March 2, 2007

Petition to Intervene - Airports Council International - North America

Airports Council International - North America - Notice of Appearance

In this case, the complaining airlines challenge, as a matter of law, the right of an airport owner and operator (a) to take the fair market value of passenger terminal assets into account when establishing terminal rental rates and (b) to calculate airline terminal rental rates using a "commercial compensatory" method that allocates costs to airline tenants on the basis of the rentable space in the facility. The rate‑setting practices followed by ACT‑NA' s members when establishing passenger terminal rental rates vary widely as a result of differing local conditions including many different kinds of contractual relationships with airline tenants. Any ruling that prohibits per se the use of the fair market value of terminal assets or commercial compensatory methods in passenger terminal rate‑setting would threaten to disrupt the established financial arrangements at many of the nation's airports owned and operated by ACI‑NA's members.

Counsel: Anderson & Kreiger, Scott Lewis, 617-621-6560, slewis@andersonkreiger.com

March 2, 2007

Petition to Intervene of Air Transport Association of America

ATA submits that the complaints herein raise a "significant dispute" under 49 U.S.C. 47129. ATA petitions to intervene because this case raises a number of significant legal and policy issues with respect to the Department's policies on airport rates and charges, airport obligations under their grant assurances, and other applicable federal law.

Counsel: ATA, David Berg

March 2, 2007

Petition of American Airlines for Leave to Intervene

Hereby petitions for permission to intervene in this proceeding pursuant to 14 C.F.R. 302.20 and the Scheduling Notice dated February 16, 2007. American seeks to intervene because it operates flights and uses terminal facilities at Los Angeles International Airport, and the results of this proceeding are likely to have a significant impact on the terms/rates at which American will be able to extend its present lease or negotiate a new lease at LAX when the present lease expires. In addition, the dispute raises numerous important legal issues relating to the reasonableness of certain airport terminal charges. The resolution of those issues could potentially affect the rates and charges paid by American at airports throughout the United States.

Counsel: American and Paul Hastings, Robert Span, 213-683-6000, robertspan@paulhastings.com

March 2, 2007

Petition of Continental Airlines to Intervene

Notice of Appearance

Hereby petitions to intervene in this proceeding pursuant to Rule 20 of the Department's Rules of Practice and the Scheduling Notice dated February 16, 2007. Continental seeks to intervene because it operates flights and uses terminal facilities at Los Angeles International Airport, and the results of this proceeding are likely to have a significant impact on the terms and rates at which Continental will be able to extend its present lease or negotiate a new lease at LAX when the present lease expires. In addition, the dispute in this proceeding raises numerous important legal issues relating to the reasonableness of certain airport terminal charges. The resolution of these issues could potentially affect the rates and charges paid by Continental at airports throughout the United States.

Counsel: Continental and Crowell & Moring, Lorraine Halloway, 202-624-2538

March 2, 2007

Petition of Delta Air Lines for Leave to Intervene

Delta leases certain facilities at Terminal 5 at LAX under a long‑term lease with the City of Los Angeles, which has a term expiring in 2025. The complaints raise important questions of law and policy with respect to the reasonableness of LAX's airport rates and leasing policies. The outcome of this proceeding and the Department's determinations on the Complaints could affect Delta's current and future interests at LAX. In addition, the Department's determinations could establish policies that will have precedential impact on airport rate setting throughout the country.

Delta is a tenant under a long term lease with the City. Delta and the City currently have disputes pending before the bankruptcy court in the Southern District of New York concerning the proper interpretation of the Lease as it relates to the calculation of maintenance and operation charges pursuant to the Lease, and the City's ability to terminate the Lease. Those disputes are not before the Department.

