III 

KAPLAN KIRSCH ROCKWELL 

February 14,2011 

Ms. Catherine M. Lang 

Acting Associate Administrator for Airports, ARP-1 

Room600E 

Federal Aviation Administration 

800 Independence Avenue, S.W. 

Washington, DC 20591 

Re: Clark County Department of Aviation Request for Determination 

Dear Ms. Lang: 

Enclosed for your review is the request of the Clark County Department of Aviation (the 

"Department") for a determination by FAA that the Department's proposed air service incentives 

program for McCarran International Airport does not conflict with its federal obligations. We 

appreciate the willingness of you and your staff to explore the relevant issues with the 

Department's representatives. 

Please let us know if there is anything we can do to help facilitate FAA's review of this program, 

so that the Department can implement it as soon as possible. 

Thank you very much. 

Sincerely, 

~~~~ Thomas R. Devine 

Enclosures 

cc. Randall Fiertz 

Kevin Willis 

Daphne Fuller 

Attorneys at Law 

Denver • New York • Washington, DC 

Kaplan Kirsch & Roch:well LI.P tel: (202) 955-5600 

1001 Connecticut Ave., N.W., Suite 800 fax: (202) 955-5616 

Washington, DC 20036 www.kapI:Ulkirsch.com 
 Clark County Department of Aviation Request for Determination that Its 

Proposed Landed Weight Incentive Program for McCarran International 

Airport (LAS) Does Not Conflict with Its Federal Obligations 

I. Introduction 

The Clark County Department of Aviation (“CCDOA” or “the Department”) 

requests a determination by the Federal Aviation Administration (“FAA”) that its 

proposed air service incentives program (“Incentives Program”), which is intended to 

induce increases in landed weight by air carriers at McCarran International Airport (the 

“Airport” or “LAS”) in Las Vegas, is consistent with its federal obligations. To qualify 

for the incentives, increases in landed weight would be measured for each carrier for each 

month, compared to the same month in the preceding year, 

The applicable obligations against which the proposal must be measured are the 

prohibitions against unjust discrimination1 and granting exclusive rights,2 the FAA’s 

Policy and Procedures Concerning the Use of Airport Revenue (“Revenue Use Policy”),3

the Policy Regarding Airport Rates and Charges (“Rates and Charges Policy”),4

 and the 

Airline Deregulation Act (ADA).5 

As demonstrated below, the Department’s proposed program (a) is nondiscriminatory, (b) does not grant any carrier an exclusive right, (c) is not prohibited by 

the Revenue Use Policy, (d) is not prohibited by the ADA, and (e) complies with the 

Rates and Charges Policy. Therefore, the FAA should determine that the proposed 

Incentives Policy does not conflict with any of the Department’s federal obligations. 

II. Background 

The Department is concerned with a temporary, but precipitous, drop in air 

service at the Airport that has not rebounded as quickly as at other airports. Landed 

weight at the Airport was down approximately 17% from Calendar Year 2007 through 

the 12-month period ending in September 2010. While some individual carriers have 

expanded operations, these initiatives have fallen well short of restoring McCarran 

operations to previous levels. This drop-off in operations has meant that the Airport’s 

airside and terminal facilities are not optimally utilized. 

The shortfall in traffic has also caused a significant drop in Airport revenue, 

particularly non-aeronautical revenue. While load factors at LAS are high, the service 

cutbacks by the carriers are reflected in a drop in passengers. On average, the Airport 

 

1

 49 U.S.C. § 47107(a), AIP Grant Assurance 22. 

2

 49 U.S.C. §§ 40103(e), 47107(a)(4), AIP Grant Assurance 23. 

3

 64 Fed. Reg. 7696 (Feb. 16, 1999) (“Revenue Use Policy”), 49 U.S.C. §§ 47107(b), 47133. 

4

 Amended at 73 Fed. Reg. 3310 (July 10, 2008), originally published at 61 Fed. Reg. 31994 (June 21, 

1996), 49 U.S.C. 47129(b) (“Rates and Charges Policy”), partially vacated by Air Transport Ass’n of Am. 

v. DOT, 119 F.3d 38 (D.C. Cir. 1997), amended by 129 F.3d 625 (D.C. Cir. 1997) (“Rates and Charges 

Policy”). 

5

 49 U.S.C. § 41713. 
2

generates approximately $9 per passenger in non-aeronautical revenue (rental cars, 

concessions, taxi fees, gaming, etc.). Because of the decline in passenger volume, 

annual revenue from these sources declined by approximately $20 million or 10% over a 

two year period from FY 2008 to FY 2010. 

In this difficult economic climate, including the recession and its lingering effects, 

airlines demand that airports reduce or hold down costs that are charged to carriers. The 

Department has implemented a number of cost-saving and cost-cutting measures, 

including the closure of some gate areas, reduced spending in purchasing and contracting, 

and not filling positions made vacant by employee attrition. Increasing the opportunities 

to travel to LAS will increase passenger volumes, and, thus, raise additional ancillary, 

passenger-related revenue that is needed to help the Airport to pay debt service, meet 

operating expenses, keep airline costs down, and raise funds for necessary Airport 

projects. 

In order to help induce expansion in air carrier operations, and thus promote 

effective utilization of airside and terminal facilities and generate additional passengers 

that, in turn, increase non-airline revenues that can be applied to further reduce air carrier 

costs, the Department has developed the Incentive Program to provide temporary relief 

from fees for increased air service to LAS. The Department views the downturn in 

operations as a short-term anomaly, and the proposed incentives will be discontinued 

when traffic is back on track. 

Unlike many airports contemplating air service incentives, the Airport receives 

service from virtually all major U.S. cities. Thus, the Department does not seek to target 

any specific markets. Rather, CCDOA seeks increased air service, in the aggregate, from 

any markets. 

Because it is important to the Department to ensure that Airport facilities are 

utilized effectively and to increase the number of passengers using the Airport, thus 

generating additional non-aeronautical revenues from such incremental passenger traffic, 

the proposed Incentive Program is tied to increased landed weight, by carrier, over the 

previous year, measured monthly. 

The Department has designed a program that is totally non-discriminatory and 

maximizes airline discretion and decision-making in developing service that qualifies for 

the incentives, in terms of the markets they serve, the duration of the service, and the 

equipment they utilize to serve those markets. 

A. Essential Elements of CCDOA’s Proposed 

Air Service Incentives Program 

The objective of the proposed Incentives Program is to provide an incentive at the 

margin to promote additions to scheduled air service seat capacity. The key elements of 

the Incentives Program are as follows: 
3

• Target start date for the program is June 1, to provide a realistic opportunity for 

air carriers to make adjustments to their service schedules in light of the 

incentives. The program will last for one year and may be extended. 

• Subject to exceptions noted below, all monthly scheduled service landed weight, 

by airline, in excess of that operated in the same month of the prior year, would 

receive a credit of up to 100% of the landing fee (currently $2.26 per 1,000 

pounds of landed weight) paid on the incremental landed weight. 

• No credit shall be given for an increase in landed weight due solely to the fact that 

scheduled service was not actually operated in the baseline year (e.g., due to 

cancellations related to acts of God, strikes, etc.) but was operated in the 

subsequent year. 

• To the extent that this program extends into 2012 (which is a leap year), February 

2012 landed weight would be compared to February 2011 landed weight 

multiplied by 29 and divided by 28, to account for the extra February day in 2012 

and put the comparisons on a comparable basis. 

• Similarly, if a carrier operates a limited number of flights per week in a small 

number of markets, so that the landings for some months are higher than for the 

corresponding month in the previous year due solely to difference in number of 

days in a month that the flights operated in the respective years, the Department 

may devise an appropriate mechanism to ensure that a credit is not accrued for 

operating essentially the same schedule, year over year. 

• The maximum monthly credit to be provided to all airlines, in the aggregate, is 

$250,000. If the monthly maximum is not reached, based on a 100% credit, the 

remaining funds will not be carried over into other months. If the monthly 

maximum is exceeded based on a 100% credit, then the maximum will be prorated across all of the qualified incremental landed weight. 

 

• Regional operations would be combined with those of the “parent” airline. 

• In the case of common ownership (e.g., Republic with Frontier and Midwest, 

Delta/Northwest, Continental/United), year-over-year comparisons would be 

made against the combined carrier operations. 

• How the landing fee credits will be applied has yet to be determined, but no 

credits will be provided until the airline earning them has actually paid its landing 

fees for the period in question. 

• The CCDOA Director’s Office has the final authority to make determinations as 

to year-over-year operations that qualify for credits, versus those that do not, 

consistent with the principles set forth in this guidance. 
4

• The waived fees will be covered by non-airline revenues of the Airport, and there 

will be no adverse impact on fees assessed on air carriers operating at LAS due to 

implementation of the incentives program. 

III. The Department’s Proposed Incentives Program is Consistent with its 

Federal Obligations 

As noted above, analysis of the issues relating to the compliance of the 

Department’s proposed Incentives Program with its federal obligations must be grounded 

in the assessment of the proposal against the underlying statutory and grant obligations 

imposed on the Airport prohibiting unjust discrimination and exclusive rights, as well as 

determining whether the Revenue Use Policy, the Rates and Charges Policy or the ADA 

necessarily precludes the Department’s proposal. The FAA’s recently published Air 

Carrier Incentive Program Guidebook: A Reference for Airport Sponsors (“Incentives 

Guidebook”) recognizes these as the actual legal requirements that are applicable to 

airports’ air service incentives programs.6

It appears that there may be three potential issues relating to the legal viability of 

a weight-based incentives, the Airline Deregulation Act (ADA), supposed potential 

discrimination against air carriers that only operate one type of aircraft, i.e., carriers that 

cannot upgauge, and provisions in the Incentives Guidebook indicating that incentives are 

allowed only for “new flights.” As set forth more fully below, the ADA is inapplicable, 

the proposal would not unjustly discriminate or confer an exclusive right, and there is no 

provision in the underlying federal obligations that requires limiting incentives to new 

flights. Statements in the Incentives Guidebook indicating that incentives may only be 

provided for new service, which the Incentives Guidebook defines as new flights, and not 

for upgauging existing flights, are not binding obligations imposed on airports. Instead, 

they represent informal guidance provided to airports over the years, and it is necessary 

and appropriate for FAA to examine the underlying legal obligations, not the Incentives 

Guidebook, in assessing the Department’s proposed Incentives Program. 

In light of the total flexibility provided to all types and kinds of air carriers to 

qualify for incentives in the manner suitable to them, and for the reasons set forth more 

fully below, FAA should find that the proposed Incentives Program does not violate any 

applicable federal obligations.

A. The Airline Deregulation Act’s prohibition against state/local government 

interference with carriers’ rates, routes or services does not apply to the 

Department’s proposed Incentives Program. 

The ADA would not bar the Department’s proposal. The ADA’s preemption 

provision prohibits a state or political subdivision from enacting or enforcing “a law, 

regulation, or other provision having the force and effect of law related to a price, route, 

