BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Transcription

1 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. ) Application of ) ) Southwest Airlines Co. ) ) For exemptions from 14 C.F.R. Part 93, ) Docket DOT-OST Subparts K and S, pursuant to 49 U.S.C. ) 41718(b) ) ) For service between Kansas City, MO and ) Ronald Reagan Washington National Airport ) (DCA-MCI) ) ) APPLICATION OF SOUTHWEST AIRLINES CO. Communications with respect to this document should be addressed to: Ron Ricks Robert W. Kneisley Executive Vice President -- Associate General Counsel Chief Legal and Regulatory Officer Leslie C. Abbott Mark Shaw Senior Attorney Vice President General Counsel & SOUTHWEST AIRLINES CO. Corporate Secretary th Street, NW SOUTHWEST AIRLINES CO. Suite Love Field Drive Washington, DC Dallas, TX bob.kneisley@wnco.com (202) March 25, 2014

2 BEFORE THE OFFICE OF THE SECRETARY DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) Application of ) ) Southwest Airlines Co. ) ) For exemptions from 14 C.F.R. Part 93, ) Docket DOT-OST Subparts K and S, pursuant to 49 U.S.C. ) 41718(b) ) ) For service between Kansas City, MO and ) Ronald Reagan Washington National Airport ) (DCA-MCI) ) ) APPLICATION OF SOUTHWEST AIRLINES CO. On March 5, 2014, the Department of Transportation ( DOT or Department ) issued a Notice establishing a proceeding pursuant to 49 U.S.C (b) to permanently reallocate two Ronald Reagan Washington National Airport ( Washington National Airport or DCA ) slot exemptions previously awarded to Republic Airline Inc. ( Republic ). The Notice invites applications from air carriers using Stage 3 aircraft for service to a small or medium hub airport within the 1,250-mile perimeter established for civil operations at Washington National Airport under Title 49 U.S.C The Department previously awarded these slot exemptions to Republic to provide competitive service between DCA and Kansas City International Airport 1

3 ( MCI ). 1 When Republic announced that it would terminate its service on February 1, 2014, the Department authorized Southwest Airlines ( Southwest ) to use the slot exemptions to serve the DCA-MCI route on a pendente lite basis. 2 Southwest now applies to provide this valuable service on a permanent basis, and proposes to further leverage the scarce slot exemptions by providing one-stop, same-plane service between DCA and Oakland International Airport ( OAK ) via MCI. See Exhibit WN-1. As set forth in the Department s March 5, 2014 Notice, the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century ( AIR-21 ), as amended by the Vision 100 Century of Aviation Reauthorization Act of 2003 ( Vision 100 ), directs the Department to grant inside-perimeter slot exemptions at DCA consistent with Title 49 U.S.C (b) in a manner that promotes air transportation: (1) by new entrant air carriers and limited incumbent air carriers; (2) to communities without existing nonstop air transportation to Ronald Reagan Washington National Airport; (3) to small communities; (4) that will provide competitive nonstop air transportation on a monopoly nonstop route to Ronald Reagan Washington National Airport; or (5) that will produce the maximum competitive benefits, including low fares. In its Notice, DOT reiterates that the Department has the discretion to premise an award of within-perimeter slot exemptions on the satisfaction of less than the greatest 1 This service was most recently provided by Frontier Airlines, then a wholly-owned subsidiary of Republic Airways. 2 Order Confirming Grant of Temporary Slot Exemption Authority, Order , Docket DOT-OST (Jan. 27, 2014). 2

4 number of criteria, or even one criterion listed in Section 41718(b), based upon the Department s analysis of the relative merits of each carrier s proposal. 3 Southwest s proposed continuation of its service to Kansas City, a medium hub airport as defined by the FAA, 4 would significantly advance the statutory goals of AIR- 21 and Vision 100 by: (1) providing strong low-fare competition on a monopoly DCA route; (2) offering the only large-jet service in the market and significantly increasing the available capacity on this otherwise under-served route; and (3) providing one-stop, same-plane service between DCA and OAK, the largest domestic airport without direct service to DCA. I. Southwest s DCA-MCI Service Will Produce Maximum Competitive Benefits by Providing Critical Low-Fare Competition on a Monopoly Route Southwest s proposed service would fulfill one of the most critical statutory criteria for the award of DCA slot exemptions, providing low-fare competition on a monopoly route. Absent Southwest s service, the only nonstop option in the DCA-MCI market would be high-fare service on small, regional jet aircraft by US Airways. Southwest s competition is essential to maintaining low fares in this important market. As shown in Exhibit WN-2, US Airways charges significantly higher fares in its DCA inside-perimeter monopoly markets than it does when it faces LCC competition. Southwest s current DCA-MCI fares average $147, offering a considerable savings to consumers. If Southwest were forced to exit the market, average fares in the market would increase sharply, by as much as 21% based on US Airway s fares in other DCA monopoly markets. See Exhibit WN-2. 3 Notice Establishing Slot Exemption Proceeding, pg. 2, Docket DOT-OST (March 5, 2014). 4 Based on the FAA s Primary Airport Enplanement Activity Summary for Calendar Year

