BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Transcription

1 BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) Joint Application of ) ) DELTA AIR LINES, INC. and ) AEROVIAS DE MEXICO, S.A. DE C.V. ) DOT-OST ) Under 49 U.S.C and ) for Approval of and Antitrust Immunity ) for Alliance Agreements ) ) ANSWER OF JETBLUE AIRWAYS CORPORATION Communications with respect to this document should be addressed to: James G. Hnat Executive Vice President General Counsel & Government Affairs Evelyn D. Sahr Drew M. Derco Eckert Seamans Cherin & Mellott, LLC 1717 Pennsylvania Avenue, N.W. Twelfth Floor Robert C. Land Senior Vice President Government Washington, D.C Affairs & Associate General Counsel Tel: (202) Fax: (202) Adam L. Schless Director, Aircraft Transactions & International Counsel JetBlue Airways Corporation 1212 New York Avenue, N.W. Suite 1212 Washington, D.C Counsel for JetBlue Airways Corporation January 30, 2017

2 BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) Joint Application of ) ) DELTA AIR LINES, INC. and ) AEROVIAS DE MEXICO, S.A. DE C.V. ) DOT-OST ) Under 49 U.S.C and ) for Approval of and Antitrust Immunity ) for Alliance Agreements ) ) ANSWER OF JETBLUE AIRWAYS CORPORATION The proposals from numerous carriers for dozens of slot pairs demonstrate the pent-up demand for access to Mexico City International Airport (MEX) and illustrate the market-distorting effects that occur when legacy carriers restrict access at slot-constrained airports. JetBlue is an advocate of Open-Skies and free competition and does not oppose Alaska, Interjet, Southwest, VivaAerobus and Volaris serving any of the routes for which they submitted proposals. However, with carriers seeking more remedy slots than are available, the Department must consider additional relevant factors when determining which proposals best provide maximum competitive benefits. These factors strongly support a grant to JetBlue of six MEX slot pairs. As an initial matter, JetBlue urges the Department to split the available slots such that 50% are allocated to U.S. carriers and 50% to Mexican carriers. Unlike other carriers, JetBlue has consistently urged the Department to deem Mexican carriers eligible to participate in any slot remedy proceeding. JetBlue believes that Mexican carrier participation is crucial in order to craft a slot remedy benefiting airlines and consumers in both countries. Given the strenuous objections to the Department s MEX slot remedy from various Mexican parties including unions and aeronautical authorities, principles of comity and reciprocity suggest that allocating a slot remedy

3 equally between U.S. and Mexican carriers best comports with the stated goals of both the Department and COFECE. Three U.S. carriers collectively sought 14 MEX slot pairs while three Mexican carriers sought 17 MEX slot pairs and 5 JFK slot pairs. Of the 28 available slot pairs at MEX and JFK, a grant of 14 slot pairs to U.S. carriers and 14 to Mexican carriers would allow five U.S. and Mexican carriers to obtain slots at MEX and each of the three Mexican carriers that participated in this proceeding to gain crucial access to JFK, which the Department identified as a major goal of the slot remedy. Such a breakdown would also allow the Department to fully grant each U.S. carrier request. JetBlue has suffered the greatest harm by the lack of MEX slots In the event that the Department does not follow JetBlue s suggestion to evenly distribute slots to U.S. and Mexican carriers, the Department should account for the fact that JetBlue has felt the pernicious effects of the unavailability of MEX slots longer and more harshly than any other carrier in this proceeding. By the time slots are allocated in this proceeding, JetBlue will have 2

