Consolidated Answer of Delta Air Lines
Content
BEFORE THE
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
________________________________________________
)
)
2016 U.S.-HANEDA COMBINATION
) Docket DOT-OST-2016-0048
SERVICES ALLOCATION PROCEEDING
)
)
________________________________________________)
CONSOLIDATED ANSWER OF DELTA AIR LINES, INC.
Communications with respect to this document should be addressed to:
Robert J. Cortelyou
Senior Vice President – Network Planning
Mary Loeffelhoz
Vice President - International Operations
DELTA AIR LINES, INC.
1030 Delta Boulevard
Atlanta, Georgia 30320
Alexander Krulic
Managing Director and Associate General
Counsel – Regulatory & International Affairs
Christopher Walker
Director – Regulatory & International Affairs
DELTA AIR LINES, INC.
1212 New York Avenue, N.W.
Washington, D.C. 20005
(202) 216-0700
[email protected]
[email protected]
Kenneth P. Quinn
Amna Arshad
Christopher K. Leuchten
PILLSBURY WINTHROP SHAW
PITTMAN, LLP
1200 17th Street, N.W.
Washington, D.C. 20036
(202) 663-8898
[email protected]
[email protected]
[email protected]
Counsel for DELTA AIR LINES, INC.
April 5, 2016
BEFORE THE
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
________________________________________________
)
)
2016 U.S.-HANEDA COMBINATION
) Docket DOT-OST-2016-0048
SERVICES ALLOCATION PROCEEDING
)
)
________________________________________________)
CONSOLIDATED ANSWER OF DELTA AIR LINES, INC.
Delta Air Lines, Inc. (“Delta”) submits its answer to the petitions for reconsideration of
United Airlines, Inc. (“United”) and American Airlines Inc. (“American”) and the petition for
reconsideration and objection of Hawaiian Airlines, Inc. (“Hawaiian”) (collectively the
“Petitions”) to the Department of Transportation’s (“Department”) Order Instituting Proceeding
and to Show Cause, instituting the 2016 U.S.-Haneda Combination Services Allocation
Proceeding and temporarily allocating four of the new U.S.-Haneda daytime slot pairs to the
incumbent carriers currently holding U.S.-Haneda slot-pair allocations (“Instituting Order”).1
Delta opposes the Petitions and supports the Department’s decision to competitively bid
these slot pairs to achieve the maximum public interest benefits, while also assuring that current
U.S.-Haneda service is not displaced during the pendency of the proceeding by awarding
temporary authority to the incumbent carriers.
1
2016 U.S.-Haneda Combination Services Allocation Proceeding, Order Instituting Proceeding and to Show Cause,
DOT Order-2016-3-26 (Mar. 22, 2016), Docket DOT-OST-2016-0048 (“Instituting Order”).
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 2
This proceeding is unique and unprecedented. Despite each petitioner’s insistence to the
contrary, 2 the Department is not “reallocating” existing authorities.
As recognized by the
Department, the opening of the U.S.-Haneda market represents new and distinct opportunities for
carriers that are not comparable to the existing routes available. These economic and public
interest considerations of nighttime service compared to daytime service to Haneda are, in fact,
as different as night and day.
Consistent with the Supreme Court’s Ashbacker doctrine,3 the Department should use a
competitive process to award the new daytime slots, which is particularly appropriate here where
members of the oneworld and Star alliances dominate the current U.S.-Haneda market.
The Department’s Show Cause portion of the Instituting Order guarantees that U.S.
carriers not aligned with oneworld or Star will not be placed at a competitive disadvantage for
the IATA 2016/2017 winter traffic season, as the allocation process plays out.4
I.
The Daytime Slot Pairs Being Allocated in this Proceeding are Substantially
Different than the Nighttime Slot Pairs Previously Allocated at Haneda
The daytime slot pairs being allocated in this proceeding are different opportunities from
the existing allocations at Haneda Airport from a legal, business, and public interest perspective.
Delta agrees with the Department that “substantially changed circumstances” warrant opening up
the proceeding, and that “[d]aytime access to Haneda has the potential to significantly expand
2
In the Matter of 2016 U.S.-Haneda Combination Services Allocation Proceeding, Docket DOT-OST-2016-0048,
Petition of United Airline Inc. For Reconsideration of Order 2016-3-26 at 1 (Mar. 29, 2016) (“United Petition”);
Petition For Reconsideration and Objection of Hawaiian Airlines, Inc. To Department of Transportation Order 20163-26 at 1 (Mar. 29, 2016) (“Hawaiian Petition and Objection”); and Petition of American Airlines, Inc. For
Reconsideration of Order 2016-3-26 at 1 (Mar. 29, 2016) (“American Petition”).
3
See Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945).
4
See Instituting Order at 4-5.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 3
the number of U.S. cities that can support commercially viable Haneda service, in contrast to
what is economically viable with nighttime slots.”5
Until February 2016, the bilateral agreement between the U.S. and Japan did not permit
the U.S. government to allocate daytime slot pairs.6 The Department could not have allocated
daytime rights to carriers, because the U.S. government did not possess such rights to allocate.
Contrary to the Petitioners’ assertions, the award of U.S.-Haneda routes under the 2010
proceeding was explicitly conditioned on limited nighttime slot availability. 7
As a result of the nighttime restrictions, no carrier currently provides Haneda service
outside of Hawaii and California. While Delta has consistently advocated for a much larger
daytime opening to ensure open and fair competition, Delta recognizes that establishing limited
daytime service to Haneda will allow for commercially viable service from parts of the U.S. that
otherwise would not have it.
II.
The Ashbacker Doctrine Supports Allocation Through a Competitive Process
“Full and fair comparative consideration”8 of all applications makes sense from a public
interest perspective, and is consistent with the U.S. Supreme Court’s Ashbacker doctrine, 9 which
5
Instituting Order at 2.
