Answer of Southwest Airlines Co (Cuba)

8/19/2019 Answer of Southwest Airlines Co (Cuba)

1/167

BEFORE THEU.S. DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARYWASHINGTON, D.C.

_____________________________________)

2016 U.S.-CUBA FREQUENCY ) Docket DOT-OST-2016-0021 ALLOCATION PROCEEDING )

_____________________________________ )

CONSOLIDATED ANSWER OF SOUTHWEST AIRLINES CO.

Communications with respect to thisdocument should be sent to:

Mark Shaw Robert W. KneisleySenior Vice President General Associate General CounselCounsel and Corporate Secretary Leslie C. Abbott

SOUTHWEST AIRLINES CO. Senior Attorney2702 Love Field Drive SOUTHWEST AIRLINES CO.Dallas, TX 75235-1611 919 18th Street, N.W., Suite 600


2/167


3/167

BEFORE THE

U.S. DEPARTMENT OF TRANSPORTATIONOFFICE OF THE SECRETARY

WASHINGTON, D.C.

_____________________________________)

2016 U.S.-CUBA FREQUENCY ) Docket DOT-OST-2016-0021

ALLOCATION PROCEEDING ) _____________________________________ )

CONSOLIDATED ANSWER OF SOUTHWEST AIRLINES CO.

Pursuant to Order 2016-2-12 (“DOT Order”) establishing this proceeding,

Southwest files this Consolidated Answer to the Applications submitted by the 12 other

participating carriers for the 20 daily round trips available between U.S. point(s) and

Havana (HAV).1 As is detailed below, a review of the competing Applications shows

conclusively that Southwest’s proposal will generate by far the greatest public benefits

in this case. When considered side-by-side for substance, it is clear that Southwest has


4/167

HAV, two daily flights between Tampa International Airport (TPA) and HAV and one

daily flight between Orlando International Airport (MCO) and HAV. In Order 2016-2-12,

the Department clearly articulates the decisional criteria that will guide its allocation of

the scarce HAV frequencies: (1) maximizing “public benefits,” (2) offering and

maintaining “the best service for the traveling and shipping public,” and (3) “the effects

of the service on the overall competitive environment, including effects on market

structure and competition in the U.S.-Cuba market, and any other market(s) shown to

be relevant.”2 As explained in detail below and in the attached exhibits, Southwest’s

proposed daily, low fare service from the three Florida airports that serve the vast

majority of the Cuban American population best satisfies these criteria.

Southwest is the only applicant that has supported its proposals with detailed

forecasts of its own traffic. As shown herein, Southwest will almost certainly have the

lowest South Florida – Havana fares of any applicant in this case. For its six daily FLL –

HAV round trips Southwest will fly its 175-seat B737-800 aircraft, among the largest


5/167

II. The Majorit y of Havana Frequencies Should be Allocated to South Florida

Airports, the Most Convenient Gateways for the Cuban AmericanPopulation as well as Efficient Connecting Points for the Rest of theCountry.

It is clear from Southwest’s direct exhibits, and those of other applicants, that a

large majority of Cuban Americans in the United States reside in Florida, and

particularly South Florida. Sixty-eight percent (68%) of Cuban Americans live in Florida

(Exhibit WN-200) and 80% of Florida’s total live in the Ft. Lauderdale – Miami area

(Exhibit WN-201). The Cuban American population in Ft. Lauderdale – Miami totals

1,061,180 (Exhibit WN-202) and represents 54% of all Cuban Americans in the U.S.

The rest of the Cuban American population (outside Florida) is widely dispersed.3

Recognizing the prohibition on U.S. resident tourist travel to Cuba, the vast majority of

the proposed service to Cuba, especially to Havana, will be aligned with the

concentrations of Cuban American residents. The chart below and Exhibit WN-R-101

show that South Florida dwarfs other cities in terms of resident Cuban American


6/167

As shown above, the South Florida Cuban American population is nearly seven

times larger than New York–Newark, which has the second largest Cuban American

population. Accordingly, a majority of the 20 available Havana frequencies should be

dedicated to South Florida service.

Because there are obviously insufficient HAV frequencies available to satisfy all

requests in this proceeding it is important to examine the extent to which each proposed

1,061,180

156,514 120,826

63,288 56,82122,115 15,382 13,413 7,305 4,439

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

+678%

Metro Area

Residents of Cuban-American Origin


7/167

In addition, 43% and 41% respectively (previous chart and Exhibit WN-R-106) of

Cuban American population served by TPA and MCO can travel to HAV with less than a

35% trip circuity. All other proposed gateways outside Florida are far more circuitous

Gateway

97%

94%

43%41%

29%26%

13% 12% 11%9% 8% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

MIA FLL TPA MCO ATL CLT EWR JFK DFW BOS DEN LAX

% of U.S. Residents of Cuban-American Origin wi thin35% Circuit y of Sub ject Gateway


8/167

It is also significant that 90% of the U.S. charter flights to Havana during the 12

months ended August 31, 2015 were operated to and from FLL/MIA. (Exhibit WN-R-

107). While some charter passengers travel to South Florida from elsewhere and make

a connection to their charter flight, the Cuban tour operators are heavily concentrated in

the South Florida market because that is where the majority of the travelers originate.

III. As Between Ft. Lauderdale and Miami, FLL Will Be the Airport Preferred byMost Cuban American Travelers from South Florida.

The extensive Cuban American population in South Florida has convenient

access to two airports that are only 29 miles apart: Ft. Lauderdale (FLL) and (MIA).

Given the density of the population in the areas surrounding these two nearby airports,

Ft. Lauderdale/Miami has long been considered a single airline market served by two

airports. Accordingly, an important consideration in this proceeding is the appropriate

allocation of frequencies between FLL and MIA. Distance (travel time) is obviously an


9/167

cities and regions. For example, Southwest’s service at Little Rock AR historically drew

many passengers from 140 miles away in Memphis TN, which until recently had no low

cost carrier service itself. Southwest’s entry at BWI beginning in 1993 penetrated the

Northern Virginia market located much closer to DCA and IAD. Similarly, Southwest’s

entry into Providence and Manchester instead of Boston’s Logan airport succeeded in

attracting large numbers of Boston passengers. In the present situation, the low fares

offered by Southwest and other low cost carriers at FLL attract hundreds of thousands

of local passengers away from the higher fares and greater congestion at MIA.

For that reason, FLL is the center of low fare air service in South Florida while

MIA is not (Exhibits WN-R-201-203). The chart below shows the distribution of low fare

service within each airport. Sixty-three percent (63%) of FLL’s seat-departures are

operated by low cost carriers7 while only 3% of MIA’s seat capacity is provided by such

carriers.

Fort Lauderdale Miami


10/167

examined, one finds that FLL enjoys over 24,000 low fare carrier weekly seat-

departures while MIA has zero (Exhibit WN-R-203).

One of the reasons why FLL has attracted the low fare carriers, especially

Southwest, Spirit and JetBlue, is because the airlines’ cost of operation at the two

airports differs dramatically – $5.84 per enplaned passenger at FLL versus $20.54 at

MIA (Exhibit WN-R-204).8 This differential by itself allows airlines at FLL to charge $15

less per one-way passenger than their counterparts at MIA. Congestion costs at MIA

also impact airline economics more than at FLL and this adds more dollars to the fare

differential. Therefore, as shown in the chart below and Exhibit WN-R-205, it should not

be surprising that FLL has 50% more domestic O&D passengers in markets served

nonstop at both airports – 13.5 million at FLL and 9.0 million at MIA.9

Ann ualO&D Passengers

13,465,47514 000 000

16,000,000

FLL Has 50% More Domestic O&D in Markets With

Both FLL and MIA Nonstop Service


11/167

Ameri can’s Average MIA Fares are Signi fi cantl y Higher than Southwest ’s

Average FLL Fares In Domesti c Nonstop Markets

Southwest has analyzed what the fare differential is likely to be between

Southwest’s proposed FLL–HAV service and American’s proposed MIA–HAV service.

This analysis is presented in Exhibits WN-R-206 through WN-R-211. In domestic

nonstop markets, Southwest’s average fares at FLL are significantly lower than

American’s fares at MIA. As the chart below shows, at the FLL – HAV distance of 255

miles, Southwest’s average fare is $49.44 lower than American’s (Exhibit WN-R-206).10

Avg. One-Way Fare Includ ing Avg.Baggage/Cancellation Fees Paid,YE Q3, 2015

$200

$250

$300

WN FLL Fare Curve

AA MIA Fare Curve At FLL -HAV Distance o f 255 Mi les the One-WayMIA AA Fare is $49 Higher on Average

= $49


12/167

Average FLL-SJU Fares Are 25%Lower than MIA-SJU Fares

Southwest also analyzed fares in the FLL/MIA–SJU11 markets to determine likely

fare differentials in Havana service. Both airports enjoy nonstop service to San Juan, a

predominantly Visiting Friends and Relatives (VFR) and leisure market. For the most

recent 12 months the average FLL one-way fare was 25%, or $50, lower than the MIA

fare (Exhibit WN-R-208), and the FLL–SJU O&D passenger volume was 103% larger

than the MIA–SJU market (Exhibit WN-R-209).

