Congestion and Delay Reduction at Chicago O'Hare International Airport, 15520-15539 [05-5882]

Agencies

• Federal Aviation Administration
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 70, Number 57 (Friday, March 25, 2005)]
[Proposed Rules]
[Pages 15520-15539]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-5882]



[[Page 15519]]

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Part IV





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 93



Congestion, Delay Reduction and Operating Limitations at Chicago O'Hare 
International Airport; Proposed Rule and Notice

Federal Register / Vol. 70, No. 57 / Friday, March 25, 2005 / 
Proposed Rules

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 93

[Docket No. FAA-2005-20704; Notice No. 05-03]
RIN 2120-AI51


Congestion and Delay Reduction at Chicago O'Hare International 
Airport

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The FAA is proposing this rule to address persistent flight 
delays related to over-scheduling at O'Hare International Airport 
(O'Hare). This proposed rule is intended as an interim measure, because 
the FAA anticipates that the rule would yield to longer term solutions 
to traffic congestion at the airport. Such solutions include an 
application by the City of Chicago that, if approved, would modernize 
the airport and reduce levels of delay, both in the medium term and 
long term. For this reason, the proposed rule includes provisions 
allowing for the limits it imposes to be gradually relaxed and in any 
event would sunset in 2008.

DATES: Send your comments on or before May 24, 2005.

ADDRESSES: You may send comments (identified by Docket Number FAA-2005-
20704) using the following method:
     DOT Docket Web site: Go to https://dms.dot.gov and follow 
the instructions for sending your comments electronically.
     Government-wide rulemaking Web site: Go to https://
www.regulations.gov and follow the instructions for sending your 
comments electronically.
     Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001.
     Fax: 1-202-493-2251.
     Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For more information on the rulemaking process, see the 
SUPPLEMENTARY INFORMATION section of this document.
    Privacy: We will post all comments we receive, without change, to 
https://dms.dot.gov, including any personal information you provide. For 
more information, see the Privacy Act discussion in the SUPPLEMENTARY 
INFORMATION section of this document.
    Docket: To read background documents or comments received, go to 
https://dms.dot.gov at any time or to Room PL-401 on the plaza level of 
the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Dr. Jeffrey Wharff, Office of Policy 
and Plans, APO-200, Federal Aviation Administration, 800 Independence 
Avenue SW., Washington, DC 20591; telephone (202) 267-3274.

SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites interested persons to participate in this 
rulemaking by submitting written comments, data, or views. We also 
invite comments relating to the economic, environmental, energy, or 
federalism impacts that might result from adopting the proposals in 
this document. The most helpful comments reference a specific portion 
of the proposal, explain the reason for any recommended change, and 
include supporting data. We ask that you send us two copies of written 
comments.
    We will file in the docket all comments we receive, as well as a 
report summarizing each substantive public contact with FAA personnel 
concerning this proposed rulemaking. The docket is available for public 
inspection before and after the comment closing date. If you wish to 
review the docket in person, go to the address in the ADDRESSES section 
of this preamble between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays. You may also review the docket using the 
Internet at the Web address in the ADDRESSES section.
    Privacy Act: Using the search function of our docket Web site, 
anyone can find and read the comments received into any of our dockets, 
including the name of the individual sending the comment (or signing 
the comment on behalf of an association, business, labor union, etc.). 
You may review DOT's complete Privacy Act Statement in the Federal 
Register published on April 11, 2000 (65 FR 19477-78), or you may visit 
https://dms.dot.gov.
    Before acting on this proposal, we will consider all comments we 
receive on or before the closing date for comments. We will consider 
comments filed late if it is possible to do so without incurring 
expense or delay. We may change this proposal in light of the comments 
we receive.
    If you want the FAA to acknowledge receipt of your comments on this 
proposal, include with your comments a pre-addressed, stamped postcard 
on which the docket number appears. We will stamp the date on the 
postcard and mail it to you.

Availability of Rulemaking Documents

    You can get an electronic copy using the Internet by:
    (1) Searching the Department of Transportation's electronic Docket 
Management System (DMS) Web page (https://dms.dot.gov/search);
    (2) Visiting the Office of Rulemaking's Web page at https://
www.faa.gov/avr/arm/index.cfm; or
    (3) Accessing the Government Printing Office's Web page at https://
www.gpoaccess.gov/fr/.
    You can also get a copy by submitting 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.

Background

The High Density Traffic Airports Rule at O'Hare

    Until July 2002, the FAA managed congestion and delay at O'Hare by 
means of the High Density Rule (HDR), which was codified in 14 CFR part 
93, subpart K. The FAA's predecessor agency adopted the HDR under its 
broad authority to ensure the efficient use of the nation's navigable 
airspace. 49 U.S.C. 40103. The HDR took effect in 1969, and while it 
originally was a temporary rule, it became permanent in 1973.
    The HDR established limits on the number of all take-offs and 
landings during certain hours at five airports, including O'Hare. In 
order to operate a flight during the restricted hours, an airline 
needed a reservation, commonly known as a slot. Slots were initially 
allocated through scheduling committees, operating under then-
authorized antitrust immunity, where all the airlines would agree to 
the allocation. But after the Airline Deregulation Act in 1978, new 
entrant airlines formed and the pre-existing, or legacy carriers, 
sought to expand. This made it increasingly difficult for airlines to 
reach agreement and the scheduling committees began to deadlock.
    In 1984, the FAA amended the HDR to increase the hours in which 
limitations at O'Hare Airport would apply and to increase the number of 
take-offs and landings permitted at that airport (49 FR 8237, March 6, 
1984). The

[[Page 15521]]

next year, a new subpart S was added to part 93 that established 
allocation procedures for slots including use-or-lose provisions and 
permission to buy and sell slots in a secondary market (50 FR 52195, 
December 20, 1985). These procedures replaced the scheduling 
committees.

Statutory Changes Ending the High Density Rule at O'Hare

    In 2000 Congress relaxed the slot rules at the high density 
airports and phased out the slot rules entirely at three of them 
including O'Hare. 49 U.S.C. 41715, 41717. With respect to O'Hare, 
Congress directed that:
    (1) Beginning July 1, 2001, the slot control restrictions be 
limited to the period between 2:45 p.m. and 8:14 p.m.;
    (2) Beginning May 1, 2000, exemptions be granted to airlines to 
provide air service to small airports with 70-seat or smaller aircraft;
    (3) 30 slot exemptions be granted to new entrant or limited 
incumbent air carriers;
    (4) After May 1, 2000, slots no longer be required to provide 
international air service; and
    (5) Slot restrictions be lifted entirely after July 1, 2002.
    In phasing out the HDR, Congress recognized the possibility that 
there could be an increase in congestion and delays at the affected 
airports. Therefore, in the section that phased out the rule, it made 
clear 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).

