[00:00:02] Speaker 04: Case number 19-1248, Spirit Airlines Inc. [00:00:06] Speaker 04: Petitioner versus United States Department of Transportation and Federal Aviation Administration. [00:00:12] Speaker 04: Ms. [00:00:12] Speaker 04: Brown for the petitioner, Mr. Schulz for the respondents. [00:00:16] Speaker 04: Ms. [00:00:17] Speaker 04: Brown, good morning. [00:00:18] Speaker 01: Good morning, Your Honor, and may it please the court, Amy Brown on behalf of Spirit Airlines. [00:00:23] Speaker 01: Since its 2010 merger with Continental, United Airlines has operated as a monopolist at Newark with a greater level of dominance at any capacity-limited airport. [00:00:36] Speaker 01: The Department of Justice has recognized the significant competitive concerns raised by that merger and the dominance that United has and required United to cede flight slots at Newark to a low-cost carrier, Southwest. [00:00:47] Speaker 01: But in 2019, Southwest announced that it was ceasing service to Newark. [00:00:51] Speaker 01: DOJ and Spirit requested that the FAA reallocate a block of 16 peak authorizations to another low-cost carrier to preserve competition at the airport. [00:01:00] Speaker 01: But in an effort to solidify its monopoly, United argued that the authorization should be retired. [00:01:05] Speaker 01: In the decision that's under review here, the FAA sided with United and announced that it would not reallocate Southwest's peak authorizations. [00:01:13] Speaker 01: Even now, when there's no congestion at airports and no reason to limit authorizations, the FAA has set up a regime that continues to favor United. [00:01:21] Speaker 01: As recently as last week, the FAA reaffirmed that Spirit is not entitled to priority for peak authorizations in future seasons and that United can effectively block Spirit from obtaining priority by continuing to operate flights during those periods. [00:01:35] Speaker 01: By failing to take the competitive concerns into account and ignoring comments from expert stakeholders like the DOJ and the Port Authority of New York and New Jersey, the FAA acted arbitrarily and capriciously. [00:01:45] Speaker 01: We asked the court to grant Spirit's petition for review and vacate the decision. [00:01:50] Speaker 03: If we conclude that the agency act was not final, you still have to [00:02:08] Speaker 01: I guess it depends on the theory on which you've concluded that there is no no final agency action. [00:02:14] Speaker 01: I said that you can be similar or can be related. [00:02:19] Speaker 03: We concluded that it's not final. [00:02:21] Speaker 03: And I'm not saying I have concluded this, but if we conclude that it's not final agency action because it doesn't have binding legal effect, would that mean that you don't have standing? [00:02:32] Speaker 01: I think not necessarily. [00:02:34] Speaker 01: Obviously there's a difference between kind of the practical consequences that a decision can have and a binding legal effect. [00:02:39] Speaker 01: And where a decision has practical consequences, but not legal consequences, there can still be an injury and still be standing, but not necessarily be a final agency action here. [00:02:49] Speaker 01: Although we think we have both. [00:02:52] Speaker 03: And so let's talk about the finality part if we could. [00:03:00] Speaker 03: What are the chances [00:03:02] Speaker 03: that the FAA will take Newark to a level three status if Spirit flies the 16 slots that Southwest used to fly during peak hours? [00:03:16] Speaker 03: What do you think the chances are that FAA will take Newark to level three? [00:03:20] Speaker 01: I think it's really difficult to put kind of a percentage on that. [00:03:23] Speaker 01: I think if the airport is operating at its peak capacity and if the delays continue to be what they are here, then the FAA has indicated [00:03:32] Speaker 01: that if there's a continual, if an airline continues to fly without authorizations at a time when the flights are at or above their peak, then it will be looking to make the transition. [00:03:47] Speaker 01: And that's not an idle threat. [00:03:48] Speaker 01: This is something that has happened before at Newark Airport in 2008. [00:03:53] Speaker 03: Before the pandemic was Newark at [00:03:57] Speaker 03: that kind of have the at maximum capacity status that you're talking about? [00:04:04] Speaker 01: Yes, yes it did. [00:04:05] Speaker 03: So if I understand you correctly, and tell me if I'm wrong, if conditions after the pandemic returned to the conditions before the pandemic, and if Spirit started flying the 16 peak slots that Southwest used to fly, [00:04:28] Speaker 03: then you think it's almost certain that the FAA would take Newark to a level three status? [00:04:35] Speaker 01: We think that that's what the FAA has indicated that it would do. [00:04:37] Speaker 01: And that's backed up by the language that's in the notices itself and by the language that's in the worldwide slot guidelines indicating that when airlines are operating above capacity and there's not a chance of kind of the voluntary negotiations that the FAA has referred to and voluntary adjustments on their own, [00:04:58] Speaker 01: that that will lead to the transition to level three. [00:05:01] Speaker 03: What do I do with the slang from national mining, which is a fairly recent DC circuit opinion. [00:05:11] Speaker 03: It says, but while regulated parties may feel pressure to voluntarily conform their behavior because the writing is on the wall about what will be needed to obtain a permit. [00:05:22] Speaker 03: There is in no order compelling the regulated entity to do anything and therefore [00:05:28] Speaker 03: no finality, I added the therefore no finality part. [00:05:31] Speaker 01: Sure. [00:05:32] Speaker 01: So I think that here the threatened transition to level three is only one part of what makes this a final agency action here. [00:05:38] Speaker 01: And the second part or one