Congestion Management Rule for John F. Kennedy International Airport and Newark Liberty International Airport, 60544-60571 [E8-24046]
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Federal Register / Vol. 73, No. 198 / Friday, October 10, 2008 / Rules and Regulations
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
efficient utilization of the navigable
airspace.
Table of Contents
14 CFR Part 93
Authority for This Rulemaking
I. Background
II Summary of the Final Rule
III. Authority To Reallocate Capacity
A. The FAA Is Legally Authorized To
Allocate Slots Through an Auction
Mechanism
1. Slots Are a Form of Property That May
Be Leased by the FAA to Others
2. FAA Leases Are Not Covered by IOAA
and This Rule Is Not in Violation of Any
Current Appropriations Restrictions
3. Leases Are Not Taxes
4. The FAA’s Authority To Give Slots to
Carriers Through Cooperative
Agreements
5. Leases That Terminate by Their Own
Terms Are Not a ‘‘Taking’’ of Property
6. The Draft Lease Terms Included in the
NPRM Were For Illustrative Rather Than
Probative Purposes
7. International Obligations
B. The FAA Has Authority To Retain the
Amounts Received From the Lease and
Disposal of Property and To Use Those
Proceeds for Congressionally Authorized
Purposes
C. The Auction of Slots Does Not Affect the
Proprietary Rights of the Port Authority
D. The FAA Has Complied With the
Administrative Procedure Act
1. The Docket Contained Adequate
Information for Meaningful Comment on
the Rulemaking Proposal
2. The Discussion of the Auction Process
Provided Sufficient Detail for
Meaningful Comment on the Rulemaking
Proposal
3. The FAA Adequately Considered
Alternatives
IV. Discussion of the Rule
A. Allocation of Slots at JFK and Newark
1. Proposed Alternatives
2. Categories of Slots
3. Initial Allocation of Slots
4. Market-Based Reallocation of Slots
a. Impact of Auctions on Competition
b. Impact of Auctions on Carrier
Investment
c. Alternatives to Reallocation
B. Secondary Trading
C. Usage Requirements
D. Unscheduled Operations
E. Sunset Provision
F. Other Issues
1. Withdrawal for Operational Need and
Future Reductions in the Cap
2. Impact of the Final Rule on the Port
Authority’s Ability To Run Its Airport
3. Minimum Usage Requirements for Slots
Acquired Through Sublease
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
I. Background
This final rule is the latest action in
a history of congestion management at
New York airports. Access to both John
F. Kennedy (JFK) and Newark Liberty
International (Newark) airports is highly
sought after. These two factors have
forced the FAA to address a dilemma:
how can the agency reduce delays while
providing some measure of access to
[Docket No. FAA–2008–0517; Amdt. No. 93–
88]
RIN 2120–AJ28
Congestion Management Rule for John
F. Kennedy International Airport and
Newark Liberty International Airport
Federal Aviation
Administration (FAA).
ACTION: Final rule.
AGENCY:
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SUMMARY: This rule establishes
procedures to address congestion in the
New York City area by assigning slots at
John F. Kennedy (JFK) and Newark
Liberty (Newark) International Airports
in a way that allows carriers to respond
to market forces to drive efficient airline
behavior. The rule also extends the caps
on the operations at the two airports,
assigns to existing operators the
majority of slots at the airports, and
develops a robust secondary market by
annually auctioning off a limited
number of slots in each of the first five
years of this rule. Auction proceeds will
be used to mitigate congestion and delay
in the New York City area. The rule also
contains provisions for minimum usage,
capping unscheduled operations, and
withdrawal for operational need. The
rule will sunset in ten years.
DATES: This rule becomes effective
December 9, 2008.
FOR FURTHER INFORMATION CONTACT: For
technical questions regarding this
rulemaking, contact: Nan Shellabarger,
Office of Aviation Policy and Plans,
APO–1, Federal Aviation
Administration, 800 Independence
Avenue, SW., Washington, DC 20591;
telephone (202) 267–7294; e-mail
nan.shellabarger@faa.gov. For legal
questions concerning this rulemaking,
contact: Rebecca MacPherson, FAA
Office of the Chief Counsel, 800
Independence Ave., SW., Washington,
DC 20591; telephone (202) 267–3073; email rebecca.macpherson@faa.gov.
SUPPLEMENTARY INFORMATION:
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carriers wishing to operate at the
airport, thus ensuring competition?
While there are many factors
contributing to the delays and
congestion at JFK and Newark, demand
for the associated airspace has outstripped capacity.
History of Congestion Management at
JFK and Newark
The FAA managed congestion during
the five hours of peak transatlantic
demand (3 p.m. through 7:59 p.m.
Eastern Time) at JFK under the High
Density Rule (HDR) from 1969 through
2006. 14 CFR part 93 subparts K and S.
However, not until deregulation of the
airline industry did the FAA need to
step in and provide for carrier access to
the airspace immediately surrounding
the airport. Prior to 1985, the carriers at
JFK, operating under antitrust
immunity, determined who would be
allowed to operate and when. The
FAA’s role was limited to determining
how many operations air traffic control
could reasonably handle during
congested periods and enforcing
operator compliance with the rules. The
HDR divided the allowable operations
(slots) by categories of users (i.e.,
carriers other than air taxis, scheduled
air taxis, and others). 33 FR 17896
December 3, 1968). In 1982, the FAA
imposed a minimum usage requirement
for the first time. 47 FR 7816 February
22, 1982). Also in 1982, the FAA
implemented an experimental buy-sell
rule, under which approximately 190
slots were transferred among carriers
over six weeks of the program. 47 FR
29814, July 8, 1982).1
The FAA established more permanent
allocation procedures for slots under the
HDR in 1985 when it adopted the Buy/
Sell Rule. 50 FR 52195, December 20,
1985. In a companion rulemaking to the
Buy/Sell Rule (SFAR 48), the FAA
provided for the withdrawal of up to
five percent of the slots at the slotconstrained airports through a reverse
lottery so as to provide a pool of slots
for new entrants and limited
incumbents. SFAR 48, 51 FR 8630,
March 12, 1986).2 The Buy/Sell Rule
included use-or-lose provisions and,
while explicitly stating that the slots
were not the carriers’ property and did
not constitute a proprietary right, the
FAA allowed carriers to buy, sell or
lease the slots on the secondary market.
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.
2 Commenters appear to have forgotten this
rulemaking action when arguing that the
withdrawal of slots for reallocation is
unprecedented.
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For the next 15 years the agency relied
primarily on the secondary market
authorized by the Buy/Sell Rule to
address access issues at the airport.
However, the Buy/Sell Rule created
market distortions by creating categories
of carriers entitled to preferential
treatment under an administrative
reallocation mechanism which severely
limited access to these carriers other
than on the open market. Affected
carriers complained to the FAA that by
grandfathering 95 percent of the slots at
the slot-controlled airports to incumbent
carriers, there was insufficient capacity
available for reallocation. The Buy/Sell
Rule also failed to foster a robust
secondary market because it did not
require any transparency. Accordingly,
carriers were able to keep out
competitors by arranging private
transactions. This resulted in carriers
interested in initiating or expanding
service at the airports often being
unaware that slots were potentially
available for sale or lease. Some carriers
also complained that they were
effectively being denied access to the
airport because their competitors
refused to sell slots or provide
meaningful lease terms.
On April 5, 2000, Congress enacted
the Wendell H. Ford Aviation and
Investment Reform Act of the 21st
Century (AIR–21 or the Act). The Act
phased out the HDR at JFK effective
January 1, 2007. The Act also preserved
the FAA’s authority to impose flight
restrictions by stating that ‘‘[n]othing in
this section * * * shall be construed
* * * as affecting the Federal Aviation
Administration’s authority for safety
and the movement of air traffic.’’ 49
U.S.C. 41715(b).
Since the spring of 2006, U.S. air
carriers serving JFK have significantly
increased their domestic scheduled
operations throughout the day. This
change in use affected the manner in
which the airport’s runways could be
used. Historically, the air traffic
controllers achieved maximum
efficiency at JFK by using either two
arrival runways and one departure
runway, or two departure runways and
one arrival runway, to facilitate the
transatlantic traffic flows. The increase
in domestic traffic—from the two largest
operators at the airport, Delta Air Lines
(Delta) and JetBlue—affected the
efficient use of JFK’s four runways.
As a result of the increase in
scheduled operations at JFK, the
summer 2007 demand exceeded the
airport’s capacity during many periods
of the day. In 2007 flight delays in the
New York City metropolitan area
soared. Delays impacted all three major
commercial airports and cascaded
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throughout the NAS. The summer of
2007 became the second worst on record
nationally for flight delays. On
September 27, 2007, the Secretary of
Transportation announced the
formation of the New York Aviation
Rulemaking Committee (NYARC) to
help the Department of Transportation
(Department) and the FAA explore
available options for congestion
management and how changes to
current policy at all three major
commercial New York City airports
would affect the airlines and the
airports.
By design, the NYARC provided
ample opportunity for extensive input
by aviation stakeholders, having
members from every major air carrier in
the United States as well as foreign
carriers, passenger groups, and the Port
Authority of New York and New Jersey
(Port Authority). Through the ARC
process, these stakeholders played a key
role in exploring ideas to address
congestion and ensuring that any
actions contemplated by the Department
and the FAA would be fully informed.
In addition to holding weekly meetings
of the full NYARC, five working groups
regularly met to explore ways to address
both congestion and allocation of the
available airspace. The NYARC worked
throughout the fall and submitted a
report to the Secretary, dated December
13, 2007, discussing its findings. A copy
of the NYARC Report may be found at
https://www.dot.gov/affairs/
FinalARCReport.pdf.
While the NYARC process was
underway, in September 2007, the FAA
designated both JFK and Newark
airports IATA Level 2, Schedules
Facilitated Airports for the 2008
summer season. 72 FR 57317 (Sept. 24,
2007). The FAA thereby received
summer scheduling information from
the carriers for those airports. Based in
part on this information, in September–
October 2007, the FAA and the
Secretary of Transportation decided that
it was necessary to invoke the
Department’s authority to convene a
meeting of air carriers to discuss flight
reductions at JFK, which was
determined to have severe congestion
during peak hours of operation. 49
U.S.C. 41722. On October 25, 2007, the
FAA designated JFK as an IATA Level
3, Coordinated Airport for summer 2008
in order to address any growth in
operations at the airport by foreign-flag
carriers.3 72 FR 60710.
3 Under both level 2 and level 3, carriers notify
the governmental entity designating the airport of
their intended schedules for the affected season
and, where possible, the two parties will attempt to
resolve each others concerns. However, under a
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During the individual air carrier
sessions, American Airlines (American),
Delta, and JetBlue Airways, which
account for over 75% of the total
operations at JFK, withdrew their
proposed peak-hour schedule increases,
and retimed some operations, for the
summer of 2008 during the afternoon
and early evening peak hours at the
airport. The FAA also received
comments on the schedule reduction
process through the public docket.
Docket FAA–2007–29320. On January
18, 2008, the FAA issued an Order
temporarily capping scheduled
operations at an average of 81 flight
operations per hour at JFK and
allocating those operations pursuant to
the agreements reached at the schedule
reduction meeting and after
consideration of the comments in the
public docket. 73 FR 3510. By its terms,
the Order took effect March 30, 2008
and was set to expire at 11 p.m. on
October 24, 2009. The Order indicated
that the FAA plans to lease any new
capacity that becomes available and any
allocated Operating Authorizations that
are returned to the FAA, for a five year
term. The leases would be pursuant to
an auction and would be awarded to the
highest responsive bidder. The FAA
said it would provide additional
information about leasing procedures
and the relevant statutory authorities
before conducting any auction. 73 FR
3510, 3514. On February 14, 2008, the
FAA amended the Order to modify the
use-or-lose provisions so that they
would correspond to those adopted by
the International Air Transport
Association (IATA) Worldwide
Scheduling Guidelines (WSG). 73 FR
8737.
In the autumn of 2007, the FAA also
found it necessary to informally discuss
summer 2008 schedules with carriers
operating at Newark, because it was
concerned that the proposed operations
would overtax the capacity of the
airport system and that limiting
operations at JFK would create a
spillover effect at Newark. Although
some carriers made modest revisions to
their proposed schedules, it was clear to
the FAA that demand would continue to
exceed capacity unless the FAA took
further actions. In order to be assured
that carriers would not add flights to
already oversubscribed hours at
Newark, and would refrain from shifting
flights from JFK to Newark, the FAA
designated Newark as an IATA Level 3,
Coordinated Airport effective the
summer of 2008. 72 FR 73,418 (Dec. 27,
2007). Some carriers, such as
carrier is not obliged to accept the governing
authority’s position at a level 2 airport.
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Continental Airlines (Continental),
Newark’s primary hub carrier, shifted
flights from peak hours to off-peak
hours. On March 18, 2008, the FAA
proposed to issue an Order to limit
hourly scheduled flight operations at
Newark and to allocate them pursuant
to its informal carrier discussions. 73 FR
14552. The proposal’s preamble
indicated the FAA’s plans to lease new
capacity, allocated Operating
Authorizations that are returned, and
currently unallocated Operating
Authorizations, by means of an auction.
On May 21, 2008, the FAA adopted the
general terms of the proposed Order,
effective June 20, 2008, through October
24, 2009. 73 FR 29550. The provisions
regarding the use of the IATA WSG for
use-or-lose, and the preamble
information on the auctions of new and
returned capacity, mirrored those in
place for JFK.
As indicated in the companion rule
addressing congestion and delays at
LaGuardia, the FAA determined that it
was necessary to cap and allocate flight
operations at the three major New York
airports operated by the Port Authority.
Recognizing the short-term nature of the
caps imposed by the Orders for JFK and
Newark, on May 21, 2008, the FAA
published a notice of proposed
rulemaking that sought to provide a
longer-term solution and address a
number of congestion-related issues. 73
FR 29626. At both JFK and Newark, the
FAA proposed to continue the hourly
caps on flight operations, and to lease
the majority of slots at each airport to
the historic operators for non-monetary
consideration under its cooperative
agreement authority. The agency also
proposed to develop a robust market
and induce competition by annually
auctioning off leases for a limited
number of slots during the first five
years of the rule.
The FAA proposed two alternatives in
the NPRM. Under the first alternative,
each carrier operating, respectively, at
JFK and Newark would receive a
‘‘baseline’’ of up to 20 slots. At each
airport, the FAA would auction off ten
percent of the total number of slots
(above the baseline) to any carrier
serving or wishing to serve the airport
and would use the proceeds to mitigate
congestion and delay in the New York
City area (after the FAA recouped the
cost of the auction). Under the second
alternative, the same auction procedure
would apply to Newark as under the
first alternative; at JFK, the FAA would
conduct an auction of twenty percent of
the slots (above the baseline) and the
auction proceeds would go to the carrier
holding the slot after the FAA recouped
the cost of the auction. Given the
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significant international presence at
both airports, the NPRM proposed to
substitute IATA WSG procedures for
auctions, in the event of new or
returned capacity. Additionally, for both
alternatives, the NPRM contained
provisions for adoption of IATA WSG
for use-or-lose, for historic rights, for
unscheduled operations, and for
withdrawal for operational need. The
FAA proposed to sunset the rule in ten
years.
On July 17, 2008, the FAA proposed
to limit unscheduled operations at JFK
and Newark, to two hourly reservations
from 6 a.m. through 1:59 p.m., from 10
p.m. through 10:59 p.m., and to one
hourly reservation from 2 p.m. through
9:59 p.m. at JFK. At Newark, the limits
would be two hourly reservations from
6 a.m. through 11:59 a.m. and from 10
p.m. through 10:59 p.m., and one hourly
reservation from 12 p.m. through 9:59
p.m. 73 FR 41156.
The comment period for the NPRM
closed July 21, 2008. Despite numerous
requests, the FAA decided against
extending the comment period,
although it noted that it historically has
considered comments filed after the end
of a comment period as long as such
consideration did not lead to delay. In
denying these requests, the FAA
provided draft copies of the lease
agreements that would result from the
initial allocation and reallocation of
slots in the final rule. The FAA
reiterated that any auction would be
conducted under the agency’s
acquisition authority. The agency also
reiterated that interested parties to the
auction would be afforded the
opportunity to comment on any
proposed auction procedures within the
context of the agency’s Acquisition
Management System.
Thirty-eight interested parties filed
comments to the docket addressing the
NPRM. The majority of comments were
consistent in rejecting the proposal.
Many commenters said that the FAA
had failed to demonstrate how the
proposal would achieve any significant
relief from congestion. Rather, according
to the commenters, the NPRM would
impose an untested and unproven
auction process on airlines that would
not address the fundamental airspace
congestion issues in the New York
metro area.
On September 30, 2008 the FAA’s
Office of Dispute Resolution for
Acquisition (ODRA) issued a decision
responding to protests that had been
filed by air carriers, the ATA, the Port
Authority, and the New York Aviation
Management Association challenging
the FAA’s legal authority to conduct a
proposed auction of two slots at
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Newark. ODRA concluded that the
FAA’s statutory authority and its
Acquisition Management System
authorized agency disposal of property
rights by way of a lease as well as the
use of a competitive auction process to
determine who the lessee should be.
On the same day the Government
Accountability Office (GAO) released an
opinion letter in response to a
congressional request that concluded
that the FAA currently lacks authority
to auction slots under either its property
disposition authority or its user fee
authority. The issues involved represent
novel legal issues upon which
reasonable people, and agencies, acting
in good faith, have disagreed. The FAA
disagrees with the GAO conclusions and
has decided to proceed with the
adoption of this final rule.
II. Summary of the Final Rule
In the NPRM, we proposed two
alternatives for withdrawal and
reallocation by auction of slots at JFK
and Newark. The rule we are adopting
follows the proposal for alternative 1. It
will replace the Orders imposing
operating limitations at JFK and Newark
and establish a rule limiting
unscheduled operations at those
airports. As proposed, the starting date
of leases under the Final Rule will be
based on industry scheduling seasons.
Leases obtained in the first auction will
start on October 25, 2009 (the first day
of the winter scheduling season), and
will terminate on March 30, 2019.
Leases obtained in subsequent auctions
will begin on the first day of the
relevant summer scheduling season and
terminate on March 30, 2019. Although
the preamble to the NPRM discussed the
possibility of operations for the summer
2009 season, slots awarded through the
first auction may be operated by the
acquiring carrier as of October 25, 2009,
i.e., for the winter scheduling season of
2009/2010.
The other basic outlines of the rule
are unchanged from our alternative 1
proposal. A slot is defined as the right
to land or depart during a 30-minute
window. Limited and Unrestricted slots
that are assigned or awarded under this
rule will be for every-day operation.4
Although the FAA retains the right to
change the cap, the rule provides for 81
slots per hour for scheduled operations
at both JFK and Newark.
Carriers at JFK and Newark will
initially be assigned their baseline
operations, which is up to 20 slots per
4 Note that some slots are not currently operated
on a daily basis. In those situations carriers would
be assigned common slots for only the days they are
currently operated.
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carrier. Ninety percent of each carrier’s
slots above its baseline operations will
be assigned to the carrier in a lease
terminating March 30, 2019. The
remaining 10 percent will be designated
as limited slots and have shorter leases.
Each carrier will identify half of the
specific slots that will become its
limited slots, and the FAA will select
the remaining half. For the first five
years of the rule, the FAA will auction
one-fifth of the limited slots
(approximately two percent of the total
number of slots at each airport). Slots
awarded through an auction will be
designated unrestricted slots after
reallocation. Unlike common and
limited slots, unrestricted slots will not
be subject to withdrawal by the FAA for
operational purposes. Unrestricted slots
will also not be subject to use-or-lose
requirements, although the Office of
Aviation Enforcement, within the Office
of the Secretary of Transportation, will
monitor any anti-competitive activity
with respect to the acquisition and use
of unrestricted slots.
Carriers will be permitted to buy or
sell their lease rights to all types of slots
at JFK and Newark, and, as proposed,
the final sales terms will be transparent,
although actual negotiations will not be
disclosed. The FAA intends this rule to
provide a means by which the market
value of slots can be made clear to all
parties. That goal necessitates the
disclosure of actual sale prices. The rule
also permits the use of the FAA’s
auction proceedings by any carrier
wishing to sell a slot in that fashion. A
carrier’s decision to use an FAAoperated auction to buy or sell a slot
does not change the character of the slot
itself. If, for example, a carrier chooses
to sell a common slot through an FAA
auction, the slot remains a common slot
following the purchase. Only limited
slots selected for auction by the FAA
become unrestricted slots.
We have decided to make final our
proposal with respect to the allocation
of any new or returned capacity. Any
slots that become available in this
fashion will be assigned under the
procedures of the WSG.
III. Authority To Reallocate Capacity
The Air Transport Association of
America (ATA), the International Air
Transport Association (IATA), the Port
Authority, American, Delta and United
Airlines (United) asserted that the
FAA’s proposed methods of allocating
slots are not lawful for several reasons
including: prior statements by
Government officials indicating that the
FAA would need additional legislation
to be able to auction slots; the FAA
cannot create property by exercising its
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regulatory power to regulate the use of
navigable airspace; slots are not
property when created and held by the
Government but only become property
when transferred to a carrier; the
proposed lease of slots for fair market
value would be a new user fee in
violation of an appropriations
restriction on using a particular
appropriation to finalize or implement a
regulation to establish a new user fee
and in violation of the Independent
Offices Appropriations Act (IOAA) (the
latter of which it is asserted is the FAA’s
only authority to charge for the lease of
slots); the leases would be an
unconstitutional usurpation of
Congress’s authority to levy taxes; the
return of slots to the Government at the
end of the term of their leases would
constitute an unconstitutional taking of
property; the Federal Grants and
Cooperative Agreements Act does not
provide authority for the FAA to give
slots to carriers through cooperative
agreements; and the FAA lacks
authority to retain the proceeds from the
lease of slots and use those proceeds to
improve capacity in the New York
airspace area.
In contrast to the criticisms to the
proposed auctions, Virgin America, Inc.
agreed with the FAA that it possesses
legal authority to conduct auctions and
to lease the slots to carriers. Virgin
America asserted that the FAA may rely
on its exclusive sovereignty over the
airspace of the United States, under 49
U.S.C. 40103, to withdraw and
reallocate slots. The carriers have no
current vested property interest in the
slots. Virgin America further maintained
that the FAA’s exclusive sovereignty
over navigable airspace, coupled with
its authority to lease property or dispose
of an interest in property for adequate
compensation, under 49 U.S.C.
40110(a)(2), enables it to lease the slots
and maintain the proceeds.
The FAA has the authority to dispose
of property interests under 49 U.S.C.
40110(a)(2). The FAA also has the
authority to ‘‘enter into and perform
such contracts, leases, cooperative
agreements, or other transactions as may
be necessary to carry out the functions
of the Administrator and the
Administration.’’ 49 U.S.C. 106(l)(6).5
The FAA has determined that the
allocation of a relatively small number
of slots via the auction of a leasehold
best effectuates the efficient allocation
of slots, both through the initial
5 A federal agency’s power to dispose of property
includes the power to lease that property, even
without express Congressional authority.
Ashwander v. Tennessee Valley Authority, 297 U.S.
288, 331 (1936).
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60547
allocation and through the development
of a robust secondary market.
An auction is intended simply to
distribute slots to the air carriers who
value them the most, thus encouraging
their most efficient use. An auction also
satisfies the direction of Congress to
‘‘place maximum reliance on
competitive market forces and on actual
and potential competition * * * to
provide the needed air transportation
system. * * *’’ 49 U.S.C.
40101(a)(6)(A).6 This section of law
describes the policies that the
Department must take into
consideration when issuing economic
regulations. This rule is not an
economic regulation. However, the
statutory provision is a clear statement
by Congress of a valid public policy aim
that the FAA is permitted to take into
consideration when issuing regulations
under section 40103. The FAA does not
intend to set a reserve price on slots so
as to assure itself that it recovers its
costs associated with either the auction
or with providing air traffic services.
The FAA instead aims to allocate all of
the slots put up for auction, thus
allowing for possible new entrants to
compete with the incumbent air carriers
at JFK and Newark and to accommodate
changes in the business strategies of air
carriers using the airports.
A. The FAA Is Legally Authorized To
Allocate Slots Through an Auction
Mechanism
Several commenters quote a statement
made in 1985 that the FAA did not
propose an auction mechanism because
legislation would be required for the
collection and disposition of the
proceeds (50 FR 52183 (December 20,
1985)), and a more recent statement in
the NPRM for the LaGuardia congestion
management rulemaking that the FAA
‘‘currently does not have the statutory
authority to assess market-clearing
charges for a landing or departure
authorization’’. 71 FR 51360, 51362,
51363 (August 29, 2006).
In 1985, the FAA lacked clear
authority to collect and dispose of the
proceeds from an auction. Rather, any
amounts collected by the agency would
need to be deposited into the General
Receipts account in accordance with 31
U.S.C. 3302. Additionally, while the
FAA had authority to dispose of an
interest in property, it was not clear that
such interests included leaseholds.
6 This section of law describes the policies that
the Department of Transportation must take into
consideration when carrying out its economic
regulatory authority over the aviation industry. This
section also is a clear statement by Congress of a
valid public policy aim that the FAA is permitted
to take into consideration.
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In the Air Traffic Management System
Performance Improvement Act of 1996,
Public Law 104–264, the FAA gained
express authority to lease property to
others. 49 U.S.C. 106(l)(6), 106(n). The
same law also gave the FAA an
exemption from 31 U.S.C. 3302, and an
account was established specifically for
all amounts the FAA collects other than
the insurance premiums and fees that it
is required to deposit into the Aviation
Insurance Revolving Fund. 49 U.S.C.
45303(c). This account is available not
just for fees assessed under chapter 453,
but for ‘‘all amounts’’ other than
insurance premiums and fees.7 Thus,
the statement made in 1985 is no longer
correct.
The commenters also refer to the fact
that the FAA sought additional
legislative authority to conduct
auctions, as part of a comprehensive
change to how the FAA would be
financed and how market-based
mechanisms would be used by both the
FAA and congested airports. The FAA
recognized that it did not have clear
statutory authority to implement a wide
array of market-based mechanisms and
that absent authority beyond that
contained in 49 U.S.C. 40103, any
reallocation via a market-based
mechanism could lead to a challenge
that the FAA had violated the ‘‘user fee
prohibition’’ attached to the agency’s
annual appropriations legislation since
1998. The FAA did not address the
agency’s authority to dispose of
property, as provided in the Air Traffic
Management System Performance
Improvement Act of 1996. Public Law
No. 104–264, codified at 49 U.S.C.
106(l)(n). The FAA’s proposed
reauthorization package, the Next
Generation Air Transportation System
Financing Reform Act of 2007, would
have substituted new user fees for
passenger ticket taxes, permitted the
airport operators Port Authority at
constrained and delayed airports to
assess market-based fees and would
have also allowed the FAA, under
certain circumstances, to impose
market-based mechanisms. This
legislative proposal, in giving authority
directly to airport proprietors to assess
and use market-based fees, was
profoundly different from the terms of
this final rule. This rule, by contrast,
relies on the FAA’s Acquisition
Management System authorities and
does not require the FAA to use any of
7 The fact that Congress excluded insurance
premiums and fees, which are not amounts assessed
under chapter 453 of title 49, expresses Congress’
plain and unambiguous intent for the FAA to
deposit all amounts it collects into this account, not
just the amounts assessed under the user fee
provisions of chapter 453.
