United Air Lines, Inc.

OST-2008-0023 - Exemption - Los Angeles-San Jose del Cabo

January 15, 2008

Application for an Exemption

United seeks an exemption authorizing it to provide scheduled foreign air transportation of persons, property, and mail in the LAX-SJD market. United will operate its LAX-SJD services from its hub at Los Angeles International Airport.

United plans to operate its proposed services with Airbus 320 equipment in United’s all-economy Ted configuration with 156 seats or similar aircraft from United’s existing fleet.

United asks that the requested exemption authority remain in effect for a period of two years subject to the usual conditions. In order to complete the planning and preparations to start service on April 14, 2008, without interruption after Frontier’s termination, United must receive its exemption authority immediately.

Counsel: United, Julie Oettinger, 202-296-2370, julie.oettinger@united.com

OST-2008-0023 - Exemption - Los Angeles-San Jose del Cabo

January 18, 2008

Answer of Delta Air Lines

Since United and Delta both seek this designation, their requests are mutually exclusive, and the Department is required to institute a comparative selection proceeding to consider the merits of the competing applications in accordance with Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945). In fact, United concedes that a comparative selection proceeding is necessary, noting that it would provide "a full detail of its level of proposed service ... should that be required by the Department for purposes of carrier selection."

Accordingly, Delta urges the Department promptly to institute a carrier selection proceeding to allocate the dormant Los Angeles - San Jose del Cabo opportunity. In that proceeding Delta will demonstrate the superiority of its proposed Los Angeles - San Jose del Cabo service proposal over those of any other carrier-applicants.

Counsel: Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com

January 22, 2008

Re: Polling Results

United received non-objections from all carriers except for Delta Airlines, Continental Airlines and Horizon Airlines. Continental and Horizon are still evaluating their position with respect to this market. As the Department is aware, Delta opposes United’s application. United and Delta both agree, however, that the Department should promptly institute a carrier selection proceeding for this route.

Given the imminent availability of the right to add an additional U.S. carrier to serve LAX-SJD, and the need for carriers to engage in advance planning, the Department should not wait until the January 30, 2008, deadline date for other carriers to respond to United’s application. Rather, the Department should immediately establish a streamlined schedule for this proceeding as it has in prior cases where service opportunities would soon become available. See, e.g. Notice dated October 5, 2005 regarding U.S.-Mexico Combination and All-Cargo Service Opportunities. Further, in its Notice instituting such a proceeding, the Department should specify the minimum information it wants carriers to file with their applications for purposes of carrier selection. See, e.g., Orders 2007-11-23, Order 2007-6-15, and 2005-2-8. The Notice should also state in advance that all applications for the authority at issue will be consolidated for contemporaneous consideration and set forth all future procedural dates.

Counsel: United, Julie Oettinger and Wilmer Hale, Bruce Rabinovitz, bruce.rabinovitz@wilmerhale.com

Order 2008-2-14
OST-2008-0056 - 2008 Los Angeles-San Jose del Cabo Exemption Proceeding
OST-2008-0023 - United - Exemption - Los Angeles-San Jose del Cabo

Issued and Served February 8, 2008

Instituting Order

By this order we institute a proceeding to select one primary carrier and one backup carrier to provide direct carrier (own-aircraft), scheduled combination air services in the Los Angeles-San Jose del Cabo market.

Under the U.S.-Mexico aviation agreement, three U.S. carriers may be designated to provide foreign scheduled air transportation services of persons, property, and mail between Los Angeles, California, and San Jose del Cabo, Mexico. Currently, American Airlines, Inc., Alaska Airlines, Inc., and Frontier Airlines, Inc. are designated to provide these services. On February 4, 2008, however, Frontier notified the Department that it will cease service on this route after April 13, 2008. Thus, one designation opportunity will become available for U.S. carrier combination service as of April 14, 2008.

We have already received an application from United for the subject route authority (see captioned application, above). Delta Air Lines, Inc., filed an answer opposing the application, stating that both United and Delta seek the available designation. Both Delta and United urge the Department to promptly institute a comparative selection proceeding in this matter.

Our principal objective in awarding the available authority will be to maximize public benefits. In this regard, we will consider which applicant will be most likely to offer and maintain the best service for the traveling and shipping public. We will also consider the effects of each applicant’s service proposals on the overall competitive environment, including the market structure and the level of competition in the U.S.-Mexico market, and on any other market shown to be relevant.

The subject combination authority will become available on April 14, 2008. In light of the requests of both United and Delta to promptly institute this case, and the public benefit of facilitating the timely introduction of replacement service on the route, we accordingly intend to process this case on an expedited procedural schedule. That schedule is as follows:

Petition for reconsideration	February 13, 2008
Replies to Petitions for Reconsideration	February 15, 2008
Applications/Supplements/Amendments	February 19, 2008
Answers	February 26, 2008
Replies	February 29, 2008

By: Michael Reynolds

OST-2008-0056 - 2008 Los Angeles-San Jose del Cabo Exemption Proceeding
OST-2008-0023 - United - Exemption - Los Angeles-San Jose del Cabo

April 28, 2008

Answer of Delta Air Lines

The injection of effective new competition into limited entry markets is obviously a public benefit that should be relevant in any competitive route case in which limited entry rights are at stake. However, all three carriers in this case would be new entrants on this city pair, and both United and Delta proposed to inject more new-entrant capacity into the market than Virgin. Virgin's effort to turn its lack of experience serving Mexico into a virtue rather than a deficiency, provides no basis for giving it any special preference in this proceeding.

Counsel: Delta, Scott McClain, 404-773-6514

April 28, 2008

Consolidated Answer of United Air Lines

The Department's tentative decision to award United primary exemption authority to introduce service on the Los Angeles-San Jose del Cabo route is sound and well reasoned. No objections have been raised that could justify an alternative outcome.

Delta does not object to the Department's decision, but rather submitted brief "comments" in support of its tentative selection for an award of back-up authority. Virgin America alone objects to the Department's decision. Virgin America's response, which essentially is a lengthy restatement of its previous arguments in support of its application, does not offer any valid basis (e.g., in terms of new evidence or arguments) for the Department to reverse its tentative decision.

United requests that the Department issue a final order confirming its selection of United as soon as possible, so that United can begin the process of implementing its service plans without delay.

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