BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

__________________________________________ Joint Application of ) ) SOUTHWEST AIRLINES CO. ) AIRTRAN AIRWAYS, INC. ) Docket DOT

- OST

- 2011

-

____ ) for approval of the trans fer of international ) route authorities pursuant to 49 U.S.C. § 41105 ) __________________________________________ )

JOINT APPLICATION OF SOUTHWEST AIRLINES CO. AND AIRTRAN AIRWAYS, INC. FOR APPROVAL OF THE TRANSFER OF INTERNATIONAL ROUTE AUTHORITIES Communication with respect to this document should be addressed to:
Ron Ricks Steven A. Rossum Executive Vice President

– Executive Vice President & Corporate Services & Corporate Secretary General Counsel Madeleine Johnson AIRTRAN AIRWAYS , INC. Vice President

– General Counsel 9955 AirTran Boulevard SOUTHWEST AIRLINES CO. Orlando FL 32827 2702 Love Field Drive Dallas TX 75235 Edward P. Faberman WILEY REIN LLP Robert W. Kneisley 1776 K Street, N.W. Associate General Counsel Washington DC 20006 Leslie Abbott, Attorney SOUTHWEST AIRLINES CO. Counsel for AirTran Airways, Inc. 1901 L Street, N.W. (202) 719

- 7402 Washington DC 20036 (202) 263

- 6284 bob.kn eisley@wnco.com leslie.abbott@wnco.com March 17, 2011 NOTICE: The Joint Applicants request that this Application be processed pursuant

to the expedited non

- hearing procedures in Subpart B of the Department’ s Procedural Regulations. Any person may file an answer supporting or opposing this Application by April 7, with copies to the Applicants and all persons served with this Application.i TABLE OF CONTENTS
I. INTRODUCTION
A. The Joint Applicants
B. The Propo sed Transaction C. Request for Relief II. THE PROPOSED ROUTE TRANSFER IS FULLY CONSISTENT WITH THE APPLICABLE PUBLIC INTEREST STANDARD UNDER SECTION 41105 AND LONG

- STANDING DOT PRECEDENT FOR APPROVAL
A. Applicable Statutory Standard
B. The Proposed Trans fer is Consistent With U.S. International Aviation Policy, and the Surviving Entity is a U.S. Citizen Fit to Hold the Authority
III. THE SOUTHWEST

- AIRTRAN COMBINATION WILL PRODUCE SIGNIFI CANT AND LASTING PUBLIC B ENEFITS
A. The Combination W ill Create a Nationwide Low

- Fare Airline That Will Enhance Domestic Competition Across the United States
B. Combining Southwest and AirTran into a Larger and St ronger L ow - F are A irline W ill A llow Southwest to R esume its L ong - T erm G rowth S trategy C. Merging the T wo C ompanies W ill G enerate S ignificant N et S ynergies
D. Acquiring AirTran W ill E nable Southwest to Initiate S mall C ommunit y Service On a Viable Basis
IV. APPROVAL OF THE JOINT APPLICATION WILL ENABLE SOUTHWEST TO INITIATE ITS FIRST EVER NEAR

- INTERNATIONAL SERVICE, AND WILL IMPROVE THE U.S. TRADE POSITION INTERNATIONALLY
V. BY CREATING A MORE EFFICIENT AND STRONGER AIRLINE, THE ACQUISITION WILL BENEFIT EMPLOYEES OF BOTH SOUTHWEST AND AIRTRAN
VI. SOUTHWEST AND AIRTRAN HAVE MINIMAL ROUTE OVERLAP; THE TRANSACTION WILL NOT MATERIALLY LESSEN CO MPETITION IN ANY MARKET
VII. CONCLUSIONBEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

__________________________________________ Joint Application of ) ) SOUTHWEST AIRLINES CO. ) AIRTRAN AIRWAYS, INC. ) Docket DOT

- OST

- 201 1

-

____ ) f or approval of the transfer of international ) route authorit ies pursuant to 49 U.S.C. § 41105 ) __________________________________________ )

JOINT APPLICATION OF SOUTHWEST AIRLINES CO. AND AIRTRAN AIRWAYS, INC. FOR APPROVAL OF THE TRANSFER OF INTERNATIONAL ROUTE AUTHORITIES Southwest Airlines Co. (“Southwest”) and AirTran Holdings, Inc., the parent company of AirTran Airways, Inc. ( “ AirTran”) ( Southwest and AirTran together the “Joint Applicants”) have entered into a n acquisition and merger agreement that will create the first truly national low

- fare airline. The combination will provide enormous benefits to consumers and communities through a network of expanded domestic and international
low

