BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON D.C.

BEFORE THE OFFICE OF THE SECRETARY U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON D.C. ) 2012 CHICAGO - CANCUN ) Docket DOT-OST-2012-0001 COMBINATION SERVICE PROCEEDING ) ) ) Applications of ) ) AIRTRAN AIRWAYS, INC ) Docket DOT-OST-2011-0225 ) FRONTIER AIRLINES, INC. ) Docket DOT-OST-2011-0214 ) For an exemption pursuant to ) 49 U.S.C. 40109 ) ) ANSWER OF AIRTRAN AIRWAYS, INC. Pursuant to the schedule set forth in Order 2012-1-4 establishing this proceeding, AirTran hereby submits this Answer in response to Frontier s Amendment and Supplement filed January 19, 2012 in this docket. 1 AirTran s previous pleadings 2 have described in detail the profound flaws in Frontier s application for a scheduled U.S. carrier designation in the ORD-CUN market, and nothing in Frontier s January 19 submission cures those flaws. Stripped of its rhetoric and baseless claims, Frontier s application involves nothing more than a dressed-up charter program masquerading as a scheduled service that would needlessly block AirTran/Southwest (and Chicago Midway Airport) from the CHI-CUN market. AirTran s proposal to serve -CUN, on 1 Common names of the carriers are used. 2 Answer to Frontier, December 6, 2011; Reply to Frontier, December 22, 2011; and Supplement to Application, January 19, 2012. 1

the other hand, would generate sorely needed competition and enormous public benefits for the Chicago region, while still allowing Frontier to participate in the market. I. FRONTIER S PROPOSAL WOULD DISSERVE THE CHICAGO PUBLIC AND WASTE A VALUABLE U.S. SCHEDULED DESIGNATION. Beginning with its initial application for exemption on November 21, 2011, Frontier made abundantly clear that its entire motivation in seeking ORD-CUN authority was to provide capacity for Apple Vacations, so that Apple would not suffer disruption due to USA 3000 s planned termination of service at the end of January 2012. As Frontier put it, Frontier has entered into an agreement with Apple Vacations to replace [its] current allocation of seats on USA 3000 s flights and ensure Apple Vacation s customers a seamless transition from USA 3000 s service 3 Accordingly, Frontier s service proposal reflected its assumption of USA 3000 s contract with Apple, proposing to operate one round-trip charter between ORD and CUN approximately 321 days per year. 4 Since then, Frontier has even acquired the USA 3000 aircraft to satisfy Apple s requirement for 168 seats. 5 So, the transition from USA 3000 to Frontier is already well underway, and is confirmed by Frontier s recent disclosure that it will commence public charters with Apple Vacations on or about January 31, 2012 6 In fact, everything Frontier proposed in its original application can be operated with charter authority, as the marketing of the seats by Apple does not require Frontier to hold scheduled authority. This is fully consistent with past practice, since neither Apple nor USA 3000 (despite holding 3 Frontier Application for Exemption, November 21, 2011 at p. 2. 4 Id. and Frontier s Reply and Answer, December 15, 2011. 5 According to AeroTransport Data Bank, USA 3000 s A320 (N261AV) was delivered to Frontier on or about January 8, 2012. 6 Frontier s Amendment and Supplement to Application, January 19, 2012, at p. 11. 2

scheduled authority) has historically sold scheduled seats directly to the public in the Chicago-Cancun market. It was not until Frontier s January 19 filing, more than eight weeks after its initial application, and six weeks after AirTran s competing application was filed, that Frontier amended its service proposal to reveal a new-found interest in selling individual tickets to the public outside of providing lift for Apple charters. Further, Frontier has now increased its proposed frequency to year-round daily service, matching the schedule proposed by AirTran in its competing application. Frontier also claims that it will operate 122,640 annual seats in its newly-expanded proposal. 7 However, for 321 days the seats will be contracted to and marketed by Apple. This represents 107,856 seats, or about 88% of the total capacity Frontier proposes to operate. All of these 107,856 seats will be sold not by Frontier or its GDS partners, but by Apple as a minor component of a bundled fare package that includes hundreds of dollars of ground services and accommodations the passenger must purchase. At most, therefore, Frontier would be able to sell the remaining 14,784 seats (only 12% of its total capacity) to the public. With such a miniscule presence in the public market, Frontier will have no meaningful impact on competition, and its claim to be the low-fare alternative in the market is absurd. AirTran/Southwest would exert significantly more pricing pressure on the incumbents United and American than Frontier, especially since most of its fares will be buried within an all-inclusive tour package price. 7 168 seats x 2 x 365 days. 3

