BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

____________________________________ ) Motions and Applications of ) ) HAWAIIAN AIRLINES, INC. ) ) Docket DOT

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- 2010

- 0018 AMERICAN AIRLINES, INC. ) ) in the matter of 2010 U.S.

- Haneda ) Combination Services ) Allocation Proceeding ) ____________________________________)

OBJECTION OF HAWAIIAN AIRLINES, INC.

Communications with respect to this document should be addressed to: Mark B. Dunkerley President & Chief Executive Officer Peter Ingram Executive Vice President and Chief Commercial Officer Hoyt H. Zia Senior Vice President, General Counsel & Corporat e Secretary Hoyt.Zia@hawaiianair.com Hawaiian Airlines, Inc. P.O. Box 30008 Honolulu, HI 96820

- 0008 J. Parker Erkmann Jonathan B. Hill Geoff Rapoport Cooley LLP 1299 Pennsylvania Ave., NW Suite 700 Washington, DC 20004 (202) 842

- 7800 (202) 842

- 7899 (fax) perkmann@cooley.com jhill@cooley.com grapoport@cooley.com
Counsel for Hawaiian Airlines, Inc.

A pril 6 , 2015DOT

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- 0018 2015 Objection of Hawaiian Airlines, Inc. Page 1 of 10 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

____________________________________ ) Motions and Applications of ) ) HAWAIIAN AIRLINES, INC. ) ) Docket DOT
- OST
- 2010
- 0018 AMERICAN AIRLINES, INC. ) ) in the matter of 2010 U.S.
- Haneda ) Combination Services ) Allocation P roceeding ) ____________________________________)

OBJECTION OF HAWAIIAN AIRLINES, INC.
The Department’s Order 2015

- 3

- 17 1 grant ing Delta Air Lines (“Delta”) its third chance to fulfill promises to the Department to provide reliable service to Tokyo’s Haneda Airport (“Haneda”) is hard to fathom given the evidence that Delta’s scheduling p ractices reflect a deliberate strategy to play keep

- away with these valuable service rights. More concerning is the Department’s expressed p reference for “ U.S. business travelers” even when the Department’s
decisions a dversely impact U.S. businesses:

Kona

- Haneda service would largely benefit Japanese

- originating leisure traffic, which, while important for promoting increased international tourism and economi c activity in Hawaii, minimizes Haneda’s advantages to U.S. travelers in general, and U.S. business travelers in particular.
Show Cause Order at 9

- 10. In the name of promoting the interest of U.S. business, the Department action has the ironic effect of h arming U.S. businesses that rely on tourism,

1 See Order to Show Cause, DOT Order 2015

- 3

- 17 (issued Mar. 27, 2015) (hereinafter “Show Cause Order”).DOT

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- 0018 2015 Objection of Hawaiian Airlines, Inc. Page 2 of 1 0 including resorts, hotels, restaurants , other travel companies and retailers while providing no appreciable benefit to business traveler s who have multiple options to fly to and from Haneda

. T he Department’s mi sguided preference find s no basis in the Department’s enabling statute, and its application is not supported by the record of this proceeding.
While Hawaiian Airlines, Inc. (“Hawaiian”) presented unrebutted evidence of the significant economic benefits o f its service proposal , the competing service proposals of Delta and American Airlines (“American”) offer ed only a recipe for yet more service cutbacks and
service failure s
. Indeed, despite requesting “ a fresh evidentiary record”, 2 the Department failed
to evaluate the evidence submitted; ignored evidence that Delta’s and American’s proposed
services would fail and did not explain why it d isregard ed the evidence. In addition, the Show Cause Order reflects a misunderstanding of the State of Hawaii and its geography. The Department appears to simply conflate Kona with Honolulu, 3 despi te the fact
that the two cities are on different islands separated by 1 70 miles and constitute two distinctly
different communities

.

