OST-97-3086 / Colgan Air / High Density Rule - New York LaGuardia / Joint Answer of Virginia and Colgan Air / December 31, 1997

Application of

Colgan Air, Inc.

for an exemption pursuant to 49 U.S.C. §41714

New York LaGuardia Airport

JOINT ANSWER OF THE DEPARTMENT OF AVIATION, COMMONWEALTH OF

VIRGINIA AND OF COLGAN AIR, INC. TO THE ANSWER OF THE OFFICE OF THE

QUEEN BOROUGH PRESIDENT, CITY OF NEW YORK

On November 4, 1997, Colgan Air, Inc. ("Colgan") requested an exemption from the requirements of Subparts K and S of Part 93 of the Federal Aviation Regulations so that it may continue its service to New York LaGuardia Airport. Colgan requested commuter air carrier slots at LaGuardia to provide eight LaGuardia round-trip flights. Colgan would use the commuter slots to serve various markets including Charlottesville, Virginia.

On December 3, 1997, the Office of the Queens Borough President, City of New York ("Borough President") filed an answer to Colgan and all other slot applicants opposing all requests for LaGuardia slots. In its Motion, the Borough President complained that -- except for Colgan -- the parties did not provide the Borough President with copies of their exemption applications. The Borough President complained that as a result of the failure to obtain copies of those filings, it was difficult for it to respond. It is ironic that the Borough President did not provide either Colgan or the Department of Aviation, Commonwealth of Virginia ("Department of Aviation") with copies of its filing. Its failure to follow the very practices it complained about demonstrates the shallowness of its overall arguments. Nevertheless, the Department of Aviation and Colgan ask for approval to file this response.

Public Interest Justifies Award of Slots to Colgan

The Borough President argues that Colgan and all other applicants have failed to make the showing required for the granting of slots. They also claim that carriers have failed to show that they cannot purchase or lease slots in the open market. Of course, the Borough President provided no evidence to support its claim.

As Colgan stated in its application, it is forced to request an exemption for commuter slots because although Colgan leases slots, /1 it has been unable to obtain permanent slots under the existing rules. A large majority of the commuter air carrier slots at LaGuardia are controlled by the major carriers or their large regional affiliates, while approximately 98% of the air carrier slots are controlled by the major carriers. Slots are not available for sale and would not be sold at prices that would allow Colgan to serve current markets. Colgan has not been able to purchase commuter slots. As a number of carriers have stated on the record in other slot petition requests, they cannot obtain air carrier slots. If large carriers are unable to purchase slots, Colgan would have no opportunity to obtain any.

The Borough President seems to believe that no small market is worthy of service to LaGuardia. The grant of Colgan's application is consistent with Congressional intent that the Department increase access to high density airports for small sized communities. As noted in

1/ Although Colgan has no reason to believe that it will lose its leased slots within a short period of time, its operations are based upon short-term leases. Those leases could be terminated at any time leaving Colgan with no alternative. This would leave Colgan without any presence at LaGuardia despite significant investments in facilities and route development.

Order 97-1-7, January 13, 1997, p.1, Congress has directed the Secretary "to make the fullest possible use of existing exemption powers under 49 U.S.C. 41714 . . 'to improve service to nonhub airports where significant improvements can be achieved,"' citing the Conference Report to the DOT FY 1997 Appropriations Bill, Public Law 104-205.

With respect to new entrants, the Department has stated that it "intends to be more receptive to considering competition as a factor in granting slot exemptions . . under the 'exceptional circumstances' criterion" (Statement of January 6, 1997 in response to GAO Report on Airline Deregulation). Allowing Colgan to obtain permanent LaGuardia slots would be consistent with these principles.

At a time in which concentration in the airline industry is increasing, Colgan is one of the few small independent commuter operators remaining in the northeast and mid-Atlantic. With large carriers having virtual control over the high density airports, it has become increasingly more difficult for independent carriers or commuter air carriers to operate in the northeast section of the United States. Access to the LaGuardia market is especially critical to Colgan's ability to continue to provide competitive service to all of its markets in the mid-Atlantic including Charlottesville.