Compare
Record
of
Discussions,
Japan-U.S.,
signed
Feb.
18,
2016, available
at
http://www.state.gov/documents/organization/253360.pdf (“2016 U.S.-Japan Agreement”) (permitting “five pairs of
slots during daytime hours between 0600 and 2255 hours and one pair of slots during late night and early morning
hours between 2200 and 0655 hours”), with Memorandum of Understanding, Japan-U.S., signed Oct. 25, 2010,
available at http://www.state.gov/documents/organization/150284.pdf, implementing Civil Air Transport
Agreement, Japan-U.S., signed Aug. 11, 1952, 4 UST 1948, TIAS 2854 (“2010 U.S.-Japan Agreement”) (stating
that “services are only permitted at Haneda between 2200 and 0700 hours”); see also In the Matter of 2010 U.S.Haneda Combination Services Allocation Proceeding, DOT Final Order (July 6, 2010), Docket DOT-OST-20100018 (“2010 Haneda Final Order”).
7
The Final Order in the 2010 allocation proceeding very clearly stated that the operations were subject to conditions,
including that “U.S. operations at Haneda will be permitted between 2200 and 0700 hours local time” and that
“departures from Haneda to a point in the 48 contiguous U.S. states are not permitted prior to midnight.” See 2010
Haneda Final Order.
8
Instituting Order at 5.
6
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 4
stands for the proposition that when a government agency is considering two bona fide
applications that are filed for the same award, granting an application without due process
deprives the loser of an opportunity to be heard. An applicant’s right to be heard is fundamental
to procedural due process. 10 Contrary to Petitioners’ assertions, 11 no basis exists for the
Department to unilaterally award these newly acquired daytime slot pairs to Haneda Airport
without inviting all applicants to submit their proposals and providing them an opportunity to be
heard.
This is particularly important in the new competitive environment, where Star and
oneworld carriers already have five of the available ten slot pairs between the U.S. and Haneda.
III.
The Instituting Order Provides Due Process for the New Slots
Petitioners United and Hawaiian cite Civil Aeronautics Board v. Delta Air Lines Inc.12 for
the proposition that, among other things, routes cannot be taken away without due process. Even
assuming that slots were being taken away, rather than new slots being awarded, Delta
respectfully submits that the Instituting Order, which grandfathers operations until the
proceeding is complete, provides such a process. Each carrier will have an opportunity to
demonstrate that its proposed service is in the public interest.
American made similar unsuccessful arguments during the 2007/2008 U.S.-Colombia
frequency allocation proceeding.13 In that proceeding, a change in the U.S.-Columbia bilateral
9
Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945).
See id. at 330.
11
See United Petition at 1, Hawaiian Petition and Objection at 1-2, American Petition at 1 (all stating that nighttime
carriers at Haneda should receive permanent daytime slot pairs before other carriers can apply and without a
proceeding).
12
367 U.S. 316, 329 (1961).
13
See In re 2007/2008 U.S.-Colombia Combination Frequency Allocation Proceeding, Petition of American
Airlines, Inc. for Reconsideration of Order 2007-11-23 (Dec. 3, 2007), Docket DOT-OST-2007-0006 (“American
2007 Colombia Petition”); See also In the matter of 2007/2008 U.S.-Colombia Combination Frequency Allocation
10
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 5
provided U.S. carriers “open skies” rights to certain Colombian cities, including Barranquilla
where American previously held frequencies. 14 Following this change, American notified the
Department of its intention to use its Barranquilla frequencies for another city. In response, the
Department instituted a proceeding to determine how to allocate American’s unused Barranquilla
frequencies, and American argued that its route was protected from summary revocation under
CAB v. Delta. 15 The Department denied American’s petition, stating that “contrary to the
assertions in American’s petition, we have not taken any frequencies away from American. All
seven frequencies remain available for American’s use, subject to the outcome of this proceeding
in which American can participate fully.”16
Similarly, here, the Department has not taken any slots away from any carriers. Rather,
the Department has allowed the incumbent carriers to continue their services during the
pendency of the current proceeding and has also provided them with a full opportunity to
participate in the proceeding and demonstrate the public interest benefits of the new daytime
services they wish to provide. Accordingly, the Department’s Instituting Order provides the
requisite due process.
Proceeding, Order on Reconsideration (Dec. 21, 2007), Docket DOT-OST-2007-0006 (“2007 Colombia
Reconsideration Order”).
14
Amendment to Air Transport Agreement, Colombia-U.S., signed Dec. 19, 2007, available at
http://www.state.gov/documents/organization/114818.pdf, amending the Air Transport Agreement, Colombia-U.S.,
signed Oct. 24, 1956, 14 UST 429, TIAS 5338.
15
See American 2007 Colombia Petition at 1.
16
See 2007 Colombia Reconsideration Order at 4. The Department also stated that “American’s reliance upon CAB
v. Delta Air Lines is without merit, as that case was specifically limited to certificate authority and not frequency
allocations.” Id. at 3.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 6
IV.
The Petitions Are Fundamentally Flawed
A.
United’s Arguments Are Unpersuasive and Inapt
United fails to demonstrate how its prior award, which was restricted on its face to
nighttime operations, would be relevant to new daytime route opportunities.
First, United wrongly claims that its San Francisco-Haneda slot is only subject to two
conditions. 17 United ignores language in Department’s Final Order granting United the slot
pair—that United’s U.S. operations at Haneda could only occur between the hours of 2200 and
0700 local time and that departures from Haneda to a point in the 48 contiguous U.S. states are
not permitted prior to midnight.18
Second, United inappropriately relies on the 2014 Seattle-Haneda proceeding as support
for its contention that a “reexamination” is not justified here.19 The question there was whether
Delta’s utilization of its nighttime slot pair still provided public benefits—the Department
ultimately found that it did.20 That scenario is distinct from the one presented in the current
proceeding, which include new rights for daytime slot pairs – rights that required renegotiation
of the U.S.-Japan bilateral agreement.21
17
Id. at 3. (claiming that the two conditions are: that United maintain the underlying authority to serve the U.S.Japan market and that United must not allow the slot pair to become dormant).
