BEFORE THE
DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

------------------------------------------------------------------------ Application of : : SOUTHWEST AIRLINES CO. : : Docket DOT

- OST

- 2014

- 0222 for an exemption pursuant to 49 U.S.C. § 40109 : to engage in foreign scheduled air transportation : of persons, property and mail between Houston : Hobby International Airport and Cancun, Mexico City, : Pu erto Vallarta, and San Jose del Cabo, Mexico :

------------------------------------------------------------------------
CONSOLIDATED REPLY OF UNITED AIRLINES, INC. AND S KYWEST AIRLINES, INC. Communications with respect to this document should be sent to: Steve Morrissey Vice President

- Regulatory & Policy UNITED AIRLINES, INC. 1225 New York Avenue, NW Suite 1100

– DCAIZ Washington, DC 20005 (202) 521

- 4373 steve.morrissey@united.com

Daniel A. Weiss Managing Director

- International Affairs and Regulatory UNITED AIRLINES, INC. 233 South Wacker Drive 10th Floor

– HDQIZ Chicago, IL 60606 (872) 825

- 6828 dan.weiss@united.com

January 8 , 201 5 Thomas Newton Bolling Vice President and Deputy General Counsel Abby L. Bried Associate General Counsel

- Regulatory, Alliances & International James Conneely Counsel

- Regulatory UNITED AIRLINES, INC. 233 South Wacker Drive 11th Floor

– HDQLD Chicago, IL 60606 (872) 825

- 8068 (872) 825

- 7415 (872) 825

- 8311 thomas.bolling@united.com abby.bried@united.com james.conneely@united.com Gerald F. Murphy Steven J. Seiden CROWELL & MORING LLP 1001 Pennsylvania Avenue, NW Washington, DC 20004 (202) 624

- 2500 gmurphy@crowell.com sseiden@crowell.com

Counsel for United Airlines, Inc. and SkyWest Airlines, Inc.BEFORE THE
DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

------------------------------------------------------------------------ Application of : : SOUTHWEST AIRLINES CO. : : Docket DOT

- OST

- 2014

- 0222 f or an exemption pursuant to 49 U.S.C. § 40109 : to engage in foreign scheduled air transportation : of persons, property and mail between Houston : Hobby International Airport and Cancun, Mexico City, : Puerto Vallarta, and San Jose del Cabo, Mexico :

------------------------------------------------------------------------

CO NSOLIDATED REPLY OF UNITED AIRLINES, INC. AND SKYWEST AIRLINES, INC.

I. INTRODUCTION.

T he A nswers of Spirit 1 and The City of Houston (“Houston”) underscore the fundamental premise advanced by United and S kyWest in their Answer to Southwest’s A pplication

– that the Department should take all steps necessary to grant Southwest the authority to serve the

Houston

- Mexico City/San Jose del Cabo markets alongside United, SkyWest and Spirit without cutting off longstanding consumer service options. Wh ile Houston asserts the need for increased

air service s in Houston

- Mexico markets, Spirit’s thinly

- veiled attempt to eliminate the competition United and /or SkyWest (d/b/a United Express ) services provide demonstrates why

all carriers who desire to serve t hese markets should be permitted to do so without delay

. Granting extra

- bilateral authority to Southwest would allow the Department to accomplish these

1 Common names are used for airlines.Consolidated Reply of United and SkyWest

Page 2 of 5

goals and is in the public interest

. Indeed, it is the only alternative that will truly benefit all
carriers, consumers and communities on both sides of the border.

II. SPIRIT’S ANSWER IGNORES LONGSTANDING DEPARTMENT PRECEDENT AND PROPOSES A LOSS FOR CONSUMERS Spirit , like Southwest, conve niently ignores the fact that the Department cannot simply reallocate United and/or SkyWest ’s U.S.

- Mexico designations to Southwest. The designations

c an only be withdrawn following a carrier selection proceeding. See United and SkyWest

Answer at 2

- 3 ( in ternal citations omitted ) . Although neither Southwest nor Spirit claim that United or SkyWest has failed to comply with the terms and conditions of its designations, the Department’s recent institution of a proceeding to consider whether Delta’s Seattle

- T okyo

Haneda slot allocation award remains in the public interest is instructive here. See Order 2014

-
12

- 9; see also, e.g ., Notice of Action Taken dated Sep. 3 2014 in Dockets DOT

- OST

- 2014

- 0129

and DOT

- OST

- 2014

- 0130 at 2 ( a competing proposal for Houston

- Mexico City services means only that the Department “would be prepared to re consider whether...award of the [United and United Express carrier ] authority...continues to be in the public interest”). As discussed below,
however, instituting such a costly and unnecessary proceeding is a distant second best option given the unique circumstances of this case.

Rather than hav ing to demonstra te the consumer benefits its services would provide in a carrier selection proceeding, Spirit has supported Southwest in its push to degrade existing

United and /or United Express services and unduly harm consumers

. The Department should disregard this cynical move for what it is: two similarly

- structured carriers attempting to

eliminate competitor s with a different business model, superior international and domestic connecting opportunities, and more flexible service offerings

. By contrast, United and SkyWestConsolidated Reply of United and SkyWest

Page 3 of 5

have focused on consumers by asking the Department to exercise extra

- bilateral authority to allow all competitors to serve the markets in question during the short 11

- week period between when Southwest proposes to commence operations and the new U.S.

