OST-97-2870 / OST-97-2932 / Exemption, High Density Rule, LaGuardia / Reply of Spirit Airlines to Queens Borough / December 18, 1997

Application of

for an exemption pursuant to 49 U.S.C. § 41714 Melbourne, Florida - New York (LaGuardia Airport)

Application of

for an exemption pursuant to 49 U.S.C. § 41714 Myrtle Beach, South Carolina -New York (LaGuardia Airport)

DOT should not entertain the Answer filed by the Borough President. The Answer is, with respect to Spirit, more than two months late, and, despite the contentions of the Borough President, there is no excuse for this extreme tardiness. Moreover, granting this motion would prejudice every party which has a slot application pending before DOT. Those applications are ripe for decision, and many parties (and especially Spirit) are anxiously awaiting a decision so that they can make aircraft scheduling decisions as soon as possible. The comments filed by the Borough President should not be permitted to delay this proceeding.

The arguments raised by the Borough President are either directed to the existence of the slot exemption procedure itself, or, with respect to the application filed by Spirit, largely are a rehash of arguments raised by other parties. The Borough President's overriding general comment in response to Spirit's application is that services proposed for LGA can as easily be offered at Newark. This is simply untrue. Spirit has devoted considerable time and energy to seeking gates at Newark, and has been unable to secure

1/ The Answer was dated December 3, 1997, but was submitted to DOT's Documentary Services Division on December 8, 1997.

access to gates at any price during the afternoon evening hours, times which are necessary to mount a viable service. Newark is in fact more congested than LGA, and is simply not a workable alternative. The Borough President's assertions about Newark also have been contradicted by the GAO, which has recognized on several occasions the severe access restrictions at Newark.

With regard to the Melbourne market, the Borough President claims that the market is not viable, citing the fact that other carriers (notably US Airways) have suspended their service to Melbourne. The comments of the Borough President are grossly misinformed. As a preliminary matter, the comments ignore the fact that US Airways last year trimmed back its service in many East Coast-Florida markets as part of a generalized route realignment, and does not necessarily reflect upon the strength or weakness of Melbourne. Moreover, even assuming US Airways' service to Melbourne was unsuccessful, the Borough President does not address the fact that US Airways has relatively high operating costs, and might have had difficulty turning a profit at Melbourne, whereas Spirit Airlines is a low-cost, low-fare carrier that is very well positioned to develop and grow the Melbourne market. /2

2/ With respect to Continental's withdrawal from the market, Spirit notes that there are three basic categories of traffic at Melbourne -- business traffic (which, contrary to the claims of the Borough President, is growing quite considerably), cruise traffic destined to Port Canaveral, and leisure traffic.. In Spirit's view, Continental's seasonal service, operated with a single mid-day rotation, did not meet the needs of business or cruise passengers. Spirit's proposed double-daily service will be appropriately timed to tap into and stimulate those markets.

The Answer of the Borough President fails to acknowledge the substantial public interest benefits to be created by Spirit's proposed service. New York is Melbourne's single largest O&D market. The market, which generated nearly 95,000 passengers in 1996, even though the market lacked year-round nonstop service, is nearly 50% larger than the Knoxville-New York O&D market, a market approved for service by the Department. Moreover, if DOT were to reject Spirit's application to serve Melbourne, Melbourne would remain a monopoly market, receiving scheduled service only from a single U.S. carrier, Delta. Spirit's service is essential to provide travelers in the Melbourne market with a choice of carriers. Moreover, as a strong low-fare competitor, Spirit will likely stimulate large volumes of traffic in this market.

The Borough President claims that the Department should reject Spirit's application because the New York-Myrtle Beach market is not large enough to sustain nonstop service, and because Spirit has not proposed to duplicate the service pattern proposed by Air South, a pattern that allegedly was critical to DOT's 1996 finding about the benefits of service to Myrtle Beach. These arguments are fallacious.

The Borough President's comments about the New York-Myrtle Beach market are at odds with the facts. At the time DOT granted Air South's exemption for Myrtle Beach service, the Myrtle Beach-New York O&D market was 79 passengers per day, each way. The most recent O&D-data available (the year ending 2Q 1997) demonstrates enormous traffic growth in the New York-Myrtle Beach market. For the year ending June 30, 1997, the New York-Myrtle Beach market generated 126,070 passengers, or 173 passengers per day in each direction. /3 In all likelihood, this figure understates actual traffic levels in the market, because it does not account for passengers utilizing charter services. Regardless of this undercounting, traffic in the market is more than adequate to support the service proposed by Spirit, and claims that service to other points in South Carolina are necessary to make this service work are utterly groundless.

Spirit's Myrtle Beach application also will provide strong public benefits. Spirit offers Myrtle Beach its only opportunity for nonstop scheduled service to New York City. Spirit's proposed low-fare service will provide a much-needed link between these communities. This is especially critical given the dependence of the Myrtle Beach area upon tourism, and the overwhelming importance of the New York area as a source of tourist traffic to Myrtle Beach.

Spirit's applications for Myrtle Beach-LaGuardia and Melbourne-LaGuardia slots meet each of the criteria articulated in DOT's decision in the Frontier case, Order 97-10-17. Spirit proposes to serve these markets with Stage 3 aircraft. As demonstrated above, each of the markets is both financially and operationally viable. Spirit's proposed services will introduce in both the Myrtle Beach and Melbourne markets a new, low-fare, nonstop service where none exists. The service proposed by Spirit is critical to the economy of Myrtle Beach, which has suffered since Air South abruptly temminated flight operations.

This factor also is compelling with respect to Melbourne, as without Spirit's service, Melbourne will remain a one-airline town.

If the Borough President is dissatisfied with the provisions of the Federal Aviation Administration Authorization Act which authorize the Secretary to grant exemptions from the slot rules at LaGuardia upon a showing of extraordinary circumstances, her appropriate remedy rests with Congress, not with DOT. Spirit strongly encourages DOT promptly to approve Spirit's pending applications for four slots to serve the LaGuardia-Myrtle Beach market, and four slots to serve the LaGuardia-Melbourne market, so that the traveling public soon may enjoy the benefits of the services the law was intended to provide.

Respectfully submitted,

Anita Mosner

GALLAND, KHARASCH & GARFINKLE, P.C.

1054 Thirty-First Street, N.W.

Washington, D.C. 20036

(202) 342-5200

Attorneys for SPIRIT AIRLINES, INC.

Date: December 18, 1997