18
In the Matter of 2010 U.S.-Haneda Combination Services Allocation Proceeding, Order 2014-4-6, Final Order
(Apr. 4, 2014), Docket DOT-OST-2010-0018. The 2014 Final Order also referred to the 2010 U.S.-Japan
Agreement which also outlines the same nighttime restrictions on the Haneda slots. See 2010 U.S.-Japan Agreement.
United also recognized the restrictions of the night time slots in the 2010 Haneda proceeding and asked the
Department to factor it in in the Department’s public interest test.” In the Matter of 2010 U.S.-Haneda Combination
Services Allocation Proceeding, Application of United Air Lines, Inc. for an Allocation of Slots for U.S.-Haneda
Combination Service at 8 (Feb. 16, 2010), Docket DOT-OST-2010-0018.
19
United Petition at 4-5.
20
The Department found that Delta’s Seattle-Haneda slot pair did provide public benefits, and ordered the slot pair
to remain allocated to Delta. See In the Matter of 2010 U.S.-Haneda Combination Services Allocation Proceeding,
Order 2015-6-14, Final Order (June 15, 2015), Docket DOT-OST-2010-0018.
21
See 2016 U.S.-Japan Agreement.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 7
B.
American’s Reliance on Department Precedent is Misplaced
American’s arguments are also flawed. American argues that the addition of slot pairs in
a proceeding does not give the Department the ability to reallocate existing slot pairs, 22 and cites
prior Department frequency allocation proceedings in support.
precedents 23 are on point.
Yet, none of the cited
As American acknowledges, the cited proceedings allocated
additional frequencies that had become available and neither included nor affected the same
allocated frequencies in the same market. As noted above, American cited to the U.S.-Columbia
proceeding where the DOT reallocated frequencies where incumbents sought to use frequencies
differently than in the original award, an uncontested point.24
Unlike in the examples of the proceedings American relies upon, the new Haneda
daytime slots are in place of the old nighttime slots. The Department has consistently recognized
that rights obtained in bilateral negotiations in exchange for operating rights of the other
country’s airlines are important “new rights” and that the public interest calls for the full use of
these rights.25 As such, they are materially different than reallocations or the addition of new
frequencies in past proceedings.
22
American Petition at 1.
American Petition at 2 (citing to In the Matter of 2007/2008 U.S.-Columbia Combination Frequency Allocation
Proceeding, DOT Order 2007-11-23 (Nov. 26, 2007), Docket OST-2007-0006 (“2007/2008 Colombia Proceeding”);
In the Matter of 1999 U.S.-Argentina Combination Service Case, DOT Final Order 2001-1-14 (issued Jan. 19, 2001),
Docket OST-1999-6210 (“1999 Argentina Proceeding”).
24
American Petition at 2 (citing to 2007/2008 U.S.-Colombia Combination Frequency Allocation Proceeding and
the 1997 U.S.-Argentina All-Cargo Frequency Proceeding).
25
See e.g., 2000 U.S.-Brazil All-Cargo Service Case, DOT Show Cause Order, Order 2001-3-27 at 6 (Mar. 29,
2001).
23
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 8
C.
Hawaiian Airlines Mischaracterizes the Current Proceeding
As Hawaiian’s own petition indicates, the current proceeding involves new opportunities
and rights available to U.S. carriers under the revised agreement.26 Given that these are new
rights it follows that the Department would review new proposals to ensure the new rights are
fully utilized in the public interest.
Nor can Hawaiian have it both ways by contending on the one hand that “some
realignment of the gateways to maximize the public interest may well be warranted,”27 but that
Hawaiian’s Honolulu route should not be included in the process. Either the public interest
warrants new allocations, as proposed by the Department, or it does not, but no legal basis exists
to maintain Hawaiian’s Honolulu slot, but not the other carriers.
Like the other Petitioners, Hawaiian’s primary argument is that the Department’s
instituting order is inconsistent with the Department’s order granting Hawaiian Haneda
authority. 28 According to Hawaiian, Hawaiian was under the impression that its right to operate
the Honolulu-Haneda route would continue even with modifications of the conditions. 29
Hawaiian’s position is without merit. First, as noted above, it is simply not true that the order
26
Hawaiian Petition and Objection at 1. (stating that available Haneda slots are “additional opportunities for U.S.
carriers at Haneda,” and that supports the “new opportunities” and the “additional access Tokyo’s downtown
airport.”) Hawaiian also cites to two proceedings that have no bearing in the current proceeding—the 2007/2008
U.S.-Colombia proceeding and the 1999 U.S.-Argentina proceeding. Both proceedings involved the allocation of
additional rights that had become available pursuant to new bilateral agreements. The Colombia proceeding also
involved the reallocation of American’s unused frequencies, as discussed in Section IV B above. In both scenarios,
the terms of the applicable bilaterals increased the number of available frequencies for U.S. carriers. The current
proceeding involves a new type of slots available as a result of a new bilateral agreement that replace the old slots
and are materially different from reallocations of past awards or the addition of new frequencies separate from those
that were previously awarded. See, e.g., 2007/2008 Colombia Proceeding; 1999 Argentina Proceeding.
27
Hawaiian Petition and Objection at 2.
28
Id. at 1.
