BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION WASHINGTON DC ______) ) NOTICE OF PETITION FOR WAIVER ) AND SOLICITATION OF COMMENTS ) Docket No. FAA­2010­0109 GRANT OF PETITION WITH CONDITIONS ) ) ______)

COMMENTS OF CONSUMER TRAVEL ALLIANCE

Communications with respect to this document should be sent to:

Charles Leocha, Director Consumer Travel Alliance, Inc. PO Box 15286, Washington, DC 20003 Tel. 202‐713‐9596 Email: [email protected]

The Consumer Travel Alliance (CTA) is a nonprofit, nonpartisan organization that works to provide an articulate and reasoned voice in decisions that affect travel consumers across travel’s entire spectrum. CTA’s staff gathers facts, analyzes issues, and disseminates that information to the public, the travel industry, regulators and policy makers. CTA was founded in January 2009 by longtime travel journalists

Charles Leocha, former MSNBC travel guru and author of Travel Rights, and

Christopher Elliott, ombudsman for National Geographic Traveler and author of travel columns for Tribune Syndicates, MSNBC.com and the Washington Post syndicate.

Introduction

Delta Air Lines, Inc. (Delta) and US Airways, Inc. (US Airways) have petitioned the

Department of Transportation for permission to swap slots between La Guardia

Airport (LGA) and Ronald Reagan Washington National Airport (DCA).

CTA submits these comments in response to the July 28, 2011 Notice issued by the

Department of Transportation (DOT) soliciting comments on a “Petition for Waiver” from and US Airways (“Joint Applicants”) to consummate a proposed transfer of a total of 349 slots at LaGuardia Airport (LGA) and Ronald

Reagan Washington National Airport (DCA) (“Slot Swap # 2”). See 76 Fed. Reg.

45313 et seq., July 28, 2011.

CTA proposes that the entire question of swapping or selling slots should be reexamined by the DOT in terms of the taxpayer good. Airline airport slots were once provided by the DOT at no cost to airlines as needed. These slots are the property of the American public and have been controlled by the DOT as a public asset for the public good.

Over the years based on bureaucratic precedent, the airlines have assumed the position that these slots are airline property and now place a monetary value on them, sell them and lease them just as they might any other assets. Under normal circumstances, the assignment of airline slots is non‐controversial since there is no shortage of slots at the majority of airports, but where circumstances have limited airport slots, they should be allocated in the public interest to maximize the public good.

This request for permission to swap slots provides DOT and FAA an opportunity to reexamine the question of airline slots at slot‐controlled airports. These two airlines have indicated that they do not need the slots they are ready to divest. In DCA,

American Airlines has indicated that they do not need the slots that they have leased to JetBlue. And in the case of and Continental with their court‐ imposed leasing arrangements at Newark, the slot permissions have effectively been stripped from Continental Airlines by DOJ.

DOT and the FAA need to make a basic statement that airline slots at the handful of airports with slot restrictions will be treated as public assets rather than airline assets. Airlines that do not maintain their slot awards in the public interest or that have publicly declared that they do not need said slots for their operation should be divested of those slots.

• This public good includes assigning slots to airlines that can use the slots as

a profitable enterprise.

• Slots should be used to maximize the capacity of the airport — airlines that

only utilize smaller commuter aircraft should have slots reassigned to other

more efficient carriers that can offer a more robust lift. • Slots should be allocated to airlines that have a history of profitably offering

fair and balanced airfares.

Maintaining unprofitable operations is neither in an airline’s corporate interest nor the public interest

Any airline that is maintaining slots and losing money on said slots should be forced to divest themselves of those slots because it serves no good for the corporation or of the public. In comments submitted to DOT, Delta and US Airways acknowledge

“the transaction allows US Airways to reduce its unprofitable flying at LGA and exit from its expensive facilities obligations…”

US Airways assumed the slots at no cost through DOT from the taxpayers. They should give those slots back to the taxpayers. When they admit to losing money on service using those slots, the only imaginable reason to keep the slots is to eliminate competition. Competition is in the public interest.

CTA strongly holds that DOT should act in the taxpayer interest rather than the corporate interest, especially in the case where US Airways is seeking to profit from selling a taxpayer asset that was given to them at no cost with the assurances that airline service would be initiated and continued.

Statements taken from Delta and US Airways’ petition noting “the transaction allows

US Airways to receive productive assets to replace the loan collateral it is selling to

Delta (i.e. LGA slots)…” should send shockwaves through DOT and its offices that deal with allocation of airport slots. These are taxpayer assets not airline assets. US

Airways has not paid the taxpayer anything for these slots. They are only allocated to that airline on the basis that the airline will provide agreed service.

