Southwest Airlines Opposing JetBlue Airways, American, Delta US-Cuba Route Applications
/Excerpt From Southwest Airlines Filing With United States Department Of Transportation
“Southwest Airlines Co. (Southwest) files this Consolidated Answer in response to (1) the Applications of JetBlue, American, and Delta for an allocation of U.S. – Havana frequencies, and (2) the motion of JetBlue to institute a new, formal proceeding to determine how three soon-to-be-available U.S. – HAV frequencies should be allocated.
Southwest filed an application on April 25, 2017, for one of three daily U.S. - Havana (HAV) frequencies that will become available when Spirit and Frontier terminate their HAV service in the coming months, as they have previously announced. With this frequency, Southwest will provide one additional daily flight between Fort Lauderdale (FLL) and HAV, for a total of three daily flights in this market. JetBlue filed an application for six weekly frequencies between FLL and HAV plus a Saturday-only BOS-HAV flight, while American and Delta each filed applications for one daily frequency for MIA – HAV service. Together, the four applicants are requesting four daily HAV frequencies whereas only three are available. Southwest opposes each of the other applications to the extent they would prevent an allocation of the one daily frequency requested in Southwest’s Application.
As detailed below, Southwest’s fares and service in the FLL – HAV market set it apart among applicant carriers and show conclusively that Southwest merits an additional HAV frequency. Among the four applicants, Southwest offers consumers by far the lowest FLL/MIA - HAV fares. A snapshot of each applicant carrier’s website for FLL/MIA – HAV fares shows that Southwest is offering significantly lower fares than the lowest fares of JetBlue, American and Delta at three different purchase dates: eight weeks, two weeks and one week from the flight departure date (Exhibit WN-1).
As shown above, eight weeks before the travel date, Southwest’s lowest available website fare is 55% below JetBlue’s lowest offered website fare, 52% below American’s and 34% below Delta’s. For travel two weeks and seven days before the date of travel, Southwest fares are also substantially lower than the comparable JetBlue, American and Delta fares for FLL/MIA-HAV travel.
In addition, Southwest currently operates by far the largest aircraft between FLL/MIA and HAV with its 175 seat 737-800 aircraft (Exhibit WN-2). Others vary from 150 seats operated by JetBlue, to 160 seats operated by Delta and American. This gives Southwest a 17% size advantage over JetBlue and 9% over American and Delta.
Southwest thus achieves the greatest output per frequency utilized, i.e., it makes the most productive use among the four applicants of the limited HAV frequencies available. Further, Southwest is one of the only applicants that has consistently served every one of its U.S. – Cuba markets with no reduction(s) in frequency or seat capacity.
When the service records of the four applicant carriers are compared side-by-side and considered against the DOT’s decisional criteria, it is clear that Southwest will make better use of an additional HAV frequency more than any other applicant. Adding an additional FLL – HAV flight will enable Southwest to continue its successful development of the HAV market, bring enormous value to U.S. consumers, and maximize public benefits.
JetBlue now comes before the Department to request a grant of one more FLL- HAV frequency so it can restore the seat capacity it surrendered voluntarily when it down-gauged its airplane on this route. JetBlue dropped 650 seats in its schedule per week and now seeks to add back 972 seats by operating another frequency. If JetBlue were simply to reinstate its original aircraft on its FLL – HAV flights, it could provide 90% of the seats it would gain by acquiring an additional frequency. Under these circumstances, JetBlue certainly does not warrant a scarce FLL – HAV frequency before Southwest, if at all.
American was awarded four daily frequencies for MIA-HAV service. No other carrier received an allocation of more than two South Florida (FLL and MIA) – Havana daily frequencies (Exhibit WN-5). For all of the reasons in Southwest’s pleadings and exhibits filed in the previous allocation proceeding, American should not be awarded a fifth frequency for MIA service before Southwest obtains its third frequency for FLL-HAV service. Importantly, Southwest offers much lower fares than American in the South Florida – HAV market. In fact, American’s lowest website fares are approximately double Southwest’s comparable fares for the eight week, two week and one week booking windows shown in Exhibit WN-1. As the Department has recognized, sustained low fares are critical to developing the fledgling HAV market and meeting the needs of the large Cuban-American population in South Florida. Increasing Southwest’s FLL–HAV frequencies from two to three daily flights will enable it to compete even more effectively against American and continue to restrain its high-fare MIA-HAV pricing.
Further, as the leading U.S. low cost carrier, Southwest is best positioned to step in and replace the low cost carrier service being discontinued by Spirit and Frontier in the FLL/MIA – HAV market, the majority of which was from FLL. Accordingly, allocating one of these frequencies to American at MIA before Southwest at FLL would undermine the competitive structure the Department carefully created for South Florida in its previous allocation decision.
As one of the highest fare carriers in the South Florida – HAV market, Delta’s current daily service provides no consumer fare benefits. As such, its MIA service does nothing to discipline American’s high fare legacy carrier pricing. In fact, in two of the three booking windows Southwest reviewed on carrier websites, Delta’s fare was higher than American’s (Exhibit WN-1). In contrast, as shown in the earlier frequency allocation proceeding, American reduces its fares significantly in response to competition from Southwest. Further, as discussed in Southwest’s earlier pleadings,
Delta has an insignificant presence at MIA and lacks connecting options. Southwest is more than twice as large at FLL as Delta is at MIA and Southwest’s FLL service would connect to 27 U.S. points with a third daily frequency, dwarfing Delta’s five connecting points with two daily frequencies (Exhibit WN-6). Based on a totality of factors, Delta’s MIA-HAV proposal is inferior to Southwest’s proposal and certainly should not deprive Southwest of an additional frequency to provide low-fare FLL – HAV service.
Southwest opposes JetBlue’s motion for the Department to institute a formal frequency allocation proceeding. While JetBlue cites the Ashbacker case in support of its motion, the Ashbacker doctrine does not require the new, formal proceeding that JetBlue envisions. Instead, Ashbacker stands for the proposition that where bona fide applications are mutually exclusive, an applicant must be provided with the “opportunity to show that its [application] will better serve the public interest than will the [competing application].”
Here, the current process governed by the Department’s Rules of Practice will enable the Department to contemporaneously evaluate the merits of each of the applicants’ service proposals and make a comparative selective decision. As Southwest has done in this Consolidated Answer, each applicant has the opportunity to respond to each other carrier’s application in the normal course of filing answers and other pleadings under the Department’s procedural rules. There is no need for the DOT to institute a new, formal proceeding to ensure contemporaneous consideration of all applications, and indeed such a separate proceeding would cause unnecessary delay in the Department’s allocation decision. Moreover, all four of the current applicants submitted voluminous pleadings in support of HAV frequencies over the exact same routes being proposed here in the Department’s 2016 allocation proceeding, thereby ensuring that the record is already extremely well developed. Together, all these factors make the institution of a separate, formal proceeding unnecessary and an inefficient use of both Department and applicant resources.
For the reasons stated above and in its pleadings in the Department’s earlier allocation proceeding, Southwest respectfully requests that the Department grant it one daily frequency to provide an additional FLL – HAV flight. This additional service will maximize public benefits by enhancing competition and providing low-cost travel options for U.S. - Cuba passengers. Southwest objects to the applications of JetBlue, American and Deltatotheextentthey wouldprecludetherequestedfrequency allocationto Id. at 328.”
