Browse by Year
/ 2008
/ October
/ Friday, October 10, 2008
[Federal Register: October 10, 2008 (Volume 73, Number 198)]
[Rules and Regulations]
[Page 60573-60601]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10oc08-18]
[[Page 60573]]
-----------------------------------------------------------------------
Part VIII
Department of Transportation
-----------------------------------------------------------------------
Federal Aviation Administration
-----------------------------------------------------------------------
14 CFR Part 93
Congestion Management Rule for LaGuardia Airport; Final Rule
[[Page 60574]]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 93
[Docket No. FAA-2006-25709; Amendment No. 93-87]
RIN 2120-AI70
Congestion Management Rule for LaGuardia Airport
AGENCY: Federal Aviation Administration (FAA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Today the FAA is publishing a final rule to address congestion
at New York's LaGuardia Airport (LaGuardia). The rule grandfathers the
majority of operations at the airport and will develop a robust
secondary market by annually auctioning off a limited number of slots;
the FAA plans to use the proceeds from the auctions to mitigate
congestion and delay in the New York City area. In addition, the hourly
cap on scheduled operations will be reduced to 71 per hour during the
regulated hours. This reduction will lead to an estimated 41 percent
reduction in modeled delay at the airport. This rule also contains
provisions for use-or-lose, 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-200, 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 Retire and 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 Air 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
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 Final Rule
A. Allocation of Slots at LaGuardia
1. Proposed Options
2. Categories of Slots
3. Initial Allocation of Slots
4. Retirement of Slots
5. Market-Based Reallocation of Slots
a. Network Effects of Auctions
b. Impacts of Auctions on Competition
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 for Future Reductions in
the Cap
2. Limit on Arrivals and Departures
3. Common Ownership
4. Impact of the Final Rule on the Port Authority's Ability To
Run Its Airport
V. Potential Loss of Service to Small Communities
VI. Regulatory Notices and Analyses
VII. Regulatory Text
I. Background
This final rule is the latest action in a long history of
congestion management at one of the most delayed airports in the United
States. Although service at LaGuardia is almost exclusively domestic,
access to the airport 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 LaGuardia, demand for the
associated airspace has long out-stripped capacity.
The FAA managed congestion at LaGuardia 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 air carrier access to the airspace immediately
surrounding the airport. Prior to 1985 the carriers at the airport,
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 operation (slots) by categories of users (i.e.,
air 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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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
88), 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 88, 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 60575]]
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
these carriers' access to slot-controlled airports 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.
---------------------------------------------------------------------------
\2\ Commenters appear to have forgotten this rulemaking action
when arguing that the withdrawal of slots for reallocation is
unprecedented.
---------------------------------------------------------------------------
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 LaGuardia effective January 1, 2007. In addition
to phasing out the HDR, AIR-21 directed the Secretary of Transportation
to grant two types of exemption from the HDR's flight restrictions. The
first type of exemption was designed to promote more competition at
slot-constrained airports and required the Secretary to grant
exemptions to a new entrant or limited incumbent for 20 flights per
carrier. The second type of exemption was aimed at improving service to
small communities and required the Secretary to grant exemptions to a
carrier operating an aircraft with less than 71 seats to Small-Hub or
Non-Hub airports for an unrestricted number of flights. 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).
Although the slot exemptions mandated by Congress under AIR-21
opened up access to LaGuardia; they also resulted in a significant
increase in delays at the airport as the number of small community
exempted operations soared throughout 2000. Using its authority in 49
U.S.C. 40103, the FAA capped AIR-21 slot exemptions at LaGuardia. While
the number of allowable scheduled operations under the HDR remained
constant at 62 per hour, the actual number of scheduled operations rose
to 75 per hour \3\ even though there were no significant increases in
the airspace or airport capacity. Thus, Congress' actions to improve
access resulted in significantly higher delays at LaGuardia than there
were before 2000.
---------------------------------------------------------------------------
\3\ There are two hours during the day when scheduled operations
exceed 75. At 9 a.m. there are a total of 76 scheduled operations,
and at 5 p.m. there are a total of 77.
---------------------------------------------------------------------------
Slots allocated under the HDR at LaGuardia were scheduled to expire
on January 1, 2007. Based on its experience in 2000, the FAA determined
that simply lifting the HDR at LaGuardia would result in a significant
increase in delays and adversely impact the airspace around New York
City and on the National Airspace System (NAS) as a whole. Accordingly,
on August 29, 2006, the FAA published a notice of proposed rulemaking
(NPRM) proposing continuation of the existing cap of 75 scheduled and
six unscheduled hourly operations as well as a new method of allocating
capacity (71 FR 51360). In addition to retaining the existing cap, the
FAA proposed to impose an average minimum aircraft size requirement for
much of the fleet serving the airport. By incentivizing carriers to use
larger aircraft, the proposal would have maximized passenger throughput
consistent with the airport's physical constraints. The FAA also
proposed to implement a limit on the duration of the slots that would
assure ten percent of the capacity at the airport would be available
annually for reallocation based on an undetermined market mechanism
that the FAA intended to administer via regulation.
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 interests in 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)(6). However, it
did refer to its statutory reauthorization proposal, which was part of
a comprehensive change to how the FAA would be financed. The FAA's
proposed reauthorization package, the Next Generation Air
Transportation System Financing Reform Act of 2007, would substitute
new user fees for passenger ticket taxes, would permit the airport
operators (such as the Port Authority of New York and New Jersey (Port
Authority)) at constrained and delayed airports to assess market-based
fees, and would also allow 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.
Rather, this rule recognizes the property interest the FAA acquires or
constructs in the navigable airspace for scheduled flight operation and
provides for the assignment of this property interest through lease
agreements with the carriers. The FAA's reauthorization legislation has
been held up for reasons unrelated to this rulemaking, and the proposed
legislation was never adopted.
The FAA recognized that it would be unable to complete its
rulemaking by January 1, 2007, when the HDR was scheduled to expire.
Indeed, since the agency had extended the comment period at the request
of several interested parties, the comment period for the NPRM did not
close until December 29, 2006. On December 27, 2006, after providing
for notice and comment, the agency published an FAA Order Operating
Limitations at New York LaGuardia Airport (LaGuardia Order) (71FR
77854).\4\ The LaGuardia Order retained the existing cap at the airport
of 75 scheduled operations and imposed a reservation system for
unscheduled operations that permitted six unscheduled operations per
hour. The LaGuardia Order did not distinguish between operations
conducted pursuant to HDR slots and AIR-21 slot exemptions; rather,
flights conducted pursuant to the exemptions were rolled into the
hourly cap without restriction. The slots and exemptions were
grandfathered to the current holder as ``Operating Authorizations''.
The Order also explicitly linked its duration to the publication of a
final rule and noted that no rights to Operating Authorizations
allocated under the Order would survive beyond the Order. No one
challenged the FAA's authority to re-impose caps at the airport
[[Page 60576]]
following the expiration of the HDR or the terms of the Order.
---------------------------------------------------------------------------
\4\ The LaGuardia Order was amended on November 8, 2007 (72 FR
63224) and again on August 19, 2008 (73 FR 48248).
---------------------------------------------------------------------------
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. 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.
After evaluating the comments received to the 2006 NPRM and the
input of the NYARC, the FAA moved forward with its rulemaking action to
address congestion at LaGuardia. Rather than pursue its earlier
proposal to require upgauging and reallocate ten percent of the
existing capacity each year, the FAA published a supplemental notice of
proposed rulemaking (SNPRM) on April 16, 2008 proposing to lease the
majority of operations at the 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
different options. Under the first option, the FAA, after retiring a
small portion of the slots, would auction off eight percent of the
slots to any carrier serving or wishing to serve LaGuardia 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
option, the FAA would not retire any slots and would conduct an auction
of twenty percent of the slots. The proceeds would go to the carrier
holding the slot after the FAA recouped the cost of the auction. The
SNPRM also contained provisions for use-or-lose, unscheduled
operations, and withdrawal for operational need. The FAA proposed to
sunset the rule in ten years.
The comment period for the SNPRM closed June 16, 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.
Twenty-six interested parties filed comments to the docket
addressing the SNPRM. 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 SNPRM 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. While other commenters did not completely object to an
auction mechanism, they did note that the timing was not right or that
the auction procedures needed to be fully developed prior to conducting
any auction.
Effective August 28, 2008, the FAA reduced the number of
reservations available for unscheduled operations from six to three. 73
FR 48428.
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. ODRA did not, however, issue an
opinion on whether the underlying slots constituted property.
On the same day the General 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 because it does not believe the
auction of a slot constitutes a user fee and because the GAO appeared
to apply an exceptionally narrow definition of property that ignores
expansive statutory provisions within the agency's various enabling
statutes and the fact that carriers have treated slots as property for
approximately 25 years. Accordingly, the FAA has decided to proceed
with the adoption of this final rule.
II. Summary of the Final Rule
Today's rule considers not only the concerns raised by commenters
in response to the NPRM and SNPRM, but also takes into account the
extensive discussions and issues raised by members of the NYARC. The
FAA is imposing a cap on scheduled operations of 71 per hour from 6
a.m. to 9:59 p.m., effective March 8, 2009. Until that date, the cap on
scheduled operations will remain at 75 per hour. This reduction in the
cap represents a five percent retirement of existing slots at the
airport and should significantly improve delays at the airport.
Unscheduled operations continue to be capped at three per hour, with
additional flights authorized when conditions permit.
In addition, approximately 85 percent \5\ of the total number of
slots currently in use at the airport will be ``grandfathered'' to
carriers who hold the corresponding Operating Authorization under the
LaGuardia Order pursuant to cooperative lease agreements for a period
of ten years. These slots are called ``Common Slots''.
[[Page 60577]]
Carriers will not pay any monetary consideration for these slots. Of
the remaining 15 percent of slots, one-third (or five percent of
existing capacity) will be retired at the end of the winter scheduling
season. These slots are called ``Limited Slots'', as are the remaining
approximately ten percent of the slots, which will be terminated and
reallocated over a five year period, commencing March 8, 2009. The FAA
intends to conduct the first auction of these slots in January 2009,
and the affected carrier will be permitted to use the slot until the
successful bidder acquires it in March. The reallocated slots, called
``Unrestricted Slots'' after reallocation, will be awarded to the
successful bidder(s) via lease agreements that will last until this
rule expires, March 9, 2019.