Resurgence of Unacceptable Levels of Congestion

    As a result of the 2000 legislation, the slot restrictions of the 
HDR ceased to exist at O'Hare as of July 1, 2002. While lifting all 
slot restrictions at O'Hare after July 1, 2002, did not affect air 
safety, it did eventually lead to a dramatic increase in airline 
delays, which reverberated throughout the national air transportation 
system.
    Initially, lifting the HDR had a minimal impact on delays due to 
the lingering effects on airline passenger traffic of the 9/11 
terrorist attacks. But by 2003, the two air carriers operating hubs at 
O'Hare, American Airlines (``American'') and United Airlines 
(``United'') had added a large number of operations and retimed other 
flights, resulting in congestion during peak hours of the day. From 
April 2000 through November 2003, American increased its scheduled 
operations at O'Hare between the hours of 12 p.m. and 7:59 p.m. by 
nearly 10.5 percent. Over the same period, United increased its 
scheduled operations at O'Hare by over 41 percent.
    The increases in operations by American and United did not result 
in a corresponding increase in seat capacity. During the peak period, 
these two carriers added 375 regional jet operations per day. Overall, 
American and United added over 600 regional jet operations per day. At 
the same time as they added regional jet operations, they reduced 
mainline jet operations. The result was a decrease in seat capacity by 
each carrier at O'Hare of more than 5.5 percent from April 2000 to 
November 2003. In November 2003, more than 40 percent of American's and 
United's O'Hare flights were operated with regional jets, many to large 
and medium hubs. The significant increases in scheduled operations 
during this time period resulted in excessive delays and congestion at 
O'Hare.
    By November 2003, O'Hare had the worst on-time performance of any 
major airport. O'Hare arrivals were on time only 57 percent of the 
time, well below the FAA goal of 82 percent. Departures were little 
better. They were on time only 67 percent of the time, well below the 
average of 85 percent at other major airports. These delays averaged 
about an hour in duration. Published schedules for February 2004 
indicated that the problem would be exacerbated by the addition of even 
more flights.
    Recognizing congestion was again becoming a significant issue, 
Congress enacted legislation that included a mechanism to help reduce 
delays and improve the movement of air traffic at congested airports. 
49 U.S.C. 41722. That statutory provision authorized the Secretary of 
Transportation (Secretary) to request that scheduled airlines meet with 
the FAA to discuss flight reductions at severely congested airports to 
reduce over-scheduling and flight delays during hours of peak 
operation, if the FAA determines that it is necessary to convene such a 
meeting and the Secretary determines that the meeting is necessary to 
meet a serious transportation need or achieve an important public 
benefit.
    In early 2004, the Secretary of Transportation and the FAA 
Administrator determined that a schedule reduction meeting was 
necessary to deal with congestion-related delays at O'Hare. Before such 
a meeting could be convened, however, United and American each agreed 
to reduce their scheduled flights voluntarily. Accordingly, the 
schedule reduction meeting was deferred. Instead, the FAA issued an 
order implementing the voluntary agreement of the two air carriers, 
Docket FAA-2004-16944-55; 69 FR 5650 (2004). The FAA order required a 5 
percent reduction in the two carriers' scheduled operations. This 
reduction was to be effective between 1 p.m. and 8 p.m. for six-months, 
beginning no later than March 4, 2004.
    The FAA again reviewed O'Hare's on-time performance in March 2004 
in light of the ordered schedule reductions. That review showed that 
the total delay minutes could have been as much as 30 percent higher 
without the reductions but that delays still remained more than double 
the level of a year earlier and represented more than a third of the 
total delays in the United States.
    In light of the continued problems at O'Hare, the FAA again 
discussed the situation with American and United. As a result, on April 
21, 2004, the FAA issued an amendment to the previous order in Docket 
FAA-2004-16944. This amendment required additional flight reductions. 
Specifically, beginning no later than June 10, 2004, it required (1) an 
additional schedule reduction of 2.5 percent of each carrier's total 
operations in the 1 p.m. through 7:59 p.m. hours including arrival 
reductions during specific times; (2) a reduction in the number of 
scheduled arrivals in the 12 p.m. hour; and (3) reductions to continue 
through October 30, 2004.
    Prior to the implementation of the June flight reductions, delays 
at O'Hare continued. In May, there were a record 14,495 total delays. 
While the numbers in June and July improved, as the last round of 
cutbacks by American and United took effect, the FAA determined that 
the overall trend of delays remained unacceptably high. Meanwhile, some 
airlines that were not party to the agreement involving American and 
United continued to add flights, making it unlikely that the hub 
carriers would extend their voluntary schedule reductions without 
similar commitments by other carriers. Published schedules for November 
indicated that during several times of the day scheduled arrivals would 
approach or exceed the airport's highest possible arrival capacity. 
Accordingly, in July, the Secretary of Transportation and FAA 
Administrator determined that the scheduling reduction meeting that had 
previously been deferred now needed to be held (69 FR 46201, August 2, 
2004).
    The meeting between DOT and the carriers convened on August 4, 
2004, and was followed by meetings between Federal officials and 
individual airlines. As a result, United and American agreed to 
reschedule and reduce scheduled