$148

$198

$50

$100

$150

$200

$250

-25%-$50

Avg . One-Way Fare Including Avg.Baggage/Cancellation and PassengerUsage Fees Paid, YE Q3, 2015


13/167

AverageOne-Way

Price PaidFLL - SJU

Southwest $124Spirit 137JetBlue 156

MIA - SJU

American $198

Source: Exhibit WN-R-210.Based on this analysis it is reasonable to conclude that Southwest will have the

lowest South Florida–Havana average fare paid: approximately $45 lower than

American, $21 lower than JetBlue and $9 lower than Spirit (Exhibit WN-R-211).

Avg. One-Way Fare Inc luding Avg.Baggage/Cancellation and PassengerUsage Fees Paid, YE Q3, 2015

$81.19

$90.01

$102.24

$126.43

$80

$100

$120

$140

Southwest Savings vs. American = $45


14/167

more likely than average U.S. travelers to check multiple bags to carry items from the

U.S. to Cuba for family members and friends. Therefore Southwest’s “Bags Fly Free”

policy for the first two checked bags for all passengers is a particularly important

consumer benefit in this proceeding. Likewise, Southwest’s “No Change Fee” policy will

provide important benefits compared to the other applicants, who charge as much as

$200 for a ticket change and rebooking, apart from any fare difference. The table below

summarizes the wide differential in these fees:


15/167

composite metric.12 Southwest’s analysis shows that most Cuban Americans and other

residents in South Florida will prefer FLL over MIA for their travel to HAV when

comparative drive times, fares, and other passenger costs such as parking are all taken

together. The rationale is that, for most South Florida passengers, the savings in lower

fares and other passenger costs at FLL greatly exceed the time value of driving to FLL

instead of MIA. This conclusion in turn supports allocating most of the frequencies

awarded for South Florida service to FLL rather than MIA.

IV. American Airlines’ Service Proposal Fails to Maximize Consumer Benefitsand Warrants Only a Fraction of its Excessive MIA Frequency Request.

American has requested 10 MIA–HAV, one CLT–HAV and one DFW–HAV for

daily service, plus once-a-week from each of LAX and ORD to/from HAV. Southwest

focuses first on American’s MIA request and then the CLT and DFW proposals.13

American’s purported justification for 10 daily MIA – HAV frequencies is woefully

lacking in both evidentiary support and credibility. First of all, American, like the other


16/167

As the chart below shows, this differential is consistent with the finding that

American’s average domestic fare is 42% higher than Southwest’s average fare (Exhibit

WN-R-302).

$117.42

$81.19

$166.85

126.43

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

Average Domesti c FLL/MIA Fare at HAV Distance Estimated FLL/MIA-HAV Average Fare

Southwest At FLL

Americanat MIA

Southwest At FLL

Ameri canat MIA

+$49

+$45

Avg. One-Way Fare Including Avg.Baggage/Cancellati on Fees Paid, YE Q3, 2015

$250

Avg. One-Way Domest ic Fare Inclu ding Avg.Baggage/Cancellation Fees Paid at WN Length of Haul


17/167

This fare differential is not surprising given that American’s average domestic

unit cost is 24% higher than Southwest’s unit cost (Exhibit WN-R-303). To demonstrate

the enormous impact Southwest has in disciplining American’s pricing, Exhibit WN-R-

304 and the chart below shows that American’s fares are 19% lower in markets with

Southwest competition compared to markets where American has no LCC competition.

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

$220

$240

$260

$280

$300

$320

$340

0 100 2 00 3 00 40 0 500 60 0 700 800 9 00 10 00 1 100 1 200 1300 1 40 0 1500 1 60 0 1700 1800 1 900 2 000

Ameri can Fares w ith

Competition from Southwestand no other LCC

Ameri can Fares Wi thoutSouthwest or Other LCC

Competition

AA without WNCompetition

h WNCompetition

Fare Change withWN Competition

200 $185 $151 -18.7%

500 $229 $186 -18.9%

1000 $269 $218 -19.0%

1500 $295 $239 -19.1%

2000 $316 $255 -19.1%

- ay omes c ar e nc u ng vg.Cancellation Fees Paid, YE Q3, 2015


18/167

other U.S. metro areas; and (2) American’s projection of potential 2017 MIA–HAV

charter flights (absent scheduled service), for the entire industry.14

American’s justification for 10 MIA–HAV frequencies based its charter service is

fundamentally flawed. According to DOT’s T-100 data, American has averaged just 1.1

MIA-HAV charters per day for the 12 months ended August 31, 2015. The carrier

provides no insight into how and why it will increase from 1.1 charters to 10 daily

scheduled flights when its only apparent “evidence” is its projection that the whole

industry would operate 9.5 or 10 charters per day absent scheduled services.

A review of American’s Application leaves the reader with the distinct impression

that regardless of how many HAV frequencies it may be awarded by the Department,

American will simply assign scheduled flight numbers to what would otherwise be

charters. See for example, American’s Application at page 20 where the carrier refers

to . . . “the smooth transition from charter flights to scheduled flights.” This plan is

supported further by the testimony of Arthur Torno where he states at page 2 of AA


19/167

proposed service, by contrast, will be a net gain to the market as Southwest has not

been a charter participant in Cuba.

American can continue to operate as many charter flights to Havana as it wishes,

of course, and since American is in the process of reducing its U.S.-Caribbean service

significantly,15 charter service may be the best course for American to follow in the

future. In any event, American’s historical (and current) level of MIA–HAV charter

activity does not support anything like 10 scheduled frequencies per day. Nor should

American be awarded any scarce frequencies to accommodate Sixth Freedom traffic

through its Miami hub. American’s proposal includes eight international connections at

MIA that would block seats to HAV and provide no benefit for American consumers

(Exhibit WN-R-305). An reasonable estimate of this traffic suggests that approximately

10% of American’s proposed MIA–HAV capacity would be consumed by Sixth Freedom

passengers.

For all the reasons stated above, and in Section III, there is no evidentiary


20/167

Dallas and Charlotte Have Very Small Cuban American

Populations Compared to Ft. Lauderdale-Miami

only 1.2% of that in Ft. Lauderdale/Miami, and Charlotte’s Cuban American population

of 7,305 is a mere 0.7% of Ft Lauderdale/Miami’s (Exhibit WN-R-306).

Thi d t ti l ti h b b th DFW d CLT i i t f ll b t

Metro Area

U.S. Residents of Cuban-American Origin

1,061,180

13,413 7,3050

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Ft Lauderdale-Miami Dallas Charlotte


21/167

is nothing in the charter O&D record that supports American’s requests for DFW or CLT,

and the geographical distribution of the Cuban American population17

does not lend any

support either.

V. JetBlue is a Higher Fare, Higher Cost and Smaller Carrier With Less MarketImpact than Southwest Airlines.

JetBlue requests 10 Havana frequencies but offers little positive evidence to

support its Application. In fact, JetBlue has provided no traffic forecasts of any sort,

which would be necessary to lay a foundation for maximizing public benefits with even a

single HAV frequency. The essence of JetBlue’s case is its claim that it is a low fare

carrier and will offer low fares to/from Havana. In support it provides data for a few

carefully selected short-haul Boston markets18 where pre-existing fares were high and

no other LCC or ULCC carriers were competing. The truth is that when JetBlue’s impact

on market fares is compared to the “Southwest Effect” on market fares, the difference

overwhelmingly favors Southwest – Southwest reduces fares an average of $41.46 per


22/167

Focusing on the FLL markets in particular, Exhibit WN-R-402 and the chart below

-$41.46

-$28.91

-$50.00

-$45.00

-$40.00

-$35.00

-$30.00

-$25.00

-$20.00

-$15.00

-$10.00

-$5.00

$0.00

Southwest JetBlue

Fare Impact of Lo w CostCarrier Competition

43%

Southwest Competition Reduces Fares an Average

of 43% More than Competition from JetBlue


23/167

Average Southwes t and JetBlue Fares in SJU Markets

In the FLL – SJU market, a predominantly leisure market with considerable

Hispanic travel, JetBlue’s average fare ($156) is 25.8% higher than Southwest’s

($124).20

Avg. One-Way Fare Inc lud ing Avg. Bagg age andCancellation/Rebooking Fees Paid – Fared Passengers Only

$140

$132

$197

$127

$147

$108

$124

$160$167

$186

$131

$154

$139

$156

$0

$50

$100

$150

$200

$250

AUS BDL LAS PIT PVD RDU SJU

Southwest

JetBlue

Av g. One-Way Fare Inc luding Av g. Bagg age andCancellation/Rebooking Fees Paid – Fared Passengers Only

$172$180

$200 SouthwestJetBlue


24/167

As shown above, in the two other relevant Florida – San Juan markets where the

two carriers compete, JetBlue’s average fare is higher than Southwest’s: $172 versus

$143, or 20.3% higher in the case of MCO – SJU, and $155 versus $134 or 15.7%

higher in the case of TPA – SJU (Exhibit WN-R-403).

It is not surprising that Southwest’s fares are lower than JetBlue’s fares because

Southwest’s unit costs are significantly lower as well. For the year ended September

30, 2015 Southwest’s cost per ASM was 20% lower than JetBlue’s costs (Exhibit WN-R-

404). This cost differential has existed for many years (12% to 20% between 2010 and

2015) and it has been increasing since 2012 (Exhibit WN-R-405).

JetBlue has requested a total of eight Florida-Havana frequencies (4 FLL + 2

TPA + 2 MCO) while Southwest has asked for nine (6 FLL + 2 TPA + 1 MCO).