---------------------------------------------------------------------------
\5\ This rule will withdraw 16.5 percent of carriers' existing
Operating Authorizations above the base of operations. Currently
unallocated capacity will also be available for auction or
retirement. This represents approximately 15 percent of the total
number of slots at the airport.
---------------------------------------------------------------------------
All slots may be transferred via a secondary market. Carriers may
continue to engage in direct negotiations. To facilitate opportunities
for participation in the secondary market, however, all available slot
sub-leases must be advertised on an FAA-run bulletin board, and the
Department will monitor transactions for anti-competitive behavior.
As proposed, Limited and Common Slots will be subject to an 80
percent usage requirement and may be withdrawn for operational need. In
addition, Common Slots may be subject to reversion, following notice
and an opportunity to comment, should the FAA determine the cap at the
airport is too high.
III. Authority To Retire and Reallocate Capacity
The Air Transport Association of America (ATA), the Port Authority,
American Airlines, Delta Airlines and United Airlines 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 an air 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'
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 air 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.
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).\6\ 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.
---------------------------------------------------------------------------
\6\ 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).
---------------------------------------------------------------------------
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).\7\ 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 LaGuardia and to
accommodate changes in the business strategies of air carriers using
LaGuardia airport.
---------------------------------------------------------------------------
\7\ This section of law describes the policies that the
Department of Transportation must take into consideration when
carrying out its economic regulaory authority over the aviation
industry. This section also is a clear statement by Congress of a
valid public policy aim the FAA is permitted to take into
consideration.
---------------------------------------------------------------------------
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 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.
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.\8\ Thus, the
statement made in 1985 is no longer correct.
---------------------------------------------------------------------------
\8\ 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.
---------------------------------------------------------------------------
The circumstances surrounding the statement made in 2006,\9\ did
not address the authorities conferred on the FAA by the Acquisition
Management System Act. The FAA has authority to lease property to
others, and to receive adequate compensation for this temporary
disposal of property,
[[Page 60578]]
including the authority to lease the slots at LaGuardia.
---------------------------------------------------------------------------
\9\ Statements were also made in environmental assessments in
2005 and 2007 that indicated that legislation might be needed to
implement market-based approaches to congestion management. These
statements are too vague to determine whether they are correct with
respect to the issue at hand.
---------------------------------------------------------------------------
As briefly discussed in the SNPRM, 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 simply
extend the existing LaGuardia Order indefinitely. The agency rejected
this option because the Order was never intended to be a long-term
solution and it perpetuates the inefficiencies contained within the
HDR. Likewise, the FAA could have pursued a final rule 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 is 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
Both the Port Authority and the ATA submit that the FAA has no
property rights in the slots the FAA proposes to auction.\10\ While the
ATA does not question that the slots are property (it disputes
ownership), the Port Authority states that the slots are ``neither
physical property, real property, intellectual property, nor an
intangible property recognized in common law.'' \11\
---------------------------------------------------------------------------
\10\ 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.
\11\ The Port Authority also uses the language in the preamble
to the SNPRM as evidence that the slots are not property because the
FAA states 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 carrieres 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.
---------------------------------------------------------------------------
The Port Authority is incorrect; slots are an intangible form of
property that may be leased. On December 27, 2006, the FAA issued an
Order limiting operations at LaGuardia pursuant to its broad authority
to regulate the use of navigable airspace under 49 U.S.C. 40103(b). 71
FR 77854 (December 27, 2006). That Order defines an Operating
Authorization \12\ as ``the operation authority assigned by the FAA to
a carrier to conduct a scheduled arrival or departure operation. * * *
.'' Id. at 77859. The Order expressly allows the trading and leasing of
Operating Authorizations. Id. at 77860. Although the Order does not
permit the permanent sale or purchase of Operating Authorizations, it
permits any form of consideration to be used in the lease or trade of
these Operating Authorizations. Id. at 7857. In addition, the Order
states that it ``is not intended to prohibit an air carrier from
contractually arranging to pledge an interest in an Operating
Authorization to a person, for use as collateral or otherwise, for the
duration of the Order.'' Id.
---------------------------------------------------------------------------
\12\ As the preamble to the current SNPRM states, the earlier
Order and NPRM used the ``Operating Authorizations'' to describe
what are called slots under the SNPRM. Both Operating Authorizations
and slots represent property interests, but the FAA has deferred to
common usage by reverting to the term ``slots.''
---------------------------------------------------------------------------
This Order reflects 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. Indeed, the ATA's own
members have treated Operating Authorizations, and the HDR 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 does not dispute that the slots
constitute a property interest; rather it argues that the property
interest is not the FAA's, because it is created at or after the
transfer to an air carrier.\13\ 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).
---------------------------------------------------------------------------
\13\ The airline commenters agree with ATA's assessment that the
slots are property of the airlines not of the FAA. See, Comments of
U.S. Airways Group, Inc. at 24. But see, Comments of American
Airlines at 7 stating that the Port Authority holds the property
interest.
---------------------------------------------------------------------------
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
[[Page 60579]]
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.\14\ 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.
---------------------------------------------------------------------------
\14\ The FCC, like the FAA, had a statutory preference for
competition prior to the requirement that it conduct auctions.
---------------------------------------------------------------------------
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) \15\ 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).
---------------------------------------------------------------------------
\15\ Such as authorized access to particular radio frequencies
and authorized use of intellectual property.
---------------------------------------------------------------------------
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.\16\ Consolidated Appropriations Act, 2008, Public
Law 110-161. The ATA also suggests that the wording of 49 U.S.C.
106(l)(6) \17\ 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 argues 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 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 LaGuardia, the
function of disposing of its interest in the slots becomes applicable.
---------------------------------------------------------------------------
\16\ 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 LaGuardia, defines the different types of slots, establishes
a reversion of 15% 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.
\17\ 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).
---------------------------------------------------------------------------
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
LaGuardia 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 (DC 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.\18\ 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
[[Page 60580]]
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 LaGuardia. 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 LaGuardia 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
travelling public will benefit.
---------------------------------------------------------------------------
\18\ 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.
---------------------------------------------------------------------------
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 (DC 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 SNPRM, one of the options proposed by the FAA was to allow the
carriers 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 LaGuardia 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 LaGuardia.
Carriers serving LaGuardia 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.\19\
---------------------------------------------------------------------------
\19\ 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.
---------------------------------------------------------------------------
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 up to
20 slots to all air carriers currently operating at the airport, and 85
percent of the remaining slots to the air carriers currently operating
at LaGuardia in proportion to their current operations, the FAA is
encouraging those air 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
LaGuardia.
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 air 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 option 1 and inadequate in option 2. The FAA strongly
disagrees with the contention that the slot auctions contemplated in
this rule are in any way an impermissible taking.\20\ First and
foremost, in order to be a taking, the air carriers would need to have
a possessory interest in the slots and they do not. For bankruptcy
purposes, air 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 to be taken. The Order establishing Operating
Authorizations at LaGuardia was of a fixed duration and any rights the
air carriers may have had in those operating authorizations will
automatically terminate when this rule becomes final.
---------------------------------------------------------------------------
\20\ The preamble to the SNPRM also addresses this issue and
provides the Supreme Court decisions supporting the FAA's position.
---------------------------------------------------------------------------
Slots transferred to air 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 air 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
[[Page 60581]]
have varying termination dates as agreed upon by the FAA and each
carrier.\21\ When the termination date arrives, any property interest
the air carrier may have in the slot similarly automatically ends.
There is no more a taking of air carrier property than there would be
in the eleventh year of a ten year lease of FAA real property to an air
carrier.
---------------------------------------------------------------------------
\21\ 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.
---------------------------------------------------------------------------
The ATA and the air 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.\22\ 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 air 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 \23\ 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.
---------------------------------------------------------------------------
\22\ 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.
\23\ Unlike the operating authorizations provided under the
LaGuardia Order, where the date of the termination of the carriers'
property interest could not be known with absolute certainty other
than it would be when this final rule becomes effective (it
admittedly has taken longer than the FAA contemplated to issue this
final rule) the slots that will be awarded as the result of an
auction have a firm term of 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.
---------------------------------------------------------------------------
The ATA and the air 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 also overstates the extent of the alleged harm. Under the
option selected in this rule, air carriers will get to keep, at a
minimum, approximately 85 percent of their current slots and for all
but eight airlines, they will get to keep 100 percent of their current
slots.
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, DC 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 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 argues 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.
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 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
[[Page 60582]]
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 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 Airlines
believe that the SNPRM 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). 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 were 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 Sec. 40103 is consistent with the
authority that the FAA has exercised at LaGuardia 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 95 percent of the air traffic coming into the
airport during the same time periods as currently exists at the
airport. The only change will be the result of the five percent
reduction in capacity.
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 LaGuardia 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 LaGuardia. 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.
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 Port Authority also claimed
that it could not adequately evaluate the appropriateness of the
proposed usage requirement and the potential impact on small
communities because relevant documentation was, in the first instance,
not submitted at all, and in the second instance, submitted for the
first time only days before the close of the comment period.
The ATA commented that the technical report explaining how slots
would initially be allocated does not adequately describe how the FAA
intends to draw down operations in excess of 75 per hour (in the 0900
and 1700 periods) under Option 2. It claimed this omission calls into
question whether the FAA truly meant to cap operations at 75 under
Option 2.
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, while provided
relatively late during the comment period, 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
[[Page 60583]]
more efficient air traffic system in and around LaGuardia 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.
As to the Port Authority's assertion that the potential impact on
small community service was only provided days before the comment
period closed, the Port Authority is mistaken. This documentation was
submitted a second time at the Port Authority's request. It had claimed
that it could not read the data in the original submission. However,
neither the FAA nor any other commenter to the rulemaking claimed to
have any difficulty reading the original document. The second
submission was filed as a courtesy to the Port Authority. As to the
Port Authority's final claim that it was unable to evaluate the
appropriate usage rate because there was no documentation in the
docket, the FAA continues to believe that the Port Authority is
uniquely situated to evaluate the extent to which carriers utilize the
existing slots because it controls the gates at the airport. The 80
percent usage requirement at the airport has been in place at LaGuardia
for approximately 25 years, and the FAA has not historically seen a
need to further increase the usage requirement. The FAA's suggestion in
the SNPRM that the Port Authority demonstrate why it believed that the
existing usage requirement was too lenient was based on the fact that
the Port Authority made this claim without any data. The FAA assumed
that, as the airport proprietor, the Port Authority had some basis for
its claim and suggested the airport provide any relevant data. Thus,
the FAA is puzzled as to why the Port Authority would now claim that it
needs to see data generated by the FAA to substantiate its claims.
