DOT Dismisses Claims in LAX Rates Case

 

Los Angeles World Airports Reaches Final Resolution
of Rates and Charges Disputes with Air Carriers

EXECUTIVE SUMMARY:  In an Order issued by the Department of Transportation ("DOT" or "Department") on the eve of our Independence day holiday, on July 3, 2013,  the DOT finalized all outstanding issues in the terminal fee disputes, which also challenged the reasonableness of fee methodologies imposed at Los Angeles International  Airport ("LAX") involving complaints filed by Southwest Airlines and US Airways at Terminal 1 ("T/1 Airlines") and Air Tran Airways, ATA Airlines, Frontier Airlines, and Midwest Express at Terminal 3 (T/3 Airlines), together referred to as the T1/T3 Airlines.  The DOT's Order dismissed the claims of the four airlines that remained in the case and terminated the proceeding in its entirety.

ISSUE:  The parties involved in this litigation had been exploring settlement negotiations to resolve issues remanded to the DOT for review by the U.S. Court of Appeals for the District of Columbia Circuit in 2009.  On February 6th of this year, Air Tran and the airport respondents in the case, namely LAWA and LAX, filed a joint stipulation for dismissal without any right of resubmitting the claims, and on March 18th, Southwest and the airport respondents filed a similar stipulation.  In both filings, the parties advised DOT that they had settled all disputes related to their claims brought concerning airport rates, charges and methodologies.  On May 9th, the airport respondents filed for dismissal of the claims brought by US Airways and Frontier Airlines, and advised the DOT that the LAWA Board of Commissioners adopted resolutions on airport-wide rates and charges on September 17, 2012, the new rate methodologies, which became incorporated in new agreements entered with those air carriers on December 26, 2012 and December 17, 2012, respectively.  Those agreements also included provisions which acknowledged that those carriers considered their claims pending before the DOT as moot and therefore they consented to the dismissal of their complaints without any right to refile them.

WHO IS IMPACTED:  As a result of the DOT's Order, all remand proceedings that were pending before the Department are dismissed.  The DOT noted that the other airlines that were complainants in the original proceeding, namely Midwest Airlines and ATA Airlines, no longer operate and have surrendered their operating certificates.  The DOT Order also referenced an earlier Order which was issued in February of 2012, in which claims brought by Alaska Airlines against the airport respondents were dismissed without any right to refile them.  Accordingly, all claims raised in the LAX III proceedings between LAX and Alaska Airlines, and the T1 /T3 Airlines are resolved and new rates and rate methodologies are in place to determine future charges for use of airport terminal space.

HOW ACI-NA WAS INVOLVED:   ACI-NA was involved in the proceedings throughout their pendency, initially before the Department of Transportation, and following the DOT's issuance of a Final Order in 2007, intervened in the parties' appeal of this matter before the United States Court of Appeals for the District of Columbia.  Scott Lewis of Anderson and Krieger was retained by ACI-NA to handle ACI-NA's intervention in that proceeding and to participate in the oral arguments supporting DOT and LAX in the appeals court.  Following the issuance of the decision by the appeals court remanding the case for review of certain matters by the DOT, ACI-NA was also prepared to participate in the remand proceedings.

BACKGROUND:  On June 15, 2007. the DOT issued its Final Decision about the reasonableness of new terminal fees and fee methodologies that were challenged by certain air carriers following the imposition of those charges by LAX on carries serving that airport.  Petitions for review of the DOT's Final Decision were filed by several airlines in the U. S. Court of Appeals for the District of Columbia Circuit.  ACI-NA and the City of Los Angeles filed a joint brief with the appeals court in this matter.

On August 7, 2009, the U.S. Court of Appeals for the District of Columbia Circuit issued its decision regarding the methods used by LAX to calculate the rental rates airlines pay for terminal space at the airport.  The appeals court remanded to DOT many of the issues for further consideration.  Although the court upheld the airport's increased maintenance and operation fees as non-discriminatory and upheld the requirement that fair market value ("FMV") be established by an independent appraisal, it directed the DOT to further review the following issues:

  1. To explain why DOT believes that an airport may use FMV to set non-airfield rates but not airfield rates;
  2. To consider whether LAX has monopoly power and, if so, how that affects the methods used to calculate rent;
  3. To either explain or abandon its position that, in establishing the FMV for non-airfield space, the airport may consider only "other aeronautical uses"; and
  4. To explain why the burden of persuasion should not be upon the airport to justify the use of different methods for determining rentable space for the airlines with month-to-month agreements and airlines with long-term agreements.

CURRENT STATUS:  Following the remand of those issues to the Department of Transportation for its review, the settlements referenced herein were reached, resulting in the dismissal of all claims in this matter.

ACI-NA Contact:  Any questions regarding this matter should be directed to Monica R. Hargrove, General Counsel of ACI-NA, at mhargrove@aci-na.org