I. T HE D EPARTMENT ’ S F AVORING OF “U.S. B USINESS T RAVELERS ” AT THE E XPENSE OF U.S. B USINESS IS W ITHOUT A S TATUTORY B ASIS . In awarding back

- up authority to American’s Los Angeles (“LAX”)

- Haneda service, the Department expressed a preference for “ U.S. business travelers in parti cular” over the “ increased

2 Order Instituting Proceedings and Requesting Applications, DOT Order 2014

- 12

- 9 (issued Dec. 15, 2014), at 5

- 6 (hereinafter, “Instituting Order”).
3 Show Cause Order at 7 (“Consistent with the Department’s ongoing goal of using the limited Haneda rights to address a variety of public interest objectives, including the objective of geographically diverse gateways, the Department tentatively finds that maintaining the Seattle gateway to Haneda would make a better use of the limited Haneda opportunity and be tter maximize the public benefits, than would allocating a fourth Haneda route to Hawaii.”).DOT

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- 0018 2015 Objection of Hawaiian Airlines, Inc. Page 3 of 1 0 international tourism and economic activity ” that would result from Hawaiian’s proposal. 4 This preference finds no basis in the Department’s enabling statute. Section 40101 of the Transportation Code states the factors the Secretary shall consider in determining which policies are “ in the public interest and consistent with public convenience and necessity ”. 5 N one of the sixteen factors listed in
Section 40101 mention the promotion of the interests of business travelers or leisure travelers

. Instead, the statute directs the Department to develop an “ air transportation system ” to serve “ th e present and futur e needs of th e commerce of the United States”. 6 The standard includes consideration of U.S. commerce overall, not a particular type of travel

. Accordingly, t here is no statutory directive for the Department’s subjugation of the U.S. commerce promoted by Hawaiian’s Kona service to the purported, unquantified benefits to “U.S. business travelers” to be served by
Delta and , potentially, American. Moreover, t he Department has not explained no r quantified the
benefit s to be realized , other than in the most general terms, while Hawaiian submitted specific

qu an tification of the benefits of bringing foreign

- originating travelers to Kona
The Department’s preference also lacks a rational basis in ec onomic policy. While the Department fails to explain its rationale for favoring business travelers, a plausible assumption is that business travel to Tokyo will facilitate the interest of U.S. business in promoting exports, seeking imports and promoting i nvestment. But the Department’s decision not to select Hawaiian’s proposal
has an immediate adverse impact on U.S. business. Every dollar spent by a Japanese

- originating traveler is a U.S. export. The advantages to U.S. business are direct, immediate and substantial

– not

4 See id. at 9

- 10.
5 49 U.S.C. § 40101 (a)

. 6 Id. at § 40101(a)(7) (A)

.DOT

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- 0018 2015 Objection of Hawaiian Airlines, Inc. Page 4 of 1 0 speculation

– and worthy of the Department’s support. This be nefit goes unaddressed in the Show
Cause Order

. Favoring the interests of business travelers is particularly problematic in this case because the purported benefits of the competing services will not be realized. The incremental benefits of Delta’s
servic e and American’s potential service are minimal . Hawaiian’s pleadings demonstrated t hat the competing service proposals are marginal and likely to result in service failures or cutbacks :

• Delta’s Seattle
- Haneda Ser vice is not W orkable : T he Haneda

- Seattle m arket is too small to support Delta’s service. 7 Delta’s Seattle lo ad factors have been lower than other failed Haneda gateways, and the purported increased connections will not appreciably increase traffic on the route. 8 Indeed, it is telling that the Department concluded it must impose strict usage requirements to ensure this valuable air service right will be used.

• Implementing American’s LAX Proposal Requires Service Cutbacks : LAX cannot support a third Haneda serv ice , meaning that American’s service would either require service cutbacks or result in yet another Haneda service failure

. 9 Indeed, given the time required to identify a B777 to perform the service, schedule crews, re

open a new station and sell tickets, the only way American can pledge to start its service in 60 days is if it simply pulls down its current LAX service from Narita International Airport (“NRT”) . As a result, there will be no incremental benefit to the commerce of the United States.

In co ntrast to the nebulous, unquantified benefits to business travelers resulting from these marginal services , Hawaiian proposed a service that will stimulate U.S. commercial activity. Consistent with the policy of the Obama Administration, Hawaiian’s proposed service will stimulate
U.S. tourism and increase spending in the United States to the benefit of U.S. businesses and U.S.

7 See Consolidated Answer of Hawaiian Airlines, Inc., DOT

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- 0018 (Jan. 12, 2015), her e inafter “Hawaiian Answer”, at 7.
8 See id. at 34

- 35.
9 See id. at 44

- 48 (“Because LAX

- HND has abundant capacity, introduction of American’s service will make all three of the services uneconomic.”).DOT

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workers

. 10 Hawaiian’s estimates of the benefits o f its service went unrebutted and unanalyzed by
DOT

. In particular, Hawaiia n forecast that its service would increase:

• U.S. household earnings by nearly four times the amount of American’s proposal and more than fifteen times the amount of Delta’s proposal, see Hawaiian Answer at HA

