American Airlines background paper re Long Beach
Provided to by AA on request May 1, 2002

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American Airlines, Inc. ("American") has served Long Beach Municipal Airport for many years, and our relationship with the City of Long Beach (the "City") and the airport staff has been positive and mutually rewarding. We submit this short paper* [footnote below] in the spirit of that relationship and with a sincere desire to resolve amicably our modest request for four permanent slots at the airport. We intend to operate our new service using only stage three aircraft -- that are in some cases quieter than the JetBlue A320s -- and in compliance with applicable curfews. We do not want to find ourselves in litigation with the City, nor do we want to upset the City’s attempt to balance legitimate and reasonable concerns over noise with its interest in operating an airport with competitive and convenient air service. Our request for four permanent slots -- at a time when only seventeen are in operation -- should not implicate the difficult and contentious issues of local authority and noise regulation. The question of whether a limit of forty-one slots is a proper exercise of local authority needs to be addressed only if the City chooses to make it an issue by failing to administer those slots in a fair manner.

[* footnote: The positions stated in this paper are not intended to be exclusive, and nothing stated herein is intended to waive ay other rights that American may have under federal, state, or local law.]

The real cause of the current dispute is the City’s agreement that gave one airline, JetBlue, two-year exclusive access to all of the remaining commercial air carrier slots at the airport. These twenty-seven slots awarded to JetBlue represent two-thirds of the available slots and are three times the number of slots given to all other commercial passenger airlines combined. News accounts reported that the agreement:

JetBlue, not surprisingly, has described its agreement with Long Beach as a unique competitive advantage in recent documents filed with the SEC as part of its initial public offering. In the same documents, JetBlue concedes that it may not be able to use all of the slots, even if given over another year to do so: "We cannot assure you that we will be successful in the Long Beach market or that we will be able to use all of our slots before June 2003." JetBlue Amendment No. 3 to S-1 Form at 11, 45, 56 (filed on April 10, 2002).

In effect, the agreement gave JetBlue a two-year option with little risk to JetBlue and significant anticompetitive implications for the rest of the carriers at Long Beach. The agreement is an attack on our right to compete at Long Beach and clearly violates both federal and local laws. As such, it raises principles that we take seriously.

Airports Must Treat All Carriers Equally

Commercial air transportation has fundamental implications for interstate commerce and, thus, is heavily regulated by federal law. Courts, the Department of Transportation, and the Federal Aviation Administration have all recognized that local authority over airports is extremely limited. Courts and administrative agencies will "closely scrutinize" any local regulation to ensure that it does not violate federal law. E.g., Arapahoe County Public Airport Auth. V. FAA, 242 F.3d 1213, 1220-21 (10th Cir. 2001). Local regulation is appropriate only if it is "reasonable, nondiscriminatory, nonburdensome to interstate commerce, and designed to accomplish a legitimate State objective in a manner that does not conflict with" federal law. 14 C.F.R. § 399.110(f); see also British Airways v. Port Auth. of New York, 558 F.2d 75, 84 (2d Cir. 1977). By accepting federal money for the airport, the City covenanted with the FAA that the airport will be open to all carriers on "reasonable conditions and without unjust discrimination." 49 U.S.C. § 47107(a)(1). The DOT and FAA have stated that preventing or impeding "a carrier’s service at an airport is inconsistent with the airport’s contractual grant assurances to provide reasonable and not unjustly discriminatory access to the airport and not grant an exclusive right at the airport." Airport Business Practices and Their Impact on Airline Competition, FAA/OST Task Force Study (October 1999) at 13. Airport managers have a legal obligation to accommodate all qualified airlines that wish to serve their airports, and "manipulating the standards to protect the interest of an existing tenant or tenants is unacceptable." Id. at 22. Stated more simply, airports should not play favorites or give a competitive advantage to one carrier at the expense of others.** [footnote below] Airports are public facilities that must be operated even-handedly.