In fact, even assuming Frontier s 14,784 seats public seats materialize, 8 they represent less than 15% of AirTran/Southwest s initial schedule of 100,010 seats, and only 12.7% of the 116,038 seats Southwest could provide in the future using the B737-800 (175 seats) during peak periods, along with the 143 seats in its reconfigured B737-700 s (Exhibit FL-R-1). Of course 100% of the AirTran/Southwest seats will be available to the general public without any requirement to purchase an expensive ground package. The expanded Frontier proposal presents the carrier with a new dilemma Frontier has no presence at ORD; no online ORD connecting routes; and little or no market awareness in Chicago. In a desperate attempt to plug this gaping hole Frontier now argues it will obtain interline connections at ORD from its direct competitors, namely United and American. It supports this claim by reference to interline agreements it has with several carriers (Frontier, Exhibit 11). However, Frontier makes no mention of code share or joint fare agreements with United and American. Indeed, why would UA or AA offer joint fares to a head-to-head competitor that would make interlining easier and less expensive? The answer is they wouldn t. So, Frontier s hypothetical interline connecting passenger would be charged the (more expensive) sum of the local fares, making it significantly cheaper for the passenger to travel the whole route entirely on UA or AA. AirTran does not recall another limited entry route case where an applicant alleged it will obtain interline traffic support from its incumbent direct competitors that operate in the same market that is at issue. Yet, in Exhibit 10 Frontier proudly touts the 8 It is also possible that Frontier has negotiated an expanded contract with Apple and that none of these incremental seats will be available to the public. Frontier has hidden from view all details of its Apple contract. 4

extensive scheduled service networks of United and American at O Hare. Even apart from the expense and inconvenience of Frontier s dubious interline concept, many of the routings shown are patently impractical. Frontier implies, for example, that a United passenger from Honolulu will fly to ORD on United and then connect to a Frontier flight to Cancun. Honolulu is already on the same latitude as Cancun. Why wouldn t the passenger simply travel online United connecting at LAX? Similarly, why would a passenger from Miami, Atlanta, Houston, or Dallas fly to ORD (a virtual backhaul) to make an interline connection on Frontier to Cancun and pay the sum of the local fares to boot, when the same passenger could go nonstop to/from Cancun. Frontier s interline connection theory is absurd on its face, and Exhibit 10 is replete with similarly preposterous passenger routings. Further, Frontier s claim of robust interline traffic support in this case is contradicted by its own experience in other Mexico markets. At Denver, Frontier s largest market, which would be expected to generate a relatively high number of interline connections, Frontier captures only a miniscule volume of interline bookings. In the DEN-CUN market, for example, only 0.7% of Frontier bookings represent interline connections to/from United. In DEN-PVR and DEN-SJD, United connecting passengers on Frontier were similarly minimal at 0.9% and 1.2% respectively (Exhibit FL-R-2). This volume of connecting traffic is so insignificant that it likely represents passengers transferred by United to Frontier due to cancellations or oversales on its own flights. In sum, Frontier s hoped-for support from interline traffic simply is not credible, as logic combined with Frontier s own experience at the Denver hub exposes the fallacy of this proposition. This underscores what AirTran has been saying for weeks that 5

Frontier has no legitimate need for scheduled authority in this market. Frontier s application for ORD-CUN was predicated entirely on stepping into the shoes of USA 3000 to provide lift for Apple Vacations without disruption, and it has already accomplished that objective under the unrestricted charter provisions of the U.S.-Mexico agreement. Under the circumstances, Frontier s demand for the only available scheduled carrier designation in the market is outrageous. Frontier s proposal would not only squander a valuable authority for which the U.S. government strongly negotiated, it would unnecessarily block AirTran/Southwest from the market, and worst of all would preclude the new competition and public benefits that AirTran/Southwest would provide for Chicago consumers by serving Midway - Cancun. Unlike Frontier, AirTran does not base its proposal on imaginary interline connections from direct competitors. Instead AirTran will rely on Southwest s huge presence and demonstrable popularity in Chicago for the generation of local passengers in the -CUN market, supported by numerous on-line connections from AirTran/Southwest s extensive network that are based on actual flight schedules that mesh with AirTran s proposed -CUN flights. Also unlike Frontier, AirTran does not seek to block its competitor from the market. Awarding scheduled authority to AirTran in the -CUN market will in no way inhibit Frontier from fully serving Apple Vacations in the ORD-CUN under its charter authority. Finally, Frontier s attack on an alleged lack of connectivity between AirTran and Southwest is completely misguided. Southwest acquired AirTran precisely for the purpose of integrating that carrier s services into Southwest s system. The acquisition 6

