[00:00:05] Speaker 00:
A, B, C, A, R, L, I, N, I, S, A, D, C, V, D, V, A, Interjet.

[00:00:19] Speaker 05:
Good morning.

[00:00:20] Speaker 05:
May it please the Court, my name is Moffett Roller, and I'm here on behalf of Petitioner A.B.C.

[00:00:26] Speaker 05:
Aerolenius, S.A.

[00:00:27] Speaker 05:
to C.B., doing business at, doing business as Enerjet.

[00:00:31] Speaker 05:
With me at the Council table is Mr. Charles Green.

[00:00:35] Speaker 05:
In this case, Petitioner Enerjet on Mexican Airlines is presenting two issues to the Court.

[00:00:41] Speaker 05:
The first issue before the court is whether the Department of Transportation, in the course of its implementation of conditions on a joint venture, implementation on conditions on the grant of antitrust immunity to a joint venture of Delta and Aeromexico,

[00:01:02] Speaker 05:
arbitrarily excluded Interjet from the list of carriers that were eligible to apply to receive takeoff and landing slots at Mexico City International Airport, MEX for short.

[00:01:17] Speaker 05:
Secondly, Your Honors, well... You don't have to go through this.

[00:01:22] Speaker 03:
We've read the briefs.

[00:01:23] Speaker 05:
All right, sir.

[00:01:24] Speaker 05:
Well, I will just say... We'll go right to your major points.

[00:01:28] Speaker 05:
Yes.

[00:01:28] Speaker 05:
Well, I'll just say that the second argument was arguing any alternative that the Department does not have authority to do what it did do.

[00:01:39] Speaker 05:
The issue with regard to arbitrary and capricious arises from the fact that the Department decided that internship would

[00:01:51] Speaker 05:
not be eligible to participate in the proceeding because, according to the Department, Enerjet already had too many landing slots at MEX.

[00:02:03] Speaker 05:
We respectfully disagree, and we argued strongly to the Department to that degree.

[00:02:09] Speaker 05:
In fact, Your Honors, the Department, in its own established criteria in conducting the competitive proceeding that it did, it said

[00:02:21] Speaker 05:
and I'm looking at the instituting order on Joint Appendix 279, that their objective was to provide the maximum competitive benefits from new preferably daily services, two from JFK and MEX, taking into account a carrier's ability to exercise competitive discipline.

[00:02:43] Speaker 05:
It is our contention, Your Honor, that the pure size of Enerjet slot holdings at MEX should not be a sole determining factor in whether Enerjet should be allowed to participate.

[00:03:06] Speaker 05:
it felt Interjet had a great deal to bring to this proceeding and it should be allowed to compete.

[00:03:16] Speaker 03:
Doesn't the statute itself indicate that the department is to consider undue concentration?

[00:03:26] Speaker 03:
Isn't that actual concentration is the word used in the statute?

[00:03:32] Speaker 05:
I'm not sure whether the actual word is used in the statute.

[00:03:38] Speaker 03:
I seem to recall reading in the brief that the statute specifically uses the word concentration.

[00:03:45] Speaker 05:
It used the word reduce competition or it could not reduce competition.

[00:03:52] Speaker 03:
But also I thought it said specifically refers to concentration.

[00:03:57] Speaker 06:
I think Judge Silberman is referring to 401-01, which are the policies that the Secretary is to take into consideration, and that includes the words avoiding unreasonable industry concentration.

[00:04:11] Speaker 05:
Right.

[00:04:12] Speaker 03:
Well, certainly the whole of- She and my younger colleagues, I try to help them out as much as I can.

[00:04:18] Speaker 05:
Well, certainly, Your Honors, the whole objective of the divestiture requirement was to temper the antitrust power that was being granted to the Joint Alliance between Delta and Aeromexico.

[00:04:32] Speaker 05:
That indeed was the whole rationale for the imposition of conditions

[00:04:37] Speaker 05:
that led to the divestiture of the 24, the ordering of the divestiture of the 24 slot bears at MEX.

[00:04:46] Speaker 05:
We are not challenging that in this appeal.

[00:04:50] Speaker 05:
We are challenging the fact that in the subsequent proceeding that the department held to allocate those slots among a group of third-party carriers,

[00:05:02] Speaker 05:
We are, our position is that it was arbitrary.

[00:05:06] Speaker 05:
The Energet had the second largest number of slots at Mexico.

[00:05:10] Speaker 03:
It did.

[00:05:11] Speaker 03:
So why isn't, why isn't the, why don't we have to defer to the agency's determination that's undue concentration?

[00:05:20] Speaker 03:
Well, the undue concentration.

[00:05:21] Speaker 03:
If Energet was allowed to compete for those.

[00:05:25] Speaker 05:
The undue concentration, Your Honor, is not the undue concentration with regard to slots.

[00:05:29] Speaker 05:
It's undue concentration with respect to the market power and the transporter market.

[00:05:35] Speaker 03:
You know, the operation of the... You want us to apply classic antitrust theory to this.

[00:05:40] Speaker 03:
Yes, sir.

[00:05:42] Speaker 03:
But the agency is not

[00:05:46] Speaker 03:
obliged to apply Chicago School of Economics.

[00:05:50] Speaker 05:
Well, Your Honor, let me just say that it is not, I respectfully submit, within the scope of the Department's authority under 41308 and 309 to regulate the slot holdings or the degree of the slot holdings at a foreign airport.

