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[Federal Register: October 10, 2008 (Volume 73, Number 198)]
[Rules and Regulations]
[Page 60543-60571]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10oc08-17]
[[Page 60543]]
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Part VII
Department of Transportation
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Federal Aviation Administration
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14 CFR Part 93
Congestion Management Rule for John F. Kennedy International Airport
and Newark Liberty International Airport; Final Rule
[[Page 60544]]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 93
[Docket No. FAA-2008-0517; Amdt. No. 93-88]
RIN 2120-AJ28
Congestion Management Rule for John F. Kennedy International
Airport and Newark Liberty International Airport
AGENCY: Federal Aviation Administration (FAA).
ACTION: Final rule.
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SUMMARY: This rule establishes procedures to address congestion in the
New York City area by assigning slots at John F. Kennedy (JFK) and
Newark Liberty (Newark) International Airports in a way that allows
carriers to respond to market forces to drive efficient airline
behavior. The rule also extends the caps on the operations at the two
airports, assigns to existing operators the majority of slots at the
airports, and develops a robust secondary market by annually auctioning
off a limited number of slots in each of the first five years of this
rule. Auction proceeds will be used to mitigate congestion and delay in
the New York City area. The rule also contains provisions for minimum
usage, capping unscheduled operations, and withdrawal for operational
need. The rule will sunset in ten years.
DATES: This rule becomes effective December 9, 2008.
FOR FURTHER INFORMATION CONTACT: For technical questions regarding this
rulemaking, contact: Nan Shellabarger, Office of Aviation Policy and
Plans, APO-1, Federal Aviation Administration, 800 Independence Avenue,
SW., Washington, DC 20591; telephone (202) 267-7294; e-mail
nan.shellabarger@faa.gov. For legal questions concerning this
rulemaking, contact: Rebecca MacPherson, FAA Office of the Chief
Counsel, 800 Independence Ave., SW., Washington, DC 20591; telephone
(202) 267-3073; e-mail rebecca.macpherson@faa.gov.
SUPPLEMENTARY INFORMATION:
Authority for This Rulemaking
The FAA has broad authority under 49 U.S.C. 40103 to regulate the
use of the navigable airspace of the United States. This section
authorizes the FAA to develop plans and policy for the use of navigable
airspace and to assign the use that the FAA deems necessary for its
safe and efficient utilization. It further directs the FAA to prescribe
air traffic rules and regulations governing the efficient utilization
of the navigable airspace.
Table of Contents
I. Background
II Summary of the Final Rule
III. Authority To Reallocate Capacity
A. The FAA Is Legally Authorized To Allocate Slots Through an
Auction Mechanism
1. Slots Are a Form of Property That May Be Leased by the FAA to
Others
2. FAA Leases Are Not Covered by IOAA and This Rule Is Not in
Violation of Any Current Appropriations Restrictions
3. Leases Are Not Taxes
4. The FAA's Authority To Give Slots to Carriers Through
Cooperative Agreements
5. Leases That Terminate by Their Own Terms Are Not a ``Taking''
of Property
6. The Draft Lease Terms Included in the NPRM Were For
Illustrative Rather Than Probative Purposes
7. International Obligations
B. The FAA Has Authority To Retain the Amounts Received From the
Lease and Disposal of Property and To Use Those Proceeds for
Congressionally Authorized Purposes
C. The Auction of Slots Does Not Affect the Proprietary Rights
of the Port Authority
D. The FAA Has Complied With the Administrative Procedure Act
1. The Docket Contained Adequate Information for Meaningful
Comment on the Rulemaking Proposal
2. The Discussion of the Auction Process Provided Sufficient
Detail for Meaningful Comment on the Rulemaking Proposal
3. The FAA Adequately Considered Alternatives
IV. Discussion of the Rule
A. Allocation of Slots at JFK and Newark
1. Proposed Alternatives
2. Categories of Slots
3. Initial Allocation of Slots
4. Market-Based Reallocation of Slots
a. Impact of Auctions on Competition
b. Impact of Auctions on Carrier Investment
c. Alternatives to Reallocation
B. Secondary Trading
C. Usage Requirements
D. Unscheduled Operations
E. Sunset Provision
F. Other Issues
1. Withdrawal for Operational Need and Future Reductions in the
Cap
2. Impact of the Final Rule on the Port Authority's Ability To
Run Its Airport
3. Minimum Usage Requirements for Slots Acquired Through
Sublease
I. Background
This final rule is the latest action in a history of congestion
management at New York airports. Access to both John F. Kennedy (JFK)
and Newark Liberty International (Newark) airports is highly sought
after. These two factors have forced the FAA to address a dilemma: how
can the agency reduce delays while providing some measure of access to
carriers wishing to operate at the airport, thus ensuring competition?
While there are many factors contributing to the delays and congestion
at JFK and Newark, demand for the associated airspace has out-stripped
capacity.
History of Congestion Management at JFK and Newark
The FAA managed congestion during the five hours of peak
transatlantic demand (3 p.m. through 7:59 p.m. Eastern Time) at JFK
under the High Density Rule (HDR) from 1969 through 2006. 14 CFR part
93 subparts K and S. However, not until deregulation of the airline
industry did the FAA need to step in and provide for carrier access to
the airspace immediately surrounding the airport. Prior to 1985, the
carriers at JFK, operating under antitrust immunity, determined who
would be allowed to operate and when. The FAA's role was limited to
determining how many operations air traffic control could reasonably
handle during congested periods and enforcing operator compliance with
the rules. The HDR divided the allowable operations (slots) by
categories of users (i.e., carriers other than air taxis, scheduled air
taxis, and others). 33 FR 17896 December 3, 1968). In 1982, the FAA
imposed a minimum usage requirement for the first time. 47 FR 7816
February 22, 1982). Also in 1982, the FAA implemented an experimental
buy-sell rule, under which approximately 190 slots were transferred
among carriers over six weeks of the program. 47 FR 29814, July 8,
1982).\1\
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\1\ This slot program was not implemented under the HDR, but
rather under SFAR 44 and was related to the limitations on air
traffic control services resulting from the controller's strike.
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The FAA established more permanent allocation procedures for slots
under the HDR in 1985 when it adopted the Buy/Sell Rule. 50 FR 52195,
December 20, 1985. In a companion rulemaking to the Buy/Sell Rule (SFAR
48), the FAA provided for the withdrawal of up to five percent of the
slots at the slot-constrained airports through a reverse lottery so as
to provide a pool of slots for new entrants and limited incumbents.
SFAR 48, 51 FR 8630, March 12, 1986).\2\ The Buy/Sell Rule included
use-or-lose provisions and, while explicitly stating that the slots
were not the carriers' property and did not constitute a proprietary
right, the FAA allowed carriers to buy, sell or lease the slots on the
secondary market.
[[Page 60545]]
For the next 15 years the agency relied primarily on the secondary
market authorized by the Buy/Sell Rule to address access issues at the
airport. However, the Buy/Sell Rule created market distortions by
creating categories of carriers entitled to preferential treatment
under an administrative reallocation mechanism which severely limited
access to these carriers other than on the open market. Affected
carriers complained to the FAA that by grandfathering 95 percent of the
slots at the slot-controlled airports to incumbent carriers, there was
insufficient capacity available for reallocation. The Buy/Sell Rule
also failed to foster a robust secondary market because it did not
require any transparency. Accordingly, carriers were able to keep out
competitors by arranging private transactions. This resulted in
carriers interested in initiating or expanding service at the airports
often being unaware that slots were potentially available for sale or
lease. Some carriers also complained that they were effectively being
denied access to the airport because their competitors refused to sell
slots or provide meaningful lease terms.
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\2\ Commenters appear to have forgotten this rulemaking action
when arguing that the withdrawal of slots for reallocation is
unprecedented.
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On April 5, 2000, Congress enacted the Wendell H. Ford Aviation and
Investment Reform Act of the 21st Century (AIR-21 or the Act). The Act
phased out the HDR at JFK effective January 1, 2007. The Act also
preserved the FAA's authority to impose flight restrictions by stating
that ``[n]othing in this section * * * shall be construed * * * as
affecting the Federal Aviation Administration's authority for safety
and the movement of air traffic.'' 49 U.S.C. 41715(b).
Since the spring of 2006, U.S. air carriers serving JFK have
significantly increased their domestic scheduled operations throughout
the day. This change in use affected the manner in which the airport's
runways could be used. Historically, the air traffic controllers
achieved maximum efficiency at JFK by using either two arrival runways
and one departure runway, or two departure runways and one arrival
runway, to facilitate the transatlantic traffic flows. The increase in
domestic traffic--from the two largest operators at the airport, Delta
Air Lines (Delta) and JetBlue--affected the efficient use of JFK's four
runways.
As a result of the increase in scheduled operations at JFK, the
summer 2007 demand exceeded the airport's capacity during many periods
of the day. In 2007 flight delays in the New York City metropolitan
area soared. Delays impacted all three major commercial airports and
cascaded throughout the NAS. The summer of 2007 became the second worst
on record nationally for flight delays. On September 27, 2007, the
Secretary of Transportation announced the formation of the New York
Aviation Rulemaking Committee (NYARC) to help the Department of
Transportation (Department) and the FAA explore available options for
congestion management and how changes to current policy at all three
major commercial New York City airports would affect the airlines and
the airports.
By design, the NYARC provided ample opportunity for extensive input
by aviation stakeholders, having members from every major air carrier
in the United States as well as foreign carriers, passenger groups, and
the Port Authority of New York and New Jersey (Port Authority). Through
the ARC process, these stakeholders played a key role in exploring
ideas to address congestion and ensuring that any actions contemplated
by the Department and the FAA would be fully informed. In addition to
holding weekly meetings of the full NYARC, five working groups
regularly met to explore ways to address both congestion and allocation
of the available airspace. The NYARC worked throughout the fall and
submitted a report to the Secretary, dated December 13, 2007,
discussing its findings. A copy of the NYARC Report may be found at
http://www.dot.gov/affairs/FinalARCReport.pdf.
While the NYARC process was underway, in September 2007, the FAA
designated both JFK and Newark airports IATA Level 2, Schedules
Facilitated Airports for the 2008 summer season. 72 FR 57317 (Sept. 24,
2007). The FAA thereby received summer scheduling information from the
carriers for those airports. Based in part on this information, in
September-October 2007, the FAA and the Secretary of Transportation
decided that it was necessary to invoke the Department's authority to
convene a meeting of air carriers to discuss flight reductions at JFK,
which was determined to have severe congestion during peak hours of
operation. 49 U.S.C. 41722. On October 25, 2007, the FAA designated JFK
as an IATA Level 3, Coordinated Airport for summer 2008 in order to
address any growth in operations at the airport by foreign-flag
carriers.\3\ 72 FR 60710.
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\3\ Under both level 2 and level 3, carriers notify the
governmental entity designating the airport of their intended
schedules for the affected season and, where possible, the two
parties will attempt to resolve each others concerns. However, under
a carrier is not obliged to accept the governing authority's
position at a level 2 airport.
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During the individual air carrier sessions, American Airlines
(American), Delta, and JetBlue Airways, which account for over 75% of
the total operations at JFK, withdrew their proposed peak-hour schedule
increases, and retimed some operations, for the summer of 2008 during
the afternoon and early evening peak hours at the airport. The FAA also
received comments on the schedule reduction process through the public
docket. Docket FAA-2007-29320. On January 18, 2008, the FAA issued an
Order temporarily capping scheduled operations at an average of 81
flight operations per hour at JFK and allocating those operations
pursuant to the agreements reached at the schedule reduction meeting
and after consideration of the comments in the public docket. 73 FR
3510. By its terms, the Order took effect March 30, 2008 and was set to
expire at 11 p.m. on October 24, 2009. The Order indicated that the FAA
plans to lease any new capacity that becomes available and any
allocated Operating Authorizations that are returned to the FAA, for a
five year term. The leases would be pursuant to an auction and would be
awarded to the highest responsive bidder. The FAA said it would provide
additional information about leasing procedures and the relevant
statutory authorities before conducting any auction. 73 FR 3510, 3514.
On February 14, 2008, the FAA amended the Order to modify the use-or-
lose provisions so that they would correspond to those adopted by the
International Air Transport Association (IATA) Worldwide Scheduling
Guidelines (WSG). 73 FR 8737.
In the autumn of 2007, the FAA also found it necessary to
informally discuss summer 2008 schedules with carriers operating at
Newark, because it was concerned that the proposed operations would
overtax the capacity of the airport system and that limiting operations
at JFK would create a spillover effect at Newark. Although some
carriers made modest revisions to their proposed schedules, it was
clear to the FAA that demand would continue to exceed capacity unless
the FAA took further actions. In order to be assured that carriers
would not add flights to already oversubscribed hours at Newark, and
would refrain from shifting flights from JFK to Newark, the FAA
designated Newark as an IATA Level 3, Coordinated Airport effective the
summer of 2008. 72 FR 73,418 (Dec. 27, 2007). Some carriers, such as
[[Page 60546]]
Continental Airlines (Continental), Newark's primary hub carrier,
shifted flights from peak hours to off-peak hours. On March 18, 2008,
the FAA proposed to issue an Order to limit hourly scheduled flight
operations at Newark and to allocate them pursuant to its informal
carrier discussions. 73 FR 14552. The proposal's preamble indicated the
FAA's plans to lease new capacity, allocated Operating Authorizations
that are returned, and currently unallocated Operating Authorizations,
by means of an auction. On May 21, 2008, the FAA adopted the general
terms of the proposed Order, effective June 20, 2008, through October
24, 2009. 73 FR 29550. The provisions regarding the use of the IATA WSG
for use-or-lose, and the preamble information on the auctions of new
and returned capacity, mirrored those in place for JFK.
As indicated in the companion rule addressing congestion and delays
at LaGuardia, the FAA determined that it was necessary to cap and
allocate flight operations at the three major New York airports
operated by the Port Authority. Recognizing the short-term nature of
the caps imposed by the Orders for JFK and Newark, on May 21, 2008, the
FAA published a notice of proposed rulemaking that sought to provide a
longer-term solution and address a number of congestion-related issues.
73 FR 29626. At both JFK and Newark, the FAA proposed to continue the
hourly caps on flight operations, and to lease the majority of slots at
each airport to the historic operators for non-monetary consideration
under its cooperative agreement authority. The agency also proposed to
develop a robust market and induce competition by annually auctioning
off leases for a limited number of slots during the first five years of
the rule.
The FAA proposed two alternatives in the NPRM. Under the first
alternative, each carrier operating, respectively, at JFK and Newark
would receive a ``baseline'' of up to 20 slots. At each airport, the
FAA would auction off ten percent of the total number of slots (above
the baseline) to any carrier serving or wishing to serve the airport
and would use the proceeds to mitigate congestion and delay in the New
York City area (after the FAA recouped the cost of the auction). Under
the second alternative, the same auction procedure would apply to
Newark as under the first alternative; at JFK, the FAA would conduct an
auction of twenty percent of the slots (above the baseline) and the
auction proceeds would go to the carrier holding the slot after the FAA
recouped the cost of the auction. Given the significant international
presence at both airports, the NPRM proposed to substitute IATA WSG
procedures for auctions, in the event of new or returned capacity.
Additionally, for both alternatives, the NPRM contained provisions for
adoption of IATA WSG for use-or-lose, for historic rights, for
unscheduled operations, and for withdrawal for operational need. The
FAA proposed to sunset the rule in ten years.
On July 17, 2008, the FAA proposed to limit unscheduled operations
at JFK and Newark, to two hourly reservations from 6 a.m. through 1:59
p.m., from 10 p.m. through 10:59 p.m., and to one hourly reservation
from 2 p.m. through 9:59 p.m. at JFK. At Newark, the limits would be
two hourly reservations from 6 a.m. through 11:59 a.m. and from 10 p.m.
through 10:59 p.m., and one hourly reservation from 12 p.m. through
9:59 p.m. 73 FR 41156.
The comment period for the NPRM closed July 21, 2008. Despite
numerous requests, the FAA decided against extending the comment
period, although it noted that it historically has considered comments
filed after the end of a comment period as long as such consideration
did not lead to delay. In denying these requests, the FAA provided
draft copies of the lease agreements that would result from the initial
allocation and reallocation of slots in the final rule. The FAA
reiterated that any auction would be conducted under the agency's
acquisition authority. The agency also reiterated that interested
parties to the auction would be afforded the opportunity to comment on
any proposed auction procedures within the context of the agency's
Acquisition Management System.
Thirty-eight interested parties filed comments to the docket
addressing the NPRM. The majority of comments were consistent in
rejecting the proposal. Many commenters said that the FAA had failed to
demonstrate how the proposal would achieve any significant relief from
congestion. Rather, according to the commenters, the NPRM would impose
an untested and unproven auction process on airlines that would not
address the fundamental airspace congestion issues in the New York
metro area.
On September 30, 2008 the FAA's Office of Dispute Resolution for
Acquisition (ODRA) issued a decision responding to protests that had
been filed by air carriers, the ATA, the Port Authority, and the New
York Aviation Management Association challenging the FAA's legal
authority to conduct a proposed auction of two slots at Newark. ODRA
concluded that the FAA's statutory authority and its Acquisition
Management System authorized agency disposal of property rights by way
of a lease as well as the use of a competitive auction process to
determine who the lessee should be.
On the same day the Government Accountability Office (GAO) released
an opinion letter in response to a congressional request that concluded
that the FAA currently lacks authority to auction slots under either
its property disposition authority or its user fee authority. The
issues involved represent novel legal issues upon which reasonable
people, and agencies, acting in good faith, have disagreed. The FAA
disagrees with the GAO conclusions and has decided to proceed with the
adoption of this final rule.
II. Summary of the Final Rule
In the NPRM, we proposed two alternatives for withdrawal and
reallocation by auction of slots at JFK and Newark. The rule we are
adopting follows the proposal for alternative 1. It will replace the
Orders imposing operating limitations at JFK and Newark and establish a
rule limiting unscheduled operations at those airports. As proposed,
the starting date of leases under the Final Rule will be based on
industry scheduling seasons. Leases obtained in the first auction will
start on October 25, 2009 (the first day of the winter scheduling
season), and will terminate on March 30, 2019. Leases obtained in
subsequent auctions will begin on the first day of the relevant summer
scheduling season and terminate on March 30, 2019. Although the
preamble to the NPRM discussed the possibility of operations for the
summer 2009 season, slots awarded through the first auction may be
operated by the acquiring carrier as of October 25, 2009, i.e., for the
winter scheduling season of 2009/2010.
The other basic outlines of the rule are unchanged from our
alternative 1 proposal. A slot is defined as the right to land or
depart during a 30-minute window. Limited and Unrestricted slots that
are assigned or awarded under this rule will be for every-day
operation.\4\ Although the FAA retains the right to change the cap, the
rule provides for 81 slots per hour for scheduled operations at both
JFK and Newark.
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\4\ Note that some slots are not currently operated on a daily
basis. In those situations carriers would be assigned common slots
for only the days they are currently operated.
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Carriers at JFK and Newark will initially be assigned their
baseline operations, which is up to 20 slots per
[[Page 60547]]
carrier. Ninety percent of each carrier's slots above its baseline
operations will be assigned to the carrier in a lease terminating March
30, 2019. The remaining 10 percent will be designated as limited slots
and have shorter leases. Each carrier will identify half of the
specific slots that will become its limited slots, and the FAA will
select the remaining half. For the first five years of the rule, the
FAA will auction one-fifth of the limited slots (approximately two
percent of the total number of slots at each airport). Slots awarded
through an auction will be designated unrestricted slots after
reallocation. Unlike common and limited slots, unrestricted slots will
not be subject to withdrawal by the FAA for operational purposes.
Unrestricted slots will also not be subject to use-or-lose
requirements, although the Office of Aviation Enforcement, within the
Office of the Secretary of Transportation, will monitor any anti-
competitive activity with respect to the acquisition and use of
unrestricted slots.
Carriers will be permitted to buy or sell their lease rights to all
types of slots at JFK and Newark, and, as proposed, the final sales
terms will be transparent, although actual negotiations will not be
disclosed. The FAA intends this rule to provide a means by which the
market value of slots can be made clear to all parties. That goal
necessitates the disclosure of actual sale prices. The rule also
permits the use of the FAA's auction proceedings by any carrier wishing
to sell a slot in that fashion. A carrier's decision to use an FAA-
operated auction to buy or sell a slot does not change the character of
the slot itself. If, for example, a carrier chooses to sell a common
slot through an FAA auction, the slot remains a common slot following
the purchase. Only limited slots selected for auction by the FAA become
unrestricted slots.
We have decided to make final our proposal with respect to the
allocation of any new or returned capacity. Any slots that become
available in this fashion will be assigned under the procedures of the
WSG.
