OST-99-5587 / American Eagle / Baton Rouge/Huntsville-Chicago O'Hare / Answer of United Air Lines / August 25, 1999
Application of
AMERICAN EAGLE AIRLINES, INC. /
Docket OST-99-5587for exemption from 14 CFR Part 93, Subparts) K and S, under 49 U.S. C. §41714 for nonstop) service to Chicago O'Hare (Baton Rouge, LA and Huntsville, AL)
ANSWER OF UNITED AIR LINES, INC.
United Air Lines, Inc. ("United") hereby submits the following answer in opposition to the petition for reconsideration of
Order 99-7-17 filed by American Eagle Airlines, Inc. ("American Eagle") on August 16, 1999, in the above-captioned proceeding:I . On July 27, 1999, the Department awarded American Eagle five out of eleven available exemption slots at O'Hare International Airport for service to Baton Rouge, LA and Huntsville, AL. Order 99-7-17. In the same order, Atlantic Coast Airways ("ACA") was awarded three slots to serve Mobile, AL and the remaining three slots were reserved for service to Charleston, SC for which ACA is now the only applicant. American Eagle is now petitioning for reconsideration of that order, claiming that American Eagle needs three additional slots to round out its service to Baton Rouge and Huntsville.
Answer of United
Page 2
2. American Eagle claims that its three additional slots can be granted because there are four "unassigned" slots at O'Hare due to the suspension of Great Lakes Aviation's service to Lafayette, IN. American Eagle urges that these slots should be used for American Eagle's proposed service to Baton Rouge and Huntsville. In fact, with the Department's approval, Great Lakes has decided to continue using these slots to provide essential air service to Lafayette. Consequently, there are no "unassigned" slots at O'Hare. /1
Because there are no unassigned exemption slots available, American Eagle's request could be granted, if at all, at the expense of ACA's proposed new service between Chicago O'Hare and Charleston, SC. American Eagle does not suggest, however, that the three slots reserved for Charleston, SC service be reassigned. It would, in any event, be wholly inappropriate to reassign exemption slots to American Eagle for its service at Baton Rouge and Huntsville at the expense of ACA's new regional jet service between Chicago and Charleston, SC.
1/ The Department will seek a replacement EAS carrier at Lafayette in the event Great Lakes were to decide to terminate service and will make available to the replacement carrier the exemption slots now used by Great Lakes. In the meantime, it would be entirely inappropriate to divest Great Lakes of the slots it needs to operate EAS at Lafayette and reassign them to American Eagle. American Eagle pulled out of that city in 1994 and at that time the Department notified that carrier that the slots used for EAS at Lafayette would be recalled so that another carrier could replace American Eagle. Order 94-5-12. Because Great lakes had concurrently received exemption slots to serve Terre Haute and was willing to operate that service via Lafayette, the Department apparently never recalled American Eagle's non-exemption EAS slots. See, e.g. Order 94-10-47. American or American Eagle now uses those slots for other services unrelated to Lafayette's needs. Great Lakes is continuing to serve Lafayette with the exemption slots that American Eagle is seeking to have reallocated. If this relief were granted, American Eagle would have the dubious distinction of having twice deprived Lafayette of EAS service and, at the same time, having benefitted in both instances by using Lafayette's EAS slots in other markets. The Department should not grant American Eagle's request at the expense of Great Lake's service to Lafayette.
Answer of United
Page 3
As explained in Order 99-7-17, "Charleston ... is now the single largest O'Hare market without nonstop service." Id. at 9.
3. indeed, the only basis American Eagle offers for the relief it seeks is the asserted "imbalance" in slot holdings at O'Hare. /2 In fact, the Department awards slot exemptions not on the basis of benefits to a carrier such as American, by helping that carrier achieve its perceived need for "slot balance," but on the basis of benefits to the public. Those public benefits are considered to warrant the issuance of exemption slots where there are "exceptional circumstances" arising from a carrier's service proposal. Among such exceptional circumstances are the provision of "new nonstop services where none exist," operated by a carrier using jet aircraft that meet Stage 3 noise requirements. Order 97-10-16 at 4. See also Orders 98-4-21 and 98-9-24. /3
2/ American Eagle claims that United and the independent United Express carriers together hold more O'Hare slots than does American Airlines and its corporate subsidiary, American Eagle, placing American at a competitive disadvantage. In fact, as United has repeatedly noted, all of American's slots, including those operated by its commuter subsidiary, are held by and operated for the direct benefit of American because American Eagle is a wholly owned subsidiary. United's United Express carriers, such as ACA, are, on the other hand, independent companies and the revenues from their O'Hare operations accrue directly to them, not to United. United benefits only from the traffic feed that its commuters generate. The Department has recognized this distinction in past slot exemption orders. See, e.g.,
Order 97-10-16 at 10-11, See also 14 C.F.R. §93.213(c). In these circumstances, there is no slot imbalance to be corrected, even if (as is not the case) that were an appropriate consideration in allocating slots.3/ The Department has previously rejected American's claim of slot imbalance as a basis for allocation of authority to support new service at O'Hare. See, e.g.,
98-4-21 at 15-16 (discussing American's and United's large slot holdings as equivalent) and Order 99-4-16 at 3 (rejecting American's request for Chicago-London frequencies under the U.S. -U.K. agreement based on claims of slot imbalance similar to those raised here).
