After imposing operating caps which failed to stem delays at the three New York airports, the Department of Transportation is trying a new experiment, scheduling its first slot auction for September 3 for a single roundtrip from Newark.
Still total departure cuts at the three New York area are not as big as anticipated, according to OAGback, which estimated for Regional Aviation News that fourth quarter departures will be down only one percent at Kennedy, 5.8 percent at LaGuardia and 0.6 percent at Newark. However, the OAGback analysis shows that mainline carriers are down gauging aircraft at the Kennedy and Newark, two connecting airports, but eliminating 8.6 percent of regional departures to 3.1 percent of mainline departures at LaGuardia, a largely origin-and-destination airport. See related story in this issue.
The DOT action prompted a threatened law suit by the Air Transport Association and threat from the Port Authority of New York and New Jersey which issued a legal notice that whoever gains the slots will not be allowed to operate there. Regionals are concerned that it will result in terminating service to medium and small city airports while other opponents suggest it will only pile more expenses on an already beleaguered industry.
DOT also earned condemnation from Congress, which is trying to introduce legislation to short-circuit such market mechanisms. In addition, Continental and Airports Council International weighed in with ACI stating the “illegal approach fails to recognize the primary role of local airport proprietors in managing congestion at their airports and seeks unlawfully to usurp the proprietary right of the Port Authority [of New York and New Jersey] to control how its facilities are used."
Of all the actions the government could take that would help the industry and the economy, not the least of which is implementing NextGen which would largely eliminate the need for market-based solutions, the Department of Transportation chose to move forward with its controversial market-based experiment. The result: a very expensive fight that promises to outlast the administration.
In addition to the combined opposition of industry organizations including the Regional Airline Association (RAA), airport managers at JFK, LaGuardia and Newark pledged to block the action, who claim the right to bar arrivals and departures resulting from an auction. But DOT lawyers say such plans exceed their authority and would violate the FAA agreement under which they accept federal funds. So, DOT has lobbed a threat of its own, that future funding will be in jeopardy if the airport managers carry out their plans.
"Auctioning the nation's airspace to the highest bidder proves that ideologues at DOT are hell bent on finishing the job oil speculators have started - destroying affordable air service to the 70 percent of American communities that depend exclusively on regional airlines,” said RAA President Roger Cohen.
Even for all its bravado in supporting its market-based solutions, DOT is only putting its little toe in the water to determine the price of slots. “This auction will allow us to implement market mechanisms on a small scale, gauge interest and determine a slot’s market value,” Secretary Peters said, adding that it also should help consumers with more reliable service. The action, however, ignores history because it comes at a time when capacity cutbacks resulting from high fuel prices will likely solve the problem just as it has in all previous economic downturns.
"The action would add flight operations at times during which the airport is already experiencing significant delays,” said Continental. “The DOT's attempt to add more flights at one of the nation's most congested and delayed airports is baffling, given the increased delays at Newark Liberty and the FAA's actions earlier this year to place caps on flight operations at Newark Liberty. Moreover, DOT doesn't have the legal authority to conduct auctions, which will get tied up in litigation by a broad spectrum of opponents who are focused on solving congestion."
Not one entity is supporting its solutions, including its own task force. The Business Travel Coalition (BTC) stated there are no airport slot-auction data from anywhere in the world that would support the claims advanced by auction proponents, “save for game-theory exercise results at universities.” The group indicated that although theory indicates auctions would drive airline airport-access costs up providing incentives for airlines to use larger aircraft, an unintended consequence will be that larger aircraft, deployed for larger, more lucrative markets, will replace smaller aircraft serving smaller communities. In fact, current capacity cuts announced to date a movement by mainlines to down gauge in favor of lregional jets.
“Pure and simple, this would represent government distortion of the marketplace of the worst kind where the losers would be mid-size cities,” said the organization. “Auctions will do nothing to reduce delays and congestion, but will only increase airfares into and out of the New York City area for business travelers, drive up airlines’ costs at the worst possible time, dampen the interest of airlines that would consider investments at the airports against an uncertainty of adequate slots and curtail access to the important New York marketplace for mid-size communities.”

Lawsuit Pending
Air Transportation Association pledged to sue to “prevent this illegal action.” The auction covers a five-year lease for the single roundtrip.
"We are extremely disappointed by the Department of Transportation's auction announcement that completely ignores strong opposition from key members of Congress, the DOT's own task force, including consumer groups on New York delays, the Port Authority and airlines,” said ATA President and CEO James C. May. “DOT's auction proposal is unlawful, unwise and will do absolutely nothing to reduce congestion and flight delays in New York. DOT has left us no options - we will sue to prevent this illegal action.”
“ATA agrees with the Port Authority’s assessment that the DOT’s proposed auction rules are unwise and unlawful,” said May. “We share the Port Authority’s concerns with the DOT’s slot auction proposal and with its threat to add still more congestion to the region. We are carefully reviewing the Port Authority’s proposed notice. Instead of providing the infrastructure that we all need, the DOT is trying to hide its failure behind an economics experiment to ration air service. Sadly, this illegal scheme will do nothing to reduce air traffic congestion or to meet the region’s and the nation’s need for air transportation.”
May noted that virtually the entire membership of the secretary’s own appointed aviation rulemaking committee on New York delays, which offered dozens of ideas to improve capacity, soundly rejected the idea of auctions. “DOT has ignored the majority of those capacity enhancements and instead misdirected its efforts on this scheme to drive up the cost of air transportation. That is just wrong and legally indefensible,” said May. “Rather than distracting from [modernizing the system] with this economics experiment, it is time for action.”
The two slots were to be allocated to Eos Airlines earlier this year, but the airline filed for bankruptcy leaving the FAA with control of the slots. The winner would be able to operate at Newark daily, arriving at 5:00 to 5:30 p.m. every day but Monday and Saturday, when the arrival would be from 12:00 to 12:30 p.m., and departing daily from 7:30 to 8:00 p.m. The funds generated from the auction will be used to reduce delays and enhance capacity at New York-area airports.
The terms and conditions of the lease and details of the auction process are available on the FAA’s procurement Web site (http://faaco.faa.gov), where they will be available for public comment until August 18. After taking into consideration all comments on both the lease and the process, a final notice and invitation to bid will be published August 25.