Petition for Waiver of the Terms of the Order Limiting Scheduled Operations at LaGuardia Airport, 63702-63714 [2011-26465]

Agencies

• Federal Aviation Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 76, Number 198 (Thursday, October 13, 2011)]
[Notices]
[Pages 63702-63714]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26465]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

[Docket No. FAA-2010-0109]


Petition for Waiver of the Terms of the Order Limiting Scheduled 
Operations at LaGuardia Airport

ACTION: Notice of grant of petition with conditions.

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SUMMARY: The Secretary and the Federal Aviation Administration (FAA) 
are granting the joint waiver request of Delta Air Lines, Inc. (Delta) 
and US Airways, Inc. (US Airways) (together, the Joint Applicants or 
the carriers) from the prohibition on purchasing operating 
authorizations (slots) at LaGuardia Airport (LGA). The waiver permits 
the carriers to consummate a transaction in which US Airways would 
transfer to Delta 132 slot pairs (265 slots) at LGA. In exchange, Delta 
would transfer to US Airways 42 slot pairs (84 slots) at Ronald Reagan 
Washington National Airport (DCA), convey route authority to operate 
certain flights to S[atilde]o Paulo, Brazil, and make a cash payment to 
US Airways. The waiver is subject to a number of conditions, including 
that the carriers dispose of 16 slots at DCA and 32 slots at LGA to 
eligible new entrant and limited incumbent carriers, pursuant to 
procedures set out in this Notice, and achieve a mutually satisfactory 
agreement regarding gates and associated facilities with any such 
purchaser.

DATES: The waiver is effective October 13, 2011.

FOR FURTHER INFORMATION CONTACT: Rebecca MacPherson, Assistant Chief 
Counsel for Regulations, by telephone at (202) 267-3073 or by 
electronic mail at rebecca.macpherson@faa.gov.

SUPPLEMENTARY INFORMATION:

The Proposed Transaction and the Waiver Request

    The FAA limits the number of scheduled and unscheduled operations 
during peak hours at LGA pursuant to an Order that was originally 
published in December 2006 and that has been extended several times 
since (the Order).\1\ The Order allocates operating

[[Page 63703]]

authorizations (commonly known as slots) to carriers and establishes 
rules for the use and operation of slots. The Order allows temporary 
leases and trades of slots between carriers, provided that they do not 
extend beyond the duration of the Order.\2\ Most importantly for 
purposes of this waiver request, the Order does not permit the purchase 
and sale of slots at LGA. The only way for a carrier to sell or 
purchase a slot at LGA is through a waiver of the Order.
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    \1\ Operating Limitations at New York LaGuardia Airport, 71 FR 
77,854 (Dec. 27, 2006); 72 FR 63,224 (Nov. 8, 2007) (transfer, 
minimum usage, and withdrawal amendments); 72 FR 48,428 (Aug. 19, 
2008) (reducing the reservations available for unscheduled 
operations); 74 FR 845 (Jan. 8, 2009) (extending the expiration date 
through Oct. 24, 2009); 74 FR 2,646 (Jan. 15, 2009) (reducing the 
peak-hour cap on scheduled operations to 71); 74 FR 51,653 (Oct. 7, 
2009) (extending the expiration date through Oct. 29, 2011); 76 FR 
18,616 (Apr. 4, 2011) (extending the expiration date until the 
effective date of the final Congestion Management Rule for LaGuardia 
Airport, John F. Kennedy International Airport, and Newark Liberty 
International Airport, but not later than Oct. 26, 2013).
    \2\ As previously noted, the Order expires upon the effective 
date of the final Congestion Management Rule at LaGuardia Airport, 
John F. Kennedy International Airport, and Newark Liberty 
International Airport, but not later than October 26, 2013.
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    A different legal regime governing slots exists at DCA. The High 
Density Rule (HDR) \3\ limits scheduled and unscheduled operations 
there. The HDR permits carriers to sell or purchase slots at DCA freely 
with only FAA confirmation of the transaction.
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    \3\ 14 CFR part 93, subparts K and S.
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    On May 23, 2011, the Joint Applicants submitted a joint request for 
a limited waiver from the prohibition on purchasing slots at LGA. The 
carriers requested the waiver to allow them to consummate a transaction 
in which US Airways would transfer to Delta 132 slot pairs (265 slots) 
at LGA, and Delta would transfer to US Airways 42 pairs (84 slots) at 
DCA, together with route authority to operate certain flights to 
S[atilde]o Paulo, Brazil, and make a cash payment to US Airways.

FAA's Tentative Determination

    On July 21, 2011 the FAA issued a Notice of petition for waiver and 
solicited comments on the proposed grant of the petition with 
conditions, through August 29 in this Docket. 76 FR 45,313 (July 28, 
2011). In that notice, we tentatively approved the proposed transaction 
subject to certain conditions (July 2011 Notice).\4\ At that time, we 
tentatively found that the proposed transaction offered important 
benefits to the public. At the same time, we were concerned that the 
proposed transaction could have an adverse impact on competition 
because of the reduction in competition between the two carriers and 
their increased market share at the two airports, among other 
factors.\5\ We evaluated the public interest in this transaction, 
examining both the benefits that were likely to be attained and the 
possible adverse consequences that could result from the proposed 
transaction, and tentatively concluded that the waiver should be 
granted with certain conditions.
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    \4\ 76 FR 45313.
    \5\ 76 FR at 45315.
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    To mitigate the competitive harms that may accrue from the 
transaction, we proposed conditions that included the divestiture of 32 
slots at LGA (16 arrival and 16 departure) and 16 slots at DCA, by a 
blind, cash-only sale through an FAA-managed Web site, to limited 
incumbent and new entrant carriers having fewer than five percent of 
the total slot holdings at DCA and LGA respectively, and that do not 
code share to or from DCA or LGA with any carrier that has five percent 
or more slot holdings. We also proposed that carriers eligible to 
purchase the divested slots not be subsidiaries, either partially or 
wholly owned, of a company whose combined slot holdings are equal to or 
greater than five percent at DCA or LGA respectively.\6\
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    \6\ We proposed an exception from the subsidiaries rule for 
Frontier Airlines, which while wholly-owned by Republic has a 
discretely different low-cost carrier business plan, and whose 
operations were confirmed to be consistent with LCC yields. 76 FR at 
45328.
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    We proposed that the carriers notify the FAA as to whether they 
intend to proceed with the transaction and, if they do, that they 
provide certain information regarding the slots to be divested. We also 
proposed that the FAA would post a notice of the available slot bundles 
on a Web site and provide for eligible carriers to register to purchase 
the slot bundles. The FAA would assign each registered bidder a random 
number, so no information identifying the bidder would be available to 
the seller or public. A bidder would be allowed to indicate its 
preference ranking for each slot bundle as part of its offer. The FAA 
would specify a bid closing date and time. All offers to purchase slot 
bundles would be sent to the FAA electronically; offers would have to 
include the prospective purchaser's assigned number, the monetary 
amount, and the preference ranking for that slot bundle. The FAA would 
review the offers for each bundle and would post all offers on the Web 
site as soon as practicable after they are received. Each purchaser 
would be able to submit multiple offers until the closing date and 
time.
    Additionally, to allow the new entrant and limited incumbent 
carriers purchasing the divested slots to establish competitive 
service, we proposed to prohibit both Delta and US Airways from 
operating any of the newly acquired slots during the first 90 days 
after the closing date of the sale of the divested slots and from 
operating more than 50 percent of the total number of slots included in 
the Joint Applicants' Agreement between the 91st and the 210th day 
following the close date of the sale of the divested slots, after which 
time the transferee would be free to operate the remainder of the 
slots.
    To enable purchasing carriers to achieve a critical mass of slots, 
we also proposed to package the slots into bundles of 8 slot pairs. 
(Thus, there would be two slot bundles at LaGuardia of 8 pairs each, 
and one slot bundle at Reagan National consisting of 8 pairs.) An 
eligible carrier may, under our proposal, purchase only one slot bundle 
at each airport (while indicating preference ranking for each slot 
bundle as part of its offer). However, should one carrier make the 
highest bid on both bundles at LaGuardia, we proposed that the seller 
would have the option of accepting both high bids, thus overriding the 
one bundle per carrier proposal.
    We further proposed that the slots purchased in the auction would 
be subject to the same minimum usage requirements as provided in the 
LGA Order and HDR, that is, 80% over a two-month reporting period. The 
minimum usage would be waived, however, for six months following 
purchase to allow the purchaser to begin service in new markets or add 
service to existing markets. Additionally, we proposed that the 
purchaser may lease the acquired slots to the seller until the 
purchaser is ready to initiate service to maximize operations at the 
airports. However, we would require that the slots not be sold or 
leased to other carriers during the 12 months following purchase 
because the purchaser must hold and use the acquired slots.
    The July 2011 Notice invited interested parties to submit their 
comments by August 29, 2011. The comments we received are summarized in 
the Appendix. We grant all motions for leave to file late comments, and 
all comments to date were accepted into the docket.

