Travel Acquisition Support Division (QMAD)

2 1 Travel Acquisition Support Division (QMAD)2 Pre-Solicitation Conference for the City Pair Program 3456 February 3, 20097 2200 Crystal Drive, Room 300 Arlington, Virginia 22202 8 11:00 a.m.910111213141516171819202122232425FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 2 1 P R O C E E D I N G S2 (Time Noted: 11:00 a.m.) 3 MR. BRISTOW: Okay. Good morning everyone. 4 Again, once again, welcome to the Pre-Solicitation 5 Conference for the City Pair Program. We appreciate your6 time to attend this morning, and we want to be able to 7 move this along pretty good, real quick. For those that 8 may need to take a break, men’s room is out to the left, 9 ladies’ room is out to the right. If we get rolling 10 along and see that possibly we, we need to take a break 11 along the way, we’ll be glad to do so. We’ll, we’ll take12 a look at that and reach a concurrence with, with 13 everyone, maybe midpoint or whatever, that we’ll be able 14 to coordinate that for you.15 But we did want to welcome you this morning. 16 We have a strong agenda this morning to cover. It’s 17 going to flow into the afternoon, but we think that as we18 move this along, we’ll be able to bring about the 19 outcomes that we’re desiring not only for our industry 20 partners, but to our customers and for the program. So 21 thanks again and welcome. 22 First, Kenneth Olson, phone, hear people who 23 dialed in, are you hearing okay?24 MR. OLSON: Yes.25 UNIDENTIFIED SPEAKER: Fantastic. Thank you.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 3 1 First, for those of you who were expecting to2 see Tim Burke, I’m not Tim Burke. I’m Frank Robinson. 3 I’m the Acting Director for the Center for Travel 4 Management, City Pair Program, lodging and some others 5 are accountable for those. So Tim will though, he’s out 6 of the office at the moment, but he’ll be coming down 7 here in the course of the day to say hi to those who 8 would really like to see him. 9 First, I want to echo what Jerry said. 10 Welcome. All right, airline industry friends and 11 customer agencies to the 2010 City Pair Program Bidders 12 Conference. One thing that ’08 and ’09 Calendar Years 13 and Fiscal Years have proven is, is that we do have a 14 really great partnership between our customers and the 15 airlines that participate in the program. Certainly this 16 was tested in FY ’08 and ’09. The extreme fluctuations 17 in fuel. Wwas the first time that fuel surcharges were 18 used extensively and applied extensively in the City Pair19 Program. It’s something that our customers, I think, 20 took a bit to adjust to because in some cases the impacts21 were very significant. Was the first time that fuel 22 surcharges had a significant cost impact on the 23 government’s travel. So I think everybody learned to 24 adjust with that. The unbundling of seat fees and 25 baggage fees and other fees, the airlines again applied FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 4 1 their commercial practices to our, our government2 market, and were, you know, looking forward to work with 3 the viability and the flexibility as these commercial 4 practices emerge. And then we really appreciate the 5 flexibility of our customers in the industry as we dealt 6 with the capacity reductions. We had probably 500 7 markets. They were smaller markets. The F Markets, 8 principally where moreover we had to -- airline capacity 9 adjustments were made, and we had to reevaluate and in 10 many cases make re-award under the FY ’09 solicitation. 11 So very interesting, very challenging past year or so, 12 and one in which I think again there was exceptional 13 cooperation between the industry and the government. So14 thank you everyone for that. 15 I think that’s it for my opening remarks. I 16 guess we will begin the official portion of the Bidders 17 Conference. But, again, thank you very much to 18 everybody.19 Okay. Thanks, Frank.20 I’d like to run through real quick though the particular 21 people that are here involved in the procurement process.22 We have Kwanita Brown from the Contracting Office; 23 Kristen Jaremback as the Contracting Officer; Anna Brown 24 is the Director of Travel Acquisitions. We have a new 25 person for as the Deputy Director for Travel and FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 5 1 Transportation Acquisitions. I’m sorry. Damon McClure?2 Is that a name from the past? Damon is back with us at 3 GSA. We have Annie Scott from -- back there with us. 4 Jerry Ellis from the Contracting/PMO area; Vince Aquilino5 from Program Management Office; and, of course, I’m your 6 facilitator for today. I’m Jerry Bristow. 7 So along the way, if we have questions, please 8 raise your hand. We have to bring the mic to you so we 9 get this properly recorded into the record and move this 10 along. 11 Thank you so much and welcome. 12 MS. SCOTT: I just wanted to say good morning 13 and welcome. I’m very happy to be here. I’m new to this14 position, and I’m excited to work with all of you. 15 UNIDENTIFIED SPEAKER: Before we start with the16 official part of it, I’m going to be passing the 17 microphone around so each one of you can identify 18 yourself and the agency that you work for or airline that19 you represent. I’ll start up here in the front row.20 MR. SCHNEIDER: Gary Schneider, Continental 21 Airlines, Houston, Texas.22 MR. IVESTER: Ron, Ron Ivester, CWT, SCATO 23 Travel Group Sales and Marketing.24 MR. MCMAHON: Kevin McMahon, AirTran Airways.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 6 1 UNIDENTIFIED SPEAKER: Joshn Junk -- AirTran2 Airways.3 MR. WALKER: Herbert Walker for the Department 4 of Transportation.5 MR. COYLE: George Coyle, American Airlines.6 MR. FAUTS: Bill Fauts, DHS, Customs Border 7 Protection.8 MR. MILLER: Rick Miller with Travel Policy 9 with GSA.10 MR. CALLAHAN: John Callahan with Virgin 11 America.12 MR. KINDER: Larry Kinder with Department of 13 State, Public Transportation.14 MR. GALLUZZO: Frank Galluzzo, OSD 15 Transportation Policy.16 MR. FLYNN: David Flynn, Director of Travel for17 HHS.18 MS. CARLOCK: Andrea Carlock, Defense Travel 19 Management Office.20 MS. HALL: Shirley Hall, Defense Travel 21 Management Office.22 MR. HICKS: Howard Hicks, Defense Travel 23 Management Office.24 MS. SIZEMORE: Patti Sizemore, DOD, 25 Headquarters, Air Mobility Command.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 7 1 MR. SHANNON: Bob Shannon, DOD, U.S. TransCom.2 MS. SISSON: Sara Sisson, Northwest, now a 3 part of Delta Airlines.4 MR. CLIFFORD: Denny Clifford, Delta Airlines,5 now a part of Northwest.6 MR. CLIFFORD: -- apparently knew to that whole7 thing so, I think that’s what it is.8 MR. KESSI: Matthew Kessi, Alaska Airlines.9 MR. FANNING: Fred Fanning, Department of 10 Commerce.11 MS. CLAYTON: Whitney Clayton, Headquarters 12 Army.13 MS. MONTANEZ: Carmen Montanez, Army, G-4.14 MS. FLOYD: Sara Floyd, EPA.15 MR. DERAWIN: Kevin Derawin, Department of 16 Justice, Travel Policy.17 MR. EDWARDS: Mark Edwards, Passenger Policy, 18 Headquarters, Marine Corps.19 MR. MCCLURE: Damon McClure, Office of 20 Acquisition, Travel, Motor Vehicles.21 MS. SCOTT: Annie Scott, GSA, Audit Division.22 MS. MOHAMMED: Levette Mohammed, GSA.23 MS. HARRISON: Kimberly Harrison, GSA, 24 Automotive.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 8 1 MS. SCHNOLL: Jeanetta Scheinaoll, GSA,2 Automotive.3 MS. HARRIS: Cheryl Harris, GSA, Automotive.4 MS. CALLOWAY: Carmen Calloway, GSA, 5 Automotive.6 MR. MALONEBILLONE: Tom MaloneBillone, United 7 Airlines.8 MS. STONER: Debbie Stoner, NSI, DOD.9 MR. BRISTOW: Just so you know, people that are10 on the telephone, and if you’re on the phone and I don’t 11 mention your name, please speak up so I can identify you.12 We have Carolyn Watt with NASA; we have Greg Royal with 13 Virgin America; John Lease (ph.), Navy, Norfolk; Angie 14 Williamson, Treasury; Charlie Conners, FTC; Debbie 15 Vanglue (ph.), EPA; Chris Gammaon, US Airways; Denise 16 Stokes, HUD; Shirley Smoke, SBA; Donna Cavos, Frontier; 17 Tony Goodman, Virgin America; Maryann Hubbard, Alaska 18 Airlines; Elizabeth Rodriguez, VA, Josheua Orlick, SSA; 19 David Carr, SSA; Steven Romano, SSA; Kasha Dean, Customs 20 Border Control; Mike O’Brien, United; and Miko Schneider,21 Jet Blue.22 MR. ELLIS: Is there anyone that’s on the phone23 that I didn’t mention? 24 Thank you.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 9 1 MS. BROWN: Good morning, ladies and2 gentlemen. Again, I’m Kwanita Brown., and I’m going to 3 take us in to this Pre-Solicitation Meeting. So the 4 first slide.5 UNIDENTIFIED SPEAKER: Here you go.6 MS. BROWN: All right. The first slide we have7 here is going to review the general requirements. The 8 first item deals with the Attachment 1, Proposal 9 Checklist, that’s what -- which is in the RFP. And this 10 checklist basically highlights all of the items in the FY11 10 RFP that must be submitted with the offeror’s 12 proposal. There have been no changes in the content of 13 the proposal checklist, but we do want to reiterate that 14 when you are submitting your items that they must be 15 completely filled out, signed and dated. 16 The second item pertains to the City Pair Offer17 Preparation System, also known as COPS. And for those 18 who are unfamiliar with the system, it is our Internet-19 bphased system that we use to -- that offerors will use 20 to submit their technical and price proposals. There is 21 also a handbook that has been included in the FY ‘10 RFP.22 There’s been no changes to content of that handbook, but23 offerors should use that as a tool for them when they are24 submitting their technical and pricing proposals. And 25 then also please note that offerors must receive a user FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 10 1 ID and password to gain access into COPS, and the e-2 mail will be sent out by the contracting team with 3 further instructions on how to do that.4 The last item that I want to touch on with this5 slide is a subcontracting plan. I will be the point of 6 contract, point of contact for the subcontracting plans. 7 One note in terms of a change with this plan is that the 8 Alaska Native Corporation, also known as ANC, and the 9 Indian tribes have been included in the small business 10 categories and the small disadvantaged business 11 categories. So basically what that means is that as 12 you’re developing your goals for the small business 13 categories and the small disadvantaged business 14 categories, you can take into consideration any 15 subcontractors that you use that would fall under the ANC16 or Indian tribes.17 Another thing that I want to point out is that 18 as you’re submitting your proposals for the FY ’10 19 solicitation, you are required to submit a subcontracting20 plan, and there is a template that has been provided for 21 all offerors in the FY’10 RFP under Attachment 6, and you22 can use it as a guide as you’re putting together your 23 plans.24 And the last thing is that if I have not 25 already contacted any of the carriers regarding the FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 11 1 submission of your subcontracting plans, I will be2 doing so in the next month or so. 3 The next slide that I’m going to touch on deals4 with Section B of the RFP. The first item is Section B-5 4, which deals with the scope of the contract. Under 6 this, there has been a change to one of the users of the 7 City Pair Program; that is DOD recruits. So those DOD 8 recruits that are traveling from Military Entrancets 9 Processing Stations, also known as MEPS, they have been 10 changed from non-mandatory users to mandatory users. 11 This is a change that has already been put into effect on12 the FY ’09 contract via a mod, and is also now going to 13 be a part of the FY ’10 solicitation. 14 The second item is B-27, which deals with the 15 audit of contract fares. We didn’t really have a change 16 of the section, but we did get a question about it. The 17 question was basically why is this section still included18 in the solicitation? And the answer to that question is19 that when all of the airline ticket transactions are 20 reviewed by the Audit Division, it is, it is not always 21 apparent how the travel arrangements were made, if a 22 quality control review was requested and paid for. So, 23 hopefully, that answers the question for the person who 24 did, did pose that.