FOR YOUR INFORMATION............................NOVEMBER 18, 1991
FTC STAFF ADVISE FAA: DATA EXAMINED DO NOT SUGGEST CHANGING CURRENT MARKET-BASED SYSTEM FOR ALLOCATING AIRPORT LANDING SLOTS AT FOUR AIRPORTS
Federal Trade Commission staff today advised the Federal Aviation Administration (FAA) that a study using FAA data from May and June 1990 on the usage of landing slots at four high- density traffic airports -- Chicago's O'Hare, Washington's National, and New York's LaGuardia and Kennedy airports -- does not suggest that changing the current market-based system for allocating and transferring the slots will necessarily result in an increase of slot usage at those airports. The staff's views were submitted in response to a September 1991 notice in which the FAA requested comments on several proposed changes to the current slot allocation and transfer system at the four airports. The staff study deals only with these airports, and does not consist of any findings that can be applied to other airports.
A "slot" is the right to take off and land during a speci- fied period of time during the day. Slots were first defined at the four airports in 1968 to deal with excess demand and noise problems. Current regulations allow slot holders to sell, trade or lease their slots, after a prescribed miniminum period of usage, and permit slots to be held by any party meeting certain FAA qualifications. The regulations also require that slots be used at least 65 percent of the time over a two-month period -- slots not meeting this requirement are withdrawn by the FAA. The FAA holds lotteries to distribute slots that have been voluntar- ily transferred back to it, or are otherwise not currently allocated.
- more - FAA Slot Allocation--11/18/91)
The proposed changes would modify the percentage of time carriers are required to use their slots to 90 percent, based on weekday usage; require the air carrier to operate for two years before selling slots obtained through the lottery; alter the definition of new-entrant or "limited incumbent" carriers who can participate in the lotteries; and alter the role of large car- riers in the lotteries. According to the FAA, the proposed changes are designed to encourage competition by making margin- ally-used slots available to new entrants or limited participants in the airline markets at the four airports.
According to the FTC staff comments, available FAA data on the pattern of slot use in May and June 1990 under the current, market-based slot-transfer system do not support two possible theories of anticompetitive effects at the four airports. Thus, the findings do not suggest that the proposed changes to the existing slot allocation and transfer rules will necessarily increase slot usage. The staff offered three principal findings, based on the examined data:
1) First, the data indicate that a comparison of slot-usage rates by carriers does not suggest that carriers with a rela- tively large share of the slots at a high-density traffic airport hoarded their slots or used them at a lower rate than carriers with smaller shares. "In general," staff said, "the data from the period studied do not support the anticompetitive theories about carriers' patterns of slot holding and usage."
2) According to the examined data, most carriers, on average, already used their slots as much as would be required under the proposed amendments and, thus, the higher requirement may only affect a few slots. "But because carriers with more slots and operations may enjoy greater flexibility in allocating flights among slots and rearranging schedules to ensure their slots meet the minimum 'use or lose' standard, the [proposed change] could have a greater effect on the carriers with fewer slots," staff said.
3) The vast majority of slots allocated in the 1986 lottery were traded or sold within two years, the staff said, adding that almost all the carriers that received slots in that lottery have exited the industry by virtue of mergers or bankruptcy. The staff concludes that, in the absence of market power, imposing significant delays or other restrictions on slot transfers may impede the efficient reallocation of slots from lower to higher- valued uses. The staff also suggests that a more efficient manner of encouraging high slot use might be to disqualify air carriers from participating in slot lotteries in the future if they sell lottery slots too quickly.
FAA Slot Allocation--11/18/91)
These comments represent the views of the staff of the FTC's Bureau of Economics, and not the Commission or any individual Commissioner.
Copies of the staff's comments are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-326- 2502.
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MEDIA CONTACT: Bonnie Jansen, Office of Public Affairs 202-326-2161
STAFF CONTACT: Bruce Kobayashi, Bureau of Economics 202-326-3363