2009 Proposed Transaction and Waiver Request

    This petition for waiver follows a prior joint waiver request by 
the same Joint Applicants.
    On August 24, 2009, US Airways and Delta requested a waiver of the 
Order to allow a similar transaction to proceed. We responded to that 
petition in a

[[Page 63704]]

February 2010 Notice,\7\ in which we tentatively found that the 
transaction should not proceed unless the Joint Applicants made more 
slots available for new entrants. Based on our analysis of competitive 
factors present at that time, we proposed to approve the transaction 
subject to the Joint Applicants disposing of 20 slot pairs (40 slots) 
at LGA and 14 pairs (28 slots) at DCA. Extensive comments were 
received, including from the Joint Applicants. After review of the 
comments, we granted the waiver request in a Notice dated May 11, 2010 
(May 2010 Notice), subject to the conditions set forth in the February 
2010 Notice.\8\ Delta and US Airways did not choose to go forward with 
the transaction subject to our proposed conditions, but instead 
appealed our decision to the U.S. Court of Appeals for the D.C. 
Circuit.\9\
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    \7\ Notice of a Petition for Waiver of the Terms of the Order 
Limiting Scheduled Operations at LaGuardia, 75 FR 7306 (Feb. 18, 
2010).
    \8\ Notice on Petition for Waiver of the Terms of the Order 
Limiting Scheduled Operations at LaGuardia Airport, 75 FR 26,322 
(May 11, 2010).
    \9\ Delta Air Lines and US Airways v. FAA and U.S. Dep't of 
Trans., Case 10-1153 (D.C. Cir. filed Jul. 2, 2010). On May 
25, 2011, the U.S. Court of Appeals dismissed this suit by mutual 
agreement of the parties.
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2011 Proposed Transaction

    The transaction as now proposed by the carriers is structurally 
similar to the transaction proposed in 2009. The carriers have 
presented the Department with an analysis of the benefits they assert 
will accrue from the transaction, and claimed that changes in the 
economy and structure of the aviation industry at DCA and LGA since 
2010 have dramatically reduced the economic harms that we viewed as 
potential adverse consequences of the original transaction.
    Among those changes are the market penetration of low-cost carriers 
(LCCs) at both DCA and LGA. The carriers state that JetBlue, AirTran, 
and Frontier have increased the number of LCC slots at DCA by 46, 
thereby increasing the LCC slots at that airport from 3.3% to 8.6%, 
exceeding the 6.5% share that would have been obtained under the 
divestiture terms of our May 2010 Notice. At LGA, the carriers point 
out that Frontier, AirTran, and Southwest recently acquired slots, for 
a net increase of 18 LCC slots, increasing the LCC slot share from 6.8% 
to 8.5%, closer to the 10.3% LCC slot share sought in our May 2010 
Notice. The carriers also state that the Southwest/AirTran merger will 
intensify competition in these markets.
    Furthermore, the carriers assert that the recent United/Continental 
merger enhanced United's competitive profile at both Newark Liberty 
International Airport (EWR) and Washington Dulles International 
Airport, as well as at LGA and DCA. Delta also states that this 
transaction will allow it to establish a hub at LGA and address the 
competitive advantage secured by American Airlines/British Airways 
through their antitrust immunity alliance.

