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IN THE UNITED STATES DISTRICT COURT


NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
CITY OF DALLAS,
Plaintiff,
v.
DELTA AIR LINES, INC., SOUTHWEST
AIRLINES CO., VIRGIN AMERICA INC.,
AMERICAN AIRLINES, INC., UNITED
AIRLINES, INC., SEAPORT AIRLINES,
INC., UNITED STATES DEPARTMENT OF
TRANSPORTATION, and THE FEDERAL
AVIATION ADMINISTRATION,
Defendants.

Civil Action No. 3:15-cv-02069-K

DEFENDANT SOUTHWEST AIRLINES CO.S THIRD AMENDED


CROSSCLAIM AGAINST DELTA AIR LINES, INC.

Defendant Southwest Airlines Co. (Southwest) hereby files this Third Amended
Crossclaim Against Delta Air Lines, Inc. (Delta).
I.

INTRODUCTION

For nearly 50 years, Southwest has fought to make Love Field what it is today: an airport
that provides consumers in the Dallas-Fort Worth area with hundreds of millions of dollars in
annual savings as a result of Southwests low fares. Indeed, Love Fields very existence is the
result of Southwests dogged determination to keep the airport operating in the 1970s and 1980s
in the face of countless legal threats and opposition from legacy carriers like Delta. More
recently, Southwest invested hundreds of millions of dollars to reinvigorate the airport so it could
better serve North Texas travelers. And, beginning in October 2014 with the expiration of
certain Wright Amendment restrictions, Southwest has added 35 new non-stop routes at Love
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Field, which has already begun to generate millions of dollars in economic benefits to the North
Texas economy and which will continue to do so as long as Southwests expanded operations at
Love Field persist.
At its core, this case concerns Deltas attempt to deprive Southwest of its contractual
rights to fully utilize the gates it negotiated for, paid for, and now preferentially leases at Love
Field. Delta has no lease or other contractual right from the City of Dallas (or anyone else) to
operate out of Love Field. Nevertheless, it seeks a free ride in the form of accommodation as a
new entrant at Love Field to operate at least 13 daily flights (and perhaps even up to 20) out of
gates that it has no right to use, all at the expense of the current preferential leaseholders. In
seeking such accommodation, Delta hascontrary to the carriers contractual rights and in direct
conflict with federal lawdemanded that the City force the existing Love Field carriers to grant
Delta gate access at Love Field in perpetuity. Through this legally baseless demand, Delta seeks
even greater rights to operate at Love Field than actual leaseholders have; indeed, even
Southwests Lease with the City of Dallas (the City) has an expiration date. Deltas demand
distorts the accommodation policy beyond recognition and flouts the plain language of federal
law as well as the Citys contractual obligations to Southwest.
Deltas request for accommodation is just the latest in a series of attempts by Delta to
get valuable gate space at Love Field for nothing. In late 2013 and early 2014, both Delta and
Southwest sought to obtain two gates that the U.S. Department of Justice (the DOJ) required
American Airlines (AA or American) to divest as part of its merger with US Airways. But
the DOJ roundly rejected Deltas bid because, in the DOJs rationale, Delta was a legacy carrier
already operating out of nearby Dallas-Fort Worth Airport (DFW Airport). As the DOJ
explained, granting Delta Americans Love Field gates does nothing to aid the competitive

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landscape in the Dallas-Fort Worth area: Delta, given its overall size and scope as well as its
presence at DFW, can and does challenge [AA] for the business of corporate customers flying to
and from the Dallas area.
Because federal law effectively bars Southwest from operating out of any airport other
than Love Field in the Dallas-Fort Worth area, and because the October 2014 repeal of the
Wright Amendment now permits nonstop flights across the country to and from Love Field, gate
space at Love Field is particularly valuable to Southwest. So in mid-2014, Southwest entered
into negotiations with United Airlines (United) to sublease two additional gates at Love Field
(the United Gates). Notably, at the same time that Southwest was negotiating with United,
Delta also entered into negotiations with United for those same two gates. United ultimately
rejected Deltas offer and reached a final agreement with Southwest in October 2014, thus
increasing Southwests total gates at Love Field from 16 to 18. Following this agreement,
Southwest and United submitted the proposed sublease to the DOJ for antitrust clearance, and
the government allowed the sublease to go into effect without imposing any conditions.
Deltas tactics are clear and shameless. It tried and failed to get the DOJ to award it the
two American gates at Love Field. It then tried and failed to bid against Southwest to sublease
the two United Gates at Love Field. Unsuccessful in both attempts, Delta now seeks its free ride
in a different wayby distorting accommodation policy beyond recognition through hiring
Washington lobbyists and ex-government lawyers to pressure the Department of Transportation
(DOT) to require the City to give Delta what Delta has no legal right to obtain and what Delta
refuses to pay for. Though at the time Deltas employees admitted that accommodation policy
provided only the barest thread of support for gate access at Love Field (given Southwests full

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use of the gates), Delta nevertheless continues to press the government for unprecedented action
on its behalf.
But even this has blown up in Deltas face. Despite Deltas insistence that the DOT has
ordered its accommodation through representations in a series of letters to the City (the DOT
Letters), the DOT recently admitted in a filing with this Court that those letters are nothing
more than nonbinding agency guidance. (Dkt. No. 134, at 2.) As the DOT further explained:
While the [DOT] letters urged the City to make a timely decision on
Deltas requests for accommodation, they did not require the City to reach
a particular decision. Nor did DOTs letters attempt to resolve several
important legal and factual questions. Indeed, even after receiving the
DOT Letters, the City has not acted on Deltas requests.
(Id.)
Even more telling, as Delta grows more desperate, its ever-evolving demands turn more
unhinged from reality. First, Delta sought accommodation at Love Field for only 5 flights a day
in October 2014. Then, in February 2015, for no reason at all, Delta declared that it was entitled
to an accommodation of 13 flights a day. Now, in its most recent filing, Delta has the audacity to
suggestwithout a legal leg to stand onthat the Court should invalidate the sublease between
United and Southwest and simply hand over those two gates to Delta. Because Delta cannot
make up its mind about its demands under the accommodation policy, its most recent request
which appears to be an illegitimate and unprecedented blend of antitrust and grant assurance
doctrinesis for the Court to scrap that policy altogether and simply give Delta the gates that the
DOJ refused to award to it and that Delta itself refused to pay for under any circumstances.
Delta cloaks its desire for a free ride in the guise of competition. But Deltas baseless
efforts to paint Southwest as a monopolist at Love Field does not change the legal and factual
reality, which Deltas own internal documents plainly admit, that the Dallas-Fort Worth
metropolitan area is a single commercial air services market served by airlines operating out of
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two competing airports: DFW Airport and Love Field. 1 And within this single integrated
market, Southwest operates from only 18 gates, or 9.7%, of the 185 total gates (including Love
Fields 20 total gates and DFW Airports 165 gates). Indeed, Southwest serves only one route
that no other airline serves out of the 52 nonstop routes it operates at Love Field. Southwests
presence in the Dallas-Fort Worth market contrasts sharply with Deltas dominant presence in
Atlanta, where Delta (i) operates 150 of the 207 (or 72%) total gates as of the end of 2014; (ii)
flies no fewer than 111 domestic non-stop monopoly routes; and (iii) aggressively uses its
influence to oppose the establishment of a second airport serving the Atlanta market. 2 Thus,
Deltas refrain that its accommodation request serves competition in the Dallas-Fort Worth
market rings hollow and hypocritical.
For these reasons, and for the reasons discussed below, forcing Southwest to
accommodate Delta would violate federal law, a Congressionally approved agreement regarding
gate usage at Love Field, and Southwests Lease with the City.
II.
1.

PARTIES

Defendant/Cross-Plaintiff/Counter-Plaintiff Southwest Airlines Co. is a Texas

corporation with its principal place of business in Dallas County, Texas.


2.

Defendant/Cross-Defendant Delta Air Lines, Inc. is a Delaware corporation doing

business in Texas, with its principal place of business in Atlanta, Georgia. Delta has appeared in
this action for all purposes and may be served through counsel.

As set forth in the Citys Original Complaint, the Department of Justice has repeatedly stated on behalf of
the United States, and structured one or more agreed judgments to be consistent with its position, that airlines
operating at Love Field and DFW Airport compete vigorously with each other in the single, integrated Dallas/Ft.
Worth market for commercial passenger air travel. See Citys Complaint, at 52.
2

Atlanta is the 9th largest metropolitan area in the United States, and is the only city in the top 10 that lacks a
secondary commercial airport. Delta accounts for approximately 78% of Atlantas total passenger traffic.
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III.
3.

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JURISDICTION AND VENUE

This Court has subject matter jurisdiction over Southwests cross-claim pursuant

to 28 U.S.C. 1332 because Southwest and Delta are citizens of different States and the amount
in controversy exceeds $75,000.
4.

This Court has personal jurisdiction over Defendant Delta Airlines, Inc. because it

is doing business in Texas and has committed torts in Texas.


5.

Venue for this action is proper in this Court pursuant to 28 U.S.C. 1391(b)(2)

because all or a substantial part of the events or omissions giving rise to the claims occurred in
this county.
IV.
A.

BACKGROUND AND FACTS 3

History of Southwest and Love Field


6.

Southwest is one of the largest, most respected, admired, and successful airlines

in the United States, despite many years of significant restrictions imposed upon it at its home
base of Dallas, Texas.
7.

In the more than forty years following the decision to build DFW Airport, the

story of Love Field and DFW has been marked by an abundance of legislation, litigation,
administrative proceedings, and, ultimately, compromise.

During this time, Southwest has

provided consumers in the Dallas-Fort Worth area with hundreds of millions, if not billions, of
dollars in savings from its low-fare air services to and from Love Field. Through Southwests
successful efforts to keep Love Field open, against competitors overt efforts to close it or restrict
Southwests operations at the airportthereby providing competition with airlines operating at
nearby DFW AirportSouthwest has consistently protected the interests of Dallas-Fort Worth
3

Southwest incorporates by reference the background and facts set forth in its Brief in Support of Its Verified
Application for Temporary Restraining Order, Preliminary Injunction, and Permanent Injunction Against Delta Air
Lines, Inc. [Doc. 11].