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arrivals by about 5 percent during peak hours and other airlines agreed 
not to increase the number of their scheduled arrivals. New entrants 
and limited incumbents were permitted to add a small number of 
scheduled flights. Based on the information provided through the 
meetings and submissions filed in the docket, the FAA issued a 
comprehensive order on scheduled arrivals at O'Hare on August 18, 2004, 
limiting arrivals by domestic carriers to 88 during most hours of the 
day and implementing the above agreement (August 2004 Order). The Order 
took effect November 1, 2004, and will expire on April 30, 2005. On 
February 10, 2005, the FAA issued an order proposing to extend the 
August 2004 Order's effect through October 2005. The FAA sought the 
views of interested persons on the advisability of extending the August 
2004 Order in Docket FAA-2004-16944.
    The FAA is reviewing a proposal by the City of Chicago to 
reconfigure O'Hare and expand its capacity to accommodate existing and 
future aviation operating demands. However, such a solution, if 
approved, would yield modest benefits in the near term (2007) and 
require many years (2013) to be fully realized. The FAA also considered 
whether any near-term air traffic procedural changes, airspace 
redesign, or equipage upgrades could provide sufficient capacity or 
efficiency gains to meet the level of airport demand experienced in 
late 2003 and much of 2004. Greater utilization of higher capacity 
runway configurations, some of which are dependent on weather and other 
operating conditions, could increase O'Hare's average arrival rate. The 
FAA will continue to monitor the actual and predicted airport 
operations to ensure that capacity does not routinely go unused. The 
FAA is reviewing the possibility that additional aircraft might be able 
to utilize land and hold short operations under more runway 
configurations, and if approved, this could provide operational arrival 
and departure benefits. New category II and category III instrumental 
landing systems for runways 27L and 27R are expected to be operational 
during fall 2005 and would increase arrival capacity in adverse weather 
conditions. The FAA is also considering airspace redesign as part of 
the Midwest Airspace Capacity Enhancement (MACE) plan, including new 
routes and sectors in the Chicago, Cleveland, and Indianapolis Air 
Route Traffic Control Centers, as well as departure and arrival routes 
in the Chicago airspace area that could increase capacity at O'Hare. 
Environmental review for these proposed changes is expected to be 
complete by late 2005. In addition, on January 20, 2005, the FAA 
implemented reduced vertical separation minima that added six new 
flight levels between 29,000 and 41,000 feet. The new flight levels 
increase overall efficiency in the national airspace system. In the 
future, this may provide alternatives to address the cumulative impact 
of aircraft departing from O'Hare and other Midwest airports.
    The NPRM, as proposed, would allow the FAA to recognize any 
capacity increases realized before the proposed sunset of the rule by 
allocating additional arrival authorizations. However, the short-term 
air traffic control changes will not, in themselves, result in 
sufficient capacity to meet historic demand. Accordingly, the FAA is 
now faced with the question of what to do when the August 2004 Order 
expires. Several courses of action have been considered.
    One possibility is to allow the August 2004 Order to expire and to 
let events run their course without FAA intervention. This would leave 
no administrative mechanism to prevent each individual airline from 
increasing its own flights. Air traffic control procedures and traffic 
management initiatives such as ground delay programs, miles-in-trail 
restrictions, and aircraft re-routing, would ensure that any additional 
flights did not affect air safety. The FAA's recent experience with 
this option is characterized by the congestion-related delays that 
O'Hare experienced in late 2003. Therefore, the likely outcome of this 
approach is a renewed, significant increase in total airline flights at 
O'Hare. Because the cost of the resulting delays is not fully 
internalized by any individual air carrier, both experience and theory 
suggest that without any constraint, each carrier would, at least 
initially, continue adding flights despite an unacceptable level of 
congestion and delay. It was such a situation that caused the FAA to 
intervene at O'Hare in early 2004. It has been argued that air carriers 
could eventually find equilibrium at O'Hare if given enough time. We 
invite comments on the option of allowing the August 2004 Order to 
expire and taking no action with respect to air carrier scheduling at 
O'Hare.
    Alternatively, the FAA could extend the August 2004 Order or 
renegotiate with air carriers for a voluntary schedule over a longer 
term than the August 2004 Order. As previously noted, the FAA on 
February 10, 2005, issued an order to show cause, which invites 
interested parties to comment on the FAA's proposal to extend the 
August 2004 Order until October 31, 2005. Nevertheless, an extension of 
the current order may not be desirable for any period longer than is 
necessary to complete this rulemaking. As the problems faced by air 
carrier scheduling committees in the 1980s demonstrate, a growing 
economy will continue to boost passenger demand. In the face of such 
market pressures, not all carriers may accept the FAA's proposal to 
extend the August 2004 Order or the issuance of a new order supplanting 
the August 2004 Order. Additionally, this NPRM raises issues that are 
not likely to be resolved in the context of a scheduling reduction 
meeting, including limitations on foreign air carriers and the creation 
of a blind buy/sell procedure.
    The FAA and Office of the Secretary of Transportation (OST) are 
also considering various administrative and market-based mechanisms 
that may improve on prior methods of allocating available capacity at 
an airport where capacity is not able to meet aviation demand. The FAA 
and OST have contracted with the National Center of Excellence for 
Aviation Operations Research (NEXTOR) to conduct research on various 
proposals to implement at LaGuardia airport upon the expiration of the 
HDR. The market-based mechanisms being researched for LaGuardia airport 
are among several measures that could be implemented at O'Hare, if 
capacity improvements are inadequate to achieve delay reduction. 
However, the research and FAA and OST policy evaluations will not be 
completed until the latter half of 2005. In addition, while market-
based mechanisms are among those being evaluated, they raise many 
issues, including the most practical implementation of such a regime, 
the effect of any such program on airfares, consideration of applicable 
legal requirements, the consistency of such a program with 
international agreements, the use of any ``surplus'' revenue, as well 
as the impact on new entrants, small airlines, competition, and service 
to small communities. An immediate approach is needed to manage the 
congestion and delays at O'Hare in the interim.
    Accordingly, the FAA is proposing a rule to manage congestion and 
delay at O'Hare until April 6, 2008, by which time one of three 
possibilities will have presented itself: (1) The first phase of an 
FAA-approved O'Hare Modernization Plan (OMP) yields enough capacity to 
obviate the need for government action to address congestion; (2) the 
first phase of an approved OMP does not yield enough capacity in the 
medium-term

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and continued action is necessary until enough long-term capacity comes 
on-line; or (3) the OMP is not approved and further action is needed 
over the medium and long term.

Authority

    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 to 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. The FAA interprets its broad statutory 
authority to ensure the efficient use of the navigable airspace to 
encompass management of the nationwide system of air commerce and air 
traffic control.
    In addition to FAA's authority and responsibilities with respect to 
the efficient use of airspace, the Secretary of Transportation is 
required to consider several other objectives as being in the public 
interest, including: Keeping available a variety of adequate, economic, 
efficient, and low-priced air services; placing maximum reliance on 
competitive market forces and on actual and potential competition; 
avoiding airline industry conditions that would tend to allow at least 
one air carrier unreasonably to increase prices, reduce services, or 
exclude competition in air transportation; encouraging, developing, and 
maintaining an air transportation system relying on actual and 
potential competition; encouraging entry into air transportation 
markets by new and existing air carriers and the continued 
strengthening of small air carriers to ensure a more effective and 
competitive airline industry; maintaining a complete and convenient 
system of scheduled air transportation for small communities; ensuring 
that consumers in all regions of the United States, including those in 
small communities and rural and remote areas, have access to 
affordable, regularly scheduled air service; and acting consistently 
with obligations of the U.S. Government under international agreements. 
See 49 U.S.C. 40101(a)(4), (6), (10)-(13) and (16), and 40105(b).

