After breaking up the American Airlines – JetBlue partnership which competed against Delta Air Lines, Delta sees a clear path to dominating in the Northeast. That’s bad for airfares and consumer choice. Now the government has taken another step to limit choices and raise fares.
- The FAA continues to fail to staff air traffic control
- So they’re telling airlines they don’t have to fly to keep their slots
- Airlines get to squat on government-subsidized permission to fly to and from congested airports, not flying but blocking other airlines from flying
By reducing the number of flights and seats in the market, while holding demand constant, airfares rise. That’s literally the anti-consumer policy of the U.S. Department of Transportation, which benefits airlines at the expense of passengers.
The FAA is allowing airlines to keep their New York slots without actually using them through October 27, 2024. The reason is lack of air traffic controllers. The government’s air traffic organization fails to hire; lacks sufficient flexibility to pay high enough wages in the New York market; takes a year to process transfers; and has largely walked away from the idea of remote towards that would minimize the need to have employees physically in the area of airports.
- The government has subsidized incumbent airlines giving them exclusive rights to fly out of an airport.
- New entrants who wish to offer service to customers can’t.
- And now the airlines with the right to fly (granted for free, and a transferable property right – they can sell the asset!) are allowed to just use those to block competitors from offering service, without offering service themselves.
This is insane.
With the FAA extending their slot waivers for New York, American Airlines – which had at least its third strategy of partnering with JetBlue trounced in court – doesn’t have to get its act together in the market for a year. They won’t even have to operate their use it or lose it ‘slot squatting’ flights.
Meanwhile, United Airlines has already announced the suspension of several Newark routes from the start of 2024 through end of March (and there’s a good chance of further suspension).
- Newark – Memphis which is currently twice daily
- Newark – Sacramento which is currently daily
- Newark – Kansas City which is currently twice daily
Newark airport isn’t FAA level 3, which means that slots cannot be sold or leased. Instead of property rights to specific takeoff and landing times, as a level 2 airport airlines submit schedules to the FAA and approves them giving priority to those who had already been operating flights in the previous season. Slot flexibility allows United not to fly and still keep its priority (preventing others from entering the market).
The slot system is insane. There are several better approaches than giving slots to airlines for free. For instance,
- Congestion pricing. Charge airlines a fee that increases with the desire to operate flights, so that the airlines willing to pay the most can fly. This means that for the most part you get the most profitable flights, demanded most by passengers, at the most peak times. (Politically you’d have a problem with losing smaller city flights at peak times.)
- Lease slots for 5 year periods. The airlines have to pay for the right to operate, and they don’t get it permanently. Airlines that are underutilizing slots wouldn’t keep them forever. They’d go to airlines willing to bid the most for a short period of time, instead of forever. The airport and local government gets the excess value here, instead of gifting it to the airline.
“Schedule facilitation” where the FAA lets existing airlines continue to fly to the exclusion of new entrants, and is in the middle of deciding who else can fly, is equally insane. Granting permanent rights, whether transferable or not, means that government-owned airports are being used for the benefit of entrenched interests rather than the public interest. It’s time to end this system, though as a result of regulatory capture by the airlines that seems unlikely.