or service of an air carrier that may provide air transportation under this subpart.” 7 

 

6 See Incentives Guidebook at pp. 3, 5. 7

 49 U.S.C. § 41713(b)(1). 
5

The Department’s proposed Incentives Program is not a regulation (or any other 

type of provision that has the force and effect of law) and therefore is not covered by the 

ADA’s preemption clause. The ADA does not preempt voluntary agreements between 

airport sponsors and air carriers such as the Incentives Program. 

The Incentives Program would not require any carrier to change its service at all. 

Those carriers that elect to take advantage of the incentives have total flexibility as to 

how they meet the criteria for the incentives: they can increase the number of flights, 

increase the size of the aircraft they operate, or any combination of the two, as each 

carrier determines; they can start and stop service as their individual business plans and 

market experience determine; and they are not locked into any specific service for any 

period of time. Or, if they prefer, they do not have to participate in the program or 

modify their operations in any way; their participation in the program is entirely 

voluntary. 

FAA has previously determined that a voluntary agreement between a local 

government and an airline, in which the local government offered financial incentives for 

the airline to provide service between identified city pairs, does not conflict with the 

ADA’s prohibition against state regulation of price, routes, or service provided by an air 

carrier.8

 As is the case here, in that instance the agreement was a contract between the 

parties rather than a regulation. The agreement was voluntarily entered into, and did not 

have the force of law, except to the extent agreed to by the carrier. Thus, the FAA 

determined that the agreement “is not law, and does not have the force of law” and was 

not subject to the ADA.9 Simply put, if a carrier elects not to participate in the Incentives 

Program, its prices, routes, and service are unaffected by the program. 

 FAA has also allowed airports to implement other air service incentives programs 

and related agreements, not finding them preempted by the ADA. In fact, all air service 

incentives programs implemented by airports that have been authorized or allowed by 

FAA are designed to induce air carriers to change their routes. Under the ADA, airports 

could not require air carriers to change their routes. Thus, incentives programs and 

related agreements are clearly not subject to, or prohibited by, the ADA; otherwise FAA 

could not allow any such programs or agreements. 

B. The Department’s proposed Incentives Program does not 

discriminate against any category of air carrier. 

 The Department’s proposal is totally non-discriminatory. A carrier can choose 

whether and how it wants to add capacity. If it wants to add new flights, it can do so and 

earn the incentive. If it wants to change the service it provides by increasing the capacity 

of its existing operations, by substituting larger aircraft for smaller aircraft, it can do that. 

Or it can do any combination of the two, as the carrier, in its sole discretion, chooses. 

 

8 See Letter from David L. Bennett, FAA Office of Airport Safety and Standards, to Bailis Bell, Dir. of 

Airports, Wichita Airport Auth., (Nov. 18, 2003), at p. 4. (Attached as Exhibit A). 

9

 Id. 
6

Thus, there can be no serious argument that the Department’s proposal is unjustly 

discriminatory in any way, or favors any carrier or type of carrier. 

 Carriers are allowed to choose the markets in which they add capacity, and they 

are allowed to choose the manner in which they add capacity. All carriers are on an equal 

footing, and whether or how they choose to qualify for the incentives is a business 

decision for each of them to make, as is the type of equipment they choose to operate. 

Indeed, it is difficult to imagine that there could be an incentive program that is less

discriminatory than the one proposed by the Department. 

 The essence of the prohibition against unjust discrimination, as elucidated by the 

FAA, is that similarly situated aeronautical users must be treated similarly. This standard 

is clearly met by CCDOA’s proposed Incentives Program. Every carrier that increases its 

landed weight, year-over-year in any given month is eligible for the incentive for the 

incremental increase in landed weight, period. That is treating similarly situated 

aeronautical users exactly the same. 

 Moreover, there is no legal basis for the assertion that a size or weight-based 

incentive is discriminatory against carriers that operate one type of aircraft.10 One could 

just as easily argue that allowing incentives only for new flights discriminates against 

carriers that have little or no ability to add flights, but could substitute larger aircraft for 

smaller aircraft. 

 FAA already permits incentives that not all airlines can take advantage of, due to 

the type of equipment they operate. For instance, FAA allows airports to provide 

incentives that are limited to international air service, for example, to specific cities, or 

for trans-oceanic or trans-Pacific (or trans-Atlantic) service, or for international service in 

general. Certain airlines, because of the aircraft they operate, would not be able to add 

qualifying service unless they obtained new types of aircraft. For instance, an air carrier 

operating only 737s could not fly non-stop from the eastern part of the U.S. to China or 

Australia, or from the western U.S. to Europe or the Middle East. Yet FAA does not find 

an incentive limited to such destinations to be discriminatory. Thus, it is clear that an air 

carrier’s business decision on the fleet it chooses to operate provides no basis for finding 

that an airport sponsor’s incentives program is unjustly discriminatory. 

 Any assertion that a weight-based incentive constitutes unjust discrimination is 

based on an implicit, subjective presumption that favors adding seats to a market via new 

flights rather than adding more seats per flight, even though the increase in capacity 

 

10 Although the Incentive Guidebook, p. 22, Q&A 35, raises the possibility that an incentive “based on 

increased weight for a previously scheduled flight . . . could be discriminatory to those airlines that do not 

have different sizes of aircraft,” it does not offer an explanation of how it would be discriminatory. 

Moreover, even if an incentive based only on increasing weight on a previously scheduled flight could be 

deemed discriminatory, such reasoning would not apply to the Department’s proposed incentive plan, 

which would allow an airline to qualify for the incentive if it adds total weight by increasing the number of 

flights it operates, by increasing the weight of aircraft used for previously scheduled flights, or any 

combination of the two. 
7

could be exactly the same either way – or even greater through upgauging, for instance, 

in upgauging from a 737 to a 747, versus adding a new flight with a regional jet. There is 

no legal requirement that an incentives program reward only capacity additions to a 

market that are achieved by new flights, rather than through the use of larger aircraft.11 

 It is inherently reasonable for an airport sponsor to seek to increase the number of 

available seats (or to use a surrogate, such as aircraft landed weight), to its airport, either 

generally or to specific markets. Increasing the number of seats adds available capacity 

and air travel opportunities for the travelling public, thus helping to fulfill the primary 

purpose of an air carrier airport. It also provides opportunities for increased numbers of 

passengers to travel through the airport, spending additional dollars and raising additional 

revenue for the airport. 

 There is no federal law or rational federal policy that compels an airport sponsor 

to prefer that additional seats or increased landed weight be obtained by increasing the 

number of flights rather than the size of the aircraft. In fact, in terms of imposing 

burdens on the air traffic control system and the environment, it can be argued that, if 

anything, the federal government should prefer that increased passenger-carrying 

capacity be achieved via increases in aircraft size, rather than number of aircraft. 

 In any event, the Department need not demonstrate that increasing passenger 

capacity is better achieved via larger aircraft, because the Department is indifferent as to 

whether increases in passenger capacity are achieved by new flights or increased aircraft 

size, and this is reflected in its proposal.12 The proposed Incentives Program is truly nondiscriminatory. In contrast, it would be discriminatory if CCDOA were only allowed to 

apply incentives to increases in landed weight due to new flights and not to incremental 

landed weight increases due to the use of larger aircraft for previously scheduled flights. 

 Requiring the Department to modify its proposal to eliminate the option for air 

carriers to qualify for the incentives by increasing the size of the aircraft they operate 

would actually be more discriminatory than the Department’s proposed program and 

would unduly circumscribe the total flexibility afforded carriers by the program. It would 

be counterproductive to eliminate any one of the broad range of options provided by 

CCDOA, and, thus, make it more difficult for some carriers to qualify for the incentive, 

based on concerns about unjust discrimination. 

 

11 The Incentive Guidebook at p. 11 provides no policy or legal basis for the statement that a new flight 

with a 50-seat aircraft may qualify for an incentive, but an upgrade in a flight from 50 to 126 seats (for an 

incremental increase of 76 seats) is not eligible for an incentive. Airports that are concerned with providing 

air service opportunities to the traveling public should not be forced to favor a 50-seat increase over a 76-

seat increase. 

 

12 In this regard, CCDOA’s proposed Incentives Program is not “based on the type or size of aircraft,” or 

contingent upon adding “a certain number of seats to the market,” or “limited to aircraft with at least a 

certain number of seats,” as discussed in the Incentive Guidebook, p. 10, Q&A’s 9 and 10. That is, the 

Department has not specified the type or size of aircraft or the number of seats that can qualify a carrier for 

an incentive. Any increase in landed weight, however achieved, will qualify for the incentive. 
8

 It is likewise clear that the Department’s proposal would not confer a right on one 

or more parties, but exclude others from enjoying or exercising a similar right. Every 

carrier would have an equal opportunity to earn the incentive. Thus, no exclusive right 

would be granted by the proposed Incentives Program. 

C. The Department’s proposed Incentives Program is consistent with the 

Revenue Use Policy, notwithstanding advice in the Incentives Guidebook 

indicating that incentives are allowed only for “new flights.” 

As discussed above, in assessing whether the Department’s proposed 

Incentives Program is consistent with its federal obligations, it is important to 

assess the program against the actual federal obligations, i.e., the applicable grant 

assurances, the Revenue Use Policy, the Rates and Charges Policy, and the ADA, 

rather than simply looking at the Guidebook, which FAA has described as not 

being a regulatory document that is binding on airports, but rather, as simply a 

compilation of past informal guidance. Such analysis of the underlying 

obligations demonstrates that the Department’s Proposed Incentives Program is 

consistent with its federal obligations. 

For instance, Subsection B, above, sets forth why the proposed Incentives 

Program is not unjustly discriminatory, given that it would provide all airlines, 

regardless of the configuration of their fleets, the opportunity to qualify for 

incentives. As set forth below, analysis of the other relevant obligations imposed 

on airports likewise demonstrates that, notwithstanding certain advice in the 

Guidebook, the Proposed Incentives Program does not violate any of CCDOA’s 

federal obligations. 

The Revenue Use Policy does not require fee waivers to be limited to “new 

flights.” Instead, it allows an airport to provide fee waiver incentives for a promotional 

period. Specifically, the Policy states that: 

Prohibited direct subsidies do not include waivers of fees or discounted 

landing or other fees during a promotional period.13 