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the proposed legislative provisions it
sought. The FAA has authority to lease
property to others, and to receive
adequate compensation for this
temporary disposal of property,
including the authority to lease the slots
at JFK and Newark.
When it published the NPRM for
LaGuardia the FAA initially believed
that imposing a market-based
reallocation mechanism as part of the
regulation could be problematic.
However, as delays soared in the region
in 2007 and Congress failed to pass
long-term reauthorization legislation,
the FAA reevaluated its options. One
option was to impose or continue orders
at all three New York metropolitan
airports that would last indefinitely.
The agency rejected this option because
the orders were never intended to be a
long-term solution and they perpetuate
the inefficiencies contained within the
HDR. Likewise, the FAA could have
initiated rulemaking that would
establish an administrative reallocation
mechanism, but the agency concluded
that approach also failed to resolve the
inefficiencies contained within the
HDR. Finally, the FAA could revisit all
of its statutory authorities and
determine whether it had the ability to
allocate slots under its existing legal
authorities.
This final approach was the one the
agency pursued because the FAA
believes it is both legal and best
represents the interests of passengers
flying in and out of the airport. The
FAA also believes this approach best
effectuates the FAA’s mandate to
provide for the efficient use of the NAS,
coupled with the Department’s mandate
to consider competitive effects. The
agency can either foster a market-based
allocation mechanism and develop a
robust secondary market, or it can walk
away from the airport after imposing a
cap and providing for a very limited
administrative reallocation mechanism.
It has decided to follow the more free
market approach.
The commenters also refer to the fact
that the FAA sought additional
legislative authority to conduct auctions
which it has not yet received. The
authority sought by the FAA was part of
a comprehensive change to how the
FAA would be financed and how
market-based mechanisms would be
used by both the FAA and congested
airports. This rule, however, relies on
the FAA’s Acquisition Management
System authorities and does not require
the FAA to use any of the proposed
legislative provisions it sought.
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1. Slots Are a Form of Property That
May Be Leased by the FAA to Others
The Port Authority, the ATA and
IATA submit that the FAA has no
property rights in the slots the FAA
proposes to auction.8 While the ATA
and IATA do not question that the slots
are property (they dispute ownership),
the Port Authority states that the slots
are ‘‘neither physical property, real
property, intellectual property, nor an
intangible property recognized in
common law.’’ 9
The Port Authority is incorrect; slots
are an intangible form of property that
may be leased. On January 18, and May
21, 2008, respectively, the FAA issued
Orders limiting operations at JFK, and at
Newark, pursuant to its broad authority
to regulate the use of navigable airspace
under 49 U.S.C. 40103(b). 73 FR 3510;
73 FR 29550. Those Orders define an
Operating Authorization 10 as ‘‘the
operation authority assigned by the FAA
to a carrier to conduct a scheduled
arrival or a departure * * *’’ Id. at
3516; 29554. The Orders expressly
allow the trading and leasing of
Operating Authorizations. Id. at 3516;
29554. Although the Orders do not
permit the permanent sale or purchase
of Operating Authorizations, they
permit any form of consideration to be
used in the lease or trade of these
Operating Authorizations. Id. at 3516;
29554.
These Orders reflect the FAA
Administrator’s determination that
Operating Authorizations are a form of
property that may be leased or traded
for consideration, and used as collateral.
Those determinations have not been
legally challenged, and the time period
for filing such a challenge has expired.
49 U.S.C. 46110. Indeed, the ATA’s and
IATA’s own members have treated
Operating Authorizations, and the HDR
8 The Regional Airline Association (RAA) makes
a similar argument. In addition, RAA states that the
FAA lacks the authority to regulate the types of
aircraft and routes to be served in air transportation.
The FAA disagrees with the premise of RAA’s
position, since the FAA may rely on a rational basis
to allocate the use of navigable airspace under 49
U.S.C. 40103. Nevertheless, this rule does not
attempt to regulate the type of aircraft or the routes
served in any manner.
9 The Port Authority also uses the language in the
preamble to the SNPRM as evidence that the slots
are not property because the FAA stated that there
was no Fifth Amendment Takings issue with the
proposed slot auction. The FAA’s statement, in
context, went to the fact that the air carriers have
no property interests in the slots after expiration of
the current Order until FAA provides them with
new slots. It did not imply that the slots were not
property; just that the air carriers possess no
property interests beyond those accorded them
under the Order.
10 Both OAs and slots represent property
interests, but the FAA has deferred to common
usage by reverting to the term ‘‘slots.’’
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slots that predated them, as a form of at
least intangible property: Leasing and
trading them for consideration; using
them as a form of collateral; and
disclosing them as assets on their
balance sheets. Bankruptcy courts have
held that slots are property.
The Port Authority cites Executive
Order 13132 for the proposition that the
FAA is ignoring the traditional role of
States as sovereigns that can create
property and has not closely examined
the effect the rulemaking would have on
the State instrumentality. The creation
of property rights, however, is not the
sole responsibility of the states. Federal
law determines what constitutes
property for the purpose of applying
federal statutes. Ross L. Blair, et al. v.
United States, Docket 2007–5049 (Fed.
Cir. 2008), citing United States v.
Kimbell Foods, Inc., 440 U.S. 715, 726
(1979) and United States v. Craft, 535
U.S. 274, 278–79 (2002). The United
States Government, pursuant to 49
U.S.C. 40103, has exclusive sovereignty
over the navigable airspace, and the
FAA exercises plenary powers over that
airspace.
Unlike the Port Authority, the ATA
and IATA do not dispute that the slots
constitute a property interest; rather
they argue that the property interest is
not the FAA’s, because it is created at
or after the transfer to an air carrier.11
Section 40110(a)(2) does not speak to
whether the FAA actually owns
property that is being disposed of. It
only speaks to the disposal of a property
interest. Only the FAA has authority to
assign the use of navigable airspace
under section 40103. Even assuming
that the property interest is created at
the time of transference, it is still a
property interest that falls within the
FAA’s authority to dispose of under
section 40110(a)(2).
As with certain other valuable public
property not expressly owned in fee by
the U.S. Government, the Government
may allow the use of public property
and frequently does so using leases. In
fact, the Government routinely
‘‘licenses’’ and ‘‘permits’’ the use of
property over which it exercises
exclusive sovereignty. In doing so,
unless otherwise specified by law, the
Government charges market rates in
accordance with OMB Circular A–25.
For example, under 36 CFR 251.53—
Authorities, the Chief of the Forest
Service (USDA) issues special use
authorizations (e.g., permits, term
permits, leases) for National Forest
System land. The USDA also issues
grazing permits under the Taylor
Grazing Act (TGA) of 1934 to allow the
permit/lease holder to use publicly
owned forage. The Federal
Communications Commission licenses
portions of the broadcast spectrum, and
since 1993 (four years before Congress
mandated the use of auctions) has
frequently done so using auctions.12
The General Services Administration
issues licenses and permits for the use
of its buildings and property, see, e.g.,
41 CFR 101–47.901, 101–47.309; see
also, GSA form 1582, ‘‘Revocable
License for Non-federal Use of Real
Property.’’ The FAA similarly uses
‘‘licenses’’ to, in effect, lease its real
property to non-federal users. See, 1.3.7
of the FAA’s Real Estate Guidance,
https://fast.faa.gov/realestate/index.htm.
In short, licenses frequently are used
to provide non-federal parties access to
public property regardless of whether
that property be real or personal
(including intangible) 13 and whether
the Government owns the property in
the traditional sense or is simply its
guardian. The FAA selected the word
‘‘lease’’ rather than ‘‘license’’ to describe
the documents that will transfer slots to
air carriers because the FAA is
conveying a longer term interest, with
fewer rights by the Government to
terminate that interest, than is usually
done when the Government licenses a
non-federal entity to use public property
(licenses of property are usually
terminable at will).
11 The airline commenters agree with ATA’s
assessment that the slots are property of the airlines
not of the FAA. See, Comments of US Airways
Group, Inc. at 24. But see, Comments of American
Airlines at 7 stating that the Port Authority holds
the property interest.
12 The FCC, like the FAA, had a statutory
preference for competition prior to the requirement
that it conduct auctions.
13 Such as authorized access to particular radio
frequencies and authorized use of intellectual
property.
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2. FAA Leases Are Not Covered by
IOAA and This Rule Is Not in Violation
of Any Current Appropriations
Restriction
The ATA argues that the only
authority by which the FAA may charge
for the lease of slots is as a user fee
under the Independent Offices
Appropriations Act (IOAA) and that the
only amount that could be charged is
the cost of administering the lease. The
ATA is incorrect on both points, but the
issue is not relevant because the FAA
does not rely on IOAA authority to
conduct auctions but on its other
authorities.
The ATA similarly argues that this
regulation falls within the parameters of
an appropriation provision that
prohibits the FAA from using funds
from its operations appropriation to
finalize or implement a regulation that
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60549
establishes a new user fee not
specifically authorized by law.14
Consolidated Appropriations Act, 2008,
Public Law 110–161. The ATA and
IATA also suggest that the wording of
49 U.S.C. 106(l)(6) 15 means this
authority may not be used because the
FAA may only enter into leases using
this authority if the leases ‘‘may be
necessary to carry out the functions of
the Administrator and the
Administration.’’ 49 U.S.C. 106(l)(6).
The ATA and IATA argue that the only
necessary function is a regulatory
function to assign airspace under 49
U.S.C. 40103. However, there are several
other statutory functions, such as using
procedures that provide for an efficient
air traffic system, 49 U.S.C. 44505, and
the desirability of placing maximum
reliance on competitive market forces
and on actual and potential competition
to provide the needed air transportation
system, 49 U.S.C. 40101(a)(6), that make
the use of the FAA’s commercial
authority to lease property to others
appropriate. See also, the legislative
history and findings of Congress when
14 ATA also suggests that by finalizing or
implementing this rule, the FAA would violate the
Anti-Deficiency Act. The Anti-Deficiency Act
would only be violated if the FAA obligated or
expended funds in excess or in advance of an
available appropriation, fund, apportionment or
other applicable administrative subdivision of
funds. 31 U.S.C. 1341, 1517. The FAA may not use
its operations appropriation to finalize or
implement a rule to promulgate a new user fee not
specifically authorized by law, but this rule simply
reduces the number of slots (lowers the cap) at JFK
and Newark, defines the different types of slots,
establishes a reversion of approximately 10 percent
of the slots, and discusses the FAA’s intent to
auction new or returned slots. This rule does not
require or impose on any entity a requirement to
pay the FAA to obtain a service or even a slot. If
the FAA does conduct an auction as contemplated
by this rule, it will do so using its pre-existing
authorities and regulation. The use of its operations
appropriation to finalize and implement this rule
therefore does not violate the Anti-Deficiency Act.
15 American Airlines reads 49 U.S.C. 106 as more
limited in scope regarding the types of property that
fall under its purview. The statute does not limit
its scope to any particular type(s) of property that
fall under its purview. The FAA has for years,
without challenge, interpreted its authority broadly
under the statute in support of Congress’ intention
of allowing the Administrator to acquire, lease,
enter into cooperative agreements and other
transactions as may be necessary to carry out the
Agency’s functions. This interpretation is known to
Congress, which has repeatedly reauthorized the
FAA without making a change to this section.
Another commenter raised the fact that the heading
of section 106(l) refers to ‘‘Personnel and Services’’
which the commenter says means that
subparagraph (6) of that section does not provide
the FAA any contracting or leasing authority. It has
been long recognized by the courts, however, that
the headings of statutes have little if any weight in
statutory interpretation. As other paragraphs of this
section deal with personnel matters, the heading is
not erroneous, but it does not in any way dilute the
broad grant of contracting, leasing, cooperative and
other transaction agreement authority Congress gave
the FAA in paragraph (6).
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it granted the FAA the authority to lease
property to others in Public Law 104–
264. Having created slots, and
determined the number of available
slots should be limited because of the
resulting strain on the NAS from the
scheduling of more flights per hour than
can be handled under current
conditions at JFK and Newark, the
function of disposing of its interest in
the slots becomes applicable.
Even if the only ‘‘necessary function
of the Administrator or Administration’’
were a regulatory one, the FAA has not
violated the appropriations restriction.
Simply put, a lease is not a user fee. A
user fee is imposed for a particular
service the Government provides to a
particular party. A lease on the other
hand, is a transfer of a possessory
interest in real, personal or intangible
property that allows the lessee the use
of that property to the exclusion of
others including the lessor. In
transferring slots to air carriers for
defined periods of time, the FAA is not
providing any air traffic or other service
to the recipients. To the contrary, the
FAA’s air traffic controllers will not be
policing or otherwise cognizant of
which air carrier owns which slot and
will provide their services in
accordance with the FAA’s Orders and
policies (predominantly first come, first
served). In transferring slots to air
carriers, the FAA is allowing that air
carrier to schedule or reserve access to
that segment of navigable airspace that
is necessary to take off or land an
aircraft at the two airports during a
particular half hour of time. In short, the
FAA is leasing rather than providing a
service to air carriers when it transfers
slots to them.
A user fee is calibrated to recover the
cost to the government of providing a
service or specific benefit to an
identifiable recipient. See, e.g., United
States v. Sperry Corp., 493 U.S. 52, 60
(1989); Seafarers International Union of
North America v. Coast Guard, 81 F.3d
179, 182–83 (D.C. Cir., 1996). The
assignment of a use of navigable
airspace for scheduled flight operations
is not a ‘‘user fee’’ under the principles
articulated in those cases.16 The cost
associated with purchasing a particular
slot does not constitute a user fee. First,
the cost associated with procuring a slot
at auction is not associated with the cost
of providing air traffic services for that
particular take off or landing. Rather, air
traffic services are paid for already
16 The FAA implemented its regulation to lease
its property to others on April 1, 1996, well prior
to the first time a restriction was included in the
FAA’s appropriation concerning the FAA’s ability
to use the operations funds appropriated to develop
or implement a new user fee.
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through the Airport and Airway Trust
Fund receipts. Second, the FAA is not
creating assignments of the use of
navigable airspace for scheduled flight
operations (slots) for the purpose of
raising revenue by leasing them to air
carriers. More precisely, the FAA has
imposed a cap and designated slots for
the purpose of allocating the efficient
use of navigable airspace. Most of these
slots will be awarded to current
operators to prevent disruption of air
services into and out of JFK and
Newark. The FAA is leasing a relatively
small number of them, by means of an
auction, to air carriers in order to draw
in new entrant carriers and provide an
opportunity for expansion by carriers
already at the airport, thereby inducing
airline competition at JFK and Newark
and ensuring that airlines winning the
slots make the highest and best use of
them. The auction is also designed to
assure that air carriers will rationalize
the use of their slots in accordance with
the value attached to them in the
auctions, and ultimately, in the
secondary market. In the end, the
traveling public will benefit.
3. Leases Are Not Taxes
A tax is generally defined as an
enforced obligation to support the
government. See United States v. La
Franca, 282 U.S. 568 (1931); see also
United States v. Butler, 297 U.S. 1, 61
(1937); Head Money Cases, 112 U.S.
580, 596 (1884); Rural Telephone
Coalition v. FCC, 8388 F.2d 1307, 1313
(D.C. Cir., 1988); United States v. City of
Huntington, 999 F.2d 71, 73 (4th Cir.,
1993). A lease acquired through a slot
auction, however, is not a tax. It is not
an amount being levied on all members
of the industry nor is it a mandatory
payment as a tax would be. Further, the
lease is not ‘‘imposed’’ as a tax is, and
is not designed for revenue-raising
purposes.
The auction of a limited number of
slots at the airport was never designed
to provide the FAA with a new source
of revenue. Indeed, in the NPRM, one of
the options proposed by the FAA was to
allow the carriers at JFK to keep all
revenue after covering the FAA’s costs
in conducting the auction. Rather, the
auction mechanism is intended to use
market forces to best allocate this
limited asset to those carriers who value
it the most, placing the asset to its best
and highest use. The FAA believes the
slots auctions will inform the airlines of
the market value of their slots so that
slot utilization can be rationalized.
While it is true that under today’s rule,
that the FAA may realize some revenue
from the auction, the agency has also
committed to putting that revenue back
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into aviation capacity enhancement and
delay mitigation projects in the New
York metropolitan area.
Unlike a tax, which imposes an
obligation on affected citizens or
consumers to pay money to the state,
the slot auction imposes no burden on
a carrier based on its citizenship or use
of the airport. The slot auction lease
payments are voluntary: The FAA does
not require a carrier to participate in an
auction in order to serve JFK or Newark.
Carriers serving the airports presently
will be given slots through cooperative
agreements and slightly less than ten
percent of the total number of slots at
the airport will be auctioned. Only the
carriers winning the bids at the slot
auctions will pay for the lease, and that
amount of money will have been
determined by the free market. The FAA
will not have pre-determined a lease
amount and will not attempt to cover its
costs in conducting the auction by
setting a reserve price.17
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
17 As discussed in the general discussion of the
auction procedures posted under the FAA’s
Acquisition Management System, the FAA will set
a reserve price to assure that, in the event only a
single bid is received for a particular slot, the
bidding carrier does not actually pay the bid price.
In that instance, the winning bidder would pay only
the reserve price.
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up to 20 slots to all air carriers currently
operating at the airport, and 90 percent
of the remaining slots to the air carriers
currently operating at JFK and Newark
in proportion to their current
operations, the FAA is encouraging
those carriers to continue their
development of civil aeronautics at the
airport and in the routes served to and
from that airport. As several
commenters noted, there is substantial
economic value both to New York and
the communities served by flights from
JFK and Newark.
American Airlines raised an
additional concern about the use of
cooperative agreements, based upon the
language in 49 U.S.C. 40110(a)(2) that
requires the FAA to receive ‘‘adequate
compensation’’ for the disposal of
property interests. The FAA finds that it
is receiving ‘‘adequate compensation’’
through the minimum slot usage
requirements. In addition, the slots are
being given in order to promote civil
aeronautics.
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5. Leases That Terminate by Their Own
Terms Are Not a ‘‘Taking’’ of Property
The ATA and the carriers argue that
the proposed auctions constitute a
taking by the government and that the
taking is prohibited for several reasons
including that it is not for a legitimate
purpose, it lacks due process, and fair
value is completely absent in the
proposed alternative 1 (as applied to
JFK and Newark) and inadequate in
alternative 2 (as applied to JFK). The
FAA strongly disagrees with the
contention that the slot auctions
contemplated in this rule are in any way
an impermissible taking.18 First and
foremost, in order to be a taking, the
carriers would need to have a
possessory interest in the slots and they
do not. For bankruptcy purposes,
carriers may have acquired a property
interest in slots, as discussed above, but
as also cited in those cases, if that
interest expires under the terms under
which it was granted, then there has
been no property right taken. The
Orders establishing Operating
Authorizations at JFK and Newark are of
a fixed duration and any rights the
carriers might have had in those
operating authorizations will terminate
when the orders end or are superseded.
By virtue of today’s rule superseding the
Orders, the carriers holding the OAs
now hold slots and have the same
interests and responsibilities in the slots
as they did in the OAs. Under today’s
18 The preamble to the LaGuardia NPRM also
addresses this issue and provides the Supreme
Court decisions supporting the FAA’s position. 73
FR 20846, 20850–20854 (April 17, 2008).
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rule, those carriers whose slot baselines
at either Newark or JFK, or both, exceed
20 at either airport, will have a modest
portion of their slots designated as
Limited Slots and subsequently
auctioned Unrestricted Slots. As of
October 25, 2009, carriers may begin to
operate the Unrestricted acquired at
auction.
Slots transferred to carriers using
cooperative agreements or leases
awarded as the result of auctions will
similarly have express automatic
termination provisions. For slots
transferred using cooperative
agreements, the carriers’ property
interest would automatically terminate
if the specified ‘‘use-or-lose’’ provisions
are not met or one of the other
conditions specified in the cooperative
agreements arises. If those provisions
are satisfied, then most of these slots
will terminate in 10 years. A few will
have varying termination dates as
agreed upon by the FAA and each
carrier.19 When the termination date
arrives, any property interest the carrier
may have in the slot similarly
automatically ends. There is no more a
taking of carrier property than there
would be in the eleventh year of a ten
year lease of FAA real property to a
carrier.
The ATA and the carriers provide
little support for the proposition that
Operating Authorizations or slots
awarded to carriers under an order with
a fixed duration results in entitlement to
those slots in perpetuity.20 To the extent
that these commenters allege harm
(such as having made investments in
airport infrastructure) based on the
unreasonable assumption that the status
quo would remain forever even though
the Order explicitly said it would
expire, that harm is the responsibility of
the carriers. These carriers took a risk,
for which they have received a return on
their investment based on their use of
the Operating Authorizations for the
period specified in the Order. If these
commenters do not wish to incur a
significantly smaller risk 21 for a
relatively small percentage of the slots
that will be initially be transferred to
them through cooperative agreements,
and then returned to the FAA as those
19 Perhaps more accurately, the determination of
which of these slots have which of the specified
termination dates will follow the process described
in this rule.
20 U.S. Airways Group’s main contention is that
the slots are property of the airlines because they
have held them ‘‘more or less continuously’’ for 40
years.
21 The slots that will be awarded as the result of
an auction have a firm term of up to ten years, with
little right by the FAA to terminate prior to the end
of that term. Most of the cooperative agreements
will similarly have a ten year firm term.
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agreements expire in order to be
auctioned, the carriers are free not to
apply for these cooperative agreements.
The ATA, IATA, and the carriers rely
on what they perceive as a three
pronged test established in Penn Central
Transp. Co v. New York City, 438 U.S.
104 (1978). In Penn Central the Court
found that there was no compensable
taking when the City’s Landmarks
Preservation Law would not allow
additional stories to be added to Grand
Central Station. Even using the three
prong test articulated by the
commenters, for the reasons stated
above, the activities described in this
rule would not constitute a Fifth
Amendment taking.
The ATA and IATA also overstate the
extent of the alleged harm. Under the
alternative selected in this rule, carriers
will get to keep, at a minimum, more
than 90 percent of their current slots.
Only seven carriers will lose any slots
under this rule and only American,
Delta and United will lose slots at both
airports.
The Port Authority cites to Air
Pegasus of D.C., Inc. v. United States,
424 F.3d 1206 (Fed. Cir. 2005), for the
proposition that the Federal
Government’s sovereignty over airspace
is not ownership in fee, but rather
navigational servitude. Air Pegasus,
however, stands for the proposition that
there is no private property right of
access to navigable airspace. If the FAA
legitimately exercises this authority to
prohibit the use of a segment of
navigable airspace, there is no property
taken for Fifth Amendment purposes. In
Air Pegasus a heliport operator was
found to have no private property rights
in its facility even though it lost all
opportunity to generate revenue (and
went out of business) after the FAA shut
down much of the airspace around
Washington, D.C. following the attacks
of September 11, 2001.
6. The Draft Lease Terms Included in
the NPRM Were for Illustrative Rather
Than Probative Purposes
The ATA also uses the draft Lease
agreement as evidence that the FAA
does not have the authority to lease the
slots. The ATA places far too much
reliance on an early draft document that
was provided to give commenters some
idea of the type of lease the FAA was
considering. For example, the standard
clauses in the FAA’s Acquisition
Management System (AMS) use the
word ‘‘contract’’ instead of ‘‘lease’’
because leases are a form of contract.
The AMS, however, by its explicit terms
applies to the acquisition and lease of
property. See, Section 4.2 of the
Acquisition Management System, and
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Real Estate Guidance, https://
fast.faa.gov/realestate/index.htm and
T3.8.1 of the FAA’s Procurement
Guidance, also located at https://
fast.faa.gov The FAA acknowledges that
some of the terms in the sample lease
that the FAA provided for illustration
were not appropriate for a lease of slots,
and will modify any proposed leases
accordingly. An additional opportunity
to comment on these terms will be
provided prior to any auction. These
sample terms, however correct or
incorrect, have no bearing on whether
the FAA has the authority to enter into
leases. Similarly, because Attachment A
was not included in the sample lease,
the ATA and IATA argue that is
evidence that there is no property the
FAA can lease. Attachment A will be
the particular slots each carrier receives.
Each Attachment A will be unique for
each particular airline. Before the slots
are given or auctioned, there is no way
to tell what any particular Attachment
A will look like, therefore no
Attachment A was provided. Instead the
sample lease simply provided notice
that there will be an attachment that
will describe which slots the lessee (or
cooperative agreement holder) will
have.
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7. International Obligations
In spite of the FAA’s authority to
lease slots and this proposal to use the
WSG to award all new and returned
capacity at JFK and Newark, the IATA,
ATA, and numerous carriers assert that
the FAA’s proposal violates the
international obligations of the United
States. Specifically, IATA and the
airlines 22 make the following
assertions: that the slot auction is
actually a user charge in violation of
bilateral air services agreements; the slot
auction is discriminatory in violation of
bilateral air services agreements; and,
the short comment period did not afford
an opportunity for foreign governments
to consult with the United States
Government on this proposal.
In support of their contention that the
slot auction is a user charge 23 that is
inconsistent with our bilateral
obligations, IATA and the carriers cite
the recent U.S.–EU air services
agreement, which states (article 12) that
user charges must be ‘‘equitably
apportioned among categories of users.’’
22 Commenters supporting IATA’s submission
include: Association of European Airlines (AEA);
KLM Royal Dutch Airlines, N.V. (KLM); Malaysia
Airlines (Malaysia); Singapore Airlines; Swiss
International Air Lines, Ltd.; Deutsche Lufthansa
AG (Lufthansa); Air France; All Nippon Airways
Co., Ltd.; and, Delta Airlines, Inc.
23 For purposes of discussing our international
obligations, we will assume arguendo that auction
proceeds are ‘‘user charges’’.
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They assert that the costs recovered by
auction proceeds are not equitably
apportioned. We disagree. We are
maintaining the use of WSG procedures,
which these commenters support, for all
new and returned capacity. Only a
select number of slots—the slots that are
being withdrawn—will be auctioned.
For that category of foreign carrier users
that choose not to participate in the
auction, the regime that they favor will
continue unchanged—the FAA will
assign slots from new and returned
capacity under the procedures set out in
the WSG and they will be able to buy,
sell or trade slots in the secondary
market. For that category of foreign
carrier users that wish to participate in
the slot auction, they will be making the
business decision that such slots have
additional value to them. We do not
believe that foreign carriers choosing to
participate in an auction, and thereby to
have access to slots to which they
would not have access under the WSG,
are being treated inequitably.
IATA and the carriers also claim that
we are not following the requirement in
the same bilateral section that user
charges ‘‘may reflect, but shall not
exceed, the full cost to the competent
charging authorities or bodies of
providing the appropriate airport,
airport environmental, air navigation,
and aviation security facilities and
services at the airport or within the
airport system.’’ To the contrary, the
proceeds of these auctions will be
deposited into a receipt account, and
those funds will be dedicated to be used
for improvements to New York’s
airspace and airport system. The
proceeds will be used for the airport
system they were derived from, and will
not go to the general fund. This is not
in violation of our bilateral agreements,
as the costs are directly related to
improving the airport system for which
the slots will be used.
