FAA Endorses Airlines Raising Prices, Limiting Flights In New York

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.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. The NYC area has insufficient capacity so the FAA should lease slots to those who carry the most passengers. The bottom performing slots should be entered into a lottery of those wanting to provide service.

    If there’s a desire to provide service to small cities then there could be a small subset of slots to cities within 350 mi.

  2. It’s hard to make the FAA the boogie man in all of this. They do bear some responsibility, but not all. Let’s be clear, the airlines are doing part of this to themselves. Maybe they should discipline themselves from wasting slots on smaller aircraft on routes that are feeding connecting traffic.

    For example, UA flies MDT-EWR. Very few people fly point-to-point from Harrisburg to the NYC metro area. They drive or take the train. The MDT-EWR route is mainly for connection. EWR shifted MDT-IAD to EWR to “improve connections.” Maybe use the underutilized asset that is IAD for hub and spoke flights and emphasize EWR for NYC traffic +/- TATL connectivity. Every RJ used into and out of NYC contributes to the congestion in the airspace.

    This said, for DECADES the FAA has been asking Congress to appropriate the funds to invest in next-gen ATC. The current issues in NYC airspace are a technology issue as much as a staffing issue. Next-gen ATC not with AI technology would greatly enhance the productivity of every ATC staff member without compromising safety.

  3. I agree that the slot system is unfair, and under normal circumstances would also agree that allowing airlines to squat on slots is anticompetitive.

    But- in this case isn’t the whole point to reduce flights because there is enough ATC capacity to fly a full schedule without delays?

    It in that regard it feels the same as Heathrow, they’re just allowing airlines to cap themselves rather than imposing a cap.

  4. several major points
    1. Slots have been treated not just in the US but throughout the world as rights which airlines may use generally without cost as long as they meet the requirements of using them. Radio frequencies are licensed differently than slots and the free market locks out smaller players because of the ability of larger players to outbid but that system is not used for slots. The US handling of slots is generally in line with global aviation norms. There would be major implications if the US decided to change the process now.
    2. There are just 3 remaining federally slot controlled airports and the race to control them has largely been finished. American and USAirways as its predecessors as well as United and Continental both had large slot portfolios in NYC and WAS and have made numerous strategic mistakes t,hat have handed the largest slot portfolio in the US to Delta which has played by the rules and has sought every opportunity to grow.
    3. The US has provided abundant opportunities – far more so than in other parts of the world – for low cost carriers to access highly coveted airports. In many cases, those airlines have simply not run good businesses which is what we are seeing with B6 at JFK even before the whole fiasco with the NEA involving both AA and B6.
    4. The outcome of the B6 and NK merger has major implications for slot controls if only because B6 is such a large slot holder for an LCC and has tried to figure out how to get its merger through at the cost of rearranging the low cost carrier segment in the NE.

    and, yes, the FAA needs to get people trained. Extending slot exemptions through next summer says there will be minimal improvement by next summer.

  5. @Tim Dunn – that other countries mirror these bad practices, having succumbed to regulatory capture, makes it worse not better (slots need to be abolished abroad not just here, and then we also need to look at how government-owned airports manage access to gates).

  6. @Peter – I keep writing about the moves FAA needs to make to address ATC deficiencies as well.

    They’ve been a disaster for two decades, people are just realizing it, and sadly not doing anything about it other than limiting flying and accepting mediocrity from the agency.

  7. The FAA should have to defend itself in a Sherman Antitrust lawsuit. It has definitely gone over to the monopolist side and is no longer acting in the public’s best interest. Maybe the slots could be monetized. A minimum of so many landing fees every day whether they are being used or not. No use short changing the airports for this action.

  8. The FAA is more concerned about having proper diversity in the ATC realm. Qualifications be damned.

  9. @jns I would love to understand more about the basis of your position. Can you share some examples of how the FAA has gone astray along with the data to support your POV?

    My impression is that the FAA has found itself where it is after decades of bipartisan neglect. My sense is they know what the need but have not been allocated the resources to implement necessary changes.

    If I’m mistaken I would value being corrected.

  10. Gary,
    regardless of whether the system makes sense or not, it is the way slots are handled worldwide.

    And the problem is not that is access for low cost carriers at slot controlled airports but that many of the airlines that have received those slots can’t manage to do a good job of using them.

    And the problem w/ capacity in the NE has nothing to do with what slots the airlines use or how they are allocated but because of understaffing by the FAA.

    I know you love to throw everything you can into a topic to try to stimulate conversation but the slot allocation process is not the reason that the FAA has extended slot exemptions.

  11. Who do you think lobbied for the slot waivers, airlines. Why reduce supply, increase demand, raise prices, and most importantly find a scapegoat for their lack of staff in NY and system wide.
    We have yet to see a staffing recovery from Covid in the airline industry and the ATC staffing issues in NY have been prevalent since 1981. Nextgen navigation is not going to make the slot system go away. JFk and LGA slots are due to runway capacity and no amount of satellites are going to solve that problem.

  12. I am not an expert on the airline slot system. It doesn’t exist in any other industry, does it? Is this one of those four-dimensional checkers intellectual games. The more I try to understand it, the more it seems like the Soviet Union, which benefitted the elite party hacks, and was good for the country residents whether they liked it or not. Can’t they just build another airport?

  13. At the same time the DOJ unwinds the NE alliance claiming that it would reduce flights and increase ticket prices! This administration is truly hopeless.

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