OST-99-5085 / New Air Corp / High Density Rule - JFK / Answer of Spirit Airlines / February 24, 1999

Application of

for an exemption from 14 C.F.R. Part 93, Subparts K and S,49U.S.C.§41714 as to allow nonstop service to and from: John F. Kennedy International Airport

On February 5, 1999, New Air Corporation ("New Air") applied to DOT for an exemption which, if granted, would provide New Air with 75 new-entrant slots at New York's John F. Kennedy International Airport ("JFK"). Spirit Airlines, Inc. ("Spirit") files this Answer in response to New Air's request. /1

1/ Pursuant to 14 CFR § 302.17, Spirit hereby requests Leave to File this Answer two days late. Spirit submits that no party will be prejudiced by this late filing, given the fact that New Air itself as of February 24 had not yet applied for a Certificate of Public Convenience and Necessity. Moreover, as Spirit will state below, the issues raised by this application are quite significant, and will not receive quick summary or review by the Department.

The scope of relief requested by New Air - 75 slots - is extremely broad, and is unprecedented. The Application also is unusual because New Air is seeking flexibility as to the city-pairs it will serve, and the routings pursuant to which such services will be provided.

Spirit takes no position on the New Air application War se. In principle, we would not oppose it, since we view the High Density Rule as an anachronism whose costs significantly outweigh its benefits. However, as a low-fare airline with a large and growing presence at both HDR and non-HDR airports in the New York Metropolitan area, Spirit believes that the broad relief sought in the New Air application must be carefully tailored to ensure that a single exemption from the Rule does not foreclose other approaches to the problem. Moreover, to the extent to which the Department chooses to break new ground and to grant New Air the relief it requests, the Department should do so on behalf of all carriers wishing to inject low-fare competition in the New York market.

Overview of Spirit's New York Operations

The New Air application on several occasions discusses the lack of service by low-fare air carriers in the New York market. Although Spirit would agree that the market is underserved by low-fare carriers relative to its size, Spirit's own presence in the market is growing dramatically and rapidly. As of March 1999, Spirit will be serving 10 routes from the New York area, with further aggressive expansion planned if traffic continues to grow at its current: pace. At present, Spirit is serving or will shortly serve:

Having introduced the first of these New York-area services in the fall of last year, Spirit has been overwhelmed with their success. For example, in January of this year (an off-peak month), Spirit carried more than 52,000 passengers, with load factors averaging 71%. Spirit anticipates carrying in excess of 100,000 passengers in its New York markets in March, after the most recent of its new services comes on line.

Although Spirit very much would like to continue its growth in the New York area, Spirit faces numerous obstacles to doing so. Having been unable to purchase slots at LGA, Spirit was fortunate enough to obtain exemptions to serve Myrtle Beach, South Carolina, and Melbourne, Florida. However, Spirit's ability to expand its presence at LGA remains questionable, and will lag behind demonstrated market demand. Although Newark is not slot-controlled, gaining access to gates and other relevant facilities there at commercially viable times remains virtually impossible. Thus, Spirit is faced with the prospect of: (i) holding its New York-area services at their current levels; (ii) expanding operations only at Islip; or (iii) seeking further (and broader) relief from the high-density rule.

In Spirit's view, options (i) and (ii) are not options at all. Holding Spirit's presence in New York to its current level would squander the valuable momentum Spirit has gained in introducing its low-fare product to New York-area travelers. Moreover, while Islip is an attractive facility for travelers originating from or destined to Long Island, it is less so for travelers doing business in Manhattan, or originating from suburbs north and west of the city.

Thus, Spirit for the time being must look to the Department for assistance in gaining access to LGA and other facility-constrained airports. We cannot emphasize too strongly that our combined growth in the New York region is primarily a facilities problem.

By asking for 75 slots over a three-year period, the New Air in effect is seeking a de facto repeal of slot rules at JFK. While Spirit, in principle, agrees with New Air about the need to impose competitive discipline upon the U.S. mega-carriers, and is acutely aware of the competitive distortions caused by slot constraints, there is room for discussion about how best to achieve these objectives. For example, Spirit would support gradual relaxations of the slot rules at all HDR airports, subject to relevant safety and health constraints. However, Spirit is concerned about doing so on a piecemeal or case-by-case basis.

Spirit's concerns lie in two primary areas - the need to ensure procedural fairness, and the need to ensure that the exemption rules are administered in a consistent manner.

On the former point, Spirit believes that it would be unfair for the Department to grant a massive (and somewhat open-ended) exemption to New Air for slots at JFK while meritorious requests for relief at other airports remain ungranted. The question of fairness would be exacerbated if, for some reason, the Department were to approve the New Air application in whole and then find it was either politically or practically untenable to grant similar-scale relief at other airports. Kennedy airspace does not, of course, operate in a vacuum but is highly intertwined with all other metropolitan airports. Spirit's latter concern would be justified if New Air were to become the only beneficiary of large-scale regulatory relief while Spirit's own aspirations for the New York area (or those of other carriers) remain unsatisfied.

Spirit perhaps should be heartened by the fact that the regulatory climate has changed to such a degree that new entrants such as New Air believe that major improvements in access to slot-controlled airports are achievable. Spirit wishes to emphasize that it, too, has thus far been encouraged by the clear signals it has seen that the Department wishes to take decisive steps to ensure that competition takes place on a level playing field. Although Spirit would interpret regulatory receptiveness to New Air's application as a further positive signal, this would not be the case if DOT were to conclude its efforts there, thereby according New Air somewhat unique status under the slot rules.

The Department should use this application as a springboard for improving the access of New Air, Spirit and all low-fare carriers to slot-controlled airports, thereby ensuring vigorous competition in the New York market and elsewhere.

Respectfully submitted,

Anita M. Mosner

GKMG CONSULTING SERVICES, INC.

1054 Thirty-first Street, N.W.

Washington, D.C. 20007

(202) 342-5201

Representatives of SPIRIT AIRLINES, INC.

February 24, 1999