Statutory Authority To Grant Waiver Subject to Slot Divestitures

    The Secretary and the Administrator have authority to grant the 
requested waiver of the LaGuardia Order, and to grant the waiver 
subject to certain conditions.\10\ The FAA is authorized to grant an 
exemption when the Administrator determines the ``exemption is in the 
public interest.'' 49 U.S.C. 40109. The Administrator may ``modify or 
revoke an assignment [of the use of airspace]'' when required in the 
public interest. 49 U.S.C. 40103(b)(1). Courts have upheld the 
conditions an agency may place on its approval of a transaction to meet 
public interest standards.\11\
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    \10\ Petition for Waiver of the Terms of the Order Limiting 
Scheduled Operations at LaGuardia Airport, 75 FR at 7307; 75 FR at 
26,324-25; 76 FR at 45,313-14. The Order was issued under the FAA's 
authority to ``develop plans and policy for the use of the navigable 
airspace and assign by regulation or order the use of the airspace 
necessary to ensure the safety of aircraft and the efficient use of 
airspace.'' 49 U.S.C. 40103(b)(1).
    \11\ See South Dakota v. Dole, 483 U.S. 203, 208 (1987) (``The 
Federal Government may establish and impose reasonable conditions 
relevant to Federal interest * * * and to the over-all objectives 
thereto''); N.Y. Cent. Sec. Corp. v. United States, 287 U.S. 12 
(1932) (upholding Interstate Commerce Commission order approving the 
acquisition of the ``Big Four'' railroad companies by N.Y. Central 
upon the condition that it also acquire short line railroads on 
certain terms).
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    Our decision to subject the Joint Applicants' waiver request to 
certain slot divestitures is consistent with, and carries out, the 
Department's Section 40101(a) pro-competitive public interest 
factors.\12\ It also complies with the FAA's public interest goals and 
objectives. Congress did not preclude the FAA Administrator from 
considering the ``public interest'' to include factors beyond 
``safety,'' ``national defense'' and ``security.'' Rather, Congress 
expressly directed the FAA Administrator to consider those matters 
``among others.'' Accordingly, as we articulated in our February 2010, 
May 2010, and July 2011 Notices, the FAA may validly consider, as being 
in the ``public interest,'' ``other factors'' including the fostering 
of competition in the context of the slot program. The ``public 
interest'' includes policies furthering airline competition, as 
provided in 49 U.S.C. 40101(a)(4), (6), (9), (10), (12)-(13) and (d). 
These goals have been public policy since at least the time of adoption 
of the Airline Deregulation Act of 1978, Public Law 95-504 (92 Stat. 
1705), and they include (among others) maximizing reliance on 
competitive market forces; avoiding unreasonable industry concentration 
and excessive market domination; and encouraging entry into air 
transportation markets by new carriers.
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    \12\ Neither the Joint Applicants nor other carriers arguing 
against the waiver conditions cite any cases prohibiting the 
Secretary or Administrator from considering pro-competitive 
objectives as being in the public interest.
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The Proposed Transaction Serves the Overall Public Interest, Although 
Divestitures Remain Necessary To Remedy Prospective Harms

    In the context of our public interest analysis here, we evaluate 
the prospective economic benefits of the transaction together with any 
potential resulting adverse economic consequences. We have not 
determined that no economic harm would result from the transaction, but 
rather that the adverse consequences that could otherwise result can be 
sufficiently mitigated such that overall benefits can be realized.
    As noted above, the Joint Applicants contend that approval of the 
slot swap would enable both carriers to more efficiently operate at the 
airports and permit more passengers and destinations to be served, thus 
creating tangible benefits to consumers. They argue that efficiencies 
will occur through upgauging of aircraft size at both LGA and DCA, 
thereby increasing throughput and competition while reducing congestion 
and delay. In addition, they contend that the facilities transfer will 
enable Delta to create a seamless hub at LGA, expand competition and 
capacity, and preserve and enhance small community access at both LGA 
and DCA.
    Most commenters did not object to the Joint Applicants' overall 
transaction per se, and a number supported it as proposed by the 
carriers. For example, the New York Travel Advisory Bureau and a number 
of travel agents and corporate travel managers doing business in New 
York expressed support for the Joint Applicants' waiver request, 
generally citing the potential for greater benefits to the economy of 
New York, the benefit of improvements proposed for the infrastructure 
at LaGuardia, and prospects for improved tourism and travel 
opportunities.

[[Page 63705]]

    However, other comments, especially from other air carriers, point 
to the potential adverse competitive impacts of increased hub 
operations at DCA and LGA. In particular, Southwest Airlines Co., 
citing a report prepared for it by Campbell-Hill Aviation Group, LLC, 
argues that the transaction would permit Delta and US Airways to 
``squander public resources'' by using their larger slot holdings to 
establish hubs at LGA and DCA that will be dependent on an even larger 
number of small regional aircraft feeder flights to establish and 
maintain hub operations.\13\ Southwest maintains that hub development 
at these slot-controlled airports would only reinforce the inefficient 
slot utilization already in place that could best be remedied by 
supporting divestitures to carriers that would efficiently operate 
slots with large aircraft to support and benefit local Washington and 
New York passengers. Moreover, Southwest contends that the consequences 
for the public of this proposed reallocation of markets would be higher 
fares, less competition, and fewer service options at both 
airports.\14\
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    \13\ Comments of Southwest Airlines Co., FAA Docket 2010-0109 at 
pp. 13-14 and Exhibit WN-115.
    \14\ Id., at 4-8.
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    While we acknowledge Southwest's claims regarding potential 
inefficiencies resulting from hub development at slot controlled 
airports, we must consider both potential operating inefficiencies and 
expected network benefits typically resulting from hub development or 
expansion. The Joint Applicants claim that numerous benefits will 
accrue to consumers as a result of their transaction. Among the more 
compelling benefits that they articulate, we are most convinced by 
their arguments that development of a LGA hub will lead to enhanced 
service to small communities (even with the small aircraft that 
Southwest contends would be used) and improved competition versus other 
east coast hubs, including United's Newark hub and US Airways' hub in 
Philadelphia.
    In terms of preserving and enhancing small community access at LGA 
and DCA, the Dane County Regional Airport, serving Madison, WI, 
expresses support for the overall transaction, but maintains concern 
that the nonstop service from Madison to LGA and DCA, currently 
provided by Delta, could be discontinued if Delta were required to 
divest some of its slots to other carriers. In addition, a number of 
Virginia interests express concern about the overall transaction, 
focusing on the possibility of losing established nonstop Roanoke-
LaGuardia service and other reductions in travel options at Virginia 
airports. Mayor Bowers of Roanoke, and various other businesses, 
educational institutions, and private citizens note that US Airways 
currently serves Roanoke from LaGuardia with three daily roundtrips, 
service that could be eliminated if the transaction were allowed to 
proceed.
    We agree that grant of the waiver will lead to some alterations in 
the Delta and US Airways service patterns and capacity per departure, 
or average throughput. However, the carriers have asserted that primary 
benefits of the transaction will include enhanced service to smaller 
communities on an overall basis.
    In evaluating the public interest in this waiver petition, we have 
carefully assessed the benefits and possible adverse consequences of 
the transaction, seeking a balanced and proportional approach to 
maintain or enhance access to small communities and to provide greater 
efficiencies for Delta and US Airways that they will in turn pass on to 
consumers. As we acknowledged in the Final Notice concerning the Joint 
Applicants' initial proposal, the transaction does raise concerns as to 
levels of airport concentration, the number of monopoly or dominant 
markets in which increased pricing power can be exercised, and the 
potential for use of the transferred slots in an anticompetitive 
manner.\15\ However, as we believed then, the appropriate remedy for us 
to adopt is not to deny the petition but rather to require divestitures 
that address those concerns. We believe the transaction's promised 
benefits for the public--particularly in light of the increased 
penetration of low cost carriers at the airports since the time of our 
last review--are sufficient for us to conclude that grant of the 
requested waiver with specified remedies is in the public interest.
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    \15\ 75 FR at 26,324 (May 11, 2010).
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Adequacy of These Divestitures To Address the Transaction's Prospective 
Harms