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area consumers for low-cost travel options. Southwest has also provided hundreds of millions of
dollars for improvements to Love Field and has invested many millions more to acquire
additional gate space at Love Field.
8.

By the mid-2000s, it had become apparent that the Wright Amendment, originally

enacted in 1979 for the purpose of promoting a once-fledgling DFW, was an outdated, anticompetitive relic that unnecessarily restricted commercial air service at Love Field.
9.

Thus, in 2006, Congress urged the cities of Dallas and Fort Worth, as well as the

DFW Board and the airlines, to work together on a proposal that would eliminate the Wright
Amendment restrictions.
10.

On July 11, 2006, representatives of Dallas, Fort Worth, DFW, American

Airlines, and Southwest finalized a local agreement, referred to as the Five-Party Agreement,
which would lead to the repeal of the Wright Amendment. A true and correct copy of the FiveParty Agreement is attached hereto as Exhibit 1.
11.

Certain terms of the Five-Party Agreement were codified as the Wright

Amendment Reform Act of 2006, Pub. L. 109-352 (WARA), reflecting acceptance by the U.S.
House of Representatives and Senate of the Five-Party Agreement. A true and correct copy of
WARA is attached hereto as Exhibit 2.
12.

The Five-Party Agreement and WARA involved the immediate repeal of

through-ticketing restrictions at Love Field, and enacted the eventual repeal of domestic
interstate restrictions on air service from Love Field, effective October 13, 2014. Additionally,
WARA imposed specific obligations on the City of Dallas. WARA provides, in pertinent part:
The city of Dallas . . . shall determine the allocation of leased gates and manage
Love Field in accordance with contractual rights and obligations existing as of
the effective date of this act for certified air carriers providing scheduled
passenger service at Love Field on July 11, 2006.
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Ex. 2, at 5(a) (emphasis added).


13.

In order to reach the compromise embodied in the Five-Party Agreement, the

airlines serving Love Field, including Southwest, agreed to reduce the number of gates at Love
Field from 32 to 20 and permanently limit the number of gates at Love Field to 20. Southwest
agreed to this reduction, and agreed to provide hundreds of millions of dollars for improvements
to Love Field, in exchange for being guaranteed full use of its remaining Love Field gates and
the eventual repeal of the Wright Amendment.
14.

Notably, the Five-Party Agreement establishes Southwest as the only airline

whose growth in the Dallas-Fort Worth market is effectively limited to Love Field. The FiveParty Agreement restricts Southwest by precluding it from operating any gates at DFW (or any
other airport within an 80-mile radius of Love Field) without correspondingly relinquishing
control of an equivalent number of gates at Love Field. See Ex. 1, Art. I, 10. However, the
Five-Party Agreement does not restrict Southwest from operating additional gates at Love Field.
15.

In agreeing to the 20-gate cap at Love Field and the penalties it would incur by

operating at DFW, Southwest relied on assurances in the Five-Party Agreement and WARA that
it would have the right to fully utilize any gates it could operate at Love Field.
C.

Southwests Gate Sublease with United Airlines


1.

AA/US Airways Merger and the DOJ Settlement

16.

In 2013, AA and US Airways announced plans to merge the two airlines.

17.

Following this announcement, the DOJ filed a lawsuit in the United States District

Court for the District of Columbia to block the proposed merger.

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In early 2014, the airlines and the DOJ settled the lawsuit, permitting the merger

to go forward, but, as part of this settlement, AA was required to divest its two leased gates at
Love Field.
19.

Meanwhile, in anticipation of the then-upcoming repeal of the domestic interstate

restrictions at Love Field, Southwest announced 20 new cities that it would begin serving from
Love Field in 2014. However, because Southwest is the principal low-cost competitor to the
much larger AA in the Dallas-Fort Worth market, demand for Southwests nonstop services from
Love Field far exceeded its then-existing gate capacity. Thus, access to AAs divested gates (or
any additional Love Field gates) would have allowed Southwest to provide the Dallas-Fort
Worth market with the benefits of new nonstop flights to 14 additional destinations that would
otherwise not be possible. Accordingly, Southwest sought to obtain a sublease of the two Love
Field gates AA was divesting.
20.

Delta and Virgin America, Inc. (Virgin) also sought use of the additional AA

gates. Delta was at that time operating flights on the AA gates pursuant to a temporary use
agreement with AA.
21.

Although Southwest demonstrated that giving it access to two more gates at Love

Field would provide the Dallas-Fort Worth market with new nonstop flights to 14 additional
destinations that would otherwise not be possible, Virgin proposed adding only three new
markets, and Delta sought only to serve a single market.
22.

The City, as the owner and operator of Love Field, had to provide its consent to

any sublease of the two Love Field gates.


23.

The City retained L.E.K. Consulting L.L.C. (L.E.K.), a leading aviation strategy

advisor, to evaluate the public statements of plans from the interested carriers, identify key

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benefits to Dallas citizens and Love Field, determine what aligned strategically with continued
support of DFW, and provide an analysis of which carrier would best serve Dallas citizens and
travelers, as well as Love Field and DFW, by using AAs two Love Field gates.
24.

Following extensive research and independent analysis, L.E.K. determined that

Southwest [was] the most attractive option for the City of Dallas. A true and correct copy of
L.E.K.s recommendation is attached hereto as Exhibit 3.
25.

Furthermore, the Campbell-Hill Aviation Group (Campbell-Hill) conducted a

study quantifying the economic benefits of Southwest service on two additional gates at Love
Field, and found that Southwests proposed service would:
a.

Reduce airfares nearly $100 per round-trip in the new Love Field markets;

b.
visitors;

Produce more than $210 million in fare savings annually to Dallas residents and

c.

Result in 1.4 million additional passengers per year flying to and from Dallas; and

d.
Attract 350,000 new visitors to the Dallas area annuallyvisitors who will spend
money in the local economy generating over 4,700 new jobs, $214 million in annual earnings to
local workers, and $559 million in local sales per year.
A true and correct copy of the Campbell-Hill report is attached hereto as Exhibit 4.
26.

Virgin and Delta, unlike Southwest, did not have restrictions on expanding at

DFW, which had, and continues to have, available gates.


27.

Despite the evidence strongly supporting awarding the AA lease to Southwest,

and even though Virgin was not restricted from expanding at DFW, the City approved AA and
the DOJs proposed sublease of the two Love Field gates to Virgin.
28.

As Southwest was (and is) the only low cost carrier that could effectively provide

rigorous price competition to AA the dominant airline in the Dallas-Fort Worth market the
decision to award the sublease to Virgin was an unconventional and puzzling result.
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In addition to the empirical evidence, public and private individuals supported

awarding the gates to Southwest.

Numerous letters from elected officials, chambers of

commerce, convention and visitors bureaus, other private organizations, and innumerable
private citizens poured into the Citys office in support of Southwest.
30.

Despite this overwhelming evidence and support for giving the gates to

Southwest, the City awarded the two AA gates to Virgin.


31.

However, in awarding the gates to Virgin, the DOJ made clear that Delta was not

an appropriate recipient because the goal of the AA divestiture was to enhance competition
against the newly merged and strengthened AA, specifically by LCCs (like Southwest and
Virgin). The DOJ also made clear that any acquirer of the two divested Love Field gates would
have to be able to meaningfully compete against [AA], thereby furthering the goals of the
[divestiture]. Notably, the DOJ determined that because Delta was a legacy carrier already
operating out of DFW, allowing it to obtain the divested Love Field gates would not aid the
competitive landscape in the Dallas-Fort Worth area. In rejecting Deltas request, the DOJ
explained: Delta, given its overall size and scope as well as its presence at DFW, can and does
challenge [AA] for the business of corporate customers flying to and from the Dallas area.
32.

Following AAs divestiture to Virgin, the gate allocation at Love Field was as

follows: Southwest retained 16 leased gates (which constituted its entire presence in the DallasFort Worth market, which has a total of 185 gates), Virgin leased two gates, and United leased
two gates. United also leased several gates at DFW, where it operated most of its daily flights in
the Dallas-Fort Worth market.

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2.

Uniteds Love Field Gates

33.

Upon information and belief, on or about August 1, 2001, the City and

Continental Airlines, Inc.s predecessor in interest, ExpressJet (collectively, Continental),


entered into a Lease of Terminal Building Premises concerning Continentals operations at Love
Field.
34.

Pursuant to the Five-Party Agreement and the enactment of WARA, Continental

and the City entered into an Amended and Restated Lease of Terminal Building Premises
(Airport Use and Lease Agreement), effective October 1, 2008 (the United Lease). United is
the successor in interest to Continental under the United Lease.
35.

Because federal law effectively restricts Southwest from operating out of any

airport other than Love Field in the Dallas-Fort Worth area, and because the October 2014 repeal
of the Wright Amendment now permits it to fly nonstop across the country, gate space at Love
Field is especially valuable to Southwest. So in mid-2014, Southwest entered into negotiations
with United Airlines (United) to sublease two additional gates at Love Field.
36.

Delta also entered into negotiations with United for those same gates. Delta made

several offers, but United ultimately rejected Deltas offers.


37.

On October 6, 2014, United and Southwest reached an agreement (the Asset

Transfer Agreement) whereby Southwest would sublease (the United Sublease) Uniteds two
gates at Love Field (the United Gates). Uniteds Lease provided that the City could not
unreasonably withhold or delay its consent to any sublease or assignment of the United Gates.
38.

Nevertheless, the City unreasonably delayed its consent for more than three

months, finally consenting to the United Sublease, subject to certain terms and conditions, on
January 28, 2015.

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Southwest submitted the United Sublease to the DOJ Antitrust Division for its

review. Following the DOJs investigation, it allowed the United Sublease to go into effect,
without imposing any conditions, in January 2015.
D.

The Accommodation of Delta


1.

Delta Tries a New Gambit To Obtain Gates at Love Field

40.

Unwilling to offer a market rate to pay for a sublease from United, high-level

Delta officers began looking for opportunities to flex its special-interest power as only a legacy
carrier like Delta could. Indeed, as of mid-2014, Delta had recently gone on a hiring spree from
the federal aviation regulatory agencies.
41.