As to the ATA's claim that the technical report failed to describe
how the FAA would pull down a total of three operations under proposed
Option 2 when the report explained how those same three operations
would be pulled down under proposed Option 1, the FAA believes that the
technical report was sufficiently clear. In any event, the FAA has
decided against adopting Option 2 and providing a separate reduction in
capacity in the two hours where existing scheduled operations exceed
75.
2. The Discussion of the Auction Process Provided Sufficient Detail for
Meaningful Comment on the Rulemaking Proposal
US Airways argued the FAA provided insufficient time to comment on
the details of the auction process. United claimed that the SNPRM
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 SNPRM 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. One of the primary complaints about the NPRM was that
the FAA failed to give any detail about the market-based mechanism it
intended to use under that proposal. Consequently, the commenters
provided very little analysis of the proposal to have ten percent of
the slots at the airport expire every year, other than to say that it
was overly disruptive. Because the FAA intended at that point to impose
a market-based reallocation mechanism by regulation, the FAA believes
the commenters complaints were valid. The agency does not believe that
complaint was valid with regard to the SNPRM. However, the agency was
also concerned that while the SNPRM did not propose to implement a
market-based reallocation mechanism, commenters would continue to
complain that they could not meaningfully comment if context were not
provided. Thus, 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 retirement or 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 and the draft lease documents, these commenters
place far too much reliance on procedures unrelated to the rulemaking.
The SNPRM discussed in detail the process for providing slots at
LaGuardia: approximately 85 percent of them will be provided to
incumbent air carriers operating at that airport through cooperative
agreements and the remaining ones will be either transferred via lease
or retired. 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 a total of three
different allocation methods 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 SNPRM.
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 the Final Rule
A. Allocation of Slots at LaGuardia
The FAA believes that at least for the next several years,
LaGuardia will likely be oversubscribed in terms of its
[[Page 60584]]
physical ability to handle aircraft. Simply put, expansion of the
airport by adding runways is not a viable option given its location.
Accordingly, a cap on operations at the airport is necessary to provide
for the efficient use of the NAS.
No commenter has suggested that there is no need to cap the
airport. While the ATA had initially claimed in 2006 that there was
inadequate justification to retain the cap, no commenter, including the
ATA, still appears to believe the cap should be lifted.
Rather, the dispute surrounding this rulemaking revolves around the
FAA's proposal to either retire or reallocate slots at the airport.
Simply put, incumbents at the airport are largely satisfied with the
status quo. While there were mixed opinions about whether any slots
should be retired, the vast majority of air carriers opposed any
measure that would result in a carrier holding fewer slots under the
final rule than it held under the LaGuardia Order. Of those carriers
who were open to reallocation, they tended to support an administrative
reallocation mechanism, noting the controversy surrounding the market-
based allocation mechanism proposed in the SNPRM.
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.
United 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. To the extent there is any market failure at
LaGuardia, it posited that failure is a capacity problem that is best
remedied by the imposition of a cap.
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 airport 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. As was the
case with the HDR, the LaGuardia Order provides for a lottery of new
and returned capacity but does 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 Options
The FAA proposed two different options for allocating slots in the
SNPRM. Under both options the vast majority of slots would have been
grandfathered to existing carriers at the airport, with a relatively
small minority either retired or auctioned off in the free market. Both
options allowed for a carrier base of 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 Option 1, ten percent of a carrier's Operating Authorizations
above its base of operations would revert to the FAA over a five-year
period. The FAA proposed that eight percent would be used for
reallocation and two percent would be retired for delay mitigation. The
FAA also noted that the amount of delay mitigation with a two percent
retirement rate may be too low to adequately address congestion and
noted that it may increase that number. The monies collected under an
auction of reallocated slots would be utilized by the FAA for delay-
mitigation efforts in the New York metropolitan area. Some of these
efforts could involve a number of initiatives identified by the NYARC
as measures that could reduce congestion in the area.
Under Option 2, 20 percent of a carrier's Operating Authorizations
above its base of operations would revert to the FAA over five years.
All twenty percent would be reallocated, but the carrier would retain
the net proceeds, rather than the FAA. The carrier initially allocated
the slot would be unable to bid on the slot because it could bid
unreasonably high amounts in order to keep out competitors, knowing
that the money would come back to it as auction proceeds.
The FAA continues to believe that under either option a sufficient
number of slots would be available for reallocation to permit access to
the airport and establish a fair market value for slots that could then
translate into a robust secondary market. While Option 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. Several commenters,
including the ATA, Delta and US Airways, suggested that the FAA should
not limit the number of bidders and possibly the most interested
bidder.
Several commenters questioned why ten percent of slots would have
expired under Option 1 but 20 percent of slots would have expired for
reallocation under Option 2. Specifically, ATA commented that if the
FAA believes that ten percent of slots are enough to create a secondary
market, then why did it propose Option 2? Additionally, Delta suggested
that selecting twenty percent of slots in Option 2 is arbitrary and
cannot be reconciled with the selection of ten percent of slots in
Option 1.
Unique among the commenters was United, who argued that Option 1
was particularly unfair because the carrier initially holding the slot
would not be entitled to receive any compensation for its loss.
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
[[Page 60585]]
value. The agency also believes that either approach would have a
minimal impact on operations at the airport and would avoid much of the
potential disruption associated with its proposals in the NPRM.
However, the agency is persuaded that Option 1 maximizes the efficiency
of the slot because the carrier who may value it the most may be the
one who held it initially. The FAA has decided to adopt the first
option, except that it will retire five percent of the airport's
capacity by lowering the hourly cap for scheduled operations to 71. The
rule also provides for the reversion of approximately ten percent of
the total number of slots currently at the airport to provide access.
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 and Operating Authorizations allocated under the
LaGuardia Order, 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, and could be subject to retirement should the FAA
need to further reduce the cap.
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 retirement or
auction. Those Limited Slots identified for auction will be leased to
the carriers under a cooperative agreement for a period of 1-4 years
\26\ so that they can be reallocated after that period of time. Limited
Slots will convert to Unrestricted Slots after they are reallocated. As
with Common Slots, Limited Slots may be withdrawn under the proposed
use-or-lose provision, or for operational reasons. Because they are
already awarded for less than five years, they will not be used to
reduce capacity should additional reductions to the cap be necessary.
---------------------------------------------------------------------------
\26\ Twenty percent of the Limited Slots that will be
reallocated will not be leased to carriers as Limited Slots. This is
because the FAA intends to auction them as Unrestricted Slots
shortly after the final rule takes effect. Likewise, the Limited
Slots scheduled for retirement will not be leased to carriers,
although the carrier will be entitled to use the slot until March 8,
2009.
---------------------------------------------------------------------------
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 slots usage of the
underlying Operating Authorizations the week of September 28 through
October 4, 2008. The FAA proposed in the NPRM to make this
determination based on operations the first full week of 2007, but
believes the later date better assesses the operating status of
carriers now. One carrier that held Operating Authorizations in January
2007 is no longer in business, although it continues to hold an air
carrier certificate. While those Operating Authorizations are currently
being operated by another carrier solely within its marketing control,
the FAA believes it is simply cleaner to allocate the slots to the
holder of the Operating Authorization only if the carrier is still
operating at the airport. Likewise, some Operating Authorizations have
been or may be returned to the FAA under the LaGuardia Order's use-or-
lose provisions and will not be allocated to the carrier that held them
nearly two years ago.
Upon the rule's effective date, each carrier at LaGuardia will
automatically be awarded up to 20 Common Slots, which will constitute
the carrier's base of 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. Air Canada will be awarded
an additional 22 Common Slots because of the United States'
international obligations with Canada. Eighty-five percent of the
remaining slots will also be grandfathered as Common Slots to the
carrier holding the corresponding Operating Authorization under the
LaGuardia 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. Approximately one third of the Limited Slots will be retired by
the FAA on March 8, 2009, the beginning of the 2009 Summer Scheduling
Season. The remaining Limited Slots 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 base of 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 retire some slots at every hour and 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 five or more slots
should be Limited Slots.\27\ 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 and which slots will be retired. 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.
---------------------------------------------------------------------------
\27\ In the SNPRM, the FAA had proposed that it would initially
exclude hours where carriers had collectively identified two slots
as Limited Slots. Since generally four slots will be retired in
every hour, the FAA believes it is appropriate to increase that
number from two to five.
---------------------------------------------------------------------------
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
[[Page 60586]]
duration will be approximately equal to that of the other affected
carriers.
Although most stakeholders are opposed to any slots being withdrawn
and auctioned, two respondents thought the auction proposals might be
too restricted or limited. The National Air Carrier Association
supported encouraging more competition at LaGuardia but questioned
whether a sufficient number of slots will be available for auction to
result in more competition. The Federal Trade Commission suggested that
the ability for auctions to improve allocative efficiency at LaGuardia
is limited by the small number of slots being auctioned. Additionally,
the Federal Trade Commission is concerned that the few slots that are
available for auction are biased towards the least valuable slots. The
FAA believes the fair allocation methodology resolves that concern.
The FAA recognizes that the overall number of slots that will be
auctioned is relatively small, particularly when compared to its
original proposal to reallocate ten percent of the airport's total
capacity every year. Such an approach would not only have assured
access to the airport, but would arguably maximize the efficiency of
the system, assuming no other constraints. However, as discussed in the
SNPRM, the carriers would in fact face other constraints. Based on the
comments of the Port Authority to the original proposal, the largest
constraint could be the ability of the Port Authority to handle its
facility as airport proprietor.
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 March 8, 2009, the first day of the
summer scheduling season. Accordingly, the FAA believes carriers will
have no problems setting a compliant schedule well in advance of the
summer scheduling season.
4. Retirement of Slots
In the NPRM and SNPRM, the FAA proposed to cap weekday and Sunday
afternoon operations at 81 per hour (75 for scheduled operations and
six for general aviation). The airport is already capped under the
LaGuardia Order at 78 (75 for scheduled operations and three for
unscheduled operations). This rule replaces that Order, although
carriers will be allowed to use the slots held under the Order until
March 8, 2009. On that day, the cap on scheduled operations will
decrease to 71 per hour. This represents a five percent reduction in
capacity at the airport. Based on the modeled results, lowering the
hourly cap from 75 to 71 could reduce mean delays by approximately 41
percent compared to modeled delays in August 2007. The FAA selected the
new cap of 71 hourly scheduled operations because delays begin to
increase sharply after that level of sustained demand. The hourly
reductions will not result in eliminating all delay at the airport,
especially when operating conditions, such as adverse weather, reduce
capacity. However, congestion-related delays are expected to be
measurably reduced.