III. Authority To Reallocate Capacity
The Air Transport Association of America (ATA), the International
Air Transport Association (IATA), the Port Authority, American, Delta
and United Airlines (United) asserted that the FAA's proposed methods
of allocating slots are not lawful for several reasons including: prior
statements by Government officials indicating that the FAA would need
additional legislation to be able to auction slots; the FAA cannot
create property by exercising its regulatory power to regulate the use
of navigable airspace; slots are not property when created and held by
the Government but only become property when transferred to a carrier;
the proposed lease of slots for fair market value would be a new user
fee in violation of an appropriations restriction on using a particular
appropriation to finalize or implement a regulation to establish a new
user fee and in violation of the Independent Offices Appropriations Act
(IOAA) (the latter of which it is asserted is the FAA's only authority
to charge for the lease of slots); the leases would be an
unconstitutional usurpation of Congress's authority to levy taxes; the
return of slots to the Government at the end of the term of their
leases would constitute an unconstitutional taking of property; the
Federal Grants and Cooperative Agreements Act does not provide
authority for the FAA to give slots to carriers through cooperative
agreements; and the FAA lacks authority to retain the proceeds from the
lease of slots and use those proceeds to improve capacity in the New
York airspace area.
In contrast to the criticisms to the proposed auctions, Virgin
America, Inc. agreed with the FAA that it possesses legal authority to
conduct auctions and to lease the slots to carriers. Virgin America
asserted that the FAA may rely on its exclusive sovereignty over the
airspace of the United States, under 49 U.S.C. 40103, to withdraw and
reallocate slots. The carriers have no current vested property interest
in the slots. Virgin America further maintained that the FAA's
exclusive sovereignty over navigable airspace, coupled with its
authority to lease property or dispose of an interest in property for
adequate compensation, under 49 U.S.C. 40110(a)(2), enables it to lease
the slots and maintain the proceeds.
The FAA has the authority to dispose of property interests under 49
U.S.C. 40110(a)(2). The FAA also has the authority to ``enter into and
perform such contracts, leases, cooperative agreements, or other
transactions as may be necessary to carry out the functions of the
Administrator and the Administration.'' 49 U.S.C. 106(l)(6).\5\ The FAA
has determined that the allocation of a relatively small number of
slots via the auction of a leasehold best effectuates the efficient
allocation of slots, both through the initial allocation and through
the development of a robust secondary market.
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\5\ A federal agency's power to dispose of property includes the
power to lease that property, even without express Congressional
authority. Ashwander v. Tennessee Valley Authority, 297 U.S. 288,
331 (1936).
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An auction is intended simply to distribute slots to the air
carriers who value them the most, thus encouraging their most efficient
use. An auction also satisfies the direction of Congress to ``place
maximum reliance on competitive market forces and on actual and
potential competition * * * to provide the needed air transportation
system. * * *'' 49 U.S.C. 40101(a)(6)(A).\6\ This section of law
describes the policies that the Department must take into consideration
when issuing economic regulations. This rule is not an economic
regulation. However, the statutory provision is a clear statement by
Congress of a valid public policy aim that the FAA is permitted to take
into consideration when issuing regulations under section 40103. The
FAA does not intend to set a reserve price on slots so as to assure
itself that it recovers its costs associated with either the auction or
with providing air traffic services. The FAA instead aims to allocate
all of the slots put up for auction, thus allowing for possible new
entrants to compete with the incumbent air carriers at JFK and Newark
and to accommodate changes in the business strategies of air carriers
using the airports.
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\6\ This section of law describes the policies that the
Department of Transportation must take into consideration when
carrying out its economic regulatory authority over the aviation
industry. This section also is a clear statement by Congress of a
valid public policy aim that the FAA is permitted to take into
consideration.
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A. The FAA Is Legally Authorized To Allocate Slots Through an Auction
Mechanism
Several commenters quote a statement made in 1985 that the FAA did
not propose an auction mechanism because legislation would be required
for the collection and disposition of the proceeds (50 FR 52183
(December 20, 1985)), and a more recent statement in the NPRM for the
LaGuardia congestion management rulemaking that the FAA ``currently
does not have the statutory authority to assess market-clearing charges
for a landing or departure authorization''. 71 FR 51360, 51362, 51363
(August 29, 2006).
In 1985, the FAA lacked clear authority to collect and dispose of
the proceeds from an auction. Rather, any amounts collected by the
agency would need to be deposited into the General Receipts account in
accordance with 31 U.S.C. 3302. Additionally, while the FAA had
authority to dispose of an interest in property, it was not clear that
such interests included leaseholds.
[[Page 60548]]
In the Air Traffic Management System Performance Improvement Act of
1996, Public Law 104-264, the FAA gained express authority to lease
property to others. 49 U.S.C. 106(l)(6), 106(n). The same law also gave
the FAA an exemption from 31 U.S.C. 3302, and an account was
established specifically for all amounts the FAA collects other than
the insurance premiums and fees that it is required to deposit into the
Aviation Insurance Revolving Fund. 49 U.S.C. 45303(c). This account is
available not just for fees assessed under chapter 453, but for ``all
amounts'' other than insurance premiums and fees.\7\ Thus, the
statement made in 1985 is no longer correct.
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\7\ The fact that Congress excluded insurance premiums and fees,
which are not amounts assessed under chapter 453 of title 49,
expresses Congress' plain and unambiguous intent for the FAA to
deposit all amounts it collects into this account, not just the
amounts assessed under the user fee provisions of chapter 453.
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The commenters also refer to the fact that the FAA sought
additional legislative authority to conduct auctions, as part of a
comprehensive change to how the FAA would be financed and how market-
based mechanisms would be used by both the FAA and congested airports.
The FAA recognized that it did not have clear statutory authority to
implement a wide array of market-based mechanisms and that absent
authority beyond that contained in 49 U.S.C. 40103, any reallocation
via a market-based mechanism could lead to a challenge that the FAA had
violated the ``user fee prohibition'' attached to the agency's annual
appropriations legislation since 1998. The FAA did not address the
agency's authority to dispose of property, as provided in the Air
Traffic Management System Performance Improvement Act of 1996. Public
Law No. 104-264, codified at 49 U.S.C. 106(l)(n). The FAA's proposed
reauthorization package, the Next Generation Air Transportation System
Financing Reform Act of 2007, would have substituted new user fees for
passenger ticket taxes, permitted the airport operators Port Authority
at constrained and delayed airports to assess market-based fees and
would have also allowed the FAA, under certain circumstances, to impose
market-based mechanisms. This legislative proposal, in giving authority
directly to airport proprietors to assess and use market-based fees,
was profoundly different from the terms of this final rule. This rule,
by contrast, relies on the FAA's Acquisition Management System
authorities and does not require the FAA to use any of the proposed
legislative provisions it sought. The FAA has authority to lease
property to others, and to receive adequate compensation for this
temporary disposal of property, including the authority to lease the
slots at JFK and Newark.
When it published the NPRM for LaGuardia the FAA initially believed
that imposing a market-based reallocation mechanism as part of the
regulation could be problematic. However, as delays soared in the
region in 2007 and Congress failed to pass long-term reauthorization
legislation, the FAA reevaluated its options. One option was to impose
or continue orders at all three New York metropolitan airports that
would last indefinitely. The agency rejected this option because the
orders were never intended to be a long-term solution and they
perpetuate the inefficiencies contained within the HDR. Likewise, the
FAA could have initiated rulemaking that would establish an
administrative reallocation mechanism, but the agency concluded that
approach also failed to resolve the inefficiencies contained within the
HDR. Finally, the FAA could revisit all of its statutory authorities
and determine whether it had the ability to allocate slots under its
existing legal authorities.
This final approach was the one the agency pursued because the FAA
believes it is both legal and best represents the interests of
passengers flying in and out of the airport. The FAA also believes this
approach best effectuates the FAA's mandate to provide for the
efficient use of the NAS, coupled with the Department's mandate to
consider competitive effects. The agency can either foster a market-
based allocation mechanism and develop a robust secondary market, or it
can walk away from the airport after imposing a cap and providing for a
very limited administrative reallocation mechanism. It has decided to
follow the more free market approach.
The commenters also refer to the fact that the FAA sought
additional legislative authority to conduct auctions which it has not
yet received. The authority sought by the FAA was part of a
comprehensive change to how the FAA would be financed and how market-
based mechanisms would be used by both the FAA and congested airports.
This rule, however, relies on the FAA's Acquisition Management System
authorities and does not require the FAA to use any of the proposed
legislative provisions it sought.
1. Slots Are a Form of Property That May Be Leased by the FAA to Others
The Port Authority, the ATA and IATA submit that the FAA has no
property rights in the slots the FAA proposes to auction.\8\ While the
ATA and IATA do not question that the slots are property (they dispute
ownership), the Port Authority states that the slots are ``neither
physical property, real property, intellectual property, nor an
intangible property recognized in common law.'' \9\
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\8\ The Regional Airline Association (RAA) makes a similar
argument. In addition, RAA states that the FAA lacks the authority
to regulate the types of aircraft and routes to be served in air
transportation. The FAA disagrees with the premise of RAA's
position, since the FAA may rely on a rational basis to allocate the
use of navigable airspace under 49 U.S.C. 40103. Nevertheless, this
rule does not attempt to regulate the type of aircraft or the routes
served in any manner.
\9\ The Port Authority also uses the language in the preamble to
the SNPRM as evidence that the slots are not property because the
FAA stated that there was no Fifth Amendment Takings issue with the
proposed slot auction. The FAA's statement, in context, went to the
fact that the air carriers have no property interests in the slots
after expiration of the current Order until FAA provides them with
new slots. It did not imply that the slots were not property; just
that the air carriers possess no property interests beyond those
accorded them under the Order.
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The Port Authority is incorrect; slots are an intangible form of
property that may be leased. On January 18, and May 21, 2008,
respectively, the FAA issued Orders limiting operations at JFK, and at
Newark, pursuant to its broad authority to regulate the use of
navigable airspace under 49 U.S.C. 40103(b). 73 FR 3510; 73 FR 29550.
Those Orders define an Operating Authorization \10\ as ``the operation
authority assigned by the FAA to a carrier to conduct a scheduled
arrival or a departure * * *'' Id. at 3516; 29554. The Orders expressly
allow the trading and leasing of Operating Authorizations. Id. at 3516;
29554. Although the Orders do not permit the permanent sale or purchase
of Operating Authorizations, they permit any form of consideration to
be used in the lease or trade of these Operating Authorizations. Id. at
3516; 29554.
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\10\ Both OAs and slots represent property interests, but the
FAA has deferred to common usage by reverting to the term ``slots.''
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These Orders reflect the FAA Administrator's determination that
Operating Authorizations are a form of property that may be leased or
traded for consideration, and used as collateral. Those determinations
have not been legally challenged, and the time period for filing such a
challenge has expired. 49 U.S.C. 46110. Indeed, the ATA's and IATA's
own members have treated Operating Authorizations, and the HDR
[[Page 60549]]
slots that predated them, as a form of at least intangible property:
Leasing and trading them for consideration; using them as a form of
collateral; and disclosing them as assets on their balance sheets.
Bankruptcy courts have held that slots are property.
The Port Authority cites Executive Order 13132 for the proposition
that the FAA is ignoring the traditional role of States as sovereigns
that can create property and has not closely examined the effect the
rulemaking would have on the State instrumentality. The creation of
property rights, however, is not the sole responsibility of the states.
Federal law determines what constitutes property for the purpose of
applying federal statutes. Ross L. Blair, et al. v. United States,
Docket 2007-5049 (Fed. Cir. 2008), citing United States v. Kimbell
Foods, Inc., 440 U.S. 715, 726 (1979) and United States v. Craft, 535
U.S. 274, 278-79 (2002). The United States Government, pursuant to 49
U.S.C. 40103, has exclusive sovereignty over the navigable airspace,
and the FAA exercises plenary powers over that airspace.
Unlike the Port Authority, the ATA and IATA do not dispute that the
slots constitute a property interest; rather they argue that the
property interest is not the FAA's, because it is created at or after
the transfer to an air carrier.\11\ Section 40110(a)(2) does not speak
to whether the FAA actually owns property that is being disposed of. It
only speaks to the disposal of a property interest. Only the FAA has
authority to assign the use of navigable airspace under section 40103.
Even assuming that the property interest is created at the time of
transference, it is still a property interest that falls within the
FAA's authority to dispose of under section 40110(a)(2).
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\11\ The airline commenters agree with ATA's assessment that the
slots are property of the airlines not of the FAA. See, Comments of
US Airways Group, Inc. at 24. But see, Comments of American Airlines
at 7 stating that the Port Authority holds the property interest.
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As with certain other valuable public property not expressly owned
in fee by the U.S. Government, the Government may allow the use of
public property and frequently does so using leases. In fact, the
Government routinely ``licenses'' and ``permits'' the use of property
over which it exercises exclusive sovereignty. In doing so, unless
otherwise specified by law, the Government charges market rates in
accordance with OMB Circular A-25. For example, under 36 CFR 251.53--
Authorities, the Chief of the Forest Service (USDA) issues special use
authorizations (e.g., permits, term permits, leases) for National
Forest System land. The USDA also issues grazing permits under the
Taylor Grazing Act (TGA) of 1934 to allow the permit/lease holder to
use publicly owned forage. The Federal Communications Commission
licenses portions of the broadcast spectrum, and since 1993 (four years
before Congress mandated the use of auctions) has frequently done so
using auctions.\12\ The General Services Administration issues licenses
and permits for the use of its buildings and property, see, e.g., 41
CFR 101-47.901, 101-47.309; see also, GSA form 1582, ``Revocable
License for Non-federal Use of Real Property.'' The FAA similarly uses
``licenses'' to, in effect, lease its real property to non-federal
users. See, 1.3.7 of the FAA's Real Estate Guidance, http://
fast.faa.gov/realestate/index.htm.
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\12\ The FCC, like the FAA, had a statutory preference for
competition prior to the requirement that it conduct auctions.
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In short, licenses frequently are used to provide non-federal
parties access to public property regardless of whether that property
be real or personal (including intangible) \13\ and whether the
Government owns the property in the traditional sense or is simply its
guardian. The FAA selected the word ``lease'' rather than ``license''
to describe the documents that will transfer slots to air carriers
because the FAA is conveying a longer term interest, with fewer rights
by the Government to terminate that interest, than is usually done when
the Government licenses a non-federal entity to use public property
(licenses of property are usually terminable at will).
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\13\ Such as authorized access to particular radio frequencies
and authorized use of intellectual property.
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2. FAA Leases Are Not Covered by IOAA and This Rule Is Not in Violation
of Any Current Appropriations Restriction
The ATA argues that the only authority by which the FAA may charge
for the lease of slots is as a user fee under the Independent Offices
Appropriations Act (IOAA) and that the only amount that could be
charged is the cost of administering the lease. The ATA is incorrect on
both points, but the issue is not relevant because the FAA does not
rely on IOAA authority to conduct auctions but on its other
authorities.
The ATA similarly argues that this regulation falls within the
parameters of an appropriation provision that prohibits the FAA from
using funds from its operations appropriation to finalize or implement
a regulation that establishes a new user fee not specifically
authorized by law.\14\ Consolidated Appropriations Act, 2008, Public
Law 110-161. The ATA and IATA also suggest that the wording of 49
U.S.C. 106(l)(6) \15\ means this authority may not be used because the
FAA may only enter into leases using this authority if the leases ``may
be necessary to carry out the functions of the Administrator and the
Administration.'' 49 U.S.C. 106(l)(6). The ATA and IATA argue that the
only necessary function is a regulatory function to assign airspace
under 49 U.S.C. 40103. However, there are several other statutory
functions, such as using procedures that provide for an efficient air
traffic system, 49 U.S.C. 44505, and the desirability of placing
maximum reliance on competitive market forces and on actual and
potential competition to provide the needed air transportation system,
49 U.S.C. 40101(a)(6), that make the use of the FAA's commercial
authority to lease property to others appropriate. See also, the
legislative history and findings of Congress when
[[Page 60550]]
it granted the FAA the authority to lease property to others in Public
Law 104-264. Having created slots, and determined the number of
available slots should be limited because of the resulting strain on
the NAS from the scheduling of more flights per hour than can be
handled under current conditions at JFK and Newark, the function of
disposing of its interest in the slots becomes applicable.
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\14\ ATA also suggests that by finalizing or implementing this
rule, the FAA would violate the Anti-Deficiency Act. The Anti-
Deficiency Act would only be violated if the FAA obligated or
expended funds in excess or in advance of an available
appropriation, fund, apportionment or other applicable
administrative subdivision of funds. 31 U.S.C. 1341, 1517. The FAA
may not use its operations appropriation to finalize or implement a
rule to promulgate a new user fee not specifically authorized by
law, but this rule simply reduces the number of slots (lowers the
cap) at JFK and Newark, defines the different types of slots,
establishes a reversion of approximately 10 percent of the slots,
and discusses the FAA's intent to auction new or returned slots.
This rule does not require or impose on any entity a requirement to
pay the FAA to obtain a service or even a slot. If the FAA does
conduct an auction as contemplated by this rule, it will do so using
its pre-existing authorities and regulation. The use of its
operations appropriation to finalize and implement this rule
therefore does not violate the Anti-Deficiency Act.
\15\ American Airlines reads 49 U.S.C. 106 as more limited in
scope regarding the types of property that fall under its purview.
The statute does not limit its scope to any particular type(s) of
property that fall under its purview. The FAA has for years, without
challenge, interpreted its authority broadly under the statute in
support of Congress' intention of allowing the Administrator to
acquire, lease, enter into cooperative agreements and other
transactions as may be necessary to carry out the Agency's
functions. This interpretation is known to Congress, which has
repeatedly reauthorized the FAA without making a change to this
section. Another commenter raised the fact that the heading of
section 106(l) refers to ``Personnel and Services'' which the
commenter says means that subparagraph (6) of that section does not
provide the FAA any contracting or leasing authority. It has been
long recognized by the courts, however, that the headings of
statutes have little if any weight in statutory interpretation. As
other paragraphs of this section deal with personnel matters, the
heading is not erroneous, but it does not in any way dilute the
broad grant of contracting, leasing, cooperative and other
transaction agreement authority Congress gave the FAA in paragraph
(6).
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Even if the only ``necessary function of the Administrator or
Administration'' were a regulatory one, the FAA has not violated the
appropriations restriction. Simply put, a lease is not a user fee. A
user fee is imposed for a particular service the Government provides to
a particular party. A lease on the other hand, is a transfer of a
possessory interest in real, personal or intangible property that
allows the lessee the use of that property to the exclusion of others
including the lessor. In transferring slots to air carriers for defined
periods of time, the FAA is not providing any air traffic or other
service to the recipients. To the contrary, the FAA's air traffic
controllers will not be policing or otherwise cognizant of which air
carrier owns which slot and will provide their services in accordance
with the FAA's Orders and policies (predominantly first come, first
served). In transferring slots to air carriers, the FAA is allowing
that air carrier to schedule or reserve access to that segment of
navigable airspace that is necessary to take off or land an aircraft at
the two airports during a particular half hour of time. In short, the
FAA is leasing rather than providing a service to air carriers when it
transfers slots to them.
A user fee is calibrated to recover the cost to the government of
providing a service or specific benefit to an identifiable recipient.
See, e.g., United States v. Sperry Corp., 493 U.S. 52, 60 (1989);
Seafarers International Union of North America v. Coast Guard, 81 F.3d
179, 182-83 (D.C. Cir., 1996). The assignment of a use of navigable
airspace for scheduled flight operations is not a ``user fee'' under
the principles articulated in those cases.\16\ The cost associated with
purchasing a particular slot does not constitute a user fee. First, the
cost associated with procuring a slot at auction is not associated with
the cost of providing air traffic services for that particular take off
or landing. Rather, air traffic services are paid for already through
the Airport and Airway Trust Fund receipts. Second, the FAA is not
creating assignments of the use of navigable airspace for scheduled
flight operations (slots) for the purpose of raising revenue by leasing
them to air carriers. More precisely, the FAA has imposed a cap and
designated slots for the purpose of allocating the efficient use of
navigable airspace. Most of these slots will be awarded to current
operators to prevent disruption of air services into and out of JFK and
Newark. The FAA is leasing a relatively small number of them, by means
of an auction, to air carriers in order to draw in new entrant carriers
and provide an opportunity for expansion by carriers already at the
airport, thereby inducing airline competition at JFK and Newark and
ensuring that airlines winning the slots make the highest and best use
of them. The auction is also designed to assure that air carriers will
rationalize the use of their slots in accordance with the value
attached to them in the auctions, and ultimately, in the secondary
market. In the end, the traveling public will benefit.
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\16\ The FAA implemented its regulation to lease its property to
others on April 1, 1996, well prior to the first time a restriction
was included in the FAA's appropriation concerning the FAA's ability
to use the operations funds appropriated to develop or implement a
new user fee.
