FAA Will Continue To Protect Incumbent Airline Slots At The Most Congested Airports

At many congested airports a ‘slot’, or limited number of permissions, is required to take off and land. Generally airlines have slots granted in perpetuity by government and these become properties rights that they can buy, sell, and trade.

However if they don’t use the slots they have at least 80% of the time, they can lose them. That’s why you get ‘ghost flights’ or planes taking off and landing without passengers, just to squat on slots. It’s why American used to run several New York JFK – Baltimore flights a day.

With the global pandemic these slot rules have largely been waived. Airlines can keep their slots without flying, since there isn’t the usual passenger demand. European waivers are extending through winter and now the U.S. Department of Transportation proposes to do the same.

  • Relief will apply to the country’s three slot-controlled airports New York’s LaGuardia, New York JFK, and Washington National Airport.

  • It will also apply to scheduled-facilitated airports Newark, Los Angeles, Chicago O’Hare and San Francisco.

  • The FAA wants airlines to let other carriers who want to provide service use slots temporarily while otherwise not in use.


Washington National Airport Historic Terminal

Granting use of congested airports and airspace by governments, for free, to existing airlines is a huge subsidy. CARES Act money has been in the news a lot. Airline tax abatement hasn’t received as much attention. And certainly the subsidies of government granting permanent property rights in the ability to serve a high demand congested airport gets insufficient coverage – and the government’s move to continue to protect those property rights during the pandemic.

These shouldn’t be perpetual property rights – instead offering leases for a defined period of time, and then re-marketing the slots as leases run out. That’s if you maintain a slot regime at all, even though they’ve been shown not to reduce delays.

Slots need to be freed. Government-granted airline privileges are a driver of industry consolidation. The primary reason Alaska Airlines acquired Virgin America was for access to gates and slots at congested airports. Badly run carriers, that provide poor passenger experience, are protected from market discipline because more innovative startups aren’t permitted to compete and incumbents can continue earning off inferior products because passengers lack other options.

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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Comments

  1. An interesting analysis would be how an airport can get rid of slots without an expansion. How would they manage all the demand?

  2. @Jack – If you auctioned off slots on a rotating 10 year basis, the prices paid would help regulate demand. If someone wants to fly into a prime slot-constrained airport it would just cost more than a less convenient airport because the airline had to pay big bucks for the landing slot. Consumers would vote with their wallets. That wouldn’t negate the need for expansion but with particularly if you add in factors like really good rail links from a more distant airport, it should be viable.

  3. @gary

    I skimmed the linked paper about efficacy of slot controls on flight delays. You write, “That’s if you maintain a slot regime at all, even though they’ve been shown not to reduce delays.”

    You way over generalized the author’s findings, to the point where your written summary is pretty much flat out wrong, and that’s even if the author’s findings are defendable.

    First, what the author concluded was that “slot controls in effect at JFK and EWR in the summer of 2008 were not effective at reducing delays compared to 2007 levels.”

    You simply cannot extrapolate the analysis of two airports for one summer and claim that “slot controls are ineffective at reducing delay.”

    Three things here with regard to the author’s methodology:

    1. This was published in 2019 using 2007 and 2008 data. Data that old is almost irrelevant 13 years later.

    2. NY Metro delays in the summer are primarily driven by off-field convection shutting down enroute airspace. Slot controls set months in advance are going to do jack for managing your summertime thunderstorm delays.

    3. One can’t make generalized statements from one season’s worth of data. It just can’t be done (defendably).

    Finally, slot controls can be effective if they’re set at the right rates. If you slot control an airport at a higher rate than it can effectively deliver, then the slot controls won’t do anything. If you set the rates at a level at or below what the airport can deliver, then they will work.

    You love to tout the efficacy of European air traffic control and push privatization of the US system “Because Europe does it.” Europe also slot controls the heck out of their airports — the UK alone has 18 slot controlled airports, and Europe has close to 200 (source: IATA).

    As for slot controls in general — that’s a political question. The free market approach is to take them all away and then let the airlines fight it out themselves. More flights = more delay, less flights = less delay, and we don’t need a bunch of “studies” to prove that.

  4. I support slot controls if they are well calibrated in such a way that they optimize capacity and minimize delays. Whether their cost should be through direct fees or opportunity costs, I’m undecided on.

    More airports that experience significant congestion and refuse to make needed capacity investments – such as SFO – should be subjected to FAA’s full-tier slot controls as well.

    As for “innovative new market entrants”, in theory they might be innovative. But in practice, they tend to just be no-frills, race-to-the-bottom cherry pickers whose “best accomplishments” are stranding passengers, abandoning routes on short notice, and taking no responsibility to provide service to smaller communities, to name a few.

    The current approach of the FAA is the right one – protect the slots, but allow any interim usage of vacant slot to anyone who wish to serve them.

    Thank you Gary for bringing up this excellent subject.

  5. If slots are property rights, wouldn’t Coasean bargaining take place giving the same result as when those slots weren’t granted? If the grantees couldn’t make best use of them, they would just sell/lease them to whoever could.

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