BEFORE THE FEDERAL AVIATION ADMINISTRATION U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

____________________________________ In the Matter of the Joint Petition of ) ) REPUBLIC AIRLINE INC. ) Docket No. FAA
- 2002 - 13734; SHUTTLE AMERICA CORPORATION ) Exemption No. 7370G ) For exemption from 14 C.F.R. Section 93.123 )

_____________________________________ )

JOINT ANSWER OF SOUTHWEST AIRLINES AND JETBLUE AIRWAYS

Ron Ricks James Hnat Executive Vice President

-- Executive Vice President Chief Legal and Regulatory Officer JetBlue Airways Corporation Mark Shaw 27

- 01 Queens Plaza North Vice President General Counsel & Long Island City, NY 11101 Corporate Secretary SOUTHWEST AIRLINES CO. Robert C. Land 2702 Love Field Drive Senior Vice President Dallas, TX 75235

- 1611 JetBlue Airways Corporation 1212 New York Ave., N.W. Robert W. Kneisley Suite 1212 Associate General Counsel Washington, DC 20005 Leslie C. Abbott Senior Attorney Jonathan B. Hill S OUTHWEST AIRLINES CO. J. Parker Erkmann 919 18 th Street, N.W. Cooley LLP Suite 600 1299 Pennsylvania Ave., N.W. Washington, DC 20006 Washington, DC 20004 bob.kneisley@wnco.com jhill@cooley.com (202) 263

- 6284 perkmann@cooley.com
Counsel for JetBlue Airways Corporation January 27 , 20141 BEFORE THE FEDERAL AVIATION ADMINISTRATION U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

____________________________________ In the Matter of the Joint Petition of ) ) REPUBLIC AIRLINE INC. ) Docket No. FAA
- 2002 - 13734; SHUTTLE AMERICA CORPORATION ) Exemption No. 7370G ) For exemption from 14 C.F.R. Section 93.123 )

_____________________________________ )

JOINT ANSWER OF SOUTHWEST AIRLINES AND JETBLUE AIRWAYS Southwest Airlines and JetBlue Airways submit this Joint Answer to the Joint
Petition filed January 6, 2014 by Republic Airline and its corporate affiliate Shuttle
America and the Amendment to the Joint Petition filed January 8, 2014 (the “Amendment”) filed by Republic and its affiliated carriers including Chautauqua
Airlines. 1

The Joint Petition requests FAA approval, via either confirmation or an amendment, for Republic to transfer Exemption No. 7370 to Shuttle America, and, pursuant to the Amendment to Chautauqua, to allow Chautauqua, for the period from February 1 st through March 1 s t
, and thereafter, Shuttle America to provide service exclusively under the Delta Connection brand to Madison, Wisconsin ( “ MSN ” ). Republic‟s petition to the FAA is part of a broader, and improper, plan to use a total of
four slot related exemptions on behalf of Delta Air Lines, under the Delta Connection
brand. Three of these are slot slide exemptions for which Republic seeks DOT approval for their use by Shuttle America in contract service as a Delta Connection carrier ( DOT

1 Common names of carriers are used.2

Docket s DOT

- OST

- 1999

- 6240 a nd DOT

- OST

- 2013

- 0086 )

. Southwest and JetBlue have filed extensive papers in th ose docket s detailing why Republic‟s proposal violates the governing statutes for slot slides and Department precedent

. 2 Similarly, the instant petition constitutes an imprope r de facto transfer of a slot exemption to Delta Air Lines, one of the largest slot holder s at DCA

. The proposed
transfer is inconsistent with the original purpose of the exemption to enhance competition by new entrants and limited incumbents , and is not necessary in order f or
Delta to serve Madison if it wishes to do so

. It should not be permitted.
I. Two Decades of P recedent Make s Clear that th is “ Braniff Exemption ” is Intended Exclusively for the Benefit of New Entrant and Limited Incumbent Carriers. Exemption No. 7370 was originally issued to Midwest Express Airlines in 2000
and subsequently transferred to Republic Airline when its parent Republic Airways Holdings Inc. acquired Midwest in 2009

. 3 This exemption was one of four so - called “Braniff exemptions” that were originally granted to America West Airlines in 1990 due to “unusual circumstances then facing that carrier.” 4 America West, a new entrant carrier, had recently participated in a lotte ry for temporary slots at DCA in May 1989. When those slots were later recalled, rather than force America West to terminate its service at DCA, the FAA took advantage of the t hen available four exempted operations previously flown by Braniff Airways at D CA and awarded them to America West

. In 2000, authority to conduct one of the four operations was withdrawn from America West
for non

- use and then given by exemption to Midwest Express

. FAA found Midwest‟s

2 See Joint Answer (filed January 15, 2014) and Joint Sur

- Reply (filed January 24, 2014) of Southwest Airlines and JetBlue Airways in Docket s DOT

- OST

- 1999

- 6240 and DOT

- OST 2013

- 0086. 3 See Letter from Rebecca B. McPherson, Assistant Chief Counsel for Regula tions, Oct. 30, 2009, in this docket. 4 Grant of Exemption to AirTran Airways, Inc., Exemption No. 8112, Docket FAA

