American Airlines


American Airlines

Answer the following questions:
1. What strategic advantages does AA have over the low cost rivals trying to break into the Dallas Fort Worth airport market?
2. What barriers to entry do the low cost rivals face?

American Airlines’ Actions Raise Predatory PricingConcerns


Michael Baye and Patrick Scholten prepared this case to serve as the basis for classroom discussion rather than to represent economic or legal fact. The

case is a condensed and slightly modified version of the public copy documents involving case No. 99-1180-JTM initially filed on May 13, 1999 in United

States of America v. AMR Corporation, American Airlines, Inc., and AMR Eagle Holding Corporation.

Between 1995 and 1997 American Airlines competed against several low-cost carriers (LCC) on various airline routes centered on the Dallas-Fort Worth

Airport. During this period, these low- cost carriers created a new market dynamic charging markedly lower fares on certain routes. For a certain period

(of differing length in each market) consumers of air travel on these routes enjoyed lower prices. The number of passengers also substantially increased.

American responded to the low cost carriers by reducing some of its own fares, and increasing the number of flights serving the routes. In each instance,

the low-cost carrier failed to establish itself as a durable market presence, and eventually moved its operations, or ceased its separate existence

entirely. After the low-cost carrier ceased operations, American generally resumed its prior marketing strategy, and in certain markets reduced the number

of flights and raised its prices, roughly to levels comparable to those prior to the period of low-fare competition.
American’s pricing and capacity decisions on the routes in question could have resulted in pricing its product below cost, and American might have intended

to subsequently recoup these costs by supra-competitive pricing by monopolizing or attempting to monopolize these routes.In addition to these routes,

American might have monopolized or attempted to monopolize by means of the “reputation for predation” it possibly gained in its successful competition

against low-cost carriers in the core markets.

American feels that its competition against the low-cost carriers was competition on the merits.
The predominant form of organization among airlines is a hub and spoke system, where many passengers leave their origin city for an intermediate hub

airport. At the hub, passengers switch to different planes that take them to their desired destination city. This system puts “local” passengers (who

specifically desire to travel to or from the hub) on the same plane with connecting or “flow” passengers (who are only passing through the hub).
Economists have noted that passengers tend to pay higher fares on average on routes from concentrated hubs than on otherwise comparable routes that do not

include a concentrated hub as an endpoint. This is called the hub premium. The hub premium exists in part because the economies of scale enjoyed by the

hubbing carrier drive marginal costs of service down, while the product differentiation advantages available to the hubbing carrier increase prices.
American’s operation of its large Dallas/Fort Worth International Airport (DFW)hub provides significant economies of scope and scale on DFW routes.

Operation of a hub, like American’s at DFW, provides economies of traffic density that lowers the costs on a per-passenger basis and/or permits the hub

operator to increase frequency.

Entrants considering entry into hub routes have to anticipate operating losses during initial periods of operation. None of the hubbing major airlines,

other than Delta and American, provide non-stop service from DFW to any point that is not one of its own hubs.
DFW is located between the cities of Dallas and Fort Worth, Texas. American’s total market share at DFW has decreased over the last three years due to a

dramatic increase in low cost carriers, DFW’s success in attracting foreign flag airlines, and dramatic growth by other major airlines at DFW.
In May 2000, American’s share of all passengers boarded at DFW increased (by 3.1%) over that for May of 1999. There are several problems with this. First,

this considers all DFW passengers, including those merely passing through the airport. As a result, it directly overstates the market share of American,

which operates at DFW as a hub. Second, while American’s market share may have increased over this time period, the number of passengers carried by low-

cost airlines at DFW increased even faster (30.7%).

Delta Air Lines also maintains a hub operation at DFW, although its hub is smaller than American’s. Delta reduced its flights during the mid 1990s at DFW,

but in the last year has increased them again. As of the end of 2000, Delta (along with its affiliated carrier, Atlantic Southeast Airlines) offered

scheduled nonstop service from DFW to 62 destinations with 209 daily flights. According to U.S. Department of Transportation T 100 data, Delta boarded more

passengers at DFW in 1999 (4.6 million) than many hub airlines boarded at hubs where they were the primary hub airline (such as Northwest at Memphis or

Continental at Cleveland). All major domestic airlines serve DFW, including Northwest Airlines, US Airways, Delta Air Lines, United Airlines, Continental

Airlines, America West, and TWA.
New entrant airlines serving DFW as of mid 2000 include Frontier, AirTran, National, Vanguard, American Trans Air, Ozark, and Sun Country. DFW, with seven

low-cost airlines, has more low-cost airlines than any other hub airport. Low-cost airlines serve at least 31 of DFW’s top 50 destinations on either a

nonstop or connecting basis.
A DFW official has stated that new entrant airlines “continue to thrive” at DFW, with a 25% year over year increase in passenger share in May 2000. The

airport’s Carrier Support program provides cooperative advertising funds to new entrants. Five new low-cost airlines have started service at DFW in the

last three years (American Trans Air, Frontier, National, Sun Country, and Ozark). There are gates and other ground facilities available at DFW for entry

by low-cost or other domestic airlines. Airport authorities control eight gates at DFW which are “common use” gates that DFW makes available to new

entrants and other airlines.
As of the third quarter of 2000, American served 79 domestic U.S. destinations non-stop from DFW, with 467 daily flights. Delta served 40 destinations

non-stop from DFW with 120 daily flights. American’s commuter airline affiliate, American Eagle, served 40 destinations non-stop with 237 daily flights and

Delta’s commuter airline affiliate, Atlantic Southeast Airways, served 19 destinations with 72 daily flights.

Delta had attempted to enlarge its DFW hub in the early 1990s but was unsuccessful and instead decreased its DFW presence. American had responded

vigorously to Delta’s attempt to grow at DFW. Delta suffered operating losses of approximately $560 million at DFW during the period from 1992-1994. From

July 1993 to July 1996, Delta reduced its daily jet departures from DFW from 249 to 145 and its commuter affiliate reduced its turboprop departures from

DFW from 97 to 88, while American increased its jet departures from 499 to 518 and increased its commuter affiliate turboprop departures from 169 to 257.

In 1995, Delta’s and its commuter affiliate, Atlantic Southwest Airways’, total spokes decreased by 14 to 65, with 223 flights per day between the

Delta’s DFW market share, measured by passengers boarded, decreased over the period July 1993 to July 1996 from 28.4% to 19.2%, while American’s increased

over the same period from 64.7% to 71.8%. After its downsizing at DFW, Delta’s primary remaining strength was in hub-to-hub routes (from DFW-ATL, DFW-CVG,

and DFW-SLC (Salt Lake City)) and in Florida and leisure markets. In 1999, Delta’s DFW hub ranked 21st of 23 in a ranking of the number of passengers

boarded by major airlines at their domestic hubs. By comparison, American’s DFW hub ranked third; American’s Chicago hub ranked 10th, and American’s Miami

hub ranked 18th. In June 1996, American flew 67% of the total available seat miles (“ASMs”) flown by airlines operating to and from DFW Airport and

Dallas-Love Field Airport. From 1993 to 2000, American’s share of DFW ASMs increased from 61.7% to 69.8%, while Delta’s share of DFW ASMs decreased from

31.5% to 18.1%.
In 1998, Delta felt that there was limited potential for growth at DFW. However, it has recently increased its presence there. Avenues for Delta growth

include regional jet use, Gulf Coast flying, and adding capacity in existing flow markets.

Love Field is an airport located within the Dallas city limits that is therefore closer geographically to the origin or destination point of many Dallas

travelers than DFW. From the time the “Wright Amendment” was passed in 1979 until October 1997, jet operations at Love Field were legally restricted to

service within Texas and between Texas and New Mexico, Oklahoma, Arkansas, and Louisiana. Beginning in October 1997, when the “Wright Amendment” was

amended by the “Shelby Amendment,” jet operations at Love Field were permitted within Texas and between Texas and New Mexico, Oklahoma, Arkansas, Kansas,

Alabama, Mississippi, and Louisiana. Beginning in February 2000, legal challenges to Love Field service to any destination by aircraft (jet or propeller)

configured to carry 56 passengers or less were set aside.
Since late 1997, federal law permits scheduled airline passenger service from Love Field as follows:
1. Non-stop scheduled passenger service using aircraft with a seating capacity of greater than 56 seats may only be provided within the Wright

Amendment Territory plus the states of Kansas, Alabama and Mississippi (the “Shelby Amendment Territory”).
2. Airlines operating from Love Field with aircraft having a seating capacity of greater than 56 seats are prohibited from holding out non-stop or

connecting air transportation to points beyond the Shelby Amendment Territory.
3. Scheduled passenger service may be provided between Love Field and points beyond the Shelby Amendment Territory, but only so long as such service

is provided on aircraft with fewer than 57 seats.

Love Field is a major base of operations for Southwest Airlines, which currently serves 13 nonstop destinations from that airport with 139 daily flights.

Southwest is a large and successful low-cost carrier. Southwest is prohibited from expanding its service from Love Field to points beyond a limited

geographical area, and there is no likelihood that Southwest will begin service from DFW Airport. Southwest does not operate any aircraft with fewer than

57 seats and has no plans to acquire any such aircraft.
On a number of nonstop routes from DFW, American had market shares ranging from 60% to 100%, based on shares of non-stop origin and destination (“O&D”)

revenue, for the period from 1990 to 1999. It had market shares ranging from 61% to 100% for these routes for the year 1999. On these non-stop routes, the

Herfindahl-Hirschman Index ranged from 5150 to 9939, for the year 1999.
On other routes for all airline service, American had market shares ranging from 60% to 95%, based on share of O&D revenue, for the period from 1990 to

1999. In 1999, American’s market share for these routes ranged from 61% to 92%. The Herfindahl-Hirschman Index on these routes ranged from 4368 to 8539 for

the year 1999.
According to data maintained by the DFW airport, American’s share of passengers boarded at the DFW airport was 70.2% as of May 2000; while the LCC share as

of the same date was 2.4%.
American’s prices in Southwest and LCC-competitive markets may be used as proxies for competitive prices that still permit American to earn a profit and

maintain service on the routes.

The price of tickets is compared on four sets of two routes, one in which American faces competition from Southwest Airlines or another LCC, and one in

which American is free from such competition. The comparison is illustrated in the following table, which lists DFW routes to various cities, with

American’s average one-way fare to that city. In each case, the first of the listed cities is a route in which American faces LCC competition.

City Fare $
Amarillo 62
Wichita 112
El Paso 92
St. Louis 192
Albuquerque 97
Omaha 215
Atlanta 117
Indianapolis 225

As the airline with the largest scope of operations at DFW, American has significant advantages over other competitors or potential competitors in DFW

routes in attracting passengers and charging higher prices. This advantage has variously been called “origin point presence” advantage, “OPP” advantage,

“origin point dominance” or “frequency dominance” by American, and has been described by American as follows: “a carrier which achieves substantial

advantage over its competition in terms of frequency and scope of service at any airport, hub or spoke, . . . will invariably obtain a disproportionate

share of the traffic and revenues for the flights originating at that airport.”
Frequency dominance or origin point presence advantages are reinforced by marketing programs including frequent flyer programs and travel agent commission

overrides. American’s investment in establishing its DFW hub involved a large sunk investment, and another airline with similar cost structure would also

have to make large investments to build a similar hub at DFW.
American generally enjoys higher margins where it does not face low-cost competition. American’s internal analyses recognize that fares and yields in

Southwest and LCC-competitive markets are significantly lower than fares and yields where American does not compete with Southwest or other LCCs. Thus,

American calculated that its revenue per available seat mile in DFW-ATL increased by 14% after the 1996 ValuJet crash caused that LCC to exit.
An American memo exists stating that, following Midway Airlines’ departure from the DFW-MDW route, American should raise prices slowly to avoid “sticker

shock,” but did not worry about competitor reactions. In fact, the same document expresses concern about such a reaction, stating that “connect carriers

continue to offer discounted fares, and our experience during the past year has demonstrated that these carriers possess strong potential to capture share

in markets where large fare differentials exist.”

