OST-99-5614 / OST-99-5532 / OST-99-5587 / Shreveport, LA / Barton Rouge, LA / American Eagle / Application of Shreveport and Petition for Suspension of Slot Allocation / April 30, 1999

Application of

THE COMMUNITY OF SHREVEPORT, LA / OST-99-5614

for an exemption from 14 C.F.R. Part 93, Subpart K and S, 49 U.S.C. §41714 as to allow the continuation of non-stop service between Shreveport and O'Hare

Application of

for an exemption from 14 C.F.R. Part 93, Subpart K and S, under 49 U.S.C. §41714 to allow non-stop service to Chicago O'Hare International Airport

Application of

The community of Shreveport, Louisiana ("community") respectfully requests that the Department of Transportation ("Department") withdraw the four O'Hare slots utilized by American Eagle Airlines in the Shreveport/O'Hare market and reallocate those slots to the community for a period of 180 days after one of the following dates, whichever is last: when American Eagle terminates its service on June 1, 1999 or when the Department issues an order awarding the four slots to the community. At the end of that 180-day period, if the community has not secured another carrier to operate the service, the four slots would be returned to the Department and subject to reallocation. Since both Baton Rouge and American Eagle have specifically asked for the four Shreveport slots, the community requests that the petitions submitted by those parties be denied.

Since 1968, the FAA's high density traffic airport rule ("HDR") (14 CFR Section 93.12 et seq.) has restricted the number of aircraft operations at JFK, LaGuardia, Washington National and O'Hare airports. Under the HDR, in order to conduct any IFR operation (arrival or departure) at an HDR airport, the operator must have a slot for the particular time frame during which the operation will be conducted.

Both the Administrator of the FAA and the Secretary of Transportation possess the authority to issue exemptions from the high density rule and to set conditions for the use of slots.

The Secretary is authorized to grant exemptions from the high density rule if the proposed service is in the public interest (49 U.S.C. §41714). The "public interest" is statutorily defined to include the following:

Congress has directed the Secretary "to make the fullest possible use of existing authority under 49 U.S.C. §41714 . . . 'to improve service to nonhub airports where significant improvements can be achieved.'"

As a result of the unavailability of slots, communities seeking new or improved service at a high density airport have few options. One such option is the ability to obtain "exemption" slots.

In a recent Order (OST 99-3-12), the Department granted slot exemptions to two communities, holding that awarding slot exemptions to communities is consistent with "the principles contained in our guidelines for determining public interest and exceptional circumstances related to exemption proposals." The Department added that the exemptions are

1/ 49 U. S.C. §40101(4), (10), (13).

2/ As noted in Order 97-1-7, January 13, 1997, p. 1, citing the Conference Report to the DOT FY 1997 Appropriations Bill, Public Law 104-205.

"subject to the ability of the community recipients of the exemptions to implement them through partnership with air carriers whose operations will be viable."

On October 9, 1997, Simmons Airlines d/b/a American Eagle filed an application with the Department seeking exemption slots to operate three daily roundtrip flights between O'Hare and a number of markets, including Shreveport.

Simmons stated that it would operate the services with 50-seat Embraer 145 regional jets. Simmons did not provide any marketing information as to the routes.

On October 20, 1997, Simmons submitted a supplement to its October 9th application in which it submitted its "traffic revenue and expense forecast for the first 12 months of service." In that filing, Simmons predicted that it would carry approximately a 50% load factor.

On April 21, 1998, the Department awarded a number of exemption slots to carriers which included Simmons in order to service Shreveport. The order contained a proposed start-up date for the Shreveport service of September 1, 1998. The service was initiated and subsequently met and exceeded the projected load factors.

Prior to American Eagle's filing with the Department to terminate Shreveport service and shift the slots, the community was not contacted by representatives of American, Simmons, or American Eagle advising of any problem with the service or that the service would be terminated. /3 Instead, the community was notified through a news broadcast on April 12, 1999 and when airport officials checked American's website. The community received no letter or communication from American Eagle advising it was terminating service, although a letter from

3/ American Eagle has still not contacted the community, although it has been throughout the state and region.

an American Airlines' official supporting proposals to shift the slots utilized for the Shreveport/O'Hare service was obtained from this docket. While the community believes that all markets should be provided with opportunities to obtain service to O'Hare, no service should be lost because of the marketing whims of the carrier originally receiving an exemption for slots. Therefore, Shreveport asks that the four slots utilized for the O'Hare service remain with the community and that the attempts of Baton Rouge and American Eagle to take control over the slots be denied.

The community believes that other carriers are willing to operate the service to O'Hare if those four slots remained with the community. If another carrier agrees to provide the service, Shreveport is prepared to accept the identical conditions on the reallocation of American Eagle's four O'Hare slots as those inspired by the Department's April 21s' Orders. If the community is unable to find a carrier within a reasonable period of time (180 days) to operate that service or that carrier's operations are not viable, the slots would be returned to the Department.