29
Id. Hawaiian mischaracterizes a June 17, 2015 letter from Delta for the proposition that Delta was the reason
nighttime operations were inserted into the 2010 Japan-U.S. Open Skies Agreement. Delta’s letter is from 2015 and
states Delta’s opinion regarding potential future changes to Haneda service, and does not address the origin of the
2010 restrictions.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 9
granting Hawaiian authority was not clear in conditioning that authority on nighttime
operations. 30
Second, despite Hawaiian’s misplaced belief, the order does not state that
Hawaiian’s authority will remain even if operating conditions have changed—this language
simply does not exist. Third, DOT may not award authority beyond those available to carriers
under existing bilateral agreements at the time of award.
Finally, by requesting that the
Department require carriers to specify nighttime or daytime slot requests, Hawaiian effectively
concedes that nighttime and daytime slots are different enough to warrant distinct public interest
analysis. 31
In the 2014 Seattle-Haneda proceeding, Hawaiian argued that the Department had the
authority to reallocate Delta’s existing slot, “broad public interest mandate to regulate and
promote competition and international air transportation.” 32 Hawaiian also stated that it is
“entirely reasonable for the Department to revoke economic authority as long as it offers Delta
the opportunity for a hearing.”33 Unlike here, where the Department is considering new route
opportunities, in the Delta Seattle-Haneda example, Hawaiian was arguing in favor of revoking
30
See 2010 Haneda Final Order at 1 (stating that “operations are only permitted between 2200 and 0700”).
Hawaiian Petition at 12. (“Hawaiian requests that the Department make the application procedures more specific
by requiring carriers to designate whether they are applying for daytime or nighttime operating authority and
ranking their preferences within each category ... As over five years of operating experience between the United
States and Haneda has shown, the requirement to operate a route authority at night has the potential to impact the
public interest benefits associated with a particular route award.”)
32
Motions and Applications of American Airlines, Inc. and Hawaiian Airlines, Inc. in the matter of 2010 U.S.Haneda Combination Services Allocation Proceeding, Answer of Hawaiian Airlines, Inc. to Petition for
Reconsideration of Order 2014-12-19, 3-6 (Jan. 2, 2015), Docket DOT-OST-2010-0018.
33
Id.
31
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 10
Delta’s existing authority. It is disingenuous for Hawaiian to now argue that the Department
lacks the authority to allocate new opportunities.34
V.
The Department’s Show Cause Portion of the Instituting Order Maximizes the
Public Benefit of Haneda Slot Pairs Without Disadvantaging U.S. Carriers
Delta supports the Department’s temporary allocation of slot pairs at Haneda, 35 because,
as the order states, it protects U.S. carriers from a competitive disadvantage against Japanese
carriers for the IATA 2016/2017 Winter Traffic Season.
Hawaiian’s objection to the temporary allocation is flawed because it is based primarily
on its arguments regarding the “reallocation” of slot pairs. As discussed at length above, the
Department is allocating new daytime slot pairs negotiated in the most recent bilateral agreement
with Japan. Being new slot pairs, the Department must conduct a proceeding for all potential
applicants before awarding the slot pairs as it has proposed here. While that important process is
underway, all U.S. carriers should agree that the public interest is served as a result of the
Department’s temporary awards to the incumbents rather than no U.S.-flag service to Haneda at
all.
34
Id. Hawaiian incorrectly cites to a past order, which the Department explicitly limited to the facts of that particular
proceeding, to support its argument that the Department should have grandfathered incumbent route right holders
while granting them the right to select a new gateway. See In the Matter of U.S. Passenger Air Carriers, DOT Order
2004-6-25 at 1 (June 28, 2004). The Department found that two carriers had an unfair advantage as a result of
obtaining frequencies through route transfer cases which were not tied to specific city-pairs. The Department
granted the carriers in that proceeding flexibility to select their routes but expressly limited its decision: “Thus,
limited to the specific circumstances and context before us, we find that our decision here is consistent with the
public interest.” Id. at 3. It should have no bearing on this case.
35
Hawaiian filed an objection to the Show Cause portion of the Instituting Order which temporarily allocates four
slot pairs, during daytime hours, to the four U.S. carriers currently operating nighttime service at Haneda. See
Hawaiian Petition and Objection at 13. United and American did not object to the Show Cause portion of the
Instituting Order. See American Petition; United Petition.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 11
Delta does not object to the Department asking carriers to specify markets and
preferences, although, as noted above, this request further supports the Department’s finding that
nighttime and daytime slots are substantially different so as to warrant a fresh look.
VI.
Conclusion
In light of the above, Delta respectfully submits that the Department follow the process
outlined in its Instituting Order.
Respectfully submitted,
Kenneth P. Quinn
Amna Arshad
Christopher K. Leuchten
PILLSBURY WINTHROP SHAW PITTMAN LLP
1200 Seventeenth Street, NW
Washington, D.C. 20036
(202) 663-8898
[email protected]
[email protected]
[email protected]
Counsel for DELTA AIR LINES, INC.
April 5, 2016
CERTIFICATE OF SERVICE
I hereby certify that on April 5, 2016, a copy of the foregoing Answer of Delta Air Lines,
Inc. was served upon the following persons via email:
Air Carrier
Name
E-mail Address
American
American
American
Hawaiian
Hawaiian
United
United
United
FedEx
UPS
Atlas Air
Polar Air Cargo
DOT
DOT
DOT
DOT
FAA
State Department
Airline Info
Howard Kass
Robert Wirick
John B. Williams
Jonathan Hill
Parker Erkmann
Dan Weiss
Thomas Bolling
Abby L. Bried
Nancy Sparks
Anita Mosner
Russell Pommer
Kevin Montgomery
Brian Hedberg
Robert Finamore
Brett Kruger
Ben Taylor
John Duncan
Thomas Engle
Airline Info
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
/s/ Christopher K. Leuchten
Christopher K. Leuchten
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
________________________________________________
)
)
2016 U.S.-HANEDA COMBINATION
) Docket DOT-OST-2016-0048
SERVICES ALLOCATION PROCEEDING
)
)
________________________________________________)
CONSOLIDATED ANSWER OF DELTA AIR LINES, INC.