During 1996, flights to and from American’s DFW hub for the previous 12 months made up 40% to 58% of American’s total domestic capacity (ASMs), but

accounted for 60% to 86% of its domestic fully allocated earnings.
As noted earlier, American’s price-average variable cost margins are higher on its flights to and from DFW than on other flights in its system. The

company’s internal documents recognize that this higher market share correlates to higher local yields. Fares on routes where American competes with other

hubbing major airlines are generally higher than on comparable routes where American competes with LCCs or Southwest.
Over the time period 1994-1999, American has maintained higher price-average variable cost margins for local passengers in routes that might have been

monopolized than it has maintained in routes which are competitive with Southwest Airlines or LCCs.
Considering all non-stop routes from DFW in which it does not compete with Southwest Airlines or an LCC, American earned a price-cost margin of 44.3% in

1994, 46.6% in 1996, and 50.7% in 1998. In all non-stop routes from DFW in which American competes with Southwest Airlines or an LCC, American earned a

price-cost margin of 9.7% in 1994, 19.1% in 1996, and 20.5% in 1998, calculated in the same manner as the price-cost margins.

There were 44 total episodes of entry by any airline into any route from DFW during the 10-year period from 1990 through 1999. That number of entry

episodes translates into 4.7% of DFW routes being entered per year, on average.
Routes from major airline hub airports other than DFW were entered by any airline at a rate of 7.7% of the hub routes per year during the 10-year period

from 1990 through 1999. DFW routes were entered by LCCs, from their own hubs, at a rate of 1.0% per year during the 10-year period from 1990 through 1999.

Routes from major airline hub airports other than DFW were entered by an LCC from its hub at a rate of 2.2% of the hub routes per year during the 10-year

period from 1990 through 1999. Such figures, however, tend to unfairly minimize the market presence of LCCs, since they focus only on nonstop service from

DFW and fail to consider LCC connecting service.

New York, including LGA, JFK, and EWR, was served by nine LCCs with 9.7% market share, as of the third quarter of 2000. Chicago, including ORD and MDW, was

served by six LCCs and Southwest, for a total LCC market share of 12.3%, as of the third quarter of 2000. Denver had an LCC market share of 15.3%; Atlanta

had an LCC market share of 16.8%; and Detroit had an LCC market share of 9.19%, as of the third quarter of 2000. LCC’s market share for all Dallas (both

Dallas-Love Field and DFW Airport,) with service from all LCCs (including Southwest) was 26.4%.
In 1995, Midway Airlines exited DFW-MDW after a period of price cutting by American, and American’s prices increased quickly. After the entry of American

Trans Air in 1998, average fares on the route decreased by 20%.
On average, for local passengers on the DFW-ICT, DFW-LGB, and DFW-COS routes, American’s price cost margins were 28%, 41%, and 36% respectively in 1999.
In 1994, American calculated ValuJet’s stage length adjusted cost per ASM to be 4.32 cents, and American’s cost per available seat mile to be 8.54 cents.
American’s Executive Vice President of Marketing and Planning, Michael Gunn, testified that Southwest’s costs were 30% lower than American’s.
An internal American document discussed the cost advantages of low-cost airlines, stating that one of the “fundamental problems in the [airline] industry”

in 1994 was that “consumer values (price) and the high cost structures of incumbent airlines have encouraged new competitors,” that in 1993 Southwest’s

labor costs/ASM were 45.8% lower than American’s, and that “today’s low-cost airlines have a cost advantage primarily because they are not burdened with

inefficient work rules.”

It is uncontroverted that new entrant airlines with low fare strategies, including Vanguard, Western Pacific, Frontier, National, and JetBlue, expect

existing competitors to match those fares. Officers of these airlines do not believe matching another carrier’s fare is anti-competitive conduct, so long

as the pricing is not below cost. Further, an airline that does not match fares is likely to lose business to its lower priced rivals.
In the early 1990s, several LCCs were affecting a significant portion of the ASMs of each of the seven major airlines (defined to be AA, CO, DL, NW, UA,

US, and TWA). LCCs by definition charge lower airfares, in part because they may have low operating costs, and in some cases provided less than the full

service quality offered by the major hub carriers.
As of May 1994, MarkAir flew 10 non-stop spokes out of United’s Denver hub, affecting 35.9% of the Denver hub ASMs. American observed ValuJet establishing

a successful hub in Atlanta. American specifically noted ValuJet’s success, and used ValuJet as an example of a hubbing LCC that could do very well at DFW.

In just over its first two years of operation, ValuJet had grown, by February 1996, to an operation with 41 aircraft, serving 28 cities, including a hub

and spoke operation at Atlanta with 22 spokes. American observed that ValuJet expanded while Delta was pursuing a short term, non-aggressive pricing

In a March 3, 1995, document entitled “Financial Impact of Low-Cost Carriers,” American made an assessment of the degree to which its routes, system-wide,

were “at risk” to additional incursion by low-cost carriers, and concluded that LCC entry into American’s DFW markets posed a serious threat to American’s

revenues. American studied the impact of ValuJet’s Atlanta hub on Delta, stating that “[f]or the 2nd Q93, on a pure share basis, DL has lost $232M in

annual revenue. Clearly we don’t want this to happen to AA at DFW.” In other words, American calculated that ValuJet’s success in forming an ATL hub cost

Delta $232 million per year in revenues.

American believed that Delta encouraged ValuJet’s development of an ATL hub through its lack of response to ValuJet’s entry. A second study conducted by

American, entitled “DFW Vulnerability to Low-Cost Carrier Competition” (“DFW Vulnerability Study”), considered the attractiveness of DFW markets to entry

by a hubbing low-cost carrier and the negative effects on American’s fares and traffic that would result if such entry occurred at DFW.
American believed that it had the ability to compete with LCC service from DFW by implementing strategies of capacity additions in select markets and

strong matching on price and availability. In a document dated May 23, 1995, American discussed its strategy of matching price and availability against

Midway Airlines in DFW-MDW, which enabled American to capture more than the share lost when Midway first entered the market. American observed that “it is

very difficult to say exactly what strategy on AA’s part translates into a new entrant’s inability to achieve their QSI share – that strategy would

definitely be very expensive in terms of AA’s short term profitability.” Delta and Southwest had both also lost share to Midway but did not regain their

lost share by May of 1995.
As noted above, American thought that lack of responses by Delta was the reason for success of ValuJet, and that “ced[ing] parts of the market to [the LCC]

. . . was not the proper way to respond.” American also observed that when Delta did begin more aggressive matching of ValuJet in July 1995, erosion of

Delta’s market share stopped.

Shortly after the DFW Vulnerability Study was completed, in mid-1995, American formed a working group to develop a strategy for dealing with LCCs at DFW

(“Strategy Working Group”). Barbara Caldas, at the time a senior analyst in American’s Yield Management Department, was the coordinator of the Strategy

Working Group. The DFW LCC Strategy Working Group involved representatives from American’s Pricing and Yield Management Department, Capacity Planning

Department, Sales Planning Department, Marketing Planning Department, Airline Profitability Analysis Department, and Eagle Pricing and Yield Management

Department. In a document memorializing notes from a January 31, 1996, meeting, called the “DFW LCC Meeting,” an American employee wrote that a strategic

objective should be formed regarding an LCC response. The employee also wrote expressing the need to “[d]emonstrate that a failure to defend our business

versus LCC could be very damaging.”
American asked Tom Cook, at the time the President of Sabre Decision Technologies (Sabre), then a subsidiary of American, to analyze how American could

more effectively operate by integrating Pricing, Yield Management and Capacity Planning. American’s then-President, Donald Carty, and American’s then-CEO,

Robert Crandall, were involved in Sabre’s project. The goal of the Sabre project was to “[i]dentify profit improvement for AA through the integrations of

Capacity Planning, Pricing, and Yield Management.” The Sabre project was coordinated by a steering committee, formed in late 1995, and made up of Mr. Cook

and American executives Mel Olsen, Tom Bacon, and Craig Kreeger. Sabre employees interviewed employees of American in American’s Finance, Capacity

Planning, Pricing and Yield Management departments, including high-level American executives. At the interviews, American executives discussed American’s

coordinated project for dealing with LCCs, including discussing the Strategy Working Group, referred to as the “DFW Strategy Task Force.”

American produced a document, entitled “DFW Low-Cost Carrier Strategy,” (“LCC Strategy Package”) which was presented to American’s senior management at a

February 27, 1996, meeting. At the February 27 meeting where the LCC Strategy Package was presented, Diana Block, at the time a manager of Domestic Yield

Management at American, and a member of the Strategy Working Group, took notes on a copy of the document. Ms. Block recorded a statement made by American’s

then-CEO, Robert Crandall to the effect that: “If you are not going to get them out then no point to diminish profit.” The presentation was met with

approval by American’s senior officers.
In developing recommendations for its DFW LCC Strategy, American considered the effect of the strategy on the profitability of both American and the LCCs.

American’s planners sought to use American’s capacity planning models to “simulate effect of pricing/capacity actions to estimate impact on AA and LCC

performance” and to research the financial condition, “balance sheets,” break-even load factors, and “tolerance” of the LCCs.
In the LCC Strategy Package, the American analysts calculated the costs of two different strategy “scenarios” for responses to SunJet. American has

generally studied competitors’ break-even load factors and balance sheets. In implementing its plans with regard to LCCs, American reviewed LCC

profitability, load factors, and market share.

American had meetings “approximately once per month” over the period of at least two years after the LCC Strategy Meeting, attended by representatives from

American’s Domestic Yield Management, Sales, Pricing, Capacity Planning, and Finance departments, to discuss markets with low-cost carrier competition.

American also measured the effects of its responses on its competitor, including producing a report entitled “Impact of LCC Response on DFW Rev/ASM,” which

considered the year-over-year effect on American’s RASM, Yield, and Load Factor, of American’s implementation of its LCC Strategy.
The DFW LCC Strategy Working Group used American’s experience competing against Midway Airlines in DFW-Midway as a case study for understanding the

magnitude of the investment that would result from taking action against LCCs at DFW.
In late May 1994, American operated 21 daily flights between DFW and Chicago’s O’Hare Airport. Midway Airlines, a low-cost carrier, operated only three

daily flights between DFW and Chicago’s Midway Airport.
In late May 1994, American adopted an inventory parity strategy against Midway Airlines’ service in DFW-Midway Airport. The strategy involved tracking the

availability of Midway’s fares on computer reservation systems and keeping the comparable American fares available for sale so long as Midway’s fare

remained available. In September 1994 American offered matching fares on more of its flights. Midway Airlines exited DFW-Chicago in March 1995.

From an early point, American’s planners did pay particular attention to LCCs which might develop hubbing operations at DFW. Early in the LCC Strategy

discussion, American perceived SunJet as one of its biggest LCC concerns because of SunJet’s potential for hubbing at DFW. After considering possible

responses to SunJet’s service from DFW, American decided not to escalate its response at the time because the cost would outweigh the benefit. American’s

staff recommended continuing the company’s “moderate” approach, but reevaluating it if “[SunJet] adds frequencies on existing routes or adds new DFW

American viewed its DFW LCC Strategy as an investment. In response to a December 1994 memorandum by Tom Bacon concerning responses to poor profitability in

the ORD-SFO market and Bacon’s comment that stronger American pricing action would not fix the problem caused by LCC competition from American Trans Air,

American’s then-CEO Robert Crandall responded to a comment that “more aggressive pricing [by American] probably would not fix [American’s] profitability

problem on the route [ORD-SFO],” by observing: “It will when [American Trans Air] is gone!” and that this was “a clear example of a place where we should

match straight up to get them out.”
American believes its long-term profit success depends on defending its DFW hub and defending its network out of DFW. Its concern that an LCC could hub

successfully at DFW was plausible. AirTran in Atlanta and Frontier in Denver are successful in routes from their respective hubs that compare in the amount

of traffic to many routes from DFW.
In other circumstances where American has considered aggressive responses to competitors that entered DFW routes, it has weighed the cost of short-term

profit loss against “benefits” that include both reduction of competition from current competitors and discouragement of future entrants.
Vanguard Airlines began flying in December of 1994. In choosing its routes, Vanguard chose to stay away from routes that Southwest was serving because in

those markets fares were already low and another low-cost carrier would not have much to offer.
Vanguard initiated nonstop DFW MCI jet service with three daily round trips on January 30, 1995. Vanguard reported in its business plan that entry with low

fares and a simple fare structure increases demand dramatically on a route, even doubling or tripling it, and it assumed that it would typically fill its

seats “primarily with travelers who cannot be accommodated on the traditional airline,” particularly “business travelers [who] often plan their trips at

the last minute.”
Vanguard carried approximately 25% of DFW MCI origin and destination passengers in the first quarter of 1995. As of January 1995, American was serving DFW

MCI with eight daily nonstop flights each way and Delta with six daily nonstop flights each way. After Vanguard’s entry, the total daily nonstop DFW MCI

service totaled 17 daily round trips.
After Vanguard filed fares in anticipation of its commencement of DFW MCI service in January 1995, American matched Vanguard’s regular low, unrestricted

fares with fares at the same fare level but with a penalty for refunds. In keeping with its strategy to “capture the best revenue mix possible with limited

capacity,” American limited the number of low-fare tickets it made available on those flights. However, American’s Domestic Yield Management Department

studied ramp count data suggesting that Vanguard was “making headway” in DFW-MCI with load factors between 58% and 62%.