Singapore Airlines argues that the
auction would affect its ability to
exercise the ‘‘fair and equal’’
opportunity to compete clause in the
bilateral air services agreement. All
carriers are afforded fair and equal
opportunity to compete, regardless of
nationality, because they have the
ability to bid for slots under the auction
mechanism. There is no guarantee that
the slots will be awarded to either a
domestic or foreign carrier. Foreign
carriers have the same opportunity as
domestic carriers to compete for the
available slots. Singapore Airlines is
also free to participate in the WSG
process for allocating new or returned
slots, and to participate in the secondary
market, just as domestic and other
foreign carriers are.
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Next, IATA and the carriers argue that
the imposition of the slot auction will
be discriminatory. The foreign carriers
argue that the auction discriminates
against them because the domestic
carriers are permitted to keep many
more slots, and will have an advantage
over them. The ATA, United Airlines,
and Delta argue that we are being
discriminatory against domestic carriers
because the foreign carriers have all of
their slots preserved and will not be
subject to the same withdrawal as the
domestic carriers, and that domestic
carriers will be forced to pay large sums
of money to maintain their current
international service, whereas the
foreign carriers will not incur the same
costs.
Both groups of carriers are incorrect—
the Department is acting in a nondiscriminatory manner. Because up to
twenty slots for each carrier (domestic
or foreign) are being preserved, no
carrier (domestic or foreign) is in danger
of losing access to JFK or Newark. No
carrier is being forced to participate in
the auction if it chooses not to
participate. All new and returned
capacity will be allocated by the FAA
under WSG procedures. The domestic
carriers similarly are not required to
participate in the auction, and in most
cases, only a select number of slots will
be withdrawn. Domestic carriers at JFK
and Newark will still have the ability,
and available slots, to continue to
maintain their international service
without necessarily participating in the
slot auction. Finally, IATA makes the
argument that the comment period was
too short to allow for foreign
government consultation on the
proposal. The proposal, like all
proposed rulemakings, was published in
the Federal Register and all interested
parties had ample opportunity to review
and comment, and afforded a 60-day
comment period to all interested parties.
We believe this is a sufficient period for
foreign governments, their agencies, or
Embassies to provide formal comments
or request consultations. In this case, no
foreign government has contacted us
with either comment or a request for
consultations. The consultation
language in our bilateral air services
agreements does not oblige the United
States Government to seek out foreign
government comments for every
proposal. Rather, the onus is on any
foreign government that wishes to
consult to make such a request.
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B. The FAA Has Authority To Retain the
Amounts Received From the Lease and
Disposal of Property and To Use Those
Proceeds for Congressionally
Authorized Purposes
The commenters assert that the FAA
has no authority to retain the amounts
received from the lease of slots, and that
31 U.S.C. 3302 requires all amounts
received by an agency be deposited into
the General Receipts account. The FAA,
however, has an express exemption
from 31 U.S.C. 3302 that it was given in
section 276 of the Air Traffic
Management System Performance
Improvement Act of 1996, Public Law
104–264, codified at 49 U.S.C. 45303(c).
Section 276 states that
‘‘Notwithstanding section 3302 of Title
31, all fees and amounts collected’’ by
the FAA, except for a few specified
exceptions such as insurance premiums,
‘‘shall be credited to a separate account
established in the Treasury and made
available for Administration activities;
* * *’’ 49 U.S.C. 45303(c). These
amounts are available immediately for
expenditure for Congressionally
authorized purposes and remain
available until expended. Id.
This paragraph of section 45303, by
its unambiguous terms, applies to all
amounts collected by the FAA, whether
or not they are amounts from fees
established under chapter 453. This is
in contrast to the first paragraph of this
section of law, which only applies to
fees and amounts collected under
chapter 453.24 Fees collected under
chapter 453 include fees for air traffic
control services provided to planes that
neither take off from nor land in the
United States (overflight fees), and fees
for airmen certificates and registration
of aircraft.25 The FAA, however, collects
amounts under authorities contained in
other chapters of law, such as insurance
premiums and other amounts which are
collected under chapter 443 of Title 49,
amounts from the disposal of an interest
in property for adequate consideration
under chapter 401, and amounts
provided from other air traffic service
providers also under chapter 401, as
well as federal, state and local
governments and private entities under
chapter 1 of Title 49.
It is a well established principle of
statutory interpretation that laws ought
‘‘to be so construed that, if it can be
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.
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prevented, no clause, sentence, or word
shall be superfluous, void, or
insignificant.’’ TRW Inc. v. Andrews,
534 U.S. 19, 32 (2001). Interpretations of
statutes should ‘‘give effect, if possible,
to every clause and word of a statute.’’
United States v. Menasche, 348 U.S.
528, 538–39 (1955) (citing Inhabitants of
Montclair Tp. v. Ramsdell, 107 U.S. 147,
152 (1883)). Using this principle, effect
must be given, if possible, to the words
‘‘all fees and amounts’’ except for those
specifically excluded, should be
deposited into the account established
by 49 U.S.C. 45303(c). The only
amounts the FAA is expressly
authorized under this paragraph to
exclude from this account are the
insurance premiums and related fees it
collects and deposits into the Aviation
Insurance Revolving Fund. A plain
meaning interpretation which gives
effect to all the words in that paragraph
is that all fees and other amounts
collected by the FAA under authorities
contained in other chapters of Title 49
or other titles should be deposited into
the account established by section
45303(c). This would include any
amounts collected from the lease of
FAA property under the authority of 49
U.S.C. 106(n) and 49 U.S.C. 40110(a)(2).
C. The Auction of Slots Does Not Affect
the Proprietary Rights of the Port
Authority
Similarly, both the Port Authority and
the Airports Council International—
North America (ACI–NA) as well as
American believe that the NPRM
impinges on the proprietary rights of the
Port Authority. The ACI–NA believes
that the FAA’s powers under 49 U.S.C.
Section 40103 do not allow us to
auction slots. In support of its position,
the ACI–NA also cites to Western Air
Lines v. Port Authority of New York and
New Jersey, 658 F. Supp. 952, 956–57
(S.D.N.Y. 1986), aff’d, 817 F.2d 222 (2nd
Cir. 1987), cert. denied, 485 U.S. 1006.
The FAA maintains that Western
supports its position more than that
proffered by the ACI–NA. Western
concluded that the perimeter rule
established by the Port Authority was a
valid restraint exercised in accordance
with the Port Authority’s proprietary
interest. Western did not suggest that
the proprietary interests of the Port
Authority take precedence over FAA
regulation; instead Western explicitly
states that ‘‘[t]his Court concludes that,
in the absence of conflict with FAA
regulations, a perimeter rule, as
imposed by the Port Authority to
manage congestion in a multi-airport
system, serve an equally legitimate local
need and fits comfortably with that
limited role, which Congress has
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60553
reserved to the local proprietor.’’ Id. at
958. Therefore, even if there was a
conflict between the proposed rule and
the Port Authority’s proprietary rights,
the FAA’s rule would prevail under
Western.
The establishment of slots under
section 40103 is consistent with the
authority that the FAA has exercised at
JFK, LaGuardia, Chicago O’Hare, and
other airports, for the past several
decades. Western is easily
distinguishable from the current
rulemaking in that this rulemaking does
not affect in any way how the Port
Authority deals with its airport
including use of its terminals. In fact,
there will be 100 percent of the air
traffic coming into JFK and Newark
during the same time periods as
currently exist at the respective airports.
The Port Authority’s assertion is that
changing the airlines that come in or the
number of flights interferes with its
proprietary interests. However, through
its regulatory process in certifying
airlines or capping arrivals and
departures, the FAA can and has
affected the air traffic in and out of JFK
and Newark, and neither the Port
Authority nor any other entity has
challenged the FAA’s responsibility to
issue certifications or control the flow of
air traffic, much less suggested it affects
the proprietary rights of airport
authorities. Additionally, the Port
Authority has always had to
accommodate carriers under the HDR by
accommodating airlines that leased,
purchased, or traded slots under the
HDR; that received slots through FAArun lotteries; or that were granted slot
exemptions under 49 U.S.C. 47174 and
41716. Furthermore, the Port Authority
is obliged to file competitive access
reports to the Secretary if it denies
access to a requesting carrier at JFK and
Newark. With respect to Newark, the
FAA must ensure that the Port
Authority successfully implements its
competition plan to enhance
opportunities for airline competition
and accommodate requesting airlines
there. 49 U.S.C. 40117(k), 47106(f).
https://www.panynj.gov/
CommutingTravel/airports/html/
ewr_comp_plan.html. (last visited
September 6, 2008). Accordingly, the
Port Authority may not claim that the
fact that a slot is acquired through an
auction presents any unusual
accommodation issues that it has not
routinely dealt with in the past.
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D. The FAA Has Complied With the
Administrative Procedure Act
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1. The Docket Contained Adequate
Information for Meaningful Comment
on the Rulemaking Proposal
Several commenters also claimed the
FAA failed to meet the requirements of
the Administrative Procedure Act (APA)
(5 U.S.C. 551, et seq.). The Port
Authority claimed that relevant
documents either were not submitted to
the docket at all, or in a form and time
insufficient to permit adequate analysis
by interested parties. In particular, the
Port Authority suggested the draft lease
documents were submitted to the docket
well after the initiation of the comment
period, contained vague terms, and did
not adequately set forth the conditions
for default. The Port Authority
maintained the default conditions are
critical because of the impact of a
default on the Port Authority’s gate
leasing agreements.
The ATA commented that the
technical report explaining how slots
would initially be allocated and
designated does not adequately describe
how the FAA intends to choose which
Common Slots would be designated as
Limited Slots.
The FAA believes the docket
submissions provided interested parties
with sufficient information to
meaningfully comment on the proposal.
The draft lease agreement for
Unrestricted Slots, is directly related to
the FAA’s potential auctioning of the
slots under its acquisition authority.
The draft cooperative agreement, which
would govern the lease terms of the
Common and Limited Slots, is arguably
more directly related to the instant
rulemaking since they will initially be
allocated to carriers under this rule.
While the Port Authority questions the
comprehensiveness of these draft leases,
they are in fact, largely complete. The
FAA is intentionally placing only
limited constraints on the slots. The
goal of this rulemaking is not to impose
complicated and intrusive constraints
on the slots. Rather it is to allow for a
more efficient air traffic system in and
around JFK and Newark while
permitting some access to new entrants
and stimulating the free market. In order
to maximize efficiencies, the FAA must
assure that the majority of the slots have
a usage requirement. That requirement,
which is mandated by today’s rule, is
the primary restriction on the Common
Slots. Limited Slots are granted for a
shorter period of time, but otherwise
largely mimic the Common Slots. The
Unrestricted Slots are even less
constrained with no usage requirement.
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2. The Discussion of the Auction
Process Provided Sufficient Detail for
Meaningful Comment on the
Rulemaking Proposal
US Airways Group (US Airways)
argued the FAA provided insufficient
time to comment on the details of the
auction process. United claimed that the
NPRM should have proposed dates as to
when the auctions would be conducted
and should have committed to
providing a certain amount of advance
notice. The ATA claimed that the FAA
violated the APA by failing to account
for carrier’s costs in participating in an
auction.
In the NPRM the FAA provided only
a general discussion of the procedures
that would govern any future auction.
This general discussion was provided
only to give interested parties a context
for the rulemaking. The FAA decided to
provide a general description of the
likely auction procedures to encourage
meaningful comment on the underlying
proposal, which is that after imposing a
ten-year cap to address congestion, a
certain number of slots would revert to
the FAA for reallocation. The FAA has
provided a more detailed discussion of
the procedures that would be used in an
auction. 73 FR 53477 (September 16,
2008). The agency provided for a 15-day
comment period which closed on
October 1, 2008. Based on the comment
submissions, the FAA may decide to
refine any final auction procedures.
That refinement, however, does not
impact this rule.
Some commenters claimed that
because the FAA has not fully
developed the auction process, the FAA
cannot finalize the proposed rule. Like
the ATA’s comments on the draft lease
documents, these commenters place far
too much reliance on procedures
unrelated to the rulemaking. The NPRM
discussed in detail the process for
providing slots at JFK and Newark:
Between 80 and 90 percent of them will
be provided to incumbent carriers
operating at the respective airports
through cooperative agreements and the
remaining ones will be transferred via
lease. The particulars of the auction
process (e.g., will it all be via the
Internet or will paper bids be allowed,
will the help desk be available 24/7 or
only during normal business hours, the
exact day when the auction will take
place, whether successive rounds of
bidding will be allowed, whether
multiple bids from the same carrier will
be permitted) are not relevant to this
rule. The FAA will, in accordance with
its Acquisition Management System,
continue to provide adequate notice of
its planned auction procedures and
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solicit comment on those procedures
prior to conducting any auction.
The ATA’s claim that not ascribing
the costs of the auction to the rule
violates the APA likely stems from
unclear drafting on the part of the FAA.
We have included the auction costs and
reallocation benefits in the final
regulatory evaluation for this rule.
3. The FAA Adequately Considered
Alternatives
Despite the fact that the FAA has
proposed two different allocation
methods at JFK in this rulemaking,
several commenters claimed that the
agency failed to adequately explore
additional alternatives in violation of
the APA. An agency is not required to
consider all possible alternatives when
engaging in rulemaking. The fact that
the commenters dislike the alternatives
considered does not mean that the FAA
has pre-decided the outcome by failing
to recognize that there may be other
alternatives. In fact, the agency
proposed multiple options. In addition,
it has considered many of the
alternatives that the commenters
recommended in response to the NPRM.
As discussed later in this document, the
FAA has decided against adopting these
approaches in lieu of proceeding with a
final rule. However, aspects of many of
these recommendations have been
incorporated into the rule or are being
addressed elsewhere.
IV. Discussion of Final Rule
A. Allocation of Slots at JFK and
Newark
The FAA believes that at least for the
next several years, JFK and Newark will
likely be oversubscribed in terms of
their physical ability to handle aircraft.
Accordingly, extending the caps on
operations at the airports is necessary to
provide for the efficient use of the NAS.
American argues for a lower cap at
both airports, stating that ‘‘[w]hile JFK
and Newark may be able to handle 81
operations per hour in ideal conditions,
this limit significantly overstates both
airports’ optimal capacity. Thus, the
FAA should revisit the issue of how
many operations at JFK and Newark can
be accommodated safely and
dependably and then set a cap at that
level * * *’’ [Emphasis in original.]
Although American believes 81
operations is above optimal
performance, it has failed to identify
what it believes to be the appropriate
number of slots per hour during
restricted periods. Under no
circumstances would we allow the
number of operations to exceed a safe
level. Beyond that, the levels as set in
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this rule represent the FAA’s best
judgment about a reasonable balance
between maximizing capacity and
minimizing delays. Of course, we have
made it clear that we continue to review
the caps, and we may withdraw
common slots if necessary, or we may
increase capacity as circumstances
allow.
The dispute surrounding this
rulemaking revolves around the FAA’s
proposal to reallocate slots at the
airport. Simply put, incumbents at the
airport are largely satisfied with the
status quo. The vast majority of carriers
opposed any measure that would result
in a carrier holding fewer slots under
the final rule than it held under the
capping Orders.
The Port Authority states in its
comment ‘‘The slot retirement system
has not been explained with respect to
the [sic] specific criteria the FAA will
use to choose slots to be withdrawn, and
whether, or how, gate-leasing
assignments will be taken into account
in this process.’’ This rule does not
provide for any ‘‘retirement’’ and we
assume that the Port Authority is
referring to Section 93.167 which states
that the FAA may withdraw limited or
common slots as necessary for
operational needs. Withdrawal for
airport operational needs is not a new
concept, and the same idea has applied
in our rules for years. The only really
new principle that has been added by
this rulemaking is that we have
committed not to withdraw unrestricted
slots. Once they are purchased at an
auction, the carrier is assured that they
can be used for the life of this rule. In
other respects, our procedures and
criteria remain the same as they have
always been.
Several commenters including the
carriers, their associations and the Port
Authority noted that the FAA has
asserted that the proposed measures
were designed to address severe delays,
preserve consumer choice, maintain
airline competiveness and preserve the
affordability of airfares. Most
commenters agreed, in some form, with
the Port Authority’s assessment that the
proposal achieved none of these
objectives. Rather, most commenters
noted that the reallocation mechanism
did nothing to address congestion and
could have the unintended consequence
of harming competition and restricting
passenger access because of the loss of
service to small communities.
Some carriers and their associations
argued that rather than encouraging a
market-based allocation method with a
robust secondary market, the proposal
would have the opposite effect—
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imposing a new and more marketintrusive regulatory scheme.
Not only is the FAA required to
ensure the efficient use of the NAS, but
it must do so in a manner that does not
penalize all potential operators at the
airport by effectively shutting them out
of the market. The FAA cannot simply
walk away from an airport once it has
imposed caps, but rather should take
steps to ensure that there are, in fact,
competitive market forces and actual
and potential competition. Competition
at an airport benefits the flying public
by providing price competition and
expanded service. The ability of carriers
to initiate or expand service at the
airports is hindered, in large part, by the
imposition of the cap. Accordingly, the
FAA believes it must strike a balance
between (1) promoting competition and
permitting access to new entrants and
(2) recognizing historical investments in
the airport and the need to provide
continuity. It is not the role of the
Government either to dictate particular
business models or to constrain a
market and provide no means for others
to enter that limited market.
The FAA believes that it is well
within the agency’s authority in 49
U.S.C. 40103 to provide some
mechanism for reallocation. The
capping Orders at JFK and Newark
provide for auctions of new and
returned capacity but do not provide for
the reallocation of capacity that is
actively being used. The FAA believes
this allocation method may be justified
as a short-term measure, but it is
inadequate for any cap intended to last
for more than a couple of years. Indeed,
Congress appears to have shared similar
concerns when it allowed for slot
exemptions in AIR–21. Today’s
proposal attempts to strike the
appropriate balance by actively
developing a robust secondary market
that properly values the limited asset
that the FAA created.
1. Proposed Alternatives
The FAA proposed two different
alternatives for allocating slots in the
NPRM. Under both alternatives the vast
majority of slots would have been
grandfathered to existing carriers at the
airports, with a relatively small minority
auctioned off in the free market. Both
alternatives allowed for a carrier
baseline operations for which up to 20
slots would be automatically allocated
to the carrier as Common Slots. These
slots would not count toward the
calculation of slots that would revert to
the FAA for retirement or reallocation.
Under alternative 1, the FAA
proposed to withdraw 10 percent of the
Carriers’ slots above its baseline
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operations. The FAA would auction the
reverting Limited Slots, with the FAA
retaining proceeds of the sale. After
recouping its costs, the FAA planned to
spend the remainder of the proceeds on
aviation congestion and delay
management initiatives in the New York
City area. Under alternative 1, any
Carrier could bid on a slot in an auction
blind to the participants and it would be
awarded in the form of an Unrestricted
Slot to the highest responsive bidder.
The winning Carrier could commence
operations using the newly acquired slot
at the beginning of the next summer
scheduling season, except that October
25, 2009, will be the commencement
date for slots acquired in the first
auction.
Alternative 2 proposed a different
auction procedure for JFK that provided
that the holder of a Limited Slot would
retain the proceeds of its sale in the
auction. The only deduction from the
sale price would be for the FAA’s costs
associated with conducting the auction.
Under this alternative, the FAA would
withdraw 20 percent of the Carriers’
slots above the baseline operations at
JFK.
The FAA continues to believe that
under either alternative a sufficient
number of slots would be available for
reallocation to permit access to the
airports and establish a fair market
value for slots that could then translate
into a robust secondary market.
Although alternative 2 allowed for an
even greater number of available slots,
it also had the potential to prevent the
most interested carrier, i.e., the one
initially allocated the slot, from bidding
on it. While the FAA anticipated that a
carrier could obtain a comparable slot,
either through the FAA auction or on
the secondary market, there was no
guarantee that would happen. This
concern was raised by several
commenters who noted that the
inability for the carrier to bid on its
previously held slots is even more
troubling because that carrier may have
the greatest incentive to retain the slot
based on established service.
As noted above, the FAA believes
either approach would help stimulate a
secondary market and would lead to a
proper assessment of the slots’ true
value. The agency also believes that
either approach would have a minimal
impact on operations at the airport.
However, the agency is persuaded that
alternative 1 maximizes the efficiency of
the slot because the carrier who may
value it the most may be the one who
held it initially.
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2. Categories of Slots
Under today’s rule, the FAA will lease
property interests in slots to carriers for
a period of up to ten years, the date the
rule sunsets. There will be three
categories of slots: Common Slots,
Unrestricted Slots, and Limited Slots.
Common Slots are those slots
grandfathered to carriers currently at the
airport. They will be awarded to the
carriers under a cooperative agreement
for the duration of the rule. The
cooperative agreement will provide
carriers with a ten-year leasehold
interest. Once the rule sunsets, all
interests will revert to the FAA. Unlike
slots allocated under the HDR at JFK,
carriers will be granted clear property
rights to Common Slots, which could be
collateralized or subleased to another
carrier for consideration. These property
rights, however, will not be absolute.
Common Slots will be subject to
reversion to the FAA under the rule’s
minimum usage provision, may be
temporarily withdrawn for operational
reasons, should the FAA need to reduce
the caps.
Those slots not categorized as
Common Slots will be categorized
initially as Limited Slots and then as
Unrestricted Slots once they are
reallocated.
Unrestricted Slots are slots that a
carrier would acquire as a leasehold.
Unlike slots allocated under a
cooperative agreement, these slots will
require monetary consideration to the
FAA. Since a carrier leasing an
Unrestricted Slot will be required to do
so because of government action, these
slots will not be withdrawn by the FAA
under the use-or-lose provisions, for
operational reasons or to further reduce
the cap should such reductions be
necessary. As with Common Slots,
Unrestricted Slots will expire when the
rule sunsets.
Limited Slots are slots that are
identified for auction. Those Limited
Slots identified for auction will be
leased to the carriers under a
cooperative agreement for a period of 1–
4 years so that they can be reallocated
after that period of time. Limited Slots
will convert to Unrestricted Slots as a
result of the auction. As with Common
Slots, Limited Slots may be withdrawn
under the proposed use-or-lose
provision, or for operational reasons.
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3. Initial Allocation of Slots
No later than this rule’s effective date,
the FAA will notify all carriers which
slots they will initially be allocated
under the rule. The FAA will make this
determination based on the operating
rights held by carriers under the Order
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limiting operations at JFK or the Order
limiting operations at Newark as
evidenced by the FAA’s records.
Carriers will be assigned corresponding
slots in 30-minute periods consistent
with the limits under § 93.163 (b) and
its summer and winter season schedules
as approved by the FAA.
Upon the rule’s effective date, each
carrier at JFK and Newark will
automatically be awarded up to 20
Common Slots, which will constitute
the carrier’s baseline operations. The
FAA believes this is a rational approach
to assuring that no carrier is impacted
at a level that could seriously disrupt its
existing operations. Ninety percent of
the remaining slots will also be
grandfathered as Common Slots to the
carrier holding the corresponding
Operating Authorization under the JFK
or Newark order. The FAA has decided
to grandfather the majority of slots at the
airport in order to minimize disruption
and to recognize the carriers’ historical
investments in both the airport and the
community.
As noted above, the remaining slots
will be categorized as Limited Slots and
will be reallocated via auction over a
five-year period. The number of slots
that a particular carrier will have
classified as Limited Slots is based
proportionally on the carrier’s presence
at the airport, taking into consideration
each carrier’s baseline operations. The
FAA will inform all carriers that will be
awarded Limited Slots how many
Limited Slots they will have no later
than the rule’s effective date.
An affected carrier will have ten days
to identify 50 percent of the total
number of Limited Slots. During the
following ten days, the FAA will
determine through a randomized
process the remainder of slots that will
be categorized as Limited Slots, taking
into account the need to have capacity
available for reallocation throughout the
day.
In determining which slots should be
designated as Limited Slots, the FAA
will initially exclude from consideration
slots held during all hours where
carriers have collectively determined
two or more slots should be Limited
Slots. This approach will assure slots
will be available for auction throughout
the day. The FAA will also determine in
what year (0–4) each Limited Slot will
revert to the FAA for reallocation, In
this way, all carriers will know within
20 days of the rule’s effective date what
slots will become available for purchase
and when.
The time windows for the Limited
Slots will be evenly distributed over the
day to the extent possible. The duration
of each Limited Slot will be assigned by
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a fair allocation process such that each
affected carrier’s aggregate lease
duration will be approximately equal to
that of the other affected carriers.
British Airways asserted that it is
overly burdensome to require carriers to
track slots and volunteer slots for
redistribution each year, and states that
such a program is used nowhere else in
the world. The FAA believes that the
carriers using the system are
sophisticated entities capable of
tracking the classification of their slots.
Furthermore, the requirement that
carriers volunteer slots for redistribution
is only required one time, at the outset
of the rule. It also only affects the seven
carriers that will lose slots. Initially
FAA considered selecting 100% of the
slots for withdrawal but later decided it
would benefit carriers and their
networks to allow them to select 50% of
the slots themselves.
Although most commenters are
opposed to any slots being reallocated
by auction, Virgin America urged the
FAA to expand the number of slots
available via auction. The FAA
recognizes that the overall number of
slots that will be auctioned is relatively
small, and a larger auction would not
only have assured greater access to the
airports, but would arguably maximize
the efficiency of the system, assuming
no other constraints. However, the FAA
understands that the carriers would in
fact face other constraints.
The ATA claimed that carriers need to
know which of its slots are Limited
Slots 90 days before the effective date of
the rule in order to be compliant with
the rule on the effective date. While the
rule becomes effective on December 9,
2008, carriers can continue their
operations without change until October
25, 2009, the first day of the winter
scheduling season. Accordingly, the
FAA believes carriers will have no
problems setting a compliant schedule
well in advance of the winter
scheduling season.
The Port Authority, American
Association of Airport Executives
(AAAE) and the ATA also express
concern about what they consider to be
inadequate information regarding the
slot auction methodology. The Port
Authority says that the terms of the
planned slot leases have not been set
forth in any meaningful detail, which, it
argues, has important effects on their
management of airport gates. We agree
that it is important for all interested
parties to have full information about
auction procedures before any auction is
conducted. That information will be
provided in the appropriate form. This
rulemaking, which merely establishes
the principles under which slots will be
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leased, is not intended to incorporate
the technicalities of the auction
procedures, a fact that the FAA
emphasized in the NPRM.
4. Market-Based Reallocation of Slots
As discussed earlier, the FAA
proposed two separate alternatives for
reallocating slots at JFK and Newark.
The FAA has decided to adopt
alternative 1. The commenters have
largely combined the two goals of this
rulemaking, to address congestion and
to provide for a more equitable and
efficient allocation of capacity, into a
single goal. Many commenters,
including carriers (American, British
Airways, Continental, Delta, Emirates,
and US Airways) and industry
associations (AAAE and ATA) said that
it is the cap on hourly operations and
not auctions that will reduce delays at
JFK and Newark. Furthermore, they
contended that the cap and the auction
are distinct proposals, with distinct
costs and benefits; while a cap may
reduce delays, an auction will merely
add costs to carriers. Some carriers and
the ATA claimed that the only
congestion-related measure included in
this proposal is the cap on operations,
which is already in place under the
capping orders at JFK and Newark. It
also argued that the FAA has not
articulated how its auctions will
translate into delay mitigation or why
the high costs of auctions are worth the
burden and risk.