closed in May 2011, and the integration of the two carriers operations is proceeding apace. Southwest and AirTran expect to receive a Single Operating Certificate from the FAA in the first quarter of 2012 (the quickest SOC issuance of any large airline merger), and expect to achieve full connectivity later this year. It is for that very reason that AirTran has focused so much attention in this case on the public benefits that will be achieved by a combined AirTran and Southwest. Frontier s denial of this obvious fact is inexplicable and cannot be taken seriously. II. HISTORY SHOWS THAT AIRTRAN/SOUTHWEST S MIDWAY- CANCUN SERVICE WILL COMPETE VIGOROUSLY WITH O HARE- CANCUN SERVICE. Beginning in 1985, when Southwest entered its first nonstop Midway market (STL), until its present day service to 57 nonstop routes, Southwest s experience has shown consistently that air service at Midway competes vigorously with air service at O Hare. Throughout this long history, whenever Southwest entered new markets from, fares fell and traffic rose at both and ORD. This phenomenon was demonstrated in our earlier Exhibits FL-120 through FL-122 for the -LGA, MSP, and BWI markets respectively. Several additional examples are provided in attached Exhibits FL-R-3 through FL-R-9 (involving Southwest s entry into -CLE, PVD, BDL, CMH, OMA, OAK, and SDF). Ignoring this obvious reality, Frontier boldly claims that Midway is not an economic substitute for O Hare and does not discipline fares at O Hare, as reflected in significantly (22%) higher average fares at O Hare in common markets. 9 This is at best misleading. Fares are naturally higher at ORD for several reasons, including key 9 See Frontier January 19 Amendment and Supplement, at p. 2. 7

differences between the services and costs at ORD vs.. These differences include, but are not limited to, the following: There is a much different mix of traffic at ORD compared to. The ORD airlines carry a higher share of business traffic than Southwest carries at. ORD is a key hub in both AA s and UA s global alliance networks, which naturally leads to a disproportionate share of corporate accounts and higher-fare passengers., on the other hand, is known for its convenience and wide array of low-cost travel options. Beyond this, the ORD carriers have always had a bias toward charging the maximum that the market will bear. Southwest and AirTran, on the other hand, have tended to price as low as possible consistent with their return on investment objectives. Southwest has historically viewed the automobile and other forms of surface transportation as its primary competitors, which requires its air fares to be kept low independent of airline competition. At ORD, airport costs per enplaned passenger are approximately $10 to $15 higher for a small operator like Frontier compared to AirTran/Southwest s costs at. Further, the disparity between ORD costs and costs is increasing. 10 The massive network of commuter and RJ flights at ORD (but not at ) has the effect of raising local ORD fares to cover the much higher unit costs of 10 During the FAA s deliberations over federal funding for the now-underway O Hare Modernization Program (OMP), evidence was presented that the cost per enplaned passenger at ORD would increase from approximately $9 in 2003 to nearly $30 after completion of the OMP. See A Critical Assessment of the Draft Environmental Impact Statement for the O Hare Modernization Program (OMP), pp. 61-62, submitted to the Federal Aviation Administration on behalf of Bensenville and Elk Grove Village, Illinois, April 6, 2005. 8

the small aircraft, compared to much lower unit costs of 137-seat full-sized jets operated by AirTran/Southwest at. In addition, s fare discipline on ORD and the economic substitutability of services at the two airports is convincingly demonstrated by the high degree to which Southwest fares at have caused the ORD carriers, especially United and American, to lower their fares in response. A summary of the individual route examples shown in the AirTran exhibits is presented in Exhibit FL-R-10. The ORD fare reductions in these examples ranged from 12% to 60%, and that measures only the short term fare impacts from the year before AirTran/Southwest entered the market to the year after entry. Consequently, it is naïve and uninformed to argue that AirTran/Southwest pricing at does not impact fares at ORD. It clearly does, and it has delivered billions of dollars in savings to Chicago consumers. Finally, to further demonstrate the market power of AirTran/Southwest in disciplining competitive fares it is instructive to examine the fare history at Denver. Frontier challenged United at DEN before Southwest entered, and succeeded in lowering fares somewhat below United s levels. However, after Southwest entered DEN markets that were already served by both United and Frontier, the average market fare declined by an additional 25% (Exhibit FL-R-11). Further, Southwest s prices to passengers at DEN are lower than Frontier s in two-thirds of nonstop markets where they compete head-to-head (18 out of 27 such markets), once taking into account not just airfares but the checked baggage and reservation change fees that Frontier charges but Southwest does not (Exhibit FL-R- 9

