United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 8, 2011 Decided January 6, 2012 

No. 11-1018 

REPUBLIC AIRLINE INC., 

PETITIONER

v. 

UNITED STATES DEPARTMENT OF TRANSPORTATION, 

RESPONDENT

On Petition for Review of an Order 

of the Department of Transportation 

 

 Christopher T. Handman argued the cause for the 

petitioner. Robert E. Cohn, Patrick R. Rizzi and Dominic F. 

Perella were on brief. 

Timothy H. Goodman, Senior Trial Attorney, United 

States Department of Transportation, argued the cause for the 

respondent. Robert B. Nicholson and Finnuala K. Tessier, 

Attorneys, United States Department of Justice, Paul M. 

Geier, Assistant General Counsel for Litigation, and Peter J. 

Plocki, Deputy Assistant General Counsel for Litigation, were 

on brief. Joy Park, Trial Attorney, United States Department 

of Transportation, entered an appearance. 
2 

 Before: HENDERSON, Circuit Judge, and WILLIAMS and 

RANDOLPH, Senior Circuit Judges. 

 Opinion for the Court filed by Circuit Judge HENDERSON. 

 KAREN LECRAFT HENDERSON, Circuit Judge: Republic 

Airline Inc. (Republic) challenges an order of the Department 

of Transportation (DOT) withdrawing two Republic “slot 

exemptions” at Ronald Reagan Washington National Airport 

(Reagan National) and reallocating those exemptions to Sun 

Country Airlines (Sun Country). In both an informal letter to 

Republic dated November 25, 2009 and its final order, DOT 

held that Republic’s parent company, Republic Airways 

Holdings, Inc. (Republic Holdings), engaged in an 

impermissible slot-exemption transfer with Midwest Airlines, 

Inc. (Midwest). In so holding, DOT summarily dismissed 

Republic’s argument that, under both DOT and Federal 

Aviation Administration (FAA) precedent, the RepublicMidwest slot-exemption transfer was permissible because it 

was ancillary to Republic Holdings’ acquisition of Midwest. 

Because DOT has departed from its precedent without 

adequate explanation, its decision cannot survive arbitrary and 

capricious review. Accordingly, we grant Republic’s petition 

for review and vacate DOT’s order. 

I. BACKGROUND

In an effort to improve airport safety and efficiency, FAA 

limits the number of take-offs and landings at several of the 

nation’s most congested and frequently delayed airports. See, 

e.g., Operating Limitations at N.Y. LaGuardia Airport, 71 

Fed. Reg. 77,854 (Dec. 27, 2006). Historically, FAA 

distributed a limited number of “slots”—i.e., take-off and 

landing rights—at five so-called high-density airports, 

including Reagan National. See 14 C.F.R. § 93.123. The 
3 

resulting slot-allocation rules are collectively known as the 

High Density Rule (HDR). City of New York v. Minetta, 262 

F.3d 169, 172 (2d Cir. 2001) (citing 14 C.F.R. §§ 93.121-

93.133, 93.211-93.229). 

 “By the early 1990s, however, the HDR was perceived 

as a barrier to improved service, in part because new air 

carriers were unable to establish service due to the lack of slot 

availability.” Id. at 172-73 (citing H.R. Rep. No. 106-167, pt. 

1, at 77-79 (1999)). As a result, in 1994, the Congress 

amended the statutory scheme to enable DOT to grant a 

limited number of exemptions to the slot limits. See Pub. L. 

No. 103-305, § 206, 108 Stat. 1569, 1584 (1994) (codified, as 

amended, at 49 U.S.C. § 41714(c) (2000)). These aptlynamed “slot exemptions” permit take-offs and landings in 

addition to those available under the HDR. See id.1

Today, the HDR has been phased out at four of the five 

high-density airports.2 Only Reagan National continues to 

operate under it. At Reagan National, DOT has 20 slot 

exemptions which can be issued to any carrier providing nonstop service to an airport within a 1,250 mile radius. See 49 

 

1

 In practice, a slot exemption authorizes an airline to provide 

nonstop service to or from a slot-controlled airport during a 

particular time frame—for example, from Reagan National to 

Kansas City, Missouri, daily at the 1 p.m. time period. 

2

 The FAA lifted the HDR at Newark Liberty International 

Airport in the early 1970s. See High Density Airports; Notice of 

Reagan National Airport Lottery Allocation Procedures, 69 Fed. 