[00:06:12] Speaker 03:
That's going to your second argument when you start – Yes, that's right.

[00:06:17] Speaker 05:
But with regard to your point in terms of the significance of the slot holdings at MEX, the department said that it calls the department – so we have a situation where the joint applicants together held about 50 percent, Enerjet was next at approximately 26 percent, and then we have

[00:06:40] Speaker 05:
with approximately half of Enerjets, we have another competitor, which is Volaris, which had 115 slots, a significant number, I submit.

[00:06:50] Speaker 05:
But you had 200 more.

[00:06:52] Speaker 05:
That is correct.

[00:06:54] Speaker 05:
That's correct.

[00:06:55] Speaker 06:
So, just to take issue with my older colleague, even in classic economic theory, having three competitors is better than having two.

[00:07:07] Speaker 06:
And having three of a larger size is better than having two and an even smaller one.

[00:07:14] Speaker 06:
So, I don't understand

[00:07:17] Speaker 06:
The presumption that the government's operating on here is that rather than give to another large competitor in oligopoly theory, you would try to give to the next smaller competitor.

[00:07:30] Speaker 06:
So you'd have three serious competitors instead of only two.

[00:07:33] Speaker 06:
What's your argument on the other side of this?

[00:07:35] Speaker 05:
The argument on the other side of this is that what you want to do by the department's own standard of providing maximum competitive benefits is you want to have as many carriers as possible.

[00:07:50] Speaker 05:
I agree, providing transporter service to temper the joint alliance.

[00:07:57] Speaker 05:
and by unilaterally excluding energy.

[00:08:01] Speaker 06:
It's not excluding them.

[00:08:02] Speaker 06:
They still have 25% of the slots, which according to the Department of Transportation, you're not even using yet.

[00:08:09] Speaker 05:
But that is a finding by Confessi and also the Mexican Antitrust Agency that the department quoted, but it also applies to Energet's competitors that were allowed to compete.

[00:08:25] Speaker 06:
Obviously, the more slots they have, the more competition they can provide.

[00:08:30] Speaker 05:
That doesn't necessarily follow, Your Honor, because the Department made no findings in that exact regard, because their Enerjet has an extensive domestic network, and it uses these slots to provide domestic service.

[00:08:47] Speaker 05:
And compared to the domestic service that Enerjet provides, the transporter service is very limited by comparison.

[00:08:56] Speaker 05:
So the question then comes,

[00:08:59] Speaker 05:
if Enerjet is excluded, would it provide as much competition as it received additional slots and was able to provide additional competition in the market?

[00:09:14] Speaker 05:
There was no finding to that effect, Your Honor.

[00:09:18] Speaker 06:
Where did you make the argument that the domestic

[00:09:23] Speaker 06:
service makes a difference in this regard.

[00:09:26] Speaker 06:
The argument you're making now... Yes, it was in our brief, Your Honor.

[00:09:29] Speaker 06:
I appreciate that.

[00:09:30] Speaker 06:
Where was it in your presentation to the DOT?

[00:09:34] Speaker 06:
It was in the... Is there a place in the adjoint appendix you can cite?

[00:09:39] Speaker 05:
It would take me a moment to find it, but... Well, you all have a rebuttal chance.

[00:09:43] Speaker 06:
Likewise, on page 9 of your reply brief, you make a number of arguments, none of which I can find in the opening brief.

[00:09:49] Speaker 06:
about Interjet's baggage policies, operational reliability, ancillary services.

[00:09:56] Speaker 06:
I don't find any of that in the opening brief.

[00:09:59] Speaker 06:
Was any of that made to the agency?

[00:10:01] Speaker 06:
And can we find that in the joint appendix?

[00:10:03] Speaker 05:
Yes, sir.

[00:10:04] Speaker 05:
We will find it by the time of the rebuttal.

[00:10:08] Speaker 05:
So the argument is that it is not

[00:10:14] Speaker 05:
a foregone conclusion to say that because Interjet has slots, that it will automatically use those slots to be an effective additional competitor of the joint alliance.

[00:10:32] Speaker 05:
But you could.

[00:10:34] Speaker 05:
Potentially, if it was on our economic benefit, but to do so, but the department did not make that determination.

[00:10:41] Speaker 06:
Why should the department think that giving even more slots will make it even more likely you'll provide competition?

[00:10:49] Speaker 06:
If you're not using the ones you have.

[00:10:51] Speaker 05:
I do not know, it's not in the record, Your Honor, to the extent to which Enerjet has any unused slots.

[00:10:59] Speaker 05:
I do not know that, Your Honor.

[00:11:01] Speaker 06:
Well, I thought that the agency said that that was the case, that you were starting to increase the use of your slots, that there is data that 26 percent or something of the slots are not being used.

[00:11:16] Speaker 06:
Did you put in any evidence that you are using all of your slots?

[00:11:20] Speaker 05:
No, Your Honor, I don't think there's any information either way in terms of the complete utilization of those slots in the record.

[00:11:34] Speaker 03:
The record doesn't specify how many slots you are not using.

[00:11:39] Speaker 04:
No, sir, it does not.

[00:11:41] Speaker 03:
Does the record indicate how many slots you are using for internal transportation within Mexico?

[00:11:46] Speaker 04:
No, sir, it does not.

[00:11:48] Speaker 03:
Well, you were just making that argument.

[00:11:49] Speaker 03:
Well, I don't understand how you can make the argument if you didn't even present it to the agency.