Communications with respect to this document should be addressed to:
Robert J. Cortelyou
Senior Vice President – Network Planning
Mary Loeffelhoz
Vice President - International Operations
DELTA AIR LINES, INC.
1030 Delta Boulevard
Atlanta, Georgia 30320
Alexander Krulic
Managing Director and Associate General
Counsel – Regulatory & International Affairs
Christopher Walker
Director – Regulatory & International Affairs
DELTA AIR LINES, INC.
1212 New York Avenue, N.W.
Washington, D.C. 20005
(202) 216-0700
[email protected]
[email protected]
Kenneth P. Quinn
Amna Arshad
Christopher K. Leuchten
PILLSBURY WINTHROP SHAW
PITTMAN, LLP
1200 17th Street, N.W.
Washington, D.C. 20036
(202) 663-8898
[email protected]
[email protected]
[email protected]
Counsel for DELTA AIR LINES, INC.
April 5, 2016
BEFORE THE
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
________________________________________________
)
)
2016 U.S.-HANEDA COMBINATION
) Docket DOT-OST-2016-0048
SERVICES ALLOCATION PROCEEDING
)
)
________________________________________________)
CONSOLIDATED ANSWER OF DELTA AIR LINES, INC.
Delta Air Lines, Inc. (“Delta”) submits its answer to the petitions for reconsideration of
United Airlines, Inc. (“United”) and American Airlines Inc. (“American”) and the petition for
reconsideration and objection of Hawaiian Airlines, Inc. (“Hawaiian”) (collectively the
“Petitions”) to the Department of Transportation’s (“Department”) Order Instituting Proceeding
and to Show Cause, instituting the 2016 U.S.-Haneda Combination Services Allocation
Proceeding and temporarily allocating four of the new U.S.-Haneda daytime slot pairs to the
incumbent carriers currently holding U.S.-Haneda slot-pair allocations (“Instituting Order”).1
Delta opposes the Petitions and supports the Department’s decision to competitively bid
these slot pairs to achieve the maximum public interest benefits, while also assuring that current
U.S.-Haneda service is not displaced during the pendency of the proceeding by awarding
temporary authority to the incumbent carriers.
1
2016 U.S.-Haneda Combination Services Allocation Proceeding, Order Instituting Proceeding and to Show Cause,
DOT Order-2016-3-26 (Mar. 22, 2016), Docket DOT-OST-2016-0048 (“Instituting Order”).
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 2
This proceeding is unique and unprecedented. Despite each petitioner’s insistence to the
contrary, 2 the Department is not “reallocating” existing authorities.
As recognized by the
Department, the opening of the U.S.-Haneda market represents new and distinct opportunities for
carriers that are not comparable to the existing routes available. These economic and public
interest considerations of nighttime service compared to daytime service to Haneda are, in fact,
as different as night and day.
Consistent with the Supreme Court’s Ashbacker doctrine,3 the Department should use a
competitive process to award the new daytime slots, which is particularly appropriate here where
members of the oneworld and Star alliances dominate the current U.S.-Haneda market.
The Department’s Show Cause portion of the Instituting Order guarantees that U.S.
carriers not aligned with oneworld or Star will not be placed at a competitive disadvantage for
the IATA 2016/2017 winter traffic season, as the allocation process plays out.4
I.
The Daytime Slot Pairs Being Allocated in this Proceeding are Substantially
Different than the Nighttime Slot Pairs Previously Allocated at Haneda
The daytime slot pairs being allocated in this proceeding are different opportunities from
the existing allocations at Haneda Airport from a legal, business, and public interest perspective.
Delta agrees with the Department that “substantially changed circumstances” warrant opening up
the proceeding, and that “[d]aytime access to Haneda has the potential to significantly expand
2
In the Matter of 2016 U.S.-Haneda Combination Services Allocation Proceeding, Docket DOT-OST-2016-0048,
Petition of United Airline Inc. For Reconsideration of Order 2016-3-26 at 1 (Mar. 29, 2016) (“United Petition”);
Petition For Reconsideration and Objection of Hawaiian Airlines, Inc. To Department of Transportation Order 20163-26 at 1 (Mar. 29, 2016) (“Hawaiian Petition and Objection”); and Petition of American Airlines, Inc. For
Reconsideration of Order 2016-3-26 at 1 (Mar. 29, 2016) (“American Petition”).
3
See Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945).
4
See Instituting Order at 4-5.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 3
the number of U.S. cities that can support commercially viable Haneda service, in contrast to
what is economically viable with nighttime slots.”5
Until February 2016, the bilateral agreement between the U.S. and Japan did not permit
the U.S. government to allocate daytime slot pairs.6 The Department could not have allocated
daytime rights to carriers, because the U.S. government did not possess such rights to allocate.
Contrary to the Petitioners’ assertions, the award of U.S.-Haneda routes under the 2010
proceeding was explicitly conditioned on limited nighttime slot availability. 7
As a result of the nighttime restrictions, no carrier currently provides Haneda service
outside of Hawaii and California. While Delta has consistently advocated for a much larger
daytime opening to ensure open and fair competition, Delta recognizes that establishing limited
daytime service to Haneda will allow for commercially viable service from parts of the U.S. that
otherwise would not have it.
II.
The Ashbacker Doctrine Supports Allocation Through a Competitive Process
“Full and fair comparative consideration”8 of all applications makes sense from a public
interest perspective, and is consistent with the U.S. Supreme Court’s Ashbacker doctrine, 9 which
5
Instituting Order at 2.
Compare
Record
of
Discussions,
Japan-U.S.,
signed
Feb.
