OST-97-2368 / OST-97-2970 / OST-97-2985 / OST-97-3259 / Trans States / America West / Simmons / Atlantic Coast / High Density Rule, Chicago O'Hare / May 21, 1998

Applications of

TRANS STATES AIRLINES, INC. / OST-97-2368

AMERICA WEST AIRLINES, INC. / OST-97-2970

SIMMONS AIRLINES, INC. d/b/a AMERICAN EAGLE / OST-97-2985

ATLANTIC COAST AIRLINES / OST-97-3259

for exemptions from 14 C.F.R. Part 93, Subparts K and S, pursuant to 49 U.S.C. 41714

ANSWER OF ATLANTIC COAST AIRLINES TO OBJECTIONS/PETITION FOR RECONSIDERATION OF AMERICAN EAGLE AIRLINES, INC.

Atlantic Coast Airlines ("ACA") hereby responds to the objections or the alternatively styled petition for reconsideration of American Eagle Airlines, Inc. (formerly Simmons Airlines) ("Eagle") of DOT Order 98-4-21. 1/ Eagle objects to the DOT's decision to award 16 O'Hare slots each to ACA and to Trans States with which to serve three cities while Eagle was awarded 16 O'Hare slots to serve four communities. Calling its award inequitable, Eagle asks the DOT to award it four additional slots with which to serve the four cities. Eagle also objects to the legal basis on which the Department made the award of 16 slots to it. ACA will, in turn, address these Eagle objections.

ACA urges the Department to reject Eagle's claim of inequitable treatment and to deny its request for four additional

1/ This ACA Answer is being filed within the time permitted for answers to petitions for reconsideration in accordance with Rule 302.37(a) of the DOT's Rules of Practice.

O'Hare slots. Further, if the Department grants Eagle's request to revise the theory basis on which the award was made to Eagle, then the same legal reasoning should apply to ACA and order 98-4-21 should, on reconsideration, be so modified.

Like Eagle, ACA did not receive all of the O'Hare slots which it requested since it sought six slots to serve each community for which it applied. Nor did ACA receive the right to serve all of the seven communities to which it was prepared to bring non-stop regional jet service. However, ACA recognizes the limits imposed on the DOT and the FAA in making slot awards at the High Density Traffic Airports as defined in Part 93, Subparts K and S of the Federal Aviation Regulations. (14 C.F.R. Part 93, Subparts K and S).

The air side capacity of O'Hare is not unlimited and the DOT must make difficult decisions in awarding exemption slots even to deserving applicants. Indeed, when the Department, in October, 1997, first granted slot exemptions using its new and expanded "exceptional circumstances" test it noted that 11 ... the number of available slot exemptions is very limited, and we may have to apply our guidelines on an increasingly more restrictive basis or even deny applications that otherwise meet the standards set forth in this order. 11 Orders 97-10-16 and 97-10-17, served October 24, 1997; See also Order 98-4-21, pp. 4-5. This backdrop to the slot exemption process is apparently not well understood by Eagle since it seems to suggest in its objection/petition for reconsideration that the number of slots awarded to it was not constrained by the limits of air side capacity. Indeed it is, and the DOT, as it predicted would be the case, had to make the difficult decision of granting some, but by no means all, of the requests of ACA, Trans States and Eagle for O'Hare exemption slots.

Apart from its failure to comprehend the nature of the slcr exemption process, which does not necessarily assure any applicant equality of opportunity, Eagle's objection is based on the faulty premise that the award of 16 slots to each carrier permits only a fixed number of services to the selected communities, and no more. Hence, Eagle argues that with 16 slots ACA or Trans States can offer three daily roundtrip flights to two of their three cities; while Eagle would be limited to two daily roundtrip flights to each of its four cities.

In making this argument, Eagle would have the DOT ignore that not all hours at O'Hare are controlled under the High Density Airport Rule. As the DOT observed in Order 98-4-21, 11 ... carriers may be able to-augment [their] operations through the use of slots outside the controlled hours (6:45 a.m. to 9:15 p.m.)..." Hence, Eagle is free to operate in non-controlled hours, as ACA is planning to do, to supplement its exemption slots, in order to provide each community with whatever pattern of service Eagle sees fit to provide. 2/ To demonstrate this point, the Department should note

2/ Eagle did not argue that it cannot operate in non-controlled hours, as the DOT suggested, and any such argument would fail given ACA's intention to do so.

that ACA is planning to conduct four flights in non-controlled hours and thereby offer two of the three communities it will serve three roundtrip flights per day and the third community will receive four daily roundtrip flights. Departures prior to 6:45 a.m. or arrivals after 9:15 p.m. are quite attractive and are welcome in the marketplace in which same day "out-and-back" service is viewed with favor by the traveling public.