When that service cannot be provided by the airline, when capacity suffers through the use of smaller commuter airlines to “hold” the airline slots, when corporations hold onto unprofitable airlines slots only to exclude competition, the consumer loses.

Every slot that either Delta or US Airways says that they don’t need, by virtue of offering them for sale to anther airline, should be carefully reexamined based on the public good rather than the corporate game plan offered by Delta and US Airways.

Maximizing the passenger lift at slot­controlled airports is in the consumer interest and in the airport’s interest of capacity maximization.

As confessed by US Airways, “Approximately 39% of US Airways LGA operations are conducted with turbo prop aircraft almost all of which are configured with 37 or fewer seats.” The petition goes on to state, “(New slots) will allow for use of larger aircraft by Delta—approximately 44% larger on average than the current US

Airways’ LGA fleet.” This translates to an average airplane size of just over 53 seats.

Rather than limiting the transaction to a promise of a 44 percent increase, the increase in capacity would be 270 percent based on calculations similar to those presented by Delta and US Airways should Southwest, for example, fly that route with their 737 aircraft that carry 137 passengers. Even JetBlue is flying on average larger aircraft on their current DCA‐BOS routes. Any decision made in the public interest should focus on airlines that can promise and deliver larger aircraft at slot‐ constrained airports.

Not only would there be a dramatic consumer benefit by more capacity flying from

LGA, there would be, as Delta and US Airways argue, a dramatic reduction in congestion. As the FAA has recognized, “[p]romoting larger aircraft is the only means to increase passenger access to LGA. … [T]he increase in passenger throughput can be considered a measure of efficiency of the use of airspace.”1

Shifting these slots that belong to the public to an airline that can promise larger aircraft combined with a history of lower airfares and the possibility of reducing air traffic congestion seems like a win‐win‐win solution for the public. And, it would allow US Airways to avoid continued losses on their LGA operations.

1 71 Fed. Frg.51,367 (Aug. 29,2006). The DOT determined that a cut of just four flights an hour during peak periods at LGA would result in a 41% decrease in delays and “saving $178 million a year in delay‐related costs.”

NextGen considerations

Another factor that should be considered is the willingness of airlines to equip aircraft with modern avionics that can maximize air traffic control efficiencies that the FAA is developing, NextGen. So far, both Delta and US Airways have been reluctant to equip their fleets with RNP capabilities that could streamline approaches and take‐offs at LGA. The CEO of US Airways has been openly contemptuous of the need for enhanced air‐traffic systems. The New York,

Philadelphia and Washington airspaces are three of the most congested in the country. Dealing with an airline whose CEO is not interested in spending to enhance

NextGen technology and who openly questions its desirability, is a lose‐lose situation for travelers, DOT and the FAA.

Southwest, on the other hand, has aggressively invested in equipping their entire fleet with the technology that can interface with ground equipment being installed at taxpayer expense. And other airlines, especially JetBlue, are at least enthusiastic about developing NextGen. When allocating slots, issues like these should merit some consideration.

Supposed sources of consumer benefits at DCA

The Petition submitted by Delta and US Airways claims that their solution would benefit Washington, DC consumers by improving US Airways’ service through added service to new destinations and proposes that this Delta/US Airways agreement would increase passenger enplanements by 20 to 25 percent because of new routes and schedule improvements.

Simply adding another airline with significantly larger aircraft would more than likely improve enplanements by more than 100 percent.

In terms of “connectivity,” US Airways claims an unquantified benefit from

“travelers connecting through DCA” on an expanded network. CTA notes that there is no need for “seamless” transfers in this day of effective interline arrangements and code‐share arrangements. The effect of this enhanced connectivity benefit is uncertain at best and undefined within the petition.

Delta and US Airways claims of “upgauging” can work against their petition

The same argument about “upgauging” aircraft is made by US Airways for DCA that is made by Delta for LGA. The airlines choose to “upguage” where it benefits them in their petition. What US Airways claims could happen at DCA can happen at LGA just as well. If this deal is not approved by DOT, the “first‐class service” touted as a benefit at DCA will flow to LGA passengers flying on US Airways.

In fact, by making LGA and DCA “hub” airports, the irrational and inefficient use of public, limited slots in order to accommodate “feeder” regional aircraft may make matters worse and indeed result in a “downgauging” of the overall airline traffic.

There are no guarantees except that a single airline will now dominate each airport.

