Communications with respect to this document should be addressed to:

Transcription

1 BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Application of FRONTIER AIRLINES, INC. For an exemption under 49 U.S.C (Chicago (ORD, Illinois- Cancun, Mexico DocketDOT OST Appl!cation of AIRTRAN AIRWAYS, INC For an exemption under 49 U.S.C (Chicago (MDW, Illinois- Cancun, Mexico DocketDOT OST BRIEF IN SUPPORT OF APPLICATION OF AIRTRAN AIRWAYS, INC. BY THE SOUTHWEST AIRLINES PILOTS' ASSOCIATION ("SWAP A" Communications with respect to this document should be addressed to: Teri Merrick General Counsel Southwest Airlines Pilots Association 14-SO.Empire Central Dallas, TX December 23, 2011

2 BRIEF SUBMITTED BY SOUTHWEST AIRLINES PILOTS' ASSOCIATION IN SUPPORT OF AIRTRAN AIRWAYS, INC.1 I. INTRODUCTION Southwest Airlines Pilots' Association ("SWAP A" is the exclusive bargaining representative for the more than 6000 pilots of Southwest Airlines. Although SWAP A does not currently represent any AirTran Airways, Inc. ("AirTran" pilots, SW APA has a vested in teres~ In the decision before the Department of Transportation because of the March Southwest Airlines Co. ("Southwest" acquisition of AirTran. Together Southwest/ AirTran provide extensive service in Chicago, and AirTran's proposed service between Midway ("MDW" and Cancun ("CUN" should be viewed as part of Southwest's overall system. Although Southwest currently enjoys a strong domestic presence at Chicago's Midway Airport ("MDW', the expansion of AirTran service from MDW to Cancun ("CUN" will strengthen the Southwest franchise in Chicago and offer excellent international flying opportunities to customers. As detailed in the following analysis, SWAP A submits this answer in support of Air'l'ran's application for an exemption pursuant to 49 U.S.C to engage in foreign scheduled air transportation between Chicago, Illinois (MDW and Cancun, Mexico (CUN, and in opposition to Frontier Airline's application for a similar exemption to fly between Chicago (ORD and CUN. 1 To the extent necessary, SWAP A requests leave from the Department to file this brief. Good cause exists for granting this request as SWAP A bas an important interest in tbe outcome of this proceeding and tbe materials it submits will provide the Department with a more complete and accurate record upon which to base its decision. 2

3 II. ANALYS1SQJ1CJ;IICAGO MARKET A. FRONTIER APPLICATION The exemption sought by Frontier Airlines (''Frontier" to fly between Chicago O'Hare International Airport (ORD and Cancun, Mexico will primarily benefit Apple Vacations, not the traveling public. It is our understanding that Apple Vacations intends to contract or utilize nearly all available seats from Frontier, which will have the effect of restricting seats from general sale. The current partner airline for Apple Vacations (under the current exemption, USA3000, makes only a small fraction, ~or fewer based on 2010 O&D data of seats available to the general public. Apple Vacations withholds the remainder of seats to sell as part of "package" vacations.z In August 2011, Apple announced a similar business relationship with Frontier. If Frontier is granted its exemption request, it is expected that they will operate the Chicago (ORD to Cancun route in the same manner as USA3000.In our opinion, this does not meet the "public good" standard for a exception, because the traveling pubic would be forced to purchase a package vacation In approximately-of cases to take advantage of this exemption for travel from Chicago to Cancun. Press releases from both Apple Vacations and Frontier suggest that Frontier does not intend to serve ORD-CUN market as a common passenger carrier, but instead will primarily serve as a contracted "lift provider", which is not in the public interest. (Frontier press release dated August, 201 t If the Department wishes to accommodate the continuing Apple Vacations travel packages from ORD to CUN, SWAP A would not object to 2 Unless otherwise noted, all data referenced in this document is from the 2010 Airline Origin and Destination Survey {DB.1A. 3

