Order 00-5-20 / Wendell Ford / Order Granting Slot Exemptions / May 22, 2000

Served: May 22, 2000

Issued by the Department of Transportation on the 22nd day of May, 2000

Applications of

for exemptions from Subparts K and S of Part 93 of Title 14, Code of Federal Regulations pursuant to 49 U.S.C. § 41717(c)

The Department grants the following requests for slot exemptions to new entrant or limited incumbent carriers at Chicago's O'Hare International Airport, to be operated by Stage 3 aircraft: (1) America West Airlines. Inc., three slot exemptions to provide nonstop service to Las Vegas, Nevada, (2) Legend Airlines, Inc., four slot exemptions to provide nonstop service to Dallas (Love Field), Texas; (3) Mesa Airlines, Inc. six slot exemptions to provide nonstop service to Columbus, Ohio; (4) National Airlines, Inc., five slot exemptions to provide nonstop service to Las Vegas, Nevada; (5) Sun Country Airlines, Inc., six slot exemptions to provide nonstop service to Minneapolis-St. Paul, Minnesota; and (6) Spirit Airlines. Inc., six slot exemptions to provide nonstop service to any of the airports in Florida and South Carolina that it proposed, to be allocated based on its assessment of market conditions and system needs.

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A. America West Airlines, Inc. and Mesa Airlines, Inc.

By application filed April 5, 2000, as amended, /5 America West requested three slot exemptions to provide nonstop service between Las Vegas, Nevada, and O'Hare

1/ Because AIR-21 directs such action to be taken, and short. mandatory deadlines are imposed, there is no requirement to prepare an environmental impact statement under the National Environmental Policy Act. See, e.g., American Airlines v. Department of Transportation, 202 F. 3d 788 (5th Cir., 1999). Note, however, that in accordance with Congressional direction and Departmental requirements, any service to be undertaken under this section must be with Stage 3 aircraft (the quietest category), priority is to be given in making grants for airport noise compatibility planning and programs to the four high-density airports, and the Department next year will study the community noise levels compared with the levels in such areas before 1991.

2/ Cf. language of H. R. Conf. Rep. No. 5 13, 106th Cong,. 2nd. Sess. 176 (2000).

3/ 49 U.S.C. §4 17 14(h). In addition, under 49 USC 41714(k) "...an air carrier that operates under the same designator code, or has or enters into a codeshare agreement, with any other air carrier shall not qualify for a new slot or slot exemption as a new entrant or limited incumbent air carrier at an airport if the total number of slots and slot exemptions held by the 2 carriers at the airport exceed 20 slots and slot exemptions."

4/ Applications were due by May 1, 2000. Furthermore, the Department considered it appropriate to give consideration to applications that had already been tiled However, the Department provided these applicants with the opportunity to amend their applications within the 10-day period should they deem it necessary to address the Department's award considerations that were outlined in Order 2000-4-15.

5/ On May 3, 2000, America West filed a motion for leave to File late and a clarification to its application, stating that Mesa Airlines, Inc. would provide the proposed service in the Columbus-O'Hare market. We will grant the motion.

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Airport, using A-320 aircraft, The amended application indicates that Mesa Airlines,, seeks eight slot exemptions to Provide nonstop service between Columbus, Ohio, and O'Hare Airport, using Canadair Regional Jets.

America West and Mesa Airlines stated that they qualify as a limited incumbent and a new entrant, respectively, under AIR-21. /6 America West states that it is now ready to improve the availability of its highly competitive service in the O'Hare-Las Vegas market, but that it has been unable to obtain additional O'Hare Airport slots at commercially reasonable times and prices. It notes that Las Vegas is its second major hub, but America West states that it cannot compete effectively with the incumbents in the O'Hare-Las Vegas market, given its limited presence due to slot constraints at O'Hare Airport.

