OST-98-3550 / Vanguard / High Density Rule, New York JFK / Answer of TWA / March 10, 1998
Application of
VANGUARD AIRLINES, INC. /
Docket OST 98-3550for an exemption from Subparts K and S of 14 CFR Part 93
(slot exemptions)
Kansas City - New York (JFK)
Pittsburgh - New York (JFK)
ANSWER OF
TRANS WORLD AIRLINES, INC.
By an application, dated
February 23, 1998, Vanguard Airlines, Inc. has requested an exemption from the slot regulations so that it may operate additional round trip Kansas City and Pittsburgh - New York (JFK) flights during the peak, slot-controlled hours. However, there is ample nonstop service between both cities and New York, and a wide range of fares available to the public. Vanguard has failed to demonstrate that the public interest requires grant of the exemption and has even failed to meet the new, liberalized qualifications that the Department has established for grant of such applications. TWA, therefore, answers and requests that Vanguard's application be denied. In support of its answer, TWA states as follows:
TWA Answer
Page 2
1. Under 49 USC § 41714(c), the Department may waive the slot limitation rules for new entrant air carriers if the exemption is in the public interest, and there are exceptional circumstances that would justify grant of the application. Vanguard clearly fails to meet these criteria. As demonstrated by Vanguard's own exhibits, there is ample service in the New York - Kansas City and New York - Pittsburgh markets, and there is absolutely nothing unusual about the markets to distinguish it from other markets to which the slot rules apply.
2. In Orders
97-10-16 and 97-10-17, the Department reinterpreted Section 41714(c) to essentially ignore the exceptional circumstances requirement. However, Vanguard does not meet even the new more liberalized standards established in those orders. Thus, the Department stated:"First, we would favor proposals that are based on jet aircraft that meet Stage 3 noise requirements; second, there should be a reasonable expectation that the proposed service would be operationally and financially viable; third, we will place a premium upon the introduction of (a) new nonstop services where none exist and (b) new competitive services, especially by applicants that have demonstrated potential to offer low-fare competition, where there is single carrier service and the market could support entry or where existing services do not produce meaningful price competition." (
Vanguard has failed to meet these criteria.
3. Vanguard has made no attempt to demonstrate that its proposed service would be operationally and financially viable or that the markets will support its entry.
TWA Answer
Page 3
It is already operating in both the Kansas City and Pittsburgh - New York markets with two flights per day in each, and could, at least, have presented the Department with figures on its traffic and load factors. However, it has not done so. In view of Vanguard's current dismal financial record, it is difficult to believe that any of its operations are financially viable. By December 1996, Vanguard had an accumulated deficit of about $41.4 million and its stock had been delisted from the NASDAQ stock market. During the first nine months of 1997, it lost an additional $21.7 million on gross revenues of $62.5 million, compared to an $11.4 million loss for the comparable period of 1996. Thus, Vanguard's net loss was approximately 1/3 of its total revenue. Vanguard has also suffered from revolving door management. It is on its third Chief Executive Officer since October 1996. Under these circumstances, Vanguard must do more than file a simple request for a slot. It should provide its historic traffic and load factors on the Kansas City and Pittsburgh - New York flights that it has already operated, a historic P&L, and a forecast demonstrating the financial viability of the routes.
4. The Department's next criteria is that it will place a premium upon the introduction of new nonstop service where none exists. However, as Vanguard's exhibits demonstrate, there is ample nonstop service between Kansas City and New York. From Kansas City to New York, there are currently 10 weekday nonstop flights by Continental, US Air, Midwest Express, and Vanguard (
Vanguard Ex. C). While most of these flights are to LaGuardia and Newark, there is no basis for arguing that
TWA Answer
Page 4
JFK - Kansas City is a separate market from the rest of New York - Kansas City. Clearly all three airports serve the local New York - Kansas City traffic. There is even more nonstop service between Pittsburgh and the New York airports, including numerous flights to Kennedy. US Airways, with a Pittsburgh hub, offers 15 daily jet services to the New York area (
Vanguard Ex. E).5. The Department will also consider new competitive services, especially by low-fare carriers, where there is single carrier service and the market could support entry or where existing services do not provide meaningful price competition. These criteria do not apply to New York - Kansas City where, as Vanguard's exhibits show, both Vanguard and existing carriers offer a wide variety of fares (
Vanguard Ex. J). Pittsburgh, like Kansas City, has a wide variety of low, normal, and promotional fares available. We should also note that the Vanguard exhibit does not include many other promotional fares offered by other airlines (Ex. J. note).6. Vanguard should not be allowed free slots at JFK when it has not made a serious attempt to acquire or lease existing slots. While it did appear at the January 27, 1998 industry meeting, and applied for slots, it did not, as far as TWA knows, attempt to acquire slots by lease. It has never contacted TWA with a request to lease slots. Vanguard has made no showing that the cost of leasing slots at JFK would be
TWA Answer
Page 5
prohibitive, and it should not be awarded slots on the basis of the limited presentation it has made in its application.
WHEREFORE, TWA respectfully requests that Vanguard's application be denied.
Respectfully submitted,
Richard J. Fahy, Jr.
Attorney for Trans World Airlines, Inc.
March 10, 1998