OST-98-4647 / American Eagle / High Density Rule - Chicago O'Hare / Answer of United Air Lines / December 18, 1998

Application of

under 49 IJ.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 Air fines, Inc. ("United") submits the following answer to the Motion of Reno Air, Inc. and the Objections of the Reno/Tahoe Parties dated December 9, 1998, in the above captioned proceeding: /1

1. By its Motion, Reno Air seeks to strike certain portions of United s December 1, 1998, response relating to Reno Air's exemption slots for service to Chicago O'Hare International Airport. The Reno/Tahoe Parties object to United's position regarding those slots but do not request that it be stricken from the record. /2

1/ Reno Air and the Reno/Tahoe Parties each seek leave to file their respective pleadings. If the Department grants them leave, United contingently requests leave to respond in order to address new issues raised by these parties and to provide the Department with a more complete and balanced record on those issues.

2/ American Airlines ("American") on December 4, 1998 f led a response to United's December 1, 1998 response. American merely repeats arguments already raised in its earlier pleadings and addressed by United. United will not burden the record with a further refutation of (continued...)

Answer of United and Contingent

Motion for Leave to File

Page 2

2. There is no need to strike United's position relating to Reno Air's slots. That carrier claims not to be a party to the instant proceeding and argues that consideration of United's position in this proceeding would be unfair to it. Contrary to Reno Air's motion, United s position is relevant to the issues raised by American's application for additional slot exemptions. While Reno Air may prefer to avoid consideration of these issues, it cannot argue that they are irrelevant to American's request. United served Reno Air with its responsive pleading and that carrier has had a fair opportunity to comment on United's position. Striking United's position is unnecessary, and Reno Air s motion should be denied.

3. Reno Air and the Reno Parties both defend Reno Air's retention of the seven O'Hare slots awarded to Reno Air to provide low fare service as a new entrant carrier between O'Hare and Reno. With respect to the two exemption slots that are not currently being used, neither Reno Air nor the Reno Parties offer any plan under which they would be put to use in the future. Given the demand for such slots for O'Hare services to other markets, such as Savannah, Georgia/Hilton Head, South Carolina as well as Greenville/Spartanburg, South Carolina, it is contrary to the public interest to allow Reno Air to retain those two dormant slots. The Department should take the necessary action to reclaim those slots and make them available for reallocation to another carrier eligible for exemptions under §41714, such as Atlantic Coast

2/ (...continued) American's repetitious arguments.

Answer of United and Contingent

Motion for Leave to File

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Airlines, Inc. ("ACA") which is seeking a slot exemption to serve the Chicago O'Hare-Savannah/Hilton Head market.

4. Both Reno Air and the Reno Parties urge that Reno Air be allowed to retain those O'Hare slots that it is currently using to operate its present O'Hare-Reno service. There are only five slots identified for such use. Both parties concede that these slots cannot be sold, leased. traded or transferred and that they can be used only for Chicago-Reno services. Both parties. however, mistakenly go on to assume that "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." Reno/Tahoe Parties Objections at 5. See also Reno Air Motion at 5-6.

As United has already noted in that portion of its December 1, 1998, pleading which Reno Air would prefer to have stricken from the record, these slots were awarded to Reno Air under 49 U.S.C. §41714(c) in recognition of the fact that it was a new entrant for Chicago service and tha1 it would be able to offer the type of low-fare service required for the leisure-oriented Chicago O'Hare-Reno market. In so doing, the Department specifically recognized American's failure to sustain viable services in this city pair, which was one of the factors that it cited as warranting the award of the exemption slots to a new entrant, low fare carrier such as Reno Air.

American is simply not eligible for an exemption under §41 714(c), as the Department has previously concluded. American holds over 900 slots at O'Hare and to the

Answer of United and Contingent

Motion for Leave to File

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extent that American wants to continue to operate Chicago-Reno services after it acquires Reno Air, it is free to do so by using slots from its own vast slot holdings. The Reno Air exemption slots will not become the property of American as a result of its acquisition of Reno Air. As both Reno Air and the Reno Parties concede, those exemption slots cannot be sold or transferred to American. Nor can American be reissued those slots by exemption under §41714(c).

5. Both Reno Air and the Reno Parties also concede that a proceeding is needed to consider the disposition of Reno Air's exemption slots. United agrees with Reno Air and the Reno Parties that the issues relating to the five O'Hare slots which Reno Air continues to use need not be resolved in this particular proceedings As United stated in its December I response. Once the American/Reno Air acquisition agreement has been consummated, it will become subject to DOT review, and at that time the disposition of the Reno Air slot exemptions must be addressed. There is nothing to bar Reno Air from continuing its Chicago O'Hare-Reno services pending completion of that review. It may even be the case that another new entrant, low fare carrier eligible :for exemptions under §41714(c) will seek those slots to continue Chicago O'Hare-Reno service. American Airlines is not such a carrier /3 however. Contrary to the apparent beliefs of Reno Air and the Reno Parties, American cannot continue Chicago O'Hare

3/ As noted above, the same cannot be said of the two slot exemptions awarded to Reno Air which that carrier has no plans to use. Those dormant slots should be recaptured by the Department and made available for reallocation without further delay.

Answer of United and Contingent

Motion for Leave to File

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Reno services pursuant to the §41714(c) slot exemption awarded to Reno Air in circumstances where American simply is not eligible for an exemption under that provision.

Respectfully submitted,

JEFFREY A MANLEY

KIRKLAND & ELLIS

655 Fifteenth Street, NW

Washington, DC 20005

(202) 879-5161

Counsel for UNITED AIR LINES, INC.

DATED: December 18, 1998