of the other parts here that I would point you to is the denial of priority that's happening immediately. [00:05:46] Speaker 01: So even now, Spirit, by not having the authorizations for future seasons is denied priority for scheduling in future seasons today. [00:05:56] Speaker 01: And that is particularly important for planning purposes because the authorizations themselves aren't finalized until very near the time that the scheduling season actually begins. [00:06:06] Speaker 01: And of course, airline tickets, on the other hand, are sold sometimes nearly a year in advance. [00:06:10] Speaker 01: And the reason that that's even possible is because the airlines can rely on priority that they've received based on their previous schedule, which guarantees them those authorizations in these future seasons, even in the event of a transition to level three. [00:06:25] Speaker 01: And so Spirit is not being entitled or not being permitted to have that priority even now. [00:06:30] Speaker 01: And so that is, I think, one of the consequences of this decision, even if you're not sure if or when the transition to level three will happen. [00:06:37] Speaker 01: It's this kind of safe harbor that Spirit is being denied. [00:06:39] Speaker 01: And the Supreme Court has held, in cases like the US Army Corps of Engineer versus Hawks from 2016, that kind of a safe harbor or the denial of that safe harbor is sufficient legal consequence for a final agency action. [00:06:54] Speaker 03: Let me ask one more question, then I'll get out of your way and out of my colleague's way. [00:07:00] Speaker 03: During the pandemic, I'm gonna guess that Newark is not having as many flights as they used to. [00:07:06] Speaker 03: If you just started flying a bunch of those 16 peak Southwest slots, and then later, I guess after the pandemic, [00:07:24] Speaker 03: you know, the scenario you don't want to have happen happens. [00:07:30] Speaker 03: Newark gets taken to a level three and it becomes illegal for you to continue to fly those slots. [00:07:38] Speaker 03: Would you have made money in the meantime or is the amount of money necessary as an initial investment to do those 16 slots greater than what you will be able to make [00:07:55] Speaker 03: in the period between now and when Newark might get taken to a level three. [00:08:03] Speaker 01: So I think that depends entirely on how long that current period is. [00:08:06] Speaker 01: The investment in the infrastructure and in the gates and all that's required to start these ad hoc flights without kind of the guarantee of future priority is significant. [00:08:18] Speaker 01: And that is what keeps Spirit from operating these flights in normal circumstances. [00:08:22] Speaker 01: So that is the kind of like painful choice between compliance and the risk of prosecution in the future that the court has referred to in CSI aviation as a final agency action. [00:08:32] Speaker 01: I do think that COVID has altered things and has altered the calculus for Spirit because there is really very limited potential for the return of these flights very soon. [00:08:45] Speaker 01: And so because of that Spirit has taken the step of operating [00:08:48] Speaker 01: operating flights, ad hoc temporary flights during times that would previously be considered peak hours, but of course they're not peak hours now because no one is flying. [00:08:59] Speaker 01: But the way that the FAA has addressed COVID and the situation has just kind of highlighted the way that it continues to favor the incumbent airlines like United here, the FAA has allowed these incumbent airlines to maintain their authorizations and the accompanying priority for future seasons [00:09:17] Speaker 01: even when they're not actually operating the flights, while the FAA has declined to issue new authorizations to airlines like Spirit who are willing and able to fly, even though they are aware that the flights are nowhere near their operating caps. [00:09:30] Speaker 01: So even while Spirit is flying now and United isn't, United is maintaining that priority for future seasons and Spirit is not. [00:09:39] Speaker 01: And last week's notice that there was a notice that was just published in the Federal Register yesterday, [00:09:46] Speaker 01: it suggests that the FAA is planning to continue that policy, at least through December of this year. [00:09:52] Speaker 01: And then starting in January, the airlines will have to operate to get priority moving forward, but they only have to give notice a month prior. [00:10:00] Speaker 01: And so if at that point, the authorizations will be at their limit again, they can essentially force Spirit out and force Spirit to make that same calculus that we were referring to earlier about whether the economics are worthwhile for it to risk [00:10:16] Speaker 01: kind of the enforcement and the cancellation of the flights. [00:10:19] Speaker 01: But it's not just, I want to also say it's not just the cancellation of the flights and the cost of the infrastructure and the gate that it stands to lose. [00:10:30] Speaker 01: If it's forced to cancel flights on a quick timeline, Spirit, because of its limited presence at Newark and its limited ability to obtain authorizations there, is also [00:10:43] Speaker 01: unable to rebook the passengers that it's booked on those flights. [00:10:46] Speaker 01: And so it loses out there as well. [00:10:49] Speaker 01: So I think that's that's another another problem here. [00:10:53] Speaker 01: I realized that I'm past my time, but I would like to turn to the merits for a moment if I if I might. [00:11:02] Speaker 01: All right. [00:11:02] Speaker 01: Thank you. [00:11:03] Speaker 01: On arbitrary and capricious review, the agency needed to address the important aspects of the problem and do more than not to the concerns [00:11:10] Speaker 01: raised by commenters only to dismiss them and they failed to do that here. [00:11:14] Speaker 01: The comments that were raised