By February 1995, Delta had announced its intention to cease DFW MCI nonstop service on May 1, 1995. In March, Vanguard announced that it would increase

its frequency of service on DFW MCI from three to five daily nonstop flights each way and in fact increased to four during that month. In April, Vanguard

began two daily one stop DFW MCI flights through Wichita. However, Vanguard decreased its nonstop DFW MCI flights to three daily flights each way in April

1995 and to one by May 1995. In the second quarter of 1995, as Vanguard was reducing its nonstop DFW MCI schedule, it had approximately 27% of origin and

destination passengers on the route. Meanwhile, American determined that it would have to choose between a “share” strategy versus a “revenue” strategy.

For the revenue strategy, one (among several) of the listed “pros” was “short term revenue gain,” with one con being “Share loss in a dominant market.”

American added four DFW MCI daily nonstop flights each way in June of 1995 and two more on July 1, 1995, in order to “stand up against Vanguard’s service

in the market.”
American realized that its June and July 1995 capacity additions in DFW-MCI could have a negative impact on profitability. In the fall of 1995, American’s

prediction that the capacity added in DFW-MCI in June and July might impact profitability proved to be correct.
American’s 14 daily nonstop flights and Vanguard’s one daily nonstop flight during the second half of 1995 were, at 15 daily flights, fewer than the 17

daily flights that had served DFW MCI earlier in 1995.
Vanguard ceased nonstop DFW MCI service in December 1995, but continued to serve the route with two one stop flights daily through Wichita. In the fourth

quarter of 1995, Vanguard carried approximately 16% of the origin and destination DFW MCI passengers.

After Vanguard ceased its nonstop DFW MCI service, American’s service dropped to ten daily flights. During the first six months of 1996, Vanguard’s share

of origin and destination passengers on DFW MCI was approximately 17%. By March 1996, American found that Vanguard’s one stop DFW MCI service (via Wichita)

was carrying significant traffic. At the end of April 1996, American lowered some of its DFW MCI fares to respond to Vanguard’s one stop fares.
In August, 1996, American decided to add two daily DFW MCI round trips as of November 1996. Vanguard announced on September 9, 1996 that it was resuming

nonstop DFW MCI service as of October with two daily nonstop flights each way and “low fares.”
American accelerated the two already planned additional DFW MCI flights scheduled to begin in November so that they would start as of October 1, 1996.

American was able to advance the commencement of these DFW MCI flights in the fall of 1996 due to the availability of pilot hours.
American decided to add a third additional DFW MCI round trip effective November 1, 1996. After Vanguard filed fares in anticipation of its re commencing

DFW MCI nonstop service in October 1996, American went to a full availability yield management strategy and responded to Vanguard’s fare levels on all

American flights.
Vanguard increased its daily DFW MCI flights from two to three in April 1997, and from three to four in September 1997. By the end of 2000, Vanguard served

DFW MCI with three nonstop flights daily; by the fourth quarter of 1999, it had approximately an 18% share of origin and destination passengers.

American at the end of 2000 offered 12 flights daily on DFW MCI, one fewer than in November 1996.
As of May 1993, American served the DFW ICT route with five daily nonstop jet flights each way. American began converting its jet service to turboprop

service on DFW ICT during the 1992 94 period when, as part of its “transition plan” during financial difficulties, it was discontinuing service to many

cities and substituting turboprop service for jet service in nearby cities.

When Delta removed the last of its DFW ICT jet service in favor of turboprop aircraft service in September 1993, American did so as well, removing the

final jet trip in June 1994. Prior to October 1996, American’s Eagle subsidiary was serving DFW ICT with nine daily nonstop turboprop flights each way.
On March 24, 1995, Vanguard announced it would initiate nonstop DFW ICT service on April 11, 1995 with two nonstop jet flights each way. Vanguard converted

two of its daily non-stop DFW-MCI flights into one-stops through Wichita, which it would be serving on a non-stop basis from DFW, giving it two non-stops

DFW-MCI and two one-stops DFW-MCI over Wichita. When Vanguard began DFW ICT service, it was the only airline offering nonstop jet service. At this time,

Delta’s commuter affiliate was offering six daily turboprop DFW ICT flights each way. Vanguard’s management felt that there was a “primary opportunity” to

serve DFW ICT because no other airline offered jet service.
When it began service, Vanguard’s one way DFW ICT unrestricted fares (that is, without advance purchase, round trip purchase, or minimum stay) were $69 for

peak period travel, and $39 off peak.
Previously, after American had announced that it would be canceling jet service, the City of Wichita had approached American about continuing to fly jets

on DFW-ICT. In February 1994, American had told the Wichita Airport Authority that it would provide three daily jet flights only if the Authority provided

a minimum revenue guarantee to American of $13,500 per round-trip. The Minimum Revenue Guarantee is a contract by which American Airlines serves cities

that are a profitability risk. Wichita rejected the minimum revenue guarantee program with American. In early 1995, the City of Wichita, the Wichita

Airport Authority, and Wichita’s business leaders had approached Vanguard to introduce jet service from Wichita to DFW in April 1995.

After Vanguard initiated DFW ICT service in April 1995, American responded with one way fares at a $20 premium over Vanguard’s one way fares, and round

trip fares equal to twice Vanguard’s one way fares. American initially made no changes to its standard yield management response for DFW ICT after Vanguard

entered the route in the spring of 1995.
After Vanguard started serving DFW-Wichita, the number of people who flew that route nearly doubled, and the average price for the trip went from $105 in

1994 to $70 in 1995. By the second quarter of 1995, Vanguard had gone from a zero share to a 46% share of DFW-ICT origin and destination passengers. In

contrast, American’s share of origin and destination passengers on this route dropped from approximately 70% in the first quarter of 1995 to approximately

44% in the second quarter of 1995.
Vanguard announced in September 1995 that it was adding a third daily jet flight on DFW ICT effective October 3, 1995.
After Vanguard’s December 1995 exit from the DFW-MCI non-stop market, American began to reduce its service to ten flights per day. Local average fares on

the route increased $75 to $100. The DFW-MCI market went from being one of American’s worst-performing routes during the first predation period to the

“best in the West” in early 1996, after Vanguard’s exit from non-stop service in the market. By May 1996, American had eliminated the $20 premium on its

one way DFW ICT fares.
Vanguard announced on July 16, 1996 that it was increasing its daily DFW ICT jet service from three flights to four, effective August 9, 1996. In August,

Vanguard’s chief executive characterized Vanguard’s DFW ICT position as “dominant” because Vanguard “ha[d] the only jets.”

By the fall of 1996, American’s yield management strategy on DFW ICT was to ensure that, in light of the low fare environment, its yield management

computer system was not assuming more high fare demand than there was likely to be. Although Vanguard was no longer serving DFW-MCI on a non-stop basis, in

the spring of 1996, American noticed that Vanguard was nevertheless carrying a significant share of DFW-MCI passengers on a connect basis over Wichita.

American believed that the reason for Vanguard’s significant share, despite its “inferior service,” was that American had raised fares, restricted lower

bucket availability, and cut capacity.
At an earlier meeting of senior management, American staff cited the response to Vanguard in DFW-MCI as a model of a successful strategy against an LCC.

Subsequently, American began to match Vanguard’s fares on DFW-ICT flights with an “open availability” yield management strategy, which significantly

expanded the number of low fare seats available. In May 1996, American began matching Vanguard’s zero to seven-day advance purchase one-way fares on all of

its DFW-MCI non-stop flights and matched Vanguard’s fourteen-day advance purchase one-way fares on five of its ten non-stop flights. Over the next few

months, American monitored the impact of this match to assess whether to step up its fare, capacity and availability responses on DFW-MCI as necessary. By

August of 1996, American determined that it needed additional capacity in DFW-Kansas City to address what it termed “competitive issues,” and decided to

increase frequency from ten to twelve round-trips effective November 1996.

American had found in a previous (1993) experiment with low “Southwest-type fares” on this route had caused it to “lose money” with fares that were “below

variable cost.” In a letter dated March 16, 1993, American’s CEO Robert Crandall had written to Congressman Dan Glickman, “We really do not want to deny

our friends in Kansas low fares — on the other hand, when we sell tickets at Southwest’s prices, we lose lots of money.” In a letter dated April 5, 1993,

American’s Senior Vice President for Marketing, Michael Gunn, had written to Congressman Dan Glickman and explained that American’s 1992-1993 “low-fare

pricing test in the Dallas/Fort Worth-Wichita market” caused “revenues in this market [then $93 or $94 per passenger] [to] drop below variable costs.”
From October 1995 to September 1996, American Eagle’s turboprop service in DFW-ICT had been performing positively. American’s Managing Director of Capacity

Planning could recall no other instance where American made a decision to add capacity as rapidly as it did in Wichita, Kansas City and Phoenix during this

time period. American’s re-introduction of five daily jet flights to the DFW-Wichita route expanded its seating capacity by 35%, in addition to making many

more seats available at the lowest fares.
On September 11, 1996, American decided to respond to Vanguard’s route restructure by accelerating the dates of its planned addition of capacity in DFW-

Phoenix from November to October 1, 1996. In response to Vanguard entry into DFW-PHX, American matched Vanguard’s fares on five of its DFW-PHX flights and

opened up seat availability. Its average fare in DFW-PHX fell from $193.90 in September 1996 to $137.38 in November 1996.

In September 1996, Vanguard announced a route restructuring that would considerably expand its DFW service, including the reintroduction of DFW-Kansas City

non-stop service, and the introduction of service from DFW to Phoenix and from DFW to Cincinnati. Vanguard’s then-CEO, Robert McAdoo, modeled the route

restructuring on a strategy that had been effective for Morris Air, a successful LCC that had operated out of Salt Lake City, which was to enter relatively

large markets on a modest scale (one flight a day) so that the major airlines would not react in some extremely vigorous manner. On September 9, 1996,

Vanguard announced that it would begin daily service between Kansas City and Cincinnati (CVG), with continuing service to DFW, among other destinations.

Vanguard also announced that it would be serving DFW-Phoenix (PHX) with one daily flight to commence on October 1, 1996.
On September 10, 1996, American began gathering data on Vanguard and the DFW-MCI market in order to determine “what we should do in response.” The next

day, it decided to move up to October its planned November addition of two round-trips and to add a third new frequency to begin in November for a total of

13 daily flights. It decided that it would substitute five jet trips daily for four of the existing DFW ICT turboprop flights. The new jet service for DFW

ICT in the fall of 1996 was funded with aircraft sitting idle due to pilot actions. Italso began matching Vanguard’s fares on all of its ten daily DFW-MCI

flights, and decided to return jets to Wichita.
On September 27, 1996, three days after American learned that Vanguard was planning to serve Cincinnati-DFW-Phoenix, American decided to re-initiate

service on DFW-Cincinnati with three daily flights effective December 2. In 1994, American had abandoned the DFW-Cincinnati (CVG) market as unprofitable.

And in August 1996, American had reviewed the DFW-CVG market and decided not to add service in that market at that time, delaying the decision until the

spring of 1997. The desire to respond to Vanguard’s entry was a major reason for American’s entry into DFW-CVG. American’s Decision FAUDNC – one of

American’s profitability measures – was negative in DFW-CVG for December 1996 through March 1997.

In September of 1996, American also began to compete in markets where Vanguard offered through or connect service against American’s non-stop service, for

example in DFW-CHI (Chicago), where American matched Vanguard on three flights with expanded availability, and DFW-DSM, where American matched Vanguard on

two flight with full availability.
Thus, as of the fall of 1996, American’s five DFW ICT jet trips competed with Vanguard’s four jet trips. Once American substituted five jet flights for

four turboprop flights on DFW ICT, its total nonstop daily service was ten flights.
American returned jets to Wichita to respond to Vanguard’s announcement of its expansion. This return of jet service to Wichita in September of 1996 was

not pursuant to a minimum revenue guarantee program with the City of Wichita. This increase of capacity from ten to twelve round-trips effective November

1996 required an override of its capacity planning model.American continued to match Vanguard’s fares and maintained full availability with its restored

jet service on DFW-ICT.
Vanguard’s share of Dallas/Fort Worth Wichita origin and destination passengers in the fourth quarter of 1996 was approximately 29%.
In the face of American’s actions between DFW and both Wichita and Kansas City, Vanguard decided to retreat somewhat by pulling its new southbound Kansas

City-DFW non-stop flight and one of its existing northbound DFW-Wichita non-stops, leaving its existing southbound one-stop flight (via Wichita) and two

northbound non-stop flights between Kansas City and DFW.