 There is no limitation that allowable fee waivers may only apply to new flights. 

The Revenue Use Policy and the Airport Compliance Manual both speak of incentives 

being available for an undefined “promotional period,” but do not specify the baseline 

from which the start of the promotional period begins. The promotional period relates to 

the time in which the incentives are available to a carrier, so that the incentives do not 

become long standing, or perpetual. As DOT explained in the preamble to the Revenue 

Use Policy: 

 

13 64 Fed. Reg. 7696, 7720, VI. B. Prohibited Uses of Airport Revenue, Paragraph 12, see also 

Airport Compliance Manual, FAA Order 5190.6B, (“Airport Compliance Manual”) ¶ 15.13 

(“Prohibited Uses of Airport Revenue”), §(n)(1), p. 15-11. 
9

The Final Policy therefore, permits fee waivers and discounts during a 

promotional period. The waiver or discount must be offered to all users 

that are willing to provide the type and level of new service14 that qualifies 

for the promotional period. The Policy limits the fee waiver or discount to 

promotional periods because of the requirement that the airport maintain a 

self-sustaining airport rate structure. In addition, indefinite fee waivers or 

discounts could raise questions of compliance with grant assurances 

prohibiting unjust discrimination.15 

 The Department’s proposal is to limit the promotional period for which any 

carrier’s increased incremental landed weight qualifies for an incentive to one year. By 

definition, once a carrier has operated at an increased landed weight for a year, the 

incremental amount will become part of the baseline from which the following year’s 

incentive would be calculated, and thus would, itself, no longer be eligible for the 

incentive. A one-year incentive is well within FAA guidelines for the allowable 

promotional period in which to provide incentives to a carrier. The program itself may be 

extended for another year, but incentives would have to be earned based on new increases 

in landed weight that year, above the elevated baseline. 

The Revenue Use Policy itself refers to the requirement referenced in the 

preamble that application of the fee waivers does not result in unjust discrimination: 

Any fee waiver or discount must be offered to all users of the airport, and 

provided to all users that are willing to provide the same type and level of 

new services consistent with the promotional offering.16 

 The thrust of this provision is that the incentives must be offered universally, and 

must actually be provided to those carriers that meet the terms of the promotion. The 

reference to “new services” certainly does not state or even imply that it applies only to 

new flights. The Revenue Use Policy does not define “new services.” Importantly, the 

Policy certainly does not state that upgauging would not qualify as one of the “new 

services” that could be the basis for an incentive. At worst, the language of the Revenue 

Use Policy is ambiguous and does not preclude an incentive from being offered for a 

flight that is not new, but rather represents new service in the form of an upgrade from an 

existing flight. Air travelers, as well as airports, reasonably regard an upgrade in the size 

of equipment used on a flight to constitute “new service(s).” 

In explaining the legal basis for treating direct subsidies of airlines differently 

from waiving fees otherwise payable by airlines, FAA has emphasized the broad 

flexibility airports have in setting, and waiving, fees. 

 

14 As set forth below, “new service” need not be limited to “new flights.” 15 64 Fed. Reg. 7696, 7709-10. 

16 Id., see also Compliance Manual, at ¶ 15-13(n)(1), p. 15-11. 
10

In contrast, the statutes relating to airport rates and charges are much less 

prescriptive. Airport fees are subject to broad requirements of 

reasonableness and nondiscrimination, under 49 U.S.C. 40116 and 

47107(a)(1), but the actual fees are set by the airport operator. Airport 

operators have substantial discretion in setting fees and routinely set fees 

to accomplish a variety of objectives. The FAA reviews fee methodologies 

and resulting fees to see that they are reasonable and not unjustly 

discriminatory, but does not generally inquire in the airport operator's 

policies or strategic objectives. Accordingly, the FAA evaluates 

promotional fee waiver programs to ensure the programs are not unjustly 

discriminatory and that the costs of a fee waiver are not in any way passed 

on to other operators, but does not consider the purposes or effectiveness 

of the program. Given the latitude provided the airport operator by 49 

U.S.C. 40116 and 47107(a)(1) to set fees, the FAA has found that a 

temporary promotional fee discount or waiver is not inconsistent with 

those statutes.17 

 Nowhere did FAA indicate that there was a legal requirement that fee waivers 

could only be provided for new flights, rather than for upgrades in equipment operated on 

a route. 

Consistent with the above provisions, FAA could, without revising the Revenue 

Use Policy or violating any legal requirement, interpret “new service” and ‘new services” 

to include service with larger equipment, rather than only entirely new flights, 

notwithstanding contrary statements in the Incentives Guidebook. 

The Incentives Guidebook provides an example of three airlines that provide 

service to a destination specified by an airport as qualifying for an incentive during the 

relevant timeframe, two via new flights with 50-seat aircraft and another via newly 

upgauged equipment on an existing flight, resulting in an additional 76 seats to the 

destination. The Guidebook states that the first two airlines are eligible for the incentive, 

because they added new flights, but the third airline is not, because it “only increased the 

gauge of aircraft, it did not add an additional qualifying flight.”18

The Guidebook also states that incremental discounts may not be offered based on 

increased weight for a previously scheduled flight, because: 

This does not qualify as new service. It would also appear to be 

based on aircraft type since the carrier would be changing the 

aircraft to add seats on an existing scheduled flight. Incremental 

discounts based on weight could be discriminatory to those airlines 

that do not have different sizes of aircraft.19 

 

17 DOT/FAA Denial of Petition, 69 Fed. Reg. 61544, 61549 (Oct. 19, 2004) (emphasis added). 18 Incentives Guidebook at p. 11. 

19 Id. at p. 22 (Q&A 35). 
11

 The Incentives Guidebook does not provide any support for this position, and in 

particular, it does not analyze upgauging in the context of the legal obligations discussed 

above, which the Guidebook acknowledges as the relevant obligations with which airport 

sponsors must comply.20 As discussed in Subsection B, above, the Department’s 

Proposed Incentives Program is not based on aircraft type nor does it discriminate against 

carriers that operate only one size of aircraft. 

 Moreover, the view expressed in the Guidebook is inconsistent with past FAA 

determinations on the subject, despite the fact that the Guidebook was not supposed to 

represent new FAA interpretations of sponsor obligations (indeed, the Guidebook was not 

published in draft form for comment by interested parties), but rather, to reflect previous 

informal FAA guidance on allowable incentives. In fact, FAA has allowed airport 

sponsors to provide incentives for service that is not new. In addressing a longsimmering situation in which the City of Wichita provided an incentive in the form of 

non-airport revenue to AirTran but not Delta, the FAA indicated that, if the City 

continued to provide incentives to AirTran, it also had to provide the incentives to Delta, 

because: 

Both AirTran and Delta Air Lines (Delta) are air carriers wishing to 

provide continued scheduled service between Wichita and Atlanta. The 

FAA views these two air carriers as similarly situated with respect to this 

route. Treating these two similarly situated air carriers differently could 

constitute a violation of grant assurance 22.21

 In other correspondence, FAA indicated that the incentives provided by 

the City to AirTran lasted a total of four years.

22 Thus, it is clear that the FAA did 

not require the incentives to be limited to new service. While the incentives in 

Wichita were provided in the form of a revenue guarantee, this does not alter the 

fact that the FAA allowed an incentive for air service that it did not consider to be 

“new.” Moreover, FAA has, if anything, established tighter restrictions on 

payment of cash to air carriers than on the waiver of fees.23 

 The FAA has also allowed the Port of Portland to provide incentives to retain

existing transoceanic service at Portland International Airport. This included fee waivers 

for service across the Atlantic or Pacific.24 

 Thus, consistent with the underlying federal obligations imposed on airport 

sponsors, particularly those contained in the Revenue Use Policy, and FAA’s previous 

guidance, as set forth above, FAA should find that there is no federal requirement that 

 

20 Incentives Guidebook at pp. 3, 5 

21 Letter from Charles C. Erhard to Arthur P. Berg (Apr. 6, 2005), at p. 6. (emphasis in original). (Attached 

as Exhibit B). 22 Letter of Charles C. Erhard to Robert E. Cohn and Arthur P. Berg (Aug. 2, 2006), at pp. 1, 2-3. 

(Attached as Exhibit C). 23 See DOT/FAA Denial of Petition, 69 Fed. Reg. 61544, 61549 (Oct. 19, 2004) (emphasis added). 24 See, e.g., July 28, 2009 Landing Fee Waiver Agreement between Port of Portland and Air China Cargo 

Company (effective May 1, 2009) at p. 1. (Attached as Exhibit D). 
12

would limit CCDOA’s proposed Incentives Program only to new flights. Rather, new 

service that is provided with new equipment should be eligible for the incentives as well. 

IV. Conclusion 

 The Airport is faced with a short-term downturn in air service that has persisted 

longer than anticipated. CCDOA expects that, through the operation of economic forces, 

air service will return to prior levels and even increase, but in the interim, CCDOA has 

devised an air service incentive program based on landing fee waivers that is designed to 

stimulate increases in air service in the short term, in order to facilitate effective 

utilization of existing airport facilities, generate non-aeronautical revenues to help hold 

down airline costs, and provide funding for necessary projects. Once traffic has returned 

to normal levels, anticipated to be in 1-2 years, the incentives will be discontinued. 

 The goal of the program is simply to stimulate air service in the short term. It 

does not matter, for the Department’s purposes, where the service comes from or in what 

form it is provided. Thus, the program, which is based on incremental increases in 

landed weight by carrier, provides maximum flexibility to air carriers, who are free to 

determine what routes they serve, how long they serve them, and the equipment they use 

to serve them. In this way, the program is totally non-discriminatory 

 The program similarly provides no exclusive right – in fact, the Incentives 

Program will be available to every carrier that wants to participate; the broad flexibility in 

qualifying for the incentives provides a genuine opportunity for every carrier, incumbent 

or new entrant, large or small, foreign or domestic, hub-and-spoke or point-to-point, 

multi-aircraft fleet or single-aircraft fleet to earn the incentive. 

 It would be paradoxical for FAA, due to unjust discrimination or exclusive rights 

concerns, to eliminate any of the broad range of options provided by CCDOA for carriers 

to qualify for the fee waiver incentive and, thus, make it more difficult for some carriers 

to qualify for the incentive. 

 As noted above, the Revenue Use Policy does not prohibit a weight-based 

incentives program; the use of a non-airline source of revenues to make up for the 

foregone landing fees ensures that there is no impact on airline fees and thus, no issue 

under the Rates and Charges Policy; and the ADA does not preempt the proposed 

program. 

 Given the universal inclusiveness of the Incentives Program and the maximum 

flexibility provided to air carriers in qualifying for the incentives, the Department submits 

that this is the type of program FAA should want to encourage, not discourage or even 

prohibit. While FAA may, in the past, have been concerned with weight-based programs 

designed simply to induce some specific shift from smaller to larger equipment, the 