Finally, the application indicates that the efficient development of Columbus as a "focus city" has been hindered because slot constraints prohibit competitors such as Mesa Airlines from operating in the market during high demand periods. The application also indicates that Columbus-O'Hare fares are about 50 percent higher than Columbus-Midway Airport fares, and that Mesa's fares in Columbus markets are 5-43 percent lower than the industry average.

B. Legend Airlines, Inc.

On March 24, 2000, Legend Airlines filed a request for 24 slot exemptions to provide nonstop service in the Dallas (Love Field)-O'Hare market. On April 28, Legend amended its application, requesting six O'Hare slot exemptions to provide nonstop service in the Dallas (Love Field)-O'Hare market, commencing March 1, 2001, and four slot exemptions to provide nonstop service in the market on September 1, 2001. /7

Legend maintains that Dallas-Ft. Worth passengers, especially business travelers, lack sufficient competition and service choices. Legend argues that because of its premium service product, it needs access to high-density routes such as Dallas/Ft. Worth-O'Hare Airport. Legend notes that only American Airlines and United Air Lines provide service in the Dallas/Ft. Worth International Airport-O'Hare Airport market, and that American began serving Dallas (Love Field)-O'Hare Airport on May 1. Legend states that American now conducts 28 round trips per day between Dallas and O'Hare Airport.

6/ On May 10, the airlines each filed certification stating that each met the statutory criteria of AIR-21 for an award of slot exemptions at O'Hare Airport.

7/ As part of its amended application, Legend certified that it met the statutory criteria of AIR-21 for an award of slot exemptions at O'Hare Airport.

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C. National Airlines, Inc.

On April 7, 2000, National Airlines filed a notice of continuing interest and a supplement to its application for five slot exemptions to provide nonstop service in the Las Vegas-O'Hare market. /8 On April 19, the applicant filed a certification stating that it qualified for slot exemptions as a new entrant at O'Hare Airport under AIR-21.

National states that the Department has already found that its request is in the public interest, and that it meets the exceptional circumstances required prior to the enactment of AIR-21. /9 National states that the only reason that the Department did not grant its earlier request was due to the limited number of O'Hare Airport slot exemptions available for distribution at that time. National contends that its proposed service is in the public interest, since it would result in new competitive operations in an underserved market and would reduce market dominance at O'Hare Airport. The applicant argues that its proposed service will provide needed additional capacity in the Las Vegas-O'Hare market, will help to lower average ticket prices in the market, and provide additional travel options to passengers.

D. Spirit Airlines, Inc.

On May 1, 2000, Spirit filed a request for 19 O'Hare slot exemptions /10 to provide nonstop service to Orlando, Tampa, and Ft. Myers, Florida (four slot exemptions each); Ft. Lauderdale, Florida (three slot exemptions); and West Palm Beach, Florida, and Myrtle Beach, South Carolina (two slot exemptions each). /11

Spirit states that its proposed low-fare operations will lessen the dominance of the incumbents in the above markets, provide passengers with lower fares and enhanced service options, promote the growth of small and new entrant air carriers, and provide additional jobs and other economic benefits for the communities. Spirit states that it is a new entrant carrier at O'Hare Airport and that it will operate Stage 3 aircraft. /12

8/ On April 7, 1999, National Airlines filed an application for five slot exemptions to provide nonstop service in the Las Vegas-O'Hare Airport market.

9/ See Order 99-7-17 at 9.

10/ Spirit's application indicates that it is seeking 20 slot exemptions for its proposed O'Hare Airport operations. However, its proposed schedule indicates that one of its flights from Ft. Lauderdale projects an O'Hare Airport arrival time of 9:40 p.m., (2140 hours), which is outside the slot-controlled period at O'Hare Airport. Therefore, we will consider Spirit's request to be for 19 slot exemptions.

11/ On May 16, 2000, the Horry County Department of Airports, the Greater Orlando Aviation Authority, and the Lee County Port Authority filed in support of Spirit's request. On May 17, the Broward County Aviation Department filed in support.