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3. Leases Are Not Taxes
A tax is generally defined as an enforced obligation to support the
government. See United States v. La Franca, 282 U.S. 568 (1931); see
also United States v. Butler, 297 U.S. 1, 61 (1937); Head Money Cases,
112 U.S. 580, 596 (1884); Rural Telephone Coalition v. FCC, 8388 F.2d
1307, 1313 (D.C. Cir., 1988); United States v. City of Huntington, 999
F.2d 71, 73 (4th Cir., 1993). A lease acquired through a slot auction,
however, is not a tax. It is not an amount being levied on all members
of the industry nor is it a mandatory payment as a tax would be.
Further, the lease is not ``imposed'' as a tax is, and is not designed
for revenue-raising purposes.
The auction of a limited number of slots at the airport was never
designed to provide the FAA with a new source of revenue. Indeed, in
the NPRM, one of the options proposed by the FAA was to allow the
carriers at JFK to keep all revenue after covering the FAA's costs in
conducting the auction. Rather, the auction mechanism is intended to
use market forces to best allocate this limited asset to those carriers
who value it the most, placing the asset to its best and highest use.
The FAA believes the slots auctions will inform the airlines of the
market value of their slots so that slot utilization can be
rationalized. While it is true that under today's rule, that the FAA
may realize some revenue from the auction, the agency has also
committed to putting that revenue back into aviation capacity
enhancement and delay mitigation projects in the New York metropolitan
area.
Unlike a tax, which imposes an obligation on affected citizens or
consumers to pay money to the state, the slot auction imposes no burden
on a carrier based on its citizenship or use of the airport. The slot
auction lease payments are voluntary: The FAA does not require a
carrier to participate in an auction in order to serve JFK or Newark.
Carriers serving the airports presently will be given slots through
cooperative agreements and slightly less than ten percent of the total
number of slots at the airport will be auctioned. Only the carriers
winning the bids at the slot auctions will pay for the lease, and that
amount of money will have been determined by the free market. The FAA
will not have pre-determined a lease amount and will not attempt to
cover its costs in conducting the auction by setting a reserve
price.\17\
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\17\ As discussed in the general discussion of the auction
procedures posted under the FAA's Acquisition Management System, the
FAA will set a reserve price to assure that, in the event only a
single bid is received for a particular slot, the bidding carrier
does not actually pay the bid price. In that instance, the winning
bidder would pay only the reserve price.
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4. The FAA's Authority To Give Slots to Air Carriers Through
Cooperative Agreements
A few commenters stated that the Federal Grants and Cooperative
Agreements Act does not provide the FAA authority to give slots as
cooperative agreements. The Federal Grants and Cooperative Agreements
Act defines when a cooperative agreement is to be used. The FAA's broad
authority to award cooperative agreements, was given to the FAA in the
Air Traffic Management System Performance Improvement Act of 1996, and
codified as 49 U.S.C. 106(l)(6). This Act expressly confers on the FAA
Administrator the authority to ``enter into and perform such * * *
cooperative agreements, and other transactions as may be necessary to
carry out functions of the Administrator and Administration. The
Administrator may enter into such * * * cooperative agreements, and
other transactions with * * * any person, firm, association,
corporation * * * on such terms and conditions as the Administrator may
consider appropriate.'' 49 U.S.C. 106(l)(6). There are several
functions of the Administrator for which it may be ``necessary'' to
enter into a cooperative agreement. One such function is to encourage
the development of civil aeronautics. 49 U.S.C. 40104. By giving
[[Page 60551]]
up to 20 slots to all air carriers currently operating at the airport,
and 90 percent of the remaining slots to the air carriers currently
operating at JFK and Newark in proportion to their current operations,
the FAA is encouraging those carriers to continue their development of
civil aeronautics at the airport and in the routes served to and from
that airport. As several commenters noted, there is substantial
economic value both to New York and the communities served by flights
from JFK and Newark.
American Airlines raised an additional concern about the use of
cooperative agreements, based upon the language in 49 U.S.C.
40110(a)(2) that requires the FAA to receive ``adequate compensation''
for the disposal of property interests. The FAA finds that it is
receiving ``adequate compensation'' through the minimum slot usage
requirements. In addition, the slots are being given in order to
promote civil aeronautics.
5. Leases That Terminate by Their Own Terms Are Not a ``Taking'' of
Property
The ATA and the carriers argue that the proposed auctions
constitute a taking by the government and that the taking is prohibited
for several reasons including that it is not for a legitimate purpose,
it lacks due process, and fair value is completely absent in the
proposed alternative 1 (as applied to JFK and Newark) and inadequate in
alternative 2 (as applied to JFK). The FAA strongly disagrees with the
contention that the slot auctions contemplated in this rule are in any
way an impermissible taking.\18\ First and foremost, in order to be a
taking, the carriers would need to have a possessory interest in the
slots and they do not. For bankruptcy purposes, carriers may have
acquired a property interest in slots, as discussed above, but as also
cited in those cases, if that interest expires under the terms under
which it was granted, then there has been no property right taken. The
Orders establishing Operating Authorizations at JFK and Newark are of a
fixed duration and any rights the carriers might have had in those
operating authorizations will terminate when the orders end or are
superseded. By virtue of today's rule superseding the Orders, the
carriers holding the OAs now hold slots and have the same interests and
responsibilities in the slots as they did in the OAs. Under today's
rule, those carriers whose slot baselines at either Newark or JFK, or
both, exceed 20 at either airport, will have a modest portion of their
slots designated as Limited Slots and subsequently auctioned
Unrestricted Slots. As of October 25, 2009, carriers may begin to
operate the Unrestricted acquired at auction.
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\18\ The preamble to the LaGuardia NPRM also addresses this
issue and provides the Supreme Court decisions supporting the FAA's
position. 73 FR 20846, 20850-20854 (April 17, 2008).
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Slots transferred to carriers using cooperative agreements or
leases awarded as the result of auctions will similarly have express
automatic termination provisions. For slots transferred using
cooperative agreements, the carriers' property interest would
automatically terminate if the specified ``use-or-lose'' provisions are
not met or one of the other conditions specified in the cooperative
agreements arises. If those provisions are satisfied, then most of
these slots will terminate in 10 years. A few will have varying
termination dates as agreed upon by the FAA and each carrier.\19\ When
the termination date arrives, any property interest the carrier may
have in the slot similarly automatically ends. There is no more a
taking of carrier property than there would be in the eleventh year of
a ten year lease of FAA real property to a carrier.
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\19\ Perhaps more accurately, the determination of which of
these slots have which of the specified termination dates will
follow the process described in this rule.
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The ATA and the carriers provide little support for the proposition
that Operating Authorizations or slots awarded to carriers under an
order with a fixed duration results in entitlement to those slots in
perpetuity.\20\ To the extent that these commenters allege harm (such
as having made investments in airport infrastructure) based on the
unreasonable assumption that the status quo would remain forever even
though the Order explicitly said it would expire, that harm is the
responsibility of the carriers. These carriers took a risk, for which
they have received a return on their investment based on their use of
the Operating Authorizations for the period specified in the Order. If
these commenters do not wish to incur a significantly smaller risk \21\
for a relatively small percentage of the slots that will be initially
be transferred to them through cooperative agreements, and then
returned to the FAA as those agreements expire in order to be
auctioned, the carriers are free not to apply for these cooperative
agreements.
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\20\ U.S. Airways Group's main contention is that the slots are
property of the airlines because they have held them ``more or less
continuously'' for 40 years.
\21\ The slots that will be awarded as the result of an auction
have a firm term of up to ten years, with little right by the FAA to
terminate prior to the end of that term. Most of the cooperative
agreements will similarly have a ten year firm term.
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The ATA, IATA, and the carriers rely on what they perceive as a
three pronged test established in Penn Central Transp. Co v. New York
City, 438 U.S. 104 (1978). In Penn Central the Court found that there
was no compensable taking when the City's Landmarks Preservation Law
would not allow additional stories to be added to Grand Central
Station. Even using the three prong test articulated by the commenters,
for the reasons stated above, the activities described in this rule
would not constitute a Fifth Amendment taking.
The ATA and IATA also overstate the extent of the alleged harm.
Under the alternative selected in this rule, carriers will get to keep,
at a minimum, more than 90 percent of their current slots. Only seven
carriers will lose any slots under this rule and only American, Delta
and United will lose slots at both airports.
The Port Authority cites to Air Pegasus of D.C., Inc. v. United
States, 424 F.3d 1206 (Fed. Cir. 2005), for the proposition that the
Federal Government's sovereignty over airspace is not ownership in fee,
but rather navigational servitude. Air Pegasus, however, stands for the
proposition that there is no private property right of access to
navigable airspace. If the FAA legitimately exercises this authority to
prohibit the use of a segment of navigable airspace, there is no
property taken for Fifth Amendment purposes. In Air Pegasus a heliport
operator was found to have no private property rights in its facility
even though it lost all opportunity to generate revenue (and went out
of business) after the FAA shut down much of the airspace around
Washington, D.C. following the attacks of September 11, 2001.
6. The Draft Lease Terms Included in the NPRM Were for Illustrative
Rather Than Probative Purposes
The ATA also uses the draft Lease agreement as evidence that the
FAA does not have the authority to lease the slots. The ATA places far
too much reliance on an early draft document that was provided to give
commenters some idea of the type of lease the FAA was considering. For
example, the standard clauses in the FAA's Acquisition Management
System (AMS) use the word ``contract'' instead of ``lease'' because
leases are a form of contract. The AMS, however, by its explicit terms
applies to the acquisition and lease of property. See, Section 4.2 of
the Acquisition Management System, and
[[Page 60552]]
Real Estate Guidance, http://fast.faa.gov/realestate/index.htm and
T3.8.1 of the FAA's Procurement Guidance, also located at http://
fast.faa.gov The FAA acknowledges that some of the terms in the sample
lease that the FAA provided for illustration were not appropriate for a
lease of slots, and will modify any proposed leases accordingly. An
additional opportunity to comment on these terms will be provided prior
to any auction. These sample terms, however correct or incorrect, have
no bearing on whether the FAA has the authority to enter into leases.
Similarly, because Attachment A was not included in the sample lease,
the ATA and IATA argue that is evidence that there is no property the
FAA can lease. Attachment A will be the particular slots each carrier
receives. Each Attachment A will be unique for each particular airline.
Before the slots are given or auctioned, there is no way to tell what
any particular Attachment A will look like, therefore no Attachment A
was provided. Instead the sample lease simply provided notice that
there will be an attachment that will describe which slots the lessee
(or cooperative agreement holder) will have.
7. International Obligations
In spite of the FAA's authority to lease slots and this proposal to
use the WSG to award all new and returned capacity at JFK and Newark,
the IATA, ATA, and numerous carriers assert that the FAA's proposal
violates the international obligations of the United States.
Specifically, IATA and the airlines \22\ make the following assertions:
that the slot auction is actually a user charge in violation of
bilateral air services agreements; the slot auction is discriminatory
in violation of bilateral air services agreements; and, the short
comment period did not afford an opportunity for foreign governments to
consult with the United States Government on this proposal.
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\22\ Commenters supporting IATA's submission include:
Association of European Airlines (AEA); KLM Royal Dutch Airlines,
N.V. (KLM); Malaysia Airlines (Malaysia); Singapore Airlines; Swiss
International Air Lines, Ltd.; Deutsche Lufthansa AG (Lufthansa);
Air France; All Nippon Airways Co., Ltd.; and, Delta Airlines, Inc.
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In support of their contention that the slot auction is a user
charge \23\ that is inconsistent with our bilateral obligations, IATA
and the carriers cite the recent U.S.-EU air services agreement, which
states (article 12) that user charges must be ``equitably apportioned
among categories of users.'' They assert that the costs recovered by
auction proceeds are not equitably apportioned. We disagree. We are
maintaining the use of WSG procedures, which these commenters support,
for all new and returned capacity. Only a select number of slots--the
slots that are being withdrawn--will be auctioned. For that category of
foreign carrier users that choose not to participate in the auction,
the regime that they favor will continue unchanged--the FAA will assign
slots from new and returned capacity under the procedures set out in
the WSG and they will be able to buy, sell or trade slots in the
secondary market. For that category of foreign carrier users that wish
to participate in the slot auction, they will be making the business
decision that such slots have additional value to them. We do not
believe that foreign carriers choosing to participate in an auction,
and thereby to have access to slots to which they would not have access
under the WSG, are being treated inequitably.
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\23\ For purposes of discussing our international obligations,
we will assume arguendo that auction proceeds are ``user charges''.
---------------------------------------------------------------------------
IATA and the carriers also claim that we are not following the
requirement in the same bilateral section that user charges ``may
reflect, but shall not exceed, the full cost to the competent charging
authorities or bodies of providing the appropriate airport, airport
environmental, air navigation, and aviation security facilities and
services at the airport or within the airport system.'' To the
contrary, the proceeds of these auctions will be deposited into a
receipt account, and those funds will be dedicated to be used for
improvements to New York's airspace and airport system. The proceeds
will be used for the airport system they were derived from, and will
not go to the general fund. This is not in violation of our bilateral
agreements, as the costs are directly related to improving the airport
system for which the slots will be used.
Singapore Airlines argues that the auction would affect its ability
to exercise the ``fair and equal'' opportunity to compete clause in the
bilateral air services agreement. All carriers are afforded fair and
equal opportunity to compete, regardless of nationality, because they
have the ability to bid for slots under the auction mechanism. There is
no guarantee that the slots will be awarded to either a domestic or
foreign carrier. Foreign carriers have the same opportunity as domestic
carriers to compete for the available slots. Singapore Airlines is also
free to participate in the WSG process for allocating new or returned
slots, and to participate in the secondary market, just as domestic and
other foreign carriers are.
Next, IATA and the carriers argue that the imposition of the slot
auction will be discriminatory. The foreign carriers argue that the
auction discriminates against them because the domestic carriers are
permitted to keep many more slots, and will have an advantage over
them. The ATA, United Airlines, and Delta argue that we are being
discriminatory against domestic carriers because the foreign carriers
have all of their slots preserved and will not be subject to the same
withdrawal as the domestic carriers, and that domestic carriers will be
forced to pay large sums of money to maintain their current
international service, whereas the foreign carriers will not incur the
same costs.
Both groups of carriers are incorrect--the Department is acting in
a non-discriminatory manner. Because up to twenty slots for each
carrier (domestic or foreign) are being preserved, no carrier (domestic
or foreign) is in danger of losing access to JFK or Newark. No carrier
is being forced to participate in the auction if it chooses not to
participate. All new and returned capacity will be allocated by the FAA
under WSG procedures. The domestic carriers similarly are not required
to participate in the auction, and in most cases, only a select number
of slots will be withdrawn. Domestic carriers at JFK and Newark will
still have the ability, and available slots, to continue to maintain
their international service without necessarily participating in the
slot auction. Finally, IATA makes the argument that the comment period
was too short to allow for foreign government consultation on the
proposal. The proposal, like all proposed rulemakings, was published in
the Federal Register and all interested parties had ample opportunity
to review and comment, and afforded a 60-day comment period to all
interested parties. We believe this is a sufficient period for foreign
governments, their agencies, or Embassies to provide formal comments or
request consultations. In this case, no foreign government has
contacted us with either comment or a request for consultations. The
consultation language in our bilateral air services agreements does not
oblige the United States Government to seek out foreign government
comments for every proposal. Rather, the onus is on any foreign
government that wishes to consult to make such a request.
[[Page 60553]]
B. The FAA Has Authority To Retain the Amounts Received From the Lease
and Disposal of Property and To Use Those Proceeds for Congressionally
Authorized Purposes
The commenters assert that the FAA has no authority to retain the
amounts received from the lease of slots, and that 31 U.S.C. 3302
requires all amounts received by an agency be deposited into the
General Receipts account. The FAA, however, has an express exemption
from 31 U.S.C. 3302 that it was given in section 276 of the Air Traffic
Management System Performance Improvement Act of 1996, Public Law 104-
264, codified at 49 U.S.C. 45303(c). Section 276 states that
``Notwithstanding section 3302 of Title 31, all fees and amounts
collected'' by the FAA, except for a few specified exceptions such as
insurance premiums, ``shall be credited to a separate account
established in the Treasury and made available for Administration
activities; * * *'' 49 U.S.C. 45303(c). These amounts are available
immediately for expenditure for Congressionally authorized purposes and
remain available until expended. Id.
This paragraph of section 45303, by its unambiguous terms, applies
to all amounts collected by the FAA, whether or not they are amounts
from fees established under chapter 453. This is in contrast to the
first paragraph of this section of law, which only applies to fees and
amounts collected under chapter 453.\24\ Fees collected under chapter
453 include fees for air traffic control services provided to planes
that neither take off from nor land in the United States (overflight
fees), and fees for airmen certificates and registration of
aircraft.\25\ The FAA, however, collects amounts under authorities
contained in other chapters of law, such as insurance premiums and
other amounts which are collected under chapter 443 of Title 49,
amounts from the disposal of an interest in property for adequate
consideration under chapter 401, and amounts provided from other air
traffic service providers also under chapter 401, as well as federal,
state and local governments and private entities under chapter 1 of
Title 49.
---------------------------------------------------------------------------
\24\ Section 45303(a) directs that all fees imposed and amounts
collected under chapter 453 are payable to the Administrator of the
FAA.
\25\ Fees collected under the authority of 49 U.S.C. 45302,
namely fees for issuing airmen certifications and registration of
aircraft, in accordance with the express language in that section
and language that historically has been in each appropriation, are
credited to FAA's operations appropriation.
---------------------------------------------------------------------------
It is a well established principle of statutory interpretation that
laws ought ``to be so construed that, if it can be prevented, no
clause, sentence, or word shall be superfluous, void, or
insignificant.'' TRW Inc. v. Andrews, 534 U.S. 19, 32 (2001).
Interpretations of statutes should ``give effect, if possible, to every
clause and word of a statute.'' United States v. Menasche, 348 U.S.
528, 538-39 (1955) (citing Inhabitants of Montclair Tp. v. Ramsdell,
107 U.S. 147, 152 (1883)). Using this principle, effect must be given,
if possible, to the words ``all fees and amounts'' except for those
specifically excluded, should be deposited into the account established
by 49 U.S.C. 45303(c). The only amounts the FAA is expressly authorized
under this paragraph to exclude from this account are the insurance
premiums and related fees it collects and deposits into the Aviation
Insurance Revolving Fund. A plain meaning interpretation which gives
effect to all the words in that paragraph is that all fees and other
amounts collected by the FAA under authorities contained in other
chapters of Title 49 or other titles should be deposited into the
account established by section 45303(c). This would include any amounts
collected from the lease of FAA property under the authority of 49
U.S.C. 106(n) and 49 U.S.C. 40110(a)(2).
C. The Auction of Slots Does Not Affect the Proprietary Rights of the
Port Authority
Similarly, both the Port Authority and the Airports Council
International--North America (ACI-NA) as well as American believe that
the NPRM impinges on the proprietary rights of the Port Authority. The
ACI-NA believes that the FAA's powers under 49 U.S.C. Section 40103 do
not allow us to auction slots. In support of its position, the ACI-NA
also cites to Western Air Lines v. Port Authority of New York and New
Jersey, 658 F. Supp. 952, 956-57 (S.D.N.Y. 1986), aff'd, 817 F.2d 222
(2nd Cir. 1987), cert. denied, 485 U.S. 1006. The FAA maintains that
Western supports its position more than that proffered by the ACI-NA.
Western concluded that the perimeter rule established by the Port
Authority was a valid restraint exercised in accordance with the Port
Authority's proprietary interest. Western did not suggest that the
proprietary interests of the Port Authority take precedence over FAA
regulation; instead Western explicitly states that ``[t]his Court
concludes that, in the absence of conflict with FAA regulations, a
perimeter rule, as imposed by the Port Authority to manage congestion
in a multi-airport system, serve an equally legitimate local need and
fits comfortably with that limited role, which Congress has reserved to
the local proprietor.'' Id. at 958. Therefore, even if there was a
conflict between the proposed rule and the Port Authority's proprietary
rights, the FAA's rule would prevail under Western.
The establishment of slots under section 40103 is consistent with
the authority that the FAA has exercised at JFK, LaGuardia, Chicago
O'Hare, and other airports, for the past several decades. Western is
easily distinguishable from the current rulemaking in that this
rulemaking does not affect in any way how the Port Authority deals with
its airport including use of its terminals. In fact, there will be 100
percent of the air traffic coming into JFK and Newark during the same
time periods as currently exist at the respective airports.