Reg. 67,382 (Nov. 17, 2004) (discussing elimination of HDR at 

Newark). In 2000, the Congress eliminated the HDR at Chicago 

O’Hare International Airport (effective July 1, 2002) and 

LaGuardia Airport and John F. Kennedy International Airport 

(effective January 1, 2007). See Pub. L. No. 106-181, § 231, 114 

Stat. 61, 108 (2000) (codified at 49 U.S.C. § 41715(a)).
4 

U.S.C. §§ 41718(b), 49109. The DOT distributes the 

exemptions 

in a manner that promotes air transportation— 

(1) by new entrant air carriers and limited 

incumbent air carriers; 

(2) to communities without existing nonstop air 

transportation to [Reagan National]; 

(3) to small communities; 

(4) that will provide competitive nonstop air 

transportation on a monopoly nonstop route 

to [Reagan National]; or 

(5) that will produce the maximum competitive 

benefits, including low fares. 

Id. § 41718(b). Importantly, “[n]o exemption . . . may be 

bought, sold, leased, or otherwise transferred by the carrier to 

which it is granted.” Id. § 41714(j). 

On July 31, 2009, Republic Holdings acquired Midwest 

in a 100% stock purchase, making Midwest its wholly-owned 

subsidiary. At the time of the acquisition, Midwest provided 

three nonstop round-trip flights between Kansas City 

International Airport (KCI) and Reagan National each day. 

One of the three flights was made possible by the two slot 

exemptions at issue here. Two months later, on September 30, 

2009, Republic sent a letter to DOT outlining the details of 

the acquisition and explaining that “as of November 3, 2009, 

Republic will operate all of Midwest’s schedules under the 

d/b/a trade name Midwest Airlines and become the holder and 

operator of Midwest’s [Reagan National] slot exemptions.” 

Letter from Robert Cohn to Todd Homan, at 1 (Sep. 30, 

2009). Republic further noted that, although section 41714(j) 

prohibits an airline from buying, selling, leasing or otherwise 

transferring slot exemptions: 
5 

[DOT] precedent in the America West/US Airways, 

American Airlines/Reno Air, and Southwest 

Airlines/ATA acquisitions establish[es] that the 

prohibition against transferring slot exemptions does 

not apply to ancillary transfers which are the product 

of a corporate acquisition or merger, such as 

Republic/Midwest. 

Id. at 4. Republic assured DOT that, just as in the cited cases, 

it intended to use the slot exemptions in the same manner for 

which they had been granted. Although Republic planned to 

replace Midwest’s Boeing 717s with Embraer regional jets, 

“there [would] be no [other] perceptible change to the 

services offered.” Id. at 2. Indeed, Republic even maintained 

Midwest’s brand name. Id. (“Republic will continue the 

Midwest branded service, including services at slot controlled 

airports . . . under the d/b/a trade name Midwest Airlines.”). 

On November 25, 2009, DOT sent Republic an informal 

letter rejecting Republic’s proposed action and “conclud[ing] 

that a ‘transfer’ of exemptions ha[d] in fact occurred.” Letter 

from Susan Kurland to Robert Cohn, at 1 (Nov. 25, 2009) 

(November 25th Letter). According to DOT, once acquired, 

Midwest no longer existed as a carrier; thus, Republic’s right 

to the exemptions resulted from an impermissible slotexemption transfer. Id. at 1-2. DOT informed Republic that it 

could continue to use the slot exemptions pending a formal 

reallocation proceeding and could apply, through that 

proceeding, to keep the slot exemptions. Id. at 2 (“[T]he 

Department will resolicit applications for the two [Reagan 

National] slot exemptions, and then determine which 

application best satisfies the criteria imposed in section 

41718(b). Republic is of course invited to submit an 

application for Kansas City (or for any other service it 

believes will best satisfy the statutory criteria).” (emphasis 

removed)). 
6 

Republic did just that. On September 30, 2010, Republic 

applied to retain the slot exemptions for KCI/Reagan National 

round-trip service, arguing inter alia that it offered the lowest 

fares, that continuing the route would maximize competition 

and that Kansas City’s economy would suffer from the loss of 

a daily direct flight to Reagan National. See Application of 

Republic Airline Inc., Docket No. DOT-OST-2000-7182, at 

8-10 (Sep. 30, 2010). Republic also renewed its argument that 

the slot exemptions were “categorically not subject to 

reallocation” because “under well-settled precedent, 

[Republic Holdings’] acquisition of Midwest [] did not 

constitute a prohibited transfer that would have warranted 

reallocation.” Id. at 11 n.9. 