Deltas first attempt at lobbying its way to the Love Field gates was to inquire of

the FAA whether it could force accommodation or require the City to convert the gates to
common use. Both options kept with Deltas aim to pay virtually nothing for using Love Field.
But Delta soon realized that the FAA could neither require common use gates nor force
accommodation.
42.

Then, in May of 2014, as Deltas hopes of a deal with United faded, Delta settled

on a Hail Mary attempt to maintain its presence at Love Field: the accommodation provision in
the Love Field leases. In sharp contrast to Deltas public statements, Delta privately admitted at
this time that accommodation provided the barest thread of support for gate access given
Southwests heavily used gates at Love Field. In fact, in evaluating this gambit, Deltas own
lower-level employees recommended closing down its unprofitable and operationally disastrous
service at Love Field. These employees further questioned whether an old-guard legacy carrier
like Delta really wanted to compete with Virgin and Southwest, low-cost carriers that, as the
DOJ has stated, bring competition to the markets they enter.

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Despite these misgivings, by October 2014, Deltas senior executives formulated

a plan for Deltas lobbying team to launch an assault on Southwests new sublease with United.
Deltaone of the worlds largest airlines hogging over 70% of gates at the Atlanta airport and
over 60% of the slots at highly congested LaGuardiapresented a hypocritical case that it was
now somehow the face of competition in Dallas. Through its connections and lobbying with the
FAA and DOT, Delta pushed for an investigation that it thought would aid its own request for
accommodation at Love Field.
2.

Deltas Requested Accommodation and the Carriers Attempts to Accommodate


Delta

44.

At or around the same time that Southwest was negotiating the Asset Transfer

Agreement with United, Delta, who had previously operated on AAs gates via month-to-month
agreements, began seeking long-term accommodation at Love Field, as its access at Americans
gates was expiring upon AAs divestiture of those gates.
45.

The Citys Lease with the airlines at Love Field contains provisions governing the

possible accommodation of other airlines at Love Field. A true and correct copy of Southwests
Lease with the City is attached hereto as Exhibit 5.
46.

Specifically, section 4.06.C of Southwests Lease provides that Southwest must

allow other airlines to use its gates only [a]t those times that [Southwest] has no scheduled use
for one or more of its assigned Gate(s). Ex. 5, at 4.06.C (emphasis added). However, the
Lease is explicit that in no event shall said use by others take precedence over [Southwests]
scheduled use. Id. (emphasis added). The Lease also provides that incumbent airlines will
accommodate a requesting airline only at such times that will not unduly interfere with [the
incumbent airlines] operating schedule. Id. at 4.06.F. (emphasis added). Thus, Southwest

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has a completely unrestricted contractual right to make full utilization of its leased gates,
including by expanding its scheduled service on those gates.
47.

The Five-Party Agreement and WARA require the City to manage requests for

accommodation in accordance with the Citys Love Field leases. See Ex. 1, at Art. I, 3(b); Ex.
2, at 5(a). Accordingly, both WARA and the Five-Party Agreement require the City to honor
Southwests right to make full utilization of its leased gates.
48.

WARA contains additional provisions dealing specifically with accommodation. 4

WARA provides that it does not act to limit the authority of the federal government to enforce
requirements of law and grant assurances 5 which impose obligations on Love Field to make its
facilities available on a reasonable and nondiscriminatory basis to air carriers seeking to use such
facilities. However, WARA also provides that such obligations shall not be construed to
require the city of Dallas . . . to modify or eliminate preferential gate leases with air carriers in
order to allocate gate capacity to new entrants or to create common use gates, unless such
modification or elimination is implemented on a nationwide basis. Ex. 2, at 5(e)(2)(B)(ii). In
other words, WARA makes clear that federal law and the grant assurances regarding the Citys
operation of Love Field do not require the City to modify existing carriers preferential lease
rights in order to accommodate a requesting airline, unless such modification or elimination is
implemented on a nationwide basis.

Under WARA, the City is required to manage Love Field in accordance w/[ pre-existing] contractual rights and
obligations, which includes, among other things, the Five Party Agreement. See Ex. 2, at 5(a). The Five Party
Agreement makes clear that questions of accommodation should be decided in accordance with the provisions of
Southwests Lease with the City. See Ex. 1, at Art. I(1)(a). As discussed above, Southwests Lease, in turn,
specifically sets forth the conditions under which any forced accommodation must occur.
5

When an airport operator, such as the City, accepts federal funds for airport projects, it must provide certain grant
assurances to the federal government regarding their operation of the airport(s). A list of the grant assurances can
be found on the Federal Aviation Administrations (FAA) website, at the following address:
http://www.faa.gov/airports/aip/grant_assurances/media/airport-sponsor-assurances-aip.pdf.

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On September 18, 2014, Delta requested gate accommodation at Love Field from

the City to run 5 flights a day out of Love Field, all to a single destinationDeltas hub at
Atlantas Hartsfield-Jackson International Airport.
50.

Following Deltas request, Southwest and the other Love Field carriers

voluntarily worked with Delta to provide Delta with the temporary usage of gate space that was
not then being fully utilized. From the outset, Southwest intended Deltas usage of the gate
space to be temporary, as Southwest had long planned and intended to fully utilize its gates
starting in 2015.

Indeed, Southwest agreed to the Five Party Agreement (which was

subsequently codified in WARA), thereby giving up additional gate space and promising to
spend (and ultimately did spend) hundreds of millions of dollars to rebuild Love Field, and also
paid a large amount of money to acquire Uniteds two gates, just so it could be in a position to
fully utilize its 18 gates at Love Field. Consistent with its intention to fully utilize its gates in
2015, Southwest specifically agreed to provide Delta with temporary use of part of one of its
gates that was then available from October 13, 2014, through January 6, 2015, to run its five
daily flights. Southwest agreed to this arrangement voluntarily, consistent with industry practice
where gate space is not being fully utilized by the leaseholder, as well as to protect passengers
who had booked Delta flights that were scheduled to operate after Deltas then-current use
agreement to operate at Love Field expired. Indeed, Delta had advertised for sale and accepted
bookings for flights at dates and times that Delta either knew or should have known it had no
right to operate. By virtue of Southwest voluntarily and temporarily providing Delta gate access,
Delta had the opportunity to fulfill its commitment to passengers and adjust its future schedule to
avoid making false representations about its schedule after January 6, 2015. Nevertheless, Delta
continued to make such false representations by advertising for sale flights from Love Field on

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and after January 6, 2015, even though it did not, at the time, have any basis to operate at Love
Field after January 6.
51.

With Deltas temporary gate use agreement with Southwest set to expire, and with

Delta having wrongfully sold flights from Love Field that would occur after January 6, 2015,
United voluntarily offered to allow Delta to operate temporarily on Uniteds gates (which United
was not then fully utilizing) for a period of 180 days, commencing on January 7, 2015, under
essentially the same terms and conditions as Deltas temporary gate use agreement with
Southwest.

Amazingly, Delta initially refused Uniteds generous offer because it did not

constitute permanent accommodation at Love Field as Delta was then demanding. As discussed
more fully below, Delta eventually accepted this offer.
52.

During negotiations of Deltas accommodation request, Delta made clear that it

was not seeking the traditional temporary accommodation that has been the industry practice for
decades for accommodating non-tenant airlines at airports around the country; rather, it was
demanding an unprecedented right of permanent accommodation at Love Field. In essence,
Delta was seeking to acquire Love Field gate space on a permanent basis without acquiring a
lease with the City and without paying the existing leaseholder fair market value for such
extremely valuable space.
53.

During negotiations, Delta approached Southwest about permanent access on its

gates at Love Field. However, as set forth above, Southwest had plans to fully utilize its then-16
Love Field gates plus the 2 gates it would eventually sublease from United. Beginning August
2015, Southwests flight schedule increased to 180 daily flights pursuant to an additional tranche
of service that was announced in February 2015. These 180 flights represent full utilization of
Southwests 18 gates under any reasonable measure. Thus, Southwest could not provide Delta

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permanent gate access without negatively impacting operations and customer experience at Love
Field. However, in an effort to come to a voluntary commercial agreement regarding gate
access, Southwest made several alternative offers to Delta for a potential longer-term gate access
deal at Love Field. These offers included proposals for an exchange of value representative of
the gate space that would be necessary to allow Delta to operate its five flights at Love Field.
54.

Remarkably, Delta refused Southwests offers without participating in any

meaningful negotiation. In essence, Delta demanded that Southwest forego five of its own
flights at Love Field, give up valuable and scarce Love Field gate space to Delta so that Delta
could run its five daily flights, and accept no more than nominal rent as compensation.
3.

The Initial Mandatory Accommodation Process

55.

Southwests Love Field Lease with the City provides that the airlines are

responsible for working out a voluntary accommodation arrangement, if gate space is available
for such an arrangement. If this is not achieved, the City can initiate a formal accommodation
process. However, the City is precluded from initiating this process unless and until a requesting
airline demonstrates to the City that it has exhausted all reasonable efforts to secure
accommodations. Ex. 5, at 4.06.F.2.
56.

As set forth above, Southwest made reasonable offers to Delta for a voluntary,

long-term commercial agreement for gate access at Love Field. Delta refused these offers and
refused to provide reasonable counter-offers or otherwise participate in negotiations over its
demand for permanent gate access.
57.

Despite Deltas refusal to participate in good faith negotiations over a long term

gate access agreement at Love Field, on December 1, 2014, the City sent a letter (the Initial
Mandatory Accommodation Letter) to Southwest, Virgin, United, and Delta informing the

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airlines that the City was initiating the formal process with the airlines whereby the City would
select an incumbent carrier that would be forced accommodate Delta.
58.

Aside from being premature because Delta did not exhaust all reasonable efforts

to secure accommodation, the Initial Mandatory Accommodation Letter also violated other of the
Citys contractual and statutory duties regarding its management of Love Field, which Southwest
explained in its December 8, 2014 response to the Initial Mandatory Accommodation Letter. A
true and correct copy of Southwests response is attached hereto as Exhibit 6.
59.