5 Even in the relatively short period of time that Southwest has served this route, and without the benefit of advance marketing prior to its entry, Southwest s low-fare service has been extremely well received. The flight now achieves an 85% load factor and has garnered significant support from the community and its elected officials. See Exhibit WN-3 and Attachment 1. II. Without Southwest s Service, Kansas City Would be DCA s Most Under- Served Medium/Large Market Within the DCA Perimeter Today, Kansas City International Airport serves nearly ten million annual passengers from Missouri and surrounding states. The states and communities that rely on MCI for air service have important ties to the federal government and the Washington, D.C. area. Without Southwest s service, Kansas City would be the most under-served medium or large market within the DCA perimeter. See Exhibit WN-4. With just one roundtrip flight a day, Southwest s service with 143-seat Boeing aircraft provides nearly 50% of the seats in the market. US Airways, in contrast, uses E170 and CRJ regional jet aircraft with an average of only 63 seats per departure. Southwest would achieve 128% greater efficiency, or 80 more seats per aircraft, on the DCA-MCI route than US Airways (Exhibit WN-5). Not only does Southwest s service offer the comfort and capacity of a full-sized jet aircraft, but all Southwest Boeing s are equipped with gate-to-gate Wi-Fi, beneficial to both business and leisure travelers. In addition, under Southwest s Bags Fly Free policy, unmatched in the industry, passengers are able to check up to two bags for no additional cost, offering an outstanding value for consumers, particularly families, and a true choice in air travel. 4

6 III. Southwest Will Further Leverage the Slot Exemptions by Providing Same- Plane Service between DCA and OAK, As Well As Numerous One-Stop Beyond-Perimeter Connecting Options In addition to the significant benefits to local consumers in the DCA-MCI nonstop market, Southwest would provide daily, same-plane service between OAK and DCA via Kansas City. Southwest s proposed same-plane DCA-MCI-OAK service will benefit thousands of Washington D.C. and Bay Area passengers annually by providing a more convenient option than is currently available between DCA and OAK. OAK, which serves the Oakland/East Bay area with a population of roughly 2.5 million, 5 is the largest airport beyond DCA s perimeter without direct flights today. See Exhibit WN-6. Southwest s DCA-MCI service would also provide efficient one-stop connecting options via MCI between DCA and eight other important beyond-perimeter cities, many with limited service to DCA Albuquerque, Denver, Las Vegas, Los Angeles, Phoenix, Portland, San Diego and Seattle. 6 See Exhibit WN-1. Southwest s ability to integrate the DCA-MCI service into its extensive route network will provide unmatched low-fare access to DCA. This will offer substantial benefits to travelers and cities both inside and outside the DCA perimeter, again making optimal use of these two valuable slot exemptions. 5 Based on the population of Alameda and Contra Costa Counties alone. Many more passengers in counties such as Marin, Napa, and Sonoma also fly out of OAK. 6 Southwest also provides one-stop connecting service via MCI between DCA and the following insideperimeter cities: Chicago, Dallas, Houston, Indianapolis, Milwaukee, Nashville and St. Louis. 5

7 Conclusion For the reasons stated above, we urge the Department to grant the two slot exemptions at issue in this proceeding to Southwest Airlines to enable it to continue providing low-fare, large-jet competitive service on the MCI-DCA route, with same-plane service between DCA and OAK via MCI. Sincerely, March 25, 2014 Robert W. Kneisley 6

