OST-98-4424 / Chautauqua Airlines / High Density Rule / LaGuardia / Answer of The Queens Borough President / October 20, 1998

APPLICATION OF:

For an exemption from Subparts K and S of 14 CFR Part 93 (Slot Restrictions at New York LaGuardia Airport) to provide nonstop service between:

Bloomington/Normal, IL and New York, NY LaGuardia Airport

Chautauqua Airlines, Inc. (Chautauqua) has filed an application for six slot exemptions from the High Density Rule to initiate three daily non-stop flights between LaGuardia Airport in New York City and the Central Illinois Regional Airport in Bloomington-Normal, Illinois. /1 Chautauqua asserts that these proposed flights will provide service not just to the residents of Bloomington-Normal, but also to the residents of Peoria, Champaign, Urbana, Springfield and Decatur.

Last week, the Office of the Queens Borough President ("Borough Presidents) filed an Answer to the application of AccessAir Holdings, Inc. ("AccessAir"), which was seeking four slots to serve this exact same geographical area. /2 There are only three differences between the application filed by Chautauqua and the application filed by AccessAir: (1) Chautauqua request six slots while AccessAir seeks only four slots; (2) Chautauqua proposes to initiate service from Bloomington/Normal while AccessAir's flights would be from Peoria; and (3) AccessAir proposes to have connecting service to Des Moines.

The Borough President will not burden the Department with a reiteration of all the arguments made in opposition to AccessAir's application, and instead we respectfully refer the Department to that answer, which is annexed hereto as Exhibit A and incorporated herein by reference. For the reasons set forth in the Answer to the application filed by AccessAir, as well as the additional reasons discussed below, it is clear that Chautauqua has not met its statutory burden of proof, and accordingly this application must be denied.

1/ Application of Chautauqua Airlines, Inc. OST-98-4424 (September 8, 1998)(hereinafter referred to as "Chautauqua Application").

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A. The Department Cannot Grant Chautauqua's Application Unless It first Analyzes the Environmental Impacts of the Proposed Service

In two decisions issued in the past year, the United States Department of Transportation ("USDOT" or "Department") awarded five different airlines a total of 30 slot exemptions to initiate service to LaGuardia Airport. /3 These slots were awarded following the issuance of an Environmental Assessment which analyzed the noise impacts of the additional flights.

Four of these slots were awarded to AirTran Airways ("AirTran"), which sought to initiate service between New York City and Knoxville, Tennessee. /4 AirTran was not able to maintain viable service to Knoxville, however, and therefore has returned those slots to the Department.

Both AccessAir and Chautauqua are now seeking to initiate service between New York City and central Illinois, and the primary difference between the two applications is that AccessAir appropriately sought only the four slots that have been returned by AirTran Airways, while Chautauqua is seeking six slots. As the Department made clear in its most recent slot decision, however, no more than 30 slot exemptions are being granted at LaGuardia Airport:

We previously placed all parties on notice, and we emphasize here again, that the number of available slot exemptions is very limited and that we may have to deny applications that otherwise meet the standards we have established for the

4/ Frontier Airlines, pages 8-9 & 15-16

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grant of such exemptions. More specifically, to assure that any new operations we may authorize will not have a significant impact on traffic, flight delays or noise, we are adhering in this order to the limit of thirty slot exemptions at LaGuardia on which we based the related environmental assessment ..../5

The Environmental Assessment issued by the Department in October 1997 analyzed the environmental impacts of up to 30 additional flights at LaGuardia Airport. /6 Accordingly, the Department has the power to grant the four AirTran slots to another carrier without first conducting a full environmental analysis, provided that the carrier establishes that the new service is in the public interest and that extraordinary circumstances warrant the award of the slot exemptions.

Nevertheless, the Department cannot grant Chautauqua's request for six additional slots, nor can it award more than four slots fatal in response to all of the pending slot exemption requests, without first conducting a new environmental impact analysis. That analysis would have to include, of course, an review of the cumulative impacts of the slots granted pursuant to the Frontier Airlines and AccessAir orders, as well as any additional slots that slots exceed the 30 analyzed in the October 1997 Environmental Assessment.