Furthermore, the Initial Mandatory Accommodation Letter also violated

Southwests rights under its Lease. The Citys Accommodation Criteria provided that the City
would make its accommodation decision based on the carriers published schedules as of a
snapshot date, which the City said ordinarily would be the date of the accommodation request.
The effect of this snapshot date is to preclude a signatory carrier from expanding its own
service on its leased gates for any schedule published after the snapshot date or for schedules
published as of the snapshot date that extend beyond 6 months after that date. As the City now
appears to recognize in its Original Complaint, mandating accommodation based on a snapshot
date would have violated Southwests preferential use rights under the Lease. Ex. 5, at 4.06.C
& F. The use of a snapshot date also would have conflicted with long-standing policies of the
FAA and DOT, which have never required that accommodation decisions be based on a carriers
schedules only as of a snapshot date. In fact, the DOTs policy, as stated in the DOT/FAA
publication Airport Business Practices and Their Impact on Airline Competition (1999) (ABP
Guide), is that, in considering an accommodation request, an air carrier tenant is not required
to cancel flights or to forfeit its use of airport facilities. Id. at p. 13 (emphasis added). 6

The ABP Guide is publicly available at http://ntl.bts.gov/lib/17000/17100/17129/PB2000108301.pdf.

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Page 20 of 106 PageID 4299

Moreover, the Citys proposed 6 month cutoff after the snapshot date for

consideration of incumbent carrier schedules is not only arbitrary, but depending on the specific
snapshot date chosen, could be highly prejudicial to Southwest given its deliberately gradual
expansion of service in the post-Wright Amendment repeal period. Southwest has progressively
and systematically increased Love Field service over the last several months, from 118 nonstop
daily flights just prior to the October 2014 repeal, to 166 flights today, to 180 flights beginning
August 9.
61.

Southwests measured expansion of service was done in full consideration of the

significant operational, reliability, and passenger-handling considerations that arose from


operating at the newly rebuilt Love Field. Southwests decision to gradually ramp up its postrepeal service has been prudent, as a number of operational and other challenges at the airport
have arisen during this period that needed to be addressed, including passenger parking
problems. The use of a snapshot date with a 6 month cutoff would penalize Southwest for
using its good judgment in not over-taxing the new airport by immediately launching the
maximum possible schedule as of the October 2014 repeal of the Wright Amendment, but
instead ramping up to the level of 180 flights over a period of several months.
62.

Importantly, despite purporting to initiate the mandatory accommodation process,

the City never mandated that Delta be accommodated at Love Field.


4.

The DOT Letters

63.

In connection with Deltas demand for accommodation, the City sought input

from the DOT regarding the Citys obligations under federal law and the grant assurances.
64.

On December 17, 2014, the DOT sent a letter to the City (the First DOT Letter)

advising the City as to its accommodation responsibilities. Remarkably, in contravention of

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longstanding DOT and FAA policies and Southwests Lease rights, as well as decades of
industry practice, the DOT noted that any mandatory accommodation made by the City for a
requesting carrier must be made on a permanent basis, so long as the accommodated carrier
continues its requested service. Furthermore, the First DOT Letter approved the use of the novel
snapshot date to determine availability for accommodation.
65.

The DOTs statements contravene and unlawfully modify Southwests Lease

rights to make full use of its leased gates. Ex. 5, at 4.06.C & F. In addition, these statements
not only lack support in federal law which, as discussed above, explicitly does not require the
City to modify existing carriers leases in order to accommodate a requesting airline, but also
contradict longstanding DOT and FAA policies providing that an air carrier tenant is not required
to cancel flights or forfeit use of airport facilities for an accommodated carrier. ABP Guide at p.
13. Such a policy would also allow a carrier like Delta to obtain rights even greater than the
rights of the existing leaseholder at an airport under the DOTs construction of accommodation
policy, an accommodated carrier would be allowed to operate on gate space at the airport in
perpetuity, while a leaseholders right to the gate space would expire at the end of the lease term.
66.

Furthermore, such permanent accommodation, if it were applied by the DOT on

a nationwide basis, would jeopardize airport financing and impose unreasonable burdens on
airport management, as carriers would be significantly less inclined to agree to leases for gate
space at airports that could, at any moment, be permanently taken away.
67.

Despite the objectionable and unsupported statements in the First DOT Letter, the

DOT correctly reaffirmed that any accommodation decision was, first and foremost, within the
Citys discretion.

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68.

Page 22 of 106 PageID 4301

Even though the First DOT Letter was contrary to federal law and long-standing

policies regarding the operation of airports, and was sent without public input by affected parties,
the City informed the airlines that it was treating the 2014 Letter as promulgating final and
binding directives on the City. Because the City was treating the First DOT Letter as a final and
binding order, Southwest was forced to appeal the DOT Letter to the U.S. Court of Appeals for
the D.C. Circuit. Southwests appeal is pending as of the date of this filing.
69.

On June 15, 2015, the DOT sent the City a second letter (the Second DOT

Letter) (collectively, the DOT Letters), largely reiterating the positions the DOT took in the
First DOT Letter. However, again, the Second DOT Letter made clear that it is the Citys
responsibility to decide how to act on Deltas requests and that [u]ltimately . . . it is the City
that must make a decision.
70.

Upon discovering the contents of the First DOT Letter, numerous airport

operators around the country wrote to the DOT expressing their concern over the Letters
contents. A true and correct copy of certain of these letters is attached hereto as Exhibit 7. In
their letters, the airport operators noted the harmful implications that the policies set forth in
the First DOT Letter would have on airports throughout the country. Namely, airports are
concerned with the fundamental departure from decades of industry understanding of federal
competition requirements that the First DOT Letter set forth by declaring that accommodation
may last in perpetuity at the option of the accommodated carrier. The airports operators letters
clearly demonstrate that the policies promoted by the DOT Letters, if applied on a nationwide
basis, would wreak havoc on airports throughout the country by fundamentally changing the
nature of airport lease rights. The airport operators are further frustrated that the DOT would

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make such a fundamental change in policy without any input by airport operators, airlines, and
other stakeholders that are directly affected by such policy.
71.

Despite Deltas repeated misrepresentations to the contrary, the DOT recently

admitted in a filing with the Court that the very DOT letters that Delta insists require its
accommodation are nothing more than nonbinding agency guidance. (Dkt. No. 134, at 2.) As
the DOT further explained in this filing:
While the [DOT] letters urged the City to make a timely decision on
Deltas requests for accommodation, they did not require the City to reach
a particular decision. Nor did DOTs letters attempt to resolve several
important legal and factual questions. Indeed, even after receiving the
DOT Letters, the City has not acted on Deltas requests.
(Id.)
5.

Deltas and AAs New Accommodation Requests

72.

Following the First DOT Letter, on December 24, 2014, the City issued a letter

purporting to require the temporary continuation of the then-existing gate use license agreement
between Southwest and Delta that was set to expire on January 6, 2015. Although it was not
made clear in the letter, the City subsequently informed the airlines that its intention was to
require United to temporarily accommodate Delta through February 28, 2015. United reiterated
to the City, and to Delta, that it had already offered to voluntarily provide Delta gate access for
180 days. Delta, faced with the possible embarrassment of having no Love Field gate access on
January 7, 2015 despite having sold flights for that date and beyond, eventually accepted
Uniteds generous offer. Remarkably, this near embarrassment only emboldened Delta even
more.
73.

On February 23, 2015, with the prospect of its gate use license agreement

terminating in July, Delta again demanded accommodation at Love Field, again on a permanent
basis, to operate five (5) daily flights, again, solely to a single destination, Atlanta. But thats not
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all. Delta went even further and requested accommodation for an additional eight (8) daily
flights from Love Field. Thus, Delta sought to operate thirteen (13) daily flights from Love
Field, effectively using most of the additional two gates that Southwest subleased at great
expense from United for its own additional flights without a lease from the City and without
paying fair market value for scarce Love Field space.
74.

In Deltas most recent filing, Delta has asked the Court to go even further and

invalidate the sublease between United and Southwest and simply hand over those 2 gates to
Delta.
75.

Deltas attempts to force its way in to Love Field encouraged other airlines to

attempt the same. AA, despite having just recently been forced to divest two gates at Love Field,
and despite operating more than 800 daily flights at DFW, on February 6, 2015, also requested
accommodation for four daily flights at Love Field. This meant that legacy carriers Delta and
AA, without any lease agreement with the City, were now requesting accommodation of 17 daily
flightsnearly full use of Southwests two subleased gates.
76.

AAs and Deltas additional requests for accommodation reveal the potential for

abuse that Deltas and the DOTs approach to accommodation presents. First, accommodation
was designed to ensure that new entrant carriers have reasonable access to airport facilities.
Neither AA nor Delta is a new entrant carrier. The DOT defined a new entrant airline in its
publication, Enforcement Policy Regarding Unfair Exclusionary Conduct in the Air
Transportation Industry, as an independent airline that has started jet service within the last ten
years and pursues a competitive strategy of charging low fares. (63 Fed. Reg. 17,919, 17920
n.1 (April 10, 1998)). Likewise, federal law in 49 U.S.C. 41762(10) defines a new entrant air
carrier as an air carrier that has been providing air transportation according to a published

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schedule for less than 5 years . . . AA and Delta, by contrast, are among the oldest and largest
airlines in the world, the polar opposite of new entrants. They do not need access at highly
constrained Love Field to compete in the Dallas-Fort Worth market. Indeed, both AA and Delta
already have large bases of operation at DFW and are free to expand their operations at that
airport at any time. Second, permanent accommodation would deprive Southwest of the right
to fully utilize its leased gates, which would in turn significantly devalue its Love Field Lease.
77.

In addition, unlike Southwest the prototypical low-cost airline famous for low

fares and convenient service frequencies Delta and American are high-cost legacy airlines.
These legacy airlines often operate smaller aircraft as opposed to Southwest, which only flies
larger jets, and they accept reduced consumer demand in exchange for higher fare levels on
routes where they do not compete with Southwest. The end result is that if Delta or American
replaces flights operated by Southwest at Love Field, it will lead to significantly reduced Love
Field capacity at materially higher costs and fares, and a resulting decline in local economic
growth and prosperity.
6.

Southwests Full Schedule and Notification to Delta of Expiring Gate Access

78.