[00:11:55] Speaker 03:
Well, Your Honor, there... And what's sort of troubling is if you have slots that you're not using, it seems to me that your objective is to prevent other people from having the slots.

[00:12:07] Speaker 05:
Oh, no, not at all, Your Honor.

[00:12:10] Speaker 05:
And there was a – the reference finding that you mentioned was a determination that was made by the Mexican agency regarding the unutilized slots, and the Department cited that.

[00:12:27] Speaker 05:
That was a general observation, but it was not a carrier-specific

[00:12:32] Speaker 05:
observation.

[00:12:35] Speaker 03:
And so the department... But here you're making the argument that your slots, some number of the slots you have, you're using for internal Mexican travel alone.

[00:12:47] Speaker 05:
Yes, sir.

[00:12:48] Speaker 03:
How many of those fall in that category?

[00:12:51] Speaker 03:
And did you present that to the agency?

[00:12:54] Speaker 05:
Your Honor, we didn't really haven't, no, Your Honor, we didn't, but that would have been a consideration that we would have presented to the agency.

[00:13:02] Speaker 05:
Why are you making the argument here if you didn't even make it before the agency?

[00:13:05] Speaker 05:
Because really we weren't allowed to.

[00:13:06] Speaker 05:
We weren't allowed to come in and compete for the slots.

[00:13:10] Speaker 06:
Why weren't you allowed to put in the evidence?

[00:13:12] Speaker 06:
That's the part I'm not following.

[00:13:13] Speaker 06:
You did make arguments.

[00:13:14] Speaker 06:
The original order to show cause was in November of 2016.

[00:13:24] Speaker 06:
The final order was in December.

[00:13:27] Speaker 06:
It reports what arguments you made.

[00:13:30] Speaker 06:
Did the agency bar you from putting in any evidence to support your arguments?

[00:13:34] Speaker 05:
No, we did make the argument, Your Honor, that we had extensive – we just – there were not numbers, but we did make the argument that Enerjet was committed to using a large

[00:13:45] Speaker 05:
a portion of those slots for domestic, it was using those slots extensively for domestic service.

[00:13:53] Speaker 05:
And we did argue that it was incumbent upon the department to let us come to the proceeding so that the department could evaluate those factors.

[00:14:05] Speaker 05:
And we did make that argument, Your Honor, even though there were not specific numbers attached to it.

[00:14:11] Speaker 06:
You're into your butthole time.

[00:14:13] Speaker 06:
Yes, and I'm sorry.

[00:14:15] Speaker 06:
Judge Silverman looks like he's about to ask.

[00:14:17] Speaker 05:
No, I'm not.

[00:14:18] Speaker 05:
OK.

[00:14:18] Speaker 05:
What I really want to touch on the second argument, Your Honor, is because that is a very important, the alternative argument, which is that the department does not have the statutory authority to do what it did here.

[00:14:33] Speaker 05:
The first argument assumes that the department had authority to conduct this proceeding, the secondary proceeding.

[00:14:40] Speaker 05:
The second argument says in the alternative,

[00:14:44] Speaker 05:
the department does not have authority under 41308 and 309 to conduct this extensive secondary proceeding.

[00:14:54] Speaker 05:
It is certainly the slot allocation procedure.

[00:14:58] Speaker 06:
If we agree with you then, you lose your slot at Kennedy Airport.

[00:15:01] Speaker 06:
Is that right?

[00:15:02] Speaker 05:
No, sir.

[00:15:04] Speaker 06:
Why does it have authority to give you a slot at Kennedy Airport?

[00:15:09] Speaker 05:
First of all, we have not challenged

[00:15:12] Speaker 05:
the allocation of the slots.

[00:15:13] Speaker 06:
But if you're telling me they are without authority, and we hold that they are without authority to allocate slots, then any of the other competitors at Kennedy can now come in and say, you've illegally been given the slot at Kennedy.

[00:15:27] Speaker 05:
That could happen.

[00:15:29] Speaker 05:
Your Honor, our position on that is... Wait a minute, I'm confused.

[00:15:33] Speaker 03:
Are you saying that they have no authority to allocate slots at all, or are you saying they have no authority to allocate slots in a foreign country?

[00:15:41] Speaker 03:
which of which of those arguments are you making?

[00:15:44] Speaker 05:
We are arguing that they have no authority to allocate the slots at MEX, Your Honor.

[00:15:50] Speaker 02:
I'm sorry.

[00:15:52] Speaker 02:
That's the end of that argument.

[00:15:54] Speaker 02:
Only at MEX are you... Yes.

[00:15:56] Speaker 06:
However... I'm sorry.

[00:15:57] Speaker 06:
I thought you were also arguing that they don't have authority to allocate slots at all.

[00:16:02] Speaker 06:
That they can only approve or not approve.

[00:16:04] Speaker 06:
Is that right?

[00:16:06] Speaker 06:
We were... Look... They can't impose conditions on

[00:16:10] Speaker 06:
They can either approve or not.

[00:16:11] Speaker 06:
Is that right?

[00:16:14] Speaker 05:
With regard to the United States allocation of slots at JFK, we did not challenge that.

[00:16:21] Speaker 05:
And I'll say why.

[00:16:26] Speaker 05:
Because it's in the United States.

[00:16:28] Speaker 02:
Your argument about the allocation of slots at this point concerns only those at MEX, right?

[00:16:34] Speaker 02:
Right.