18,
2016, available
at
http://www.state.gov/documents/organization/253360.pdf (“2016 U.S.-Japan Agreement”) (permitting “five pairs of
slots during daytime hours between 0600 and 2255 hours and one pair of slots during late night and early morning
hours between 2200 and 0655 hours”), with Memorandum of Understanding, Japan-U.S., signed Oct. 25, 2010,
available at http://www.state.gov/documents/organization/150284.pdf, implementing Civil Air Transport
Agreement, Japan-U.S., signed Aug. 11, 1952, 4 UST 1948, TIAS 2854 (“2010 U.S.-Japan Agreement”) (stating
that “services are only permitted at Haneda between 2200 and 0700 hours”); see also In the Matter of 2010 U.S.Haneda Combination Services Allocation Proceeding, DOT Final Order (July 6, 2010), Docket DOT-OST-20100018 (“2010 Haneda Final Order”).
7
The Final Order in the 2010 allocation proceeding very clearly stated that the operations were subject to conditions,
including that “U.S. operations at Haneda will be permitted between 2200 and 0700 hours local time” and that
“departures from Haneda to a point in the 48 contiguous U.S. states are not permitted prior to midnight.” See 2010
Haneda Final Order.
8
Instituting Order at 5.
6
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 4
stands for the proposition that when a government agency is considering two bona fide
applications that are filed for the same award, granting an application without due process
deprives the loser of an opportunity to be heard. An applicant’s right to be heard is fundamental
to procedural due process. 10 Contrary to Petitioners’ assertions, 11 no basis exists for the
Department to unilaterally award these newly acquired daytime slot pairs to Haneda Airport
without inviting all applicants to submit their proposals and providing them an opportunity to be
heard.
This is particularly important in the new competitive environment, where Star and
oneworld carriers already have five of the available ten slot pairs between the U.S. and Haneda.
III.
The Instituting Order Provides Due Process for the New Slots
Petitioners United and Hawaiian cite Civil Aeronautics Board v. Delta Air Lines Inc.12 for
the proposition that, among other things, routes cannot be taken away without due process. Even
assuming that slots were being taken away, rather than new slots being awarded, Delta
respectfully submits that the Instituting Order, which grandfathers operations until the
proceeding is complete, provides such a process. Each carrier will have an opportunity to
demonstrate that its proposed service is in the public interest.
American made similar unsuccessful arguments during the 2007/2008 U.S.-Colombia
frequency allocation proceeding.13 In that proceeding, a change in the U.S.-Columbia bilateral
9
Ashbacker Radio Corp. v. FCC, 326 U.S. 327 (1945).
See id. at 330.
11
See United Petition at 1, Hawaiian Petition and Objection at 1-2, American Petition at 1 (all stating that nighttime
carriers at Haneda should receive permanent daytime slot pairs before other carriers can apply and without a
proceeding).
12
367 U.S. 316, 329 (1961).
13
See In re 2007/2008 U.S.-Colombia Combination Frequency Allocation Proceeding, Petition of American
Airlines, Inc. for Reconsideration of Order 2007-11-23 (Dec. 3, 2007), Docket DOT-OST-2007-0006 (“American
2007 Colombia Petition”); See also In the matter of 2007/2008 U.S.-Colombia Combination Frequency Allocation
10
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 5
provided U.S. carriers “open skies” rights to certain Colombian cities, including Barranquilla
where American previously held frequencies. 14 Following this change, American notified the
Department of its intention to use its Barranquilla frequencies for another city. In response, the
Department instituted a proceeding to determine how to allocate American’s unused Barranquilla
frequencies, and American argued that its route was protected from summary revocation under
CAB v. Delta. 15 The Department denied American’s petition, stating that “contrary to the
assertions in American’s petition, we have not taken any frequencies away from American. All
seven frequencies remain available for American’s use, subject to the outcome of this proceeding
in which American can participate fully.”16
Similarly, here, the Department has not taken any slots away from any carriers. Rather,
the Department has allowed the incumbent carriers to continue their services during the
pendency of the current proceeding and has also provided them with a full opportunity to
participate in the proceeding and demonstrate the public interest benefits of the new daytime
services they wish to provide. Accordingly, the Department’s Instituting Order provides the
requisite due process.
Proceeding, Order on Reconsideration (Dec. 21, 2007), Docket DOT-OST-2007-0006 (“2007 Colombia
Reconsideration Order”).
14
Amendment to Air Transport Agreement, Colombia-U.S., signed Dec. 19, 2007, available at
http://www.state.gov/documents/organization/114818.pdf, amending the Air Transport Agreement, Colombia-U.S.,
signed Oct. 24, 1956, 14 UST 429, TIAS 5338.
15
See American 2007 Colombia Petition at 1.
16
See 2007 Colombia Reconsideration Order at 4. The Department also stated that “American’s reliance upon CAB
v. Delta Air Lines is without merit, as that case was specifically limited to certificate authority and not frequency
allocations.” Id. at 3.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 6
IV.
The Petitions Are Fundamentally Flawed
A.
United’s Arguments Are Unpersuasive and Inapt
United fails to demonstrate how its prior award, which was restricted on its face to
nighttime operations, would be relevant to new daytime route opportunities.
First, United wrongly claims that its San Francisco-Haneda slot is only subject to two
conditions. 17 United ignores language in Department’s Final Order granting United the slot
pair—that United’s U.S. operations at Haneda could only occur between the hours of 2200 and
0700 local time and that departures from Haneda to a point in the 48 contiguous U.S. states are
not permitted prior to midnight.18
Second, United inappropriately relies on the 2014 Seattle-Haneda proceeding as support
for its contention that a “reexamination” is not justified here.19 The question there was whether
Delta’s utilization of its nighttime slot pair still provided public benefits—the Department
ultimately found that it did.20 That scenario is distinct from the one presented in the current
proceeding, which include new rights for daytime slot pairs – rights that required renegotiation
of the U.S.-Japan bilateral agreement.21
17
Id. at 3. (claiming that the two conditions are: that United maintain the underlying authority to serve the U.S.Japan market and that United must not allow the slot pair to become dormant).