    The Department's July 2011 Notice, proposing to grant Delta's and 
US Airways' renewed request for a waiver subject to the condition that, 
among other things, the carriers divest 16 slot pairs at LGA and 8 slot 
pairs at DCA, was premised on the view that circumstances had in fact 
changed at the affected airports since the time of our initial 
review.\16\ Several airlines in competition with the Joint Applicants 
argue that circumstances have not changed substantially enough to merit 
approval of the waiver request, and that, in any event, the Department 
was aware of these circumstances when it issued the July 2011 Notice. 
Believing the proposed slot remedy to be inadequate, some commenters--
including Southwest, Jet Blue, Frontier, and Spirit, as well as ACAA--
further urge us to require the divestiture of roughly 30% more slots, 
as we did under different circumstances in our initial review.
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    \16\ 76 FR 45,315.
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    In our initial review of the proposed 2009 transaction, we 
concluded that the concern about anti-competitive effects was 
compounded by the fact that LCCs--which create the most competitive 
impact by their ability to dramatically lower fares and increase the 
volume of passengers in a market--had only a limited presence at the 
affected airports. The Department's May 2010 Notice, and the 
divestitures it would have required, were premised on data recited in 
the Notice finding that collectively, LCCs had only 3.3% of slot 
interest holdings at DCA and 6.8% at LGA.\17\ The Department was aware 
at that time of JetBlue's transaction with American Airlines to acquire 
its first DCA slots,\18\ but JetBlue's service was not initiated until 
November of 2010,\19\ six months after the Final Notice was issued. Our 
review and assessment of the needed number of divestitures was focused 
on actual, not planned, service, recognizing the fact that agreements 
can be modified and plans can change.
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    \17\ 75 FR 26,323.
    \18\ See 75 FR 26,323, n. 11, and 76 FR 45,315-45,316.
    \19\ See Comments of JetBlue, FAA Docket 2010-0109, Aug. 30, 
2011 at 6.
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    Southwest also argued that DOT must have been ``fully aware'' at 
the time of the Final Notice of the ``Republic to Frontier'' 
transaction, involving 18 slots at DCA and 13 at LGA.\20\ However, the 
announcement was not made until mid-April 2010 that Midwest Airlines 
(which had been acquired by Republic) would begin flying under the 
Republic name, with the Midwest brand being phased out in 2011.\21\ 
And, regardless of the announcement, it was uncertain at that time 
whether the Midwest operations assumed by Frontier would be marketed 
with yields consistent with LCC operations, so it would have been 
premature to then count Frontier's new slots as representing LCC slot 
increases.
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    \20\ See Comments of Southwest Airlines, FAA Docket 2010-0109 at 
p. 6.
    \21\ See, e.g., Milwaukee Sentinel-Journal, ``JSOnline,'' http./
www.jsonline.com/business/90750954.html, April 13, 2010.
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    The third major change in circumstances was the AirTran-

[[Page 63706]]

Southwest merger, which was not announced until the Fall of 2010, well 
after the May 2010 issuance of the Final Notice. Given the size of the 
transaction and its potential to introduce Southwest's brand, passenger 
loyalty, and route network to a broader array of customers, this merger 
is an important changed circumstance that could not have been 
considered in May 2010 but must be considered now.\22\
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    \22\ Southwest argued as well that a few smaller transactions 
affecting LCC presence at Reagan National or LaGuardia had occurred 
prior to the May 4, 2010 Final Notice that the Department must have 
known about but did not raise until the July 2011 Notice was issued 
in connection with the Joint Applicants' revised proposal. The 
largest of these was a trade of slots between Continental and 
AirTran: AirTran operated the slots but Continental remained the 
holder. We generally looked at holdings in the Final Notice but 
subsequently refined our analysis to include operations as 
appropriate in the July 2011 Notice. In any event, the Department 
clearly specified in the Tables in the July 2011 Notice the 
distribution of slots actually considered in the May 2010 Notice and 
the origin for each change that was reported. See Table 5 at 76 FR 
45,323 and Table 6 at 76 FR 45,325.
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    In our subsequent review, the Department focused on actual LCC 
penetration and determined that the LCC shares at the affected airports 
had increased markedly. At DCA it had gone from a de minimis share of 
3.3% to 8.5%; at LGA it increased modestly from 6.9% to 8.2%.\23\ These 
changes in LCC holdings, notably the addition of a new competitor at 
DCA in JetBlue and the larger portfolio of a merged Southwest/AirTran, 
portend a gradual shift in the competitive dynamics. While the changed 
circumstances between our initial and subsequent reviews fall well 
short of addressing all concerns at the affected airports, they are 
significant and cannot be overlooked. The changes show that LCCs have 
gained a competitive beach head at DCA and LGA that is not likely to be 
reclaimed any time soon.
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    \23\ See 76 FR 45323-45325. See also 76 FR 45327. Due to minor 
inconsistencies in rounding, the May 11, 2010 Notice indicated that 
the pre-transaction LCC share at LGA was 6.8%, while the July 28, 
2011 Notice indicated a 6.9% share.
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    Aside from the timing of the events, the Department also considered 
the magnitude of the changed circumstances. We supplied evidence to 
show that our reliance on LCC penetration to discipline fares justified 
a departure from the initial decision. For example, in the July 28, 
2011 Notice, we determined that average weighted yields, used as a 
proxy for fares, had decreased in the DCA-BOS market as a result of 
JetBlue's entry in 2010, and had continued to decrease in the LGA-IND 
market following AirTran's entry in 2009.\24\ At DCA, we supplied data 
and analysis to show that fares across all markets had fallen.\25\ The 
commenters do not challenge these data. Their opposition to the remedy 
now being proposed focuses on the number of LCC holdings as a 
percentage of total holdings. However, we view the increasing levels of 
LCC penetration and the associated favorable effects on fares across a 
number of markets as more significant, and these important developments 
support our decision to allow the slot swap to proceed so long as there 
is an appropriate divestiture of slots auctioned in sufficient numbers 
to qualified new entrants or limited incumbents to mitigate the 
potential competitive harm resulting from the transaction.
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    \24\ See 76 FR 45,327.
    \25\ See 76 FR 45,327.
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    A number of commenters contend that we could do more to enhance 
competition at both these airports than we proposed last July, by 
requiring more slots to be divested. However, in the particular 
circumstances of this case, we believe it appropriate for us to proceed 
with a remedy that reallocates only the number of slots necessary to 
address the competitive harm caused by the transaction, while still 
preserving the benefits of the transaction.
    Our approach focuses on the incremental competitive change and the 
potentially strong effect of new entrant competition that is possible 
with a critical mass of slots. It does not address pre-existing 
conditions that affect competition at the airports and, in all 
likelihood, would continue to affect competition even if we required 
30% more slots to be divested. Stated another way, our objective has 
not been to add as much new service by new entrants and limited 
incumbents as possible but rather to rely to the maximum extent on the 
introduction of a critical mass of new services, anticipating that 
those services will have an oversized effect on competition across a 
number of markets sufficient to address the potential competitive harm 
resulting from the transaction. The Department laid a foundation for 
this approach by emphasizing the effect of new entrant/LCC services on 
prices across a number of markets. That foundation is not in dispute. 
Seen in this light, the final slot remedy need not necessarily be 
mathematically congruent with the increased LCC penetration, as 
commenters suggest. The remedy is proportional and effective to address 
the possible adverse consequences of the transaction, while still 
preserving its public benefits.
    Southwest asserts that the remedy must be larger because the 
transaction will ``permanently lock out'' low-fare competition.\26\ 
Southwest claims that it will be virtually impossible for LCCs to 
expand at these airports because already-scarce slots will become even 
less available, and after the transaction is consummated, Delta and US 
Airways will become the most logical high bidders for any slots that 
may come on the market.\27\ Southwest's assertions do not take into 
account the full competitive landscape. While it is true that Delta and 
US Airways will significantly increase their presence at LGA and DCA, 
respectively, they will not be the only carriers with the resources to 
acquire new slots, which are still likely to become available over 
time, as they have thus far. Southwest and other carriers have cash on 
hand, as well as developed route networks and other assets that can be 
leveraged for greater access to LGA and DCA.
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    \26\ Comments of Southwest Airlines Co., Docket 2010-0109 at 4 
(Aug. 29, 2011).
    \27\ Id., at 6.
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    In summary, we believe the approach taken in the July 28 Notice 
remains appropriate under the current circumstances, and is justified 
by recent changes in the competitive and operating environments at DCA 
and LGA.

