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ORAL ARGUMENT REQUESTED

Nos. 17-1056; 17-1115_____________________________________

IN THE UNITED STATES COURT OF APPEALSFOR THE DISTRICT OF COLUMBIA CIRCUIT

_______________________________________

ABC AEROLINEAS, S.A. de C.V., d/b/a INTERJET

Petitioner,v.

UNITED STATES DEPARTMENT OF TRANSPORTATION

Respondent,___________________________________________

On Petitions for Review of Final Ordersof the U.S. Department of Transportation

___________________________________________

FINAL BRIEF OF PETITIONER

Moffett B. RollerRoller & Bauer, PLLCWashington Dulles International Airport45005 Aviation Drive; Suite 200Dulles, VA 20166Phone: 202-331-3300Fax: 202-331-3322

Attorneys for PetitionerABC Aerolíneas, S.A. de C.V, d/b/a Interjet

USCA Case #17-1056 Document #1691261 Filed: 09/01/2017 of 56

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CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES

The following information is provided pursuant to D.C. Cir. Rule 28(a)(1):

Parties and Amici The parties are:

• ABC Aerolíneas, S.A. de C.V., d/b/a Interjet (Interjet), Petitioner; and

• the United States Department of Transportation.

There are no amici.

Rulings Under Review The rulings under review are:

(1) Case No. 17-1056 DOT Order 2016-12-13, a Final Order issued by the U.S.

Department of Transportation on December 14, 2016, in Docket DOT-OST-2015-

0070 in response to the Joint Application of Delta Air Lines, Inc. and Aerovías de

México, S.A. de C.V. for immunity from U.S. antitrust laws, and

(2) Case No. 17-1115 DOT Order 2017-4-6, a Final Order issued by the U.S.

Department of Transportation on April 10, 2017, in Docket DOT-OST-2015-0070.

Related Case Case No. 17-1056 and Case No. 17-1115 were consolidated by

Order of this Court dated May 1, 2017. The cases on review have not previously

been before this Court or any other court. Petitioner is unaware of any cases

related to the two cases under review currently pending in this Court or in any

other court.


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RULE 26.1 CERTIFICATE OF CORPORATE DISCLOSURE

Pursuant to Federal Rule of Appellate Procedure 26.1 and D.C. Cir. Rule

26.1, Petitioner ABC Aerolíneas, S.A. de C.V., d/b/a Interjet (Interjet) certifies the

following disclosures:

Interjet is a privately-held Mexican corporation that provides commercial air

transportation. Interjet is not publicly held or traded. The following officers,

directors, or trustees of Interjet are known to have an interest in the outcome of this

case:

• Mr. Jose Luis Garza Alvarez, Chief Executive Officer

• Mr. Luis Alejandro Beristain Mercado, Chief Financial Officer

• Mr. Francisco Javier Licea Ventura, Chief Operating Officer

• Mr. Luis Alberto Hernandez Garcia, General Counsel and Legal Vice President

• Mr. Oscar Arguello Ruiz, Technical Vice President

• Mr. Benjamin Mejia Ortiz, Operational Security Vice President.

Interjet further certifies that the following natural persons and corporations

have an interest in the outcome of this particular case:

• Mr. Miguel Aleman Velasco

• Mr. Miguel Aleman Magnani

• Mr. Jorge Aleman Velasco

• Ms. Beatriz Aleman Velasco de Giron

• Galem, S.A. de C.V.

• Aleman Group


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TABLE OF CONTENTS

CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES ............. i

RULE 26.1 CERTIFICATE OF CORPORATE DISCLOSURE............................. ii

TABLE OF CONTENTS......................................................................................... iii

TABLE OF AUTHORITIES .....................................................................................v

GLOSSARY............................................................................................................. vi

STATEMENT OF JURISDICTION..........................................................................1

STATEMENT OF THE ISSUES...............................................................................2

STATUTES AND REGULATIONS.........................................................................3

STATEMENT OF THE CASE..................................................................................5

SUMMARY OF THE ARGUMENT ..................................................................... 13

STANDING ............................................................................................................ 15

ARGUMENT .......................................................................................................... 16

I. THE DEPARMENT OF TRANSPORTATION’S DECISION TO EXCLUDEINTERJET FROM THE PROCEEDING TO ALLOCATE SLOTS TO BEDIVESTED AT MEXICO CITY INTERNATIONAL AIRPORT WASARBITRARY AND CAPRICIOUS....................................................................... 16

A. The Department’s decision to exclude Interjet was arbitrary and capriciousbecause it bore no logical relationship to the stated goals of the MEX slotremedy. ..............................................................................................................18

B. The Department’s exclusion of Interjet from participating in the MEX slotallocation process violates established antitrust principles by punishing Interjetfor its success at obtaining slots at MEX while giving unmerited favor to itscompetitors. .......................................................................................................25


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C. The Department acted irrationally and illogically in excluding Interjet fromconsideration for an allocation of MEX slots while granting slots to Volarisand vivaAerobus, the third and fifth-place slot holders at MEX. .....................27

D. The ATI Final Order is internally inconsistent. ..........................................29

II. THE DEPARTMENT EXCEEDED ITS AUTHORITY BY UNDERTAKINGTO ALLOCATE MEX SLOTS [ARGUMENT IN THE ALTERNATIVE] ........ 31

A. The Department has no statutory authority over the allocation of slots atMEX. .................................................................................................................31

B. Sections 41308 and 41309 of 49 U.S.C. provide no authority for theDepartment to narrow the conditions that COFECE imposed on the JointApplicants’ divestiture of eight slot-pairs at MEX and, in particular, to excludeInterjet from the list of carriers that COFECE deemed eligible to receivedivested slots at MEX. ......................................................................................40

C. The Department's statutory authority to grant antitrust immunity pursuantto 49 U.S.C. §§ 41308 and 41309 does not give the Department a statutorybasis to allocate slots at MEX. ..........................................................................43

CONCLUSION....................................................................................................... 45

Certificate of Compliance with Type-Volume Limit, Typeface Requirements, andType-Style Requirements Applicable to Briefs ...................................................... 47

CERTIFICATE OF SERVICE ............................................................................... 48


v

TABLE OF AUTHORITIES

Cases

American Trucking Ass'ns v. Federal Motor Carrier Safety Admin.,724 F.3d 243 (D.C. Cir. 2013)............................................................................. 22

Burlington Northern & Santa Fe Ry. v. Surface Transp. Bd.,403 F.3d 771 (D.C. Cir. 2005) (internal citations omitted)................................. 21

Business Roundtable v. SEC, 647 F.3d 1144 (D.C. Cir. 2011).............................. 29

Cousins v. Secretary of United States DOT, 880 F.2d 603 (1st Cir 1989)..............36

Curley v. AMR Corp., 153 F.3d 5 (2d Cir. 1998) .................................................. 37

ExxonMobil Gas Mktg. Co. v. FERC, 297 F.3d 1071 (D.C. Cir. 2002)................ 18

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co.,463 U.S. 29, 43 (1983) .................................................................................. 22, 27

United Mine Workers of Am. v. Department of Labor,358 F.3d 40, 44 (D.C. Cir. 2004)......................................................................... 20

United States v. Aluminum Co. of America,148 F.2d 416 (2d Cir. 1945) ................................................................................ 25

Statutes

5 U.S.C. § 706................................................................................................... 18, 31

49 U.S.C. § 41308......................................................................................................3

49 U.S.C. § 41309............................................................................................... 3, 44

49 U.S.C. § 46110............................................................................................... 1, 15

49 U.S.C. §§ 40101-46501 ..................................................................................... 15

49 U.S.C. §§ 41308-41309 ..................................... 6, 8, 9, 13, 14, 35, 40, 43, 44, 46

Other Authorities

Article 1 of the Chicago Convention .......................................................................36


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GLOSSARY

AICM Aeropuerto Internacional de la Ciudad de México

ATI Antitrust Immunity

ATI Final Order Final Order 2016-12-13, December 14, 2016

ATI SCO Order to Show Cause 2016-11-2, November 4, 2016

APA Administrative Procedure Act

COFECE Comisión Federal de Competencia Económica de México(Federal Economic Competition Commission)

CALR Mexican Civil Aviation Law Regulations

DGAC Dirección General de Aeronáutica Cívil

FDAN Frente por la Defensa de la Aviación Nacional(National Aviation Defense Front)

Interjet ABC Aerolíneas, S.A. de C.V.

Joint Applicants Delta Air Lines, Inc. andAerovías de México, S.A. de C.V.

LCC Low-Cost Carrier

MEX Mexico City International Airport

RAL Mexican Airport Law Regulations

SCO Order to Show Cause

Slot Assignment Final Order 2017-4-6, April 10, 2017Final Order

Slot Assignment SCO Order to Show Cause 2017-3-1, March 2, 2017


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Slot Assignment Final Order 2017-4-6, April 10, 2017Final Order

vivaAerobus Aeroenlaces Nacionales, S.A. de C.V.