4 operated to MEX with extremely uncompetitive nonviable slots for nearly two years, sustained only because of its long-term commitment to the Mexico City market. InterJet, VivaAerobus and Volaris have, respectively, 313, 64 and 115 peak-day operations at MEX. 1 Each has been able to operate transborder routes in significant markets from MEX with peak-slot times. Although Southwest has also been harmed by the slot restrictions at MEX, it nonetheless has two valuable day-time MEX slot pairs and in fact conceded that it has been able to provide only two viable daily flights to/from MEX given that their third flight is at nearly identical times to JetBlue s two MEX flights, with late-night arrivals and early-morning departures. 2 The Department must also account for Alaska s history at MEX. In 2005, the Department selected Alaska to provide non-stop service in the LAX-MEX market, then a limited entry market in which only two designated U.S. carriers could provide service. 3 Alaska, which began service to Mexico in 1988, seemingly had no problem obtaining peak-time MEX slots as it operated midday flights at MEX for over a decade. In 2015, Alaska entered into a commercial transaction with American to transfer the [LAX-MEX] route [to American], 4 which the Department approved. 5 Alaska ceased operating LAX-MEX with its own aircraft in late 2015 and American in turn began 2x daily LAX-MEX service. However, Alaska and American continue to codeshare on the route. Both of American s daily LAX-MEX flights carry Alaska s AS* designator code, 1 DOT Order at 24. These figures were from October 2016, as the Department was preparing its Show Cause Order. In December 2016, these figures for Interjet, VivaAerobus and Volaris further increased to 317, 65 and 120, respectively. Source: Diio schedules, retrieved on 1/29/ Application of Southwest Airlines Co. for MEX Slots at 4, Docket DOT-OST Like JetBlue, Southwest proposes to use some remedy slots to replace the unviable MEX slots it currently has and add additional frequencies in those markets. 3 DOT Order Consolidated Reply of Alaska Airlines, Inc. at 15, Docket DOT-OST DOT Order

5 which under the Department s codeshare jurisprudence means that Alaska already provides nonstop service in the market. 6 Further, Alaska s proposal omitted mentioning the legal status of the peak-time MEX slots it used to operate to LAX for over a decade. It is possible that Alaska still controls MEX slots that it leases to American for that carrier s 2x daily LAX-MEX service. 7 The Department should be wary of selecting Alaska s proposal ahead of that of JetBlue or Southwest if the legal status and history of Alaska s MEX slots is not clarified. 8 If the MEX slots that Alaska previously held to provide LAX-MEX service are in fact currently being used by American, then Alaska s claim that its access to the MEX market is barred by the lack of available slots is not true. 9 The Department should be especially wary of this Alaska-American relationship in light of the U.S. Department of Justice s recently expressed concerns over Alaska-American cooperation in markets where both carriers provide non-stop service Unlike other route transfer cases, Alaska is not abandoning the service but remains a strong competitor in the market by placing the AS* code on the American-operated flights. Joint Application for Transfer of International Route Authority and Applications for Amendment of Exemptions at 5, Dockets DOT-OST , DOT-OST and DOT-OST In approving the route transfer, the Department noted that Alaska will remain a presence in the market by virtue of its code-sharing on American s flights. DOT Order When American began 2x daily LAX-MEX service in 2015, its flight schedule closely mirrored the times that Alaska previously operated. If Alaska does not lease the slots to American, it is quite likely that they were otherwise transferred to American or returned to AICM with the express intention that they be re-allocated to American. In any event, it appears that American increased its slot portfolio at MEX in Unlike JetBlue, Southwest, Volaris and Interjet, Alaska (and VivaAerobus) never participated earlier in the DL-AM ATI proceeding to express any concern about the MEX slot situation. 9 Application of Alaska Airlines, Inc. For Allocation of U.S.-Mexico City Slot Pairs at 11, Docket DOT-OST To address the transaction s likely competitive harm, the proposed settlement requires Alaska to significantly reduce the scope of the codeshare agreement. See < 4