- fare scheduled service. The combined airline will provide new flight options for millions of travelers at lower cost s and bring greater economic activity to the areas
served. Accordingly, pursuant to 49 U.S.C. § 41105 and Subpart B of the Department’s Rules of Practice, Southwest and AirTra n hereby jointly apply for approval of the de facto route transfer that will result from Southwest’s acquisition of AirTran. Additionally, by a concurrent filing, the Joint Applicants seek an interim exemption for the de facto transfer pursuant to 49 U.S. C. § 40109(c). For the reasons discussed below,Joint Application of Southwest Airlines and AirTran Airways

2 Southwest and Airtran request that both the exemption and final approval be expeditiously granted.
I. INTRODUCTION Southwest and AirTran are proposing to combine their operations to create the first truly nat ional low

- fare airline. This will be accomplished by Southwest acquiring AirTran Holdings, Inc. as a wholly

- owned subsidiary leading to an eventual combining of Southwest and AirTran under a single operating certificate as Southwest Airlines. Following t he close of the transaction, the combined airline will serve over 100 U.S.
cities with over 4,000 daily flights , and will generate hundreds of millions of dollars in annual savings to c onsumers as well as increased economic activity in the markets
served b y the combined carrier across the country

. Unlike other recent airline mergers, the Southwest / AirTran combination is not premised only on projected cost synergies or new routings due to a larger network or alliance membership. Rather, the Southwest / AirT ran acquisition will result in an expansion of low

- fare service and competition to hundreds of markets that would otherwise not take place by either carrier absent the merger. Th e dramatic expansion of low

- fare service due to the Southwest

- AirTran combina tion will save consumers and
businesses hundreds of millions of dollars annually by providing new low

- cost competition throughout the United States

. Other r ecent airline mergers, by contrast, did not even purport to reduce fares to consumers to any signif icant extent. The effects of the acquisition and merger on the three areas assessed under Section 41105

– financial viability, domestic competition and the trade position of the United States in international air transportation

– will all be positive. Southwest andJoint Application of Southwest Airlines and AirTran Airways

3 AirTran are a natural fit in several important ways. Both companies are low

- cos t airlines

w ith an emphasis on outstanding customer s ervice, a nd a history of providing benefits
to consumers via low

- fare competition

. The acquisition of AirTra n will allow Southwest to fill major voids in its current route network by initiating first

- time service to both Hartsfield

- Jackson Atlanta International Airport

- the nation’s busiest airport

- and Ronald Reagan Washington National A irport, as well as exp anding its min or presence
at New York LaGuardia Airport

. Notably, the route networks of the two carriers are very complementary, and b oth airlines operate all

- Boeing aircraft which will facilitate the consolidation and continued low operating costs. The S outhwest

- AirTran transaction p rovides extensive public benefits that are discuss ed below in detail. In brief, the c ombin ation of these two carriers:

Provide s customers with more low

- fare destinations and stronger low

- fare competition as the combined carri er expands its network and diversifies into new markets

– large and small , domestic and international.
Add s 39 new destinations to Southwest’s current route network , enabling Southwest to offer its customers hundreds of additional nonstop, one

- stop and connecting travel options.
Provide s new or expanded low

- fare competition in major markets and hubs with high average fares , including Reagan National Airport (DCA), New York LaGuardia Airport (LGA) , Memphis (MEM) and Charlotte (CLT)

. Enable s Southwest to initiate a major pattern of service in Atlanta (ATL), the busiest airport in the U.S. a nd the largest domestic market that Southwest does not currently serve. Although AirTran has a strong presence in ATL, there are many high

- fare ATL city

- pairs unserv ed (or under

- served) by AirTran that w ould significantly benefit from low

- fare competition provided by Southwest

. Expand s single

- carrier service offerings to , from, and via cities that Southwest and AirTran both a lready serve

– including Baltimore, Milwa ukee and OrlandoJoint Application of Southwest Airlines and AirTran Airways

4 – all of whose airports have capa city available for the combined carrier, as well as other carriers, to enter and grow.
Enable s Southwest to extend service to certain small and midsize communities currently served by AirTran

. Th ese communities will reap significant benefits f ro m the expanded low

- fare service and travel options made possible by connecting to Southwest’s much more extensive route system

. The transaction will also allow Southwest to employ AirTran ’s smaller B

- 7 17 fleet and operating experience to consider expand ing the combined network to additional small and midsized markets