The Port Authority's assertion is that changing the airlines that
come in or the number of flights interferes with its proprietary
interests. However, through its regulatory process in certifying
airlines or capping arrivals and departures, the FAA can and has
affected the air traffic in and out of JFK and Newark, and neither the
Port Authority nor any other entity has challenged the FAA's
responsibility to issue certifications or control the flow of air
traffic, much less suggested it affects the proprietary rights of
airport authorities. Additionally, the Port Authority has always had to
accommodate carriers under the HDR by accommodating airlines that
leased, purchased, or traded slots under the HDR; that received slots
through FAA-run lotteries; or that were granted slot exemptions under
49 U.S.C. 47174 and 41716. Furthermore, the Port Authority is obliged
to file competitive access reports to the Secretary if it denies access
to a requesting carrier at JFK and Newark. With respect to Newark, the
FAA must ensure that the Port Authority successfully implements its
competition plan to enhance opportunities for airline competition and
accommodate requesting airlines there. 49 U.S.C. 40117(k), 47106(f).
http://www.panynj.gov/CommutingTravel/airports/html/ewr_comp_
plan.html. (last visited September 6, 2008). Accordingly, the Port
Authority may not claim that the fact that a slot is acquired through
an auction presents any unusual accommodation issues that it has not
routinely dealt with in the past.
[[Page 60554]]
D. The FAA Has Complied With the Administrative Procedure Act
1. The Docket Contained Adequate Information for Meaningful Comment on
the Rulemaking Proposal
Several commenters also claimed the FAA failed to meet the
requirements of the Administrative Procedure Act (APA) (5 U.S.C. 551,
et seq.). The Port Authority claimed that relevant documents either
were not submitted to the docket at all, or in a form and time
insufficient to permit adequate analysis by interested parties. In
particular, the Port Authority suggested the draft lease documents were
submitted to the docket well after the initiation of the comment
period, contained vague terms, and did not adequately set forth the
conditions for default. The Port Authority maintained the default
conditions are critical because of the impact of a default on the Port
Authority's gate leasing agreements.
The ATA commented that the technical report explaining how slots
would initially be allocated and designated does not adequately
describe how the FAA intends to choose which Common Slots would be
designated as Limited Slots.
The FAA believes the docket submissions provided interested parties
with sufficient information to meaningfully comment on the proposal.
The draft lease agreement for Unrestricted Slots, is directly related
to the FAA's potential auctioning of the slots under its acquisition
authority. The draft cooperative agreement, which would govern the
lease terms of the Common and Limited Slots, is arguably more directly
related to the instant rulemaking since they will initially be
allocated to carriers under this rule. While the Port Authority
questions the comprehensiveness of these draft leases, they are in
fact, largely complete. The FAA is intentionally placing only limited
constraints on the slots. The goal of this rulemaking is not to impose
complicated and intrusive constraints on the slots. Rather it is to
allow for a more efficient air traffic system in and around JFK and
Newark while permitting some access to new entrants and stimulating the
free market. In order to maximize efficiencies, the FAA must assure
that the majority of the slots have a usage requirement. That
requirement, which is mandated by today's rule, is the primary
restriction on the Common Slots. Limited Slots are granted for a
shorter period of time, but otherwise largely mimic the Common Slots.
The Unrestricted Slots are even less constrained with no usage
requirement.
2. The Discussion of the Auction Process Provided Sufficient Detail for
Meaningful Comment on the Rulemaking Proposal
US Airways Group (US Airways) argued the FAA provided insufficient
time to comment on the details of the auction process. United claimed
that the NPRM should have proposed dates as to when the auctions would
be conducted and should have committed to providing a certain amount of
advance notice. The ATA claimed that the FAA violated the APA by
failing to account for carrier's costs in participating in an auction.
In the NPRM the FAA provided only a general discussion of the
procedures that would govern any future auction. This general
discussion was provided only to give interested parties a context for
the rulemaking. The FAA decided to provide a general description of the
likely auction procedures to encourage meaningful comment on the
underlying proposal, which is that after imposing a ten-year cap to
address congestion, a certain number of slots would revert to the FAA
for reallocation. The FAA has provided a more detailed discussion of
the procedures that would be used in an auction. 73 FR 53477 (September
16, 2008). The agency provided for a 15-day comment period which closed
on October 1, 2008. Based on the comment submissions, the FAA may
decide to refine any final auction procedures. That refinement,
however, does not impact this rule.
Some commenters claimed that because the FAA has not fully
developed the auction process, the FAA cannot finalize the proposed
rule. Like the ATA's comments on the draft lease documents, these
commenters place far too much reliance on procedures unrelated to the
rulemaking. The NPRM discussed in detail the process for providing
slots at JFK and Newark: Between 80 and 90 percent of them will be
provided to incumbent carriers operating at the respective airports
through cooperative agreements and the remaining ones will be
transferred via lease. The particulars of the auction process (e.g.,
will it all be via the Internet or will paper bids be allowed, will the
help desk be available 24/7 or only during normal business hours, the
exact day when the auction will take place, whether successive rounds
of bidding will be allowed, whether multiple bids from the same carrier
will be permitted) are not relevant to this rule. The FAA will, in
accordance with its Acquisition Management System, continue to provide
adequate notice of its planned auction procedures and solicit comment
on those procedures prior to conducting any auction.
The ATA's claim that not ascribing the costs of the auction to the
rule violates the APA likely stems from unclear drafting on the part of
the FAA. We have included the auction costs and reallocation benefits
in the final regulatory evaluation for this rule.
3. The FAA Adequately Considered Alternatives
Despite the fact that the FAA has proposed two different allocation
methods at JFK in this rulemaking, several commenters claimed that the
agency failed to adequately explore additional alternatives in
violation of the APA. An agency is not required to consider all
possible alternatives when engaging in rulemaking. The fact that the
commenters dislike the alternatives considered does not mean that the
FAA has pre-decided the outcome by failing to recognize that there may
be other alternatives. In fact, the agency proposed multiple options.
In addition, it has considered many of the alternatives that the
commenters recommended in response to the NPRM. As discussed later in
this document, the FAA has decided against adopting these approaches in
lieu of proceeding with a final rule. However, aspects of many of these
recommendations have been incorporated into the rule or are being
addressed elsewhere.
IV. Discussion of Final Rule
A. Allocation of Slots at JFK and Newark
The FAA believes that at least for the next several years, JFK and
Newark will likely be oversubscribed in terms of their physical ability
to handle aircraft. Accordingly, extending the caps on operations at
the airports is necessary to provide for the efficient use of the NAS.
American argues for a lower cap at both airports, stating that
``[w]hile JFK and Newark may be able to handle 81 operations per hour
in ideal conditions, this limit significantly overstates both airports'
optimal capacity. Thus, the FAA should revisit the issue of how many
operations at JFK and Newark can be accommodated safely and dependably
and then set a cap at that level * * *'' [Emphasis in original.]
Although American believes 81 operations is above optimal performance,
it has failed to identify what it believes to be the appropriate number
of slots per hour during restricted periods. Under no circumstances
would we allow the number of operations to exceed a safe level. Beyond
that, the levels as set in
[[Page 60555]]
this rule represent the FAA's best judgment about a reasonable balance
between maximizing capacity and minimizing delays. Of course, we have
made it clear that we continue to review the caps, and we may withdraw
common slots if necessary, or we may increase capacity as circumstances
allow.
The dispute surrounding this rulemaking revolves around the FAA's
proposal to reallocate slots at the airport. Simply put, incumbents at
the airport are largely satisfied with the status quo. The vast
majority of carriers opposed any measure that would result in a carrier
holding fewer slots under the final rule than it held under the capping
Orders.
The Port Authority states in its comment ``The slot retirement
system has not been explained with respect to the [sic] specific
criteria the FAA will use to choose slots to be withdrawn, and whether,
or how, gate-leasing assignments will be taken into account in this
process.'' This rule does not provide for any ``retirement'' and we
assume that the Port Authority is referring to Section 93.167 which
states that the FAA may withdraw limited or common slots as necessary
for operational needs. Withdrawal for airport operational needs is not
a new concept, and the same idea has applied in our rules for years.
The only really new principle that has been added by this rulemaking is
that we have committed not to withdraw unrestricted slots. Once they
are purchased at an auction, the carrier is assured that they can be
used for the life of this rule. In other respects, our procedures and
criteria remain the same as they have always been.
Several commenters including the carriers, their associations and
the Port Authority noted that the FAA has asserted that the proposed
measures were designed to address severe delays, preserve consumer
choice, maintain airline competiveness and preserve the affordability
of airfares. Most commenters agreed, in some form, with the Port
Authority's assessment that the proposal achieved none of these
objectives. Rather, most commenters noted that the reallocation
mechanism did nothing to address congestion and could have the
unintended consequence of harming competition and restricting passenger
access because of the loss of service to small communities.
Some carriers and their associations argued that rather than
encouraging a market-based allocation method with a robust secondary
market, the proposal would have the opposite effect--imposing a new and
more market-intrusive regulatory scheme.
Not only is the FAA required to ensure the efficient use of the
NAS, but it must do so in a manner that does not penalize all potential
operators at the airport by effectively shutting them out of the
market. The FAA cannot simply walk away from an airport once it has
imposed caps, but rather should take steps to ensure that there are, in
fact, competitive market forces and actual and potential competition.
Competition at an airport benefits the flying public by providing price
competition and expanded service. The ability of carriers to initiate
or expand service at the airports is hindered, in large part, by the
imposition of the cap. Accordingly, the FAA believes it must strike a
balance between (1) promoting competition and permitting access to new
entrants and (2) recognizing historical investments in the airport and
the need to provide continuity. It is not the role of the Government
either to dictate particular business models or to constrain a market
and provide no means for others to enter that limited market.
The FAA believes that it is well within the agency's authority in
49 U.S.C. 40103 to provide some mechanism for reallocation. The capping
Orders at JFK and Newark provide for auctions of new and returned
capacity but do not provide for the reallocation of capacity that is
actively being used. The FAA believes this allocation method may be
justified as a short-term measure, but it is inadequate for any cap
intended to last for more than a couple of years. Indeed, Congress
appears to have shared similar concerns when it allowed for slot
exemptions in AIR-21. Today's proposal attempts to strike the
appropriate balance by actively developing a robust secondary market
that properly values the limited asset that the FAA created.
1. Proposed Alternatives
The FAA proposed two different alternatives for allocating slots in
the NPRM. Under both alternatives the vast majority of slots would have
been grandfathered to existing carriers at the airports, with a
relatively small minority auctioned off in the free market. Both
alternatives allowed for a carrier baseline operations for which up to
20 slots would be automatically allocated to the carrier as Common
Slots. These slots would not count toward the calculation of slots that
would revert to the FAA for retirement or reallocation.
Under alternative 1, the FAA proposed to withdraw 10 percent of the
Carriers' slots above its baseline operations. The FAA would auction
the reverting Limited Slots, with the FAA retaining proceeds of the
sale. After recouping its costs, the FAA planned to spend the remainder
of the proceeds on aviation congestion and delay management initiatives
in the New York City area. Under alternative 1, any Carrier could bid
on a slot in an auction blind to the participants and it would be
awarded in the form of an Unrestricted Slot to the highest responsive
bidder. The winning Carrier could commence operations using the newly
acquired slot at the beginning of the next summer scheduling season,
except that October 25, 2009, will be the commencement date for slots
acquired in the first auction.
Alternative 2 proposed a different auction procedure for JFK that
provided that the holder of a Limited Slot would retain the proceeds of
its sale in the auction. The only deduction from the sale price would
be for the FAA's costs associated with conducting the auction. Under
this alternative, the FAA would withdraw 20 percent of the Carriers'
slots above the baseline operations at JFK.
The FAA continues to believe that under either alternative a
sufficient number of slots would be available for reallocation to
permit access to the airports and establish a fair market value for
slots that could then translate into a robust secondary market.
Although alternative 2 allowed for an even greater number of available
slots, it also had the potential to prevent the most interested
carrier, i.e., the one initially allocated the slot, from bidding on
it. While the FAA anticipated that a carrier could obtain a comparable
slot, either through the FAA auction or on the secondary market, there
was no guarantee that would happen. This concern was raised by several
commenters who noted that the inability for the carrier to bid on its
previously held slots is even more troubling because that carrier may
have the greatest incentive to retain the slot based on established
service.
As noted above, the FAA believes either approach would help
stimulate a secondary market and would lead to a proper assessment of
the slots' true value. The agency also believes that either approach
would have a minimal impact on operations at the airport. However, the
agency is persuaded that alternative 1 maximizes the efficiency of the
slot because the carrier who may value it the most may be the one who
held it initially.
[[Page 60556]]
2. Categories of Slots
Under today's rule, the FAA will lease property interests in slots
to carriers for a period of up to ten years, the date the rule sunsets.
There will be three categories of slots: Common Slots, Unrestricted
Slots, and Limited Slots.
Common Slots are those slots grandfathered to carriers currently at
the airport. They will be awarded to the carriers under a cooperative
agreement for the duration of the rule. The cooperative agreement will
provide carriers with a ten-year leasehold interest. Once the rule
sunsets, all interests will revert to the FAA. Unlike slots allocated
under the HDR at JFK, carriers will be granted clear property rights to
Common Slots, which could be collateralized or subleased to another
carrier for consideration. These property rights, however, will not be
absolute. Common Slots will be subject to reversion to the FAA under
the rule's minimum usage provision, may be temporarily withdrawn for
operational reasons, should the FAA need to reduce the caps.
Those slots not categorized as Common Slots will be categorized
initially as Limited Slots and then as Unrestricted Slots once they are
reallocated.
Unrestricted Slots are slots that a carrier would acquire as a
leasehold. Unlike slots allocated under a cooperative agreement, these
slots will require monetary consideration to the FAA. Since a carrier
leasing an Unrestricted Slot will be required to do so because of
government action, these slots will not be withdrawn by the FAA under
the use-or-lose provisions, for operational reasons or to further
reduce the cap should such reductions be necessary. As with Common
Slots, Unrestricted Slots will expire when the rule sunsets.
Limited Slots are slots that are identified for auction. Those
Limited Slots identified for auction will be leased to the carriers
under a cooperative agreement for a period of 1-4 years so that they
can be reallocated after that period of time. Limited Slots will
convert to Unrestricted Slots as a result of the auction. As with
Common Slots, Limited Slots may be withdrawn under the proposed use-or-
lose provision, or for operational reasons.
3. Initial Allocation of Slots
No later than this rule's effective date, the FAA will notify all
carriers which slots they will initially be allocated under the rule.
The FAA will make this determination based on the operating rights held
by carriers under the Order limiting operations at JFK or the Order
limiting operations at Newark as evidenced by the FAA's records.
Carriers will be assigned corresponding slots in 30-minute periods
consistent with the limits under Sec. 93.163 (b) and its summer and
winter season schedules as approved by the FAA.
Upon the rule's effective date, each carrier at JFK and Newark will
automatically be awarded up to 20 Common Slots, which will constitute
the carrier's baseline operations. The FAA believes this is a rational
approach to assuring that no carrier is impacted at a level that could
seriously disrupt its existing operations. Ninety percent of the
remaining slots will also be grandfathered as Common Slots to the
carrier holding the corresponding Operating Authorization under the JFK
or Newark order. The FAA has decided to grandfather the majority of
slots at the airport in order to minimize disruption and to recognize
the carriers' historical investments in both the airport and the
community.
As noted above, the remaining slots will be categorized as Limited
Slots and will be reallocated via auction over a five-year period. The
number of slots that a particular carrier will have classified as
Limited Slots is based proportionally on the carrier's presence at the
airport, taking into consideration each carrier's baseline operations.
The FAA will inform all carriers that will be awarded Limited Slots how
many Limited Slots they will have no later than the rule's effective
date.
An affected carrier will have ten days to identify 50 percent of
the total number of Limited Slots. During the following ten days, the
FAA will determine through a randomized process the remainder of slots
that will be categorized as Limited Slots, taking into account the need
to have capacity available for reallocation throughout the day.
In determining which slots should be designated as Limited Slots,
the FAA will initially exclude from consideration slots held during all
hours where carriers have collectively determined two or more slots
should be Limited Slots. This approach will assure slots will be
available for auction throughout the day. The FAA will also determine
in what year (0-4) each Limited Slot will revert to the FAA for
reallocation, In this way, all carriers will know within 20 days of the
rule's effective date what slots will become available for purchase and
when.
The time windows for the Limited Slots will be evenly distributed
over the day to the extent possible. The duration of each Limited Slot
will be assigned by a fair allocation process such that each affected
carrier's aggregate lease duration will be approximately equal to that
of the other affected carriers.
British Airways asserted that it is overly burdensome to require
carriers to track slots and volunteer slots for redistribution each
year, and states that such a program is used nowhere else in the world.
The FAA believes that the carriers using the system are sophisticated
entities capable of tracking the classification of their slots.
Furthermore, the requirement that carriers volunteer slots for
redistribution is only required one time, at the outset of the rule. It
also only affects the seven carriers that will lose slots. Initially
FAA considered selecting 100% of the slots for withdrawal but later
decided it would benefit carriers and their networks to allow them to
select 50% of the slots themselves.
Although most commenters are opposed to any slots being reallocated
by auction, Virgin America urged the FAA to expand the number of slots
available via auction. The FAA recognizes that the overall number of
slots that will be auctioned is relatively small, and a larger auction
would not only have assured greater access to the airports, but would
arguably maximize the efficiency of the system, assuming no other
constraints. However, the FAA understands that the carriers would in
fact face other constraints.
The ATA claimed that carriers need to know which of its slots are
Limited Slots 90 days before the effective date of the rule in order to
be compliant with the rule on the effective date. While the rule
becomes effective on December 9, 2008, carriers can continue their
operations without change until October 25, 2009, the first day of the
winter scheduling season. Accordingly, the FAA believes carriers will
have no problems setting a compliant schedule well in advance of the
winter scheduling season.
The Port Authority, American Association of Airport Executives
(AAAE) and the ATA also express concern about what they consider to be
inadequate information regarding the slot auction methodology. The Port
Authority says that the terms of the planned slot leases have not been
set forth in any meaningful detail, which, it argues, has important
effects on their management of airport gates. We agree that it is
important for all interested parties to have full information about
auction procedures before any auction is conducted. That information
will be provided in the appropriate form. This rulemaking, which merely
establishes the principles under which slots will be
[[Page 60557]]
leased, is not intended to incorporate the technicalities of the
auction procedures, a fact that the FAA emphasized in the NPRM.
4. Market-Based Reallocation of Slots
As discussed earlier, the FAA proposed two separate alternatives
for reallocating slots at JFK and Newark. The FAA has decided to adopt
alternative 1. The commenters have largely combined the two goals of
this rulemaking, to address congestion and to provide for a more
equitable and efficient allocation of capacity, into a single goal.
Many commenters, including carriers (American, British Airways,
Continental, Delta, Emirates, and US Airways) and industry associations
(AAAE and ATA) said that it is the cap on hourly operations and not
auctions that will reduce delays at JFK and Newark. Furthermore, they
contended that the cap and the auction are distinct proposals, with
distinct costs and benefits; while a cap may reduce delays, an auction
will merely add costs to carriers. Some carriers and the ATA claimed
that the only congestion-related measure included in this proposal is
the cap on operations, which is already in place under the capping
orders at JFK and Newark. It also argued that the FAA has not
articulated how its auctions will translate into delay mitigation or
why the high costs of auctions are worth the burden and risk.
The FAA fully agrees that the reallocation method, regardless of
what it is, will not have a direct impact on controlling delays. That
type of control is achieved by extending the cap beyond the JFK and
Newark Orders. The FAA believes that the reallocation mechanism may
lead to an air transportation system that is more efficient for the
traveling public, even though that mechanism does not reduce the number
of aircraft flying in and out of the airport. It is possible that
carriers may decide, at least on some routes, to increase the size of
the aircraft they are using. While nothing in today's rule dictates
this result, it is certainly at least generally foreseeable.
While most of the carriers were categorically opposed to a market-
based reallocation mechanism, that opposition was not universal. The
FTC argued in favor of an auction mechanism, recognizing the value
associated with providing a carrier with a direct financial incentive
to maximize the value of a slot.
The FAA has decided to finalize its proposal because it believes
that a market-based mechanism such as an auction is the best way to
assure that this scarce resource is allocated to the user who values it
the most. As a steward of public property, the FAA has an obligation to
strive toward getting the best value for that property. Other Federal
agencies have used auctions to determine who values Federal property
the highest. In addition, a number of papers regarding the societal
value of allocating slots via an auction have been published over the
past several years.\26\ Simply put, a carrier who is required to
purchase a slot, will value it more highly than a carrier who received
the slot at no cost. Accordingly, the carrier will ensure the slot's
best economic use, i.e., putting it to the use valued most highly by
the traveling public. If the carrier cannot profitably use the slot, it
will presumably sublease the slot to another carrier who can maximize
its efficient use. In addition, a carrier wishing to gain a presence at
an airport can purchase the lease from the government directly rather
than attempting to obtain slots solely from its competitors, increasing
competition at the airport.
---------------------------------------------------------------------------
\26\ Cf., DotEcon Ltd., Auctioning Airport Slots--a Report for
HM Treasury and the Department of the Environment, Transport and the
Regions, April 2001; Whalen and Carlton, Economic Analysis Group
Discussion Paper--Proposal for a Market-Based Solution to Airport
Delays, October 2007; Brueckner, Slot-Based Approaches to Airport
Congestion Management, May 2008.