Carrier Eligibility for the Divested Slots

    Some commenters, including JetBlue and Virgin America, assert that 
we may not direct the Joint Applicants to divest certain DCA and LGA 
slots to new entrant and limited incumbent carriers having fewer than 
five percent of the total slot holdings at the respective airports, 
because the ``below five percent'' threshold is contrary to statutory 
definitions of limited incumbents or otherwise outside the scope of the 
FAA's statutory authority. We disagree. As an initial matter, the FAA 
routinely imposes special conditions that must be met in order to 
either assure an equivalent level of safety (not an issue in this case) 
or to ensure that the public interest is met. Nothing in the 
Administrator's authority to issue exemptions prevents the FAA from 
tailoring those conditions to the circumstances surrounding the 
exemption request. In the context of the July 2011 Notice, we used the 
term ``limited incumbent'' in a generic sense to mean an airline with a 
limited, or small, presence at the airport. We intend, of course, to 
provide opportunities for competition and low-fare service at DCA and 
LGA by allowing such carriers, as well as new entrant airlines, to 
purchase divested slots.

[[Page 63707]]

    We are not obliged to confine the category of air carriers eligible 
to purchase slots to those ``limited incumbent air carriers'' holding 
or operating ``fewer than 20'' slots or slot exemptions, as JetBlue 
suggests. Rather, that statutory definition of ``limited incumbent'' 
(49 U.S.C. 41714(h)(5)) applies only to specific circumstances not 
relevant here.\28\ The ``limited incumbent'' definition applies, for 
example, to the Secretary's criteria for awarding within-perimeter slot 
exemptions at DCA. 49 U.S.C. 41718(b)(1). The definition also applies 
to the FAA's High Density Rule (HDR) protocols for withdrawing slots 
and distributing slots in a lottery at DCA. 14 CFR 93.213(a)(5), 
93.223(c)(3), 93.225(h). Neither the statutory nor regulatory 
definitions of ``limited incumbent'' cabin the Department's authority 
to promote the public interest. The Department has determined that 
fashioning a reasonable class of carriers that may purchase divested 
slots for purposes of providing competition at congested airports is an 
appropriate and proportionate remedy in these circumstances.
---------------------------------------------------------------------------

    \28\ 49 U.S.C. 41714 (h) provides that the definitions set forth 
in that section, including the definition of ``Limited incumbent 
carrier,'' only apply ``[i]n this section and sections 41715-41718 
and 41734(h) * * *.''
---------------------------------------------------------------------------

    Moreover, Congress' directive to the Secretary to grant certain 
slot exemptions to new entrant or limited incumbent carriers at LGA and 
JFK expired upon the January 1, 2007 statutory termination of the HDR 
at those airports. 49 U.S.C. 41716(b), 41715(a)(2). The Department is 
under no statutory or regulatory directive to apply the ``fewer than 
20'' threshold to determine the class of carriers eligible to purchase 
the divested slots in this proceeding.
    In the Department's February 2010 Notice, in connection with the 
Joint Applicant's initial request, we proposed the use of a five 
percent threshold, because carriers having slot holdings above that 
point provide a minimum level of competitive service sufficient to 
affect pricing in the market.\29\ Restricting eligibility to new and 
smaller carriers below that threshold would help attract carriers that 
offered the prospect of increased efficiencies and innovations, as well 
as the ability to increase throughput at the airports, so long as they 
had a sufficient number of slots to establish sustainable patterns of 
service.\30\ Moreover, use of a 5% standard, rather than setting the 
threshold at a lower level, would enlarge the number of potential 
competitors for the divested slots, creating a more robust market for 
them and a greater likelihood that the awarded slots would be utilized 
in an efficient and effective manner.
---------------------------------------------------------------------------

    \29\ See, e.g., Gimeno, 20(2) ``Reciprocal Threats in 
Multimarket Rivalry: Staking out `Spheres of Influence' in the U.S. 
Airline Industry,'' Strategic Management Journal 101 at 110.
    \30\ 75 FR at 7310-11.
---------------------------------------------------------------------------

    The ``five percent rule'' is the same as that adopted in the May 
2010 Notice in which we granted the joint waiver request of the 
carriers conditioned on divesting certain LGA and DCA slots to eligible 
new entrant and limited incumbent carriers, which we defined as those:

having fewer than five percent of total slot holdings at DCA and/or 
LGA, do not code share to or from DCA or LGA with any carrier that 
has five percent or more slot holdings, and are not subsidiaries, 
either partially or wholly owned, of a company whose combined slot 
interest holdings are equal to or greater than five percent at LGA 
and/or DCA.