Mr. McAdoo concluded that his limited entry strategy had not succeeded in the context of the competitive environment. Vanguard believed that it was

virtually impossible to generate the loads and revenue required to achieve profitability on the DFW-ICT route in light of American’s competition.
After asking Robert McAdoo to resign, Vanguard’s board of directors hired a new CEO, John Tague, who took over on November 1, 1996. Tague assessed

Vanguard’s existing route structure, which included an evaluation of competitive conditions in each of the routes and of the potential reactions of those

competitors. Tague observed that in many respects, Vanguard was “functioning pretty well.” However, he also felt that Vanguard’s route structure when he

took over was “excessively dissipated,” “lacked focus,” and, given the size of its fleet, “needed to be in a more concentrated geographic area.”
Tague restructured Vanguard’s routes into a Kansas City hub and spoke system in November, 1996, and canceled Vanguard’s service from Phoenix and Cincinnati

that had been introduced as part of Mr. McAdoo’s strategy (including the routes to DFW), along with the DFW-ICT route.
On November 8, 1996, Vanguard announced that it was leaving the DFW-CVG route after only eight trips. At the same time, it announced that it was leaving

the DFW-PHX route altogether, and that it would be leaving the DFW-Wichita route altogether in December. Vanguard ceased DFW ICT service in December 1996.

By April 1997, Vanguard had eliminated all non Kansas City hub service except for a profitable Midway Minneapolis route. Vanguard continued to deploy its

aircraft after April 1997 primarily on routes from Kansas City.
American’s FAUDNC performance in DFW-PHX declined significantly in November 1996. However, as American notes, while FAUDNC declined, it nonetheless

remained positive. Moreover, FAUDNC increased three-fold between October, 1996 and January, 1997, even after further increases in seat capacity.

In mid-December of 1996, Senator Brownback of Kansas complained to American’s then-CEO, Robert Crandall about the recent fare increases on DFW-ICT. On

January 2, 1997, Mr. Crandall drafted a response to Senator Brownback that included the point “[i]n recent weeks, fares between Wichita and DFW have been

below cost.” The letter American actually sent to Senator Brownback contained the following language: “fares were too low … to allow us to earn a

reasonable rate of return.”
After Vanguard’s November exit, American’s fares increased, although they remained below the fare charged prior to Vanguard’s market entry. American

eliminated three turboprop flights in April of 1997, thereby bringing the monthly seat capacity back to American’s September 1996 level. American as of the

end of 2000 served DFW ICT with five jet trips and four turboprop trips daily. Delta as of the end of 2000 was serving DFW ICT with five daily turboprop

After Vanguard’s exit, fares on the DFW-Wichita rose from $70 to $117, higher than the period when Vanguard operated in Wichita, but lower than the period

1990 to 1992. The number of passengers who traveled on the route rose from 60,000 in 1993, to 147,000 in 1996, and fell to approximately 76,000 in 1999.
Vanguard has maintained DFW service out of its Kansas City hub, and continues to serve the route to this day. Kansas City is Vanguard’s only non-stop

destination served from DFW. Eventually, fares of both American and Vanguard increased on the DFW-MCI route. In 1997 and 1998, American continued to

monitor and take actions, such as fare matching on a flight specific basis or flight bracketing, of Vanguard’s through or connect service, which included

at various times DFW-Chicago, DFW-Minneapolis, DFW-Des Moines, DFW-Denver, DFW-New York (JFK) and DFW-San Francisco.

American’s average fares throughout the period of Vanguard’s nonstop DFW ICT service were equal to or higher than Vanguard’s average fares.
Western Pacific opened a hub at COS in April 1995, and began DFW COS service in June 1995 with two daily nonstop 737 flights each way. In the second

quarter of 1995 Western Pacific had approximately a 28% share of DFW COS origin and destination passengers. When Western Pacific began DFW COS service,

that route was the only nonstop route on which Western Pacific and American competed against one another.
DFW COS is a seasonal route, with typically higher service in the summer. In 1994, American had added a fifth F-100 jet to the route, and continued to

serve the route with five flights through the end of the summer season. In May of 1995, it had added yet another flight to the route. Thus, at the time

Western Pacific began DFW COS service, American had five DFW COS round trips. Delta had three round trips.

For the first month after Western Pacific began DFW-COS service, American did not add more flights but reduced prices, responding to Western Pacific’s low,

unrestricted fares with ones of the same dollar value, but with advance purchase and round trip ticketing requirements that Western Pacific’s fares did not

have. During this time, American’s average revenue fell from about $124 to about $106.
In July 1995, American added two DFW COS flights. After American’s fare reductions and capacity increases, average revenue fell below $100, in contrast to

its Summer 1994 average revenue of approximately $120. In the fourth quarter of 1995, Western Pacific’s share of DFW COS passengers was approximately 38%

and American’s was approximately 45%.
In December 1995, American briefly withdrew one F-100 flight per day from DFW-COS. One reason that American’s profits for the month increased is because of

the reduction in service on DFW-COS.
In November 1995, Western Pacific announced that it was reducing service on DFW-COS to one round-trip per day. On January 8, 1996, it did so to redeploy

the airplane to commence COS-ATL (Atlanta) service. Western Pacific’s general strategy was to redeploy aircraft to commence service on new routes, due to

inadequate aircraft availability and to make more money. In May 1996, its single DFW COS route was one of Western Pacific’s top five contributing routes.

Notes taken during a February 1996 DFW LCC strategy meeting indicated that a recommendation was made by some person that American should get Western

Pacific “out” of DFW before Western Pacific added back the second flight it had withdrawn. In March 1996, American made plans to “protect DFW” by adding

one round-trip flight to DFW-COS and upgrading all round trips to MD-80s. A month later, it broadened availability of low fares on DFW-COS. Between May and

July 1996, American replaced its seven F-100 flights per day on DFW-COS with eight MD-80s, causing a 43% increase in capacity over June 1996 and more than

a 100% increase in capacity over the five F-100s that American flew during the summer of 1994 (before Western Pacific entered). After the end of the 1996

peak summer season, American’s Capacity Planning Department planned to make a normal seasonal frequency reduction on DFW-COS. However, American’s Yield

Management Department intervened and American continued to deploy eight MD-80 round-trips. From September 1996 through October 1997, American increased its

capacity on DFW-COS.
From September 1996 to October 1997, American’s capacity additions and associated price and yield management actions caused American’s profitability on the

DFW-Colorado Springs route, as measured by American’s FAUDNC, to decline substantially, and indeed to become negative. However, VAUDNS, VAUDNC and VAUDNC-

AC (other measures of profitability) were all positive during throughout this period.
Western Pacific’s one flight garnered from 16 to 23% of the DFW COS traffic in the first three quarters of 1996.
American monitored Western Pacific’s beyond service from at least early 1996. In March, 1996, American notes that Western Pacific’s bookings in DFW-SEA

have decreased, prompting it to state: “It appears our strategy towards Western Pacific may be working.” In the spring of 1996, American’s LCC team

undertook the task of determining whether American should match Western Pacific in additional DFW flow markets.

In May, 1996, American’s LCC team had concluded that Western Pacific’s reduction to one flight in January resulted in poor connections over COS and did not

present a viable threat to American. American subsequently canceled the matching fare on its DFW-SEA non-stop. In October 1996, American stated that it

“will continue to monitor W7 flow traffic over COS.” In late 1996, Western Pacific changed chief executives and the new management shifted Western

Pacific’s strategy to high frequency service on a more limited number of routes. At the end of December 1996, Western Pacific added a second DFW COS round

trip daily and announced that it would add a third as of February 1997.
In January 1997, American decided to add a ninth DFW COS round trip and to upgrade three aircraft to Boeing 757s effective March 1997. It also began a

“massive incentive program” which increased the number of travel agencies in Colorado Springs eligible for special incentives to book their clients on

American. It also provided free first class upgrades to MCI corporate customers and frequent fliers on the DFW-COS route. American noted that Western

Pacific’s additional DFW-COS flights produced for Western Pacific “a substantial increase in market share for many of its flow markets.” In early 1997,

American’s list of “wait and see” markets expanded to include 14 total Western Pacific markets. During the Spring and Summer of 1997, American continued to

monitor closely Western Pacific’s activities in its flow markets.
In March 1997, American added three 757s and withdrew two MD-80s, increasing service to four MD-80s, three 757s, and two F-100s flights per day on DFW-COS.
At times during the period of June to December 1996, American used inefficient banking operations on some flights, and flights from Colorado Springs to DFW

sometimes met outgoing west-bound banks taking passengers west of DFW. It is unusual that American used 757 aircraft on DFW-COS.
As American and other airlines increased their capacity, it became increasingly difficult for Western Pacific to stimulate additional demand at acceptable

fare levels in Colorado Springs.

At the end of April 1997, Western Pacific announced that it was moving more than half of its flights from COS to Denver (DEN), effective at the end of

June. Colorado Springs and Denver are approximately 50 miles apart. In the second quarter of 1997, when Western Pacific moved significant operations from

COS to DEN, it carried approximately 21% of the DFW COS passengers.
Western Pacific’s new DFW-Denver service was met with strong pricing and yield management initiatives by American. Company memos show that, in the summer

of 1997, American contemplated a response including matching fares and providing full availability on 6 of 12 flights.
In June 1997, Western Pacific announced that it would merge with Frontier Airlines. Frontier Airlines is an LCC that operates a hub in Denver. On June 29,

1997, Western Pacific withdrew two 737 flights from DFW-COS, reducing service to one flight per day. On July 1, 1997, American down gauged the 757 aircraft

on the DFW COS route.
In July 1997, Western Pacific reduced daily service on DFW-COS to one-half round-trip per day. In August, American withdrew two daily MD-80s flights from

DFW-COS and added one F-100, serving DFW-COS with four MD-80s and three F-100s round-trips per day. The same month, Western Pacific resumed daily service

on DFW-COS with two 737 flights per day.
On September 9, 1997, American conducted a financial analysis of Western Pacific that calculated its break-even load factor. During this same period,

American “add[ed] back” two additional flights per day on DFW-COS, and decided to change its strategy from matching on 6 of 12 flights on DFW-DEN, to fully

matching on all 12 daily round-trip flights.

An October 1997 System Results package shows that DFW-DEN (along with DFW-ATL) “posted the largest FAUDNC declines.” “Both are low-cost carrier competitive

markets. In DFW DEN, AA was at 13 RT in October and W7 at 4.” The same month, American planned to adjust its winter schedule to add two additional DC-10

aircraft to DFW-DEN, in part by downgrading LAX-EWR to “fund” the additional aircraft.
The Western Pacific/Frontier merger was called off in late September, 1997. Frontier withdrew from the proposed merger with Western Pacific because of

concerns about the valuation of Western Pacific stock. In October, Western Pacific ceased all nonstop DFW COS service, but continued to serve DFW-DEN with

four flights per day with connecting service to COS. Western Pacific filed for bankruptcy on October 5, 1997 and ceased all operations in February 1998.
American’s average local fare in DFW-DEN decreased from $180 in June 1997 to $129 in July 1997 and then decreased further in October 1997 to $108. After

Western Pacific’s withdrawal from DFW-Colorado Springs, American reduced capacity. Average revenue rose to $119.
In 1998, American continued to monitor Western Pacific’s flow markets and to match Western Pacific on a flight-specific basis in numerous flow markets.
At the end of 2000, American offered six daily nonstop DFW COS flights, while Delta offered two daily nonstop flights. United, Frontier, American, and

Delta also offered nonstop DFW DEN service as of the end of 2000.