On February 26, 2015, Southwest publicly announced and began selling an

additional 16 flights from Love Field scheduled to begin August 9, 2015, including flights to 8
new nonstop destinations. This announcement meant that, as of August 9, 2015, Southwest will
be operating 180 peak-day flights to 50 nonstop destinations on its 18 Love Field gates, resulting
in an average of 10 flights-per-gate per dayfull utilization under any reasonable gate
availability analysis.
79.

On February 27, 2015, Southwest specifically provided notice to Delta and the

City of its 180-flights-per-day schedule beginning August 9. At the same time Southwest, which

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had honored Deltas gate license agreement with respect to the United Gates in connection with
its United Sublease, also offered to extend Deltas gate license agreement for two weeksuntil
July 19, 2015. This notice gave Delta plenty of time to prepare for the expiration of its access to
gates at Love Field. Delta never responded to this offer.
7.

The Citys Second Mandatory Accommodation Process

80.

In mid-April 2015, the City indicated to Southwest that it was soon going to be re-

initiating the mandatory accommodation process. In connection therewith, on April 16, 2015,
the City sent to all affected airlines draft accommodation criteria, principles and gate
scheduling rules, (collectively, the Proposed Accommodation Criteria) which the City said it
would use in making its accommodation decision. The City sought comments from affected
airlines on the Proposed Accommodation Criteria.
81.

Because the Proposed Accommodation Criteria, like the Initial Mandatory

Accommodation Letter, violated Southwests lease rights and were contrary to federal law and
long-standing policy governing the operation of airports, Southwest provided a response to the
Citys Proposed Accommodation Criteria on April 28, 2015, detailing its objections to the
criteria. A true and correct copy of Southwests Response is attached hereto as Exhibit 8.
82.

As with the Initial Mandatory Accommodation Process, the City never mandated

that Delta be accommodated.


8.

Deltas Refusal to Vacate and Planned Trespass

83.

During a telephone call on June 17, 2015, counsel for Delta, Kenneth P. Quinn,

informed Southwest that despite the impending termination date of July 6, 2015, Delta was not
going to return the leased space to Southwest and, instead, had every intention of remaining on
the space and using it for the Atlanta flights for the indefinite future based on letters issued by

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the DOT in December 2014 and June 2015 relating to Love Field. Mr. Quinn made it clear that
absent a court order Delta was not going to vacate the space even after the license agreement
with Southwest terminated on July 6, 2015. Furthermore, Deltas station manager at Love Field
informed Southwest employees that Delta had no plans to leave Love Field, even after the
expiration of its License. Delta even went so far as to inform the City that it would employ
security personnel in order to physically prevent Southwest from using its Love Field gate space
following the expiration of Deltas License. See Citys Complaint, at 97. Deltas stated plan to
trespass on Southwests leased gate space could have easily deteriorated into a scenario of
battling passengers, half of whom have no flights, dueling airlines and clashing private security
personnelprecisely the situation the City, Southwest, and the other airlines which provided
Delta with ample time to leave Love Field have worked so diligently to avoid.
84.

In sum, Delta admitted that, as of July 7, 2015, it would trespass on Southwests

Love Field gates and would disrupt and/or prevent Southwests planned operations on those
gates, by physical force if necessary. Furthermore, Delta represented that it would permanently
trespass on Southwests property, as it had no intention of ever leaving the gate space. Deltas
intention was made all the more clear by the fact that it continued to accept reservations for its
current five daily flights after July 6, 2015.
9.

The Citys Lawsuit and the Extension of Deltas License

85.

Despite Southwests contractual and statutory rights and the numerous policy

reasons for refusing accommodation to a legacy carrier like Delta which already possesses the
ability to compete in, and expand its operations in, the Dallas-Fort Worth market the City,
while never granting Deltas accommodation request, failed to formally deny Deltas
accommodation request.

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Page 28 of 106 PageID 4307

Rather, on June 17, 2015, with Deltas temporary license on Southwests gates set

to expire on July 6, the City filed this lawsuit, seeking, among other things, a declaration from
this Court as to what its decision should be.
87.

In response to Deltas threat to trespass on Southwests property following the

expiration of its license, Southwest filed an application for temporary injunctive relief. Delta and
the City likewise filed applications for temporary injunctive relief.
88.

After a telephonic hearing, and in order to provide the Court with more time to

review the parties briefs and consider the significant legal issues involved, Southwest agreed to
extend Deltas temporary license agreement. Southwest and Delta executed a Gate Use License
Agreement on July 2, 2015, extending Deltas license to use Southwests gates to operate 5
flights a day until the earlier of September 30, 2015 or the date the Court issues an order granting
injunctive or final relief. However, Delta continues to seek permanent accommodation at Love
Field and still has no intention, absent a court order, of abandoning Southwests Love Field gates
following the expiration of its extended license.
89.

As demonstrated, mandating that Southwest accommodate Delta on Southwests

fully utilized gates would violate Southwests lease rights, the Five-Party Agreement, and
WARA, and constitute an impermissible taking of Southwests property rights without just
compensation.
V.
A.

CAUSES OF ACTION

Count One: Trespass Against Delta


90.

Southwest hereby repeats and incorporates by reference the allegations set forth in

the preceding paragraphs.

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Page 29 of 106 PageID 4308

Pursuant to the Southwest Lease and the United Sublease, Southwest has a lawful

right to possess its Love Field gates.


92.

Delta has admitted that it will physically, intentionally, and voluntarily enter

Southwests property without a legal right to do so upon the expiration of its License.
93.

Deltas trespass will cause injury to Southwests right of possession.

94.

Southwest seeks injunctive relief to enjoin Deltas trespass, in addition to its

actual damages.
B.

Count Two: Declaratory Judgment Against Delta


95.

Southwest hereby repeats and incorporates by reference the allegations set forth in

the preceding paragraphs.


96.

Pursuant to the Southwest Lease and the United Sublease, Southwest has a lawful

right to possess its Love Field gates.


97.

Deltas only right to Love Field gate access is pursuant to the License.

98.

The License expires, at the latest, on September 30, 2015.

99.

After the License expires, Delta will have no legal right to gate access at Love

Field. Despite this, Delta intends to continue to occupy and operate out of Southwests Love
Field gates after the License expires.
100.

Thus, there exists a case or controversy as to whether Delta has any right to

operate out of Southwests Love Field gates following the Licenses expiration.
101.

Pursuant to 22 U.S.C. 2201, Southwest seeks a declaration that (1) Southwest

has a possessory right to its 18 Love Field gates, and (2) Delta has no right to occupy or operate
out of Southwests Love Field gates after the expiration of the License.

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Page 30 of 106 PageID 4309

Count Three: Declaratory Judgment Against Delta


102.

Southwest hereby repeats and incorporates by reference the allegations set forth in

the preceding paragraphs.


103.

Delta has no standing to assert a claim under the Lease that the City violated the

Lease when it approved the United Sublease.


104.

The Citys approval of the United Sublease was not contrary to the public interest.

105.

Pursuant to the Southwest Lease, the United Sublease, WARA and the Five Party

Agreement, Southwest cannot be divested of the two gates based on the Citys approval of the
United Sublease and the two gates cannot be converted to Common Use Gates under the
control of the City.
106.

Delta has suffered no legally cognizable injury as a result of the Citys approval

of the United Sublease.


107.

Thus, there exists a case or controversy as to whether Delta has any right to

operate out of Southwests Love Field gates following the Licenses expiration.
108.

Pursuant to 22 U.S.C. 2201, Southwest seeks a declaration that (1) Delta has no

standing to seek divestiture of the two gates, and (2) Delta has suffered no injury as the result of
the Citys approval of the United Sublease.
C.

Count Four: Requests for Injunctive Relief


109.

Southwest hereby repeats and incorporates by reference the allegations set forth in

the preceding paragraphs.


110.

Southwests request for temporary injunctive relief is set forth in its Brief in

Support of its Verified Application for Temporary Restraining Order, Preliminary Injunction and
Permanent Injunction Against Delta Air Lines, Inc.

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111.

Page 31 of 106 PageID 4310

Southwest is entitled to permanent injunctive relief to enjoin Delta and its agents,

servants, employees, attorneys, and any persons or entities acting in concert or participation with
Delta, from trespassing on Southwests Love Field gates following the expiration of the License.
VI.
112.

JURY DEMAND

Southwest hereby requests a trial by jury in this action and has tendered the

appropriate fee.
VII.

PRAYER

For these reasons, Plaintiff Southwest Airlines Co. hereby requests that the Court award
the following relief:
a.

Enter judgment on Southwests claims against Delta;

b.

Enter declaratory judgments for Southwest, as provided above;

c.

Upon conclusion of the hearing on Southwests Application for Preliminary


Injunction, enter a preliminary injunction for the duration of this lawsuit, as
requested above;

d.

Upon final hearing, enter a permanent injunction, as requested above;

e.

Award Southwest actual damages, reasonable and necessary attorneys fees, and
court costs; and

f.

Grant all such other and further relief at law or in equity that the Court may deem
just and proper.

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VIII.

Page 32 of 106 PageID 4311

PRAYER

WHEREFORE, PREMISES CONSIDERED, Southwest respectfully ask the Court to


deny all relief requested in the City of Dallas Original Complaint, that Southwest be awarded its
attorneys fees and costs, that judgment be entered in Southwests favor, and for all such other
and further relief, both at law and in equity, to which Southwest may be justly entitled.

DATED: September 9, 2015

Respectfully submitted
/s/ Christopher Patton
John T. Cox, III
Texas Bar No. 24003722
tcox@lynnllp.com
Kent D. Krabill
Texas Bar No. 24060115
kkrabill@lynnllp.com
Britta Erin Stanton
Texas Bar No. 24036976
bstanton@lynnllp.com
Christopher W. Patton
cpatton@lynnllp.com
Texas Bar No. 24083634
Stephen M. Cole
Texas Bar No. 24078358
scole@lynnllp.com
LYNN TILLOTSON PINKER & COX, LLP
2100 Ross Avenue, Suite 2700
Dallas, TX 75201
Telephone: 214.981.3830
Facsimile: 214.981.3839
ATTORNEYS FOR DEFENDANT
SOUTHWEST AIRLINES CO.

