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TWA Airlines LLC

Over the past several weeks, a number of carriers have applied in OST-00-7181, or expressed interest in applying, to replace TWA in using these two exemption slots. American, Continental Airlines, Inc. and United Air Lines, Inc. have applied to operate nonstop service from DCA to Los Angeles; Delta Air Lines, Inc., to Salt Lake City; Frontier Airlines, Inc., to Denver; Alaska Airlines, Inc., to Seattle; and North-west Airlines, Inc., to an unnamed beyond-perimeter city.

The Department will be required to conduct a carrier -selection proceeding to choose a single successor to TWA among these many applicants. That proceeding has not yet been instituted, and is not likely to be concluded before the closing date of the American/TWA Airlines LLC/TWA transaction, which the parties are seeking to accomplish at the earliest possible time. As of the closing, TWA will cease to utilize its DCA-LAX exemption slots and, absent the relief sought here, nonstop service in this market would precipitously end.

In these circumstances, the public interest would best be served by granting pendente lite exemption authority to TWA Airlines LLC to continue operating daily nonstop flights in the DCA-LAX market until a successor to TWA is named in the carrier-selection proceeding.

If this service ends suddenly, consumers holding tickets and reservations would suffer the inconvenience of disrupted travel plans. Passengers booked for service after the closing occurs would be left without nonstop service between DCA and LAX. To the extent that they are re-booked, they would be required to use Dulles for nonstop service, and could only use DCA for one-stop service.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com

TWA Airlines LLC

Counsel:  Metropolitan Washington Airports Authority, Edward Faggen

Trans World Airlines LLC

TWA LLC is American’s alter ego, not an even remotely independent airline. TWA LLC is wholly-owned by American, and its three managers are American’s Chairman, Vice Chairman and Senior Vice President for Finance. (See Application of American, TWA and TWA LLC in Docket OST-01-9027 at 14 and Exhibit 5) American and United, American’s proposed partner for Washington service, already dominate Washington-Los Angeles service, and there is no possibility that TWA LLC will compete vigorously with American and United. In sharp contrast, Continental would compete vigorously and successfully with both American and United for Washington Reagan-Los Angeles traffic if it were awarded interim authority for the route.

Counsel:  Continental and Crowell Moring, Bruce Keiner, rbkeiner@cromor.com

Trans World Airlines LLC

Indeed, as a graphic demonstration to the Department of the priority Alaska has attached to establishing that the Seattle gateway and Alaska can better maximize the pro-competitive use of these two "beyond perimeter" DCA slots, Alaska seriously considered pursuing Seattle gateway-DCA service on a pendente lite basis. Alaska. however, recognized that the Department would find it extremely difficult on an interim basis to shift that service to another gateway regardless of the comparative merits of the various other gateways and other carriers seeking these two TWA Los Angeles-DCA beyond perimeter slots. At the same time, it is virtually certain that the proceeding for the long-term award of these "beyond-perimeter" slots will be hotly contested. The Department should therefore not be placed in the extremely difficult position of twice having to make new carrier selection decisions within the next 60-90 days on these two slots. Provided the Department conducts its long-term carrier selection proceeding on an expedited schedule, Alaska has reluctantly concluded that the most prudent course would be for the Department to simply allow American to operate TWA's two slots subject to appropriate conditions to minimize the prejudicial effect on the other carrier applicants, including Alaska, of granting this authority even on just a pendente lite basis.

American's pendente lite exemption application raises all of the problems of prejudice associated with the potential award of interim authority to a carrier which will also be among the applicants for the long-term authorization. The Department and, before it, the Civil Aeronautics Board always evidenced great sensitivity to the obvious prejudicial impact of granting such authority on an interim basis to one among several competing carriers and, on a number of occasions, declined to make any interim award to avoid just such prejudice.

Counsel:  Squire Sanders, Marshall Sinick, 202.626.6651

In light of the fact that the TWA/American acquisition has been approved by the bankruptcy court, and that the Justice Department has advised that it will not oppose the transaction, the circumstances foreseen by the Department when it issued the cautionary letter to American and TWA have now come to pass. All interested parties in this proceeding, including TWA LLC and American, agree that a carrier selection case is now necessary to reallocate the former TWA slot exemptions. TWA LLC requests the interim use of the slot exemptions during the pendency of the case.

Delta agrees that these valuable public resources should not be allowed to go unused for any period of time. Indeed, on January 29, 2001, as soon as Delta became aware of the Department's determination that the TWA slot exemptions would need to be reallocated, Delta immediately applied for DCA-Salt Lake City authority. Since Delta's application was filed, numerous other carriers have expressed an interest in the use of the TWA slots. Delta has consistently advocated that the Department promptly set down a proceeding to determine a successor prior to the cessation of service by TWA.

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

This American Airlines proposal would allow it to continue to reap the benefits of its partnership with TWA while pretending that it is submitting its request on behalf of the "public interest."' As noted in the petition, TWA Airlines LLC is a wholly-owned subsidiary of American and is the entity that will temporarily acquire TWA's assets, including large numbers of DCA slots, until all assets are permanently transferred to American.

Once again, one of the nation's largest carriers is asking that the Department create a special "slot" rule to allow it to gain additional control over DCA slots while new entrants continue to be blocked from competing at that airport. The only party that will benefit from American's continued use of the beyond-perimeter slots is American. If the Department allows American to operate these beyond-perimeter rule slots, it would bolster American's efforts to continue its control over the market and the slots.