18
In the Matter of 2010 U.S.-Haneda Combination Services Allocation Proceeding, Order 2014-4-6, Final Order
(Apr. 4, 2014), Docket DOT-OST-2010-0018. The 2014 Final Order also referred to the 2010 U.S.-Japan
Agreement which also outlines the same nighttime restrictions on the Haneda slots. See 2010 U.S.-Japan Agreement.
United also recognized the restrictions of the night time slots in the 2010 Haneda proceeding and asked the
Department to factor it in in the Department’s public interest test.” In the Matter of 2010 U.S.-Haneda Combination
Services Allocation Proceeding, Application of United Air Lines, Inc. for an Allocation of Slots for U.S.-Haneda
Combination Service at 8 (Feb. 16, 2010), Docket DOT-OST-2010-0018.
19
United Petition at 4-5.
20
The Department found that Delta’s Seattle-Haneda slot pair did provide public benefits, and ordered the slot pair
to remain allocated to Delta. See In the Matter of 2010 U.S.-Haneda Combination Services Allocation Proceeding,
Order 2015-6-14, Final Order (June 15, 2015), Docket DOT-OST-2010-0018.
21
See 2016 U.S.-Japan Agreement.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 7
B.
American’s Reliance on Department Precedent is Misplaced
American’s arguments are also flawed. American argues that the addition of slot pairs in
a proceeding does not give the Department the ability to reallocate existing slot pairs, 22 and cites
prior Department frequency allocation proceedings in support.
precedents 23 are on point.
Yet, none of the cited
As American acknowledges, the cited proceedings allocated
additional frequencies that had become available and neither included nor affected the same
allocated frequencies in the same market. As noted above, American cited to the U.S.-Columbia
proceeding where the DOT reallocated frequencies where incumbents sought to use frequencies
differently than in the original award, an uncontested point.24
Unlike in the examples of the proceedings American relies upon, the new Haneda
daytime slots are in place of the old nighttime slots. The Department has consistently recognized
that rights obtained in bilateral negotiations in exchange for operating rights of the other
country’s airlines are important “new rights” and that the public interest calls for the full use of
these rights.25 As such, they are materially different than reallocations or the addition of new
frequencies in past proceedings.
22
American Petition at 1.
American Petition at 2 (citing to In the Matter of 2007/2008 U.S.-Columbia Combination Frequency Allocation
Proceeding, DOT Order 2007-11-23 (Nov. 26, 2007), Docket OST-2007-0006 (“2007/2008 Colombia Proceeding”);
In the Matter of 1999 U.S.-Argentina Combination Service Case, DOT Final Order 2001-1-14 (issued Jan. 19, 2001),
Docket OST-1999-6210 (“1999 Argentina Proceeding”).
24
American Petition at 2 (citing to 2007/2008 U.S.-Colombia Combination Frequency Allocation Proceeding and
the 1997 U.S.-Argentina All-Cargo Frequency Proceeding).
25
See e.g., 2000 U.S.-Brazil All-Cargo Service Case, DOT Show Cause Order, Order 2001-3-27 at 6 (Mar. 29,
2001).
23
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 8
C.
Hawaiian Airlines Mischaracterizes the Current Proceeding
As Hawaiian’s own petition indicates, the current proceeding involves new opportunities
and rights available to U.S. carriers under the revised agreement.26 Given that these are new
rights it follows that the Department would review new proposals to ensure the new rights are
fully utilized in the public interest.
Nor can Hawaiian have it both ways by contending on the one hand that “some
realignment of the gateways to maximize the public interest may well be warranted,”27 but that
Hawaiian’s Honolulu route should not be included in the process. Either the public interest
warrants new allocations, as proposed by the Department, or it does not, but no legal basis exists
to maintain Hawaiian’s Honolulu slot, but not the other carriers.
Like the other Petitioners, Hawaiian’s primary argument is that the Department’s
instituting order is inconsistent with the Department’s order granting Hawaiian Haneda
authority. 28 According to Hawaiian, Hawaiian was under the impression that its right to operate
the Honolulu-Haneda route would continue even with modifications of the conditions. 29
Hawaiian’s position is without merit. First, as noted above, it is simply not true that the order
26
Hawaiian Petition and Objection at 1. (stating that available Haneda slots are “additional opportunities for U.S.
carriers at Haneda,” and that supports the “new opportunities” and the “additional access Tokyo’s downtown
airport.”) Hawaiian also cites to two proceedings that have no bearing in the current proceeding—the 2007/2008
U.S.-Colombia proceeding and the 1999 U.S.-Argentina proceeding. Both proceedings involved the allocation of
additional rights that had become available pursuant to new bilateral agreements. The Colombia proceeding also
involved the reallocation of American’s unused frequencies, as discussed in Section IV B above. In both scenarios,
the terms of the applicable bilaterals increased the number of available frequencies for U.S. carriers. The current
proceeding involves a new type of slots available as a result of a new bilateral agreement that replace the old slots
and are materially different from reallocations of past awards or the addition of new frequencies separate from those
that were previously awarded. See, e.g., 2007/2008 Colombia Proceeding; 1999 Argentina Proceeding.
27
Hawaiian Petition and Objection at 2.
28
Id. at 1.
