[Federal Register: August 29, 2006 (Volume 71, Number 167)]
[Rules and Regulations]
[Page 51381-51404]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29au06-14]
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Part IV
Department of Transportation
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Federal Aviation Administration
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14 CFR Part 93
Congestion and Delay Reduction at Chicago O'Hare International Airport;
Final Rule
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 93
[Docket No.: FAA-2005-20704; Amendment No. 93-85]
RIN 2120-AI51
Congestion and Delay Reduction at Chicago O'Hare International
Airport
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
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SUMMARY: The FAA is adopting regulations to address persistent flight
delays from overscheduling at O'Hare International Airport (O'Hare).
This final rule is intended to be an interim measure only, and the FAA
anticipates that the rule will yield to longer term solutions to
traffic congestion at the airport. Such solutions include plans by the
City of Chicago to modernize the airport and reduce levels of delay,
both in the medium term and long term. For this reason, the final rule
includes provisions allowing for the limits it imposes to be gradually
relaxed, and in any event the regulation will sunset in 2008.
DATES: This amendment becomes effective October 29, 2006. Affected
parties, however, do not have to comply with the information collection
requirements in Sec. Sec. 93.23, 93.25, 93.27, 93.28, 93.29, 93.30,
93.31, and 93.32 until the FAA publishes in the Federal Register the
control number assigned by the Office of Management and Budget (OMB)
for this information collection requirement. Publication of the control
number notifies the public that OMB has approved this information
collection requirement under the Paperwork Reduction Act of 1995.
FOR FURTHER INFORMATION CONTACT: Dr. Jeffrey Wharff, Office of Policy
and Plans, APO-200, Federal Aviation Administration, 800 Independence
Avenue, SW., Washington, DC 20591; telephone (202) 267-3274.
SUPPLEMENTARY INFORMATION:
Availability of Rulemaking Documents
You can get an electronic copy using the Internet by:
(1) Searching the Department of Transportation's electronic Docket
Management System (DMS) Web page (http://dms.dot.gov/search); Visiting the Office of Rulemaking's Web page at http://www.faa.gov/
avr/arm/index.cfm; or
Accessing the Government Printing Office's Web page at http://www.gpoaccess.gov/fr/index.html
.
You can also get a copy by sending a request to the Federal
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence
Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make
sure to identify the amendment number or docket number of this
rulemaking.
Anyone is able to search the electronic form of all comments
received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act statement in the Federal Register published on
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit
http://dms.dot.gov.
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996 requires FAA to comply with small entity requests for information
or advice about compliance with statutes and regulations within its
jurisdiction. If you are a small entity and you have a question
regarding this document, you may contact your local FAA official, or
the person listed under FOR FURTHER INFORMATION CONTACT. You can find
out more about SBREFA on the Internet at http://www.faa.gov/avr/arm/sbrefa.cfm
.
Authority for This Rulemaking
The FAA has broad authority under 49 U.S.C. 40103 to regulate the
use of the navigable airspace of the United States. This section
authorizes the FAA to develop plans and policies for the use of
navigable airspace and to assign the use we deem necessary to its safe
and efficient utilization. It further directs the FAA to prescribe air
traffic rules and regulations governing the efficient utilization of
the navigable airspace. The FAA interprets this broad statutory
authority to encompass management of the nationwide system of air
commerce and air traffic control.
In addition to the FAA's authority and responsibilities with
respect to the efficient use of airspace, the Secretary of
Transportation is required to consider several other objectives as
being in the public interest, including: Keeping available a variety of
adequate, economic, efficient, and low-priced air services; placing
maximum reliance on competitive market forces and on actual and
potential competition; avoiding airline industry conditions that would
tend to allow at least one air carrier unreasonably to increase prices,
reduce services, or exclude competition in air transportation;
encouraging, developing, and maintaining an air transportation system
relying on actual and potential competition; encouraging entry into air
transportation markets by new and existing air carriers and the
continued strengthening of small air carriers to ensure a more
effective and competitive airline industry; maintaining a complete and
convenient system of scheduled air transportation for small
communities; ensuring that consumers in all regions of the United
States, including those in small communities and rural and remote
areas, have access to affordable, regularly scheduled air service; and
acting consistently with obligations of the U.S. Government under
international agreements. See 49 U.S.C. 40101(a)(4), (6), (10)-(13) and
(16), and 40105(b).
Background
On March 25, 2005, the FAA published a notice of proposed
rulemaking (NPRM) (70 FR 15521) which would limit the number of
scheduled arrivals at O'Hare during peak operating hours and establish
an allocation system, including transfer and usage requirements.