- Mexico air transport
agreement goes into effect. 2 Why have Southwest and now Spirit asked the Department to

eliminate competitor s rather than find a solution to maximize competition and consumer

benefits?

III. HOUSTON DEM ONSTRATES THE NEED FOR A CREATIVE SOLUTION TO MAXIMIZE COMPETITION IN HOUSTON

- MEXIC O MARKETS As the nation’s premiere gatew ay to Mexico and one of its fastest growing business and population centers , Houston stands only to gain from increased air carrier competition in

Houston

- Mexico markets. “[Houston’s] remarkable economic strength provides ongoing new opportunities for car riers, passengers and shippers, and ever
- growing potential for additional air

services to meet the communit y’s increasing needs. These needs are especially vital

– and growing

– where Mexico is concerned.” Houston Answer at 3. But disrupting existing United

and /or United Express services for even two and one

- half months

– as Southwest and Spirit

propose

– would affect tens of thousands of passengers. For example, i n the 12 month

- period
ended November 30, 2014, nearly half of Unite d’s Houston

- Mexico City passengers flew on

United in one direction and its United Express partner in the other direction, a figure that increases to nearly two

- thirds of passengers in the Houston

- San Jose del Cabo market

. This is ample evidence that consu mers depend on these flexible service offerings and that they should

2 United an d SkyWest have raised significant concerns regarding Southwest’s ability to commence its proposed Houston

- Mexico City/San Jose del Cabo services on October 15, 2015 that must be addressed before the Department can even consider eliminating existing consumer services options in these markets. See United and SkyWest Answer at 7

- 9.Consolidated Reply of United and SkyWest

Page 4 of 5

not be interrupted for even a period of 11 weeks, particularly since the Department has the tools available to help the tens of thousands of consumers that would be affected. Preserving these

flexible itinerary and fare class options, along with unparalleled network connecting opportunities at United’s Houston hub , is precisely why “Houston hopes that the Department will explore all opportunities available to approve and secure additional rights from Mexico so that all carriers wishing to serve [the Houston

- Mexico City/San Jose del Cabo] markets are able to obtain the authority they need on a timely basis.” Id . at 5

Gra nting extra

- bilateral authority to allow Southwest to operate alongsi de United, SkyWest and Spirit provides such a solution. A s detailed in United’s and SkyWest’s Answer, the Department has relied on extra

- bilateral authority more than a dozen times in recent years

– and largely to the benefit of Mexican carriers. See United and SkyWest Answer at 5

- 6. There is no reason the Department should not do so once again , given these unique circumstances , to the benefit of all U.S. carriers wishing to serve these significant Houston

- Mexico markets.
Moreover, in the words of th e Chairman of the Subcommittee on Trade of the House Ways and
Means Committee, “[i]t is not in the best interest of Houston or the traveling public to withdraw long held rights granted...to United or its United Express partners, and which benefit U.S.

consum ers who use IAH as an airport to access Mexico, for a period of only 2.5 months.” Letter from Congressman Kevin Brady (TX

- 8) to Anthony Foxx, Sec’y, U.S. Dept. of Transp. (Dec. 29, 2014) (Exhibit A to the United and SkyWest Answer).Consolidated Reply of United and SkyWest

Page 5 of 5

IV. CONCLUSION For the foregoing reasons, United urges the Department to grant Southwest extra

- bilateral authority for Southwest to commence its proposed Houston

- Mexico City/San Jose del Cabo operations and preserve existing United mainline and SkyWest (d/b/a United Expr ess) regional jet services to the benefit of United’s customers, coworkers and communities. Doing so is the only alternative that would enhance competition on these important U.S.

- Mexico routes, further

the intent of the new U.S.

- Mexico air transport agre ement, and serve the public interest. Respectfully submitted,
CROWELL & MORING LLP

____________________________ Gerald F. Murphy Steven J. Seiden gmurphy@crowell.com sseiden@crowell.com

Counsel for United Airlines, Inc. and SkyWest Airlines , Inc.

January 8 , 201 5CERTIFICATE OF SERVICE

I certify that I have this date served the foregoing document on the following persons in accordance with the Department’s Rules of Practice.

robert.wirick@aa.com howard.kass@aa.com nssparks@fedex.com gbleopard@fedex.com kevin.montgomery@polaraircargo.com rpommer@atlasair.com rsilverberg@sgbdc.com jjohnson@sgbdc.com msinick@ssd.com stephen.lachter@cozen.com robert.land@jetblue.com jhill@cooley.com perkmann@cooley.com dkirstein@yklaw.com jyoung@yklaw.com bob.kneisley@wnco.com leslie.abbott@wnco.com pjackson@swapa.org matwood@cozen.com anita.mosner@hklaw.com jennifer.nowak@hklaw.com sascha.vanderbellen@delta.com chris.walker@delta.com robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com thomas.ting@suncountry.com john.varley@virginamerica.com rbtrinder@zsrlaw.com paul.gretch@dot.gov brett.kruger@dot.gov susan.kurland@dot.gov brian.hedberg@dot.gov reese.davidson@dot.gov todd.homan@dot.gov peter.irvine@dot.gov cristinasa@state.gov info@airlineinfo.com

__________________________________ Steven J. Seiden January 8, 2015