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 12 1 The last item that I’m going to address is B-2 36, which deals with the City Pair Program activity 3 reporting. And basically the change that was made was to4 the language of Subsection C, and it was changed as 5 follows: data may reflect either ticketed transactions or6 flown transactions. And the new language that you will 7 now see in the FY ’10 solicitation is, data shall reflect8 flown transactions by passenger count, not revenue count.9 And we did receive a question about this section as well.10 The question was basically, why has passenger count now 11 been added to this provision? We have been using the 12 same format for almost 10 years without this requirement.13 And the answer to that question is basically some 14 carriers were -- were submitting passenger and a revenue 15 data, while others were submitting just revenue data. 16 And what we wanted to do with this change was to tighten 17 up the language and allow us to receive more accurate 18 data, since ticketed or revenue data is not a true 19 representation of City Pair usage. And an example, an 20 example of that would be is if a traveler did purchase a 21 ticket but never took the flight. So we’re looking to 22 get more accurate data by changing that language. 23 The last slide that I’m going to cover deals 24 with Section C of the RFP, which deals with the contract 25 clauses. There have been two new clauses that have been FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 13 1 incorporated under Section 3, Section C-3. The first2 is 52.239-1 (is actually a typo there), privacy or 3 security safeguards. The second one is 52.203-13, which 4 is the contractor code of business ethics and conduct. I5 would just suggest for all offerors to please visit the 6 Federal Acquisition Regulation website. Please review 7 those two clauses. If you have any questions after you 8 review those clauses, please reference the e-mail or call9 the Contracting Team, and we’ll be able to address those 10 questions for you. 11 Now the next slide deals with the fuel 12 surcharge, and I’m going to turn it over to Kristen 13 Jaremback, who will take it from here.14 MS. JAREMBACK: I’m Kristen Jaremback, the 15 Contracting Officer, in case I haven’t met any of you 16 before. And -- make sure everyone on the phone can still17 hear. Okay? Anybody have any problem? Okay.18 The first slide I’ll talk about are fuel 19 surcharges, and the, the sections in the solicitation are20 Sections B-19, C-4, and C-13, all deal with fuel 21 surcharges.22 Section B-19, which is taxes, fees and fuel 23 surcharges, has changed this year. Specifically Section 24 B for international markets. Fuel, fuel surcharges are 25 now to be included in all fares offered in international FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 14 1 market. The changes made provide greater consistency2 between domestic and international fares offered at time 3 of offer submission and to reduce any confusion on the 4 applicability of fuel surcharges at time of offeror 5 submission, and after contract award and the -- of 6 contract all fuel, fuel surcharges can be applied. There7 were several questions on this, on this issue here, and I8 tried to group them all together. I’m going to try and 9 address them. If I don’t address your exact question, 10 feel free to raise your hand, and hopefully I can, I can 11 answer it then. 12 I hope that some of what I have just mentioned 13 did answer some of your questions, but just to reiterate 14 the point we’re making the change only to international 15 markets. Domestic markets continue to be handled the 16 same way as they were previously. The difference between17 domestic and international fares at the of offeror 18 submission has caused confusion, and this change will 19 provide the consistency in how fares are submitted and 20 the application of fuel surcharges after contract award 21 and throughout the contract period. 22 At the time of offeror submission, any 23 anticipated fuel surcharges should be included as part of24 the fare offered. And I’m, I’m stressing the word 25 anticipated, because that’s what, that’s what we’re FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 15 1 looking for, any fuel surcharges that are commercially2 applied at the time of offeror submission should be 3 included in the fare. And then any unanticipated fuel 4 surcharges proposed commercially after the time of 5 offeror submission may be applied to awarded contractors 6 in accordance with Section C-13 of the RFP.7 Do you have any questions?8 Tom. Wait. Tom, hang on one second.9 UNIDENTIFIED SPEAKER: -- the microphone.10 MR. MALONEBILLONE: Can you hear me?11 UNIDENTIFIED SPEAKER: Let’s just -- no. Let’s12 just set up the rules now. If you’re asking a question, 13 you must have the microphone in your hand.14 MR. MALONEBILLONE: Tom MaloneBillone, United 15 Airlines. For years international fuel surcharges were 16 not part of the fare. One year they became part of the 17 fare when we were allowed to implement fuel charges on 18 the domestic market. But then last year we went back to 19 the old way of keeping fuel surcharges out of the 20 international fares. Now we’re going back to this. This21 causes some real problems with us as far as coding goes, 22 because each country is different. So when we file the 23 fares, we have issue with the fuel surcharges. I don’t 24 know why we can’t go back to what worked for the 30 25 something years, to something that’s -- was gotten rid ofFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 16 1 last year. And this is in light of our request to move2 forward with this contract rather than backwards, and 3 this seems to be a backwards step in the contract. The 4 international fuel surcharges for a long time were never 5 included in the fares. One year they were included in the6 fares, then they were taken out again. Now we want to go7 back. It just doesn’t make sense.8 That’s all I have to say.9 UNIDENTIFIED SPEAKER: You want to answer that 10 first?11 MR. CLIFFORD: Denny Clifford, Delta Airlines. 12 I’ve got to ask this question. We, we have been at this 13 stuff for a year now, and not once has this issue come up14 with respect to putting fuel surcharges into the fare. 15 We’ve had numerous meetings, both one-on-one and publicly16 as recently as December, as recently as our one-on-one 17 three days ago. It was never brought up, and we want to 18 know why. What is the catalyst and why has this never 19 been brought up and all of a sudden at the 12th hour plus 20 we get this dropped on us? And I have follow-up 21 questions as well.22 MR. BRISTOW: The change in the language was 23 actually done back in September as an amendment to FY 24 ’09. It was also discussed at the partnership meeting in25 October what that change would be. Because it was made FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 17 1 in ’09, we’re now crafting the language in ’10 to make2 sure that we continue that process of what was reviewed 3 at the amendment for ’09 and at the partnership meeting 4 in October. We didn’t feel that there was any other 5 discussions to be -- had to be made in December nor in 6 our three-day-ago meeting. Unfortunately, maybe we 7 should have brought that to the table. We thought it had8 already been confirmed through the amendment and also in 9 our, in our previous discussions. 10 MR. MALONEBILLONE: Could you please cite the 11 amendment that was sent to all of us via e-mail?12 MR. BRISTOW: Sure.13 MR. MALONEBILLONE: I don’t remember seeing 14 anything like that.15 MR. BRISTOW: September 30, 2008.16 MR. MALONEBILLONE: What is the mod number?17 MS. JAREMBACK: It’s actually not an amendment.18 I sent out a contracting officer’s interpretation letter.19 What Jerry is referring to is some time last year before 20 contract award, I don’t, I don’t know the exact date off 21 the top of my head, I did issue an amendment to the FY 22 ’09 RFP. It was more of a clarification on how to handle23 international fuel surcharges, because we did have -- we 24 had quite a few problems with it last year as far as 25 consistency went. So we are tightening up the language FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 18 1 here. And I have to stress that anticipated fuel2 surcharges that we’re looking for. We’re not looking for3 -- we understand that you can’t anticipate those 4 surcharges six, eight months out. So what we’re looking 5 for is to include in your fares offer for both domestic 6 and international, we’re asking that you include the fuel7 surcharges that are anticipated at the time of offeror 8 submission. It doesn’t change -- domestic has always 9 been handled this way. It’s always been handled -- it 10 was handled this way last year. We’re just making 11 international the same for consistency.12 MR. CLIFFORD: I think you underestimated our 13 concern about this issue. It should have been addressed.14 It wasn’t, in specific terms. Maybe that’s water under 15 the bridge, but I guess that’s why we’re here today. 16 Kristen, you mentioned that we, we should put 17 into a bid fare what we anticipate fuel to be. Let me 18 give you some stats, because I pulled this off just this 19 morning. There are experts in this industry of oil and 20 gas that have predicted the following, okay. In 2009, 21 $43 a barrel; in 2010, $55. That’s just one company. As22 a matter of fact, it’s the U.S. Government that predicted23 that. Barkley’s Capital 2009, $75; 2010, $104. Nimesma 24 (ph.) Energy, 2009, $37.20. Roaker (ph.) Credit 25 Services, $55 in ’09, $77 in 2010. What’s the trend FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 19 1 here? There is no trend. It’s inconsistent. This is2 the most volatile commodity on the planet right now and 3 will continue to be so for the next 2, 3, 4 years. How 4 can we possibly anticipate fuel when not even the experts5 in this industry know what in the world it’s going to be?6 And I think it’s ludicrous. I think it’s, it’s 7 impractical. There’s no reality to what you’re 8 suggesting. And Tom’s right, United Airlines, hit it on 9 the head. We need to have it like it was in prior years.10 It makes absolutely no sense to put this in the fare. 11 And, and I don’t understand why you have both the option 12 -- not an option -- you put -- one part says put it in 13 the fare, but then you also allow us to add it in later 14 for surcharges. I don’t understand that at all.15 MS. JAREMBACK: What we’re looking for here is 16 not anticipated in the sense that you’re predicting out 17 in the future. That’s why we have the Economic Price 18 Adjustment clause in -- at C-13. We have that in there 19 for after the time of bid submission if a fuel surcharge 20 has been imposed commercially, we allow you to add that 21 on to your City Pair contract fares.22 MR. CLIFFORD: Why not do it from the very 23 beginning? Why even put that clause in there for the 24 original fare?25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 20 1 MS. JAREMBACK: See, I, I think we’re, we’re2 missing the point here. What we’re doing -- how domestic3 fares are handled right now or, or last year, let’s take 4 FY ’09, if you had a fuel surcharge in place commercially5 at the time of bid submission, you were, you were 6 supposed to have included that into your fare at that 7 time of bid submission. If there were unanticipated fuel8 surcharges imposed commercially after the time of bid 9 submission, we allowed you to send us a written 10 notification of that, and we added onto your contract 11 fares. That’s how domestic markets were handled. 12 International were not handled that way. Fuel surcharges13 were not included in the fare. What we’re doing now is 14 trying to make them both consistent that fuel surcharges 15 will be, will be in the fare when at time of bid 16 submission. We still will allow additional fuel 17 surcharges if they’re imposed commercially after the time18 of bid submission. 19 Is that clear?20 MR. MALONEBILLONE: It -- again -- the whole 21 issue was domestic and international.22 MS. JAREMBACK: Excuse me, excuse me. 23 Can you hear that?24 UNIDENTIFIED SPEAKER: Got to record that.25 MS. JAREMBACK: Yeah. Need you to --FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 21 1 MR. MALONEBILLONE: Okay. The whole thing is2 that there is a difference between domestic fuel 3 surcharges and international fuel surcharges, because 4 prior to two years ago, we were not allowed to take fuel 5 surcharges on domestic routes, because all fares included6 all fees and taxes and surcharges. Now this has changed 7 because of the way the market was going and we were 8 complaining that, you know, fuel was going out of sight 9 and we couldn’t do anything about it. Never up until 10 that point, never was fuel included in our contract price11 on the international side, because the rules for 12 international didn’t -- excuse me -- said that it 13 excluded all fees and surcharges. Okay. So right now 14 you’re making a major change in this contract, and in the15 way that it has been held for -- how long has this 16 contract been in effect? 