DEFENDANT SOUTHWEST AIRLINES CO.S THIRD AMENDED


CROSSCLAIM AGAINST DELTA AIR LINES, INC.
#4832-8658-3080

PAGE 32

Case 3:15-cv-02069-K Document 160 Filed 09/14/15

Page 33 of 106 PageID 4312

CERTIFICATE OF SERVICE
The undersigned hereby certifies that on September 9, 2015, the foregoing document was
served on all counsel of record through the Courts ECF system.

/s/ Christopher Patton


Christopher Patton

DEFENDANT SOUTHWEST AIRLINES CO.S THIRD AMENDED


CROSSCLAIM AGAINST DELTA AIR LINES, INC.
#4832-8658-3080

PAGE 33

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EXHIBIT 3

L.E.K. Consulting llc, 75 State Street, 19th Floor, Boston, MA 02109, USA
t: 617.951.9500 f: 617.951.9392 www.lek.com

The materials contained in this document are intended to supplement a


discussion between the City of Dallas and L.E.K. Consulting on April 22,
2014. These perspectives are confidential and will only be meaningful
to those in attendance.

April 22, 2014

Assessment of optimal use of Americans divested


Love Field gates for the City of Dallas

Love Field Gate Recommendations

Case 3:15-cv-02069-K Document 52-3 Filed 07/09/15

Page 1 of 25 PageID 969

Wroclaw

Tokyo

Sydney

Singapore

Shanghai

Seoul

So Paulo

San Francisco

Paris

New York

New Delhi

Munich

Mumbai

Milan

Melbourne

Los Angeles

London

Chicago

Chennai

Boston

Beijing

Bangkok

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Page 2 of 25 PageID 970


Disclaimer

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

L.E.K. is not able to predict future events, developments and uncertainties. Consequently, any of the forward-looking statements
contained in this report may prove to be incorrect or incomplete, and actual results could differ materially from those projected or
estimated in this report. L.E.K. undertakes no obligation to update any forward-looking statements for revisions or changes after
the date of this report and L.E.K. makes no representation or warranty that any of the projections or estimates in this report will be
realized. Nothing contained herein is, or should be relied upon as, a promise or representation as to the future.

This report is based on information available at the time this report was prepared and on certain assumptions, including, but not
limited to, assumptions regarding future events, developments and uncertainties and contains forward-looking statements
(statements that may include, without limitation, statements about projected revenues, earnings, market opportunities, strategies,
competition, expected activities and expenditures, and at times may be identified by the use of words such as may, could,
should, would, project, believe, anticipate, expect, plan, estimate, forecast, potential, intend, continue and
variations of these words or comparable words).

User may not distribute, reproduce, disclose, or describe this report, in whole or in part, to any third party unless and until (a) User
receives the prior written consent of L.E.K. (which consent may be withheld for any or no reason in L.E.K.s sole and absolute
discretion) and such third party executes L.E.K.s standard non-reliance and release agreement or (b) L.E.K. Consulting has
provided its consent.

The sole purpose of this report is to assist User in evaluating the Project and this report shall not be used for any other purpose.
User acknowledges that it has, either alone or in conjunction with its advisors, made an independent investigation into the
advisability of the Project and that this report is not the sole basis for Users ultimate course of action with respect to the Project.
L.E.K. is not and shall not be responsible for decisions made by User. No third party shall be a beneficiary of the report or have
any right to rely upon the report, and L.E.K. is not, and shall not be, responsible for any third partys review or use of the report.

This report has been prepared by L.E.K. Consulting LLC (L.E.K.) for the City of Dallas, Inc. (the User) in connection with a
specified scope of work described in the letter of engagement with the Client (the Project). The defined term L.E.K. shall mean
L.E.K. and its affiliates, and each of their former, current or future owners, partners, members, directors, managers, officers,
directors, employees, attorneys and agents and the successors and assigns of the foregoing persons. L.E.K. reserves the right to
amend, supplement or replace this report at any time. User shall not rely on any oral communications by L.E.K. employees or
representatives with respect to the Project, and the opinions, projections, estimates and conclusions of L.E.K. are solely those set
forth in and qualified by this report.

Case 3:15-cv-02069-K Document 52-3 Filed 07/09/15

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z Appendix

z Review of airline proposals and recommendations

z Background and objectives

Agenda

Case 3:15-cv-02069-K Document 52-3 Filed 07/09/15


Agenda

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

Page 3 of 25 PageID 971

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Annual passengers*: 8.1M (2013)

Non-stop destinations: 44**

Active passenger airlines: 4

Delta^:

3.

2%

2%

96%

Southwest Airlines' corporate headquarters is at Love Field, and Dallas is a focus


city for them
As a result of the American-USAirways merger, AA must divest its 2 gates at DAL
The close proximity to downtown Dallas and limited gate availability have
generated significant interest in the 2 American gates

z
z

Strategic context

New Orleans, LA
Albuquerque, NM
Lubbock, TX
El Paso. TX
Midland, TX

6.
7.
8.
9.
10.

Dallas Fort Worth (DFW), the primary


international airport in the D/FW
Metroplex and the largest hub for
American Airlines

Due to the Wright Amendment Reform Act of 2006, in October of 2014, direct
flights are no longer limited to the 9 nearby states

Houston, TX
San Antonio, TX
Austin, TX
Kansas City, MO
St. Louis, MO

DFW

Neighboring airports

1.
2.
3.
4.
5.

The ten busiest domestic routes out of DAL


from Oct 2012- Oct 2013^^:

Route network

Aerial view

* Given the Wright Amendment Reform Act of 2006, Love fields capacity is limited to 20 gates; ^ Following the merger of American and US Airways, the U.S. DOJ is
requiring Americans 2 gates (currently sub-leased to Delta) to be divested at DAL **Nonstop flights with more than 50 passengers per day ^^Based on pax
Source: L.E.K. analysis of ARN Fact book, City of Dallas, Diio Mi; Bing Maps
CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.
3

United:

2.

Note:

Southwest:

1.

Airline market share^^

Number of aircraft gates: 20*

Key Operational Statistics

Dallas Love Field (DAL) is a cityowned public airport 6 miles


northwest of downtown Dallas,
Texas. It was Dallas' main airport
until 1974 when Dallas/Fort Worth
International Airport opened

Description

DAL

Page 4 of 25 Background
PageID 972 and objectives

Dallas Love Field (DAL) is located in the City of Dallas and is currently
restricted to 20 gates

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Page 5 of 25 Background
PageID 973 and objectives

NYC

CHI

WAS

SFO

DEN

ATL

LAS

HOU

MCO

10
910

1,066

1,208

1,234

1,261

1,300

1,499

1,652

1,965

2,124

Daily pax
(incl. connect)

Planned

20

19

18

17

16

15

14

13

12

11

Rank

No service from DAL

Planned service from DAL

Currently served by DAL

Currently Served

Planned

Planned

Planned

No Service

Planned

Planned

Planned

Planned

DAL
service

MCI

DTW

MSP

SAN

MSY

SEA

PHL

PHX

SAT

BOS

Destination*

557

565

590

616

638

682

687

692

765

843

Daily pax
(incl. connect)

Currently Served

No Service

No Service

Planned

Currently Served

No Service

No Service

Planned

Currently Served

No Service

DAL
service

* NYC (LGA, JFK, EWR, HPN), LAX (LAX, BUR, SNA, ONT, LGB), CHI (ORD, MDW), WAS (DCA, IAD, BWI) SFO (SFO, SJC, OAK) **Nonstop flight offered to
destination from DAL or DFW ^Average of 75% to 85% load factor ^^Some flights may be operated by an E75 with the same number of seats ***Based on the
assumption that Delta only gets two gates
Source: L.E.K. analysis of Diio Mi
CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.
4

LAX

Note:

Destination*

Rank

Top 20 destinations from the D/FW Metroplex both DAL and DFW (Q3 2012 Q3 2013)

With the expiration of the Wright Amendment, 14 of the top 20 destinations


from the Dallas/Fort Worth Metroplex will be served by DAL

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Page 6 of 25 Background
PageID 974 and objectives

There is no restriction on whether American can receive compensation for sub-leasing the gates

The DOJ claims rights to approve the selected carrier; their focus is on increased competition and
facilitating new opportunities for low cost carriers

Source: The U.S. Department of Justice

The U.S. Department of Justice

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

Section XII of the proposed Final Judgment prohibits the merged company from reacquiring an ownership
interest in the divested slots or gates during the term of the Final Judgment

z The final agreement prohibits the merged company from reacquiring an ownership interest in the
divested slots or gates

z The DOJ prefers the gates be assigned to an LCC versus remain open for common use, to
ensure that a new entrant has the right number and time for slots to compete effectively

The U.S. Department of Justice

The goal of the divestiture remedy is to enhance the ability of the LCCs to frustrate coordination among the
legacy carriers

z The DOJs intent with the divestiture is to create competition for American out of Dallas by
leveraging the more convenient location of DAL to give an advantage to a new entrant

z American Airlines will have to relinquish the gates at all airports under commercial terms and
conditions identical to those pursuant to which the gates and facilities are leased to New
American

In its settlement with American, the DOJ is requiring AA to divest its two
preferential use gates at Dallas Love Field (DAL)

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Page 7 of 25 Background
PageID 975 and objectives

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

z The City of Dallas is seeking to establish a clear position on what the optimal outcome is for the
City and its residents

z Given the critical role that DAL airport plays in the local economy and the important service they
provide for the citizens of Dallas, the City is looking to develop a framework for evaluating
potential new airline tenants for the gates

Virgin America (potential new entrant at DAL)

Delta (currently sub-leases the two AA gates)

Southwest (based in Dallas and currently the largest operation at DAL)

z The close proximity of DAL to downtown Dallas and limited gate availability has generated
significant interest in these gates from other airlines, including:

The City of Dallas is looking for a recommendation on the optimal use of


American's two gates at DAL

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Page 8 of 25 Background
PageID 976 and objectives

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

z Overall, which airline (or airlines) represent the best fit for the DAL gates given the Citys
objectives and why?

z How does each candidate airline rate across the key evaluation criteria?

z What specific criteria should be used to determine the best use of the gates for the City of
Dallas? How should those criteria be weighted?

z What is an appropriate framework for evaluating the options and determining the optimal solution
for the City?

z What are the primary interests of each stakeholder group as they relate to the awarding of the
DAL gates?

z Who are the key stakeholders in the decision to award American Airlines divested gates at DAL?

z What overall objectives should guide the Citys assessment of potential new airline tenants for
the DAL gates?