6 The Department should not disproportionately grant slots to ULCC carriers The Department should be mindful of the split between low-cost carriers (LCCs) and ultralow cost carriers (ULCCs) when allocating slots in this proceeding. Because VivaAerobus and Volaris are both ULCCs, a disproportionate grant of slots to those carriers could limit the impact of the Department s remedy, which aimed, among other things, to prevent consumer harm in an important business market [JFK-MEX] connecting the two largest cities in North America. 11 While JetBlue welcomes all competition in the JFK-MEX market, and supports the allocation of JFK slots to the three Mexican carriers that seek them, slots should not be allocated at both JFK and MEX to fund these carriers JFK-MEX services unless and until all 14 U.S. carrier proposals for MEX slots are granted. Because VivaAerobus and Volaris have 64 and 115 peak-day MEX operations, respectively, both carriers have an ability to self-fund MEX slots for JFK-MEX service. The Department should have every expectation that those carriers will do so if the Department grants them JFK slots given that some of the JFK slots are the most financially and operationally valuable slots at one of the world s most slot-constrained airports. 12 VivaAerobus application, one of two ULCC proposals, should receive the lowest priority of any carrier in this proceeding as it offers the fewest potential competitive benefits. The carrier does not currently even operate one daily flight to the United States, yet alone any flights from MEX to the United States. VivaAerobus admitted that it does not currently offer combined bookings on connecting flights which would limit the competitive benefits of its service to MEX. 13 Until this proceeding, it had not even attempted to obtain expanded economic authority 11 DOT Order at 13. In most circumstances, business travelers are less likely to use an ULCC. 12 DOT Order at Application of Aeroenlaces Nacionales, S.A. de C.V. For an Exemption and Slot Allocation at 6, Docket DOT- OST

7 to account for the rights now available to U.S. and Mexican carriers under the new bilateral. Finally, many of its requested slot times are in off-peak hours. For example, VivaAerobus requested 5 daily arrival slots at JetBlue s two daily flights to MEX are currently scheduled to arrive at MEX at 2305 and If JetBlue is allocated its #1 and # 2 priority slots in this proceeding, these two 2300 slots, within 20 minutes of VivaAerobus s requested arrival times, would be available and could be allocated to the carrier. 14 Similarly, Southwest has also indicated that it would cease using its 2330 arrival slot if it is granted its # 1 priority slot in this proceeding. 15 It would be inconsistent with the purpose of this proceeding for the Department to award remedy slots so close in time to the slots that JetBlue and Southwest have indicated are unviable and that they plan to vacate. Volaris also requested 2 daily off-peak slots, at 0455 and 0505, for red-eye arrivals from Chicago and Oakland. JetBlue acknowledges that VivaAerobus and Volaris would need a peaktime departure from MEX in order to operate some of these round-trip transborder services. Within the framework that JetBlue proposed, however, in which each U.S. carrier request is granted in full, the Department could deny these requests for 7 off-peak slots, which would result in the Department only having to deny 7 additional slot requests made by VivaAerobus and Volaris. Another possible solution would be if the Department tweaks the times of proposed JFK schedules. For example, Mexican carriers requested JFK slots at, inter alia, 1410 turning to 1530 (Volaris), 1340 turning to 1510 (VivaAerobus) and 1625 turning to 1740 (InterJet). Because the Department s remedy limits JFK slot divestitures to two slots between 1500 and 2059, it would be 14 If allocated remedy slots in this proceeding, JetBlue planned to return the slots to AICM. If the Department desires, JetBlue is willing to directly transfer these early-morning and late-night slots to a carrier that the Department selects. VivaAerobus, like other carriers in this proceeding, will have to comply with the Department s terms for Phase 2 slots including the exhaustion of efforts provision with airport slot coordinators. 15 Application of Southwest Airlines Co. for MEX Slots at 4, Docket DOT-OST

8 impossible for the Department to grant all three requests. But if the Department grants VivaAerobus or Volaris a JFK slot an hour earlier than its proposed arrival time (which would be consistent with the parameters of the JFK remedy), the MEX departure time could similarly be advanced an hour, which would be 0600 for VivaAerobus or 0700 for Volaris. Because JetBlue indicated that the early morning slots it currently uses for FLL and MCO departures will be returned if it is allocated remedy slots in this proceeding, there will be at least two slots available around that time period that VivaAerobus and Volaris could use for departures to JFK. JetBlue s Suggested Allocation U.S. and Mexican carriers requested slots fairly evenly throughout the day. No one hourtime-period was oversubscribed with carriers collectively seeking more than 6 slots in that time period. Carriers did not collectively seek more than 4 slots in the two non-consecutive hours designated by Delta and Aeromexico. JetBlue requested no more than 2 slots in any one hour period and had amongst the most evenly distributed slot requests of any carrier in this proceeding. 7