2015A

- 617;

• U.S. GDP growth of more than three times the increase of American’s proposal and more than fifteen times the amount of Delta’s proposal, see id. HA

- 2015A

- 616; and

• U.S. job growth of nearly four times the increase of American’s proposal and more than fifteen times the amount of Delta’ s proposal, see id. HA

- 2015A

- 614.
Behind these statistics stands a panoply of resorts, hotels, restaurants, car rental companies, retailers, tour operators, construction companies and their employees

– all U.S. businesses and U.S. workers

– that stand to benefit from Hawaiian’s proposed service. Each dollar spent represents a U.S. export. The Department even credited the benefits of foreign

- originating traffic 11 before dismissing them in
favor of business travelers. Hawaiian respectfully submits that Department policy should consider the broader range of factors that Congress directed, includ ing “ placing maximum reliance on competitive mark et forces and on act ual and potential competition to provide the needed air transportation system , ” developing an air transportation regulatory system that promotes “the
commerce of the United States” and promoting “ the continued strengthening of small air carriers to ensure a more effective and competitive airline industry .” 12

10 See Hawaiian Answer at 29

- 39.
11 Order to Show Cause at 9

- 10 (foreign originating traffic is “important for promoting increased international tourism and economic activity in Hawaii”).
12 49 U.S.C. § 40101(a)(6) (A) , (7) (A) and (13).DOT

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II. T HE S HOW C AUSE O RDER F AILS TO E XPLAIN A DEQUATELY THE D EPARTMENT ’ S D ECISION TO D ISREGARD E VIDENCE P RESENTED BY H AWAIIAN IN THIS P ROCEEDING . In response to the Department’s request for a “ a fresh evidentiary record” to determine

“ whether the public interest would be best served by allowing Delta to retain the currently
allocated Seattle

- Haneda slot pair or, instead, by an alternative disposition of the Seattle

- Haneda slot pair ” , 13 Hawaiian submitted evidence in this proceeding that the competing services will either fail or cause other competing Haneda services to become uneconomic. 14 Indeed, in prior proceedings in this docket, Hawaiian’s predictions about the weakness of competin g applications have proven prophetic. 15 Yet, t he Show Cause Order fails to address the evidence submitted by
Hawaiian that there is in adequate demand to support the proposed services. The failure to
consider critical evidence or explain its dismissal unde rmines the entire reason for refreshing the evidentiary record and violates the Administrative Procedure Act.

13 Initiating Order at 5

- 6.
14 Hawaiian predicted Delt a’s Seattle market will fail. See Hawaiian Answer at 34

- 40 and accompanying e xhibits (“Since [the Department concluded the Seattle market was too small in 2010] , the Seattle market has not grown and is still too small to support the service and, like Detr oit, has and will continue to fail. ”). Hawaiian also predicted that the introduction of HND

LAX service also would cause a service failure. See id. at 41

- 54 and accompanying exhibits (“The [LAX

- HND] market is simply not large enough for a third carrier. . . Hawaiian respectfully submits that an award to American will result in yet another Haneda reallocation proceeding in short order.”).
15 See Consolidated Answer of Hawaiian Airlines, Inc., DOT

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- 0018, at HA

- A

- 512 (Mar. 1, 2010) (“DTW IS NOT LAR GE ENOUGH TO SUPPORT HND SERVICE WITHOUT REDUCING SERVICE TO NRT OR CHARGING MUCH HIGHER PRICES”); See id. at HA

A

- 508 (“SEA IS NOT LARGE ENOUGH TO SUPPORT HND SERVICE WITHOUT REDUCING SERVICE TO NRT OR CHARGING MUCH HIGHER PRICES”); see id. at HA

A

- 305 ( “JFK IS NOT LARGE ENOUGH TO SUPPORT HND SERVICE WITHOUT REDUCING SERVICE TO NRT OR CHARGING MUCH HIGHER PRICES”) ; Consolidated Answer of Hawaiian Airlines, Inc., DOT

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- 0018 (Sep. 6, 2012), hereinafter “Hawaiian 2012 Answer”, at 29 (“Seattle is still too small to support more service and, like Detroit, will not be rescued by connecting service from Delta, Alaska or anyone else.”).DOT

