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Updated: Wednesday, February 2, 2005 10:41 AM


OST-04-18586 - DCA Slots - Petition of Air Carrier Association to Block Transfer



High Density Slots - Petition of Air Carrier Association to Block Transfer

OST-04-18586

July 7, 2004

Petition of the Air Carrier Association of America to Suspend the Transfer or Lease of Slots at Ronald Reagan Washington National Airport

The rules should require that the FAA (in a public docket) and all parties be notified of possible sales/leases and that all details concerning slot transactions are fully disclosed. Moreover, the Department should immediately investigate (under 49 U.S.C. § 41712) the slot transactions between dominant carriers including the motives and processes utilized by these carriers to expand their control over DCA and LaGuardia Airport and to block low‑fare competition at these airports. Until the Department has completed its review of these issues, it should suspend all DCA and LGA slot leases or sales among the largest six carriers.

The Department has apparently decided that the nation's six largest carriers can decide amongst themselves the future of airline competition at DCA and LGA. Is there any chance that a slot‑holding carrier would lease slots to a new entrant carrier that wants to compete with that carrier? Would an alliance partner lease slots to low‑fare a carrier that could add service in a market under the control of its alliance partner? Of course not. A review of recent slot transactions demonstrates that carriers obtaining slots from other large slot holders do not enter markets served by the original slot holding carrier or its alliance partners.

Counsel: ACA, Edward Faberman, 202-639-7502, epfaberman@acaa1.com


July 27, 2004

Answer of Continental Airlines

ACAA's strident arguments ignore or obscure fundamental reasons why the slot buy/sell system adopted nearly twenty years ago has remained effective in allowing airlines to adjust capacity to market demand and meet operational needs through sales and leases of slots at Washington Reagan National Airport and LaGuardia International Airport. When the buy/sell rule was adopted, incumbent airlines were allowed to retain their slots to avoid disruptions in service and to recognize the investment in slots and the development of air services by those airlines. At the same time, new entrants and limited incumbents were given the ability to secure slots through lotteries as well as the opportunity to buy or lease slots. The ability to buy and sell slots has indeed allowed many airlines to develop reasonably effective service patterns despite constraints on the number of slots available. Throughout this period, Congress has considered slot issues repeatedly without taking any action to terminate the buying and selling of slots.

Perhaps the most ridiculous claim by ACAA is that Continental's complaints about its total inability to operate any flights at London Heathrow airport is the "same" as the situation for would‑be entrants at Washington Reagan National Airport. In fact, new entrants and limited incumbents have been awarded more slots at Washington Reagan National through the exemption process than Continental uses there. Although new entrants and limited incumbents have been authorized to buy and sell slots at Washington Reagan National and LaGuardia International for nearly twenty years, Continental to this day cannot legally acquire a single slot at London Heathrow.

Counsel: Continental and Crowell & Moring, Bruce Keiner, 202-624-2615


July 27, 2004

Answer of The Regional Airline Association

The buy/sell rule and related slot regulations have enabled airlines to offer flights to meet established passenger demand at slot‑controlled airports. So long as airports are slot‑constrained, not all requests for slots can be met, but prohibitions on the buying, selling and leasing of slots would preclude changes to service patterns required by changes in circumstances. The ability of regional airlines and their codeshare partners to buy, sell and lease slots has enabled them to provide critical service with regional jets between slot‑controlled airports and small communities and to maintain frequencies demanded by travelers in both small and large markets on an economic basis during these difficult times for network airlines. Meanwhile, many of the ACAA member airlines have benefited from slot exemptions, are continuing to prosper, and could acquire DCA slots at market prices if they chose to do so.

By: Deborah McElroy, 202-367-1250


August 2, 2004

Response of The Air Carrier Association of America to Answers of the Regional Airline Association and Continental Airlines

Continental is demanding authority for approximately 10 roundtrips or more. New entrants would be delighted to have 10 DCA roundtrips to best serve their primary markets from DCA! Continental complains about not having any service at Heathrow. Does this mean that if Continental had one roundtrip at Heathrow it would be satisfied? At what point would it withdraw its concern about BA being able to purchase slots?

The proposed Northwest Airlines slot transfer is going to a carrier that dominates DCA, US Airways. Whether it be DCA or Heathrow, the dominant carrier must not be allowed to increase dominance when the door is closed to those that will provide true competition. As the Department and FAA have repeatedly stated, slots do not belong to the carriers and can be withdrawn by the FAA and reallocated. It is time to open all doors and provide full public scrutiny of slot transfer actions.

Counsel: ACA, Edward Faberman, 202-639-7502


High Density Slots - Petition of Air Carrier Association to Block Transfer

Order 05-02-01
OST-04-18586 - Petition of Air Carrier Association to Block Transfer

Issued and Served February 1, 2005

Order

The first two of ACAA’s requests are properly before the FAA. That agency has the authority and primary responsibility under 49 U.S.C. §40103(b) to ensure the efficient use of the navigable airspace and to assign its use by rule or order. The HDR was promulgated in 1969 under this authority. The Buy/Sell Rule is part of Subpart S of 14 CFR Part 93, which is the regulatory scheme governing the allocation of IFR operations at HDR airports such as DCA and LGA. The FAA and the Office of the Secretary will give the same careful, thorough consideration to the competitive issues ACAA raises here that they gave to competitive issues when considering whether to allow slots to be bought, sold, and leased, as documented in the regulatory history of the Buy/Sell Rule. See 50 FR 52180 at 52182- 52186 (December 20, 1985).

As for ACAA’s third and fourth requests, we must decline to grant them. The petition, read as a whole, primarily challenges the Buy/Sell Rule and only tangentially invokes 49 U.S.C. 41712, the Department’s authority to investigate and prohibit unfair or deceptive practices and unfair methods of competition. The Buy/Sell Rule allows carriers that hold slots to sell or lease them without first informing the government, the public, or all air carriers of their intent to dispose of the slots and without making the details of sale or lease agreements public. As noted, the FAA and OST adopted this rule after giving due consideration to all competitive issues raised, and it is the FAA, again in conjunction with OST, that will now be considering whether the rule should be amended along the lines ACAA proposes. The pleadings here do not provide sufficient grounds for the Enforcement Office to institute an investigation into whether slot-holding carriers at DCA and LGA have been engaging in unfair methods of competition within the meaning of 49 U.S.C. 41712. Moreover, even if we were to institute such an investigation, we would not have the authority to suspend slot transactions pending its completion. Section 41712 empowers the Department to order carriers to stop offensive practices only after finding the practices to be violations, which in turn it can only do after providing the carriers with notice and an opportunity for a hearing.

For all of these reasons, we dismiss ACAA’s petition insofar as it asks the Department to investigate whether slot-holding carriers at DCA have been engaging in unfair methods of competition within the meaning of 49 U.S.C. 41712 and to suspend slot trades while this investigation is in process. We take no action on the remainder of ACAA’s petition, as it is properly before the FAA.

By: Samuel Podberesky

FAA-2001-9854 - Manage LGA Operations after Rule's Expiration


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