The FAA does not intend to raise the new cap unless conditions at
the airport improve sufficiently to permit additional operations
without undue delay. The FAA also specifically reserves the right to
further lower the cap should operations at the airport remain unduly
delayed. 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.
The Port Authority claimed in response to the NPRM that 75
scheduled operations per hour are too high; American Airlines echoed
this concern in its comments on the SNPRM. United argued against
retiring any existing slots. It claimed that any reduction in the
number of slots is contrary to market efficiencies because it would
eliminate an economically valuable asset.
The ATA argued that the FAA provided no justification for lowering
the cap: If the FAA believes there is a need to reduce capacity below
the cap, the need would exist regardless of allocation mechanism and
should be fully explained. Many of the commenters also argued that the
SNPRM results in almost no reduction in delays, with average delays
reduced by less than one minute.
American Airlines supported an overall reduction in the existing
cap at the airport, noting that delays were too high. It also supported
a flexible system to raise the cap if sufficient improvements are made
to the airspace. United, on the other hand, was critical of the FAA's
proposal to increase the cap when greater efficiencies in the airspace
are realized and suggested the agency instead engage in rulemaking
prior to increasing the cap. The ATA agreed with United that the FAA
should not raise the cap without seeking input from stakeholders.
United also linked the proposal to increase the cap with the proposed
auction mechanism.
The FAA recognizes that both the NPRM and SNPRM primarily focused
on the efficient allocation of slots and did not propose to
significantly reduce delay from levels established under the HDR after
AIR-21 and the LaGuardia Order. Even under Option 1, the level of delay
mitigation would have been minimal, with only 18 slots retired after
five years. The agency estimated that at the end of the scheduled
retirements, the average minutes of delay would be reduced by
approximately one minute as the result of scheduled retirements. The
FAA specifically noted in the SNPRM that reducing the cap could be the
best way to address delay mitigation. Accordingly, the agency
specifically requested comment as to whether it should reduce the
maximum number of scheduled operations from 75 to a lower number. In
addition, the agency sought comment on whether it should maintain a
maximum number of scheduled operations at 75 per hour but increase the
number of slots that would be retired. Finally, there are a few hours
where there are slightly fewer than 75 scheduled operations. The FAA
sought comment on whether these slots should be retired or reallocated
via an auction.
The FAA has decided that the cap at LaGuardia is too high and the
type of reductions anticipated under proposed Option 1 were too low,
and would be achieved over too long a period of time, to be meaningful.
Prior to the implementation of AIR-21, scheduled hourly operations at
the airport were limited by the HDR to 62. While the FAA does not
believe the delay modeling currently justifies a reduction to these
levels, it does believe the modeling justifies a greater reduction than
proposed in the SNPRM. Based on the same modeling technique used to
determine the appropriate cap at JFK and Chicago O'Hare International
Airport in Schedule Reduction Meetings addressing those airports, the
FAA has determined that the appropriate cap on scheduled operations at
LaGuardia is 71.
In the SNPRM, the FAA proposed to randomly select operations in
excess of 75 in those hours where there are more than 75 scheduled
operations. These operations would have been designated as Limited
Slots and would have been retired, so that there are no hours where
there are more than 75 scheduled operations. The FAA has decided there
is no need to treat these slots differently from the other slots that
are retired to reduce the hourly cap on operations. Rather, the impact
of reducing the
[[Page 60587]]
hourly cap is that, for these two hours, five or six slots will be
retired rather than four.
5. Market-Based Reallocation of Slots
As discussed earlier, the FAA proposed two separate options for
reallocating slots at LaGuardia. The FAA has decided to adopt a
modified version of Option 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 the ATA, United and American Airlines,
said that it is the cap on hourly operations and not auctions that will
reduce delays at LaGuardia. 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.
US Airways claimed that the FAA is more interested in experimenting
with auctions at LaGuardia than improving congestion and delays.
Similarly, American Airlines said that the level of competition in the
New York market appears to be the FAA's greatest concern rather than
the amount of congestion. According to American Airlines, although the
New York-area airports are some of the most competitive, the SNPRM
suggests nothing that would reduce congestion and delays.
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 LaGuardia Order and the retirement of a small number of
slots. 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 LaGuardia
Order, which was never intended to be anything more than a bridge
between the HDR and a final rule. While some commenters have argued
that it is unreasonable for the FAA to even contemplate a situation in
which LaGuardia is unconstrained, that is exactly the result that the
expiration of the HDR, without further regulatory action, achieves.
Because the FAA will now be reducing the size of the cap, the delay
reduction will be even more significant. The FAA believes that the
reallocation mechanism may lead to an air transportation system that is
more efficient for the travelling 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,\28\ and the FAA finds the arguments made in favor
of auctions in those papers compelling. 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.
---------------------------------------------------------------------------
\28\ 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 at least 24
slots available in the auction. In the following four years there will
be at least 22 slots available.\29\ Since carriers need pairs of slots,
this is equivalent to 11 to 12 round-trips per day. Assuming a minimum
competitive pattern of service is between two and three round-trips per
day, the equivalent of four to five 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.
---------------------------------------------------------------------------
\29\ The agency anticipates that there may be additional slots
available for auction because of returned or unallocated capacity.
---------------------------------------------------------------------------
The FAA intends to auction off 20 percent of the Limited Slots that
are not retired annually. 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 second Sunday
of the following March. 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.
[[Page 60588]]
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
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 physical constraints at the airport and 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 intends to auction off that capacity, and
will categorize the slots as Unrestricted Slots.\30\
---------------------------------------------------------------------------
\30\ If any slots were not bid on in the final year of the
annual auction, the FAA would retire those slots until it
reallocated new or returned capacity. The agency does not yet know
if enough new or returned capacity would be available to justify an
annual reallocation.
---------------------------------------------------------------------------
a. Network Effects of Auctions
The potential for auctions to have adverse network effects was a
concern for many stakeholders. The Federal Trade Commission noted that
network effects are likely to be complex since the worth of one
particular flight is dependent on other flights. Accordingly, the
Federal Trade Commission cautioned that auctions at LaGuardia might not
lead to an efficient outcome.
US Airways noted that the network and route systems of airlines
required substantial investments and many years to build. Carriers rely
on routes from smaller cities to provide passengers to their hubs at
airports such as LaGuardia. This structure, according to US Airways, is
at risk should the FAA complete its rulemaking as proposed in the
SNPRM. US Airways also objected to the possibility that a carrier could
lose slots that are important feeder flights into its hub at LaGuardia.
Furthermore, according to US Airways, the loss of just a few passengers
could jeopardize service to some smaller markets.
United Airlines commented that slots are essential to allow
airlines to provide flights between LaGuardia and other cities and the
carrier may even be forced to discontinue service to some communities
because of the loss of slots. The ATA added that some carriers have
made large investments in their schedules with the expectation that
they will be able to continue serving LaGuardia and that these
schedules will compliment their other daily operations.
The FAA recognizes that any reallocation of slots through an
auction, or any other allocation mechanism, can affect the network
structure of an airline. We are also aware that several carriers at the
airport have made investments in the infrastructure at LaGuardia based
on their previous slot holdings under the HDR. However, when Congress
phased out the HDR as part of AIR-21, it was clear to all stakeholders
that slots and slot allocations under that rule would no longer exist
as of January 2007.
In an effort to ensure a smooth transition between the expiration
of the HDR and a new allocative regime, the FAA grandfathered use of
all slots to carriers on a temporary basis. This final rule will
continue to allocate a majority of slots to the incumbent slot holders.
To the extent that a carrier's Limited Slot reverts to the FAA,
there is nothing in this rule that precludes that carrier from bidding
in the auctions to acquire the same or a comparable slot for the
purpose of maintaining the status quo. Similarly, we believe the rule
will promote a robust secondary market, which will provide further
opportunity for carriers to acquire slots to satisfy their network
needs.
b. Impact of Auctions on Competition
The SNPRM assumed that auctions will lead to efficient airline
behavior. The Port Authority opinion differs. The Port Authority
commented that auctions may exacerbate anti-competitive conditions,
which would 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 LaGuardia could use
their relatively stronger balance sheets to outbid the smaller, non-
legacy airlines that help stimulate competition. The Air Carrier
Association of America's (ACAA) comments echo this concern.
According to the Port Authority and the ACAA, the SNPRM provides
the legacy incumbent carriers the incentive to bid prices beyond the
level carriers with a limited presence at the airport can afford, then
trade the slots they win among themselves to maintain their current
schedules. The result could be a significant increase in airfares and a
decrease in the number of destinations served.
Offering a different view, US Airways commented that there is
already significant competition at LaGuardia, and new entrants have
more the 50 daily roundtrips from this airport. US Airways also
suggested that competition from new entrants at LaGuardia has helped
moderate fares for the New York City region. It also asserted that
there is no evidence that new entrants cannot enter the market, or that
the reallocation proposal would address that concern even if it were
valid.
Unlike most of the commenters, the ACAA was not opposed to the
consideration of auctions. However, it believes that too many questions
exist about auctions as a method to promote competition for this
proposal to move forward. The ACAA was primarily concerned with
providing low-cost carriers access to entry in LaGuardia, particularly
now that all three of the major New York metro airports are capped.
US Airways argued that the 20-slot base of operations is clearly
designed to protect new entrant carriers at the expense of other
carriers and ignores the fact that these new entrants already have a
significant presence both at LaGuardia and in the New York metropolitan
area as a whole. The FAA notes that the base of operations was
intentionally designed to promote at least some competition at the
airport by ensuring limited incumbents retain the opportunity to serve
the airport. However, this degree of competition, when viewed in the
context of the total
[[Page 60589]]
number of operations at the airport, negatively impacts no one. Thus,
the FAA finds US Airways' argument that the 20-slot base of operations
is detrimental to carriers who have a larger presence at the airport is
disingenuous. All carriers, regardless of the size of their operations
at the airport, are entitled to the base of operations. For slots above
this level, Limited Slots are assigned on a proportional basis, so that
larger carriers will have more Limited Slots only because they will be
grandfathered a greater number of total slots at the airport. In
addition, while the base of operations provision protects up to 20
slots per carrier, it does not allow a carrier with fewer than 20
operations to increase their holdings unless they are willing to lease
them from another carrier or participate in an auction.
The FAA disagrees with the assertion that the limited number of
auctions contemplated in this rule will reduce competition at the
airport. The HDR, in place at LaGuardia airport for decades, 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.