Volaris Concesionaria Vuela Compania de Aviación, S.A.P.I.


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STATEMENT OF JURISDICTION

The United States Court of Appeals for the D.C. Circuit has jurisdiction

under 49 U.S.C. § 46110(a) because the Court is giving is consolidated

consideration to two Petitions for Review of two final orders of the Secretary of

Transportation.

The Petition for Review in Case No. 17-1056 seeks review of DOT Order

2016-12-13, issued on December 14, 2016. The Petition for Review was filed on

February 13, 2017, within 60 days of the issuance of Order 2016-12-13.

The Petition for Review in Case No. 17-1115 seeks review of DOT Order

2017-4-6, issued on April 10, 2017. The Petition for Review was also filed on

April 10, 2017, within 60 days of the Department of Transportation’s Final Order.

Both DOT Orders were issued in DOT Docket DOT-OST-2015-0070.


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STATEMENT OF THE ISSUES

1. Whether Final Order 2016-12-13 and Final Order 2017-4-6 of the

U.S. Department of Transportation were arbitrary and capricious, an abuse of

discretion, and/or without adequate or sufficient support in the administrative

record, insofar as they precluded Petitioner, ABC Aerolíneas, S.A. de C.V., d/b/a

Interjet, from eligibility to apply for certain landing and takeoff authorizations

(slots) at Mexico City International Airport (MEX) that the Department was

allocating among other low-cost U.S. and Mexican airlines.

2. Whether the Department of Transportation exceeded its statutory

authority by allocating divested slots at MEX, an airport outside of the United

States.


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STATUTES AND REGULATIONS

49 U.S.C. § 41308

(a) Definition. In this section, "antitrust laws" has the same meaning giventhat term in the first section of the Clayton Act (15 U.S.C. 12).

(b) Exemption authorized. When the Secretary of Transportation decides itis required by the public interest, the Secretary, as part of an order undersection 41309 or 42111 of this title [49 USCS § 41309 or § 42111], mayexempt a person affected by the order from the antitrust laws to the extentnecessary to allow the person to proceed with the transaction specificallyapproved by the order and with any transaction necessarily contemplated bythe order.

(c) Exemption required. In an order under section 41309 of this title [49USCS § 41309] approving an agreement, request, modification, orcancellation, the Secretary, on the basis of the findings required undersection 41309(b)(1) [49 USCS § 41309(b)(1)], shall exempt a personaffected by the order from the antitrust laws to the extent necessary to allowthe person to proceed with the transaction specifically approved by the orderand with any transaction necessarily contemplated by the order.

49 U.S.C. § 41309 (a)-(b)(1)

(a) Filing. An air carrier or foreign air carrier may file with the Secretary ofTransportation a true copy of or, if oral, a true and complete memorandumof, an agreement (except an agreement related to interstate airtransportation), or a request for authority to discuss cooperativearrangements (except arrangements related to interstate air transportation),and any modification or cancellation of an agreement, between the air carrieror foreign air carrier and another air carrier, a foreign carrier, or anothercarrier.

(b) Approval. The Secretary of Transportation shall approve an agreement,request, modification, or cancellation referred to in subsection (a) of thissection when the Secretary finds it is not adverse to the public interest and isnot in violation of this part [49 USCS §§ 40101 et seq.]. However, theSecretary shall disapprove--


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(1) or, after periodic review, end approval of, an agreement, request,modification, or cancellation, that substantially reduces or eliminatescompetition unless the Secretary finds that--(A) the agreement, request, modification, or cancellation is necessary tomeet a serious transportation need or to achieve important public benefits(including international comity and foreign policy considerations); and(B) the transportation need cannot be met or those benefits cannot beachieved by reasonably available alternatives that are materially lessanticompetitive; or….(c) Notice and opportunity to respond or for hearing.(1) When an agreement, request, modification, or cancellation is filed, theSecretary of Transportation shall give the Attorney General and theSecretary of State written notice of, and an opportunity to submit writtencomments about, the filing. On the initiative of the Secretary ofTransportation or on request of the Attorney General or Secretary of State,the Secretary of Transportation may conduct a hearing to decide whether anagreement, request, modification, or cancellation is consistent with this part[49 USCS §§ 40101 et seq.] whether or not it was approved previously.(2) In a proceeding before the Secretary of Transportation applyingstandards under subsection (b)(1) of this section, a party opposing anagreement, request, modification, or cancellation has the burden of provingthat it substantially reduces or eliminates competition and that lessanticompetitive alternatives are available. The party defending theagreement, request, modification, or cancellation has the burden of provingthe transportation need or public benefits.(3) The Secretary of Transportation shall include the findings required bysubsection (b)(1) of this section in an order of the Secretary approving ordisapproving an agreement, request, modification, or cancellation.


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STATEMENT OF THE CASE

For most of the latter half of the Twentieth Century, commercial air

transportation to and from the United States was governed by bilateral aviation

agreements between the United States and individual foreign countries. These

bilateral agreements, with few if any exceptions, were very restrictive, commonly

specifying, for example, the routes on which service could be operated, the number

of airlines that each country could designate to operate on those routes, and even

the frequency of service. In addition, the aviation agreements of this era typically

gave each country broad authority to require airlines to submit fares for

governmental review and to disapprove fares that one country found to be

unacceptable.

Following the advent of domestic airline deregulation in the United States in

the late 1970s and 1980s, the United States began to negotiate more liberal

bilateral agreements, known as "Open-Skies Agreements". In contrast to their

restrictive predecessors, Open-Skies Agreements authorized each country to

designate an unlimited number of its carriers to operate from any point or points in

its territory to any point or points in the other country with no frequency

restrictions. Open-Skies Agreements also removed pricing restrictions for

practical purposes. As with domestic deregulation, such agreements are generally

regarded as promoting competition in international markets.


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Notwithstanding the liberalization in the regulatory regime governing

international aviation, one restriction to normal corporate relationships among

international airlines that has continued in place is the prohibition on cross-border

or multinational ownership of airlines. In most countries, including the United

States, national laws limit ownership and control of a given country’s airlines to

citizens of the same country. These long-standing restrictions precluded any

public benefits that might arise from direct cross-border airline mergers, and the

antitrust laws of the United States and other countries otherwise barred airline

companies from engaging in activities, such as price coordination, that mergers

would have made moot. This was true even if as a matter of pure economic

analysis there was otherwise enough competition in the market to temper the effect

of any arguably anticompetitive activity between two airlines that might have

merged under another legal framework.

In response to this dilemma the U.S. Department of Transportation (the

Department) shortly after the beginning of the era of Open Skies in the 1990s

began to develop policies that would enable what in many respects is a de facto

merger between a U.S. airline and the airline of another country. Under authority

granted by 49 U.S.C. §§ 41308 and 41309, the Department will consider an

application to grant antitrust immunity (ATI) to a joint venture created by a U.S.

airline and a foreign airline to provide international air transportation between the


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United States and the other country. Through the joint venture the carriers share

revenue and expenses and coordinate prices, flight-times, marketing, and other

services with respect to their joint aviation services.

Under the Department’s policy, however, an essential prerequisite for the

Department’s consideration of such an application for ATI is the existence of an

open skies agreement to govern aviation relations between the United States and

the home country of the other carrier. An open skies agreement ensures the

possibility of the entry of competing airlines to temper any anticompetitive or

monopolistic practices by the joint venture.

By 2014, the United States had entered into over a hundred Open Skies

agreements with other nations. Notably absent was an Open Skies agreement

between the United States and its neighbor to the south, Mexico. On November

21, 2014, a liberalized air transport agreement between the United States and

Mexico was initialed. Although this liberalized agreement did not meet the

Department's definition for a true Open Skies agreement, subsequent

intergovernmental communications between the United States and Mexico in 2015

led the Department to determine that the Agreement as modified did qualify to be

an Open Skies Agreement.

On November 6, 2015, Delta Air Lines, Inc. and Aerovías de México, S.A.

de C.V. (together the “Joint Applicants”) submitted a request to the Department of


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Transportation for immunity from U.S. antitrust laws pursuant to 49 U.S.C. §§

41308 and 41309 in order to operate a Joint Venture between the United States and

Mexico. The Department initially postponed its consideration of the Joint

Applicants' Application because the liberalized air transport agreement between the

United States and Mexico did not contain all of the elements of an Open Skies

agreement.

The Joint Applicants also submitted a parallel request for ATI to the Federal

Economic Competition Commission (COFECE), the Mexican agency in charge of

regulating anticompetitive business practices, for approval of their Joint Venture.