[00:16:34] Speaker 05:
However, I understand what you're asking.

[00:16:36] Speaker 02:
Now that however just ruined my understanding.

[00:16:38] Speaker 02:
If there's a however to it.

[00:16:40] Speaker 05:
Judge Garland, your question is well placed.

[00:16:48] Speaker 05:
And to the extent that the argument at MEX throws into question

[00:16:55] Speaker 05:
the allocation of plots at JFK.

[00:16:58] Speaker 05:
Our position is that that is an issue that the department should be allowed to address on remand because at JFK the department does have additional authority over U.S.

[00:17:10] Speaker 05:
airspace takeoff and landing slots at JFK.

[00:17:15] Speaker 05:
It is, we've not argued in the briefs about that at all.

[00:17:20] Speaker 02:
And so it is plausible that... Is it or is it not your argument on this second point that they did not have the authority to regulate slots at MEX?

[00:17:30] Speaker 05:
That is correct, Judge Santel.

[00:17:32] Speaker 02:
Would you quit going to the other airports then and telling us about that?

[00:17:36] Speaker 02:
If it's not the case that it concerns the other airports, stick with MEX and admit that it has no bearing on the other airports.

[00:17:45] Speaker 05:
Well, I agree that it has no bearing on the other airport.

[00:17:49] Speaker 02:
Good.

[00:17:49] Speaker 02:
So quit putting the buts after it every time you say that.

[00:17:52] Speaker 05:
I was just trying to answer the questions, Your Honor, to this.

[00:17:55] Speaker 06:
Well, you agree that with the exception of foreign airports, the Department is entitled to put conditions on its approval of a joint venture or merger.

[00:18:08] Speaker 06:
Is that right?

[00:18:08] Speaker 05:
Your Honor, we do not dispute the ability of the Department to impose reasonable conditions on the imposition of the antitrust immunity, such as the divestiture of slots.

[00:18:23] Speaker 06:
What about the assignment of slots?

[00:18:25] Speaker 05:
We object to that, Your Honor.

[00:18:27] Speaker 06:
Now, my understanding was at Kennedy, it was assigned to you, not just that they had to divest, but that they had to give it to you.

[00:18:36] Speaker 06:
Is that wrong or right?

[00:18:37] Speaker 05:
That is the consequence of what the department proceeding at JFK did.

[00:18:43] Speaker 05:
Yes, Your Honor.

[00:18:43] Speaker 06:
So was that a reasonable condition or not?

[00:18:48] Speaker 05:
At JFK, it is our – we've not addressed it, but yes, if you're – as far as we are concerned, that's a reasonable condition at JFK, but we've not addressed it.

[00:18:58] Speaker 03:
In other words, I understand your position here.

[00:19:00] Speaker 03:
The Department of Transportation has no authority to allocate slots except interject.

[00:19:06] Speaker 03:
Except what?

[00:19:07] Speaker 03:
Except the Enerjet, which has a special position that you can get allocation slots.

[00:19:12] Speaker 03:
No, no, no, Your Honor.

[00:19:13] Speaker 05:
Is that right?

[00:19:13] Speaker 05:
No, and I'm not saying that.

[00:19:15] Speaker 03:
Well, that's in effect what you're saying, because Judge Garland has pointed out your argument was the agency can't allocate slots at all, but on the other hand, it's okay to allocate them to you.

[00:19:30] Speaker 05:
Well, there were two alternative arguments, as I'm sure you understand.

[00:19:34] Speaker 05:
And so one, of course, does assume that they have the authority to do that.

[00:19:39] Speaker 05:
And on that one, we're arguing our exclusion was arbitrary.

[00:19:42] Speaker 03:
But as far as... Well, you better get to the second argument.

[00:19:45] Speaker 05:
But as... Well, that's what I have been on, is the second argument that they have no statutory authority to allocate the slots at MEX.

[00:19:53] Speaker 05:
Because of what?

[00:19:54] Speaker 05:
Because it is...

[00:19:58] Speaker 05:
because what they've done is an exercise of air transportation regulation that goes far beyond what

[00:20:08] Speaker 05:
the department is authorized to do by imposing reasonable conditions under 41308 and 309.

[00:20:14] Speaker 05:
You mean because this is unreasonable?

[00:20:17] Speaker 05:
The conduct of saying, carrier X gets this slot at MEX, carrier Y gets that slot at this time, and that you have to come back to us.

[00:20:26] Speaker 03:
The agency did not allocate slots at MEX.

[00:20:29] Speaker 03:
Oh, it did.

[00:20:29] Speaker 03:
No, it didn't.

[00:20:30] Speaker 03:
It said it would agree to giving antitrust immunity if those slots were allocated by

[00:20:38] Speaker 03:
of course, the Mexican authorities.

[00:20:41] Speaker 05:
We're doing a little bit in semantics because the department itself used the word allocate in certain instances.

[00:20:48] Speaker 05:
That is true.

[00:20:49] Speaker 05:
And at other times it used the word assign.

[00:20:54] Speaker 03:
But it's clear that the implication of the reading of their order is that this would be true only if Mexican authorities went along with it.

[00:21:05] Speaker 05:
That is true.

[00:21:06] Speaker 05:
The Mexican authorities did go along with it.

[00:21:09] Speaker 05:
But it is our position, Your Honor, that it violated U.S.

[00:21:13] Speaker 05:
law to conduct this elaborate secondary proceeding, which is a form of route regulation.

