OST-99-6547 / OST-99-2870 / OST-97-2932 / Spirit Airlines / High Density Rule – New York LaGuardia / November 23, 1999

Application of

Docket Nos. OST-99-6547 / OST-97-2870 / OST-97-2932

for an exemption pursuant to 49 U.S.C. § 41714

Ft. Lauderdale/Ft. Myers/Orlando/Tampa/West Palm Beach/Detroit - New York (LaGuardia Airport)

Under Section 206 of the Federal Aviation Administration Authorization Act of 1994, 49 U.S.C. § 41714(c) ("FAAA Act"), the Secretary of Transportation by exemption may provide new entrant airlines with an opportunity to serve High Density Rule airports (other than Washington National) upon finding the proposed air transportation services to be "in the public interest and the circumstances to be exceptional." Spirit Airlines, Inc. ("Spirit") hereby requests such an exemption so that Spirit may provide new daily non-stop roundtrip scheduled jet services between Ft. Lauderdale, Florida; Ft. Myers, Florida; Orlando, Florida; Tampa, Florida; West Palm Beach, Florida; and Detroit, Michigan, on one hand, and New York's LaGuardia Airport ("LGA"), on the other hand. /1 Spirit intends to introduce service in the new markets covered by this Application on or about February 15, 2000, or as soon thereafter as practicable. Accordingly, Spirit requests that the relief requested in this Application be granted on or before December 30, 1999.

Spirit is requesting 14 new slots, which would provide it with a total of 20 slots at LGA. These slots would enable Spirit to serve Detroit, the new Florida markets listed above, and Myrtle Beach and Melbourne, in accordance with market demand. /2 As discussed in greater detail below, granting Spirit the flexibility to adjust its service to adapt to changing market conditions would be fully consistent with the Department's decision in the JetBlue case. See DOT Order 99-9-11.

DOT granted JetBlue Airways a total of 75 new-entrant slots to operate nonstop service between New York's John F. Kennedy Airport ("JFK") and various points in the United States, which included the Florida markets at issue in this Application. When JetBlue applied for these slots, it did not indicate the precise markets it would serve, the

1/ Spirit is not submitting a proposed operating schedule at this time, because Spirit is prepared to establish its timings for these services in conjunction with the FAA, in order to offer schedules which both benefit the public and minimize any air traffic delays or negative impact on the community surrounding LGA.

2/ Spirit also requests that the Department amend its existing exemptions to serve LGA, issued for service to Melbourne, Florida and Myrtle Beach, South Carolina, pursuant to DOT Orders 98-4-22 and 98-10-29, so that it can allocate slots among its new and preexisting LGA services as it deems necessary. Spirit's services to Myrtle beach and Melbourne have been a resounding success (see page 5, infra), and Spirit urges the Department not to interpret this request in any way as a diminution of Spirit's commitment to those markets. Spirit is merely requesting the same operational flexibility enjoyed by its competitors to make minor capacity adjustments to accommodate changes in seasonal demand. In fact, there may well be times during the year when Spirit will offer three daily frequencies to MYR or MEL and only a single daily frequency to some of the Florida points included in this Application.

level of frequencies it would operate, or its timing for introducing such service. Instead, JetBlue provided DOT with a list of 44 potential markets to be selected at a later date. See Order 99-9-11. DOT found that JetBlue required the requested commercial flexibility, that JetBlue's proposed service would be in the public interest, and that "exceptional circumstances" warranted the relief awarded to JetBlue.

The Department should promptly grant the relief requested by Spirit. The Department already has determined that the new markets Spirit proposes to serve are large enough to support a viable service, and would benefit from the introduction of lowfare competition. See Orders 99-9-11 and 98-10-29. Moreover, DOT also has found that enabling carriers to adjust their services to respond to changes in market demand will ensure the viability of such services and enhance competition. Order 99-9-11, at 10. Spirit, one of the nation's fastest growing airlines and a leader in offering low fares, is well-positioned to provide such competition. Grant of the requested exemption and amendment of Spirit's existing LGA exemption authority would comport with the Department's decision in the JetBlue case, the intent of the FAAA Act, and the Department's prior rulings on new entrant slot requests.

Spirit is one of the nation's fastest growing airlines. Founded in the early 1990's, Spirit currently operates a fleet of 21 aircraft serving 14 destinations. Spirit's services have been well received, with its system-wide load factor for this year to date averaging 78%, even with the addition of several new MD-80 aircraft to the Spirit fleet. Spirit is known for offering the public hassle-free low fares. In fact, Spirit's entry into a market generally has resulted in the decline of average fares by as much as 70%.