However, as the chart below highlights, Southwest is significantly larger with broader

U.S. network services than JetBlue at the competing Florida gateways (Exhibit WN-R-

406 and R-407). As a result, Southwest will be able to serve numerous cities in the


25/167

In addition, as shown below, Southwest is five times larger than JetBlue at TPA

(Exhibit WN-R-408 and R-409).

HPNHPNHPNHPNHPNHPNHPNHPNHPN

JFKJFKJFKJFKJFKJFKJFKJFKJFK

EWREWREWREWREWREWREWREWREWR

SWFSWFSWFSWFSWFSWFSWFSWFSWF

RICRICRICRICRICRICRICRICRIC BW IBWIBWIBWIBWIBWIBWIBWIBWIDCADCADCADCADCADCADCADCADCA

PHLPHLPHLPHLPHLPHLPHLPHLPHL

ORHORHORHORHORHORHORHORHORH

BOSBOSBOSBOSBOSBOSBOSBOSBOS

SFOSFOSFOSFOSFOSFOSFOSFOSFO

LASLASLASLASLASLASLASLASLAS

AUS AUS AUS AUS AUS AUS AUS AUS AUS

LAXLAXLAXLAXLAXLAXLAXLAXLAX

SJUSJUSJUSJUSJUSJUSJUSJUSJU

HA VHA VHA VHA VHA VHA VHA VHA VHA V

FLLFLLFLLFLLFLLFLLFLLFLLFLL

BDLBDLBDLBDLBDLBDLBDLBDLBDLLGALGALGALGALGALGALGALGALGA

SYRSYRSYRSYRSYRSYRSYRSYRSYR

RDURDURDURDURDURDURDURDURDU

PITPITPITPITPITPITPITPITPITCLECLECLECLECLECLECLECLECLE

CHSCHSCHSCHSCHSCHSCHSCHSCHS

DTWDTWDTWDTWDTWDTWDTWDTWDTW

JAXJAXJAXJAXJAXJAXJAXJAXJAX

PVDPVDPVDPVDPVDPVDPVDPVDPVDPHLPHLPHLPHLPHLPHLPHLPHLPHL


ISPISPISPISPISPISPISPISPISP

DCADCADCADCADCADCADCADCADCA

DENDENDENDENDENDENDENDENDEN


PHXPHXPHXPHXPHXPHXPHXPHXPHX


HOUHOUHOUHOUHOUHOUHOUHOUHOU

HAVHAVHAVHAVHAVHA VHA VHA VHAV


ALB ALB ALB ALB ALB ALB ALB ALB ALB

ATL ATL ATL ATL ATL ATL ATL ATL ATL

BDLBDLBDLBDLBDLBDLBDLBDLBDL

BNABNABNABNABNABNABNABNABNA

BUFBUFBUFBUFBUFBUFBUFBUFBUF

BWIBWIBWIBWIBWIBWIBWIBWIBWICMHCMHCMHCMHCMHCMHCMHCMHCMH

DALDALDALDALDALDALDALDALDAL

INDINDINDINDINDINDINDINDINDMCIMCIMCIMCIMCIMCIMCIMCIMCI

MDWMDWMDWMDWMDWMDWMDWMDWMDW

MKEMKEMKEMKEMKEMKEMKEMKEMKE

MSYMSYMSYMSYMSYMSYMSYMSYMSY

PITPITPITPITPITPITPITPITPIT


STLSTLSTLSTLSTLSTLSTLSTLSTL

TPATPATPATPATPATPATPATPATPA

Average Daily Seat-Departures

13,195

12,000

14,000

89.1

80

90

10037

30

35

40

Average Daily Departures Nonst op Destinations

Southwest’s Has More Convenient Connections at FLL than JetBlue

Southwest Has Five Times More Service at TPA to U.S. Points than JetBlue


26/167

Finally, Southwest is more than twice the size of JetBlue at MCO (Exhibit WN-R-

410 and R-411).21

AUS AUS AUS AUS AUS AUS AUS AUS AUSSATSATSATSATSATSATSATSATSAT


FNTFNTFNTFNTFNTFNTFNTFNTFNT

PVDPVDPVDPVDPVDPVDPVDPVDPVD


HAVHAVHAVHAVHAVHAVHAVHAVHAV





MSYMSYMSYMSYMSYMSYMSYMSYMSYHOUHOUHOUHOUHOUHOUHOUHOUHOU


BHMBHMBHMBHMBHMBHMBHMBHMBHM


BWIBWIBWIBWIBWIBWIBWIBWIBWI

CAKCAKCAKCAKCAKCAKCAKCAKCAKCMHCMHCMHCMHCMHCMHCMHCMHCMH


INDINDINDINDINDINDINDINDINDISPISPISPISPISPISPISPISPISP

MCIMCIMCIMCIMCIMCIMCIMCIMCI


MHTMHTMHTMHTMHTMHTMHTMHTMHTMKEMKEMKEMKEMKEMKEMKEMKEMKE

PHLPHLPHLPHLPHLPHLPHLPHLPHL


SDFSDFSDFSDFSDFSDFSDFSDFSDFSTLSTLSTLSTLSTLSTLSTLSTLSTL

ALB ALB ALB ALB ALB ALB ALB ALB ALBBUFBUFBUFBUFBUFBUFBUFBUFBUF


GRRGRRGRRGRRGRRGRRGRRGRRGRR

MEMMEMMEMMEMMEMMEMMEMMEMMEM


BDLBDLBDLBDLBDLBDLBDLBDLBDLHPNHPNHPNHPNHPNHPNHPNHPNHPN

JFKJFKJFKJFKJFKJFKJFKJFKJFKEWREWREWREWREWREWREWREWREWR





LGALGALGALGALGALGALGALGALGA



18,662

10 000

12,000

14,000

16,000

18,000

20,000

178%

124.6

80

100

120

140

44

25

30

35

40

45

50

Average Daily Departures Nonstop Destinations

159%159%

Southwest’s TPA Convenient Connections Compared to JetBlue’s

Southwest is More than Twice as Large as JetBlue at MCO to U.S. Points


27/167

When comparing the two applications side-by-side, a totality of factors including

Southwest’s greater market fare impact and broader connecting service options make

all of its Florida – HAV service proposals a superior choice over JetBlue’s.

JetBlue also proposes two daily JFK – HAV flights. New York/Newark is the

second largest Cuban American residential community; however, it is only 15% the size

CAKCAKCAKCAKCAKCAKCAKCAKCAK

MHTMHTMHTMHTMHTMHTMHTMHTMHTROCROCROCROCROCROCROCROCROC


FNTFNTFNTFNTFNTFNTFNTFNTFNTBDLBDLBDLBDLBDLBDLBDLBDLBDL



SATSATSATSATSATSATSATSATSAT



MCOMCOMCOMCOMCOMCOMCOMCOMCO







BWIBWIBWIBWIBWIBWIBWIBWIBWICMHCMHCMHCMHCMHCMHCMHCMHCMHINDINDINDINDINDINDINDINDIND


MCIMCIMCIMCIMCIMCIMCIMCIMCI



PHLPHLPHLPHLPHLPHLPHLPHLPHLPITPITPITPITPITPITPITPITPIT


SDFSDFSDFSDFSDFSDFSDFSDFSDFSTLSTLSTLSTLSTLSTLSTLSTLSTL

BHMBHMBHMBHMBHMBHMBHMBHMBHM


GRRGRRGRRGRRGRRGRRGRRGRRGRR

MEMMEMMEMMEMMEMMEMMEMMEMMEM

OMAOMAOMAOMAOMAOMAOMAOMAOMA HPNHPNHPNHPNHPNHPNHPNHPNHPNLGALGALGALGALGALGALGALGALGA

EWREWREWREWREWREWREWREWREWRJFKJFKJFKJFKJFKJFKJFKJFKJFKBWIBWIBWIBWIBWIBWIBWIBWIBWI


ORHORHORHORHORHORHORHORHORH



PSEPSEPSEPSEPSEPSEPSEPSEPSE

BQNBQNBQNBQNBQNBQNBQNBQNBQN




MCOMCOMCOMCOMCOMCOMCOMCOMCO

SYRSYRSYRSYRSYRSYRSYRSYRSYRBUFBUFBUFBUFBUFBUFBUFBUFBUFBDLBDLBDLBDLBDLBDLBDLBDLBDL

SLCSLCSLCSLCSLCSLCSLCSLCSLC

Southwest Has Signif icantly More Convenient Connections at MCO than JetBlue


28/167

In conclusion, Southwest’s Florida–Havana proposals will provide greater public

benefits than JetBlue’s, and Southwest has justified all of its requests with empirical

forecasts, while JetBlue has not. Considering the two carrier applications side-by-side,

it is clear that Southwest will be a stronger low-fare competitor in the U.S. – Cuba

market, and will offer consumers significantly larger and broader U.S. network services

than JetBlue at the competing Florida gateways.

VI. Spiri t’s High Fee Service Proposal and Unreliable Market History Do NotWarrant an Award in this Case.

Spirit proposes two daily flights between FLL and HAV utilizing its A319 aircraft

with 145 seats. As shown below and in Exhibit WN-R-505, this means that Southwest

would carry at least 21% more HAV passengers per nonstop flight than Spirit. This is a

significant difference with so few HAV frequencies available to allocate to U.S. carriers.