12). 11 Southwest s average price over all 27 markets combined is 2.7% lower than Frontier s. This comparison is conservative (i.e., biased in favor of Frontier) because the checked bag fees used are based on system averages even though travelers in leisure markets check more bags than the average of all routes in the carrier s system. III. PASSENGER DEMAND FOR SERVICE AT MIDWAY IS EQUAL TO THE DEMAND AT O HARE. Contrary to Frontier s disparaging (and uninformed) description of Midway Airport, AirTran has already shown that Midway and O Hare are equally effective in attracting traffic when the level of services offered at each airport is similar. Exhibit FL- 117, submitted with AirTran s January 19 Supplement, shows that in large Chicago markets with similar nonstop service at both and ORD, the volume of passengers is 99.4% as great as the ORD volume. This is unsurprising since, as Exhibit FL-105 demonstrates, the population within a 60-minute drive of is 94% as great as the population within 60 minutes of ORD. Beyond this, there is also evidence that is more effective than ORD in attracting passengers when services are similar at both airports. For the 12 months ended September 30, 2011 Midway s O&D traffic share exceeded its seat share in 26 of the top 30 markets where both and ORD had nonstop service, demonstrating the strength of Midway relative to O Hare (Exhibit FL-R-13). In fact, Midway Airport is more convenient than O Hare for major segments of the Chicago market, and in some respects is clearly preferred by Chicago travelers. First, Midway is only 10 miles from downtown Chicago while O Hare is 18 miles from 11 The average of such fees per fared passenger is $8.80 for Frontier but only $0.38 for Southwest. These amounts have been included in the prices charged by both carriers and the percentage differences are shown in Exhibit FL- R-12. 10

downtown. 12 This 8 mile difference is highly significant to many passengers in this very large and congested urban market. Second, the experience of connecting passengers is much better at than ORD. At ORD, domestic-to-domestic minimum connecting time is 50 minutes, but only 25 minutes at ; domestic-to-international minimum connecting time is 75 minutes at ORD and 60 minutes at ; and international-to-domestic minimum connecting time is 90 minutes at ORD and 60 minutes at. 13 Third, air traffic congestion creates a much higher incidence of delayed flights at ORD than. According to DOT reports, the average percentage of arrivals delayed beyond 15 minutes was 28.4% at ORD and 19.1% at for the 12 months ended November 30, 2011. 14 So, Frontier s insinuation that Chicago-Cancun passengers prefer ORD over by a factor of 30 to 1 for Cancun service 15 is self-serving and patently false. As AirTran/Southwest pointed out in its January 19 Supplemental filing, today s CHI-CUN traffic is at ORD because that is where all the nonstop service is operated. Connecting service is obviously not a competitive substitute for nonstop flights (see Exhibit FL-116). As AirTran demonstrated previously, s share of Chicago traffic dramatically increases whenever Southwest inaugurates new service that competes with ORD. In the case of Chicago-Washington Dulles (IAD), for example, passengers jumped from only 2.5% of ORD s volume before Southwest s entry to 122% after entry (Exhibit FL-118). In the -BUF market, traffic expanded from only 2.9% of ORD 12 Official Airline Guide, January 2012. 13 Id. 14 DOT Air Travel Consumer Report, latest 12 monthly issues. 15 See Frontier s January 19 Amendment and Supplement, at pp. 2 and 4. 11

traffic prior to Southwest s entry to 73% after Southwest entered (Exhibit FL-119). For both markets the total Chicago traffic increased significantly due to Southwest s new service at 65% in the case of Chicago IAD, and 131% for Chicago-Buffalo. Further evidence of the fact that and ORD effectively serve the same Chicago market is found in a comparison of airline schedules in the multi-airport metropolitan areas of Chicago, New York/Newark, and Baltimore/Washington (see Exhibit FL-R-14). In New York/Newark, there are 49 destinations that are served by the same carrier at more than one New York area airport (Exhibit FL-R-15). For example, Delta serves Atlanta from all three New York area airports JFK, EWR and LGA. This is just one of the total 49 carrier-destination combinations in New York/Newark. Why does this occur? Because the carriers serving the New York/Newark area know that JFK, LGA and EWR serve different portions of the region and no single airport serves the entire area. The same phenomenon occurs in the Baltimore/Washington area. Exhibit FL-R- 16 shows that there are 31 destinations where a carrier serves more than one of the three Baltimore/Washington airports. Again, the carriers serving that area know that BWI, DCA, and IAD primarily serve different parts of region, and it is necessary to serve more than one of those airports to effectively access the entire market. However, in the case of Chicago, there are only three carrier-destination combinations where the same carrier serves the market from both Chicago airports (Exhibit FL-R-17). This is because major Chicago airlines like United, American and Southwest know they can access the same domestic traveler population at either 12