30 some years? Okay, 30 years,17 and except for one year. So for 29 years, this is the 18 way the contract has read. And now you want to take what19 happened one year and make it permanent. We’re having a 20 real hard time with this. Like I said, we have coding 21 problems. This is massive work for us to differentiate 22 the YQ which we call is our fuel surcharge on the 23 commercial side and on the government side. Specifically24 when it relates to different markets. Because the fuel 25 surcharge in domestic is generally the same across the FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 22 1 board. But when you go into the international markets,2 depending on the market you’re doing, that fuel surcharge3 is going to be different, okay. And it’s really a lot of4 work and money that we invest in having to change that. 5 And to be quite honest with you, when this first 6 happened, we didn’t make any changes in, in the 7 international fuel surcharges on, on the contract because8 of the coding issues and until the new contract came out 9 and said we could do it differently. But this -- now 10 it’s, it’s a problem for United Airlines.11 MR. CLIFFORD: This is a huge issue for Delta, 12 absolutely huge. The argument that it’s to -- it’s done 13 to avoid confusion is very weak. Why? Tom just said it.14 We’ve done this for 29 years. There’s obviously no 15 confusion if it’s been done for that long. So I think 16 that that argument is, is without merit. You really need17 to take a very, very serious look at this issue. And I 18 just don’t think it has any foundation. There is nothing19 wrong with the way it’s been done before. There’s 20 nothing wrong with applying the fare and having fuel 21 surcharges added later. This is too volatile a market, 22 and, and I don’t know what purpose it serves the GSA. I 23 don’t know what purpose it serves the airlines.24 MR. BRISTOW: Fuel surcharges were a big issue 25 this year. The administrative burden for the carriers FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 23 1 and for the government was tremendous. Make your2 reservations today. This is what the fuel surcharge was.3 Go to ticket tomorrow, the new fuel charge is in effect. 4 We allowed the fuel surcharges to be able to escalate 5 according to the volatility of the market. Most of those6 domestically have, have disappeared. Internationally 7 though, they’re still in place. We feel that the 8 airlines do know how much that fuel is going to cost 9 them. They do know how far out they have hedged their 10 fuel requirements, and that it would assist you to put 11 that into the fare today. It still allows you to 12 increase your fuel surcharges at time of contract 13 implementation on October 1st as to what today’s rate is. 14 It was to help streamline the process for you and ensure 15 that, number one, you’re able to anticipate that; and, 16 number two, you just weren’t all of a sudden hit with a 17 fuel surcharge that may be $300 -- each way to a ticket 18 that was 400 bucks. It is important that we’re able to 19 look at and review these types of fees along the way in 20 our evaluation process to make a proper award. Some 21 airlines charge this rate, other airlines charge this 22 rate. It would be incumbent upon us to know what that 23 would be today or when you submit your bid with a lookout24 of how you purchased your fuel, what today’s current fuel25 surcharges are and be able to provide a price FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 24 1 accordingly. It was to assist you. And then the door2 is still open at the end on implementation October 1st for3 you to implement your fuel surcharges that are 4 appropriate for that day.5 MR. CLIFFORD: Jerry, I think you need 6 clarification on how fuel hedging works with the 7 airlines. There seems to be the supposition that we are 8 six months out and hedging and it’s pretty much locked 9 in, and that that’s the way it goes. You know, that may 10 have been the case some time ago when, when fuel was less11 volatile. It was more straight, straight across the 12 board. It ain’t that way now. And I can tell you, every13 day we are looking at our hedgings. And frequently, we 14 re-negotiate on a very frequent basis hedging. You don’t15 go out six months. You can’t. It’s too volatile. We 16 have fuel experts that look at this every single day, and17 there’s collars. There are what they call collars. It’s18 all sophisticated fuel and oil -- or oil and gas stuff. 19 The bottom line is we have ceilings, we have floors, we 20 have everything in between. And if you think that we can21 predict where this is going to be, you’re wrong. It 22 doesn’t work that way. Every day we’re changing the, the23 situation with respect to our fuel costs and 24 renegotiating those things depending on where we think it25 might be. But we’re not always right, so you have to go FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 25 1 back and re-negotiate. So it’s not, it’s not that2 easy. It’s very complicated, and it changes all the 3 time, which is why I’m underscoring the fact that we need4 to have the ability not to put it in the fare, but to put5 it on later when we have a little bit better idea after 6 the fact. 7 MR. BRISTOW: One other thing. And you’re right8 about the hedging, because we don’t know either. Today’s9 fuel price today at $43, we’re not getting the same 10 benefit on the fuel surcharge today because of how they 11 were hedged out before. You still have not received the 12 same drawback in your pricing because of how you 13 purchased your fuel 3, 4, 6 months ago. So the 14 government doesn’t get that benefit until your part 15 reduces that process. And we allow it to continue to be 16 implemented in your fuel surcharges. So I do agree with 17 that. But I think we’d like to take this back, take a 18 look at it. We understand your issues for reporting 19 these. We can go back and take a look at this and, and 20 re-read this to see what we should be doing. This is 21 what the Pre-Solicitation Conference is about, to have 22 these open-floor discussions, and in a practical manner 23 to understand what the problems are and which way we can 24 proceed. Okay. So we’ve got fuel surcharge on these 25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 26 1 references the way they are internationally. We’ll2 make sure that we address that. Okay. 3 Any other questions on that?4 MS. JAREMBACK: I just want to make one quick 5 comment about what you said, Denny. After bid submission6 on international markets, if you are awarded a contract, 7 you can still add fuel surcharges. You can still 8 implement them as long as all the requirements in 9 Sections C-13 are met. We’re not taking that away.10 MR. CLIFFORD: I understand that.11 MS. JAREMBACK: Okay.12 MR. CLIFFORD: But you’re not giving us, you’re13 not, you’re not -- it’s not, it’s a consistent practice. 14 You can’t just say okay well you can put it in your fares15 and some airlines do and some airlines don’t. You can’t 16 leave it that way. It’s, it’s got to be more pristine 17 than that. I just don’t, I still don’t understand why 18 you, why you want to put it into the fare basis instead 19 of just keeping that alone by itself the fare based on 20 its own merits and the fuel surcharge is tacked on later,21 if we want it to be separately, rather than keep dumping 22 thing into the fare such as and we’re -- talk about this,23 bags. 24 MS. JAREMBACK: As Jerry said, we’ll table this25 for discussion. This is why we have the pre-solicitationFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 27 1 meetings to discuss these issues, but we’ll take it2 back internally. But how you just described it, Denny, 3 the fuel surcharges should be included in domestic bids 4 as it is now. So I’m not quite seeing how you’re, you’re5 saying that it’s not consistent. It might not be how the6 airlines do it right now or how you’ve been bidding or, 7 you know, you as the airline community, but what we’re 8 looking at is when you, you place your bid is that you 9 include everything that is happening commercially at that10 time, and then we still allow you to add any fuel 11 surcharges on after that, if they’re imposed 12 commercially, like I said, following the rule for 14-day 13 consecutive minimum. So we are allowing for the 14 additional, but we’re just saying up front, if you know 15 that there’s a fuel surcharge in a certain market at the 16 time of bid submission, we want that, we want to include 17 it in the fare. We don’t want you to go back, you know, 18 years to add fuel surcharges on that -- back before you 19 submitted your bid.20 MR. CLIFFORD: In practice, there’s a huge 21 difference between domestic --22 MS. JAREMBACK: Okay.23 MR. CLIFFORD: -- fuel surcharge and 24 international.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 28 1 MR. BRISTOW: Have to clear a path over here2 Tom or we’re going to have to move you up to the front, 3 okay.4 MR. MALONEBILLONE: To go to Denny’s point, 5 there is a huge difference between domestic and 6 international. Domestic fuel surcharges we’re dealing 7 with one government. In essence it’s the United States 8 Government. There’s no additional fees or any kind of 9 things that go into the application of a fuel surcharge. 10 When we’re dealing with different countries, we have 11 different issues that we have to deal with when we apply 12 fuel surcharges. So in previous years, we did not really13 apply any fuel surcharges to the international because of14 the difficulty it was to try to split out what it would 15 be for government versus commercial. We didn’t want to 16 hit the government with these real high fees. But 17 unfortunately, there’s just no way to split it out. So 18 if we include it in the fare, it makes it very difficult 19 for us going forward to take a portion of the fuel 20 surcharge and now add to the government fare as a YQ -- 21 so I don’t know if anybody else is in pricing or revenue 22 management here that works with this stuff, but we have 23 some major issues. Because as it was presented to me in 24 the past is that the way we did fuel surcharges it makes 25 it very difficult to split out the commercial fuel FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 29 1 surcharges from what we would charge, charge the2 government. So when we were allowed to at the end of the3 last contract when we bid for FY ’09 to take the -- to 4 not put the fuel surcharge in the fare and just take the 5 commercial fuel surcharge made it a lot cleaner for us 6 and a lot easier and less costly. So this is the point I7 think we’re trying to get at. There’s got to be a way if8 you, if you’re going to continue this, maybe when we 9 present the bids, we present the fare and maybe what the 10 fuel surcharge is at that time commercially. So it will 11 come up when you do a fare quote as a fare, and then what12 the fuel surcharge is, but that would have been 13 identified at the time of bid. And you follow where, 14 where I’m coming from on that? So you’ll know ahead of 15 time what portion of the fare is the fuel surcharge, 16 rather than lumping it in the fare. And that allows us 17 to continue the way we’re doing it. 18 MR. BRISTOW: Don’t think we didn’t have that 19 discussion. But what that does do then is make fuel 20 surcharge an evaluation process, correct? Because if you21 have Airline A providing a fare for $300 --22 MR. MALONEBILLONE: We have that problem now.23 MR. BRISTOW: You have a fuel surcharge of 150.24 You have $450 fare. Airline 2 has 310 but only has a 25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 30 1 fuel surcharge of 100. You want me to evaluate this as2 410 and do it to number 2 and award it?3 MR. MALONEBILLONE: Let the chips fall where 4 they may.5 MR. BRISTOW: There we go.6 MR. MALONEBILLONE: I mean, you know, this is a7 difficult issue.8 MR. BRISTOW: It’s very difficult.9 MR. MALONEBILLONE: Okay, and you can go 10 through everything that’s charged now in all of our 11 charges and say -- when we get into the facts, how, how 12 do you evaluate the true value of what you’re paying.13 MR. BRISTOW: Tom, we can’t hear you.14 MR. MALONEBILLONE: Oh, please.15 MR. BRISTOW: The transcriber can’t hear you.16 MR. MALONEBILLONE: You guys have microphones 17 in your 2009 budget?18 MR. BRISTOW: We actually asked for three.19 MR. MALONEBILLONE: Okay. Taking that example,20 why don’t you just take all the fees that --– áa la carte21 that the airlines charge in evaluating -- that was one of22 my questions that I threw out to you. Why are you just 23 taking on certain fees that you’re going to include in an24 evaluation such as the bag fees, which is a big issue 25 that’s coming up here? Now, I mean why don’t you take FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 31 1 into consideration the airlines should allow more2 legroom at a fee, you know? Like United Airlines there’s3 more legroom in certain portions of the cabin. Or change4 your reimbursement to allow your passengers to take 5 advantage of that extra legroom. Now the fare is the 6 fare. That’s what the general -- you always want to be 7 treated like the general public, that’s the way the 8 general -- this is the fare. This is all the fees on top9 of it.10 MR. FLYNN: This is David with HHS. From a 11 agency perspective, we’re looking at more planning and 12 budgeting. When we can’t get the fuel surcharge included13 into the price, it’s harder for us to plan and budget for14 international, even domestic travel. When I send off for15 travel going international and it’s costing we are 16 estimating, you know, $1,000 for the trip, and then it 17 comes back at $1400 as when it gets close to the trip, 18 then we have to go through the whole approval stage again19 on having that traveler -- on the international trip.20 MR. CLIFFORD: And we appreciate that, but 21 welcome to America. Because every corporation in America22 has to do the same thing.23 UNIDENTIFIED SPEAKER: Is this how you cut me 24 off?25 (Simultaneous comments.)FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 32 1 MR. CLIFFORD: Anyway, my point is you’re2 letting the tail wag the dog here, you know. I realize 3 and understand you’ve got issues with respect to your 4 budget and how you do things internally, but every 5 corporation in America does the exact thing, you know. 6 We put a clear only fare out there, not with all these 7 ancillary costs involved and, and people just have to 8 deal with that. Why? Because we don’t know what those 9 costs are going to be either, okay. To Tom’s point and 10 everybody else’s point, you know, you’re adding things 11 into a fare, bags, whatever, is muddying up the what I 12 call the pristine comparison of an evaluation process. 