OST-98-3603 / Savannah/Hilton Head / Chicago O'Hare / Response of Savannah/Hilton Head / April 2, 1998

Application of The Community of

for an exemption from 14 C.F.R. Part 93, SubpartKandS,49U.S.C.441714 as to allow non-stop service to Chicago O'Hare Airport

On March 11, 1998, the communities of Savannah, Georgia/Hilton Head, South Carolina ("Savannah/Hilton Head") along with other municipalities and businesses from the states of Georgia and South Carolina ("Parties") requested that the Department grant an exemption from the requirements of Subparts K and S of Part 93 of the Federal Aviation Regulations so that they may obtain direct non-stop service to Chicago's O'Hare Airport. The Parties requested eight slots at O'Hare to allow four Savannah/Hilton Head-O'Hare round-trip flights.

In its response, United states that: there is no legal basis to award slots to communities; because of capacity constraints at O'Hare if Savannah needs service to Chicago, it should be to Midway Airport; and that the Department should invite other parties to apply for additional slots.

I. The Department has broad authority to grant exemptions from the high density regulations.

The Parties have asked the Department to grant its petition under the Department's and the FAA's (14 C.F.R. Part 11) general regulatory authority as well as under 49 U.S.C. §41714.

As was stated in Special Federal Aviation Regulation 43 [45 F.R. 72637, November 3, 1983]:

Throughout the history of the high density rule (14 C.F.R. Part 93, Subparts K and S), the FAA and Department of Transportation have granted numerous exemptions to allow carriers to operate departures or arrivals at high-density airports, although such operations may have exceeded hourly slot limitations. Most recently, the Department of Transportation allocated slots to both Air Canada and Canadian Air for operations at LaGuardia Airport. Those operations exceed hourly high-density limits at LaGuardia.

The FAA has also allowed foreign air carriers to operate at O'Hare, even when such operations exceeded hourly limitations. Finally, the FAA has on occasion granted slot exemptions for domestic operations.

Section 41714 encourages the Secretary to grant slot exemptions under certain conditions; it does not restrict the Secretary's general authority to grant exemptions nor does it even suggest that slot exemptions may only be granted under this provision.

In its orders, the Department of Transportation has correctly expanded the list of markets that it will consider for exemptions under Subsection (a)(2) of Section 41714.

If United's objections are upheld, medium communities would have to lose service in order to be eligible for an exemption for O'Hare service. Moreover, such a decision would be contrary to the directions issued by the Department for small/medium communities to use their own resources to increase service levels. In "The Low Cost Airline Service Revolution," April 1996. the Department states:

As discussed in the Parties' application, the civic and business community of the Savannah/Hilton Head area met the Department's challenge and on their own increased air service. Having attracted and sustained that additional service -- substantially increasing passenger boardings -- it is inconceivable that the Department would now penalize the community for adding service by telling the people and businesses of the two-state area that, because of that success, it is not eligible for service to O'Hare, essential to its continued economic growth.

United also argues that the Parties request cannot be granted under Subsection (c), which requires that slots be used by a new entrant. The Parties take no position as to whether American Eagle or each of United's code-sharing affiliates qualify as new entrants. The Parties do note that both carriers and their affiliates control approximately 1,000 slots each, and each is requesting more than 11 additional slots in petitions before the Department of Transportation (unless United is conceding that DOT cannot allocate to United Express the 42 slots it has requested). /1 Moreover, the Parties note that section (c)(l) states that the Secretary may grant

1/ United's international affiliates are also seeking additional slots.

exemptions to enable new entrant air carriers to provide air transportation at high-density airports." Granting the exemptions requested by the Parties would enable "new entrants to provide service" to the same extent that slots were provided to either American Eagle or United Express. /2

II. Service to Midway Airport does not meet the needs of the two-state area.

III. Economic growth for medium communities and the maintenance of a competitive airline system should not be under the control of a few large carriers.

Whether the Savannah/Hilton Head communities receive service to O'Hare cannot be left to the sole discretion of one or two large carriers. The Parties have asked for less than .008% of

2/ Section (c)( L ) does not state that slot exemptions shall only be granted to new entrants.

the slots held by United. While the Parties believe that the O Hare carriers should be allotted to expand, they cannot be the sole authority controlling access to O'Hare Airport.

United also suggests that if the Department entertains a grant of this petition, that it should be given the opportunity to "seek slots." As a carrier that holds 1,000 slots and is already seeking approximately 45 additional slots through its affiliates, that claim is without merit.

As to the claim that this request is speculative, the Parties have proposed that a definitive timetable. If slots obtained are not used by a certain date, they will be returned. The Parties suggest that a request based on future aircraft deliveries is more speculative. Over the years, large carriers have delayed the initiation of service because of various delays.

IV. Communities need Departmental support to maximize economic growth

Secretary of Transportation Slater has encouraged communities to explore market-based solutions to address local service needs. The Parties applaud the Secretary for his position. As explained earlier in this document, the Parties have taken numerous initiatives to increase air carrier service. This application is consistent with the Secretary's charge to explore market-based approaches.

The high density rule allows communities to hold and purchase slots. The parties agree that slots are a scarce resource. The allocation of these important resources should be based upon the public interest. While the Parties do not disagree that slots should be made available to carriers seeking to grow and compete, it is time for the Department to recognize that it can do more than simply add on to the total slot holdings of two of the most powerful and successful carriers in the world. /3 At a time when the Department is adding to the strength of those carriers by increasing their slot holdings, allowing them to enter new international markets, and approving worldwide alliances, it should allow communities to become part of the international aviation system. While those communities can work with carriers to solidify service to most U.S. domestic markets, they need slots to obtain service to O'Hare. The March 11 petition sets forth a compelling case as to the significant benefits that would result if nonstop service commenced between Savannah/Hilton Head and O'Hare. Those benefits include the creation of jobs, economic opportunity, new economic investment, and will help the Savannah/Hilton Head community enjoy the true benefits of the Department's actions to create "Open Skies" with Canada and around the world.

The communities of Savannah/Hilton Head have followed the Department's call to take local market-based actions to expand airline service. That service has in turn opened new opportunities to create markets that are best served through O'Hare -- the upper midwest and Canada. These communities must be given an opportunity to receive service to O'Hare. This request is a minimal slot request. At a time when the two carriers controlling approximately 2000 slots are seeking 100 additional slots, the Parties are seeking 8.

The Parties believe that the public interest supports granting this petition. Certainly, the public interest is not only served when slots are given to the largest carriers in the world. If,

however the Department is uncertain as to the utilization of slots under this exemption request the Parties urge the Department to use this as a test case. As an alternative, the Department could award the slots to the community and review the results in several years.

By taking such an action, the Department will be taking a giant step to bring the benefits of its policies to small and medium communities and will be helping the two-state area determine its future. It is time for the Department to join with the people and businesses of Savannah/Hilton Head and work together to power the engine of economic growth and job creation. With the Department's assistance, those possibilities are limitless. Without Department action, those local efforts may stall.

For all these reasons, the Parties respectfully request that the Department reject United's argument and grant an exemption from the high density slot regulations to allow four nonstop Savannah/Hilton Head-Chicago O'Hare roundtrips.

Respectfully submitted,

Edward P. Faberman

UNGARETTI & HARRIS

1747 Pennsylvania Avenue, N.W.

Suite 900

Washington, D.C. 20006-4604

Submitted April 2, 1998