OST-98-4647 / American Eagle / High Density Rule – Chicago O’Hare / Objections of the Reno/Tahoe Parties / 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)

The Airport Authority of Washoe County /1 and the Reno/Tahoe Air Service Task Force (collectively the Reno/Tahoe Parties) object, in the strongest terms possible, to the assertions made by United Air Lines, Inc. ("United") in this docket (Response and Motion of United filed on December 1, 1998) that Chicago O'Hare slots dedicated to Reno/Tahoe service should-be withdrawn and reallocated to another community. The issue of Reno Air, Inc.'s ("Reno Air") dedicated Reno-Chicago O'Hare slots is irrelevant to the continuing slot dispute, in this and other dockets, between United and its United Express commuter affiliates and American Airlines, Inc. (Americana) and its American Eagle commuter subsidiaries.

1/ Owner and Operator of Reno/Tahoe International Airport and Reno Stead Airport.

United's argument is based upon the announced intention of American to acquire Reno Air. United contends that the transfer of Reno Air's O'Hare slots to American as part of the acquisition would amount to an impermissible sale, trade or transfer of exemption slots. United is not only wrong, as a matter of law, but its assertions that the Department should reallocate slots dedicated to the Reno market is without legal foundation, is contrary to the public interest, and should be rejected summarily by the Department.

In light of United's surprise attempt to introduce new and irrelevant issues into the instant proceeding and the lack of notice that the issue of Reno-Chicago O'Hare slots would be raised in this docket, fundamental fairness requires that the Reno/Tahoe Parties be afforded an opportunity to respond. Therefore, the Reno/Tahoe Parties respectfully request leave, to the extent deemed necessary by the Department, to file these objections.

In fact, the allocation of Chicago O'Hare slots to Reno Air for the introduction of Reno-Chicago O'Hare service was the first and, perhaps, most successful use of the exemption power granted the Secretary under the 1994 amendment to the Statute (49 USC 41714). As a result of that exemption, Reno Air was able to introduce and, as market conditions warranted, expand service between Reno and Chicago O'Hare, at the time the largest Chicago market without nonstop service. As traffic has grown significantly, extensive benefits have been bestowed upon the community, the State, businesses and the traveling public.

In the four years since Reno Air instituted daily nonstop service, the Reno-O'Hare market has more than tripled, increasing from approximately 56,890 annual O & D passengers in 1994 to 166,740 annual O & D passengers in 1997. At present, Reno Air offers a seasonally adjusted three round trips a day between Reno and Chicago O'Hare. According to its schedule, Reno Air once again intends to offer four daily round trips, commencing February, 1999. While Reno Air has not used the two additional exemption slots granted by Order 97-10-16, October 24, 1997, it has been able to offer the proposed level of four daily round trips, using five temporary exemption slots, with three of the eight operations performed outside the slot controlled times.

The implications of the American acquisition, if completed, remains speculative. The Reno/Tahoe Parties, political interests in the community and the State, and Nevada's Congressional delegation will be seeking commitments from American concerning future service. There is every reason to believe that American will continue to operate, under the Reno Air franchise or otherwise, multiple Reno-Chicago O'Hare flights. Indeed, the Reno/Tahoe Parties are prepared to support strongly the retention by American (under the Reno Air franchise or otherwise) of all Reno Air exemption slots.

Reno Air's Reno-Chicago O'Hare operation has been very successful, even though Reno Air does not serve any connecting markets to the east of Chicago. Once American takes over the route, it will be able to offer numerous new on-line connecting opportunities on its extensive route system out of Chicago. These new connections undoubtedly will contribute significantly to the financial success of the Reno-Chicago O'Hare operation and bring more visitors to Reno/Tahoe.

Also, while this is not the appropriate docket in which to debate the legal issues involved, an acquisition by American of Reno Air will not amount to the sale, trade or transfer of temporary exemption slots within the meaning of Order 94-9-30, September 20, 1994, which granted Reno Air the original slot exemptions. 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 and/or transferred. Indeed, the exemption slots granted to Reno Air were restricted to Reno service only. According to the Department, [since grant of this exemption is dependent upon the unique nature of the market, 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, to the extent American acquires Reno Air and its operations, American will be able to continue operating the Reno-Chicago route with the dedicated Reno-O'Hare exemption slots.

As a tourist destination, Reno/Tahoe is dependent upon adequate, convenient air transportation because it competes with other tourist destinations for discretionary passengers. To a great extent, the economic future of the Reno/Tahoe region depends on the availability of nonstop air transportation to important midwest and east coast gateways. Because there are numerous other attractive alternative destinations, convenient air transportation is essential to ensure that tourists and other discretionary passengers do not travel elsewhere.

The Department cannot allow O'Hare slots to be removed once again from Reno, thereby reducing or eliminating Reno service to its largest midwest market, to the detriment of commercial interests, the local economy, and the public interest.

For these and other reasons, the Reno/Tahoe Parties respectfully request that the Department reject United's misplaced arguments concerning the withdrawal and reallocation of Chicago O'Hare slots that are dedicated to Reno/Tahoe service.

Respectfully submitted,

Stephen H. Lachter

LAW OFFICES OF STEPHEN H. LACHTER

1150 Connecticut Avenue, N.W.

Suite 900

Washington, DC 20036

(202) 862-4321

COUNSEL FOR THE RENO/TAHOE PARTIES

December 9, 1998