The FAA fully agrees that the
reallocation method, regardless of what
it is, will not have a direct impact on
controlling delays. That type of control
is achieved by extending the cap beyond
the JFK and Newark Orders. The FAA
believes that the reallocation
mechanism may lead to an air
transportation system that is more
efficient for the traveling public, even
though that mechanism does not reduce
the number of aircraft flying in and out
of the airport. It is possible that carriers
may decide, at least on some routes, to
increase the size of the aircraft they are
using. While nothing in today’s rule
dictates this result, it is certainly at least
generally foreseeable.
While most of the carriers were
categorically opposed to a market-based
reallocation mechanism, that opposition
was not universal. The FTC argued in
favor of an auction mechanism,
recognizing the value associated with
providing a carrier with a direct
financial incentive to maximize the
value of a slot.
The FAA has decided to finalize its
proposal because it believes that a
market-based mechanism such as an
auction is the best way to assure that
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this scarce resource is allocated to the
user who values it the most. As a
steward of public property, the FAA has
an obligation to strive toward getting the
best value for that property. Other
Federal agencies have used auctions to
determine who values Federal property
the highest. In addition, a number of
papers regarding the societal value of
allocating slots via an auction have been
published over the past several years.26
Simply put, a carrier who is required to
purchase a slot, will value it more
highly than a carrier who received the
slot at no cost. Accordingly, the carrier
will ensure the slot’s best economic use,
i.e., putting it to the use valued most
highly by the traveling public. If the
carrier cannot profitably use the slot, it
will presumably sublease the slot to
another carrier who can maximize its
efficient use. In addition, a carrier
wishing to gain a presence at an airport
can purchase the lease from the
government directly rather than
attempting to obtain slots solely from its
competitors, increasing competition at
the airport.
The value associated with allocating a
scarce government resource via an
auction was also recognized by Congress
in the telecommunications context
when it passed the Licensing
Improvement Act of 1993. In the
section-by-section analysis of the
statute, the committee report
specifically references promotion of
efficient and intensive use of the
electromagnetic spectrum as one of the
objectives the committee believed the
new legislation would achieve. 1993
USCCAN at 580.
As noted earlier, the agency’s own
experiences with slot-controlled airports
under the HDR are consistent with the
observations made in the literature.
Under the Buy/Sell Rule, carriers
wishing to enter the market complained
they were unable to gain market-share,
and the underutilization of those slots
allocated to the carriers at no cost forced
the agency to impose a usage
requirement.
The auction process contemplated by
today’s rule will guarantee carriers
wishing to initiate or extend operations
at the airport an opportunity to acquire
slots. In January 2009 there will be
approximately 18 slots available for
auction at JFK and 18 slots available at
Newark airports. Carriers typically
26 Cf., DotEcon Ltd., Auctioning Airport Slots—a
Report for HM Treasury and the Department of the
Environment, Transport and the Regions, April
2001; Whalen and Carlton, Economic Analysis
Group Discussion Paper—Proposal for a MarketBased Solution to Airport Delays, October 2007;
Brueckner, Slot-Based Approaches to Airport
Congestion Management, May 2008.
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require pairs of slots, so today’s rule
will provide the equivalent of
approximately 9 round trips per day at
both airports. In the following four years
there will be at least 18 slots available,
as well. Assuming a minimum
competitive pattern of service is
between two and three round-trips per
day, the equivalent of three to four
routes would be available per year.
Carriers would be free to supplement
their holdings in the secondary market,
which the agency believes will be
stimulated by this rule.
The FAA intends to auction off 20
percent of the Limited Slots annually for
the first five years of the rule. Any
carrier may bid on the slot, and it will
be awarded to the highest responsive
bidder. The winning parties may
commence operations using the newly
acquired slots on the first day of the
subsequent summer scheduling season,
except for the slots acquired in the first
auction. In the unlikely event no bids
are received, the FAA will retire the slot
until the next auction. Allowing the
carrier holding the Limited Slot to retain
it, as suggested by some commenters,
could encourage the carrier to simply
not bid on the slot. The FAA will retain
all auction proceeds. After recouping its
costs, the FAA intends to spend the
remainder of the proceeds on congestion
and delay management initiatives in the
New York City area. The FAA has
already established a receipt account for
these proceeds.
The FAA will not reallocate slots after
the first five years (other than those
returned under the rule’s use-or-lose
provisions) because it believes that
ideally slots should transfer from one
carrier to another through the secondary
market. The FAA has decided to be
involved in a limited number of slot
transactions during the first five years of
the rule to help establish that market.
Not only will the auctions help create a
market for slots, but all carriers will be
able to assess the true market value of
a slot. Armed with information on how
much a given slot is likely to be worth
on the open market, carriers (and their
shareholders) will be in a better position
to determine whether to continue
operating marginally-performing flights
or to sublease the corresponding slot.
The FAA believes that merely relying
on the secondary market to accurately
establish the value of slots, as some
commenters have suggested, is
problematic. A fundamental problem
with the secondary market cannot be
addressed without first addressing the
primary market. Incumbents have
significant incentives not to sell or lease
out slots to airlines that will compete
with their networks to a substantial
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degree. Thus, incumbents rationally
foreclose entry both to other incumbents
and to new entrants. One of our
objectives in this rule is to change those
incentives and reduce the likelihood
that incumbents can foreclose entry and
potential competition indefinitely.
In addition, in the secondary market
a carrier may rely on tangible assets that
do not have the same monetary value for
all carriers or even non-tangible assets,
such as goodwill or a pre-existing
relationship, when evaluating whether
to lease a slot. Thus, while the slot may
have a real value for the carriers
engaged in the negotiations, that value
cannot be translated into a ‘‘fair market
value’’ that can be relied on throughout
the industry as a reasonable valuation of
the slot. The agency believes that it
should not take more than five years for
a robust secondary market to develop.
Given the carriers’ ability to sublease
slots if the operations associated with
the slots are not financially productive,
the FAA anticipates that there will be
little new or returned capacity for most
of the time the rule is in effect. With the
advent of NextGen technology, there
may be new capacity in the later years
of the rule. To the extent there is any
new or returned capacity, the FAA will
award that capacity in keeping with the
WSG.
Although a number of commenters
expressed specific support for the use of
WSG procedures in assigning new or
returned capacity, the National Air
Carrier Association (NACA) opposed
that approach. It believes that the WSG
procedures would not allow new
entrant carriers to establish their
presence at the airports. Contrary to that
assertion, the WSG provides for a
preference for new entrants; by
providing for withdrawal and auction of
additional slots, new entrants will have
an even greater opportunity to establish
a market presence.
Lufthansa objected to the NPRM’s
definition of a new entrant as a carrier
that has been administratively allocated
up to 8 slots during controlled hours.
Lufthansa states that the WSG gives new
entrant status to airlines ‘‘with less than
2 arrivals and departures’’ and makes no
separate provision for slots acquired by
auction. It argued that the proposal was
‘‘contradictory’’ to the WSG process. We
are adopting the definition as proposed.
As we discussed in the NPRM, the FAA
understands that in order to maintain
viable operations at JFK or Newark, a
carrier would need four to six slots for
domestic operations, and at least two
slots for an international operation. The
five slots contemplated under the WSG
provide little opportunity for a new
entrant carrier to establish its operations
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before losing new entrant status and
thereafter being able to expand in the
New York market only through the
purchase of a lease. Setting a limit of
eight slots administratively assigned by
the FAA as the cut-off for new entrant
status allows a carrier to maintain its
operations and provides some ability to
grow without jeopardizing the carrier’s
access to slots through the WSG.
Furthermore, we note that our decision
here to allow carriers with up to 8 slots
to retain new entrant status is consistent
with our approach at Chicago O’Hare.
a. Impact of Auctions on Competition
The NPRM assumed that auctions will
lead to efficient airline behavior. The
Port Authority, ACI–NA, NACA and
some carriers suggest that auctions may
harm competition and could lead to
reduced opportunities for new entrant
and limited incumbent airlines to enter
the airport. They claimed that the large
incumbent carriers with the majority of
slots at JFK and Newark could use their
relatively stronger balance sheets to
outbid the smaller, non-legacy airlines
that help stimulate competition. The
ATA and others suggest that a carrier
could obtain a slot through auction and
then chose not to operate for anticompetitive purposes.
Offering a different view, American
suggests that because the New York
market is already sufficiently
competitive as a result of the presence
of three comprehensive and competing
networks, hubs at JFK and Newark,
presence of low-cost carriers, and
presence of a greater number of foreign
flag carriers serving the area than any
other area of the country this rule is
unnecessary.
The FAA disagrees with the assertion
that the limited number of auctions
contemplated in this rule will reduce
competition at the airport. At JFK, the
HDR was criticized for not providing
sufficient opportunity for new entrant or
limited incumbent carriers to enter or
expand service at the airport. We
believe there is merit to these criticisms.
This rule will provide additional
opportunities for new entry at JFK and
Newark.
To encourage greater competition and
expand opportunities for entry at the
airport, the FAA intends to reallocate by
auction a portion of existing slots from
those carriers who held the majority of
slots at JFK and Newark. The auction is
designed to provide greater competition
at the airport because it uses the market
to reallocate limited resources to those
who value the asset most.
We understand the concerns of some
persons that carriers may attempt to use
Unrestricted Slots which are not subject
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to a usage requirement to monopolize
operations at an airport. The
Department has the authority to ensure
that carriers do not use their ability to
permit such slots to remain idle to
unlawfully restrict competition. The
Department’s mandate under 49 U.S.C.
41712 to prohibit unfair methods of
competition authorizes it to stop carriers
from engaging in conduct that can be
characterized as anticompetitive under
antitrust principles. If the Department is
presented with clear and convincing
evidence that a carrier is hoarding slots
to monopolize operations at an airport
it will pursue enforcement action
against the carrier.
b. Impact of Auctions on Carrier
Investment
The ATA, Cathay Pacific Airways,
Continental, KLM and U.S. Airways
noted that carriers have invested in
terminal facilities, gates, servicing
facilities, aircraft and promotion of
flights out of JFK and Newark, with the
expectation that they would continue to
operate from those airports. They
suggest that under this rule, their
presence at the airports is threatened.
KLM and U.S. Airways further state that
airlines that have already significantly
invested in their operations at these
airports will be, in effect, penalized by
having to pay for the privilege a second
time.
It is our view that nothing in this rule
prejudices the carrier’s invested
presence at the JFK and Newark.
Nothing in this rule bars carriers from
providing services to the New York area.
To the extent that a carrier may have
slots subject to withdrawal, it has equal
opportunity to maintain or expand its
service through the auction mechanism.
We also disagree with the assertion that
carriers are being asked to pay a second
time for the privilege of serving JFK or
Newark because the investments that
carriers have made in the airport and
near-by services are for the benefit of all
flights they offer, not just those that may
be subject to reallocation.
c. Alternatives to Reallocation
Many commenters said that the FAA
should use other approaches instead of
auctions to reduce delays at JFK and
Newark. In particular, the FAA should
focus on implementing operational
procedures and investments to enhance
capacity. The AAAE, ACI–NA, the
Asociacion de Latinoamericano de
Trasporte Aero (ALTA), and the
Regional Airline Association (RAA),
Boeing, and several carriers said that the
FAA should proceed with implementing
advanced air traffic control technologies
and should focus on completing
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NextGen. Similarly, the ATA suggests
that the FAA continue to implement the
77 New York Aviation Rulemaking
Committee improvements and continue
implementing NextGen.
The IATA and the ATA and their
member airlines expressed their
preference for use of the IATA WSG
instead of an auction approach at JFK
and Newark. Delta supports WSG
because it is a tested process that can be
applied fairly without harming U.S.
carriers in comparison to other carriers.
The IATA asserts that a WSG approach
because it is a ‘‘fair, transparent nondiscriminatory’’ mechanism that is a
widely recognized and accepted for
distribution of slots at congested
airports.
As to the suggestion that the FAA
focus on the various technological and
physical improvements identified by the
NYARC, many of these initiatives are
already underway. However, we do not
believe that they will address the
congestion issues at JFK and Newark
sufficiently to merit lifting the caps on
operations. It is the caps that create the
need for reallocation and the
Administration supports a market-based
mechanism to soften the impact on the
market created by the caps. In the
process we will foster the development
of a robust secondary market and ensure
the opportunity for new entry into the
New York area.
The commenters are correct in stating
that WSG is a widely recognized and
accepted mechanism for distribution of
slots at congested airports. As discussed
above, we will use WSG to award any
new or returned capacity at JFK and
Newark, to the extent it does not
conflict with U.S. rules, to ensure that
even carriers that do not choose to
participate in the auctions have another
means to access the restricted market.
However, the number of slots likely to
be available for reallocation from new or
returned capacity would be insufficient
to stimulate a secondary market or
create enough opportunity for new
carriers to enter the market. Withdrawal
and reallocation of slots via auction
ensures the opportunity for new entry
and an efficient allocation of slots
among all carriers at the airports, such
that each slot is allocated to the user
who values it the most highly.
B. Secondary Trading
All slots will have value in the
secondary market. To the extent that the
secondary market is not mature and the
value of slots is not well-known, the
auction should inform potential buyers
of the value of these slots and stimulate
the secondary market. The FAA believes
that ultimately the best way to
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maximize competition is with the
development of a robust secondary
market. To that end, the agency did not
propose a system of set-asides and
exemptions that would be available to
new entrants and limited incumbents.
We believe some measures must be
taken to assure access to the secondary
market. The system of preferences and
exemptions developed under the HDR
and AIR–21 at JFK may have
significantly diluted the viability of the
secondary market ostensibly created
under the HDR’s Buy/Sell Rule as
several commenters claim, but we do
not believe that was the sole culprit.
The Buy/Sell Rule permitted
transactions that were never advertised
and the terms of which were never
monitored for anti-competitive
behavior.
We believe all carriers interested in
initiating operations at JFK or Newark,
or increasing their operations there,
should have an opportunity to
participate in any transactions.
Accordingly, the FAA will permit
carriers to include Common Slots for
sale in the auction organized by the
FAA. If a carrier wishes to include some
of its Common Slots in the auction,
these slots will be treated in the same
manner as other slots being auctioned
by the FAA. The carrier would be able
to specify a minimum price for these
slots so that it need not give up the slots
unless they command a price that the
carrier is willing to accept and it would
retain the proceeds.
In addition, the FAA will establish a
bulletin-board system whereby carriers
seeking to sublet slots outside the
auction process, or to acquire such
subleases, would notify the FAA, which
would then post the relevant
information on its website. The FAA
will post a transaction within two
business days of receipt and verification
of the request and post the transaction
for ten business days. The FAA has
decided that transactions via the
bulletin-board-system do not have to be
blind, and the transaction may include
both cash and non-cash payments.
Some carriers noted that the
secondary market should be as
transparent as possible since even a
hybrid system, whereby the lessor
would accept the highest cash bid and
then negotiate the value of nonmonetary 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
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carrier offering to lease the slot.
However, we also believe non-cash
transactions should result in both more
bidders and potentially higher bids.
Since the non-cash aspect of a
transaction would require direct
negotiating, parties would need to be
disclosed.
In order to preclude the type of
collusion that appears to have been
present, at least some of the time, under
the Buy/Sell Rule, the Department will
monitor trades on the secondary market.
The Department already has the
authority under 49 U.S.C. 41712 to
investigate, prohibit, and impose
penalties on an carrier for an unfair or
deceptive practice or an unfair method
of competition in air transportation or
the sale of air transportation. The
Department has consistently held that
this authority empowers it to prohibit
anticompetitive conduct (1) that violates
the antitrust laws, (2) that is not yet
serious enough to violate the antitrust
laws but may do so in the future, or (3)
that, although not a violation of the
letter of the antitrust laws, is close to a
violation or contrary to their spirit.27
Today’s rule requires carriers to file
with the Department a detailed
breakdown of all lease terms and asset
transfers for each transaction, and the
subletting carrier must disclose all bids
submitted in response to its solicitation.
Lufthansa objects to our plan to publish
the sales price for subleases of slots
between carriers. It believes that slot
lease sales should be conducted in the
same way as aircraft sales, i.e., as a
private matter between two parties. We
hope and expect that transparency in
the sublease process will encourage
efficiency in the utilization of airport
capacity. Lufthansa has not explained
any alternative way to create this market
information, and we will adopt this
provision as proposed. The requirement
is also needed so that the Department
can adequately monitor the secondary
market.
The slot may not be operated by the
acquiring carrier until all
documentation has been received, and
the FAA has approved the transfer. The
approval process is required to assure
the FAA has up-to-date information on
who is operating the flight. The FAA
will not limit its approval based on any
27 See United Airlines, Inc. v. Civil Aeronautics
Board, 766 F. 2d 1107, 1112, 1114 (7th Cir. 1985)
and cases cited therein; see also H.R. Rep. No. 98–
793, 98th Cong., 2d Sess. (1984) at 4–5, Order 2002–
9–2, Complaint of the American Society of Travel
Agents, Inc., and Joseph Galloway against United
Air Lines, Inc, et al. (Docket No. OST–99–6410) and
Complaint of The American Society of Travel
Agents, Inc., and Hillside Travel, Inc. against Delta
Air Lines, et al. (Docket No. OST–02–12004)
(September 4, 2002) at 22–23.
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substantive provisions in the document.
Although the ATA claimed the
provisions governing the secondary
market are unduly intrusive and
chilling, the FAA believes that even in
a robust market it needs to track and
provide oversight of the market. This
oversight will ensure access remains
available to all interested parties and the
slots are actually being used in the
manner represented to the FAA. Since
Common and Limited Slots may be
transferred in the secondary market, the
underlying policy considerations
supporting the FAA’s decision to award
them under a cooperative agreement
rather than for monetary consideration
remain, even if the operating carrier has
changed.
Trades among marketing carriers and
one-for-one trades do not have to be
advertised. Marketing carriers should
not have to open up transactions to the
carrier community as a whole any more
than a single carrier should have to
disclose its scheduling decisions to
other carriers. The FAA will approve
these transactions, as it has done
historically. As is the case with longerterm transfers among different carriers,
the FAA only approves the transaction
to maintain accurate information on
which carrier is operating a particular
slot.
Same day trades among marketing
carriers that address emergency
situations such as maintenance
problems or other unforeseen
operational issues may take place
without prior approval by the FAA, but
carriers must notify the FAA of the trade
within five business days. One-for-one
trades among carriers will not be subject
to the restrictions of the secondary
market because they enhance the
operational efficiency of the airport.
However, the exchange of slots on a
one-for-one basis cannot be for
consideration, since they would then
take on the characteristics of lease
agreements negotiated in the secondary
market. Nonetheless, carriers must
notify the FAA of all such trades so that
the agency can maintain accurate
information on which carrier is
operating a particular slot.
United Parcel Service (UPS)
expressed its concern that the
provisions of section 93.168 must be
flexible enough to accommodate its
demand peak during the period between
Thanksgiving and Christmas. It notes
that slot trades among U.S. air carriers
with unified marketing control do not
need to be advertised, because the
carriers are considered to be a single
unit for the purposes of this rule. Since
UPS enters into contracts with other
cargo carries to handle its increased
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volume, it would like to receive similar
treatment for these arrangements. UPS
appears to misunderstand the rationale
for our proposal. Trades between
carriers under the same marketing
control are not lease transfers within
any common-sense meaning of the term.
There is, for these purposes, only a
single carrier with multiple operations.
That is quite different from the situation
UPS describes for its peak period, where
it enters into contracts with separately
owned and operated carriers that, for
much of the year, are its competitors. In
any event, our rule should not affect
UPS’s ability to contract with other
carriers to handle its additional cargo,
and we believe that no change to the
rule language is necessary. Although a
carrier seeking to sublet or transfer a slot
will be required to post the bid through
the FAA Web site, we believe that any
additional burden is minimal and
outweighed by the value of the of the
transparency of the process. In addition,
the transaction is not blind; and the
carrier is not required to accept the
highest submitted bid.
C. Usage Requirements
The FAA is adopting the usage
requirements proposed in the NPRM.
Specifically, Common and Limited Slots
must be used 80 percent of the time over
a season unless the FAA waives the
usage requirements due to unusual and
unforeseeable circumstances beyond the
carrier’s control. The impact of these
events must extend beyond five
consecutive days. Unrestricted Slots
will not be subject to the usage
requirements.
Under this rule each slot will be
assigned a corresponding scheduled
operation. Carriers will be required to
report a series of flights under a single
slot number rather than in the aggregate.
In this way the FAA will be able to more
accurately track a slot’s usage with the
flight it was scheduled against. Carriers
will be permitted to operate a charter,
maintenance, or ferry operation in lieu
of a scheduled operation and not have
that operation discounted as long as
they do not abuse the privilege.
Several commenters, including the
ATA, the Port Authority, and several
carriers noted that the proposal to
exclude Unrestricted Slots from the
usage requirement is inconsistent with
the current practice of requiring all
slots, even those purchased in the
secondary market, to be subject to the
use-or-lose requirements. These
commenters suggested that all slots
should be subject to usage requirements.
The Port Authority also suggested that
the proposal to exclude Unrestricted
Slots from the usage requirement could
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lead to the dominant carriers placing
bids with the effect of driving away or
blocking new entrants and limited
incumbents from JFK and EWR. The
price of a slot could be determined by
the value that a dominant carrier would
assign to eliminating competitors rather
than from the use of the slot itself, as
there is no usage requirement. The Port
Authority added that this could lead to
a decrease in the number of airlines and
destinations served at an airport,
resulting in higher fares.
We understand the concerns of some
persons that carriers may attempt to use
Unrestricted Slots which are not subject
to a usage requirement to monopolize
operations at an airport. We do not
believe this risk is sufficiently large to
attach a usage requirement on
Unrestricted Slots. Since the FAA
wishes to introduce a market-based
means of addressing slot allocation,
both initially and in the secondary
market, the agency believes the
Unrestricted Slot should be just that—
unrestricted. Furthermore, slots
acquired at auction will have a known
and provable market value. That fact
will be clear to the carriers’ management
and stockholders, who are both likely to
resist the waste of a valuable (and
salable) company asset. Our rule should
encourage the use of slots at JFK and
Newark for their highest and best
purpose. The FAA does not believe
there is a need to treat all slots equally
when they are not all allocated under
the same terms and conditions.28
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
28 Unrestricted Slots could potentially have a
higher value in the secondary market than Common
or Limited Slots because they are not subject to the
same restrictions.
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with its authority to take enforcement
action for any violation of a regulatory
requirement.
D. Unscheduled Operations
As proposed in the NPRM,
unscheduled operations at JFK and
Newark will be restricted. Two
unscheduled operations will be
permitted at Newark between 6 a.m. and
11:59 a.m. and between 10 p.m. and
10:59 p.m.; one operation per hour will
be permitted between 12 noon and 9:59
p.m. At JFK, there will be two
unscheduled operations permitted per
hour between 6 a.m. and 1:59 p.m. and
between 10 p.m. and 10:59 p.m.
Between 2 p.m. and 9:59 p.m., the limit
is one unscheduled operation. Under
today’s rule, reservations are required to
use the airport (except for emergency
operations) and may be obtained up to
72 hours in advance. The reservations
will be available on an hourly, rather
than half-hourly, basis. This will
provide additional flexibility with
minimal operational impacts overall.
To the extent Air Traffic Control
(ATC) can handle additional requests
(for example in good weather), it will do
so without regard to the reason for the
request. In addition, ATC may decide
special circumstances justify an
additional flight. However, there is no
guarantee that the FAA will accept more
than one or two reservations per hour,
and the determination to handle more
traffic would likely be made on that day.
Reservations for all non-emergency
flights would still be required. The FAA
will allow public charter operators to
reserve up to 25 percent of available
allowable afternoon and evening
reservations up to six months in
advance. If more than one public charter
operation is desired for a given hour, the
public charter operator without the
advance reservation could attempt to
secure a reservation within the threeday window that is available for all
other unscheduled operations.
A large portion of the unscheduled
operations comes from general aviation,
and Aircraft Owners and Pilots
Association (AOPA) stated in its
comments that our rule will cause an
increase in the number of operations at
airports elsewhere in the region, to
levels beyond the capacity of those
airports. While we agree that there may
be some increased demand for other
airports, we are aware of no reason to
believe this demand will exceed the
capacity available. We note that no
other airports in the region have
expressed any such concerns in
comments to this rulemaking.
The FAA does not believe that public
charter operators and on demand
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charter operators should be treated
similarly. Unlike on demand charters,
public charters may not be marketed
until prospectuses are filed with the
Department and they are marketed to
individual consumers long in advance
of the dates of operation. Public charters
are also generally limited to operating
from larger airports. Thus, in the New
York area, public charters cannot be
operated from many of the local
airports, such as Teterboro, that are
available to on demand charter flights.
For these reasons, we believe public
charter operators should have a
significantly earlier opportunity to
obtain slots for their operations under
this rule than on demand charters.
Additionally, unscheduled flights
produce roughly the same delay costs as
scheduled flights at the same time.
However, unscheduled flights can be
accommodated if operators are flexible
in their arrival or departure times. In
response to public comment we have
assessed the impact on business if
unscheduled flights are restricted based
upon the FAA’s record of actual
operations in the agency’s Enhanced
Traffic Management System (ETMS) for
year ended May 31, 2008. FAA has
indicated that it should be able to
accommodate more unscheduled
operations in visual meteorological
conditions (VMC) (capacity permitting).
In the analysis of ETMS, FAA assumes
that unscheduled flights would be
accommodated in VMC weather or if
there is available capacity in an adjacent
hour (one hour either side of the actual
hour of operation in the data.) based on
the year June 1, 2007 through May 31,
2008, ETMS data show the number of
unscheduled operations per year where
there was insufficient capacity in the
adjacent two hours to handle demand
beyond the levels specified in today’s
rule was 87 at Newark and 23 at JFK.
This represents well below one
operation per day. These flights may
have to divert to another airport, change
their time of arrival or departure by
more than one hour or be cancelled. The
concern about peak seasonal demand
expressed above by UPS also was raised
by comments to this portion of the
NPRM. NACA, the Cargo Airline
Association, and four carriers believe
that the limits in the rule are
insufficient to meet demand in the
period leading up to the Christmas
holiday. With only one reservation per
hour during certain hours, Polar and the
Cargo Airline Association (CAA) also
argue that the rule effectively prohibits
any unscheduled cargo flights. Although
there are other airports in the region,
NACA claims that they do not offer a
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60561
viable alternative for a commercial
service operation.
While we sympathize with these
concerns, we do not believe that they
will materialize in the dire manner
predicted. The FAA has reviewed cargo
operations at JFK and Newark during
the peak holiday season, and we believe
that capacity exists on various days or
through temporary returns by other
carriers to accommodate some flights
above historically operated levels.
ETMS data collected during the holiday
period November 26, 2007 through
December 31, 2007 shows that at
Newark 75 percent of the controlled
hours had available capacity for
unscheduled operations (i.e., at least
one available reservation ) and at JFK 82
percent of the controlled hours had
available capacity for unscheduled
operations. In addition, most cargo
operators have already received
temporary slot allocations from the FAA
for the November-December 2008 period
under the existing orders and there is no
reason to believe this would not remain
a viable option under today’s rule.