Spirit is unusual among new entrant airlines in its reputation for consistent growth, reliable services, and financial stability. Although Spirit's success probably can be attributed to several factors, such as close attention to costs and careful growth, Spirit wishes to emphasize that its choice of markets has contributed to its good fortune. Spirit as a rule has sought to enter markets which have the potential to be stimulated by low-fare competition. Spirit's high system-wide load factors amply demonstrate the success of this strategy.

When DOT granted JetBlue's exemption request, it found that the "list [of markets proposed by JetBlue] is a combination of underserved and/or high fare markets with relatively little price competition, for which we concur that service by a low-fare airline would likely be successful." Order 99-9-11 at 9. Among the 44 points listed by Jet Blue in its initial application are five -- Ft. Lauderdale, Ft. Myers, Orlando, Tampa and West Palm Beach -- for which Spirit is seeking an exemption here.

The Department's determination about the needs of these markets for low-fare service is as applicable to Spirit as it is to JetBlue. DOT has determined that each of the markets covered in this Application meets the Department's exemption criteria, and that each would benefit from the injection of low-fare competition. Recognizing the strong public interest benefits of injecting low-fare competition at "New York City, whose air fares are, in many instances, not competitive," DOT emphasized quite heavily the consumer benefits that Southwest Airlines has brought to the markets it serves, and stated its belief that JetBlue would bring similar benefits to the traveling public. See Order 99-9-1 , at 8.

Similar to Southwest, Spirit's services have caused fares in the markets it serves to fall dramatically. /3 Spirit's own operations at LaGuardia are a strong case on point. In 1998, prior to Spirit's introduction of LaGuardia-Melbourne service, O&D traffic in the market was approximately 17 passengers per day, each way. These passengers paid an average one-way fare of $130.40. After Spirit introduced service in this market, Spirit alone was carrying 164 passengers per day, each way, for an average one-way fare of approximately $83. This represents a one-year traffic increase of 964%, and an average fare reduction of 63%.

Spirit's experience in the Myrtle Beach-LaGuardia market has been similarly compelling. In 1998, there were 28 daily passengers traveling per day, each way in the LGA-MYR market, paying an average one-way fare of $112. In 1999, Spirit alone has carried 143 passengers per day, each way in this market, with an average one-way fare of $76. This is more than a fivefold traffic increase, and a 67% average fare reduction.

In its application for slots at JFK, JetBlue noted the current average fare in each of the new New York-Florida city-pairs at issue in this Application. According to the JetBlue Application, average one-way fares in the markets Spirit proposes to serve were as follows:

3/ Spirit's entry into a market causes average fares to decline quite considerably. See Department of Transportation, "The Low Cost Airline Service Revolution," April 1996, at Attachment 2, pp. 1-2.

Tampa - NY $148

West Palm Beach - NY $137

See Application, Appendix at pp. 23, 24, 43, 55 and 59.

Spirit currently offers scheduled service from the New York area to each of the five Florida points listed above, at fares which are dramatically lower than the prevailing average. For the year ended July 1999, Spirit's average one-way fares for service between New York-area airports to the points above ranged from a low of $85 to a high of $93. Fares for the markets above, which average $140.40, are 55% higher than Spirit's average fare of $90.28 for these markets. Spirit has always been a strong low-fare competitor. Spirit would be willing to commit itself to offering low fares in the Ft. Lauderdale/Ft. Myers/Orlando/Tampa and West Palm Beach markets if it were to receive the exemption it requests.

As indicated above, the Department already has determined that the markets above can support additional service, and would benefit from low-fare competition. Spirit requires authority to offer low-fare service from LGA to the Florida markets at issue here in order to meet growing market demand and to compete with other carriers serving the New York-Florida market. For example, Spirit presently serves the Ft. Lauderdale-LGA market with a single daily frequency operated outside of slot-controlled hours. To respond to other carriers serving the New York-Ft. Lauderdale market, and JetBlue, which also proposes to operate New York-Ft. Lauderdale, Spirit simply must be able to increase its frequency offerings. Spirit wishes to note that four of the five new Florida-New York markets it proposes to serve ranked among the 12 largest domestic city-pair markets of over 750 miles in length as of the year ended March 31, 1999. /4 To maintain a critical competitive mass, and to penetrate the New York-Florida market, Spirit simply must expand its presence at LGA. Spirit is particularly well prepared to introduce service from LGA to the Florida points at issue in this Application, as it already has a strong marketing presence, infrastructure and competitive foothold in each of the Florida markets covered by this Application. This will help to ensure the viability and, indeed, success, of these proposed services.

Spirit proposes to operate daily nonstop service between Detroit's Metro Airport and LGA. Spirit would be the only nonstop carrier other than Northwest serving LGA from Detroit Metro, as Pro Air serves New York from Detroit City Airport. Similar to Pro Air, Spirit will offer low fares in this market, and "materially improve competition in the Detroit marketplace." See Application of Pro Air, Docket 3583, March 5, 1998, at 4.