13 And Tom’s exactly right, you know, why don’t you include 14 everything else? You know, whether you have smoking or 15 nonsmoking. Some international carriers still have 16 smoking today. I mean you can put all sorts of things 17 into the fare. As soon as you begin that process, you’re18 on a slippery slope. You start moving away from a clear 19 evaluation process that’s black and white compared to 20 other airlines, and that’s the problem that we’ve got 21 with putting anything, whether it be fuel surcharges. I 22 realize in domestic that that’s different than 23 international. But you’re still muddying up the works 24 even there. You’re just not getting a comparative 25 analysis of apples to apples. You’ve got apples and FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 33 1 grapefruit running out there. And it’s only going to2 exacerbate the problem when you start putting bags and 3 everything else in there. Where do you stop the process?4 MR. BRISTOW: Thank you. 5 MS. JAREMBACK: Okay. We’ll move on from that 6 discussion on the B-19, Section B -- international -- I 7 think we have a, a few issues that we are taking away and8 we will discuss. I will, I’ll quickly go over the GSA’s 9 interpretation of fuel surcharges and how they are 10 handled just so that we’re all on the same page. This --11 okay. This one might be a little easier. Just so that 12 we’re all on the same page and that everyone is clear 13 about how fuel surcharges work and how they are applied. 14 They’ll be handled as they currently are in accordance 15 with Section C-13, which includes written notification of16 the commercial fuel surcharge imposed, the affected 17 booking inventories -- the YCA, dash CA and dash CB, the 18 amount of the fuel surcharge, the market to which the 19 fuel surcharge is applicable, and a 14 consecutive day 20 minimum before implementing them on City Pair contract 21 fares. For any fuel surcharge that was initiated after 22 the date of submission of offers but before contract 23 effective date, a submission of a written representation 24 of the original offer price did not include any amount of25 anticipated fuel surcharges needed. If the date when the FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 34 1 fuel surcharge is imposed commercially is after2 contract award but prior to the start of the FY ’10 3 contract period and the fuel surcharge is in place by at 4 least 14 consecutive days commercially, the fuel 5 surcharge will be effective no earlier than October 1, 6 2009, which is the effective date of the F10 contract. 7 And I think that would have handled all of the questions 8 related -- there was a question regarding just to talk 9 generally about how fuel surcharges are applied. And Tom10 has a question.11 MR. MALONEBILLONE: I have a suggestion on the 12 notification of reducing fuel surcharges. We’re getting 13 like maybe 5, 6, 7 things a day that are reducing fuel 14 surcharges, and the issue we have is when we -- if we, if15 we submit -- figure out the time to fill out the 16 spreadsheet, having to put the date that it was in effect17 commercially originally doesn’t make sense because it’s 18 being reduced, not increased. So I’m making a suggestion19 that when we have a reduction in the fuel surcharge, 20 which is the same day as the commercial fuel surcharge 21 reduces, that we just put the date that it’s effective in22 and not have when it originally went into effect. Does 23 that make -- doesn’t even make sense because it’s going 24 down. So then that date now that went down becomes the 25 effective date of the fuel surcharge. Makes it a lot FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 35 1 cleaner, a lot easier. Because I mean if you’re2 getting 5, 6, 7, 8 -- a day, I mean it’s not the only 3 thing you have to do, you know, and it’s really difficult4 to keep on top of it. So if you make that change in the 5 process, I personally would say thank you very much.6 MS. JAREMBACK: We can certainly take a look at7 that. The -- our only issue is for all the FY ’09 8 contract holders, there was the contract -- 9 interpretation letter sent out last September that 10 addressed the format that the, that the fuel surcharges 11 need to be submitted in. And as long as that’s followed,12 I don’t see why that’s a problem. We just need to 13 maintain the actual, the format. So we’ll take it back 14 and review it, but it doesn’t, it doesn’t appear to be a 15 problem.16 MR. COYLE: George with American. Just a quick17 question for clarification. If at the time of bid 18 submission you calculate in the fuel surcharge but the 19 fuel surcharge goes up $5 or something, will you be able 20 to apply the difference, the increased amount, just the 21 $5 additional? Did that make sense?22 MS. JAREMBACK: So at time of bid submission 23 you, you -- you, you offer a fare. And then after that 24 time, you -- that the fuel surcharge has gone up by $1, 25 $2, $5, after contract award, and you have to, you know, FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 36 1 to be awarded that contract, City Pair market, you can2 ask for an increase in fuel surcharges, but the effective3 date will be no earlier than October 1, ’09. That’s the 4 effective date of the contract. So, yes, you can 5 increase the fuel surcharge as long as all of the, the 6 regulations in C-13 apply, all of those, those rules. 7 So, yes, you can. It, it -- I don’t think I’m making 8 myself clear, but --9 MR. COYLE: Just the difference?10 MS. JAREMBACK: Just the difference. So if it 11 was a $50 fuel surcharge and it has increased in that 12 market to 55, it would just be the difference.13 MR. COYLE: $5?14 MS. JAREMBACK: Yes. You would not add the 55 15 on top of the 50 in that case. 16 Any other questions on fuel surcharges?17 Moving on, Section D-1, Subsection C, period of18 acceptance of offers. Last year Section D-2 was included19 in the solicitation, which held prices in the offer firm 20 for 880 days. This was incorrectly incorporated last 21 year, and it was changed via a modification to all FY ’0922 contract holders. So we’re just changing it back to for 23 F ’10 as it’s been in every year past on the program 24 where D-1 will read that offerors agree to hold the price25 in its offer firm for the length of the contract period.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 37 1 Any questions?2 Next section is D-5, Method of Evaluation and 3 Award for Group 1. The maximum points under Sub-factor 14 for international markets will be 40 for nonstop service 5 and 20 for direct connect service. The reason for this 6 change is that distribution points are scored both on 7 outbound and inbound flights. And this was not 8 previously reflected in the distribution table. That, so9 that’s why the -- that’s why it was changed. There was a10 question on it, and I hope I answered it. If I didn’t, 11 are there any further questions?12 MR. CLIFFORD: The max before, Kristen, was 60,13 is that right? Or no?14 MS. JAREMBACK: 20 and 10.15 MR. CLIFFORD: Okay, but it’s 20 and 10 before.16 So has this gone up?17 MS. JAREMBACK: It’s --18 MR. CLIFFORD: Or down from their prior -- it’s19 gone up?20 MS. JAREMBACK: Yes.21 MR. CLIFFORD: We’ve had that for years, right,22 with the other point system, right?23 MS. JAREMBACK: The other point system only 24 counted for one way. It didn’t count for inbound and 25 outbound flights, and Bissell (ph.) Station reads that weFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 38 1 should be counting inbound and outbound flights. So2 it, it was never previously recorded that way. So it, 3 it’s a, it’s a change, but -- any other questions?4 MR. BRISTOW: Same factor. It’s just double.5 MS. JAREMBACK: Any other questions?6 Jerry Ellis will talk about the City Pair 7 Market System.8 MR. ELLIS: Good morning. Afternoon, ladies 9 and gentlemen. I just want to talk about how we came 10 about and talked a little bit about the markets. First 11 we survey our agencies through a program called FARMS. 12 It’s Federal Agency Requirements Market System. 13 Basically it outlines what they feel going forward what 14 their markets they would -- their requirements are, and 15 we ask for estimated passengers. We also take into 16 consideration ARC and smart pay data or historical data. 17 So we look at all the areas before selecting markets. 18 Just to let you know, for FY ’10, again we received over 19 35,000 market request requirements, if you will, from the20 various agencies, and we understand both from our 21 standpoint and your standpoint that this is a number that22 we cannot deal within this contract. So we pair it down 23 based on passenger usage down to a workable number for us24 and for you, and we try to keep that number somewhere 25 between 6 and 7 thousand markets. And, again, we did a FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 39 1 great deal of extra analyization this year to look at2 those markets that were requestered [sic] and to try to 3 ensure that at least one carrier met the minimum service 4 criteria in each one of the markets for solicitation so 5 we don’t end up with a lot of markets which no carrier 6 will qualify for and is what we call wasted markets.7 So here’s what we ended up with. A total of 8 6,891 total markets. There are -- 2,590 Group 1 domestic9 markets; 6,068 Group 1 international markets; and, again,10 we have extended more markets into the extended 11 connection marketplace to again meet our customer use 12 requests and to ensure that at least one carrier meets 13 the minimum criteria. So we try to get bids in those far14 away markets in the Middle East and Africa and places 15 like that. So we now have 84 Group 1 extended connection16 domestic markets, and many of those are in and out of 17 Hawaii or Alaska. And we have 187 extended connection 18 international markets, and then a total of 3,529 group --19 total of group 1 markets and 2,487 Group 2 domestic 20 markets, 875 Group 2 international markets, and that 21 brings us to the final total.22 Do we have any questions on how we arrived at 23 those markets or on those markets?24 We had a couple of questions on, on the 25 markets, and let me get those.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 40 1 MR. CLIFFORD: Could you just state how many2 markets by comparison you have in FY ’09?3 MR. ELLIS: Yeah. FY ’09 we solicited 6,808 4 markets. Actually -- let me get my, my notes here. We 5 have 83 more line items than we did last year, and 6 actually we saw a great deal more usage. We have 61 A 7 markets. Those are 20,000 or more passengers per year. 8 That increased by 26 over FY ’09. We have 48 B markets. 9 That’s 15,000 to 20,000. That increased by 23 over last 10 year. 92 C markets, which increased by 41 over last 11 year. That’s 1,000 -- that’s 10,000 to 15,000 12 passengers. 283 D markets. 