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III. T HE S HOW C AUSE O RDER F AILS TO D ISTINGUISH B ETWEEN H ONOLULU AND K ONA . The Show Cause Order reflects the Department’s misunderstanding of the State of Hawaii and its geography. In commenting on the need for geographically diverse gateways, the Department appears to simply conflate Kona with Honolulu:
Consistent with the Department’s ongoing goal of using the limited Haneda rights to address a variet y of public interest objectives, including the objective of geographically diverse gateways, the Department tentatively finds that maintaining the Seattle gateway to Haneda would make a better use of the limited Haneda opportunity and better maximize the p ublic benefits, than would allocating a fourth Haneda route to Hawaii. 16 The Department’s conclusion is belied by the fact that the two cities are separated by 170 miles
and are on different islands . To put this in perspective, the distance between Kona a nd Honolulu is approximately the same distance as the distance between New York and Boston , as reflected in the map below:

16 Show Cause Order at 7.DOT

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Chart 1: Kona and Honolulu Are Nearly As Far Apart as New York and BostonDOT

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- 0018 2015 Objection of Hawaiian Airlines, Inc. Page 9 of 1 0 Just as no one would consider New York and Boston as part of the same market, Hawaiian respectfully submits that Honolulu and Kona should be considered separate markets for the purposes of allocating air service rights

. Similarly, in assessing geographic diversity, the Department has lumpe d Kona together with Honolulu bec ause they are in the same state. 17 But no one would suggest that cities such as San Francisco and Los Angeles are the same market for the purposes of a route selection proceeding . The Dep artment’s concern about four frequencies serving one state is even more puzzling when the start

- up of American’s back

- up authority
would result in five frequencies being allocated to California. As the Department is undoubtedly aware, the O&D market betwe en Hawaii and Tokyo is nearly twice the size of the O&D market between Tokyo and California

. 18

CONCLUSION
Hawaiian objects to the award of the frequency at issue in this proceeding and the award
of back

- up authority to American

. A s the Department recognized, Hawaiian “has fully delivered
on its Honolulu

- Haneda service promises”. 19 Despite Hawaiian’s record and proposing a viable service in competition with proposals that are doomed to failure, 20 the Department has selected the competing applications. Because the Show Cause Order fails to adequately explain its decision, Hawaiian respectfully submits that the Show Cause Order fails to comply with the

17 Even considering Haneda service to the State of Hawaii as a whole, the state is underserved relative to California given the demand for service to the two states. See Hawaiian Answer at HA

- 2015A

- 401.
18 Id

. at 12

- 13, Exhibit HA

- 2015A

- 303

- 304.
19 Show Cau se Order at 7.
20 See Hawaiian 2012 Answer at 12 (predicting failure of Delta’s Seattle service); Hawaiian Answer at 47 (predicting that American’s LAX service will cause all current HND

- LAX services to become uneconomic).DOT

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Administrative Procedure Act

. I f the Department considers the public interest, and specifically
the economic impact , of the competing proposals and provid es a reasoned analysis of the record evidence, as required by law, the Department would select Hawaiian’s application to serve Kona.
Respectfully submitted,
Dated: April 6 , 2015

_____________________________________ J. Parker Erkmann Jonathan B. Hill Geoff Rapoport Cooley LLP 1299 Pennsylvania Ave., NW Suite 700 Washington, DC 20004 (202) 842

- 7800 (202) 842

- 7899 (fax) jhill@cooley.com perkmann@cooley.com grapoport@cooley.com
Cou nsel for Hawaiian Airlines, Inc.CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Objection of Hawaiian Airlines, Inc. was served this 6 th day of April 2015 via email transmission or U.S. mail on the following: jeremy.ross@alaskaair.com dheffernan@coze n.com abigail.donovan@aa.com francis.heil@aa.com howard.kass@aa.com robert.wirick@aa.com sascha.vanderbellen@delta.com chris.walker@delta.com dan.weiss@united.com Thomas.bolling@united.com steve.morrissey@united.com gmurphy@crowell.com englets@stat e.gov cristinasa@state.gov info@airlineinfo.com charles.hunnicutt@thompsonhine.com patricia.snyder@thompsonhine.com seth.waxman@wilmerhale.com sseiden@crowell.com robert.finamore@dot.gov brett.kruger@dot.gov paul.gretch@dot.gov todd.homan@dot.gov brian.hedberg@dot.gov peter.irvine@dot.gov john.s.duncan@faa.gov glindsey@lawa.org ejames@jamhoff.com ishiwata.k@portseattle.org safora.i@portseattle.org Mike.Donatelli@alpa.org Ambassador Kenichiro Sasae Embassy of Japan 2520 Massachusetts Ave., NW Washington, DC 20008

__________________________ Erin Combs

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