The Department found with respect to Pro Air that "exceptional circumstances" warranted the approval of low-fare service between LGA and Detroit. See Order 98-10-29 at 9. DOT observed that Pro Air proposed to offer fares considerably lower than the average $209 one-way fare then offered by Northwest, and that the public would benefit by the injection of low-fare competition. Spirit wishes to note that it, too, is prepared to offer much-needed low-fare competition in the Detroit-New York marketplace.

4/ Spirit's New York-Ft. Lauderdale was ranked second (6,564 passengers per day); New York-Orlando, third (6,197 passengers per day); New York-West Palm Beach, sixth (5,321 passengers per day); and New York-Tampa, eleventh (3,053 passengers per day). See Aviation Daily, November 11, 1999, at 7.

If current fares from Detroit to Florida (a far longer stage length than Detroit-New York average between $89 - $98 each way, and Spirit is prepared to offer commensurately low fares at New York. /5

Spirit's interest in the Detroit-LaGuardia market is not new. Spirit first proposed to offer service from LGA to Detroit's City Airport in 1995, just one year after the FAA Act was enacted. /6 Spirit was among the first carriers to seek relief under that statute. At that time, DOT took the view that. a market's need for low-fare competition did not constitute "exceptional circumstances" under the FAA Act, and denied the relief requested by Spirit. See Order 95-8-38. Spirit is heartened that the Department now interprets the statute more expansively, and is hopeful that it will soon receive the relief it requests.

There is no question that Spirit satisfies DOT's other criteria for granting exemptions. Spirit will serve the market with quiet, Stage 3 compliant MD-80 series aircraft. Moreover, Spirit qualifies as a "new entrant" at LGA within the meaning of 49 U.S.C. § 41714. Spirit holds only six slots at LGA, and has never sold or given up slots at that airport.

5/ Data is for year ending July 1999, and covers the Detroit-Ft. Lauderdale/ Orlando/West Palm Beach/Tampa/Ft. Myers markets.

6/ Spirit proposed to offer this service from Detroit City Airport in part because it lacked a dedicated gate at Detroit Metro. Spirit is pleased to note that, earlier this week, Spirit moved into its new gates at that airport.

Only grant of the requested exemption will provide Spirit with the level of access to LaGuardia it requires. Over the years, Spirit has made, both orally and in writing, and without success, bona fide offers to purchase/lease slots at LaGuardia. Spirit's, own experience is consistent with the Department's finding in the JetBlue case that "[t]here is ample evidence that the cost of obtaining slots at [slot-controlled] airports is very high, if indeed slots can be obtained at all." Order 99-9-11 at 13.

DOT's strong support of ongoing legislative efforts to relax the High Density Rule, as well as its decision to grant JetBlue 75 slots at JFK, should be viewed as an indication of DOT's serious commitment to making much-needed changes in the heretofore dismal state of competition at slot-controlled airports. Spirit is hopeful that Congress will soon pass legislation that will mitigate, if not eliminate, the constraints upon competition imposed by the High Density Rule. Spirit has crafted this Application to be consistent not only with the Department's decision in the JetBlue case, but also with recent Congressional agreements on the slot issue, which have been endorsed by DOT. Spirit is hopeful that DOT will extend relief similar to that which it extended to JetBlue (albeit on a much smaller scale than JetBlue) to Spirit, so that Spirit can continue to offer its popular low fares at New York.

Spirit is among the ranks of carriers such as Southwest and, hopefully, JetBlue, that can offer meaningful price competition in short- and medium-haul markets. However, absent the relief requested here, Spirit will have only a limited opportunity to do so at New York City, a market DOT itself has recognized is plagued by high fares.

WHEREFORE, Spirit Airlines, Inc. respectfully requests that the Department grant to Spirit on or. before December 30, 1999, an exemption from Subparts K and S of Part 93 of the Federal Aviation regulations which would confer upon Spirit 14 new slots at LGA. Spirit also requests that its existing slot exemptions be amended so that it might commingle its new and existing slots, thereby permitting Spirit to operate daily non-stop roundtrip service between Ft. Lauderdale, Ft. Myers, Orlando, Tampa, West Palm Beach, Detroit, Melbourne and Myrtle Beach to New York's LaGuardia Airport as commercial circumstances dictate.

Respectfully submitted,

Anita Mosner

GAMBLING CONSULTING SERVICES, INC.

1054 Thirty-First Street, New.

Washington, D.C. 20036

(202) 342-5201

Representatives of SPIRIT AIRLINES, INC.

Date: November 23, 1999