American’s average fares were higher than Western Pacific’s average fares during the entire period that Western Pacific was offering DFW COS service.
DFW-LGB (Long Beach)
In August 1993, SunJet International received DOT authorization to operate as a “supplemental” carrier. By October 1993, SunJet commenced operation with

two MD-80 jets, one flying between Fort Lauderdale and Newark, one between Newark and St. Petersburg. SunJet intended to serve the Tampa Bay area by

offering service out of the St. Petersburg/Clearwater International Airport (PIE). SunJet, by setting its prices lower than fares regularly offered by

major carriers, attracted price-sensitive passengers who might otherwise have chosen not to fly.
Although SunJet was not a “scheduled carrier,” as that term is used in the airline industry, SunJet offered regularly scheduled flights on the city-pairs

it served. SunJet entered into agreements with contractors to provide certain services, including reservations and ticketing, marketing, aircraft

maintenance, and baggage handling. SunJet also entered into an agreement with World Technology Systems (WTS) under which WTS provided financial backing and

reservation and revenue accounting support for SunJet. WTS also selected routes for SunJet.

In June of 1994, American had “abandoned” its efforts to serve DFW-Long Beach due to lack of traffic. In the same month, SunJet entered DFW with limited

service to Newark (EWR) and Long Beach (LGB), resulting in one-stop service between Newark and Long Beach. SunJet added non-stop service between DFW and

St. Petersburg, and one-stop service between St. Petersburg and Long Beach in February of 1995. SunJet wanted to serve the Los Angeles market from its

service cities (EWR and PIE) on the east coast. The company viewed the Long Beach airport as an ancillary or secondary airport serving the Los Angeles

area, the use of which provided significant cost savings in landing fees compared to Los Angeles International (LAX). SunJet learned about American’s

withdrawal of DFW-LGB service after it had decided to start serving DFW-LGB.
No scheduled airline offered DFW LGB nonstop service from June 1994 to January 1997. America West had offered connecting DFW LGB service (through its

Phoenix hub) since 1994.
SunJet offered a third DFW LGB nonstop flight daily from September 26 December 6, 1996.
American referenced SunJet’s DFW-EWR/LGB service in a June 1994 presentation entitled “Start-up/Low Cost Carriers.” It also noted that SunJet’s entry into

the DFW-DWR market in June 1994 “resulted in $198 round-trip DFW-EWR fares and the first instance of a low-cost carrier connecting passengers in DFW.”

American reduced fares in the DFW-FPA market in December 1994.
By December of 1995, American recognized that SunJet’s route structure presented opportunities for SunJet to create a DFW hub. American noted that SunJet

enplaned more passengers per day than any other LCC at DFW in September of 1995, and was a major concern for American. SunJet’s initiation of DFW-LGB

service was one factor which led American to consider re-entering the DFW-LGB route as early as December of 1995. American anticipated capital start-up

expenditures of from $100,000 to $120,000, with “worst-case” start-up costs of $171,000.

In February of 1996, American decided to continue its strategy of matching SunJet on a limited basis and not to pursue a stronger approach unless SunJet

increased its frequency or added additional DFW routes. In late 1995 or early 1996, American expanded its limited match of SunJet fares to four flights

into EWR and three flights into TPA. As of May 16, 1996, American matched SunJet’s fares on six DFW-EWR flights, and three flights in PIE (TPA).
David Banmiller became CEO and President of SunJet in May of 1996. He was hired by John Mansour, who purchased SunJet from its original owner in September

of 1995. SunJet’s new management made plans to add an additional DFW-LGB flight in August of 1996. WTS and SunJet personnel advised SunJet management

against adding the third DFW-LGB flight, recognizing that SunJet was currently flying below the “radar” and that adding capacity might lead to a strong

response from American.
SunJet’s former management had avoided flying more than two frequencies on any single route to assist in avoiding a response by major carriers. However,

SunJet initiated a third DFW-LGB non-stop daily flight on September 26, 1996. In November, it began advertising plans to begin DFW-OAK service.
American responded to SunJet’s announcements of new and expanded DFW service with a variety of actions. On November 25, 1996, American announced it would

enter DFW-LGB and increase frequency in DFW-OAK. SunJet discontinued its third DFW-LGB flight in December of 1996.
SunJet canceled plans to enter DFW-OAK. There is a fact dispute as to the reason for the cancellation. WTS felt that it was due to insufficient customer

response. There is other evidence that the cancellation occurred because SunJet failed to secure the necessary aircraft.

On January 3, 1997, American announced that it was resuming nonstop DFW LGB service effective January 31, 1997 with three daily round trips. American began

DFW LGB service in January 1997 with fares of an equal value to what it believed were SunJet’s lowest fares, but with greater restrictions than SunJet’s,

specifically a 3 day advance purchase requirement and round trip ticketing only.
SunJet had financial difficulties for at least nine months prior to March 1997. WTS, which provided marketing services to SunJet, assumed control of all

financial risk related to passenger sales and SunJet’s sales and route selection functions in March 1997. Prior to this, SunJet decided where and when it

would fly, and WTS provided reservation and revenue accounting support. After “reviewing conditions within [its] industry, including competitive factors

and [its] internal challenges, SunJet agreed to turn over all scheduling, pricing and marketing functions to WTS.” SunJet retained financial responsibility

for aircraft, crew, maintenance and insurance, and WTS assumed financial responsibility for and direct supervision of other aspects of flight operations.

WTS discontinued its PIE-DFW service andreduced DFW LGB service to one flight in March 1997 in order to use the second airplane on another route. SunJet

suspended all flight operations on June 17, 1997 and filed for bankruptcy protection the next day, telling its shareholders that this failure was due to

“significant aircraft down time as a result of non routine maintenance issues.”
After SunJet’s bankruptcy, WTS contracted with other carriers to continue operating SunJet’s routes (doing business as SunJet). WTS added a second DFW LGB

round trip from July to September 1997. WTS’ profits on its DFW-LGB route went from $175,040 in July 1997 to $41,284in September 1997, after American added

a fourth DFW-LGB flight in August 1997.Overall, during the period that WTS operated the DFW LGB route, it earned more than $1 million in profits on it.

American added a fourth DFW LGB flight in August 1997. WTS discontinued SunJet’s DFW-LGB service in January 1998, stating that it was having difficulty

obtaining a long term commitment for aircraft which would meet LGB’s noise ordinances, and it was unable to secure replacement lift services. WTS personnel

have subsequently also attributed this decision to other reasons, including competition by American. WTS ceased operations in June 1999.
After SunJet exited DFW-EWR, American withdrew capacity.
As of the end of 2000, American was continuing to offer four DFW LGB nonstop flights daily. United was offering nonstop DFW LAX service as well as of the

end of 2000. Delta as of the end of 2000 offered nonstop DFW LAX service, as well as nonstop service between DFW and Orange County (SNA) and Ontario (ONT)

airports in the Los Angeles Basin. According to DOT data, Southwest as of the end of 2000 carried connect traffic between Dallas Love Field and the Los

Angeles Basin. Other airlines, including Frontier and National, offered service between Dallas/Fort Worth and the Los Angeles Basin on a connecting basis

as of the end of 2000.
American frequently experiences negative results for the first few months of service on a new route.
DFW EWR (Newark)

American may have engaged in predatory conduct on DFW EWR against SunJet by adding flights in May 1996 and removing some restrictions from its SunJet

responsive fares in November 1996. SunJet began DFW EWR service in June 1994 with low, unrestricted (no advance or round trip purchase requirement) fares.

American and Delta were offering nonstop DFW EWR service in June 1994. In May 1995, American began offering a DFW EWR fare designed to respond to (but not

undercut) SunJet’s, but with advance purchase and round trip travel requirements that SunJet did not impose, and offered its responsive fare only on a

limited number of American flights.
Continental Airlines, which operates a hub at Newark, began DFW EWR service effective May 1, 1996.
American increased its DFW EWR service by three flights by June 1996, after Continental began DFW EWR service with three daily flights.
In November 1996, American removed a Saturday night stay requirement on its “matching” SunJet DFW EWR fares but continued to maintain the advance purchase

and round trip restriction, and offer its “matching” fares only on a limited number of its flights.
SunJet ceased operations in June 1997; WTS ceased serving DFW EWR at the end of 1997.
At the end of 2000, American (ten daily flights) and Continental (seven daily flights) continued to offer nonstop DFW EWR service; Delta offered nonstop

service to the New York Metropolitan area at LGA and JFK; and other airlines (including Vanguard and AirTran) offered connecting service between DFW and

EWR, and numerous other airlines were offering connecting service between DFW and LGA and JFK.

DFW TPA (Tampa)
American may have engaged in predatory conduct on DFW TPA against SunJet by becoming more aggressive against SunJet in November 1996 by removing

restrictions from its “matching” fares.
SunJet began DFW PIE (St. Petersburg) service in early 1995 with low, unrestricted (no advanced purchase or round trip required) fares.
American has never served PIE, but served (and still serves) Tampa International Airport, 15 miles from PIE. In January 1995, American responded to (but

did not undercut) what it believed to be SunJet’s lowest DFW PIE fares on DFW TPA on a round-trip basis, and with a 7 day advance purchase requirement that

SunJet did not impose, and only on a limited number of its DFW TPA flights.
In November 1996, American reduced the advance purchase requirement on its responding DFW TPA fares to three days and removed a Saturday night stay

requirement but continued to maintain the round-trip restriction, and to offer these fares on only some of its DFW TPA flights. In March, 1997,

SunJet assigned route decisions to WTS, which decided to exit this route. In sworn responses to a Department of Justice Civil Investigative Demand dated

April 23, 1998, WTS attributed its decision to stop DFW PIE service to “lack of passenger demand and aircraft unavailability,” and did not mention any

American conduct.
American (six daily flights) and Delta (three daily flights) offered nonstop DFW TPA service as of the end of 2000; connecting service was provided

by AirTran and others.
DFW OAK (Oakland)

American might have engaged in predatory conduct in DFW OAK by “substantially matching” SunJet’s DFW OAK fares.
Sun Jet announced in November 1996 that it would initiate DFW OAK service in December with low, unrestricted (no advance purchase or round trip purchase

required) fares. When SunJet made this announcement in November 1996, American and Delta were already offering nonstop DFW OAK service.
American filed DFW OAK fares in November 1996 effective on SunJet’s starting date responding to (but not undercutting) SunJet’s fare levels, but with a

round trip and three day advance purchase requirement that SunJet did not impose.
SunJet did not begin DFW OAK, in part because it was unable to secure the additional aircraft necessary to operate the route. As of the end of 2000,

American (four daily flights) and Delta (three daily flights) served DFW OAK nonstop, while other airlines offered service between Dallas/Fort Worth and

Oakland, San Francisco, and San Jose on a nonstop or connecting basis.
DFW PHX (Phoenix)
American may have engaged in below cost pricing from October 1996 through November 1996. Vanguard announced on September 9, 1996 that it would introduce

DFW PHX service on October 1, 1996 at “low fares.” On September 24 and October 9, 1996, Vanguard announced service between Phoenix and Cincinnati, Denver,

Wichita, and Minneapolis beginning in October or November.
At the time Vanguard announced DFW PHX service, DFW PHX was already served by Delta, American and America West on a nonstop basis. Phoenix is a hub for

America West airlines and has been since 1994. Vanguard began one daily round trip DFW PHX service in October 1996.
Prior to Vanguard announcing its DFW PHX service, American had published its plan to add four DFW PHX flights (in addition to American’s then nine daily

round trips) over the September December 1996 period.
After Vanguard’s announcement of DFW PHX service, American accelerated the start dates on some of its four additional flights. American matched Vanguard’s

fare level and offered the matching fares on five of American’s DFW PHX flights.
After Vanguard hired a new CEO, Vanguard announced on November 8, 1996 that it was canceling DFW PHX (and other PHX) service, eliminating PHX entirely from

its route structure. Vanguard’s DFW PHX service operated only from October to November 1996.
At the end of 2000, American continued to serve DFW PHX (with 11 daily nonstop flights constituting more service than it offered during 1996), as did

America West (five daily flights) and Delta (three daily flights) on a nonstop basis. Moreover, according to DOT data, as of the end of 2000, Southwest

carried connect traffic between Dallas Love Field and Phoenix.
During the twelve months preceding Vanguard’s April 1995 entry into the DFW-ICT market (April 1994-March 1995), American’s average fare, local

passengers carried and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$99 – $108 3,932 – 5,557 21,314 – 32,109

During the four quarters preceding Vanguard’s April 1995 entry into the DFW – ICT market (2Q 1994 – 1Q 1995), the total number of local passengers

traveling in that market each quarter ranged from 16,420 to 19,390. The average market fare ranged from $105 to $115 during that period.

