BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) 2016 U.S.-CUBA FREQUENCY ) ALLOCATION PROCEEDING ) DOCKET OST-2016-0021 ) REPLY OF EASTERN AIR LINES GROUP, INC. Communications with respect to this document should be sent to: John R. Mietus, Jr. LAW OFFICE OF JOHN MIETUS, LLC 6400 Goldsboro Road, Suite 215 Bethesda, Maryland 20817 (202) 747-5212 john@mietuslaw.com Counsel for EASTERN AIR LINES GROUP, INC. March 21, 2016
BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) 2016 U.S.-CUBA FREQUENCY ) DOCKET OST-2016-0021 ALLOCATION PROCEEDING ) March 21, 2016 ) REPLY OF EASTERN AIR LINES GROUP, INC. Thirteen applicants offer the Department a diverse set of options, further developed in last week s answers, for allocating new U.S.-Cuba scheduled authority. Some applicants look forward to an exciting, competitive, developmental market, while others espouse a level of greed or monopolistic thinking that is awkward as the Administration urges Cuba to adopt capitalist, free-market ways. Eastern Air Lines Group, Inc. ( Eastern ) continues to believe that the Department s geographic allocation of oversubscribed Havana frequencies should reflect their relative shares of U.S.-Cuba, origin-and-destination (O&D) traffic, focusing on the Cuban- American population present in South Florida. Eastern also believes that the Department should take every opportunity to promote inter-carrier competition from specific U.S. points or regions. Experienced and able, Eastern is an appropriate applicant for U.S.-Cuba frequencies, and its proposed service will further both of these public interest goals.
Eastern Air Lines Reply Page 2 Many applicants have recognized the paramount importance of the Miami-Havana market, for which Eastern has requested one daily frequency and three other carriers have requested 15 more. While there is some debate over the relative importance of Havana service from other Florida airports, several applicants have argued vigorously for it. But American Airlines has argued, at length, that only a single U.S. carrier should offer scheduled Florida-Havana service: American Airlines at Miami. Such a monopoly might not put off the Cuban government, which has maintained Cubana s decades-long monopoly in international jet service. But American s proposal is antithetical to American values of open competition and market forces on which our economy is built. Fortunately, the Department need not contradict the Administration s economic message to Cuba and grant American s full proposal; there are viable, competing service proposals from Delta, Eastern, FedEx, and Frontier at Miami and from several other carriers across Florida. Eastern s service proposal is bolstered by a record of successful Cuba charters. It now operates 90+ charters each month, will be adding public charter service to its sixth Cuban city, and has flown Major League Baseball teams and the front office, as well as other important business and diplomatic charters. Unfortunately, that history was lost on a few Eastern critics. American agreed with Eastern that prior U.S.-Cuba operating experience is important, and American s Exhibit AA-R-219 showed 329 Eastern-operated Cuba charters in 2015. Yet American claimed that Eastern
Eastern Air Lines Reply Page 3 has no appropriate experience? 1 Delta similarly ignored Eastern s Cuba experience (which Delta cannot match), choosing instead to assert that the history of small, limited scope carriers (implying Eastern and others) in limited-entry markets is poor and littered with failures.... 2 Such an oversimplification would be a poor basis for ignoring the potential competition of smaller carriers in setting up scheduled service in the novel, specialized U.S.-Cuba market. In any case, the Department need not consign Eastern to the litter basket 3 on Delta s say-so. Eastern s excellent operational record demonstrates its ability to execute well-founded business plans, and it has strong investor backing. These attributes, not lists of carriers past, are what count. Others applicants have questioned Eastern s aircraft. Frontier (at 8-9) argued that their 145-seat configuration would somehow mean higher fares would prevail, though the fares Frontier fears would likely be disciplined by other carriers operating as many as nine daily Miami frequencies. JetBlue (at 39) questioned whether Eastern s fleet is large enough (to cover two block 1 See American at 11. Unless otherwise specified, citations are to Answers filed by carrier applicants in this proceeding. 2 Delta at 3. Historical lists catch readers eyes; witness the explosion of listicles as web page filler. # U.S.-Cuba Applicants You Won t Believe Were Once in Bankruptcy Court would be catchy too, but also of limited value in assessing the public interest. 3 Cf. William Safire, On Language; Dust Heaps of History, N.Y. TIMES, Oct. 13, 1983, http://www.nytimes.com/1983/10/16/magazine/on-language-dust-heaps-ofhistory.html.