The Shreveport market is a large market with service to a number of hubs, although the community has no service to a number of important destinations. If service in the community is lacking, travelers will drive several hours to other markets to obtain alternative flights. The community, its residents, and businesses suffer significantly when travelers are forced to find alternative airports.

The importance of airline service to small communities has been the subject of a number of forums including the National Air Service Roundtable in Chattanooga, Tennessee in February, 1997, where state, local, and federal officials discussed market-based solutions to local air service problems. The genesis for the meeting was the need to provide focus and clarity to the national understanding about local-air service problems and to finish "the unfinished business of the Airline Deregulation Act of 1978 by bringing a competitive mix of service to all communities," particularly those that lack adequate airline competition or service quality. The Conference recognized the direct linkage between air transportation and job creation, economic growth and quality of life. The significance of airline service to the economic growth of small communities was best summarized by the following Conference statement:

At the end of the conference a number of issues including slot availability were highlighted in "The National Air Service Roundtable: A Consensus Report" written by Joseph P. Schwieterman, Ph.D. While the Conference identified a number of marketing steps that can be taken by communities and carriers, the participants agreed that 'if local efforts to enhance competition are to succeed," the federal government must address barriers to entry including the availability of slots. The report stated that:

The purpose of deregulation was not to freeze certain communities out of the nation's largest markets. It was also not to allow a carrier that controls slots to set standards for service and to give communities no market alternatives when it decides to move service to another market. The Department should not allow a different standard of service to exist at high density airports.

Although the community has been delighted to have much-needed service to O'Hare and boardings are growing, American Eagle has made a unilateral decision to use the slots elsewhere. During the past nine months, the community and airport officials have worked to promote the service. American Eagle is leaving although passenger boardings met (and in some months exceeded)' projections. Moreover, to accommodate expected passenger growth from American Eagle and other flights, the airport is undergoing a $30 million expansion of the gate area, ticket counters and parking facilities. American Eagle did little on its own to strengthen the market. Since American Eagle never advised the community that it was leaving or discussed problems as to market potential, the community was given no opportunity to address marketing or passenger load concerns.

If the service was not to a high density airport, the community would have options to seek a new carrier for this market. However, those options are not available because no carrier can obtain slots to operate to O'Hare. Even a carrier wishing to serve the most profitable market in the country from a high density airport could not do so without slots. Since American Eagle also serves Shreveport-Dallas/Forth, American Eagle may have little incentive to expend the resources necessary to build the Shreveport-O'Hare market. This is particularly the case if it believes that slots are an asset that can be moved from market to market. This is not the first market where American Eagle has withdrawn high density airport service. If American Eagle is allowed to move service, how long would American Eagle remain in the next market?

The community supports deregulation and the market place and would not be requesting slots if American Eagle was not able to meet its projection and if it had worked with the community to strengthen the market. Unfortunately, despite a growing market, American Eagle has apparently decided not to work with the community and to move the slots to another market. /4

If there is going to be increased airline competition and improved airline service in small and medium communities, communities must be given enhanced opportunities to promote service, including to high density airports.

Carriers that have been provided slots by the Department should not be free to do as they wish with those slots. In its April 27, 1999 application for the four Shreveport slots, American Eagle (part of company that controls more slots than any other airline) complains that it doesn't want to be disadvantaged. It is time to focus on how significantly the community would be disadvantaged if the slots are summarily withdrawn. The public interest demands more than "we can move our service elsewhere." The Department has extensive authority to issue slot exemptions and to place conditions on the use of slots. It should not allow carriers to receive exemption slots, ignore commitments and expenses incurred by communities and have unlimited

4/ In March 1999, the load factor was 58%!

authority to move those slots. Such actions can damage a market, counter extensive economic development activity, and impose significant costs on airports.

Therefore, the community asks the Department to temporarily designate the slots utilized by American Eagle for service between Shreveport and O'Hare for withdrawal and to allocate those slots for community use if new service is established within 180 days after one of the following dates, whichever is last: when American Eagle terminates its service on June 1, 1999 or when the Department issues an order awarding the four slots to the community. If not, those four slots will be returned to the Department. The community also asks that the petitions of Baton Rouge and American Eagle be denied.

Approving the request in this petition will promote service to small and medium communities and will allow the American public to determine the future of competition.

Now is the time for the Department to take the steps necessary to ensure that all parties enjoy the benefits of deregulation and that those benefits are not controlled by a carrier holding slots. This proposal is consistent with Department actions to enhance opportunities for small and medium communities as well as with actions previously taken by the Department to increase community rights with regard to slots.

5/ American may be content with forcing all passengers to its Shreveport-Dallas service.

Respectfully submitted,

Edward P. Faberman

UNGARETTI & HARRIS

1500 K Street, N.W. -- Suite 250

Washington, D.C. 20005-1714

Tel: (202) 639-7501

Fax: (202) 639-7505