During the period from June 1995 through September 1996, while Vanguard served the DFW – ICT market but before American’s questionable acts in that market,

American’s average fare, local passengers carried and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$52 – $75 5,166 – 7,578 30,528 – 34,664

During that same period, the total number of local passengers traveling in that market ranged from 35,140 to 37,460 per quarter. The average market fare

ranged from $60 to $68.
During the period from October 1996 through December 1996, when American may have engaged in predatory acts in the DFW-ICT market, American’s

average fare, local passengers carried and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$58 – $61 10,076 – 11,041 44,798 – 47,588

During that same October 1996 through December 1996 period, the total number of local passengers traveling in that market 38,650 for the quarter. The

average market fare was $55.
During the twelve – month period beginning six months after Vanguard’s exit (July 1997 – June 1998) from the DFW-ICT market, American’s average fare, local

passengers carried, and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$88 – $102 7,019 – 8,373 29,939 – 33,790

During the same twelve-month period, the total number of local passengers traveling in that market ranged from 20,840 to 24,590 per quarter. The average

market fare ranged from $94 to $99.
During the second twelve-month period beginning six months after Vanguard’s exit (July 1998-June 1999) from the DFW-ICT market, American’s average fare,

local passengers carried, and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$100 – $123 5,744 – 8,257 25,891 – 33,651

During the same twelve-month period, the total number of local passengers traveling in that market ranged from 19,610 to 23,200 per quarter. The average

market fare ranged from $105 to $120.
During the period from January 1994 to December 1994, before Vanguard entered the DFW-MCI market, American’s average fare, local passengers carried and

total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$107 – $117 14,831 – 19,306 61,489 – 69,092

During the same period, the total number of local passengers traveling in that market ranged from 66,190 to 71,860 per quarter. The average market fare

ranged from $108 to $115.
During the period from February 1995 through December 1995, while Vanguard served the DFW-MCI market on a non-stop basis, American’s average fare, local

passengers carried, and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$77 – $98 19,269 – 34,528 58,903 – 106,996

During the same February 1995 through December 1995 time period, the total number of local passengers traveling in that market ranged from 94,520 to

103,610 per quarter. The average market fare ranged from $79 to $88.
During the period from January 1996 to September 1996, when Vanguard did not serve the DFW-MCI market on a non-stop basis, American’s average fare, local

passengers carried, and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$108 – $147 24,435 – 31,568 74,404 – 92,534

During the same January 1996 to September 1996 period, the total number of local passengers traveling in that market ranged from 83,740 to 98,900 per

quarter. The average market fare ranged from $110 to $128.

During the period from October 1996 to May 1998, while Vanguard served the DFW-MCI market and American might have engaged in predation in that market,

American’s average fare, local passengers carried and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$76 – $102 29,312 – 43,303 85,890 – 106,992

During that same October 1996 to May 1998 time period, the total number of local passengers traveling in that market ranged from 104,870 to 128,850 per

quarter. The average market fare ranged from $74 to $96.
After the end of the period when American might have engaged in predation in DFW-MCI, from June 1998 through September 1999, American’s average fare, local

passengers carried, and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$93 – $126 27,222 – 40,026 72,644 – 100,503

After the end of the same period, the total number of local passengers traveling in that market ranged from 110,690 to 126,430 per quarter. The average

market fare ranged from $96 to $113.

During the period from June 1994 to May 1995, the one-year period preceding Western Pacific’s entry into the DFW-COS market, American’s average fare, local

passengers carried, and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$141 – $178 2,740 – 4,373 21,533 – 29,479

During the period from June 1994 to May 1995 (3Q 1994- 2Q 1995), the one-year period preceding Western Pacific’s entry into the DFW-COS market, the total

number of local passengers traveling in that market ranged from 11,490 to 22,310 per quarter. The average market fare ranged from $114 to $158.
During the period from July 1995 through October 1997, while Western Pacific served the DFW-COS market, American’s average fare, local passengers carried,

and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$73 – $110 9,088 – 24,673 36,385 – 80,304

During the period that Western Pacific served in the DFW-COS market (July 1995 through October 1997 (3Q 1995- 3Q 1997)), the total number of local

passengers traveling in that market ranged from 45,800 to 86,090 per quarter. The average market fare ranged from $75 to $102.

During the period from during the twelve-month period beginning six months after Western Pacific’s exit from the DFW-COS market (April 1998 through March

1999), American’s average fare, local passengers carried, and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$120 – $156 7,536 – 12,487 32,607 – 41,334

During that same period, the total number of local passengers traveling in that market ranged from 25,550 to 40,120 per quarter. The average market fare

ranged from $131 to $139.
During the period from February 1997 through January 1998, while both American and SunJet served the DFW-LGB market, American’s average fare, local

passengers carried and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$83 – $118 6,615 – 24,997 21,128 – 34,472

During the same February 1997 through January 1998 period, the total number of local passengers traveling in that market ranged from 59,210-75,000 per

quarter, excluding passengers carried by SunJet. The average market fare ranged from $94 to $107.
During the twelve-month period beginning six months after SunJet’s exit (July 1998 through June 1999), American’s average fare, local passengers carried,

and total seats, on a monthly basis, were within the following ranges:

American Average Fare American Local Passengers American Seats
$142 – $177 13,513 – 25,309 21,866 – 33,739

During the same twelve-month period, the total number of local passengers traveling in that market ranged from 60,200-77,360 per quarter. The average

market fare ranged from $141 to $164.
The following table shows the monthly ranges for American’s monthly average fare, the local passengers carried, and the total number of seats allocated to

various routes. In addition, the table shows the total number of passengers in the market (shown per quarter rather than by month) and the average fare

during the period. The first section, dealing with the Dallas – Wichita route, uses five time periods: the 12 months preceding Vanguard’s market entry, the

period after entry but before any possible “predation,” the period of the potential predation, and the two successive 12-month periods following Vanguard’s

departure from the market. The second Dallas – Kansas City, uses periods representing the period prior to Vanguard’s entry, the period of Vanguard’s non-

stop service, the period of Vanguard’s connect-only service, the period of the suspected predation, and the subsequent 16 months. The third section, Dallas

– Colorado Springs, shows three periods: the year prior to Western Pacific’s entry in the market, the period Western Pacific operated in the market, and

the twelve month period commencing six months after Western Pacific’s departure from the market. The final section, Dallas – Long Beach, has two periods:

that during which American and SunJet were both in the market, and the twelve-month period commencing six months after SunJet’s exit.


American Market

Average Fare Local Passengers Total Seats Average Fare Passengers/Quarter
06/1994 – 05/1995 $ 99 – 108 3932 – 5557 21,314 – 32,109 $ 105-115 16,420 – 19,390
06/1995 – 09/1996 52 – 75 5166 – 7578 30,528 – 34,664 60 – 68 35,140 – 37,460
10/1996 – 12/1996 58 – 61 10,076 – 11,041 44,798 – 47,588 55 38,650
07/1997 – 06/1998 88 – 102 7019 – 8373 29,939 – 33,790 94 – 99 20,840 – 24,590
07/1998 – 06/1999 100 – 123 5744 – 8257 25,891 – 33,651 105 – 120 19,610 – 23,200
01/1994 – 12/1994 107 – 117 14,831-19,306 61,489 – 69,092 108 – 115 66,190 – 71,860
02/1995 – 12/1995 77 – 98 19,269-34,528 58,903 – 106,996 79 – 88 94,520 – 103,610
01/1996 – 09/1996 108 – 147 24,435 – 31,568 74,404 – 92,534 110 – 128 83,740 – 98,900
10/1996 – 05/1998 76 – 102 29,312 – 43,303 85,890-106,992 74 – 96 104,870 – 128,580
06/1998 – 09/1999 93 – 126 27,222 – 40,026 72,644 – 100,503 96 – 113 110,690 – 126,430
06/1994 – 05/1995 141 178 2,740 – 4,373 21,533 – 29,479 114 – 158 11,490 – 22,310
07/1995 – 10/1997 73 – 110 9,088 – 24,673 36,385 – 80,304 75 – 102 45,800 – 86,090
04/1998 – 03/1999 120 – 156 7,536 – 12,487 32,607 – 41,334 131 – 139 25,550 – 40,120
02/1997 – 01/1998 83 – 118 6,615 – 24,997 21,128 – 34,472 94 – 107 59,210 – 75,000
07/1998 – 06/1999 142 – 177 13,513 – 25,309 21,866 – 33,739 141 – 164 60,200 – 77,3600

American’s Performance Measures and Related Facts
Marginal cost is the incremental cost of a very small change in output. Marginal cost is difficult to measure directly. Incremental cost is the amount by

which costs change when output changes. Incremental cost is an extension of the concept of marginal cost.

American has developed a number of internal measures that address, among other things, route performance. Some of these measures are referred to as

“decision measures” because they are used for decision making rather than financial reporting. Certain of American’s decision measures, such as Decision

FAUDNC, primarily measure the relative performance of routes. The company employs two basic categories of flight and route performance measures: fully

allocated earnings measures (including the Decision FAUDNC and Decision FAUDNS measures) and variable earnings measures (including the Decision VAUDNC and

Decision VAUDNS measures).

American’s fully allocated earnings measures, such as Decision FAUDNC, reflect revenues minus all categories of costs within American’s decision accounting

system, including variable expenses, aircraft ownership, fixed overhead, interest, equity and income taxes.
American’s variable earnings measures of flight and route performance, such as Decision VAUDNC, reflect revenues minus the variable expense categories of

costs within American’s decision accounting system. The company’s variable earnings measures of flight and route performance are known as “Decision

VAUDNC” and “Decision VAUDNS.” VAUDNC refers to variable earnings plus upline/downline contribution Net of Costs. Decision VAUDNC attempts to capture the

net upline/downline revenues generated from connecting passengers and then subtracts the variable costs associated with those passengers as well as an

estimated incremental flight cost assigned to every connecting passenger.
VAUDNS refers to variable earnings plus upline/downline contribution Net of Spill. Decision VAUDNS attempts to capture the upline/downline revenues from

connecting passengers net of spill. “Spill” reflects the likelihood that accommodating an additional passenger on an upline/downline flight would result in

the loss of some other passenger that was “spilled” to a competitor’s flight.

VAUDNC and VAUDNS are calculated using costs categorized as variable over an 18 month planning horizon. The costs included in the VAUDNC/VAUDNS measures

represent more than 72% of the total costs included in American’s decision accounting system for the DFW MCI, DFW ICT, DFW COS, and DFW LGB routes over the

relevant time periods. VAUDNC reflects onboard revenues minus the categories of expense labeled by American as “decision variable expense” and adds the

incremental contribution of upline/downline passengers. VAUDNC and VAUDNS are measures of variable earnings of a route within American’s 18-month planning

The government has proposed its own measure of American’s variable earnings (which it has labeled “VAUDNC AC”). The cost component of VAUDNC AC includes

American’s VAUDNC costs plus costs of aircraft ownership. Thus, VAUDNC AC treats aircraft ownership costs as a variable expense, thereby reducing the

apparent performance of the route. VAUDNC AC includes over 79% of the total costs included in American’s decision accounting system for the DFW MCI, DFW

ICT, DFW COS, and DFW LGB routes over the relevant time periods.
Aircraft ownership costs are properly considered fixed costs in the industry, and are not an avoidable cost of changing capacity in a route.
Under each of the VAUDNC, VAUDNS, and VAUDNC AC measures, over the possible predation periods, American’s revenues exceeded its average variable costs at

the route level on the following routes: DFW MCI (Kansas City), DFW ICT (Wichita), DFW COS (Colorado Springs), and DFW LGB (Long Beach). With respect to

the DFW PHX (Phoenix), DFW EWR (Newark), DFW TPA (Tampa), and DFW OAK (Oakland) routes, American’s revenues did not appear to be below any measure of


As noted above, American’s decision accounting system has a measure termed FAUDNC. This was a part of a number of profitability measures intended to

reflect the economic value of operating a flight, a segment, a hub or the entire system. The company expended a substantial amount of time and money

investigating its accounting systems, and in developing decision FAUDNC. Since its development of FAUDNC in 1995, American has continued to modify its

methodology to improve route profitability reporting.
Decision FAUDNC stands for fully allocated earnings plus upline/downline contribution net of costs. Decision FAUDNC is a fully allocated earnings measure.

American developed FAUDNC to compare the performance of its various routes against each other using a benchmark that reflected its fully allocated earnings

(and thus its fully allocated costs of operation).