as well as the congressional policy favorite competition required the agency to consider the competitive effects that its decision was going to have here and it failed to do so. [00:11:27] Speaker 01: The agency has kind of gestured towards concerns with congestion and the need to study that but the record is very clear that any competitive, that there's going to be significant competitive consequences here [00:11:39] Speaker 01: and only a limited effect on congestion. [00:11:43] Speaker 01: Competition in Newark is just as bad as it was in 2010 and in 2015 when the DOJ negotiated for these slots and when the DOJ sued United to prevent it from gaining additional slots from Delta. [00:11:57] Speaker 01: Southwest's departure leaves United with 81% of the peak afternoon hours, 73% of all of Newark's flights, [00:12:05] Speaker 01: It gives United five additional monopoly routes. [00:12:08] Speaker 01: In addition to the 81 that it already has and spirit. [00:12:13] Speaker 01: If it were allowed to operate during these these peak hours could add flights to four of those monopoly routes. [00:12:19] Speaker 01: And it means the loss of a million low cost tickets per year. [00:12:23] Speaker 01: On the other hand, you have the congestion and [00:12:27] Speaker 01: The data in the record here shows that retiring Southwest authorization will only reduce congestion by 1.2%. [00:12:34] Speaker 01: And if Congress were, if the FAA were actually concerned with congestion, the proper thing to do here would be to use the congressionally approved mechanism. [00:12:45] Speaker 01: And that is the schedule reduction meeting, which it's done in the past and use that perhaps to shift the flights from the two o'clock p.m. [00:12:51] Speaker 01: hour, which would reduce congestion by something like 20% rather than the 1.2%. [00:12:56] Speaker 02: Brown, you said United went from 81 to 86 monopoly routes when Southwest withdrew? [00:13:03] Speaker 01: That's correct. [00:13:04] Speaker 02: And if Spirit were flying Southwest slots, it would compete with United on four? [00:13:13] Speaker 01: Yes, on four of the five routes that United did. [00:13:15] Speaker 02: That's what we know. [00:13:16] Speaker 02: It's four of the five at the margin. [00:13:18] Speaker 02: Okay, thank you. [00:13:19] Speaker 01: Yes. [00:13:21] Speaker 01: The FAA has tried to kind of frame its decision as the middle ground preservation of the status quo, but it's neither of those things. [00:13:28] Speaker 01: It doesn't actually, it doesn't preserve the status quo for competition. [00:13:31] Speaker 01: So United, or the FAA had to choose between preserving status quo for competition and preserving its policy that prevented it from, or that it would not allocate slots above the limits here. [00:13:44] Speaker 01: And it had to explain why it favored the latter instead of the former. [00:13:48] Speaker 01: The DOJ and other experts have long recognized the value of competition, particularly from a low cost carrier at an airport like Newark with a dominant monopolist. [00:13:59] Speaker 01: And that was a decision that needed to be, or that was a factor that needed to be taken into account here. [00:14:05] Speaker 01: I know I'm well over my time, but. [00:14:08] Speaker 02: I believe you had an adverse order on June 4th, is that correct? [00:14:12] Speaker 01: Yes, I think there was an order on June 4th. [00:14:15] Speaker 01: The most recent that we've seen is this, [00:14:17] Speaker 01: is the Federal Register notice that was just published yesterday. [00:14:21] Speaker 02: The June forwarder was denying your application for some of the slots, correct? [00:14:27] Speaker 01: I am not positive on that, but if I'm sure if that's the date in the record, I'd have to go back and check on that for. [00:14:34] Speaker 02: You're pending from whatever date it was that denied you your application? [00:14:40] Speaker 01: For the slots for the next season, sorry, for summer. [00:14:44] Speaker 01: We don't have a petition for that. [00:14:47] Speaker 01: at this point, no. [00:14:49] Speaker 01: Our view is that the petition that's at issue here and the petition for denial of the slots and the denial of the reallocation of Southwest kind of will cover the future seasons as well, because we would have priority then. [00:15:08] Speaker 01: But we have requested those authorizations in future seasons as well. [00:15:14] Speaker 05: Thank you. [00:15:14] Speaker 05: Thank you, Ms. [00:15:15] Speaker 05: Brown. [00:15:16] Speaker 05: Mr. Schultz. [00:15:22] Speaker 00: Thank you, Your Honor. [00:15:23] Speaker 00: May it please the court. [00:15:25] Speaker 00: Benjamin Schultz on behalf of the Secretary of Transportation and the Administrator of the FAA. [00:15:31] Speaker 00: The agency action that is being challenged in this case is not a final agency action. [00:15:36] Speaker 00: It was a notice that the FAA published in fall 2019 telling the airlines how it expected to run the level two schedule facilitation process for the upcoming summer 2020 season. [00:15:48] Speaker 00: That notice was not final agency action for two different reasons. [00:15:52] Speaker 00: The first was that it lacked legal effect. [00:15:54] Speaker 00: And the second was that even if you thought that FAA's approvals of particular routes had legal effect or approvals of particular time periods had legal effect, the notice was not the culmination of even that process because all that the notice did was it told the airlines how it was going to go through its facilitation process, but then it was incumbent on the airlines to submit their proposed schedules and actually go through that process [00:16:19] Speaker 00: and go through the process of negotiation and facilitation. [00:16:22] Speaker 00: It is only once that process ended that the airlines would know which schedules were approved and which ones were not. [00:16:30] Speaker 00: I'd be happy to talk more about the final agency