75 FR at 26,337.

    JetBlue also states that our definition of carriers eligible to 
purchase divested LGA slots unlawfully ignores a purported statutory 
mandate to make up to 20 LGA slot exemptions available to new entrants 
and limited incumbents.\31\ In making this argument, JetBlue claims 
that the ``interim slot rules at New York airports,'' enacted by 
Congress in the Wendell H. Ford Aviation Investment Reform Act of 2000 
(AIR-21), entitled all new entrant and limited incumbent carriers to 
receive up to 20 LGA slot exemptions. 49 U.S.C. 41716(b). JetBlue 
suggests that the divestiture must first favor those carriers with less 
than 20 slots before offering an opportunity for those with more than 
20 slots to purchase the divested slots.
---------------------------------------------------------------------------

    \31\ Comments of JetBlue Airways, FAA-2010-0109, at 19-22 (Aug. 
29, 2011).
---------------------------------------------------------------------------

    AIR-21 expired at LGA along with the HDR. Any articulation of 
Congressional purpose in enacting AIR-21 simply no longer applies at 
LGA. Thus, we reject JetBlue's argument for the reasons set forth 
above. In addition, JetBlue's reading of Section 41716(b) is overly 
generous to the new entrant/limited incumbents. This provision did not 
entitle each applicant to 20 LGA slot exemptions, as JetBlue claims. 
Rather, it directed the Secretary, subject to procedures set out in 
Section 41714(i), to grant slot exemptions to new entrants or limited 
incumbents at LGA ``if the number [ ] granted * * * does not exceed 20 
* * *.'' 49 U.S.C. 41716(b). In other words, it prohibited the 
Secretary from granting the LGA slot exemptions described in Section 
41716(a) to any carrier whose LGA slots and slot exemptions would total 
more than 20.
    JetBlue and Virgin America also comment on Frontier's eligibility. 
Our July 2011 Notice tentatively found that Frontier, a carrier with 
limited holdings at DCA and LGA, would qualify as an eligible bidder 
for slots.\32\ We explained that it was appropriate for Frontier to bid 
even though it was wholly-owned by Republic, which holds more than 5% 
of slots at DCA. The Department noted that Frontier has a unique 
business plan and relationship in the Republic structure, and confirmed 
that its yields have remained consistent with those of LCCs.
---------------------------------------------------------------------------

    \32\ 76 FR 45,330, n. 40.
---------------------------------------------------------------------------

    JetBlue and Virgin America contend that Frontier should not be 
eligible. JetBlue's argument centered on the assertion that the 
Department must restrict bidding to carriers with 20 or fewer slots, 
and that Frontier is owned by a carrier whose slot holdings far exceed 
the ``20 or fewer'' threshold.\33\ The ``20 or fewer'' issue was 
addressed above. Virgin America also cites Frontier's ownership as a 
concern, but suggests that it would be too difficult for the Department 
to monitor whether Frontier's business plan was, in fact, delivering 
lower fares as intended.\34\
---------------------------------------------------------------------------

    \33\ Comments of JetBlue at 13 (Aug. 29, 2011); Reply Comments 
of JetBlue at 3 (Sept. 13, 2011).
    \34\ Comments of Virgin America at 11-12 (Aug.29, 2011).
---------------------------------------------------------------------------

    However, Frontier's inclusion in the pool of eligible bidders is 
consistent with our objective of crafting a remedy to mitigate the loss 
of competition associated with the Delta/US Airways slot swap. Frontier 
operates as a separate business within the Republic corporate 
structure, with a low-cost carrier business plan and yields consistent 
with low-cost operations. Republic's other slots are pledged for use on 
a long term basis by Republic's other business, which operates regional 
aircraft on behalf of mainline carriers, and the slots are therefore 
not available to exert competitive discipline on incumbent carriers. 
Should Frontier be successful in bidding on the slots being divested 
here, the approval to operate them will be conditioned upon its 
maintaining a low-cost carrier business plan and operating the divested 
slots with yields consistent with LCC operations for the duration of 
the five-year minimum hold requirement.
    A final eligibility issue concerns Southwest Airlines and AirTran. 
In the July 2011 Notice, the Department recognized the merger of 
Southwest and

[[Page 63708]]

AirTran,\35\ but Westjet and Spirit seek clarification of Southwest/
AirTran's status as potential bidders for divested slots.\36\ Southwest 
and AirTran are merging, and therefore have every incentive and--unlike 
Frontier--ability to combine their assets to exert competitive 
influence in the market. Southwest and AirTran thus will be required to 
bid as a single unit; they are eligible to do so because their combined 
holdings do not exceed 5% at either airport.
---------------------------------------------------------------------------

    \35\ 76 FR 45,316.
    \36\ Comments of WestJet at 2, 9 (Aug. 29, 2011); Comments of 
Spirit at 14, n. 23 (Aug. 29, 2011).
---------------------------------------------------------------------------

Slot Bundles of Eight Pairs Will Best Promote Competitive Discipline at 
DCA and LGA

    In the Department's earlier analysis, we expressed concern over 
increased levels of airport concentration, which together with (1) an 
increase in the number of monopoly or dominant markets in which 
increased pricing power could be exercised, (2) the prospect for higher 
fares in some markets, and (3) the potential for use of transferred 
slots in an anti-competitive manner, warranted conditioning approval on 
the carriers' agreement to divest a number of slots. Given all of these 
concerns, we asserted that limited divestitures at both airports would 
lead to an injection of additional competition from other carriers, 
which may effectively mitigate these prospective harms.
    In our May 2010 Notice we said that an effective remedy must (1) 
provide a sufficient number of slots to allow other carriers to mount 
an effective competitive response, (2) define the pool of eligible 
carriers to include those with the greatest economic incentive to use 
the slots as intensively as possible and exert competitive discipline, 
and (3) ensure that the bundles of divested slots are suitable for a 
commercially viable service pattern and structured proportionate to the 
slots that are part of the slot swap.
    Working from these criteria, we proposed to bundle the slots in 8-
pair units at each airport, meaning that there would be one bundle at 
DCA and two at LGA. In the May 2010 Notice, we expressed our tentative 
belief that this approach would maintain high competitive discipline 
levels and would be preferable to dividing the slots into smaller 
packages that could cause underutilizations or inefficiencies.
    In response, several carriers that would be designated as new 
entrants/limited incumbents filed comments regarding slot bundles. 
Allegiant proposes smaller bundles to allow the largest number of 
carriers with different types of operations to participate. JetBlue 
argues that new LCC entry at DCA makes it no longer necessary for 
bundles of slots to be spread throughout the day. Instead, JetBlue 
states that eligible carriers should be able to bid on individual slot 
pairs to complement their existing schedules. Virgin America claims 
that the bundles are unnecessarily large and would likely increase 
market concentration and impair competition. Sun Country contends that 
it would be unable to utilize all of the slots in a given bundle and 
that the price for the large bundles would be prohibitive. West Jet 
proposes that smaller bundles would lead to increased participation by 
smaller LCCs. Spirit, in its most recent filing, seeks a free 
distribution of slots ``into sets of usable pairs.'' \37\ Finally, 
Frontier states that it, along with every other LCC filing comments 
with the exception of Southwest, supports smaller bundles, maintaining 
that such a structure would expand the pool of LCCs and destinations 
gaining new or enhanced access to DCA and LGA and would reduce the 
relative concentration of slot holdings among just a few carriers.
---------------------------------------------------------------------------