or ORD, and there is no need to duplicate services at two airports and incur unnecessary costs. IV. AIRTRAN/SOUTHWEST S CUSTOMER SERVICE, CONVENIENCE, AND VALUE ARE FAR SUPERIOR TO FRONTIER S. Despite Frontier s claims that it provides a better product with substantially more amenities, a look at objective industry rankings and onboard product offerings shows conclusively that AirTran/Southwest provide far superior customer service and value than Frontier. For example, the 2011 Airline Quality Rating ( AQR ) study ranked AirTran and Southwest first and fifth respectively for Overall Quality, while Frontier placed a distant ninth. Similarly, this same study revealed that Frontier had 1.23 consumer complaints per 100,000 passengers, five times the number for Southwest (0.27). 16 Further, regarding onboard amenities, Frontier fails to mention that it requires customers to pay additional fees for all of its so-called enhanced products. For example, Frontier charges $6 to watch TV, 17 $8 to watch a movie, 18 and up to $14 for food and beverage items. 19 Similarly, its so called STRETCH seating and advanced seat assignments come at an additional cost to the consumer based on fare class. 20 These features and other inflight sales options should be considered sources of supplemental fare revenue rather than disguised as consumer benefits. Moreover, the value of any of these product offerings decreases significantly when airfare is bundled into packaged vacations. In this context, consumers focus less 16 See http://www.airlineinfo.com/public/2011aqr.pdf 17 See Frontier Airlines Inflight Entertainment, www.frontierairlines.com/flight-info/inflight-entertainment 18 Id. 19 See Frontier Airlines Inflight Catering, www.frontierairlines.com/flight-info/inflight-catering 20 See Frontier Airlines STRETCH Seating, www.frontierairlines.com/flight-info/stretch-seating 13

on the airline experience and more on the entirety of the vacation package when making purchasing decisions. One wonders what the actual value of Frontier s competitively attractive service product is when Frontier intends to sell 88% of its seats via Apple Vacations and not directly to the public (Exhibit FL-R-1, p. 2). By comparison, Southwest provides an array of benefits to passengers at no additional charge. Southwest s policy is to provide a high-value, no-hassle, product delivered with exceptional customer service and without nickel-and-diming customers. Significantly, Southwest does not charge passengers for their first or second checked bag, a benefit that is particularly important to international travelers who have a high proportion of luggage to check. Southwest also does not impose a reservation change fee, affording travelers flexibility and confidence in making and adjusting their travel plans. Frontier, on the other hand, charges $20 for the first checked bag, another $20 for the second checked bag, and $50 for changing a reservation. 21 Finally, Frontier s claims about the superiority of its distribution channels are flawed on several levels. For starters, to suggest that Southwest - the largest and most successful low fare airline in the country - has an ineffective distribution system is laughable. Southwest s ability to connect directly with Chicago consumers is unsurpassed, via its website, www.southwest.com (the most popular U.S. airline website by a large margin), 22 as well as telephone reservation centers and awardwinning advertising and marketing efforts. Furthermore, despite Frontier s claim to the contrary, Southwest also distributes its fares through two of the largest GDSs, Sabre 21 See http://www.frontierairlines.com/ 22 Nielsen, YE Nov 2011. 14

and Travelport (which itself includes Apollo and Worldspan). Collectively, these GDSs account for 90% of both the U.S. and Mexico GDS markets. Frontier, on the other hand, needs to rely heavily on expensive GDS s for bookings since it has such a limited presence in many of the cities that it serves - especially Chicago. This is not so much a consumer benefit as it is a carrier weakness. Only about 45% of Frontier s passengers traveling system-wide book directly on frontierairlines.com, 23 indicating that Frontier s GDS booking ratio to/from Mexico is simply in line with how it chooses to distribute its product. With Southwest s long history and enormous presence in Chicago, customers are thoroughly experienced in booking travel directly with the airline and will undoubtedly do so for its future -Cancun service. V. CONCLUSION For the reasons stated above and in its prior submissions, AirTran requests that the Department grant its Application for Exemption and designate AirTran to provide scheduled foreign air transportation of persons, property and mail between and CUN. Respectfully submitted, January 26, 2012 Robert W. Kneisley 23 From Republic s 3Q 2011 Earnings Call. 15

CERTIFICATE OF SERVICE I hereby certify that on January 26, 2012, a copy of the foregoing was served via e-mail on the following persons: robert.cohn@hoganlovells.com (Frontier Airlines) patrick.rizzi@hoganlovells.com (Frontier Airlines susan.kurland@dot.gov paul.gretch@dot.gov brian.hedberg@dot.gov brett.kruger@dot.gov todd.homan@dot.gov esta.rosenberg@dot.gov john.allen@faa.gov ursk@dos.gov Rosemarie S. Andolino Commissioner City of Chicago Department of Aviation rosemarie.sandolino@cityofchicago.org Erin O Donnell Managing Deputy Commissioner City of Chicago Department of Aviation, Midway Airport Erin@cityofchicago.org info@airlineinfo.com Leslie C. Abbott 16