12/ As part of its application, Spirit certified that it met the statutory criteria of AIR-2 I for an award of slot exemptions at O'Hare Airport. See Appendix A.

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E. Sun-Country Airlines, Inc.

On April 24, 2000, Sun Country Airlines filed a request for six slot exemptions to provide nonstop service in the Minneapolis/St. Paul-O'Hare market, commencing on September 3, 2000. /13 Sun Country states that it will offer fares in the O'Hare-Minneapolis/St. Paul market considerably lower than those offered by the incumbent carriers and that its low-fare service will significantly stimulate traffic growth and economic activity, benefiting both Chicago and Minneapolis-St. Paul.

A. National Airlines, Inc.

On April 21, 2000, America West filed a motion for leave to file and a response to the application filed by National Airlines. We will grant the motion. America West urges the Department to deny the request. America West maintains that the Department should not award slots to an air carrier that offers only point-to-point service when greater public benefits would result from awarding them to a network carrier.

On May 9, 2000, National Airlines filed a motion for leave to file and a reply to America West's pleading. We will grant the motion. National argues that it has demonstrated clearly that its proposal is in the public interest, and that its proposed service satisfies the statutory criteria mandated by AIR-21. It urges the Department to grant its request for five slot exemptions.

B. Legend Airlines, Inc.

On April 11, 2000, America West filed a motion to file and an answer opposing Legend's request. We will grant the motion. America West claims that there are limited competitive benefits to be realized from Legend's proposed O'Hare Airport service. The carrier also maintains that there exists uncertainty as to Legend's ability to commence its proposed service prior to the statutory narrowing of slot-controlled times at O'Hare Airport.

On April 18, 2000, Legend filed a reply. The carrier urges the Department to grant Its request. It also questions whether America West qualifies for slot exemptions as a limited incumbent carrier under 49 U.S.C. § 41714(k), since America West and Continental Airlines are code-share partners.

13/ On May 4, Sun Country filed a supplement to its application certifying that it meets all of the qualifying criteria set forth in AIR-21 for an award of slot exemptions at O'Hare Airport.

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On April 24, 2000, American Airlines filed a motion for leave to file and an answer to Legend's request. We will grant the motion. American states that It takes no position on Legend's proposed operations. American does object to certain characterizations made by Legend about American's competitive actions and practices. American urges the Department not to base its decision in this case on the allegations made by Legend.

On May 3, 2000, America West filed an answer. America West states that it does not now oppose Legend's application, provided the Department also grants America West's pending application for slot exemptions at O'Hare Airport. Additionally, it challenges Legend's claim that it is not eligible for a slot exemption award under AIR-21. America West states that it does not participate with Continental Airlines in a codesharing arrangement at O'Hare Airport. Thus, America West argues that it does qualify for consideration here.

C. Spirit Airlines, Inc.

On May 17, 2000, Spirit Airlines filed a motion to file and a consolidated answer, asking the Department to grant its request in toto. We will grant the motion. Spirit Airlines urges the Department to award these 30 slot exemptions in a manner that would provide an applicant with the "critical mass" required to offer an effective competitive presence at O'Hare Airport. Spirit Airlines also challenges 'America West's application as a limited incumbent carrier under the AIR 21 Act.

Legend Airlines and Spirit Airlines have questioned whether America West has a basis to apply for slot exemptions at O'Hare Airport under the AIR-21 Act, considering its code-share relationship with Continental Airlines. Essentially, these carriers assert that America West-Continental Airlines are affiliated carriers within the meaning of 49 U.S.C. § 41714(k). Therefore, they maintain that America West does not qualify as a limited incumbent carrier at O'Hare Airport, given that Continental's slot holdings at O'Hare Airport exceed 20.