    \37\ Comments of Spirit Airlines, Inc., Docket No. 2010-0109, at 
5 (Aug. 29, 2011).
---------------------------------------------------------------------------

    Southwest contends that packaging slots into large bundles for 
allocation would be the most effective competitive response to the 
larger Delta and US Airways positions at LGA and DCA, especially if the 
divested slots are concentrated in the hands of a single strong 
competitor at both airports. Southwest maintains that the Department 
should avoid trying to ``keep everyone happy'' by placing arbitrary 
restrictions on the allocation process that will only result in slots 
being under-used or even forfeited by carriers operating insufficient 
frequencies and therefore unable to mount an effective response and 
provide meaningful price discipline to the strengthened Delta and US 
Airways. Southwest cites the Campbell-Hill report appended to its 
comments that ``splitting the slots arbitrarily among multiple carriers 
would only dilute the impact of the new service vis-[agrave]-vis the 
incumbents and provide fewer competitive benefits to the public.'' \38\ 
Finally, Southwest concludes that dividing the small number of divested 
slots among several low-cost, low-fare carriers, as Frontier supports, 
would be counter-productive, as the modified bundles would generate 
only weak and diffuse competition, thus benefiting the Joint 
Applicants, and wasting a rare opportunity to inject strong and 
sustainable low-fare competition at airports that desperately need it.
---------------------------------------------------------------------------

    \38\ Comments of Southwest Airlines Co., Docket No. 2010-0109, 
App. at 15 (Aug. 29, 2011).
---------------------------------------------------------------------------

    After reviewing the competing arguments, we have concluded that 
there is likely to be greater overall public benefit if the larger 
(i.e., 8 slot pair) bundles are retained. Under their proposal, Delta 
and US Airways are not committed to any particular markets for defined 
periods. Each carrier would be free to discontinue any of the proposed 
routes and initiate others. With that flexibility, they could choose to 
use their increased slot holdings to target carriers with more limited 
slot holdings, for example by increasing their roundtrips in 
competitive markets and ``sandwiching'' competitor flights. A 
restructured remedy consisting of smaller bundles of slots to more 
carriers, as proposed by Spirit, JetBlue, Allegiant, WestJet and Virgin 
America could make certain new entrants highly vulnerable to such 
scheduling changes and frustrate the competitive responsiveness we are 
seeking.
    Under the approach we take by this Notice, the bulk of the benefits 
derived from the divestitures required as a condition to this waiver 
will be from new entrant or limited incumbent carriers using the 
divested slots, and in order to be effective the bundles of remedied 
slots must be structured in such a way to enhance the likelihood of 
sustainable service. Diminishing the size and extensive time of day 
coverage of remedied bundles, an approach promoted by Spirit, JetBlue, 
Allegiant, WestJet, and Virgin America, will not create the degree of 
competitive impact required to compensate for the expected harm to be 
generated from this transaction.
    We find that establishing bundles of slots for sale will enable an 
eligible carrier to purchase a sufficient array of slots to operate and 
maintain competitive service throughout the day. Bundling will assist 
the purchasing carrier in initiating or increasing service in an 
operationally efficient and pro-competitive manner. Packaging more 
slots in fewer bundles is the best approach to optimize competitive 
discipline. Furthermore, bundling eight slot pairs at DCA and two 
bundles of eight slot pairs each at LGA will help to avoid 
underutilization and inefficiencies of resources, including facilities, 
aircraft and staffing, that may result from more bundles containing 
fewer slot pairs.

[[Page 63709]]

Procedures for Transferring Divested Slots

    In connection with the proposed auction mechanics for the purchase 
by eligible carriers of the divested slots, Southwest objected to the 
imposition of a deadline for bids. It believes that a deadline such as 
the one we proposed creates disincentives for early bidding and is 
subject to manipulation through last-minute bidding. It proposes a 
different approach, with features like minimum increases between offers 
and time limits on submitting a higher offer following the most recent 
offer.
    We disagree. In order to allow the sale to be completed, there must 
be some closing time for offers. Southwest's system would create a 
moving deadline based on how much time has elapsed since the previous 
bid. Different buyers will have different strategies, and submitting an 
offer at the last minute is just one such strategy. For example, a 
bidder might equally attempt a high preemptive ``shut out'' offer. We 
cannot predict the various strategies, and, therefore, choose not to 
depart from our proposal, which will be easier for the FAA to manage.
    Once the sales period closes, the FAA will determine the highest 
offer for each bundle. If each bundle receives only a single offer, the 
FAA would notify the seller by forwarding the purchaser's 
identification. If one eligible carrier had made the highest purchase 
offer on multiple bundles at LGA, the FAA would determine which offer 
is valid based on preference ranking. The successful bid for the other 
LGA bundle will be the next-highest offer from a carrier that remains 
eligible to purchase the slots. This information will be forwarded to 
the respective seller. The FAA will notify the selling and purchasing 
carriers to allow them to carry out the transaction, including any gate 
and ground facilities arrangements. The full amount of the proceeds 
could be retained by the selling carrier. The seller and purchaser will 
be required to notify the FAA that the transaction has been completed 
and certify that only monetary consideration will be or has been 
exchanged for the slots.
    In the July 2011 Notice, we had proposed that if the highest bidder 
for both LGA bundles was the same eligible carrier, the amounts of the 
offers would be communicated to the seller and the seller could choose 
to accept both highest offers instead of the highest offers of two 
different eligible bidders as identified by the FAA. In its comments, 
the Port Authority of New York and New Jersey (Port Authority) would 
allow more than one bundle there to go to a single purchaser, and 
Southwest argued that we should dispense with the proposed restriction 
that an eligible carrier may purchase no more than one of the LGA 
bundles. However, JetBlue asserted that our procedures should not 
enable one carrier to purchase all of the available slots, but rather 
should enhance the competitive benefits to the public by giving greater 
opportunities to new entrants and limited incumbents in light of the 
new and different services they provide. Frontier offered similar 
comments. In response, the Joint Applicants afforded ``deference to the 
Department on how it chooses to conduct the slot auction.'' \39\
---------------------------------------------------------------------------

    \39\ Response of Joint Applicants to Show Cause Order, FAA-2010-
0109, at 3 (August 29, 2011).
---------------------------------------------------------------------------

    Upon further reflection, we believe that having two carriers 
receive slots at LGA achieves the better result, as it will 
appropriately balance our goal of a remedy introducing additional 
competition at the airports with our belief that the number of slots 
obtained by each carrier must be sufficient to assure that they can be 
used effectively to stimulate competition. Thus, we will modify the 
position on this issue that we had taken earlier and require that the 
carriers package the divested slot pairs at LGA into two bundles which 
must be sold to two separate eligible carriers, as further discussed 
below.
    In the unlikely event that there are no offers for a slot interest, 
the slot interests will revert automatically to the FAA. If necessary, 
the FAA may announce at a later date a means for disposing of a slot 
interest that attracts no purchase offer. Alternatively, under the 
Order, the FAA could simply retire the slot as a congestion mitigation 
measure. We do not expect that this need will arise.
    We have adopted our proposal to conduct sales by a cash-only, FAA 
``blind'' web site. A blind-only mechanism has the capability of 
maximizing the competitive potential of the divestiture packages, as 
that sale method would target the potential competitors with the 
greatest economic incentive to use slots as intensively and efficiently 
as possible.