[00:21:20] Speaker 05:
The Department has no authority to regulate the trans-border market by saying carrier X flies from A to B, and this carrier gets this.

[00:21:33] Speaker 05:
The Mexican authority accepted it, but that begs the question, Your Honor, of whether the Department had the authority under U.S.

[00:21:41] Speaker 05:
law to do it.

[00:21:45] Speaker 05:
And I see that my time has well expired.

[00:21:48] Speaker 06:
Thank you.

[00:22:03] Speaker 01:
Good morning.

[00:22:03] Speaker 01:
May it please the court, Christopher Perry for the Department of Transportation.

[00:22:07] Speaker 01:
In this case, DOT made a reasonable decision to make Interjet ineligible for Mexico City slots due to its significant presence at that airport and made the rational choice to make those remedy slots available to other carriers that face the most significant structural barriers at the airport.

[00:22:22] Speaker 01:
Those were low cost and low fare carriers based in both Mexico and the United States that had either a small number of slots at that airport or no slots.

[00:22:31] Speaker 01:
Interjet, it's not contested, was one of the two dominant carriers at the airport, besides Aeromexico, which is one of the joint applicants.

[00:22:38] Speaker 01:
So in this case, the Department's decision to exclude Interjet was to... I'm a little confused.

[00:22:42] Speaker 03:
What about the two legacy carriers?

[00:22:45] Speaker 01:
Correct, Your Honor.

[00:22:46] Speaker 01:
DOT's criteria for making eligibility determinations were twofold.

[00:22:50] Speaker 01:
First, we decided to only make the slots available to low-cost and low-fare carriers, which we had decided in past cases.

[00:22:57] Speaker 03:
My recollection, is it united in Delta?

[00:23:00] Speaker 03:
No, united in somebody else.

[00:23:02] Speaker 01:
United in America, Your Honor.

[00:23:03] Speaker 01:
Correct.

[00:23:03] Speaker 03:
They had a lot of slots, too.

[00:23:05] Speaker 01:
They had, correct, Your Honor, certainly smaller than Interjet, but in the way of a couple of dozen.

[00:23:09] Speaker 01:
And in that instance, the department's decision was to say, legacy carriers were not going to have the same competitive effect.

[00:23:15] Speaker 01:
That was the other aspect of our criteria.

[00:23:17] Speaker 03:
Now, here's what I have a question with respect to the second argument here, the authority.

[00:23:23] Speaker 03:
What is the limit to the conditions that you can impose?

[00:23:28] Speaker 03:
Well, Your Honor, they have... When you sit down as a lawyer,

[00:23:33] Speaker 03:
and advise the Department of Transportation as to what conditions they can impose and what they can't.

[00:23:38] Speaker 03:
What is the limitation?

[00:23:40] Speaker 01:
Correct, Your Honor.

[00:23:40] Speaker 01:
I think they're twofold.

[00:23:41] Speaker 01:
In the first instance, if there were a statutory interpretation question, which there really isn't, that would be a Chevron question.

[00:23:46] Speaker 01:
In the second instance, we would be in APA reasonableness.

[00:23:50] Speaker 03:
No, no.

[00:23:51] Speaker 03:
I'm asking what limitations.

[00:23:54] Speaker 03:
Is there no limitation on the conditions that the Department of Transportation can impose on the approval?

[00:24:01] Speaker 01:
There are limitations, Your Honor.

[00:24:02] Speaker 01:
What are the limitations?

[00:24:03] Speaker 01:
Well, I think it's a standard of reasonableness.

[00:24:05] Speaker 01:
In that respect, we would agree with what Energet is saying, and that is essentially their same primary argument, which has to do with whether or not our divestiture remedy was an exercise of reasonableness under the APA.

[00:24:15] Speaker 01:
And so we disagree that this was actually an allocation that occurred

[00:24:19] Speaker 01:
in Mexico City beyond our authority, all we did in this instance was to say we have two parties coming.

[00:24:24] Speaker 03:
Suppose Mexico had disagreed with you.

[00:24:27] Speaker 03:
Suppose Mexico was here and saying this is an unlawful effort on the part of Department of Transportation to regulate affairs within our countries.

[00:24:40] Speaker 03:
What would that, what would your position be?

[00:24:42] Speaker 01:
That, Your Honor, it's simply no deal.

[00:24:44] Speaker 01:
So in this instance, the parties have to approach both countries' authorities and say, here's the deal I want.

[00:24:49] Speaker 01:
Here's what I'm asking you for approval under both countries' laws.

[00:24:53] Speaker 03:
If there's overlap between what those two countries decide ought to be the standard, and the port— The Mexican is saying this is unlawful for the Department of Transportation to reach into regulating our airport.

[00:25:07] Speaker 01:
had they so decided, Your Honor, they could have.

[00:25:09] Speaker 01:
And in fact, the airport authority then could have actually refused to grant the slot transfers, which... No, but suppose they were in this court claiming that the Department of Transportation's behavior was illegal.

[00:25:21] Speaker 01:
Well, then, Your Honor, I suppose the court wanted to defer to that.

[00:25:23] Speaker 01:
But at the end of the day, if they didn't approve it, which they could do under their own law, there simply wouldn't be a deal and there wouldn't be any need.

[00:25:29] Speaker 01:
So in this instance, the question is simply, is there effective overlap?

[00:25:32] Speaker 03:
So is there any limitation to the kind of conditions you can impose in foreign airports?

[00:25:36] Speaker 03:
Anything at all?