Demand for passenger flights is lower in
portions of November and December,
and the rule allows carriers to return
slots to the FAA for a portion of a
scheduling season without subjecting
the slots to the use-or-lose requirements
if they provide notice prior to the
commencement of the applicable
scheduling season. Additionally, the
unscheduled reservation system for JFK
and Newark grants authority to the Vice
President, System Operations Services,
to allow additional reservations for
unscheduled operations. These can be
authorized if there are available carrier
slots, such as those temporarily returned
to the FAA, or based on a finding that
additional flights would not
significantly increase delay. The FAA
will regularly assess operations on a
daily basis to determine if additional
reservations could be made available for
unscheduled operations. We note as
well that, under the previous rules at
JFK and Chicago O’Hare, cargo and
passenger carriers routinely requested
slots for additional operations. Carriers
often have scheduling flexibility, and
the FAA has worked with them when
possible to time flights during periods of
minimal operational impact. Our rule
here will provide additional flexibility
to carriers, by making it easier for them
to purchase or sublease slots to
supplement any direct slot allocation
from the FAA. Short-term slot trades
and leases are common at U.S. slot
controlled airports and are often used to
accommodate different scheduling
patterns by carriers. Therefore, we do
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not believe that there is any need to
include any special provisions for
holiday operations.
E. Sunset Provision
This rule terminates at 11 p.m. on
March 30, 2019. As we stated in the
NPRM, this approach will allow for
future determinations by the FAA as to
whether a cap is still needed and, if so,
whether changes are needed to more
efficiently manage the scarce resource.
When the New York/New Jersey/
Philadelphia Metropolitan Area
Airspace Redesign project and NextGen
technologies are fully implemented, we
expect they will significantly alleviate
delays and improve air traffic efficiency.
When we see the impact of these
improvements over the next ten years,
we will take that into account along
with our experience with effectiveness
of the rule on the distribution of slots
and entry into JFK and Newark.
This rule will expire in ten years. One
of the criticisms of the HDR was that it
was a temporary rule that has lasted
almost 40 years. As such, it became
difficult to manage, particularly as it
was amended to address changes in
business models. We believe the public
interest is better served by directly
providing the rule will sunset in ten
years. This approach will allow for
future determinations by the FAA as to
whether a cap is still needed and, if so,
whether changes are needed to more
efficiently allocate and constrain the
scarce resource. At present it is
impossible to determine what changes
in business models may occur over the
next ten years. In addition, full
implementation of the New York/New
Jersey/Philadelphia Metropolitan Area
Airspace Redesign project and NextGen
technologies are expected to mitigate
and improve air traffic efficiency within
the next ten years, and we should not
prejudge the market response.
The ATA questioned why this rule is
implemented on a temporary basis if the
agency believes it represents the best
solution for the airport. Additionally,
several commenters noted that
temporary slot lives reduce the value of
slots. They argued the short-term nature
of the proposal and the uncertainty of
future slot operations at JFK and
Newark would have a chilling effect on
the value given to slots and gates in
relation to capital flow and
collateralization. Several carriers were
concerned that financial institutions
would lose confidence in slots as
collateral and reduce or eliminate a
carrier’s ability to fully collateralize the
asset.
The FAA believes providing a date
certain through which slots will be
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awarded actually increases the certainty
of the holding. The assumption seems to
be that regulatory inactivity is the
solution to all the carriers’ concerns,
and that therefore, the FAA should just
maintain the status quo. This is not an
acceptable solution. The capping orders
at JFK and Newark temporarily froze the
slot allocations at the airports to serve
as temporary solutions. The FAA
believes it is important for carriers and
those who provide financing to realize
that slots at a constrained airport are not
intended to be a permanent response to
solving congestion, with the incumbents
being afforded unlimited rights.
F. Other Issues
1. Withdrawal for Operational Need and
for Future Reductions in the Cap
The FAA is adopting its proposal to
retain the right to temporarily withdraw
Limited and Common Slots for
operational need. We requested
comment on whether the FAA should
establish a level of slots that would not
be subject to withdrawal or temporary
suspension to fulfill operational needs.
We were concerned about the
possibility of marginalizing or excluding
small operators from the airport. No
comments were received on this issue.
For that reason, we conclude that it is
not necessary to establish such a
reserve.
The FAA has historically retained the
right to withdraw slots for operational
need, although it has rarely, if ever,
been exercised. This provision is
included to allow the FAA to
immediately address a situation where
it cannot handle the usual amount of
traffic on a temporary basis. This
provision would typically be invoked
because of problems with the landside
infrastructure, such as a closed runway
or terminal, or changes to air traffic
control procedures that would result in
sustained capacity reductions.
The FAA is also retaining the right to
further reduce the cap on operations
should the airport remain unduly
delayed and the Administrator
determines that the cap on operations
remains too high. The FAA anticipates
it would call for a Schedule Reduction
Meeting should further reductions be
warranted. In any case, the FAA would
fully meet its obligations under the APA
at that time, and this rule does not
provide a means for further cap
reductions absent subsequent action on
the part of the agency. For the reasons
discussed earlier, this provision is
limited to Common Slots.
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2. Impact of the Final Rule on the Port
Authority’s Ability To Run Its Airport
The ACI–NA and the Port Authority
both claim that the proposal to auction
slots interferes with the Port Authority’s
ability to run the airport and constitutes
an impermissible infringement on the
Port Authority’s right to collect revenue
for use of the airport facilities. The ACI–
NA believes that market-based access
issues should remain within the
exclusive purview of the airport’s
proprietor. The Port Authority
expressed similar sentiments in its
comments to the NPRM suggesting it
develop a method of allocation at the
airport.
The FAA has never proposed to deny
carriers gate access at JFK or Newark,
nor has it proposed to otherwise address
issues associated with the facilities at
the airport. The FAA recognizes that the
Port Authority bears responsibility for
the terminal-side portion of the airport.
However, it is the FAA, and not the Port
Authority, that has responsibility for
managing the airspace. While the Port
Authority claims that slot auctions
would somehow be disruptive to the
airport, it fails to explain how, in terms
of making arrangements for gates and
other airport facilities, acquiring a slot
via an auction is any different from
acquiring a slot via the secondary
market, or for that matter, via a lottery,
as was the case under the HDR.
To the extent public policy goals
could arguably be better achieved by an
airport proprietor rather than the FAA,
the agency notes that this rule provides
for no special carve-outs. To the extent
an airport could address these policy
issues through a market-based, or even
administratively based mechanism, it is
free to do so consistent with its grant
obligations and any other restrictions
imposed by Federal law, policy and our
international obligations.
3. Minimum Usage Requirements for
Slots Acquired Through Sublease
In the NPRM, the FAA proposed to
provide for a 90 day waiver of the
minimum usage requirement for
common and limited slots acquired by
sublease. We have subsequently
determined that there is no need for
such a provision. The starting date of a
sublease is fully within the control of
the contracting carriers and can be
easily negotiated to address any possible
concerns related to starting new service.
Moreover, in the event of highly
unusual or unpredictable
circumstances, a carrier may apply
under § 93.170(c) for a waiver of the
minimum usage requirements.
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V. Potential Loss of Service to Small
Communities
Several commenters expressed their
concern that this rule may adversely
affect service to small communities
because the rule will make operating at
JFK and EWR more expensive. AAAE
suggests that this will serve as a
disincentive for airlines to bid for slots
for flights to small communities because
the smaller number of seats that
typically fly to small communities.
Several foreign carriers further note that
a reduction in service to small
communities may negatively affect their
opportunities to provide a wide variety
of services with their U.S. carrier
partners. ACI–NA suggests that the FAA
take action to protect services to small
communities.
Although not directly related to the
loss of service to small communities, the
FAA notes the Canadian Airports
Council (CAC) expressed concern that
air service to Canada would be
jeopardized because the major Canadian
cities are much smaller than their U.S.
counterparts and cannot sustain larger
aircraft. The CAC further suggests that
that we grant an exemption to the rule
for international flights, including
transborder flights. This rule does not
violate our international obligations, we
will therefore not grant such an
exemption.
The FAA recognizes the importance
of small community service at JFK and
Newark and believes that this rule will
provide adequate opportunity for
services to small communities because
90 per cent of slots will not be affected,
and the remaining 10 percent of slots
will be auctioned over the first five
years of the rule. Under these conditions
carriers will have the opportunity to
adjust their services to continue services
as the market warrants. Furthermore,
the agency continues to believe that a
system whereby upgauging to larger
aircraft is completely voluntary
decreases the likelihood of a whole-sale
withdrawal from smaller markets.
Although there may be a slight
reduction to small community service
by not dedicating slots for those
particular cities, we believe market
conditions and fuel prices are the
primary motivation for any reduction in
service, and not a consequence of
federal action in this rule. Due to these
facts, and the Administration’s decision
to rely on the market to allocate slots
according to their highest and best use,
we do not believe it is appropriate to
develop a separate class of slots
specifically for use to and from small
communities. The FAA wishes to avoid
any unintended consequences on a
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carrier’s marketing and network
decisions that could result from set
asides or exemptions for small
communities.
VI. Regulatory Notices and Analyses
Changes to Federal regulations must
undergo several economic analyses.
First, Executive Order 12866 directs that
each Federal agency shall propose or
adopt a regulation only upon a reasoned
determination that the benefits of the
intended regulation justify its costs.
Second, the Regulatory Flexibility Act
of 1980 requires agencies to analyze the
economic impact of regulatory changes
on small entities. Third, the Trade
Agreements Act (19 U.S.C. 4 2531–2533)
prohibits agencies from setting
standards that create unnecessary
obstacles to the foreign commerce of the
United States. In developing U.S.
standards, the Trade Act requires
agencies to consider international
standards and, where appropriate, to be
the basis of U.S. standards. Fourth, the
Unfunded Mandate Reform Act of 1995
(Pub. L. 104–4) requires agencies to
prepare a written assessment of the
costs, benefits, and other effects of
proposed or final rules that include a
Federal mandate likely to result in the
expenditure by State, local, or tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
annually (adjusted for inflation).
In conducting these analyses, FAA
has determined this final rule (1) has
benefits that justify its costs, is a
‘‘significant regulatory action’’ as
defined in § 3(f) of Executive Order
12866, which is also known as an
‘‘economically significant regulation
action,’’ and is ‘‘significant’’ as defined
in DOT’s Regulatory Policies and
Procedures; (2) would not have a
significant economic impact on a
substantial number of small entities; (3)
would not adversely affect international
trade; and (4) would not impose an
unfunded mandate on State, local, or
tribal governments, or on the private
sector. These analyses, set forth in this
document, are summarized below.
Total Costs and Benefits of This
Rulemaking
Through implementation of an
auction, FAA estimates that this final
rule will result in a long-term
improvement in the allocation of scarce
slot resources at JFK and Newark. The
estimated present value of net benefits
of improved slot allocation by auctions
is $272 million at JFK and $225 million
at Newark from 2009 to 2019. The costs
of the rule, with a present value of $34
million at JFK and $20 million at
Newark, are due to the design,
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60563
implementation and participation in an
auction of slots. These costs assume that
the full cost of setting up the auction
mechanism and participating in the
auctions are individually borne at each
airport; in fact, if auctions are
conducted at more than one airport in
the New York area, the costs of the
setting up and participating in the
auctions could be shared among the
users of the airports and would be lower
on a per airport basis. The net benefits
of the auctions are, therefore, $238
million at JFK and $205 million at EWR.
This regulatory impact analysis
assumes as a baseline that in the
absence of this rulemaking, the FAA
would not otherwise impose long-term
caps on aircraft operations at JFK and
Newark. Therefore, the FAA estimates
that, through the long-term
implementation of a cap on aircraft
operations, this final rule will result in
about a 25 percent reduction in the
average delay per operation at JFK
relative to a situation with no cap. After
allowing for the lost consumer and
producer surplus due to a reduction in
air service caused by the caps, the net
value of the savings in average delay
attributable to the cap generates a
present value net benefit of about $1,629
million from 2009 to 2019. At Newark,
this final rule will result in about a 23
percent reduction in the average delay
per operation at Newark relative to a
situation with no cap, generating a
present value net benefit (after
deducting lost producer and consumer
surplus from reductions in air service)
of about $634 million from 2009–2019.
The benefits are estimated by comparing
the no-rule scenario (similar to the
situation at JFK and Newark in August
2007) with the proposed cap.
Who Is Potentially Affected by This
Rulemaking
• Operators of scheduled and nonscheduled, domestic and international
flights, and new entrants who do not yet
operate at JFK or EWR.
• All communities, including small
communities with air service to JFK or
EWR.
• Passengers of scheduled flights to
JFK or EWR.
• The Port Authority of New York
and New Jersey, which operates the
airports.
• Passengers on scheduled and
unscheduled flights in New York
airspace.
Key Assumptions
• Baseline JFK: No operating
authorizations or caps (the rule will
generate approximately $1,867 billion in
net benefits compared to this case, of
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which approximately $238 million is
due to reallocation benefits associated
with the auctions and the balance due
to the caps).
• Baseline EWR: No operating
authorizations or caps (the rule will
generate approximately $839 billion in
net benefits compared to this case, of
which approximately $205 million is
due to reallocation benefits associated
with the auctions and the balance due
to the caps).
• A cap on operations from 81
scheduled operations plus one to two
unscheduled operations per hour at
each airport, which features:
• 100 percent of slots 29 held by
carriers with fewer than 21 slots at each
airport will be reassigned to the carrier
with 10 years of life;
• For holders with 21 or more slots,
90 percent of slots above the baseline of
20 slots will be reassigned to the carrier
with leases of 10 years and ten percent
of slots above the baseline will be
assigned to the carrier with shorter
leases and then auctioned over five
years.
• For the purposes of this evaluation,
the effective date is (11/1/08).
Other Important Assumptions
• Discount Rates—7%
• Period of Analysis—2009 through
2019 (The rule will sunset in ten years)
• Assumes 2008 Constant Year
Dollars.
• Passenger Value of Travel Time—
$30.02 per hour.30
Alternatives We Have Considered
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• No caps: The FAA expects that
without regulatory caps, operators
would expand operations at both
airports above current levels, and hence
further worsen airport delays.
• Caps without auctions: This
alternative would impose caps at 81
scheduled operations plus one to two
unscheduled operations per hour; it
would implicitly assign operations to
current holders of operating
authorizations at the airports.
• Caps with auctions: This alternative
would permanently impose caps at 81
scheduled operations plus one to two
unscheduled operations per hour; it
would assign the large majority of
operations to current holders of
operating authorizations at the airport;
29 A ‘‘slot’’ is defined as the right to land or depart
(not both) in IFR conditions in a 30-minute time
window.
30 GRA, Incorporated ‘‘Economic Values for FAA
Investment and Regulatory Decisions, A Guide’’,
prepared for FAA Office of Aviation Policy and
Plans, (October 3, 2007). The passenger value of
time reflects a mix of business and leisure travel
developed for the New York area.
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and would auction a small but
consistent number of slots for the first
five years of the rule.
Benefits of This Rulemaking
Since publishing the NPRM, we have
updated our benefit estimates, with a
significant upward adjustment to the
cap benefits at JFK. This adjustment was
necessary because the FAA identified a
calculation error attributable to an
incorrect reference to an output value in
the airport delay model. We also made
a smaller, downward adjustment to the
Newark cap benefits. Finally, we
reduced the estimated net benefits of
improved slot allocation caused by the
auctions at both airports relative to
those recorded in the NPRM. These
latter reductions resulted from the
higher estimates of airline auction
participation costs that we used in the
final regulatory evaluation for this final
rule.
A detailed discussion of the applied
methodology as related to consumer and
producer surplus can be found in the
final regulatory evaluation. The primary
benefits of this rulemaking are due to
the delay reduction from the caps on
operations and an improvement in the
efficiency of allocation of scarce slot
resources through the use of an auction
mechanism and secondary slot
subleasing markets characterized by
clearly defined property rights.
Costs of This Rulemaking
The major costs of this final rule are
the costs to the public and private
sectors of designing, implementing and
participating in the auction.
Additionally, the implementation of
caps under this rulemaking will lead to
a reduction in flights into JFK and
Newark compared to what would occur
without the caps. The FAA has
estimated the value of these scheduled
flight reductions and has deducted them
from the delay benefits of the caps at
each airport to calculate overall net
benefits of the caps.
Paperwork Reduction Act
This proposal contains the following
new information collection
requirements. As required by the
Paperwork Reduction Act of 1995 (PRA)
(44 U.S.C. 3507(d)), the FAA has
submitted the information requirements
associated with this proposal to the
Office of Management and Budget for its
review.
The ATA claimed that the FAA’s
estimate of the paperwork burden of the
rule is ‘‘totally flawed’’ and understated.
It cited what it believed to be an
inconsistency in the PRA estimates for
both JFK and EWR in which the first
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year burden hours were not added to
recurring annual hours in the NPRM. In
fact, the FAA believed it was clear in its
presentation that the first year and
annual recurring numbers were additive
for the first year. However, to avoid
misunderstanding, the combined first
year and recurring year burdens for both
airports are given a separate line item in
this final rule.
The ATA claimed that realistically,
management of this program will take at
a minimum 50% of a management
employee’s time and could require a full
time employee, depending on the final
rule. The FAA notes that the analysis of
paperwork burden does not attempt to
include the time required to participate
in auctions, only the reporting
requirements to the government. The
full assessment of time that an airline
might spend in its voluntary
participation in an auction is provided
in the Final Regulatory Evaluation of
this rule. However, the FAA has added
a significant recurring burden of 32
hours per carrier per year at each airport
in which an auction occurs (inserted in
the paperwork requirements of Section
93.165(c) below). The FAA made this
change to reflect the paperwork required
if a carrier actually participates in an
auction. This addition of time to the
PRA estimate leads to a considerable
increase in the total labor hours
assigned to PRA purposes under this
rule.
The ATA also noted that there will be
significant legal fees associated with
negotiating, drafting, executing and
monitoring the secondary market. The
FAA believes that the reporting labor
requirements estimated under Section
93.168 for the PRA reflect the actual
reporting requirement burden, noting
that the negotiating of the sublease itself
is not an activity involving reporting to
the government. The FAA reemphasizes
that participation in the auction and
secondary market are not requirements
of this rule. A carrier with existing slots
at JFK and EWR is permitted to continue
operations at the airport using the
common slots provided to them as part
of this final rule. Carriers will only need
to engage in the secondary market and
auctions if they choose to buy, lease or
sell slots.
The information requirements in
today’s rule are similar to those
specified in the just-issued final rule for
congestion management at LaGuardia
Airport. The FAA has modified these
requirements for JFK and EWR and
summarized them below.
Title: Congestion Management Rule
for John F. Kennedy International
Airport and Newark Liberty
International Airport.
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Summary: The FAA is assigning the
majority of operational slots at JFK and
Newark to current occupants and
developing a secondary market by
annually auctioning off a limited
number of slots at each airport. This
rule also contains provisions for use-orlose and withdrawal for operational
need. The rule will sunset in ten years.
More information on the requirements
adopted today is detailed elsewhere in
today’s notice.
Use of: The information is reported to
the FAA by scheduled operators holding
slots at JFK and Newark. The FAA logs,
verifies, and processes the requests
made by the operators.
This information is used to allocate,
track usage, withdraw, and confirm
transfers of slots among the operators
and facilitates the transfer of slots in the
secondary market. The FAA also uses
this information in order to maintain an
accurate accounting of operations to
ensure compliance with the operations
permitted under the rule and those
actually conducted at the airports.
Respondents: The respondents to the
information requirements in today’s rule
are scheduled carriers with existing
service at JFK and Newark, carriers that
plan to enter the JFK and Newark
markets (by auction or secondary
market), and carriers that enter the JFK
and Newark market in the future. There
are currently seventy-seven (77) carriers
with existing scheduled service at JFK
and thirty-nine (39) carriers with
existing scheduled service at Newark.
Various carriers included in these totals
have service at both airports.
Frequency: The information collection
requirements of the rule involve
scheduled carriers notifying the FAA of
their use of slots. Each carrier must
notify the FAA of its: (1) Designation of
50 percent of its Limited Slots, if
applicable, as well as auction
paperwork requirements; (2) request for
confirmation to sublease slots; (3)
consent to transfer slots under the
transferring Carrier’s marketing control;
(4) requests for confirmation of one-forone slot trades; (5) slot usage
(operations); (6) request for assignment
of slots available on a temporary basis;
and (7) usage rate as detailed in the rule.
Annual Burden Estimate: The annual
reporting burden for each subsection of
the rule is presented below. Annual
burden estimates presented in today’s
notice are based on burden estimates
from the final rule ‘‘Congestion
Management Rule for LaGuardia
Airport’’ (Docket No. FAA–2006–25709;
Notice No. 08–04).
The burden is calculated by the
following formula:
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Annual Hourly Burden = (# of
respondents) * (time involved) *
(frequency of the response).
60565
JFK
(4 carriers with Limited Slots) * (80
hours per submittal) = 320 hours.
Based on the current allocation of
Operating Authorizations and the level
of baseline operations each carrier
would be assigned under today’s
proposal, we assumed the four carriers
with the most operations at JFK would
expend up to ten days of planning time
each, potentially 80 hours, to develop
and submit their designations of 50
percent of its Limited Slots, for a total
of 320 hours. This designation would
occur once, ten days after the final rule
effective date.
in an auction. Specifically, this
paperwork includes the Auction
Expression of Interest and the bid file to
FAA auction system. These paperwork
submission requirements will be filed
electronically. Note that the estimate
below does not include auction
participation labor and costs.
Participation in auctions is voluntary
and these hours and costs (which
encompass those for paperwork
requirements) are quantified and treated
as a cost of the rule in the Final
Regulatory Evaluation.
Newark
(39 carriers) * (32 hours per carrier) *
(1 occurrence per year) = 1,248 hours
§ 93.164(c)(2) Categories of Slots: A
Carrier shall designate 50 percent of its
Limited Slots
Newark
(1 carrier) * (240 hours per submittal)
= 240 hours.
(5 carriers) * (80 hours per submittal)
= 400 hours.
Total Annual Hourly Burden = 640
hours.
Based on the projected allocation of
Operating Authorizations and the level
of baseline operations each carrier will
be assigned under today’s rule, we
assumed that one carrier, Continental
Airlines, with the most operations at
Newark would expend up to 30 days of
planning time, potentially 240 hours, to
develop and submit its designation of 50
percent of its Limited Slots. The
remaining five carriers required to
designate Limited Slots would each
expend up to 10 days of planning time,
potentially 80 hours each, to develop
and submit their designation of 50
percent of their Limited Slots. These
five carriers would therefore need 400
hours. In total, the six carriers at
Newark required to designate Limited
Slots would require 640 hours of effort
to make the designation. This
designation would occur once, ten days
after the final rule effective date.
Section 93.165(c) Initial Assignment of
Slots
JFK
(77 carriers) * (32 hours per carrier) *
(1 occurrence per year) = 1,462 hours
Whereas the FAA does not believe
that all carriers, or even a majority, will
participate in each auction, we have
assumed for this exercise that the 77
carriers operating at JFK will expend be
required to allocate some time to
develop and submit the paperwork
required if a carrier actually participates
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Section 93.166(b)–(c) Assignment of
New or Returned Slots
We made no assumptions about
additional workload for carriers at either
airport associated with the IATA-like
administrative process for assigning
new or returned slots. Workload would
vary depending on how many (if any)
new or returned slots were to develop
at either airport over the 10 year period
of the proposed rule. In any case,
carriers are already familiar with and
use IATA-like allocation methods and
would handle them in the course of
normal operations at JFK and Newark.
Section 93.168 (b),(d),(f) Sublease and
Transfer of Slots
JFK
(18 carriers) * (1.5 hours per
submittal) * (4 occurrences per year) =
108 hours.
(59 carriers) * (1.5 hours per
submittal) * (2 occurrences per year) =
177 hours.
Total Annual Hourly Burden = 285
hours.
Based on burden estimates from
‘‘Congestion Management Rule for
LaGuardia Airport,’’ we assumed the 77
carriers operating at JFK would expend
one and one half hours for each
occurrence of a lease or transfer of a
slot. For each operator with 6 or more
slots (18 carriers total), we assumed that
a lease or transfer of a slot would occur
on average quarterly. For each operator
with fewer than 6 slots (59 carriers
total), we assumed that a lease or
transfer of a slot would occur on average
biannually. The total annual hourly
burden for all carriers collectively
would be 285 hours.
Newark
(1 carrier) * (1.5 hours per submittal)
* (16 occurrences per year) = 24 hours.
(12 carriers) * (1.5 hours per
submittal) * (4 occurrences per year) =
72 hours.
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(26 carriers) * (1.5 hours per
submittal) * (2 occurrences per year) =
78 hours.
Total Annual Hourly Burden = 174
hours.
As with JFK, we assumed the 39
carriers operating at Newark would
expend one and one half hours for each
occurrence of a lease or transfer of a
slot. For the largest operator, we
assumed that a lease or transfer of four
slots would occur on average quarterly.
For those operators at Newark with 6 or
more slots (12 carriers total, excluding
Continental Airlines), we assumed that
a lease or transfer of a slot would occur
on average quarterly. For each operator
with fewer than 6 slots (26 carriers
total), we assumed that a lease or
transfer of a slot would occur on average
biannually. The total annual hourly
burden for all carriers collectively
would be 174 hours.
Section 93.169 (b), (d) One-for-One
Trades of Slots
JFK
(18 carriers) * (1.5 hours per
submittal) * (4 occurrences per year) =
108 hours.
(59 carriers) * (1.5 hours per
submittal) * (2 occurrences per year) =
177 hours.
Total Annual Hourly Burden = 285
hours.
Based on burden estimates from
‘‘Congestion Management Rule for
LaGuardia Airport,’’ we assumed the 77
carriers operating at JFK would expend
one and one half hours on paperwork
for each occurrence of a one-for-one
trade of a slot. For each operator with
6 or more slots (18 carriers total), we
assumed that a one-for-one slot trade
would occur on average quarterly. For
each operator with fewer than 6 slots
(59 carriers total), we assumed that a
one-for-one slot trade would occur on
average biannually. The total annual
hourly burden would be 285 hours.
trade of four slots would occur on
average quarterly. For those operators at
Newark with 6 or more slots (12 carriers
total, excluding Continental Airlines),
we assumed that a one-for-one slot trade
would occur on average quarterly. For
each operator with fewer than 6 slots
(26 carriers total), we assumed that a
one-for-one slot trade would occur on
average biannually. The total annual
hourly burden would be 174 hours.
Section 93.172(a)–(b) Reporting
Requirements
JFK
(77 carriers) * (1.5 hours per
submittal) * (4 occurrences per year) =
462 hours
This estimate is based on burden
estimates from the ‘‘Congestion
Management Rule for LaGuardia
Airport’’ (Docket No. FAA–2006–25709;
Notice No. 08–04). We assume the 77
carriers operating at JFK would expend,
on average, one and one half hours two
times per summer and winter season to
submit the data required by § 93.172.
Newark
(39 carriers) * (1.5 hours per
submittal) * (4 occurrences per year) =
234 hours.
This estimate is based on burden
estimates from the ‘‘Congestion
Management Rule for LaGuardia
Airport’’ (Docket No. FAA–2006–25709;
Notice No. 08–04). We assume the 39
carriers operating at Newark would
expend, on average, one and one half
hours every two months to submit the
data required by § 93.172.
Summary
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Newark
JFK
Total First Year Hourly Burden—320
Hours.
Total First Year Hourly Burden Plus
Recurring Cost in First Year—3,816
Hours.
Total Recurring Annual Hourly
Burden (per year for 10 years)—3,496
Hours.
(1 carrier) * (1.5 hours per submittal)
* (16 occurrences per year) = 24 hours.
(12 carriers) * (1.5 hours per
submittal) * (4 occurrences per year) =
72 hours.