Counsel:  Ungaretti Harris, Edward Faberman, 202.639.7501

TWA urges the Department to consider that, within days, Department of Transportation is expected to approve a transfer of essentially all of TWA's current authority to TWA LLC. As such, the Department should take action to permit TWA LLC to continue to operate beyond-perimeter slots at Reagan National. Without such action, TWA LLC will be unable to continue to offer transportation to passengers who have currently booked transportation on TWA's nonstop DCA-Los Angeles flights. Specifically, TWA will no longer hold an operators certificate or relevant Department of Transportation authority after the transfer of its international and domestic certificates in Docket OST 01-9027. If the Department does not take action to grant exemption authority to TWA LLC, TWA LLC, to operate LAX-DCA after the closing of American's purchase of TWA, passengers will be substantially inconvenienced by a required immediate cessation of non-stop service in the market. Such an outcome appears unnecessary given TWA LLC's stated commitment to operate the service until the Department decides on a successor in a separate proceeding.

TWA further notes that another recipient of beyond-perimeter slots -- National Airlines -- is currently under the protection of federal bankruptcy court. As such, the Department might, in the very near future, be faced with the need to reallocate an additional two beyond perimeter slots at DCA currently held by National Airlines. Given this fact, the public might be better served by the Department allowing TWA's integration to proceed with the DCA slots being granted to TWA LLC on an interim basis. On this basis, the Department will have the opportunity to evaluate whether National Airlines Las Vegas slots will also need to be reallocated.

Counsel:  Glenn Wicks, 202.457.7790

United finds it regrettable that the Department is now backed into a position of either seeing TWA's DCA-LAX service abruptly terminate and passengers scramble to be reaccommodated, or conducting an interim or long-term carrier selection proceeding in its entirety in a matter of a few weeks. However, United, for one, is ready, willing and able to provide interim nonstop DCA-LAX service pending the Department's selection of a long-term replacement carrier for TWA's exemption slots. In fact, United is filing concurrently a Contingent Application seeking the pendente lite authority to do so. As the Contingent Application demonstrates, United's DCA-LAX service would be far superior and offer substantially greater network access and public interest benefits than would service by American's alter ego, TWA Airlines LLC.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com

The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century

By:  Susan McDermott

Alaska Airlines, Inc.; America West Airlines, Inc.; Continental Airlines; TWA Airlines LLC; United Air Lines, Inc.

We have decided to grant the TWA LLC application at this time pending approval by the Federal Aviation Administration for the requisite operating authorities. We deny the applications of Continental, Alaska, United, and America West.

We agree with the parties supporting the application that the public interest is best served by granting TWA LLC's request. Without the requested relief, an abrupt service cessation is likely causing substantial inconvenience and confusion for DCA-Los Angeles passengers. While we agree that other applicants could also provide the interim service until a new carrier is selected, even in these circumstances the transition costs for passengers could be significant. For example, schedules might alter significantly, reservations would have to change, tickets reissued, and passengers informed of the changes.

We also agree with the commenters that the approval be very short-term in nature. In that regard the Department has set a very aggressive timetable: proposals are due April 16, answers are due April 30, and we fully expect to issue a final carrier selection decision in May. The authority granted here will expire 90 days after the issuance date of this order or when a replacement service is selected, whichever is earlier. Finally, we wish to make clear that our action here in no way gives American Airlines any advantage whatsoever in the long-term carrier selection decision.

By: Susan McDermott

Vanguard Airlines, Inc.

Counsel:  Vanguard, Robert Rowen

National Airlines, Inc.

National proposes to operate the slot exemptions to provide a second daily nonstop roundtrip frequency between DCA and the carrier's hub at Las Vegas McCarran International Airport (LAS).

As was demonstrated in National's original slot exemption application, a growing demand for airline seats exists between DCA and LAS, the top leisure destination in the world. To supplement the data presented in that pleading, National notes that during the period September 1999 to September 2000, McCarran International Airport in Las Vegas was the fourth largest domestic O&D market, after Los Angeles, Atlanta and Chicago O'Hare. Of the 15 largest hotels in the world, 14 are located in Las Vegas. 4/ Between 1993 and 2000, hotel occupancy rates in Las Vegas averaged over 90% year-round, as compared to the national average over that same period of 67%. Taking into account all the hotel and motel rooms in the Las Vegas area which are under construction and/or proposed for development, by the end of 2003, the total Las Vegas room inventory will be 175,972, an increase of 42% from current levels. This sizable hotel expansion win clearly require additional air service to meet heightened customer demand.

Counsel:  Hogan Hartson, George Carneal, 202-637-6546, gucarneal@hhlaw.com 

Alaska Airlines, Inc., America West Airlines, Inc., American Airlines, Inc., Continental Airlines, Inc., Delta Air Lines, Inc., Frontier Airlines, Inc., National Airlines, Inc., United Airlines, Inc., and Vanguard Airlines, Inc.

We have decided to select Alaska Airlines for nonstop service to Seattle. Our selection is premised on our conclusion that its proposed service best meets the statutory requirements for allocation of DCA slot exemptions that are specified in AIR-21.

As was the case in our first DCA exemption proceeding, applicants have tended to emphasize one or the other of these two criteria, depending upon the strength of their existing presence at DCA. Those with the strongest presence highlighted the scope and size of their respective networks at their beyond-perimeter hubs and the competitive benefits that could be brought to multiple markets via those networks. Applicants with a more limited DCA presence stressed that the Congressional objective to advance competitive benefits could best be addressed by granting their applications. Carriers in this latter group argued that even though, in most cases, their networks were smaller, their selection would produce a stronger competitive impact than an award to any of the larger, more established DCA incumbents. With the exception of Alaska and Vanguard, each of the applicants in the group with a limited DCA presence received an award of at least two slot exemptions in our earlier decision. They now argue that additional frequencies are required to expand the service and competitive benefits of their previous selection. 

By:  Susan McDermott

DOT Press Release

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