BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Application of DELTA AIR LINES, INC. for a frequency allocation (U.S. - Brazil) ) ) ) ) ) ) ) Docket DOT-OST-2013-

APPLICATION OF DELTA AIR LINES, INC.

Communications with respect to this document should be addressed to:

Glen Hauenstein Executive Vice President, Network Planning & Revenue Management Robert J. Cortelyou Senior Vice President – Network Planning DELTA AIR LINES, INC. 1030 Delta Boulevard Atlanta, Georgia 30320 Andrea Fischer Newman Senior Vice President – Government Affairs DELTA AIR LINES, INC. 1212 New York Avenue, N.W. Washington, D.C. 20005

Alexander Van der Bellen Managing Director – Government Affairs & Associate General Counsel Chris Walker Regional Director – Government Affairs DELTA AIR LINES, INC. 1212 New York Avenue, N.W. Washington, D.C. 20005 (202) 842-4184 sascha.vanderbellen@delta.com

March 4, 2013BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Application of DELTA AIR LINES, INC. for a frequency allocation (U.S. - Brazil) ) ) ) ) ) ) ) Docket DOT-OST-2013-

APPLICATION OF DELTA AIR LINES, INC.

I. Introduction Delta Air Lines, Inc. (“Delta”) is pleased to respond to the Department’s February 15, 2013 Notice inviting applications for the additional U.S.-Brazil frequencies that become available on October 1, 2013 and October 1, 2014. Thanks to the success of the U.S. Government in negotiating a new air transport agreement with Brazil, these new opportunities arise under the transitional Me morandum of Consultations, which is expected to result in full open skies by 2015. The opportunities at issue in this proceeding provide an important opportunity address the critical interim need for increased service and competition at Sao Paulo, Brazil’s largest and most important

market. Delta requests the following frequencies from the 2013 tranche:

 Seven (7) frequencies for Atlanta-Sao Paulo.

 Seven (7) frequencies for New York (JFK)-Sao Paulo.

Delta requests the following frequencies from the 2014 tranche:

 Seven (7) frequencies for Detroit-Sao Paulo.Application of Delta Page 2 The limited-entry Sao Paulo market is the largest and most important in South America. This is the first time in more than a decade that the Department has the opportunity to allocate new Sao Paulo frequencies. While Delta is a strong competitor, it faces serious challenges in competing against the dominant U.S.-Brazil incumbent carriers, American and United. Improving the competitive market structure is a key public interest consideration in this proceeding. The following table shows the current distribution of the 105 U.S. “unrestricted” frequencies currently available for service to

Sao Paulo:

American leads all others with 47 unrestricted frequencies -- nearly half the entire U.S. allocation. Following its merger with Continental, United is a strong second place challenger with 35 unrestricted frequencies. Delta is disadvantaged by its third place standing, with only 23 unrestricted frequencies – less than half of American’s total, and a third less than United. Delta is under-represented in terms of its Brazil frequencyApplication of Delta Page 3 allocation relative to Delta’s large U.S. hub network, strong customer base, and demonstrated commitment to developing U.S.-Latin American routes.

The public interest would be best served by the full grant of Delta’s 21 frequency proposal, helping to level the playing field against American (which will remain the dominant carrier) and to achieve parity with United. Unless corrective action is taken by the Department to alleviate the frequency imbalance against Delta, the competitive distribution of frequencies will become worse. Under the terms of the Delta/US Airways slot swap transaction, Delta is obligated to transfer seven unrestricted frequencies to US Airways in summer 2015, prior to Open Skies. At the time it was approved by the Department, 1 the Delta/US Airways LGA-DCA slot swap and related Brazil frequency transfer was seen as a way to enable new co mpetitive entry by US Airways, which had no Sao Paulo frequencies of its own. 2 Now, however, in the wake of the announced American/US Airways merger, the contractually obligated transfer of Delta’s unrestricted Brazil frequencies would have the unanticipated result of strengthening the dominant combined American/US Airways entity, and weakening Delta, already the smallest player.

Delta will respond in detail to the comparative merits of other airline proposals, including American’s early-filed application, at the appropriate time in the carrier selection process. For now we will simply observe that American has flexibility within its current portfolio of 47 Sao Paulo frequencies (including quadruple daily flights at Miami and double daily flights at JFK) to operate its Los Angeles and Chicago proposals without a further allocation of frequencies in this proceeding.