[00:25:38] Speaker 01:
Yes, Your Honor.

[00:25:38] Speaker 01:
We wouldn't be able to actually do anything to regulate or effectuate any regulation of conduct in that country.

[00:25:45] Speaker 01:
All we can do is impose a condition that we place upon the parties to say, do this if you wish.

[00:25:50] Speaker 03:
So there is no limitation on what you can impose on the parties?

[00:25:53] Speaker 01:
None.

[00:25:54] Speaker 01:
I respectfully disagree, Your Honor.

[00:25:55] Speaker 01:
I think, again, it's subject to a Chevron standard and a reasonableness standard, and I think what we did here is reasonable.

[00:26:00] Speaker 01:
In this instance, if the Mexican government— Say it.

[00:26:03] Speaker 02:
The Chevron standard doesn't tell us anything at all.

[00:26:06] Speaker 02:
no i don't understand what kind of limitations would there be forget what standard you're judging them under what where does that line draw that you uh...

[00:26:17] Speaker 01:
Well, if we were actually telling Mexico what they must do as a matter of their law or process or authority, or telling the airport authority what they must do, that would be an extraterritorial exercise of our sovereignty.

[00:26:30] Speaker 01:
That's not what happened.

[00:26:31] Speaker 01:
All we did was impose a condition that the parties could either accept or leave, or if the Mexican authorities had wanted to reject it, they could.

[00:26:38] Speaker 02:
If the Mexican authorities rejected it, what would have happened at that point?

[00:26:42] Speaker 02:
Simply no deal, Your Honor.

[00:26:45] Speaker 06:
To face it could have denied antitrust immunity is what you're saying.

[00:26:49] Speaker 01:
Correct your honor or it simply would not have entered into force it would have become mood.

[00:26:52] Speaker 01:
So if co face a the Mexican authority it simply wanted to say we don't think this is a good deal or we're going to do it with our own conditions.

[00:27:00] Speaker 01:
They could have done that or they simply could have rejected it.

[00:27:03] Speaker 01:
The area of overlap between the two countries' orders and remedies is the area of effective opportunity for the parties to carry forward the deal.

[00:27:09] Speaker 01:
Much like, for example, if somebody wants to get a building constructed, they might have to get permits from multiple different authorities.

[00:27:15] Speaker 01:
No one's telling you you have to do it, but we are saying you have to collect these permits from these different offices within their expertise to carry it forward, whether that be fire or water or whatever it may be.

[00:27:28] Speaker 06:
Required for the joint venture to operate or only for the joint venture to have antitrust immunity To operate your honor.

[00:27:36] Speaker 06:
So I don't think it's particularly relevant to the case by just interested the section we've been looking at is the

[00:27:44] Speaker 06:
exemption for antitrust immunity.

[00:27:48] Speaker 01:
That's correct, Your Honor.

[00:27:48] Speaker 01:
So 41308 and 41309 are the two governing statutes.

[00:27:51] Speaker 06:
Where does it say they can't operate?

[00:27:53] Speaker 06:
They can operate, but then they just risk being sued under the antitrust law.

[00:27:57] Speaker 01:
Well, that's correct, Your Honor.

[00:27:58] Speaker 01:
I think a couple of things would happen.

[00:28:00] Speaker 01:
First of all, these carriers have to be permitted both in our country and in Mexico

[00:28:07] Speaker 01:
And so there would also be vulnerability with respect to whether or not they're operating within their permit, their certificate of public convenience and necessity.

[00:28:15] Speaker 01:
Correct, Your Honor.

[00:28:17] Speaker 06:
I take it that when you say the conditions have to be reasonable, the content of reasonableness is provided by 401-01?

[00:28:27] Speaker 06:
which are the factors that the transportation secretary has to take into consideration?

[00:28:33] Speaker 01:
Yes, Your Honor, at least those are the factors that would also, we think, be read through 41308 and 41309.

[00:28:38] Speaker 01:
They're generally governing provisions.

[00:28:40] Speaker 06:
Yes, but so you couldn't just pose any old condition.

[00:28:43] Speaker 06:
It would have to be a condition relating to reliance on competitive market forces, avoiding unreasonable industry concentration, that sort of thing.

[00:28:52] Speaker 01:
Correct, Your Honor.

[00:28:53] Speaker 06:
That would have been your answer to my question.

[00:28:56] Speaker 01:
It is a good answer, Your Honor.

[00:28:59] Speaker 01:
I try to help out everybody.

[00:29:03] Speaker 01:
So, returning to Interjet's primary argument with respect to arbitrary and capricious review.

[00:29:06] Speaker 01:
The decision was also internally consistent.

[00:29:09] Speaker 01:
We applied the same rationale to exclude JetBlue at JFK.

[00:29:13] Speaker 01:
And in that instance, JetBlue was also the second largest carrier by a substantial margin.

[00:29:19] Speaker 01:
That decision was what allowed Interjet to actually be eligible and get the slot that it wanted to at JFK.

[00:29:25] Speaker 01:
That was one of its primary objectives in this proceeding, was to get a slot at a more commercially beneficial hour.

[00:29:31] Speaker 01:
In the next respect, Enerjet says that they're being punished for their success.

[00:29:35] Speaker 01:
They're not.

[00:29:36] Speaker 01:
All we're doing, again, is imposing reasonable conditions.

