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49743

Reno Air, Inc.

Not only is Reno Air ineligible to retain the slot awards under §41714(c), but many of the premises underlying the slot exemptions have been undermined by American's acquisition. In awarding O'Hare slots to Reno Air, the Department noted that Reno Air was an "advertised low-fare" carrier and a new entrant in the Chicago market. As such, the Department believed that Reno Air could offer the low-fare service needed for the leisure-oriented Chicago O'Hare-Reno market. The Department noted American's failure to sustain viable service in the city pair, presumably due to American directing its capacity toward the higher yield and more potentially profitable markets. After being acquired by American Airlines, there is no reason to believe that Reno Air will continue to direct its efforts toward the low-fare leisure travelers that were of particular concern to the Department in awarding new entrant slot exemptions to Reno Air.  This is not to say, however, that the Chicago-Reno market is not deserving of service. American may, in fact, decide to continue Reno Air's service in the market. But if it does, American can readily obtain slots from its own substantial slot holdings. It is also possible that another new entrant, low-fare carrier may seek the slots for Reno-Chicago service now operated by Reno Air under the exemption it is no longer eligible to hold.

Counsel:  United and Kirkland Ellis, Jeffrey Manley, 202-879-5161, jeffrey_manley@kirkland.com

Reno Air, Inc.

United's effort to destroy the City of Reno's critically important service link to O'Hare is simply one more episode in United's unrelenting campaign to maintain and advance its slot advantage at O'Hare. The compelling needs of the City of Reno and other Nevada interests for continued nonstop access to the Chicago hub should not be sacrificed to United's agenda for continued slot dominance at O'Hare.

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com

By acquiring Reno Air, American will be able to continue to provide service over the Reno-Chicago route with the dedicated O'Hare exemption slots. While the Department retains the authority to modify the exemption, no action should be taken if American continues, as it has pledged, to serve the Reno-Chicago O'Hare market. The Department also should proceed very cautiously since profound and serious effects on the communities, the State of Nevada, businesses and the traveling and shipping public obviously would result from the kind of precipitous action urged by United.

Counsel:  Reno and Stephen Lachter, 202-862-4321

On all counts, United is wrong. United's assertions that the Department should reallocate slots dedicated to the Reno market is without legal foundation, is contrary to the public interest, and should be rejected summarily by the Department. Most importantly, United apparently has lost sight of the compelling public interest factors that support the retention of all Reno Air O'Hare slots by American to be used for Reno-Chicago O'Hare service. The withdrawal of slots and the resulting elimination of Reno-Chicago O'Hare service, would have severe adverse economic consequences and would be contrary to the public interest.

Counsel:  Stephen Lachter, 202-862-4321

Reno Air, Inc.

Finally, to the extent American Eagle has regrettably pitted the communities of Savannah/Hilton Head and Greenville/Spartanburg against one another by the filing of its unexplained late application and thereby trying to turn the ACA application into a carrier/city selection proceeding, the comparative merits favor an award to ACA for all of the reasons set forth by ACA's prior pleadings referenced above.

Counsel:  Bagileo Silverberg, Robert Silverberg, 202-944-3300

Not only does American not qualify as a new entrant, it does not make any commitment to continue the low-fare services which the Department found were necessary to produce the public benefits on which the issuance of slot exemptions for Reno-Chicago service was premised. The Department concluded that, absent low fares, frequent nonstop services could not be sustained in a leisure market such as Reno-Chicago. American itself failed to sustain nonstop Reno-Chicago nonstop service and has provided no basis on which to conclude that it will be able to do so as a result of its acquisition of Reno Air. There is, for example, no demonstration that Reno Air, under American's ownership, can continue to maintain the lower costs that are needed to offer low-fare services and still show a profit. Indeed, American does not even suggest that it intends to maintain Reno Air's existing low cost structure, let alone seek to demonstrate that it could do so under the terms of its various collective bargaining agreements.

Counsel:  United and Kirkland Ellis, Jeffrey Manley, 202-879-5161, jeffrey_manley@kirkland.com

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