GAO: FAA Has No Authority to Auction EWR Slots

 - October 1, 2008, 4:38 AM

The General Accounting Office ruled yesterday that the Federal Aviation Administration lacks the authority to auction arrival and departure slots at Newark Liberty International Airport, at least temporarily laying to rest the controversy that led the Regional Airline Association and the Air Transport Association to vigorously protest a plan to distribute the slots once awarded to Eos Airlines to the highest bidder.

According to Regional Airline Association president Roger Cohen, the plan—although at first involving just a single round trip originally scheduled for auction on September 3—would have set a perilous precedent U.S. regional airlines could not afford to let stand.

“Auctioning the nation’s airspace to the highest bidder proves that ideologues at DOT are hell bent on finishing the job oil speculators have started--destroying affordable air service to the 70 percent of American communities that depend exclusively on regional airlines,” said Cohen.

The slot in question involved a daily departure from 7:30 pm to 8:30 pm, and an arrival from 5:00 pm to 5:30 pm on Sunday, Tuesday, Wednesday, Thursday and Friday, and from noon to 12:30 pm every Monday and Saturday. The winner of the auction would have gained a five-year leasehold at Newark.

While the DOT asserted that the free-market approach to slot allocation would encourage competition and therefore more efficient use of a scarce resource, the industry saw it as the first step in an eventual campaign to forcibly seize slots from their rightful custodians and reallocate them to the highest bidders, without any regard for the cities affected.  

The RAA, the Air Transport Association, the International Air Transport Association and the Port Authority all criticized the plan as misguided and illegal. The Port Authority, in fact, had threatened to block any airline that won the slot from operating at Newark—a move the DOT said it would challenge in the courts.  

From the RAA’s perspective, the most damaging aspect of the slot auction lay with its potential to discourage the use of small airplanes. An airline willing to commit a given level of investment for a slot will, the thinking goes, try to extract all the revenue it can from that asset. Of course, larger airplanes generally draw more revenue than smaller ones; but small communities depend on the smaller airplanes for most of their service. According to the Port Authority, the plan threatens service from at least 25 cities, including Bangor, Maine, Des Moines, Iowa, Sarasota, Fla., and Albuquerque, N.M.

“If you start auctioning off airspace to the highest bidder, just by definition the only ones who are going to be able to afford that are the absolute wealthiest corporate jet [operators] or [carriers operating] the absolute highest-yield airline markets,” said Cohen. “It’s going to be whoever can pay the most, where money is no object, [such as] an operator into Newark from…Dubai.”