COFECE reviewed the Joint Applicants’ request and issued a Resolution on March

31, 2016 in which COFECE conditionally approved the Joint Venture. COFECE

was, however, concerned that granting antitrust immunity to the Joint Venture

would exacerbate the market power that Aeromexico already exercised at Mexico

City International Airport (MEX) due to the high percentage of landing and takeoff

authorizations (slots) held by Aeromexico. COFECE therefore conditioned its

approval on the divestiture of eight slot-pairs at MEX by the Joint Applicants.

COFECE’s remedy specifically listed several air carriers, including Interjet, that

would be eligible to receive the divested MEX slots. COFECE Plenary

Resolution, Docket DOT-OST-2015-0070-0037, June 1, 2016 at DL-0001355 [JA

93]. COFECE directed the Joint Applicants to allocate the eight slot-pairs among


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the listed carriers and to submit a record of these transfers to the Airport

Administrator—the entity that establishes the landing and takeoff schedules of

aircraft at MEX pursuant to the terms defined in Article 63 of the Airports Law.

Id. at 101-06 [JA 103-08].

The U.S.-Mexico Open Skies Agreement was ratified by the Mexican Senate

on April 26, 2016, effective August 20, 2016, and on June 6, 2016, the Department

issued a notice establishing a procedural schedule for its consideration of the Joint

Applicants’ request for U.S. antitrust immunity.

After receiving the comments of various interested parties, including

Interjet, the Department issued Order to Show Cause 2016-11-2, on November 4,

2016, (ATI SCO) tentatively granting antitrust immunity to the Joint Applicants

pursuant to 49 U.S.C. §§ 41308 and 41309 for service between the United States

and Mexico. The Show Cause Order stipulated that the Department’s grant of

antitrust immunity would be subject to several proposed remedies and conditions.

These remedies included, inter alia, the removal of exclusivity clauses from the

Joint Venture agreement, and the divestiture of 24 of the Joint Applicants’ slot-

pairs at MEX. According to the ATI Final Order, these 24 slot-pairs identified in

the Department’s order included the eight slot-pairs that COFECE had ordered to

be divested. ATI Final Order at 21 [JA 254]. In addition to requiring the

divestiture of the 24 slot-pairs at MEX, the Department took a further step and


10

stated that it intended to unilaterally select which carriers were to receive all of the

divested slots at MEX—a foreign airport over which the Department lacks

jurisdiction. For all practical purposes, this would include the eight slots that

COFECE had ordered to be divested. The ATI Final Order also stipulated that

Interjet would not be eligible to receive any of the divested MEX slots because,

according to the Department, Interjet’s current slot holdings at MEX already gave

Interjet the ability to implement new transborder service. ATI Final Order 2016-

11-2 at 23 [JA 256].

In response, Interjet objected to the Department’s tentative determination,

arguing, inter alia, that finalizing the Department’s tentative decision to exclude

Interjet from eligibility for MEX slots would be arbitrary and adverse to the public

interest and that even undertaking to allocate slots at a foreign airport would

exceed the authority of the Department. See Comments of ABC Aerolineas, S.A.

de C.V., d/b/a Interjet, Docket DOT-OST-2015-0070-0086, Nov. 18, 2016 at 9-10

[JA 204-05]; Reply of ABC Aerolineas, S.A. de C.V., d/b/a Interjet, Docket DOT-

OST-2015-0070-0095, Nov. 30, 2016 at 2 (Interjet ATI SCO Reply) [JA 223].

Likewise, two Mexican regulatory authorities, the Dirección General de

Aeronáutica Civil Mexico (DGAC) and Aeropuerto Internacional de la Ciudad de

Mexico (AICM), the operator and slot administrator of MEX, objected to the

Department’s intention to allocate the divested MEX slots, arguing that the


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Department was improperly attempting to override their jurisdiction. DGAC

Response on Slot Policy, Docket DOT-OST-2015-0070-0077, Oct. 2, 2015 at 1-2,

4, 7-8 [JA 150-51, 153, 156-57]; Comment from Aeropuerto Internacional de la

Ciudad de México, Docket DOT-OST-2015-0070-0078, Nov. 17, 2016 at 10 [JA

173].

On December 14, 2016, the Department issued Final Order 2016-12-13 (ATI

Final Order) in which it affirmed its decision that Interjet would not be eligible for

divested slots at MEX. Id. at 21-24 [JA 254-57].

Following the ATI Final Order, the Department issued Order 2017-1-6, on

January 6, 2017, in which the Department instituted a proceeding to allocate to

specific airlines slots to be divested at MEX and JFK.1 After receiving

applications for slots by carriers eligible to receive slots at both airports, the

Department issued Order to Show Cause 2017-3-1 (the Slot Assignment SCO) on

March 2, 2017, announcing its tentative allocation of the divested slots.

On March 13, 2017, Interjet filed Comments and Objections to the Slot

Assignment SCO, renewing its arguments that the Department’s decision to deny

Interjet eligibility to bid along with its competitors for divested MEX slots was not

supported by facts or evidence and that the Department lacked statutory

1 DOT Order 2017-1-6 also provided for the Department to allocate slots to bedivested at John F. Kennedy International Airport (JFK) in New York, but thatportion of the allocation proceeding is not at issue in this Petition for Review.


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jurisdiction to allocate the divested MEX slots. Comments and Objections of ABC

Aerolíneas, S.A. de C.V., d/b/a Interjet, to Order to Show Cause 2017-3-1, Docket

DOT-OST-2015-0070-0158, Mar. 13, 2017 (Interjet Objections to Slot Assignment

SCO) [JA 317]. In its objections, Interjet also noted that the Department had again

failed to explain how excluding Interjet from eligibility for MEX slots achieves

any legitimate goal of the Department. See Interjet Objections to Slot Assignment

SCO [JA 317].

On April 10, 2017, the Department issued Final Order 2017-4-6 (Slot

Assignment Final Order) in which the Department finalized its allocation of the

Joint Applicants’ divested slots. Slot Assignment Final Order [JA 326]. The

Department considered and summarily dismissed Interjet’s renewed arguments,

inter alia, that the Department’s decision to exclude Interjet from the MEX slot

allocation process was arbitrary and that the allocation of the divested MEX slots

was in excess of its statutory jurisdiction. Slot Assignment Final Order at 7-9 [JA

332-34]. The Department also reaffirmed its decision that Interjet would not be

eligible for divested slots at MEX. This appeal follows.


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SUMMARY OF THE ARGUMENT

Pursuant to its authority under 49 U.S.C. §§ 41308 and 41309, the

Department of Transportation granted U.S. antitrust immunity to a Joint Venture

created by Delta Airlines and Aeromexico (Joint Applicants) to provide

transborder air transportation between the United States and Mexico. The

Department, however, conditioned its ATI grant on numerous requirements, the

most significant of which was the divestiture to other airlines of 24 landing and

takeoff authorizations (slot-pairs) at Mexico City International Airport (MEX), an

access-restricted airport. The divestiture was intended to increase cross-border

competition with the Joint Venture at MEX where an immunized Joint Venture

would have significant market power due to the large number of MEX slots held

by Aeromexico.

The Department there upon initiated a further proceeding to allocate to

certain U.S. and Mexican low-cost carriers the slots being divested at MEX, an

airport outside the United States. In so doing, however, the Department arbitrarily

and capriciously excluded Interjet from the group of low-cost carriers that the

Department identified as eligible to apply for the 24 divested slot-pairs. The

Department asserted that Interjet was excluded because, in the Department's

judgment, the number of MEX slots already held by Interjet was sufficient to

enable Interjet to introduce cross-border service to compete with the Joint Venture.


14

This decision was arbitrary and capricious because the Department failed to

articulate any valid explanation why the size of Interjet's MEX slot holdings alone

should completely bar Interjet from even being considered for divested MEX slots,

especially when the Department's express objective for the slot divestiture was to

increase competition between MEX and points in the United States. The

Department never, for example, provided an explanation that showed that there

would be greater transborder competition at MEX if Interjet remained ineligible to

seek divested slots than there would be if Interjet were able to pursue and receive

divested slots for Interjet to use to compete with the Joint Venture. Interjet is

accordingly asking the Court to vacate the Department's MEX slot allocation and

to remand the case to the Department with instructions to reallocate the 24 MEX

slot-pairs in a manner that does not impermissibly exclude Interjet from

consideration as a slot recipient.

Interjet is also arguing in the alternative that the Department has no authority

to even initiate a proceeding to allocate slots at an airport in a foreign country.

While the Department may arguably impose some reasonable conditions on a grant

of ATI, the governing statute, 49 U.S.C. §§ 41308 and 41309, does not authorize

the Department to impose the numerous and far-reaching conditions that qualified

the grant of ATI in this case. The statute does not, for example, empower the

Department to use an ATI proceeding to impose extensive “conditions” on the


15

Joint Applicants and also on third parties in order to rebalance competition on the

entire transborder market between MEX and points in the United States, no matter

how desirable that objective may be.