Hubs lead to less efficient use of landing slots

Studies have consistently shown that once airlines set up hubs, their per plane lift actually decreases rather increases as Delta and US Airways would have DOT believe. Studies conducted by Southwest Airlines have shown that the current USAir lift out of DCA averages only 83 seats per aircraft, Delta’s lift out of LGA averages

105 seats and Continental’s lift out of Newark averages 91 seats.

CTA agrees with Airport Councils International — North America (ACI‐NA) in their submitted comments, that:

Moreover, as the Comments submitted by the San Francisco International Airport recognize, the precedent set by the DOT’s allowance of the pending transaction establishes incentives for air carriers to obtain monetary compensation from the sale of assets that they do not own. This could encourage air carriers to add flights at current non-slot-controlled airports until they become so congested that the FAA expands the implementation of slots and slot-controls to such airports, which would give the air carriers with the greatest operations during congested periods, assets that could command great monetary compensation. A further problem with this scenario is that it could exacerbate industry competition dynamics by making the “have” airlines enjoy even greater dominance while the “have not” air carriers would not be able to gain access to assets that would foster service enhancements that could benefit the travelling public from that airport community.

Recent slot transactions have produced more low­cost­carrier competition, but not enough.

CTA notes that if this petition were to be approved it would leave US Airways with more than a 50 percent share of the DCA traffic and Delta would be in control of almost 50 percent of LGA. Neither situation is good from a consumer point of view.

In the words of ACI‐NA it establishes “enshrined incumbency.”

The entry of low‐cost carriers has historically had dramatic effects on airfares. The

Southwest Effect, named after the country’s largest low cost carrier, has been documented in airport after airport across the country. The recent agreement that provided JetBlue with access to DCA demonstrated, again, the dramatic effect a well‐ run low‐cost carrier has on local airfares. Prior to JetBlue’s takeover of the BOS‐DCA route from (AA) airfares ranged in the average range of $250‐

$300 and that now has been reduced by almost 30 percent.

The DOT should not approve any arrangement that allows Delta and US Airways to maintain effect control of LGA and DCA respectively. There is no consumer good in an arrangement that allows one airline to dominate any airport. Delta and US

Airways’ pricing behavior has been seen over and over again in airports where they do not have adequate competition. Consumers pay higher prices.

It is not rocket science. Look at BWI that has significant competition. Prices are far lower than those at DCA; even IAD provides relief for passengers looking for lower airfares than those offered at DCA. Without low‐fare competition, these kinds of major price differentials will continue.

With effective commercial control of these airports, the major carriers will have an opportunity to continue their dominance of these airports through more frequent scheduling that works against LCCs. Plus, LCCs will not have an opportunity to expand, even if they offer better and lower‐cost service from these airports. They are forever limited by the slot restraints.

Airline claims of acting in the public interest are to be viewed skeptically

Thought the petition for this slot swap from Delta and US Airways is peppered with claims that the airlines are acting in the public interest, their prevailing corporate interests have been made abundantly clear by their actions during the period that the FAA’s taxing authority was suspended. Their actions, which speak far louder than any claim in a petition to DOT, showed their true colors. This petition for a slot swap is simply a method to enhance their ability to drive additional profits from these two airports at the expense of consumers.

A fair auction of airport slots

DOT’s method of slot divestiture and resale in the public interest, is beyond the capability of CTA staffers. However, should DOT and the FAA decide that airline slots are a valuable public asset, I am certain that they can design a fair system to allocate airline slots. Whatever system is utilized, it should guarantee that LCCs could garner a significant number of slots so that they can provide significant competition to the legacy carriers who are striving to build defensible airport hubs.

This allocation of airline slots to LCC, whatever numbers are decided by DOT, must also be accompanied with access to airport facilities. CTA staff has witnessed the hoarding of airport gates at Boston Logan when AirTran was limited to only one gate while Northwest held gates that they did not utilize. Airline competition is not only effected through flight slots and airfares, but by the hoarding of gates and facilities that make competitive operations impossible.

Dismantling this physical facility barrier to competition will possibly be more difficult than simply reallocating airline slots. First, there is only so much physical space at LGA and DCA. Second, there are certainly contracts that will need to be unwound and renegotiated with the airport authorities. Third, the changes will probably not be able to occur at the same time and will have to be programmed into the airport and airline operations.

Take back public property and use it in the public interest

DOT should use this request for the Delta/US Airways slot swap as a reason to reexamine the entire airline slot system and bring it back into the public interest rather than continuing to allow the airlines to treat what should be public assets as corporate assets on their balance sheets and allow the airlines to sell and lease these public assets as though they are corporate property.