Counsel: Delta and Hogan & Hartson, Robet Cohn

March 2, 2007

Petition of Northwest Airlines for Leave to Intervene

Hereby petitions for permission to intervene in this proceeding pursuant to 14 C.F.R. 302.20 and the Scheduling Notice dated February 16, 2007. Northwest seeks to intervene because it operates flights and uses terminal facilities at Los Angeles International Airport, and the results of this proceeding are likely to have a significant impact on the terms/rates at which Northwest will be able to extend its present lease or negotiate a new lease at LAX when the present lease expires. In addition, the dispute raises numerous important legal issues relating to the reasonableness of certain airport terminal charges. The resolution of those issues could potentially affect the rates and charges paid by Northwest at airports throughout the United States.

Counsel: Northwest and Paul Hastings, Robert Span, 213-683-6000, robertspan@paulhastings.com

March 2, 2007

Petition to Intervene of United Air Lines

Hereby petitions for permission to intervene in this proceeding pursuant to 14 C.F.R. 302.20 and the Scheduling Notice dated February 16, 2007. United seeks to intervene because it leases terminal facilities at Los Angeles International Airport from the Los Angeles World Airports Authority, and the results of this proceeding are likely to have a significant impact on the terms/rates at which United will be able to extend its present lease or negotiate a new lease at LAX when the present lease expires. In addition, the dispute raises numerous important legal issues relating to the reasonableness of certain airport terminal charges. The resolution of those issues could potentially affect not only United's lease with LAWA, but also similar leases United has entered into with airport authorities throughout the United States.

Counsel: Wilmer Cutler, Bruce Rabinovitz, 202-663-6960

March 9, 2007

Contingent Answer of United Air Lines

Even if the TBIT carriers are not entitled to have their Complaint considered in the § 47129 proceeding (along with the Terminal 1 and 3 carriers) as of right, there is every reason for the Department to consolidate the Complaints in a single proceeding as a matter of discretion. The question whether foreign carriers can be awarded retroactive relief in the form of refunds (or credits against future charges) if the new rents and charges are found to be unjust or unreasonable need not be decided now - though, as indicated above, we believe that question clearly should be answered in the affirmative even if § 47129 procedures do not apply.

Counsel: Wilmer Hale, Bruce Rabinovitz, 202-663-6960, bruce.rabinovitz@wilmerhale.com

March 13, 2007

Consolidated Reply of Carrier-Petitioners for Intervention

The Department should reject LAWA's attempt to prevent American, Continental, Delta, Northwest and United from exercising their due process rights to participate as intervenors in this case. This case clearly implicates petitioners' current and future property interests at LAX. In addition, the outcome of this case could establish policies with respect to rates and charges that would have precedential impact on airport rate setting at other U.S. airports. Indeed, as ACT-NA recognizes in its petition for intervention, which LAWA has not opposed, the complaints in this case present issues potentially affecting "the interpretation of laws governing airport leasing practices and the establishment of passenger terminal rental rates, and the application of the rules of practice for proceedings of this kind." The Carrier-Petitioners clearly have a significant interest in the resolution of these issues.

Counsel: Crowell & Moring, Lorraine Halloway, 202-624-2538, lhalloway@crowell.com for Continental / Paul Hastings, Robert Span, 213-683-6000, robertpan@paulhastings.com for American and Northwest / Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com for Delta / Wilimer Hale, Bruce Rabinovitz, 202-663-6960, bruce.rabinovitz@wilmerhale.com

March 20, 2007

Joint Answer of Airline Intervenors to Respondents' Motion to Require Production of Documents

Not only does LAWA's Motion run counter to the Instituting Order, it also seeks documents that cannot be used as post hoc justification for the rent increases at LAX. Airline agreements with other airlines (in subleases at LAX) or with other airport authorities have no relevance to the issue of whether LAWA's imposed rates are reasonable and non‑discriminatory. Airlines are not subject to the Anti‑Head Tax Act or to the federal grant assurance strictures that apply to the rental and user charges/fees levied by airport operators. And in contrast to LAWA, airlines are not monopolists; their subtenants, if any, have myriad alternatives to obtain accommodation at LAX