. Strengthen s AirTran’s existing service to key near

- international leisure markets in the Caribbean and Mexico and lay s the foundation for additional near - international destinations in the future.
Generate s more jobs and more career opportunities for the combined employee groups. AirTran’s employees are expected to benefit significantly from becoming part of Southwest. Southwest is the most heavily unionized airline in the U.S. and offers, on average, the highest employee wages and benefits in the passenger airline industry. It has an un matched history of working cooperatively with all of its employee groups. Both Southwest and AirTran e mployees are expected to benefit from the unique growth opportunities the proposed acquisition presents.
Facilitate s Southwest’s ability to increase efficiency and boost profits and financial returns on capital, all of which are essential for Southwest to grow its fleet and expand its network, while promoting competition and providing more opportunities for employees , customers , and the communities it will serve

. Stimulate s more orders for Boeing aircraft

– one of America ’s great companies

– which will p romote U.S. job growth for Boeing as well as its subcontractors and vendors. Just recently, Southwest announced an order for 20 B 737

- 800 aircraft to replace a like number of B737

- 700 aircraft in its fleet. Post merger, t hese larger, longer

- range aircraft could provide significant public benefits by replacing AirTran’s smaller aircraft in markets such as DCA and LGA which are slot constrained, in Latin and Caribbean markets, or in long

- haul markets to the West C oast or Hawaii.
T he combination of Southwe st and AirTran creates a platform for growth thatJoint Application of Southwest Airlines and AirTran Airways

5 neither carrier would be able to undertake on its own , adding up to much more than the sum of the parts. J oining these two airlines will advance the public interest by creating hundreds of new low

- cost tra vel options that will provide greater competition and lower fares for millions of American travelers, more flights for communities, and more job opportunities as the merged airline continues to grow and provide low

- fare competition
across the U nited States

.

A. The Joint Applicants
1. Southwest Airlines Co. Southwest , the nation’s largest low

- cost, low

- fare airline , provides scheduled air transportation throughout the United States and has its principal place of business i n Dallas, Texas. 1 Southwest commenced service with three aircraft on June 18, 1971 as an intra

- Texas carrier . Today, Southwest has a fleet of 548 Boeing 737 aircraft serving
71 cities in 3 7 states with over 3, 4 00 daily flights. Later t his month Southwest will begin service to Newark, New Jer sey (EWR) , a major destination that neither it nor AirTran serves today. In 2010 Southwest carried 88 million domestic originating passengers, more than any other U

. S

. airline ba sed on the most recent DOT data available. Southwest principally provides po int

- to

- point, rather than hub

- and

- spoke, service and will continue to do so after the merger

. This business model allows Southwest to optimize the use of key assets, including aircraft, gates, and e mployees, and also facilitates Southwest’s ability to pro vide frequent , conveniently

- timed flights with predominantly nonstop routings for the benefit of its customers

. In 2010 a pproximately
73% of Southwest’s passengers fl ew nonstop to their destination. Southwest was

1 Southwest also holds exemption authority to serve Canada but has not provide d service under that authority. See Attachment B hereto.Joint Application of Southwest Airlines and AirTran Airways

6 profitable f or the 38 th consecutive year in 2010 , earning net income of $4 59 million. Southwest is a “citizen of the United States” as defined in 49 U

. S

. C

. § 40102 , and will remain so after the transaction.

2. AirTran Airways, Inc. AirTran is one of the largest low

- cost scheduled airlines in the U nited States in terms of departures and seats offered. AirTran operates domestic service primarily in
the East and Midwest, and also provides service to five international destinations in the Caribbean and Mexico , with new service starting to Bermuda in A pril 2011

. Approximately one - half of AirTran’s flights originate or terminate at its major base of operations in Atlanta ; the company also has a sizable presence in Baltimore , Milwaukee , and Orlando. AirTran currently operate s a fleet of 8 8 Boeing 717

- 20 0 aircraft and 52 Boeing 737

- 700 aircraft offering approximately 700 scheduled flights per day to 69 destinations in the United States and Mexico , Jamaica , t he Bahamas , Aruba , and the Dominican Republic (see Attachment A). Like Southwest, t he traditional e lements of AirTran’s s ervice include low costs and low fares; excellent customer service; an attractive network; and the enthusiasm and skill of its employees. AirTran is a U.S. citizen with principal executive offices
located in Orlando , Florida

.