On December 10, 2010, DOT issued Order No. 2010-12-

16 (Final Order), withdrawing the exemptions and 

reallocating them to Sun Country for nonstop round-trip 

service between Lansing, Michigan and Reagan National. 

Final Order at 1. In two brief footnotes, DOT rejected 

Republic’s argument that its transfer did not violate section 

41714(j). According to DOT, it had “carefully considered, 

and rejected, these arguments in [its] [November] 25, 2009 

letter to Republic[’s] counsel,” id. at 11 n.14, and it directed 

Republic to the earlier letter “for a full discussion as to why 

[it] found that the proposed transfer would violate section 

[41714(j)],” id. at 2 n.1. 

Republic petitions for review pursuant to 49 U.S.C. 

§ 46110(a) and (c) and 5 U.S.C. § 706. 

II. ANALYSIS

The Administrative Procedure Act instructs us to “hold 

unlawful and set aside agency action, findings, and 

conclusions found to be [] arbitrary, capricious, an abuse of 

discretion, or otherwise not in accordance with law.” 5 U.S.C. 

§ 706(2)(A). Although the scope of review under the arbitrary 
7 

and capricious standard is narrow and a court is not 

empowered to substitute its judgment for that of the agency, 

Rural Cellular Ass’n v. FCC, 588 F.3d 1095, 1105 (D.C. Cir. 

2009), the agency must provide a “rational connection 

between the facts found and the choice made” so as to afford 

the reviewing court the opportunity to evaluate the agency’s 

decision-making process. Motor Vehicle Mfrs. Ass’n v. State 

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting 

Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 

158 (1962)). One of the core tenets of reasoned decisionmaking is that “an agency [when] changing its course . . . is 

obligated to supply a reasoned analysis for the change.” Id. at 

42; see also Kreis v. Sec’y of the Air Force, 406 F.3d 684, 687 

(D.C. Cir. 2005) (“It is axiomatic that an agency must treat 

similar cases in a similar manner unless it can provide a 

legitimate reason for failing to do so.” (internal quotation 

marks omitted)). That said, an agency is not required to 

distinguish every precedent cited to it by an aggrieved party. 

See Bush-Quayle ‘92 Primary Comm., Inc. v. Fed. Election 

Comm’n, 104 F.3d 448, 454 (D.C. Cir. 1997) (“We may 

permit agency action to stand without elaborate explanation 

where distinctions between the case under review and the 

asserted precedent are so plain that no inconsistency 

appears.”). But where, as here, “a party makes a significant 

showing that analogous cases have been decided differently, 

the agency must do more than simply ignore that argument.” 

LeMoyne-Owen Coll. v. NLRB, 357 F.3d 55, 61 (D.C. Cir. 

2004). 

As Republic outlined at considerable length in its 

September 30, 2009 letter, DOT and FAA precedent in the 

America West/US Airways, American Airlines/Reno Air and 

Southwest Airlines/ATA acquisitions establish that the 

prohibition against transferring slot exemptions does not 

apply to a transfer that is part-and-parcel of a corporate 

acquisition or merger. DOT first confronted this issue in 
8 

1999, after American Airlines, Inc. (American Airlines) 

announced its plan to “purchase all outstanding stock” of 

Reno Air, Inc. (Reno Air) so that Reno Air would become the 

wholly-owned subsidiary of the parent company. See Appl. of 

Reno Air, Inc. for Exemption, Order No. 99-2-26, 1999 WL 

95072, at *1 (DOT Feb. 23, 1999) (Order on Motion to 

Reopen the Record) (Reno Air). A competitor filed a protest 

with DOT, arguing that Reno Air’s slot exemptions at O’Hare 

International Airport should be reallocated because the 

merger resulted in a prohibited “transfer” of the exemptions. 

See id. at *4. DOT dismissed the challenge. Id. According to 

DOT: 

The proscription of selling, trading and transferring 

slot exemption authority was intended to prevent the 

formation of a market for slot exemption authority. 

Because mergers present a substantially different 

market than one trading slot exemptions, the 

Department has the discretion to treat the effect of 

the merger . . . as not violating the proscription . . . . 