127,750

108 587

120,000

140,000

Annu al One-Way Seats/Passengers

+21,900+21%


29/167

average price paid by Spirit’s FLL–SJU passengers today is 11% higher than the

comparable Southwest FLL--SJU price paid (Exhibit WN-R-502).

23

As shown below, consistent with this finding, Spirit’s FLL-HAV fare is projected

by Southwest to also be 11% higher than Southwest’s.24

While Spirit makes a lot of noise about offering “cheap” fares, its impact on the

Av g. One-Way Fare Includ ing Av g.Baggage/Cancellation and PassengerUsage Fees Paid, YE Q3, 2015

Estimated FLL-HAV Estimated MIA-HAV

% Higher than Southwest: -- 11.0% 25.9% 55.7%

$81.19

$90.01

$102.24

$126.43

$0

$20

$40

$60

$80

$100

$120

$140

SOUTHWEST SPIRIT JETBLUE AMERICAN


30/167

Similarly, it is reasonable to assume that Spirit will have a minimal impact on U.S.

– Cuba fares compared to Southwest and will therefore have little effect on “the overall

competitive environment, including effects on market structure and competition in the

-$41.46

-$26.13

-$50.00

-$45.00

-$40.00

-$35.00

-$30.00

-$25.00

-$20.00

-$15.00

-$10.00

-$5.00

$0.00

Southwest Spirit

Fare Impact of Low CostCarrier Competition

58%


31/167

Spirit’s FLL – HAV service would connect to only 20 U.S. domestic points compared to

27 points for Southwest’s service (Exhibit WN-R-504).


9,318

6,427

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

WN NK

45%

62.3

35.3

0

10

20

30

40

50

60

70

WN NK

28

21

0

5

10

15

20

25

30

WN NK

Average Daily Departu res Nons top Destinations

76%

33%


LGALGALGALGALGALGALGALGALGA ACY ACY ACY ACY ACY ACY ACY ACY ACY

PBGPBGPBGPBGPBGPBGPBGPBGPBG

BWIBWIBWIBWIBWIBWIBWIBWIBWI

IAGIAGIAGIAGIAGIAGIAGIAGIAG

CLECLECLECLECLECLECLECLECLEDTWDTWDTWDTWDTWDTWDTWDTWDTWORDORDORDORDORDORDORDORDORD

MSPMSPMSPMSPMSPMSPMSPMSPMSP

DENDENDENDENDENDENDENDENDENPVDPVDPVDPVDPVDPVDPVDPVDPVDPHLPHLPHLPHLPHLPHLPHLPHLPHL ISPISPISPISPISPISPISPISPISP

DCADCADCADCADCADCADCADCADCADENDENDENDENDENDENDENDENDEN

ALB ALB ALB ALB ALB ALB ALB ALB ALBBDLBDLBDLBDLBDLBDLBDLBDLBDL


BWIBWIBWIBWIBWIBWIBWIBWIBWICMHCMHCMHCMHCMHCMHCMHCMHCMHINDINDINDINDINDINDINDINDINDMCIMCIMCIMCIMCIMCIMCIMCIMCI





Southwest’s U.S. Service Compared to Spiri t (NK) at FLL

Southwest’s FLL Convenient Connections Com ared to S irit’s


32/167

public (emphasis added).”26 It is therefore of decisional significance that Spirit has a

history of abandoning international routes – an astonishing 16 such abandonments in

the past 10 years, nine of which were Ft. Lauderdale routes (Exhibit WN-R-506). 27


33/167

complaint level is among the lowest, and is about 5% of the level recorded against Spirit

(Exhibit WN-R-508).

Spirit clearly will not offer “the best service for the traveling and shipping public”

8.08.5

10.3

7.3

12.7

19.2

12.6

15.4

11.6 11.710.8 11.0

0.6 0.5 0.5 0.4 0.4 0.7 0.7 0.6 0.5 0.5 0.3 0.5

0.0

5.0

10.0

15.0

20.0

25.0

January February March Apr il May June July August September October November December

SouthwestSpirit

Complaints per 100,000Enplanements,

January - December 2015

2015


34/167

DL-601). Delta also makes no suggestion that it will offer low fares. Ironically, Delta’s

proposal depends on Sixth Freedom traffic to support its JFK and ATL flights, despite its

boisterous campaign against the three major Middle East carriers for their participation

in U.S. O&D Sixth Freedom traffic.29

It is not surprising that Delta has made no low fare proposal. As shown below, in

the domestic marketplace Delta’s average fare level is 46% higher than Southwest’s

(Exhibit WN-R-601)

$162.01

$236.77

$50

$75

$100

$125

$150

$175

$200

$225

$250

+46%

Avg. O ne-Way Domestic Fare Includ ing Avg.Baggage/Cancellation Fees Paid at WN Length of Haul


35/167

Delta’s Entry in the MIA-HAV Market Would Do Nothing to Discipline American’sPricing and Would Have Littl e if Any Effect on Fares

reduces its fares significantly in response to competition from Southwest (see Section

IV above and Exhibit WN-R-304).

Finally, Delta has insignificant proposed connecting options at MIA, with just

seven connecting U.S. cities other than New York and Atlanta (Exhibit WN-R-605). As

shown below, Southwest is twice as large at FLL as Delta is at MIA (Exhibit WN-R-604)

$0$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

$220

$240

$260

$280

$300

$320

$340

$360

$380

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000

Legacy Fares WithSouthwest and No Other

LCC Competition

Legacy Fares With

Legacy Only Competition

DistanceLegacy Only,

1 Carrier Legacy Only,

2 or 3 Carriers

Legacywith WN

Competition

200 $188 $200 $152

500 $240 $245 $192

1000 $289 $284 $229

1500 $322 $311 $249

2000 $347 $331 $273

Trip Length (One-Way Nonstop Miles)

Legacy Fares in Markets WithOne Legacy Carrier Only

Avg. On e-Way Domestic Fare Incl uding Avg.Baggage/Cancellation Fees Paid, YE Q3, 2015


36/167

Southwest Provides Almost Three Times as ManyConvenient Connections at FLL Compared to Delta at MIA

Delta proposes equally insignificant connections in Orlando, with just eight U.S.

connecting cities other than New York and Atlanta while Southwest’s proposal would

connect to 32 U.S. points behind MCO (Exhibit WN-R-609). Southwest’s low fare

proposal to serve MCO – HAV is vastly superior both in terms of expected fare

difference and interior markets served. As shown below, Southwest is twice the size of

Delta at MCO (Exhibit WN-R-607) and Southwest will offer its traditional low fares while

Delta can be expected to operate with much higher fares.


37/167

The Cuban American Population in New York and Atlanta are Very Small

Compared to Ft. Lauderdale-Miami

Finally, Delta proposes once daily ATL-HAV and JFK-ATL. As the chart below

and Exhibit WN-R-610 show, the Ft. Lauderdale/Miami Cuban American population is

nearly 7 times as large as New York/Newark and 48 times as large as that of Atlanta.

U.S. Residents o f Cuban-American Origin

1,061,180

156,514

22,115

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000


38/167

VIII. There is No Justification for United’s Saturday-only Requests That WouldDisrupt Critical Daily Service Patterns From Viable Gateways.

United requests one daily EWR–HAV frequency plus 4 once-a-week frequencies

at Chicago, Houston, Washington and a second Saturday-only at Newark. United’s

once-a-week proposals are not supported by a meaningful market analysis or forecast,

and United should not be permitted to disrupt the 7-day patterns that other applicants

would operate from more viable U.S. gateways in this case. With its four once-a-week

proposals United appears to be simply throwing its hat in the ring, as none of them have

any semblance of seriousness. In order to maximize public benefits of the HAV

frequencies, the Department should accept no once-a-week remnants from United’s

service proposal.

In addition, United provides no analytic support for its daily EWR–HAV proposal.

It has offered no traffic forecast to justify its application. This is not surprising since the

Cuban American population living in the New York-Newark metro area is 156,514,

which is only 15% of the Ft. Lauderdale – Miami population (Exhibit WN-R-703).


39/167

United has also applied for one daily frequency for EWR-HAV. As noted

previously, in Exhibit WN-R-703 and in the chart below, the FLL/MIA Cuban-American

population dwarfs that of New York-Newark. Accordingly, EWR frequencies would

serve only a small share of U.S. - Havana travelers and should not be awarded at the

expense of the great majority of the Cuban American population for whom FLL is a far

more convenient gateway (Exhibit WN-R-704).

$162.01

$239.96

$0

$25

$50

$75

$100

$125

$150

$175

$200

$225

$250

Southwest United

+48%

Avg. O ne-Way Domestic Fare Includ ing Avg.Baggage/Cancellation Fees Paid at WN Length of Haul


40/167

Southwest’s U.S. FLL Service Dwarfs Frontier at MIA

IX. Frontier’s Service Proposal Is Unsupported by the Evidence andUndermined by Its Long History of Market Failures.

Frontier’s service proposal is centered on Miami (3 daily frequencies) with a

conditional offer to serve DEN–HAV so long as it also receives a MIA–HAV frequency.

Frontier has a very small presence in Miami, and it cannot provide U.S. network benefits

or blanket coverage of the U.S. as Southwest can do from FLL. Today Frontier

operates only six week day departures at MIA to six cities, none of which are points in

the Caribbean or Latin America. As the chart below shows, Southwest is ten times

larger at FLL as Frontier is at MIA to U.S. points (Exhibit WN-R-802).