America West answered that § 41714(k) considers slots of code-share carriers jointly only if the two carriers code share at the particular airport. America West states that none of the O'Hare Airport slots held by Continental Airlines are used for code-share operations with America West and, therefore. America West is a limited incumbent at O'Hare Airport. America West argues that its code sharing with Continental Airlines at other airports is irrelevant to its status as a limited incumbent at O'Hare Airport because its code sharing elsewhere does not increase its presence at O'Hare Airport.

We agree with America West.

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Section 41714(k) excludes affiliated carriers from awards under 49 U.S.C. § 41717t,~), if their combined slot holdings exceed 20. Specifically, § 41714(k) states that "an air carrier that operates under the same designator code, or has or enters into a code-share agreement, with any other air carrier shall not qualify for a new slot or slot exemption as a new entrant or limited incumbent air carrier at an airport if the total number of slots and slot exemptions held by the 2 carriers at the airport exceed 20 slots and slot exemptions." Consistent with legislative history, /14 the Department has interpreted this as meaning that the Secretary shall aggregate the slots and slot exemptions held by code-share partners, if the partners are conducting code-share operations with each other at the respective High Density Airport. In this case America West has shown that it and Continental Airlines do not conduct code-share operations with each other at O'Hare Airport.

49 U.S.C. § 41717(c)(1) directs the Secretary to grant, by order, a total of 30 slot exemptions from the requirements under 14 C. F. R. Part 93, Subparts K and S to any new entrant air carrier or limited incumbent air carrier to provide air transportation to or from Chicago's O'Hare Airport. 49 U.S.C. § 41717(c)(2) requires the Secretary to grant these 30 slot exemptions within 45 days of the date of the request for such exemption.

Consistent with the provisions outlined in Order 2000-4-15, each of the applicants has certified to the Department, in accordance with 14 C.F.R. 302.4(b), that it meets the statutory criteria as a new entrant or limited incumbent; i.e., that it and any affiliates pursuant to § 41714(k) hold or operate (or held or operated since December 16, 1985) fewer than 20 slots and slot exemptions at Chicago's O'Hare Airport. Each applicant has also confirmed the number of slot exemptions it is seeking, and stated that they each will use Stage 3 compliant aircraft in the conduct of their proposed operations at O'Hare Airport.

Six airlines have filed slot exemption requests with the Department for priority treatment, asking for a total of 51 slot exemptions, to be used to provide nonstop service to ten communities. This circumstance requires the Department to select among competing applications. The bases for our determinations in this matter are described in Order 2000-4-15.

14/ Cf. language of H.R. Conf. Rep. No. 106-513, 106th Cong. 2nd Sess. 176 (2000):

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As an initial matter, we find that the applicants have each made a sufficient showing that considerable service benefits would be attained through each of the proposed operations, that there would be a positive effect on competition in each of the affected markets, and that there is a strong likelihood that the service would he operationally and financially viable. For these reasons, it would be our preference to approve each application. However, this priority proceeding allows us to grant a total of only 30 slot exemptions.

We note that the applicants differ on their proposed startup dates. America West and Mesa Airlines state that they would be prepared in initiate service within 45 days of an award by the Department. Legend indicates that it plans to commence its Dallas (Love Field)-O'Hare Airport operations on March 1, 2001, at the earliest. While National Airlines does not provide the record with a start-up date for its proposed service, we note that the carrier applied for Las Vegas-O'Hare Airport slots in April 1999, and that it began operations at its Las Vegas hub in mid-1999. Therefore, we expect that National Airlines is well positioned to commence these proposed services on a timely basis. Spirit states that it intends to commence its proposed service on or about September 22, 2000. Sun Country proposes to begin its operations on September 3, 2000.