AirTran/Southwest Would Offer Far More Seats to the Public Than Frontier Docket DOT-OST-2012-0001 Exhibit FL-R-1 Page 1 of 2 AirTran/Southwest Proposed Schedule AirTran/Southwest (Future Up-gauged Schedule) 1 Frontier 2 100,010 Seats 116,038 Seats 14,784 Seats 107,856 Seats Seats Offered to the Public Seats Contracted to Apple Vacations 1/ In the future Southwest will have the ability to upguage to the B737-800 during the peak season and on peak days of the week. This estimate of annual seats assumes 50% of all flights are operated with the B737-800 (175 seats) and 50% with the re-configured B737-700 (143 seats). 2/ See page 2

AirTran/Southwest Would Offer Far More Seats to the Public Than Frontier Docket DOT-OST-2012-0001 Exhibit FL-R-1 Page 2 of 2 A. Frontier Schedule for Apple Vacations Period of the Year 1 Mid Dec. thru April (1) (2) (3) (4) No. of Days 136 Weekly Freq. 7 No. of Days Served 2 136 One-Way Seats 3 45,696 May thru August 123 6 105 35,280 Sept. thru early Nov. 76 5 54 18,144 Mid Nov. thru Mid Dec. 30 6 26 8,736 Total 365 321 107,856 B. Public Seats Frontier Schedule Revised to Daily (Assumed to be Outside the Apple Contract) 44 14,784 365 122,640 1/ Reply and Answer of Frontier Airlines, Inc., December 15, 2011, Page 7. 2/ [Column (1) 7] x Column (2). 3/ Column (3) x 168 x 2.

Docket DOT-OST-2012-0001 Exhibit FL-R-2 Frontier Obtains Virtually No Interline Traffic From United on Mexico Service from Denver UA Passengers Connecting to/from F9 as a Percentage of Annual F9 Seats 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0.7% 0.9% 1.2% DEN-CUN DEN-PVR DEN-SJD Source: Adjusted Marketing Information Data Tapes (MIDT), YE Q3 2011; OAG Schedules YE Q3 2011

Docket DOT-OST-2012-0001 Exhibit FL-R-3 Southwest s Entry in -CLE Stimulated Traffic And Lowered Fares at Both ORD and Average Fare O&D Passengers ORD ORD $180 450,000 $170 $160 400,000 397,070 $150 $140 $130 $120 $122 $142 350,000 300,000 315,200 343,450 $110 $100 250,000 $90 $80 $70 $70 200,000 $60 150,000 $50 $40 $30 $41 100,000 79,930 $20 50,000 $10 $0 0. Source: DOT, Origin-Destination Passenger Survey.

Docket DOT-OST-2012-0001 Exhibit FL-R-4 Southwest s Entry in -PVD Stimulated Traffic And Lowered Fares at Both ORD and Average Fare O&D Passengers ORD ORD $250 180,000 166,420 $200 $208 160,000 140,000 $150 $147 $136 120,000 100,000 93,350 108,010 $100 $93 80,000 60,000 $50 40,000 20,000 $0 0 1,150 Source: DOT, Origin-Destination Passenger Survey.

Docket DOT-OST-2012-0001 Exhibit FL-R-5 Southwest s Entry in -BDL Stimulated Traffic And Lowered Fares at Both ORD and Average Fare O&D Passengers ORD ORD $300 400,000 $250 $242 350,000 333,460 $200 $202 300,000 250,000 221,820 $150 $144 200,000 $100 150,000 $50 $47 100,000 50,000 73,440 $0 0 3,800 Source: DOT, Origin-Destination Passenger Survey.

Docket DOT-OST-2012-0001 Exhibit FL-R-6 Southwest s Entry in -CMH Stimulated Traffic And Lowered Fares at Both ORD and Average Fare O&D Passengers ORD ORD $160 350,000 $140 $120 $100 $102 $140 $122 300,000 250,000 287,450 220,650 200,000 $80 161,810 $60 150,000 $40 $40 100,000 $20 50,000 41,390 $0 0 Source: DOT, Origin-Destination Passenger Survey.

Docket DOT-OST-2012-0001 Exhibit FL-R-7 Southwest s Entry in -OMA Stimulated Traffic And Lowered Fares at Both ORD and Average Fare O&D Passengers ORD ORD $140 250,000 $120 $120 200,000 199,630 $100 $80 $78 150,000 134,200 $65 119,450 $60 $49 100,000 $40 50,000 $20 24,180 $0 0 Source: DOT, Origin-Destination Passenger Survey.