Id.3 Accordingly, it allowed the newly-formed American 

Airlines subsidiary to continue to hold the exemptions 

originally granted to Reno Air. 

 

3

 Although, as DOT notes, Reno Air is “not a [s]ection 41714(j) 

DOT precedent, as it arose prior to enactment of the statute,” 

Respondent’s Br. at 15, we nonetheless find it persuasive. The 

provision of the 1994 DOT order at issue in Reno Air is nearly 

identical to section 41714(j). Compare Appl. of Reno Air, Inc., 

Order No. 94-9-30, 1994 WL 521207, at *4 (DOT Sep. 20, 1994) 

(carrier prohibited from “selling, trading, transferring, or 

conveying” exemption), with 49 U.S.C. § 41714(j) (exemption may 

not be “bought, sold, leased, or otherwise transferred by the carrier 

to which it is granted”). DOT has provided no sound reason why it 

interprets similar language differently. Indeed, DOT itself cited 

Reno Air in America West, infra, which is a section 41714(j) case. 
9 

DOT reached the same result seven years later when U.S. 

Airways, Inc. (U.S. Airways) merged with America West 

Airlines (America West). See Pet. of the Air Carrier Ass’n of 

Am., Order No. 2006-3-6, 2006 WL 2658672 (DOT Mar. 7, 

2006) (America West). After the merger was announced, an 

industry group petitioned DOT, arguing that America West 

was attempting to “transfer or convey its slot exemptions to 

the new US Airways/America West entity” and that, under 

section 41714(j), the exemptions should be reallocated. Id. at 

*2. Relying on Reno Air, DOT once again dismissed the 

challenge and held that, while an acquisition of corporate 

assets only (including slot exemptions) might be an 

impermissible transfer, “the type of merger at issue here”—

namely, a complete corporate merger—does not involve 

“monetizing the exemptions by selling or transferring them 

for other considerations to other parties, an obvious abuse at 

the center of the statute’s prohibition.” Id. at *4. 

FAA reached a similar result in a 2008 decision involving 

the bankruptcy of ATA Airlines (ATA). See Congestion 

Mgmt. Rule for LaGuardia Airport, 73 Fed. Reg. 64,883, 

64,884 (Oct. 31, 2008) (ATA). At the time of its bankruptcy 

filing, ATA held fourteen slots at LaGuardia Airport.4

 The 

 

See Pet. of the Air Carrier Ass’n of Am., Order No. 2006-3-6, 2006 

WL 2658672, at *4 n.10 (DOT Mar. 7, 2006). 

4

 As noted above, FAA distributes slots, see 14 C.F.R. 

§§ 93.121-93.133, 93.211-93.229, but DOT issues slot exemptions, 

see 49 U.S.C. § 41714(c). Although ATA involves slots, not slot 

exemptions, it is nonetheless analogous here. In practice, both slots 

and slot exemptions enable an aircraft to take off or land at a certain 

airport at a certain time. Moreover, the provision at issue in ATA is 

similar to section 41714(j). Compare 71 Fed. Reg. at 77,857

(“sales, purchases, or transfers of [slots] will not be permitted”), 

with 49 U.S.C. § 41714(j) (exemption may not be “bought, sold, 

leased, or otherwise transferred by the carrier to which it is 
10 

slots were subject to a FAA order which, much like section 

41714(j), barred their “sale[], purchase[], or transfer[].” See 

Operating Limitations at N.Y. LaGuardia Airport, 71 Fed. 

Reg. at 77,857. When FAA was asked if a post-bankruptcy 

purchaser could retain the non-transferable slots, it answered 

in the affirmative. See Congestion Mgmt. Rule for LaGuardia 

Airport, 73 Fed. Reg. at 64,884. So long as the buyer acquired 

ATA’s “business as a whole,” it could continue to maintain 

the slots without violating FAA’s no-transfer order. Id. 

 Rather than attempt to distinguish these cases, DOT has 

ignored them completely. Indeed, despite Republic’s efforts, 

which twice directed DOT’s attention to DOT and FAA 

precedent, neither DOT’s November 25th Letter nor its Final 

Order even mentions the cases. The totality of DOT’s 

reasoning is found in three sentences in its November 25th 

Letter: 

After careful review, we have concluded that a 

‘transfer’ of exemptions has in fact occurred. 