9 If the Department adopts JetBlue s proposal to evenly split the 28 available remedy slot pairs among U.S. and Mexican carriers, then 14 MEX slot pairs would be allocated to U.S. carriers, 10 MEX slot pairs would be allocated to Mexican carriers and 4 JFK slot pairs would be allocated to Mexican carriers. JetBlue has included an appendix below that demonstrates how the proposals submitted by the six carriers could be tweaked to accommodate virtually every request given that JetBlue and Southwest have indicated on the record their plans to return slot pairs that are commercially unviable for FLL/MCO/HOU but that other carriers could use for parts of proposed services. If the Department s proposed divestiture results in a Mexican carrier receiving a viable arrival slot but a departure slot the carrier believes is unviable, those carriers could always use their ample MEX slot portfolios to cover those departure slots as necessary. Because the Department limited the grant of ATI to five years and noted that it plans to re-examine the slot situation in the coming years, Mexican carriers that do not receive a full allocation now would also have ample opportunity to request additional slots in any future remedy proceeding. Conclusion JetBlue thanks the Department for the opportunity to participate in this proceeding and for its efforts to create a viable slot remedy. For the reasons explained above, the 28 remedy slots should be evenly split between U.S. and Mexican carriers and JetBlue should be granted the six MEX slot pairs it requested. Respectfully submitted, Evelyn D. Sahr Drew M. Derco Eckert Seamans Cherin & Mellott, LLC January 30, 2017 Counsel for JetBlue Airways Corporation 8

10 APPENDIX JetBlue proposes the following slot allocation remedy. The below proposal would result in each U.S. carrier request at MEX being granted, three Mexican carriers gaining JFK slots, and dozens of new transborder flights that would benefit the traveling public in both countries. Phase 1 allocation of 14 slot pairs/28 slots: 0700: WN departure for HOU, VB departure for LAX 0800: Y4 departure for JFK 0900: B6 arrival from FLL 1000: B6 departure for FLL, WN arrival from HOU, VB departure for LAS 1100: B6 arrival from MCO, WN departure for HOU 1200: B6 departure for MCO, AS arrival from SAN, Y4 departure for SAT 1300: AS departure for LAX 1400: B6 arrival from MCO, AS arrival from LAX 1500: B6 departure for MCO, AS departure for SFO, VB arrival from LAX 1600: B6 arrival from FLL, AS arrival from SFO 1700: B6 departure for FLL, AS departure for LAX, Y4 arrival from SAT 1800: AS arrival from LAX, AS departure for SAN, Y4 arrival from JFK : VB arrival from LAS 2000: WN arrival from HOU Commentary: Each Phase 1 U.S. carrier request would be fully granted. Y4 would receive a total of four JFK and MEX slots for its #1 priority and two MEX slots for its # 2 priority. Y4 would receive a slightly altered schedule for its MEX-JFK service, that it indicated would be acceptable as it is within 90 minutes of its proposed times, that would allow it and 4O to both receive JFK remedy slots consistent with the terms of the JFK remedy. 4O would receive JFK slots with its proposed schedule. Y4 could receive a 1459 departure slot from JFK instead of 1530, which would require its MEX departure slot to be shifted from 0830 to 0800 or 0759 (both hours have available remedy slots under this proposal), its JFK arrival slot to be shifted to the 1300 hour, and its MEX arrival slot either remaining in the 1900 hour or being shifted to the 1800 hour as proposed above (both hours have available remedy slots under this proposal). VB would receive its #1 and #2 priorities for Phase 1 and introduce its first two transborder routes from MEX to the United States, to LAX and LAS, with peak MEX slot times. Allocation of Phase 1 slots to individual carriers: B6: 8 MEX AS: 8 MEX Y4: 4 MEX, 2 JFK WN: 4 MEX VB: 4 MEX 4O: 2 JFK A total of 28 MEX slots and 4 JFK slots would be allocated in Phase Y4 s JFK arrival could be in the 1800 or 1900 hour.