In the event Interjet's alternative argument is successful, Interjet is asking the

Department to remand the case to the Department with instructions to direct the

Joint Applicants to divest the 24 slot-pairs at MEX in a manner consistent with the

conditions imposed by COFECE or other authorized Mexican regulatory authority.

STANDING

Interjet has standing to pursue its challenge to the Final Orders issued by the

Department under 49 U.S.C. § 46110 because Interjet has “a substantial interest in

an order issued by the Secretary of Transportation…under this part [49 U.S.C. §§

40101-46501].” Interjet has a substantial interest in both of the Department’s

underlying Final Orders as both Orders exclude Interjet from eligibility to receive

divested slots at MEX. Interjet actively participated in both of underlying DOT

proceedings and submitted multiple comments to the Department including those

in which Interjet raised the objections that are the basis for its Petitions in the cases

before the Court.


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ARGUMENT

I. THE DEPARMENT OF TRANSPORTATION’S DECISION TOEXCLUDE INTERJET FROM THE PROCEEDING TO ALLOCATESLOTS TO BE DIVESTED AT MEXICO CITY INTERNATIONALAIRPORT WAS ARBITRARY AND CAPRICIOUS

The decision of the Department of Transportation (Department) to exclude

Interjet from eligibility to receive divested slots at MEX was arbitrary and

capricious because Interjet’s exclusion wholly failed to advance the stated purpose

of the slot divestiture at MEX.

In the ATI Final Order, the Department stated that the purpose of the slot

divestitures and reallocation at MEX was “to ensure that there is adequate

competition to outweigh the harm caused by the Joint Applicants’ market power at

MEX in order that the benefits of the alliance are passed on to consumers, given

the barriers to entry caused by the slot regime at MEX…” ATI Final Order at 19

[JA 252]. Likewise, in the Slot Assignment Final Order, the Department stated:

[t]he purpose of the divestitures, as described in Orders 2016-11-2 and2016-12-13 (November 4, 2016, the ATI Show Cause Order andDecember 14, 2016, the ATI Final Order, respectively), is to alleviatethe competitive harm likely to result from the transaction and toensure sufficient competition in the environment in which the JointVenture will operate.

Slot Assignment Final Order at 2 [JA 327].

Based on these criteria, the Department should have allocated the Joint

Applicants’ divested slots to carriers based on the capability of a particular low-


17

cost carrier to provide the best transborder competitive service. The Department

instead excluded Interjet simply because the Department felt that Interjet’s current

slot holdings at MEX should preclude Interjet from receiving any of the divested

slot-pairs. The Department never considered the effectiveness of the transborder

competition that Interjet would provide using the newly-divested MEX slots. The

Department’s decision to exclude Interjet from the slot allocation proceeding was

arbitrary and capricious because it was internally inconsistent and based on faulty

reasoning and improper considerations.

The Department never considered whether allowing Interjet to compete for,

and potentially qualify to receive, an award of divested slot-pairs would result in

more or less competition in the MEX transborder market than would be the case if

Interjet were barred from competing to receive any of the divested slots at MEX.

To arbitrarily state that Interjet should be precluded from participating simply

because the Department felt that Interjet already had too many slots at MEX is

wholly arbitrary absent any showing why excluding Interjet solely on the basis of

having a given number or percentage of slots at MEX would result in more

transborder competition at MEX following a grant of ATI than would be the case if

Interjet were allowed to participate. Such an analysis would necessarily have to

address the logic of allowing participation by other low-cost carriers, notably

Volaris and vivaAerobus that also had sizable slot holdings at MEX and were


18

actually providing more transborder service than Interjet. ATI SCO at 11 [JA

124].

Standard of Review: Under 5 U.S.C. § 706, a reviewing court must hold unlawful

and set aside the actions, findings, and conclusions of an administrative agency

that are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance

with law. In making this determination, “the court must consider whether the

decision was based on a consideration of the relevant factors and whether there has

been a clear error of judgment.” ExxonMobil Gas Mktg. Co. v. FERC, 297 F.3d

1071, 1083 (D.C. Cir. 2002).

A. The Department’s decision to exclude Interjet was arbitrary andcapricious because it bore no logical relationship to the stated goals of theMEX slot remedy.

The Department failed to show a logical correlation between the stated goals

of the MEX slot remedy and the rationale that it provided for excluding Interjet

from the MEX remedy. In the ATI Final Order, the Department stated that the

purpose of the MEX slot remedy was to inject sufficient competition at MEX to

discipline what would be the very dominant slot-holding position of the Joint

Applicants following a grant of ATI:

These divestitures are…designed to ensure that there is adequatecompetition to outweigh the harm caused by the Joint Applicants’market power at MEX in order that the benefits of the alliance are passed


19

on to consumers, given the barriers to entry caused by the slot regime atMEX, documented extensively in the record of this proceeding.

ATI Final Order at 19 [JA 252].

The Department further stated:

Interjet and American’s arguments that they should be eligible toreceive MEX slots are misplaced. As stated above, the objective ofthe Department’s remedy is to inject sufficient competition atMEX to discipline the dominant position of the Joint Applicantsat MEX. The Department believes that the most efficient way to dothis, requiring the least number of divestitures, is to link LCC andlow-fare carrier networks to MEX, thereby ensuring adequate networkcompetition.

Id. at 23 [JA 256] (emphasis added).

Interjet had objected to this logic and had argued in its Comments to the ATI

SCO: “There is no logical or legal basis for the Department’s assumption that

Interjet’s status as the second-largest slot-holder at MEX should preclude Interjet

from competing with other low-cost carriers for the divested slots.” Comments of

ABC Aerolineas, S.A. de C.V., d/b/a Interjet, Docket DOT-OST-2015-0070-0086,

Nov. 21, 2016 at 2 (Comments of Interjet to ATI SCO) [JA 197]. Interjet further

asserted that, “The Department’s focus should be on competition in the US-Mexico

transborder market, and any prohibition on Interjet’s ability to compete for

divested MEX slots is inconsistent with the goal of maximizing competition in the

transborder market.” Id. at 10 [JA 205].


20

The Department’s response, however, quoted above, was wholly devoid of

any explanation as to why the simple fact that Interjet already held MEX slots

meant that competition from Interjet would be less effective in achieving the

Department’s goal of disciplining the dominant position of the Joint Applicants or

that there would be less competition if Interjet were allowed to compete and

potentially receive some of the divested slot-pairs.

Continuing from the quotation above, the Department simply stated:

We…determined the eligibility of LCC and low-fare carriers based ontheir level of slot holdings at MEX, and their ability and willingnessto launch competitive service in a timely fashion. By its ownadmission, Interjet has over 26% of the slots at MEX, more by farthan any other carrier besides Aeromexico. Interjet does not needassistance to achieve competitive access at MEX; it already has it.

ATI Final Order at 23 [JA 256].

This conclusory explanation by the Department wholly failed to explain how

Interjet’s exclusion would promote the goal of injecting whatever the Department

considered to be “sufficient competition” at MEX. Stating a reason “without

explanation[] is not information in the least; it is merely a reiteration of the

decision.” United Mine Workers of Am. v. Department of Labor, 358 F.3d 40, 44

(D.C. Cir. 2004).

Similarly,

An agency must provide an adequate explanation to justify treatingsimilarly situated parties differently. Where an agency appliesdifferent standards to similarly situated entities and fails to support


21

this disparate treatment with a reasoned explanation and substantialevidence in the record, its action is arbitrary and capricious and cannotbe upheld.

Burlington Northern & Santa Fe Ry. v. Surface Transp. Bd., 403 F.3d 771, 776-

777 (D.C. Cir. 2005) (citations omitted).

Notably, although the ATI Final Order stated that the Department considered

the carriers’ “willingness to launch competitive service in a timely fashion,” the

record contains no information or findings regarding the extent to which Interjet

would be likely to “launch competitive service” by using slots that Interjet already

holds such that more overall competition would ensue if Interjet were excluded

than if Interjet were allowed to seek divested slots. For Interjet to “launch”

competitive service using its existing slot pool would mean that Interjet would

need to reassign slots from other markets. Doing so, however, may or may not

have been in Interjet’s best commercial interest. Even if Interjet were able to

repurpose its currently-held MEX slots for new transborder service as facilely as

the Department assumed, the Department failed to demonstrate why this is a

relevant consideration in achieving the goal of disciplining the Joint Applicants’

market power.

The question the Department should have asked in deciding whether to

exclude Interjet from slot eligibility is whether providing Interjet with additional

slots for transborder service from MEX would do more or less to strengthen overall


22

competition than providing the same slots to Interjet’s competitors. The

Department instead focused solely, and inexplicably, on Interjet’s slot holdings at

MEX, and did not address the real issue.

In order for an administrative decision to escape reversal, “[agencies] must

examine the relevant data and articulate a satisfactory explanation for its action

including a rational connection between the facts found and the choice made.”