1 See, DOT/FAA Notice granting petition, Do cket FAA-2010-0109 (Issued October 7, 2011). 2 US Airways currently leases seven (7) frequenci es from United for Charlotte-Sao Paulo service.Application of Delta Page 4 II. Service Proposals

A. Atlanta-Sao Paulo Delta’s first priority for 2013 service 3 is to secure frequencies for a second daily Atlanta-Sao Paulo flight. Atlanta is the world’s largest airline hub, and is well situated to provide broad network coverage of the entire United States. Atlanta’s location in the Southeastern United States provides conv enient, competitive, and non-circuitous Sao Paulo connections. Delta and its regional affiliates provide nonstop service from Atlanta to more than 150 U.S. points, and operate more than 1,000 peak day departures at the hub. The availability of new time of day coverage and increased capacity on this route will allow more passengers to take advantage of the convenient Atlanta hub gateway. As noted above, American provides four daily flights from its large Miami hub, but Delta is limited to a single daily flight at Atlanta. Minimum frequencies: Delta requires a minimum of seven frequencies for its proposed second daily Atlanta-Sao Paulo se rvice. The service will be operated on a year-round basis.

Start date: Delta would prefer to start December 15, 2013, consistent with the seasonal upswing in peak holiday demand, but could start as soon as the beginning of the IATA winter traffic season on October 27, 2013, if required. Delta respectfully requests a startup condition of a minimum of 120 days from a final award to allow for adequate advance preparation and marketing.

Aircraft: Delta will use Boeing 767-300ERs, equipped with 35 Business Elite seats, 32 Economy Comfort (premium economy) seats, and 143 economy class seats. Delta’s BusinessElite cabin features new, state-of-the-art flat bed seats, video on

3 While Delta’s preference is for 2013 frequencies, Delta would accept an award of 2014 frequencies for either of its Atlanta or New York proposals.Application of Delta Page 5 demand entertainment system, and award- winning food and wine service. The new service would be funded from Delta’s existing fleet of 58 767-300ERs.

B. New York (JFK)-Sao Paulo Delta’s second priority for 2013 is to secure frequencies for a second daily New York (JFK) - Sao Paulo flight. American has two JFK-Sao Paulo flights to Delta’s one, enabling American to offer more time channels and to compete more effectively for business customers. United’s large Newark hub, combined with a codeshare presence on TAM’s JFK flight also give it a marketing advantage in New York. A second daily Delta JFK-Sao Paulo flight will improve Delta’s offering, creating new options for customers, and more vigorous competition in the marketplace.

We incorporate by reference the minimum frequency requirements, start date, and aircraft details above. (Each of Delta’s proposals would be operated independent of the others).

C. Detroit-Sao Paulo

Continuation of Delta’s daily Detroit-Sao Paulo flight is a vital public interest concern and Delta’s first and only priority for 2014 frequencies. As previously discussed, Delta is contractually obligated to transfer seven weekly unrestricted frequencies to US Airways as part of the DOT-approved DCA/LaG uardia slot swap transaction. It is very important that Delta receive an allocation of frequencies to offset the required transfer to US Airways, which is now American’s merger partner, and will form a combined entity with a massive portfolio of U.S.-Brazil frequencies. An allocation of frequencies to Delta is important to ensure that Detroit will continue to receive service, and that Delta’s third place frequency allocation is not further undermined by loss of slots.Application of Delta Page 6 Delta is obligated to transfer seven Sao Paulo frequencies to US Airways no later than the start of the Summer 2015 IATA season in March, 4 and would use the October 2014 frequency allocation requested here to ensure the uninterrupted continuation of daily, year-round Detroit-Sao Paulo service following the transfer. The flights will continue to operate using B-767-300ER aircraft.

III. Conclusion Delta respectfully submits that the public interest would be best served by the grant of 21 frequencies for the Atlanta, New York, and Detroit - Sao Paulo services

described above.

Respectfully submitted,

_________________________________ Alexander Van der Bellen Managing Director, Government Affairs & Associate General Counsel DELTA AIR LINES, INC.

4 While Brazil is expected to become open ski es by October 2015, it would be extremely costly and disruptive if Delta were forced to cancel service for the 2015 Summer season. In addition, while Delta shares the Department’s optimism that Open Skies will take effect by October 2015, there are important further steps that must be taken by the Government of Brazil to ratify the agreement, which create some degree of uncertainty and concern.CERTIFICATE OF SERVICE A copy of the foregoing Application has been served this 4th day of March, 2013, upon the following persons via email:

Francis.Heil@aa.com howard.kass@usairways.com benjamin.slocum@usairways.com dan.weiss@united.com anbird@fedex.com jhill@dowlohnes.com robert.land@jetblue.com kevin.montgomery@polaraircargo.com jyoung@yklaw.com dkirstein@yklaw.com anita.mosner@hklaw.com paul.gretch@dot.gov esta.rosenberg@dot.gov brian.hedberg@dot.gov brett.kruger@dot.gov urskr@state.gov joe.cambron@wcaa.us brubinst@panynj.gov louis.miller@atlanta-airport.com steve.luben@atlanta-airport.com info@airlineinfo.com