Retention of the Sale Proceeds by the Joint Applicants

    A number of commenters, including several air carriers, question 
our proposal to allow the Joint Applicants to retain the proceeds from 
the slot sales we are requiring as a condition to this waiver. These, 
and some others, argued that the current owners received the slots from 
the FAA without payment, are not the owners of slots, and that any 
divestitures should serve to benefit parties other than the 
carriers.\40\ Additionally, Spirit asserts that limited incumbent 
airlines are entitled to the divested slots at no cost under the pro-
competitive policies in Section 40101(a) and the prohibition on 
purchases or sales of slots in the LGA Order. Spirit also expresses 
concern that the Joint Applicants could enjoy a ``financial windfall'' 
by being able to retain the proceeds of a sale, citing a 2007 FAA 
Notice regarding operating limitations at LGA indicating that rights 
held under slot rules would end on December 31, 2006.\41\
---------------------------------------------------------------------------

    \40\ The Airports Council International (ACI-NA) argued that 
slots should be treated as community assets that should be used to 
benefit the communities and airports, rather than carriers, and the 
Consumer Travel Alliance argued that the slots contemplated in the 
transaction are not assets of the air carriers and should be treated 
as property of the American public. These commenters commonly 
referred to FAA's regulations that state that ``[s]lots do not 
represent a property right but represent an operating privilege 
subject to absolute FAA control.'' 14 CFR 93.223(a).
    \41\ Comments of Spirit Airlines, FAA-2010-0109, at 4, 10 (Aug. 
29, 2011), referencing FAA's Notice of Order on Operating 
Limitations at New York LaGuardia Airport, 71 FR 77854, 77857 (Dec, 
27, 2007).
---------------------------------------------------------------------------

    The Joint Applicants respond that their application does not 
contemplate that slots would be divested without compensation, and that 
they would not have offered to divest any slots if they believed that 
would be required.
    Allowing the Joint Applicants to retain the proceeds from the sale 
of the divested slots in this case is within our authority. Since 1985, 
the FAA has permitted carriers to purchase, lease, sell, and otherwise 
transfer slots for consideration under the HDR's Buy-Sell Rule.\42\ The 
FAA's regulatory permission to buy and sell slots is consistent with 
the complementary HDR provision that slots do not represent a property 
``right'' but a privilege subject to FAA control and encumbrances.\43\ 
Furthermore, a secondary market in slots conforms to the pro-
competitive policies of the Airline Deregulation Act by, among other 
things, relying on ``competitive market forces'' and ``encouraging 
entry into air transportation markets by new and existing carriers.'' 
49 U.S.C. 40101(a)(6), (12). Accordingly, the FAA is under no statutory 
obligation to have the divested slots allocated to eligible carriers 
free of charge. Additionally, a sale of the slots is not a financial 
windfall but allows the Joint Applicants to maximize the value of their 
slots as originally intended as part of the larger transaction. 75 FR 
at

[[Page 63710]]

7311.\44\ Finally, the purchasers of the LGA slots will receive the 
same interest that current slot holders at LGA have. This interest is 
comparable to that which Delta will receive in connection with its 
purchase of the US Airways' LGA slots. Our waiver of the LGA Order 
transfers to Delta the same interests that US Airways currently holds 
under the terms of that Order.
---------------------------------------------------------------------------

    \42\ 50 FR 52195 (Dec. 20, 1985); 14 CFR 93.221.
    \43\ 14 CFR 93.223.
    \44\ Spirit and the Air Carrier Association of America contend 
that the Joint Applicants did not seek compensation for the divested 
slots. Comments of Air Carrier Ass'n of Am., FAA-2010-0109, at 3 
(July 1, 2011); Comments of Spirit Airlines, FAA-2010-0109, at 2 
(June 24, 2011). The Joint Applicants dispute this allegation, and 
state that ``[t]hey would not have offered to divest slots if they 
had believed that they would be withdrawn and reallocated without 
compensation.'' Response of Joint Applicants to Show Cause Order, 
FAA-2010-0109, at 4 (Aug. 29, 2011).
---------------------------------------------------------------------------

    After review of these comments, we remain persuaded that both our 
earlier position on these issues and our approach in granting the 
petition with divestitures are the correct ones.

Implementation in Tranches

    In the July 2011 Notice, the Department proposed to prohibit each 
transferee Joint Applicant from operating any of the newly acquired 
slots during the first 90 days after the closing date of the sale of 
the divested slots. We further proposed to prohibit them from operating 
more than 50 percent of the total number of slots included in the Joint 
Applicants' Agreement between the 91st and the 210th day following the 
close date of the sale of the divested slots. After that time, we would 
allow the transferee to operate the remainder of the slots. The purpose 
of these prohibitions was to allow the new entrant and limited 
incumbent carriers that purchased the divested slots a sufficient 
period to establish competitive service, without interference from new 
operations of the Joint Applicants.
    The Joint Applicants have not objected to this proposal, nor have 
others contended that it is unfair or impractical. We will therefore 
finalize this aspect of the waiver as it had been proposed.

Availability of Facilities to Purchasing Carriers

    Our Notice proposed to require the selling carrier to make airport 
facilities available to the purchaser under reasonable conditions only 
if the purchasing carrier lacks access to facilities and is unable to 
obtain such access from the airport operator. We see no need to change 
this proposal or, as suggested by Southwest, to waive the use-or-lose 
period until such time as the purchasing carrier actually occupies the 
airport facilities. Nor do we agree with the Port Authority's 
suggestion to extend the proposed six-month use-or-lose waiver due to 
potential difficulties with arranging facilities for requesting 
carriers.
    Rather, we fully expect both the Port Authority, as the operator of 
LGA, a large hub, and the Metropolitan Washington Airports Authority 
(MWAA), as the operator of DCA, also a large hub, to make facilities 
available, with reasonable dispatch, to requesting carriers and within 
the six-month period after the purchase of the divested slots. The Port 
Authority and MWAA each are bound by DOT federal grant assurances to 
provide reasonable and competitive access at their respective airport 
facilities to requesting airlines and airlines wishing to expand 
service at their airports. They must file competition disclosure 
reports with the FAA if they fail to do so. Additionally, they have 
each taken action, under their airport competition plans, to reduce 
barriers to entry and enhance competitive access at their airports. 
Furthermore, the Department and the FAA are available to facilitate 
access at appropriate airport facilities if necessar