Department’s proposed program is very different, because it allows carriers total freedom 

to choose how they will increase their landed weight. It provides benefits to carriers that 

increase landed weight by adding new flights as well as those that provide new service by 
increasing the size of aircraft they use to serve the Airport. The proposed program would 

penalize no carriers, and would provide an opportunity for all carriers to qualify for the 

incentives, however they see fit. 

Moreover, this is truly a short-term program, to deal with a short-term anomaly in 

traffic, until economic forces return traffic to its normal levels. The Department's 

approach is thus in line with a fundamental purpose of FAA's air service incentives 

program. 

Simply put, there is no policy or legal reason to disallow the Department's 

proposed Incentives Program. For these reasons, CCDOA urges FAA to determine that 

the Department's proposed air service development program is consistent with its federal 

obligations. 

Respectfully submitted, 

Thomas R. Devine 

Kaplan, Kirsch & Rockwell, LLP 

Counsel for Clark County Department of Aviation 

February 14,2011 

13 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 07/18 

r •• 

. ,~ 

U.s. Depcrtment 

of Transj:)ortatlon 

Federal AvIation 

Administration 

August 11, 2004 

Office of Airport Safety and 

Standards 

Bailis Bell, Director of Airports 

Wichita Airport Authority 

2173 Air Cargo Road 

Wichita, KS 67209 

Dear Mr. Bell: 

800 InofependenC1~ ,~ ... e •• S.w. 

Washillgton, D.C. ~!0591 . 

On November 18,2003, I wrote to you in response to a complaint by Deltt:. Air Lines, 

Inc. (Delta Air Lines) regarding an agreement between the City c)fWichita (City) and 

AirTran Airways, Inc. (AirTran). That agreement, effective May 8,2002, provided 

fin.anoia! incentives from tbe City to AirTran for providing schectuled air $!lrvice 

between identified city pairs. 

We reviewed. thai agreement and detennined that.as long as subsidy paytm:nts to the 

airline did not come from aiIport revenue~ ·the paYD:lents' themselves would not violl~te 

the Federal Aviation Admirustra.tion's (FAA) Policy and fr.ocedures Concerning thf! 

Use of Airport Revenue, 64 FR 7696 (February 16, 1999) (Revenue Use P<: Hey). 

However, we noted that the agreement could potentially result in a violatio:l of the 

airport's Federal grant assurances regarding economic nondiscrimination a:ld exclusf.ve 

rights. 

At the time that letter was written, we were not aware of any promotional i:1centive,s 

that had been denied to other carriers under the same circumstaIl(~es. Neith~ were we 

a.ware of any other cauier being denied the opportunity to provide service 1.ll1der thEl 

same conditions as guaranteed exclusively to AirTran. Based on our understanding that 

no other carriers had been denied comparable treatment, we found the aUp(.rt sponsor 

was not in violation of its grant assurances rega.rding economic nondiscrim:.nation and 

exclusive rights at that time. . 

We have now received a second complaint from Delta Air Lines regarding 1 May 11. 

2004, agreement between the City and AirTran. According to thc~ complair .t, this J:l~~W 

agreement offers similar incentives to the May 8, 2002~ agreement. Again) the City is 

offering ftnancial incentives to be paid from City funds, not from airport ret renue. As 

before, this would not violate the Revenue Use Policy since airport revenu,e is not 

involved in the transaction. However, we have to consider whether this agr.eement 

conflicts with the airport sponsor's grant assurances regarding eCI)nomic t1,t:.CEIV. ED 

nondiscrimination and exclusive rights. rt I; 

AUG 1 6 2.004 

W.AA. 
04/28/2008 15:45 5454355584 CELEBRATION PAGE 08/18 

. , 

'2 

00 Economic Nondiscrimination. Federal Grant Assurance 22, Economic 

Nondiscrimination, requires the airport sponsor to make the airport availabll~ for 

public use on reasonable terms and withOl.lt unjust discrimination -10 all types, 

kinds, and classes of aeronautical activities. The assurance states in pertinl~tlt 

part, 

"Each air cattier hsing such airport (whether as a tenant, n.ontenant, 

or subtenant of an.other air carrier tenant) shall be subject tc such 

nondiscriminatory and substantially comparable lutes, regu:.ations, 

conditions, rates, fees, rentals, and other charges 'Mth respe ~t to 

facilities directly and substantially related to providing air 

transportation as are applicable to all such air carriers whict make 

similar use of such ~irport and utilize similar facilities, subj.:ct to 

reasonable classifications such as tenants or nontertWnts and 

signatory carriers and noosi.gnatory carriers." [As:ru.rance 22 e] 

The May 11,2004, agreement between the City and Air'I'ran provides an 

economic benefit exclusively to AirTran. The agreement states, "The City 

agrees that AirTtan shall be the sole and exclusive scheduled air ca:tier 

providing service under this or any other similar block hour or pas8~nger 

revenue guarantee in whatever direct or indirect form between Wichita (ICT) 

and Atlanta CATL)." We understand that Delta Air Lines has requested similar 

incentives under the same program to provide the same sc~rvice, ane was delued. 

The May 11, 2004, exclusive agreement results in economic discrimination 

benefiting one aeronautioal user to the detriment of another, which :.S a violation 

of grant assurance 22 . 

.QU Exclusive Rights. Federal'Grant Assurance 23, Exclusiv(~ Rights, pt'ohibits the 

airport sponsor from permitting any aeronautical entity to have an exclusive 

right to provide service at the airport. 

While the agreement in question grants an exclusive economic bendit to onl;: 

aeronautical user over anotber, it does not grant an exclusive right tu AirTran. to 

be the sole provider of a particular service. Therefore, this agreemelt, in and of 

itself, does not appear to result in a violation of grant asSurance 23. It is not 

clear at this time whether the economic benefit is sufficient to be co:ls.idered an 

exclusive right under grant assurance 23. 

We are aware that the agreement in question is between the City iUl.d AirTrJlll. You 

have advised us that the airport sponsor, Wiohita'Airport Authority, is not fl party to the 

agreement. It appears, however, that the Wichita Airport Authority is part of the 

Wichita City Government. In fact, the Director of Airports repor:s to the C :ty Manager. 

Thex-efore, the F M considers the City and the Airport Authority as a sing1(~ entity £:)]7 

the purposes of sponsorship of Airport Improvement Program (AtP) grants and related 

grant obligations. 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 09/18 

3 

Grant assurance 22 requires the airport sponsor to ensure that si.milarly Si1 uated 

aeronautical enterprises enjoy comparable economic conditions within which to O:?I~ate. 

Both AirTran and Delta Air Lines are air carriers wishing to provide sche,iuled service 

between Wichita and Atl~nt.a. It appears AirTran is guaranteed an exclusive :financial 

benefit denied to Delta Air Lines for the same service. The Widrita Airp(lrt AuthoIity 

may not permit one air carrier to receive a benefit denied to another air ca;~ier under the 

same circumstances. Based on the infonnation we have, it would appear 1 hat the 

Wichita Airport Authority is in violation of grant assurance 22. 

Please respond within 30 days explaining how the Wichita Airport Authority will 

resolve this issue, providing a tirne1ine for resolution. If you diSlagree witl:l our 

preliminary conclusions, please provide any additional information you believe wiU 

support your views. . 

If you have any questions, please contact Charles Erhard, Division Ma.nag,~ of the FM 

Airport Compliance Division, at (202) 267-3446, or Katherine Baxter, Air:Jort 

Compliance Analyst, at (202) 267-9024. 

Sincerely, 

GLu 

David 1. Bennett 

Director, Office of Airport Safety and Standards 

Cc: Mr. Robert E. Cohn, 

Counsel for Delta Air Lines, Inc. 

ShawPittman LLP 

2300 N Street, NW 

Washington, DC 20037~1128 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 02/18 

.~.~ :" 

. ~ 

0, 

U.S. Deportment 

of Transportotton 

Federal Aviafion 

AdministratIon 

NOV '1 a 2003 

Office of Airport Safety and 

Standards 

BaiJis Bell, Director of Airports 

Wichita Airport Authority 

2173 Air Cargo Road 

Wichita, KS 67209 

Dear Mr. Bell: 

ao.o 'ndependence Ave •• S.W. 

Was'1ington, D.C. 205Sl1 

As you are aware, Delta Air Lines provided us a copy of the dra.ft agreem ent bef:\.ye1eIl. 

the City ofWicbita (City) and AitTran Ai.rWays. Inc. (Ai.rTran) mwbich ':he Cityoffers 

financial incentives for AirTran to provide da.ilY schedUled round-trip jet ;ervice 

between identi.fi,ed city pairs. We reviewed that agl-eement to consider w] lether the 

incentives offered are compatible:with va.tious Federal regulati<ms and policies, 

_ ip.cluding: (1) FAA'sPoliC)l a,nd Procedures Concerning the User of Airport Reve:nue, 

64 FR 7696 (February 16, 1999) (Revenue Use Policy), (2) airp,ort sponsor Federal 

grant a~SUl"ances, (3) FAA's Policy Regarding Airport Rates and Charges, (61 FR 

31994 (June 21, 1996) (Rates and Charges Policy};a:n.dl(4) Titll::''49 Unite.:! Sta.tes Code 

(U.S.C.), § 41713(b). 

We determined that the draft agreement is consistent with the Rrtvenue Us,~ Policy: the 

Rates and Charges Policy, and Title 49 U.S.C. § 41713(b). In considerin!!;the draft 

agTeement's consistency with the airport sponsor's Federal grant assuran.cms, we 

identified two areas that could potentially resul.t in a violation:' 

• Under Assurance 22, Economic Nondiscrimination. pronlotional fe:e waivers or 

discounts must be made available to all aeronautical users willing t:l pro'Vide the, 

same type and level of new service. 

• Under Assurance 23, Exclusive Rights, the airport sponse,r may not permit cltle 

aeronautica.l user to have a guaranteed exclusive benefit. , 

At this titne, we are not aware that promotion~ fee waivers have been denied to other 

cairiers under the same circumstances. Neither are we aware that another dr cattier: has 

been denied the opportunity to provide service under tl;l.~ same conditions a s guarant(~ed 

exclusively to AirTrau. Therefore, we find the airport sponsor is not cu:rreIttlyfn 

violation offuese grant assurances. 

The basis for'our detemrination is presented in the discussion below. . . . .. '... .. 

w'AA, 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 03/18 

',., 

(1) Revenue Use Policy. The Revenue Use Policy identifies appropriate costs tha.t can 

be covered by .aiJ::port revenue. It also identifies prohibited uses of airpjrt revenue. We 

considered whether the sections in the draft agreement covering subsidy- paymeDts to 

AirTran and payments for cooperative marketing and advertising were within thc~ 

giUdelioes of the Revenue Use Policy. 

, . 

(3) Air Carrier Subsidies 

The Revenue Use Policy permits ai:r.port sponsors to P;::lY the ful] costs of 

activities directed toward promot:ing new air se:r:v:ice ~ld compet ition at the 

airport from Hilport revenue. It pem:rits fee waivers and discounts during a 

promotional period So long as the waiver or di.scount is offered t) all user:; 

will:ing to provide the same type and level of new service. It dO(ls not, however, 

allow sponsbrs to pay direct air camer subsidies of any kind. 

The draft agreement between the City and AirTran provides guaranteed 

. payinents to AirTran. These are air cauier subsidies that ma.y nc; t be paid out of . 

airport revenue, We note, however,' that these sublSidy payments are to cc)me 

from the City and not from aiIport revenue. Since the payments do not iuvolve 

airport revenue, these payments do not violate the Rev~mue Use Policy. 

(b) Cooperative Marketing Payments 

The Reven.ue Use Policy permits a share ofpromotional expense:, for IDmketing, 

advertising. and related activities to be paid from airport revenue. The dra·fi: 

agreement between the City and AirTran calls for airpc.rt revenuc; up to a 

specified sum to be used for cooperative marketing and. advertish~g for th,;, new 

service. These payments do :not violate the Revenue Use Policy .. 

(2) Federal Gral1t Assura,nces. The FAA incorporates into grlmt agreements cert;rin 

obligations airport owners accept when receiving Federal grant funds or ·Nhen acc',{,ti.o.g 

the transfer of Federal property for airport purposes. These ob:tigations ar¢ p~ese11ted in 

. the form of grant assurances designed to protect the public's investment in civil aviation 