---------------------------------------------------------------------------
The value associated with allocating a scarce government resource
via an auction was also recognized by Congress in the
telecommunications context when it passed the Licensing Improvement Act
of 1993. In the section-by-section analysis of the statute, the
committee report specifically references promotion of efficient and
intensive use of the electromagnetic spectrum as one of the objectives
the committee believed the new legislation would achieve. 1993 USCCAN
at 580.
As noted earlier, the agency's own experiences with slot-controlled
airports under the HDR are consistent with the observations made in the
literature. Under the Buy/Sell Rule, carriers wishing to enter the
market complained they were unable to gain market-share, and the
underutilization of those slots allocated to the carriers at no cost
forced the agency to impose a usage requirement.
The auction process contemplated by today's rule will guarantee
carriers wishing to initiate or extend operations at the airport an
opportunity to acquire slots. In January 2009 there will be
approximately 18 slots available for auction at JFK and 18 slots
available at Newark airports. Carriers typically require pairs of
slots, so today's rule will provide the equivalent of approximately 9
round trips per day at both airports. In the following four years there
will be at least 18 slots available, as well. Assuming a minimum
competitive pattern of service is between two and three round-trips per
day, the equivalent of three to four routes would be available per
year. Carriers would be free to supplement their holdings in the
secondary market, which the agency believes will be stimulated by this
rule.
The FAA intends to auction off 20 percent of the Limited Slots
annually for the first five years of the rule. Any carrier may bid on
the slot, and it will be awarded to the highest responsive bidder. The
winning parties may commence operations using the newly acquired slots
on the first day of the subsequent summer scheduling season, except for
the slots acquired in the first auction. In the unlikely event no bids
are received, the FAA will retire the slot until the next auction.
Allowing the carrier holding the Limited Slot to retain it, as
suggested by some commenters, could encourage the carrier to simply not
bid on the slot. The FAA will retain all auction proceeds. After
recouping its costs, the FAA intends to spend the remainder of the
proceeds on congestion and delay management initiatives in the New York
City area. The FAA has already established a receipt account for these
proceeds.
The FAA will not reallocate slots after the first five years (other
than those returned under the rule's use-or-lose provisions) because it
believes that ideally slots should transfer from one carrier to another
through the secondary market. The FAA has decided to be involved in a
limited number of slot transactions during the first five years of the
rule to help establish that market. Not only will the auctions help
create a market for slots, but all carriers will be able to assess the
true market value of a slot. Armed with information on how much a given
slot is likely to be worth on the open market, carriers (and their
shareholders) will be in a better position to determine whether to
continue operating marginally-performing flights or to sublease the
corresponding slot.
The FAA believes that merely relying on the secondary market to
accurately establish the value of slots, as some commenters have
suggested, is problematic. A fundamental problem with the secondary
market cannot be addressed without first addressing the primary market.
Incumbents have significant incentives not to sell or lease out slots
to airlines that will compete with their networks to a substantial
[[Page 60558]]
degree. Thus, incumbents rationally foreclose entry both to other
incumbents and to new entrants. One of our objectives in this rule is
to change those incentives and reduce the likelihood that incumbents
can foreclose entry and potential competition indefinitely.
In addition, in the secondary market a carrier may rely on tangible
assets that do not have the same monetary value for all carriers or
even non-tangible assets, such as goodwill or a pre-existing
relationship, when evaluating whether to lease a slot. Thus, while the
slot may have a real value for the carriers engaged in the
negotiations, that value cannot be translated into a ``fair market
value'' that can be relied on throughout the industry as a reasonable
valuation of the slot. The agency believes that it should not take more
than five years for a robust secondary market to develop.
Given the carriers' ability to sublease slots if the operations
associated with the slots are not financially productive, the FAA
anticipates that there will be little new or returned capacity for most
of the time the rule is in effect. With the advent of NextGen
technology, there may be new capacity in the later years of the rule.
To the extent there is any new or returned capacity, the FAA will award
that capacity in keeping with the WSG.
Although a number of commenters expressed specific support for the
use of WSG procedures in assigning new or returned capacity, the
National Air Carrier Association (NACA) opposed that approach. It
believes that the WSG procedures would not allow new entrant carriers
to establish their presence at the airports. Contrary to that
assertion, the WSG provides for a preference for new entrants; by
providing for withdrawal and auction of additional slots, new entrants
will have an even greater opportunity to establish a market presence.
Lufthansa objected to the NPRM's definition of a new entrant as a
carrier that has been administratively allocated up to 8 slots during
controlled hours. Lufthansa states that the WSG gives new entrant
status to airlines ``with less than 2 arrivals and departures'' and
makes no separate provision for slots acquired by auction. It argued
that the proposal was ``contradictory'' to the WSG process. We are
adopting the definition as proposed. As we discussed in the NPRM, the
FAA understands that in order to maintain viable operations at JFK or
Newark, a carrier would need four to six slots for domestic operations,
and at least two slots for an international operation. The five slots
contemplated under the WSG provide little opportunity for a new entrant
carrier to establish its operations before losing new entrant status
and thereafter being able to expand in the New York market only through
the purchase of a lease. Setting a limit of eight slots
administratively assigned by the FAA as the cut-off for new entrant
status allows a carrier to maintain its operations and provides some
ability to grow without jeopardizing the carrier's access to slots
through the WSG. Furthermore, we note that our decision here to allow
carriers with up to 8 slots to retain new entrant status is consistent
with our approach at Chicago O'Hare.
a. Impact of Auctions on Competition
The NPRM assumed that auctions will lead to efficient airline
behavior. The Port Authority, ACI-NA, NACA and some carriers suggest
that auctions may harm competition and could lead to reduced
opportunities for new entrant and limited incumbent airlines to enter
the airport. They claimed that the large incumbent carriers with the
majority of slots at JFK and Newark could use their relatively stronger
balance sheets to outbid the smaller, non-legacy airlines that help
stimulate competition. The ATA and others suggest that a carrier could
obtain a slot through auction and then chose not to operate for anti-
competitive purposes.
Offering a different view, American suggests that because the New
York market is already sufficiently competitive as a result of the
presence of three comprehensive and competing networks, hubs at JFK and
Newark, presence of low-cost carriers, and presence of a greater number
of foreign flag carriers serving the area than any other area of the
country this rule is unnecessary.
The FAA disagrees with the assertion that the limited number of
auctions contemplated in this rule will reduce competition at the
airport. At JFK, the HDR was criticized for not providing sufficient
opportunity for new entrant or limited incumbent carriers to enter or
expand service at the airport. We believe there is merit to these
criticisms. This rule will provide additional opportunities for new
entry at JFK and Newark.
To encourage greater competition and expand opportunities for entry
at the airport, the FAA intends to reallocate by auction a portion of
existing slots from those carriers who held the majority of slots at
JFK and Newark. The auction is designed to provide greater competition
at the airport because it uses the market to reallocate limited
resources to those who value the asset most.
We understand the concerns of some persons that carriers may
attempt to use Unrestricted Slots which are not subject to a usage
requirement to monopolize operations at an airport. The Department has
the authority to ensure that carriers do not use their ability to
permit such slots to remain idle to unlawfully restrict competition.
The Department's mandate under 49 U.S.C. 41712 to prohibit unfair
methods of competition authorizes it to stop carriers from engaging in
conduct that can be characterized as anticompetitive under antitrust
principles. If the Department is presented with clear and convincing
evidence that a carrier is hoarding slots to monopolize operations at
an airport it will pursue enforcement action against the carrier.
b. Impact of Auctions on Carrier Investment
The ATA, Cathay Pacific Airways, Continental, KLM and U.S. Airways
noted that carriers have invested in terminal facilities, gates,
servicing facilities, aircraft and promotion of flights out of JFK and
Newark, with the expectation that they would continue to operate from
those airports. They suggest that under this rule, their presence at
the airports is threatened. KLM and U.S. Airways further state that
airlines that have already significantly invested in their operations
at these airports will be, in effect, penalized by having to pay for
the privilege a second time.
It is our view that nothing in this rule prejudices the carrier's
invested presence at the JFK and Newark. Nothing in this rule bars
carriers from providing services to the New York area. To the extent
that a carrier may have slots subject to withdrawal, it has equal
opportunity to maintain or expand its service through the auction
mechanism. We also disagree with the assertion that carriers are being
asked to pay a second time for the privilege of serving JFK or Newark
because the investments that carriers have made in the airport and
near-by services are for the benefit of all flights they offer, not
just those that may be subject to reallocation.
c. Alternatives to Reallocation
Many commenters said that the FAA should use other approaches
instead of auctions to reduce delays at JFK and Newark. In particular,
the FAA should focus on implementing operational procedures and
investments to enhance capacity. The AAAE, ACI-NA, the Asociacion de
Latinoamericano de Trasporte Aero (ALTA), and the Regional Airline
Association (RAA), Boeing, and several carriers said that the FAA
should proceed with implementing advanced air traffic control
technologies and should focus on completing
[[Page 60559]]
NextGen. Similarly, the ATA suggests that the FAA continue to implement
the 77 New York Aviation Rulemaking Committee improvements and continue
implementing NextGen.
The IATA and the ATA and their member airlines expressed their
preference for use of the IATA WSG instead of an auction approach at
JFK and Newark. Delta supports WSG because it is a tested process that
can be applied fairly without harming U.S. carriers in comparison to
other carriers. The IATA asserts that a WSG approach because it is a
``fair, transparent non-discriminatory'' mechanism that is a widely
recognized and accepted for distribution of slots at congested
airports.
As to the suggestion that the FAA focus on the various
technological and physical improvements identified by the NYARC, many
of these initiatives are already underway. However, we do not believe
that they will address the congestion issues at JFK and Newark
sufficiently to merit lifting the caps on operations. It is the caps
that create the need for reallocation and the Administration supports a
market-based mechanism to soften the impact on the market created by
the caps. In the process we will foster the development of a robust
secondary market and ensure the opportunity for new entry into the New
York area.
The commenters are correct in stating that WSG is a widely
recognized and accepted mechanism for distribution of slots at
congested airports. As discussed above, we will use WSG to award any
new or returned capacity at JFK and Newark, to the extent it does not
conflict with U.S. rules, to ensure that even carriers that do not
choose to participate in the auctions have another means to access the
restricted market. However, the number of slots likely to be available
for reallocation from new or returned capacity would be insufficient to
stimulate a secondary market or create enough opportunity for new
carriers to enter the market. Withdrawal and reallocation of slots via
auction ensures the opportunity for new entry and an efficient
allocation of slots among all carriers at the airports, such that each
slot is allocated to the user who values it the most highly.
B. Secondary Trading
All slots will have value in the secondary market. To the extent
that the secondary market is not mature and the value of slots is not
well-known, the auction should inform potential buyers of the value of
these slots and stimulate the secondary market. The FAA believes that
ultimately the best way to maximize competition is with the development
of a robust secondary market. To that end, the agency did not propose a
system of set-asides and exemptions that would be available to new
entrants and limited incumbents.
We believe some measures must be taken to assure access to the
secondary market. The system of preferences and exemptions developed
under the HDR and AIR-21 at JFK may have significantly diluted the
viability of the secondary market ostensibly created under the HDR's
Buy/Sell Rule as several commenters claim, but we do not believe that
was the sole culprit. The Buy/Sell Rule permitted transactions that
were never advertised and the terms of which were never monitored for
anti-competitive behavior.
We believe all carriers interested in initiating operations at JFK
or Newark, or increasing their operations there, should have an
opportunity to participate in any transactions. Accordingly, the FAA
will permit carriers to include Common Slots for sale in the auction
organized by the FAA. If 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
and it would retain the proceeds.
In addition, the FAA will establish a bulletin-board system whereby
carriers seeking to sublet slots outside the auction process, or to
acquire such subleases, would notify the FAA, which would then post the
relevant information on its website. The FAA will post a transaction
within two business days of receipt and verification of the request and
post the transaction for ten business days. The FAA has decided that
transactions via the bulletin-board-system do not have to be blind, and
the transaction may include both cash and non-cash payments.
Some carriers noted that the secondary market should be as
transparent as possible since even a hybrid system, whereby the lessor
would accept the highest cash bid and then negotiate the value of non-
monetary assets after the bid was accepted, would close interested
lessees out of the transaction.
We continue to have reservations about the adequacy of the value
associated with non-monetary assets when the leasing carrier is not a
direct competitor versus when the potential lessee competes directly
against the carrier offering to lease the slot. However, we also
believe non-cash transactions should result in both more bidders and
potentially higher bids. Since the non-cash aspect of a transaction
would require direct negotiating, parties would need to be disclosed.
In order to preclude the type of collusion that appears to have
been present, at least some of the time, under the Buy/Sell Rule, the
Department will monitor trades on the secondary market. The Department
already has the authority under 49 U.S.C. 41712 to investigate,
prohibit, and impose penalties on an carrier for an unfair or deceptive
practice or an unfair method of competition in air transportation or
the sale of air transportation. The Department has consistently held
that this authority empowers it to prohibit anticompetitive conduct (1)
that violates the antitrust laws, (2) that is not yet serious enough to
violate the antitrust laws but may do so in the future, or (3) that,
although not a violation of the letter of the antitrust laws, is close
to a violation or contrary to their spirit.\27\
---------------------------------------------------------------------------
\27\ See United Airlines, Inc. v. Civil Aeronautics Board, 766
F. 2d 1107, 1112, 1114 (7th Cir. 1985) and cases cited therein; see
also H.R. Rep. No. 98-793, 98th Cong., 2d Sess. (1984) at 4-5, Order
2002-9-2, Complaint of the American Society of Travel Agents, Inc.,
and Joseph Galloway against United Air Lines, Inc, et al. (Docket
No. OST-99-6410) and Complaint of The American Society of Travel
Agents, Inc., and Hillside Travel, Inc. against Delta Air Lines, et
al. (Docket No. OST-02-12004) (September 4, 2002) at 22-23.
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Today's rule requires carriers to file with the Department a
detailed breakdown of all lease terms and asset transfers for each
transaction, and the subletting carrier must disclose all bids
submitted in response to its solicitation. Lufthansa objects to our
plan to publish the sales price for subleases of slots between
carriers. It believes that slot lease sales should be conducted in the
same way as aircraft sales, i.e., as a private matter between two
parties. We hope and expect that transparency in the sublease process
will encourage efficiency in the utilization of airport capacity.
Lufthansa has not explained any alternative way to create this market
information, and we will adopt this provision as proposed. The
requirement is also needed so that the Department can adequately
monitor the secondary market.
The slot may not be operated by the acquiring carrier until all
documentation has been received, and the FAA has approved the transfer.
The approval process is required to assure the FAA has up-to-date
information on who is operating the flight. The FAA will not limit its
approval based on any
[[Page 60560]]
substantive provisions in the document. Although the ATA claimed the
provisions governing the secondary market are unduly intrusive and
chilling, the FAA believes that even in a robust market it needs to
track and provide oversight of the market. This oversight will ensure
access remains available to all interested parties and the slots are
actually being used in the manner represented to the FAA. Since Common
and Limited Slots may be transferred in the secondary market, the
underlying policy considerations supporting the FAA's decision to award
them under a cooperative agreement rather than for monetary
consideration remain, even if the operating carrier has changed.
Trades among marketing carriers and one-for-one trades do not have
to be advertised. Marketing carriers should not have to open up
transactions to the carrier community as a whole any more than a single
carrier should have to disclose its scheduling decisions to other
carriers. The FAA will approve these transactions, as it has done
historically. As is the case with longer-term transfers among different
carriers, the FAA only approves the transaction to maintain accurate
information on which carrier is operating a particular slot.
Same day trades among marketing carriers that address emergency
situations such as maintenance problems or other unforeseen operational
issues may take place without prior approval by the FAA, but carriers
must notify the FAA of the trade within five business days. One-for-one
trades among carriers will not be subject to the restrictions of the
secondary market because they enhance the operational efficiency of the
airport. However, the exchange of slots on a one-for-one basis cannot
be for consideration, since they would then take on the characteristics
of lease agreements negotiated in the secondary market. Nonetheless,
carriers must notify the FAA of all such trades so that the agency can
maintain accurate information on which carrier is operating a
particular slot.
United Parcel Service (UPS) expressed its concern that the
provisions of section 93.168 must be flexible enough to accommodate its
demand peak during the period between Thanksgiving and Christmas. It
notes that slot trades among U.S. air carriers with unified marketing
control do not need to be advertised, because the carriers are
considered to be a single unit for the purposes of this rule. Since UPS
enters into contracts with other cargo carries to handle its increased
volume, it would like to receive similar treatment for these
arrangements. UPS appears to misunderstand the rationale for our
proposal. Trades between carriers under the same marketing control are
not lease transfers within any common-sense meaning of the term. There
is, for these purposes, only a single carrier with multiple operations.
That is quite different from the situation UPS describes for its peak
period, where it enters into contracts with separately owned and
operated carriers that, for much of the year, are its competitors. In
any event, our rule should not affect UPS's ability to contract with
other carriers to handle its additional cargo, and we believe that no
change to the rule language is necessary. Although a carrier seeking to
sublet or transfer a slot will be required to post the bid through the
FAA Web site, we believe that any additional burden is minimal and
outweighed by the value of the of the transparency of the process. In
addition, the transaction is not blind; and the carrier is not required
to accept the highest submitted bid.
C. Usage Requirements
The FAA is adopting the usage requirements proposed in the NPRM.
Specifically, Common and Limited Slots must be used 80 percent of the
time over a season unless the FAA waives the usage requirements due to
unusual and unforeseeable circumstances beyond the carrier's control.
The impact of these events must extend beyond five consecutive days.
Unrestricted Slots will not be subject to the usage requirements.
Under this rule each slot will be assigned a corresponding
scheduled operation. Carriers will be required to report a series of
flights under a single slot number rather than in the aggregate. In
this way the FAA will be able to more accurately track a slot's usage
with the flight it was scheduled against. Carriers will be permitted to
operate a charter, maintenance, or ferry operation in lieu of a
scheduled operation and not have that operation discounted as long as
they do not abuse the privilege.
Several commenters, including the ATA, the Port Authority, and
several carriers noted that the proposal to exclude Unrestricted Slots
from the usage requirement is inconsistent with the current practice of
requiring all slots, even those purchased in the secondary market, to
be subject to the use-or-lose requirements. These commenters suggested
that all slots should be subject to usage requirements. The Port
Authority also suggested that the proposal to exclude Unrestricted
Slots from the usage requirement could lead to the dominant carriers
placing bids with the effect of driving away or blocking new entrants
and limited incumbents from JFK and EWR. The price of a slot could be
determined by the value that a dominant carrier would assign to
eliminating competitors rather than from the use of the slot itself, as
there is no usage requirement. The Port Authority added that this could
lead to a decrease in the number of airlines and destinations served at
an airport, resulting in higher fares.
We understand the concerns of some persons that carriers may
attempt to use Unrestricted Slots which are not subject to a usage
requirement to monopolize operations at an airport. We do not believe
this risk is sufficiently large to attach a usage requirement on
Unrestricted Slots. Since the FAA wishes to introduce a market-based
means of addressing slot allocation, both initially and in the
secondary market, the agency believes the Unrestricted Slot should be
just that--unrestricted. Furthermore, slots acquired at auction will
have a known and provable market value. That fact will be clear to the
carriers' management and stockholders, who are both likely to resist
the waste of a valuable (and salable) company asset. Our rule should
encourage the use of slots at JFK and Newark for their highest and best
purpose. The FAA does not believe there is a need to treat all slots
equally when they are not all allocated under the same terms and
conditions.\28\
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\28\ Unrestricted Slots could potentially have a higher value in
the secondary market than Common or Limited Slots because they are
not subject to the same restrictions.
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The Department has the authority to ensure that carriers do not use
their ability to permit such slots to remain idle to unlawfully
restrict competition. The Department's mandate under 49 U.S.C. 41712 to
prohibit unfair methods of competition authorizes it to stop carriers
from engaging in conduct that can be characterized as anticompetitive
under antitrust principles. If the Department is presented with clear
and convincing evidence that a carrier is hoarding slots to monopolize
operations at an airport it will pursue enforcement action against the
carrier. In order to assist the Department in determining whether a
carrier is engaging in anticompetitive behavior, we are expanding the
requirement in the regulatory text to report usage to include
Unrestricted Slots as well as Common and Limited Slots. While a carrier
would not risk losing an Unrestricted Slot for failure to report, the
FAA could take civil enforcement action consistent
[[Page 60561]]
with its authority to take enforcement action for any violation of a
regulatory requirement.
D. Unscheduled Operations
As proposed in the NPRM, unscheduled operations at JFK and Newark
will be restricted. Two unscheduled operations will be permitted at
Newark between 6 a.m. and 11:59 a.m. and between 10 p.m. and 10:59
p.m.; one operation per hour will be permitted between 12 noon and 9:59
p.m. At JFK, there will be two unscheduled operations permitted per
hour between 6 a.m. and 1:59 p.m. and between 10 p.m. and 10:59 p.m.