[** footnote: The current situation at Long Beach does not involve a carrier that has invested years developing routes for the benefit of the travelling public and thus has "grandfathered" rights to certain slots.]

These federal obligations are paramount and cannot be overridden, altered, or diminished by local laws or private contractual obligations. E.g., Arapahoe County Public Airport, 242 F.3d at 1220-24; Niswonger v. American Aviation, Inc., 411 F. Supp. 769, 771 (E.D. Tenn. 1975), aff’d, 529 F.2d 526 (6th Cir. 1976). Nothing in the City’s secret agreement with JetBlue can excuse it from operating the airport in a fair and non-discriminatory manner. The violation of these federal obligations can, among other things, put at risk all federal funding for the airport. E.g., City and County of San Francisco v. FAA, 942 F.2d 1391, 1394 (9th Cir. 1991).

The principle that airports, as federally funded public facilities, should be operated in a reasonable, fair, and nondiscriminatory manner is further protected by constitutional principles of equal protection, due process, and the Commerce Clause.

These constitutional, statutory, and regulatory standards of fairness were lost in the JetBlue agreement. That agreement was shrouded in secrecy, and at JetBlue’s insistence not offered to any other carrier. The City simply acquiesced to JetBlue’s desire to freeze out all competition and allowed JetBlue to dictate when and how local laws were changed and when its agreement became public. There simply was no reasonable basis to amend local laws to accommodate an agreement designed to advantage one carrier at the competitive expense of all other "similarly situated" carriers. Such an agreement is arbitrary and unfair and impermissibly burdens interstate commerce.

Statement on Local Noise Regulation

American recognizes that some in the Long Beach community are concerned that American may try to abolish the forty-one slot limit. We, frankly, do not believe that the slot rules or noise concerns should be issues. We are asking for four permanent slots at an airport with only seventeen current operations. The airport is not even close to reaching its forty-one slot limit, and that limit may never be reached since JetBlue has no contractual obligation to fly any of the slots it is sitting on, and has admitted that it may not be able to use them, even if given until June of 2003. The question of forty-one slots becomes an issue only if you assume that JetBlue can legally hoard twenty-seven slots for two years without operating most of them, leaving no more slots for any other carriers.

Yet, if the City adheres to the position that no slots are available, the question of whether forty-one is an appropriate number will inevitably be asked. The City claims that the forty-one slots are part of its efforts to regulate the noise effects of the airport. At this point, we do not believe the City has enough information to answer the question of whether forty-one slots can be justified under federal law, nor are we anxious to re-raise the contentious issues that led to a decade of litigation in the 1980s and early 1990s.

It is, however, important for the City to understand the limits of state and local authority to restrict air commerce through noise regulation. Congress has found that "a noise policy must be carried out at the national level." 49 U.S.C. § 47521(3). Local regulations play an extremely limited role in aviation, and any regulation that impacts competition in air commerce will be closely scrutinized. The airport bears the burden of establishing that the regulation is reasonable, not arbitrary, applied fairly, and necessary to meet legitimate local concerns.

As already stated, the City cannot defend the reasonableness and fairness of forty-one slots after giving one carrier exclusive access to the twenty-seven remaining slots. To the extent local noise regulation can permissibly burden interstate air carrier service, that burden must be shared fairly among all carriers. It is arbitrary and fundamentally unfair to allow JetBlue to grow "at its own pace" into three-quarters of all the slots available for passenger air service, yet rely on local noise regulation to preclude any competitive response.

In addition, much has changed at Long Beach Municipal Airport, and in aviation in general, since the City first established forty-one slots based on a basket of noise. For example, commercial aircraft are quieter, Boeing has reduced the number of flights that McDonnell Douglas once operated, and the commuter slots are unused. Indeed, the City’s municipal code states that the number of slots should be increased if the cumulative noise at the airport fails to exceed established levels. The code is, in this regard, merely a reflection of federal law that obligates the airport proprietor to constantly justify restrictions. In any event, determining and defending the right number will be a difficult and contentious issue, and need only be addressed if the City continues to contend that all the slots are gone, even those that are currently unused.