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 under
the HDR. 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.
c. Alternatives to Reallocation
The Port Authority commented that a notice of proposed rulemaking
that solicits comment on a single solution when other significant
solutions have been recently proposed is inherently flawed. It noted
the NYARC, through working group 5, evaluated the use of the IATA
Worldwide Scheduling Guidelines (WSG) but that approach was not even
referred to in the SNPRM, despite near unanimous support among NYARC
members for that alternative. American Airlines similarly suggested the
FAA adopt the WSG under a slot rule addressing all three New York
metropolitan airports rather than relying on auctions to reallocate
capacity. Delta also suggested that the FAA take steps to improve the
secondary market in conjunction with the existing Order before adopting
a final rule based on the SNPRM. Echoing Delta's sentiment, U.S.
Airways suggested the buy/sell mechanisms implemented under the HDR
could be improved or modified to address concerns about competition.
Many stakeholders said that the FAA should use other approaches
instead of auctions to reduce delays at LaGuardia. In particular, the
FAA should focus on implementing operational procedures and investments
to enhance capacity. The American Association of Airport Executives
said that the FAA should proceed with implementing ADS-B and other air
traffic control technologies. The Regional Airline Association said
that rather than auctioning slots, the FAA should focus on completing
NextGen. Similarly, the ATA suggests that the FAA continue to implement
the 77 New York Aviation Rulemaking Committee improvements and continue
implementing NextGen.
Delta suggested several alternatives to addressing a perceived
inability to access the market. Even though it did not support any of
the alternatives, it suggested they were both legal and less disruptive
than the proposal. While some of the ideas associated with improving
the transparency of the secondary market have already been proposed by
the FAA and are incorporated in today's rule, Delta also suggested that
all transactions in the secondary market could be negotiated via an
FAA-managed auction or that a carrier be required to place a set number
of slots up for auction, but be allowed to set a reserve price. The ATA
suggested the agency adopt a slightly modified version of the existing
Order and have the FAA act as a clearing-house for the secondary
market, but impose no constraints on the transactions.
The ACAA argued that some reallocation mechanism other than an
auction should be provided since all three major New York metropolitan
area airports are capped. It noted that there should be some slots
available to limited incumbents because the larger carriers are drawing
down service and exploring merger possibilities. The FAA has
historically provided for the administrative allocation of slots. We
could have proposed such an approach in this rulemaking. However, the
auction allows the market to allocate resources, which is the standard
way virtually all resources are allocated in the U.S. economy.
The WSG approach has never been used at a domestic airport like
LaGuardia. While the FAA could adopt a domestic equivalent of the WSG,
the FAA has decided against this approach because, like the lottery
provisions of the HDR, it does not provide for a sufficient amount of
capacity available for reallocation to stimulate the secondary market.
The ATA is correct that of the many members of the ARC working group,
five supported using the WSG at LaGuardia. However, several carriers
not on the working group were opposed to that approach and some of
their concerns are included in the NYARC report.
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 LaGuardia sufficiently
to merit lifting the cap on operations. It is the cap that creates the
need for reallocation.
Finally, as to the suggestions that the FAA leave the LaGuardia
Order in place but make improvements to the secondary market, the FAA
has already implemented several changes to the existing provisions
controlling the secondary market in this rule.
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 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
[[Page 60590]]
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
LaGuardia, 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 Web site. 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.
The ACAA commented that any mechanisms geared toward a secondary
market must include a blind sale/transfer allocation system for any
proposed sale or lease of slots. Other carriers, including U.S. Airways
and American Airlines, 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 air 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.\31\
---------------------------------------------------------------------------
\31\ 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.
---------------------------------------------------------------------------
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. The requirement is 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 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 with 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.
C. Usage Requirements
The FAA is adopting the usage requirements proposed in the SNPRM.
Specifically, Common and Limited Slots must be used 80 percent of the
time over a two-month reporting period 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 and the Port Authority, 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 added that
given current market conditions of higher fares, driven by higher fuel
costs, there is a possibility that the auction bid
[[Page 60591]]
prices may be sufficiently low to cause a large incumbent carrier to
make low bids for various slots, and then simply not use them as a
means of blocking future competition after markets improve from the
current depressed condition.
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. One hundred percent of the slots allocated under
the HDR and then converted into Operating Authorizations under the
LaGuardia Order were initially allocated by the FAA at no cost to the
carrier. Because the slots were free, carriers were incentivized to
hoard slots in order to keep competitors out, and the FAA was forced to
implement a usage requirement. 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. 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.\32\
---------------------------------------------------------------------------
\32\ 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.
---------------------------------------------------------------------------
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 with its authority
to take enforcement action for any violation of a regulatory
requirement.
The Port Authority continues to argue, without support, that the
usage requirement should be higher than 80 percent. It commented to the
SNPRM that it has an interest in maximizing use of its runways.
Although it is not reasonable to expect 100 percent utilization, the
Port Authority believes that a 90 percent utilization standard, applied
against aggregate slot use would assure five-day-per-week use of slots.
The Port Authority also proposed that the FAA report data on slot usage
at least at the aggregate level. It stated it could use these data to
evaluate the relationship of slot usage and the FAA's exercise of
authority to enforce the use-or-lose provisions. We have not seen a
need to increase the usage requirement beyond 80 percent. The waiver
provisions of this rule are quite limited. In addition, the agency has
recently demonstrated that it intends to apply these provisions
narrowly.\33\ The usage requirement is designed to address legitimate
problems that arise in the regular course of business and includes
flight cancellations due to maintenance problems, poor weather, or
missed connections. Given the likelihood that the FAA will not grant a
waiver request except under exceptionally tight conditions, a carrier
has every incentive to use the slot as much as possible to preserve a
cushion for the types of problems it can reasonably expect to
encounter. We acknowledge the Port Authority's request to see usage
data, but that request does not fall within the ambit of this
rulemaking.
---------------------------------------------------------------------------
\33\ On July 3, 2008, the FAA denied a request submitted by six
air carriers, seeking a waiver of the minimum usage requirements at
all U.S. airports that have such requirements as a result of rapidly
escalating fuel prices. The FAA's denial of the air carrier's
request is available in docket FAA-2008-0656. In addition, on August
6, 2008, the FAA denied a separate request by AirTran Airways for a
temporary waiver of the minimum usage requirement at LaGuardia based
on the construction-related closure of a jetway that was dedicated
to AirTran's operations.
---------------------------------------------------------------------------
Finally, in the SNPRM, the FAA proposed to provide for a 90 day
waiver of the 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.
D. Unscheduled Operations
As proposed in the SNPRM, the FAA is limiting unscheduled
operations into and out of LaGuardia during the constrained hours.
Historically these operations have been restricted via the LaGuardia
Order to six per hour, but the FAA has recently reduced that number to
three under the LaGuardia Order. 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 three 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 one of
the three available allowable operations 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.
The Aircraft Owners and Pilots Association (AOPA), NetJets and the
National Air Transportation Association (NATA) commented that the
number of unscheduled arrivals is overly restrictive. According to
AOPA, although general aviation is less than four percent of total
operations at LaGuardia, the number of unscheduled arrivals is reduced
by fifty percent. Similarly, NetJets suggested that although general
aviation makes a negligible contribution to congestion in the New York
area, the SNPRM has a disproportionate impact on general aviation
compared with scheduled carriers. It also asserts that the FAA has not
linked the reduction in permitted operations with any delay reduction
benefit nor evaluated the potential cost impact on affected businesses.
These commenters do not believe an objective analysis of the historical
usage rate for unscheduled operations has been provided to justify the
proposed decrease and therefore, the FAA may have underestimated the
negative effect of a 50 percent reduction in unscheduled operations.
The Port Authority claimed the FAA did not look at the proposed
reduction in unscheduled services at LaGuardia in light of similar
restrictions at JFK and Newark Airports.
Contrary to the Port Authority's assertion, the proposal to reduce
[[Page 60592]]
unscheduled operations at LaGuardia was generated by the agency's
concern on managing operations within the region. Consistent with this
action, the FAA proposed limits for unscheduled operations at JFK and
Newark.\34\ At these airports, the FAA proposed reductions in the
number of unscheduled operations in the most congested hours. The FAA
finds it reasonable to limit unscheduled operations at LaGuardia to
their 2007 usage levels. In the New York area, the FAA must balance
fair and reasonable access against congestion reduction and management
goals. To reach these goals, the number of unscheduled operations
cannot grow at LaGuardia, JFK or Newark. While permissible unscheduled
operations at the airport are reduced by 50 percent, actual operations
are reduced little, if at all.
---------------------------------------------------------------------------
\34\ 73 FR 41156 (July 17, 2008).
---------------------------------------------------------------------------
In addition, NATA objected to the proposal to allow public charter
carriers to reserve one of the three available hourly slots up to six
months in advance, while Part 135 on-demand air carriers will only be
able to reserve slots up to 72 hours in advance. NATA believes that
passengers on Part 135 on-demand aircraft should have the same ability
to pre-plan their arrival and departure times as passengers on
scheduled airlines and public charters.
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 for year ended May 31, 2008. The total number of
hours where unscheduled operations exceed available slots was 174. The
number of hours where there was insufficient capacity in the adjacent
two hours to handle excess demand was zero. Thus, if an unscheduled
flight changes its flight plan slightly, it will be accommodated and
this operator would not incur costs.
The ATA commented that helicopters should be subject to this
proposal because they also take up valuable air traffic control
services. The FAA recognizes that helicopter operations can add to a
controller's workload. However, because the FAA did not propose, or
even suggest, that helicopters would be covered by this rule, there
would have been no reason for helicopter operators to comment on the
rule and there is inadequate scope to add them at this time.
E. Sunset Provision
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 LaGuardia
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 is somewhat puzzled by the carriers' assertion that having
the rule sunset in ten years is somehow more detrimental to their
interests than keeping in place an order whose expiration date is
linked to a final rule that could be issued at any time. 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
LaGuardia Order status quo. This is not an acceptable solution. The
LaGuardia Order was issued as a bridge document and was never intended
to stay in place for more than a year or two. Accordingly, the FAA
simply froze all operations at the airport under the HDR conditions,
except that the carriers are precluded from selling their Operating
Authorizations. The Order was not subjected to the type of policy rigor
or economic analysis that justifies any rule intended to be more than
an initial measure. In addition, 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. The FAA has
historically retained this right, 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.