[00:29:39] Speaker 01:
And rather than trying to look at Enerjet and saying you're doing something improper, we're simply taking the fact of their position and saying we need to account for that in the reasonable analysis if we're looking at competitive conditions at that airport as a whole and trying to address structural problems.

[00:29:53] Speaker 06:
Is there any way in which the process was structured that prevented Enerjet

[00:29:57] Speaker 06:
putting in any evidence that it wanted with respect to its competitiveness?

[00:30:02] Speaker 01:
No, Your Honor.

[00:30:02] Speaker 01:
They could have and did repeatedly.

[00:30:04] Speaker 01:
We had multiple show cause orders, multiple different orders at the assignment phase as well.

[00:30:09] Speaker 01:
Even after we put out a show cause order in the slot assignment phase last March, Interjet submitted another filing in which it renewed its objection with respect to their exclusion, and we addressed it yet again in our final order on the merits in April, which is the second order that's under review here.

[00:30:24] Speaker 01:
So we were happy to receive their submissions repeatedly.

[00:30:26] Speaker 01:
It just so happens that getting additional data about factors like baggage, other things that your honor mentioned that were in the reply brief.

[00:30:33] Speaker 01:
Those were not brought before the agency at that stage.

[00:30:36] Speaker 01:
They would not have made any real difference because what we were addressing.

[00:30:39] Speaker 01:
were structural problems at the airport, not problems or questions with respect to their service.

[00:30:44] Speaker 06:
And what was the evidence in the record about how many of their current slots they were using?

[00:30:49] Speaker 01:
So, Your Honor, if you look at Joint Appendix page 334, which is our final order under review, we addressed Interjet's arguments on the merit again and said, Interjet operates more than 25 percent of the slots at MEX, which is not contested, and said, second, incumbents at MEX, including Interjet, do not use 37 percent of their slots on average.

[00:31:09] Speaker 01:
So that's an aggregated figure.

[00:31:11] Speaker 01:
It says Interjet did not dispute either of those data points, which are derived from official Mexican sources, which is the CAFECE report.

[00:31:17] Speaker 01:
We'd be happy to look at anything that Interjet put in the record.

[00:31:19] Speaker 01:
It was J 334, Your Honor.

[00:31:21] Speaker 01:
We'd be happy to look at anything put in the record, but we have to look at the record that's put before us, and that's precisely what we did.

[00:31:27] Speaker 01:
We can't simply guess at what Interjet's doing, nor do we have a burden to say that they will only do this if it's in their commercial interest.

[00:31:33] Speaker 01:
They have to tell us what they're going to do.

[00:31:35] Speaker 01:
Furthermore, even if they're not using any of these slots for international service right now,

[00:31:40] Speaker 01:
It's our view, and it's supported by economic theory, that the fact that they simply could is itself something that could help to competitively discipline the two major carriers here in this instance.

[00:31:50] Speaker 01:
If you're in Mexico and your second carrier breathing down your neck is Enerjet, you can simply say, well, they're not using this for this service now, but if I raise my price too high, they might be able to flip over and capture some of that market.

[00:32:01] Speaker 01:
So we did that as well.

[00:32:05] Speaker 01:
If there are no further questions.

[00:32:07] Speaker 06:
Apparently not.

[00:32:08] Speaker 06:
Thank you.

[00:32:10] Speaker 06:
Is there time remaining?

[00:32:13] Speaker 06:
All right.

[00:32:13] Speaker 06:
Your opponent graciously did not use all of his time, so we're going to let you have two minutes of his time.

[00:32:21] Speaker 06:
It's a good thing I didn't tell him that in advance, because he would have run out of time.

[00:32:30] Speaker 05:
Your Honor, with regard to the I

[00:32:39] Speaker 05:
I was not able to find it in the brief time, but I do believe that we indeed did make the argument, certainly about the domestic network, to the Department in the course of the various pleadings that we made.

[00:32:55] Speaker 03:
But— How many slots are you not using at all for either domestic or foreign?

[00:33:01] Speaker 05:
I do not know that, Your Honor.

[00:33:03] Speaker 03:
Why would you not know that?

[00:33:06] Speaker 03:
Your Honor, the— Your counsel in the Court of Appeals, why would you not know that?

[00:33:10] Speaker 03:
And isn't that sort of suspicious?

[00:33:12] Speaker 03:
Why the devil would you want more slots if you have a lot of slots that you're not using?

[00:33:18] Speaker 03:
Is that because your real objective is to prevent anybody else from having the slots?

[00:33:22] Speaker 03:
Oh, no, no.

[00:33:23] Speaker 05:
Oh, of course not.

[00:33:24] Speaker 05:
No, not at all.

[00:33:25] Speaker 05:
To the best of my knowledge, inner jet, whether Your Honor, I shouldn't, I can't testify, but Your Honor, to a large extent,

[00:33:39] Speaker 05:
some of this information that is missing is missing because we were not allowed to come to the party, if you will, in which we could make arguments regarding these issues.

[00:33:54] Speaker 06:
This is the part I'm not understanding.

[00:33:55] Speaker 06:
And it worried me when you first said it.

[00:33:57] Speaker 06:
I asked the Department of Transportation.

[00:33:59] Speaker 06:
They said you could have submitted any evidence you wanted.

[00:34:02] Speaker 06:
The orders reflect the fact that you made arguments.

[00:34:07] Speaker 06:
Can you point to some document or instruction of the Department of Transportation that says you can make arguments but you can't submit evidence?