Proposed Solutions

Assuming that the City does not intend to pursue the patently improper objective of giving one airline a unique competitive advantage, it has some discretion in how it accommodates carriers in a manner that complies with federal law. A number of options occur to us.

If the City’s primary objective is protecting the forty-one slots limit, it merely needs to administer those slots in a fair and equitable manner. The City has a long-way to go before all of the slots are in use making the number of slots ripe for a challenge. There are at least three easily identified alternatives.

Apply the previously existing "use it or lose it" rules. Before JetBlue cut its own private deal, all the carriers played by the same rule. They had to begin serving a route within 90 days and operating that route within 180 days. That universally applied rule made certain that airport assets did not sit unused, that no one carrier could hoard slots, and that all carriers had an equal opportunity to compete. It was, in a word, fair.

JetBlue has long since gone past the time that the airport traditionally gave to other carriers, and its slots should be returned to the slot pool. However, JetBlue, like every other carrier, should have the right to reapply for those slots under the same rules applied to every other carrier. In the event that the number of slots requested exceeds the number of slots available, the airport can use a lottery to distribute the slots. Like the pre-existing use it or lose it rule, a lottery is a process that the City has used before and is inherently non-discriminatory.

Give all carriers an equal opportunity to claim slots based on a two-year use it or lose it rule. A two-year use it or lose rule seems unreasonably long and appears to be simply a product of the City changing the rules to accommodate the commercial interests of a single airline. However, if the City holds a sincere belief that two-years is appropriate, it must, at the very least, make sure that all carriers have an opportunity to claims slots under these conditions. That opportunity was, of course, short-circuited by the secrecy that surrounded the JetBlue deal and JetBlue’s insistence that it be given all of the remaining slots. In order to meet its obligations under federal law, the City must undo that inequity.

All carriers should be given a chance to claim slots under the two-year rule. Once again, a lottery can be used if the number of slots requested exceeds the number that are available.

Award American permanent slots now and address the issue of slots only when the carriers are actually prepared to operate all forty-one slots. American can be granted its four final slots now without even approaching the limit. The limit comes into play if and only if JetBlue decides to and is able to use all of the twenty-seven allocated to it over the next thirteen months (and JetBlue has even admitted that it may lack the ability to do so). If JetBlue is able to use more than 23 slots within that time period, the City can decide at that time whether to administer a fair lottery, or to increase the number of air carrier flights. If a lottery is chosen, slots that have been operated for a period of six months before the lottery should be exempted, in order to make the process fair between old and new carriers, and in order to avoid jeopardizing established flights and routes.

* * * *

Adjust the number of air carrier slots. If the City’s primary interest is accommodating twenty-seven JetBlue flights a day and deriving the competitive and economic benefits of that service, the City can re-evaluate its forty-one slot limit. Notably, the City has established at least 25 slots for commuter flights that are not currently being used, so that re-allocating permissible noise between "baskets" would certainly appear to be an option. As already indicated, the City may well be able to increase the number of flights without exceeding the noise limits already established. The City can also make the decision that the benefits of enhanced service outweigh the costs of more flights.


American’s position is simple. We object to being deprived of the opportunity to grow and compete at Long Beach based on a secretly negotiated deal given to one carrier. We have no doubt that the JetBlue agreement violates federal law, and we are prepared to vindicate our rights, if necessary.

In doing so, American has no interest in challenging the forty-one slots or in preventing the City from accommodating JetBlue flights. The City must, however, balance these two competing objectives in a manner that is fair to all carriers and is consistent with federal law. It is eminently clear that the City cannot pick and choose the winners and losers in the Long Beach market by giving one carrier three-quarters of the slots now available for commercial passenger service. It is also clear that the City has a number of options for accommodating American’s request and avoiding a costly legal fight that it will surely lose. We continue to hope that the City will acknowledge our right to compete at Long Beach and that we can continue to have a mutually rewarding relationship with the City and its airport staff.