Decision FAUDNC attempts to capture the upline/downline revenues generated from connecting passengers and then subtracts the costs associated with those

passengers as well as an estimated incremental flight cost assigned to every connecting passenger. Beyond the upline/downline revenues generated from

connecting passengers, FAUDNC does not capture the system benefits to American of operating particular routes and flights. Such benefits arise from the

fact that serving certain routes can provide enhanced regional presence or origin point presence to American’s route network, thereby making its entire

system more attractive to travelers. But these system benefits are not captured in the performance measures for individual routes and flights because the

benefits accrue on other routes and flights.
Although the percentage can change slightly from year to year, FAUDNC captures approximately 97 99% of American’s total costs. The only costs excluded from

FAUDNC are certain corporate general and administrative expenses, such as legal expenses and certain corporate officer salaries, long term leases for space

that cannot be subleased, and certain fixed maintenance expenses. And, again although the percentage can vary slightly from year to year, expenses excluded

from FAUDNC represent approximately 1 3% of American’s total operating costs.

In generating FAUDNC, American allocates or assigns all of the operating expenses within its decision accounting system down to the level of individual

nonstop flights. American’s methodology for calculating route expenses is simply to aggregate the expenses that were allocated to each flight operated on

that route. While there are certain types of expenses in FAUDNC, such as fuel or landing fees, that are directly caused by a particular flight or route,

there are many other costs in FAUDNC that constitute the overhead or general operating expenses incurred in running an airline, particularly one with a

complex hub and spoke network, that are not driven (or may not be driven depending on the specific circumstances presented) by operating or not operating a

particular flight or route. Examples of such expenses at American include dispatch, city ticket offices, certain station expenses, a portion of pilot pay

and other labor costs, certain maintenance expenses, American’s flight academy, flight simulator maintenance, investments in yield management and other

computerized systems, and sales and advertising. FAUDNC includes certain costs that would not be entirely avoided if American were to abandon service on a

particular DFW route, but rather all or a portion of which would be reallocated to other routes.
In generating FAUDNC, American allocates certain general operating expenses among its various flights and routes on an arbitrary basis, such as takeoffs

and landings, flight hours, or passenger enplanements. The cost accounts incorporated in FAUDNC include such fixed overhead expenses as aircraft related

overhead and system related overhead.

American’s aircraft related overhead expenses consist mainly of fixed expenses for American’s maintenance facilities in Tulsa and Fort Worth, including

rent (covering the retirement of long term facility bonds), computer systems, communications and utilities. These fixed maintenance expenses are allocated

to American’s aircraft on the basis of either departures or flight hours. Also included in aircraft related overhead is the exterior cleaning of airplanes

(as distinguished from the interior cabin cleaning done after each flight). Each airplane exterior is cleaned on a periodic basis and the overall expense

of this activity is allocated across the fleet based on departures. American’s system related overhead expenses consist of a wide range of activities

required to operate a large hub and spoke airline. These include management, supervision and administrative expenses associated with aircraft load and

clearance (the weight and balance of aircraft), as well as flight attendant staffing. In addition, this category includes functions such as headquarters

marketing and sales, capacity planning, corporate communications, pricing and yield management, flight operations and safety, cabin design and crew

scheduling. Passenger advertising is also part of this category, including media advertising (newspapers, magazines, radio and television) and timetable

production costs.
While American’s aircraft related and system related overhead expenses are not driven by the operation of any particular route or flight, in order to

generate FAUDNC, these expenses are allocated arbitrarily over American’s entire fleet. FAUDNC includes a target return on American’s capital, including

imputed interest and returns to equity for flight assets, station assets and system assets. FAUDNC includes an assumed income tax on profits for both the

route at issue and for all upline/downline revenues.
While American tries to include in Decision FAUDNC all cost categories that could be impacted or affected by anticipated changes in overall system capacity

or traffic over an 18-month planning horizon, this means if American anticipated a downturn in its business 18 months hence and decided to scale down its

operations in response, it could reduce some of the costs in its “fixed” categories over an 18-month period. Not all costs in FAUDNC could be eliminated

over 18 months, or scaled down proportionately with a planned reduction in activity levels.

During any given month, American has many domestic routes that generate negative FAUDNC results. According to some calculations, 16 Americans routes (3% of

all its routes) had negative FAUDNC for 12 consecutive months. There are numerous routes in American’s domestic system that generate persistently negative

FAUDNC results.
FAUDNC, therefore, is a fully allocated earnings measure, not a measure of the variable costs of serving a route. It includes those costs which could be

affected by anticipated changes in system capacity or traffic over an 18-month planning horizon. It reflects revenues minus all categories of costs within

American’s decision accounting system, including decision passenger variable expense, decision direct capacity expense, cargo variable expense, variable

overhead, decision fixed overhead expense, decision interest expense, decision equity expense, and decision income tax expense. FAUDNC excludes only 1 to 3

% of all of American’s costs. As noted earlier, FAUDNC includes at least 97% of American’s total operating costs and approaches 99% of all costs. FAUDNC

includes fixed costs; it includes $600 million in fixed overhead expenses. Only 16.5% of the fixed overhead within FAUDNC are direct costs which are

proportional to activity level. Many costs in FAUDNC involve step functions, and any particular expense category in FAUDNC may be overstated or understated

by the average cost used in FAUDNC. Thus, not every cost in FAUDNC would be eliminated or scaled down proportionately with any particular planned reduction

in activity.

FAUDNC is used as a measure to evaluate route performance. VAUDNC and VAUDNS are used to measure flight and route performance. FAUDNC establishes a long

term benchmark marking at the break-even level. A negative FAUDNC reflects that, for some perhaps temporary period, American was failing to generate

revenue to meet all operating costs plus a target return on capital.
FAUDNC is designed to capture the upline/downline revenues generated from connecting passengers and then subtract the costs associated with those

passengers, which includes the incremental capacity cost of carrying a connecting passenger on the upline/downline flight.
A long term negative FAUDNC indicates a potential for a problem. However, a negative FAUDNC over a shorter period of time does not indicate that action on

a route is necessary. American has endured long periods — sometimes over 18 months — when its system-wide average FAUDNC was negative. In June 1994, 55% of

American’s routes were FAUDNC negative.
American’s senior management met monthly to review routes and system profitability. A regular feature of such meetings was the review of the worst

performing routes, as measured by FAUDNC. FAUDNC is one of the factors American uses when evaluating whether to exit a route.
American has found it too difficult to allocate system benefits to individual routes through FAUDNC. The negative FAUDNC month followed a capacity

expansion is significant, as well as the fact that such an effect on profitability from capacity additions is atypical.

Again, VAUDNS, VAUDNC and VAUDNC-AC are measures of average avoidable cost of a route. However, VAUDNC-AC overstates short run average variable cost

(“SRAVC”) because it includes fixed aircraft ownership costs. VAUDNS, VAUDNC and VAUDNC-AC capture between 72% and 79% of all American’s costs.
On the DFW-LGB route, American’s VAUDNC and VAUDNS were negative for the first month or two. It is uncontroverted that airlines typically incurred losses

during the start up of a new route. Throughout the entire period of possible predation, American’s VAUDNC and VAUDNS were positive.
On the DFW – Wichita route, American’s VAUDNC and VAUDNS were never negative. They “approach[ed] zero” for one month (October, 1996), but then rebounded.

Taken over the entire period of possible predation, American’s revenues on the route, as measured by VAUDNC and VAUDNS, covered its costs.
American does not ordinarily perform special analyses of costs; rather it relies on the costs reported in its decision accounting system to understand the

impact of its route decisions on costs. In addition to its decision measures, American maintains financial accounting measures of profitability. American

maintains a measure of route profitability in its financial accounting system, which it refers to as “Accounting Pre-Tax Earnings.” American’s financial

accounting route profitability measure reflects the fully allocated costs that tie to reported Airline Group financial results. American Eagle calculates

fuel cost for a route by pooling station fuel expenses and then allocating them to flights based on generic burn rates for particular aircraft types.
Only 3% of American’s domestic routes had a period of negative FAUDNC for 12 months and only 1.2% for a period of 18 months. However, with a shorter period

of reference, it is uncontroverted that many American routes have consistently negative FAUDNC.

American’s capacity additions lowered American’s load factors and increased its costs per passenger for some periods on some routes. For example,

American’s entry in DFW-LGB lowered its load factors in other DFW-LAX Basin routes. American’s capacity additions could have the effect of lowering the

entrant’s load factor and therefore decreasing profitability.

The “capacity planning model” is a profit forecasting model used to assess how to deploy American’s fleet. The logic of the capacity planning model seeks

to maximize system profitability subject to fleet and operating constraints. American uses the capacity planning model as an indicator of the most

profitable allocations of its fleet.

In the summer of 1997, American undertook an investigation of the incremental profitability of the additional capacity at DFW in response to LCCs. Based on

data from DFW-Kansas City and DFW-Colorado Springs, American found that there was “market stimulation as AA responds with increased capacity and pricing

reductions. Traffic generation, however, generally does not compensate for the loss in price premium and profitability is significantly impacted.”
In response to ValuJet entry, American employed a strategy that sought to maximize revenue and profit in DFW-Atlanta in competition with ValuJet from

approximately 1994 to summer 1995 — a strategy that involved a conservative pricing strategy, matching fares only on a flight specific basis and employing

a yield management strategy to limit availability of matching fares.
American altered its strategy against ValuJet, adding significant capacity in September and December 1995. The effect of these actions resulted in American

incurring significantly reduced profitability in DFW-ATL from September 1995 to May 1996. In October, 1995, American’s Vice-President of Capacity Planning

stated that if American had adopted an aggressive response when ValuJet first entered DFW, it might “have left DFW with memories of a poor result.”

Southwest has competed with American in the Dallas/Ft.Worth area for over 20 years. Southwest has had operating costs that were significantly lower than

American’s on a stage length adjusted basis. American reduced its jet capacity in DFW routes competitive with Southwest by 25.7% between May 1995 and May

1996. As a result, American’s seat availability for Southwest-type traffic declined. American’s capacity planning and revenue management strategies in

Dallas/Ft. Worth Southwest-competitive routes had “truncated” passenger demand for its services. During the relevant time period, American “accepted a

limited amount of traffic at Southwest’s walk-up fares while generally rejecting their advance-purchase, very low fares.” As a result of its capacity and

yield management strategies in Southwest-competitive routes, American relied more on flow traffic than on local traffic to provide profitability in those

routes. A regression analysis comparing American’s responses to LCCs at DFW with its responses to Southwest Airlines at DFW found that capacity changes in

Southwest competitive markets are generally associated with increases in profitability, in sharp contrast to the negative effect on profitability from

American’s changes in capacity in DFW LCC markets.
American normally uses its profit forecasting and fleet assignment model to develop its operating plan. American overrode its capacity planning model by

keeping the eighth frequency in DFW-COS to “address competitive issues.” American overrode its capacity planning model by increasing frequency in DFW-MCI

from ten to twelve round-trips, also to “address competitive issues.” American normally restricts its availability of fares in the lower buckets on popular

flights and flights where there is a demand for higher fares.

American stationed personnel at the gates of the LCCs at DFW in order to count the number of passengers boarding the LCC’s flights (which American referred

to as “ramp counts.”) American used these ramp counts so that it could more quickly react to competitors, including low cost carriers. Ramp counts are

common in the airline industry. Monthly ramp counts were distributed to people high-up at American who were intimately involved with American’s DFW LCC

Strategy. Ramp counts are expensive: American spent “nearly half a million dollars on ramp counts of approximately 20 routes” in 1998.
The airline industry is one in which the profitability of an airline’s pricing, yield management or capacity initiatives often depends heavily on the

anticipated response of other airlines. Analysis that tracks economic theories known as “game theory” is used in the airline industry to predict actions by

competitors and gauge competitors’ reactions. As part of its planning process, American regularly constructs scenarios regarding possible competitive

actions and reactions by other airlines and takes actions based on those predictions.
As part of its consulting project for American, Sabre considered possible decision-making processes for American that entailed analyzing competitors’ data,

including costs, scheduling practices and projected schedules, share, load factor, and profit impacts.
American believes that LCCs engage in “game-theory” analyses when determining whether to enter, expand in, or remain in, a market in competition with an

incumbent. American believes that if it permits an LCC to fly one flight in a market, that LCC will increase its frequencies and become a powerful

competitor, and believes that it is valuable for competitors taking note of American’s actions.