74 more than last year. And13 1,496 E markets, which increased 58 over last year. So 14 what you see from this is unlike maybe some of your other15 business units, government travel is not decreasing. In 16 fact, it’s increasing. So we feel at GSA that this makes17 us a very valuable customer because our passengers are 18 steady and in fact increasing over some of your other 19 business units. The questions that we received regarding20 markets, one of them was Alaska and Hawaii markets with 21 two connect points, extending connection markets. That 22 was not a full sentence. It was basically we were just 23 trying to draw your attention to there are more Alaska 24 and Hawaii markets that are in the extended connection 25 4,000 series that you’ll see on the domestic side. And FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 41 1 all the extended connection markets, be they domestic2 or international, have a one flight minimum criteria. So3 one flight in and out that meet the qualifications will 4 suffice for bid purposes.5 Any other questions on -- excuse me -- on, on 6 the markets?7 I thank you very much. 8 Kristen, are you going to take on the baggage 9 fees? Oh, good.10 MS. JAREMBACK: Okay. I’m going to talk 11 briefly about where GSA is coming from as far as baggage 12 fees, and I will address all of the questions that have 13 come in. There are quite a few, and, again, I tried to 14 lump them all together to address them in one. So let me15 get through both of my, you know, areas I’m going to talk16 about, and then I’ll open up the floor for discussion.17 Okay. So the changes for baggage fees are made18 in Section B-19, D-7 and D-8. The baggage fee is for 19 evaluation purposes only. The proposed YCA and dash CA 20 fares will be the awarded contract fare. The baggage 21 fees will not become part of either of those fares. For 22 Group 1 markets, proposed baggage fees will be added to 23 the composite fare and factored into the overall cost 24 benefit tradeoff. For Group 2, the proposed baggage fees25 will be added to the composite fare for price evaluation.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 42 1 As you know, Group 2 is evaluated on lowest price2 technically acceptable. 3 So there’s no other cost benefit trade-off. The 4 questions that came in, I’m going to try and address 5 right now. The baggage fee is for the first bag only, 6 and does not include additional charges for overweight 7 and oversized bags. That would still be considered an 8 extra fee at the time of travel, and is not considered in9 the evaluation process. A question came in on how will 10 -- identify which passengers will, will not be charged at11 the airport for baggage fees. In answer, if you, if you 12 are awarded, if carrier is awarded the City Pair Market, 13 which included a baggage fee for evaluation purposes, 14 then you may charge a passenger that amount at the time 15 of travel for the first checked bag. Standard commercial16 practices for second, third, overweight, oversize bags 17 can be applied as necessary according to airline policy. 18 B-13 -- here’s another question. B-13, Subsection 3, 19 states all fares shall include the cost of meals and 20 baggage handling services normally and customarily 21 provided by scheduled carriers to the same class of 22 commercial passengers. Which baggage handling services 23 do you mean? We’re talking about the first baggage, the 24 first bag fee only. And this section is basically 25 stating that the same -- for the same class of commercialFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 43 1 passengers fares for government travel should include2 the same type of fees. GSA does not know -- we were 3 asked if we had the percentage of travelers who are 4 affected by baggage fees. We do not have a hard 5 percentage of travelers that are affected by baggage 6 fees, but we do know that the average trip of a 7 government traveler is about three and a half days, and 8 GSA estimates that at least one bag will be necessary to 9 perform that travel. So with one checked bag at just a 10 $15 baggage fee for the first bag with one million 11 passengers, that’s 15 million right there. And we know 12 that we have at least 8 million passengers a year. So 13 it’s quite a big, quite a big amount.14 MR. MALONEBILLONE: You’re assuming everybody 15 that --16 MS. JAREMBACK: Can we wait until I’m done 17 before we -- let me just go through a couple more bullet 18 points, Tom, and then I’ll get your question. Okay? 19 A question came in about why the baggage fee 20 was the only fee selected, and that is because it’s the 21 only fee that’s not optional. Passengers cannot choose 22 to use that service or not. Like we said, there’s -- for23 a typical traveler a three and a half day business trip 24 will require a bag. So that’s why we’re saying that it’s25 not an option will be to have to take a bag to perform FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 44 1 their mission -- them to take at least one bag to2 perform their mission. And unlike other ancillary fees 3 like seat selection for premium class seating or other 4 such fees where a traveler has a choice to pay for those 5 extra services. With the baggage, the first baggage fee,6 they don’t typically have a choice. GSA does understand 7 that active duty military are not charged with baggage 8 duty -- excuse me -- for baggage by most carriers. 9 However, for evaluation purposes, this is not taken into 10 account, and GSA is using the baggage fees for evaluation11 for City Pair Market, not by government passenger type. 12 And then a question came in regarding the COPS 13 system. And in COPS there will be a separate column for 14 baggage fee -- submitted.15 And that wraps up the questions. So I’ll take 16 questions from the audience.17 Tom.18 MR. MALONEBILLONE: Tom MaloneBillone, United 19 Airlines. We had this discussion, I think it was in 20 October, about question as to why we didn’t include the 21 bag fees in, in the pricing -- pricing, and the issue 22 became why should we penalize the person who doesn’t 23 bring a bag or just brings carryon to pay more for the 24 travel? I am having a hard time --25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 45 1 UNIDENTIFIED SPEAKER: -- we can’t hear him2 on the phone.3 MR. MALONEBILLONE: The question was -- or the 4 answer to the question I have is back in October, we had 5 a meeting, and one of the issues that came up was why 6 don’t we just include the bag fee in the price, the GSA 7 price? And my response at that time was well then you’re8 penalizing every traveler, whether they have a bag or 9 not, they’re going to pay a higher fare, all right. Now 10 I don’t know how often you all have been on a plane, but 11 I would say the majority of people do not check their 12 bags. You can put three and a half days of clothing in 13 the overhead quite easily with, you know, and overhead 14 bag. So you’re having us apply this rule to everybody 15 who may not use it. And your, your figures are assuming 16 everybody’s going -- that’s going three and a half days 17 is bringing a bag. Well, you can’t make an assumption 18 like that. That is why I asked the question what 19 percentage of people carry bags? And I’ll bet you it’s 20 less than 5 percent of all your travelers. But you don’t21 have the data. You’re shaking your head no, but you 22 don’t have the data. You’re not telling us, okay. The 23 issue is you’re making everybody penalized, you’re 24 penalizing everybody for something that not everybody is 25 using. And it’s an optional thing. You can put three FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 46 1 and a half days for clothing and change of clothing in2 a bag that will fit in the overhead, if that’s your 3 criteria. I think this is, this is bogus.4 MR. CLIFFORD: Denny Clifford, Delta. Tom’s 5 100 percent right on every single point. Your strongest 6 argument that this is designed -- it was put in because 7 it’s not optional is false. He’s absolutely right. 8 Three and a half days, most people go to carry-on. How 9 many people -- go for a three and a half day trip and 10 carry something -- how, how many people want to wait at 11 the carousel, pick it up at the end of the day? Except 12 for you, Andrea. But the point is it is optional, and 13 what you’ve done here is you’re not evaluating the fares,14 one fare against another with 14 different airlines or 15 whoever is bidding on the market. You’re evaluating our 16 baggage policy, and that’s just plain wrong.17 MR. BRISTOW: Our hopes under this is to 18 evaluate the cost of the trip and the cost of the travel,19 which includes all these other ancillary type fees. The 20 other ones like we said are choices, premium class 21 travel, larger seats, fuel surcharge, we left that as it 22 is, so that you would have an economic price adjustment. 23 We have no economic price adjustment for this. Each of 24 the carriers charge a different rate. Some exempt our 25 active duty military. Some don’t charge for the federal FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 47 1 government or the City Pair Government any fares. We2 trying to standardize the process for evaluation purposes3 only, but still allows you the flexibility to charge your4 rates for those that check the bag and not charge those 5 who don’t. For evaluating purposes, you want me to take 6 your baggage fees today and apply them to the fare that 7 you put in, because that is the total cost of the travel.8 Some charge $10, some charge $15, some charge $25. We 9 only say we’re going to evaluate it off of the first bag.10 We allow you that difference on the second bags because 11 some charge $25, $40, $50 for the second bag. We felt 12 that it was inappropriate. One bag would do it. We 13 would be able to evaluate the fares and the fee applied 14 to it to make the best conscious decision. If you want 15 to say no fees on this City Pair Market, no baggage fee, 16 then the composite rate will be your fare. You still 17 have the flexibility to charge later. But for evaluation18 purposes, you said that you would not charge the 19 government a fee for bags, and some carriers don’t. The 20 confusion out there this year in the baggage fees, who is21 going to be charged, who is not, how much is it going to 22 be charged? That’s where the voice of our customer, in 23 talking to them, came back to us and said, we need some 24 assistance here. The initial discussion back in October 25 was to put the bags in the fee, and we agreed, putting itFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 48 1 into the fare, putting the baggage fee into the fare2 compounds your issue, and you want to be able to bid 3 appropriately just on the fare. But what we need to do 4 is properly evaluate the services that we’re receiving. 5 And if Carrier A says I’m not going to charge the 6 government on City Pair fares for bags, then so be it. 7 And that fare wins as part of the evaluation process. 8 Very similar to here. The fare could be $300. This could9 be $15. The fare could be $310. This could be $10. Who10 gets awarded that market? And based on our analysis and 11 the amount of travelers that we have, the cost impact is 12 tremendous to our travelers, and we don’t believe that 13 people just stick all the bags up into the overhead. 14 They have to have the option to get what they need to do 15 or get where they need to go and perform their mission 16 appropriately.17 MR. MALONEBILLONE: You just said something, 18 which is quite interesting, and I’m going to throw a 19 hypothetical out to you, okay. I’m Carrier A, and I look20 at your method of, of evaluating the fares, and I go, 21 gee, you know, if I tell the government I’m not going to 22 charge the bag fee just for this evaluation purposes, I 23 will say no, I’m not going to charge it. But two months 24 down the road when the contract is effective, I charge 25 $25 or $30 dollars for the first bag. I’ve got that CityFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 49 1 Pair, but now my evaluation is all skewed because I’m2 charging $25, $30 dollars for a bag that you didn’t 3 include in your evaluation. I can game the system. I 4 mean not that I’m going to, but I wouldn’t put it past 5 some people that might want to do that, and they’ll get 6 the City Pair and then you’ll be paying more.7 MR. AQUILINO: Let’s be a little clear. Look,8 we’re not asking you to declare whether you’re going to 9 charge a baggage fee or not. That’s not what the purpose10 of this thing is. All we’re saying is that when you do, 11 you include it in a number, the composite number there. 