BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

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1 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Application of SOUTHWEST AIRLINES CO. for an exemption pursuant to 49 U.S.C to engage in foreign scheduled air transportation of persons, property and mail between Houston Hobby Airport and Cancun, Mexico City, Puerto Vallarta, and San Jose del Cabo, Mexico Docket DOT-OST (HOU-CUN) (HOU-MEX) (HOU-PVR) (HOU-SJD) Application of SOUTHWEST AIRLINES CO. for an exemption pursuant to 49 U.S.C to engage in scheduled foreign air transportation of persons, property and mail between the United States and Belize Docket DOT-OST ANSWER OF THE CITY OF HOUSTON Communications with respect to this document should be sent to: Mario C. Diaz Director Ian Wadsworth Chief Commercial Officer Department of Aviation CITY OF HOUSTON John F. Kennedy Blvd. Houston, TX (281) (281) (fax) Rachel B. Trinder ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C (202) (202) (fax) For the City of Houston Dated: December 29, 2014

2 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Application of SOUTHWEST AIRLINES CO. for an exemption pursuant to 49 U.S.C to engage in foreign scheduled air transportation of persons, property and mail between Houston Hobby Airport and Cancun, Mexico City, Puerto Vallarta, and San Jose del Cabo, Mexico Docket DOT-OST (HOU-CUN) (HOU-MEX) (HOU-PVR) (HOU-SJD) Application of SOUTHWEST AIRLINES CO. for an exemption pursuant to 49 U.S.C to engage in scheduled foreign air transportation of persons, property and mail between the United States and Belize Docket DOT-OST ANSWER OF THE CITY OF HOUSTON The City of Houston ( Houston or the City ) respectfully submits this answer to the applications filed on December 11, 2014 by Southwest Airlines Co. ( Southwest ) for the bilateral designations and other authority necessary to operate scheduled foreign air transportation between Houston s William P. Hobby Airport ( Hobby or HOU ), on the one hand, and Cancun, Mexico City, Puerto Vallarta, and San Jose del Cabo, Mexico, on the other hand commencing in October 2015, with sales of the flights to begin in

3 Page 2 the first quarter of 2015 as well as for the authority necessary to operate scheduled foreign air transportation between Hobby and Belize City. 1 Houston s air service to Mexico is a key component of the vibrant economic and cultural relationship between them. Houston is already the nation s largest air transportation gateway to Mexico, and its international air traffic overall is growing at a record pace. Since the year 2000 Houston s international passenger count has increased by an impressive 60%, and as of the end of October 2014 its year-to-date international traffic was up 10% over the same period in This remarkable air traffic growth reflects Houston s role as one of the key engines of the U.S. economy. If the greater Houston Metropolitan Statistical Area ( MSA ) were a State, it would rank eighteenth in population, ahead of Missouri and Maryland. 2 Indeed, with a gross product of $533 billion in 2013, the region has a GDP that exceeds that of all but 21 foreign countries. A significant component in Houston s ever-growing international traffic is the region s strong position as a leading location for major companies that have a global presence. The Houston region is home to the headquarters of 26 of the 2014 Fortune 1 Because the U.S.-U.K. Bermuda 2 agreement, which is applicable to this service, provides for unlimited U.S. carrier services between the U.S. and Belize, Houston believes that grant of the Belize authority requested by Southwest in docket DOT-OST should not be controversial. Nevertheless, Houston wishes to confirm its strong support for Southwest s HOU-BZE application, as well as for the carrier s recent announcement that it will operate HOU-SJO services starting in October 2015 pursuant to its existing U.S.-Costa Rica authority in docket DOT-OST Both Belize City and San Jose are important destinations for leisure and business passengers from Houston and the south central U.S., and Southwest will introduce important new competition into both of those markets. 2 See 2014 Houston Facts, (June 2014). 2

4 Page companies and 28 of the 2014 Forbes Global 2000 companies, 3 and the Houston metroplex is the leading job creator among U.S. cities. 4 This remarkable economic strength provides ongoing new opportunities for carriers, passengers and shippers, and ever-growing potential for additional air services to meet the community s increasing needs. These needs are especially vital and growing where Mexico is concerned. Indeed, more than 600,000 members of the greater Houston community comprising over 44% of Houston s foreign-born population were born in Mexico. As a result, Houston is very fortunate that multiple U.S. and Mexican carriers already are serving or wish to serve Mexico markets from Houston. Notably, United today serves 26 destinations in Mexico from its hub at Houston s George Bush Intercontinental Airport ( IAH ) a transborder network unmatched by any other U.S. carrier. In light of the growing demand for additional Houston-Mexico air services, Houston is extremely pleased that the U.S. and Mexico recently initialed an important update to their bilateral air services agreement; the City hopes that the procedures necessary for the agreement s implementation will be completed as soon as possible. In particular, the new provisions allowing for unlimited designations in transborder citypair markets for third- and fourth-freedom passenger services will finally enable U.S.- Mexico services to expand commensurate with market needs. 3 Additionally (based on data provided by the Greater Houston Partnership), more than 1,200 Houston companies currently do business with Mexico; 44 have subsidiaries in Mexico; and numerous Mexican companies have subsidiaries in Houston. 4 See, e.g., 18 Facts That Make Houston The Best City In America, businessinsider.com/houston-best-city-in-america (July 1, 2014) (noting that among the twenty most populous U.S. metropolitan statistical areas, Houston has by far achieved the highest percentage of jobs recovered since the end of the economic downturn). 3