Eastern Air Lines Reply Page 4 hours daily?). And despite extensive discussion about the O&D nature of the Miami-Havana market not requiring a domestic feeder network, a popular theme was to criticize Eastern s small fleet for not making domestic connections available to Miami-Havana service. 4 Some have suggested that it s procedurally improper, or perhaps simply too early, for the Department to consider Eastern s application. The most vocal was JetBlue (at 39-40), which fretted that Eastern s 2015 fitness finding might no longer be relevant, evoked eviscerat[ion of] [P]residential review provisions, and questioned the wisdom of granting more authority to a carrier that has not yet celebrated a birthday. However, JetBlue started service with much the same boldness it now criticizes in Eastern. As the mysterious New Air, it applied in February 1999 for 75 New York JFK slot exemptions without a pending request for domestic operating authority, and it asked the Department to park unused exemptions for up to three years while it went about building an airline. 5 Several years later, the Department granted JetBlue its first foreign authority -- by exemption and therefore without the grant of a certificate, Presidential review under 49 U.S.C. 41307, or a docketed fitness proceeding. DOT simply noted: 4 See Delta at 16, Frontier at 8-9, JetBlue at 40, Silver at 27, Southwest at 52, Spirit at 13. Cf. American at 3,6,9. 5 JetBlue s slot exemption request, featuring a phase-in period of three years, was filed in Docket OST-1999-5085. JetBlue filed its application for domestic certificate authority three months later in Docket OST-1999-5616.
The foreign air transportation services authorized here are not markedly different in terms of aircraft size or stage length from the carrier s current scheduled interstate operations under its existing certificate authority. We, therefore, found that JetBlue is qualified to provide the proposed air transportation services for the period covered by the exemption. Eastern Air Lines Reply Page 5 * * * On the basis of data officially noticeable under Rule 24(g) of the Department s regulations, we found the applicant qualified to provide the services authorized. 6 The Department can and should consider Eastern s U.S.-Cuba scheduled service proposal now. DOT has issued exemptions to transition carriers to new types of authority (foreign from domestic, scheduled from charter) they had not previously held. The key factor is the similarity of a proposed operation to the carrier s existing service. 7 Here, Eastern operates frequent Miami-Havana charter flights with B737-800 aircraft (last year, an 6 Notice of Action Taken (corrected) dated March 18, 2004 in Docket OST-2004-17265 (JFK-Santo Domingo/Santiago, Dominican Republic). In fact, the first Presidential review of JetBlue authority occurred only in December 2005, covering blanket integration authority granted by Order 2005-12-5. 7 Exemptions awarding carriers their first foreign authority, as with JetBlue, occur with some regularity. See, e.g., SeaPort Airlines, Inc., Notice of Action Taken dated Sep. 4, 2014 in Docket OST-2014-0110 (interstate scheduled carrier receives San Diego-San Felipe, Mexico exemption). All-cargo carriers with charter authority similarly have received their first scheduled, foreign authority by exemption. See, e.g., Centurion Air Cargo, Inc., Notice of Action Taken dated Sep. 2, 2004 in Docket OST-2004-18880 (granting scheduled Colombia authority); TradeWinds Airlines, Inc., Notice of Action Taken dated Aug. 20, 2004 in Docket OST-2004-18674 (granting scheduled Korea authority; emphasis added): TradeWinds currently provides all-cargo charter flights between the United States and Asia. Operationally, the services proposed in the instant application are not markedly different in scope from those charter services. Thus, we found no reason to question the carrier's qualifications to provide the [scheduled] services proposed in the present application.