A November 4, 1996 memorandum and study on Caribbean Strategy Issues notes that “American’s ultimate strategy . . ., particularly with regard to capacity

levels, is likely to send a message to our competitors about our willingness to defend our market position. . . . Any strategy decision should be made with

this in mind.”
Access Air, a Des Moines, Iowa-based LCC, sought to avoid a competitive response from the major airlines by following these rules: “stay off of elephant

paths…, don’t eat the elephant’s food…, and keep the elephants more worried about each other than they are about you.” The fundamental criterion of the

Access Air business plan was to serve very large attractive destinations that no one else had turned into a hub. Such routes were not as well-served as hub

routes. Access Air sought to avoid a competitive response from major airlines generally; it did not consider American’s reputation as a factor in deciding

not to enter DFW. Also, Access Air intentionally designed its fare levels to be above the average variable costs of the major airlines so they would not

consider Access Air a threat.

American, through its questionable conduct on the routes, has possibly earned a reputation for predation that deters competition on other DFW routes,

allowing it to recoup the possible predatory investment it made in the Competitive Response Routes at issue by charging supra-competitive prices on those

other DFW routes.
American’s potential predatory conduct and reputation could have been a contributing factor to the abandonment of nonstop service in DFW ICT and DFW PHX by

Vanguard; the abandonment of nonstop service in DFW-LGB, DFW-EWR, and DFW-PIE by SunJet [WTS]; the abandonment of expansion plans for DFW-COS service from

between June 1995 and January 1997 by Western Pacific, and that company’s ultimate abandonment of nonstop service in DFW COS.

Despite the possible reputation American has for responding aggressively to low fare competition, six low-cost carriers have entered DFW since 1995.

American Trans Air initiated DFW MDW (Midway, Chicago) service in May, 1998. The company AirTran (re)initiated DFW ATL (Atlanta) service in April 1997, and

began DFW GPT (Gulfport) service in March 1999. Big Sky Airlines began nonstop service to five destinations from DFW in 1999. Ozark Airlines began nonstop

DFW Columbia, MO service in March 2000. Frontier initiated DFW DEN (Denver) service in December 1998. National initiated DFW LAS (Las Vegas) service on

September 30, 1999. Sun Country initiated nonstop DFW LAS (Las Vegas) and DFW MSP (Minneapolis) service in 1999, and announced additional DFW service to

several locations in Mexico in March 2000.
American has not undercut the published fare of an LCC with a published American fare during the relevant time period.
Airline products can vary in many dimensions. American’s product was superior to an LCC’s product because American offered higher frequencies, and (in some

instances) a frequent flier program and advance seat selection. American considers its frequent flyer program the best in the industry.
It is uncontroverted that fare matching was part of American’s LCC strategy, but American did not actually undercut LCC fares on any of the relevant


The following chart represents two tests for “net sacrifice” in DFW MCI, DFW ICT, DFW COS and DFW LGB:
Potential Predatory Conduct Impact on Predation Route Profitability – Table 1

FAUDNC Margin During Base Period FAUDNC Margin in Southwest Markets
Predatory In Market Net Predatory In Market Net
Loss Recoupment Sacrifice Loss Recoupment Sacrifice

MCI I 4,811,722 135,744 4,675,979 4,821,829 340,077 5,161,906
MCI II NA NA NA 14,126,870 928,580 15,055,451
ICT 800,231 1,392,797 592,566 926,754 637,201 1,563,955
COS 5,343,445 3,266,439 2,077,006 7,007,899 1,746,760 5,261,138
LGB NA NA NA 3,524,496 5,865,870 2,341,374

The table illustrates two ways to calculate the amount of “predatory loss” American allegedly incurred in DFW MCI, DFW ICT, DFW COS, and DFW LGB during the

possible periods of predation.
The first method or test devised to calculate the “predatory loss” column for Table I used as a benchmark of American’s average FAUDNC margin on that route

during a period of “legitimate competitive conditions” prior to the potential periods of predation, which is a natural base period.

The second method or test that is used to calculate the possible “predatory loss” column for Table I used as a benchmark American’s average FAUDNC margin

in “Southwest Markets,” meaning those routes on which American competes with Southwest. The “predatory loss” columns in Table I reflect the difference

between American’s actual revenues during the periods of alleged predation and the revenues predicted by using the two benchmark FAUDNC margins devised.

The “in market recoupment” columns in Table I reflect the difference between American’s actual revenues after the periods of possible predation and the

revenues predicted by using the two benchmark FAUDNC margins he devised. The “net sacrifice” columns in Table I are the arithmetic sum of the respective

“predatory loss” columns and “in market recoupment” columns. Where the “in market recoupment” columns of Table I are positive, American might have already

achieved some market recoupment. Where the “net sacrifice” columns of Table I are positive (such as in Wichita), American has fully recouped on that route

according to the table. Where the “net sacrifice” columns of Table I are negative (such as in Colorado Springs), American has not recouped in the alleged

market according to these calculations.
The only two periods that American might have engaged in supra-competitive pricing on the DFW MCI route are January September 1996 and after May 1998. In

the first test of the January September 1996 period in DFW MCI, American earned above competitive returns of $135,744, but its alleged predatory loss

amounted to $4,811,722, leading to a “net sacrifice” of $4,675,979. In applying the second test to the January September 1996 period in DFW MCI, a “net

sacrifice” of $5,161,906 was calculated. In applying the second test to the January September 1996 period in DFW MCI, American lost an additional $340,077

during the in-market recoupment period.

The first in-market recoupment test for the period since May 1998 on the DFW MCI route seems to be inapplicable because there is no natural period of

normal competition to use for comparison. In applying the second test to the period since May 1998 in DFW MCI, a “net sacrifice” of $15,055,451 is

According to the second test for the period since May 1998 in DFW MCI, American lost an additional $928,580 during the in-market recoupment period. The 17

-month period from April 1995 to September 1996 (after Vanguard began DFW ICT service but before American resumed jet service) seems to have been a period

of “legitimate competition” and is a “natural base period.”
Although a net gain of $592,566 is calculated for American on the DFW ICT route using the first test, three months out of seventeen are chosen for the “pre

predation” base period, July September 1996. Recalculating the “predatory loss” and “in market recoupment” columns using the first test and using the

entire April 1995 September 1996 “natural base period,” results in additional losses of $7,325,019 during the “recoupment” period and a “net sacrifice” of

$8,941,191 in DFW ICT.

In applying the second test for DFW ICT, an additional loss during the “recoupment” period of $637,201, and a total “net sacrifice” of $1,563,955 on the

DFW ICT route are calculated. In applying the first test for DFW COS, a “net sacrifice” of $2,077,006 is calculated.
In applying his second test for DFW COS, a “net sacrifice” of $5,261,138 is calculated.
An alternative method of testing in-market recoupment uses zero FAUDNC (revenues minus fully allocated costs equals zero) as a benchmark of competitive

prices. This method yields that American has recouped in four of the five episodes of possible predation.
The following are possible barriers to entry exist at DFW: government certification of new entrants; access to gates and other airport facilities; and

major airlines’ marketing programs like frequent flyer plans, corporate discount contracts, and travel agent commission incentives.

No industry surveys or other indirect tests have been conducted to determine whether American actually has a reputation for predation.

A reputation for aggressive behavior can be achieved by an airline without engaging in predatory pricing and that developing a reputation for

aggressiveness through non predatory, lawful competition “by definition” is not anti-competitive. Supranormal (or supra-competitive) pricing is a

prerequisite to recovering (or recouping) alleged predatory losses from predatory pricing.
In1998, Atlanta, with a population of 3,541,230, was served by 25 LCC spokes of over 350 miles. In the same year, Denver, with a population of 2,125,212,

was served by 10 LCC spokes of over 350 miles. And also in 1998, Dallas, with a population of 4,574,561, was served by three LCCs on non-Wright Amendment

cities. Most Wright amendment spokes are shorter than 350 miles. These figures, however, are misleading. More recent figures show that DFW has LCC service

on seven spokes. More importantly, the comparison grossly distorts the situation in the Dallas area by excluding Southwest Airlines routes.

The routes in question, and the associated alleged relevant markets, fall into four categories. First, there are possibilities of predatory conduct with

respect to seven “core” routes (flights between DFW airport and airports in Kansas City, Wichita, Colorado Springs, Long Beach, Phoenix, Tampa, and

Oakland). In addition to these core routes, American’s actions potentially affected approximately 40 “reputation” routes, in which American might have

monopolized or attempted to monopolize the routes by acquiring a “reputation for predation” in the core routes. In addition, there are some five routes in

which American possibly committed predatory conduct, but did not monopolize or attempt to monopolize the routes, and five routes in which American did not

monopolize, attempted to monopolize, or engage in predatory conduct, but in which the effects of the possible predation elsewhere might have been “felt.”
In each case, the possibility of American’s actions is substantially similar: that American, when faced with low cost carrier competition on various

routes, might have instituted an aggressive policy of price matching and capacity increases which might have unfairly “stole” customers from the low cost

carrier, which was eventually forced to cease competition on the route. After the departure of the low cost carrier, American might have increased its

prices and reduced the number of flights serving the route.

Potential monopolization against American requires proof: (1) that American has monopoly power in a properly defined relevant market; and (2) that it

willfully acquired or maintained this power by means of anti-competitive conduct, as distinguished from growth or development as a consequence of a

superior product, business acumen, luck or historical accident. Potential attempted monopolization requires proof of: (1) a relevant geographic and product

market; (2) American’s specific intent to monopolize the market; (3) anti-competitive conduct by American in furtherance of this attempt; and (4) the

dangerous probability that American will succeed in this attempt.
Business activity is not “anti-competitive” so long as there is “a legitimate business justification for the conduct.” Multistate Legal Studies, 63 F.3d at

1550. Specifically, the Act in question does not “prohibit the adoption of legal and ordinary marketing methods already used by others in the market.”

The potential anti-competitive conduct in the present action is predatory pricing: that American, in the face of low fare carrier competition, shifted from

its traditional strategy and adopted competitive tools which combined price reductions and capacity increases, and that the cost of these tools was greater

than the revenue obtained. American possibly endured these losses only because it knew, once the low fare carriers were driven out of the core markets; it

could reduce service, increase prices, and recoup the losses by supra-competitive pricing.
In reality, American’s fare prices and its production level — whether characterized as ‘output’ or ‘productive capacity’ are two sides of the same coin.

According to American, they typically preferred to operate by selling (relatively) fewer seats at higher prices. When it was faced with new entrant, low-

cost carrier competitors, American supposedly chose to match the fares of its competitors rather than lose substantial market share to them. The

introduction of low fare travel can stimulate passenger demand by a factor of two or three.
Productive capacity in the present action cannot be considered in isolation. American’s changes in capacity should not be deemed anti-competitive. To be

considered anti-competitive, American must have priced its product below an appropriate measure of cost, and enjoyed a realistic prospect of recouping its

losses by supra-competitive pricing.
This table subtracts the former (“predatory losses”) from the latter (“recoupment”). If the result is positive, this is taken as evidence of recoupment.

Benchmark: FAUDNC Margin during Base Period FAUDNC in Southwest Markets

Predatory Loss
Net Sacrifice
Predatory Loss
Net Sacrifice

– 4,811,722


ICT (Berry)

ICT (Full Base)

– 7,007,899
– 5,261,138

– 3,524,496


ATL Atlanta
BDL Hartford
BHM Birmingham
BNA Nashville
BOS Boston
BWT Baltimore
CLE Cleveland
CLT Charlotte, NC
CMH Columbus
COS Colorado Springs
COU Columbia, MO
CVG Cincinnati
DCA DC Reagan
DEN Denver
DFW Dallas-Ft. Worth
DSM Des Moines
DTW Detroit
EWR Newark
FLL Ft. Lauderdale
GPT Gulfport
HSV Huntsville, AL
IAD DC Dulles
ICT Wichita
IND Indianapolis
JFK NY Kennedy
LAS Las Vegas
LAX Los Angeles
LGA NY LaGuardia
LGB Long Beach
MCI Kansas City
MCO Orlando
MDW Chicago Midway
MEM Memphis
MIA Miami
MSP Minneapolis/St. Paul
OAK Oakland
OMA Omaha
ONT Ontario, CA
ORD Chicago O’Hare
PDX Portland
PHL Philadelphia
PHX Phoenix
PIE St.Petersburg/Clearwater
PIT Pittsburgh
RDU Raleigh-Durham, NC
SAN San Diego
SEA Seattle
SFO San Francisco
SGF Springfield, MO
SJC San Jose
SJU San Juan, PR
SLC Salt Lake City
SNA Santa Ana
TPA Tampa
TUS Tucson