9,318

4,000

5,000

6,000

7,000

8,000

9,000

10,000

848%

62.3

30

40

50

60

7028

15

20

25

30

Average Daily Departures Nons top Destinations

949% 367%


41/167

Southwest’s Offers Almost Seven Times As Many ConvenientConnections at FLL than Front ier at MIA

Southwest’s Low Fare Service Has a Substantially Greater Impact on

Market Structure and Competition than Spirit’s

Frontier styles itself as an “ultra-low cost carrier” (“ULCC”). But as the

Department is aware, there are gimmicks and hidden charges in the pricing structure of

some ULCC carriers. The empirical evidence shows that Southwest, which eschews

hidden fees,30 has twice as much impact on lowering market fares than Frontier (Exhibit

WN-R-801).

PVDPVDPVDPVDPVDPVDPVDPVDPVDPHLPHLPHLPHLPHLPHLPHLPHLPHL



DCADCADCADCADCADCADCADCADCADENDENDENDENDENDENDENDENDEN












BWIBWIBWIBWIBWIBWIBWIBWIBWICMHCMHCMHCMHCMHCMHCMHCMHCMH


INDINDINDINDINDINDINDINDINDMCIMCIMCIMCIMCIMCIMCIMCIMCI









MIAMIAMIAMIAMIAMIAMIAMIAMIA

LGALGALGALGALGALGALGALGALGAPHLPHLPHLPHLPHLPHLPHLPHLPHL

ORDORDORDORDORDORDORDORDORD


Fare Impact of Low Cost


42/167

Frontier’s proposal is not supported by market analysis or a traffic forecast of any

kind. We are simply asked to believe it can fill its airplanes, earn a profit, and stay and

develop its markets. This is an extremely tall order when Frontier has abandoned 73

domestic and 13 international stations since 2005 (Exhibits WN-R-809 and R-810).

MZT

PVR

SJD

ZIH

ACA

CZM

YYC

GDL

YVR

SJO

LIR

MBJ

HUX

Q1 ’05 Q1 ’06 Q1 ‘07 Q1 ‘08 Q1 ‘09 Q1 ‘10 Q1 ‘11 Q1 ‘12 Q1 ‘13 Q1 ‘14 Q1 ‘15 Q1 ’16 Q1 ‘17

Period Served

Frontier has Abandoned 13 International Airpor ts Since 2005


43/167

Frontier Has Abandoned More than Half the Ai rpor ts i t Has Served Since 2005

In total, Frontier has abandoned a staggering 283 routes since 2005 (Exhibit WN-

R-812). Frontier only commenced service to Miami in December 2014 (15 months ago)

and it is already beginning to reduce its service and seat capacity (Exhibit WN-R-805).

Airports Abandoned= 58% (78)

Air ports CurrentlyServed= 42% (56)

42

40

45

Weekly Departures

7,056

8,000

Weekly Seat-Departur es

Spirit Has Only Served MIA for 15 Months and is Al ready Start ing to Pu ll Down Service


44/167

Denver’s Limited Cuban American Population Does Not Warrant Nonstop HAV Service

Frontier’s record of abandoning markets casts serious doubt on its ability to

“operate and maintain” MIA-HAV service. However, even if it did remain in the market,

its service would not have a meaningful impact on American’s MIA-HAV fares due to its

de minimus size and high fee structure. As shown herein, Southwest has a significantly

greater impact on market fares with its low fare product and trusted brand.

Frontier’s Denver – Havana proposal is also extremely weak. In fact, the carrier

states that it must have the traffic support from Miami in order to operate to/from

Denver. That is hardly surprising given that there are only 4,439 Cuban Americans

living in the Denver area compared to over one million in the Ft. Lauderdale – Miami

area (Exhibit WN-R-806). Excessive circuity would also impair Frontier’s ability to serve

passengers beyond Denver (Exhibit WN-R-807 and R-808).

1,061,180

1,200,000

U.S. Residents of Cuban-American Origin


45/167

There is nothing unique or compelling about Frontier’s proposal, which is focused

on a market where it has a de minimus presence. For a carrier with Frontier’s large-

scale history of “in and out” or “let’s see if it works” air service, the requirements for

Frontier to qualify for one of the precious few HAV frequencies should be orders of

magnitude higher than is warranted for a highly stable airline like Southwest with

extraordinary success over a very long period of time. Given Frontier’s erratic history,

its weak service proposal, and its serious consumer complaint problems (Exhibit WN-R-

813), the Department should not risk any of the Havana frequencies on Frontier.

14.4

15.8

12.0

14.0

16.0

18.0SouthwestFrontier

Complaints p er 100,000Enplanements,

January - December 2015

In Contrast to Southwest, Fronti er Does Not ProvideGood Service to the Traveling Publi c


46/167

X. Alaska’s LAX-HAV Proposal Would Serve a Significantly Smaller Marketthan FLL-HAV and Deserves At Most One Frequency.

Alaska Airlines has requested two daily LAX – HAV frequencies with some flights

operating behind LAX to SEA and PDX. However, the notion of serving behind points

with “single-plane” service31 is meaningless in the in-bound direction because of U.S.

Customs and Immigration and aircraft security inspections. These procedures require

the deplaning of passengers and all carry-on items plus inspection of the aircraft for

every international flight returning to the U.S.

The Seattle and Portland metro areas are home to very few Cuban Americans –

5,323 in the case of Seattle, and 3,960 for Portland.32 Both markets would generate

very low numbers of VFR traffic. In addition, Alaska’s markets behind LAX would incur

severe circuity penalties. As shown below, only three markets have less than 35%

circuity (Exhibit WN-R-903 and R-905).

ANC ANC ANC ANC ANC ANC ANC ANC ANC

PDXPDXPDXPDXPDXPDXPDXPDXPDX

SEASEASEASEASEASEASEASEASEA


47/167

Alaska Airlines has declined to present a forecast of the traffic it expects to carry.

However, without analysis or support, the carrier asserts there will be 159,000 local LAX

– HAV passengers, or 190,000 on-boards when connecting traffic is included.33 This is

Alaska’s industry forecast, not an estimate of what it would carry with two daily

frequencies. Allowance must be made for other airline market shares, which naturally

would reduce Alaska’s share.

American, United, Delta and Southwest all have significant operations at LAX

and their loyalty programs are a powerful draw. If Alaska is the only carrier with daily

nonstop service to HAV it will obtain, at most, 132,120, or 50% of the local market with

one flight, or 75% with the two flights. Alaska asserts that connecting passengers will

be 19.5% as great as the volume of local passengers. 34 Given the small market size in

SEA and PDX, coupled with Alaska’s circuity disadvantage, it is not realistic to expect

more than a 10% connecting traffic add-on. As a result, a realistic projection of Alaska’s

load factors does not exceed 66% for a single HAV frequency and 50% for two


48/167

Alaska Airl ines’ Service Proposal ProducesVery Weak Traffic and Low Load Factors

LAX - HAVOne

FrequencyTwo

Frequency AS Assumed Local Market 159,000 159,000

Assumed by Southwest- AS share 50% 75%

- AS local passengers 79,500 119,250

- On-board passengers (at 110% of local) 87,450 131,175

Alaska’s Capacity and Load Factor- One-way seats35 132,130 264,260

- Projected Load Factor 66.2% 49.6%

Alaska’s application makes references to its “low costs,” but this is meaningful

only if it translates into low fares. Alaska provides no analysis to relate its fares to other

airlines in any markets. It simply asserts on page 11 that it will . . . “offer low fares to

stimulate traffic. . .” Southwest has compared its fare structure with Alaska in domestic


49/167

In sum, Alaska’s service proposal clearly does not support an allocation of two

HAV frequencies. Further, it is questionable whether one frequency is even justified

since the Los Angeles Cuban American population is miniscule compared to South

Fl id (E hibit WN R 101 d R 904) d ld h i t

$162.01

$199.35

$0

$25

$50

$75

$100

$125

$150

$175

$200

$225

$250

Southwest Alaska

+23%

Avg. One-Way Domes tic Fare Incl udin g Avg.Baggage/Cancellation Fees Paid at WN Length of Haul


50/167

XI. Sun Country’s Less-Than-Daily Service is Not Viable and Would DivertValuable Frequencies from Important Daily Service Proposals.

Sun Country is proposing Ft. Myers – Havana service twice a week with behind

i t Mi li l t Mi li H t k It ld

Metro Area

U.S. Residents of Cuban-American Orig in

1,061,180

63,288

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Ft. Lauderdale-Miami Los Angeles

The Cuban American Population in FLL/MIA Dwarfs Los Angeles


51/167

In short, there is no basis to grant any of the limited Havana frequencies to Sun

Country – not even 0.6 of one frequency (four days-a-week service) – that would disrupt

the 7-day patterns other applicants are proposing to operate from more viable U.S.

gateways. Sun Country’s application does not merit any of the scarce Havana

frequencies available and should be denied.

XII. Silver Airways’ Proposes Service With Very Small Aircraft (34 Seats) and its Appl ication Should Be Denied on that Basis Alone.