The Proposal

Limit on O'Hare Arrivals During Peak Periods

    Under the proposed rule, the FAA would limit the number of 
scheduled flight arrivals at O'Hare from 7 a.m. and 8:59 p.m. local 
time Monday through Friday and from noon to 8:59 p.m. on Sunday. 
Scheduled arrivals would be limited to 88 per hour (and to 50 in any 
half hour) between 7 a.m. and 7:59 p.m.; \1\ however, from 8 p.m. to 
8:59 the limit on scheduled arrivals would increase to 98. Arrival 
times would be assigned according to the procedures described elsewhere 
in this document. Unscheduled flight arrivals (such as, arrivals by 
general aviation, the military, and certain charter services) would be 
restricted to four (4) per hour, under an advance reservation system 
described in proposed Special Federal Aviation Regulation (SFAR) No. 
105 Proposed Reservation System for Unscheduled Arrivals at Chicago's 
O'Hare International Airport, published by the FAA on October 20, 2004 
(69 FR 61708), which after adoption would be replaced by this proposed 
rule. Thus, arrivals in total would be limited to 92 per hour during 
all regulated periods (except for the 8 p.m. to 8:59 p.m. hour).
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    \1\ The Order provides for 89 arrivals during certain hours to 
accommodate planned schedule increases by certain limited incumbent 
carriers. The proposed rule would permit similar exceptions above 88 
arrivals per hour in order to account for existing schedules and 
foreign air carriers.
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    The proposed hourly arrival limits are based on the analysis 
originally done as part of the delay-reduction proceedings that 
resulted in the August 2004 Order, the FAA's confidence in the general 
reliability of its delay-projection models, and the FAA's actual 
experience with operations at O'Hare following the implementation of 
the Order. In establishing a target (as required by 49 U.S.C. 41722) 
for the delay-reduction proceedings, the FAA examined the airport's 
operations over 140 weekdays from November 3, 2003, through May 14, 
2004, and found that it had accommodated an average of 90 arrivals per 
hour in all weather conditions, including an average of 86 scheduled 
and four (4) unscheduled flights, during the peak period of noon 
through 6:59 p.m. Because demand for access to O'Hare is highest at 
these hours, the arrival rate experienced over this period would tend 
to indicate the maximum average capacity of the airport under various 
weather, runway, and operating conditions. The figure also correlated 
closely to the reported average airport acceptance rate for this 
period,\2\ suggesting that there was little or no unused capacity 
during these times.
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    \2\ The airport acceptance rate or airport arrival rate is the 
number of arrivals an airport is capable of accepting each hour. The 
rate changes to reflect the impact of weather or other operating 
conditions on the arrival capacity.
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    In the delay-reduction proceedings the Administrator had initially 
set a rate of 86 scheduled arrivals per hour and 22 arrivals for each 
rolling 15-minute period as a target for industry agreement; this 
assumed that the historical average of four additional unscheduled 
arrivals per hour by general aviation, military, cargo, and charter 
flights would continue. In ultimately deciding to use a somewhat higher 
arrival rate of 88 scheduled operations per hour in the Order, the 
Administrator considered information provided by air carriers during 
the scheduling reduction discussions. These carriers maintained that 
such a limitation would result in unused airport capacity under many 
conditions and that the use of a 15-minute limitation on arrivals was 
overly restrictive and would unnecessarily hamper the carriers' 
scheduling flexibility. The participants proposed that the FAA consider 
allowing a scheduled arrival rate of at least 90 flights per hour and 
constrain operations by no longer than 30-minute periods. The airlines 
also requested that the FAA allow more flights toward the end of the 
service day in order to allow them to complete connections and 
reposition their fleets for the following day.
    After consideration of these arguments and the results forecast by 
the agency's delay-reduction models, the Administrator decided to use a 
scheduled arrival rate of approximately 88 flights for the period 
between 7 a.m. and 7:59 p.m. and 98 arrivals in the 8 p.m. hour (which 
is the end of the ``service day,'' when the effect of any delays on 
later operations is most limited). The Administrator also determined 
that the use of a ``rolling'' constraint over each 30-minute period of 
no more than 50 arrivals (with the exception of the 8 p.m. hour) would 
achieve a desirable level of delay reduction. The proposed rule, if 
adopted, would set similar 30-minute limits as were imposed by the 
Order but would not establish a regulatory process for a ``rolling'' 
limit. Recognizing that schedule peaking within a short time period 
significantly increases delays, the FAA intends to closely monitor 
scheduling practices, and as at other airports, we will encourage 
carriers to schedule realistically within O'Hare's capacity.
    As was the case with the August 2004 Order, the FAA is now 
proposing to restrict arrivals only, rather than both arrivals and 
departures, as had been the case under the High Density Rule. Limiting 
the cap to only arrivals is simpler and lessens the government's 
intervention in airline scheduling. The number and timing of arrivals 
usually

[[Page 15524]]