Between 2 p.m. and 9:59 p.m., the limit is one unscheduled operation.
Under today's rule, reservations are required to use the airport
(except for emergency operations) and may be obtained up to 72 hours in
advance. The reservations will be available on an hourly, rather than
half-hourly, basis. This will provide additional flexibility with
minimal operational impacts overall.
To the extent Air Traffic Control (ATC) can handle additional
requests (for example in good weather), it will do so without regard to
the reason for the request. In addition, ATC may decide special
circumstances justify an additional flight. However, there is no
guarantee that the FAA will accept more than one or two reservations
per hour, and the determination to handle more traffic would likely be
made on that day. Reservations for all non-emergency flights would
still be required. The FAA will allow public charter operators to
reserve up to 25 percent of available allowable afternoon and evening
reservations up to six months in advance. If more than one public
charter operation is desired for a given hour, the public charter
operator without the advance reservation could attempt to secure a
reservation within the three-day window that is available for all other
unscheduled operations.
A large portion of the unscheduled operations comes from general
aviation, and Aircraft Owners and Pilots Association (AOPA) stated in
its comments that our rule will cause an increase in the number of
operations at airports elsewhere in the region, to levels beyond the
capacity of those airports. While we agree that there may be some
increased demand for other airports, we are aware of no reason to
believe this demand will exceed the capacity available. We note that no
other airports in the region have expressed any such concerns in
comments to this rulemaking.
The FAA does not believe that public charter operators and on
demand charter operators should be treated similarly. Unlike on demand
charters, public charters may not be marketed until prospectuses are
filed with the Department and they are marketed to individual consumers
long in advance of the dates of operation. Public charters are also
generally limited to operating from larger airports. Thus, in the New
York area, public charters cannot be operated from many of the local
airports, such as Teterboro, that are available to on demand charter
flights. For these reasons, we believe public charter operators should
have a significantly earlier opportunity to obtain slots for their
operations under this rule than on demand charters.
Additionally, unscheduled flights produce roughly the same delay
costs as scheduled flights at the same time. However, unscheduled
flights can be accommodated if operators are flexible in their arrival
or departure times. In response to public comment we have assessed the
impact on business if unscheduled flights are restricted based upon the
FAA's record of actual operations in the agency's Enhanced Traffic
Management System (ETMS) for year ended May 31, 2008. FAA has indicated
that it should be able to accommodate more unscheduled operations in
visual meteorological conditions (VMC) (capacity permitting). In the
analysis of ETMS, FAA assumes that unscheduled flights would be
accommodated in VMC weather or if there is available capacity in an
adjacent hour (one hour either side of the actual hour of operation in
the data.) based on the year June 1, 2007 through May 31, 2008, ETMS
data show the number of unscheduled operations per year where there was
insufficient capacity in the adjacent two hours to handle demand beyond
the levels specified in today's rule was 87 at Newark and 23 at JFK.
This represents well below one operation per day. These flights may
have to divert to another airport, change their time of arrival or
departure by more than one hour or be cancelled. The concern about peak
seasonal demand expressed above by UPS also was raised by comments to
this portion of the NPRM. NACA, the Cargo Airline Association, and four
carriers believe that the limits in the rule are insufficient to meet
demand in the period leading up to the Christmas holiday. With only one
reservation per hour during certain hours, Polar and the Cargo Airline
Association (CAA) also argue that the rule effectively prohibits any
unscheduled cargo flights. Although there are other airports in the
region, NACA claims that they do not offer a viable alternative for a
commercial service operation.
While we sympathize with these concerns, we do not believe that
they will materialize in the dire manner predicted. The FAA has
reviewed cargo operations at JFK and Newark during the peak holiday
season, and we believe that capacity exists on various days or through
temporary returns by other carriers to accommodate some flights above
historically operated levels. ETMS data collected during the holiday
period November 26, 2007 through December 31, 2007 shows that at Newark
75 percent of the controlled hours had available capacity for
unscheduled operations (i.e., at least one available reservation ) and
at JFK 82 percent of the controlled hours had available capacity for
unscheduled operations. In addition, most cargo operators have already
received temporary slot allocations from the FAA for the November-
December 2008 period under the existing orders and there is no reason
to believe this would not remain a viable option under today's rule.
Demand for passenger flights is lower in portions of November and
December, and the rule allows carriers to return slots to the FAA for a
portion of a scheduling season without subjecting the slots to the use-
or-lose requirements if they provide notice prior to the commencement
of the applicable scheduling season. Additionally, the unscheduled
reservation system for JFK and Newark grants authority to the Vice
President, System Operations Services, to allow additional reservations
for unscheduled operations. These can be authorized if there are
available carrier slots, such as those temporarily returned to the FAA,
or based on a finding that additional flights would not significantly
increase delay. The FAA will regularly assess operations on a daily
basis to determine if additional reservations could be made available
for unscheduled operations. We note as well that, under the previous
rules at JFK and Chicago O'Hare, cargo and passenger carriers routinely
requested slots for additional operations. Carriers often have
scheduling flexibility, and the FAA has worked with them when possible
to time flights during periods of minimal operational impact. Our rule
here will provide additional flexibility to carriers, by making it
easier for them to purchase or sublease slots to supplement any direct
slot allocation from the FAA. Short-term slot trades and leases are
common at U.S. slot controlled airports and are often used to
accommodate different scheduling patterns by carriers. Therefore, we do
[[Page 60562]]
not believe that there is any need to include any special provisions
for holiday operations.
E. Sunset Provision
This rule terminates at 11 p.m. on March 30, 2019. As we stated in
the NPRM, this approach will allow for future determinations by the FAA
as to whether a cap is still needed and, if so, whether changes are
needed to more efficiently manage the scarce resource. When the New
York/New Jersey/Philadelphia Metropolitan Area Airspace Redesign
project and NextGen technologies are fully implemented, we expect they
will significantly alleviate delays and improve air traffic efficiency.
When we see the impact of these improvements over the next ten years,
we will take that into account along with our experience with
effectiveness of the rule on the distribution of slots and entry into
JFK and Newark.
This rule will expire in ten years. One of the criticisms of the
HDR was that it was a temporary rule that has lasted almost 40 years.
As such, it became difficult to manage, particularly as it was amended
to address changes in business models. We believe the public interest
is better served by directly providing the rule will sunset in ten
years. This approach will allow for future determinations by the FAA as
to whether a cap is still needed and, if so, whether changes are needed
to more efficiently allocate and constrain the scarce resource. At
present it is impossible to determine what changes in business models
may occur over the next ten years. In addition, full implementation of
the New York/New Jersey/Philadelphia Metropolitan Area Airspace
Redesign project and NextGen technologies are expected to mitigate and
improve air traffic efficiency within the next ten years, and we should
not prejudge the market response.
The ATA questioned why this rule is implemented on a temporary
basis if the agency believes it represents the best solution for the
airport. Additionally, several commenters noted that temporary slot
lives reduce the value of slots. They argued the short-term nature of
the proposal and the uncertainty of future slot operations at JFK and
Newark would have a chilling effect on the value given to slots and
gates in relation to capital flow and collateralization. Several
carriers were concerned that financial institutions would lose
confidence in slots as collateral and reduce or eliminate a carrier's
ability to fully collateralize the asset.
The FAA believes providing a date certain through which slots will
be awarded actually increases the certainty of the holding. The
assumption seems to be that regulatory inactivity is the solution to
all the carriers' concerns, and that therefore, the FAA should just
maintain the status quo. This is not an acceptable solution. The
capping orders at JFK and Newark temporarily froze the slot allocations
at the airports to serve as temporary solutions. The FAA believes it is
important for carriers and those who provide financing to realize that
slots at a constrained airport are not intended to be a permanent
response to solving congestion, with the incumbents being afforded
unlimited rights.
F. Other Issues
1. Withdrawal for Operational Need and for Future Reductions in the Cap
The FAA is adopting its proposal to retain the right to temporarily
withdraw Limited and Common Slots for operational need. We requested
comment on whether the FAA should establish a level of slots that would
not be subject to withdrawal or temporary suspension to fulfill
operational needs. We were concerned about the possibility of
marginalizing or excluding small operators from the airport. No
comments were received on this issue. For that reason, we conclude that
it is not necessary to establish such a reserve.
The FAA has historically retained the right to withdraw slots for
operational need, although it has rarely, if ever, been exercised. This
provision is included to allow the FAA to immediately address a
situation where it cannot handle the usual amount of traffic on a
temporary basis. This provision would typically be invoked because of
problems with the landside infrastructure, such as a closed runway or
terminal, or changes to air traffic control procedures that would
result in sustained capacity reductions.
The FAA is also retaining the right to further reduce the cap on
operations should the airport remain unduly delayed and the
Administrator determines that the cap on operations remains too high.
The FAA anticipates it would call for a Schedule Reduction Meeting
should further reductions be warranted. In any case, the FAA would
fully meet its obligations under the APA at that time, and this rule
does not provide a means for further cap reductions absent subsequent
action on the part of the agency. For the reasons discussed earlier,
this provision is limited to Common Slots.
2. Impact of the Final Rule on the Port Authority's Ability To Run Its
Airport
The ACI-NA and the Port Authority both claim that the proposal to
auction slots interferes with the Port Authority's ability to run the
airport and constitutes an impermissible infringement on the Port
Authority's right to collect revenue for use of the airport facilities.
The ACI-NA believes that market-based access issues should remain
within the exclusive purview of the airport's proprietor. The Port
Authority expressed similar sentiments in its comments to the NPRM
suggesting it develop a method of allocation at the airport.
The FAA has never proposed to deny carriers gate access at JFK or
Newark, nor has it proposed to otherwise address issues associated with
the facilities at the airport. The FAA recognizes that the Port
Authority bears responsibility for the terminal-side portion of the
airport. However, it is the FAA, and not the Port Authority, that has
responsibility for managing the airspace. While the Port Authority
claims that slot auctions would somehow be disruptive to the airport,
it fails to explain how, in terms of making arrangements for gates and
other airport facilities, acquiring a slot via an auction is any
different from acquiring a slot via the secondary market, or for that
matter, via a lottery, as was the case under the HDR.
To the extent public policy goals could arguably be better achieved
by an airport proprietor rather than the FAA, the agency notes that
this rule provides for no special carve-outs. To the extent an airport
could address these policy issues through a market-based, or even
administratively based mechanism, it is free to do so consistent with
its grant obligations and any other restrictions imposed by Federal
law, policy and our international obligations.
3. Minimum Usage Requirements for Slots Acquired Through Sublease
In the NPRM, the FAA proposed to provide for a 90 day waiver of the
minimum usage requirement for common and limited slots acquired by
sublease. We have subsequently determined that there is no need for
such a provision. The starting date of a sublease is fully within the
control of the contracting carriers and can be easily negotiated to
address any possible concerns related to starting new service.
Moreover, in the event of highly unusual or unpredictable
circumstances, a carrier may apply under Sec. 93.170(c) for a waiver
of the minimum usage requirements.
[[Page 60563]]
V. Potential Loss of Service to Small Communities
Several commenters expressed their concern that this rule may
adversely affect service to small communities because the rule will
make operating at JFK and EWR more expensive. AAAE suggests that this
will serve as a disincentive for airlines to bid for slots for flights
to small communities because the smaller number of seats that typically
fly to small communities. Several foreign carriers further note that a
reduction in service to small communities may negatively affect their
opportunities to provide a wide variety of services with their U.S.
carrier partners. ACI-NA suggests that the FAA take action to protect
services to small communities.
Although not directly related to the loss of service to small
communities, the FAA notes the Canadian Airports Council (CAC)
expressed concern that air service to Canada would be jeopardized
because the major Canadian cities are much smaller than their U.S.
counterparts and cannot sustain larger aircraft. The CAC further
suggests that that we grant an exemption to the rule for international
flights, including transborder flights. This rule does not violate our
international obligations, we will therefore not grant such an
exemption.
The FAA recognizes the importance of small community service at JFK
and Newark and believes that this rule will provide adequate
opportunity for services to small communities because 90 per cent of
slots will not be affected, and the remaining 10 percent of slots will
be auctioned over the first five years of the rule. Under these
conditions carriers will have the opportunity to adjust their services
to continue services as the market warrants. Furthermore, the agency
continues to believe that a system whereby upgauging to larger aircraft
is completely voluntary decreases the likelihood of a whole-sale
withdrawal from smaller markets.
Although there may be a slight reduction to small community service
by not dedicating slots for those particular cities, we believe market
conditions and fuel prices are the primary motivation for any reduction
in service, and not a consequence of federal action in this rule. Due
to these facts, and the Administration's decision to rely on the market
to allocate slots according to their highest and best use, we do not
believe it is appropriate to develop a separate class of slots
specifically for use to and from small communities. The FAA wishes to
avoid any unintended consequences on a carrier's marketing and network
decisions that could result from set asides or exemptions for small
communities.
VI. Regulatory Notices and Analyses
Changes to Federal regulations must undergo several economic
analyses. First, Executive Order 12866 directs that each Federal agency
shall propose or adopt a regulation only upon a reasoned determination
that the benefits of the intended regulation justify its costs. Second,
the Regulatory Flexibility Act of 1980 requires agencies to analyze the
economic impact of regulatory changes on small entities. Third, the
Trade Agreements Act (19 U.S.C. 4 2531-2533) prohibits agencies from
setting standards that create unnecessary obstacles to the foreign
commerce of the United States. In developing U.S. standards, the Trade
Act requires agencies to consider international standards and, where
appropriate, to be the basis of U.S. standards. Fourth, the Unfunded
Mandate Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare
a written assessment of the costs, benefits, and other effects of
proposed or final rules that include a Federal mandate likely to result
in the expenditure by State, local, or tribal governments, in the
aggregate, or by the private sector, of $100 million or more annually
(adjusted for inflation).
In conducting these analyses, FAA has determined this final rule
(1) has benefits that justify its costs, is a ``significant regulatory
action'' as defined in Sec. 3(f) of Executive Order 12866, which is
also known as an ``economically significant regulation action,'' and is
``significant'' as defined in DOT's Regulatory Policies and Procedures;
(2) would not have a significant economic impact on a substantial
number of small entities; (3) would not adversely affect international
trade; and (4) would not impose an unfunded mandate on State, local, or
tribal governments, or on the private sector. These analyses, set forth
in this document, are summarized below.
Total Costs and Benefits of This Rulemaking
Through implementation of an auction, FAA estimates that this final
rule will result in a long-term improvement in the allocation of scarce
slot resources at JFK and Newark. The estimated present value of net
benefits of improved slot allocation by auctions is $272 million at JFK
and $225 million at Newark from 2009 to 2019. The costs of the rule,
with a present value of $34 million at JFK and $20 million at Newark,
are due to the design, implementation and participation in an auction
of slots. These costs assume that the full cost of setting up the
auction mechanism and participating in the auctions are individually
borne at each airport; in fact, if auctions are conducted at more than
one airport in the New York area, the costs of the setting up and
participating in the auctions could be shared among the users of the
airports and would be lower on a per airport basis. The net benefits of
the auctions are, therefore, $238 million at JFK and $205 million at
EWR.
This regulatory impact analysis assumes as a baseline that in the
absence of this rulemaking, the FAA would not otherwise impose long-
term caps on aircraft operations at JFK and Newark. Therefore, the FAA
estimates that, through the long-term implementation of a cap on
aircraft operations, this final rule will result in about a 25 percent
reduction in the average delay per operation at JFK relative to a
situation with no cap. After allowing for the lost consumer and
producer surplus due to a reduction in air service caused by the caps,
the net value of the savings in average delay attributable to the cap
generates a present value net benefit of about $1,629 million from 2009
to 2019. At Newark, this final rule will result in about a 23 percent
reduction in the average delay per operation at Newark relative to a
situation with no cap, generating a present value net benefit (after
deducting lost producer and consumer surplus from reductions in air
service) of about $634 million from 2009-2019. The benefits are
estimated by comparing the no-rule scenario (similar to the situation
at JFK and Newark in August 2007) with the proposed cap.
Who Is Potentially Affected by This Rulemaking
Operators of scheduled and non-scheduled, domestic and
international flights, and new entrants who do not yet operate at JFK
or EWR.
All communities, including small communities with air
service to JFK or EWR.
Passengers of scheduled flights to JFK or EWR.
The Port Authority of New York and New Jersey, which
operates the airports.
Passengers on scheduled and unscheduled flights in New
York airspace.
Key Assumptions
Baseline JFK: No operating authorizations or caps (the
rule will generate approximately $1,867 billion in net benefits
compared to this case, of
[[Page 60564]]
which approximately $238 million is due to reallocation benefits
associated with the auctions and the balance due to the caps).
Baseline EWR: No operating authorizations or caps (the
rule will generate approximately $839 billion in net benefits compared
to this case, of which approximately $205 million is due to
reallocation benefits associated with the auctions and the balance due
to the caps).
A cap on operations from 81 scheduled operations plus one
to two unscheduled operations per hour at each airport, which features:
100 percent of slots \29\ held by carriers with fewer than
21 slots at each airport will be reassigned to the carrier with 10
years of life;
---------------------------------------------------------------------------
\29\ A ``slot'' is defined as the right to land or depart (not
both) in IFR conditions in a 30-minute time window.
---------------------------------------------------------------------------
For holders with 21 or more slots, 90 percent of slots
above the baseline of 20 slots will be reassigned to the carrier with
leases of 10 years and ten percent of slots above the baseline will be
assigned to the carrier with shorter leases and then auctioned over
five years.
For the purposes of this evaluation, the effective date is
(11/1/08).
Other Important Assumptions
Discount Rates--7%
Period of Analysis--2009 through 2019 (The rule will
sunset in ten years)
Assumes 2008 Constant Year Dollars.
Passenger Value of Travel Time--$30.02 per hour.\30\
---------------------------------------------------------------------------
\30\ GRA, Incorporated ``Economic Values for FAA Investment and
Regulatory Decisions, A Guide'', prepared for FAA Office of Aviation
Policy and Plans, (October 3, 2007). The passenger value of time
reflects a mix of business and leisure travel developed for the New
York area.
---------------------------------------------------------------------------
Alternatives We Have Considered
No caps: The FAA expects that without regulatory caps,
operators would expand operations at both airports above current
levels, and hence further worsen airport delays.
Caps without auctions: This alternative would impose caps
at 81 scheduled operations plus one to two unscheduled operations per
hour; it would implicitly assign operations to current holders of
operating authorizations at the airports.
Caps with auctions: This alternative would permanently
impose caps at 81 scheduled operations plus one to two unscheduled
operations per hour; it would assign the large majority of operations
to current holders of operating authorizations at the airport; and
would auction a small but consistent number of slots for the first five
years of the rule.
Benefits of This Rulemaking
Since publishing the NPRM, we have updated our benefit estimates,
with a significant upward adjustment to the cap benefits at JFK. This
adjustment was necessary because the FAA identified a calculation error
attributable to an incorrect reference to an output value in the
airport delay model. We also made a smaller, downward adjustment to the
Newark cap benefits. Finally, we reduced the estimated net benefits of
improved slot allocation caused by the auctions at both airports
relative to those recorded in the NPRM. These latter reductions
resulted from the higher estimates of airline auction participation
costs that we used in the final regulatory evaluation for this final
rule.
A detailed discussion of the applied methodology as related to
consumer and producer surplus can be found in the final regulatory
evaluation. The primary benefits of this rulemaking are due to the
delay reduction from the caps on operations and an improvement in the
efficiency of allocation of scarce slot resources through the use of an
auction mechanism and secondary slot subleasing markets characterized
by clearly defined property rights.
Costs of This Rulemaking
The major costs of this final rule are the costs to the public and
private sectors of designing, implementing and participating in the
auction. Additionally, the implementation of caps under this rulemaking
will lead to a reduction in flights into JFK and Newark compared to
what would occur without the caps. The FAA has estimated the value of
these scheduled flight reductions and has deducted them from the delay
benefits of the caps at each airport to calculate overall net benefits
of the caps.
Paperwork Reduction Act
This proposal contains the following new information collection
requirements. As required by the Paperwork Reduction Act of 1995 (PRA)
(44 U.S.C. 3507(d)), the FAA has submitted the information requirements
associated with this proposal to the Office of Management and Budget
for its review.
The ATA claimed that the FAA's estimate of the paperwork burden of
the rule is ``totally flawed'' and understated. It cited what it
believed to be an inconsistency in the PRA estimates for both JFK and
EWR in which the first year burden hours were not added to recurring
annual hours in the NPRM. In fact, the FAA believed it was clear in its
presentation that the first year and annual recurring numbers were
additive for the first year. However, to avoid misunderstanding, the
combined first year and recurring year burdens for both airports are
given a separate line item in this final rule.
