Spirit Airlines Wins Important APA Appeal at the D.C. Circuit

Paul, Weiss won a significant victory under the Administrative Procedure Act for client Spirit Airlines in an appeal taking aim at the way that the Federal Aviation Administration allocates flight authorizations at Newark Liberty International Airport.

In a unanimous opinion in Spirit Airlines, Inc. v. U.S. Department of Transportation and Federal Aviation Administration (No. 19-1248), a panel of the U.S. Court of Appeals for the D.C. Circuit held that the FAA erred in refusing to reallocate flight authorizations at Newark Airport without considering the decision’s effects on competition. The court ordered the FAA to address the competition issue on remand, noting that "the record provides precious little insight into whether or how the FAA approached the competition problem."

The dispute arose after the FAA and the U.S. Department of Transportation issued a notice in 2019 announcing the retirement of low-cost carrier Southwest Airlines’ peak-period flight authorizations at Newark. Spirit, a budget carrier hoping to take over the authorizations, petitioned for review in November 2019, arguing that the agency’s action was arbitrary and capricious under the APA because it failed to address the competitive effects of its decision, which would strengthen United’s already substantial share of authorizations at its primary airport hub, reducing consumer choice and healthy competition, and that the agency did not provide substantial evidence that reallocating the Southwest slots would significantly increase congestion.

The FAA argued that its decision didn’t amount to a final agency action and was not subject to judicial review. The agency contended that Spirit or any other carrier was legally free to operate flights not included on the FAA’s pre-approved schedules. It also argued that the decision to retire Southwest’s peak authorizations rather than distribute them to another carrier was justified to relieve congestion at an airport that is among the country’s busiest.

Paul, Weiss was retained in March 2020 to assist with the petition before the D.C. Circuit. At oral arguments in September 2020, litigation associate Aimee Brown, representing Spirit, argued that the FAA’s decision was, in fact, final, because it prevented the airline from operating as many peak-period flights as it would otherwise have done. She also argued that FAA’s actions essentially relegated Spirit to a second-class status, with fewer protections if it offered flights outside the pre-approved scheduling.

The Circuit panel agreed with Spirit on every point, finding that the decision was effectively final and reviewable. “Spirit is legally free to operate unapproved flights or, improbably, to try to persuade other airlines to swap their peak slots for Spirit's off-peak slots,” U.S. Circuit Court Judge Douglas H. Ginsburg wrote. “The FAA's action, however, effectively forecloses Spirit from operating as many peak-period flights as it would otherwise do. In this way, the FAA's action hinders Spirit's ability to pursue business opportunities as surely as would an express prohibition.” In remanding the matter to the FAA, the Court held that the agency had “[i]gnor[ed] an important aspect of the problem” and must grapple with the competitive effects of its decision and provide record support for it.

In addition to Aimee Brown, the Paul, Weiss team on the appeal included litigation partners Kannon Shanmugam and Andrew Finch.