29
Id. Hawaiian mischaracterizes a June 17, 2015 letter from Delta for the proposition that Delta was the reason
nighttime operations were inserted into the 2010 Japan-U.S. Open Skies Agreement. Delta’s letter is from 2015 and
states Delta’s opinion regarding potential future changes to Haneda service, and does not address the origin of the
2010 restrictions.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 9
granting Hawaiian authority was not clear in conditioning that authority on nighttime
operations. 30
Second, despite Hawaiian’s misplaced belief, the order does not state that
Hawaiian’s authority will remain even if operating conditions have changed—this language
simply does not exist. Third, DOT may not award authority beyond those available to carriers
under existing bilateral agreements at the time of award.
Finally, by requesting that the
Department require carriers to specify nighttime or daytime slot requests, Hawaiian effectively
concedes that nighttime and daytime slots are different enough to warrant distinct public interest
analysis. 31
In the 2014 Seattle-Haneda proceeding, Hawaiian argued that the Department had the
authority to reallocate Delta’s existing slot, “broad public interest mandate to regulate and
promote competition and international air transportation.” 32 Hawaiian also stated that it is
“entirely reasonable for the Department to revoke economic authority as long as it offers Delta
the opportunity for a hearing.”33 Unlike here, where the Department is considering new route
opportunities, in the Delta Seattle-Haneda example, Hawaiian was arguing in favor of revoking
30
See 2010 Haneda Final Order at 1 (stating that “operations are only permitted between 2200 and 0700”).
Hawaiian Petition at 12. (“Hawaiian requests that the Department make the application procedures more specific
by requiring carriers to designate whether they are applying for daytime or nighttime operating authority and
ranking their preferences within each category ... As over five years of operating experience between the United
States and Haneda has shown, the requirement to operate a route authority at night has the potential to impact the
public interest benefits associated with a particular route award.”)
32
Motions and Applications of American Airlines, Inc. and Hawaiian Airlines, Inc. in the matter of 2010 U.S.Haneda Combination Services Allocation Proceeding, Answer of Hawaiian Airlines, Inc. to Petition for
Reconsideration of Order 2014-12-19, 3-6 (Jan. 2, 2015), Docket DOT-OST-2010-0018.
33
Id.
31
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 10
Delta’s existing authority. It is disingenuous for Hawaiian to now argue that the Department
lacks the authority to allocate new opportunities.34
V.
The Department’s Show Cause Portion of the Instituting Order Maximizes the
Public Benefit of Haneda Slot Pairs Without Disadvantaging U.S. Carriers
Delta supports the Department’s temporary allocation of slot pairs at Haneda, 35 because,
as the order states, it protects U.S. carriers from a competitive disadvantage against Japanese
carriers for the IATA 2016/2017 Winter Traffic Season.
Hawaiian’s objection to the temporary allocation is flawed because it is based primarily
on its arguments regarding the “reallocation” of slot pairs. As discussed at length above, the
Department is allocating new daytime slot pairs negotiated in the most recent bilateral agreement
with Japan. Being new slot pairs, the Department must conduct a proceeding for all potential
applicants before awarding the slot pairs as it has proposed here. While that important process is
underway, all U.S. carriers should agree that the public interest is served as a result of the
Department’s temporary awards to the incumbents rather than no U.S.-flag service to Haneda at
all.
34
Id. Hawaiian incorrectly cites to a past order, which the Department explicitly limited to the facts of that particular
proceeding, to support its argument that the Department should have grandfathered incumbent route right holders
while granting them the right to select a new gateway. See In the Matter of U.S. Passenger Air Carriers, DOT Order
2004-6-25 at 1 (June 28, 2004). The Department found that two carriers had an unfair advantage as a result of
obtaining frequencies through route transfer cases which were not tied to specific city-pairs. The Department
granted the carriers in that proceeding flexibility to select their routes but expressly limited its decision: “Thus,
limited to the specific circumstances and context before us, we find that our decision here is consistent with the
public interest.” Id. at 3. It should have no bearing on this case.
35
Hawaiian filed an objection to the Show Cause portion of the Instituting Order which temporarily allocates four
slot pairs, during daytime hours, to the four U.S. carriers currently operating nighttime service at Haneda. See
Hawaiian Petition and Objection at 13. United and American did not object to the Show Cause portion of the
Instituting Order. See American Petition; United Petition.
Consolidated Answer of Delta Air Lines, Inc.
Docket OST-2016-0048
Page 11
Delta does not object to the Department asking carriers to specify markets and
preferences, although, as noted above, this request further supports the Department’s finding that
nighttime and daytime slots are substantially different so as to warrant a fresh look.
VI.
Conclusion
In light of the above, Delta respectfully submits that the Department follow the process
outlined in its Instituting Order.
Respectfully submitted,
Kenneth P. Quinn
Amna Arshad
Christopher K. Leuchten
PILLSBURY WINTHROP SHAW PITTMAN LLP
1200 Seventeenth Street, NW
Washington, D.C. 20036
(202) 663-8898
[email protected]
[email protected]
[email protected]
Counsel for DELTA AIR LINES, INC.
April 5, 2016
CERTIFICATE OF SERVICE
I hereby certify that on April 5, 2016, a copy of the foregoing Answer of Delta Air Lines,
Inc. was served upon the following persons via email:
Air Carrier
Name
E-mail Address
American
American
American
Hawaiian
Hawaiian
United
United
United
FedEx
UPS
Atlas Air
Polar Air Cargo
DOT
DOT
DOT
DOT
FAA
State Department
Airline Info
Howard Kass
Robert Wirick
John B. Williams
Jonathan Hill
Parker Erkmann
Dan Weiss
Thomas Bolling
Abby L. Bried
Nancy Sparks
Anita Mosner
Russell Pommer
Kevin Montgomery
Brian Hedberg
Robert Finamore
Brett Kruger
Ben Taylor
John Duncan
Thomas Engle
Airline Info
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
/s/ Christopher K. Leuchten
Christopher K. Leuchten