4 the Department issuing Frontier a limited charter designation in addition to granting AirTran's exemption application. However, the greatest value to the flying public would result in the Department granting the AirTran application for exemption regardless of the Department's decision regarding Charter service. B. AIRTRAN APPLICATION Unlike Frontier, it is expected that AirTran will make available- for general sale to the general public- seats between Chicago (MDW and Cancun in traditional, competitive airline service. AirTran will not require the purchase of "packages" in order to travel. If AirTran is granted the exemption, the traveling public will have far more fare options and choices of travel days. AirTran Airways, recently acquired by Southwest Airlines, can pmvide MDW-CUN service to connecting passengers from Chicago as well as dozens of cities served by AirTran and Southwest Frontier, on the other hand, has no connecting service to ORD and thus will only.serve passengers who reside within driving distance of ORD. Frontier's current Chicago area service is to and from MDW, and Frontier has made no indication of an intent. to change its Chicago service in the future. Despite its own presence at MDW, Frontier has argued that Chicago passengers prefer O'Hare over Midway. We view this arguments as pure conjecture and counterintuitive to the desires of airline passengers. Consider, for example, Volaris Airlines' recently added and successful Guadalajara service to MDW. In January of 2011 Volaris began nonstop service to Guadalajara from MDW. Prior to Volaris's entry the market had not had nonstop service since ATA Airlines ceased flying this route in In the first six months of 2010, one year prior to Volaris's entry, Travel Port Illuminate O&D data indicated 4

5 that over a period of time, ORD had 12 to 17 times as many Guadalajara O&D passengers as Midway. Prior to Volaris, the only way a MDW passenger could get to Guadalajara was through a connection on Delta Airlines. In the first six months of 2011, after Volaris had entered the market, that gap had closed. ORD now serves only 1.8 to 1.5 times as many passengers, which is in-line with the number of seats offered in both cities. If AirTran Is allowed to begin service from MDW to CUN we expect a similar result Passengers choose convenient, low-fare travel out of Chicago, regardless of the originating airport In the instant matter, the "public good" will be better served by allowing traditional, competitive air service to CUN from Chicago. This will a.llow the flying public more competitive options, rather than reserving the exemption to primarily benefit one private tour operator. C. IMPACT ON BEST INTEREST OF FLYING PUBLIC The exemptions under 49 U.S.C best serve the public good if granted for common, public transportation, rather than for private companies to use between city pairs. When viewed from "the public interest" instead of from Apple Vacation's interest, an exemption consideration should examine the general ability for the traveling public to purchase tickets without paying what could be described as a "package vacation tax". The public interest in an exemption to provide air service from Chicago to the beach - resort Cancun would lie in expanded service and schedules, the ability for passengers to connect from neighboring cities and the flexibility allowed in making and changing travel plans. Under the current exemption, and presumably under the new contract between Frontier and Apple Vacations, nearly all (if not all seats on Frontier's flights to the beach resort of Cancun would be pre-sold to package vacation purchasers who obtain their air 5

6 transportation only as part of a "package deal" where vacationers purchase hotel accommodations and receive air transportation with the tour. An examination of ticketing data shows that approximately-passengers- out of almos-total- on Apple Vacation's current airline of choice, USA3000, paid an identical fare in the ORD- CUN bi-directional market in There does not appear to be a normal distribution of ticket fares. The number of customers who purchased airfare absent a package deal, appears to b~or fewer; it also is possible this number approaches zero on many flights. The fact that Frontier will serve the market with a larger aircraft than USA3000 is negated by the fact that the majority of tickets will be spoken for by Apple Vacations. Based on O&D data, SWAP A argues that the Apple Vacation relationship will have the effect of offering the equivalent of only a 26-seat aircraft to the general public. This is far fewer than the 137 seats AirTran can offer the general public.i 6

7 It can be argued that the current exemption used by Apple Vacations through USA3000 results in a provider that isn't "low fare" in this market. Apple Vacations' partner airline has an average fare that is onl-lower than American. Airlines and-lower. than United Airlines. However, unlike USA3000, both American and United offer a first class product. The distribution in the chart above indicates that United Airlines offered a ~ ;,significant number of fares below -whereas USA3000 did not. There is no reason to believe this distribution and lack of discounting will change because approximatel~of the tickets appear to be sold at a bulk rate. Unless this bulk rate is reduced, Frontier's exemption will not stimulate new demand for the market. In contrast, we believe that AirTran may significantly lower average fares to CUN in both the local markets and in the various connecting markets served in coordination with Southwest. 7

