Slot auctions coming to all 3 NYC-area airports

updated 5:01 p.m. ET May 16, 2008

WASHINGTON - Slot auctions designed to reduce delays nationwide and increase competition are coming to John F. Kennedy International Airport in New York and Newark Liberty International Airport in New Jersey, the government said Friday.

The Transportation Department also said the government and industry must improve procedures for complying with maintenance and safety rules to avoid massive flight cancellations, like those that left hundreds of thousands of passengers stranded last month when American Airlines and other carriers had to ground MD-80 jetliners to inspect or redo wiring. Those inspections were supposed to have been completed in March.

The White House, which demanded action after last summer's record delays, lauded the announcement made just a week before one of the busiest traveling holidays. But the airline industry and some critics said the effort will do little to ease delays — and the Air Transport Association threatened legal action to ground the plan.

The department last month announced similar slot auctions for New York's LaGuardia Airport that will require carriers to auction off some of their existing slots over the next five years and possibly retire others. The three New York-area airports, all of which will soon have flights capped during peak hours, last year had the nation's lowest on-time arrival rates. Aviation officials say delays there cascade throughout the system.

Under the latest proposals from DOT Secretary Mary Peters, all airlines operating at Newark and JFK would be given as many as 20 daily slots for the 10-year life of the rule.

Under one option at JFK, 10 percent of the airline's slots above the base amount would be made available via an auction, the carriers could bid on their own slots and proceeds would be invested in congestion and capacity improvements in the region. Or the airlines would auction 20 percent of slots above the baseline and keep all the proceeds. Depending on the option, up to 179 slots of the airport's 1,245 could be affected.

The plan also calls for auctioning 10 percent of slots at Newark above the baseline annually for the first five years of the rule, making 96 slots out of 1,219 at the airport auctioned over the 10-year span.

The ATA, which represents the nation's largest airlines, and the International Air Transport Association said the government lacks the legal authority to impose the auctions.

The Port Authority of New York and New Jersey, which runs all three airports, isn't convinced auctions are the remedy to delay and said it will work with the industry "to examine our options for prohibiting the federal government from implementing" the plan.

If the airlines sued, they would not get an injunction because proving "irreparable harm" when finances are involved is very difficult, said DOT General Counsel D.J. Gribbin. The government would still conduct the auctions and then "see what the courts decide," he added.

Analysts said the rules could raise fares since the nation's largest carriers control most of the slots at those airports and don't want to lose or sell them.

Peters disagreed and said the department was making the proposal because economists estimate that fares drop by more than 30 percent when new airlines enter a market. The department will accept comments on the new proposal for the next 60 days before a final rule is issued. Federal officials said auctions at the airports should begin by early next year.

After reviewing reports from the government and AMR Corp.'s American Airlines about the grounded MD-80s, with each side placing some the blame on the other, Peters said the FAA and the airlines must improve procedures for requesting and approving alternative solutions for safety directives, and review existing communication rules to ensure "significant safety decisions are made using a clearly documented process."

The reports were not requested to assess blame or second-guess FAA safety assessments, but to gather suggestions for creating an unambiguous process that more clearly defines compliance, federal officials said in a conference call with reporters.

Elsewhere, the department will begin requiring airlines and travel agents to disclose fees for checking a second bag in their online and print ads, and before anyone buys a ticket. As carriers struggle to offset surging prices for jet fuel, many have raised ticket prices and started charging extra fees for checking baggage.

Airlines must also report new and complete data on the time passengers spend on the tarmac, an issue that gained prominence after two winter weather-related incidents in recent years when hundreds of passengers were stuck on the tarmac for up to 10 1/2 hours.

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