Since publishing the NPRM in March 2005, the FAA twice has extended
the Order published in August 2004 that set operation limits on
domestic and Canadian scheduled arrivals into O'Hare International
Airport. The Order most recently was extended to October 29, 2006,
which coincides with the effective date of this rule (71 FR 16405;
March 31, 2006).
History
The High Density Traffic Airports Rule at O'Hare
Until July 2002, the FAA managed congestion and delay at O'Hare by
means of the High Density Rule (HDR), which was codified in 14 CFR part
93, subpart K. The FAA adopted the HDR under its broad authority to
ensure the efficient use of the nation's navigable airspace (49 U.S.C.
40103). The HDR took effect in 1969, and while it originally was a
temporary rule, it became permanent in 1973.
The HDR established limits on the number of all take-offs and
landings during certain hours at five airports, including O'Hare. In
order to operate a flight during the restricted hours, an airline
needed a reservation, commonly known as a slot. Slots were initially
allocated through scheduling committees, operating under then-
authorized antitrust immunity, where all the airlines would agree to
the allocation. After the Airline Deregulation Act in 1978, new entrant
[[Page 51383]]
airlines formed and the pre-existing, or legacy carriers, sought to
expand. This increased competition made it increasingly difficult for
airlines to reach agreement, and the scheduling committees began to
deadlock.
In 1984, the FAA amended the HDR to increase the hours in which
limitations at O'Hare would apply and to increase the number of take-
offs and landings permitted at that airport (49 FR 8237, March 6,
1984). The next year, a new Subpart S was added to Part 93 that
established allocation procedures for slots including use-or-lose
provisions and permission to buy and sell slots in a secondary market
(50 FR 52195, December 20, 1985). These procedures replaced the
scheduling committees.
Statutory Changes Ending the High Density Rule at O'Hare
In 2000 Congress relaxed the slot rules at the high density
airports and phased out the specific regulations then in place at three
of them, including O'Hare (49 U.S.C. 41715, 41717). With respect to
O'Hare, Congress directed that:
(1) Beginning May 1, 2000, exemptions be granted to airlines to
provide air service to small airports with 70-seat or smaller aircraft;
(2) 30 slot exemptions be granted to new entrant or limited
incumbent air carriers;
(3) After May 1, 2000, slots no longer be required to provide
international air service;
(4) Beginning July 1, 2001, the slot control restrictions be
limited to the period between 2:45 p.m. and 8:14 p.m.; and
(5) Slot restrictions be lifted entirely after July 1, 2002.
In phasing out the HDR, however, Congress recognized the
possibility that there could be an increase in congestion and delays at
the affected airports. Therefore, in the section that phased out the
rule, it made clear that ``[n]othing in this section * * * shall be
construed * * * as affecting the Federal Aviation Administration's
authority for safety and the movement of air traffic.'' (49 U.S.C.
41715(b).)
Resurgence of Unacceptable Levels of Congestion
As a result of the 2000 legislation, the slot restrictions of the
HDR lapsed at O'Hare as of July 1, 2002. The absence of these
restrictions allowed airlines operating at the airport to add flights,
which over time led to a dramatic increase in airline delays. These
delays reverberated throughout the national air transportation system.
Initially, lifting the HDR had a minimal impact on delays due to
the lingering effects of the 9/11 terrorist attacks on airline
passenger traffic. But by 2003, the two air carriers operating hubs at
O'Hare, American Airlines (``American'') and United Airlines
(``United''), had added a large number of operations and retimed other
flights, resulting in congestion during peak hours of the day. From
April 2000 through November 2003, American increased its scheduled
operations at O'Hare between the hours of 12 p.m. and 7:59 p.m. by
nearly 10.5 percent. Over the same period, United increased its
scheduled operations at O'Hare by over 41 percent.
The increases in operations by American and United did not result
in a corresponding increase in seat capacity. During the peak period,
these two carriers added 375 regional jet operations per day. Overall,
American and United added over 600 regional jet operations per day. At
the same time as they added regional jet operations, they reduced
mainline jet operations. The result was actually a decrease in seat
capacity by each carrier at O'Hare of more than 5.5 percent from April
2000 to November 2003 while flights increased by an average of 150 per
day. In November 2003, more than 40 percent of American's and United's
O'Hare flights were operated with regional jets, many to large and
medium hubs. The significant increases in scheduled operations during
this time period resulted in excessive delays and congestion at O'Hare.