Midwest, the party to which the awards were 

granted, has now ceased to exist as a carrier. Unlike 

Frontier, which was acquired by Republic but still 

operates as a subsidiary under its own operating 

certificate, Midwest clearly no longer holds or 

operates the exemptions, and Republic’s claim to 

these exemptions arises only as a result of its 

transaction with Midwest. 

November 25th Letter at 1-2. DOT’s Final Order references 

these three sentences, calling them the “full discussion as to 

why [DOT] found that the proposed transfer would violate 

[section] 41714(j).” Final Order at 2 n.1. 

 

granted”). In neither its November 25th Letter nor its Final Order 

did DOT explain why FAA precedent is not, at the very least, 

persuasive. 
11 

It escapes us how this so-called “full discussion” explains 

DOT’s decision. In both Reno Air and America West, the 

“party to which the awards were granted” (like Midwest) 

eventually “ceased to exist as a carrier” (again, like Midwest). 

November 25th Letter at 1; see Reno Air, 1999 WL 95072, at 

*1; America West, 2006 WL 2658672, at *2-*5. In both cases, 

the acquiring carrier’s (like Republic’s) “claim to the 

exemptions ar[ose] only as a result of its transaction” with the 

carrier it acquired (like Midwest). November 25th Letter at 2; 

see Reno Air, 1999 WL 95072, at *1; America West, 2006 

WL 2658672, at *4. Yet in both cases, DOT allowed the 

acquiring entities to retain the slot exemptions. See Reno Air, 

1999 WL 95072, at *5; America West, 2006 WL 2658672, at 

*4. Similarly, when Southwest Airlines (Southwest) acquired 

ATA’s business as a whole in the ATA bankruptcy 

proceeding, ATA “ceased to exist as a carrier” and no longer 

“h[eld] or operat[ed]” the slots. November 25th Letter at 1; 

see 73 Fed. Reg. at 64,884. Nevertheless, FAA allowed 

Southwest to retain and utilize the slots originally issued to 

ATA. 73 Fed. Reg. at 64,884. 

Moreover, while it is true that—unlike Frontier Airlines 

which Republic acquired in July 2009—Midwest no longer 

intended to operate under its “own operating certificate,” 

DOT’s scant analysis fails to explain why this fact has any 

bearing on whether an impermissible slot transfer occurred. 

An air operator’s certificate (AOC) is simply FAA’s approval 

to operate an aircraft for commercial purposes. See 14 C.F.R. 

§ 119.5(b). Because Midwest intended to change the aircraft 

servicing the KCI/Reagan National route (from Boeing 717s 

to EmbrBaer regional jets), it was required to obtain a new 

AOC. But rather than explain how a new AOC could be 

relevant to determining if a slot-exemption transfer occurs, 

DOT asks us in effect to guess at its underlying reasoning. 

But we cannot uphold its action based on speculation. See 

Williams Gas Processing-Gulf Coast Co. v. FERC, 475 F.3d 
12 

319, 328-29 (D.C. Cir. 2006) (“Arbitrary and capricious 

review strictly prohibits us from upholding agency action 

based only on our best guess as to what reasoning truly 

motivated it.”).

 DOT asserts a new reason for distinguishing the 

Republic/Midwest merger in its brief on appeal. According to 

DOT’s new position, what really matters is when the acquired 

airline ceases to exist: “[I]f an air carrier is acquired by 

another company, but continues post-acquisition to operate, 

DOT has determined that no [] transfer of control over the slot 

exemptions has occurred.” Respondent’s Br. at 12. But this 

argument fails for two reasons. First, it is post hoc

rationalization that cannot support DOT’s action. See State 

Farm, 463 U.S. at 50 (“[T]he courts may not accept appellate 

counsel’s post hoc rationalizations for agency action.”); 

Manin v. Nat’l Transp. Safety Bd., 627 F.3d 1239, 1243 (D.C. 

Cir. 2011) (“[T]he law does not allow us to affirm an agency 

decision on a ground other than that relied upon by the 

agency.”). Second, Midwest did not cease to exist as an 

operating entity when it was acquired. Indeed, Republic 

Holdings completed the stock purchase nearly three months 

before seeking to merge Midwest’s operations with 

Republic’s. DOT’s post hoc rationalization therefore would 

do nothing to advance its case. 

For the foregoing reasons, we grant Republic’s petition 

for review and vacate DOT Order No. 2010-12-16. 

 So ordered.