OST-98-4647 / American Eagle / High Density Rule – Chicago O’Hare / Motion of Reno to Strike United’s Response / December 9, 1998

Application of

under 49 U.S.C. 41714 for an exemption from the high density rule governing Chicago O'Hare slots (14 CFR Part 93)

(Greenville/Spartanburg, South Carolina)

United's assertions are irrelevant to the issues in this docket. Reno Air is not a party to this proceeding and any actions which might be taken in this proceeding at United's urging would have severe adverse effects upon Reno Air, the Reno/Tahoe community, the State of Nevada, and the traveling public. 

Fundamental fairness and due process of law require that these issues be raised in an appropriate forum, with- proper safeguards to insure that an adequate record is developed. Under these circumstances, Reno Air requests that the Department strike the designated portions of United's pleading. In the alternative, Reno Air requests that the Department consider this Motion as an Answer in Opposition to United's Response.

Since Reno Air is not a party to this proceeding, leave is sought to file the attached Motion to Strike. As noted, United has raised the irrelevant issue of Reno-Chicago O'Hare slots in a proceeding involving an Application of American Eagle Airlines, Inc. ("American Eagle") for the allocation of O'Hare slots to serve Greenville/Spartanburg, South Carolina. Any action by the Department of the sort urged by United would have severe and adverse effects upon Reno Air, the community and the traveling and shipping public. Therefore, Reno Air requests leave to file a Motion to Strike.

United's attempt to carve up Reno Air and reallocate its O'Hare slots in this proceeding is a denial of Reno Air's due process rights. Apparently, United needs to be reminded that Reno Air is still an independent operating carrier that offers four daily round trip flights between Reno and Chicago O'Hare. None of Reno Air's O'Hare slots have been Transferred to American. Moreover, this proceeding involving American Eagle's request for two slots to serve Greenville/Spartanburg is not the appropriate proceeding in which to consider Reno-Chicago O'Hare. If the Department ever needs to reconsider its decisions awarding O'Hare slots to Reno Air, that action must be taken only in a proceeding involving Reno Air and in which Reno Air is afforded full due process protections. In any event, obvious public interest reasons compel the total rejection of United's arguments.

In fact, there are substantial public interest reasons that support the determination that Reno Air's Chicago O'Hare slots fulfill an important public need and should be retained under the present circumstances. The Department specifically found in Order 94-9-30, September 20, 1994, that grant of Reno Air's Application for an exemption to enable the carrier to offer three daily round trip flights in the Reno-Chicago O'Hare market would be in the public interest. The Department determined that the economic characteristics of the market, the history of nonstop service between Reno and Chicago O'Hare, and Reno Air's long-expressed intentions of serving Chicago O'Hare from its hometown market are unique and meet the exceptional-circumstances requirement of the Act (Order at 5).

The Department's determination clearly was correct. In what likely was the most successful use of the exemption power granted the Secretary under the 1994 amendment to the Statute (49 USC 41714), Reno Air was able to introduce service between Reno and Chicago O'Hare (at the time Reno-Chicago O'Hare was the largest O'Hare market without nonstop service) initially at a level of two daily round trips and, as market conditions warranted, Reno Air increased service to three and then four daily round trips.

In the four years since Reno Air instituted daily nonstop service, the Reno-O'Hare market has more than tripled, increasing from 56,890 annual O & D passengers in 1994 to 166,740 in 1997. See Exhibit 1. Similarly, Reno Air's traffic has shown substantial and sustained growth, from 72,760 0 & D passengers in 1995, the first full year of nonstop service, to 91,310 passengers in 1996, 104,510 passengers in 1997 and 32,250 passengers in the 18t Quarter of 1998 (compared to 22,670 in the 16t Quarter of 1997). See Exhibit 2.

On July 30, 1997, Reno Air submitted an Application for two additional O'Hare slots to enable the carrier to increase service to four daily round trips. Reno Air's application was granted by the Department by Order 97-10-16, October 24, 1997. Once again, the Department found that Reno Air's Application was in the public interest and met the exceptional circumstances test (Order at 8). While Reno Air has implemented the fourth round trip on a seasonal basis (at present, Reno Air offers a seasonally adjusted three daily round trip pattern of service and, commencing in February 1999, will once again offer four round trips in the market) the carrier has not been able to optimize its schedule, given its present fleet composition, in a manner that would require use of the two additional slots granted by Order 97-10-16. However, Reno Air has delivered on its promise to offer four daily round trips and the two additional slots allocated to Reno Air to serve the Reno-Chicago O'Hare market should remain available for that purpose pending completion of the American acquisition and review of American's intentions concerning Reno-Chicago O'Hare service.

While this is not the appropriate docket to debate the legal issues involved, an acquisition of Reno Air by American would not amount to a sale, trade or transfer of temporary exemption slots within the meaning of Order 94-9-30. It is clear from a reading of the Order that the Department intended to prohibit the direct sale, trade or transfer of exemption slots in the manner that traditional slots are sold, leased, traded or transferred. The obvious purpose of this restriction was the fact that these were exemption slots, restricted to Reno service only. "Since grant of this exemption is dependent upon the unique nature of the market..., according to the Department, We attach the condition that this exemption authority be used only for the provision of nonstop service between Reno and Chicago O'Hare. (Order 94-9-30 at 5).

Thus, by acquiring Reno Air, American will be able to continue Reno Air operations over the Reno-Chicago route with the dedicated O'Hare exemption slots. And while the Department retains the authority to modify the exemption, any such action must await consummation of the American-Reno Air acquisition. The Department should, of course, proceed very cautiously since profound and serious effects on the community, businesses and the traveling and shipping public would obviously result from the kind of precipitous actions urged by United.

Under these circumstances, Reno Air respectfully requests leave to file the instant Motion and urges the Department to strike and disregard all references and arguments pertaining to Reno Air's O'Hare slots from United Response of December 1, 1998.

Respectfully submitted,

Stephen H. Lachter

LAW OFFICES OF STEPHEN H LACHTER

COUNSEL FOR RENO AIR, INC.

December 9, 1998