Today, Hogan Lovells’ Global Unmanned Aircraft Systems (UAS) Practice Chair Lisa Ellman testified to the House Small Business Subcommittee on Investigations, Oversight and Regulations ...27 September 2016
DOT Order on Airline Slots Vacated By D.C. Circuit
In a strongly worded decision, the Court of Appeals for the D.C. Circuit vacated a Department of Transportation Order that had withdrawn two within-perimeter slot exemptions from Republic Airlines and reallocated them to Sun Country Airlines. The DOT rarely has a carrier selection in a contested route proceeding reversed or vacated on judicial review. It is so rare and the standard of review so deferential that airlines rarely incur the time and expense of appealing such adverse decisions to the courts.
In this case, Republic’s parent company acquired Midwest Airlines, the carrier that had originally been awarded the slot exemptions at issue. Unlike the FAA which approved Republic’s continued holding of the slots under the FAA’s jurisdiction after the acquisition and integration of Midwest, the DOT did not. Instead, disregarding on-point precedent which Republic discussed at length in the administrative proceedings, the DOT held that the acquisition of the two slot exemptions by Republic constituted an impermissible transfer. After holding a selection proceeding, the DOT reallocated the two slot exemptions to Sun Country for service between National Airport and Lansing pursuant to Order 2012-12-16. Republic appealed.
On appeal, the D.C. Circuit vacated that Order. After discussing the standards under the Administrative Procedure Act and recognizing the typical deference afforded to government agencies, the Court pointed out that where, as in this case, “a party makes a significant showing that analogous cases have been decided differently, the agency must do more than simply ignore that argument.” LeMoyne-Owen College v. NLRB. The Court failed to do so:
“As Republic outlined at considerable length in its September 30, 2009 letter, DOT and FAA precedent in the America West/US Airways, American Airlines/Reno Air and Southwest Airlines/ATA acquisitions establish that the prohibition against transferring slot exemptions does not apply to a transfer that is part-and-parcel of a corporate acquisition or merger. Rather than attempt to distinguish these cases, DOT has ignored them completely. Indeed, despite Republic's efforts, which twice directed DOT's attention to DOT and FAA precedent, neither DOT's November 25th Letter nor its Final Order even mentions the cases. . . . It escapes us how this so-called “full discussion” explains DOT's decision.”
The D.C. Circuit also rejected the post-hac rationalization of DOT’s counsel for the Order to withdraw the slot exemptions. Accordingly, the Court vacated the DOT’s Order. The DOT has since issued an order allocating two within-perimeter slot exemptions to Republic for nonstop service to Kansas City, effectively putting Republic back in the position it held when the DOT first withdrew the slot exemptions.
Hogan Lovells represented Republic in the administrative proceeding before the DOT and the appeal before the D.C. Circuit.