OST-99-5475 / Sioux City / High Density Rule - Chicago O'Hare / Letter from United to Mims and Murphy / April 16, 1999

April 16, 1999

1. Bradley Mims

Acting Assistant Secretary for Aviation and International Affairs

Department of Transportation

400 Seventh Street, S.W.

Room 10232

Washington, O.C. 20590

Patrick V. Murphy

Deputy Assistant Secretary for

Aviation and International Affairs

400 Seventh Street, S.W.

Room 10232

Washington, D C. 20590

While the Department in its order was careful to make clear that its approach was "experimental" and "a one-time experiment," the policy implications are of great concern. It is reasonable to expect that the Department will be pressed to extend and generalize this experiment beyond the 1 79-day exemptions it granted. We urge the Department not to do so, for the reasons discussed belongs.

First, granting slot exemptions directly to localities, rather than to carriers, threatens to disrupt the cooperative carrier-community relationships that greatly enhance and facilitate air

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service to small communities. By forcing carriers to compete with communities for slots, a "community slot" approach could well undermine these cooperative efforts.

United in particular, has a long history of working with small communities to improve service to its Chicago hub. For example, in recently bringing service upgrades to small communities through the introduction of regional jet service to Chicago, United encouraged its independent United Express commuter carriers and worked closely with both the communities and the commuter carriers to gain the needed authorities. Such carrier-community cooperation was also instrumental in identifying communities as potential beneficiaries of new service using the 60 O'Hare slots resulting from DOT's December 1997 environmental assessment. As a direct result of these cooperative efforts, six cities that previously lacked nonstop service to O'Hare now have regional jet service- Charleston, Chattanooga, Springfield, Wilkes Barre/Scranton, Roanoke, and Tri-Cities. And United continues to work with cities to improve existing services, including by arranging slot exemption transfers between its commuter carriers and many similar efforts.

Continuation by DOT of the "experimental" practice of awarding slot exemptions to communities runs a serious risk of creating a disservice to small communities by undermining the cooperative approach that has allowed service improvements where justified by marketplace considerations. Under the present system, the carriers have identified the communities where new services would be viable, based on traffic potential. Once identified, the carriers work with those communities to find a way of serving these needs, a process that often involves the important input of the Department. Where decision-making on slots becomes driven not by marketplace economics, but by courthouse politics, however, carriers will necessarily compete, rather than cooperate, with the communities they serve and wish to serve.

Second, in the absence of any clear or established criteria for selecting "deserving" communities (or' for that matter, for selected communities to choose "deserving" carriers), a practice of awarding slots to communities, rather than to carriers, would dramatically politicize the already-difficult slot allocation process. Untethered from either service criteria or market considerations, slot grants to communities could become little more than an exercise in power politics, with slots going to the strongest and most vociferous politicians, rather than to the markets that most deserve and can support service economically. The Department cannot be expected, particularly without substantive service criteria to rely on, to arbitrate these kinds of inter-community political contests.

In the present system, where carriers and communities cooperate based on marketplace factors, politics plays a secondary role. While political support is sought and is helpful, it is rarely determinative. A community, no matter how influential its representatives, cannot reasonably hope for service that is not economically justified. In contrast, a "community slot" approach could force the Department. without comparative economic criteria on which to rely, to award scarce economic resources where they would produce less than optimal public benefits in order to address political concerns.

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Third, by granting slots to localities that, in turn, dole them out to carriers, the Department would fail to exercise its important regulatory and oversight responsibility to see that decisions as to the opportunity for conducting air services throughout the United States are made by the national authority for the maximum public benefit. For the same reasons that Congress wisely pre-empted state and local governments from making decisions "related to a price, route or service of an air carrier," 49 U.S.C. section 41713(b)(1), the federal government bears responsibility for overseeing the process of allocating aviation service opportunities.

The Transportation Department, not local or city governments, has the needed experience and expertise to examine carrier proposals and select those that provide the greatest benefit and are most likely to be economically viable. These kinds of choices are based on the economics of the proposed operation and the relative benefits to the travelling public as a whole, not just the residents of one particular community. For example, the Department has the expertise to weigh competing canter claims as to the amount of local and connecting traffic that will benefit from competing service proposals. This allows the Department to take into account not only the needs of the individual community seeking service to a hub, but also the needs of the other communities served through that hub, and the hub community itself Giving sole discretion over carrier selection to the individual community alone precludes adequate consideration of this important decision-making element.

Let me reiterate in closing that our concern with the Department's "experimental" practice is not based on any specific issues regarding service to the Savannah/Hilton Head or Greenville/Spartanburg communities. Indeed, we are gratified that new nonstop service between Savannah and C)'Hare will become a reality when the United Express carrier, Atlantic Coast Airlines, begins nonstop regional jet service next month. Nor do we see any need to submit a petition for reconsideration of the recent awards based on this practice given the Department's representation that the approach there employed is experimental in nature and relatively show term.

Rather, for all of the reasons discussed here, we believe it important that the Department not extend or expand this experiment. Indeed, we urge DOT to consider transferring the slot exemptions from those communities who have received them as part of this experiment to the carriers serving those communities, when the 179-day experimental period concludes, assuming that awards to such carriers are deemed to be in the public interest.

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We appreciate the Department's consideration of our strong concerns in this matter.

Sincerely,

Michael G. Whitaker

Vice President-International and Regulatory Affairs