Silver Airways’ entire service proposal contemplates the use of Saab 340 aircraft

with a maximum capacity of 34 seats,36 and its projected load factor is only 59.5% after

adjusting for the payload restrictions.37

Southwest’s forecast of average annual passengers per Havana frequency is

108,587 (Exhibit WN-100) while Silver projects an average of 14,740 annual

passengers per frequency (Exhibit 3M-13). Allocation of a Havana frequency to

Southwest would generate 7.4 times as many passengers as a frequency operated by


52/167

Silver also suffers from a small network that is unable to provide Havana service

to passengers in other parts of the United States. If U.S. - Havana frequencies were

unlimited, Silver would of course be free to compete even with its small aircraft and

127,750

22,693

108,587

14,740

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Annual Seats per Dail ySouthwest 737-800

Frequency

Annual Seats per Dai lySilver Saab 340

Frequency

Annual Passengers per Daily Southwest 737-800

Frequency

Forecast Annual Silver Passengers per Daily Saab

340 Frequency

Annual One-Way Seats/Passengers

Addition al AnnualSeats perFrequency = 105,057

Addit ional AnnualPassengers perFrequency = 93,847


53/167

FAA Part 121 authorization to conduct scheduled flights.38 Furthermore, Dynamic’s

small fleet of four airplanes will not be able to provide any network benefits to the U.S.–

Havana market. The application of Dynamic should therefore be rejected.

Eastern is certificated to provide charter service but similarly does not hold

scheduled authority. With only four planes in its fleet, it also would be unable to provide

any network benefits to the Miami – Cuba market. Eastern’s application also should be

rejected.

CONCLUSION

For the reasons given above and in its Application, Southwest’s proposal to

provide FLL-HAV, TPA-HAV and MCO-HAV service will “maximize public benefits” in

this proceeding, as well as satisfy the Department’s other decisional criteria.

Southwest’s proposal will “offer and maintain the best service for the traveling public”

and will have unmatched positive effects “on the overall competitive environment,

including effects on market structure and competition in the U.S.-Cuba market.”


54/167

CERTIFICATE OF SERVICE

I hereby certify that on March 14, 2016, a copy of the foregoing was served via e-

mail on the following persons:

[email protected] (Alaska Airlines)[email protected] (Counsel for Alaska Airlines)[email protected] (American Airlines)[email protected] (American Airlines)

[email protected] (Delta Air Lines)[email protected] (Delta Air Lines)[email protected] (FedEx Express)[email protected] (FedEx Express)[email protected] (Counsel for Frontier)[email protected] (JetBlue Airways)[email protected] (Counsel for JetBlue Airways)[email protected] (Counsel for JetBlue Airways)

[email protected] (Counsel for Spirit Airlines)[email protected] (Counsel for Spirit Airlines)[email protected] (Sun Country Airlines)[email protected] (United Airlines)[email protected] (Counsel for United Airlines)

[email protected] (Virgin America)[email protected] (Counsel for Virgin America)

[email protected] (Counsel for Virgin America)

[email protected] (Counsel for Houston Airport System) [email protected] (Counsel for Houston Airport System)

mailto:[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]:[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]:[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]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


55/167

BEFORETHE U.S. DEPARTMENT OF TRANSPORTATION

2016 U.S. – Cuba Frequency Allocation ProceedingDocket DOT-OST-2016-0021

Rebuttal Exhibits Supporting the Answer of

Washington, D.C. March 14, 2016

Table of Contents

Docket OST-2016-0021Page 1 of 5


56/167

Table of Contents

Before Consideration o f Convenient Connections, Ft. Lauderdale-Miami Has Nearly 700% More Cuban-American Residents than the Next Largest Proposed Gateway

Southwest’s Proposed Florida Points Are Very Convenient to Cuban-American Residents

Ft. Lauderdale is Much More Convenient than th e Proposed Northeast Gateways

Ft. Lauderdale is Much More Convenient than th e Proposed Non-Florida Gateways in the South

Ft. Lauderdale is Much More Convenient than th e Proposed Gateways in the West

FLL and MIA Are By Far the Most Convenient Gateways for Cuban-American Residents Followed by Tampa and Orlando

The Large Emphasis of Charter Flights fro m Ft. Lauderdale-Miami Highlights How Important th is Market is Relative to Other U.S. Markets

ExhibitNumber WN-R

101

102

103

104

105

106

107

Florida and Especi ally Ft. Lauderdale-Miami Warrants the Vast Majority o f Available Havana Frequencies

Ft. Lauderdale (FLL) Will Be the Airpor t Preferred by Most Cuban-American Travelers from South Florida

Over 60% of Ft. Lauderdale’s Domestic Seat-Departures are on Low Cost Carriers, Dwarfing Miami’s Low Cost Carrier Share of Less Than Three Percent

Ft. Lauderdale has 23 Times More Weekly Domestic Low Cost Carrier Seat-Departures Than Miami

Ft. Lauderdale has Over 24,000 Weekly Low Cost Carrier Seat-Departures to the Caribbean Compared to Zero for Miami

MIA’s Cost Per Enplaned Passenger is 252% Higher t han FLL’s Cost Per Enplaned Passenger

Ft. Lauderdale has 50% More Domestic Passengers than Miami i n Markets where Both Have Nonstop Service

Southwest’s FLL Fares are Significantly Below American’s MIA Fares In Domestic Nonstop Markets

In Domestic Markets Where Both Air ports Have Nonstop Service, FLL Fares are Significantly Below Those of MIA

FLL-SJU Fares Are 25% Lower than MIA-SJU Fares

The FLL-SJU Passenger O&D Market is Mor e Than Twice as Lar ge as MIA-SJU

In the South Florida - San Juan Market, Southwest h as the Lowest Total Fare Paid

Based on South Florida-SJU, Southwest Will Have the Low est South Florida-HAV Total Fare Paid

Eighty Percent (80%) of South Florida Cuban-Americans Are Within a One Hour Drive of FLL

Sixty One Percent (61%) of South Florida Cuban-Americans Are Within a 45 Minute Drive of FLL

A Majo ri ty o f South Flor ida Resid ents Wil l Pref er FLL over MIA Because of FLL’s Low er Fares and Cost s to Passen gers

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214

A Major ity of South Florid a Cuban-Amer ican Res idents Wil l Pref er FLL over MIA

Table of Contents



57/167

Table of ContentsExhibit

Number WN-R

Amer ican ’s Cur rent Domesti c Fare Lev els an d Est imated HAV Fare Levels A re Over $45 High er th an South wes t’s Fare

Amer ican ’s Av erage Domes ti c Fare is 42% High er than Sout hwest’ s

Amer ican ’s Dom esti c Unit Cost s Are 24% High er th an South west ’s

Amer ican L owers i ts Far es Sign ifi cant ly In Respo nse t o South west ’s Competit ion

Amer ican ’s Pro pos al Inclu des 8 In ternat ion al Con nect ion s at MIA That Woul d Bl ock Seats t o HAV an d Pro vid e No Ben efi t fo r Am eri can Con sum ers

The Ft. Lauderdale-Miami Cuban-American Population Dwarfs that of Both Dallas and Charlotte

FLL is a Much More Convenient Gateway for Cuban Am ericans than Either DFW or CLT

Over the Past Six Years, American has Signifi cantly Reduced Its Service and Capacity Between the U.S. and t he Caribbean

301

302

303

304

305

306

307

308

Rebuttal to American Airlines

Southwest’s Effect on Reducing Market Fares is 43% Greater than JetBlue’s

In All But One Fort Lauderdale Domestic Market in Which Southwest and JetBlue Have Nonstop Service, Southwest Offers the Lower Average Fare

In Every San Juan Market in Which Southwest and JetBlue Have Nonstop Service, Southwest Offers the Lower Average Fare

JetBlue’s Unit Costs Are 20% Higher than Southwest’s

Southwest’s Unit Costs Have Been Consistently Below J etBlue’s Costs Over Time

Southwest is Larger t han JetBlue at FLL to U.S. Points

JetBlue’s FLL-HAV Proposal Connects to 24 U.S. Points While Southwest’s FLL-HAV Proposal Connects t o 27 U.S. Points

At TPA Sout hwes t is Five Times L arger than JetBl ue to U.S. Poin ts

Aft er Excl udi ng Exces sively Cir cui tou s Routes J etBl ue’s TPA-HAV Proposal Connects to Jus t 7 U.S. Poi nts Whi le Southwest ’s TPA-HAV Prop osal Conn ects to 33 U.S. Poin ts

At MCO So uth west is Mo re Than Twic e As Large As JetBl ue to U.S. Poin ts

Aft er Excl udi ng Exces sively Cir cui tou s Routes J etBl ue’s MCO-HAV Prop osal Conn ects to J ust 14 U.S. Poin ts Whi le Southw est’ s MCO-HAV Pro pos al Con nect s to 32 U.S. Poin ts

Aft er Excl udi ng Exces sively Cir cui tou s Routes J etBl ue’s BOS-HAV Propos al Con nect s to Jus t 2 U.S. Poi nts

FLL is a Much More Convenient Gateway for Cuban Am ericans than JFK, EWR or BOS

Aft er Excl udi ng Exces sively Cir cui tou s Routes J etBl ue’s JFK-HAV Pr opo sal Co nnec ts t o Just 7 U.S. Poin ts

The Ft. Lauderdale-Miami Cuban-American Population Dwarfs that of New York-Newark and Boston

401

402

403

404

405

406

407

408

409

410

411

412

413

414

415

Rebuttal to JetBlue Airways

Table of Contents



58/167

Table of Contents

ExhibitNumber WN-R

Southwest’s Effect on Reducing Market Fares is 58% Greater than Spirit’s

Aft er Ad jus ti ng for Relevan t Fees, Spi rit ’s Av erage FLL-SJU Far e is 11% Hig her t han Sout hwest’ s