The ATA claimed that realistically, management of this program will
take at a minimum 50% of a management employee's time and could require
a full time employee, depending on the final rule. The FAA notes that
the analysis of paperwork burden does not attempt to include the time
required to participate in auctions, only the reporting requirements to
the government. The full assessment of time that an airline might spend
in its voluntary participation in an auction is provided in the Final
Regulatory Evaluation of this rule. However, the FAA has added a
significant recurring burden of 32 hours per carrier per year at each
airport in which an auction occurs (inserted in the paperwork
requirements of Section 93.165(c) below). The FAA made this change to
reflect the paperwork required if a carrier actually participates in an
auction. This addition of time to the PRA estimate leads to a
considerable increase in the total labor hours assigned to PRA purposes
under this rule.
The ATA also noted that there will be significant legal fees
associated with negotiating, drafting, executing and monitoring the
secondary market. The FAA believes that the reporting labor
requirements estimated under Section 93.168 for the PRA reflect the
actual reporting requirement burden, noting that the negotiating of the
sublease itself is not an activity involving reporting to the
government. The FAA reemphasizes that participation in the auction and
secondary market are not requirements of this rule. A carrier with
existing slots at JFK and EWR is permitted to continue operations at
the airport using the common slots provided to them as part of this
final rule. Carriers will only need to engage in the secondary market
and auctions if they choose to buy, lease or sell slots.
The information requirements in today's rule are similar to those
specified in the just-issued final rule for congestion management at
LaGuardia Airport. The FAA has modified these requirements for JFK and
EWR and summarized them below.
Title: Congestion Management Rule for John F. Kennedy International
Airport and Newark Liberty International Airport.
[[Page 60565]]
Summary: The FAA is assigning the majority of operational slots at
JFK and Newark to current occupants and developing a secondary market
by annually auctioning off a limited number of slots at each airport.
This rule also contains provisions for use-or-lose and withdrawal for
operational need. The rule will sunset in ten years. More information
on the requirements adopted today is detailed elsewhere in today's
notice.
Use of: The information is reported to the FAA by scheduled
operators holding slots at JFK and Newark. The FAA logs, verifies, and
processes the requests made by the operators.
This information is used to allocate, track usage, withdraw, and
confirm transfers of slots among the operators and facilitates the
transfer of slots in the secondary market. The FAA also uses this
information in order to maintain an accurate accounting of operations
to ensure compliance with the operations permitted under the rule and
those actually conducted at the airports.
Respondents: The respondents to the information requirements in
today's rule are scheduled carriers with existing service at JFK and
Newark, carriers that plan to enter the JFK and Newark markets (by
auction or secondary market), and carriers that enter the JFK and
Newark market in the future. There are currently seventy-seven (77)
carriers with existing scheduled service at JFK and thirty-nine (39)
carriers with existing scheduled service at Newark. Various carriers
included in these totals have service at both airports.
Frequency: The information collection requirements of the rule
involve scheduled carriers notifying the FAA of their use of slots.
Each carrier must notify the FAA of its: (1) Designation of 50 percent
of its Limited Slots, if applicable, as well as auction paperwork
requirements; (2) request for confirmation to sublease slots; (3)
consent to transfer slots under the transferring Carrier's marketing
control; (4) requests for confirmation of one-for-one slot trades; (5)
slot usage (operations); (6) request for assignment of slots available
on a temporary basis; and (7) usage rate as detailed in the rule.
Annual Burden Estimate: The annual reporting burden for each
subsection of the rule is presented below. Annual burden estimates
presented in today's notice are based on burden estimates from the
final rule ``Congestion Management Rule for LaGuardia Airport'' (Docket
No. FAA-2006-25709; Notice No. 08-04).
The burden is calculated by the following formula:
Annual Hourly Burden = ( of respondents) * (time involved)
* (frequency of the response).
Sec. 93.164(c)(2) Categories of Slots: A Carrier shall designate 50
percent of its Limited Slots
JFK
(4 carriers with Limited Slots) * (80 hours per submittal) = 320
hours.
Based on the current allocation of Operating Authorizations and the
level of baseline operations each carrier would be assigned under
today's proposal, we assumed the four carriers with the most operations
at JFK would expend up to ten days of planning time each, potentially
80 hours, to develop and submit their designations of 50 percent of its
Limited Slots, for a total of 320 hours. This designation would occur
once, ten days after the final rule effective date.
Newark
(1 carrier) * (240 hours per submittal) = 240 hours.
(5 carriers) * (80 hours per submittal) = 400 hours.
Total Annual Hourly Burden = 640 hours.
Based on the projected allocation of Operating Authorizations and
the level of baseline operations each carrier will be assigned under
today's rule, we assumed that one carrier, Continental Airlines, with
the most operations at Newark would expend up to 30 days of planning
time, potentially 240 hours, to develop and submit its designation of
50 percent of its Limited Slots. The remaining five carriers required
to designate Limited Slots would each expend up to 10 days of planning
time, potentially 80 hours each, to develop and submit their
designation of 50 percent of their Limited Slots. These five carriers
would therefore need 400 hours. In total, the six carriers at Newark
required to designate Limited Slots would require 640 hours of effort
to make the designation. This designation would occur once, ten days
after the final rule effective date.
Section 93.165(c) Initial Assignment of Slots
JFK
(77 carriers) * (32 hours per carrier) * (1 occurrence per year) =
1,462 hours
Whereas the FAA does not believe that all carriers, or even a
majority, will participate in each auction, we have assumed for this
exercise that the 77 carriers operating at JFK will expend be required
to allocate some time to develop and submit the paperwork required if a
carrier actually participates in an auction. Specifically, this
paperwork includes the Auction Expression of Interest and the bid file
to FAA auction system. These paperwork submission requirements will be
filed electronically. Note that the estimate below does not include
auction participation labor and costs. Participation in auctions is
voluntary and these hours and costs (which encompass those for
paperwork requirements) are quantified and treated as a cost of the
rule in the Final Regulatory Evaluation.
Newark
(39 carriers) * (32 hours per carrier) * (1 occurrence per year) =
1,248 hours
Section 93.166(b)-(c) Assignment of New or Returned Slots
We made no assumptions about additional workload for carriers at
either airport associated with the IATA-like administrative process for
assigning new or returned slots. Workload would vary depending on how
many (if any) new or returned slots were to develop at either airport
over the 10 year period of the proposed rule. In any case, carriers are
already familiar with and use IATA-like allocation methods and would
handle them in the course of normal operations at JFK and Newark.
Section 93.168 (b),(d),(f) Sublease and Transfer of Slots
JFK
(18 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 108 hours.
(59 carriers) * (1.5 hours per submittal) * (2 occurrences per
year) = 177 hours.
Total Annual Hourly Burden = 285 hours.
Based on burden estimates from ``Congestion Management Rule for
LaGuardia Airport,'' we assumed the 77 carriers operating at JFK would
expend one and one half hours for each occurrence of a lease or
transfer of a slot. For each operator with 6 or more slots (18 carriers
total), we assumed that a lease or transfer of a slot would occur on
average quarterly. For each operator with fewer than 6 slots (59
carriers total), we assumed that a lease or transfer of a slot would
occur on average biannually. The total annual hourly burden for all
carriers collectively would be 285 hours.
Newark
(1 carrier) * (1.5 hours per submittal) * (16 occurrences per year)
= 24 hours.
(12 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 72 hours.
[[Page 60566]]
(26 carriers) * (1.5 hours per submittal) * (2 occurrences per
year) = 78 hours.
Total Annual Hourly Burden = 174 hours.
As with JFK, we assumed the 39 carriers operating at Newark would
expend one and one half hours for each occurrence of a lease or
transfer of a slot. For the largest operator, we assumed that a lease
or transfer of four slots would occur on average quarterly. For those
operators at Newark with 6 or more slots (12 carriers total, excluding
Continental Airlines), we assumed that a lease or transfer of a slot
would occur on average quarterly. For each operator with fewer than 6
slots (26 carriers total), we assumed that a lease or transfer of a
slot would occur on average biannually. The total annual hourly burden
for all carriers collectively would be 174 hours.
Section 93.169 (b), (d) One-for-One Trades of Slots
JFK
(18 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 108 hours.
(59 carriers) * (1.5 hours per submittal) * (2 occurrences per
year) = 177 hours.
Total Annual Hourly Burden = 285 hours.
Based on burden estimates from ``Congestion Management Rule for
LaGuardia Airport,'' we assumed the 77 carriers operating at JFK would
expend one and one half hours on paperwork for each occurrence of a
one-for-one trade of a slot. For each operator with 6 or more slots (18
carriers total), we assumed that a one-for-one slot trade would occur
on average quarterly. For each operator with fewer than 6 slots (59
carriers total), we assumed that a one-for-one slot trade would occur
on average biannually. The total annual hourly burden would be 285
hours.
Newark
(1 carrier) * (1.5 hours per submittal) * (16 occurrences per year)
= 24 hours.
(12 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 72 hours.
(26 carriers) * (1.5 hours per submittal) * (2 occurrences per
year) = 78 hours.
Total Annual Hourly Burden = 174 hours.
As with JFK, we assumed the 39 carriers operating at Newark would
expend one and one half hours on paperwork for each occurrence of a
one-for-one trade of a slot. For the largest operator, we assumed that
a one-for-one trade of four slots would occur on average quarterly. For
those operators at Newark with 6 or more slots (12 carriers total,
excluding Continental Airlines), we assumed that a one-for-one slot
trade would occur on average quarterly. For each operator with fewer
than 6 slots (26 carriers total), we assumed that a one-for-one slot
trade would occur on average biannually. The total annual hourly burden
would be 174 hours.
Section 93.172(a)-(b) Reporting Requirements
JFK
(77 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 462 hours
This estimate is based on burden estimates from the ``Congestion
Management Rule for LaGuardia Airport'' (Docket No. FAA-2006-25709;
Notice No. 08-04). We assume the 77 carriers operating at JFK would
expend, on average, one and one half hours two times per summer and
winter season to submit the data required by Sec. 93.172.
Newark
(39 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 234 hours.
This estimate is based on burden estimates from the ``Congestion
Management Rule for LaGuardia Airport'' (Docket No. FAA-2006-25709;
Notice No. 08-04). We assume the 39 carriers operating at Newark would
expend, on average, one and one half hours every two months to submit
the data required by Sec. 93.172.
Summary
JFK
Total First Year Hourly Burden--320 Hours.
Total First Year Hourly Burden Plus Recurring Cost in First Year--
3,816 Hours.
Total Recurring Annual Hourly Burden (per year for 10 years)--3,496
Hours.
Newark
Total First Year Hourly Burden--640 Hours.
Total First Year Hourly Burden Plus Recurring Cost in First Year--
2,470 Hours.
Total Recurring Annual Hourly Burden (per year for 10 years)--1,830
Hours.
The burden estimates for JFK and Newark do not include the time
required to participate in the annual auctions. The FAA provides
participation hour and cost estimates in its Final Regulatory
Evaluation for this rule.
According to the 1995 amendments to the Paperwork Reduction Act (5
CFR 1320.8(b)(2)(vi)), an agency may not collect or sponsor the
collection of information, nor may it impose an information collection
requirement unless it displays a currently valid OMB control number.
The OMB control number for this information collection will be
published in the Federal Register, after the Office of Management and
Budget approves it.
Regulatory Flexibility Determination
The Regulatory Flexibility Act of 1980 (RFA) establishes ``as a
principle of regulatory issuance that agencies shall endeavor,
consistent with the objective of the rule and of applicable statutes,
to fit regulatory and informational requirements to the scale of the
business, organizations, and governmental jurisdictions subject to
regulation.'' To achieve that principle, the RFA requires agencies to
solicit and consider flexible regulatory proposals and to explain the
rationale for their actions. The RFA covers a wide-range of small
entities, including small businesses, not-for-profit organizations, and
small governmental jurisdictions.
Agencies must perform a review to determine whether a proposed or
final rule would have a significant economic impact on a substantial
number of small entities. If the agency determines that it would, the
agency must prepare a regulatory flexibility analysis as described in
the Act.
However, if an agency determines that a proposed or final rule is
not expected to have a significant economic impact on a substantial
number of small entities, section 605(b) of the 1980 RFA provides that
the head of the agency may so certify and a regulatory flexibility
analysis is not required. The certification must include a statement
providing the factual basis for this determination, and the reasoning
should be clear. The basis for such FAA determination follows.
The final rule most directly affects four scheduled operators at
JFK (Delta Air Lines, JetBlue Airways, American Airlines, and United
Airlines) and six scheduled operators at Newark (Continental Airlines,
American Airlines, United Airlines, Delta Air Lines, U.S. Airways, and
Northwest Airlines). These carriers will receive one or more Limited
Slots. None of these carriers are small businesses. However, the FAA
considered that some small regional operators affiliated with these
carriers and using slots provided by these carriers could be affected.
Based on a review of the number of employees for each scheduled
operator, the FAA
[[Page 60567]]
found that only one scheduled operator (CommutAir) at JFK, and none at
Newark, are considered small by Small Business Administration size
standards (in this case, firms with 1,500 or fewer employees).
CommutAir operates under the name Continental Connection for
Continental Airlines. Continental Airlines has fewer than 20 operations
per day at JFK and therefore neither it nor CommutAir is affected by
this rule.
As discussed in more detail in the final rule, several commenters
expressed their concern that this rule may adversely affect service to
small communities because the rule will make operating at JFK and EWR
more expensive, particularly because such communities are served by
smaller aircraft with higher per seat costs.
The FAA believes that this rule will provide adequate opportunity
for services to small communities because more than 90 percent of slots
at JFK and EWR will not be affected, and the remaining less than 10
percent of slots will be auctioned in 2 percent increments over the
first five years of the rule. Moreover, once auctioned, a carrier may
or may not upgauge a slot. The agency believes that a system whereby
upgauging to larger aircraft is completely voluntary decreases the
likelihood of a wholesale withdrawal from smaller markets.
There may be a slight reduction in small community service by not
dedicating slots for those particular cities, but we believe market
conditions and fuel prices are the primary motivation for any reduction
in service rather than a consequence of federal action in this rule. We
believe market forces will generate appropriate allocations of slots
and do not believe it is appropriate to develop a separate class of
slots specifically for use to and from small communities.
Using Enhanced Traffic Management System (ETMS) data, the FAA has
determined that there are approximately 54 identifiable unscheduled
operators at JFK and 61 identifiable unscheduled operators at Newark
who could be affected by this rule. While some of these operators may
be small businesses, the FAA does not believe they will be
significantly impacted by this rulemaking. These operators typically
have greater flexibility to adjust operations and carry out very few
operations during peak hours compared to scheduled opearators. During
peak hours in the summer of 2007, there were fewer than two average
unscheduled operations per hour at each airport, whereas the proposed
rule would allow 1 to 2 operations per hour. In summary, while the
final rule reduces the number of unscheduled operations per hour, it
does not significantly affect the overall number of current unscheduled
operations that take place at each airport.
Using 2007 Census data, the FAA has also reviewed whether there
would be interruptions to service to communities with a population of
less than 50,000. We do not know if there will be any service
interruptions as a result of the rule. In the IRE, we reviewed
population statistics for every city served from JFK and Newark in
August 2007 (the base for initial allocation of slots under the
proposal) and found none with a population of less 50,000. The ATA,
however, identified two cities--Bangor, Maine, and Burlington,
Vermont--that it stated fell below 50,000 in population. The FAA notes,
however, that the metropolitan areas of these cities are well above
50,000, with Bangor at 91,000 as of 2000 and Burlington at 169,000.
The ATA identified an inconsistency in the definition of small
community that was used in the NPRM and the IRE. The FAA concedes that
the definition of a small community used in the IRE was too expansive,
involving any community served by a small or non-hub airport. The
correct definition for this rulemaking is the 50,000 threshold value
used in the NPRM.
Therefore, the FAA certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
International Trade Impact Assessment
The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the
Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal
agencies from establishing any standards or engaging in related
activities that create unnecessary obstacles to the foreign commerce of
the United States. Pursuant to these Acts, the establishment of
standards or engaging in related activities is not considered as
creating unnecessary obstacles to the foreign commerce of the United
States, so long as the standards and activities have a legitimate
domestic objective, such as the protection of safety, and do not
operate in a manner that excludes imports that meet this objective. The
statute also requires consideration of international standards and,
where appropriate, that they be the basis for U.S. standards. The FAA
notes the rule to establish slots and limited auctions of slot leases
at JFK and Newark is necessary for the efficient utilization of the
national airspace system, and has assessed the effects of this
rulemaking to ensure that the final rule will not impose costs or
barriers to international entities within the national airspace system.
Foreign entities at both JFK and Newark will not have any slots
classified as Limited Slots. Foreign carriers might benefit from the
rule if they choose to participate in the proposed auction to acquire
additional slots or to sublease slots in the secondary market. Several
foreign carriers further note that a reduction in service to small
communities could negatively affect their opportunities to provide a
wide variety of services with their U.S. carrier partners. As explained
above, the FAA believes that this rule will provide adequate
opportunity for services to small communities. Foreign trade will not
be adversely affected.
Unfunded Mandate Assessment
The Unfunded Mandate Reform Act of 1995 (the Act) is intended,
among other things, to curb the practice of imposing unfunded Federal
mandates on State, local, and tribal governments. Title II of the Act
requires each Federal agency to prepare a written statement assessing
the effects of any Federal mandate in a proposed or final agency rule
that may result in an expenditure of $100 million or more (adjusted
annually for inflation) in any one year by State, local, and tribal
governments, in the aggregate, or by the private sector; such a mandate
is deemed to be a ``significant regulatory action.'' The FAA currently
uses an inflation-adjusted value of $136.1 million in lieu of $100
million. This final rule does not contain such a mandate. The
requirements of Title II do not apply.
Executive Order 13132, Federalism
The FAA has analyzed this final rule under the principles and
criteria of Executive Order 13132, Federalism. We determined that this
action will not have a substantial direct effect on the States, on the
relationship between the national Government and the States, or on the
distribution of power and responsibilities among the various levels of
government, and, therefore, would not have federalism implications.
Environmental Analysis
FAA Order 1050.1E, ``Environmental Impacts: Policies and
Procedures'' identifies FAA actions that are normally categorically
excluded from preparation of an environmental assessment or
environmental impact statement under the National Environmental Policy
Act (NEPA) in the absence of extraordinary circumstances. The FAA has
determined that this rulemaking qualifies for the categorical
exclusions
[[Page 60568]]
identified in paragraph 312d ``Issuance of regulatory documents (e.g.,
Notices of Proposed Rulemaking and issuance of Final Rules)'' covering
administration or procedural requirements (does not include Air Traffic
procedures; specific Air Traffic procedures that are categorically
excluded are identified under paragraph 311 of this Order)'' and
paragraph 312f, ``Regulations, standards and exemptions (excluding
those which if implemented may cause a significant impact on the human
environment.)'' It has further been determined that no extraordinary
circumstances exist that may cause a significant impact and therefore
no further environmental review is required. The FAA has documented
this categorical exclusion determination. A copy of the determination
and underlying documents has been included in the Docket for this
rulemaking. FAA received no comments explicitly addressing the
documented categorical exclusion. Minor changes have been made to the
documentation that was available for the NPRM. FAA Order 1050.1E,
``Environmental Impacts: Policies and Procedures'' identifies FAA
actions that are normally categorically excluded from preparation of an
environmental assessment or environmental impact statement under the
National Environmental Policy Act (NEPA) in the absence of
extraordinary circumstances.
The FAA has determined that this rulemaking qualifies for the
categorical exclusions identified in paragraph 312d ``Issuance of
regulatory documents (e.g., Notices of Proposed Rulemaking and issuance
of Final Rules)'' covering administration or procedural requirements
(does not include Air Traffic procedures; specific Air Traffic
procedures that are categorically excluded are identified under
paragraph 311 of this Order)'' and paragraph 312f, ``Regulations,
standards and exemptions (excluding those which if implemented may
cause a significant impact on the human environment.)'' It has further
been determined that no extraordinary circumstances exist that may
cause a significant impact and therefore no further environmental
review is required. The FAA has documented this categorical exclusion
determination. A copy of the determination and underlying documents
will be included in the Docket for this rulemaking. FAA received no
comments explicitly addressing the documented categorical exclusion.
Minor changes have been made to the documentation that was available
for the NPRM.
Regulations That Significantly Affect Energy Supply, Distribution, or
Use
The FAA has analyzed this rule under Executive Order 13211, Actions
Concerning Regulations that Significantly Affect Energy Supply,
Distribution, or Use (May 18, 2001). We have determined that it is not
a ``significant energy action'' under the executive order because while
a ``significant regulatory action'' under Executive Order 12866, it is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy.
Availability of Rulemaking Documents
You can get an electronic copy of rulemaking documents using the
Internet by--
1. Searching the Federal eRulemaking Portal (http://
www.regulations.gov);
2. Visiting the FAA's Regulations and Policies web page at http://
www.faa.gov/regulations_policies/; or
3. Accessing the Government Printing Office's web page at http://
www.gpoaccess.gov/fr/index.html.
