OST-98-3603 / Savannah/Hilton Head / High Density Rule, Chicago O'Hare / Reply of United / April 13, 1998

Application of

for an exemption from 14 C.F.R. Part 93, Subpart K and S. 49 U.S.C.

§ 41719 as to allow non-stop service to Chicago O'Hare Airport

REPLY OF UNITED AIR LINES, INC.

The Community of Savannah, Georgia/Hilton Head, South Carolina ("Savannah") has applied for an exemption that would allow it to arrange with a carrier to provide up to four round trips to Chicago O'Hare. In response to United's Answer to the application questioning the legal basis upon which such an exemption could be granted, Savannah has filed a Response which effectively amends the form of relief which it requests.

The Department's decision on this application raises significant and critical policy questions. Because of the expansion of these issues represented by Savannah's amendment of its request, the public interest demands that the Department

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allow United to address these new issues. United, therefore, requests leave to file the following Reply.

Savannah originally filed pursuant to 49 U.S.C. § 41714 (subsection unspecified) seeking an exemption that would allow it to offer slots to an unidentified carrier that might then be encouraged to provide service between Savannah and Chicago O'Hare International Airport. Now that it has been pointed out to Savannah that the exemption statute upon which it is relying does not provide a basis upon which the Department could grant the relief Savannah has requested, Savannah has shifted gears. The essential point of the community's response is the same as that made in its original filing -- its economic development would be aided by service to O'Hare. United does not disagree. This contention alone is, however, an insufficient legal basis for the Department to grant the relief Savannah seeks.

Without a basis in § 41714, Savannah now contends that the Department is authorized to grant it the relief it seeks under the general exemption authority that has been exercised to create exceptions to the High Density Rule. As United recently learned /1, the FAA administers the High Density Rule, and the

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Department administers the exemption process. Presumably, the Department is not authorized to exercise exemption authority delegated to the Administrator of the FAA under the High Density Rule, just as the FAA is not authorized to administer the capacity made available under the exemption statute. Thus, even if Savannah were eligible for relief from the rule under 14 C.F.R. Part 11, it: has applied to the wrong agency to obtain it.

Savannah, however, continues to argue its case based on the criteria for relief under § 41714. Savannah is too large to meet the standard for an exemption for service to a nonhub, defined as having no more than 0.05 percent of annual national emplacements. Savannah is much larger than that, as demonstrated by its own exhibits. This is not to say that Savannah could not benefit from additional air transportation services, only that these services could not be provided to O'Hare with an exemption under § 41714(a)(2) and Order 96-10-42. Savannah also has not identified a "new entrant" carrier that would be the only entity eligible to utilize an exemption granted pursuant to subsection (c) of the statute. /2

2/ Savannah states that it takes no position as to whether United Express or American Eagle carriers are eligible as new entrants to operate exemptions under subsection (c). Then the community argues that it would be just as legitimate for the (Cont'd on next page)

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Savannah claims also that service to Midway would not meet its needs. Only access to Canada and international destinations will do. Savannah, however, already enjoys access to Canada and other international destinations through Atlanta, Charlotte and Washington Dulles. Given this array of service alternatives, the allocation of valuable slots for a service to be performed by an as-yet unidentified carrier cannot be justified whether by the DOT under the exemption statute or by the FAA under Part 11.

Savannah also contends that it is utilizing a "market-based" approach to secure service to O'Hare. However, a true market-based approach would be the purchase of slots in the marketplace established by the FAA through the implementation of the Buy-Sell Rule. What Savannah seeks is the grant of a government benefit that it can use to leverage an as-yet unidentified airline to institute service. While Federal economic development assistance for communities like Savannah

(Cont'd from previous page) Department to grant an exemption to it under subsection (c) as to the United Express or American Eagle carriers that have applied for exemptions under subsection (a)(2). Response at 4. This non sequitur mixes apples (applications of United Express and American Eagle carriers for small community exemptions pending under subsection (a)(2)) and oranges (the requirements of subsection (c) for new entrant exemptions) while conveniently ignoring Savannah's representation in its application that with slots granted as requested, it would be able to negotiate with American Eagle or United Express to operate them to O'Hare.

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may be perfectly appropriate, it should not be accomplished through manipulation of the High Density Rule.

To the extent that Savannah is pressing for a new form of exemption for services to a medium-sized community by carriers other than new entrants, no decision to award such exemptions should be made until an invitation has been extended to all eligible carriers. That was the procedure followed when the Department opened up § 41714(a) exemptions to include services to non-hubs as well as points eligible for EAS. Order 96-10-42. If the Department decides to create such a new, extra-statutory category of exemptions, United certainly has a lest of new, medium-sized cities it would like to serve from O'Hare pursuant to such exemptions.

Respectfully submitted,

JOEL STEPHEN BURTON

GINSBURG, FELDMAN and BRESS, CHARTERED

1250 Connecticut Avenue, N.W.

Suite o00

Washington, D.C. 20036

(202) 637-9130

Counsel for UNITED AIR LINES, INC.

DATED: April 13, 1998