Docket DOT-OST-2012-0001 Exhibit FL-R-8 Southwest s Entry in -OAK Stimulated Traffic And Lowered Fares at Both ORD and Average Fare O&D Passengers ORD ORD $300 $270 160,000 148,780 $250 140,000 120,000 $200 $176 100,000 88,490 98,570 $150 $131 80,000 $100 $95 60,000 40,000 36,280 $50 20,000 $0 0 Source: DOT, Origin-Destination Passenger Survey.

Docket DOT-OST-2012-0001 Exhibit FL-R-9 Southwest s Entry in -SDF Stimulated Traffic And Lowered Fares at Both ORD and Average Fare O&D Passengers ORD ORD $180 300,000 $160 $140 $125 $153 $135 250,000 266,630 $120 200,000 $100 150,000 $80 $60 100,000 100,800 $40 $33 50,000 54,210 $20 $0 0 3,950 Source: DOT, Origin-Destination Passenger Survey.

O Hare Fares Declined Significantly Southwest Entered New Markets at Midway Docket DOT-OST-2012-0001 Exhibit FL-R-10 ORD Fare Decrease (Year Over Year) 70% Examples 60% 60% 50% 51% 46% 45% 40% 40% 35% 35% 30% 20% 10% 16% 13% 12% 0% Market BWI CLE OMA MSP BDL OAK PVD LGA CMH SDF ORD Average Fare Year Entry at : $165 $142 $120 $159 $242 $270 $208 $154 $140 $153 Year Entry at : $66 $70 $65 $87 $144 $176 $136 $129 $122 $135 Source: DOT, Origin-Destination Passenger Survey.

Southwest s Entry Into Frontier/United Denver Markets Lowered Prices by an Average of 25% Docket DOT-OST-2012-0001 Exhibit FL-R-11 Weighted Average Fare (All Carriers) $160 $140 $143 $120 $100-25% $107 $80 $60 $40 $20 $0 Market Fare Average For 12 Mos. Market Fare Average For 12 Mos. Note: Includes markets where United & Frontier both had nonstop service before Southwest entered. Markets included are Albuquerque, Austin, Nashville, Chicago, Houston, Las Vegas, Kansas City, Orlando, Oklahoma City, Phoenix, San Diego, Seattle, Salt Lake City, Tampa. Data include the last 12 months directly prior to, and after, Southwest service initiation as weighted by O&D volume. Includes fared passengers only. Source: U.S. DOT Origin & Destination Survey & U.S. DOT T-100 Onboard data.

Southwest Charges Lower Prices in 18 of the 27 DEN Markets Where It Competes Against Frontier Docket DOT-OST-2012-0001 Exhibit FL-R-12 Market DTW LAS FLL PDX LAX MCO IND MSP SAN SNA SEA SFO TUS SAT AUS OMA SMF GEG PHL SLC PHX ABQ BNA STL OKC MCI F9 Price Charged 1 151 110 174 131 115 177 140 113 116 118 140 137 89 117 110 97 130 123 181 91 102 85 142 121 100 127 102 Price Charged 1 139 101 160 122 108 166 132 107 111 112 134 131 85 113 107 94 128 121 181 91 105 89 149 127 108 137 111 % Lower than F9-8.4% -8.2% -7.6% -7.2% -6.4% -6.2% -5.9% -5.7% -4.9% -4.6% -4.5% -4.5% -4.3% -3.3% -2.5% -2.4% -1.8% -1.5% 0.1% 0.3% 2.1% 4.5% 4.9% 4.9% 7.8% 8.3% 8.6% Lower than F9 No No No No No No No No No Weighted by market O&D, Southwest s price charged across all 27 markets is 2.7% lower than Frontier s price charged. 1 Includes average fares plus baggage and reservation change fees per fared O&D passenger ($0.38 per Southwest passenger, and $8.80 per Frontier passenger). Both fees and fares are calculated using YE Q3 2011 data. Includes all DEN markets with nonstop service from both F9 and for the entire 12 month period. Includes fared passengers only. Source: OAG Schedules, YE Q3 2011; US DOT O&D Survey YE Q3 2011, Form 41, YE Q3 2011 for average baggage and change fees per passenger.