(26 carriers) * (1.5 hours per
submittal) * (2 occurrences per year) =
78 hours.
Total Annual Hourly Burden = 174
hours.
As with JFK, we assumed the 39
carriers operating at Newark would
expend one and one half hours on
paperwork for each occurrence of a onefor-one trade of a slot. For the largest
operator, we assumed that a one-for-one
Newark
Total First Year Hourly Burden—640
Hours.
Total First Year Hourly Burden Plus
Recurring Cost in First Year—2,470
Hours.
Total Recurring Annual Hourly
Burden (per year for 10 years)—1,830
Hours.
The burden estimates for JFK and
Newark do not include the time
required to participate in the annual
auctions. The FAA provides
participation hour and cost estimates in
its Final Regulatory Evaluation for this
rule.
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According to the 1995 amendments to
the Paperwork Reduction Act (5 CFR
1320.8(b)(2)(vi)), an agency may not
collect or sponsor the collection of
information, nor may it impose an
information collection requirement
unless it displays a currently valid OMB
control number. The OMB control
number for this information collection
will be published in the Federal
Register, after the Office of Management
and Budget approves it.
Regulatory Flexibility Determination
The Regulatory Flexibility Act of 1980
(RFA) establishes ‘‘as a principle of
regulatory issuance that agencies shall
endeavor, consistent with the objective
of the rule and of applicable statutes, to
fit regulatory and informational
requirements to the scale of the
business, organizations, and
governmental jurisdictions subject to
regulation.’’ To achieve that principle,
the RFA requires agencies to solicit and
consider flexible regulatory proposals
and to explain the rationale for their
actions. The RFA covers a wide-range of
small entities, including small
businesses, not-for-profit organizations,
and small governmental jurisdictions.
Agencies must perform a review to
determine whether a proposed or final
rule would have a significant economic
impact on a substantial number of small
entities. If the agency determines that it
would, the agency must prepare a
regulatory flexibility analysis as
described in the Act.
However, if an agency determines that
a proposed or final rule is not expected
to have a significant economic impact
on a substantial number of small
entities, section 605(b) of the 1980 RFA
provides that the head of the agency
may so certify and a regulatory
flexibility analysis is not required. The
certification must include a statement
providing the factual basis for this
determination, and the reasoning should
be clear. The basis for such FAA
determination follows.
The final rule most directly affects
four scheduled operators at JFK (Delta
Air Lines, JetBlue Airways, American
Airlines, and United Airlines) and six
scheduled operators at Newark
(Continental Airlines, American
Airlines, United Airlines, Delta Air
Lines, U.S. Airways, and Northwest
Airlines). These carriers will receive one
or more Limited Slots. None of these
carriers are small businesses. However,
the FAA considered that some small
regional operators affiliated with these
carriers and using slots provided by
these carriers could be affected. Based
on a review of the number of employees
for each scheduled operator, the FAA
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found that only one scheduled operator
(CommutAir) at JFK, and none at
Newark, are considered small by Small
Business Administration size standards
(in this case, firms with 1,500 or fewer
employees). CommutAir operates under
the name Continental Connection for
Continental Airlines. Continental
Airlines has fewer than 20 operations
per day at JFK and therefore neither it
nor CommutAir is affected by this rule.
As discussed in more detail in the
final rule, several commenters
expressed their concern that this rule
may adversely affect service to small
communities because the rule will make
operating at JFK and EWR more
expensive, particularly because such
communities are served by smaller
aircraft with higher per seat costs.
The FAA believes that this rule will
provide adequate opportunity for
services to small communities because
more than 90 percent of slots at JFK and
EWR will not be affected, and the
remaining less than 10 percent of slots
will be auctioned in 2 percent
increments over the first five years of
the rule. Moreover, once auctioned, a
carrier may or may not upgauge a slot.
The agency believes that a system
whereby upgauging to larger aircraft is
completely voluntary decreases the
likelihood of a wholesale withdrawal
from smaller markets.
There may be a slight reduction in
small community service by not
dedicating slots for those particular
cities, but we believe market conditions
and fuel prices are the primary
motivation for any reduction in service
rather than a consequence of federal
action in this rule. We believe market
forces will generate appropriate
allocations of slots and do not believe it
is appropriate to develop a separate
class of slots specifically for use to and
from small communities.
Using Enhanced Traffic Management
System (ETMS) data, the FAA has
determined that there are approximately
54 identifiable unscheduled operators at
JFK and 61 identifiable unscheduled
operators at Newark who could be
affected by this rule. While some of
these operators may be small
businesses, the FAA does not believe
they will be significantly impacted by
this rulemaking. These operators
typically have greater flexibility to
adjust operations and carry out very few
operations during peak hours compared
to scheduled opearators. During peak
hours in the summer of 2007, there were
fewer than two average unscheduled
operations per hour at each airport,
whereas the proposed rule would allow
1 to 2 operations per hour. In summary,
while the final rule reduces the number
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of unscheduled operations per hour, it
does not significantly affect the overall
number of current unscheduled
operations that take place at each
airport.
Using 2007 Census data, the FAA has
also reviewed whether there would be
interruptions to service to communities
with a population of less than 50,000.
We do not know if there will be any
service interruptions as a result of the
rule. In the IRE, we reviewed population
statistics for every city served from JFK
and Newark in August 2007 (the base
for initial allocation of slots under the
proposal) and found none with a
population of less 50,000. The ATA,
however, identified two cities—Bangor,
Maine, and Burlington, Vermont—that it
stated fell below 50,000 in population.
The FAA notes, however, that the
metropolitan areas of these cities are
well above 50,000, with Bangor at
91,000 as of 2000 and Burlington at
169,000.
The ATA identified an inconsistency
in the definition of small community
that was used in the NPRM and the IRE.
The FAA concedes that the definition of
a small community used in the IRE was
too expansive, involving any
community served by a small or nonhub airport. The correct definition for
this rulemaking is the 50,000 threshold
value used in the NPRM.
Therefore, the FAA certifies that this
rule will not have a significant
economic impact on a substantial
number of small entities.
International Trade Impact Assessment
The Trade Agreements Act of 1979
(Pub. L. 96–39), as amended by the
Uruguay Round Agreements Act (Pub.
L. 103–465), prohibits Federal agencies
from establishing any standards or
engaging in related activities that create
unnecessary obstacles to the foreign
commerce of the United States.
Pursuant to these Acts, the
establishment of standards or engaging
in related activities is not considered as
creating unnecessary obstacles to the
foreign commerce of the United States,
so long as the standards and activities
have a legitimate domestic objective,
such as the protection of safety, and do
not operate in a manner that excludes
imports that meet this objective. The
statute also requires consideration of
international standards and, where
appropriate, that they be the basis for
U.S. standards. The FAA notes the rule
to establish slots and limited auctions of
slot leases at JFK and Newark is
necessary for the efficient utilization of
the national airspace system, and has
assessed the effects of this rulemaking to
ensure that the final rule will not
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60567
impose costs or barriers to international
entities within the national airspace
system.
Foreign entities at both JFK and
Newark will not have any slots
classified as Limited Slots. Foreign
carriers might benefit from the rule if
they choose to participate in the
proposed auction to acquire additional
slots or to sublease slots in the
secondary market. Several foreign
carriers further note that a reduction in
service to small communities could
negatively affect their opportunities to
provide a wide variety of services with
their U.S. carrier partners. As explained
above, the FAA believes that this rule
will provide adequate opportunity for
services to small communities. Foreign
trade will not be adversely affected.
Unfunded Mandate Assessment
The Unfunded Mandate Reform Act of
1995 (the Act) is intended, among other
things, to curb the practice of imposing
unfunded Federal mandates on State,
local, and tribal governments. Title II of
the Act requires each Federal agency to
prepare a written statement assessing
the effects of any Federal mandate in a
proposed or final agency rule that may
result in an expenditure of $100 million
or more (adjusted annually for inflation)
in any one year by State, local, and
tribal governments, in the aggregate, or
by the private sector; such a mandate is
deemed to be a ‘‘significant regulatory
action.’’ The FAA currently uses an
inflation-adjusted value of $136.1
million in lieu of $100 million. This
final rule does not contain such a
mandate. The requirements of Title II do
not apply.
Executive Order 13132, Federalism
The FAA has analyzed this final rule
under the principles and criteria of
Executive Order 13132, Federalism. We
determined that this action will not
have a substantial direct effect on the
States, on the relationship between the
national Government and the States, or
on the distribution of power and
responsibilities among the various
levels of government, and, therefore,
would not have federalism implications.
Environmental Analysis
FAA Order 1050.1E, ‘‘Environmental
Impacts: Policies and Procedures’’
identifies FAA actions that are normally
categorically excluded from preparation
of an environmental assessment or
environmental impact statement under
the National Environmental Policy Act
(NEPA) in the absence of extraordinary
circumstances. The FAA has
determined that this rulemaking
qualifies for the categorical exclusions
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identified in paragraph 312d ‘‘Issuance
of regulatory documents (e.g., Notices of
Proposed Rulemaking and issuance of
Final Rules)’’ covering administration or
procedural requirements (does not
include Air Traffic procedures; specific
Air Traffic procedures that are
categorically excluded are identified
under paragraph 311 of this Order)’’ and
paragraph 312f, ‘‘Regulations, standards
and exemptions (excluding those which
if implemented may cause a significant
impact on the human environment.)’’ It
has further been determined that no
extraordinary circumstances exist that
may cause a significant impact and
therefore no further environmental
review is required. The FAA has
documented this categorical exclusion
determination. A copy of the
determination and underlying
documents has been included in the
Docket for this rulemaking. FAA
received no comments explicitly
addressing the documented categorical
exclusion. Minor changes have been
made to the documentation that was
available for the NPRM. FAA Order
1050.1E, ‘‘Environmental Impacts:
Policies and Procedures’’ identifies FAA
actions that are normally categorically
excluded from preparation of an
environmental assessment or
environmental impact statement under
the National Environmental Policy Act
(NEPA) in the absence of extraordinary
circumstances.
The FAA has determined that this
rulemaking qualifies for the categorical
exclusions identified in paragraph 312d
‘‘Issuance of regulatory documents (e.g.,
Notices of Proposed Rulemaking and
issuance of Final Rules)’’ covering
administration or procedural
requirements (does not include Air
Traffic procedures; specific Air Traffic
procedures that are categorically
excluded are identified under paragraph
311 of this Order)’’ and paragraph 312f,
‘‘Regulations, standards and exemptions
(excluding those which if implemented
may cause a significant impact on the
human environment.)’’ It has further
been determined that no extraordinary
circumstances exist that may cause a
significant impact and therefore no
further environmental review is
required. The FAA has documented this
categorical exclusion determination. A
copy of the determination and
underlying documents will be included
in the Docket for this rulemaking. FAA
received no comments explicitly
addressing the documented categorical
exclusion. Minor changes have been
made to the documentation that was
available for the NPRM.
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Regulations That Significantly Affect
Energy Supply, Distribution, or Use
The FAA has analyzed this rule under
Executive Order 13211, Actions
Concerning Regulations that
Significantly Affect Energy Supply,
Distribution, or Use (May 18, 2001). We
have determined that it is not a
‘‘significant energy action’’ under the
executive order because while a
‘‘significant regulatory action’’ under
Executive Order 12866, it is not likely
to have a significant adverse effect on
the supply, distribution, or use of
energy.
Availability of Rulemaking Documents
You can get an electronic copy of
rulemaking documents using the
Internet by—
1. Searching the Federal eRulemaking
Portal (https://www.regulations.gov);
2. Visiting the FAA’s Regulations and
Policies web page at https://
www.faa.gov/regulations_policies/; or
3. Accessing the Government Printing
Office’s web page at https://
www.gpoaccess.gov/fr/.
You can also get a copy by sending a
request to the Federal Aviation
Administration, Office of Rulemaking,
ARM–1, 800 Independence Avenue,
SW., Washington, DC 20591, or by
calling (202) 267–9680. Make sure to
identify the docket number, notice
number, or amendment number of this
rulemaking.
You may access all documents the
FAA considered in developing this final
rule, including economic analyses and
technical reports, from the internet
through the Federal eRulemaking Portal
referenced in paragraph (1).
VII. Regulatory Text
List of Subjects in 14 CFR Part 93
Air traffic control, Airports,
Navigation (air).
■ 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
1. The authority for part 93 continues
to read as follows:
■
Authority: 49 U.S.C. 106(g), 40103, 40106,
40109, 40113, 44502, 44514, 44701, 44719,
46301.
2. Part 93 is amended by adding
Subpart N to read as follows:
■
Subpart N—John F. Kennedy International
Airport and Newark Liberty International
Airport Traffic Rules
Sec.
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93.161 Applicability.
93.162 Definitions.
93.163 Slots for scheduled arrivals and
departures.
93.164 Categories of slots.
93.165 Initial assignment of slots.
93.166 Assignment of new or returned slots.
93.167 Reversion and withdrawal of slots.
93.168 Sublease and transfer of slots.
93.169 One-for-one trade of slots.
93.170 Minimum usage requirements.
93.171 Unscheduled operations.
93.172 Reporting requirements.
93.173 Administrative provisions.
Subpart N—John F. Kennedy
International Airport and Newark
Liberty International Airport Traffic
Rules
§ 93.161
Applicability.
(a) This subpart prescribes the air
traffic rules for the arrival and departure
of aircraft used for scheduled and
unscheduled service, other than
helicopters, at John F. Kennedy
International Airport (JFK) and Newark
Liberty International Airport (Newark).
(b) This subpart also prescribes
procedures for the assignment, transfer,
sublease and withdrawal of slots issued
by the FAA for scheduled operations at
JFK and Newark.
(c) The provisions of this subpart
apply to JFK and Newark during the
hours of 6 a.m. through 10:59 p.m.,
Eastern Time. No person shall operate
any scheduled arrival or departure into
or out of JFK or Newark during such
hours without first obtaining a slot in
accordance with this subpart. No person
shall conduct an unscheduled operation
to or from JFK or Newark during such
hours without first obtaining a
reservation.
(d) A U.S. Air Carrier conducting
operations solely under another carrier’s
marketing control with unified
inventory control shall not be
considered a separate carrier for
purposes of this rule.
(e) The slots assigned under this
subpart terminate at 11 p.m. on March
30, 2019.
§ 93.162
Definitions.
For purposes of this subpart, the
following definitions apply:
Airport Reservation Office (ARO) is an
operational unit of the FAA’s David J.
Hurley Air Traffic Control System
Command Center. It is responsible for
the administration of reservations for
unscheduled operations at JFK and
Newark.
Baseline operations are those
common slots held by a carrier at JFK
or Newark on December 9, 2008, that do
not exceed 20 operations per day.
Carrier is a U.S. or foreign carrier with
authority to conduct scheduled service
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under parts 121, 129, or 135 of this
chapter and the appropriate economic
authority for scheduled service under 14
CFR chapter II and 49 U.S.C. chapter
401, 411 and 413.
Common slot is a slot that is assigned
by the FAA as a lease under its
cooperative agreement authority for the
length of this rule.
Enhanced Computer Voice
Reservation System (e-CVRS) is the
system used by the FAA to make arrival
or departure reservations for
unscheduled operations at JFK, Newark,
and other designated airports.
Limited slot is a slot held every day,
the lease for which expires prior to the
expiration of this rule for subsequent
award by the FAA as an unrestricted
slot.
New Entrant is any carrier that is
administratively allocated a total of 8 or
fewer slots on any day of the week at
JFK or Newark, respectively, during
controlled hours at any point during the
duration of the rule.
Public charter is defined in 14 CFR
380.2 as a one-way or roundtrip charter
flight to be performed by one or more
direct carriers that is arranged and
sponsored by a public charter operator.
Public Charter Operator is defined in
14 CFR 380.2 as a U.S. or foreign public
charter operator.
Reservation is an authorization
received by a carrier or other operator of
an aircraft, excluding helicopters, in
accordance with procedures established
by the FAA to operate an unscheduled
arrival or departure on a particular day
of the week during a specific 60-minute
period.
Scheduled operation is the arrival or
departure segment of any operation
regularly conducted by a carrier
between either JFK or Newark and
another point regularly served by that
carrier.
Slot is the operational authority
assigned by the FAA to a carrier to
conduct one scheduled operation or a
series of scheduled operations at JFK or
Newark on a particular day(s) of the
week during a specific 30-minute
period.
Summer Scheduling Season begins on
the last Sunday of March.
Unrestricted slot is a slot that is
awarded to a carrier by the FAA via the
auction of a lease.
Unscheduled operation is an arrival
or departure segment of any operation
that is not regularly conducted by a
carrier or other operator of an aircraft,
excluding helicopters, between JFK or
Newark and another service point. The
following types of carrier operations
shall be considered unscheduled
operations for the purposes of this rule:
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public, on-demand, and other charter
flights; hired aircraft service; extra
sections of scheduled flights; ferry
flights; and other non-passenger flights.
Winter Scheduling Season begins on
the last Sunday in October.
§ 93.163 Slots for Scheduled Arrivals and
Departures.
(a) During the hours of 6 a.m. through
10:59 p.m., Eastern Time, no person
shall operate any scheduled arrival or
departure into or out of JFK or Newark
without first obtaining a slot in
accordance with this subpart.
(b) Except as otherwise established by
the FAA under paragraph (c) of this
section, the number of slots shall be
limited to no more than eighty-one (81)
per hour at JFK and eighty-one (81) per
hour at Newark. At JFK, the number of
slots may not exceed 44 in any 30minute period, and 81 in any 60-minute
period. At Newark, the number of slots
may not exceed 44 in any 30-minute
period and 81 in any 60-minute period.
The number of arrival and departure
slots in any period may be adjusted by
the FAA as necessary based on the
actual or potential delays created by
such number or other considerations
relating to congestion, airfield capacity
and the air traffic control system.
(c) Notwithstanding paragraph (b) of
this section, the Administrator may
increase the number of slots based on a
review of the following:
(1) The number of delays;
(2) The length of delays;
(3) On-time arrivals and departures;
(4) The number of actual operations;
(5) Runway utilization and capacity
plans; and
(6) Other factors relating to the
efficient management of the National
Airspace System.
§ 93.164
Categories of Slots.
(a) General. Each slot shall be
designated as a common slot, limited
slot or unrestricted slot and shall be
allocated to the carrier under a lease
agreement. A lease for a common or
limited slot shall be assigned via a
cooperative agreement. A lease for an
unrestricted slot shall be awarded via an
auction.
(b) Common slots.
(1) All slots within any carrier’s
baseline operations, as determined on
December 9, 2008, shall be designated
as common slots.
(2) Ten percent of the slots at JFK and
Newark on December 9, 2008 not
otherwise designated as common slots
under paragraph (b)(1) of this section
shall be designated as limited slots. All
other slots shall be designated as
common slots.
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60569
(c) Limited slots. Those slots assigned
to a carrier subject to return to the FAA
under § 93.165(c) shall be designated as
limited slots until the date of their
reallocation by the FAA as unrestricted
slots. A carrier may continue to use a
limited slot that has reverted to the FAA
until the date of its reallocation.
(1) Each carrier with a total number of
daily operations at JFK or Newark in
excess of its baseline operations will be
notified by no later than December 9,
2008 how many of its slots will be
designated as limited slots pursuant to
paragraphs (c)(2) and (3) of this section.
(2) A carrier shall designate 50
percent of its limited slots. The carrier
must notify the FAA of its
determination by December 19, 2008.
(3) The FAA will designate the
remaining limited slots initially
excluding those hours in which two or
more slots have been designated as
limited slots by the carriers.
(4) No later than December 29, 2008,
the FAA will publish a list of all limited
slots and the dates upon which they
will expire.
(d) Unrestricted slots. Unrestricted
slots are slots acquired by a carrier
through a lease with the FAA awarded
via an auction. Unrestricted slots are not
subject to withdrawal by the FAA.
§ 93.165
Initial assignment of slots.
(a) Except as provided for under
paragraphs (b) and (c) of this section,
any carrier utilizing operating rights
allocated under the Order limiting
operations at JFK or the Order limiting
operations at Newark as evidenced by
the FAA’s records, will be assigned
corresponding slots in 30-minute
periods consistent with the limits under
§ 93.163(b) and its summer and winter
season schedules as approved by the
FAA. If necessary, the FAA may utilize
administrative measures such as
voluntary measures or a lottery to retime the assigned slots within the same
hour to meet the 30-minute limits under
§ 93.163(b). The FAA Vice President,
System Operations Services, is the final
decision-maker for determinations
under this section.
(b) If a carrier was allocated operating
rights under the Order limiting
operations at JFK or the Order limiting
operations at Newark, but the operating
rights were held by another carrier, then
the corresponding slots will be assigned
to the carrier that held the operating
rights for that period, as evidenced by
the FAA’s records.
(c) Starting January 13, 2009, and
every year thereafter through 2013, onefifth of the total number of Limited slots
shall revert to the FAA in accordance
with the schedule published under
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§ 93.164(c)(4) and be auctioned as
unrestricted slots by the FAA. Any slot
receiving no responsive bids will be
retired until the next auction. An
affected carrier will be allowed to use
the limited slot until the date of its
reallocation by the FAA as an
unrestricted slot.
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§ 93.166
slots.
Assignment of new or returned
(a) This section describes the process
by which the FAA assigns new slots, as
well as slots returned to the FAA
pursuant to the provisions of § 93.170.
These slots will be assigned by the FAA
to requesting carriers for the summer
and winter scheduling seasons.
(b) Requests for the new slots or
returned slots or both must be submitted
to the Federal Aviation Administration,
Slot Administration Office, AGC–200,
800 Independence Avenue, SW.,
Washington, DC 20591 (Facsimile: (202)
267–7277; e-mail: 7-awaslotadmin@faa.gov), by the deadline as
published by the FAA in a Federal
Register notice for each summer and
winter scheduling season. The
requesting carrier must submit its entire
schedule at JFK and Newark for the
particular season, noting which requests
are in addition to, or changes from, the
previous corresponding season at the
respective airports.
(c) Before assigning new or returned
slots under this section, the FAA will
first accommodate carrier requests to
retime slots for operational reasons or to
bring the flight time closer to the time
originally requested by the applicant
carrier in previous corresponding
seasons, as reflected in FAA records.
(d) After accommodating carrier
requests for retiming of slots, the FAA
will assign 50% of the new slots and
returned slots to new entrants, unless
requests by new entrants constitute
fewer than 50% of available slots.
(e) With the remaining available slots,
if all requests for slots under this section
cannot be accommodated, the FAA will
give priority to requests to introduce
year-round service or to extend an
existing operation to a year-round
operation.
(f) Thereafter, the FAA will assign
slots considering all relevant factors
including:
(1) The effective period of operation;
(2) The extent and regularity of
intended use of a slot;
(3) Schedule constraints of carriers
requesting slots.
§ 93.167
slots.
Reversion and withdrawal of
(a) This section does not apply to
unrestricted slots.
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(b) A carrier’s common slots or
limited slots at JFK or Newark revert
back to the FAA 30 days after the carrier
has ceased all operations at the
respective airport(s) for any reasons
other than a strike.
(c) The FAA may retime, withdraw, or
temporarily suspend common slots and
limited slots at any time to fulfill
operational needs.
(d) Common slots and limited slots
temporarily withdrawn for operational
need will be withdrawn in accordance
with the priority list established under
§ 93.173 and international obligations.
(e) Except as otherwise provided in
paragraph (a) of this section, the FAA
will notify an affected carrier before
withdrawing or temporarily suspending
a common slot or limited slot and
specify the date by which operations
under the common slot or limited slot
must cease. The FAA will provide at
least 45 days’ notice unless otherwise
required by operational needs.
(f) Any common slot or limited slot
that is temporarily withdrawn under
this paragraph will be reassigned, if at
all, only to the carrier from which it was
withdrawn, provided the carrier
continues to conduct scheduled
operations at the respective airport.
(g) Should the Administrator
determine that the cap on scheduled
operations at Newark or JFK is too high,
he may withdraw common slots to
reduce the cap. Any such action by the
Administrator shall be subject to the
notice and comment provisions of the
Administrative Procedure Act.
§ 93.168
Sublease and transfer of slots.
(a) A carrier may sublease its slots to
another carrier in accordance with this
section and subject to the provisions of
the carrier’s lease agreement with the
FAA. The character of the slot (e.g.,
common slot) will not change.
(b) A carrier must provide notice to
the FAA to sublease a slot. Such notice
must contain: the slot number and time,
effective dates and, if appropriate, the
duration of the lease. The carrier may
also provide the FAA with a minimum
bid price.
(c) The FAA will post a notice of the
offer to sublease the slot and relevant
details on the FAA Web site at https://
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;
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(2) The offered and final length of the
sublease;
(3) The consideration offered by all
bidders and provided by the sublessee.
(e) The slot may not be used until the
conditions of paragraph (d) of this
section have been met, and the FAA
provides notice of its approval of the
sublease.
(f) Slots may be transferred among a
U.S. carrier and another carrier that
conducts operations at JFK or Newark
solely under the transferring carrier’s
marketing control, including the entire
inventory of the flight. Each party to
such transfer must provide written
evidence of its consent to the transfer
and the FAA must confirm and approve
these transfers in writing prior to the
effective date of the transaction.
However, the FAA will approve
transfers under this paragraph up to five
business days after the actual operation
to accommodate operational disruptions
that occur on the same day of the
scheduled operation. The FAA Vice
President, System Operations Services
is the final decision-maker for any
determinations under this section.
(g) A carrier wishing to sublease a slot
via an FAA auction under § 93.165,
rather than pursuant to this section, may
do so. The carrier shall retain the
proceeds and the slot shall retain the
same designation that it had prior to the
carrier placing it up for auction.
§ 93.169
One-for-one trade of slots.
(a) A carrier may trade a slot with
another carrier on a one-for-one basis.
(b) Written evidence of each carrier’s
consent to the trade must be provided
to the FAA.
(c) No recipient of the trade may use
the acquired slot until written
confirmation has been received from the
FAA.
(d) Carriers participating in a one-forone trade must certify to the FAA that
no consideration or promise of
consideration was provided by either
party to the trade.
§ 93.170
Minimum usage requirements.
(a) This section does not apply to
unrestricted slots.
(b) Any common slot or limited slot
included in a summer or winter season
schedule approved by the FAA that is
not used at least 80 percent of the time
during the period for which it is
assigned will be withdrawn by the FAA.
(c) The FAA may waive the
requirements of paragraph (b) of this
section in the event of a highly unusual
and unpredictable condition which is
beyond the control of the carrier and
which affects carrier operations for a
period of five or more consecutive days.
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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.
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§ 93.171
Unscheduled operations.
(a) During the hours of 6 a.m. through
10:59 p.m. Eastern Time, no person may
operate an aircraft other than a
helicopter to or from JFK or Newark
unless he or she has received, for that
unscheduled operation, a reservation
that is assigned by the Airport
Reservation Office (ARO) or in the case
of public charters, in accordance with
the procedures in paragraph (d) of this
section. Requests for reservations will
be accepted through the e-CVRS
beginning 72 hours prior to the
proposed time of arrival to or departure
from JFK or Newark. Additional
information on procedures for obtaining
a reservation is available on the Internet
at https://www.fly.faa.gov/ecvrs.