11 Phase 2 allocation of 10 slot pairs/20 slots: 0700: WN departure for LAX, VB departure for JFK, VB departure for IAH 1000: Y4 departure for DEN 1100: Y4 departure for IAD 1200: WN arrival from FLL 1300: B6 arrival from LAX, WN departure for FLL, VB departure for OAK, VB arrival from IAH 1400: B6 departure for LAX, VB departure for LAX 1700: B6 arrival from LAX, VB arrival from JFK, VB departure for SAT 1800: B6 departure for LAX, Y4 departure for OAK, Y4 arrival from DEN 1900: Y4 departure for ORD 2200: WN arrival from LAX Commentary: Y4 would be allocated some Phase 1 requests that could not be granted such as a 1100 departure slot for IAD and a 1900 departure for ORD. It would be allocated a 1800 hour departure slot for OAK, its # 1 priority for Phase 2. However, because Y4 requested off peak arrival times for these proposed slots (including in the 0400 and 0500 hours), this proposal does not allocate arrival slots for these three flights from the pool of remedy slots. Y4 could obtain offpeak early morning/late night slots from AICM or from the 3 early morning/late-night slots that JetBlue and Southwest indicated they would cease using. Y4 indicated that an altered schedule for its IAD-MEX flight would be acceptable; the proposal also allocates arrival and departure slots for Y4 s proposed MEX-DEN-MEX service. Similarly, VB would be allocated a 1400 departure slot for LAX, a 1300 departure slot for OAK and a 1700 departure slot for SAT but not an arrival slot from the remedy pool for those three flights. VB could obtain off-peak 2255 arrival slots from AICM or from the 3 late-night slots that JetBlue and Southwest indicated they would cease using. VB would be allocated slots at MEX and JFK for its proposed MEX-JFK-MEX service, but the JFK departure would have to be shifted 11 minutes earlier, to 1459, to comply with the terms of the JFK remedy. The arrival time at MEX would similarly be shifted from the 1800 hour to the 1700 hour. VB would also receive two MEX slots in order to operate roundtrip service to IAH. Allocation of Phase 2 slots to individual carriers: VB: 7 MEX, 2 JFK Y4: 5 MEX, 2 JFK B6: 4 MEX WN: 4 MEX A total of 20 MEX slots and 4 JFK slots would be allocated in Phase 2.

12 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Answer of JetBlue Airways Corporation was served by electronic mail this 30 th day of January, 2017 on the following: robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com dheffernan@cozen.com robert.wirick@aa.com howard.kass@aa.com alex.krulic@delta.com chris.walker@delta.com nssparks@fedex.com perkmann@cooley.com mroller@rollerbauer.com bob.kneisley@wnco.com leslie.abbott@wnco.com dkirstein@yklaw.com dan.weiss@united.com steve.morrissey@united.com anita.mosner@hklaw.com brownpa@state.gov englets@state.gov john.s.duncan@faa.gov susan.mcdermott@dot.gov bob.goldner@dot.gov jeffrey.gaynes@dot.gov todd.homan@dot.gov peter.irvine@dot.gov albert.muldoon@dot.gov matt.zisman@dot.gov don.horn@dot.gov brian.hedberg@dot.gov benjamin.taylor@dot.gov kristen.davis@dot.gov info@airlineinfo.com Aeromexico Alaska Airlines American Airlines Delta Air Lines FedEx Hawaiian Interjet Southwest Airlines Spirit Airlines United Airlines Volaris State/FAA/DOT/DOJ AirlineInfo Drew M. Derco