Counsel: Paul Hastings, Robert Span for American and Northwest / Hogan & Hartson, Robet Cohn for Delta / Wilmer Cutler, Bruce Rabinovitz, 202-663-6960 for United / Crowell & Moring, Lorraine Halloway for Continental

April 27, 2007

Brief of Intervenor Air Transport Association of America

This proceeding was prompted by LAWA's most recent attempt to cloak itself in the guise of a commercial landlord and free itself of the statutory and regulatory framework which, in reality, defines it and every other commercial airport that has accepted federal funds. Like LAWNs previous forays down this path, this dispute arises because of LAWA's antipathy toward its primary and overriding obligation to operate the airport for the benefit of the airlines and the traveling public. This attitude was best exemplified by LAWA's highest ranking policy witness, Patricia Tubert, who testified that LAWA could convert passenger hold areas at LAX into restaurants and bars where the passengers could wait for their flights in order to justify increased rents. LAWA's propensity to act like a commercial landlord while retaining the benefits of a locational monopolist is LAWA's attempt to unfairly have the best of both worlds. Unfortunately for LAWA, it is not free to ignore the law and treat LAX as ordinary commercial real estate.

Counsel: ATA and Silverberg Goldman, Robert Silverberg, 202-944-3300

April 27, 2007

Brief of Airline Intervenors

It is striking to note that, of all the airports in the country, LAX is the one that has most often been embroiled in disputes with its airline tenants that have led the Department to institute extraordinary proceedings under 49 U.S.C. 47129. The record in this case shows why this is so. LAWA, which consistently turns an annual profit at LAX, nonetheless has refused to abide by the restrictions imposed on it by federal law and, instead, seeks to adopt "commercial practices [to] determine[] terminal rents for airline. LAWA does so, even though it ackowledges-as it must that it is "not a normal commercial landlord" and, by law, cannot "charge above its costs. LAWA's attempt to act like a private commercial landlord cannot be reconciled with its federally-mandated obligation to operate LAX for the benefit of air travelers and to make the airport available to all carriers on terms that are fair, reasonable, and not unjustly discriminatory. LAWA's refusal to suppress its commercial ambitions as necessary to comply with its obligations under federal law has given rise to its troubling decade-long inability to resolve disputes amicably with its airline tenants.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com for Delta / Wilmer Hale, Bruce Rabinovitz, 202-663-6960, bruce.rabinovitz@wilmerhale.com for United / Paul Hastings, Robert Span, 213-683-6253, robertspan@paulhastings.com for American and Northwest / Crowell & Moring, Lorraine Halloway, 202-624-2538, lhalloway@crowell.com for Continental

April 27, 2007

Brief of Airports Council International

Section 47129 was never intended to provide an administrative forum for an expedited determination of whether or not a written agreement authorizes a particular charge: that is a question of state law to be pursued in an appropriate judicial forum.

As this case has illustrated, "rocket docket" proceedings under 47129 impose enormous burdens on airport sponsors (as well as upon the DOT and any complaining air carriers), Congress understood that such expedited administrative review should not to be available to air carriers that merely have grievances about whether a particular charge was, or was not, authorized by a written agreement; disputes of that kind belong in the courts if they cannot otherwise be resolved. Airport managers often enter into written agreements with air carriers so that proceedings of this kind can be avoided. The DOT should not undercut that incentive by allowing air carriers to bring contract disputes before the Department under 47129.

Counsel: Anderson & Kreiger, Scott Lewis, 617-621-6560, slewis@andersonkreiger.com

May 4, 2007

Reply Brief of the Intervenor Air Transport Association

LAWA and ACI have alleged that there is no legal or per se rule barring the use of fair market value in setting rents for terminal space. ACI goes one step further, arguing that the D.C. Circuit in ATA v, DOT, 119 F.3d 38 (D.C. Cir. 1997), allowed DOT to adopt any approach to rate setting for terminal space, provided only that the agency must give some explanation for the chosen methodology. ACI, however, has misread the Court's opinion in the ATA case, as it has been confirmed by subsequent DOT decisions.