closely correlates to the number and timing of departures. Moreover, in 
the FAA's experience, arrival delays tend to be more disruptive to the 
system and cause delays in later flights since a late-arriving aircraft 
is not available for an on time departure.
    In setting the hourly arrival caps in the Order, and proposing the 
same caps for use in this rule, the Administrator has also relied on 
analyses performed at the FAA's request by MITRE Corporation,\3\ which 
ran computer modeling to simulate the effect of hypothetical schedule 
reductions on the level of flight delays at O'Hare. In the FAA's 
experience, these models are highly reliable in forecasting the effect 
of various schedules on airport delays. To assess the impact of 
potential reductions, the FAA and MITRE selected several different 
O'Hare schedules for air carriers publishing their flights in the 
Official Airline Guide (OAG) and analyzed them to simulate the 
resulting delays in arrival queues. For each scenario, MITRE assumed a 
total of four (4) unscheduled flights per hour; because the exact times 
these flights arrive are unknown, they were randomly assigned arrival 
times during each hour. Because arrival queuing delays also depend on 
available capacity at ORD (which can change with runway, weather and 
operating conditions), actual hourly arrival capacity was included for 
each weekday in the model.
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    \3\ MITRE is a not-for-profit corporation working with 
government clients. It addresses issues of critical national 
importance, combining systems engineering and information technology 
to develop innovative solutions. MITRE's work is focused within 
three Federally Funded Research and Development Centers, one of 
which performs systems research and development work for the Federal 
Aviation Administration and other civil aviation authorities.
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    The models predicted that constraints used in the August 2004 Order 
(that is, an arrival rate of approximately 88 scheduled and four 
unscheduled operations per hour, together with the 30-minute 
constraints discussed above) would reduce O'Hare delays by 
approximately 20 percent from the levels then attributable to schedules 
in effect at the time of the August 2004 Order. The FAA also simulated 
the results of a completely unconstrained schedule--using the 
industry's then-proposed November 2004 schedules--and calculated that 
delays under the Order would be approximately 43 percent less severe 
than would be experienced if no action were taken and those November 
2004 schedules were allowed to take effect.
    Preliminary results of the Order, as reflected in FAA's calculated 
O'Hare on-time performance statistics for the month of November, 2004, 
confirm that the arrival limitations adopted in the Order have 
materially reduced delays and thus support adopting identical 
limitations in the proposed rule. Although the reduction in delays has 
somewhat exceeded the FAA's forecast, the Administrator believes that 
there is insufficient data to support a relaxation of those limits. 
During this rulemaking proceeding, however, the FAA will continue to 
review the proposed limitations and, if justified by the models and 
actual delay statistics, consider whether the limitations should be 
modified in response to changing conditions at O'Hare. In addition, as 
described below, the proposed rule provides for the FAA periodically to 
reevaluate the available capacity at O'Hare and to make adjustments in 
the arrival limits as warranted.
    As proposed, the rule would maintain the limitations on arrivals 
assignments established in the August 2004 Order. Until a final rule is 
adopted in this rulemaking, the cumulative delay statistics and 
modeling results may demonstrate to the Administrator that increasing 
the number of arrivals above what is proposed in this notice will still 
allow for acceptable operational performance. If so, the arrival cap on 
scheduled operations may be raised in a final rule, if adopted.
    It is also possible that air traffic procedural changes or other 
enhancements will result in a limited increase in arrival capacity over 
the duration of the proposed rule. Therefore, the FAA will periodically 
reexamine the level of available capacity at O'Hare. Under the proposed 
rule, every six months, the FAA would review the level and length of 
delays, operating conditions at the airport and other relevant factors 
to determine whether more arrivals can be allowed. The FAA estimates 
for the purposes of this proposal that such a review would, in no 
event, result in hourly arrivals in excess of O'Hare's current capacity 
under optimal conditions, which is 100 arrivals per hour.
    The FAA also is considering whether the final rule should provide a 
mechanism through which the level of available capacity would be 
adjusted based on considerations other than delays and efficiency 
concerns. Specifically, we seek comment on whether the hourly limits on 
Arrival Authorizations should be adjustable based on broader public 
interest concerns as set forth in 49 U.S.C. 40101 (a) (including 
keeping available low-priced air services, maintaining a system relying 
on actual and potential competition, and encouraging new entry), and if 
so, which concerns. Further, we seek comment on whether the process to 
make such adjustments shall be established in the rule or whether 
standing exemption authority should be relied upon.

Initial Assignment of Arrival Authorizations

    Under the proposal, the FAA would initially assign Arrival 
Authorizations \4\ based on the terms of August 2004 Order, as amended. 
The FAA would first look to the scheduled arrivals for each affected 
domestic carrier in effect from November 1, 2004 through November 7, 
2004.\5\ Thus, if a carrier published a daily scheduled arrival at 1 pm 
in the first week of November, it would retain that arrival time by 
receiving the assignment of an Arrival Authorization for that 
operation. In this manner, the arrivals permitted under the August 2004 
Order would be preserved. The FAA would rely on its records to 
determine when an arrival had been scheduled during the first week of 
November and which carrier held the appropriate authorization. Each 
initial Arrival Authorization would be for the corresponding 30-minute 
period indicated by the FAA's records. In the event that a carrier had 
not published a scheduled arrival during the first week of November to 
which it was entitled under the August 2004 Order, the terms of the 
Order would control.
---------------------------------------------------------------------------

    \4\ An Arrival Authorization is the operational authority 
assigned to an air carrier or foreign air carrier by the FAA to 
conduct one scheduled IFR arrival operation each week on a specific 
day of the week during a specific 30-minute period at O'Hare.
    \5\ We chose the first week of November because that was the 
first seven-day period during which the August 2004 Order was 
effective.
---------------------------------------------------------------------------

    The FAA would publish its proposed initial assignment of scheduled 
Arrival Authorizations 14 days before the effective date of the rule. 
The FAA Vice President, System Operations Services for the Air Traffic 
Organization would be the final decision-maker with respect to the 
initial assignment of scheduled Arrival Authorizations.
    By assigning Arrival Authorizations to each carrier in a manner 
that corresponds with the arrivals actually scheduled by such carrier 
during the first week of November 2004, the FAA intends to minimize any 
operational or economic disruption to the airline industry upon 
implementation of the proposed rule. Assignment of Arrival 
Authorizations to carriers currently holding them would avoid immediate 
disruption of air service to the public.
    Additionally, the schedules flown during that seven-day period 
reflect an

[[Page 15525]]

agreement reached between each domestic and Canadian air carrier and 
the FAA as part of the voluntary schedule reduction discussions that 
occurred in August 2004 under the auspices of section 41722 of Title 
49. Each carrier thus would be able to maintain the schedule it put in 
place when the August 2004 Order was adopted and which it accepted 
after negotiation. The FAA is concerned that other assignment methods--
such as a random lottery of authorizations--would not be consistent 
with the results of the voluntary discussions.
    The proposed assignment method is also consistent with the FAA's 
handling of similar issues in the past, such as the slot allocation and 
transfer methods under the High Density Rule, 50 FR 52180, December 20, 
1985. Concerns were expressed in the context of that rule that 
grandfathering existing slot allocations would confer a financial 
windfall on incumbent carriers and adversely effect new entrants. While 
acknowledging the benefit to incumbent carriers, the Department 
believed there, as here, that this effect was necessary in order to 
minimize disruption of existing service patterns.