and to ensure compliance with Federat laws. We reviewed the draft agreement h~1:vveen 

the City and MITran to detellllme whether the agreement violates the alr:?or.t SpOJl~30r~S 

grant assurances conceming (a) economic nondiscrimination, (b) e;x:cl'llsi're rights, and 

(c) self*sustainability. 

The draft agreement is between the City and AirTran. The airpo~ spons(' t, Wich:1a 

Airport Authority, is not a party to the agreement. Howe'Ver, it is ourunderstandiog that 

the ~embers of the Wichita Airport Authority are essentially the same pc::)ple as 1he 

members of the city body responsible for reviewing and ~proving the drj\ft agree:i:llent. 

We also note that, while not a party to the agreement, the Wich:lta Airporl Author..ty is 

committed by the draft agreement to providir.1,g :funds for coopel:ative mar:ceting. ·We 

assume the Wichita Airport Authority is substantially involved :in attracting this n'~w 

service to' the airport and in s1lucturing the draft agreemet1t. Its members are, or sh:luld 

be, fully aware oftbe airport sponsor's obliga.tions regaxdin,g its grant aSSl1.'r:ancm:t~nftD 

such, we will not accept the fact that the agreement is with tb.e City rather tha:ri thel :'loOr:- . '. M'W ~ IJ. " UJ . t'l'.,.l'J ~ • 

~I A A ... , .... '"\. 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 04/18 

Wic~ta Airport Authority as a defense for failure to comply 'with the S1 )onsor' s grant 

a.s~ances. 

00 Economic No:o.discrimination. Federal Grant Assurance 22, EC(:lnomic , 

lvondtscn'mination, requires the ai'tport sponsor to maj{e the airport available for 

public use on reasonable terms and without unjust disGrirninatiO:l to all rypes, 

kinds, and classes of aeronautical activities. . ' . 

The draft agreement. between the City and AirTran pre,vides an economic: 

incentive to AirTran. A promotionai fee waiver or dis,;;ount must be offerl3d to 

all users that are willing to provide the type and level (.fnew ser'Tlce that 

qualifies for the promotional period. We are no.t awa.re of other air ca.rrier.:~ that 

have requested and been denied the same eCQnomic be:o.efit for 'p::ovidi't).g the 

same type and level of new service as'AirTra'O. We w()uld re.mirJd the W:lc,bita 

Airport Authority, however, that it could be f01.Ul.d in v.lolation ofAssura1:l('.e 22 

should it deny a:i:J.other'alr carrier the same opportunity under the same terI'lls and 

circumstances as provided to AirTran. 

1hl Exclusive Rights. Federal Grant Assurance 23, Exclusive Rights! prohibits the 

ailport sponsor from permitting' any aeronautica1 entity to have an excluslve 

right to provide service at the aiIport. 

The draft agreement between the City and AirTran statt~s that " .. ,A1rTran shall 

be the sole and exclusive scheduled all' ca:r:rier pro'1ding service l . .nder this or 

any other similar ... passenger revenue guarantee ... " Clearly, the City here is 

p,roviding an exclusive benefit to A.il'Tra'O. to be the only ai! came'; on this route 

recei'Via.g an economic inoentiye. It does not matter that the agrer;ment is with 

the City rather than the Wicbita AiIport Authority. Iris the airpO!t sponsor that 

may not permit such an exclusive arrangement. 

Assurance 23, requires the allport sponsor. to terminate any exclusive right, to , 

conduct an aeronautical activity now exiting. In this case, the airt: ort SpoIls,or 

may continue to ~llow AiITran,to operate the designa.ted service and to :receive 

the revenue guarantee from City funds. 'However, shoul.d another air cam':!' 

choose to operate the same service in the same maimer under the ~ arne 

circumstances, that air car.d.er should not be denied the same or sir.oilar passenger 

revenue guarantee. Weare not aware of any instance in which tbi; has occ:tlITed. 

However, we would re:tnind the Wichita Airport Authority that it «: ould be fbund 

in violation of Assurance 23 should it permit.one air car.ier to rec~liye a. benefit 

denied to another air carrier under the same circumstances. 

(g) Self-sustainability. Federal Grant Assurance 24, Fee and Rental Structure, 

requires the all-port sponsor to maintain a fee and rental :structure hat willl~,ak:e 

3 

the airport as self-sustaining as possible under the existiJlg cl"t'cUIruitances. l1~~~'1l."Eff'il 

draft agree:m.eut between the City and AirTran does not (~aU for an/ fee Wa:l~ .. ~""'l \f ,"" 

or fee reductions that 'Will affect the self-sustaio.ability 0:: the aiIpo:i. ~""l; 1'),.' ·jIiQ-; . ~~"J r c-. "} !,..,. .., 

'NAA. 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 05/18 

"':". 

(3) Rates and Charges Policy. The Rates and Ch9-rges Policy provide~ gu.idau.(~~l for 

establishing fees for air carriers aI'ld ather aeronautical USCI'S. Rates, feels, and C~ll!1"ges 

to aeronautical users must be fa;u- and reasonable; they cannot be unjust :y 

discriminatory; and they must be consistent with the sponsor's obligatkn to makl~ the 

. airport as self-susta.i:oiIig as possible under the circumstances. 

Costs associated with incentives benefiting one or a limi~cd number of e ir carriere! may 

not be factored into the rate base or allocated to air carners not beue:fitir..g from m;,ch 

incentives unless those other air earners ag;ree. 

The draft agreement between the City and AirTran does not :1tlclude fee waivers or 

·4 

... reductions. Theref<?rej in this case, there are no issu~s regardhg waived or reduc:ed fees 

where the C()sts no:rmally cover~d by the waived rev.¢ue tttigJ:Lt be impr!:'Pe:r:1y shifted to 

other air carriers. The draft agreement does inc1ud~ cooperatN'e tnarketi.ng exp~l~les to 

be paid from aiIport revenue funds. These costs, while an appropriate O!,eratiug 

expense fat the aiIport, canuot. be included in. the rate base or s:hifted to (ther air ::uriers 

without their agreement. 

{In calculattOg a rate base, the airport sponsor must use a reaso:nable, conr: is tent, and 

:transparent method of identifying and distributing costs. Wbi11~ we have liece:iveC . 

.general concerns .from air carners that promotional incentive C()sts may Ii ot be clElarly . 

. identified or equitably distributed, we are not aware Of any instances:in which an air 

''Carrier has alleged that promotional incentive costs at Wichita JM:id~Cont:1ner.tt Airport 

,have been improperly identified or inequitably distributed. 

i(4) Title 49 United States Code, § 41713{b). This section of the United ~ tates Cc·o.e 

'deals with preem.ption of authority over prices, routes, and service. Generally, tbis 

,section states that a State or political authority may not enact 01' enforce a law, 

regulation, or other provision having the force and effect of law related to a price, route, 

or service of an arr camer. 

:The draft agreement between the City and AirTran calls for AirTran to pr·,vide ~iJy 

scbeduled round-trip jet ~ervice for identilled city ,pair mm-kets. The draft agreetrl'~lt 

also stipulates that faxes offered on these flights will not vary significant!)· from th.ose 

nonnally offered by AirTran i:u markets of simila:r: distance. Accord:ing tel the draft 

agreem~t, AirTran may adjust flight times and aircraft type in jaccordanc.~ with it:$ 

usual proeedures and operational requlrements. Tn addition, AiI'Tran will letemrltlEl the 

actual fare levels and inventory allocation. 

The draft agreement represents a contract between the parties. It is not law, and it does 

not have the force of law, except to the extent agreed by the car.rier. The air carrie:r 

agreed to operate on certain routes while retaiIring control over price and service. We 

find no conflict between this draft agreement and U.S.C. § 41713(b). 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 06/18 

• I 

\, 

Conclusion 

Based on the above analysis, we determined that the draft agreement is consistent with 

, ~eRevenue U~e Policy, the Rates and Charges Policy, and Title 49 U.:LC. § 41713(b). 

At ~s ;time, we find the Wichita AirPort Authority is not in violation o::its graut 

assurances regarding the draft agreement between the City and AirTran HOWeYE1l", we 

would remind the allJlort sponsor that (1) a promotional fee 'W'aiver or d:.scount must be 

offered to all users willing to provide the same type and level of new se:-vice, and (2) 

the airport sponsor may not per.n.tlt one air .carrier to enjoy an exclusive' :>ene,fit . 

regardless of how that benefit is derived. . . . 

If. you have au,y questio:ils regarding this ;matter, please contact KatheriIl'~ ~axter at 

(202) 267-9024. ~ 

Sincerely, 

David L. Bennett 

Director, Office of Ai-cport Safety and Standar~ 

" cc: Rebecca. A, Bays 

General Attorney, Law Department 

Delta Air Lines, Io.o. I . 

P.O. B02C 20574 

Atlanta, GA 30320-6001 

W.A.J~. 

5 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 11/18 

U.S. Deportment 

Of Transportation 

Office of Airport Safety and 

Standards 

800 Inelapendence Ave., SIN. 

Washll'l~ton, DC 20!;91 

Fedetcl Aviation 

Administration 

April 6, 2005 

Arthur P. Berg 

Palmer & Dodge, LLP 

730 Fifth Avenue, Suite 900 

New York., NY 10019 

Dear Mr. Berg: 

RE: Air Cattier Subsidies to AirTran from the City ofWichit~. 

Thank you for your letter of October 18, 2004, outlining the Wichita Airport 

Authority's (Authority) position regarding the May 11,2004, agreem.ent between the 

City of Wichita (Ci.ty) and AirTran Airways, Inc. (AirTran) in which the City agreed to 

provide financial incentives directly to AirTratl. 

On August 11, 2004, David Bennett, Director, FAA Office of Aitport Safet y and 

Standards, wrote a letter to Mr. Bailis Bell~ Director of Airports at the Wichita AitpOlt 

Authority, advising that the agreement between the City and Ai.rTran provided an 

exclusive economic benefit to one aeronautical user to the detrimt:'}nt of an01her in an 

apparent violation of grant assurance 22, Econom.ic Nondiscrimination. 

The Authority disagrees with this assessment. In your October 18, 2004, re.::Ily, you 

present two points for discussion: (1) You argue-that th.e City and Authority are sep2ltate 

entities and that the actions of the City should not be imputed to tl1e Authority; and ('2) 

there is a reasonable basis for the City to subsidize the new service started by AirTran. 

(1) City and Authority as Senarate Entities 

You argue that the City and Authority are separate entities, and since the At.thon.ty is 

not a party to the agreement between the City and AirTran. it should not be leId 

accountable for the actions of the City in this matter. 

As noted in the August 11,2004, letter, we hold the view that the Authority is part of 

the Wichita City Government and that the Director of Airports reports to the City 

Manager. In light of this relationship .• the FAA considers the City and the Authority as 

a single entity for the purposes of sponsorship of Airport Improvement Program (All)) 

grants and related grant obligations. 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 12/18 

2 

You acknowledge that the members of the governing body ofthc~ City are ":he members 

of the City Council, and that the members of the City Council ate the members ofth,e 

Authority. You argue, n.onetheless, that the Wichita Airport Authority is a. separate: 

entity from the City of Wiohita. 

As evidence, you provide minutes from the May 11, 2004, City Coun.cil M ;,eting in 

which the AirTran agreement was discussed. You state 50" • the nlembers o:~the City 

Council approved the agreement with AirTran as the governing body ofth~: City, nq:!, as 

the governin.g body of the Wichita Airport Authority." 

TIlese same minutes show~ however., that it was the Director of Airports wl.o reviewc:d 

the agenda item labeled "Transportation Services Agreement - AirTran Abways, Inc." 

at this meeti.ng. That puts the Authority into the discussions and action reg,"u-ding the 

agreement with AirTran. 

As further evidence that the Authority is separate from the City, you provide minutE~s 

from the August 10, 2004, City Council Meeting purporting to show a sepa.rate City 

Council agenda and Airport agenda. Both agendas, however, are included nnder tho 

broad title of "City Council Proceedings." In addition, a notice hnmediatel:r following 

th.e heading for the Airport Agenda states, "The City Council is meeting as the 

governing body of the Airport .... " In our view, this statement supports our contention 

that the City Council is the governing body of the Airport. 

In addition, we poitlt out that both the City and the Authority agrE~ed to gratlt assuram:e 

obligation.s. Thc Mayor. the City Manager~ and the Director of Airports all signed grant 