You can also get a copy by sending a request to the Federal
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence
Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make
sure to identify the docket number, notice number, or amendment number
of this rulemaking.
You may access all documents the FAA considered in developing this
final rule, including economic analyses and technical reports, from the
internet through the Federal eRulemaking Portal referenced in paragraph
(1).
VII. Regulatory Text
List of Subjects in 14 CFR Part 93
Air traffic control, Airports, Navigation (air).
0
In consideration of the foregoing, the Federal Aviation Administration
amends Chapter I of Title 14, Code of Federal Regulations, as follows:
PART 93--SPECIAL AIR TRAFFIC RULES
0
1. The authority for part 93 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40103, 40106, 40109, 40113, 44502,
44514, 44701, 44719, 46301.
0
2. Part 93 is amended by adding Subpart N to read as follows:
Subpart N--John F. Kennedy International Airport and Newark Liberty
International Airport Traffic Rules
Sec.
93.161 Applicability.
93.162 Definitions.
93.163 Slots for scheduled arrivals and departures.
93.164 Categories of slots.
93.165 Initial assignment of slots.
93.166 Assignment of new or returned slots.
93.167 Reversion and withdrawal of slots.
93.168 Sublease and transfer of slots.
93.169 One-for-one trade of slots.
93.170 Minimum usage requirements.
93.171 Unscheduled operations.
93.172 Reporting requirements.
93.173 Administrative provisions.
Subpart N--John F. Kennedy International Airport and Newark Liberty
International Airport Traffic Rules
Sec. 93.161 Applicability.
(a) This subpart prescribes the air traffic rules for the arrival
and departure of aircraft used for scheduled and unscheduled service,
other than helicopters, at John F. Kennedy International Airport (JFK)
and Newark Liberty International Airport (Newark).
(b) This subpart also prescribes procedures for the assignment,
transfer, sublease and withdrawal of slots issued by the FAA for
scheduled operations at JFK and Newark.
(c) The provisions of this subpart apply to JFK and Newark during
the hours of 6 a.m. through 10:59 p.m., Eastern Time. No person shall
operate any scheduled arrival or departure into or out of JFK or Newark
during such hours without first obtaining a slot in accordance with
this subpart. No person shall conduct an unscheduled operation to or
from JFK or Newark during such hours without first obtaining a
reservation.
(d) A U.S. Air Carrier conducting operations solely under another
carrier's marketing control with unified inventory control shall not be
considered a separate carrier for purposes of this rule.
(e) The slots assigned under this subpart terminate at 11 p.m. on
March 30, 2019.
Sec. 93.162 Definitions.
For purposes of this subpart, the following definitions apply:
Airport Reservation Office (ARO) is an operational unit of the
FAA's David J. Hurley Air Traffic Control System Command Center. It is
responsible for the administration of reservations for unscheduled
operations at JFK and Newark.
Baseline operations are those common slots held by a carrier at JFK
or Newark on December 9, 2008, that do not exceed 20 operations per
day.
Carrier is a U.S. or foreign carrier with authority to conduct
scheduled service
[[Page 60569]]
under parts 121, 129, or 135 of this chapter and the appropriate
economic authority for scheduled service under 14 CFR chapter II and 49
U.S.C. chapter 401, 411 and 413.
Common slot is a slot that is assigned by the FAA as a lease under
its cooperative agreement authority for the length of this rule.
Enhanced Computer Voice Reservation System (e-CVRS) is the system
used by the FAA to make arrival or departure reservations for
unscheduled operations at JFK, Newark, and other designated airports.
Limited slot is a slot held every day, the lease for which expires
prior to the expiration of this rule for subsequent award by the FAA as
an unrestricted slot.
New Entrant is any carrier that is administratively allocated a
total of 8 or fewer slots on any day of the week at JFK or Newark,
respectively, during controlled hours at any point during the duration
of the rule.
Public charter is defined in 14 CFR 380.2 as a one-way or roundtrip
charter flight to be performed by one or more direct carriers that is
arranged and sponsored by a public charter operator.
Public Charter Operator is defined in 14 CFR 380.2 as a U.S. or
foreign public charter operator.
Reservation is an authorization received by a carrier or other
operator of an aircraft, excluding helicopters, in accordance with
procedures established by the FAA to operate an unscheduled arrival or
departure on a particular day of the week during a specific 60-minute
period.
Scheduled operation is the arrival or departure segment of any
operation regularly conducted by a carrier between either JFK or Newark
and another point regularly served by that carrier.
Slot is the operational authority assigned by the FAA to a carrier
to conduct one scheduled operation or a series of scheduled operations
at JFK or Newark on a particular day(s) of the week during a specific
30-minute period.
Summer Scheduling Season begins on the last Sunday of March.
Unrestricted slot is a slot that is awarded to a carrier by the FAA
via the auction of a lease.
Unscheduled operation is an arrival or departure segment of any
operation that is not regularly conducted by a carrier or other
operator of an aircraft, excluding helicopters, between JFK or Newark
and another service point. The following types of carrier operations
shall be considered unscheduled operations for the purposes of this
rule: public, on-demand, and other charter flights; hired aircraft
service; extra sections of scheduled flights; ferry flights; and other
non-passenger flights.
Winter Scheduling Season begins on the last Sunday in October.
Sec. 93.163 Slots for Scheduled Arrivals and Departures.
(a) During the hours of 6 a.m. through 10:59 p.m., Eastern Time, no
person shall operate any scheduled arrival or departure into or out of
JFK or Newark without first obtaining a slot in accordance with this
subpart.
(b) Except as otherwise established by the FAA under paragraph (c)
of this section, the number of slots shall be limited to no more than
eighty-one (81) per hour at JFK and eighty-one (81) per hour at Newark.
At JFK, the number of slots may not exceed 44 in any 30-minute period,
and 81 in any 60-minute period. At Newark, the number of slots may not
exceed 44 in any 30-minute period and 81 in any 60-minute period. The
number of arrival and departure slots in any period may be adjusted by
the FAA as necessary based on the actual or potential delays created by
such number or other considerations relating to congestion, airfield
capacity and the air traffic control system.
(c) Notwithstanding paragraph (b) of this section, the
Administrator may increase the number of slots based on a review of the
following:
(1) The number of delays;
(2) The length of delays;
(3) On-time arrivals and departures;
(4) The number of actual operations;
(5) Runway utilization and capacity plans; and
(6) Other factors relating to the efficient management of the
National Airspace System.
Sec. 93.164 Categories of Slots.
(a) General. Each slot shall be designated as a common slot,
limited slot or unrestricted slot and shall be allocated to the carrier
under a lease agreement. A lease for a common or limited slot shall be
assigned via a cooperative agreement. A lease for an unrestricted slot
shall be awarded via an auction.
(b) Common slots.
(1) All slots within any carrier's baseline operations, as
determined on December 9, 2008, shall be designated as common slots.
(2) Ten percent of the slots at JFK and Newark on December 9, 2008
not otherwise designated as common slots under paragraph (b)(1) of this
section shall be designated as limited slots. All other slots shall be
designated as common slots.
(c) Limited slots. Those slots assigned to a carrier subject to
return to the FAA under Sec. 93.165(c) shall be designated as limited
slots until the date of their reallocation by the FAA as unrestricted
slots. A carrier may continue to use a limited slot that has reverted
to the FAA until the date of its reallocation.
(1) Each carrier with a total number of daily operations at JFK or
Newark in excess of its baseline operations will be notified by no
later than December 9, 2008 how many of its slots will be designated as
limited slots pursuant to paragraphs (c)(2) and (3) of this section.
(2) A carrier shall designate 50 percent of its limited slots. The
carrier must notify the FAA of its determination by December 19, 2008.
(3) The FAA will designate the remaining limited slots initially
excluding those hours in which two or more slots have been designated
as limited slots by the carriers.
(4) No later than December 29, 2008, the FAA will publish a list of
all limited slots and the dates upon which they will expire.
(d) Unrestricted slots. Unrestricted slots are slots acquired by a
carrier through a lease with the FAA awarded via an auction.
Unrestricted slots are not subject to withdrawal by the FAA.
Sec. 93.165 Initial assignment of slots.
(a) Except as provided for under paragraphs (b) and (c) of this
section, any carrier utilizing operating rights allocated under the
Order limiting operations at JFK or the Order limiting operations at
Newark as evidenced by the FAA's records, will be assigned
corresponding slots in 30-minute periods consistent with the limits
under Sec. 93.163(b) and its summer and winter season schedules as
approved by the FAA. If necessary, the FAA may utilize administrative
measures such as voluntary measures or a lottery to re-time the
assigned slots within the same hour to meet the 30-minute limits under
Sec. 93.163(b). The FAA Vice President, System Operations Services, is
the final decision-maker for determinations under this section.
(b) If a carrier was allocated operating rights under the Order
limiting operations at JFK or the Order limiting operations at Newark,
but the operating rights were held by another carrier, then the
corresponding slots will be assigned to the carrier that held the
operating rights for that period, as evidenced by the FAA's records.
(c) Starting January 13, 2009, and every year thereafter through
2013, one-fifth of the total number of Limited slots shall revert to
the FAA in accordance with the schedule published under
[[Page 60570]]
Sec. 93.164(c)(4) and be auctioned as unrestricted slots by the FAA.
Any slot receiving no responsive bids will be retired until the next
auction. An affected carrier will be allowed to use the limited slot
until the date of its reallocation by the FAA as an unrestricted slot.
Sec. 93.166 Assignment of new or returned slots.
(a) This section describes the process by which the FAA assigns new
slots, as well as slots returned to the FAA pursuant to the provisions
of Sec. 93.170. These slots will be assigned by the FAA to requesting
carriers for the summer and winter scheduling seasons.
(b) Requests for the new slots or returned slots or both must be
submitted to the Federal Aviation Administration, Slot Administration
Office, AGC-200, 800 Independence Avenue, SW., Washington, DC 20591
(Facsimile: (202) 267-7277; e-mail: 7-awa-slotadmin@faa.gov), by the
deadline as published by the FAA in a Federal Register notice for each
summer and winter scheduling season. The requesting carrier must submit
its entire schedule at JFK and Newark for the particular season, noting
which requests are in addition to, or changes from, the previous
corresponding season at the respective airports.
(c) Before assigning new or returned slots under this section, the
FAA will first accommodate carrier requests to retime slots for
operational reasons or to bring the flight time closer to the time
originally requested by the applicant carrier in previous corresponding
seasons, as reflected in FAA records.
(d) After accommodating carrier requests for retiming of slots, the
FAA will assign 50% of the new slots and returned slots to new
entrants, unless requests by new entrants constitute fewer than 50% of
available slots.
(e) With the remaining available slots, if all requests for slots
under this section cannot be accommodated, the FAA will give priority
to requests to introduce year-round service or to extend an existing
operation to a year-round operation.
(f) Thereafter, the FAA will assign slots considering all relevant
factors including:
(1) The effective period of operation;
(2) The extent and regularity of intended use of a slot;
(3) Schedule constraints of carriers requesting slots.
Sec. 93.167 Reversion and withdrawal of slots.
(a) This section does not apply to unrestricted slots.
(b) A carrier's common slots or limited slots at JFK or Newark
revert back to the FAA 30 days after the carrier has ceased all
operations at the respective airport(s) for any reasons other than a
strike.
(c) The FAA may retime, withdraw, or temporarily suspend common
slots and limited slots at any time to fulfill operational needs.
(d) Common slots and limited slots temporarily withdrawn for
operational need will be withdrawn in accordance with the priority list
established under Sec. 93.173 and international obligations.
(e) Except as otherwise provided in paragraph (a) of this section,
the FAA will notify an affected carrier before withdrawing or
temporarily suspending a common slot or limited slot and specify the
date by which operations under the common slot or limited slot must
cease. The FAA will provide at least 45 days' notice unless otherwise
required by operational needs.
(f) Any common slot or limited slot that is temporarily withdrawn
under this paragraph will be reassigned, if at all, only to the carrier
from which it was withdrawn, provided the carrier continues to conduct
scheduled operations at the respective airport.
(g) Should the Administrator determine that the cap on scheduled
operations at Newark or JFK is too high, he may withdraw common slots
to reduce the cap. Any such action by the Administrator shall be
subject to the notice and comment provisions of the Administrative
Procedure Act.
Sec. 93.168 Sublease and transfer of slots.
(a) A carrier may sublease its slots to another carrier in
accordance with this section and subject to the provisions of the
carrier's lease agreement with the FAA. The character of the slot
(e.g., common slot) will not change.
(b) A carrier must provide notice to the FAA to sublease a slot.
Such notice must contain: the slot number and time, effective dates
and, if appropriate, the duration of the lease. The carrier may also
provide the FAA with a minimum bid price.
(c) The FAA will post a notice of the offer to sublease the slot
and relevant details on the FAA Web site at http://www.faa.gov. An
opening date, closing date and time by which bids must be received will
be provided.
(d) Upon consummation of the transaction, written evidence of each
carrier's consent to sublease must be provided to the FAA, as well as
all bids received and the terms of the sublease, including but not
limited to:
(1) The names of all bidders and all parties to the transaction;
(2) The offered and final length of the sublease;
(3) The consideration offered by all bidders and provided by the
sublessee.
(e) The slot may not be used until the conditions of paragraph (d)
of this section have been met, and the FAA provides notice of its
approval of the sublease.
(f) Slots may be transferred among a U.S. carrier and another
carrier that conducts operations at JFK or Newark solely under the
transferring carrier's marketing control, including the entire
inventory of the flight. Each party to such transfer must provide
written evidence of its consent to the transfer and the FAA must
confirm and approve these transfers in writing prior to the effective
date of the transaction. However, the FAA will approve transfers under
this paragraph up to five business days after the actual operation to
accommodate operational disruptions that occur on the same day of the
scheduled operation. The FAA Vice President, System Operations Services
is the final decision-maker for any determinations under this section.
(g) A carrier wishing to sublease a slot via an FAA auction under
Sec. 93.165, rather than pursuant to this section, may do so. The
carrier shall retain the proceeds and the slot shall retain the same
designation that it had prior to the carrier placing it up for auction.
Sec. 93.169 One-for-one trade of slots.
(a) A carrier may trade a slot with another carrier on a one-for-
one basis.
(b) Written evidence of each carrier's consent to the trade must be
provided to the FAA.
(c) No recipient of the trade may use the acquired slot until
written confirmation has been received from the FAA.
(d) Carriers participating in a one-for-one trade must certify to
the FAA that no consideration or promise of consideration was provided
by either party to the trade.
Sec. 93.170 Minimum usage requirements.
(a) This section does not apply to unrestricted slots.
(b) Any common slot or limited slot included in a summer or winter
season schedule approved by the FAA that is not used at least 80
percent of the time during the period for which it is assigned will be
withdrawn by the FAA.
(c) The FAA may waive the requirements of paragraph (b) of this
section in the event of a highly unusual and unpredictable condition
which is beyond the control of the carrier and which affects carrier
operations for a period of five or more consecutive days.
[[Page 60571]]
Examples of conditions which could justify a waiver under this
paragraph are weather conditions that result in the restricted
operation of the airport for an extended period of time or the
grounding of an aircraft type.
(d) The FAA will treat as used any common slot or limited slot held
by a carrier on Thanksgiving Day, the Friday following Thanksgiving
Day, and the period from December 24 through the first Sunday of
January.
Sec. 93.171 Unscheduled operations.
(a) During the hours of 6 a.m. through 10:59 p.m. Eastern Time, no
person may operate an aircraft other than a helicopter to or from JFK
or Newark unless he or she has received, for that unscheduled
operation, a reservation that is assigned by the Airport Reservation
Office (ARO) or in the case of public charters, in accordance with the
procedures in paragraph (d) of this section. Requests for reservations
will be accepted through the e-CVRS beginning 72 hours prior to the
proposed time of arrival to or departure from JFK or Newark. Additional
information on procedures for obtaining a reservation is available on
the Internet at http://www.fly.faa.gov/ecvrs.
(b) Reservations, including those assigned to public charter
operations under paragraph (d) of this section, will be available to be
assigned by the ARO on a 60-minute basis as follows:
(1) At JFK, two reservations per hour between 6 a.m. and 1:59 p.m.
and between 10 p.m. and 10:59 p.m. and one reservation per hour between
2 p.m. and 9:59 p.m.
(2) At Newark, two reservations per hour between 6 a.m. and 11:59
a.m. and between 10 p.m. and 10:59 p.m. and one reservation per hour
between 12 noon and 9:59 p.m.
(c) The ARO will receive and process all reservation requests for
unscheduled arrivals and departures at JFK and Newark. Reservations are
assigned on a ``first-come, first-served'' basis determined by the time
the request is received at the ARO. Reservations must be cancelled if
they will not be used as assigned.
(d) One reservation per hour will be available for assignment to
public charter operations prior to the 72-hour reservation window in
paragraph (a) of this section. No more than 25 percent of the
reservations available from 12 noon through 9:59 p.m. will be made
available to public charter operations under this paragraph.
(1) The public charter operator may request a reservation up to six
months in advance of the date of the flight operation. Reservation
requests should be submitted to Federal Aviation Administration, Slot
Administration Office, AGC-200, 800 Independence Avenue, SW.,
Washington, DC 20591. Submissions may be made via facsimile to (202)
267-7277 or by e-mail to: 7-awa-slotadmin@faa.gov.
(2) The public charter operator must certify that its prospectus
has been accepted by the Department of Transportation in accordance
with 14 CFR part 380.
(3) The public charter operator must identify the call sign/flight
number or aircraft registration number of the direct air carrier, the
date and time of the proposed operation(s), the airport served
immediately prior to or after JFK or Newark, aircraft type, and the
nature of the operation (e.g., ferry or passenger). Any changes to an
approved reservation must be approved in advance by the Slot
Administration Office.
(4) If reservations under paragraph (d)(1) of this section have
already been assigned, the public charter operator may request a
reservation under paragraph (a) of this section.
(e) The filing of a request for a reservation does not constitute
the filing of an IFR flight plan as required by regulation. The IFR
flight plan may be filed only after the reservation is obtained, must
include the reservation number in the ``Remarks'' section, and must be
filed in accordance with FAA regulations and procedures.
(f) Air Traffic Control will accommodate declared emergencies
without regard to reservations. Non-emergency flights in direct support
of national security, law enforcement, military aircraft operations, or
public-use aircraft operations may be accommodated above the
reservation limits with the prior approval of the Vice President,
System Operations Services, Air Traffic Organization. Procedures for
obtaining the appropriate waiver will be available on the Internet at
http://www.fly.faa.gov/ecvrs.
(g) Notwithstanding the limits in paragraph (b) of this section, if
the Air Traffic Organization determines that air traffic control,
weather and capacity conditions are favorable and significant delay is
unlikely, the FAA may determine that additional reservations may be
accommodated for a specific time period. Unused slots may also be made
available temporarily for unscheduled operations. Reservations for
additional operations must be obtained through the ARO.
(h) Reservations may not be bought, sold or leased.
Sec. 93.172 Reporting requirements.
(a)(1) No later than September 1 for the summer scheduling season
and February 1 for the winter scheduling season, each carrier holding a
common slot or limited slot must submit an interim report of slot usage
for each day of the applicable scheduling season. (2) No later than 30
days after the last day of the applicable scheduling season, each
carrier must submit a final report of the completed operations for each
day of the entire scheduling season.
(b) Such reports, in a format acceptable to the FAA, must contain
the following information for each common slot or limited slot:
(1) The slot number, time, and arrival or departure designation;
(2) The operating carrier;
(3) The date and scheduled time of each of the operations conducted
pursuant to the slot, including the flight number, and origin/
destination, and aircraft type identifier; and
(4) Whether a flight was actually operated.
(c) The FAA may withdraw the slot of any carrier that does not meet
the reporting requirements of paragraph (a) of this section.
Sec. 93.173 Administrative provisions.
(a) Each slot shall be assigned a number for administrative
convenience.
(b) The FAA will assign priority numbers by random lottery for
common slots and limited slots at JFK and Newark. Each common slot and
limited slot will be assigned a withdrawal priority number, and the 30-
minute time period for the common slot or limited slot, frequency, and
the arrival or departure designation.
(c) If the FAA determines that operations need to be reduced for
operational reasons, the lowest assigned priority number common slot or
limited slot will be the last withdrawn.
(d) Any slot available on a temporary basis may be assigned by the
FAA to a carrier on a non-permanent, first-come, first-served basis
subject to permanent assignment under this subpart. Any remaining slots
may be made available for unscheduled operations on a non-permanent
basis and will be assigned under the same procedures applicable to
other operating reservations.
(e) All transactions under this subpart must be in a written or
electronic format approved by the FAA.
Issued in Washington, DC, on October 6, 2008.
Robert A. Sturgell,
Acting Administrator.
[FR Doc. E8-24046 Filed 10-9-09; 8:45 am]
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