OST-99-5153 / AccessAir / High Density Rule / February 25, 1999

Application of

for an exemption from Subparts K and S of 14 CFR Part 93 (High Density Rule) as applied to New York LaGuardia Airport to provide non-stop service between:

Des Moines, Iowa/Moline-Quad Cities, Illinois and New York LaGuardia (combination service); and

Des Moines, Iowa/Peoria, Illinois and New York LaGuardia (combination service)

Pursuant to 49 U.S.C.§ 41714(c), AccessAir, inc. ("AccessAir"), hereby applies on an urgent basis for two slot exemptions from the Department's High Density Rule at New York's LaGuardia Airport. AccessAir requires these two exemptions on an emergency basis in order to continue operating one of its current daily flights between Des Moines, Iowa, and New York beyond April 3, 1999.

AccessAir is a new entrant air carrier. It received effective authority from the Department to operate interstate air transportation of persons, property, and mail less than one month ago. /1

From its inception, AccessAir has placed great emphasis on the importance to its early success of being able to offer service between Des Moines, Iowa, and New York's LaGuardia Airport on itineraries that included Peoria, Illinois, and Moline/Quad Cities, Illinois. These communities enjoyed no nonstop or even single plane service to New York prior to the commencement of AccessAir's services.

It was clear from the outset that one of AccessAir's major challenges would be the securing of a sufficient number of commercially viable takeoff and landing slots at LaGuardia to support its new service. In that connection, AccessAir diligently explored the possibility of purchasing or leasing usable LaGuardia slots from current slot holders well before it received effective authority. This early effort was unsuccessful.

Accordingly, still well in advance of its receipt of effective authority, AccessAir applied twice to the Department, pursuant to 49 U.S.C. § 41714(c), for exemptions from the High Density Rule ("HDR"), 14 C.F.R. Part 93, Subparts K and S. the regulation that limits the number of slots available at LaGuardia, and other high density airports. First, on November 4, 1997, AccessAir applied for six slot exemptions. Although the Department explicitly recognized the public benefits that would flow from AccessAir's proposed new services, the available slots were allocated to competing applicants. /2 Weighing against AccessAir, the Department said, was the fact that it was still awaiting its FAA certification.

On September 24, 1998, after learning that four LaGuardia slot exemptions earlier granted to another carrier had been returned to the Department, AccessAir applied again under 49 U.S.C. § 41714(c) to have those slots reallocated to it. Once more, however, the Department opted in favor

of competing applications. The Department acknowledged once again the importance of AccessAir's proposed service to the Midwest communities that would be its primary beneficiaries. Again, however, the fact that AccessAir's FAA certification was still pending weighed against it. /3

Given its inability to secure slots through the Department's exemption process, AccessAir continued to pursue other strategies. First, it succeeded in identifying one pair of slots -- supporting one flight per day -- that was unused and available during less busy attractive hours. Second, its continued effort to obtain slots from current slot holders finally succeeded with the leasing of a pair of slots from Northwest Airlines, Inc. ("Northwest"). /4

Thanks to those two successes, AccessAir is currently operating two round-trip flights a day between Des Moines, Iowa, and LaGuardia Airport -- one via Moline/Quad Cities International Airport, Illinois, and a second via Peoria, Illinois. /5 AccessAir's service via Moline/Quad Cities is currently accommodated by the slots AccessAir was able to obtain during the less busy hours of the day. Its services between Des Moines and LaGuardia via Peoria are supported by the slots currently leased from Northwest.

4/ The terms of the lease with Northwest required that AccessAir take responsibility for the slots effective December l8, 1998. Because AccessAir was not yet authorized to operate at that time, the slots would have been subject to confiscation by the FAA under its "use-or-lose" regulation, 14 C.F.R. § 93.227(j). AccessAir petitioned the FAA for an exemption from this regulation on December 8, 1998. The FAA granted the exemption by letter dated February 1, 1999.

5/ AccessAir also operates two daily round-trip flights between Des Moines, Iowa, and Los Angeles, California. One originates at Peoria, Illinois, and the second at Moline/Quad Cities, Illinois.

As indicated, AccessAir has been using a pair of slots leased from Northwest to support its one round-trip flight per day between Des Moines and LaGuardia via Peoria. The slots in question are:

Northwest notified AccessAir on or about January 31, 1999, that it intended to reclaim the pair of slots it is currently leasing to AccessAir effective April 4, 1999. Upon receiving this notification, AccessAir immediately redoubled its effort in the commercial market to find replacement slots that might be available for lease from current slot holders. To date, that effort has been unsuccessful. Accordingly, unless it obtains two exemptions from the HDR to enable it to continue its flights between Des Moines/Peoria and LaGuardia. /6 AccessAir faces the very real possibility that it may have to suspend this important new service after April 3, 1999.