B. The Pro posed Transaction On September 26, 2010, Southwest entered into a n agreement to acquire 100% of AirTran Holdings, Inc. , the parent company of AirTran Airways and merge it and
AirTran into Southwest . Closing of the transaction is subject to approval by A irTran

s hare holders (at a special meeting scheduled March 23, 2011) , receipt of Department ofJoint Application of Southwest Airlines and AirTran Airways

7 Justice (“DOJ”) and certain other regulatory clearances, as well as other customary closing conditions. Following the closing , each outstanding share of AirTran Holdings, Inc.’s common stock will be converted into the right to receive $3.75 in cash and 0.321 shares of Southwest common stock. The number of shares of Southwest common stock to be received is subject to adjustment based on Southwest’s share price prio r to closing. 2 The acquisition w ill allow Southwest to significantly expand and diversify its network and provide growth oppo rtunit ies that are not possible or practicable for Southwest to achieve on a stand

- alone basis . Southwest plans initially to oper ate AirTran as a wholly owned subsidiary but after a transition period w ill merge AirTran fully into Southwest. To ensure that customer expectations are met and to avoid potential confusion, Southwest expects to continue to market AirTran flights under th at brand until the AirTran customer experience , including aircraft configuration and boarding procedures , are brought into conformity with the current Southwest customer experience.

C. Request for Relief Under long

- standing precedent, the D epartment has de termined that when two air carriers each holding international route authority come under common ownership and control, a de facto transfer of authority has taken place under 49 U.S.C. § 41105, requiring prior DOT approval. See, e.g. , Continental/United , O rder 2011

- 3

- 14, March 10, 2011 at 5, n.10; Delta/Northwest , Order 200 9

- 1

- 8 , January 15 , 200 9 , at 3. Accordingly, Southwest and AirTran jointly apply for approval of the de facto route transfer that, as

2 Additional information about the transaction can be found at www.lowfaresfarther.com , Southwest’s Investor Relation webpage accessible via www.southwest.com , and www.airtran.com

.Joint Application of Southwest Airlines and AirTran Airways

8 noted above, will result from Southwest’s acquisitio n of all outstanding shares of AirTran
common stock. More s pecifically, the Joint Applicants request that the Department take the following action s : (1) approve the de facto transfer of AirTran’s domestic certificate of public convenience and necessity a nd international route authorities to Southwest ; (2)
reissue the international route authorit ies issued to AirTran in the name of “AirTran Airways, Inc. or Southwest Airlines Co ”

. ; and (3) approve the final , de jure transfer of AirTran’s international and domestic authority to Southwest once the t wo carriers are

c ombine d into a single entity. See Continental/United, supra , at 5

. In addition, the Joint Applicants are concurrently requesting an interim exemption pursuant to 49 U.S.C. § 40109(c) pending final approval of the transfer of AirTran’s
international route authorities under Section 41105. Based on long

- standing Department precedent in previous airline acquisitions and mergers , the Joint Applicants ask that both applications be granted expeditiously.
II. THE PROPOSED ROUTE TRANSFER IS FULLY CONSISTENT WITH THE APPLICABLE PUBLIC INTEREST STANDARD UNDER SECTION 41105 AND LONG - STANDING DOT PRECEDENT FOR APPROVAL
A. Applicable Statutory Standards Section 41105 authorizes the Department to approve an interna tional route transfer if it determines that the transfer is “consistent with the public interest. ” 49 U.S.C. § 41105(a); see also Continenta l /United, supra, at 4 ; Delta/Northwest , supra, at
4. The Department has stated that t he primary criteria it consid ers in determining the public interest are “ whether the certificate transfer would conflict with important international aviation policy objectives and whether the surviving entities are U.S. citizens and whether they will be fit to hold the authority. ” Co ntinental/United, supra, atJoint Application of Southwest Airlines and AirTran Airways

9 4 ; D elta/Northwest

, supra , at 4; American/TWA , Order 20 01

- 4

- 7, April 6, 2001, at 4. In addition, Section 41105 (b) requires the Department to analyze the impact of the
transaction on : (1) the viability of the air carrier applica nts , (2) competition in the
domestic airline industry , and (3) the trade position of the United States in the international air transportation market. Continental/United , supra, at 4; Delta/

Northwest, supra, at 4 ; Delta/Comair , Order 20 00

- 9

- 4, September 1 1, 2000, at 2. Well

- established Department precedent creates a presumption in favor of approving route transfer applications, “provided that they do not conflict with important international aviation policy objectives and are not otherwise inconsistent w ith the public interest.” See , e .g. , UPS/Challenge , Order 20 00