action if the court has questions about it. [00:16:35] Speaker 00: And I do want to in particular. [00:16:37] Speaker 02: I do have a question about it. [00:16:40] Speaker 02: The spirit has cited here and relied on our decision in the security points. [00:16:48] Speaker 02: and in safe extensions, right? [00:16:53] Speaker 02: We could call them bins and lights for short. [00:16:58] Speaker 02: And in each case, it was because the agency action as to which finality was an issue, limited or defeated completely the petitioner's ability to seek [00:17:18] Speaker 02: advantageous business relationships to sell the lights, for instance, to airports. [00:17:26] Speaker 02: So whatever the nature of the letter there, it had this limiting effect that seems to be quite an out, I'm referring to a letter in security point seems to have an effect very much like the effect of the notice here, saying, you're not going to be able to [00:17:47] Speaker 00: backfill these slots. [00:17:58] Speaker 00: the action, in fact, had legal effect. [00:18:00] Speaker 00: What it was is there were binding agreements. [00:18:03] Speaker 00: And if the agency had modified those agreements, then there would have been a change in the legal relationship. [00:18:09] Speaker 00: So when the agency refused to modify those agreements, it was choosing one legal regime over another. [00:18:15] Speaker 00: There was binding legal effect. [00:18:17] Speaker 00: That's not the case here. [00:18:19] Speaker 00: Because here, even if you thought that the FAA's approvals had, even if you thought that the FAA's [00:18:26] Speaker 00: decision making said something about approvals, those approvals still don't have legal effect. [00:18:32] Speaker 00: And a good way to think about this is another one of these courts cases, which case that we cite is the Joshi versus NTSB case. [00:18:39] Speaker 00: And that's a case where Joshi asked the NTSB to reconsider something and the agency refused to reconsider a published report that had it issued. [00:18:48] Speaker 00: And it's the case that the agency was definitively saying, look, we're not [00:18:51] Speaker 00: modifying our report, that's gonna just be the report and there's nothing you can do about it, Mr. Joshi, but it was still held to be not final agency action because the underlying report didn't have legal effect. [00:19:03] Speaker 00: And so that's what's going on here. [00:19:04] Speaker 00: The FAA's approvals state the FAA's views. [00:19:07] Speaker 00: It's the FAA saying, these are the flights that we think should go forward, but if Spirit wants to go ahead and operate those flights without FAA approval, it is legally free to do so. [00:19:17] Speaker 00: The other problem though with your honor's reliance on the security point case [00:19:21] Speaker 00: is that even if you thought that it was the approval process that had some sort of legal effect, that only is part of the finality inquiry. [00:19:28] Speaker 00: The other half is whether or not this is the consummation of the agency's decision. [00:19:33] Speaker 00: And it's very telling. [00:19:35] Speaker 02: I'm sorry. [00:19:36] Speaker 02: One of the elements of the notice, I think, is saying that the slots that it approves or has approved will have priority. [00:19:48] Speaker 00: Well, respectfully, your honor. [00:19:49] Speaker 00: That's actually not what it says. [00:19:51] Speaker 00: It's saying that if the agency ultimately concludes that it needs to go to level three at some point in the future. [00:19:58] Speaker 00: It expects that at that indeterminate future point at which it prospectively goes [00:20:04] Speaker 00: to a level three airport, then at that point it expects that the approved flights would have priority over the unapproved flights. [00:20:11] Speaker 00: Now that's a really important thing to understand because we were not here saying that if at some point in the future the FAA goes to level three and Spirit wants to get a slot and Spirit doesn't get that slot in the level three regime. [00:20:24] Speaker 00: We're not saying that [00:20:25] Speaker 00: Spirit can't at that point seek judicial review. [00:20:27] Speaker 00: A slots regime would have legal effect. [00:20:30] Speaker 00: What we are saying is that in the level two regime where all that FAA is doing is this voluntary facilitation process where it's telling people, okay, these are the flights that we think are good. [00:20:40] Speaker 00: Those are the flights that we would rather that you didn't fly because those decisions don't have legal effect and Spirit is still free to fly right now, then it's not yet final agency action. [00:20:52] Speaker 02: I'm reminded of Clay Whitehead's observation many years ago that the force, the power of the sword of Damocles is not that it falls, but that it hangs. [00:21:01] Speaker 00: Well, respectfully, Your Honor, this court has just a legion of cases that say that when you look at the finality inquiry, it's not the practical consequences, it's the legal consequences. [00:21:12] Speaker 00: And that's something that this court has said [00:21:13] Speaker 00: Indeed, in the Joshi case, everybody conceded that the NTSB's reports had significant practical consequences, but nonetheless, because it was just a report and it didn't have legal consequences, it was held not to be final agency action. [00:21:27] Speaker 00: That's just one of many cases. [00:21:29] Speaker 00: There are plenty of cases about agency advice letters. [00:21:32] Speaker 00: There are cases, for example, I think there's the California case about the EPA where the EPA had [00:21:39] Speaker 00: said that something was decided and then it reopened it and there was significant doubt as to whether that old decision was going to stand and the states were going to have to do all these changes to their plans. [00:21:49] Speaker 00: So everybody agreed that there were significant practical consequences, but it was nonetheless held to be not