(b) Reservations, including those
assigned to public charter operations
under paragraph (d) of this section, will
be available to be assigned by the ARO
on a 60-minute basis as follows:
(1) At JFK, two reservations per hour
between 6 a.m. and 1:59 p.m. and
between 10 p.m. and 10:59 p.m. and one
reservation per hour between 2 p.m. and
9:59 p.m.
(2) At Newark, two reservations per
hour between 6 a.m. and 11:59 a.m. and
between 10 p.m. and 10:59 p.m. and one
reservation per hour between 12 noon
and 9:59 p.m.
(c) The ARO will receive and process
all reservation requests for unscheduled
arrivals and departures at JFK and
Newark. Reservations are assigned on a
‘‘first-come, first-served’’ basis
determined by the time the request is
received at the ARO. Reservations must
be cancelled if they will not be used as
assigned.
(d) One reservation per hour will be
available for assignment to public
charter operations prior to the 72-hour
reservation window in paragraph (a) of
this section. No more than 25 percent of
the reservations available from 12 noon
through 9:59 p.m. will be made
available to public charter operations
under this paragraph.
(1) The public charter operator may
request a reservation up to six months
in advance of the date of the flight
operation. Reservation requests should
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be submitted to Federal Aviation
Administration, Slot Administration
Office, AGC–200, 800 Independence
Avenue, SW., Washington, DC 20591.
Submissions may be made via facsimile
to (202) 267–7277 or by e-mail to:
7-awa-slotadmin@faa.gov.
(2) The public charter operator must
certify that its prospectus has been
accepted by the Department of
Transportation in accordance with 14
CFR part 380.
(3) The public charter operator must
identify the call sign/flight number or
aircraft registration number of the direct
air carrier, the date and time of the
proposed operation(s), the airport
served immediately prior to or after JFK
or Newark, aircraft type, and the nature
of the operation (e.g., ferry or
passenger). Any changes to an approved
reservation must be approved in
advance by the Slot Administration
Office.
(4) If reservations under paragraph
(d)(1) of this section have already been
assigned, the public charter operator
may request a reservation under
paragraph (a) of this section.
(e) The filing of a request for a
reservation does not constitute the filing
of an IFR flight plan as required by
regulation. The IFR flight plan may be
filed only after the reservation is
obtained, must include the reservation
number in the ‘‘Remarks’’ section, and
must be filed in accordance with FAA
regulations and procedures.
(f) Air Traffic Control will
accommodate declared emergencies
without regard to reservations. Nonemergency flights in direct support of
national security, law enforcement,
military aircraft operations, or publicuse aircraft operations may be
accommodated above the reservation
limits with the prior approval of the
Vice President, System Operations
Services, Air Traffic Organization.
Procedures for obtaining the appropriate
waiver will be available on the Internet
at https://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.
PO 00000
Frm 00029
Fmt 4701
Sfmt 4700
§ 93.172
60571
Reporting requirements.
(a)(1) No later than September 1 for
the summer scheduling season and
February 1 for the winter scheduling
season, each carrier holding a common
slot or limited slot must submit an
interim report of slot usage for each day
of the applicable scheduling season. (2)
No later than 30 days after the last day
of the applicable scheduling season,
each carrier must submit a final report
of the completed operations for each
day of the entire scheduling season.
(b) Such reports, in a format
acceptable to the FAA, must contain the
following information for each common
slot or limited slot:
(1) The slot number, time, and arrival
or departure designation;
(2) The operating carrier;
(3) The date and scheduled time of
each of the operations conducted
pursuant to the slot, including the flight
number, and origin/destination, and
aircraft type identifier; and
(4) Whether a flight was actually
operated.
(c) The FAA may withdraw the slot of
any carrier that does not meet the
reporting requirements of paragraph (a)
of this section.
§ 93.173
Administrative provisions.
(a) Each slot shall be assigned a
number for administrative convenience.
(b) The FAA will assign priority
numbers by random lottery for common
slots and limited slots at JFK and
Newark. Each common slot and limited
slot will be assigned a withdrawal
priority number, and the 30-minute time
period for the common slot or limited
slot, frequency, and the arrival or
departure designation.
(c) If the FAA determines that
operations need to be reduced for
operational reasons, the lowest assigned
priority number common slot or limited
slot will be the last withdrawn.
(d) Any slot available on a temporary
basis may be assigned by the FAA to a
carrier on a non-permanent, first-come,
first-served basis subject to permanent
assignment under this subpart. Any
remaining slots may be made available
for unscheduled operations on a nonpermanent basis and will be assigned
under the same procedures applicable to
other operating reservations.
(e) All transactions under this subpart
must be in a written or electronic format
approved by the FAA.
Issued in Washington, DC, on October 6,
2008.
Robert A. Sturgell,
Acting Administrator.
[FR Doc. E8–24046 Filed 10–9–09; 8:45 am]
BILLING CODE 4910–13–P
E:\FR\FM\10OCR6.SGM
10OCR6
Agencies
[Federal Register Volume 73, Number 198 (Friday, October 10, 2008)]
[Rules and Regulations]
[Pages 60544-60571]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-24046]
[[Page 60543]]
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Part VII
Department of Transportation
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Federal Aviation Administration
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14 CFR Part 93
Congestion Management Rule for John F. Kennedy International Airport
and Newark Liberty International Airport; Final Rule
Federal Register / Vol. 73, No. 198 / Friday, October 10, 2008 /
Rules and Regulations
[[Page 60544]]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 93
[Docket No. FAA-2008-0517; Amdt. No. 93-88]
RIN 2120-AJ28
Congestion Management Rule for John F. Kennedy International
Airport and Newark Liberty International Airport
AGENCY: Federal Aviation Administration (FAA).
ACTION: Final rule.
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SUMMARY: This rule establishes procedures to address congestion in the
New York City area by assigning slots at John F. Kennedy (JFK) and
Newark Liberty (Newark) International Airports in a way that allows
carriers to respond to market forces to drive efficient airline
behavior. The rule also extends the caps on the operations at the two
airports, assigns to existing operators the majority of slots at the
airports, and develops a robust secondary market by annually auctioning
off a limited number of slots in each of the first five years of this
rule. Auction proceeds will be used to mitigate congestion and delay in
the New York City area. The rule also contains provisions for minimum
usage, capping unscheduled operations, and withdrawal for operational
need. The rule will sunset in ten years.
DATES: This rule becomes effective December 9, 2008.
FOR FURTHER INFORMATION CONTACT: For technical questions regarding this
rulemaking, contact: Nan Shellabarger, Office of Aviation Policy and
Plans, APO-1, Federal Aviation Administration, 800 Independence Avenue,
SW., Washington, DC 20591; telephone (202) 267-7294; e-mail
nan.shellabarger@faa.gov. For legal questions concerning this
rulemaking, contact: Rebecca MacPherson, FAA Office of the Chief
Counsel, 800 Independence Ave., SW., Washington, DC 20591; telephone
(202) 267-3073; e-mail rebecca.macpherson@faa.gov.
SUPPLEMENTARY INFORMATION:
Authority for This Rulemaking
The FAA has broad authority under 49 U.S.C. 40103 to regulate the
use of the navigable airspace of the United States. This section
authorizes the FAA to develop plans and policy for the use of navigable
airspace and to assign the use that the FAA deems necessary for its
safe and efficient utilization. It further directs the FAA to prescribe
air traffic rules and regulations governing the efficient utilization
of the navigable airspace.
Table of Contents
I. Background
II Summary of the Final Rule
III. Authority To Reallocate Capacity
A. The FAA Is Legally Authorized To Allocate Slots Through an
Auction Mechanism
1. Slots Are a Form of Property That May Be Leased by the FAA to
Others
2. FAA Leases Are Not Covered by IOAA and This Rule Is Not in
Violation of Any Current Appropriations Restrictions
3. Leases Are Not Taxes
4. The FAA's Authority To Give Slots to Carriers Through
Cooperative Agreements
5. Leases That Terminate by Their Own Terms Are Not a ``Taking''
of Property
6. The Draft Lease Terms Included in the NPRM Were For
Illustrative Rather Than Probative Purposes
7. International Obligations
B. The FAA Has Authority To Retain the Amounts Received From the
Lease and Disposal of Property and To Use Those Proceeds for
Congressionally Authorized Purposes
C. The Auction of Slots Does Not Affect the Proprietary Rights
of the Port Authority
D. The FAA Has Complied With the Administrative Procedure Act
1. The Docket Contained Adequate Information for Meaningful
Comment on the Rulemaking Proposal
2. The Discussion of the Auction Process Provided Sufficient
Detail for Meaningful Comment on the Rulemaking Proposal
3. The FAA Adequately Considered Alternatives
IV. Discussion of the Rule
A. Allocation of Slots at JFK and Newark
1. Proposed Alternatives
2. Categories of Slots
3. Initial Allocation of Slots
4. Market-Based Reallocation of Slots
a. Impact of Auctions on Competition
b. Impact of Auctions on Carrier Investment
c. Alternatives to Reallocation
B. Secondary Trading
C. Usage Requirements
D. Unscheduled Operations
E. Sunset Provision
F. Other Issues
1. Withdrawal for Operational Need and Future Reductions in the
Cap
2. Impact of the Final Rule on the Port Authority's Ability To
Run Its Airport
3. Minimum Usage Requirements for Slots Acquired Through
Sublease
I. Background
This final rule is the latest action in a history of congestion
management at New York airports. Access to both John F. Kennedy (JFK)
and Newark Liberty International (Newark) airports is highly sought
after. These two factors have forced the FAA to address a dilemma: how
can the agency reduce delays while providing some measure of access to
carriers wishing to operate at the airport, thus ensuring competition?
While there are many factors contributing to the delays and congestion
at JFK and Newark, demand for the associated airspace has out-stripped
capacity.
History of Congestion Management at JFK and Newark
The FAA managed congestion during the five hours of peak
transatlantic demand (3 p.m. through 7:59 p.m. Eastern Time) at JFK
under the High Density Rule (HDR) from 1969 through 2006. 14 CFR part
93 subparts K and S. However, not until deregulation of the airline
industry did the FAA need to step in and provide for carrier access to
the airspace immediately surrounding the airport. Prior to 1985, the
carriers at JFK, operating under antitrust immunity, determined who
would be allowed to operate and when. The FAA's role was limited to
determining how many operations air traffic control could reasonably
handle during congested periods and enforcing operator compliance with
the rules. The HDR divided the allowable operations (slots) by
categories of users (i.e., carriers other than air taxis, scheduled air
taxis, and others). 33 FR 17896 December 3, 1968). In 1982, the FAA
imposed a minimum usage requirement for the first time. 47 FR 7816
February 22, 1982). Also in 1982, the FAA implemented an experimental
buy-sell rule, under which approximately 190 slots were transferred
among carriers over six weeks of the program. 47 FR 29814, July 8,
1982).\1\
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\1\ This slot program was not implemented under the HDR, but
rather under SFAR 44 and was related to the limitations on air
traffic control services resulting from the controller's strike.
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The FAA established more permanent allocation procedures for slots
under the HDR in 1985 when it adopted the Buy/Sell Rule. 50 FR 52195,
December 20, 1985. In a companion rulemaking to the Buy/Sell Rule (SFAR
48), the FAA provided for the withdrawal of up to five percent of the
slots at the slot-constrained airports through a reverse lottery so as
to provide a pool of slots for new entrants and limited incumbents.
SFAR 48, 51 FR 8630, March 12, 1986).\2\ The Buy/Sell Rule included
use-or-lose provisions and, while explicitly stating that the slots
were not the carriers' property and did not constitute a proprietary
right, the FAA allowed carriers to buy, sell or lease the slots on the
secondary market.
[[Page 60545]]
For the next 15 years the agency relied primarily on the secondary
market authorized by the Buy/Sell Rule to address access issues at the
airport. However, the Buy/Sell Rule created market distortions by
creating categories of carriers entitled to preferential treatment
under an administrative reallocation mechanism which severely limited
access to these carriers other than on the open market. Affected
carriers complained to the FAA that by grandfathering 95 percent of the
slots at the slot-controlled airports to incumbent carriers, there was
insufficient capacity available for reallocation. The Buy/Sell Rule
also failed to foster a robust secondary market because it did not
require any transparency. Accordingly, carriers were able to keep out
competitors by arranging private transactions. This resulted in
carriers interested in initiating or expanding service at the airports
often being unaware that slots were potentially available for sale or
lease. Some carriers also complained that they were effectively being
denied access to the airport because their competitors refused to sell
slots or provide meaningful lease terms.
---------------------------------------------------------------------------
\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 JFK effective January 1, 2007. The Act also
preserved the FAA's authority to impose flight restrictions by stating
that ``[n]othing in this section * * * shall be construed * * * as
affecting the Federal Aviation Administration's authority for safety
and the movement of air traffic.'' 49 U.S.C. 41715(b).
Since the spring of 2006, U.S. air carriers serving JFK have
significantly increased their domestic scheduled operations throughout
the day. This change in use affected the manner in which the airport's
runways could be used. Historically, the air traffic controllers
achieved maximum efficiency at JFK by using either two arrival runways
and one departure runway, or two departure runways and one arrival
runway, to facilitate the transatlantic traffic flows. The increase in
domestic traffic--from the two largest operators at the airport, Delta
Air Lines (Delta) and JetBlue--affected the efficient use of JFK's four
runways.
As a result of the increase in scheduled operations at JFK, the
summer 2007 demand exceeded the airport's capacity during many periods
of the day. In 2007 flight delays in the New York City metropolitan
area soared. Delays impacted all three major commercial airports and
cascaded throughout the NAS. The summer of 2007 became the second worst
on record nationally for flight delays. On September 27, 2007, the
Secretary of Transportation announced the formation of the New York
Aviation Rulemaking Committee (NYARC) to help the Department of
Transportation (Department) and the FAA explore available options for
congestion management and how changes to current policy at all three
major commercial New York City airports would affect the airlines and
the airports.
By design, the NYARC provided ample opportunity for extensive input
by aviation stakeholders, having members from every major air carrier
in the United States as well as foreign carriers, passenger groups, and
the Port Authority of New York and New Jersey (Port Authority). Through
the ARC process, these stakeholders played a key role in exploring
ideas to address congestion and ensuring that any actions contemplated
by the Department and the FAA would be fully informed. In addition to
holding weekly meetings of the full NYARC, five working groups
regularly met to explore ways to address both congestion and allocation
of the available airspace. The NYARC worked throughout the fall and
submitted a report to the Secretary, dated December 13, 2007,
discussing its findings. A copy of the NYARC Report may be found at
https://www.dot.gov/affairs/FinalARCReport.pdf.
While the NYARC process was underway, in September 2007, the FAA
designated both JFK and Newark airports IATA Level 2, Schedules
Facilitated Airports for the 2008 summer season. 72 FR 57317 (Sept. 24,
2007). The FAA thereby received summer scheduling information from the
carriers for those airports. Based in part on this information, in
September-October 2007, the FAA and the Secretary of Transportation
decided that it was necessary to invoke the Department's authority to
convene a meeting of air carriers to discuss flight reductions at JFK,
which was determined to have severe congestion during peak hours of
operation. 49 U.S.C. 41722. On October 25, 2007, the FAA designated JFK
as an IATA Level 3, Coordinated Airport for summer 2008 in order to
address any growth in operations at the airport by foreign-flag
carriers.\3\ 72 FR 60710.
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\3\ Under both level 2 and level 3, carriers notify the
governmental entity designating the airport of their intended
schedules for the affected season and, where possible, the two
parties will attempt to resolve each others concerns. However, under
a carrier is not obliged to accept the governing authority's
position at a level 2 airport.
---------------------------------------------------------------------------
During the individual air carrier sessions, American Airlines
(American), Delta, and JetBlue Airways, which account for over 75% of
the total operations at JFK, withdrew their proposed peak-hour schedule
increases, and retimed some operations, for the summer of 2008 during
the afternoon and early evening peak hours at the airport. The FAA also
received comments on the schedule reduction process through the public
docket. Docket FAA-2007-29320. On January 18, 2008, the FAA issued an
Order temporarily capping scheduled operations at an average of 81
flight operations per hour at JFK and allocating those operations
pursuant to the agreements reached at the schedule reduction meeting
and after consideration of the comments in the public docket. 73 FR
3510. By its terms, the Order took effect March 30, 2008 and was set to
expire at 11 p.m. on October 24, 2009. The Order indicated that the FAA
plans to lease any new capacity that becomes available and any
allocated Operating Authorizations that are returned to the FAA, for a
five year term. The leases would be pursuant to an auction and would be
awarded to the highest responsive bidder. The FAA said it would provide
additional information about leasing procedures and the relevant
statutory authorities before conducting any auction. 73 FR 3510, 3514.
On February 14, 2008, the FAA amended the Order to modify the use-or-
lose provisions so that they would correspond to those adopted by the
International Air Transport Association (IATA) Worldwide Scheduling
Guidelines (WSG). 73 FR 8737.
In the autumn of 2007, the FAA also found it necessary to
informally discuss summer 2008 schedules with carriers operating at
Newark, because it was concerned that the proposed operations would
overtax the capacity of the airport system and that limiting operations
at JFK would create a spillover effect at Newark. Although some
carriers made modest revisions to their proposed schedules, it was
clear to the FAA that demand would continue to exceed capacity unless
the FAA took further actions. In order to be assured that carriers
would not add flights to already oversubscribed hours at Newark, and
would refrain from shifting flights from JFK to Newark, the FAA
designated Newark as an IATA Level 3, Coordinated Airport effective the
summer of 2008. 72 FR 73,418 (Dec. 27, 2007). Some carriers, such as
[[Page 60546]]
Continental Airlines (Continental), Newark's primary hub carrier,
shifted flights from peak hours to off-peak hours. On March 18, 2008,
the FAA proposed to issue an Order to limit hourly scheduled flight
operations at Newark and to allocate them pursuant to its informal
carrier discussions. 73 FR 14552. The proposal's preamble indicated the
FAA's plans to lease new capacity, allocated Operating Authorizations
that are returned, and currently unallocated Operating Authorizations,
by means of an auction. On May 21, 2008, the FAA adopted the general
terms of the proposed Order, effective June 20, 2008, through October
24, 2009. 73 FR 29550. The provisions regarding the use of the IATA WSG
for use-or-lose, and the preamble information on the auctions of new
and returned capacity, mirrored those in place for JFK.
As indicated in the companion rule addressing congestion and delays
at LaGuardia, the FAA determined that it was necessary to cap and
allocate flight operations at the three major New York airports
operated by the Port Authority. Recognizing the short-term nature of
the caps imposed by the Orders for JFK and Newark, on May 21, 2008, the
FAA published a notice of proposed rulemaking that sought to provide a
longer-term solution and address a number of congestion-related issues.
73 FR 29626. At both JFK and Newark, the FAA proposed to continue the
hourly caps on flight operations, and to lease the majority of slots at
each airport to the historic operators for non-monetary consideration
under its cooperative agreement authority. The agency also proposed to
develop a robust market and induce competition by annually auctioning
off leases for a limited number of slots during the first five years of
the rule.
The FAA proposed two alternatives in the NPRM. Under the first
alternative, each carrier operating, respectively, at JFK and Newark
would receive a ``baseline'' of up to 20 slots. At each airport, the
FAA would auction off ten percent of the total number of slots (above
the baseline) to any carrier serving or wishing to serve the airport
and would use the proceeds to mitigate congestion and delay in the New
York City area (after the FAA recouped the cost of the auction). Under
the second alternative, the same auction procedure would apply to
Newark as under the first alternative; at JFK, the FAA would conduct an
auction of twenty percent of the slots (above the baseline) and the
auction proceeds would go to the carrier holding the slot after the FAA
recouped the cost of the auction. Given the significant international
presence at both airports, the NPRM proposed to substitute IATA WSG
procedures for auctions, in the event of new or returned capacity.
Additionally, for both alternatives, the NPRM contained provisions for
adoption of IATA WSG for use-or-lose, for historic rights, for
unscheduled operations, and for withdrawal for operational need. The
FAA proposed to sunset the rule in ten years.
On July 17, 2008, the FAA proposed to limit unscheduled operations
at JFK and Newark, to two hourly reservations from 6 a.m. through 1:59
p.m., from 10 p.m. through 10:59 p.m., and to one hourly reservation
from 2 p.m. through 9:59 p.m. at JFK. At Newark, the limits would be
two hourly reservations from 6 a.m. through 11:59 a.m. and from 10 p.m.
through 10:59 p.m., and one hourly reservation from 12 p.m. through
9:59 p.m. 73 FR 41156.
The comment period for the NPRM closed July 21, 2008. Despite
numerous requests, the FAA decided against extending the comment
period, although it noted that it historically has considered comments
filed after the end of a comment period as long as such consideration
did not lead to delay. In denying these requests, the FAA provided
draft copies of the lease agreements that would result from the initial
allocation and reallocation of slots in the final rule. The FAA
reiterated that any auction would be conducted under the agency's
acquisition authority. The agency also reiterated that interested
parties to the auction would be afforded the opportunity to comment on
any proposed auction procedures within the context of the agency's
Acquisition Management System.
Thirty-eight interested parties filed comments to the docket
addressing the NPRM. The majority of comments were consistent in
rejecting the proposal. Many commenters said that the FAA had failed to
demonstrate how the proposal would achieve any significant relief from
congestion. Rather, according to the commenters, the NPRM would impose
an untested and unproven auction process on airlines that would not
address the fundamental airspace congestion issues in the New York
metro area.
On September 30, 2008 the FAA's Office of Dispute Resolution for
Acquisition (ODRA) issued a decision responding to protests that had
been filed by air carriers, the ATA, the Port Authority, and the New
York Aviation Management Association challenging the FAA's legal
authority to conduct a proposed auction of two slots at Newark. ODRA
concluded that the FAA's statutory authority and its Acquisition
Management System authorized agency disposal of property rights by way
of a lease as well as the use of a competitive auction process to
determine who the lessee should be.
On the same day the Government Accountability Office (GAO) released
an opinion letter in response to a congressional request that concluded
that the FAA currently lacks authority to auction slots under either
its property disposition authority or its user fee authority. The
issues involved represent novel legal issues upon which reasonable
people, and agencies, acting in good faith, have disagreed. The FAA
disagrees with the GAO conclusions and has decided to proceed with the
adoption of this final rule.
II. Summary of the Final Rule
In the NPRM, we proposed two alternatives for withdrawal and
reallocation by auction of slots at JFK and Newark. The rule we are
adopting follows the proposal for alternative 1. It will replace the
Orders imposing operating limitations at JFK and Newark and establish a
rule limiting unscheduled operations at those airports. As proposed,
the starting date of leases under the Final Rule will be based on
industry scheduling seasons. Leases obtained in the first auction will
start on October 25, 2009 (the first day of the winter scheduling
season), and will terminate on March 30, 2019. Leases obtained in
subsequent auctions will begin on the first day of the relevant summer
scheduling season and terminate on March 30, 2019. Although the
preamble to the NPRM discussed the possibility of operations for the
summer 2009 season, slots awarded through the first auction may be
operated by the acquiring carrier as of October 25, 2009, i.e., for the
winter scheduling season of 2009/2010.
The other basic outlines of the rule are unchanged from our
alternative 1 proposal. A slot is defined as the right to land or
depart during a 30-minute window. Limited and Unrestricted slots that
are assigned or awarded under this rule will be for every-day
operation.\4\ Although the FAA retains the right to change the cap, the
rule provides for 81 slots per hour for scheduled operations at both
JFK and Newark.
---------------------------------------------------------------------------
\4\ Note that some slots are not currently operated on a daily
basis. In those situations carriers would be assigned common slots
for only the days they are currently operated.
---------------------------------------------------------------------------
Carriers at JFK and Newark will initially be assigned their
baseline operations, which is up to 20 slots per
[[Page 60547]]
carrier. Ninety percent of each carrier's slots above its baseline
operations will be assigned to the carrier in a lease terminating March
30, 2019. The remaining 10 percent will be designated as limited slots
and have shorter leases. Each carrier will identify half of the
specific slots that will become its limited slots, and the FAA will
select the remaining half. For the first five years of the rule, the
FAA will auction one-fifth of the limited slots (approximately two
percent of the total number of slots at each airport). Slots awarded
through an auction will be designated unrestricted slots after
reallocation. Unlike common and limited slots, unrestricted slots will
not be subject to withdrawal by the FAA for operational purposes.
Unrestricted slots will also not be subject to use-or-lose
requirements, although the Office of Aviation Enforcement, within the
Office of the Secretary of Transportation, will monitor any anti-
competitive activity with respect to the acquisition and use of
unrestricted slots.
Carriers will be permitted to buy or sell their lease rights to all
types of slots at JFK and Newark, and, as proposed, the final sales
terms will be transparent, although actual negotiations will not be
disclosed. The FAA intends this rule to provide a means by which the
market value of slots can be made clear to all parties. That goal
necessitates the disclosure of actual sale prices. The rule also
permits the use of the FAA's auction proceedings by any carrier wishing
to sell a slot in that fashion. A carrier's decision to use an FAA-
operated auction to buy or sell a slot does not change the character of
the slot itself. If, for example, a carrier chooses to sell a common
slot through an FAA auction, the slot remains a common slot following
the purchase. Only limited slots selected for auction by the FAA become
unrestricted slots.
We have decided to make final our proposal with respect to the
allocation of any new or returned capacity. Any slots that become
available in this fashion will be assigned under the procedures of the
WSG.
III. Authority To Reallocate Capacity
The Air Transport Association of America (ATA), the International
Air Transport Association (IATA), the Port Authority, American, Delta
and United Airlines (United) asserted that the FAA's proposed methods
of allocating slots are not lawful for several reasons including: prior
statements by Government officials indicating that the FAA would need
additional legislation to be able to auction slots; the FAA cannot
create property by exercising its regulatory power to regulate the use
of navigable airspace; slots are not property when created and held by
the Government but only become property when transferred to a carrier;
the proposed lease of slots for fair market value would be a new user
fee in violation of an appropriations restriction on using a particular
appropriation to finalize or implement a regulation to establish a new
user fee and in violation of the Independent Offices Appropriations Act
(IOAA) (the latter of which it is asserted is the FAA's only authority
to charge for the lease of slots); the leases would be an
unconstitutional usurpation of Congress's authority to levy taxes; the
return of slots to the Government at the end of the term of their
leases would constitute an unconstitutional taking of property; the
Federal Grants and Cooperative Agreements Act does not provide
authority for the FAA to give slots to carriers through cooperative
agreements; and the FAA lacks authority to retain the proceeds from the
lease of slots and use those proceeds to improve capacity in the New
York airspace area.
In contrast to the criticisms to the proposed auctions, Virgin
America, Inc. agreed with the FAA that it possesses legal authority to
conduct auctions and to lease the slots to carriers. Virgin America
asserted that the FAA may rely on its exclusive sovereignty over the
airspace of the United States, under 49 U.S.C. 40103, to withdraw and
reallocate slots. The carriers have no current vested property interest
in the slots. Virgin America further maintained that the FAA's
exclusive sovereignty over navigable airspace, coupled with its
authority to lease property or dispose of an interest in property for
adequate compensation, under 49 U.S.C. 40110(a)(2), enables it to lease
the slots and maintain the proceeds.
The FAA has the authority to dispose of property interests under 49
U.S.C. 40110(a)(2). The FAA also has the authority to ``enter into and
perform such contracts, leases, cooperative agreements, or other
transactions as may be necessary to carry out the functions of the
Administrator and the Administration.'' 49 U.S.C. 106(l)(6).\5\ The FAA
has determined that the allocation of a relatively small number of
slots via the auction of a leasehold best effectuates the efficient
allocation of slots, both through the initial allocation and through
the development of a robust secondary market.