- 6

- 7, June 12, 2000, at 3. As demonstrated below, the Joint Applicants ’ proposed transfer of international route authority generates substantial public benefits, satisfying the public interes t standard reflected in Section 41105, and is fully consistent with the Department’s international aviation policies, relevant statutory criteria, and precedent in prior merger cases.
B. The Proposed Transfer is Consistent W ith U.S. International Aviation Pol icy , and the Surviving Entity Is a U.S. Citizen Fit to Hold the Authority
The route transfer approval requested by the Joint Applicants is fully consistent
with the criteria specified in Section 41105, as well as the DOT ’s international policy goals gener ally . The Department’s Statement of United States International Air Transportation Policy, issued May 3, 1995, identified increasing airline opportunities to expand their operations, increasing the variety and type of services available to consumers, and enhancing the access of U.S. cities to the international air transportation system as among the best ways to achieve the overall goal of promoting “safe, affordable, convenient and efficient air service.” 60 Fed. Reg. 21841, 21844 (MayJoint Application of Southwest Airlines and AirTran Airways

10 3, 1995). This pro posed route authority transfer is fully consistent with this policy
because it will increase international air service opportunities for the combined airline, expand the variety of international services offered to consumers , and connect more U.S. cities t o the international air transportation system.
The route transfer approval requested by this A pplication will advance U.S. international aviation policy by fostering U.S.

- flag competition to near

- international destinations such as Mexico and the Caribbean. Because Southwest does not currently serve any international destinations, there is no overlap with AirTran on these routes

. Connecting AirTran’s current international destinations to the combined Southwest/AirTran network will create new low

- fare trav el options for millions of consumers in dozens of additional cities, stimulating additional U.S. passenger traffic in these markets. Moreover, th is combination will serve as a platform for potential
additional service to near

- international destinations in the future, further advancing the Department’s international aviation policy goals

. The transfer of AirTran’s international route authority does not give rise to any international aviation policy concerns. All of the AirTran routes, except thos e to Mexico, are governed by open skies or open entry agreements, and accordingly, will not prevent other U.S. carriers from entering these markets. The transfer of AirTran’s Mexico authority to Southwest will ensure that the current level of U.S. airline competition is maintained or improved. Because Southwest does not currently provide any international service, the number of U.S. carriers serving these markets will remain the same and no other U.S. carrier will be inhibited from entering the markets in question

.Joint Application of Southwest Airlines and AirTran Airways

11 Both Southwest and AirTran h old Certificates of Public Convenience and Necessity from the Department to conduct domestic scheduled service, and are

“ citizens of the United States” as defined in 49 U

. S

. C

. § 40102(a)(15) . The proposed acquisiti on of AirTran by Southwest will not change this. Both carriers remain fit to conduct operations as certificated air carriers , and the combined carrier will remain a citizen of the United States. Indeed, t he combined carrier will be financially strong ,
mo re efficient, and a more effective low

- fare competitor than either carrier would be on
a stand

- alone basis.

III. THE SOUTHWEST - AIRTRAN COMBINATION WILL PRODUCE SIGNIFICANT AND LAST ING PUBLIC BENEFITS
The Southwest

- AirTran transaction will provide substantia l benefits to millions of U.S. consumers annually, from large , medium, and small communities throughout the United States. Initially, c onsummation of the transaction will enable Southwest to

ex pand its network to 38 new destinations that are currently ser ved by AirTran but not by Southwest. The combined network will initially serve 109 points compared to 71 for Southwest alone today. Over this larger network Southwest will be able to offer
consumers online access to hundred s of new low

- fare itineraries. The new services made possible by the merger will generate hundreds of millions of dollars in annual fare savings to consumers compared to the current high average fares in many of these
markets. For this reason , t h e transaction will provide enormous ben efits for consumers, communities , and businesses across the United States

.Joint Application of Southwest Airlines and AirTran Airways

12 A. The Combination W ill Create a Nationwide Low - F are Airline T hat Will Enhanc e Competition Across the United States The combination of Southwest and AirTran will create a strong a nd more diversified airline that is better equipped to expand low

- fare service and compete with newly merged , larger network airlines. As noted above, approval of the acquisition will
enable t he combined carrier to expand the number of online options it c an provide to consumers by connecting AirTran and Southwest networks. Most significantly, this will provide Southwest with its first

- time access to Atlanta, the nation’s busiest airport where Southwest has no presence today. Southwest plans to build on t he low

- fare competition that AirTran already provides in Atlanta by adding a significant number of

new nonstop destinations and numerous new online connections for consumers. This will enhance competition not just in Atlanta but also in the many new desti nations and routings to , from , and through Atlanta that will benefit from Southwest’s entry and expansion into ATL. The linking of the two networks will also fill other large voids in Southwest’s current route system, including Southwest’s first

- ever se rvice to slot

- controlled Reagan National (DCA), a larger presence at LaGuardia (LGA) , and a small but new presence at legacy carrier hubs such as Charlotte (CLT) and Memphis (MEM)