Answer of United
Page 4
American Eagle has demonstrated an unfortunate propensity to acquire O'Hare slots under the guise of meeting the Department's goal of serving small and medium-sized communities where "exceptional circumstances" apply, only to withdraw that service or to artfully juggle slots and services to comport with its own corporate goals. For example, within the last six months, American Eagle has pulled out of two small communities, namely Moline, IL and Wausau, WI, in favor of new regional jet service to Omaha, NE and Pittsburgh, PA, respectively. In addition, since January 1998, American Eagle has reduced service between O'Hare and other small communities including Champaign, IL, Green Bay, WI, South Bend, IN, Springfield, IIL, and Traverse City, ML These reductions have allowed American Eagle to make commuter slots available to commence regional jet service to two other large cities, namely Baltimore, MD, and Memphis, TN. (Exhibit UA- 1)
There were certainly no "exceptional circumstances" surrounding services between Chicago and the large cities to which American has diverted O'Hare commuter slots intended to be used for service to small communities. All of these cities enjoy nonstop service to Chicago from two or more carriers. American's cynical actions in diverting these commuter slots for regional jet service to these large cities belie its asserted willingness to commit its resources to the provisions of services meeting the Department's "exceptional circumstances" test. /4
4/ American's continuing unprincipled actions toward small community services at O'Hare are reminiscent of the promises it made in 1991-3 to several such communities to gain their support for an amendment of the HDR to allow the conversion of commuter slots to be operated with larger aircraft. Once its regulatory goal had been gained, American quickly reneged on the promises it made to many small communities that it would use converted slots to improve services between such communities and O'Hare. See 14 C.F.R. §93.219(e) and FAA Regulatory Dockets 26339, 26788 and 27106.
Answer of United
Page 5
4. While American was redeploying its commuter slots away from these small communities, it was hypocritically seeking exemption slots to serve other small communities. Of the eleven exemption slots which the Department reassigned in
Order 99-7-17, eight had originally been allocated to American Eagle to operate service between O'Hare and two cities that met the "exceptional circumstances" test because they lacked nonstop service to Chicago: Shreveport, LA and Montgomery, AL. After promising to serve these points, American Eagle dropped service to O'Hare after less than a year, apparently finding it more efficient to serve these cities over its major hub at Dallas/Ft. Worth. According to one of these cities, American Eagle did not even give it advance notice of its decision to terminate service to O'Hare. See Application of Shreveport, dated April 30, 1999, in Docket OST-99-5614 at 4-5.While American is using its regional jets to divert Chicago passengers to Dallas/Ft. Worth and is using its O'Hare commuter slots to support regional jet service to large cities such as Baltimore, Pittsburgh, Memphis and Omaha that are already well served, United and its United Express carriers are cooperating with each other to use regional jets and O'Hare exemption slots to improve services to small communities. For example, ACA, Great Lakes and United all cooperated to upgrade service to Fargo, ND and Sioux Falls, SD from turboprop to regional jet service. The Department recognized the benefits of this upgrade by approving the transfer of exemption slots from Great Lakes to ACA. Order 98-10-28. Moreover, at Peoria, IL, United and its United Express carriers similarly upgraded O'Hare service from turboprops to regional jets using non-exemption slots. Moreover, the United Express carriers that received exemption slots to provide regional jet service to six small communities in 1998 have continued to serve all six
Answer of United
Page 6
points. American Eagle, by comparison, dropped service to half the communities it was authorized to serve. Unlike American Eagle, United and United Express carriers have not used regional jets as the pretext for abandoning small communities but, as noted above, have worked to find a way to use regional jets to improve services to small communities that are, to a large extent, served pursuant to exemption slots. See Exhibit UA-2 illustrating comparative deployment of regional jets at O'Hare.
Given American's evident corporate policy to abandon service to small communities as it replaces its commuter's turboprop aircraft with regional jets, the Department should reject American's request for still more exemption slots to support American's purported small community services. In contrast, United and United Express carriers continue to provide air service to approximately 30 small and medium-sized cities from their O'Hare hub. United and its commuter partners recognize the importance of the Department's initiative for service to small and medium-sized communities and have consistently expanded service to such communities, devoting significant resources, including regional jets, to realize that goal.
5. For the foregoing reasons, the Department should deny American Eagle's petition for reconsideration of the Department's award of five, rather than eight, exemption slots to American Eagle for service to Baton Rouge and Huntsville.
Respectfully submitted,
Jeffrey A. Manley
KIRKLAND ELLIS
655 Fifteenth Street, NW
Washington, D.C. 20005
(202) 879-5161
Counsel for UNITED AIR LINES, INC.
DATED: August 25, 1999