OST-00-7180 / Wendell Ford Aviation Investment and Reform Act / Answer of Spirit Airlines / May 17, 2000

In the matter of

for exemptions from 14 CFR Part 93, under 49 U.S.C. § 41717(c)

Spirit Airlines, Inc. ("Spirit") respectfully requests leave to file late this Consolidated Answer to the applications filed in this docket. Pursuant to Order 2000-4-15, several U.S. carriers, including Spirit, have applied for the 30 new-entrant slots at Chicago's O'Hare International Airport ("O'Hare" or "ORD") that have become available as a result of the passage of Air 21. While Spirit applauds the passage of Air 21 to the extent it creates opportunities for new-entrant airlines at O'Hare and elsewhere, Spirit would have preferred that the new opportunities had been greater in scope, thereby obviating the need for a competitive carrier selection process. However, given the apparent need for such a process, Spirit files this answer in response to competing ORD slot applications.

Spirit proposes to offer ten daily roundtrip flights at O'Hare, serving six markets - Myrtle Beach, Tampa, Orlando, Fort Lauderdale, Ft. Myers, and West Palm Beach. Spirit's proposal is modeled closely on Spirit's service to these specific markets from Detroit's Metro Airport, which have greatly increased the number of passengers and substantially reduced the average fare in those markets. Spirit is proposing to enter the

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O'Hare market in a relatively robust fashion out of its belief that the O'Hare market needs and can easily sustain low-fare service to bur nation's leading leisure destinations, and in part out of its belief that a new entrant must serve a handful of markets (as opposed to just one or two routes) in order to operate efficiently., Spirit would urge the Department to award these slots in a manner that would provide one or more O'Hare new entrants with the critical mass they require to mount an effective competitive presence in the market, rather than providing a large number of carriers with a smaller number of slots, which would allow new entry only on a piecemeal basis. /1

America West has applied for 11 slots, which would be used to provide nonstop service to Columbus and to Las Vegas. The Department should reject these proposals in their entirety.

As a preliminary matter, the Department should take cognizance of the fact that America West already enjoys access to O'Hare, and in fact has chosen to trade three O'Hare slots it previously held to American in exchange for slots at other airports. See Application of America West, page 5, note 3. This cuts against America West's stated need for these exemptions. Moreover, under the terms of "Air 21," America West does not qualify as a "limited incumbent." Under 49 U.S.C. § 41714(k):

1/ To this end, Spirit must express its disappointment with the Department's interpretation of 49 U.S.C. § 41717(c) to the extent the Department believes that it may award only a total of 30 new-entrant frequencies, rather than 30 slot exemptions to "any new entrant air carrier or limited incumbent air carrier to provide air transportation to or from Chicago O'Hare International Airport," as the statute indicates. Had new entrants received such slots, they would have been able to quickly make their competitive presence felt, as the authors of the statute had intended.

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America West is, of course, a code-share partner of Continental Airlines, a carrier that holds far more than 20 slots at O'Hare. Therefore, America West should not be treated as a "new entrant" or "limited incumbent" for the purpose of gaining access to O'Hare. The claims of America West that this section is inapplicable unless America West and Continental code-share at Chicago are not persuasive, as the language of the statute says nothing of the sort.

Legend has applied for 10 slots so that it might operate 5 daily nonstops between Chicago and Dallas. While Legend's rationale for its request is that it requires five daily nonstop services to mount an effective competitive challenge to American, the limited number of frequencies available in this proceeding dictates against the award of so many frequencies for service to a single market. There comes a point where mounting high levels of service in a market merely to maintain competitive "parity" raises the risk that the services will not be viable, a factor the Department must weigh in determining how best to award such frequencies. While the Dallas-Chicago market may be large, the fact remains that, by any measure, Legend's proposal to add five daily nonstop services in a market with already-high levels of service is simply untenable, and must be rejected.

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In addition, while Spirit supports Legend's efforts to challenge American, Spirit strongly believes that public policy favors Spirit's proposal because it will produce significantly more consumer benefits. Spirit plans to use 164-seat MD-80 series aircraft, while Legend's proposal would utilize aircraft limited to 56-seats. If there were no slot limitations, both proposed services would offer new price competitive options. However, given that the Department only may award a limited number of exemptions, those proposals which maximize the public benefits with the scarce number of available slots should be granted preference. Clearly, in the case at hand, Spirit's proposed services will benefit significantly more passengers than Legend's proposed services. Accordingly, if the Department wishes to maximize the consumer benefits as its policy dictates, then it must favor Spirit's proposal.

Another factor militating against an award to Legend of the slots it seeks is the fact that Legend will not be in a position to introduce any new service until March 2001, nearly ten months from now. Legend proposes to introduce three daily services as of that date, with the remainder being operated as of September 1, 2001. Given the value of these slots, and the fact that demand for such slots far outstrips the available supply, it would contravene settled DOT policy to allow these slots to remain unused for the long period of time that Legend would. Legend's plan to serve a single market several months from now. should not be permitted to block Spirit's plan to offer far more immediate benefits to six highly deserving communities.

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National Airlines proposes to offer three daily nonstop services between Chicago and Las Vegas. While National attempts to argue that the Las Vegas O'Hare market is in strong need of additional low-fare competition, the fact is that this market already is receiving ample service. Moreover, National does not explain why a leisure market such as Las Vegas would require three flights per day rather than a more modest level of service. While in an ideal world National should receive its full request, the scarcity of available slots will require the Department to make hard choices among the markets to be served. This militates against a full award to National.

Sun Country proposes to operate three daily nonstop roundtrip services between Chicago and Minneapolis/St. Paul. While Sun Country argues that it would add a low-, fare option to this market, it does not explain why the market requires service at the level Sun Country proposes, or why such services would offer greater public benefits than competing proposals.

Spirit is the only applicant in this proceeding proposing to establish ORD as a new operating focal point, offering Chicago-area travelers low-fare access to a variety of attractive leisure destinations. Spirit's service will have a large employment impact at ORD, and will stimulate additional tourism to communities that are highly dependent upon tourism revenues.

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Another factor to consider are the recent programs introduced by American and United to remove seats from their aircraft, creating more room for "premium economy" or full fare passengers. This measure will diminish the ability of United and American to accommodate demand at O'Hare for inexpensive seats for traffic destined to the leisure markets Spirit proposes to serve, making the need for Spirit's low-fare service at O'Hare even more compelling.

WHEREFORE, Spirit respectfully requests that its motion for leave to file this Consolidated Answer be granted, and for the reasons set forth above and in Spirit's application, request that the Department promptly grant Spirit the twenty slots it seeks.

Respectfully submitted,

Anita Mosner

Steven Quan

GKMG CONSULTING SERVICES, INC.

1530 Wilson Boulevard

Arlington, VA 22209

(703) 312-1446

Representatives of SPIRIT AIRLINES, INC.

Date: May 17, 2000