Southwest is 50% Larger than Spirit at FLL to U.S. Points

Spirit’s FLL-HAV Proposal Connects to 20 U.S. Points While Southwest’s FLL-HAV Proposal Connects to 27 U.S. Points

Southwest Would Carry at Least 21% More HAV Passengers per Nonstop Flight than Spirit

In the Last 10 Years Spirit Has Exited 16 International Routes, 12 of Them in Florida

Spirit Exited Service at Washington National Airport in 2012

Southwest Has One of Lowest Customer Complaint Levels in the Industr y, While Spirit Has One of the Highest

501

502

503

504

505

506

507

508

Rebuttal to Spirit Airlines

Delta’s Average Domestic Fare Level is 46% Higher than Southwest’s

Delta’s Domestic Unit Costs Are 48% Higher than Southwest’s

Based on Empir ical Data, Delta’s Entry in the MIA-HAV Market Would Have Little if Any Effect on Fares

Southwest at FLL is More Than Twice Large As Delta at MIA to U.S. Points

Delta’s MIA-HAV Proposal Connects to Jus t 7 U.S. Points Other Than New York and Atlanta

Aft er Excl udi ng Ex cess ivel y Circ uit ous Rout es, Del ta’s MIA-HAV Pro pos al Con nect s to Jus t 7 U.S. Poi nts Other th an New York and Atl anta Whil e Sout hwes t’ s FLL-HAV Pro pos al

Connects to 27 U.S. Points

Southwest is Twice the Size of Delta at MCO to U.S. Points

Aft er Excl udi ng Ex cess ivel y Circ uit ous Rout es Delt a’s MCO-HAV Propo sal Connects to Jus t 8 U.S. Poi nts Other than New Yo rk an d At lan ta

Aft er Excl udi ng Ex cess ivel y Circ uit ous Rout es Delt a’s MCO-HAV Propo sal Connects to Jus t 8 U.S. Poi nts Other than New Yo rk an d At lan ta Whi le Southw est’ s MCO-HAVProposal Connects to 32 U.S. Points

The Ft. Lauderdale-Miami Cuban-American Population Dwarfs that o f Both New York-Newark and Atlanta

FLL is a Much More Convenient Gateway for Cuban Americans than Either JFK or ATL

Aft er Excl udi ng Ex cess ivel y Circ uit ous and Internatio nal Ro utes Delta’s JFK-HAV Pro pos al Con nect s to Jus t 8 U.S. Poi nts

601

602

603

604

605

606

607

608

609

610

611

612

Rebuttal to Delta Air Lines

Table of Contents



59/167

Table of Contents

ExhibitNumber WN-R

United’s Domestic Average Fare Levels Are 48% Higher than Southw est’s

United’s Domestic Unit Costs Are 44% Higher than Southwest’s

The Ft. Lauderdale-Miami Cuban-American Population Dwarfs that o f New York-Newark

FLL is a Much More Convenient Gateway for Cuban Americans than EWR

Aft er Exc lud ing Exces siv ely Cir cui tous Routes Unit ed’ s EWR-HAV Prop osal Conn ects to Jus t 19 U.S. Poi nts

701

702

703

704

705

Rebuttal to United Airlines

Southwest’s Effect on Reducing Market Fares is 88% Greater than Frontier’s

Southwest at FLL is Ten Times Larger than Frontier at MIA to U.S. Points

Frontier’s MIA-HAV Proposal Connects to Jus t 4 U.S. Points

Frontier’s MIA-HAV Proposal Connects to Jus t 4 U.S. Points While Southwest’s FLL-HAV Proposal Connects t o 27 U.S. Points

Since Starting Service to MIA in December 2014, Frontier Has Already Begun to Reduce Capacity

The Ft. Lauderdale-Miami Cuban-American Population Dwarfs that of Denver

FLL is a Much More Convenient Gateway for Cuban Am ericans than DEN

Aft er Excl udi ng Exces sively Cir cui tou s Routes Fr on tier ’s DEN-HAV Pro pos al Con nect s to Jus t 7 U.S. Poi nts

Frontier Has Abandoned 13 International Stations in t he Last 10 Years

Frontier Has Abandoned 73 Domestic Stations in t he Last 10 Years and Re-Entered 8

Since 2005, Frontier has Abandoned Nearly 60% of t he 134 Airports i t Has Served

Frontier has Exited 283 Routes Since 2005

Southwest Has One of Lowest Complaint Levels in the Industr y, Frontier Has One of the Highest

801

802

803

804

805

806

807

808

809

810

811

812

813

Rebuttal to Frontier Airlines

T bl f C t t



60/167

Table of Contents

ExhibitNumber WN-R

Alas ka’s A verage Domesti c Fare Lev els A re 23% Higher than Sou thwest ’s

Alas ka’s Do mest ic Un it Co sts Are 9% Higher than Sout hwest’ s

Aft er Excl udi ng Exces sively Cir cui tou s Routes A lask a’s LAX-HAV Pro pos al Con nect s to Jus t 3 U.S. Poi nts

The Ft. Lauderdale-Miami Cuban-American Population Dwarfs that of Los Ang eles

FLL is a Much More Convenient Gateway for Cuban Americans than LAX

901

902

903

904

905

Rebuttal to Alaska Airlines

Southwest Would Carry 94,000 More Passengers and Provide 105,000 More Seats per Frequency than Silver

Every Frequency Awarded to Silver for HAV Service Would Lose 94,000 Passengers

1001

1002

Rebuttal to Silver Airways


61/167

Florida and Especially Ft. Lauderdale-MiamiWarrants the Vast Major ity of Available Havana Frequencies

Before Consideration of Convenient Connections

Docket OST-2016-0021Exhibit WN-R-101


62/167

Before Consideration of Convenient Connections,Ft. Lauderdale-Miami Has Nearly 700% More Cuban-American

Residents than the Next Largest Proposed Gateway

1/ Combined Statistical Areas when available. Combines Sarasota and Lakeland with Tampa and Palm Bay/Melbourne Flori da with Orlando.

Note: Includes gateways with proposed year-round daily or more large aircraft service.Source: U.S. Department of Commerce, Bureau of Census, American Community Survey, 2014 – 5 year estimates.

1,061,180

156,514120,826

63,288 56,82122,115 15,382 13,413 7,305 4,439

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

+678%

Metro Area/1

Residents o f Cuban-American Origin

Southwest’s Proposed Florida Points AreV C i C b A i R id



63/167

Very Convenient to Cuban-American Residents

FLL (94%)/1

TPA (43%)/2 MCO (41%)/3

FLL

HAV

Each Dot Represents Relative Size ofCuban-American Residents within35% Circuity of the Airport Shown

TPA

HAV

MCO

HAV1/ 94% of all Cuban-American residents in the U.S. can travel to HAV via FLL with less than 35% circuity.2/ 43% of all Cuban-American residents in the U.S. can travel to HAV via TPA with less than 35% circuity.3/ 41% of all Cuban-American residents in the U.S. can travel to HAV via MCO with less than 35% circuity.Source: U.S. Bureau of the Census, 2014 American Community Profile

35% Circuity is an accepted analytical limit for for ecasting traffic. Circuity in excess of 35%introduc es significant additio nal travel time that is inco nvenient for many passengers.

Ft Lauderdale is Much More Convenient than the Proposed Northeast Gateways



64/167

Ft. Lauderdale is Much More Convenient than the Proposed Northeast Gateways

JFK(12%)/2

BOS(9%)/4

EWR(13%)/3

FLL (94%)/1

FLL

HAV

HAV

HAV

HAV

JFK

EWR

BOS


1/ 94% of all Cuban-American residents in the U.S. can travel to HAV via FLL with less than 35% circuity.2/ 12% of all Cuban-American residents in the U.S. can travel to HAV via JFK with less than 35% circuity.3/ 13% of all Cuban-American residents in the U.S. can travel to HAV via EWR with less than 35% circuity.4/ 9% of all Cuban-American residents in the U.S. can travel to HAV via BOS with less than 35% circuity.Source: U.S. Bureau of the Census, 2014 American Community Profile

Ft. Lauderdale is Much More Convenient than theDocket OST-2016-0021

Exhibit WN-R-104


65/167

Proposed Non-Florida Gateways in the South

CLT(26%)/2

DFW(11%)/4

ATL(29%)/3

FLL (94%)/1

FLL

HAV

HAV

HAV

HAV

CLT

ATL

DFW


1/ 94% of all Cuban-American residents in the U.S. can travel to HAV via FLL with less than 35% circuity.2/ 26% of all Cuban-American residents in the U.S. can travel to HAV via CLT with less than 35% circuity.3/ 29% of all Cuban-American residents in the U.S. can travel to HAV via ATL with less than 35% circuity.4/ 11% of all Cuban-American residents in the U.S. can travel to HAV via DFW with less than 35% circuity.Source: U.S. Bureau of the Census, 2014 American Community Profile

Ft Lauderdale is Much More Convenient than the Proposed Gateways in the West



66/167

Ft. Lauderdale is Much More Convenient than the Proposed Gateways in the West

DEN(8%)/2

LAX(7%)/3

FLL (94%)/1

FLL

HAV

HAV

HAV

DEN

LAX


1/ 94% of all Cuban-American residents in the U.S. can travel to HAV via FLL with less than 35% circuity.2/ 8% of all Cuban-American residents in the U.S. can travel to HAV via DEN with less than 35% circuity.3/ 7% of all Cuban-American residents in the U.S. can travel to HAV via LAX with less than 35% circuity.4Source: U.S. Bureau of the Census, 2014 American Community Profile

FLL and MIA Are By Far the Most Convenient Gateways for


Page 1 of 2


67/167

FLL and MIA Are By Far the Most Convenient Gateways forCuban-American Residents Followed by Tampa and Orlando

(Absolute Number of Cuban-American Residents)

Note: Includes gateways with proposed year-round daily (or more) large aircraft service.Source: U.S. Department of Commerce, Bureau of Census, American Community Survey, 2014 – 5 year estimates.