The Department may grant exemptions from the HDR to "new entrants" /7 if the Secretary finds it to be "in the public interest and the circumstances to be exceptional ...." /8

6/ AccessAir may wish to use the slots for flights via Moline/Quad Cities as well, for which reason the :instant application is styled in a way that includes both itineraries.

7/ AccessAir clearly qualifies as a "new entrant." The definition of "new entrant" set forth in 49 U.S.C. § 41714(h)(3) incorporates "limited incumbent carrier" as defined in 14 C.F.R. § 93.213(a)(5) -- i.e., a carrier that holds less than 12 air carrier slots at the airport in question.

8/ 49 U.S.C. § 41714(c).

The Department has established clear decisional guidelines for its evaluation of requests for exemptions from the HDR. /9 Briefly stated, the Department has said that it would favor proposals that satisfy the following criteria:

• The service will be operated with jet aircraft that meet State 3 noise requirements. /10

• There should be a reasonable expectation that the proposed service will be operationally and financially viable.

• The service will represent the introduction of (a) new nonstop service where none exists and (b) new competitive services, especially by applicants that have the demonstrated potential to offer low-fare competition, where there is single carrier service and the market could support entry, or where existing services do not produce meaningful price competition.

It is clear that AccessAir's service, less than a month old, satisfies these wholly appropriate tests for the grant of exemptions. Specifically:

Stage 3 aircraft. AccessAir operates only quiet, Stage 3 compliant 737-200 aircraft.

Operational and financial viability. There can be little doubt that there is a reasonable expectation that the service to be supported by the slot exemptions sought herein will be operationally and financially viable. Its operational viability is no longer a matter of speculation, of course, as the service has been operating in the market for nearly a month. As to financial viability, as indicated above, the Department awarded AccessAir effective authority to commence operations less than a month ago. That authority was predicated in part on the Department's tentative finding in 1997 that, if AccessAir's plans were carried out, it would "have sufficient financial resources available to it to enable it to commence its proposed operations without posing an undue

10/ 14 C.F.R. Part 36, Subpart C and Appendix C.

risk to consumers or their funds." /11 In keeping with the Department's normal practice, it reviewed current financial information immediately prior to authorizing the commencement of operations in order to ensure that AccessAir continued to meet its financial fitness test.

New nonstop service; new competition. As indicated above, a central feature of AccessAir's business plan is the delivery of new direct and nonstop services to cities in the Midwest that heretofore have not enjoyed even single plane service to New York. AccessAir provides single-plane, one-stop service between Des Moines and LaGuardia, and nonstop service between both Peoria and Moline/Quad Cities and LaGuardia. The service is offered at unrestricted fares well below those prevailing prior to AccessAir's startup, with attractive discount fares available to young people, seniors, groups, and travelers able to book flights three weeks in advance. Passengers enjoy spacious seating and full meal service. In other words, AccessAir represents precisely the kind of high-quality, innovative competition that the Department seeks to foster.

The final point to be made in favor of AccessAir's application is that it seeks exemptions permitting it to conduct a mere two operations (i.e., one round-trip flight) per day. Favorable consideration of the instant request will have no meaningful impact on the noise exposure to which neighboring residents are subjected; nor on congestion or delay in any part of the national airspace system; nor, of course, on aviation safety. /12

12/ 49 U.S.C. § 41714(e)(1)(B) for factors Congress instructed the Secretary to consider in his continuing examination of slot regulation. The impact of increases in operations at HDR airports on noise, delay, congestion, and safety are specifically listed.

It is difficult to imagine circumstances that satisfy the Department's criteria more completely than those surrounding the instant application. Not only does AccessAir's request threaten no adverse consequences to any interested party, the services it will be able to maintain in the market are precisely the kind of innovative, low-fare, competitive, and convenient services the Department seeks to encourage through the grant of occasional slot exemptions at high density airports. That AccessAir, after a: long and difficult quest, finally obtained slots through a commercial transaction only to lose them a few months later through no fault of its own demonstrates beyond question that the exceptional circumstances Congress instructed the Secretary to consider clearly exist in this case, and that a grant of the instant application clearly would be in the public interest.

WHEREFORE, AccessAir, Inc., respectfully urges the Department to grant, on an urgent basis, exemptions from the High Density Rule sufficient to permit it to conduct one daily round-trip between Des Moines, Iowa, and LaGuardia Airport via either Peoria, Illinois, or Moline/Quad Cities International Airport, Illinois, with effect from April 4, 1999.

Respectfully submitted,

Jeffrey N. Shane

WILMER, CUTLER & PICKERING

2445 M Street, N.W.

Washington, D.C. 20037-1420

Telephone: (202) 663-6000 Facsimile: (202) 663-6363

Counsel to AccessAir, Inc.

DATED: February 25, 1999