. Moreover, where appropriate, Southwest will also be able to up

- gauge AirTr an’s existing aircraft at these slot controlled and congested airports with 175

- seat B 737

- 800 model aircraft that Southwest currently has on order, thereby increasing capacity and competition even
where it may not be able to increase flight frequency

. 3

3 Air Tran currently serves DCA and LGA with a combination of B737 and B717 aircraft having 137 and 117 seats respectively.Joint Application of Southwest Airlines and AirTran Airways

13 B. C ombining Southwest and AirTran into a L arger and S tronger L ow - F are A irline W ill A llow Southwest to R esume its L ong - T erm G rowth S trategy As noted above, Southwest’s historic pattern of growth stalled severely in the last
decade due primarily to the sharp a nd lasting economic downturn coupled with significantly rising operating costs. As a result, Southwest’s fleet has remained virtually flat in the last several years. A lthough Southwest has initiated service to a number of
new destinations in recent years , it has done so by moving aircraft from relatively under

performing markets to new market opportunities rather than by expanding the fleet as it has done in the past. Southwest has stated publicly that additional fleet growth would not be prudent until i t meets its internal financial targets that would justify the large investment required to acquire additional aircraft , and Southwest has not met those targets for the last several years. The AirTran acquisition will fundamentally change Southwest’s no

- gro wth
outlook

. By acquiring a currently profitable air carrier and generating hundreds of millions of dollars in ongoing revenue synergies , the transaction will enable Southwest
to meet its financial targets to justify investment in new aircraft and growth. This will allow Southwest to resume its historic pattern of fleet growth and market expansion that has profoundly shaped the airline industry over the last four decades. By enabling Southwest to meet its financial targets as well as providing strategic opportunities for new growth, the AirTran acquisition will enable Southwest to exploit new opportunities
that would either not be available to it at all , or would not be available on a financially viable basis, absent this transaction. Thus, this transact ion is a n historic opportunity for Southwest to resume its previous pattern of expanding low

- fare service and competition
to more and more communities and consumers across the United States.Joint Application of Southwest Airlines and AirTran Airways

14 C. Merging the T wo C ompanies W ill G enerate S ignificant N et S ynergie s Unlike other recent airline mergers, the Southwest

- AirTran transaction is premised on creating a p latform for growth of low

- fare service and competition that would otherwise not take place, and the resulting consumer benefits by the spread of low fare s farther across the country

. Southwest has also forecast that it will gain hundreds of millions of dollars in net synergies from the AirTran acquisition . T hese synergies will be generated , for example, from efficiencies and best practices that can
be sh ared between the carriers , and opportunities resulting from Southwest’s financial strength , including its industry

- leading credit rating , to reduce AirTran ’s financing costs and better access the capital markets. Importantly , none of the se synergies is ex pected
to be generated by cutting wages, furloughing work groups , or closing cities. To the contrary , this combination is motivated by the expansion of low

- fare service and new competition that would not be viable for either carrier on a stand

- alone basis

. D. Acquiring AirTran W ill E nable Southwest to Initiate S mall C ommunit y Service On a Viable Basis
Via the transaction, Southwest will gain access to AirTran’s fleet of 8 8 Boeing 717 aircraft, which are smaller than , and ha ve a lower overall trip cost than , Southwest’s
B

- 737 aircraft. Th ese aircraft will give Southwest the ability to serve smaller markets
than it is able to serve profitably today with its current fleet. In addition, Southwest will benefit from AirTran ’s experience in serving small and mids ized communities successfully. Overall, the AirTran acquisition provides Southwest with a potentially effective means of serving cities and communities that are smaller than it has historically served, and w hich suffer from limited access to l ow - fare comp etition.Joint Application of Southwest Airlines and AirTran Airways

15 IV. APPROVAL OF THE JOINT APPLICATION WILL ENABLE SOUTHWEST TO INITIATE ITS FIRST EVER NEAR - INTERNATIONAL SERVICE, THEREBY I MPROV ING THE U.S. TRADE POSIT ION IN THE INTERNATIONAL MARKET The route transfer requested in this Joint Application will im prove the U.S. trade position in the international air service market by allowing Southwest to initiate and expand internationally more quickly and efficiently than it could otherwise. As noted
above , Southwest does not currently serve any international d estinations. Because Southwest has been a purely domestic carrier for its entire 40

- year history, it would be a complex and time consuming process to initiate international service on its own. Moreover, as noted, Southwest has repeatedly stated its inten tion not to grow the fleet for the foreseeable future due to an inability to meet its internal financial targets that justify new growth. However, via this transaction, Southwest will be able to begin near

international service immediately upon the linkin g of the two networks , and to serve many more destinations than it would be able to serve with a constrained fleet