12 That’s what we’re saying. So you will be -- whatever 13 your fare is, your fare basis will be looked at against 14 everyone else. It’s not declaring whether you’re going 15 to charge for bag or not. You’ve already said whether 16 you’re going to do that. 17 MR. CLIFFORD: But, Vince, Tom is right. There18 will be airlines that game the system just to get the 19 award. You can’t do that. That’s absolutely unfair, and20 it’s apples and oranges. You’ve got to evaluate this 21 contract based on fares and only fares. That’s what it 22 was founded upon 30 years ago, that’s the way it should 23 be consistently. When you start dumping, and you are 24 dumping these things in to this contract, you have 25 totally bastardized, and I use that from a technical FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 50 1 standpoint, this contract. There is no way that you2 can equally represent and evaluate carriers when you’re 3 going to have carriers that do this. They’re going to 4 game the system, and they’re not going to be up front 5 with this thing at all. You’ve got to base this thing on6 fares and fares only, and baggage has got to have nothing7 to do with it. Otherwise, I’m telling you what, you’re 8 going to have -- there’s a reason that you have not had 9 participation in this contract from three major carriers,10 okay. If you want others pushed away, you can take the 11 risk, but you are pushing people away from this contract 12 with things like this.13 MR. BRISTOW: We are trying to even the playing14 ground. We’re also trying to make sure that we properly 15 evaluate this for our customers and traveler 16 participation. As I stated, the confusion out there in 17 the field, at the airport, of who is being charged, who 18 is not, who gets this award, who doesn’t, there are some 19 carriers that don’t charge for the bag and may return 20 back to the program. Those are issues that we have to 21 take a look at. Other carriers feel that they don’t 22 charge for a baggage fee and that they are 23 inappropriately not awarded a contract based simply on 24 the base fare when they offer other services that are 25 beneficial to the traveler on a daily basis.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 51 1 UNIDENTIFIED SPEAKERMS. CARLOCK: Can I have2 a point of clarification. I’m a little confused. And I 3 need to understand what they are saying, the airlines. 4 So am I clear to understand then that if the fare is $3005 and then there’s a $10 fee for the bag, which would be 6 310, right now at this point they would bid that, and the7 evaluation would be on the 310?8 MR. BRISTOW: Correct.9 UNIDENTIFIED SPEAKERMS. CARLOCK: Correct? 10 Okay. But then there could be a carrier that only bid the11 $300 and then state that they are not going to charge a 12 fare or a fee for the bag, and then two months down the 13 road come back and ask for an equitable adjustment, if 14 you will, to now charge $10 or actually $20 for the bag. 15 So now their fee is actually 320 versus the 315 or the 16 310. Is that what I’m hearing? Is that accurate 17 statement? And I’ve got one more point. The additional 18 $20, is that then added to the $300 or do we still have 19 to pay the separate $25 separate when we get to the 20 airport?21 MR. BRISTOW: Pay the $25 separate when you get22 to the airport.23 UNIDENTIFIED SPEAKERMS. CARLOCK: So it’s not 24 going to be included. So we’re right back where we are 25 right now?FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 52 1 MR. BRISTOW: That’s correct.2 MR. CLIFFORD: Well, not exactly.3 UNIDENTIFIED SPEAKERMS. ARLOCK: Well, we are 4 because --5 MR. CLIFFORD: Well, yeah, right, you guys are.6 The problem is you’ve got a partner who you’re dealing 7 with participating in this contract that’s giving you 8 deeply discounted fares. What are the airlines getting 9 for this? You’re going to have an airline out there that10 gets awarded the market by not fessing up so to speak 11 with the bag fees. They get awarded the market and then,12 oh, okay, two months later they put in the bag charge, 13 okay. That’s not right. That is unfair, and you can’t 14 have a system that is designed that way, which evaluates 15 it without, without considering -- you’ve got to have 16 outside straight across the board just the fare 17 evaluation. And, by the way, Jerry, just one last point 18 just for the record, your objectors are mutually 19 exclusive. You said you have to accommodate your, your 20 passengers, your travelers, people are complaining about 21 this, as well as, as accommodate the airlines. You can’t22 do both. Those are mutually exclusive objectives, and 23 you’ve got to decide one way or the other how this goes, 24 but it’s an unfair system the way you’ve got it designed.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 53 1 UNIDENTIFIED SPEAKER: I’m also concerned2 about the fact of an airline saying they’re not going to 3 charge a bag fee, and then they at a later point put that4 bag fee in. Those markets really should -- the 5 administrative nightmare of that, I don’t think you’d 6 want to go there.7 MR. BRISTOW: Okay.8 MR. ELLIS: If I may make a point. This 9 polling the airlines here. How do you feel that if we 10 put in the contract that if you put down that you are not11 charging the government passengers a bag fee, then you 12 cannot do it for the life of that contract? That would 13 take care of that problem about gaming.14 UNIDENTIFIED SPEAKER: Well, that would help, 15 but I still think you need to more clearly define in the 16 contract what you’re covering for bag fee, that it needs 17 specifically to spell out first bag fee. It does not -- 18 include second bag fee, overweight, excise or excess 19 baggage, any of those fees. I mean this is very generic 20 and, and really open to interpretation.21 MR. GAMMONGAMMAN: This is Chris GammonGamman 22 from US Airways. I’d also like to add that the one bag 23 fee added -- the first bag fee added to the fare seems a 24 little bit more anecdotal than based on empirical 25 evidence.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 54 1 MR. BRISTOW: Okay. Different suggestions2 here and that’s what we’re here for today, different 3 suggestions on how to get through this issue. Should we 4 take the baggage fees that you’re charging currently 5 today as an evaluation factor and a past performance 6 factor and add it into the fare? Or should we give you 7 the flexibility to say, yes, I will charge a bag or no, I8 won’t? And in the fare, not in the fare, separate from 9 the fare but for the evaluation process. 10 I’m sorry. Tom.11 MR. MALONEBILLONE: Just want to make sure I 12 understand the evaluation process here, because I think 13 it’s getting a little muddy. You’re going to take what 14 we bid for the YCA and the dash CA fare and come up with 15 a composite and then add the fuel surcharge on that to 16 come up with the evaluation criteria.17 MR. BRISTOW: You mean the baggage.18 UNIDENTIFIED SPEAKER: Baggage fee.19 MR. MALONEBILLONE: Okay, the bag. I’m sorry, 20 the bag fee. And that’s how you’re going to do it. 21 You’re not going to take the YCA and say, okay, it’s 22 another $30 or $25, you’re going to take the composite. 23 It’s going to -- I’ve heard several things around here, 24 and I just want to make sure that I was -- when I go to 25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 55 1 my people for pricing, I need to tell them how that’s2 going to be evaluated.3 MR. BRISTOW: The same composite --4 MR. MALONEBILLONE: It’s going to be the 5 composite fare and not on the individual fare?6 MR. BRISTOW: Correct.7 MR. MALONEBILLONE: Okay. Thank you.8 MR. BRISTOW: The same composite fare that you 9 -- just adds in the bag fee.10 UNIDENTIFIED SPEAKER: Do you have question, 11 Jerry Ellis?12 MR. CLIFFORD: No. We don’t want that, and the13 reason, this is the reason. You don’t have across the 14 board, yes, we’re going to charge bag fees or, no, we 15 don’t charge bag fees. There are segments within the 16 population -- there’s the DOD component. Delta Airlines 17 offers free baggage to the DOD component, but they do not18 for Embassy staff. They do not for -- we do not for 19 civil service. They -- we, Delta Airlines does not 20 charge for the DOD person on active duty, but it does for21 civil servants of the government.22 MR. ELLIS: That was already covered. We’re 23 not taking the military DOD passenger into consideration.24 It’s just for the government --25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 56 1 MR. CLIFFORD: But my, but my point is this. 2 We as the airline bidding this contract have to have the 3 flexibility. When we look at a YCA fare or a blank CA 4 fare, we don’t want to be in a situation of thinking, 5 okay, do we need to -- is this a, a more of a civil 6 servant-type market or is this more of a DOD market and 7 having to go through gyrations of, okay, who is going to 8 get charged a bag, who is not going to charge a bag? 9 What are should we consider with respect to all of those 10 different variables? We can’t have that. It’s just, 11 it’s a mess. It’s a mess administratively. It’s 12 impossible to administer and, and it just doesn’t work. 13 We’ve got to keep it clean. And the way it’s been clean 14 is the way it’s been done in the past. Keep it out of 15 the fare evaluation process. I know it’s not in the 16 fare. It’s in the evaluation process the way it stands 17 right now. You can’t do it that way. 18 MR. BRISTOW: Jerry, I just wanted to comment 19 on the -- on what you said. I, I think if you’re going 20 to include bag fees or not include bag fees in the 21 evaluation, you know, that’s, that’s your decision, but, 22 you know, whatever, whatever carriers bid, that’s what 23 they, you know, and, and they win that award, that, that 24 needs to be a commitment. So if they bid no bag fees, 25 then they need to be, you know, if they win an award FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 57 1 based on whatever fare and whatever bag fee, then, you2 know, you obviously don’t allow us to, you know, once we 3 win an award today raise the fare or, or do whatever we 4 want with the fare. So I think that the same needs to 5 apply to bag fees as well.6 MR. ELLIS: Denny, your point is well taken 7 about, you know, it’s always been this way, it’s always 8 been this way. Well, things changed this past year, 9 Denny. The airlines are the ones that unbundled all 10 these fees, and we have to answer to our customers on the11 impact of their operations and on their finances. And 12 this is part of that. I mean we allowed the fuel 13 surcharge to go forward, and that’s been a very big help 14 to a lot of airlines, and it’s been an administrative 15 problem for us, but we sucked it up, and we allowed that 16 to go forward, as you can see. But now the unbundling of17 all these fees is having another financial and 18 operational impact on our customers, and we at GSA, we 19 have a fiduciary responsibility to answer those types of 20 inquiries, and what are we as a government doing to 21 protect and help our passengers?22 MR. BRISTOW: Please state your name and --23 MR. CLIFFORD: Denny Clifford, Delta Airlines. 24 You know what? Regarding fiduciary responsibilities, we 25 also have that to our stockholders and our, our owners ofFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 58 1 our company, okay. That being said, your point about2 change is well taken. Things do change. We understand 3 that. So why after fighting for two years for ticket 4 time limits, a major change of this industry, you have 5 decided not to accept this, and this is the first time 6 it’s been mentioned -- in meeting. First time it’s been 7 -- it wasn’t even on the agenda. I don’t know what in 8 the world happened to that. You presented your case in 9 December, but it still has not really been addressed why 10 that was rejected. That’s a change we asked for. We 11 didn’t get. So the changes we would like, such as ticket12 time limits and we asked for, we were faced in December 13 with what I call a quid pro quo. There’s no other way to14 define it. You said okay, if we opt for putting bags in 15 the fare, the GSA will consider putting in TTL for the, 16 for the contract. You know what? We got neither. You 17 said no to the TTL, and you said okay we’re going to put 18 the stuff in the bag, in the fare anyways regarding bags.19 And that is not a partnership. Frank is still here. 20 Frank mentioned this is a excellent cooperation, a great 21 partnership. You know what? It’s not. This is a one-22 way deal, and I’ll just say that one point. Because it 23 has been one way. The airlines have fought very hard on 24 the TTL issue and on some other things. We’ve not gotten25 those. That, ladies and gentlemen, is not a partnership.