Fortunately, the Department made clear in both Frontier Airlines and AccessAir that it is maintaining a limit of 30 new slots at LaGuardia Airport. /7 For the purposes of this answer, the Borough President is assuming that this remains the position of the Department, and that only the four slots returned by AirTran are available. Accordingly, we will not reiterate the arguments previously made regarding the adverse impacts that these additional flights will have

5/ AccessAir Holdings, Order 98-4-22 (April 21, 1998), page 4 (emphasis added).

7/ Applications of Frontier Airlines, ValuJet Airlines and AirTran Airways, Order No 97-10-17 (October 24, 1997)(hereinafter referred to as "Frontier Airlines"), page 4; AccessAir, Order No. 98-4-22, page 5

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on noise, pollution, delays, safety and traffic. /8 Instead, for the purposes of the remainder of this Answer it is assumed that the Department could award at most four slots in response to Chautauqua's application. /9

B. Granting Slot Exemptions to Chautauqua Would Be Contrary to the Public Interest

Any airline seeking an exemption from the High Density Rule must demonstrate that the new proposed service would be in the "public interest". Specifically, the applicant must show that the expected benefits from the new service outweigh the significant adverse impacts that would result from the granting of the slot exemption applications.

Even though the Department has previously indicated that up to 30 additional flights will not have a "significant" adverse impact, the Department still is required by law to undertake a balancing of the positive and negative consequences that would result from every application for slot exemptions. Any increase in the number of flights at LaGuardia Airport inevitably will increase noise, delays, pollution and traffic and will decrease aviation safety to some extent, and the Borough President respectfully submits that, even assuming that the Department determines that the four slots returned by AirTran Airways should be awarded to another carrier, the slots should not be awarded to Chautauqua because the minimal public

9/ The Borough President respectfully reserves the right to submit additional arguments relating to the adverse impacts on local residents if, as a result of Chautauqua's application and the other applications currently under review or filed in the future, the Department indicates that the total number of slots to be granted may exceed the 30 total slots that were the subject of the Environmental Assessment

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benefits that would accrue from those proposed flights do not outweigh the adverse impacts on the 2 million residents of Queens.

The Department has now received fir applications from air carriers seeking slot exemptions to provide service to central Illinois. First, AirTran Airways filed an application in May 1997 for slot exemptions to provide service to Bloomington/Normal, Moline/Quad Cities, Toledo, Akron and Knoxville. Although the Department granted AirTran four slots to serve Knoxville, it found that none of the remaining markets were not large enough to warrant slot exemptions.

Specifically, the Department noted that its origin/destination ("O&D") data for 1996 showed only 22,220 passengers per year for Toledo, only 15,510 annual O&D passengers for Akron/Canton, and only 15,230 passengers per year for Moline/Quad Cities. Bloomington/Normal was the smallest marked that AirTran proposed to serve, with only 5,720 annual O&D passengers. Accordingly, in October 1997 the Department rejected all of these slot requests, stating:

One month later, AccessAir Holdings filed an application for six slot exemptions to provide service to Moline/Quad Cities and Peoria, with connecting service to Des Moines. The Department noted that the total O&D traffic was only 39,984 for these cities, including

10/ Frontier, page 16 (emphasis added).

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Des Moines, which would not be receiving non-stop service under AccessAir's proposal. AccessAir also claimed that it would draw passengers from throughout central Illinois, including Bloomington/Normal, Springfield, Decatur and Champaign. Meanwhile, the People and Businesses of Bloomington/Normal and Moline-Quad Cities, Illinois and Toledo and Akron-Canton, Ohio" (Illinois/Ohio) filed a petition asking the Department to reconsider the prior denial of AirTran's application, asserting that the market to be served was greater than the Department had acknowledged.