For a carrier such as Colgan, options are limited. Its service from LaGuardia is an essential part of its system. Without its high density airport routes, Colgan would be placed in a significant competitive disadvantage -- threatening its future economic health and its ability to serve all of its markets. This would be inconsistent with the overall interests of small cities in Virginia, Massachusetts, West Virginia and other states depending on commuter service. It was not the intent of the Airline Deregulation Act that only large markets sewed by large carriers should obtain access to federally regulated airports or that the only commuter markets to obtain access are those controlled by the large carriers. Instead, the Airline Deregulation Act calls for:

"Avoiding unreasonable industry concentration, excessive market domination, [and] monopoly power";

"Encouraging entry, into air transportation markets by new and existing air carriers and the continued strengthening of small air carriers to ensure a more effective and competitive airline industry."

It is essential that the Department of Transportation provide "commuter air carrier markets" with the same benefits and priorities as jet markets. Small communities must not be blocked from establishing permanent air service to the nation's premier business airports -particularly LaGuardia. Colgan is the only carrier proposing service to a small community. This is consistent with Congressional intent to open opportunities for small markets ~ the history, of the high density rule that has emphasized the importance of commuter air carrier service. In the past, the Department of Transportation has recognized the importance of commuter operations by increasing the number of commuter slots at O'Hare and National Airports. Commuter air carrier markets must not be treated as less important.

Over the past decade the number of air carriers and commuter operators in the country has diminished. This is particularly the case in the Northeast. As a result, small communities have been hit the hardest. Colgan is one of the few carriers expanding to these markets. Without permanent slots, Colgan has demonstrated its commitment to maximizing its presence at LaGuardia and to those markets. Yet, Colgan's ability to continue the service and growth is precluded by the current slot limits. If Colgan does not have permanent LaGuardia service, all of its service could be impacted.

It is clearly in the public interest to meet the needs of competition and growth of service at small markets by enabling Colgan to secure a permanent position at LaGuardia during slotted time periods. For these communities, for other markets sewed by Colgan and for the air transportation needs of all states in the Northeast, LaGuardia service to secure permanent economic stability and longterm growth. Department of Transportation approval of Colgan's application is particularly warranted given the exceptional circumstances of Colgan's disadvantage as to the major carriers.

As to the Borough President's comments on the impact to the ATC system if any flights are added at LaGuardia, when Patrick V. Murphy, Department of Transportation Deputy Assistant Secretary for Aviation and International Affairs, testified before the Subcommittee on Transportation of the Senate Appropriations Committee on October 21, 1997, he stated:

In 1995, at the direction of Congress, the President, and the airline commission, the Department completed a study on the high density rule. We concluded that a change in the high density rule would not affect safety. . . In the short term there would be an increased noise impact; however, in the longer term, the transition to quieter all stage 3 aircraft would reduce noise levels to a point lower than experienced today.

We also concluded that since 1968 when the slot rule was issued, air traffic control has changed dramatically. The implementation over the last 30 years of sophisticated technology in traffic management initiatives has enhanced the efficiency of the air space system. It is the traffic management system, not the high density rule, that ensures the safe operation of the air traffic control system.

It is unfortunate that the Borough President has chosen to ignore facts, the history of the high density rule, and the world's best air traffic control system and employees to suit its own interests by claiming that because of safety interests, all slot requests before the Department should be denied.

WHEREFORE, for the reasons stated above, the Department of Aviation and Colgan respectfully requests that the Department of Transportation dismiss the arguments made by the Borough President and grant Colgan an exemption from Subparts K and S of Part 93 of the Federal Aviation Regulations for sixteen commuter slots at New York LaGuardia Airport.

Respectfully submitted,

Edward P. Faberman

UNGARETII & HARRIS

1747 Pennsylvania Avenue, N.W.

Suite 900

Washington, D.C. 20006-4604

December 30, 1997