. Assuming the economic environment is f avorable, Southwest intends to maintain AirTran’s current international service. Moreover, S outhwest ’s much more extensive
domestic network , coupled with its much more powerful distribution system , particularly
its website at www.southwest.com , adds the potential for an expansion of service to
additional near - intern ational destinations in the future

. V. BY CREATING A MORE EFFICIENT AND FINANCIALLY STRONGER AIRLINE, THE ACQUISITION WILL BENEFIT EMPLOYEES OF BOTH AIRTRAN AND SOUTHWES T Before approving a route transfer under Section 41105, t he Department takes
into con sideration the impact on airline workers. American/TWA , supra , at 4; Atlas/Polar

, O rder 2001

- 12

- 15 , December 19, 2001, at 8. The merger of Southwest andJoint Application of Southwest Airlines and AirTran Airways

16 AirTran and the transfer of international routes at issue in this proceeding will substantially benefi t employees of both carriers by creating a more efficient and financially stronger airline , with a larger network, that is better able to continue to provide industry

- leading salaries and benefits , as well as job security that is unmatched
in the airline i ndustry

. The U

. S

. airline industry is notoriously volatile. It is highly competitive, capital intensive and subject to economic externalities , particularly sharp fluctuations in jet fuel costs. Against this backdrop, Southwest has achieved an unpar allele d record of profitability for 38 consecutive years , and was the first airline to introduce a profit

sharing plan when the company made its first annual profit in 1973

. Southwest is also the most heavily unionized U.S. airline and works hard to
maintain positive and productive relationships with the eight separate labor unions representing its employee groups. Through good times and challenging times, Southwest has never furloughed employee s or cut wages and benefits. Indeed, Southwest has been widely re cognized for its strong labor relations hips and a unique
commitment to its people , an achievement that is all the more impressive in an industry that is plagued by notoriously difficult labor relations

. The Join t Applicants are committed to fair and equi table integration of the labor groups and do not anticipate involuntary furloughs of front

- line employees. 4 To the contrary, the 43,000 employees of both Southwest and AirTran stand to benefit significantly from this acquisition by the creation of a stron ger and more financially

4 On February 24, 2011 So uthwest announced it had reached an AirTran Transition Agreement with its pilots union. See Southwest Press Release at http://www.swamedia.com/releases/83693c07

- ef8b

- 0850

- 5 bf3

- 84004d66878b

.Joint Application of Southwest Airlines and AirTran Airways

17 secure company with a national network that will be better able to continue to provide industry

- leading pay , job security , and long

- term career opportunities

. VI. SOUTHWEST AND AIRTRAN HAVE MINIMAL ROUTE OVERLAP; THE TRANSACTION WILL NOT MATERIALLY LESSEN COMPETITION IN ANY MARKET Southwest and AirTran are a natural fit , both culturally and geographically . In addition to being low

- cost, low

- fare carriers with an emphasis on outstanding customer service, the carriers have very little market overlap. A irTran’s route structure is predominantly north

- south concentrated mostly in the Eastern states , whereas Southwest has a largely east

- west orientation with a strong presence in the Western
states that AirTran lacks

. Furthermore, t he few overlap routes are either leisure
markets or have no structural barriers to entry such as slots or gate constraints t hat would impede competitors from entering or expanding existing service. Official Airline Guide (OAG) schedules for the week of March 21, 2011 show only
2 4 nonstop overlaps out of a total of 610 nonstop city

- pair s served by Southwest and
AirTran in total

. Of these 2 4 markets , 9 have at least one nonstop competitor, in most
cases another low

- cost carrier. The remaining 1 5 markets are leisu re markets where
direct and one

- stop flights via other carrier hubs offer effective competition. In addition,
leisure markets tend to be extremely price sensitive, which serves as a strong disincentive to any carrier to raise fares. None of the airpo rts w here both carriers currently provide significant service

– BWI, MKE, and MCO

- are slot controlled , and they each contain sufficient gates and facilities for competitors ; in addition, each of those airports is served by many other airlines and at least one additional low

- cost carrier besides Southwest and AirTran.Joint Application of Southwest Airlines and AirTran Airways

18 Beyond this, Southwest’s business model depends on stimulating large amounts of
new tr affic with low fares , a pillar of the well

- known “Southwest Effect” dubbed by the Department many years ago

. AirTran has followed a similar approach with its pricing. In addition to competing against other airlines, both S outhwest and AirTran compete significantly against ground transportation or the decision of potential passengers not to
travel at all ; these n on - airline forms of competition are present regardless of the level of competition by other airlines

. In sum, c ombining these two low

- cost carriers will stimulate new competition by expanding low fares to hundreds of new markets and adding flexibility an d strength to the combined carrier, all to produce enormous benefits for the traveling public.

