not going to tolerate.” Chris Moran, Southwest’s Plan at Hobby Could Sl ow Down Lines at Bush , H OUSTON C HRONICLE (May 24, 2012), available at http://www.chron.com/news/houston

- texas/article/Customs

- staffing

- re mains

- question

- in

- Hobby

3584338.php . United and SkyWest thank Mr. Diaz for his candor on the matter, particularly given the positive growth trends experienced at IAH. To illustrate, IAH experienced a cumulative international passenger growth of approximately 15.0% (3.8 million passengers to 4.4 million) from FY2009 to FY2013. See Houston Airport System, Statistical Report Fiscal
Year 2013 , F LY 2H OUSTON , at 8, available at http://www.fly2houston.com/TrafficStats . That pattern of incre asing passenger volume continued through the beginning of FY2014, with passenger growth increasing by 12.7% through June 2014 compared to the same period in
FY2013. See Houston Airport System, Statistical Report Fiscal Year 2014 , F LY 2H OUSTON , at 8, availa ble at http://www.fly2houston.com/TrafficStats . United and SkyWest do not contend that IAH’s growth should impact HOU, but rather highlight these important facts to demonstrate that
there are reasona ble concerns and questions as to how HOU can be adequately staffed by CBP by October 15, 2015. Unless and until Southwest can demonstrate that HOU’s new international facilities will be completed and fully staffed by Southwest’s proposed startup date, it would be reckless for the Department to consider eliminating existing consumer service options in the Houston

- Mexico City/San Jose del Cabo markets.A nswer of United and SkyWest

Page 9 of 9
V I

. CONCLUSION For the foregoing reasons, United urges the Department to grant Southwest extra

- bilate ral authority for Southwest to commence its proposed Houston

- Mexico City/San Jose del Cabo operations and preserve the existing United mainline and SkyWest (d/b/a United Express ) regional jet services to the benefit of United’s customers, coworkers and communities. Doing so would enhance competition on these important U.S.

- Mexico routes, further the intent of the new
U.S.

- Mexico air transport agreement, and serve the public intere st. Respectfully submitted, CROWELL & MORING LLP

____________________________ Gerald F. Murphy Steven J. Seiden gmurphy@crowell.com sseiden@crowell.com Counsel for United Airlines, Inc. and SkyWest Airlines , Inc. December 29 , 201 4EXHIBIT A
 CERTIFICATE OF SERVICE

I certify that I have this date served the foregoing document on the following persons in accordance with the Department’s Rules of Practice. robert.wirick@aa.com howard.kass@aa.com nssparks@fedex.com gbleopard@fedex.com kevin.montgomery@polaraircargo.com rpommer@atlasair.com rsilverberg@sgbdc.com jjohnson@sgbdc.com msinick@ssd.com stephen.lachter@cozen.com robert.land@jetblue.com jhill@cooley.com perkmann@cooley.com dkirstein@yklaw.com jyoung@yklaw.com bob.kneisley@wnco.com leslie.abbott@wnco.com pjackson@swapa.org matwood@cozen.com anita.mosner@hklaw.com jennifer.nowak@hklaw.com sascha.vanderbellen@delta.com chris.walker@delta.com robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com thomas.ting@suncountry.com john.varley@virginamerica.com rbtrinder@zsrlaw.com paul.gretch@dot.gov brett.kruger@dot.gov susan.kurland@dot.gov brian.hedberg@dot.gov reese.davidson@dot.gov todd.homan@dot.gov peter.irvine@dot.gov cristinasa@state.gov info@airlineinfo.com

____________ ______________________ Steven J. Seiden December 29 , 201 4