Key Issues

z The primary objective of this project is to provide a framework for the City to evaluate the best
use of American Airlines divested gates at DAL and a well-reasoned position on the optimal
outcome of the current process for the City of Dallas

Primary Objective

The intent of this project is to identify the best new use of the AA gates at
DAL for the City of Dallas, its citizens, and DAL itself

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Page 9 of 25Background
PageID 977 and objectives

Chief architect of the merchandizing (ancillary revenue) movement in the U.S. industry
and internationally

2 of the 3 largest frequent flier programs in the industry

2 of the 3 largest airline mergers in industry history

Retail master plan development

Traffic forecasting

Commercial air service development strategies

Buy- and sell-side advisory work for airport privatizations

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

z Extensive work with leading airports and airport groups around the globe

z Leading strategic advisor to the global airline industry, where clients include more than half of
the top 50 airlines around the world by market capitalization, including both major network
carriers and leading LCCs

z More than 25 years successfully advising on strategic issues in the aviation sector globally,
with a combination of airline and airport advisory experience that is unique among consultants
in the industry

L.E.K. Aviation Credentials

The City of Dallas selected L.E.K. Consulting to conduct this work based on
L.E.K.s reputation and experience as a leading aviation strategy advisor

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Page 10 of 25Background
PageID 978and objectives

Worked with DAL and the city of Dallas to


understand their primary objectives, views of key
stakeholders, and other relevant criteria

Reviewed relevant proposals and materials


prepared by airlines seeking to win the DAL gates

Identified and outlined the key stakeholders

Leveraged L.E.K. experience with airport


development to outline high level objectives for
each stakeholder

Developed an evaluation framework and


determined the relative importance of each
scoring criterion

Identified several potential gate-award scenarios

Conducted secondary research and independent


analysis to determine the attractiveness of each
potential gate-award scenario

Recommended a best case scenario for the City


based on L.E.K.s view of the relative importance
of each objective

L.E.K. did do

Perform a route-level fare analysis to evaluate


each potential possibility created with different
entrants and scenarios

Discuss this issue with any carrier, including those


submitting a proposal

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

Receive input from City officials on their desired


outcome

Perform forecasting analysis to determine future


passenger traffic for each gate and potential
airline, including any QSI analysis

Conduct an interview campaign for each primary


and secondary stakeholder to reinforce our
independent assumptions

Perform an in-depth, industry wide analysis on


each potential airline that may or may not be
interested in the DAL gates

L.E.K. did not do

To complete this assessment, L.E.K. conducted extensive secondary


research, leveraged internal expertise, and conducted independent analysis

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z Appendix

10

z Review of airline proposals and recommendations

z Background and objectives

Agenda

Case 3:15-cv-02069-K Document 52-3 Filed 07/09/15


Agenda

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

Page 11 of 25 PageID 979

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Proposal
thesis

CLT
PHL
DTW
MSP
EWR

z
z
z
z
z
z

SFO
SJC
OAK
SMF
SEA
PDX

BOS
RDU
MEM
IND
ECP
CHS

Introduce meaningful competition


to American Airlines and more
destinations from DAL

z Southwest already has 16 of 20


gates at DAL
z Southwest cannot fly out of DFW
without relinquishing DAL gates,
so this is their most realistic
expansion opportunity

z 737-700 (143 seats)


z 737-800 (175 seats)

z
z
z
z
z

Southwest

Source: L.E.K. analysis of formal airline proposals, announced intentions of gate usage by carriers, previous airline behavior
CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.
11

Offer a competing network of


flights with a differentiated
product and lower fares to large
business markets from DAL

z Dallas area expansion plans


contingent upon obtaining 2 DAL
gates
z Virgin has stated that they would
exit DFW

z Requesting gates for common


use, which Delta would then
use as needed
z Requires 3 gates for its full
plan, implying potential
access to Uniteds gates

Additional
considerations

Provide DAL with 1-stop


access to global
destinations

z A320 (146 seats)

LAX (4)
SFO (4)
LGA (4)
DCA (4)
ORD (2)

z CRJ-900 (76 seats)


z Boeing 717 (110 seats)

z
z
z
z
z

Proposed
aircraft

ATL (6)
LGA (5)
MSP (3)
DTW (3)
LAX (5)

z
z
z
z
z

Virgin

Proposed
routes
(flights/day)

Delta

z
z
z
z
z
z

Page 12 of 25Review
PageID
of980
airline proposals

Delta (DL), Virgin America (VX), and Southwest (WN), have expressed
interest in American's (AA) two gates at DAL

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Page 13 of 25 PageID 981


Key stakeholders

Source: L.E.K. analysis

not included in
this analysis

Other
stakeholders

Secondary
stakeholders

Primary
stakeholders

Stakeholders

American Airlines

12

z Minimize direct route overlap

We have
excluded other
stakeholder
considerations
from our
analysis in order
to remain
objective; The
DOJs needs do
not necessarily
overlap with the
needs of the
primary
stakeholders
CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

z Minimize number of competitors in the Dallas area

z Increased competition for AA in Dallas


z Greater LCC presence in Dallas and nationally

z Minimum direct route overlap between DFW and DAL, to


reduce potential passenger loss

DFW airport

DOJ

z Maximum job creation

z Minimum risk of airline service level changes

z Maximum traffic through the airport, increasing airport revenues

z Increased business activity

z New convenient premium class service at DAL

z Best possible flight schedule / frequency of service

z Greatest number of non-stop destinations from Dallas (DAL + DFW)

z Low fares

DAL airport
employees

DAL airport

Local business
community

Dallas residents

z Greatest number of non-stop destinations from Dallas (DAL + DFW)

Primary needs and motivations:

Given the Citys responsibilities, Dallas residents and the local business
community should be seen as the primary stakeholders in the gate decision

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Page 14 of 25 PageIDEvaluation
982
criteria

Add a partner that will


contribute to the community

Airline stability and


commitment at DAL

Increase number of DAL jobs

Add convenient
premium class service at DAL

Minimize route overlap with


DFW

Lower fares from DAL

Maximize O&D passenger


throughput across DAL & DFW

Increase non-stop
destinations from DAL

Source: L.E.K. analysis

Tier 3
objectives

Tier 2
objectives

Tier 1
objectives

Objectives

13

Residents
Business community

Residents
DAL airport
DAL airport employees

DAL airport
DAL airport employees

Business community
Residents

DFW Airport
AA

Residents
Business community

Residents
Business community
DAL airport
DAL airport employees

Residents
Business community

Stakeholders supported

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

Commitment to the community

Minimize risk to DAL and City of


Dallas given reliance on limited
airlines; ensure longstanding
commitment

Increase DAL jobs

New premium (first class) service to


key cities from the more convenient
DAL location (vs. DFW)

Limited cannibalization of existing


DFW passenger volume

Lower fares caused either by an


increase in competition or new LCC
entrant

Greatest number of key routes being


served (demonstrated by demand)
Maximize DAL aero & non-aero revenue
Maximize local economic growth
Maximize indirect jobs in Dallas

More non-stop destinations from DAL

z
z
z

Needs met

The Citys main objective should be to maximize O&D passenger throughput across
both DAL and DFW, as that would represent maximum utility for stakeholders

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Page 15Non-stop
of 25 PageID
983
destinations
from DAL

SJC

SFO

Airline

17

Proposed
destinations

DAL

all 5 of DLs
All
and 3 of VXs
proposed
destinations
are covered by
WNs plans

MSP

MEM

ORD
IND

ECP

ATL*

DTW

WN

RDU

DCA

EWR

DL

PHL

CHS

CLT

VX

All 3 airlines
would serve
LGA

LGA*

BOS

Note:
* Current/planned WN destinations w/out gates ^Includes destinations from Deltas and Virgins proposals that Southwest is already planning to fly with its existing gates
Source: L.E.K. analysis of company proposals and Dio Mii
CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.
14

LAX*

OAK

SMF

PDX

SEA

Proposed DAL destination airports for WN, VX and DL

Southwests proposal would likely lead to the highest number of non-stop


destinations from DAL

All 3 airlines
would serve
LAX

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2517

79%

18

A319/A320

119 or 146
seats per
aircraft

1,692

2,076
1,884

110 seats
per aircraft

76 seats
per aircraft

1,448

84%

CRJ-900: 14^^
B717: 6

CRJ-900^ & B717

A319 only

A319 and A320

A320 only

While Southwest claims 737-800s would be deployed,


737-700s are more probable on marginal routes

As Virgin will be pulling out of DFW, the net impact to


the Metroplex could only be 1,200 1,300 pax/day

While Virgin proposes using A320s; we have assumed


they would split their service between A319s and
A320s as a new entrant

As these services would overlap with existing DFW


service, it is likely that a substantial number of pax
would be pulled from the existing service

Delta proposes using 16 CRJ-900s; while they suggest


a 3rd gate would be necessary, we have capped their
total flights at 20, matching Southwest

With smaller aircraft planned, Delta is expected to serve


fewer passengers than WN or VX

Virgin could serve nearly as many DAL pax as Southwest,


but at some risk to DFW

* Calculated as (aircraft seats) x (flights/day) x (system-wide load factor); ** Max potential assumed to be 11 turns per day based on Southwest performance at
MDW; typical efficient gate usage is 7-8 turns per day; *** 2012 system wide load factor; ^ Some flights may be operated by an E175 with the same number of
seats; ^^ Based on the assumption that Delta only gets two gates (proposing 16 total for 3 gates)
Source: L.E.K. analysis of ADP; company proposals; company seating charts
CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.
15

Note:

80%

System wide
load factor***

B737-700/800

146 or 175
seats per
aircraft

2,288

20

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

Based on intended aircraft and gate usage, Southwest is


projected to have the highest passenger throughput for DAL

z
Likely
Likely a
a smaller
smaller
net
impact
net impact when
when
considering
considering
potential
potential losses
losses
at
at DFW
DFW