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983) (citing Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168

(1962)). In American Trucking Ass'ns v. Federal Motor Carrier Safety Admin.,

724 F.3d 243, 253 (D.C. Cir. 2013), this Court partially vacated a trucking rule

upon finding that the agency failed to offer an explanation for the rule’s application

to short-haul operations. The Department similarly failed to provide a reasoned

explanation regarding Interjet’s ineligibility for MEX slots.

In the Comments and Objections of ABC Aerolineas, S.A. de C.V., d/b/a

Interjet, to Order to Show Cause 2017-3-1, (Interjet Objections to Slot Assignment

SCO) Interjet renewed its argument that the Department’s decision to deny Interjet

the right to bid along with the other competitors for divested MEX slots was not

supported by facts or evidence. Interjet noted that the Department had failed to

explain how precluding Interjet from obtaining any of the divested slots at MEX

protected consumers or advanced competition in the transborder market.


23

Interjet also noted that the Department's repeated assertions that Interjet is

capable of adding new transborder service were made without reference to any

data or information that showed whether repurposing any of Interjet’s current

MEX slot holdings for transborder service would represent their best commercial

utilization. Interjet asserted that the Department's failed to explain how its claim

that Interjet could add more service related to the Department's goal of maximizing

transborder competition. Interjet Objections to Slot Assignment SCO at 3-4 [JA

320-21].

The faulty reasoning in the Department’s conclusory assertion that “Interjet

does not need assistance to achieve competitive access at MEX; it already has it” is

evidenced by the Department’s failure to (1) present any facts to support its claim

that Interjet could, in fact, repurpose its MEX slots or that doing so would be

advantageous to Interjet; and (2) to draw any clear distinction between Interjet and

its competitors who also held many slots at MEX but were allowed to participate in

the remedy.

In the Department’s response, the Slot Assignment Final Order again failed

to explain any correlation between the Department’s claims regarding Interjet’s

supposed ability to implement additional transborder service and the Department’s

apparent conclusion that additional transborder service by airlines other than

Interjet will do the most to temper the market power of the Joint Applicants.


24

The Department instead reiterated its position that its decision was justified

solely by the size of Interjet’s slot holdings at MEX. The Department attempted to

show that Interjet had the ability to repurpose slots, “if it were profitable to do so”

by noting, data from a 2014 report by COFECE that stated that incumbents at

MEX do not use 37% of their slots on average. Slot Assignment Final Order at 8-9

[JA 333-34].

This effort by the Department to rationalize its decision to exclude Interjet

defies logic given the fact that the Department allotted MEX slots to Mexican low

cost carriers that already held slots at MEX, namely seven slot-pairs, or 14 slots, to

Volaris and three slot-pairs, or six slots, to vivaAerobus. Assuming that it is true

that incumbents at MEX do not use 37% of their slots on average, then why did the

Department give slots to Volaris and vivaAerobus? By the Department’s

reckoning, Volaris held at least 115 slots and vivaAerobus held at least 64 slots at

the end of 2016. ATI SCO at 24 [JA 137]. Since Volaris held at least 115 slots,

the Department’s logic suggests that Volaris would have had approximately 42

unused slots it could use for new transborder service. Why, therefore, wouldn’t

Volaris and vivaAerobus repurpose these extra slots, “if it were profitable to do

so?” This effort by the Department to explain Interjet’s exclusion generates more

questions than answers, but what it does not do is explain why new transborder

competition that includes Interjet would be less beneficial than new transborder

competition that is limited to Interjet’s competitors.


25

B. The Department’s exclusion of Interjet from participating in the MEXslot allocation process violates established antitrust principles by punishingInterjet for its success at obtaining slots at MEX while giving unmerited favorto its competitors.

By excluding Interjet, the Department is punishing Interjet for its successful

efforts to obtain slots at MEX while rewarding the failure of its competitors to

pursue a similar strategy. As Interjet argued to the Department, “Over the past

decade, Interjet has worked diligently to obtain slots at MEX to offer competitive

service both domestically and internationally. Interjet acquired slots at MEX as

part of its commitment to a long-term business strategy that involved developing

MEX as a hub.” Interjet Objections to Slot Assignment SCO at 3 [JA 320].

In United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945),

Judge Learned Hand cautioned, “The successful competitor, having been urged to

compete, must not be turned upon when he wins.” Id. at 403. Interjet’s slot

holdings at MEX, the result of Interjet’s successful planning and business acumen,

do not, in and of themselves, provide any legitimate basis for the Department’s

exclusion of Interjet.

In contrast to the Joint Applicants’ slot holdings at MEX, Interjet’s slot

holdings pale by comparison and pose no threat competition. As Interjet asserted

in its Comments and Objections to the Slot Assignment SCO, Aeromexico holds

approximately two-thirds more slots at MEX than Interjet (at least 519 for

Aeromexico versus at least 313 for Interjet). Interjet Objections to Slot


26

Assignment SCO at 3 [JA 320]; ATI SCO at 24 [JA 137]. The Department’s

decision to exclude Interjet should be contrasted with the fact that the Department

allowed Volaris, which also has substantial slot holdings at MEX (at least 115 slots

versus at least 313 for Interjet) to participate in the slot allocation process.

In the Slot Assignment Final Order, the Department asserted, “[O]ur

decision is consistent with the formal guidance provided by the Department of

Justice merger remedies, in which it has explained the importance of ‘remedies that

protect the competitive landscape’ as a whole.” Id. at 8 [JA 333]. The Department

further noted, “the Supreme Court has made clear that the government must

fashion ‘effective’ antitrust remedies to address competitive harm, including

divestitures, even if such remedies may cause ‘economic hardship’ to individual

parties.” Id..

The Department’s response, however, sidesteps Interjet’s objections.

Interjet was not arguing that the slot allocation was inconsistent with the general

principles of antitrust law because it harmed Interjet. Instead, Interjet objected

because the Department failed to explain whether excluding Interjet would

advance a legitimate government interest in addressing antitrust concerns. The

Department decided to exclude Interjet based on Interjet’s slot holdings at MEX

without providing any cogent explanation as to why its decision would protect or

promote competition.


27

While the Department has been myopically fixated on Interjet’s slot

holdings as the justification for Interjet’s exclusion, the Department has failed to

shed any light on the question of how allowing Interjet to compete for slots would

affect the competitive market. Over the course of two proceedings with numerous

objections by Interjet, the Department has still not articulated any colorable

explanation why excluding Interjet from competing for divested slots arguably

advances transborder competition from MEX.

C. The Department acted irrationally and illogically in excluding Interjetfrom consideration for an allocation of MEX slots while granting slots toVolaris and vivaAerobus, the third and fifth-place slot holders at MEX.

The Supreme Court has stated that an administrative agency:

must examine the relevant data and articulate a satisfactoryexplanation for its action including a rational connection between thefacts found and the choice made. In reviewing that explanation, wemust consider whether the decision was based on a consideration ofthe relevant factors and whether there has been a clear error ofjudgment. Normally, an agency rule would be arbitrary and capriciousif the agency has relied on factors which Congress has not intended itto consider, entirely failed to consider an important aspect of theproblem, offered an explanation for its decision that runs counter tothe evidence before the agency, or is so implausible that it could notbe ascribed to a difference in view or the product of agency expertise.

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,

43 (1983) (internal citations and quotation marks omitted) (emphasis added).

The Department rationalized its decision to exclude Interjet from slot

eligibility at MEX by claiming that the goal of the proceeding was to provide


28

access at MEX to carriers with no other means of initiating new transborder service

from the airport. ATI Final Order at 23 [JA 256]. Of course, as already noted, the

Department awarded 20 slots (10 slot-pairs), or 42% of the 24 slot-pairs to be

divested at MEX, to two other Mexican airlines, Volaris and vivaAerobus that

together held at least 179 MEX slots. The Department, however, has provided no

rational explanation for this inconsistency. Volaris, which held at least 115 MEX

slots prior to receiving any divested slots, received 14 additional slots (7 slot-

pairs), an increase of 12% to its overall holdings. vivaAerobus, which held at least

64 MEX slots, received six additional slots (3 slot-pairs), an increase of 9.4%.

In the ATI SCO, the Department stated, “[B]ecause the aim of the

divestitures is to implement new competitive service, we tentatively determine that

only those LCCs and low-fare carriers with a limited presence, or no presence, at

the respective airports will be eligible.” Id. at 24 [JA 137]. Likewise, in the ATI

Final Order the Department asserted, “The Department’s remedy is focused on

providing access at MEX to carriers that do not have it, and have demonstrated that

they cannot achieve it otherwise, in order for them to provide competitive service,

disciplining the JV.” ATI Final Order at 23 [JA 256].

This standard that the Department advanced is squarely at odds with its

ultimate decision to award close to half of the Joint Applicants’ divested MEX

slots to Volaris and vivaAerobus, carriers that respectively held the third and fifth


29

largest number of slots at MEX. ATI SCO at 24 [JA 137]; Slot Assignment Final

Order, Appendix A, at 1 [JA 342].