5 Page 4 This development will be especially critical for Houston and Hobby; extensive new international facilities are under construction at Hobby, and are on schedule for an October 2015 opening. These facilities, financed in significant part through a partnership with Southwest, will enable not only new international services from Southwest but also from other U.S. and foreign carriers, with services to Mexico as the key component. These services not only will significantly expand Houston s overall access to Mexico, but also will provide important competition to existing and future Mexico services from IAH, and are anticipated to expand the opportunities for all carriers. A City study on the impact of opening Hobby to international services concluded that once the services are fully developed they will generate 1.3 million new passengers (primarily in Houston-Mexico markets) including not just new traffic at HOU but also stimulated net growth at IAH; additional benefits will include significant overall fare savings for local and connecting passengers using IAH and HOU as gateways to Mexico. Furthermore, Hobby s new role as an international gateway is expected to create 14,000 new jobs and have a total economic impact of $1.2 billion in the greater Houston area. As the Department knows, while the U.S. and Mexico anticipate implementation of the new bilateral in early 2016, that is not soon enough to ensure open access to all markets by the time the new Hobby international facilities open in 2015, and as Southwest has indicated in its application, it needs to begin marketing the new services very soon. In two of the four city-pair markets in which Southwest seeks designations Houston-Cancun and Houston-Puerto Vallarta there currently are unallocated designations available for services by a U.S. carrier. But in the other two markets 4

6 Page 5 Houston-Mexico City and Houston-San Jose del Cabo all the available designations have been allocated, including in each market two that are held by United and a regional affiliate, one of which Southwest seeks in each city-pair. Houston greatly values all of the services provided by carriers at both HOU and IAH, and has no desire to lose of any of its existing services, even during the interim period prior to implementation of the new agreement. Both United and Southwest are important partners with the City. Both have made substantial commitments to and generate extensive air transportation benefits for the City, and major expansion and development projects are underway at both IAH and HOU to accommodate the carriers current and future growth. But at the same time, the City s interest and obligation is to promote additional air services and competition, and in seeing that new entrant carriers desirous of providing Mexico services from Houston can obtain the authority that they need. Houston hopes that the Department will explore all opportunities available to approve and secure additional rights from Mexico so that all carriers wishing to serve these markets are able to obtain the authority they need on a timely basis. As Southwest has indicated, it needs to receive the authority as soon as possible so that it can begin selling flights by the first quarter of 2015, given the Hobby international facilities opening date and the October 2015 start date for Southwest s services. Houston asks the Department to ensure that whatever action is taken, it is concluded consistent with that timeframe. Accordingly, Houston asks the Department to take the steps necessary to ensure that Southwest receives the authority it seeks and on the timeframe it seeks, with 5

7 Page 6 respect to both the Houston-Mexico markets at issue in docket DOT-OST and the Houston-Belize authority requested in docket DOT-OST Respectfully submitted, Dated: December 29, 2014 Rachel B. Trinder ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C (202) (202) (fax) rbtrinder@zsrlaw.com For the City of Houston 6

8 CERTIFICATE OF SERVICE I certify that on this 29th day of December 2014, a copy of the foregoing was served on the parties named below in accordance with the Department s Rules of Practice. Rachel B. Trinder rsilverberg@sgbdc.com, jjohnson@sgbdc.com, and mgoldman@sgbdc.com (Counsel for ABX Air) chuck.hill@airtransport.cc (Air Transport International) msinick@ssd.com (Counsel for Alaska Airlines) agoerlich@ggh-airlaw.com (Counsel for Allegiant Air) robert.wirick@aa.com, francis.heil@aa.com, and howard.kass@aa.com (American Airlines) jcanny@amerijet.com (Amerijet) jrichardson@johnlrichardson.com (Counsel for Amerijet) rpommer@atlasair.com (Atlas Air) john@mietuslaw.com (Counsel for Centurion Air Cargo) sascha.vanderbellen@delta.com, chris.walker@delta.com, and sametta.c.barnett@delta.com (Delta Air Lines) cefelts@fedex.com and nssparks@fedex.com (Federal Express) matwood@cozen.com and slachter@cozen.com (Counsel for Frontier) jhill@cooley.com and perkmann@cooley.com (Counsel for JetBlue Airways) robert.land@jetblue.com (JetBlue Airways) kevin.montgomery@polaraircargo.com and peter.beckett@polaraircargo.com (Polar Air Cargo) robert.cohn@hoganlovells.com and patrick.rizzi@hoganlovells.com (Counsel for Republic Airlines) ethan.blank@rjet.com (Republic Airlines) temerson@skywest.com (SkyWest Airlines) bob.kneisley@wnco.com and leslie.abbott@wnco.com (Southwest Airlines) dkirstein@yklaw.com and jyoung@yklaw.com (Counsel for Spirit Airlines)

9 and (Sun Country) and (United Airlines) and (Counsel for United Airlines) and (Counsel for UPS) (UPS) and (Virgin America) and (DOT) (FAA) (USTRANSCOM) and (State Department) (Southwest Airlines Pilots Association)