By November 2003, O'Hare had the worst on-time performance of any
major airport. O'Hare arrivals were on time only 57 percent of the
time, well below the FAA goal of 82 percent. Departures were little
better. They were on time only 67 percent of the time, well below the
average of 85 percent at other major airports. These delays averaged
about an hour in duration. Published schedules for February 2004
indicated that the problem would be exacerbated by the addition of even
more flights.
Recognizing congestion was again becoming a significant issue,
Congress enacted legislation that included a mechanism to help reduce
delays and improve the movement of air traffic at congested airports
(49 U.S.C. 41722). That statutory provision authorized the Secretary of
Transportation (Secretary) to request that scheduled air carriers meet
with the FAA to discuss flight reductions at severely congested
airports to reduce over-scheduling and flight delays during hours of
peak operation, if the Administrator determines that it is necessary to
convene such a meeting and the Secretary determines that the meeting is
necessary to meet a serious transportation need or achieve an important
public benefit.
In early 2004, the Secretary and the FAA Administrator determined
that a schedule reduction meeting was necessary to deal with
congestion-related delays at O'Hare. Before such a meeting could be
convened, however, United and American each agreed in separate
discussions with agency officials to reduce their scheduled flights
voluntarily. Accordingly, the schedule reduction meeting was deferred.
Instead, the FAA issued an order implementing the voluntary agreement
of the two air carriers, Docket FAA-2004-16944-55; 69 FR 5650 (2004).
The FAA order required a 5 percent reduction in the two carriers'
scheduled operations. This reduction was to be effective between 1 p.m.
and 8 p.m. for six-months, beginning no later than March 4, 2004.
The FAA again reviewed O'Hare's on-time performance in March 2004
in light of the ordered schedule reductions. That review showed that
the total delay minutes would have been as much as 30 percent higher
without the reductions but that delays still remained more than double
the level of a year earlier and represented more than a third of the
total delays in the national airspace system.
In light of the continued problems at O'Hare, the agency officials
again discussed the situation with American and United to consider
additional flight reductions to improve on-time performance at the
airport. As a result, on April 21, 2004, the FAA issued an amendment to
the previous order in Docket FAA-2004-16944. This amendment required
additional flight reductions. Specifically, beginning no later than
June 10, 2004, it required (1) An additional schedule reduction of 2.5
percent of each carrier's total operations in the 1 p.m. through 7:59
p.m. hours including arrival reductions during specific times; (2) a
reduction in the number of scheduled arrivals in the 12 p.m. hour; and
(3) reductions to continue through October 30, 2004.
Prior to the implementation of the June flight reductions, delays
at O'Hare continued. In May, there were a record 14,495 total delays.
While the numbers in June and July improved, as the last round of
cutbacks by American and United took effect, the FAA determined that
the overall trend of delays remained unacceptably high.
Meanwhile, some airlines that were not party to the agreement
involving American and United continued to add
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flights, making it unlikely that those two carriers would extend their
voluntary schedule reductions without similar commitments by other
carriers. Published schedules for November indicated that during
several times of the day scheduled arrivals would approach or exceed
the airport's highest arrival capacity. Accordingly, in July, the
Secretary and FAA Administrator determined that the scheduling
reduction meeting that had previously been deferred now needed to be
held (69 FR 46201, August 2, 2004).
The meeting between DOT and the carriers convened on August 4,
2004, and was followed by meetings between Federal officials and
individual airlines. As a result, United and American agreed to
reschedule and further reduce scheduled arrivals by about 5 percent
during peak hours and other airlines agreed to some flight re-timings
and not to increase the number of their scheduled arrivals. New
entrants and limited incumbents were permitted to add a small number of
scheduled flights. Based on the information provided through the
meetings and submissions filed in the docket, the FAA issued a
comprehensive order on scheduled arrivals at O'Hare on August 18, 2004,
limiting scheduled arrivals by U.S. and Canadian air carriers to 88
during most hours of the day and implementing the above agreement
(August 2004 Order). The Order took effect November 1, 2004, and was to
expire on April 30, 2005. The FAA extended this Order on three separate
occasions to permit full consideration of the issues and comment on the
NPRM.\1\ On each occasion the agency sought the views of interested
persons on the advisability of extending the August 2004 Order in
Docket FAA-2004-16944. As indicated in the October 2, 2005, extension
of the Order, significant operational benefit has been achieved since
the voluntary schedule reductions took effect on November 1, 2004. The
subsequent extensions of the Order were necessary to maintain the
scheduling limits set in August 2004 and achieve delay--reduction and
operational benefits pending completion of this rulemaking.