agreements on. behalf of the Authority: 

• The Mayor signed grant agreements as the Wichita Airpolt Authorit y' s 

designated official representative between July 2003 and August 2004.' 

• The City Manager sign.ed grant agreements and amendments as the ·Wichita 

Airport Authority's designated official representative between. April 2001 and 

August 2002.2 

• The Director of Ahports signed grant agreements between June 199~i and 

August 1999.3 TIle Director of Airports and the City Clerk also signed an 

am.endmel1t September 3, 2003. 

1 The Mayor signed gl'ant agreements on July 15,2003; August 12,2003; August 19. 2003: Septell1b~lr 3, 

2003; May 18, 2004; and August 25, 2004. 

Z The City Manager sigoed grant agreements on .Tlme 5, 200 I; September 11, 21)01; May 24. 2002; June 

20,2002; and August 27,2002. The City Manager and the Director of Airports s.igncd an amendment cn 

April S, :200]. T11e City Manager and the City Clerk signed an amendment May 2 J, 2002. 

~ Thlt Director of Airports signltd grant agreements ,hmc 5, 1995; March 28, 1.996; July 7. H97; May 1 :~, 

1998; May 27, 1998; March 1. .• 1999; March 31, 1999;.ruly 1.3, 1999; Augu.st2, 1.999. 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 13/18 

We affl111l our position that the City and the Authority are collectively and individuaJ1y 

obligated by the grant assurances accepted by the Mayor, the City Manage:, and th~ 

Director of Airports as recipients of AlP grant funds. 

We reiterate tbat the May 11, 2004, agreement betweel1 the City and AirTrm provides 

an economic benefit eXclusively to one aeronautical user to the detriment (If another~ in 

an. apparent violation of grant assurance 22, Economic Nondiscrimination. 

(2) Reasonable Basis to Provide Subsidy 

3 

You atgue that even if grant assurance 22 is applicab.le to the present situat.on, therl;: is a 

reasollabl.e basis for the City to agree to subsidIze the new servic(~ started b:{ AirTran as 

shown by (a) the economic benefit to the City, (b) the classification disti.nclion betwcell 

legacy and low fare carriers, and (c) Congressional intent. 

(gl Economic Impact 

You n.ote that the presence of AirTran has had a si.gnifiCa11t im.pa(:t on redu,:cd airfare:s 

at Wichita Mid-Contin.ent Airport, You report a 30 percent reducti.on in ai.rfares and a. 

corresponding 33 percent increase in passengers with an estimated savings ';0 air 

travelers in excess of $85 million. You state that the City has a strong publ:.e intereHt ill 

maintaining AirTran's low-farc service to their community. 

Both the Department of Transportation (nOT) and the FAA have an interest in 

promoting competition and encouraging new entrant a,ir carrier access at th~~ nation';:; 

airports. In fact, FAA's policies contemplate marketing incentive programs consistent 

with those goals. However, the fact that the Ci.ty favors the routes and fares of one 

carrier over another does not justify continuing a fmancial incentive that fa"ors one 

carrier over another making simi.lar use of the airport. 

(b) Cla~sification. Distinctions 

We have indicated that the agreement with AirTran appears to be inconsistemt with 

grant assurance 22, Economic Nondiscrimination, as a result of the City's financial 

incentive provided to one aeronautical user to the exclusion of another similarly situ.;tted 

aeronautical user. 

Under grant assurance 22(e), the airport sponsor must ensure that each ajr c~lfriet using 

the airport i.s subject to 110ndiscriminatory and substantially compa,rable nUE:S, 

regulations, conditions, rates, fees, r.entals, arJ,d other charges with respect to facilities 

directly and substantially related to providing air transportation as are applicable to all. 

such air carri.ers which make silnilar use of such airport and use similar facilities, 

subject to reasonable classifications such as tenants or non-tenants and signatory 

carriers and non~s.i.gnatory carriers. 
04/28/2008 16:46 6464355684 CELEBRATION PAGE 14118 

You argue that a "reasonable classifi.cation" should include the distinction between 

legacy and low-fare carriers. 

Title 49 of the United States Code (U.S.C.) § 47107(a)(2)(B) and grant as~:~lrance 22 

provide for distinctions based on. the level of commitment the ail' carrier makes to the 

airport (signatory versus nOIl"signatory and tenant versus non-tenant). Ajr carriers 

making the sarne level of commitment fall into thc same classific:ation category. 

Title 49 of the United States Code § 47107(a) requires airport spOllS0rs to E.ssure tl:M.t 

the aitport will be available for public use on reasonable conditic,ns and wi'hout unjust 

4 

. discrhnlnatiol1. It also requires that air carriers making similar u:~e of the a: tport wi).l be 

subject to substantially compara.bIe charges. Section 47107(a)(2)(B) a.llow~ for 

differences based 011 reasonable classift.cations, "such as betweel1. (i) tenant) and 110;:) .. 

tenru1ts; and (U) signatory and non·signatory carriers." 

The reasonable classifications cited above hi (i) and (ii) are exam.ples from the statute. 

They do not necessarily reflect the only reasonable classification:; that could be 

considered. However, both examples in the statute relate to the 11~vcl of fin:mcial 

obHgation assumed by the carrier for the benefit of the airport. Those carril~rs making a 

higher level of financial commitment - such as tenant and signatory carrier:: - may b(~ 

classified in a separate category from those carriers that do not accept that Hgher levd 

of financial commitment. 

You have not indicated that AirTran has accepted a higher leve] c,ffinancia: obligation 

to the airport than other tenant air carriers. You have not argued l:hat the aix carriers in 

thi.s matter are not similarly situated in telms of their si.gnatory or tenant sta::us. The 

distinction you ate proposing is based on ticket pricing. Ticket priCing doer: not reflel~t 

a level of commitment carriers make to the airport financially. We have int~rpreted 

classifications under this statute to be limi.ted to those categories that speak to the 

carriers' finru1ciat commitment to the airport. Therefore, we do not recogni;!:e ticket 

pricing as a reasonable basis for designating air carrier classifications as those 

classifications relate to § 47107(a)(2)(B) an.d grant assurance 22. 

(0) Congressional Intent 

You argue that COl1gt'ess intended to allow the type of direct subsEdy payments cove:rEld 

in the May 11, 2004, agreement between the City and AirTran as ,~videnced by the 

creation of the Small Community Air Service Development Program (pilot program). 

The pilot program. you mention is a DOT pilot program designed to provide funds that 

may be used f(')f direct air carrier subsidies as part of a plan to bring new ser{ice to a 

given community. Th.e pilot program limits subsidy payments to a tlU'ee-yea 

i.ntroductory period. Only thosc airports accepted into the pilot pT·ogram are pennitted 

to make the direct ait: carrier subsidy payments described. The City ofWicbita is no'; 

participating in this pilot progrrun. 
04/28/2008 15:45 5454355584 CELEBRATION PAGE 15/18 

5 

The existen.ce of the DOT pilot program does not override the requiremen.ts of the grant 

assurances and obligations accepted by airport sponsor.s. In fact" the pilot ;:>rogram 

specifically forbids subsidy payments to be made using airport rl:lVenUe, which would be 

a violation of the FAA Policy and Procedures Concerning the use ojAirp,Jr( Reven.ue, 

64 Fed. Reg. 7696 (February 16,1996) (Revenue Use Policy)~ and discounlges the 

airport from being involved directly in the subsidy payment plan. 

In a series of questions and answers regarding the pilot program, Docket OST -2002-

11590, the DOT states, 

"It is our detemlil1ation that airports cannot use airport revenues for direct 

air carrier subsidy and still be consistent with the FAA po.Jicy on revenue 

diversion. The city, county, or state airport owner may provide the :tir 

carrier subsidies, but from. non-airport funds. Of course, c;harnber 0:-

comm.erce groups and other business interests m.ay also provide tha'l type 

of subsidy. The airport, however, should not involve itselfin the direct 

carrier s\l.bsidy, or even act as a funnel for monetary contributiot:l.s b:{ nonairport itlterests. The airport may waive or discount fees to an airline for a 

promotional period, but must do so in a non-discriminatory way. T(I the 

extent that applicants intend to use airport revenues as part of their 

proposal here, they should carefully review the proposed use of those 

funds against the FAA's policy guidelines on use of airport revenue." 

We find no evidence to support your contention that Congress intended - tbrough the 

DOT pilot program or any other - to allow airport sponsors tl1e n~xibility y)U are 

requesting in applying incentives to air carriers differently when using non- :J.irport 

funds. Marketing incentive programs - even those in.centivc programs aim~:d at 

increasing air carrier competition or encouraging low fare service - must be consist(~r.lt 

with the FAA's Revenue Use Policy. the grant assurances, ru,d FAA's Polic:v Regarding 

Airport Rates and Charges, 61 Fed. Reg. 31994 (June 21, 1996). 

We recognize that Congress does encourage new service and incrl~ased competition. 

F M'S Revenue Use Policy provides leeway for ai.rports to encourage new s'~rvice 

through various marketing lllcenti.ve programs. 

The City of Wichita has already been given some latitude in encouraging new service 

provided by AirTr.an in a May 8, 2002, agreement in whi.ch the City providt::d direct El.J~r 

carrier subsidies paid from non~airport revenue sources. At that time~ we de:termined 

that no other air carrier was similarly situated to Air Tran in the route it was serving. 

We advised the Airport Director that other similarly situated air c2LT.riers (i.e. those 

bringing in new service to destinations requested by the airport splJnsor) wOllld have to 

be given the same i.ncentives as AirTran. 
6464355684 CELEBRATION PAGE 1bf18 

04/28/2008 16:46 

6 

Cgnclusion 

Grant assurance 22 requires the airport sponsor to ensure that sir.a.ilarly sittated 

aeronautical enterpri.ses enjoy comparable economic conditions 'within which to operate. 

Both AirTran and Delta Air Lines (Delta) are air carriers wishing to provide continued 

schedu1ed service between Wichita and Atlanta. The FAA views these tw(, air calTic~s 

as similarly situated with respect to this route. Treating these two similarl) situated :!lir 

carriers differently could constitute a violation of grant assurance: 22. 

The arguments you present for differentiating AirTran from Delt.a l'egardi.nl~ service C)n 

this route and fot' allowing the City to provide an economic bene:fit cxclusiHely to 

AirTran cannot be sustained. 

• The City of Wichita, through the Wichita Airport Authority, manag':s the airport 

and fUllctions as the airport sponsor. 

• Air carriers cannot be treated differently under grallt assw:ance 22 b.iSed on 

categories or classifications that are wlrelated to the air carr.iers' financial 

co.mmitment to the airport. 

After considering the arguments raised and the additional informntion provlded, we 

continu.e to consider the Authority's agreement with AirTran to be inconsisl ent with 

grant assurance 22. Economic Nondiscrimination, as a result of p'?Jlmitting disparate 

economic conditions for similarly situated air carriers operating on the sam~: route. 

Please respond within 30 days explaining how the Authority will resolve this issue of 

unjust economic discrimination, and providing a timeline for resolution. 

This letter is neither final agency action nor a final order of the Administrator under 

49 U.S.C. § 40101, et. seq., OJ' 49 U.S.C. § 47101, ct. seq. 

If you have any questions, please contact me at (202) 267 -3187 ~ or Kathel'in~ Baxter. 

Ajxport Compliance Analyst, at (202) 267-9024. 

Char. es C. Erhard 

Manager, Airport CompUance Division 

Cc: Mr. Bailis Bell. Director of Airports 

Wichita Aitport Authority 

21 73 Air Cargo Road 

Wichita, KS 67209 
AUG-02-2006 14:39 FROM: 

o 

U-S. Department 

of If.<lnsportation 

Federal Aviation 

Administration 

AUG ~ 20GB 

Robert E. Colm, Esq. 

Hogan & Harton L.L.P. 

555 13th Street, N.W. 

Washington, D.C. 20004-1109 

Arthur P, Berg, Esq_ 

Kaplan. Kirsch & Rockwell LLP 

730 Fifth Avenue, Suite 900 

New York, N.Y. 10019 

TO:1 646 514 5440 

soo Indopenc;lence Avo., S.w. 

WashlrlglOI1, D.C_ 20591 

RE: Delta Air Lines' Informal Complaint Concerning Wichita's Air Carrier Subsidies to 

A irTran Ajrways. Inc. 