final agency action. [00:21:55] Speaker 02: I agree, but it's an elusive distinction between practical and legal consequences in the Safe Extensions case. [00:22:07] Speaker 02: where the consequence is that the company could not sell lights to airports. [00:22:13] Speaker 02: That sounds like a practical consequence. [00:22:16] Speaker 00: Well, it's also a legal consequence. [00:22:18] Speaker 00: The way that it was understood was that it was a, the way at least this court said that it understood the legal regime was that it was a legally, a legal bar on those people buying the product. [00:22:28] Speaker 00: So it was not just that [00:22:30] Speaker 00: you know, they felt that there were practical problems. [00:22:32] Speaker 00: It was that, at least again, as this court understood it, that it was illegal for them to make those sales. [00:22:37] Speaker 00: Nobody's saying it's illegal for Spirit to operate these unapproved flights. [00:22:41] Speaker 02: Yes, it was illegal for them to make those sales. [00:22:43] Speaker 02: Or put another way, no sales, no one would buy. [00:22:47] Speaker 02: Actually, that's what the company or the court said. [00:22:51] Speaker 02: Problem being, no airport would buy them. [00:22:54] Speaker 02: That's unlawful for the company to sell them, but no airport would buy them. [00:22:59] Speaker 00: Respectfully, I think that's not how the court understood it in Safe Extensions, at least as I read the opinion, the court understood it that it was in fact a legal bar. [00:23:11] Speaker 00: But even if this court has a different reading, I still want to make a distinction that there are some situations where this court has had a slightly different understanding of finality in situations where the regulated party is put to the situation where it might have to face prosecution. [00:23:32] Speaker 00: That's like, for example, the Ipsen case. [00:23:34] Speaker 00: That's not even what we have here. [00:23:36] Speaker 00: If Spirit operates these unapproved flights, it's not like if Spirit thinks that it's okay, and then the FAA says, no, actually, we don't like what you're doing, that Spirit faces some sort of fine or civil enforcement action for anything it did in the past. [00:23:50] Speaker 00: All that happens is something, at most, all that happens is something prospective. [00:23:54] Speaker 00: FAA would say, wow, there's really a lot of congestion here. [00:23:57] Speaker 00: So prospectively, we're going to make this change in the legal regime. [00:24:00] Speaker 00: everything that you did up until that point, you did it and it's done. [00:24:05] Speaker 00: There are no fines that we're gonna impose on you or anything like that. [00:24:08] Speaker 02: Let me first take you back, let's deal with that in a second, take you back to safe extensions, okay? [00:24:15] Speaker 02: The FAA argues that the AC 42F, quote, neither imposes a legal obligation upon any person nor creates any legal rights, close quote. [00:24:25] Speaker 02: This is absurd. [00:24:27] Speaker 02: As Safe Extensions points out, quote, if a manufacturer's equipment does not meet specifications, it cannot be, close quote, placed on the list of FAA approved products airports can buy. [00:24:40] Speaker 02: The specs effectively prohibits airports from buying light bases that fail the new test. [00:24:49] Speaker 02: Now, you're telling me that is illegal as opposed to distinction, as opposed to merely practical. [00:24:55] Speaker 00: That is how I read this court's understanding of the legal regime and safe extensions. [00:25:00] Speaker 02: I suppose it's legal in the somewhat attenuated sense that they won't be able to enter into contracts or no airport will enter into a purchase contract. [00:25:13] Speaker 00: At least as recited in the opinion. [00:25:15] Speaker 02: Because they could lawfully buy the lights. [00:25:18] Speaker 02: They just couldn't use them. [00:25:20] Speaker 00: Well, I think if your honor wants to make that distinction, it's still a legal effect in the sense that the use would be prohibited. [00:25:29] Speaker 00: Here, no one's saying that spirit is. [00:25:31] Speaker 02: It would be, but it isn't. [00:25:33] Speaker 02: It would be if, right? [00:25:34] Speaker 02: But they don't have to use them. [00:25:36] Speaker 02: They can buy them without using them. [00:25:39] Speaker 02: Here, it would be, you're saying, if only the FAA got around to or had approval applications to disapprove. [00:25:50] Speaker 00: Your honor, here it's, I don't see the parallel here because here it's not like if Spirit says, okay, we're gonna fly this, then it has like an empty airplane. [00:26:01] Speaker 00: If Spirit says, we're gonna fly this, then they can sell those tickets, people can board those flights, those flights can take off. [00:26:08] Speaker 02: And they will have obligate contract obligations to refund tickets. [00:26:15] Speaker 00: If the flights get canceled, I suppose they might impose on themselves those obligations. [00:26:21] Speaker 02: What do you make of this part of the notice? [00:26:24] Speaker 02: Carriers are reminded that runway approval must be obtained from the FAA in addition to any requirement for approval from the airport terminal or other facilities prior to operating flights at the airport. [00:26:37] Speaker 00: Yes, Your Honor, that was inarticulately phrased. [00:26:40] Speaker 00: What the FAA was trying to say there was the airlines for the relevant periods need to submit their schedules in advance. [00:26:49] Speaker 00: And if you look at the very next sentence that follows the sentence that Your Honor quoted, they make clear that this is indeed a voluntary regime because it's clear that the only thing that happens if an airline flies a time that is not otherwise approved [00:27:04] Speaker 00: is that there might be sufficient resulting congestion such that the FAA says, you know what, we might need to go to a level three in the