[00:34:16] Speaker 06:
What do you mean by the phrase, we weren't allowed to come to the party?

[00:34:20] Speaker 05:
By the phrase, we were not allowed to participate in the slot allocation proceeding at MEX.

[00:34:29] Speaker 06:
Were you not allowed to respond to the order to show cause with evidence?

[00:34:33] Speaker 05:
Yes, Your Honor, we certainly were.

[00:34:39] Speaker 05:
But I guess all I can say, Your Honor, is that it's easier in hindsight perhaps to see some of these things than at the moment.

[00:34:49] Speaker 05:
But we certainly argued to the Department on the arbitrary issue, you know, that we had a far

[00:34:54] Speaker 05:
there were other considerations other than that particular issue.

[00:34:58] Speaker 05:
And the other issue that we did argue was that we had a far smaller portion of the transporter market than did some of our competitors who did receive slots.

[00:35:12] Speaker 05:
And we argued that that was an indicia of arbitrariness.

[00:35:17] Speaker 05:
But if I might switch to the

[00:35:20] Speaker 05:
to the statutory authority question again, I would just like to make clear that yes, we limit our argument to MEX, but to the extent that the court has any concerns about that and says that it draws in JFK

[00:35:39] Speaker 05:
It's our position that that's an appropriate matter for the department to undertake.

[00:35:45] Speaker 05:
Any implications of that are for you to remand it to the department for further consideration there.

[00:35:52] Speaker 05:
But in terms of the statute... So I just want to be clear.

[00:35:56] Speaker 06:
I understand this argument.

[00:35:57] Speaker 06:
So you agree that with respect to domestic airports, the department is free to impose reasonable conditions on

[00:36:07] Speaker 06:
whom the slots are in a divestiture are allocated to.

[00:36:13] Speaker 05:
Your Honor, I am not— Under the statute.

[00:36:16] Speaker 05:
I'm not—we are not addressing that.

[00:36:18] Speaker 06:
Well, I know, but today you are.

[00:36:20] Speaker 06:
So I just want to know—I want to know your interpretation of the statute.

[00:36:26] Speaker 06:
Do you agree that it permits DOT, when it orders a divestiture, to also say,

[00:36:34] Speaker 06:
the slots have to go to this company or that company, as long as it's reasonable with respect to antitrust competitiveness considerations.

[00:36:43] Speaker 05:
It is our position, Your Honor, that the Department has authority, whether it derives solely from 41308 or 309 or from other sources which we haven't addressed, we agree that the Department has authority to do that in the United States.

[00:36:59] Speaker 05:
I see.

[00:36:59] Speaker 06:
So then your argument is just limited to the contention that

[00:37:03] Speaker 06:
this effectively subverts the sovereignty of Mexico.

[00:37:08] Speaker 05:
Is that right?

[00:37:12] Speaker 05:
And we're also arguing, Your Honor, that the Department does not have the authority insofar as this line allocation proceeding goes to do that.

[00:37:24] Speaker 05:
They have the authority to

[00:37:29] Speaker 05:
impose reasonable conditions, a reasonable condition would say you must divest 24 slot pairs.

[00:37:35] Speaker 05:
That would be reasonable.

[00:37:36] Speaker 06:
I just want to again be clear.

[00:37:38] Speaker 06:
In a domestic airport, do you agree that if it were reasonable, it could order divestiture and allocation?

[00:37:49] Speaker 05:
I agree that at a domestic airport, I'm not saying that it's necessarily based on 41308 or 309.

[00:38:00] Speaker 06:
What is it based on then?

[00:38:01] Speaker 05:
Well, as I said, Your Honor, we haven't undertaken to address that.

[00:38:05] Speaker 06:
Do you think it's inconsistent with those sections for domestic?

[00:38:11] Speaker 06:
So imagine a situation in which

[00:38:14] Speaker 06:
The choice of divestiture is to go to the second largest airline, which is 200 times more powerful in terms of slots than anything else.

[00:38:28] Speaker 06:
And instead, the agency, the department says, if the biggest airline is going to divest, it has to give it to the smallest airline.

[00:38:36] Speaker 06:
Would it have that authority under this section?

[00:38:39] Speaker 06:
Or do you think it would violate the sections that we're talking about here?

[00:38:42] Speaker 05:
I want to make sure I understand your hypothetical.

[00:38:44] Speaker 05:
So if, if, what was the example again, Your Honor?

[00:38:47] Speaker 06:
Imagine that the agency decides to, one, divest,

[00:38:54] Speaker 06:
And two, for very good antitrust reasons, whatever they are, assume that they are perfect antitrust reasons, decides to give it to a small airline rather than to a large airline, and says, if you're going to divest, you have to give to this small airline.

[00:39:09] Speaker 06:
Does it have that authority for a domestic airport, or is it invalid under any of the statutes we're considering today?

[00:39:32] Speaker 05:
I think under that example, Your Honor, I'm thinking carefully.

[00:39:35] Speaker 05:
It's difficult to say for certain, but as best I understand the example, I think if that was the limit of it, it was just giving it to a particular carrier.

[00:39:48] Speaker 05:
Again, knowing all the facts, I'm inclined to think it probably does have that authority, the Department.

[00:39:56] Speaker 05:
It's difficult to say in the abstract, Your Honor, but I believe so.

[00:40:01] Speaker 05:
Further questions?

[00:40:02] Speaker 06:
I'll take them out on our submission.

[00:40:04] Speaker 06:
Thank you.