---------------------------------------------------------------------------
\5\ A federal agency's power to dispose of property includes the
power to lease that property, even without express Congressional
authority. Ashwander v. Tennessee Valley Authority, 297 U.S. 288,
331 (1936).
---------------------------------------------------------------------------
An auction is intended simply to distribute slots to the air
carriers who value them the most, thus encouraging their most efficient
use. An auction also satisfies the direction of Congress to ``place
maximum reliance on competitive market forces and on actual and
potential competition * * * to provide the needed air transportation
system. * * *'' 49 U.S.C. 40101(a)(6)(A).\6\ This section of law
describes the policies that the Department must take into consideration
when issuing economic regulations. This rule is not an economic
regulation. However, the statutory provision is a clear statement by
Congress of a valid public policy aim that the FAA is permitted to take
into consideration when issuing regulations under section 40103. The
FAA does not intend to set a reserve price on slots so as to assure
itself that it recovers its costs associated with either the auction or
with providing air traffic services. The FAA instead aims to allocate
all of the slots put up for auction, thus allowing for possible new
entrants to compete with the incumbent air carriers at JFK and Newark
and to accommodate changes in the business strategies of air carriers
using the airports.
---------------------------------------------------------------------------
\6\ This section of law describes the policies that the
Department of Transportation must take into consideration when
carrying out its economic regulatory authority over the aviation
industry. This section also is a clear statement by Congress of a
valid public policy aim that the FAA is permitted to take into
consideration.
---------------------------------------------------------------------------
A. The FAA Is Legally Authorized To Allocate Slots Through an Auction
Mechanism
Several commenters quote a statement made in 1985 that the FAA did
not propose an auction mechanism because legislation would be required
for the collection and disposition of the proceeds (50 FR 52183
(December 20, 1985)), and a more recent statement in the NPRM for the
LaGuardia congestion management rulemaking that the FAA ``currently
does not have the statutory authority to assess market-clearing charges
for a landing or departure authorization''. 71 FR 51360, 51362, 51363
(August 29, 2006).
In 1985, the FAA lacked clear authority to collect and dispose of
the proceeds from an auction. Rather, any amounts collected by the
agency would need to be deposited into the General Receipts account in
accordance with 31 U.S.C. 3302. Additionally, while the FAA had
authority to dispose of an interest in property, it was not clear that
such interests included leaseholds.
[[Page 60548]]
In the Air Traffic Management System Performance Improvement Act of
1996, Public Law 104-264, the FAA gained express authority to lease
property to others. 49 U.S.C. 106(l)(6), 106(n). The same law also gave
the FAA an exemption from 31 U.S.C. 3302, and an account was
established specifically for all amounts the FAA collects other than
the insurance premiums and fees that it is required to deposit into the
Aviation Insurance Revolving Fund. 49 U.S.C. 45303(c). This account is
available not just for fees assessed under chapter 453, but for ``all
amounts'' other than insurance premiums and fees.\7\ Thus, the
statement made in 1985 is no longer correct.
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\7\ The fact that Congress excluded insurance premiums and fees,
which are not amounts assessed under chapter 453 of title 49,
expresses Congress' plain and unambiguous intent for the FAA to
deposit all amounts it collects into this account, not just the
amounts assessed under the user fee provisions of chapter 453.
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The commenters also refer to the fact that the FAA sought
additional legislative authority to conduct auctions, as part of a
comprehensive change to how the FAA would be financed and how market-
based mechanisms would be used by both the FAA and congested airports.
The FAA recognized that it did not have clear statutory authority to
implement a wide array of market-based mechanisms and that absent
authority beyond that contained in 49 U.S.C. 40103, any reallocation
via a market-based mechanism could lead to a challenge that the FAA had
violated the ``user fee prohibition'' attached to the agency's annual
appropriations legislation since 1998. The FAA did not address the
agency's authority to dispose of property, as provided in the Air
Traffic Management System Performance Improvement Act of 1996. Public
Law No. 104-264, codified at 49 U.S.C. 106(l)(n). The FAA's proposed
reauthorization package, the Next Generation Air Transportation System
Financing Reform Act of 2007, would have substituted new user fees for
passenger ticket taxes, permitted the airport operators Port Authority
at constrained and delayed airports to assess market-based fees and
would have also allowed the FAA, under certain circumstances, to impose
market-based mechanisms. This legislative proposal, in giving authority
directly to airport proprietors to assess and use market-based fees,
was profoundly different from the terms of this final rule. This rule,
by contrast, relies on the FAA's Acquisition Management System
authorities and does not require the FAA to use any of the proposed
legislative provisions it sought. The FAA has authority to lease
property to others, and to receive adequate compensation for this
temporary disposal of property, including the authority to lease the
slots at JFK and Newark.
When it published the NPRM for LaGuardia the FAA initially believed
that imposing a market-based reallocation mechanism as part of the
regulation could be problematic. However, as delays soared in the
region in 2007 and Congress failed to pass long-term reauthorization
legislation, the FAA reevaluated its options. One option was to impose
or continue orders at all three New York metropolitan airports that
would last indefinitely. The agency rejected this option because the
orders were never intended to be a long-term solution and they
perpetuate the inefficiencies contained within the HDR. Likewise, the
FAA could have initiated rulemaking that would establish an
administrative reallocation mechanism, but the agency concluded that
approach also failed to resolve the inefficiencies contained within the
HDR. Finally, the FAA could revisit all of its statutory authorities
and determine whether it had the ability to allocate slots under its
existing legal authorities.
This final approach was the one the agency pursued because the FAA
believes it is both legal and best represents the interests of
passengers flying in and out of the airport. The FAA also believes this
approach best effectuates the FAA's mandate to provide for the
efficient use of the NAS, coupled with the Department's mandate to
consider competitive effects. The agency can either foster a market-
based allocation mechanism and develop a robust secondary market, or it
can walk away from the airport after imposing a cap and providing for a
very limited administrative reallocation mechanism. It has decided to
follow the more free market approach.
The commenters also refer to the fact that the FAA sought
additional legislative authority to conduct auctions which it has not
yet received. The authority sought by the FAA was part of a
comprehensive change to how the FAA would be financed and how market-
based mechanisms would be used by both the FAA and congested airports.
This rule, however, relies on the FAA's Acquisition Management System
authorities and does not require the FAA to use any of the proposed
legislative provisions it sought.
1. Slots Are a Form of Property That May Be Leased by the FAA to Others
The Port Authority, the ATA and IATA submit that the FAA has no
property rights in the slots the FAA proposes to auction.\8\ While the
ATA and IATA do not question that the slots are property (they dispute
ownership), the Port Authority states that the slots are ``neither
physical property, real property, intellectual property, nor an
intangible property recognized in common law.'' \9\
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\8\ The Regional Airline Association (RAA) makes a similar
argument. In addition, RAA states that the FAA lacks the authority
to regulate the types of aircraft and routes to be served in air
transportation. The FAA disagrees with the premise of RAA's
position, since the FAA may rely on a rational basis to allocate the
use of navigable airspace under 49 U.S.C. 40103. Nevertheless, this
rule does not attempt to regulate the type of aircraft or the routes
served in any manner.
\9\ The Port Authority also uses the language in the preamble to
the SNPRM as evidence that the slots are not property because the
FAA stated that there was no Fifth Amendment Takings issue with the
proposed slot auction. The FAA's statement, in context, went to the
fact that the air carriers have no property interests in the slots
after expiration of the current Order until FAA provides them with
new slots. It did not imply that the slots were not property; just
that the air carriers possess no property interests beyond those
accorded them under the Order.
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The Port Authority is incorrect; slots are an intangible form of
property that may be leased. On January 18, and May 21, 2008,
respectively, the FAA issued Orders limiting operations at JFK, and at
Newark, pursuant to its broad authority to regulate the use of
navigable airspace under 49 U.S.C. 40103(b). 73 FR 3510; 73 FR 29550.
Those Orders define an Operating Authorization \10\ as ``the operation
authority assigned by the FAA to a carrier to conduct a scheduled
arrival or a departure * * *'' Id. at 3516; 29554. The Orders expressly
allow the trading and leasing of Operating Authorizations. Id. at 3516;
29554. Although the Orders do not permit the permanent sale or purchase
of Operating Authorizations, they permit any form of consideration to
be used in the lease or trade of these Operating Authorizations. Id. at
3516; 29554.
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\10\ Both OAs and slots represent property interests, but the
FAA has deferred to common usage by reverting to the term ``slots.''
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These Orders reflect the FAA Administrator's determination that
Operating Authorizations are a form of property that may be leased or
traded for consideration, and used as collateral. Those determinations
have not been legally challenged, and the time period for filing such a
challenge has expired. 49 U.S.C. 46110. Indeed, the ATA's and IATA's
own members have treated Operating Authorizations, and the HDR
[[Page 60549]]
slots that predated them, as a form of at least intangible property:
Leasing and trading them for consideration; using them as a form of
collateral; and disclosing them as assets on their balance sheets.
Bankruptcy courts have held that slots are property.
The Port Authority cites Executive Order 13132 for the proposition
that the FAA is ignoring the traditional role of States as sovereigns
that can create property and has not closely examined the effect the
rulemaking would have on the State instrumentality. The creation of
property rights, however, is not the sole responsibility of the states.
Federal law determines what constitutes property for the purpose of
applying federal statutes. Ross L. Blair, et al. v. United States,
Docket 2007-5049 (Fed. Cir. 2008), citing United States v. Kimbell
Foods, Inc., 440 U.S. 715, 726 (1979) and United States v. Craft, 535
U.S. 274, 278-79 (2002). The United States Government, pursuant to 49
U.S.C. 40103, has exclusive sovereignty over the navigable airspace,
and the FAA exercises plenary powers over that airspace.
Unlike the Port Authority, the ATA and IATA do not dispute that the
slots constitute a property interest; rather they argue that the
property interest is not the FAA's, because it is created at or after
the transfer to an air carrier.\11\ Section 40110(a)(2) does not speak
to whether the FAA actually owns property that is being disposed of. It
only speaks to the disposal of a property interest. Only the FAA has
authority to assign the use of navigable airspace under section 40103.
Even assuming that the property interest is created at the time of
transference, it is still a property interest that falls within the
FAA's authority to dispose of under section 40110(a)(2).
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\11\ The airline commenters agree with ATA's assessment that the
slots are property of the airlines not of the FAA. See, Comments of
US Airways Group, Inc. at 24. But see, Comments of American Airlines
at 7 stating that the Port Authority holds the property interest.
---------------------------------------------------------------------------
As with certain other valuable public property not expressly owned
in fee by the U.S. Government, the Government may allow the use of
public property and frequently does so using leases. In fact, the
Government routinely ``licenses'' and ``permits'' the use of property
over which it exercises exclusive sovereignty. In doing so, unless
otherwise specified by law, the Government charges market rates in
accordance with OMB Circular A-25. For example, under 36 CFR 251.53--
Authorities, the Chief of the Forest Service (USDA) issues special use
authorizations (e.g., permits, term permits, leases) for National
Forest System land. The USDA also issues grazing permits under the
Taylor Grazing Act (TGA) of 1934 to allow the permit/lease holder to
use publicly owned forage. The Federal Communications Commission
licenses portions of the broadcast spectrum, and since 1993 (four years
before Congress mandated the use of auctions) has frequently done so
using auctions.\12\ The General Services Administration issues licenses
and permits for the use of its buildings and property, see, e.g., 41
CFR 101-47.901, 101-47.309; see also, GSA form 1582, ``Revocable
License for Non-federal Use of Real Property.'' The FAA similarly uses
``licenses'' to, in effect, lease its real property to non-federal
users. See, 1.3.7 of the FAA's Real Estate Guidance, https://
fast.faa.gov/realestate/index.htm.
---------------------------------------------------------------------------
\12\ 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) \13\ and whether the
Government owns the property in the traditional sense or is simply its
guardian. The FAA selected the word ``lease'' rather than ``license''
to describe the documents that will transfer slots to air carriers
because the FAA is conveying a longer term interest, with fewer rights
by the Government to terminate that interest, than is usually done when
the Government licenses a non-federal entity to use public property
(licenses of property are usually terminable at will).
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\13\ Such as authorized access to particular radio frequencies
and authorized use of intellectual property.
---------------------------------------------------------------------------
2. FAA Leases Are Not Covered by IOAA and This Rule Is Not in Violation
of Any Current Appropriations Restriction
The ATA argues that the only authority by which the FAA may charge
for the lease of slots is as a user fee under the Independent Offices
Appropriations Act (IOAA) and that the only amount that could be
charged is the cost of administering the lease. The ATA is incorrect on
both points, but the issue is not relevant because the FAA does not
rely on IOAA authority to conduct auctions but on its other
authorities.
The ATA similarly argues that this regulation falls within the
parameters of an appropriation provision that prohibits the FAA from
using funds from its operations appropriation to finalize or implement
a regulation that establishes a new user fee not specifically
authorized by law.\14\ Consolidated Appropriations Act, 2008, Public
Law 110-161. The ATA and IATA also suggest that the wording of 49
U.S.C. 106(l)(6) \15\ means this authority may not be used because the
FAA may only enter into leases using this authority if the leases ``may
be necessary to carry out the functions of the Administrator and the
Administration.'' 49 U.S.C. 106(l)(6). The ATA and IATA argue that the
only necessary function is a regulatory function to assign airspace
under 49 U.S.C. 40103. However, there are several other statutory
functions, such as using procedures that provide for an efficient air
traffic system, 49 U.S.C. 44505, and the desirability of placing
maximum reliance on competitive market forces and on actual and
potential competition to provide the needed air transportation system,
49 U.S.C. 40101(a)(6), that make the use of the FAA's commercial
authority to lease property to others appropriate. See also, the
legislative history and findings of Congress when
[[Page 60550]]
it granted the FAA the authority to lease property to others in Public
Law 104-264. Having created slots, and determined the number of
available slots should be limited because of the resulting strain on
the NAS from the scheduling of more flights per hour than can be
handled under current conditions at JFK and Newark, the function of
disposing of its interest in the slots becomes applicable.
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\14\ ATA also suggests that by finalizing or implementing this
rule, the FAA would violate the Anti-Deficiency Act. The Anti-
Deficiency Act would only be violated if the FAA obligated or
expended funds in excess or in advance of an available
appropriation, fund, apportionment or other applicable
administrative subdivision of funds. 31 U.S.C. 1341, 1517. The FAA
may not use its operations appropriation to finalize or implement a
rule to promulgate a new user fee not specifically authorized by
law, but this rule simply reduces the number of slots (lowers the
cap) at JFK and Newark, defines the different types of slots,
establishes a reversion of approximately 10 percent of the slots,
and discusses the FAA's intent to auction new or returned slots.
This rule does not require or impose on any entity a requirement to
pay the FAA to obtain a service or even a slot. If the FAA does
conduct an auction as contemplated by this rule, it will do so using
its pre-existing authorities and regulation. The use of its
operations appropriation to finalize and implement this rule
therefore does not violate the Anti-Deficiency Act.
\15\ American Airlines reads 49 U.S.C. 106 as more limited in
scope regarding the types of property that fall under its purview.
The statute does not limit its scope to any particular type(s) of
property that fall under its purview. The FAA has for years, without
challenge, interpreted its authority broadly under the statute in
support of Congress' intention of allowing the Administrator to
acquire, lease, enter into cooperative agreements and other
transactions as may be necessary to carry out the Agency's
functions. This interpretation is known to Congress, which has
repeatedly reauthorized the FAA without making a change to this
section. Another commenter raised the fact that the heading of
section 106(l) refers to ``Personnel and Services'' which the
commenter says means that subparagraph (6) of that section does not
provide the FAA any contracting or leasing authority. It has been
long recognized by the courts, however, that the headings of
statutes have little if any weight in statutory interpretation. As
other paragraphs of this section deal with personnel matters, the
heading is not erroneous, but it does not in any way dilute the
broad grant of contracting, leasing, cooperative and other
transaction agreement authority Congress gave the FAA in paragraph
(6).
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Even if the only ``necessary function of the Administrator or
Administration'' were a regulatory one, the FAA has not violated the
appropriations restriction. Simply put, a lease is not a user fee. A
user fee is imposed for a particular service the Government provides to
a particular party. A lease on the other hand, is a transfer of a
possessory interest in real, personal or intangible property that
allows the lessee the use of that property to the exclusion of others
including the lessor. In transferring slots to air carriers for defined
periods of time, the FAA is not providing any air traffic or other
service to the recipients. To the contrary, the FAA's air traffic
controllers will not be policing or otherwise cognizant of which air
carrier owns which slot and will provide their services in accordance
with the FAA's Orders and policies (predominantly first come, first
served). In transferring slots to air carriers, the FAA is allowing
that air carrier to schedule or reserve access to that segment of
navigable airspace that is necessary to take off or land an aircraft at
the two airports during a particular half hour of time. In short, the
FAA is leasing rather than providing a service to air carriers when it
transfers slots to them.
A user fee is calibrated to recover the cost to the government of
providing a service or specific benefit to an identifiable recipient.
See, e.g., United States v. Sperry Corp., 493 U.S. 52, 60 (1989);
Seafarers International Union of North America v. Coast Guard, 81 F.3d
179, 182-83 (D.C. Cir., 1996). The assignment of a use of navigable
airspace for scheduled flight operations is not a ``user fee'' under
the principles articulated in those cases.\16\ The cost associated with
purchasing a particular slot does not constitute a user fee. First, the
cost associated with procuring a slot at auction is not associated with
the cost of providing air traffic services for that particular take off
or landing. Rather, air traffic services are paid for already through
the Airport and Airway Trust Fund receipts. Second, the FAA is not
creating assignments of the use of navigable airspace for scheduled
flight operations (slots) for the purpose of raising revenue by leasing
them to air carriers. More precisely, the FAA has imposed a cap and
designated slots for the purpose of allocating the efficient use of
navigable airspace. Most of these slots will be awarded to current
operators to prevent disruption of air services into and out of JFK and
Newark. The FAA is leasing a relatively small number of them, by means
of an auction, to air carriers in order to draw in new entrant carriers
and provide an opportunity for expansion by carriers already at the
airport, thereby inducing airline competition at JFK and Newark and
ensuring that airlines winning the slots make the highest and best use
of them. The auction is also designed to assure that air carriers will
rationalize the use of their slots in accordance with the value
attached to them in the auctions, and ultimately, in the secondary
market. In the end, the traveling public will benefit.
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\16\ The FAA implemented its regulation to lease its property to
others on April 1, 1996, well prior to the first time a restriction
was included in the FAA's appropriation concerning the FAA's ability
to use the operations funds appropriated to develop or implement a
new user fee.
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3. Leases Are Not Taxes
A tax is generally defined as an enforced obligation to support the
government. See United States v. La Franca, 282 U.S. 568 (1931); see
also United States v. Butler, 297 U.S. 1, 61 (1937); Head Money Cases,
112 U.S. 580, 596 (1884); Rural Telephone Coalition v. FCC, 8388 F.2d
1307, 1313 (D.C. Cir., 1988); United States v. City of Huntington, 999
F.2d 71, 73 (4th Cir., 1993). A lease acquired through a slot auction,
however, is not a tax. It is not an amount being levied on all members
of the industry nor is it a mandatory payment as a tax would be.
Further, the lease is not ``imposed'' as a tax is, and is not designed
for revenue-raising purposes.
The auction of a limited number of slots at the airport was never
designed to provide the FAA with a new source of revenue. Indeed, in
the NPRM, one of the options proposed by the FAA was to allow the
carriers at JFK to keep all revenue after covering the FAA's costs in
conducting the auction. Rather, the auction mechanism is intended to
use market forces to best allocate this limited asset to those carriers
who value it the most, placing the asset to its best and highest use.
The FAA believes the slots auctions will inform the airlines of the
market value of their slots so that slot utilization can be
rationalized. While it is true that under today's rule, that the FAA
may realize some revenue from the auction, the agency has also
committed to putting that revenue back into aviation capacity
enhancement and delay mitigation projects in the New York metropolitan
area.
Unlike a tax, which imposes an obligation on affected citizens or
consumers to pay money to the state, the slot auction imposes no burden
on a carrier based on its citizenship or use of the airport. The slot
auction lease payments are voluntary: The FAA does not require a
carrier to participate in an auction in order to serve JFK or Newark.
Carriers serving the airports presently will be given slots through
cooperative agreements and slightly less than ten percent of the total
number of slots at the airport will be auctioned. Only the carriers
winning the bids at the slot auctions will pay for the lease, and that
amount of money will have been determined by the free market. The FAA
will not have pre-determined a lease amount and will not attempt to
cover its costs in conducting the auction by setting a reserve
price.\17\
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\17\ As discussed in the general discussion of the auction
procedures posted under the FAA's Acquisition Management System, the
FAA will set a reserve price to assure that, in the event only a
single bid is received for a particular slot, the bidding carrier
does not actually pay the bid price. In that instance, the winning
bidder would pay only the reserve price.
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4. The FAA's Authority To Give Slots to Air Carriers Through
Cooperative Agreements
A few commenters stated that the Federal Grants and Cooperative
Agreements Act does not provide the FAA authority to give slots as
cooperative agreements. The Federal Grants and Cooperative Agreements
Act defines when a cooperative agreement is to be used. The FAA's broad
authority to award cooperative agreements, was given to the FAA in the
Air Traffic Management System Performance Improvement Act of 1996, and
codified as 49 U.S.C. 106(l)(6). This Act expressly confers on the FAA
Administrator the authority to ``enter into and perform such * * *
cooperative agreements, and other transactions as may be necessary to
carry out functions of the Administrator and Administration. The
Administrator may enter into such * * * cooperative agreements, and
other transactions with * * * any person, firm, association,
corporation * * * on such terms and conditions as the Administrator may
consider appropriate.'' 49 U.S.C. 106(l)(6). There are several
functions of the Administrator for which it may be ``necessary'' to
enter into a cooperative agreement. One such function is to encourage
the development of civil aeronautics. 49 U.S.C. 40104. By giving
[[Page 60551]]
up to 20 slots to all air carriers currently operating at the airport,
and 90 percent of the remaining slots to the air carriers currently
operating at JFK and Newark in proportion to their current operations,
the FAA is encouraging those carriers to continue their development of
civil aeronautics at the airport and in the routes served to and from
that airport. As several commenters noted, there is substantial
economic value both to New York and the communities served by flights
from JFK and Newark.
American Airlines raised an additional concern about the use of
cooperative agreements, based upon the language in 49 U.S.C.
40110(a)(2) that requires the FAA to receive ``adequate compensation''
for the disposal of property interests. The FAA finds that it is
receiving ``adequate compensation'' through the minimum slot usage
requirements. In addition, the slots are being given in order to
promote civil aeronautics.
5. Leases That Terminate by Their Own Terms Are Not a ``Taking'' of
Property
The ATA and the carriers argue that the proposed auctions
constitute a taking by the government and that the taking is prohibited
for several reasons including that it is not for a legitimate purpose,
it lacks due process, and fair value is completely absent in the
proposed alternative 1 (as applied to JFK and Newark) and inadequate in
alternative 2 (as applied to JFK). The FAA strongly disagrees with the
contention that the slot auctions contemplated in this rule are in any
way an impermissible taking.\18\ First and foremost, in order to be a
taking, the carriers would need to have a possessory interest in the
slots and they do not. For bankruptcy purposes, carriers may have
acquired a property interest in slots, as discussed above, but as also
cited in those cases, if that interest expires under the terms under
which it was granted, then there has been no property right taken. The
Orders establishing Operating Authorizations at JFK and Newark are of a
fixed duration and any rights the carriers might have had in those
operating authorizations will terminate when the orders end or are
superseded. By virtue of today's rule superseding the Orders, the
carriers holding the OAs now hold slots and have the same interests and
responsibilities in the slots as they did in the OAs. Under today's
rule, those carriers whose slot baselines at either Newark or JFK, or
both, exceed 20 at either airport, will have a modest portion of their
slots designated as Limited Slots and subsequently auctioned
Unrestricted Slots. As of October 25, 2009, carriers may begin to
operate the Unrestricted acquired at auction.
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\18\ The preamble to the LaGuardia NPRM also addresses this
issue and provides the Supreme Court decisions supporting the FAA's
position. 73 FR 20846, 20850-20854 (April 17, 2008).
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Slots transferred to carriers using cooperative agreements or
leases awarded as the result of auctions will similarly have express
automatic termination provisions. For slots transferred using
cooperative agreements, the carriers' property interest would
automatically terminate if the specified ``use-or-lose'' provisions are
not met or one of the other conditions specified in the cooperative
agreements arises. If those provisions are satisfied, then most of
these slots will terminate in 10 years. A few will have varying
termination dates as agreed upon by the FAA and each carrier.\19\ When
the termination date arrives, any property interest the carrier may
have in the slot similarly automatically ends. There is no more a
taking of carrier property than there would be in the eleventh year of
a ten year lease of FAA real property to a carrier.
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\19\ Perhaps more accurately, the determination of which of
these slots have which of the specified termination dates will
follow the process described in this rule.
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The ATA and the carriers provide little support for the proposition
that Operating Authorizations or slots awarded to carriers under an
order with a fixed duration results in entitlement to those slots in
perpetuity.\20\ To the extent that these commenters allege harm (such
as having made investments in airport infrastructure) based on the
unreasonable assumption that the status quo would remain forever even
though the Order explicitly said it would expire, that harm is the
responsibility of the carriers. These carriers took a risk, for which
they have received a return on their investment based on their use of
the Operating Authorizations for the period specified in the Order. If
these commenters do not wish to incur a significantly smaller risk \21\
for a relatively small percentage of the slots that will be initially
be transferred to them through cooperative agreements, and then
returned to the FAA as those agreements expire in order to be
auctioned, the carriers are free not to apply for these cooperative
agreements.
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\20\ U.S. Airways Group's main contention is that the slots are
property of the airlines because they have held them ``more or less
continuously'' for 40 years.
\21\ The slots that will be awarded as the result of an auction
have a firm term of up to ten years, with little right by the FAA to
terminate prior to the end of that term. Most of the cooperative
agreements will similarly have a ten year firm term.
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The ATA, IATA, and the carriers rely on what they perceive as a
three pronged test established in Penn Central Transp. Co v. New York
City, 438 U.S. 104 (1978). In Penn Central the Court found that there
was no compensable taking when the City's Landmarks Preservation Law
would not allow additional stories to be added to Grand Central
Station. Even using the three prong test articulated by the commenters,
for the reasons stated above, the activities described in this rule
would not constitute a Fifth Amendment taking.
The ATA and IATA also overstate the extent of the alleged harm.
Under the alternative selected in this rule, carriers will get to keep,
at a minimum, more than 90 percent of their current slots. Only seven
carriers will lose any slots under this rule and only American, Delta
and United will lose slots at both airports.
The Port Authority cites to Air Pegasus of D.C., Inc. v. United
States, 424 F.3d 1206 (Fed. Cir. 2005), for the proposition that the
Federal Government's sovereignty over airspace is not ownership in fee,
but rather navigational servitude. Air Pegasus, however, stands for the
proposition that there is no private property right of access to
navigable airspace. If the FAA legitimately exercises this authority to
prohibit the use of a segment of na