Number of passengers*

2,800

Commentary

Potential DAL passengers per day by aircraft type

Based on fleet plans and potential cannibalization at DFW, Southwest would


likely drive the most passenger traffic across both DAL & DFW

Proposed
flights per day**

Case 3:15-cv-02069-K Document 52-3 Filed 07/09/15


Page 16 of
25 PageIDacross
984 DAL & DFW
O&D passenger
throughput
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Southwest
at MDW

11.0

Southwest
at DAL

10.0

American
at LAX

7.2

Note:
* Based on L.E.K. experience and industry observation
Source: L.E.K. analysis of Diio Mi

10

15

Number of gate turns per day

Maximum efficient gate usage

Typical
efficient
gate usage*

7.5

16

(3) Consistency of demand throughout the day, as


airlines attempt to match their schedule to the most
popular times to fly (typically motivated by business
travel)

(2) Airline operational efficiency, as certain airlines


perform better at catering, fueling, inspecting, and
loading aircraft

(1) Size of aircraft, as larger aircraft take longer to turn

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

Given industry evidence of efficient gate


usage, we have assumed that 10-11 turns
per gate is a reasonable estimate for DAL

Southwest, with an all narrow-body fleet and efficient


operations, is able to support up to 11 flights per day at
some gates at MDW

At LAX, where pre-merger American is gateconstrained, it is able to support ~94 mainline flights per
day out of its 13 gates (7.2 flights per gate per day)

In gate-constrained situations, U.S. airlines typically


can operate ~7.5 flights per day out of a single gate

Maximum efficient gate usage is based on three


main factors:

The Southwest and Delta proposals likely represent the maximum daily
usage of the available gates

Case 3:15-cv-02069-K Document 52-3 Filed 07/09/15


Page 17 of
25 PageIDacross
985 DAL & DFW
O&D passenger
throughput
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Fare impact

50

100

150

200

250

300

350

500

1,500

Average distance

1,000

Legacy only
Legacy and LCC competitive^^

DFW LCC flights


DAL flights^

VX (DFW-LAX)

2,000

B6 (DFW-BOS)

VX (DFW-SFO)

SY (DFW-MSP)
F9 (DFW-DEN)

(Q3 2012-Q3 2013)


Average fare (dollars)

Average domestic fares from DAL and DFW

28

Avg. LCC fare differential (%)

28

13

Chicago
(MDW/ORD)

While Southwest has historically offered lower fares


in Dallas, Houston, and Chicago, its track-record is
mixed fares have actually increased ~23% in ATL
(vs. 4% nationally) since Southwest took over
AirTran

Neither Southwest nor Virgin typically offer Dallas


fares as low as JetBlue, Frontier, or Sun Country

Historically, Virgin has not offered significantly


lower fares in Dallas relative to WN or other LCCs

Key Observations

20

Houston
(HOU/IAH)

Avg. WN fare differential (%)

Comparison

(Q3 2012-Q3 2013)

Fare differentials from legacy fares in


similar markets to DAL/DFW

Historically, Southwest has driven a greater fare differential in Dallas than


Virgin; however it has a mixed track record in other markets

Page 18 of 25 PageID 986

* Only nonstop destinations from DAL with passengers per day greater than 50 passengers per day; NK was not included in this analysis, as they appear to have minimal
impact on other carrier's fares; ^ DAL flights are all non-stop flights from DAL; ^^ Legacy and LCC competitive are routes with both Legacy and LCC presence
Source: Airlines and Aviation: Dallas Business Telegram, L.E.K. analysis of Dio Mii
CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.
17

Note:

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Page 19 of 25 PageIDDFW
987 route overlap

Source: L.E.K. analysis of company proposals and Dio Mii

Proposed Virgin destination from DAL


not served by DFW

Proposed new city destination from


DAL that DFW currently serves
Proposed Southwest destination from
DAL not served by DFW
Proposed Delta destination from DAL
not served by DFW

18

Incremental non-stop destinations from DAL by carrier

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

ECP

CHS

Despite the substantial increase in nonstop destinations, only CHS and ECP
(both Southwest) do not overlap with existing service from DFW

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Page 20 of 25New
PageID
988 class service
premium

8 first class seats

8 first class seats

Source: seatguru.com; L.E.K. analysis

8 first class seats x 18 flights


= 144 first class seats per day

A320

A319

19

12 first class seats

12 first class seats

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

12 first class seats x 20 flights


= 240 first class seats per day

B717

CRJ-900

With both more flights and more first class seats per aircraft, Delta would
provide the greatest increase in premium class service at DAL

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Page 21 of 25 PageID 989


Tier 3 objectives

Add a partner that


will contribute to the
community

Airline stability and


commitment

Increase number of
DAL jobs

Source: L.E.K. experience

If a carrier receives preferential gates


at restricted DAL, a similar high level of
community involvement should be
expected

20

American Airlines and Southwest both


have a large footprint and positive
impact in the Dallas community

Diversification could mitigate some of


DALs airline customer risk

Given that DAL currently relies on


Southwest for 96% of all passenger
throughput, it is significantly exposed to
any risk associated with the airline

It is less likely that the gain of 2 incremental


gates would have a material impact on
Southwests community support, which is already
strong

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

If either Delta or Virgin could use the gates at


DAL to grow their presence in the market, they
could similarly increase their profile in the
community and partnership with the city

While Virgin would help from a diversification


standpoint, it would come with some element of
risk, as it is the smallest of the three carriers with
the smallest existing presence in Dallas

Southwest, one of the largest employers in


Dallas, is very likely to remain at DAL; we expect
that they will use the gates fully but may not
reach new destinations as those markets are
unproven

Delta is the only legacy carrier vying for the gates


at DAL and given its scale is likely the most
stable of the three carriers; however, DL has left
Dallas once before

Virgin or Delta would likely create more jobs at


DAL due to the added requirements of supporting
an incremental carrier

z
Additional carriers at DAL would likely
require incremental airport employees

Implications

Rationale

Delta or Virgin would likely create the greatest number of new jobs at DAL and
similarly represent a greater opportunity to increase corporate partnership
with the community (whereas Southwest is already a strong partner)

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CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

Southwest is the most attractive option for


the City of Dallas

Overall attractiveness

z Deltas scale gives it stability although it has left


Dallas before, while Southwest is fully committed as
the home-town carrier

z VX or DL would likely create more jobs at DAL due


to the added requirements of supporting an
incremental carrier

z With both more flights and more first class seats per
aircraft, Delta would provide the greatest increase in
premium class service at DAL

z ECP and CHS (both WN) are the only proposed new
destinations that are not currently served by DFW

z Historically, Southwest has driven a greater fare


differential in Dallas than Virgin; however it has a
mixed track record in other markets

z While both Southwest and Virgin would serve


substantial passengers, Virgin would be removing
flights from DFW

z DL or VX represent a greater opportunity to increase


corporate partnership with the community (whereas
Southwest is already a strong partner)

21

Least beneficial

z Southwest is proposing 17 new nonstop destinations


vs. 5 (DL) and 5 (VX)

Rationale

Most beneficial

Add a partner that will


contribute to the community

Airline stability and


commitment

Increase number of DAL jobs

Add convenient
premium class service at DAL

Minimize route overlap with


DFW

Lower fares from DAL

Maximize O&D pax


throughput across DAL & DFW

Increase non-stop
destinations from DAL

Source: L.E.K. analysis

Objectives (% weighting)

Tier 1 (50%)

Tier 2 (40%)

Tier 3 (10%)

Page 22 of 25 PageIDRecommendations
990

Southwest is the most attractive option for the City of Dallas, given both
expectations for its O&D pax throughput and potential for low fares

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Page 23 of 25 PageIDRecommendations
991

Conditions can be made public that gate usage is lost when destinations or routes fall below a
predetermined number and a competing carrier desires to add service

Allegiant could have a Saturday flight to LAS

22

JetBlue could shift its three BOS flights from DFW to DAL

Source: FAA; L.E.K. analysis

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

z Additional carriers that may not be able to support a full gate at DAL would have easier access to
the terminal on a more limited basis, for example:

z Depending on carrier flexibility, more than one of the bidders could be partially accommodated
within the two gates

Airport-controlled common-use gates give the airport operator more flexibility to assign gates and to
facilitate entry
FAA/OST Task Force, October 1999

z Common use is generally seen as the best way to allow new entrants

z Airlines could be held accountable for the benefits stated in their proposal (planned routes,
aircraft) if they risk losing the gates

Benefits of a common-use model

A common-use strategy could allow the City to manage the gates in an


optimal way across carriers

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z Appendix

23

z Review of airline proposals and recommendations

z Background and objectives

Agenda

Case 3:15-cv-02069-K Document 52-3 Filed 07/09/15


Agenda

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

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Page 25 of 25 PageID 993


Appendix

CMH
PIT

1238

1215

1156

1082

1061

1060

834

804

753

750

741

623

622

607

547

546

532

529

520

500

494

487

LAX

DEN

ATL

LAS

LGA

HOU

SFO

STL

SAT

MCO

BOS

PHX

PHL

MSY

MCI

MSP

SEA

EWR

AUS

DTW

IAH

BWI

RDU

SJC

IND

PDX

AMA

LIT

IAD

MIA

MAF

LBB

SLC

TUL

BNA

CLT

ABQ

ELP

TPA

SNA

FLL

SAN

DCA

1310

ORD

Airport Code

PAX per day

Airport Code

174

192

193

203

207

222

239

247

257

260

267

282

282

286

315

333

335

353

386

406

462

471

472

PAX per day

24

DAY

PBI

OAK

AZA

CVG

MFE

MEM

TUS

COS

RSW

SDF

BDL

HRL

CRP

ONT

OKC

SMF

JAX

MKE

CLE

OMA

BHM

MDW

Airport Code

91

92

96

98

99

100

103

103

105

113

113

117

118

120

130

132

144

147

148

156

161

170

172

GRR

GSP

ORF

PNS

TYS

ICT

XNA

SJU

JAN

DSM

RNO

HNL

BTR

VPS

RIC

Airport Code

53

54

57

57

59

63

66

70

71

72

72

80

83

86

90

PAX per day

CONFIDENTIAL
2014 L.E.K. Consulting LLC. All rights reserved.

PAX per day

Current DFW and DAL nonstop destinations in the U.S. with more than 50
passengers per day

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EXHIBIT 4

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