Dear Messrs. Colm and Berg: 

On July 22, 2003, Delta Air Lines, Inc. ("Delta") requested that the Federal Aviation Administration 

e'F AA"), Office of Aiq>orts. initiate an informal investigation concerning a transportation services 

agreemenl entered into on May 8, 2002 between the City of Wichita ("City" or "Wichita") and 

AirTran Airways, Inc. ("AirTrau"). The FAA agreed to infonnaUy investigate the City's revenue 

guarantees tUlder that agreement, and May 11,2004 and May 7, 2005 extensions oftlle agreement 

As part of its investigation, the FAA met with Delta and the Cily, and participated in an exchange of 

correspondence on the legal and policy issues raised by the agreements. On Oelober 5, 2005, tbe 

FAA requested that each party submit a substantive leiter briefon the remaining legal issue of 

whether the City is Obligated under the terms of Airport Improvement Program ( ""AIP") grants 

agreements. Thereafter. the partiers filed initial and reply brief..~. 

Before the FAA completed its investigation, however, the Clty advised in a June 21. 2006 letter that 

the current tnmsportation services agreement between the City and AirTran expired on May 7. 2006, 

and that no futur.e agreements of this type are contemplated by the City. The City further advised 

lhat the recent establish.ment by the Kansas legislature of an annual $5 million State Affordable 

Airfare Fund to provide annual grants to subsidize air carrier service - and through the new fund, the 

replacement of the City by Sedgwick County in future agreements with Airiran - moot the issue 

concerning the City;s revenue guarantees to AirTnm. In light of these developments, the City 

requests the FAA to close its infonnal investigation. 

Upon review of the City's Jrule 21 letter. and consideration of Federal law, FAA poJicies. and the 

record, the FAA concludes that the Wichita Airport Authority ("'Authority") is not currently in 

violation of its grant assurances. Therefore, as explained below, the FAA hereby closes its infonllal 

investigation of the air carrier subsidies provided by the City to AirTran. 
AUG-02-2006 14:39 FROM: TO:1 646 514 5440 

&ckground 

On Febmary 28, 2002, the City entered into two-year revenue guarantee agreement with AirTran, 

under which the carrier provided air service to Atlanta and Chicago (etlcctive May 8, 2002) in 

exchange for a revenue guarantee based on cost of service. The agreement established with cap or 

$3 million for the first year and $1.5 million for the secoll(l 

2 

On July 22, 2003, Delta requested the FAA to initiate an infonnal investigation concerning the 

2002 agreement. Delta alleged that the agreement violated the grant assurances and other Federal 

law, and that the City made payments of $3 million to AirTran between May 8, 2002, and April 30, 

2003. 

On November 18,2003, the FAA advised the Authority that it reviewed the agreement effective 

May 8, 2002 and determined that it was consistent with revenue use requirements. The FAA 

pointed out, however, that the promotional fee waiver or discount must be offered to a11 users 

wiHing to provide same type and level of new service, and that the sponsor may not permit one 

carrier to enjoy an exclusive benefit regardless of how the benefit is derived. The FAA warned the 

City that should another carrier choose to operate the same service in the same manner under the 

same circumstances, the City could not lawfully deny that carrier same or similar passenger revenue 

guarantees. 

On May 11,2004) the City council approved a one-year extension of the AirTran agreement 

through May 7, 2005, with a $2.5 million cap. 

On July 27,2004, Delta requested the FAA to initiate an investigation ofthc May 11,2004 

Transportation Services Agreement between AirTran and City. Delta alleged that the new 

agreement was inconsistent with aviation law and policy and violated the grant assurances 

(exclusive rights, unjust discrimination, rates and charges policy). Delta advised that it had sought 

and was denied the ability to receive similar benefits tor service between Atlanta and Wichita. The 

carrier pointed out that at the time the agreement was signed, AirTran and Delta were similarly 

situated. 

On August 11.2004, the FAA letter advised the Authority that it had received a second complaint 

from Delta and that the carrie..- requested similar incentives under the same program but was denied. 

The FAA advised that the May 11.2004 exclusive agreement resulted in economic discrimination 

in violation of grant assumnce no. 22. The FAA also advised that it considered the City and the 

Authority to be a single entity for purposes of sponsorship of AlP grants and related grant 

obligations. The FAA warned that the Authority may not permit one carner to receive a. benefit 

denied to another carrier under the same circumstances. The FAA requested the Authority to 

respond widlin 30 days explaining how it would resolve the issue and provide a timeline for 

resohllion. 

On October 18, 2004. counsel for the City advised the FAA that it should reject Delta's claims 

because the AirTran agreement was between the City and AilTJ"'d.n and funded with City revenues. 

The City stated that the Authority was a separate entity from the City and was not a party to the 

agreement. The City further argUed that even if the City was subject to the unjust discrimination 

requirement. there was a reasonable basis for City to subsidize AirTran's new service while 

refusing to subsidize service by Delta. The City indicated that the Congress, through the u.s. 
AUG-02-2006 14:39 FROM: TO:1 646 514 5440 

Department of Transportation's ("DOT") Small Community Air Service Development Progra.m. 

recogniz.ed the reasonableness of distinguishing between legacy and new entrant, low-fare camers 

such as AirTran. As a result, Delta alleged that the Congress and DOT have recognized that it is 

not unjustly discriminatory to distinguish between legacy and new entrant, low-cost carriers by 

providing the latter with financial assistance to promote increased air service and lower fares. 

011 March 23, 2005, Delta wrote to the Authority advising that it had learned that the City was 

considering renewal of its revenue guarantee to AirTran for a fourth year conunencing in May 

3 

2005, and that Delta desired a similar revenue guarantee. «There is no basis to discriminate in favor 

of one carrier and not the other. We ask only that Delta be put On a level playing field with AirTran 

as Grant Assurance 22 requires .... " 

In an April6~ 2005 letter to the City, the FAA affirmed its position tha.t the City and the Authority 

are collectively and individually obligated by the grant assurances accepted by the Mayor. the City 

Manager, and the Director of Airports as recipients of AfP grant funds. The FAA also reiterated 

that the May 1 t. 2004 agreement between the City and AirTran provided an economic benefit 

exclusively to one aeronautical user to the detriment ofanothcr~ in apparent violation of grant 

assurance no. 22, economic nondiscrimination. The agency also advised that the existence of 

DOT's Small Community Air Service Development Program did not ()Verride the requirements of 

the grant assurances accepted by sponsors. The FAA asked the City to respond within 30 days to 

advise how the unjust discrimination lssue would be resolved. 

On May 7, 2005, an additional one-year extension to the transportation services agreement with 

AirTran became effective. The extension was approved by the Wichita City Council on ApTi119, 

2005. 

Ln an April 25, 2005, Dcltaurged the FAA to take immediate enforcement action, find that the 

Authority is in violation of the grant assurances, and issue an order dlrecting the Authority to cease 

and desist. Delta advised the FAA that the City had approved a new one-year extension to the 

revenue guarantee agreement with AirTran. 

On May 16, 200S. tile City replied to the FAA's April 6, 2005 letter. arguing that the City Council 

and ilie Airport Board were separate entities and the FAA has no jurisdiction over the City. The 

City alleged that the FAA aeted arbitrarily in disregarding the fact that the City Council acts as the 

City's legislative body and separately as the airport board. The City also argued that there was no 

unjust discrimination in awarding a subSidy to AirTran but not to Delta, and that the FAA should 

interpret grant assurances to permit discrimination between low-cost and legacy carriers. 

On June l, 2005, Delta responded to the City's May 16.2005 letter, expressing its view that the 

FAA correctly found that the City and the Authority were one and the same for purposes of 

enforcing grant assurances. Delta also arb'lled that the Sarasota case had no relevance here because 

thal example involved the use of allport revenue, and that for the past four years, the City has gi yen 

an exclusive subsidy to AirTran but has denied Delta a fair and equal opportunity to receive the 

same subsidy. Delta opined that the subsidy amounts to an artificial market distortion which 

interferes with a competitive marketplace and provides significant economic advantage to AirTran 

to Delta's detriment. Delta further argued that the City's attempt to justify its discrimination by 

relying on the right of sponsors to establish reasonable classifications has no me(it, and that the 

agreement violated both the discrimination and exclusive rights prohibitions in the grant assurances. 
AUG-02-2006 14:40 FROM: TO:1 646 514 5440 

Finally, Delta submitted that the agreement also violated the Federal preemption provision, 

49 U.S.C § 41713(b). 

On October 5; 2005, the fAA requested that each party submit a substantive lettcr brief on this 

issue of whether the City is obligated under the tenns of AlP grants agreements. In the lettcr, the 

FAA had advised that it still held the view that the Authority is part of tile Wichita City 

Government and that the Director of Air.ports reports to the City Manager. The FAA therefore 

considered the City and the Authority to be a single entity for (he purposes of sponsorship of AlP 

grants and their related contractual obligations. The FAA concluded its letter by stating that it has 

not accepted the fact that the transportation services agreement is with the City rather than the 

Authority as a defense for failure to comply with the sponsor's grant assurances. 

4 

On November 18, 2005, the City and Delta filed their letter briefs. The City expressed the view that 

under the U.S. Constitution. federal case law, and Kansas law, thc City and the Airport Authority are 

separate legal entities. The City urged the FAA to find that the Authority is a separate legal entity 

that has entered into the AlP grant. agreements with the FAA and that the assurances under the 

agreements do not apply to the City. 

Delta alleged that the subsidy agreement violates the grant assurance probibitions against unjust 

discrimination and exclusive rights, and the Federal preemption provi.sion, 49 U.S.C. § 41713(b). 

Delta reallegcd that the Authority is not independent of the City, and is governed and controlled by 

the City. Delta noted that the record shows that the Mayor ofWichi.ta signed several of the grant 

agreements as the Authority's designated official representative. The carrier also argued that given 

the fact that the City by its own admission is the governing body of the Authority, and in light of the 

overlapping and interlocking relationships between the City and the Authority, the Authority calIDot 

avoid its grant assurance requirements "by hiding behind the artificial corporate veil wilen both the 

City and Authority arc effectively controlled by the same entities and individuals." 

On December 22, 2005, the City and Delta filed their reply briefs. After addressing Delta's 

argLiments~ the City cited an executi ve oTder encouraging Federal agencies to be deferential to states 

when taking action that affects the polieymaking discretion of tile states. The City also alleged that 

the FAA's position violates fundamental constitutional principles of federalism. Finally. the City 

argued that Delta's reliance on the Federal preemption provision is outside the scope of the FAA's 

request and has no merit. 

Delta stated that while it may be true that the City and the Authority are distinct legal entities under 

state law, the Authority played a significant role in the creation of the AirTran agreement and that 

the juridical legal distinctions in practice have been blurred. Delta also reasserted past arguments 