As even LAWA and ACI admit, the Department ultimately decided in the LAX I and LAX II cases that LAWA's use of a fair market valuation for the airfield at LAX was unreasonable for a variety of policy reasons, and the D.C. Circuit affirmed that decision. In DOT's Order on remand, which was issued after the court in the ATA case rejected DOT's disparate treatment of airfield and terminal facilities, DOT concluded that airfield fees must be based on historic cost. This conclusion was based upon the very same factors that the D.C. Circuit found applied equally to non-airfield and airfield facilities-namely that LAWA, having committed under the grant assurances to operate LAX as an airport, has no opportunity costs because there is no alternative lawful use of the airport. Further, in Brendan Airways, LLC v. The Port Auth. Of New York and New Jersey, the only other § 47129 rate case decided by DOT since that time, the Department found that it was "logical and reasonable" to apply the Policy Statement's provisions on airfield asset valuation to non-airfield facilities. LAWA has provided no basis for ignoring this precedent here.

For the reasons set forth in ATA' s opening brief and this reply brief, ATA respectfully requests that LAWA' s new terminal charges be declared unreasonable and unlawful, and that LAWA be required to refund all amounts attributable to the increases.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300, rsilverberg@sgbdc.com

May 4, 2007

Reply of Brief of the Airline Intervenors - Bookmarked

The Airline Intervenors' Opening Brief showed that Los Angeles World Airport's unilateral imposition of terminal space rent based on what LAWA terms "fair market rental value" is unreasonable and unlawful because it generates revenues from aeronautical users in excess of LAWA's costs of providing facilities and services to the airlines. Under the compensatory methodology LAWA employs to set terminal rents and charges, that is not permissible, as LAWA itself acknowledges. We also showed that the excess revenues generated by LAWA's FMV space rental charges are being accumulated unlawfully into a progressively mounting surplus that LAWA will use to help fund future capital projects that are not being used by - and do not benefit - current rate-payers.

The Department should find that LAWA's unilateral imposition of FMV-based space rental charges - and the concomitant accumulation of excess revenue in a progressive surplus to help find future capital projects - are unreasonable and unlawful.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com for Delta / Wilmer Hale, Bruce Rabinovitz, 202-663-6960, bruce.rabinovitz@wilmerhale.com for United / Paul Hastings, Robert Span, 213-683-6253, robertspan@paulhastings.com for American and Northwest / Crowell & Moring, Lorraine Halloway, 202-624-2538, lhalloway@crowell.com for Continental

May 4, 2007

Reply Brief of the Airports Council International-North America - Bookmarked

ACI-NA anticipated in its opening brief that the Carriers would attempt to convince the DOT not only to invalidate the particular terminal rates they challenge at LAX, but also to establish new rules of general application that would impair the ability of airport proprietors throughout the country to continue to use reasonable, well-established rate-setting methods. That is exactly what has happened. As their opening briefs confirm, the Carriers seek new rules that would (a) dilute their burden of proof; (b) bar the use of "commercial compensatory" rate-setting methods; (c) prohibit the use of fair market value in setting the rates for all non-airfield facilities they use; and (d) force airports to give the benefit of airline leases to non-signatory carriers.

The T1/T3 and TBIT Carriers have not shown that the rates they challenge should be set aside. But if the ALJ finds that the new terminal rates at LAX are in any way unlawful, ACI-NA respectfully urges the ALJ to avoid pronouncing new rules of general application that are unnecessary to his decision and would have unjustified, undesirable or unintended consequences elsewhere.