1,933,2121,860,990

846,850812,560

576,695

512,018

248,926 239,952214,899

185,770159,408

132,437

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000


Gateway

U.S. Residents of Cuban-American Origin within35% Circuity of Subject Gateway


Page 2 of 2FLL and MIA Are By Far the Most Convenient Gateways for


68/167

Note: Includes gateways with proposed year-round daily (or more) large aircraft service.Source: U.S. Department of Commerce, Bureau of Census, American Community Survey, 2014 – 5 year estimates.

Gateway

97%94%

43%41%

29%26%

13% 12% 11%9% 8% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


FLL and MIA Are By Far the Most Convenient Gateways forCuban-American Residents Followed by Tampa and Orlando

(Share of Cuban-American Residents)

% of U.S. Residents of Cuban-American Origin within35% Circuity of Subject Gateway

Th L E h i Ch t Fli ht f Ft L d d l Mi i



69/167

The Large Emphasis on Charter Flights from Ft. Lauderdale-MiamiHighlights How Important FLL/MIA is Relative to Other U.S. Markets

Florida = 68%

California =5%

FLL/MIA TPA JFK MCO SJU

Ft. Lauderdale- Miami= 90%

Source: U.S. DOT, T-100 Data.

U.S. – HAV Charter Passengers – YE August 2015 = 631,993


70/167

A Majority of South Florida Cuban-AmericanResidents Wil l Prefer FLL over MIA

Ft. Lauderdale (FLL) Will Be the Airport Preferred by


Page 1 of 5


71/167

( ) p yMost Cuban-American Travelers from South Florida

Ft. Lauderdale (FLL) and Miami International (MIA) are 29 miles apart (by road) and it takes 39 minutes to drive

between them. It is a fact that the majority of Cuban Americans living in South Florida are closer to MIA than FLL measured bydriving time. It is equally true that FLL enjoys significantly lower fares than MIA, and this attracts passengers who will drive

further to save a considerable amount of money. Southwest Airlines has proven this to be true in many cities. Southwest’s

significant entry into BWI beginning in 1993 penetrated the Northern Virginia market that lives much closer to DCA or IAD.

When Southwest entered Providence and Manchester instead of Boston’s Logan airport, it did so with the purpose of serving

the Boston metropolitan market and it did this effectively and successfully. In the South Florida situation, the low fares offered

by Southwest, JetBlue and Spirit attract hundreds of thousands of local passengers away from the higher fares and greatercongestion at MIA.

One of the considerations before the Department in this case is to combine passenger decisional considerations

of access time/cost with fare differentials between the two airports, in order to determine which airport will be preferred by the

majority of South Florida residents. In some respects this is a complex analytical question that demands a lot of data in order to

produce a precise numerical answer. Fortunately this case does not require such a degree of analytical precision. It is

sufficient to determine which airport, FLL or MIA, will be preferred by a majority of the Cuban Americans and other residents,

with comparative access times and cost, and comparative fares taken into account.

Exhibits WN-R-201 through WN-R-204 establish the fact that FLL is the center of low fare air service in South

Florida and MIA is not. Exhibit WN-R-201 shows the distribution of low fare service within each airport. Sixty percent (60%) of

FLL’s seat-departures are operated by low cost carriers while only 3% of MIA’s seat capacity is provided by low cost carriers.



Page 2 of 5


72/167


In absolute terms, FLL has 23 times as many domestic low cost carrier seat-departures as MIA (Exhibit WN-R-202); and when

service to the Caribbean markets is examined, one finds that FLL enjoys over 24,000 low cost carrier weekly seat-departuresand MIA has zero (Exhibit WN-R-203).

One of the reasons why FLL has attracted the low cost carriers, especially Southwest, Spirit and JetBlue is

because the airlines’ cost of operation/1 at the two airports is dramatically different – $5.84 per enplaned passenger at FLL

versus $20.54 at MIA (Exhibit WN-R-204). This differential by itself allows airlines at FLL to charge $15 less per one-way

passenger than their counterparts at MIA. It should not be surprising that FLL has 50% more domestic O&D passengers in

markets served nonstop at both airports – 13.5 million at FLL and 9.0 million at MIA/2

.The next step is to estimate what the fare differential is likely to be between Southwest’s proposed FLL – HAV

service and American’s proposed MIA – HAV service. This analysis is presented in Exhibits WN-R-206 through WN-R-211. In

domestic nonstop markets Southwest’s average fares at FLL are significantly lower than American’s fares at MIA. At the FLL –

HAV distance of 255 miles Southwest’s average fare is $49 lower than American’s (Exhibit WN-R-206)/3. When all carriers are

included in this analysis, and not just Southwest and American, the average one-way fare differential in favor of FLL is $48

(Exhibit WN-R-207).

1/ Terminal plus air field charges.

2/ For the 12 months ended September 30, 2015. See Exhibit WN-R-205.3/ All fares include baggage, cancellation and “usage fees” in the case of Spirit Airlines.



Page 3 of 5


73/167


Southwest analyzed fares in the FLL/MIA – SJU/4 markets to determine current/5 differentials. Both airports enjoy

nonstop service to San Juan, a predominantly VFR and leisure market. For the most recent 12 months the average FLL one-

way fare was 25%, or $50, lower than the MIA fare (Exhibit WN-R-208), and the FLL – SJU O&D passenger volume was 103%

larger than the MIA – SJU market (Exhibit WN-R-209).

Southwest compared the average one-way SJU fares paid by passengers of Southwest, Spirit and JetBlue at FLL,

and American at MIA. Baggage/cancellation and passenger usage fees (Spirit) must be combined with the base fare in order to

arrive at the price actually paid by the passenger. Exhibit WN-R-210 shows clearly that Southwest provides the lowest price in

the market by a large degree. If only the base fares are compared Southwest is still lower than American at MIA by 32.8%, and

lower than JetBlue at FLL by 16.0%. The average fare comparisons are as follows:

Average

One-Way

Price Paid

Average

One-Way

Base Fare

FLL - SJU

Southwest $124.00 $123.56

Spirit

137.46

98.19

JetBlue

156.14

147.11

MIA - SJU

American

$197.81

$183.92

Source: Exhibit WN-R-210.

4/ San Juan, Puerto Rico5/ For the 12 months ended September 30, 2015. See Exhibit WN-R-205.



Page 4 of 5


74/167


Based on this analysis it is reasonable to conclude that Southwest will have the lowest South Florida – Havana

total fare paid - $45 lower than American, $21 lower than JetBlue and $9 lower than Spirit (Exhibit WN-R-211). The next step is

to reflect the fare differential between Southwest and American as a key decisional criteria for passengers choosing between

FLL and MIA for their trip to Havana.

A superficial view of the geographical distribution of South Florida Cuban American residents shows that most of

them live closer (in drive time) to MIA than to FLL, although 80% live within one hour of FLL because it is only 29 miles from MIA

(Exhibit WN-R-212). Furthermore, FLL is within 45 minutes of 61% of the South Florida Cuban American residents (Exhibit WN-

R-213).

Airport choice is much more complicated than a simple drive-time comparison. Comparisons of schedules

(frequency and time of day), airport facilitation time, parking cost, expected delay and risk allowance, and comparative fares all

play a part in passenger choice behavior. It is known for many other multi-airport regions that comparative air fares play a very

significant role in selecting an airport for travel.

To compare the value of drive time and fare differential, Southwest’s analysis is as follows/6:

1. The monetary value of passenger drive time was estimated assuming the market is 80% leisure and 20%

business, and the value per hour for leisure and business travelers was adopted from the DOT’s current guide.

2. A weighted average value of time was determined from Step 1 above, and it is $38.70.

3. The average fare differential between Southwest’s FLL – HAV and American’s MIA– HAV services is estimated

from Exhibits WN-R-206 and R-211 to be $47.34.

6/ These steps are presented in Exhibit WN-R-214, page 2..



Page 5 of 5


75/167


4. Next, a conservative allowance for additional driving cost to FLL for the average traveler ($9.01) is deductedfrom the estimated fare differential to yield a net savings at FLL of $38.33 per one-way passenger trip.

5. The difference of airport parking cost favors FLL significantly over MIA, and this is another passenger

consideration.

It should be concluded from Southwest’s analysis in Exhibit WN-R-214, coupled with the residential location of

Cuban Americans in South Florida, that a majority of Cuban Americans will prefer FLL over MIA for their travel to HAV, providingSouthwest Airlines is allocated sufficient frequencies to accommodate the demand.

Over 60% of Ft. Lauderdale’s Domestic


Documents

Answer of Southwest Airlines Co (Cuba)