VII. CONCLUSION Southwest’s proposed acquisition of AirTran and t he resulting transfer of AirTran’s
international authorities to Southwest is fully consistent with the pub l ic interest under 4 9 U.S.C. § 41105. T he combination will advance the public interest and generate significant public benefits by (1) creat ing a stronger , more efficient low

- fare airline with a truly national network , (2) bring ing expanded low

- fa re competition to ATL, LGA and DCA , and other critical domestic aviation markets, (3) increas ing international competition by connecting Southwest ’s existing network to destinations in the Caribbean and Mexico, (4) improv ing the trade position of the Unite d States in the international air transportation market due to enhanced low

- fare competition , and (5) benefit ting the employees of both airlines due to enhanced career opportunities and job security

. T he requested route transfer is also consistent with th e Department’s international aviation policies and approvals of route transfers in previous airlineJoint Application of Southwest Airlines and AirTran Airways

19 mergers and acquisitions

. According ly , the Joint Applicants request that this Application be approved on an expedited basis for the reasons detailed above

.

Respectfully submitted,

_______________ ________ _____________________ Robert W. Kneisley Edward P. Faberman Associate General Counsel WILEY REIN LLP SOUTHWEST AIRLINES CO. 1776 K Street, N.W. 1901 L Street, N.W. Washington DC 20 006 Washington DC 20036 Counsel for AirTran Airways, Inc. (202) 263

- 6284 (202) 719

- 7402 bob.kneisley@wnco.com efaberman@wileyrein.com

March 17, 2011 Washington D CCERTIFICATE OF SERVICE

I hereby certify that I have this 17th day of March 2011 served a copy of the foregoing Joint Application of Southwest Airlines Co. and AirTran Airways, Inc. by email upon th e persons listed below:

msinick@ssd.com carl.nelson@aa.com scott.mcclain@delta.com sascha.vanderbellen@delta.com jeff.morgan@delta.com nssparks@fedex.com robert.land@jetblue.com jhill@dlalaw.com recohn@hhlaw.com prrizzi@hhlaw.com j young@yklaw.com dkirstein@yklaw.com John.Fredericksen@suncountry.com mlbenge@zsrlaw.com jeffrey.manley@united.com hkamen@coair.com dan.weiss@coair.com howard.kass@usairways.com benjamin.slocum@usairways.com dave.pflieger@virginamerica.com jegillick@zsrlaw.com louis.miller@atlanta

- airport.com pwiedefeld@bwiairport.com bb ateman@mitchellairport.com pbrown@goaa.org john.allen@faa.gov urskr@state.gov

______________________ Leslie C. AbbottATTACHMENT A



### AirTran Airways, Inc. International Route Authorities

Docket Cert ificate/ Exempt ion Authority Effective Date

2005

- 21134 Exemption ATL

- CUN; BWI

- CUN 8/6/2010
2010

- 0146 Exemption MKE

- CUN 6/23/2010
2010

- 0292 Exemption ATL

- Bermuda; BWI

- Bermuda 12/10/ 20 10
2009

- 0201 Exemption U

. S

. - Jamaica 9/4/2009
2009

- 0202 Exemption U

. S

. - Nassau, Bahamas 9/4/2009
2000

- 8052 Exemption ATL

- Freeport, Bahamas 5/3/2010
2009

- 0200 Exemption US

- Aruba 9/4/2009
2010

- 0158 Exemption US

- Dominican Republi c 7/8/2010
2005

- 22228 Certificate

(Order 2006

- 1

- 1) Blanket Route Integration Authority 3/7/2006



### AirTran Airways, Inc. Domestic Authority

Docket Certificate/Exemption Authority Issued Date

1998

- 4024 Certificate

(Order 2009

- 9

- 1 0) Interstate scheduled passenger certificate (PC&N) 9/15/2000

### ATTACHMENT B

Southwest Airlines Co. International Route Authority

Docket Cert/Exempt Authority Effective Date

2008

- 0392 Exemption U.S.

- Canada 1/9/2011



### Southwest Airlines Co. Do mestic Authority

Docket Cert/Exempt Authority Issued Date

2005

- 23296 Certificate

(Order 2005

- 12

- 4) Interstate scheduled passenger certificate (PC&N) 12/9/2005