- The Washington Times - Monday, June 12, 2000

Busy air travelers will soon benefit from more flights at Ronald Reagan Washington National Airport and major airports serving Chicago and New York, but the benefits are limited by government bungling. The Wendell H. Ford Aviation Investment and Reform Act of the 21st Century, signed by President Clinton on April 5, severely restricts rational use of the new takeoff and landing "slots" that it creates. It states "No [new slot] may be bought, sold, leased or otherwise transferred by the carrier to which it is granted."
The prohibition on trading new slots is a big change from current regulations, which expressly allow trading of the valuable slots. Slots at O'Hare Airport have traded for as much as $3.5 million. The value of slots is also apparent in recent news reports that the merger of United Airlines and US Airways may spawn a "virtual" carrier, DC Air. Its key asset will be not planes or facilities but 220 slots at National worth $142 million.
The statutory prohibition on trading of slots means any assignment of new slots at four major airports (John F. Kennedy and La Guardia in New York, O'Hare in Chicago and Reagan in Washington) will soon be against consumers' best interests. Irrespective of how the Department of Transportation initially assigns slots, increases in demand on an unserved route or declines in the financial health of a given airline may make slot transfers economically sensible. But such sensible transfers would be illegal under the act.
The Department of Transportation is exacerbating the act's deficiencies by planning to give away permanent rights to the valuable new slots to airlines that it deems worthy. DOT's plans have the flavor of a free giveaway to big business. Why not instead capture the slot values through an auction similar to the Federal Communications Commission's successful auctions for new licenses to use the radio spectrum?
An auction of the new slots would let economics determine routes. The act already requires some of the new flights to go to small cities. Of the 12 new slots for short-distance flights from Reagan, four will go to small hub and non-hub airports and eight to medium-hub and smaller airports. Given this statutory protection of service to small cities, there is no policy rationale for DOT to have complete discretion to choose which airlines should fly which routes.
An auction could also help to control the growing problem of congestion. Under the new policy, airlines can schedule their flights with few restrictions. Such scheduling will exacerbate crowding of airways, runways and terminals. Auctions of slots for specific flight times can alleviate these difficulties and ensure that airlines that increase use of capacity at peak times pay for the privilege instead of having everyone pay with increased delays.
Given the statutory limitations on trading of slots, DOT should auction leases to the slots so they are regularly reassigned to their best use. An auction would reduce wasteful lobbying, generate federal revenue and avoid free gifts of valuable slots to large corporations. DOT should auction the new airline slots to ensure that airlines and communities that put the highest value on air travel are most likely to get them.

Randall Lutter is a scholar at the AEI-Brookings Joint Center for Regulatory Studies.

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