We find that it is in the public interest in this proceeding to permit a maximum number of new entrant or limited incumbent airlines to establish new competitive operations at O'Hare Airport. Granting an initial allocation of six slot exemptions here (except where fewer were requested) would enable each applicant to initiate startup service and establish a market presence at O'Hare Airport. However, we recognize that this determination will leave us with a shortage, such that we will only be able to grant one of the applicant airlines, which has requested six or more slot exemptions, only four. Importantly, we note that a determining factor for a priority award in this case is a determination by the Department that there is "the practical ability by the carrier to initiate service on a timely basis." /15 Legend Airlines' application indicates that the earliest it will be prepared to commence any of its proposed service is March 1, 2001. /16 Therefore, consistent with our qualifying criteria. we find that it is in the public interest to award Legend Airlines four slot exemptions rather than six in this priority proceeding.

Spirit Airlines, which has applied for slot exemptions to serve multiple airports, may allocate the six slot exemptions granted here to supply nonstop service from O'Hare Airport to any of these airports, based on its assessment of market conditions and system needs.

15/ See Order 2000-4-15 at 2.

16/ See amended application, dated April 28, 2000. at 4

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Order 2000-4-15 noted that Congress had provided for a liberalized regime of granting slot exemptions at O'Hare Airport, if the applications are found to be in the public interest. 49 U.S.C. § 41714(i). The statute requires that these decisions he made within 60 days of the application. Qualified applicants who were not awarded here the total number of slot exemptions they sought under this § 41717(c) priority process may re-apply for the balance of their request under 49 U.S.C. § 41714(i).

As the FAA slot regulation makes clear "slot(s) do not represent a property right but represent an operating privilege subject to absolute FAA control (and) slots may be withdrawn at any time..." to fulfill the Department's operating needs. 14 CFR 93.223(a). Under the provisions of 49 U.S.C. § 417140) these carriers may not sell, trade, transfer, or convey the operating authorities granted by the subject exemptions. Further, granting of these exemptions in no way is to be construed as allowing a carrier to operate services that it otherwise could not, i.e., carriers must still meet all the requirements of the Department of Transportation, the Federal Aviation Administration, and all other statutes and regulations governing air transportation.

This Order is issued under authority delegated in 49 CFR 1.56(a).

1. The Department grants exemptions from 14 C.F.R. Part 93, Subparts K and S, to America West Airlines, Inc. (three slot exemptions, to serve Las Vegas, Nevada); Legend Airlines, Inc. (four slot exemptions, to serve Dallas (Love Field), Texas); Mesa Airlines, Inc. (six slot exemptions, to serve Columbus. Ohio); National Airlines, Inc. (five slot exemptions, to serve Las Vegas, Nevada); Spirit Airlines, Inc. (six slot exemptions, to serve any of the airports in Florida and South Carolina that it proposed, to be allocated based on Spirit's assessment of market conditions and system needs); and Sun Country Airlines, Inc. (six slot exemptions, to serve Minneapolis-St. Paul, Minnesota) to enable these applicants to conduct the operations described in this order at Chicago O'Hare International Airport during the slot-controlled hours of 6:45 a.m. to 9:15 p.m., at times to be determined in consultation between the applicant airlines and the Federal Aviation Administration;

2. The Department directs America West Airlines, Inc.; Legend Airlines, Inc.; Mesa Airlines, Inc.; National Airlines, Inc.; Spirit Airlines, Inc.; and Sun Country Airlines, Inc. to contact the Airspace and Air Traffic Law Branch of the Office of the Chief Counsel in the Federal Aviation Administration as soon as possible following the issuance of this order to determine with the Federal Aviation Administration the actual times for

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arriving, and departing flights as authorized by this order and to establish the starting date for implementing the schedules:

3. We grant all motions to file otherwise unauthorized documents;

4. The authorities granted under these exemptions are subject to all of the other requirements delineated in 14 C.F.R. Part 93, Subparts K and S, including, but not limited to, the reporting provisions and use or lose requirements; and

5. We will serve this order on all interested parties.

By:

Deputy Assistant Secretary for Aviation

and International Affairs

(SEAL)