Docket DOT-OST-2012-0001 Exhibit FL-R-13 s O&D Traffic Share Exceeds Its Seat Share in 26 of the Top 30 Markets Where Both and ORD Have Service Traffic Share CHI Rank by O&D Market O&D ORD O&D Total CHI O&D Share 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 LGA LAX MCO LAS BOS ATL SFO DEN MSP PHX PHL IAH/HOU FLL RSW TPA SEA BWI SAN MCI DTW STL CLE BNA IAD CMH PIT RDU SNA AUS PDX 117,823 166,706 342,363 231,567 100,956 218,225 69,205 260,779 206,663 189,656 115,253 152,714 158,099 170,206 169,254 57,430 153,648 103,253 147,193 94,164 115,728 98,898 133,831 95,732 102,113 85,961 66,225 26,758 48,701 43,455 936,981 552,049 268,629 362,087 458,048 335,350 479,138 265,451 313,275 310,285 330,411 256,180 240,946 167,316 168,105 244,699 131,940 172,141 119,230 167,092 138,352 125,784 74,872 109,682 101,136 104,793 122,394 155,344 114,158 106,947 1,054,804 718,755 610,992 593,654 559,004 553,575 548,343 526,230 519,938 499,941 445,664 408,894 399,045 337,522 337,360 302,129 285,588 275,394 266,423 261,255 254,080 224,682 208,703 205,414 203,250 190,754 188,618 182,102 162,860 150,402 11% 23% 56% 39% 18% 39% 13% 50% 40% 38% 26% 37% 40% 50% 50% 19% 54% 37% 55% 36% 46% 44% 64% 47% 50% 45% 35% 15% 30% 29% Seats 243,586 286,056 442,319 445,935 240,276 604,124 134,945 604,245 571,823 334,691 283,621 282,020 197,417 206,050 227,811 137,548 318,011 185,772 451,891 388,949 437,952 308,233 341,912 285,773 306,952 253,973 159,181 49,868 96,565 89,598 Seat Share ORD Seats 1,761,867 1,265,537 484,897 718,837 1,035,694 848,289 1,098,344 795,385 991,559 723,744 847,580 799,954 353,155 218,785 317,947 767,392 327,719 490,728 442,672 569,952 676,177 393,936 218,134 384,000 345,714 317,321 314,649 334,792 281,178 299,165 Total CHI Seats 2,005,453 1,551,593 927,216 1,164,772 1,275,970 1,452,413 1,233,289 1,399,630 1,563,382 1,058,435 1,131,201 1,081,974 550,572 424,835 545,758 904,940 645,730 676,500 894,563 958,901 1,114,129 702,169 560,046 669,773 652,666 571,294 473,830 384,660 377,743 388,763 Share 12% 18% 48% 38% 19% 42% 11% 43% 37% 32% 25% 26% 36% 49% 42% 15% 49% 27% 51% 41% 39% 44% 61% 43% 47% 44% 34% 13% 26% 23% Source: OAG Schedules, YE Q3 2011; US DOT O&D Survey YE Q3 2011

Many Airlines Use Multiple Airports in the New York And Washington Areas to Serve the Same Destination Because They Regard Each Airport as a Separate Market Docket DOT-OST-2012-0001 Exhibit FL-R-14 Carrier-Destination Combinations 60 50 40 49 Example: Delta serves Atlanta from LGA, JFK and EWR. The Delta-Atlanta market is counted as 1 of 49 carrier-destination combinations in New York/Newark. 30 31 20 10 3 0 New York/Newark Washington/Baltimore Chicago Note: Includes only domestic and Canada routes Source: Official Airline Guide Schedules for the week of January 15-21, 2012.

Forty-Nine Destinations Are Served by the Same Carrier Via More Than One New York Area Airport Docket DOT-OST-2012-0001 Exhibit FL-R-15 YUL MSP SFO SLC EGE DEN STL MKE ORD IND DTW CLE CMH CVG YYZ LGA EW R JFK PHL BW I IAD DCA BOS MEM BNA CLT RDU LAX PHX DFW ATL IAH MCO TPA RSW PBI FLL MIA Service from 3 NYC Airports (12 carrier-destinations) Service from 2 NYC Airports (37 carrier-destinations) Note: Includes only domestic and transborder Canada routes Source: Official Airline Guide schedules for the week of January 15-21, 2012.

Thirty-One Destinations Are Served by the Same Carrier Via More Than One Washington Area Airport Docket DOT-OST-2012-0001 Exhibit FL-R-16 MSP YYZ SFO SLC DEN MKE ORD DTW CLE CVG LGA EW R JFK PHL BW I IAD DCA BOS CLT LAX PHX DFW ATL IAH MCO RSW FLL MIA Service from 3 WAS Airports (17 carrier-destinations) Service from 2 WAS Airports (14 carrier-destinations) Note: Includes only domestic and transborder Canada routes Source: Official Airline Guide schedules for the week of January 15-21, 2012.

Only Three Destinations Are Served by the Same Carrier Via Both and ORD Docket DOT-OST-2012-0001 Exhibit FL-R-17 MSP ORD DTW ATL Service from both and ORD (3 carrier-destinations) Note: Includes only domestic and transborder Canada routes Source: Official Airline Guide schedules for the week of January 15-21, 2012.