As discussed earlier, the FAA is also retaining the right to
further reduce the cap on operations should the Administrator determine
that the cap on operations remains too high. For the reasons discussed
earlier, this provision is limited to Common Slots.
2. Limit on Arrivals and Departures
In response to the NPRM, American Airlines and The City of New York
suggested the final rule should regulate arrivals only. The FAA
explained in the SNPRM why it continues to believe that the sequencing
of flights at LaGuardia is so tight that the FAA does not believe it
can merely limit arrivals. American
[[Page 60593]]
Airlines continues to assert that only constraints on arrivals are
needed. Nevertheless, the FAA continues to believe both arrivals and
departures should be slot-controlled.
3. Common Ownership
The proposal defines ``common ownership'' as requiring at least 50
percent beneficial ownership or control by the same entity or entities.
ATA commented that this definition would not cover many of the network
carriers' regional partners as very few have at least a 50 percent
beneficial ownership or control of these independent companies. The FAA
will treat commonly owned carriers as single entities for determining a
carrier's base of operations or whether transfers are appropriate.
Independent carriers, such as those cited by the ATA, will each be
entitled to a base of operations of up to 20 slots regardless of
whether they offer services under their own names or under a code-share
agreement with another carrier. Transfer provisions between commonly
owned and affiliated carriers receive similar treatment.
4. 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
LaGuardia, 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.
V. Potential Loss of Service to Small Communities
Several stakeholders were concerned about the adverse effects of
this SNPRM on service to small communities. The ATA noted that at least
one destination is served by Essential Air Service (EAS) from
LaGuardia. The one EAS community currently with service to LaGuardia
(Lebanon, New Hampshire) will receive service to a new hub airport in
another city as of November 4, 2008.
Several carriers, their associations and ACI-NA commented that if
carriers prioritize which service to continue, it is likely that
carriers will continue the most profitable routes, the dense routes
connecting to large markets, and drop service to smaller markets.
Commenters argued that both the provision that Limited Slots revert to
the FAA and the market-based allocation of Unrestricted Slots would
result in a loss of small community service.
United noted that the ``confiscation'' of slots would lead to
carriers eliminating flights, most likely to smaller communities. It
claimed the argument in the initial regulatory evaluation that carriers
would keep these flights because they are currently profitable is
flawed; faced with a reduction in the overall number of flights, which
could only be recouped at a cost, carriers will reprioritize its
current interests and will likely drop service to smaller communities.
US Airways also remarked that the SNPRM proposed a form of a
``forced upgauging'' on LaGuardia and that will almost inevitably lead
to diminished service to small and medium-sized markets. US Airways
went on to state that this loss of service would be exacerbated by the
auctioning of slots at other New York area airports. The commenter
argued that the auction could end up actually increasing system-wide
congestion because there would be more flights between LaGuardia and
other airports that are already congested because the service to
smaller, non-congested airports would no longer make sense
economically.
Several commenters noted that service to small communities is
provided on smaller aircraft. The Port Authority estimated that with
auctions, the cost per seat for carriers could be from two to six times
higher for small aircraft. The Regional Airline Association commented
that many communities are served exclusively by small regional aircraft
and that it is only through these smaller planes that there can be any
meaningful competition in smaller communities.
Both the Port Authority and the American Association of Airport
Executives raised concerns about the potential impact to communities
within 300 miles of New York City. These commenters noted that
alternative hubs are not a realistic option for cities within a 300
mile radius of LaGuardia; and the Port Authority noted that service to
these communities has already declined 14 percent in the past year.
They also noted that the concern that a particular community could lose
existing service to LaGuardia was raised by several smaller
municipalities and their community organizations in response to the
NPRM. In particular, the Port Authority noted the assessment by Newport
News/Williamsburg International Airport that the loss of one third of
AirTran's service to the community could result in the loss of
approximately $20 billion per year to the region.
Finally, NetJets commented that limiting unscheduled operations
will also negatively impact small communities. According to NetJets,
many of the smallest markets have no commercial air service to the New
York City area and general aviation is the only air link to the region.
Additionally, NetJets noted that general aviation is going to become
more important for service to New York City as scheduled carriers
reduce the reach of their networks because of high fuel prices.
While not directly related to the loss of service to small
communities, the Canadian Airports Council 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 FAA recognizes that there is a significant level of small
community service at LaGuardia. We believe small community service is
an important sector of aviation. The FAA has made several changes to
its original proposal to address the potential loss of services. Not
only did the agency withdraw the requirement for aircraft upgauging at
LaGuardia, but it also reduced the number of slots that would be
reallocated from 100 percent of slots every ten years to 10 percent of
slots in the first five years, with no reallocation thereafter. The
SNPRM did not provide any carve-outs for small community
[[Page 60594]]
service like the upgauging proposal of the NPRM, and we do not adopt
any today. 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.
We note that the AIR-21 exemptions from the HDR, which permitted
additional flights by new entrant carriers and by carriers serving
small hub and non-hub airports with smaller aircraft have expired.
Until the spring/summer of 2008, when the cost of oil reached
unprecedented levels, we had not seen a reduction in service to small
communities under the LaGuardia Order, which allows commercial
decisions by the carriers and does not classify Operating
Authorizations by class of user. Therefore, although there may be a
slight reduction in 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.
Furthermore, several air carriers have noted in public fora that
service to small communities from LaGuardia is profitable and an
important part of their network operations. 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.
The FAA acknowledges the Canadian Airports Council's concern about
service to smaller sized Canadian cities. However, Air Canada will be
allocated 42 common slots because of the United States' bilateral
obligations with Canada. Consequently, Air Canada, the only Canadian
carrier currently serving LaGuardia, will have continued access to the
slots they have historically operated and will not be affected by the
reallocation aspect of this final rule.
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, this 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, and is a ``significant
regulatory action'' as defined in Executive Order 12866 both because it
is economically significant and because it raises the type of novel
policy issues contemplated under that executive order. Accordingly, OMB
has reviewed this final rule. The rule is also ``significant'' as
defined in DOT's Regulatory Policies and Procedures. The final rule
will not have a significant economic impact on a substantial number of
small entities and will not adversely affect international trade or
impose an unfunded mandate on State, local, or tribal governments, or
on the private sector.
The FAA received numerous comments regarding its regulatory
analysis of this rulemaking action. These comments are addressed in the
Final Regulatory Evaluation and readers are directed to that document
to see how they are addressed.
Among the concerns raised by commenters was that the analysis of
the SNPRM did not satisfy Executive Order 12866. 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. The FAA complied with this order by
making its determination in the SNPRM regulatory evaluation based upon
the quantified benefits exceeding the quantified costs. In addition we
have taken into account public comments in our final evaluation and
have updated our cost and benefits estimates.
Total Costs and Benefits of This Rulemaking
We evaluate the costs and benefits of this rule using two
baselines. One baseline assumes no operating constraints at the
airport; this is the same baseline as the NPRM and SNPRM. The second
baseline preferred by some commenters assumes the current operating
limits at the airport continue into the foreseeable future. When we
evaluate this final rule using the same baseline as in the SNPRM, the
net total benefits are $3.2 billion. When we use the alternative
baseline, the total estimated net benefits are $1.3 billion.
The net present value benefits of the auction are $65.4 million. As
the sale of a slot is a transfer (no change to gross national product),
we assign no costs to those purchasing a slot. While the total present
value auction costs are $24 million, the slot reallocation benefits
that offset these costs are $89.3 million.
Who Is Potentially Affected by This Rulemaking
Operators of scheduled and non-scheduled flights to
LaGuardia and new entrants who do not yet operate at LaGuardia.
All communities, with air service to LaGuardia (including
small communities).
Passengers of scheduled flights to LaGuardia.
The Port Authority of New York and New Jersey, which
operates the airport.
Passengers on scheduled and unscheduled flights transiting
New York airspace.
Base Case
Base Case 1: No operating authorizations or caps (the rule
will generate $3.2 billion in net benefits, of which $65.4 million is
attributable to reallocation benefits associated with auctions and the
balance to the cap on operations).
Base Case 2: Indefinite extension of the current LaGuardia
Order (the rule will generate $1.3 billion in net benefits, of which
$65.4 million are attributable to reallocation benefits associated with
auctions and the balance to the cap on operations).
Assumptions
Discount Rate--seven percent.
Assumes 2008 Constant Year Dollars.
Passenger Value of Travel Time--$30.86 per hour.\35\
---------------------------------------------------------------------------
\35\ GRA, Incorporated ``Economic Values for FAA Investment and
Regulatory Decisions, A Guide'' prepared for the FAA Office of
Aviation Policy and Plans (October 3, 2007). Value is weighted using
LaGuardia shares of 51 percent leisure and 49 percent business
travel.
---------------------------------------------------------------------------
85 percent of current slots will be ``grandfathered'' to
carriers who hold
[[Page 60595]]
the corresponding Operating Authorization under the LaGuardia Order
pursuant to a cooperative lease agreement for a period of ten years.
Alternatives We Have Considered
No caps (no action): Based on past history, the FAA
expects operators would expand operations and further worsen airport
delay.
2006 NPRM: The 2006 NPRM would have instituted caps,
provided for mandatory upgauging, and withdrawn 10 percent of slots
annually for reallocation. We have amended the SNPRM proposal in favor
of the one finalized here.
Caps with no reallocation: This alternative would
permanently impose caps at 75 scheduled operations and three
unscheduled operations per hour. It would grandfather all current
Operating Authorizations, assigning them to carriers currently
operating at the airport. This alternative would stifle actual and
potential competition.
Benefits of This Rulemaking
The primary benefits of this rulemaking will be due to the delay
reduction from the reduction in the cap on operations and an
improvement in the allocation of scarce slot resources through the use
of an auction mechanism.
Since publishing the NPRM and the SNPRM, we have updated our cost
and benefit estimates. A detailed discussion of the applied methodology
as related to consumer and producer surplus can be found in the NPRM
regulatory evaluation. The total net benefits of this final rule are
summarized in the following table. The baseline costs and benefits from
setting the cap of 75 scheduled operations and 6 unscheduled
operations, plus reducing the cap, and the net benefits from the
auction result in net benefits of $3.2 billion. The net benefits from
reducing the cap and from the auction are $1.2 billion based on the
current capped operation level. This is the alternative baseline
suggested by commenters.