But Eagle is not limited to solely operating in non-controlled hours in order to supplement its service to the non-hub communities to which it was awarded slots. By its own admission, Eagle along with its airline affiliate, American Airlines, has 914 O'Hare slots after taking account of the award made in order 98-4-21. These slot holdings grant Eagle a enormous advantage not enjoyed by ACA which has no other slots on which to draw to make up its O'Hare schedule. Eagle and American can surely find slots either inside or outside of the controlled hours to properly fashion a full pattern of service to and from the four cities it was awarded slots to serve. Indeed, with over 900 hundred slots at its disposal the DOT need not take seriously Eagle's argument that the award of 16 slots each to ACA, Trans States and Eagle "is an unwarranted penalty against American Eagle. . . " . Eagle Objection, p. 4. ACA, as an independent United code share partner, has no corporate affiliate to turn to for slots as does Eagle and to credit Eagle's objection to the structure of the O'Hare slot awards in Order 98-421, would clearly be inappropriate.

In pressing its position, Eagle ignored the DOT's suggestion that American assist it in enabling Eagle to implement the full three-roundtrip service pattern it proposed. American can and should be expected fill in for any additional slots that Eagle may require rather than unbalance the carefully crafted O'Hare slot awards to the three regional jet carriers. Of the three applicants, only one, American Eagle, is affiliated by ownership with a major carrier and, hence, there is a sound basis for distinguishing among and between ACA and Trans States, on the one hand, and American Eagle, on the other. Under these circumstances, clearly contemplated by the DOT, Eagle's application received "equal consideration" to that given the requests of ACA and Trans States.

If Eagle is correct that the DOT has sixty O'Hare slots to award but has thus far allocated only 55, this fact alone does not justify any additional award to Eagle. The public interest would never be served by increasing the slots held by American and Eagle (which currently totals 914 slots) at the expense of unaffiliated carriers like ACA which has only 16 slots and no corporate affiliate on which to rely for a pool of additional slots. Therefore, even if five additional slots are available for award, Eagle has not made a compelling case for concentrating slots in its hands. Eagle, like ACA, should exercise self-help and fashion its flight schedule using the resources at its disposal (which are considerable) rather than asking for yet an additional governmental dispensation.

Eagle's second objection to Order 98-4-21 is with the decision of the DOT to award slots to Eagle utilizing reassigned EAS slots and then replenishing them for use by Eagle to provide essential air service to three unrelated cities, rather than directly awarding Eagle slots under 49 U. S.C. § 41714 (a) and the 1997 Conference Report language (S. Rep. No. 325, 104th Cong. 2nd Sess. at 12, 1996) ("Conference Report") relied upon by the Department in awarding slots to Great Lakes Aviation by Order 97-1-7. In United's objections to Order 98-4-21 it made the same point.

While ACA did not object to Order 98-4-21, and still does not do so, ACA would, nonetheless, observe that if the Department were to agree with Eagle and United that the award of slots to Eagle to serve nonhub airports should have been made under 49 U.S.C. § 41714 (a) , then this legal reasoning should similarly apply to the award to ACA and to Trans States. In the case of all three applications for O'Hare exemption slots, the cities proposed to be served are FAA-defined nonhub airports. Further, by linking these smaller communities with non-stop service to O'Hare, the applicants were acting consistently with the Congressional Directive to the DOT to improve small community- 0 'Hare service patterns by using its EAS exemption authority (49 U.S.C. § 41714(a) and the Conference Report). Further, an award of slots to ACA and Eagle pursuant to 49 U.S.C. § 41714(a) would be consistent with DOT precedent awarding 20 O'Hare slots to Great Lakes by Order 97-1-7, January 16, 1997.

Therefore, if the Department were to change the legal basis on which Eagle is to be awarded 16 O'Hare slots, the same reasoning should apply to ACA. There would be no basis for distinguishing the applicable legal theory merely because ACA may also be considered a new entrant (not having previously operated or owned any slots at O'Hare) while Eagle, formerly Simmons, could not be so characterized by virtue of its vast O'Hare slot holdings. /2 However, this difference should not be used to distinguish the theory for grant of O'Hare slot exemptions. It would be unfair to base Eagle's award under one provision of the law and ACA's award (and Trans States) under another when all of the carrier applications fall well within the provisions of § 41714(a) as supplemented by the Conference Report. Were such a distinction to be drawn it could impact ACA's eligibility to receive additional O'Hare slots to serve non-hub communities (were it to make such application) since, after the grant of this exemption, ACA will by definition no longer be a new entrant or limited incumbent which is defined as a carrier having fewer than 12 slots at the subject airports. On the other hand, were Eagle to receive its award under § 41714(a) it would not be similarly prejudiced as it could rely on such precedent and seek additional slots under § 41714(a). Therefore, if the DOT were to decide to rely upon § 41714 (a) and the

3/ According to the FAA's records, Eagle is listed as holder of 262 slots at O'Hare as of April 28, 1998.

Conference Report to make the award of slots to Eagle, so should this legal reasoning apply to ACA and Trans States.

Accordingly, for the reasons stated above, the DOT should deny the Eagle petition for reconsideration and make final the award of 16 O'Hare slots each to ACA, Trans States and Eagle. Further, if the theory employed by the Department in awarding Eagle its 16 slots is revised in accordance with Eagle's request, the same legal approach should apply to ACA and Trans States.

Very truly yours,

BAGILEO, SILVERBERG & GOLDMAN, L.L.P.

Attorneys for ATLANTIC COAST AIRLINES

Robert P. Silverberg

Dated: May 21, 1998