RAA criticizes plans for DOT slot auctions

 - August 29, 2008, 1:37 PM

The DOT’s plan to auction a single round-trip slot at Newark Liberty International Airport on September 3 sets a perilous precedent U.S. regional airlines can ill afford to let stand, according to Regional Airline Association (RAA) president Roger Cohen.

“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.

Formerly awarded to the now bankrupt Eos Airlines, the slot in question involves a daily departure from 7:30 p.m. to 8:30 p.m., and an arrival from 5 p.m. to 5:30 p.m. on Sunday, Tuesday, Wednesday, Thursday and Friday, and from noon to 12:30 p.m. every Monday and Saturday. The winner of the auction would gain a five-year leasehold at Newark.

“This auction will allow us to implement market mechanisms on a small scale, gauge interest and determine a slot’s market value,” said DOT Secretary Mary Peters.
“However, the real winners in this auction will be consumers, who stand to benefit from more reliable air service that costs less in terms of both time and money.”

How consumers stand to benefit remains at the center of the debate. While the DOT asserts that the free-market approach to slot allocation will encourage competition and therefore be a more efficient use of a scarce resource, the industry sees it as the first step in an eventual campaign to forcibly seize slots from their rightful custodians and reallocate them to the highest bidders, with no regard for the cities affected.  

The RAA, the Air Transport Association, the International Air Transport Association and the Port Authority of New York and New Jersey, which operates the airport, have all criticized the plan as misguided and illegal. The Port Authority, in fact, has threatened to block any airline that wins 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.”

Congress has already introduced several measures attached to the FAA reauthorization and appropriations bills that would prevent the DOT from following through with the plan. However, Cohen worries that the legislation won’t get enacted before the auction takes place. “This is a rush to the courthouse door, with the DOT trying to jam something through with little or no public comment,” said Cohen. [The comment period ran from August 5 to August 18. –Ed.] “They’re trying to do this before Congress can act; it’s pretty clear.”