Code-Sharing Arrangements

    The FAA proposes that, with a limited exception explained below, 
each Arrival Authorization would be allocated solely to the carrier 
that actually operated the flight, regardless of any code-sharing 
agreements. We acknowledge that in other proceedings, the Department 
has determined whether there is an affiliate relationship by looking to 
the designator code or other code-sharing arrangement.\6\ We are 
concerned that this approach would artificially restrict the growth 
opportunities of limited incumbents at O'Hare. Although code-sharing 
agreements are common in parent-subsidiary type relationships, they are 
also increasingly present in marketing arrangements between carriers 
that are essentially independent and largely control their own sales. 
If the FAA were to deem an affiliate relationship to exist by virtue of 
code-sharing agreements alone, code-share partners like American and 
Alaska would become affiliated carriers for purposes of this rule. This 
would have the effect of denying Alaska the opportunities afforded 
other limited incumbents not involved in code-sharing agreements.
---------------------------------------------------------------------------

    \6\ Cf. 49 U.S.C. 41714(k).
---------------------------------------------------------------------------

    At the same time, in making our initial Arrival Authorization 
determinations, the FAA does not intend to assign Arrival 
Authorizations to a carrier that is essentially operating its service 
as a contractor for another carrier and does not market its services 
independently and in its own name. If we were to treat these contract 
carriers as independent carriers, a carrier with a significant number 
of incumbent Arrival Authorizations could take advantage of preferences 
for new entrants and incumbents by entering into affiliate 
relationships with the sole purpose of increasing their number of 
Arrival Authorizations. Thus, under the proposal, where the operating 
carrier conducts the flight solely under the control of another 
carrier, the carrier controlling the inventory of the flight would 
receive the assignment.

Treatment of Foreign Carriers

    The FAA proposes assigning Arrival Authorizations to foreign 
carriers based on seasonal usage. (Canadian carriers are treated 
differently from other foreign carriers under this rule as discussed in 
detail below.) Because there is more seasonal variation in 
international service some foreign carriers could be excluded from the 
initial assignment or be assigned Arrival Authorizations that do not 
match their scheduled summer operating times if assignments were based 
only on November 2004 schedules. Accordingly, we propose establishing a 
seasonal assignment procedure whereby a foreign carrier's initial 
assignment of Arrival Authorizations would be based on its published 
schedules for the winter season that began October 2004 and for the 
summer season that began April 2004. The FAA Vice President, Systems 
Operations Services for the Air Traffic Organization would be the final 
decision-maker with respect to the initial assignment of scheduled 
Arrival Authorizations.

Categories of Operators

    Upon the initial assignment, all carriers would fall into one of 
three following categories: incumbent, limited incumbent or new 
entrant. A new entrant would be a carrier that does not operate any 
Arrival Authorizations at O'Hare and, has never held an Arrival 
Authorization. A limited incumbent carrier would be a carrier that 
operates eight or fewer Arrival Authorizations at O'Hare and has never 
sold or given up an Arrival Authorization. All other carriers would be 
treated as incumbent carriers.
    We recognize that canceling limited incumbent status for a carrier 
that chooses to sell an Arrival Authorization could discourage 
legitimate business choices. The practical impact, however, is merely 
the loss of a preference for future Arrival Authorization assignments; 
the carrier also retains the ability to obtain Arrival Authorizations 
on the same basis as any other incumbent. We have tentatively 
determined that the approach toward limited incumbents presented here 
represents a fair treatment of carriers that are not new entrants but 
that should be afforded some additional consideration due to their 
limited presence at the airport. The proposed definition here is 
consistent with the August 2004 Order.

Treatment of New Entrants/Limited Incumbents and New Capacity

    The competing policy considerations that the Administrator weighed 
in her August 2004 Order confront the agency again today, because 
demand for access to O'Hare still exceeds capacity.\7\ Although the law 
directs the FAA to manage the safe and efficient use of the navigable 
airspace,\8\ we also look to DOT's mandates, overall Congressional 
policy,\9\ and the public interest for guidance.
---------------------------------------------------------------------------

    \7\ Under the order, the two hubbing carriers at the airport 
were the only carriers that reduced operations and retimed a number 
of flights. These carriers also represent the largest carrier 
investment in operations and infrastructure at the airport. However, 
these carriers correspondingly have added a very large number of 
flights in the last three years. (During peak hours and from April 
2000 to November 2003, American added 56 flights, United added 225 
and the net increase of all other carriers at the airport was six.)
    \8\ 49 U.S.C. 40103(b).
    \9\ See, e.g., Delta Air Lines v. CAB, 674 F.2d 1 (D.C. Cir. 
1982).
---------------------------------------------------------------------------

    Several factors here suggest that it would be appropriate to 
provide a preference to new entrants and limited incumbents at the 
airport. First, as we noted above, the Secretary of Transportation 
considers a number of matters in the public interest when carrying out 
the Department's functions, including ``placing maximum reliance on 
competitive market forces and competition.'' \10\ Second, the Airline 
Deregulation Act of 1978, which reduced the regulation of domestic and 
international air transportation, enunciated pro-competitive policies. 
When addressing airport access issues, Congress has frequently favored 
new entrants over incumbents.\11\ Congress has added provisions to the 
statutes governing airport grants and passenger facility charges to 
encourage airports to adopt policies that will promote competition.\12\ 
Third, past OST and FAA rules and orders relating to flight 
restrictions at the high density airports

[[Page 15526]]

also took into account the need to promote competition through new 
entry and expansion by limited incumbents.\13\
---------------------------------------------------------------------------

    \10\ 49 U.S.C. 40101(a)(6).
    \11\ 49 U.S.C. 41714(c), (h), 41716(b), 41717(c), 41718(b)(1).
    \12\ 49 U.S.C. 40117(k), 47106(f), and 47107(s).
    \13\ See, e.g., 14 CFR 93.225 (lottery of available slots); High 
Density Airports: Notice of Extension of the Lottery Allocation and 
Notice of Lottery for Limited Slot Exemptions at LaGuardia Airport 
66 FR 41294 (Aug. 7, 2001) (expanding the scope of new entrants 
eligible to participate in the lottery to those that did not 
participate in the Dec. 4, 2000, including those that had not 
applied for the AIR-21 slot exemptions by Dec. 4, 2000); High 
Density Airports, 67 FR 65826 (Oct. 28, 2002) (adopting the new 
entrant preference procedure for reallocating withdrawn or returned 
lottery slot exemptions at LaGuardia). In Northwest Airlines v. 
Goldschmidt, the court agreed that an allocation of slots to 
carriers that increased low-fare service would be consistent with 
the pro-competitive policy established by the Airline Deregulation 
Act of 1978. (645 F.2d 1309 (8th Cir. 1980)).
---------------------------------------------------------------------------