D. The ATI Final Order is internally inconsistent.

A decision by a federal agency is arbitrary if it is internally inconsistent.

“We also agree with the petitioners that the Commission's discussion of the

estimated frequency of nominations under Rule 14a-11 is internally inconsistent

and therefore arbitrary.” Business Roundtable v. SEC, 647 F.3d 1144, 1153 (D.C.

Cir. 2011).

The ATI Final Order is internally inconsistent because it explicitly states that

the Department’s remedy is compatible with the COFECE remedy although the

remedies are incompatible. “Compatibility” as envisioned by the Department is

impossible to achieve if one accords the COFECE remedy its appropriate status as

an integrated set of economic conditions under which the Joint Venture could

proceed without violating Mexican antitrust laws.

In both the ATI SCO and the ATI Final Order, the Department explicitly

stated that it structured its MEX remedy to be “compatible” with the COFECE

remedy: “[T]he Department’s broader remedy of 24 MEX slot-pairs and four JFK

slot-pairs takes into account these [COFECE’s] terms and is compatible with

COFECE’s approach.” ATI Final Order at 29 [JA 262].

As discussed in the Show Cause and Final Orders, the Comisión Federal deCompetencia Económica (COFECE), separately approved the joint venture


30

with its own conditions, specifically the divestiture of eight (8) slot-pairs atMEX. The Department has structured its remedy such that compliance withit is concurrent with the COFECE remedy, thereby lessening the impact onthe Joint Applicants.

Order 2017-1-6 at 2 [JA 277].

Despite these claims, the Department’s decisions, first, to restrict the

discretion of the Joint Applicants to transfer the eight MEX slot-pairs in the

manner that COFECE directed, and, second, to exclude Interjet, are incompatible

with COFECE’s remedy. COFECE’s remedy specified a list of carriers, including

Interjet, that were eligible to receive the eight slot-pairs that COFECE was

ordering the Joint Applicants to divest. COFECE’s remedy emphasized the

importance of ensuring that all of the eligible carriers selected by COFECE should

have an equal opportunity to seek the eight slot-pairs that were to be divested

pursuant to COFECE’s remedy:

[T]he Parties must make sure and shall be bound to the fact that wholeprocedure provided in the Final Proposal must include principles ofequality and equity. To achieve the latter, Section 1.8 must providethat the letter must be sent on the same day to all potential assigneesand must be drafted on the same terms.

COFECE Plenary Resolution, DL-0001355 [JA 100].

COFECE intended that Interjet should be allowed to apply for divested

MEX slots, and COFECE intended for Interjet to be given the same consideration

as other carriers. The inherent inconsistency between the Department’s exclusion

of Interjet and the Department’s assertion that Interjet’s exclusion is “compatible”


31

with COFECE’s approach is demonstrated by a hypothetical. Suppose COFECE

conditioned its grant of Mexican ATI such that the ATI would be invalidated if the

Department were to award divested slots to any carriers other than a subgroup of

five or six carriers that COFECE selected from the eleven carriers on the DOT list.

The Department would undoubtedly take exception to such action as incompatible

with the remedial actions embodied in the Department’s Final Orders—just as the

Department’s exclusion of Interjet is incompatible with COFECE’s remedy.

II. THE DEPARTMENT EXCEEDED ITS AUTHORITY BYUNDERTAKING TO ALLOCATE MEX SLOTS[ARGUMENT IN THE ALTERNATIVE]

Standard of Review Under 5 U.S.C. § 706, a reviewing court must hold unlawful

and set aside the actions, findings, and conclusions of an administrative agency

that are in excess of the agency’s “statutory jurisdiction, authority, or limitations,

or short of statutory right.”

A. The Department has no statutory authority over the allocation of slotsat MEX.

The Department’s decision to allocate slots at MEX exceeds the

Department’s statutory jurisdiction. The Mexican government has exclusive

authority over slot allocation at MEX. AICM and ultimately, its parent agency, the

DGAC, have the authority to administer slot allocation at MEX. The Department

does not, even under United States law.


32

The ATI SCO announced the Department’s intention to exercise control

over virtually every aspect of the allocation of all 24 of the Joint Applicants’

divested MEX slots—including, for practical purposes, the allocation of the eight

slot-pairs that COFECE had already ordered to be divested. The ATI SCO also

announced the Department’s intention to exclude Interjet as a potential recipient

for the 24 slot-pairs to be divested at MEX.

Two Mexican regulatory authorities, the Joint Applicants, Interjet, and the

National Aviation Defense Front2 all objected to the Department’s intention to

allocate the slots to be divested at MEX and argued the Department was making an

improper attempt to override the jurisdiction of the Mexican authorities.

The DGAC stated:

DGAC views DOT’s tentative decision to be inconsistent with thespirit of the recently liberalized bilateral aviation agreement betweenthe United Mexican States and the United States of America in orderto provide conditions that allow Mexican carriers to be competitivegiven the natural asymmetry between the aviation industries of bothcountries. DGAC therefore respectfully, but firmly, requests that theUSDOT reconsider the conditions tentatively proposed on the JCA.

DGAC Comments, Docket DOT-OST-2015-0070-0077, Nov. 17, 2016, at 1-2 [JA

150-51].

2 Frente por la Defensa de la Aviación Nacional (FDAN) or the National AviationDefense Front, is a consortium of unions collectively representing 75% of Mexicanaviation employees. FDAN Reply Comments, November 30, 2016, Docket DOT-OST-0070-0089 at 2 [JA 211].


33

AICM similarly objected to the Department’s attempt to usurp its regulatory

authority:

AICM submits that it is the role of AICM to administer the slotallocation process in Mexico City pursuant to article 63 of theAirports Law. In addition to that, pursuant to Article 21 of the CivilAviation Law Regulations, each slot allocated [by] AICM has to beultimately authorized by DGAC. The DOT’s view of how slotsshould be allocated in Mexico…is unprecedented andunnecessary.

AICM Comments, Docket DOT-OST-2015-0070-0078, Nov. 17, 2016, at 10

(emphasis added) [JA 173].

The Joint Applicants, FDAN, and Interjet also contended that the

Department’s attempt to allocate MEX slots was improper.

[The ATI SCO] also usurps the authority to allocate the divested slotpairs at MEX—“permanent[ly]”—according to DOT’s “terms andconditions.” Indeed, the Order appears to envision that DOT willallocate those slot pairs without even consulting with COFECE, eventhough MEX is central to Mexico’s economic and transportationstrategies.

This disregard for Mexican regulatory authority over MEX is anaffront to international comity and could raise serious foreignrelations issues with an essential trading partner.

Objections by Joint Applicants to SCO, Docket DOT-OST-2015-0070-0084,Nov. 18, 2016, at 36 [JA 186].

Such excessiveness—together with the element interventionismmentioned in the preceding paragraph—may only be interpreted as anapplication of extraterritorial jurisdiction by reason of nationalityagainst the Mexican State, its citizens, and companies in general (butprincipally to airlines).


34

This kind of intervention also prevents Interjet from obtaining theslots that Aeromexico would have to divest. This in fact wouldimpose a restriction on a Mexican airlines in the Mexicanterritory, substituting Mexican authorities in its own jurisdictionwhich is illegally outrageous.

FDAN Reply Comments, November 30, 2016, Docket DOT-OST-0070-

0089, at 6 [JA 215] (emphasis added).

Importantly, Interjet strongly objected to the Department's tentative decision

to allocate the divested MEX slots among carriers of its choosing. In responding to

the ATI SCO, Interjet asserted: “The Department has no authority to require the

Joint Applicants to transfer their slots at MEX directly to competing airlines

selected by the Department.” Comments of Interjet to ATI SCO at 9 [JA 204].

Interjet asserted that:

DOT can at best only require the Joint Applicants to divest their slots atMEX. Following this divestiture, Aeropuerto Internacional de la Ciudad deMexico (AICM), the Mexican legal body that is responsible for operations atMEX, will have the responsibility to determine which carriers should receivethe slots and what restrictions may apply to the use of these slots. Any MEXslot allocation and usage-restrictions determined by the Department can atbest only be a recommendation to Mexican authorities.

Id. at 9-10 [JA 204-05]. In its Reply Comments, Interjet further argued, “The

Department should order the carriers to divest the necessary slots but defer to

comity by acknowledging authority of Mexican authorities over the allocation

process.” Interjet ATI SCO Reply at 2 [JA 223].