future. [00:27:12] Speaker 02: Well, inarticulate phrasing can be fatal sometimes. [00:27:15] Speaker 00: Well, Your Honor, I think if you want to look at more evidence of what was going on here, you can also look at the other notices that are in the administrative record. [00:27:24] Speaker 00: Probably the most important one is when the FAA in 2016 took Newark from its level three to its level two status. [00:27:31] Speaker 00: And it's important to understand the distinction. [00:27:33] Speaker 00: In level three, if you fly a flight that you don't have a slot for, you face fines, you face civil enforcement actions. [00:27:40] Speaker 00: But when you go down to level two, the whole point of going to level two was to get rid of that. [00:27:45] Speaker 00: And the FAA said at the time, we're instead going to go through a process that it expressly termed a voluntary process. [00:27:56] Speaker 02: Are you familiar with the Chamber of Commerce case in this court? [00:28:01] Speaker 02: an OSHA case. [00:28:03] Speaker 00: I'm not sure I know which case your honor is referring to. [00:28:05] Speaker 02: Another instance in which the agency said that taking advantage of the program they were offering was completely voluntary. [00:28:14] Speaker 02: And the court held that as a practical matter, compliance was effectively coerced. [00:28:22] Speaker 02: And that made the order appeal. [00:28:25] Speaker 00: Your Honor, there are some rare cases where courts have, despite the numerous cases in this court saying that you shouldn't account for practical consequences, there are some rare cases where this court has nonetheless looked to practical consequences. [00:28:39] Speaker 00: But when it has done so, my understanding has been in very narrow circumstances where, for example, you might face enforcement action. [00:28:46] Speaker 00: So for example, the Ipsen case, where if you took an action and then the agency later decided that you were wrong, then you would face [00:28:55] Speaker 00: enhanced penalties for having done it in the interim. [00:28:58] Speaker 00: The most that spirit can say here, and I want to point out, by the way, that the things that it's saying about its business costs are things that it's saying here oral argument. [00:29:07] Speaker 00: It's not pointing to things in the record. [00:29:09] Speaker 00: This is not an argument that it was even making in its opening brief about finality. [00:29:13] Speaker 00: But the business costs that it's saying are not anything close to the kinds of things that this court was talking about when it was talking in absent about [00:29:21] Speaker 00: fines or other kinds of prosecutions. [00:29:24] Speaker 00: The most that we're talking about is that there's some sort of uncertainty out in the future. [00:29:28] Speaker 00: And I want to point out, by the way, that that uncertainty that they're worried about, that's there regardless. [00:29:34] Speaker 00: Even if they get these approvals, these approvals are only good for a six-month scheduling season. [00:29:39] Speaker 00: There's no legal requirement that when the FAA goes to the winter 2020 scheduling season or summer 2021 that it continue at existing grandfather policies. [00:29:49] Speaker 00: The uncertainty is there regardless. [00:29:51] Speaker 00: Historically, the FAA has continued its grandfathering policy. [00:29:55] Speaker 00: And maybe for the carriers that provides them some sort of assurance and benefit that they know what the historical tendencies have been. [00:30:03] Speaker 00: But it's not like if Spirit got these approvals for a six month period, it would be secure for sure that all the uncertainty was gone. [00:30:11] Speaker 00: So really all that we're talking about here is they're trading kind of one sort of loose situation for maybe kind of another informal security. [00:30:23] Speaker 03: And again, your honor, I realize that we've been talking a lot about the legal effect, but I also don't want to- Mr. Schultz, just before we go beyond finality, I have one question. [00:30:36] Speaker 03: Well, two. [00:30:37] Speaker 03: How long does it take to go from level two to level three? [00:30:40] Speaker 03: If the FDA decides to make that decision, are we talking weeks, months? [00:30:46] Speaker 00: I think the answer is unclear. [00:30:48] Speaker 00: And in part, there are different ways that you could go from level two to level three. [00:30:54] Speaker 00: One way to do it is with a scheduling reduction meeting. [00:30:57] Speaker 00: That's the way it was done at JFK in 2007. [00:31:00] Speaker 00: And that took a few months, is my understanding. [00:31:03] Speaker 00: There were meetings, there were discussions. [00:31:05] Speaker 00: Ultimately, the process at the end of that [00:31:09] Speaker 00: was an order that forcibly reduced the flights at the airport and issued a level three regime. [00:31:16] Speaker 00: Another way to do it is the way that it's been done at LaGuardia and then the way it's been done, I think, at JFK since that scheduling reduction meeting, which is that the FAA has published a notice in the Federal Register. [00:31:29] Speaker 00: It's gotten comments from people. [00:31:31] Speaker 00: And then the comments come back. [00:31:33] Speaker 00: The FAA responds to those comments. [00:31:35] Speaker 00: It might make some changes in response to the comments. [00:31:37] Speaker 00: I think the short answer is historically it's been a matter of months, but every situation is different. [00:31:46] Speaker 03: So let's imagine that the pandemic is over and Newark is at level two and Spirit is flying all these flights that they want to fly because compliance [00:32:06] Speaker 03: who's voluntary. [00:32:09] Speaker 03: And let's imagine I'm looking to book a flight on an airplane nine months out. [00:32:18] Speaker 03: And let's imagine I know everything that the five of us now know. [00:32:27] Speaker 03: Would you buy that airline ticket? [00:32:31] Speaker 00: Your honor, I think it depends on a lot of factors. [00:32:34] Speaker 00: One thing to remember also is that [00:32:36] Speaker 00: Even if you had complete knowledge of airline schedules, airline schedules can change for a lot of reasons. [00:32:45] Speaker 00: Even once airlines get approval within the scheduling facilitation process, things can change even within that process. [00:32:53] Speaker 00: So even an airline that had certainty vis-a-vis the FAA, that airline might change its schedules for a whole host of other reasons. [00:33:01] Speaker 00: So I think that's just a really hard question to answer without knowing more information. [00:33:06] Speaker 03: If you were choosing as a purchaser between two airlines that were otherwise identical, but one of them is facing at least the possibility of losing its slots in the manner that Spirit would face at least the possibility of losing its slots, and you are a purchaser choosing between those two otherwise identical airlines, which airline would you buy your ticket from? [00:33:35] Speaker 00: Your honor, I think even in that situation, even that other airline, it's not 100% secure either because there's always the possibility out there that the FAA could go to level three. [00:33:47] Speaker 00: And that's in fact what happened at JFK in 2007. [00:33:51] Speaker 00: Delays spiked at the airport. [00:33:54] Speaker 00: And within a matter of a few months, airlines thought that they could fly in this completely unregulated regime. [00:34:00] Speaker 00: There were no slot requirements or not even, there were no slot requirements at [00:34:05] Speaker 00: I think maybe JFK was level two at the time, so I don't want to say completely unregulated regime, but it certainly wasn't level three. [00:34:12] Speaker 00: And then because of delay spiking at JFK, the FAA had that scheduling reduction meeting, it culminated in order, and there were fewer flights at the airport. [00:34:22] Speaker 00: So again, even within this level two construct, even the airlines that have these approvals [00:34:29] Speaker 00: even they don't have that level of certainty. [00:34:31] Speaker 00: So I, you know, I think if you want to say like, is there maybe Spirit has some indeterminate higher percentage that it might not get approval, that it might not be able to fly some flight in the future. [00:34:45] Speaker 00: What that difference in percentages is really hard to say. [00:34:47] Speaker 00: I certainly haven't seen anything in the record from Spirit establishing that. [00:34:52] Speaker 00: And of course, you know, that would be their burden as the party that is [00:34:55] Speaker 00: affirmatively asserting jurisdiction under 46.110. [00:34:58] Speaker 00: And as to what the percentage difference is and whether that would affect a choice, I think it's just, I don't know the answer to that without more information. [00:35:09] Speaker 00: And I think in any event, your honor, all that that gets to is practical consequences, which this court has just been really adamant is not the way that you evaluate finality. [00:35:22] Speaker 02: I appreciate it. [00:35:23] Speaker 02: I have a question about the merits, just briefly. [00:35:25] Speaker 02: Am I correct in recalling, Mr. Schultz, that the FAA, when it made this decision, projected it would reduce delays by something under two minutes per flight on average? [00:35:38] Speaker 00: Your honor, that's not correct. [00:35:40] Speaker 00: And there's different models that are in the record. [00:35:45] Speaker 00: And depending on which model you use, you might get a slightly different answer. [00:35:50] Speaker 00: I think if you use, there was data that looked at November 2019 schedules, and that's probably the most comprehensive model in the record. [00:36:00] Speaker 00: This is a tab in an Excel spreadsheet. [00:36:03] Speaker 00: It's in the Joint Appendix, but it's produced in native format. [00:36:06] Speaker 00: It's a giant Excel file. [00:36:07] Speaker 00: The court's welcome to go through it if it wants to. [00:36:10] Speaker 00: But at the end of the day, if you look at the tab called EWR 2019 11 WOSWA2, [00:36:19] Speaker 00: What that analysis shows is it's around three to four minutes projected per flight in the late afternoon to early evening period. [00:36:28] Speaker 00: But remember, that's per flight over approximately 80 flights per hour. [00:36:33] Speaker 00: So we're not just talking kind of nothingness here. [00:36:37] Speaker 00: We're talking real benefit. [00:36:39] Speaker 00: And then the other thing to keep in mind is that arrivals and departures are not in equipoise. [00:36:45] Speaker 00: The patterns at large northeastern airport like Newark [00:36:49] Speaker 00: would be that you tend to see more arrivals in the morning hours, you tend to see more departures in the evening hours. [00:36:56] Speaker 00: So that three to four minutes average is actually masking the fact that in the late afternoon, evening, where you see more arrivals than departures, that you're seeing more benefits on the arrival side. [00:37:07] Speaker 00: And again, so this is not some insignificant thing. [00:37:11] Speaker 00: I also want to point out that if you look at spirits brief, where they try and make these claims about de minimis benefit, and if you actually pull those record sites, [00:37:19] Speaker 00: They don't support that at all. [00:37:21] Speaker 00: These are just assertions that Spirit is making, but their record sites don't establish that. [00:37:26] Speaker 02: So I think I'm looking at the right material here. [00:37:31] Speaker 02: This is the graphic form. [00:37:32] Speaker 02: I've also got the tabular form. [00:37:34] Speaker 00: Yes. [00:37:35] Speaker 00: Hopefully you're looking at tab EWR 2019-11 WOSWA2. [00:37:40] Speaker 00: I know there's a lot of tabs in that spreadsheet. [00:37:42] Speaker 02: I believe that is correct. [00:37:44] Speaker 00: OK, great. [00:37:46] Speaker 02: So all