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 59 1 UNIDENTIFIED SPEAKERMR. BRISTOW: Ticketing2 time limit was going to be discussed, and I’ll, I’ll go 3 ahead and take the opportunity to discuss it now. We 4 worked the entire year to do our analysis on the 5 ticketing time limit, through time, effort and expense on6 behalf of the Government to be able to provide an 7 analysis of the issues. We listened to our customer 8 groups. We did a pilot test with our DOD affiliates to 9 ensure what the impact might be. Today, the economic 10 issues that face us as well are astronomical. The amount 11 of money it costs us to implement ticketing time limits, 12 to move in that direction, would be too inappropriate for13 us to, to advise ticketing time limits would proceed 14 forward. We gave the, we gave the analysis to the 15 carriers in December. We had one-on-one discussions with16 the carriers. Not all agree that ticketing time limit 17 was the number one priority. May have been a nice to 18 have, but it wasn’t a deal breaker. Some carriers 19 specifically stated that they needed the ticketing time 20 limit. All of these considered comes up with the 21 decision of what we had to make today. And it is a 22 partnership thing. We didn’t let you down and not do the23 study. If you want the, the dollar amounts it cost us to24 do these studies and the time it took, I’ll be glad to 25 share them with you. We didn’t leave the plate out thereFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 60 1 and not, not paid attention to -- specific time line --2 did you get it? No. But it wasn’t without a concerned 3 effort on the part of the Government and the partnership 4 of the carriers and with our customers to even consider 5 it. The customer base came back and said possibly quid 6 pro quo, could we have the fees installed into the fare, 7 and they’ll be better suited to take on the ticketing 8 time limit? Carriers said, no, they didn’t want that to 9 happen. We’re looking at baggage fees now outside of the10 quid pro quo. We’re trying to come up with effective 11 resolutions to these issues. We have to restore the 12 confidence of the City Pair Program back to the travelers13 issue. That’s where we’re at today. City Pair Program, 14 should I take it, not take it? Should I go commercially,15 not go commercially? What’s the best fare? What’s the 16 total cost of my travel? Am I going to get reimbursed 17 for that or not? Am I at the ticket counter, and I’m not18 supposed to be able to have to pay for this bag, and I’m 19 getting charged? Well, gosh, I heard they’re not getting20 charged. How come I’m getting charged? Commercial 21 practices, we’re trying to get as close as possible to 22 that, but every time we do, it’s costing the Government 23 more money as well. We’re looking at with a new 24 administration, the new economics, somebody to come out 25 and say cut travel 10 percent. That economic activity FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 61 1 taken away from the carriers would be significant to2 you. We’re looking at properly managing the process, 3 properly managing travel so that a straight across the 4 board 10 percent reduction doesn’t come about. We need 5 to be able to have these tools necessary to make the best6 evaluation possible for our customers and for you the 7 carriers. Significant effort is put into the 8 solicitation for you to get the awarded contracts and the9 compliance, that’s what we’re working on today. We’re 10 going to be working on compliance. We’re going to be 11 working on better travel management. We have a 12 concurrent meeting going on over at SGTP with the travel 13 agencies to talk about debit memos, talk about secure 14 flight, talk about Fly America, how they should be 15 purchasing the City Pair fares and to make sure that the 16 awarded carriers get what they are contracted for. We 17 still believe it’s a partnership, and we hope you do too.18 MR. CLIFFORD: Thank you. Just for the record,19 and, and I did not say we were not appreciative of the 20 efforts and the time and the money it cost to do the TTL 21 study. But a partnership is when you compromise. And to22 be honest, there has not been a whole lot of compromising23 in the last few years. I’ll give you the fact that you 24 gave us fuel surcharges. Why? You didn’t have a choice.25 The world changed, and you had to change with it. The --FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 62 1 you just mentioned you needed to restore -- how you2 need to restore confidence in the travelers about this 3 contract. What are you doing about restoring the 4 confidence of the airlines who participate in this 5 contract, three of whom have not bid either any of this 6 contract or a major portion of it? Don’t you think you 7 have a confidence problem with your participating 8 airlines? When I say a, a partnership, I’m talking about9 we give you input, and we hope that we get something out 10 of that in return. For example, this whole baggage 11 issue. I will be extremely disappointed. Delta will be 12 extremely disappointed, if this goes forward and you 13 continue to put bags into the fare in the evaluation 14 process. That’s precisely what I’m talking about here. 15 Okay, we didn’t get the TTL. We fought hard. We did it 16 as best as we think -- I think we could have as an 17 airline industry. We didn’t get it. That was your 18 economic decision. Fine. But now you’ve got another 19 chance here. You’ve got bag issues. Are you going to be20 so-called jamming that down our throats? Or are we going21 to have some compromise here, and you’re going to say, 22 okay, fine, the airlines may be right about this? That’s23 what I’m talking about as far as partnership. Because 24 there have been a lot of things in the past we’ve asked 25 for, and, frankly, we are the gift that keeps giving timeFREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 63 1 and time again, and it’s got to stop sooner or later.2 That’s where your restoring confidence comes in.3 MR. BRISTOW: But like other fees and the 4 baggage fees, were not our intent to change. Airlines 5 changed this last year. We’re trying to work this out 6 from that change that happened last year. All these 7 different types of fees associated with that. Okay. It 8 says policy. Can they travel this way? Can they get 9 reimbursed for this? How’s this going to occur? Bags 10 came out to be not the choice aspect, and we are trying 11 to move our travelers for compliance under the City Pair 12 Contract. Those carriers that didn’t participate before,13 we hope that they see an advantage of coming back and 14 participating in a strong program that provides good 15 service to our customers and value to the industry. 16 That’s what we’re looking for, and it is a compromise on 17 our part. It’s a balancing act to try and make sure that18 our customers are well taken care of -- large amount of 19 customers. It may be only 2 percent, but as we looked 20 through out evaluation and did our analysis, each of the 21 carriers that were awarded contracts in 2007, received 22 more dollar value that we awarded. 72 percent of all of 23 our travelers traveled on YCA-CA fares. 12 percent -- 24 I’m sorry, 16 percent traveled on DG fares, and the other25 12 percent purchase commercial fares. This is a strong FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 64 1 program, and it does have compliance factors, and we’re2 looking to tighten those up and ensure that the, that the3 carriers that win the award get the benefit from that. 4 Baggage fees is one of them. We’re not the ones that 5 broke out the fees. We’re not the ones that unbundled 6 them. But we have to take care of our travelers. We have7 to work this out. 8 MR. MALONEBILLONE: I’m going to change the 9 subject here because you’re going to do what you’re going10 to do, and each carrier is going to make a decision as to11 what they’re going to do when it comes to bid. 12 UNIDENTIFIED SPEAKER: Identify yourself, 13 please.14 MR. MALONEBILLONE: Tom MaloneBillone, United 15 Airlines.16 UNIDENTIFIED SPEAKER: Thank you.17 MR. MALONEBILLONE: All right. Earlier, and 18 I’m going to step back a bit because I wasn’t able to ask19 a question on the point about the clause in the contract 20 about audits. Okay. And that kind of got short time on 21 that. I can understand why you would audit fares when it22 was the TMC making the decision where the traveler called23 the TMC and the TMC put the fares together and issued the24 ticket, and they may have made a mistake. And so audits 25 looks at that mistake and says, gee, you know, United FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 65 1 Airlines, we had an overcharge. Why? I don’t know.2 Talk to the TMC. Well, we used to have meetings with 3 audits. We don’t have them anymore. Moving down the 4 line, it was always said, well, once ETS and DTS come 5 online, going back a few years, we’ll be able to identify6 right to the traveler what the problem is. That hasn’t 7 happened, okay. Your traveler is making the decision to 8 pick whatever fare it is, and it’s being approved by the 9 Government. It’s being approved by the AO, which in our 10 belief is the Government. So the Government has approved11 this travel. Whatever the fare is, the Government has 12 approved it. Now, there’s an audit. Okay? You already 13 approved the travel. So why are you auditing it? The 14 Government approved the travel. Now the Government’s 15 come back and say, well, no, we don’t want to approve 16 that travel. Now TMC didn’t do anything. The airline 17 didn’t do anything. Is there a traveler that made the 18 decision? You need to go back to them. I think that 19 whole clause needs to be taken out of the contract. 20 That’s my personal opinion. Because it is a nightmare. 21 We had nothing to do with it. The TMC 99 percent of the 22 time has nothing to do with it. Travelers are making 23 that decision. And even if it was the TMC, it’s already 24 been approved travel by the Government. So it’s very 25 confusing.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 66 1 MR. BRISTOW: Notices of overcharges and2 debit memos constant issue, and, and we also look at 3 contractual obligations, and we have the City Pair 4 Contract over here, under TSS we have the TMC contract. 5 But the airlines also are the ones that have the contract6 with the TMC’s to issue that debit memo. We are 7 approaching this in a strategic analysis of the debit 8 memo problem. This week we are proposing a focus group 9 that’s going to help assist with this. Quality controls 10 and ETS, ETS systems are such that to be able to monitor 11 that overcharge of the City Pair fare. Most airlines 12 agree they should not be charged more than the City Pair 13 fare, and the AO that possibly approves it does not 14 necessarily have the authority to override the City Pair 15 Contract. Under regulatory obligation audits is charged 16 with managing and auditing the transportation of these 17 contracts. They only go after the City Pair fares.18 MR. MALONEBILLONE: That’s not true. That is 19 not true.20 MR. BRISTOW: In the -- well, if it’s not, then21 here’s what we’re proposing. A focus group to be able to22 discuss these with the carriers, the TMC’s, the 23 Government, and to be able to address these issues and to24 make sure that we’re going to correct this. This is one 25 of our objectives this year. Because if we minimize the FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 67 1 amount of notices of overcharge, the amount of debit2 memos, we feel we can pay attention to some of these 3 other things, help you control your cost, help you 4 administer your contract appropriately, and we can stay 5 focused and approached on the right issues. We’re going 6 to try and minimize that this year. That’s one -- number7 one objective for the TMC’s and relationship with the 8 carriers. I know it doesn’t satisfy the answer today, 9 but we’re going to be working on this issue as one of our10 objectives. Remember the plan we had last year to make 11 sure that we cover these issues? Want to open the floor 12 for that later to make sure that we’re going to cover 13 those issues, and we’ll make sure that we’re addressing 14 those throughout the year.15 Any other questions?16 MR. AQUILINO: Jerry, my point is, you know, if17 we have any more items to discuss, because it is getting,18 you know, towards lunchtime or even past, and we just 19 want to know if you all want to take a 15-minute break, 20 we come back, if there’s more to talk about, or if you 21 just wanted to finish up and call it a day. We’ll leave 22 it up to --23 Everybody wants to finish up, raise your hand.24 Okay. So we’ll just finish it up.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 68 1 MR. BRISTOW: Okay. We’re going to continue2 on and finish up. To those on the phone, thank you very 3 much.4 Next question, anything? Look at my notes 5 here. Because I want to talk about some other issues 6 here that we have outstanding for this year.7 MR. ELLIS: We would invite any of the agencies8 that are either on the phone call or in the audience to 9 please formulate and express any of their views here, you10 know. We’ve heard from GSA certainly. We’ve heard from 11 our industry people. Are there any agencies that have 12 anything to bring to the table or, or discuss in regards 13 to the City Pair Contract?14 MS. SIZEMORE: Patty Sizemore from the DOD. 15 Just in response to, you know, the partnership. We 16 didn’t ask specifically for a criteria of the baggage to 17 be in the evaluation criteria. We would prefer to have a18 set number of bags free in the contract or included in 19 the fare, just like it has been in previous years. As 20 much of a nightmare as it is for you to figure out, you 21 know, whether it’s a DOD traveler or a military traveler 22 or other Government employee, our travelers are traveling23 on all of your airlines, and when you have a different 24 baggage requirement on each airline, it’s a nightmare for25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 69 1 the traveler as well. That’s why we would like the2 contract to say one set bag for every, every customer.3 MR. ELLIS: And Patty makes an excellent point.4 And first of all, let me say this. We applaud and thank 5 the industry for what they do for our uniformed military 6 personnel with the, the allowance of the two B-4 bags at 7 70 pounds. That really helps our uniformed personnel. 