Net Benefits of the Rule ($2008 mil)
------------------------------------------------------------------------
------------------------------------------------------------------------
Net Benefit of a Cap: 75 scheduled; 6 Unscheduled....... $1,862.5
Net Benefit of Reducing Cap: 71 scheduled; 3 unscheduled 1,226.7
Net Benefit of the Auction.............................. 65.4
---------------
TOTAL NET BENEFITS of CAP, CAP Reduction and Auction 3,154.6
TOTAL NET BENEFITS of CAP Reduction and Auction..... 1,292.1
------------------------------------------------------------------------
Costs of This Rulemaking
Since the SNPRM, and at the request of commenters, we have re-
estimated the costs associated with this rule. These costs include the
costs to the public and private sectors of designing, implementing and
participating in the auction. The total present value costs are $23.9
million. As the costs of purchasing a slot are a transfer from one
entity to another, these costs are not included. However, we include a
discussion of slot values in the Final Regulatory Evaluation. We
estimate $6.2 million as the nominal auction costs to the FAA. The
nominal cost for carriers is $21.7 million.
Paperwork Reduction Act
This proposal contains the following new information collection
requirements. As required by the Paperwork Reduction Act of 1995 (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.
ATA believes the FAA's estimate of the paperwork burden is
understated. ATA noted that there will also be significant legal fees
associated with negotiating, drafting, executing and monitoring the
secondary market. Based on this, ATA believes the estimated burden
should be between 50 percent to 100 percent of a full-time management
employee's time.
FAA does not agree with ATA's assessment of the time necessary to
participate in the secondary market. The secondary market being adopted
in this final rule does not vary much in scope from the secondary
market in place at the airport over the past several years. We do,
however, acknowledge that participation in the government auction will
require airlines to dedicate employee time and resources in order to
prepare and submit their bids. It should be noted, however, that
participation in the auction and secondary market are not requirements
of this rule. A carrier with existing slots at LaGuardia is permitted
to continue operations at the airport using the common slots
grandfathered to them as part of this final rule. Carriers will only
need to engage in the secondary market and auction if they choose to
buy, lease or sell slots.
Some of the information requirements in today's rule are similar to
those originally proposed in the 2006 notice. The FAA has updated these
requirements and summarized them below.
Title: Congestion Management Rule for LaGuardia Airport.
Summary: The rule grandfathers the majority of operations at the
airport and will develop a robust secondary market by annually
auctioning off a limited number of slots; the FAA plans to use the
proceeds from the auctions to mitigate congestion and delay in the New
York City area. In addition, the hourly cap on scheduled operations
will be reduced to 71 per hour during the regulated hours except. This
reduction will lead to an estimated 41 percent reduction in modeled
delay at the airport. This rule also contains provisions for use-or-
lose, unscheduled operations, and withdrawal for operational need. The
rule will sunset in ten years.
More information on the proposed requirements is detailed elsewhere
in today's notice.
Use of: The information is reported to the FAA by scheduled
operators holding slots. 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
buying and selling 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 airport.
Respondents: The respondents to the proposed information
requirements in today's notice are scheduled carriers with existing
service at LaGuardia, carriers that plan to enter the LaGuardia market
(by auction or secondary market), and carriers that enter the LaGuardia
market in the future. There are currently fourteen (14) carriers with
existing scheduled service at LaGuardia.
Frequency: The information collection requirements of the rule
involve
[[Page 60596]]
scheduled carriers notifying the FAA of their use of slots. The
carriers must notify the FAA of: (1) Its designation of 50 percent of
its Limited Slots; (2) request for confirmation to sublease slots; (3)
its 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) participation in FAA
auctions.
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 2006
notice.
The burden is calculated by the following formula:
Annual Hourly Burden = ( of respondents) * (time involved)
* (frequency of the response).
Section 93.64(c)(3) Categories of Slots: 50 percent designation of
Limited Slots
(6 carriers) * (80 hours per submittal) = 480 hours.
Based on the current allocation of Operating Authorizations and the
level of baseline operations each carrier would be grandfathered under
today's rule, we assumed the 6 carriers with the most operations at
LaGuardia would expend up to 10 days of planning time each, potentially
80 hours, to develop and submit its designation of 50 percent of its
Limited Slots. This designation would occur once, ten days after the
final rule effective date.
Sections 93.65(c)-(d) and 93.66(a) Initial Assignment of Slots and
Assignment of New or Returned Slots
We assumed 50 carriers will expend time submitting and collecting
information to participate in the proposed auctions for slot
assignments. For the overall auction activity, a carrier would likely
assemble a multidisciplinary team of existing staff that would consist
of an auction manager, an operations research specialist, and a
corporate lawyer. The assembled team involved in the auction would not
be dedicated entirely to the auction process and could continue to work
on existing projects and responsibilities. The information collection
is 32 hours per carrier and is a subset of the overall carrier auction
costs. It consists of submitting an expression of interest (8 hours)
and submitting bids (24 hours).
We estimate the annual auctions would require approximately 32
hours for the assembled team of resources to submit the Auction
Expression of Interest and submit the bid file to FAA auction system.
Both of these paperwork submission requirements will be filed
electronically.
(50 bidding carriers) * (32 hours per carrier ) * (1 occurrence per
year) = 1,600 hours.
Section 93.68(b)-(f) Sublease and Transfer of Slots
(14 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 84 hours.
Based on burden estimates from the 2006 notice, we assumed the 14
carriers operating at LaGuardia would expend one and one half hours for
each occurrence of a lease or transfer of a slot. For each operator, we
assumed that a lease or transfer of a slot would occur on average
quarterly.
Section 93.69(b) One-for-One Trades of Operating Authorizations
(14 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 84 hours.
Based on burden estimates from the 2006 notice, we assumed the 14
marketing carriers operating at LaGuardia expend one and one half hours
for each occurrence of a one-for-one trade of a slot. For each
operator, we assumed that a one-for-one trade of a slot would occur
quarterly.
Section 93.72(a) Reporting Requirements
(14 carriers) * (1.5 hours per submittal) * (6 occurrences per
year) = 126 hours.
Based on burden estimates from the 2006 notice, we assumed the 14
carriers operating at LaGuardia expend one and one half hours every two
months of the data required by Sec. 93.72(a).
Section 93.73(d)-(e) Administrative Provisions
(14 carriers) * (1.5 hours per submittal) * (4 occurrences per
year) = 84 hours.
Based on burden estimates from the 2006 notice, we assumed the 14
carriers operating at LaGuardia expend one and one half hours every
quarter for administrative provisions.
Summary
Total First Year Hourly Reporting Burden--2,458 Hours;
Total Recurring Annual Hourly Reporting Burden (years 2-5)--1,978
Hours;
Total Recurring Annual Hourly Reporting Burden (after fifth year)--
378 Hours.
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.
OMB has assigned control number 2120-0719 to this information
collection.
Regulatory Flexibility Determination
The Regulatory Flexibility Act of 1980 (Pub. L. 96-3540) (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.
This final rule will not have a significant impact on a substantial
number of entities as there is only one small entity that might be
affected. Although there are three scheduled operators whose employee
total is less than 1,500 (the SBA criterion for small entity airline),
all three of these operators are subsidiaries of larger companies with
employees exceeding 1,500. In January, 2007 there was one destination,
Nantucket Memorial Airport, whose surrounding community was
substantially less than the SBA criterion of 50,000 for communities.
When we checked Official Airline Guide for July, 2008 we found one
additional destination, Martha's Vineyard, with seasonal service having
a surrounding-community population less than 50,000. We conclude that
there is only one community with year-round
[[Page 60597]]
service that qualifies as a small entity and no airline operator is a
small entity.
Since the comments to the SNPRM referenced small communities,
operators, and small equipment, we will now discuss those comments
within the context of the requirements of the Regulatory Flexibility
Act. We have already provided more general responses to the comments
earlier in this document.
The FAA received one comment claiming that the FAA failed to
adequately consider alternatives in violation of the Regulatory
Flexibility Act. This commenter was not a small entity. Because the
agency has determined that the rule will not have a significant
economic impact on a substantial number of small entities, no further
analysis as required under the Act. However, as discussed earlier, the
agency has considered multiple alternatives in developing this rule.
Several commenters noted that service to small communities is
provided using smaller aircraft. The Port Authority estimated with
auctions, the cost per seat for carriers could be from two to six times
higher for small aircraft. The Regional Airline Association (RAA)
commented many communities are served exclusively by small regional
aircraft and that it is only through these smaller planes that there
can be any meaningful competition in smaller communities. US Airways
also remarked the SNPRM will be a form of a ``forced upgauging'' on
LaGuardia and that to the extent the other New York area airports use
auctions, it will preclude nonstop service from many smaller
communities.
Finally, NetJets commented limiting unscheduled operations will
also negatively impact small communities. According to NetJets, many of
the smallest markets have no commercial air service to the New York
City area and general aviation is the only air link to the region.
This final rule helps ensure service to small communities as we
dropped the requirement for aircraft upgauging at LaGuardia and we
reduced the number of slots for reallocation from 100 percent of slots
in ten years to ten percent of slots in five years. A majority of slots
at the airport will be grandfathered to current slot-holders for the
duration of the rule. The reduction of slots to be reallocated, and the
withdrawal of upgauging will help ensure service to small community
airports. This rule is not designed to force carriers to serve
particular communities. Ultimately this rule allows the market to
allocate scarce resources. Just as is the case today, the rule allows
an operator to make a business decision to retain, add, or remove
service to a small community. In the case a small community loses
service, they can apply for Essential Air Service from the Department
of Transportation to restore service. Currently neither the airport at
Martha's Vineyard with its seasonal service nor Nantucket Memorial
Airport receives Essential Air Service.
The changes contained in this final rule also help operators flying
smaller equipment. With only ten percent of the slots subject to
reallocation, the initial impact on all operators is substantially
reduced. Although there will be no rule requirement regarding the size
of airplane, the operator might decide to fly a larger, or smaller
airplane. This decision belongs to the operator. With a reduced number
of slots to be reallocated and the removal of upgauging, the impact on
all operators and especially those flying smaller equipment has been
reduced.
Lastly most of NetJet's comments are directed toward the
nonscheduled service requirement. After reviewing LaGuardia
nonscheduled service, nearly all service can be accommodated at
preferred times under the final rule. For those few cases where the
preferred hour is not possible, almost all service can be accommodated
in the adjacent hours. Lastly, in the rare case where the adjacent hour
will not accommodate the overflow, a 2- to 3-hour window should permit
the operation. The rule does allow all operators, including NetJet the
opportunity to buy a slot to ensure operations to New York. Such an
opportunity is very difficult in today's environment.