- 2003

- 14563, p. 2 (Aug. 14, 2003) (hereafter “AirTran Airways Exemption”)

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application to be in the public interest because (a) “ Midwest Express [was] the only carrier to express interest in obtaining this slot to augment its limited service at DCA ”
and (b) “ Midwest Express [was] considered a limited incumbent carrier at DCA and that a grant of exemption in this case wo uld not change that status. ” 5 When America West ceased operations in April 2003, the FAA reallocated the remaining three Braniff slot exemptions to AirTran Airways over a competing application from Delta‟s wholly

- owned subsidiary Comair on August 14, 2003

. 6 Since the FAA was faced with competing applications for the se exemptions, it undertook a more rigorous
and comprehensive analysis than for the unopposed Midwest award. Since safety was not an issue, the FAA applied its public interest standard , broadly defined, to determine which air carrier should receive the exemptions

. In doing

so , FAA specifically cited “the Department‟s policy of promoting competition in the airline industry consistent with former Section 102 of the Federal Aviation Act, wh ich among other matters, allows the Secretary to „place maximum reliance on competitive market forces and on actual and potential competition‟ in determining what is „in the public interest and consistent with public convenience and necessity.‟” 49 U.S.C. §
40101. The FAA also noted that : Former Section 102 provides that the Secretary should consider as being in the public interest, „ avoiding unreasonable industry concentration , excessive market domination , monopoly powers , and other conditions that would tend to allow at least one air carrier or foreign air carrier unreasonably to increase prices, reduce services, or exclude competition in air transportation.‟ 7

5 Exemption No. 7370; FAA Regulatory Docket No. 30190, Oct. 19, 2000 (emphasis added). 6 See Letter from Kathryn B. Thomson, Chief Counsel, July 9, 2012, in this docket. Spirit Airlines also applied for the exemptions but was not selected. 7 AirTran Airways Exemption at 6, n. 9 (emphasis added).4

Moreover, the FAA stated that “granting an exemption to a new entrant at DCA [was]
consisten t with the rationale for awarding the slots to America West

– allowing a carrier to maintain or achieve access to the airport.” 8 Similarly, in denying Comair‟s application for the slot exemptions, FAA found it
relevant that “Delta/Comair/Delta Connection operates 147 slots at DCA [which] represents nearly 20 percent of all the slots at DCA.” The FAA went on to state that : [E] ven without the available slot exemptions, it is obvious that Delta and Comair have adequate slots to commence the proposed servic e today; decisions on where to allocate resources are made by the carriers. The petitioner could serve the routes in question on a nonstop basis without any action by the FAA. 9 Similarly here, Delta “could serve the route in question on a nonstop basis without any action by the FAA.” In fact, Delta did serve the DCA

- MSN route for many years until January 2012 when it voluntarily chose to discontinue service. Republic‟s proposal contravenes consistent FAA precedent that these slot exemptions are intended to enable n ew entrant and limited incumbent carriers to compete more effectively with larger DCA slot holders

. But Shuttle America/Chautauqua are not proposing to use Exemption No. 7 370 to provide competit ion and options for consumers under their own brand or even Republic‟s brand. To the contrary, the benefit of the exemption would inure entirely to Delta, the largest airline in the world and the second largest DCA incumbent with a portfolio of more than
100 slots. Shuttle America/Chautauqua will be nearly invisible to consumers, and the exemption will therefore do nothing to enhance competition.

8 Id. at 6. 9 Id.5

Indeed, grant of this petition would transfer th e exemption from a limited incumbent, low cost airline to a large incumbent legacy carrier. Delta would never qualify for the exemption in its own right, yet under Republic‟s proposal would receive
the benefit of the exemption that was awarded to a limited incumbent at DCA to enhance its ability to compete with la rger carriers. Such a transfer of this valuable and limited slot exemption would turn the original purpose of the exemption on its head and
is inconsistent with two decades of DOT and FAA precedent

. II. Republic’s Proposal to Provide Service Exclusively Under the Delta Brand is Explicitly Prohibited by the Conditions Contained in the Exemption

. Republic ‟s proposal to use Exemption No. 7370 to provide service that will be marketed, priced and distributed exclusively by Delta Air Lines as Delta Connection flights is a de facto transfer and as such contravenes the explicit language of the

e xemption itself. Specifically, Condition and Limitation No. 3 states: “ The slot may be utilized only by Republic for a flight marketed under one of the Republic brands .” 10 This requirement is unqualified . Not only must the exemption be operated by Republic but it
also must be marketed by Republic or one of its brands , i.e. , Shuttle America or Chautauqua

. Moreover, Condition No. 5 of the e xemptio n broadly prohibits any type of
transfer : The operation authorized under this exemption is not part of the pool of permanent slots at DCA. However, this operation, while in effect, is subject to the provisions of 14 C.F.R. part 93, subparts K and S, including the slot usage requ irement, except that the authority may not be sold, leased, or otherwise transferred