    Thus, as capacity becomes available during the duration of the 
rule, the FAA proposes to establish a limited preference for new 
entrants and limited incumbents. If the capacity grows per hour from 88 
up to 90 arrivals, any capacity not needed to accommodate foreign air 
carriers would be assigned by lottery to new entrants and limited 
incumbents. If Arrival Authorizations remain, they would be assigned to 
incumbent carriers on an interim basis until the next lottery, when 
they would again be made available first to new entrants and limited 
incumbents.
    Once the capacity reaches 90 per hour, the preference for new 
entrants and limited incumbents would be suspended until these rules 
terminate. Any new capacity resulting in additional Arrival 
Authorizations would then be assigned by lottery with no preference 
based on carrier identity. At that point all carriers would be placed 
on an equal footing.
    Our proposal to continue to favor new entrants and limited 
incumbents in the lottery process is consistent with the equities of 
the situation at O'Hare. The two largest airlines have added a very 
large number of flights in the last three years. While this build-up 
was lawful, it resulted in congestion at O'Hare, as stated earlier. 
Even under this proposal, American and United will still operate the 
vast majority of flights at O'Hare, with a greater percentage of 
Arrival Authorizations at O'Hare than they had slots under the HDR 
before its phase-out, and thus the two airlines will have a substantial 
ability and greater flexibility than rivals to shift flights in 
response to consumer demand and initiatives taken by competitors. We 
tentatively believe that this proposal represents a reasonable 
compromise between promoting competition and recognizing the 
substantial investments of existing carriers at O'Hare. We invite 
commenters to discuss whether the limited preference for new entrants 
and limited incumbents would promote competition (and if so, what form 
the competitive benefits might take), and whether the service benefits 
potentially obtainable from the hubbing airlines' networks argue 
against the preference in the allocation of arrival rights if the FAA 
determines that the airport's capacity will allow 89 or 90 scheduled 
hourly arrivals.

Blind Buy/Sell

    The proposal does not create property rights in any assignment of 
Arrival Authorizations. However, the purchase and sale of Arrival 
Authorizations would be allowed, in order to advance the goals of 
promoting the most efficient use of the airspace and maximizing 
reliance on market forces. See for example, paragraphs (6) and (12) of 
section 40101(a) of Title 49 of the United States Code. Permitting such 
transactions will promote operating efficiency and minimize the need 
for on-going government intervention in the assignment and distribution 
of O'Hare Arrival Authorizations. There would be no further need for 
the FAA to engage in the lengthy negotiations with airlines, as it had 
to do throughout 2004. Nor will there be any risk that these 
negotiations would fail to bear fruit leaving some airlines 
dissatisfied or all airlines with a serious congestion and delay 
problem. Each airline will enjoy an equal opportunity to adjust its 
schedules though the purchase or sale of Arrival Authorizations.
    Under the High Density Rule the Department received complaints 
about the buy/sell process as it was implemented. The rule permitted 
the buyer and seller to deal directly with each other and therefore the 
identity of the carriers were known to each other. Various parties 
complained to the Department that incumbent carriers would refuse to 
sell to a new entrant or other airline that could pose a competitive 
threat. Some airlines and other entities have complained that they were 
not even aware of opportunities to purchase slots.\14\
---------------------------------------------------------------------------

    \14\ The DOT has docketed three petitions on this subject in 
recent years. Dockets OST-2004-18586, OST-2002-13650, and FAA-2001-
9156. The petitions are available for review on the DOT's Web site.
---------------------------------------------------------------------------

    To prevent airlines from engaging in this sort of collusion or 
purposely not selling to a particular competitor, sales of Arrival 
Authorizations under this proposal would be permitted only through a 
blind market overseen by the FAA. This would ensure that new entrants 
and all other airlines have an equal opportunity to purchase Arrival 
Authorizations. The offer to sell an Arrival Authorization would be 
posted in a manner that would ensure notice to all airlines and give 
all airlines an equal opportunity to bid without disclosing the 
identity of the seller. Similarly, the identity of the bidders would 
not be disclosed until the highest bid is accepted and the transfer of 
the authorization is made.
    The only consideration permitted for transactions in the blind 
market would be money. Use of real property such as gates, non-monetary 
assets or other services in lieu of cash would not be permitted. Also, 
under the proposal, Arrival Authorizations obtained by a carrier in a 
lottery by virtue of the carrier's status as a new entrant or limited 
incumbent could not be sold or leased until they had been used for at 
least twelve months, except that they could be sold or leased within 
that period to another new entrant or limited incumbent. Such a 
restriction is consistent with the approach taken by the agency under 
the HDR, which restricted new entrants and limited incumbents from 
selling or leasing slots obtained in a lottery for two years thereafter 
(unless transferred to another new entrant or limited incumbent). Our 
proposal would help ensure that airlines seeking an allocation of slots 
actually intend to use the slots they acquire while fulfilling an 
important policy objective with respect to competition at O'Hare.
    An airline seeking to sell an Arrival Authorization would have to 
provide 30 days' notice to the FAA with the Arrival Authorization 
number, times, frequencies, and effective date. The FAA would post 
information about the proposed sale and closing date for bids. 
Information identifying the seller would not be posted. Offers to buy 
must be made by the closing date. The FAA would forward the highest bid 
to the seller without any identification of the proposed buyer. The 
seller would have three business days to make a decision. If the seller 
accepts the bid, the FAA would notify the winning bidder and require 
both airlines to submit the necessary information to transfer the 
Arrival Authorization. The buyer may not use the Arrival Authorization 
until the FAA has received written confirmation of the transfer. A 
record of each sale will be kept on file by the FAA and be made 
available to the public upon request. Only airlines would be allowed to 
participate in this market.
    Although sales under the blind buy-sell would be allowed as 
described above, the proposed rule does not currently provide for 
leasing and sub-leasing of these authorizations.

[[Page 15527]]

However, the FAA is considering allowing carriers to lease (and 
sublease) Arrival Authorizations, because leasing would provide 
carriers greater flexibility and promote the more efficient use of 
Arrival Authorizations. Leasing would allow carriers to adjust their 
schedules based on changing seasonal or market conditions, and it would 
make it easier for carriers to enter new markets and determine whether 
market conditions justified the purchase of Arrival Authorizations.
    However, as explained above, we would require a blind market for 
the sale of any Arrival Authorization in order to prevent collusion and 
efforts by an Arrival Authorization holder to sell Arrival 
Authorizations to its weakest competitor rather than the carrier that 
could use the Arrival Authorizations most efficiently and profitably. A 
rule allowing the lease of Arrival Authorizations must similarly 
include conditions that would prevent collusion and deny the lessor 
carrier the ability to choose which competitor could lease its Arrival 
Authorizations. The FAA therefore believes that leases and subleases, 
if allowed, should be negotiated only through a process emulating the 
proposed blind market for the sale of Arrival Authorizations. A lessor 
thus would give the FAA notice of its intent to lease Arrival 
Authorizations, the FAA would invite other carriers to bid for the 
lease, no consideration other than cash could be offered by the lessee, 
the lease would not restrict the lessee's ability to use the Arrival 
Authorizations, and the lessor would determine at most the length of 
the lease (alternatively the rule could set a minimum length for all 
leases of Arrival Authorizations). The FAA invites comments on the 
potential impact of a rule allowing leases and subleases.