8 CERTIFICATE OF SERVICE I hereby certify that on March 25, 2014, a copy of the foregoing was served via e- mail on the following persons: msinick@ssd.com (Alaska Airlines) howard.kass@aa.com (American Airlines) francis.heil@aa.com (American Airlines) sascha.vanderbellen@delta.com (Delta Air Lines) robert.cohn@hoganlovells.com (Republic Airways) patrick.rizzi@hoganlovells.com (Republic Airways) robert.land@jetblue.com (JetBlue Airways) jhill@dowlohnes.com (JetBlue Airways) perkmann@dowlohnes.com (JetBlue Airways) shawn.voyles@flypex.com (People Express) dkirstein@yklaw.com (Spirit Airlines) jyoung@yklaw.com (Spirit Airlines) John.Fredericksen@suncountry.com (Sun Country Airlines) dan.weiss@united.com (United Air Lines) pmurphy@lopmurphy.com (USA3000) john.varley@virginamerica.com (Virgin America) susan.kurland@dot.gov bob.goldner@dot.gov james.dann@dot.gov todd.homan@dot.gov peter.irvine@dot.gov brian.ctr.meehan@faa.gov Mark D. VanLoh, A.A.E. Director of Aviation Kansas City International Airport Mark.VanLoh@kcmo.org Deborah Ale Flint Aviation Director for the Port of Oakland Oakland International Airport dale@portoakland.com John E. Potter President and Chief Executive Officer Metropolitan Washington Airports Authority john.potter@mwaa.com info@airlineinfo.com Leslie C. Abbott

9 Exhibit WN-1 Southwest Airlines Proposed DCA-MCI Service SEA PDX OAK DEN MCI DCA LAS ABQ LAX SAN PHX Proposed DCA Route Direct OAK Service Current WN Beyond MCI Routes Aircraft to be Used: B Seats per Aircraft: 143 Daily DCA Departures: 1 Note: Includes Seattle which is served seasonally. Source: Innovata Schedule data for Wednesday, March 12, 2014.

10 Exhibit WN-2 Without Competition from Southwest, US Airways DCA-MCI Fares Would Increase Average One-Way DCA Fare $210 $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 $147 Current WN DCA-MCI Fare /1 $171 Current DCA-MCI Average Fare (All Carriers) $188 Current US DCA-MCI Average Fare $207 US DCA-MCI Fare at US DCA Monopoly Pricing /2 1/ Latest available WN average local fare on DCA-MCI nonstop (week of March 17, 2014). 2/ Derived from a yield curve that plots US Airways yields in monopoly markets at DCA. The equation is (distance) Note: Average fare paid per mile excludes zero fare passengers (frequent flyer redemptions, etc.). Includes carriers average per-passenger baggage and cancellation/rebooking fees. Source: U.S. DOT, Origin-Destination Passenger Survey, YE Q3 2013, via DIIO.

11 Exhibit WN-3 Even Without Advance Marketing, Southwest s Low-Fare Service Has Been Well Received by Consumers and Has Achieved an 85% Load Factor WN DCA-MCI Load Factor 100% 90% 85% 80% 70% 64% 70% 60% 50% 45% 49% 41% 40% 30% 20% 10% 0% 2/9 2/16 2/23 3/2 3/9 3/17 Week Beginning Based on Southwest internal data for the period February 9, 2014 to March 21, Source: Southwest Airlines.

12 Exhibit WN-4 Without Southwest's Service, MCI would be DCA's Most Under-Served Medium/Large Market Inside the Perimeter DCA O&D Passengers per Seat Departure Passengers per Day Each Way MCI MCO MSY FLL TPA STL Includes markets with 200 or more passengers per day each way from DCA. Source: Innovata Schedule data for March 12, 2014; U.S. DOT Origin-Passenger Survey, YE Q3 2013, via Diio.

13 Exhibit WN-5 Southwest s Average DCA-MCI Seats per Departure Is More Than Double US Airways Average Average Seats per DCA-MCI Departure % +44 Seats % +80 Seats Southwest Frontier U.S. Airways ( ) (E190) (2-E170, 1-CRJ) Source: Innovata Schedule data for March 12, 2014 and January 8, 2014 for Frontier.

14 Exhibit WN-6 OAK is the Largest Domestic Airport Without Direct Service to DCA Total Domestic Onboard Passengers (Millions) Largest U.S. Airports Without Direct (Same-Plane) Service to DCA OAK SNA SMF SJC SAT Source: U.S. DOT T-100 Data, YE Nov 2013, via Diio.

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