35

While the Department gives lip service to the proposition that Mexican

authorities have final authority over the allocation of slots at Mexican airports,

(“ultimate approval of [MEX slot] transfers continues to rest with AICM” (ATI

Final Order at 14 [JA 247])), the Department has largely dismissed and ignored the

objections to the Department’s decision to preempt the jurisdiction of AICM and

DGAC. The Department stated:

[I]n answer to the challenge that the divestiture is contrary to Mexicanlaw, the Department must point out that the Joint Applicants areavailing themselves of U.S. law for the purposes of obtaining antitrustimmunity. The Department’s grant of such authority is within itsdiscretion, and not something that Aeromexico is entitled to as amatter of right. The grant of such authority subject to one or moreconditions is not inconsistent with U.S. or, for that matter Mexicanlaw. If the Joint Applicants are unable to comply with such acondition in a manner that is consistent with Mexican law, theirfailure to meet the condition will result in the ATI not becomingeffective.

ATI Final Order at 14 (footnote omitted) [JA 247].

The Department’s statement, however, that it was proposing a grant of ATI

to the Joint Applicants “subject to one or more conditions” (emphasis added) is

undoubtedly the understatement of the year. The issue that should accordingly be

of primary importance to this Court is whether the extensive restructuring of the

MEX transborder market that DOT engineered through the extensive number of

conditions that it imposed in this proceeding—the so-called “one or more

conditions”—transcends the scope of its authority under §§ 41308 and 41309.


36

In Cousins v. Secretary of United States DOT, 880 F.2d 603 (1st Cir 1989),

the U.S. Court of Appeals for the First Circuit examined its authority to review an

order by the Department that allegedly conflicted with a federal statute. The First

Circuit determined that:

“[T]he APA, in addition to telling courts to "hold unlawful and setaside" agency action that is "arbitrary" or "capricious," also tells themto set aside agency action that is "otherwise not in accordance withlaw" or is "in excess of statutory jurisdiction, authority, or limitations,or short of statutory right." 5 U.S.C. § 706(2)(A, & C). These wordsare general in their meaning; they do not restrict the courts toconsideration of the agency's own enabling statute.

id. at 608. The First Circuit also noted that the legislative history of the APA

supported its holding: that courts must enforce “any and all applicable law.” Id. at

608-09.

The United States and Mexico are both signatories to the Convention on

International Civil Aviation (Chicago Convention). Included, therefore, in the

body of law that DOT must apply is Article 1 of the Chicago Convention which

states, “The contracting States recognize that every State has complete and

exclusive sovereignty over the air-space above its territory.” In this regard the

Second Circuit stated:

Without question, Mexico has sovereign jurisdiction over its own airspace.See Ley de Vias Generales de Communicacion, Libro Cuatro, Articulo 306(Mex.), translated in Staff of Senate Comm. on Commerce, 89th Cong., 1stSess., Air Laws and Treaties of the World, 1, 1721 (Comm. Print1965)(hereinafter "Communications Law")(Translation of CommunicationsLaw is found at pp. 1721-43); see also Chicago Convention, 15 U.N.T.S. 21,


37

art. 1 ("The contracting states recognize that every State has complete andexclusive sovereignty over the airspace above its territory."). Moreover, theMexican federal government has exclusive jurisdiction over issues relatingto the "inspection, supervision and control of civil air navigation, [including]all civil aircraft in Mexican territory or which fly over it, as well as theircrew, passengers and goods transported." Communications Law, art. 308.

Curley v. AMR Corp., 153 F.3d 5, 15 (2d Cir. 1998) (internal citations omitted).

The Department, however, seems to have neglected long-established international

principles that grant each country sovereignty over civil air navigation, including

airports, within its territory.

In its Second Final Order, the Department responded to Interjet’s renewed

objections that the Department’s allocation of the divested slots at MEX exceeded

the Department’s statutory jurisdiction by arguing that its distribution of the slots

did not constitute an “allocation.”

[The Department] does not, and cannot, allocate slots at MEX. TheDepartment has conditioned its discretionary grant of ATI on the JointApplicants’ divestiture of certain assets, as well as their transfer ofthose slots, in a manner that is compatible with Mexican laws andprocedures; a condition that the Joint Applicants voluntarily accepted.The onus is now on the Joint Applicants to comply with thatcondition. Although the Department has determined the carriers towhich the Joint Applicants will transfer the slots, as set forth below,the ultimate approval of those slot transfers at MEX continues to restwith AICM. If the Joint Applicants do not obtain approval of the slottransfers, then the Department’s grant of ATI will simply not enterinto force.

Slot Assignment Final Order at 7 [JA 332] (emphasis added).


38

The Department’s illogical and defensive response suggests that the

Department recognizes that it would at least be questionable, if not improper, to

allocate slots at an airport in another country. Unfortunately for DOT, such a slot

allocation, however it is characterized, exceeds the statutory authority of the

Department. Furthermore, whether or not the Mexican authorities yielded to the

Department’s slot allocation at MEX following their initial objections is irrelevant

to this Court’s consideration of the legality of the Department’s actions.

Any acquiescence by Mexican authorities to the Department’s slot allocation

is no doubt understandable in light of DOT’s threat to withhold U.S. ATI from the

Joint Venture if AICM and DGAC did not go along with what DOT decreed. The

Department’s assertion that it is not technically allocating the MEX slots but that it

is merely setting conditions on the Joint Applicants’ grant of ATI belies the fact

that the Department has conducted an entire administrative proceeding in order to

determine which carriers get what slots at what times at MEX.

Major characteristics of the Department’s Final Orders show that the

Department is doing more than merely setting “one or more conditions.” The

Department, for example, foresees that it will continue to regulate the disposition

of the divested MEX slots long after the Joint Applicants have transferred the 24

slot-pairs to the recipient carriers designated by DOT, i.e., for at least the initial

five-year ATI approval period.


39

Selected Carriers shall seek prior approval from DOT to transfer tothird party airlines any slot-pairs obtained from the Joint Applicants aspart of the slot divestiture. Any such subsequent transfers shall notinclude cash or non-cash consideration for the duration of the termsand conditions set forth in Section 5.

ATI Final Order, Appendix A, Para. 4, at 38 [JA 271].

We determine that carriers wishing to change the destination of a slotassigned by this Order shall seek the Department’s approval byproviding the Department at least 14 calendar days’ notice of thedesired change. If the Department takes no action within 14 calendardays the change will be deemed approved;

Slot Assignment Final Order at 15 [JA 340]. The Department thus determines the

acceptability of any subsequent holder of a divested slot-pair, the consideration

that the original holder can receive for the slots (none), and the route on which the

slots can be used.

In its Comments and Objections to the Slot Assignment SCO, Interjet noted

that the ongoing restrictions on MEX slots being imposed by the Department only

serve to highlight the Department’s lack of statutory authority to allocate slots at

MEX:

[T]he broad jurisdiction that Department is exercising in thisproceeding extends far beyond dictating the carriers that receive theslot-pairs divested by Aeromexico. The Department is alsoundertaking to regulate the distribution and utilization of the divestedslots by the recipient carriers throughout the five-year term of theinitial ATI grant. Wholly apart from its allocation of the initial slot-pairs divested at MEX, the Department is lacking both the authorityand a clear means of enforcement to control the slot allocation atMEX following the initial transfer of the slot-pairs divested byAeromexico. This further inconsistency in the approach that DOT is


40

pursuing supports the arguments that Interjet, along with otherinterested parties, have asserted throughout this proceeding: theallocation of slots at MEX is properly administered by Mexicanauthorities.

Interjet Objections to Slot Assignment SCO at 5-6 [JA 322-23].

If, as the Department asserts, the conditions imposed by its Final Orders are

not an usurpation of Mexico’s authority to administer the allocation of slots at the

busiest airport in Mexico, then, at the very least, the Final Orders would not

provide for the Department’s ongoing management of the divested slots following

their initial transfer.

The Department has no legal jurisdiction over the allocation of slots at

MEX. By attempting to allocate slots at MEX, the Department is acting in excess

of its statutory jurisdiction and improperly interfering with the regulatory authority

of the Mexican government.

B. Sections 41308 and 41309 of 49 U.S.C. provide no authority for theDepartment to narrow the conditions the COFECE imposed on the JointApplicants’ divestiture of eight slot-pairs at MEX and, in particular, toexclude Interjet from the list of carriers that COFECE deemed eligible toreceive divested slots at MEX.

The conditions that DOT has imposed on the divestiture and allocation of

the Joint Applicants’ MEX slots are incompatible with the slot-allocation

procedure that COFECE’s Preliminary Remedy set forth with respect to the eight

slot-pairs that COFECE ordered to be divested. This is especially problematic in

light of the Department’s claim that its own slot divestiture requirements


41

harmonize with those of COFECE. By imposing its own conditions in place of

conditions ordered by COFECE, the Department is exceeding its statutory

jurisdiction and violating the sovereignty of Mexico over its own airports. Further,

by imposing requirements that conflict with COFECE’s requirements but stating

that its requirements are compatible, the Department’s Final Order and Instituting

Order are arbitrary and capricious, an abuse of discretion, and, in excess of

statutory authority.