In summary, the FAA has mitigated the impact on all operators,
especially those flying smaller equipment, and there is only one small
entity who would potentially be affected by this rule. Nantucket
Memorial receives year-round service and the surrounding community is
less than 50,000. However, as one small entity is not a substantial
number, as the acting FAA Administrator, I certify this final 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 prohibits Federal agencies from
establishing any standards or engaging in related activities that
create unnecessary obstacles to the foreign commerce of the United
States. Legitimate domestic objectives, such as safety, are not
considered unnecessary obstacles. The statute also requires
consideration of international standards and, where appropriate, that
they be the basis for U.S. standards. The FAA has assessed the
potential effect of this proposed rule and determined that it would
impose no costs on international entities and thus have a no trade
impact. Canadian entities are the only foreign operators at LaGuardia
and their slots are protected by a bilateral aviation agreement and not
affected by the rule. They might benefit from the rule if they choose
to participate in the proposed auction to acquire additional slots.
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 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, does 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 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
[[Page 60598]]
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.
The Port Authority estimates that there would be a five to fifteen
percent increase in night operations as a result of the proposed
auction alternatives in the SNPRM. A resident of a neighborhood near
LaGuardia said that there are already many flights until midnight and
that flights in these later hours adversely affect the quality of life
of neighbors. The FAA does not believe there is a reasonable projection
that the final rule will result in additional nighttime operations for
the following reasons. First, there are currently 14 unused slots in
the 8 p.m. and 9 p.m. hours that could be used for scheduled
operations; we therefore believe it is unlikely that the number of
nighttime operations will increase to a point where the currently
unallocated slots are filled and additional operations are added in the
later evening hours. Second, there are a limited number of remote
overnight parking positions at the airport, which physically bounds the
number of nighttime operations that can be accommodated at LaGuardia.
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.
Additional Information
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
rule, including economic analyses and technical reports, from the
internet through the Federal eRulemaking Portal referenced in paragraph
(1).
List of Subjects in 14 CFR Part 93
Air traffic control, Airports, Navigation (air).
VIII. Regulatory Text
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 citation for part 93 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40103, 40106, 40109, 40113, 44502,
44701, 44719, 46301.
0
2. Subpart C is added to read as follows:
Subpart C--LaGuardia Airport Traffic Rules
Sec.
93.35 Applicability.
93.36 Definitions.
93.37 Slots for scheduled arrivals and departures.
93.38 Categories of slots.
93.39 Initial assignment of slots.
93.40 Assignment of new or returned slots.
93.41 Reversion and withdrawal of slots.
93.42 Sublease and transfer of slots.
93.43 One-for-one trade of slots.
93.44 Minimum usage requirements.
93.45 Unscheduled operations.
93.46 Reporting requirements.
93.47 Administrative provisions.
Subpart C--LaGuardia Airport Traffic Rules
Sec. 93.35 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 LaGuardia Airport (LaGuardia).
(b) This subpart also prescribes procedures for the assignment,
transfer, sublease and withdrawal of Slots issued by the FAA for
scheduled operations at LaGuardia.
(c) The provisions of this subpart apply to LaGuardia during the
hours of 6:00 a.m. through 9:59 p.m., Eastern Time, Monday through
Friday and from 12 noon through 9:59 p.m., Eastern Time, Sunday. No
person shall operate any scheduled arrival or departure into or out of
LaGuardia during such hours without first obtaining a slot in
accordance with this subpart. No person shall conduct an unscheduled
operation to or from LaGuardia during such hours without first
obtaining a reservation.
(d) Carriers that have common ownership shall be considered a
single air carrier for purposes of this rule.
(e) The slots assigned under this subpart terminate at 10:00 p.m.
on March 9, 2019.
Sec. 93.36 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 LaGuardia.
Base of operations are those common slots held by a carrier at
LaGuardia on December 9, 2008, that do not exceed 20 operations per day
and all slots guaranteed under The Air Transport Agreement between the
Government of the United States of America and the Government of
Canada.
Carrier is a U.S. or foreign air carrier with authority to conduct
scheduled service 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. chapters 411 and 413.
Common ownership with respect to two or more carriers means having
in common at least 50 percent beneficial ownership or control by the
same entity or entities.
Common slot is a slot that is allocated 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 and/or departure reservations for
unscheduled operations at LaGuardia and other designated airports.
Limited slot is a slot, the lease for which expires prior to the
expiration of this rule for retirement or subsequent allocation by the
FAA as an unrestricted slot.
Public charter is defined in 14 CFR 380.2 as a one-way or roundtrip
charter
[[Page 60599]]
flight to be performed by one or more direct air 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 during a specific 60-minute period.
Scheduled operation is the arrival or departure segment of any
operation regularly conducted by a carrier between LaGuardia 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 LaGuardia on a particular day(s) of the week during a specific 30-
minute period.
Unrestricted slot is a slot that is allocated 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 LaGuardia 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.
Sec. 93.37 Slots for scheduled arrivals and departures.
(a) During the hours of 6 a.m. through 9:59 p.m., Eastern Time,
Monday through Friday and from 12 noon through 9:59 p.m., Eastern Time,
Sunday, no person shall operate any scheduled arrival or departure into
or out of LaGuardia without first obtaining a slot in accordance with
this subpart.
(b)(1) Prior to March 8, 2009, the number of slots shall be limited
to no more than seventy-five (75) per hour unless otherwise provided by
the Administrator. The number of slots may not exceed 38 in any 30-
minute period, and 75 in any 60-minute period.
(2) Effective March 8, 2009, and except as otherwise established by
the FAA under paragraph (c) of this section, the number of slots
available from 6 a.m. through 9:59 p.m. shall be limited to no more
than seventy-one (71) per hour. The number of slots may not exceed 38
in any 30-minute period, and 71 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. 93.38 Categories of slots.
Each slot shall be designated as a common slot, limited slot or
unrestricted slot and shall be assigned 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.
(a) Common slots.
(1) All slots within any carrier's base of operations as determined
on December 9, 2008 shall be designated as common slots.
(2) 176 slots at LaGuardia on December 9, 2008 shall be designated
as limited slots or unrestricted slots. All other slots shall be
designated as common slots.
(b) Limited slots. Those slots assigned to a carrier subject to
return to the FAA under Sec. 93.39(c) and (d) shall be designated as
limited slots until the date of their reassignment by the FAA as
unrestricted slots or their retirement by the FAA. A carrier may
continue to use a limited slot that has reverted to the FAA until the
second Sunday in the following March.
(1) Each carrier with a total number of daily operations at
LaGuardia in excess of its base of 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 (b)(3) and (4) of this section.
(2) A carrier shall designate 50 percent of its limited slots. The
carrier must notify the FAA of its designation by December 19, 2008.
(3) The FAA will designate the remaining limited slots, initially
excluding those hours in which five 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.
(c) 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. 93.39 Initial assignment of slots.
(a) Except as provided for under paragraphs (b) and (c) of this
section, any carrier allocated operating rights under the Order,
Operating Limitations at New York LaGuardia Airport, during the week of
September 28-October 4, 2008, as evidenced by the FAA's records, will
be assigned corresponding slots in 30-minute periods consistent with
the limits under Sec. 93.37(b). 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. 93.37(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 LaGuardia Airport during the week of September
28-October 4, 2008, but the operating rights were held by another
carrier regularly conducting operations at the airport as of that week,
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)(1) In accordance with the schedule published under Sec.
93.38(b)(4),
(i) Twenty-four (24) limited slots shall revert to the FAA on
January 13, 2009 and be auctioned as unrestricted slots by the FAA.
(ii) Every year thereafter, twenty-two (22) limited slots shall
revert to the FAA and be auctioned as unrestricted slots by the FAA.
(2) Any slot receiving no responsive bids will be retired until the
next auction.
(3) An affected carrier will be allowed to use the limited slot
until the following second Sunday in March.
(d) On March 8, 2009, the FAA will retire 64 of the limited slots
returned to the FAA under Sec. 93.38(b).
Sec. 93.40 Assignment of new or returned slots.
(a) New capacity or capacity returned to the FAA pursuant to the
provisions of Sec. 93.44 will be reassigned by the FAA via an auction.
Slots acquired from the FAA under the auction proceeding shall be
designated as unrestricted slots.
(b) The FAA may decide to accumulate a quantity of slots prior to
conducting an auction.
[[Page 60600]]
Sec. 93.41 Reversion and withdrawal of slots.
(a) This section does not apply to unrestricted slots.
(b) A carrier's common slots or limited slots revert back to the
FAA 30 days after the carrier has ceased all operations at LaGuardia
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. 93.47.
(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 LaGuardia.
(g) Should the Administrator determine that the cap on scheduled
operations at LaGuardia 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. 93.42 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) A carrier may transfer a slot to another carrier that conducts
operations at LaGuardia 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. 93.39(c), 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. 93.43 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. 93.44 Minimum Usage Requirements.
(a) This section does not apply to unrestricted slots.
(b) Any common slot or limited slot that is not used at least 80
percent of the time over a consecutive two-month period shall 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. 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. 93.45 Unscheduled operations.
(a) During the hours of 6 a.m. through 9:59 p.m., Monday through
Friday, and 12 noon through 9:59 p.m. on Sunday, no person may operate
an aircraft other than a helicopter to or from LaGuardia 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 LaGuardia. Additional information on procedures for
obtaining a reservation is available on the Internet at http://
www.fly.faa.gov/ecvrs.
(b) Three reservations are available per hour, including those
assigned to public charter operations under paragraph (d) of this
section. The ARO will assign reservations on a 60-minute basis.
(c) The ARO will receive and process all reservation requests for
unscheduled arrivals and departures at LaGuardia. 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 allocation to
public charter operations prior to the 72-hour Reservation window in
paragraph (a) of this section.
(1) The public charter operator may request a reservation up to six
months in advance of the date of 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
[[Page 60601]]
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 LaGuardia, and aircraft type. 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 allocated, 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 are 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. 93.46 Reporting requirements.
(a) Within 14 days after the last day of the two-month period
beginning January 1, 2009 and every two months thereafter, each carrier
must report, in a format acceptable to the FAA, the following
information for each 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;
(4) The aircraft type identifier.
(b) The FAA may withdraw the common slot or limited slot of any
carrier that does not meet the reporting requirements of paragraph (a)
of this section.
Sec. 93.47 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 LaGuardia. 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. E8-24048 Filed 10-9-08; 8:45 am]
BILLING CODE 4910-13-P
Browse by Year
/ 2008
/ October
/ Friday, October 10, 2008
|
|