. 11 In an attempt to circumvent these explicit prohibitions , Republic suggests that because Shuttle America has registered the trade name of “Delta Connection” with the

10 Exemption No. 7370G; Regulatory Docket No. FAA

- 2002

- 13734 , p. 2 , July 9, 2012 (emphasis added)

. 11 Id

. (Emphasis added).6

DO T under 14 C.F.R. Part 215, its Delta Connection service should be “considered „utilized... for a flight marketed under one of the Republic brands.” 12 This argument is
absurd. As the screen shot below shows clearly, from a consumer‟s perspective,
Shuttle America , Chautauqua and Republic are all but invisible under Republic‟s proposal

. Delta controls the marketing, distribution, and pricing of the DL code Delta
Connection flight made possible with this slot exemption , and the service appears to be just ano ther flight in Delta‟s already large DCA portfolio.

12 Joint Petition of Republic Airline Inc. and Shuttle America Corporation; Docket No. FAA

- 2002

- 13734, p. 5 (Jan. 6, 2014)(hereafter “Joint Petition”).7

Republic‟s use of Exemption No. 7 370 for the commercial benefit of D elta Air
L ines in this manner is flatly inconsistent with the conditions of the exemption itself prohibiting transfer

. Accordingly , t he FAA should deny Republic‟s petition and withdraw the slot exemption for non

- use.
III. Republic’s Request for the FAA to Waive the “Brand Condition” Would Undermine the Original Purpose of the Slot Exemption. In a tacit acknowledgement of the weakness of its arguments, Republic requests that if necessary FAA waive the “brand” condition or amend Exemption No. 7370 to authorize operations under the Delta Connection brand. 13 Republic states that using
this slot ex emption to allow for the continuation of DCA

- MSN service is a compelling public interest. 14 This argument is irrelevant, as the merits of a particular route have no bearing on the grant of these specific slot exemptions . In the original re allocation of th e Braniff slot exemptions, FAA stated explicitly that : In granting the requested exemption under the unique circumstances of this case, however, the FAA cannot consider the specific route plans of the petitioners in determining where the public interest l ies

. As noted in the grant of exemption to America West, FAA decisions on slot allocation or exemption authority have never been predicated on route selection but rather on access by specific carriers to specific airports , in this case, DC A. 15 Thus the pu blic interest in this case is narrowly focused on providing access to DCA for
small and limited incumbent carriers. Allowing Republic to transfer the benefits of this slot exemption to Delta does not satisfy this test and in fact contravenes it

. Unlike an EAS or AIR

- 21 slot exemption proceeding , Republic‟s arguments about the importance
of nonstop service to Madison , service to small communities, high load factors on the

13 Id. at 6. 14 Id. at 6

- 7. 15 Grant of Exemption to AirTran Airways, Inc. at p. 6, n. 9 (emphasis added)

.8

route , and proposed new dual

- class service are of no relevance in this case

. Furthe rmore, Republic‟s argument that the transfer should be allowed because it has a small slot portfolio at DCA and without the exemption would have to discontinue
service in this market is also specious . The Republic proposal will use the slot exemption entir ely for the benefit of Delta Air Lines , so it is Delta‟s ample slot portfolio
that is relevant here.
IV. In Blatant Disregard of the FAA’s Authority, Republic and Delta Have Already Consummated the Exemption Transfer and are Selling the Service to the Public

. Despite the FAA‟s exclusive a uthority over the use of these valuable slot exemptions, Republic and Delta have cut the FAA out of the process altogether. Without waiting for the comment period to close or the F AA to rule, Republic and Delta have brazenly gone ahead and effected the transfer of the slot exemption. As of Friday January 18, Delta loaded fares f or the proposed DCA

- MSN service

-- fares that are

more than 100% greater than those that were in effect for the same service offered by Republic 16

– and has begun to sell tickets. The previous screen shot demonstrates that the service is already being held out to the public for sale , with no qualification that FAA approval has not been obtained

. If the FAA were to allow the Republic/Delta plan to go forward, not only would the purpose of the slot exemptions be gutted but the agency‟s authority to administer them
will be undermined. The FAA should not condone such a direct disregard of its authority, and ins tead should ensure that these restricted exemptions fulfill their original
purpose -- to allow new entrant and limited incumbent carriers to “maintain or achieve access to the airport” so that they may better compete with larger carriers.

16 Delta‟s $253 fare is an increase of approximately 220% from Republic‟s DCA

- MSN fares, which averaged $115.9 ~~~~~~~~~~~~~ Republic‟s unauthorized de facto transfer of E xemption No. 7370 to Delta as
described above is inconsistent with the FAA‟s original finding of public interest , prohibited by the explicit language of the exemption itself, and disrespectful of the

a gency ‟s a uthority. For all of the se reasons, we urge the FAA to reject Republic‟s Joint
P etition.

Respectfully submitted,

__________________ __________________ Robert W. Kneisley Jonathan B. Hill Leslie C. Abbott J. Parker Erkmann
Southwest Airlines Co. Counsel for JetBlue Airways Corporation

January 27 , 2014