In Instituting Order 2017-1-6 the Department included a section titled,

“COMPATABILITY WITH COFECE REMEDY” in which the Department

stated:

As discussed in the Show Cause and Final Orders, the Comisión Federal deCompetencia Económica (COFECE), separately approved the joint venturewith its own conditions, specifically the divestiture of eight (8) slot-pairs atMEX. The Department has structured its remedy such that compliance withit is concurrent with the COFECE remedy, thereby lessening the impact onthe Joint Applicants.

As such, the Department will seek to assign at least eight (8) of the PhaseOne MEX slot-pairs to carriers under terms that allow the Joint Applicantsto satisfy conditions imposed by COFECE, including that the slot-pairs:• Be transferred, with approval by AICM, by May 17, 2017;• Be notified to COFECE;• Be transferred to a list of carriers that is broader than the list of eligiblecarriers established by the Department; and• Not be reacquired by the Joint Applicants for a period of 10 years.

Order 2017-1-6 at 2 [JA 277].


42

However, as detailed supra, the conditions of the Department’s Orders

differed from COFECE’s remedy in several important respects. Key differences

between the Department’s Final Orders and COFECE’s remedy include:

(1)(a) COFECE wanted ten carriers, including Interjet, to be eligible to receive the

eight slot-pairs to be divested at MEX pursuant to the COFECE remedy. The

carriers on the COFECE list were, Alaska Airlines, American Airlines, Interjet,

Frontier Airlines, JetBlue, Southwest Airlines, Spirit Airlines, United Airlines,

Volaris, and vivaAerbus. COFECE Plenary Resolution, March 31, 2016, at DL-

0001355 n. 236 [JA 93]. (b) The Department’s list, however, included eleven

carriers: Alaska, Southwest, JetBlue, Frontier, Sun Country, Virgin America,

Allegiant, Spirit, Hawaiian, Volaris, and vivaAerobus, but of course, no Interjet.

Of these eleven carriers, seven overlapped with those on the COFECE list;

(2) The Department, but not COFECE, granted the Joint Applicants the protection

of a ceiling on the number of slot-pairs to be divested during a given hour;

(3) Although Interjet sees no basis for the Department exclude it from

consideration to receive any of the 24 MEX slot-pairs to be diverted, to the extent

the Department was indeed trying to make its slot allocation procedures compatible

with those of COFECE, the Department should have, at a bare minimum, allowed

Interjet to bid on eight “COFECE compatible” slot-pairs at MEX.

(4) The Department, but not COFECE, has attempted to impose on recipient


43

carriers conditions limiting the routes for which the slots could be used (although

any slot-pairs received by U.S. carriers could necessarily only be used for

transborder service).

The Department’s insistence that compliance with its Final Orders could be

concurrent with the COFECE remedy ignores the conflicting aspects of the two

remedies, frustrates the efforts of Mexican authorities to administer the allocation

of slots at their own national airport, and interferes with Mexican sovereignty.

In addition, Interjet’s exclusion also raises the question of whether the

allocation would have been better or different if Interjet had been allowed to

participate. Interjet’s exclusion fundamentally altered the implementation of the

COFECE approval granting ATI. The fact that the Department’s attempt to

allocate slots at MEX interferes with the COFECE remedy—despite the

Department’s claims to the contrary—only emphasizes the fact that the

Department exceeded its statutory jurisdiction by intruding on the purview of the

Mexican government.

C. The Department statutory authority to grant antitrust immunitypursuant to 49 U.S.C. §§ 41308-09 does not give the Department a statutorybasis to allocate slots at MEX.

The Department has conceded that it is relying on its authority to grant

antitrust immunity pursuant to 49 U.S.C. §§ 41308 and 41309 as the basis of its

authority to allocate the Joint Applicants’ divested MEX slots. “[T]he


44

Department’s determination in this case is governed by the legal framework

established by statute in 49 U.S.C. §§ 41308-09.” Slot Allocation Final Order at 4

[JA 329].

In the Slot Assignment Final Order, the Department considered the threshold

question required by § 41309, i.e., whether the agreement between the Joint

Applicants would “substantially reduce[] or eliminate[] competition,” as required

by § 41309(b)(1). The Department concluded: “Our economic analysis led us to

the conclusion that, subject to the remedies we planned to adopt, the Joint

Application was consistent with the requirements of section § 41309(b)(1).” Id.

The Department further stated that it determined that conditions at MEX would

have a substantial impact on competition in the foreseeable future, unless

appropriate conditions were imposed and that, to address this concern, the

Department had decided to order slot divestitures as a condition of the grant of

antitrust immunity. Id. at 5 [JA 330].

While the Department’s authority to place some reasonable conditions on its

grant of antitrust immunity may be implied under §§ 41308 and 41309, the

Department has no authority under those sections to regulate the use of slots at a

foreign airport. Neither can the Department use an ATI application as means to

impose its preferred regulatory framework on transborder markets or as means to

regulate the actions of carriers other than those applying for antitrust immunity.


45

Notably, the Department has failed to point to a single ATI proceeding in

which it undertook to allocate divested slots at a foreign airport and to impose

conditions on the use of these slots. The Joint Applicants are the ones applying

for a grant of antitrust immunity, and it is only on the Joint Applicants that the

Department can impose reasonable conditions, subject to the Joint Applicants’

acceptance.

CONCLUSION

Based on the foregoing arguments in support of Interjet’s primary and

alternative arguments, Interjet respectfully requests the Court to vacate both of the

Department’s Final Orders insofar as those Orders allocate the MEX slot-pairs that

the Joint Applicants divested as a condition of obtaining ATI from the Department.

Because the Department’s decision to exclude Interjet from the list of

carriers eligible to apply for divested slots at MEX is arbitrary and capricious, the

Court should remand the case to the Department with instructions to reallocate the

24 MEX slot-pairs in a manner that does not impermissibly exclude Interjet from

consideration as a slot recipient and that is otherwise consistent with the Order and

Opinion of this Court. The Department should be directed to initiate conforming

steps as promptly as possible and to implement the reallocation by the earliest date

possible.


46

In the event the Court should instead accept Interjet’s alternative argument,

namely, that the Department’s authority under 49 U.S.C. §§ 41308 and 41309 to

approve an agreement and to grant antitrust immunity does not authorize DOT to

allocate slots at a non-U.S. airport such as MEX, the Court should remand the case

to the Department with instructions to allow the Joint Applicants to divest the 24

slot-pairs at MEX in a manner consistent with the conditions imposed by COFECE

or other authorized Mexican regulatory authority.

The Court should also allow DOT to leave the initial allocation in effect

until the earliest date that DOT can implement and comply with the Order and

Opinion this Court.

Respectfully submitted,

/s/ Moffett B. Roller__________________ ___ .

Moffett B. RollerD.C. Bar No. 236398;Court of Appeals Bar No. 27053Washington Dulles International Airport45005 Aviation Drive; Suite 200Dulles, VA 20166Phone: 202-331-3300Fax: 202-331-3322

Attorneys for PetitionerABC Aerolineas, S.A. de C.V., d/b/a Interjet


47

Certificate of Compliance with Type-Volume Limit, Typeface Requirements,and Type-Style Requirements Applicable to Briefs

This Brief of Petitioner complies with the type-volume limit of FED. R. APP.

P. 32 (a)(7)(B)(i) because, excluding the parts of the document exempted by FED.

R. APP. P. 32(f) and D.C. Cir. Rule 32(e)(1), this Brief contains 10,614 words.

This Brief complies with the typeface requirements of FED. R. APP. P.

32(a)(5) and the type-style requirements of FED. R. APP. P. 32(a)(6) because the

Brief has been prepared in a proportionally spaced typeface of an acceptable size,

14-point Times New Roman font.

Respectfully submitted,

/s/ Moffett B. Roller .Moffett B. Roller

(D.C. Bar No. 236398; Court of Appeals BarNo. 27053)Washington Dulles International Airport45005 Aviation Drive; Suite 200Dulles, VA 20166Phone: 202-331-3300Fax: 202-331-3322



48

CERTIFICATE OF SERVICE

I hereby certify that I have this 1st day of September 2017, caused the

Final Brief of Petitioner to be served upon the following parties by electronic

means via the Case Management/Electronic Case Files (CM/ECF) system of the

U.S. Court of Appeals for the District of Columbia Circuit:

Ms. Frances [email protected]. Robert B. [email protected] States Department of JusticeAntitrust Division, Appellate Section950 Pennsylvania Ave., NW; Rm 3224Washington, D.C. 20530

Mr. Paul M. [email protected]. Christopher S. [email protected]. Department of Transportation1200 New Jersey Avenue, SEWashington, D.C. 20590

/s/ Moffett B. Roller .Moffett B. Roller

(D.C. Bar No. 236398; Court of Appeals Bar No. 27053)Washington Dulles International Airport45005 Aviation Drive; Suite 200Dulles, VA 20166Phone: 202-331-3300Fax: 202-331-3322


Dated: September 1, 2017


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