Stubborn Over Slots

Air Safety Week, Oct 13, 2008

DOT Secretary Mary Peters is pressing ahead with proposed slot auctions at JFK International, Newark International and LaGuardia.

Peters announced final rules to auction a limited number of landing and take-off slots at each of the region's three airports, beginning in January.

Under the final rules, airlines operating at the three airports would receive a 10-year ownership of the vast majority of FAA slots they currently operate.

However, the new rules call for a gradual auctioning over the next five years of up to 10 percent of the landing and take off slots these airlines currently operate free of charge today.

She added that the rules also would lower the hourly operating cap at LaGuardia airport from 75 slots per hour to 71 slots per hour by "retiring" an additional five percent of the slots currently being used, cutting delays by an estimated 40 percent.

Under the rule for La Guardia, existing airlines would keep 988 of the slots they currently operate. The remaining 113 slots would be made available over the next five years by auction to airlines interested in starting new service or expanding current operations at the airport.

In addition, under the rule for JFK and Newark, existing airlines would keep 1,035 of the slots they currently operate at JFK Airport and 1,154 of the 1,245 slots they currently operate at Newark Airport. The remaining 89 slots at JFK and 91 slots at Newark would be made available over a five-year period for airlines wishing to expand their current operations or start new services at either of the airports.

DOT believes that as a result of the auctions, all air carriers would have the opportunity to enter or expand current operations in the New York market, bringing lower fares and improve service. She noted that fares declined by 25 percent at Philadelphia International after a new airline entered that market in 2004.

"Without slot auctions, a small number of airlines will profit while travelers bear the brunt of higher fares, fewer choices and deteriorating service," she said. "Slot auctions, meanwhile, will keep flights to New York affordable, available and vibrant while giving all airlines an opportunity to compete in one of the world's most popular aviation markets."

The DOT's action comes after issuance of a legal opinion that the Bush Administration has no legal authority to auction coveted takeoff and landing rights at congested New York-area airports to ease congestion and boost competition,

The Government Accountability Office (GAO) said "the FAA currently lacks authority to auction arrival and departure slots, and thus also lacks authority to retain and use auction proceeds. The FAA now asserts that it may assign the use of that airspace using its general property management authority. According to the FAA, slots are intangible property that it constructs, owns, and may lease for adequate compensation. An examination of those statutes read as a whole, however, makes clear that Congress was using the term "property" to refer to traditional forms of property. It was not referring to FAA's regulatory authority to assign airspace slots, no matter how valuable those slots may be in the hands of the regulated community.

"Accordingly, in our opinion, the FAA lacks a legal basis to go forward with the Newark auction or any other auction, and if the FAA were to go forward with auctioning slots without obtaining the necessary authority and retained and used the proceeds, the GAO would raise exceptions," the GAO continued.

The decision had left unclear whether the DOT would back down. It had delayed the first slot auction involving Newark International, but had left the door open for the controversial approach. The Bush Administration is pressing ahead with its slot auction scheme in the face of legal challenges.

The Air Transport Association (ATA) calls the slot auction scheme ill- conceived and one that will result in a lengthy and costly legal challenge.

"The DOT decision patently defies the recommendation of the GAO by attempting to move forward with an illegal auction of airport slots. Rather than needlessly forcing a costly and protracted legal challenge over an ideological experiment, DOT should follow the recommendations made by the New York Aviation Rulemaking Committee and implement fair and practical solutions to address delays and add needed new capacity," said ATA President and CEO James C. May. "The Secretary of Transportation's own group of key stakeholders has proposed a clear set of solutions, while rejecting the idea of auctions. It is past time to act on those recommendations."

Giovanni Bisignani, IATA's Director General and CEO said: "DOT's decision is incredibly disappointing. Rather than addressing the root-causes of congestion at New York's airports, the Bush Administration is spending its last days in office single-mindedly pursuing an alleged free-market experiment at some of the globe's most important aviation gateways.