8 An Examination Of Ability To Boo!{ Fares to tbe Resort Town of Cancun While examining "the public interest", we made an attempt to book a fare as a nonpackage vacation purchaser (i.e. as a. c~ttom,er searching for airfare only, not a~ ail. Apple Vacations tour customer. While the current Apple Vacations contractor purports to list fares to Mexico on its booking website, usa3000.com, it appears to be very difficult for the average customer to purchase a ticket. We argue that there is no evidence that this practice will change materially if Frontier becomes the contracted operator.3 Scenario One: In an attempt to book a holiday vacation returned only one available flight to Cancun and only three available return flights from Cancun: 3 Search for airfares on usa3000.com was conducted on December 16,

9 When attempting to book a non-package fare more than one month into the future, only could be booked, and zero return flights could be booked. SWAP A fully supports the AirTran application for exemption under 49 U.S.C to engage in foreign scheduled air transportation between Chicago, Illinois (MDW and Cancun, Mc:Xico (CUN. In contrast with providing charter lift, AirTran will be provide the flying public with choices of connections from cities served by MDW. As the integration with Southwest continues, passengers in cities such as Columbus, Ohio, Detroit, Michigan, Indianapolis, Indiana, Oklahoma City, Oklahoma, Omaha, Nebraska, Minneapolis, Minnesota and many other llastcoast passengers will have the opportunity to book flights to Cancun. Frontier cannot make the same assertion. By contracting with Apple Vacations, the passengers flo~ by Frontier will be a tiny subset of customers: those who Jive in the 9

10 Chicago area and want to purchase pacl<age vacations. Therefore, the exemption to AirTran should be granted for the greater good of the flying public. If the Department wishes to grant Frontier a limited Charter-only exemption, this should not be done at the exclusion of AirTran from the Chicago - Cancun market. 10

11 CERTIF:ICA.J'lt OF SERVICE I HEREBY CERTIFY THAT ON December 23, 2011, a copy of the foregoing was served via on the following persons: l~~lig_,!!hh!:!tt.@wn~;g.cqid (Southwest Airlines lui!!,lu!t:i~ley@:wnc.q,!;juu (Southwest Airlines bob.jordan@wuco.com (AirTran Airlines ID.!!t!!l~@.:s!!!:I&9J!I (Alasl<a Airlines!!.!l!'l!l!ll~.Q!l.@.!l!!A;m.n (American Airlines sascha.vanderbellen.@delta.com (Delta Air Lines jgff.mq_rg!ln.@jlg!tl!&!lm {Delta Air Lines!:l!lb. C.Qb.!!Ji!!.l!!!ga_nlo.x~U,~;gm (Frontier Airline patrick.rizzi.@horumi.!!y!lu.cqid (Frontier Airline jhill@dowlobn!l1!.c9m (J etblue Airways g_~lr.!!j:.t:in@y:kl!!:w&qid (Spirit Airlines jyoung@yklaw.com (Spirit Airlines John.Fredericksen.@suncouno:y.com (Sun Country Airlines dan.:w!li!!!!.@y!lit_g{i~~,;q.!!i (United Air Lines howard lrnss@usairways.com (US Airways pmurphy@lopmurphy.com (USA30000 ha.rhl!!:!!lr1!1!l!!l!l@yjrgj_namg_ric!l.cqm {Virgin America susan.kurland.@dot.ggy tq!ld.llo!!!nn.@mt.g!jr ~~t.!l.r.q 1[@..erg@dqJ,gmt brian.hedberg.@dot.gov brett.kmger@dot.go~~: Pa!!l.gretch@!Jg.t,gg:v. john.allen@ (aa.gov ursk@dos.gov. Rosemarie S. Andolino Commissioner. City of Chicago Department of Aviation RQ!!~J!lll!:l~~nd!llJ!I..9_@.!;i.ty_Q.fcbJ.ca,g.(M!rg Erin O'Donnell Managing Deputy Commissioner City of Chicago Department of Aviation, Midway Airport. :!IDJ!@~cityofchicago.QI:g.. m;- - A~::e~==-_... ~ck 11