8 But to Patty’s point, you have the uniformed military 9 people sometimes traveling with a DOD civilian 10 counterpart. One is charged, one is not, and so on and 11 so forth. So it, it does add to confusion and, you know, 12 the Government passengers being charged. Again this is a13 -- each individually airline decision on their part, but 14 there is confusion among the ranks, and that’s why this 15 came to the forefront in this, this year’s contract is 16 because we heard loud and long from our customer base 17 about the confusion and the problems that the baggage 18 fees were, were having with our customers.19 Again, any other agency want to be heard from? 20 This is your chance. 21 MR. IVESTER: Ron Ivester, CWT, SATO travel. A22 question. In the GSA program, what percentages is your 23 DOD customers compared to the total amount of passengers?2425FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 70 1 MR. ELLIS: A rough, thumbnail guesstimate is2 DOD represents about 70 percent of our passenger usage. 3 That’s a rough thumbnail guesstimate.4 MR. IVESTER: Ron Ivester. And so what I 5 understand is that you’re doing this baggage evaluation 6 on 30 percent of your customers?7 MR. ELLIS: No -- DOD. You have uniformed 8 military members that are exempt. You have DOD civilian 9 employees that are not exempt. So I don’t have an exact 10 figure, you know. Maybe Patty or Andrea or somebody 11 could tell me, you know, what the percentage is of 12 uniformed military members as opposed to DOD civilians, 13 but I would assume that it’s substantial.14 MR. BRISTOW: And, thus, the confusion. Really15 is, especially when they get out at the airport.16 We would like to ask everybody else who wants 17 to chime in about other issues that would like to be 18 addressed here this year, be glad to, to discuss those as19 well.20 MR. COYLE: I’d like to add one to your list, 21 if I could. George with American Airlines. On the 22 audits, we still get those via US mail, and the process 23 is often a year behind, and the airline receives an NOC. 24 If there is any way we can move into the electronic age 25 of doing those via electronic transfer, it will save our FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 71 1 folks from having this stack of paper and trying to2 Xerox it and getting it to different departments. You 3 know, the research process would be sped up. There’s 4 other things that prohibit the airlines from collecting 5 on -- Resolution 850, passed last year, which prevents us6 from going back to an agency and debiting them, even if 7 they are at fault or even if they did something outside 8 of their booking procedures. We still have to eat the 9 loss. So there’s some benefit if we could speed that 10 process up, and I’d like to talk about that --11 MR. BRISTOW: The good part about it is that 12 the reporting process coming in is actually down to about13 seven months rather than a year. So we’re getting -- 14 closing that gap. That’s the good part. The other part 15 is, like you said, how do we go electronically? We’re 16 looking at some areas through our Management Information 17 Service to assist audits as well to move that through. 18 Debit memos, we -- reduce the amount of debit memos or 19 the notices of overcharge to the carriers, will actually 20 help out this bottom part down here. Not encumber you 21 with administrative processes to be able to, you know, to22 have to go back to the travel agencies and retrieve the 23 differences in the fare and like that, if the ticket is 24 actually issued correctly from the beginning, and then it25 makes that process a lot less.FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 72 1 UNIDENTIFIED SPEAKER: Jerry, I would ask, as2 it relates to debit memos for DOD, what we have seen more3 recently is that we’re not sure that the City Pair 4 Contract and the audit folks are all on the same sheet of5 music as to when debit memos should be issued. So I would6 ask that we look at and make sure that the -- contract is7 in compliance with the way the City Pairs Program 8 Contract is written, because we do have some issues that 9 we’ve recently seen where we’re questioning whether a 10 debit memo should have been issued.11 MR. BRISTOW: And that’s going to be part of 12 the process. Please understand that the Audit Department13 does not issue the debit memo. The Audit Department 14 issues the notice of overcharge to the carrier, and the 15 carrier issues the debit memo back to the TMC.16 UNIDENTIFIED SPEAKER: But the, but the debit 17 memo is issued based on what the Audit Department has 18 provided to the carrier.19 MR. BRISTOW: Based on the criteria. We 20 understand that. We’re going to be working on that as 21 part of it, and I hope that DOD is going to be on this 22 focus group committee to assist us in that, in this 23 discussion.24 Tom.25FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 73 1 MR. MALONEBILLONE: To that note, we would2 like a definition of what the Government thinks is an 3 administrative fee versus a penalty. Now to me, if 4 you’re using what may be the lowest logically local fare,5 but there is a fee for a change and the Government agency6 says, well, that’s a penalty, I’m going to go to the next7 fare, we’re seeing things where that’s considered an 8 administrative fee, and a fare may be a couple of hundred9 dollars higher that the Government went for. So we’re 10 getting -- say no you should have went to this other 11 fare. So if we can get a real definition of what is 12 considered an administrative fee versus a penalty, that, 13 that would go a long way. We have a lot of those issues 14 right now where it’s into the what is the lowest, the 15 logical local fare when complying with --16 MR. BRISTOW: Okay. 17 MR. SCHNEIDER: Gary Schneider, Continental 18 Airlines. You know, we, the airlines, are spending a lot19 of money to try to help you out. We really are. Some of20 the things we have you don’t even use. We have on-line 21 check-in. Why isn’t the military and government using 22 on-line check-in? 24 hours before departure, they can 23 get their, their boarding pass and avoid another problem 24 at the airport. Internationally, all they have to do is 25 -- their passport through a special kiosk machine we FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 74 1 have. Once you do it once, they can check in at their2 home. Why isn’t the Government promoting that, that the 3 airlines are spending so much money on right now? That 4 would save the Government a lot of time and a lot of 5 frustration at the airport, online check-in 24 hours 6 before departure, get your boarding pass.7 MR. BRISTOW: Does that mean Continental is 8 going back on the program?9 UNIDENTIFIED SPEAKER: You can use PDA also.10 MR. BRISTOW: That’s a good question. Yeah, 11 that is good, because we are looking at these different 12 types of issues to be -- in fact, when you look at this 13 secure flight, passport going to be a big issue in the 14 passenger name records. They’re going to have to have 15 passport number, name--16 UNIDENTIFIED SPEAKER: Gender.17 MR. BRISTOW: -- gender and birth date. So we 18 are working on that with the carriers and with our 19 customer agencies, with the ETS, DTS systems, GDS’s, so 20 that we understand what specific information is necessary21 to get into the record and move them along at the 22 airport. That is correct. So that’s one of the issues 23 that we want to approach this year. It’s going to be a, 24 a roll-out to the carriers. We don’t know how that’s 25 going to happen. That’s a confidential application FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 75 1 between TSA and the, and the carriers. Different2 carriers are going to be rolled out at different times. 3 So we’re unable to find that, that part out. We are going4 to work on secure flight. The other one is CPR 5 participation. Really important for compliance issues. 6 We’re going to be utilizing the Management Information 7 Services data that just has been cranked up at HHS. Is 8 that correct? Going to be able to monitor City Pair 9 usage on a monthly basis with downloads from our TMC’s. 10 Travel management is a huge application for us, and 11 making sure that the City Pair participation and 12 enforcement of compliance under City Pair is taken care 13 of. Fly America Act, we approach that because DOD 14 specific to their travel is that they use the Fly America15 Act on U.S. carriers. New things coming up here, open 16 skies, the EU open skies. If there’s no contract there 17 bid in that marketplace, the new rule will be that 18 they’ll be able to travel on foreign flight carrier from 19 that origin to that destination, except DOD. They’re 20 going to ensure that DOD employees fly Fly America. So 21 we have to make sure that we have all these things in 22 motion for it. Of course we’ve got to take a look at the 23 audits, electronic version. We are working in tandem 24 with each of these different areas to make sure that 25 we’re going to have a valuable program for our carriers FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 76 1 to participate in. So we do have these issues open. I2 encourage more information to come back to us on the 3 baggage issue on what you think and how you think we 4 could/should do this. We’ve taken into consideration a 5 number of avenues. We have to protect the interest of 6 our travelers -- protect the interest of our airlines. 7 But at the same time, we can’t get gamed in some of these8 areas as well. So we’re looking for active participation9 on your part. And, please, if you have another thought 10 about how to do this, we’re not the only ones out here, 11 so please give us a call or send us an e-mail.12 You have contact information? 13 Real quick, I want to put this back up. 14 Because we thought this was effective last year. I’m 15 sorry you can’t read this. We tried to get a copy of it 16 at the last second, but we’ll have that on, on a readable17 aspect. What this states here is that we have our 18 planning meetings over here in January. Pre-Solicitation19 Conference is today. Airline industry provide 20 documentation to support proposed requests, if you have 21 others additional to these that are up here. Monitor the22 impact of these changes monthly. Review possible system 23 changes. Review for possible TMC changes. There’s a lot24 of things that have to go in this application to make 25 sure that we end up at the end of the year, make sure FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 77 1 that we have from October 1st we’re ready to go, and2 then, of course, we get right back into next year’s 3 solicitations. So if we can work on some of these and 4 have these cleared up by October 1st, we’ll be rolling the5 program. We’ve opened the lines of communication. We 6 exchanged the rolls and responsibilities of Program 7 Management Office to the Contracting Officers so that 8 they can properly evaluate the proposals that come in, 9 and the Program Management Office can continue to work on10 these issues as they’re outstanding. So the door is 11 open. We’ll be running these issues for the rest of the 12 year.13 Any other comments?14 Any other questions? Going once --15 Thank you all for participating. Thank you. 16 Good to see you. Have a good year.17 I’m sorry. Contact information is coming up. 18 There we go. For the airlines, we’ve sent this out to 19 your home offices in e-mail format so that you have all 20 of these to work with.21 (Whereupon, at 1:00 p.m., on February 3, 2009, 22 the Pre-Solicitation Conference was concluded.)232425FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 78 12345678910111213141516171819202122232425FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947 79 1 C E R T I F I C A T E 2 This is to certify that the attached 3 proceedings of the Pre-Solicitation Conference held on 4 February 3, 2009, were held as herein appears, and that 5 this is the original transcription thereof.678 ______Dan Hawkins, Reporter 9 FREE STATE REPORTING, INC.101112 13141516171819202122232425FREE STATE REPORTING, INC. Court Reporting Transcription D.C. Area 301-261-1902 Balt. & Annap. 410-974-0947

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