including (hat the City is the governing body of the Airport and that the agreement violates the 

Fcderal preemption provision. 

On May 7, 2006, the May 7,2005 one-year extension to the transportation services agreement with 

AirTran expired. 

Analysis 

As indicated in the record, the FAA has bad some significant concerns with the transportation 

services agreement entered into between the City and AirTrnn. Under the agreement, the City 
AUG-02-2006 14:40 FROM: TO:1 646 514 5440 

promised to provide financial incentives to AirTran in exchange for providing scheduled air service 

between identified city pairs. The agreement - in its various fbnns as it was renewed - nlised a 

compliance issue with respect to the prohibition against unjust discrimination because it pennilled 

disparate economic conditions for similarly situated air carriers operating on the same route. The 

agreement also raised a compliance issue concerning the exclusive rights prohibition since it denied 

Delta the opportunity to provide service under the same conditions as guaranteed exclusively to 

AirTran. 

5 

The FAA was in the process of finalizing its investigation when it received the City's June 21,2006 

letter, in which counsel for the City of Wichita advised that the last transportation services 

agreement between the City and AirTran expired on May 7, 2006; and that "no future agreement by 

the City is contemplate<t" Counsel for the City also advised that new Kansas state legislation moots 

the issue conceming revenue guarantees to AirTran by the City with either airport- or non-airporl 

revenues. I According to the City, the state statute created an annual $5 million State Affordable 

Airfare Fund that provides annual grants to Regional Economic Area Partnerships to be used "to 

provide mOre air flight options, more competition for air travel an.d affordable airfares for Kansas, 

including a regional ailport in Western Kansas," House Substitute for SelL.1te Bill No. 475, "An act 

concerning economic development; creating the state affordable airfare fund to support certain 

programs~ providing for certain studies and reports" § I (approved Apr. 18,2006). Counsel further 

advised that based upon a grant under tbe st.·tte statute, Sedgwick County has entered into a new 

transportation services agreement with AirTran, and that future agreements would continue to be 

entered into between the airline arld the County, not the City. The City of Wichita is situated within 

Sedgwick County. Counsel concludes by requesting the FAA to close its informal investigation of 

the City-AiTTran agreement. 

Based upon the infonnation provided by the City, the FAA agrees that the outstanding legal issues 

relating to unjust discrimination and exclusive rights are now moot. The fact that (1) the current 

agreement has now expired, (2) counsel for the City represents that the City will no longer enter into 

such agreements, and (3) Sedgwick County, which is not an airport sponsor, has replaced the City as 

a party in the agreements with AirTran, eliminates the outstanding compliance issues relating to 

unjust discrimination and exclusive rights. Since Sedgwick County is not an airport sponsor, it is not 

bound by the AlP grant assurance prohibitions against unjust discrimination and exclusive rights. 

None of tho funding for the statc program should come from or be directed through the Authority'S 

accounts, and other Authority incentives should not be merged with the State program. 

Because the current tran.~portation services agreement expired and the City has represented that it 

will no longer enter into such agreements with air carriers, there is 110 need for the FAA to make 

fonnal findings on the issues of whether or. not the City and the Authority arc separate entities, and 

whether the City (in addition to the Authority) is obligated under 1he grant assurances. 

Based upon the City's June 211etter, Feder-allaw, FAA policies~ and the record in this infonnal 

investigation, the FAA concludes that the Wichita Airport Authority is not currently in violation of 

l When the FAA received the City's June 21, 2006 letter, its investigation had not yet been finalized. As a 

result~ the agency had not yet made findings on whether the city revenue used to fund the agreement was 

airport revenue or non-airport revenue_ 
AUG-02-2006 14:40 FROM: TO:1 646 514 5440 

its grant assurances.

2 Therefore, as explained below. the FAA hereby closes its investigation of the 

legality of the transportation services agreement between the City and AirTran. 

6 

lfthe City were in the future to enter into another air transportation services agreement with AirTran 

(or another carrier) utili7.ing its own funds or funds from the stntc's affordable airfare fund program, 

and denied other air carriers a similar opportunity, the City's compliance with its grant assurance 

obligations would again be called into question. 

Charles C. Erhard 

Manager 

Airport Compliance Branch 

Office of Airports 

2 The FAA Compliance Program is designed to aehiove voluntary compliance with 

federal obligations accepted by owners andlor operators of public-use airports developed 

with FAA administered assistance. 1l1erefore, in addressing allegations of 

noncompliance, the FAA will make a detennination as to whether an airport sponsor is 

currently in compliance with the applicable federal obligations. Sec FAA Order S190_6A (Oct. 2, 1989), ~ 5-

1 and 5-I(b)(1)(the basis of the FAA's Compliance Prognun is "an educational effort to achieve voluntary 

compliance."). 
LANDING FEE WAIVER AGREEMENT 

This LANDING FEE WAIVER AGREEMENT ("Agreement"), effective May 1, 2009 

("Effective Date") is between the PORT OF PORTLAND, a Port district of the State of Oregon 

("Port"), and AIR CHINA CARGO COMPANY LTD, an entity incorporated in the People's 

Republic of China, and formerly doing business as Air China Limited, both foreign corporations 

authorized and in good standing to do business in the State of Oregon ("Airline"). 

RECITALS 

A. The Port is the owner and operator of the Portland International Airport ("PDX"), 

located in Portland, Oregon. 

B. Port and Airline are parties to a Signatory Cargo Carrier Operating Agreement 

(Port Agreement No. 2005-151), effective July 1, 2005 ("Lease") pursuant to which Airline 

provides scheduled international transoceanic air cargo service between PDX and Beijing, China, 

that is extremely important to the Port and the state of Oregon which is the ninth most trade 

dependent state in the United States of America. 

C. Due to an unprecedented economic downturn resulting in what the Port 

anticipates will be a temporary reduction in demand for international air service, the Port has 

implemented a program to support carriers that provide this essential non-stop transoceanic 

service that will remain in effect for a period of one (1 ) year; and 

D. The Federal Aviation Administration has reviewed the Port's landing fee waiver 

program. 

NOW, THEREFORE, the parties intending to be legally bound by the terms and conditions of 

this Agreement, and in consideration of the mutual covenants and the benefits accruing 

respectively to the Port and Airline, the Port and Airline agree as follows: 

1. FEE WAIVERS 

1.1 Landing Fee Waiver 

The Port agrees to credit to Airline the value of all international transoceanic landing fees 

otherwise collectable pursuant to the Lease for a period of one (1) year, beginning May 1, 2009 

("Effective Date"). The Port will transfer funds from a Port Cost Center account to an Airline 

Cost Center account to ensure that the landing fee waiver will not impact the rates and charges of 

non-participating PDX carriers. 

2. GOOD STANDING 

In order to continue to qualifY for the landing fee waiver contemplated by this Agreement, the 

Airline must be in compliance with the Lease and all other agreements with the Port and shall be 

current on all amounts owed the Port. In the event the Airline is in arrears with regard to rates, 

charges and other fees due the Port, the Port has the right to suspend or terminate the landing fee 

waivers, provided the Port first gives the Airline notice of such arrearage or failure to comply 

and allows the Airline no less than thirty (30) days to pay the arrearage or cure the failure to 

comply. Such notice shall contain reference to the Port's intention to terminate the landing fee 

1 - Landing Fee Waiver Agreement Lcgal-ltdimarketingwh/Air China Fee Waiver Agreement f.docx 
waivers under this Agreement if Airline fails to satisfy its payment obligations or effect the 

applicable cure. 

3. FORCE MAJEURE 

If the performance by either of the parties of their respective obligations under this Agreement is 

delayed or prevented, in whole or in part, by any extraordinary act of terrorism, nature, 

explosion, epidemic, war, civil disorder, change in laws, or unexpected and unavoidable labor 

strike or material shortage that could not have been reasonably anticipated or avoided by the 

impacted party (collectively, "Force Majeure"), then that party shall be excused from 

performance of its obligations until the Force Majeure event has resolved without liability so 

long as performance occurs as soon as reasonably possible, to the extent performance can occur. 

4. FEDERAL REQUIREMENTS 

This Agreement is intended to satisfy the standards for airport incentive programs for promotion 

of air carrier service set forth in the Federal Aviation Administration's ("F AA") Statement of 

Policy and Procedures Concerning the Use of Airport Revenue, 64 FR 7696, February 16, 1999. 

5. MISCELLANEOUS PROVISIONS 

5.1 Defined Terms 

Except as otherwise defined herein or where the context clearly requires otherwise, all 

capitalized terms used in this Agreement shall have the meanings given such terms in the Lease. 

5.2 Entire Agreement 

Except as expressly provided in this Agreement, all of the terms and conditions of the 

Agreement shall remain in full force and effect. 

5.3 The Law of Oregon 

This Lease shall be governed, construed and enforced in accordance with the laws of the 

State of Oregon. Jurisdiction shall be with Multnomah County Courts or the Federal Court 

located in Portland, Oregon. 

5.4 Counterparts 

This Agreement may be executed in separate counterparts, each of which is deemed to be 

an original and all of which taken together constitute one and the same agreement. 

5.5 Assignment 

This Agreement is personal to each of the Port and Airline and shall not be assigned. 

5.6 Severability 

Should any provision of this Agreement be found to be illegal or unenforceable, it is the 

intent of the parties that the remainder of this Agreement shall remain in full force and effect. 

5.7 Notices 

All notices required or desired to be given under this Agreement shall be in writing and 

may be delivered by electronic mail or facsimile followed by hard copy versions in the 

international post. Notices sent by post shall be addressed as follows: 

To the Port: 

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and to the Airline: 

The Port of Portland 

7000 N.E. Airport Way 

Portland, OR 97218 

Attn: General Manager, Air Service Development 

Air China Cargo Company, LTD 

No. 46, Xiaoyun Road 

Chaoyang District, Beijing lO0027, P.R. China 

Any notice delivered by personal delivery shall be deemed received by the addressee upon actual 

delivery; any notice delivered by mail as set forth in this Agreement shall be deemed received by 

the addressee on the third (3rd) Business Day after deposit. The addresses to which notices are 

delivered may be changed by giving notice of such change in accordance with this notice 

provision. 

5.8 Survival 

Any covenant, condition, representation or warranty contained herein shall survive the 

expiration or earlier termination of this Agreement and shall remain fully enforceable thereafter 

5.9 Modification 

Any modification of this Agreement shall not be valid unless reduced to writing and 

executed by the parties hereto. 

5.10 Amendments 

The parties may mutually agree to amend this agreement in writing. 

5.11 Third Party Beneficiaries 

Nothing in this Agreement gives or shall be construed to create a benefit to any party who 

is not a signatory party to this Agreement. 

IN WITNESS HEREOF, the parties have subscribed their names hereto effective as of the year 

and date first written above. 

AIR CHINA CARGO COMPANY LTD 

By: 

Print Name: 

As Its: 

Date: 

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APPROVED AS TO LEGAL SUffiCIENCY 

~~\..:. ~and