One-for-One Trades

    In addition, the proposed rule would permit the one-for-one 
exchange of Arrival Authorizations between airlines so long as no 
additional consideration was provided. Under the proposal, these 
exchanges must be publicly disclosed and could take place outside of 
the blind market because many of these arrangements are for operational 
reasons and could be accomplished only through multi-carrier trades. 
Such exchanges would be an effective way to deal with variations in 
seasonal demand and airline business strategies. The authorizations 
could not be used until written confirmation of the transaction is 
received from the FAA.

Canadian Carriers

    In 1995, the U.S. and Canadian governments entered into a bilateral 
agreement that phased in elements of an open trans border aviation 
regime between the two countries. At the time that the U.S. and Canada 
adopted the bilateral agreement, the HDR was still in effect at O'Hare. 
Annex II of the agreement specifically addressed access to O'Hare.
    Annex II provided Canadian air carriers with a base level of 36 
O'Hare arrival and departure slots during the summer season and 32 
arrival and departure slots during the winter season. Under the 
agreement, the U.S. could not withdraw slots from a Canadian air 
carrier for reallocation to another air carrier for international 
operations or for reallocation to a new entrant air carrier if 
withdrawing the slot would reduce the Canadian air carriers below the 
base level. Nevertheless, all O'Hare slots operated by Canadian air 
carriers were subject to the minimum slot usage requirement in the HDR 
that governed the operations of U.S. air carriers.
    Annex II also allowed Canadian air carriers to obtain slots at 
O'Hare under the same allocation system as U.S. air carriers. However, 
the FAA could withdraw any slots obtained by Canadian air carriers 
above the base level at any time for the FAA's operational need.
    As a result of the 1995 bilateral agreement, the O'Hare slots of 
Canadian air carriers, which previously consisted of international 
slots, in effect converted to domestic slots. The bilateral agreement 
would likewise apply to the assignments of Arrival Authorizations at 
O'Hare under this proposed rule. Accordingly, the FAA proposes to treat 
Canadian air carriers identically to U.S. air carriers in this 
proposal, except that arrivals initially assigned to Canadian carriers 
will not be subject to withdrawal to accommodate other foreign carriers 
or new entrants.

Foreign Carriers

    We propose to apply the rule described in this notice to foreign 
carriers in order to ensure a single regulatory framework governs all 
scheduled operations at O'Hare. While the August 2004 Order did not 
limit the number of foreign carrier flights (foreign air carriers could 
not participate in the scheduling-reduction discussions under 49 U.S.C. 
41722), the Order did include these operations in determining the 
hourly limit of 88 arrivals per hour. The August 2004 Order also stated 
that the FAA planned to list O'Hare as a Schedules Facilitated Airport, 
Level 2, under the International Air Transport Association (IATA) 
guidelines. The FAA has made that designation for the summer 2005 
scheduling season and foreign carriers were requested to submit their 
proposed schedules to the FAA in advance for review. The rule, as 
proposed, would mean that O'Hare is a Fully Coordinated Airport, Level 
3, under IATA guidelines and the FAA would list it accordingly. The FAA 
would generally follow the IATA Worldwide Scheduling Guidelines to the 
extent they do not conflict with adopted rules and procedures.
    The proposal would treat foreign carriers somewhat differently from 
U.S. and Canadian carriers because foreign airline services to the 
United States (and U.S. airline services to foreign countries) are 
subject to intergovernmental air services agreements imposing 
obligations on the United States and the foreign government. In 
addition, there are differences in the manner in which U.S. airlines 
and foreign airlines typically operate at O'Hare.
    Each international air services agreement typically obligates the 
United States and the foreign government party to ensure that the flag 
carriers of each party have a fair and equal opportunity to compete in 
the market. The United States thus has some obligation to provide 
access to O'Hare for foreign airlines. U.S. carriers similarly need 
adequate access to slot-controlled airports overseas. Any rule 
governing Arrival Authorizations at O'Hare must allow the United States 
to comply with its obligations under international agreements and 
preserve reciprocal treatment on access to Arrival Authorizations and 
slots. Furthermore, as we stated in the August 2004 Order imposing 
temporary limits on O'Hare operations agreed upon by U.S. airlines, 
most foreign airlines operate only a few flights at O'Hare. Only three 
of the 22 non-Canadian foreign airlines serving O'Hare as of August 19, 
2004, operated three or more daily roundtrips. Airlines serving a 
number of important international markets cannot, moreover, schedule 
flights throughout the day. Instead, operational and market demands 
require carriers to schedule their flights during a relatively small 
part of the day (the afternoon and evening for arriving transatlantic 
flights, for example). Foreign airlines are also more likely to operate 
seasonal services. Most of the U.S. airlines serving O'Hare, especially 
the two hubbing airlines, would hold a significant number of Arrival 
Authorizations and so would have some ability to shift flights

[[Page 15528]]

between domestic and foreign routes. In contrast, each foreign airline 
has been limited to serving its international routes and in any event 
would have few Arrival Authorizations.
    With respect to the initial assignment of Arrival Authorizations, 
foreign airlines would be treated in a similar fashion to their 
domestic counterparts. However, in recognition of the greater 
seasonality in international operations, each foreign airline would be 
assigned Arrival Authorizations for the winter traffic season based on 
its published schedules for the winter season that began October 2004 
and for the summer season that began April 2004. Moreover, foreign 
carriers, except Canadian carriers, would not be allowed to sell any of 
the Arrival Authorizations initially assigned to them. Also, these 
Arrival Authorizations would not be subject to any of the proposed 
minimum usage provisions described below. Nonetheless, an authorization 
initially assigned to a foreign airline would have to be returned to 
the FAA if not used during any fifteen-day period.
    There are two options being considered with respect to the 
treatment of foreign carriers in the context of providing additional 
access to O'Hare beyond initial assignments or for new entry.
    Under the first option (the administrative option), the FAA would 
accommodate requests by foreign carriers for new or additional access 
administratively. The FAA would provide these Arrival Authorizations 
out of any unused Arrival Authorizations that FAA may have or an 
Arrival Authorization may be withdrawn from a U.S. airline. Foreign air 
carriers would not be able to buy, sell or lease Arrival Authorizations 
or to participate in any lottery; however, they could participate in 
one-for-one trades as described above.
    Under the second option (the elective option), to obtain Arrival 
Authorizations above their initial assignments, if any, foreign 
carriers could elect to request an Arrival Auth