Finding all of these claims insufficient, the Department issued an order in April 1998 denying both the application submitted by AccessAir and the petition for reconsideration filed by the Illinois/Ohio parties. Although noting that some positive benefits might accrue from the proposed flights, the Department found that there were "drawbacks to each proposal that weigh against . . . granting exemptions", and that these "negative considerations command greater weight" than the purported benefits. /12 The Department specifically noted that the proposed service was Not as strong traffic-wise" as other applications that had been submitted, the Department denied the applications. /13

When AirTran subsequently found that it could not provide viable non-stop service between New York City and Knoxville, Tennessee (even though the O&D passenger market In Knoxville is much larger than the market in any of the cities proposed to be served nonstop by AccessAir or Chautauqua), AirTran returned those four slots to the Department. In response, AccessAir filed a second, revised application for slot exemptions in September 1998. Specifically, AccessAir indicated that it had been able to obtain slots for its proposed Moline/Quad Cities service, and thus the new application sought only the four AirTran slots for the purpose of providing non-stop service to Peoria.

12/ AccessAir, Order No. OST-98-4-22, pages 21-22.

13/ Id. page 24.

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Finally, Chautauqua has now filed an application for slot exemptions to serve the exact same geographical area, except that service would be provided to Bloomington/Normal rather than Peoria. /14

Of course, the demand for air carrier service from Peoria and Bloomington/Normal is no greater now than it was when the Department rejected the first applications submitted by AirTran and AccessAir. AccessAir sought to circumvent that clear deficiency by choosing not to provide recent O&D data for its proposed service, instead exaggerating the potential demand by relying on the 1994 and 1995 data contained in its 1997 application, which included O&D traffic for areas that would not be served with the requested slots. /15

Chautauqua Airlines takes a different approach, and correctly admits that, based upon the Department's annual O&D traffic data, there is insufficient demand to warrant the granting of a slot exemption. /16 Instead, Chautauqua argues that the reported annual O&D passenger data does not reflect True market demands, and that the Department should "not rely on O&D data." /17 Of course, Chautauqua does not state what objective data the Department should use to evaluate slot exemption requests. Apparently believes that the Department should instead simply accept as fact Chautauqua's "projection" that it will carry approximately 63,000

14/ Although Chautauqua, unlike AccessAir, does not propose to offer connecting service from Peoria to Des Moines, that is not a significant difference for the purpose of the statutory analysis. As noted in the Answer filed by the Borough President to AccessAir's application, at least six other airlines already offer one-stop service between New York and Des Moines. The Department has made clear that slot exemptions will only be granted to provide nonstop flights to underserved areas, and AccessAir's proposed service to Des Moines did not meet either of those requirements, and thus that is cannot form a basis for a slot award.

15/ 1997 AccessAir Application, Exhibits 2 & 3.

17/ Id.

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passengers per year, even though there is no legitimate basis for this clearly over-inflated projection.

The Borough President respectfully asserts that the Department's annual O&D data, is by far the best and most objective measure of demand for air travel between cities. More importantly, the Department has made clear in each of its prior orders that it must compare the potential positive and negative impacts of all pending exemption applications, and Chautauqua has provided no basis for believing that the O&D data for Bloomington/Normal is overstated or understated to a greater or lesser extent than the O&D data for any other city. As a result, the Department is perfectly justified in relying upon that data when deciding whether to grant slot exemptions.

C. The Other Requirements for the Granting of Slot Exemptions Have Not Been Met

In all other respects, the application filed by Chautauqua Airlines is indistinguishable from the application filed by AccessAir. Accordingly, Chautauqua's application should be denied for the same reasons as set forth in the prior Answer filed by the Borough President, which is annexed hereto as Exhibit A and incorporated herein by reference. Specifically:

18/ Answer to 1998 AccessAir Application, pages 19-20.

19/ Id., pages 13-16

20/ Id., pages 13-16

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21/ Id., pages 16-17

22 Id., pages 16-17

23/ Id., pages 17-18

24/ Id., pages 6-8

25/ Id., pages 5-6.

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For the reasons set forth above, application filed by Chautauqua Airlines for slot exemptions from the High Density Rule at LaGuardia Airport should be denied in its entirety.

Respectfully submitted,

CLAIRE SHULMAN

President

Borough of Queens

By

David M. Nocenti

Counsel to the Borough President

120-55 Queens Boulevard

Kew Gardens, New York 11424

(718) 286-2880

October 20, 1998