Counsel: ACI-NA, Patricia Hahn, 202-293-8500, phahn@aci-na.org

May 21, 2007

Brief of Intervenor Air Transport Association of America to the DOT Decisionmaker

This proceeding is of great importance to the members of the Air Transport Association of America, Inc., the principal trade and service organization representing the U.S. scheduled airline industry, because the massive fee increases recently imposed by Los Angeles World Airports upon certain air carriers at Los Angeles International Airport raise significant legal and policy issues pertaining to airport rates and charges and, if allowed to stand, LAWA's increased charges would have a substantial adverse impact on rate setting at airports throughout the country. One of the significant legal issues raised by LAWA's fee increases is whether it is reasonable under federal law and DOT'S Policy on Airport Rates and Charges for LAWA unilaterally to impose terminal rents based upon a purported fair market valuation given LAWA's decision to employ a compensatory methodology. In his Recommended Decision, Judge Goodwin found that it is not reasonable, holding that "LAWA's use of market rent in setting terminal fees is unreasonable. It is not designed to, nor does it fairly, cover cost; and it has no other uses properly applicable to airport fee-setting schemes. It may not stand." R.D. at 58. This holding should be affirmed by the DOT decision-maker for all of the reasons discussed below. To finally bring to an end LAWA's obvious inability to give up its claim that it is entitled to recover opportunity costs from airlines, DOT should firmly and clearly establish the policy that fees charged by airports for essential aeronautical facilities, absent an agreement to the contrary, must be based on historic cost. Only through such a policy will the well-founded corollary policy of encouraging good faith airport-carrier negotiation to set fees and resolve disputes achieve its intended goal.

Counsel: Silverberg Goldman, Robert Silverberg, 202-944-3300, rsilverberg@sgbdc.com

May 21, 2007

Opening Brief of Airline Intervenors

By way of background, it is striking to note that, of all the airports in the country, LAX has been the one most often embroiled in disputes with its airline tenants that have led the Department to institute three extraordinary proceedings under 49 U.S.C. 47129. The record in this case shows why. Simply put, as the ALJ found, LAWA has refused to negotiate in good faith with the airlines'" and to abide by the restrictions imposed on it by federal law. Instead, it seeks to maximize the fees and charges imposed on airlines by adopting "commercial practices [to] determine[] terminal rents for airlines," even though its own witnesses acknowledge-as they must-that LAWA is "not a normal commercial landlord" and, by law, cannot "charge above its costs." LAWA's attempt to act like a private commercial landlord cannot be reconciled with its federally-mandated obligation to operate LAX for the benefit of air travelers and to make the airport available to all carriers on terms that are fair, reasonable, and not unjustly discriminatory. This has given rise to LAWA's decade-long inability to resolve disputes amicably with its airline tenants.

LAWA's adoption of commercial leasing practices has led to the setting of terminal rents and charges that exceed its reasonably incurred and properly allocated costs of providing facilities and services to the airlines. These rents and charges violate federal law and policy. As the ALJ found, they are "unreasonable," "unlawful," and "may not stand."

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com for Delta / Paul Hastings, Robert Span, 213-683-6253, robertspan@paulhastings.com for American and Northwest / Wilmer Hale, Bruce Rabinovitz, 202-663-6960, bruce.rabinovitz@wilmerhale.com for United / Crowell & Moring, Lorraine Halloway, 202-624-2538, lhalloway@crowell.com for Continental

May 21, 2007

ACI-NA's Opening Brief to the DOT Decisionmaker

ACI-NA urges the DOT to disavow the ALJ's misguided approach. The DOT should, instead, reaffirm certain core principles of airport rate-setting: (a) an airport owner has no obligation to enter into - and therefore has no obligation to negotiate - agreements with air carriers prescribing how compensatory rates will be set; (b) an airport owner can change its rate-setting methods over time and adopt reasonable methods that have never been used before; (c) an airport owner can differentiate between signatory and non-signatory carriers in setting rates; and (d) an airport owner has a right to use commercial compensatory rate-setting methods to recover administrative, security and access costs properly allocable to passenger terminals. The DOT should also decline to use this case as the occasion for pronouncing a new policy concerning the use of fair market value in setting rates for the use of non-airfield facilities.

Counsel: ACI-NA, Patricia Hahn, 202-293-8500, phahn@aci-na.org