right, so you're telling us it's three to four minutes on average. [00:37:50] Speaker 00: For the late afternoon, early evening period. [00:37:53] Speaker 00: Because remember, not all of the time periods at this airport were at the scheduling limits. [00:37:58] Speaker 02: Was the lower number that I recalled something that averaged it over all the operations? [00:38:03] Speaker 00: I don't know where that number comes from. [00:38:06] Speaker 00: I do know that Spirit has made assertions that are not supported by the record citations in their brief. [00:38:11] Speaker 00: So perhaps Your Honor was relying on one of those assertions. [00:38:16] Speaker ?: Thank you. [00:38:17] Speaker 00: Before we leave finality, I realize I'm well over my time, but I just wanna make sure that I get the other answer to Judge Ginsburg's question about safe extensions, which is that if you think all of what I've been saying about legal effect is wrong, then it's still important to understand that Spirit brought this challenge to an order that was issued before anybody had actually submitted their summer 2020 schedules. [00:38:42] Speaker 00: And so if Spirit thought that these approvals had legal effect, if they thought that they had all these business consequences, [00:38:47] Speaker 00: It was incumbent on them to at least wait until the approval process was done, because at that point, there would be more clarity about which flights were approved and which flights weren't. [00:38:57] Speaker 00: And indeed, as we point out to the court, there were new peak flights that ended up getting approved in the summer 2020 scheduling session, including some that went to ultra low cost carriers. [00:39:13] Speaker 00: And the fact that Spirit filed this challenge prematurely [00:39:16] Speaker 00: on an incomplete record, I think just illustrates the lack of finality here. [00:39:19] Speaker 02: And are the approvals to which you're going to be grandfathered? [00:39:23] Speaker 00: I'm sorry. [00:39:23] Speaker 00: I think Your Honor and Judge Walker were talking at the same time. [00:39:26] Speaker 00: I didn't hear either question. [00:39:28] Speaker 02: Were the approvals to which you just referred going to be grandfathered? [00:39:33] Speaker 00: So Your Honor, when we talk about grandfathering, [00:39:37] Speaker 00: When there's a prospective session, so if we're talking about summer 2021, if the FAA continues its historical grandfathering policies, then the fact that somebody was approved in summer 2020, if they operate those flights, then they would, under historical policies, get grandfathering in summer 2021, yes. [00:39:57] Speaker 00: Thank you. [00:39:58] Speaker 05: All right, Judge Walker, did you have a question? [00:40:03] Speaker 05: I'm good. [00:40:04] Speaker 05: Thank you. [00:40:05] Speaker 05: All right. [00:40:05] Speaker 05: All right. [00:40:06] Speaker 05: Thank you, Mr. Schultz. [00:40:07] Speaker 05: Thank you. [00:40:08] Speaker 05: Ms. [00:40:09] Speaker 05: Brown, I think you're out of time, but why don't you take a couple minutes? [00:40:17] Speaker 01: I appreciate that, Your Honor. [00:40:20] Speaker 01: The June 4th denial that Judge Ginsburg was referencing, that is cited in our reply brief at page 12, and that is consistent with the other notices and the FAA's position throughout. [00:40:31] Speaker 01: This entire proceeding and all all proceeding since now that that's been consistently reiterated that it's not going to reallocate these authorizations to the extent that they are above the operating caps. [00:40:43] Speaker 01: The FAA has or the government seems to kind of try and walk back some of the mandatory language that appears in the in the in the in the notice itself, but it's it's pretty unequivocal [00:40:54] Speaker 01: The notice says that carriers are quote ultimately expected to operate according to the FAA approved runway times. [00:41:00] Speaker 01: That's it. [00:41:01] Speaker 01: One of the notices at JA 225 the worldwide slot guidelines with which the FAA says it complies uses similarly mandatory language. [00:41:12] Speaker 01: So I think that it's, it's a little [00:41:15] Speaker 01: The agency is kind of trying to have it both ways here by forecasting or showing those that it's regulating that it intends to hold them to these without creating kind of a final agency action here, especially in Newark's situation when there's not just the authorizations, but the caps on the authorizations and the caps on flights, which is unique to Newark itself. [00:41:37] Speaker 01: The sort of Damocles that Judge Ginsburg has referenced that we think has fallen already [00:41:42] Speaker 01: The FAA has given priority for the authorizations to United, and that's a present effect that puts us at a disadvantage today, even if we can fly for a limited time in the interim. [00:41:53] Speaker 01: The government has said that we didn't cite the economic costs to Spirit in our brief, but that's actually at our reply on pages nine and 10 where we reference that the economic considerations made it impossible for Spirit to kind of fly on an ad hoc basis when its flights could be canceled at any moment. [00:42:13] Speaker 01: When the government also hasn't denied here that if we keep flying without authorizations and the the service returns to the pre pandemic levels, the FAA would convert to level three. [00:42:24] Speaker 01: And it's also clear from the record. [00:42:26] Speaker 01: I think that when you have historic precedence and the priority during level two that does transfer over to level three. [00:42:33] Speaker 01: And so there is this this safe harbor that I referenced before [00:42:36] Speaker 01: So I can see that I'm past my time. [00:42:39] Speaker 01: If there are no further questions, we would ask the court to vacate the decision and grant our petition here. [00:42:46] Speaker 05: All right. [00:42:46] Speaker 05: Thank you. [00:42:47] Speaker 05: And your case is submitted.