Milbank, Tweed, Hadley & McCloy LLP

June 16, 2008 Re: Comments of Elliot Gewirtz, Partner, Milbank, Tweed, Hadley & McCloy LLP, to the Congestion Management Rule for LaGuardia Airport, Docket Number FAA- 2006-25709 The following is a summary of proposed changes to the Congestion Management Rule for LaGuardia Airport relating to the transfer of slots and our reasons for them. We note at the outset that the commentary to the proposed rules (as it appears in the Federal Register, Volume 73, Number 75, of April 17, 2008) asserts that the “best way to maximize competition [among airlines at airports] is with the development of a robust secondary market.” Our comments are in furtherance of this objective. Specific suggested revisions to the text of the proposed rules are contained in the attached Exhibit A. Throughout the commentary, the FAA states that one of its goals in formulating and implementing the proposed rules is to “stimulate a secondary market” for slots, which will allow for the “proper assessment of the slots’ true value.” See Sections III.E. and III.G. Indeed, the FAA explains that, after the initial allocation of slots among airlines that will occur in connection with the implementation of the proposed rules, there will not be a need for the FAA to continually reallocate slots because “ideally slots should transfer from one carrier to another carrier through the secondary market.” See Section III.E.3. In furtherance of this goal, Section 93.68 of the proposed rules provides that slots on lease from the FAA to a carrier may be transferred to an unrelated carrier in one of two ways: (1) by subleasing the slots to another carrier or (2) by trading the slots for other slots held by another carrier. In addition, the commentary to the rules states that “the FAA proposes to…permit carriers to include common slots for sale in the auction, organized by the FAA.” See Section III.G. (Section III.G further provides, in relevant part, that “[i]f a carrier wishes to include some of its common slots in the auction, these slots will be treated in the same manner as other slots being auctioned by the FAA. The carrier would be able to specify a minimum price for these slots so that it need not give up the slots unless they command a price that the carrier is willing to accept.” We have included these provisions in our proposed amendments, as set forth in Exhibit A.) However, provisions for the sale of leases from one carrier to another carrier do not appear in the text of the proposed rules. We therefore suggest that the proposed rules be modified to provide that, in addition to subleasing or trading slots, a carrier may sell slots in an FAA auction, as contemplated in the commentary. The sale might be accomplished either as a direct assignment of a carrier’s lease or as a sale of a carrier’s right to enter into a slot lease with the FAA. If a carrier is not permitted to sell or assign its lease of a slot, the true value of the slot in the secondary market may be impaired. Under the proposed rules, as currently drafted, a carrier’s only option to monetize its underused slots is to sublease such slots to another carrier. When considering whether to sublease a slot, a sublessee-carrier will have to assess the risk that the acts or omissions of its sublessor could result in the loss of its sublease. A sublessor could fail to perform its obligations under its FAA lease or become the subject of an insolvency proceeding, in either case, resulting in the termination of the sublessor’s lease with the FAA. Termination of the headlease could result in termination of the sublease. As a result, the sublessee-carrier is likely to offer a price for the sublease of such slots that reflects the value of the slots discounted to account for such risks. Consequently, the offer will not reflect a slot’s actual market value, and the establishment of an efficient secondary market for slots free from the credit and/or performance risk of the transferor will accordingly be impaired. If, however, a carrier is able to sell its slot or assign its lease of a slot to another carrier, the purchaser-carrier should be willing to offer a price that reflects the true secondary-market value of the slot. In other words, the price will not need to be adjusted to compensate for the risks the purchaser-carrier would have assumed as result of the sublessor-sublessee relationship. Similarly, any lender to a carrier will consider the same risks in determining whether or not to lend on the security of slots. If the only way a lender can realize on its collateral is to force a sublease of a slot, this will similarly impair the value of slots as collateral. The foreclosing lender will no more be able to effect a transfer of the slot free of the performance and solvency risk of its borrower-carrier than the borrower-carrier itself. This will make lending on the security of slots less attractive which in turn will further impede the secondary-market value of a slot. On the other hand, we believe that if the proposed rules are modified as we recommend, lenders will find comfort in the fact that slots may be sold or the lease of a slot assigned, in addition to being subleased, thereby removing the borrower-carrier from the collateral chain and allowing for a higher valuation of such collateral. This will facilitate the ability of carriers to raise capital, which will in turn strengthen the secondary-market value of slots. Finally, we note that our proposal is consistent with the proposed forms of lease agreement (relating to Unrestricted Slots, Common Slots and Limited Slots), which provide in relevant part that “[n]othing shall prohibit lessee from selling or subleasing the Lease in the secondary markets.” See Article 5 of the forms. If our proposal is adopted, the forms will need to be revised to make express reference to the assignment of leases. We therefore request that the FAA consider the foregoing proposal, which we believe to be consistent with the FAA’s express intention to “ensure that there are, in fact, competitive market forces and actual and potential competition” at airports. See Section III.B.