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\1\ See 71 FR 16405, March 31, 2006; 70 FR 59798, October 13,
2005; and 70 FR 15540, March 25, 2005.
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Related Activity
On July 8, 2005, the FAA published in the Federal Register Special
Federal Aviation Regulation (SFAR) 105, ``Reservation System for
Unscheduled Operations at Chicago's O'Hare International Airport,'' (70
FR 39610). This SFAR limits unscheduled arrivals at the airport to four
per hour and provides an allocation mechanism for operators to obtain
reservations for those operations. SFAR 105 was extended through March
31, 2006 (70 FR 66253).
On September 30, 2005, the FAA issued the Record of Decision for
O'Hare Modernization providing final agency determinations and
unconditional approval of the revised Airport Layout Plan and other
certain Federal actions by the FAA necessary for the proposed
improvement of O'Hare, as provided in Alternative C presented to the
agency (the O'Hare Modernization Plan and other components of the
City's Airport Master Plan.). The O'Hare Modernization Plan (OMP)
provides for certain capacity enhancement actions to result in new
capacity by 2008.
Phased implementation of the OMP will provide incrementally
increasing operational benefits. The FAA's analysis projects that the
addition of the first new OMP runway will, by 2008, allow the airfield
to accommodate over 50,000 additional forecast operations with an
average annual delay per aircraft no higher than exists today. With the
completion of Phase 1 of the OMP, the FAA's analysis projects that the
airfield will accommodate, by the 2010 time frame, approximately 90,000
additional forecast operations (over today's activity level) with a
decrease in average annual delay per aircraft of approximately 33%
below today's delay per aircraft at O'Hare. Finally, with the
completion of OMP Phase 2 in 2013, the FAA's analysis projects that the
airfield will accommodate approximately 1.12 million annual forecast
operations (an increase of more than 140,000 annual operation over
today's activity level) with an average annual delay per aircraft
nearly 70% below today's delay per aircraft.
Summary of Comments
The FAA published the NPRM, ``Congestion and Delay Reduction at
Chicago O'Hare International Airport,'' on March 25, 2005. The comment
period closed on May 24, 2005. During that period, we received 22
comments from interested parties including airlines, industry
organizations, individuals, members of Congress and the City of Chicago
(City). We also received five additional comments after the close of
the comment period.
In the NPRM, we requested comment on several specific aspects of
the proposed rule, as well as any general comments. Comments to the
NPRM are addressed below by topic. Only one commenter supported the
proposal entirely; he is a student and pilot.
Overall, most commenters agreed that before the recent schedule
reductions at O'Hare, congestion and delays had become intolerable.
Some clearly disliked the proposal and questioned whether less
intrusive methods were available to address short-term congestion and
delay. Nearly all commenters agreed that governmental limits on flights
are not the preferred approach and increasing air traffic capacity at
O'Hare is the best way to solve the problem of congestion and delays.
Some commenters suggested that the Order only accomplished what market
forces ultimately would have dictated carriers to do if given
appropriate time.
Comments expressing concern that the NPRM amounted to a
reimposition of the HDR were received from Senators Richard Durbin and
Barack Obama, and Representatives Dennis Hastert, Jesse Jackson, Jr.,
Jerry Costello, John Shimkus, Jerry Weller, Melissa Bean, Danny K.
Davis, Henry Hyde, Judy Biggert, Timothy Johnson, Daniel Lipinski, Luis
V. Gutierrez, Lane Evans, Bobby L. Rush, Rahm Emanuel, Mark Kirk, and
Donald A. Manzullo (Members of Congress). The Members did not oppose a
short-term limit on flights, with certain modifications, provided that
the rule sunset (as proposed) no later than April 2008.
Expiration of the August 2004 Order (No Further Governmental Action)
We questioned in the NPRM whether the limitations established in
the August 2004 Order should be allowed to expire of their own accord
with no governmental intervention to address the operational
environment at the airport. Under this approach, carriers would be free
to determine the number and timing of flights at O'Hare.
The Department of Justice (DOJ) and the Air Carrier Association of
America (ACAA) objected to allowing the Order to expire with no
mechanism in place to manage demand at O'Hare. DOJ argued that allowing
the Order to expire with no plan in place to deal with the airport's
limited capacity would lead to more congestion and significant delays
for passengers throughout the country. ACAA contended that both
American and United would add flights to block competition at any cost
and that smaller carriers have fewer options to cancel flights or re-
route passengers through other airports and consequently suffer
disproportionate delays.
The City argued the opposite. The City requested that the FAA
accelerate the OMP approval process, allow the Order to expire, and let
free market forces manage flight levels. The City
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also countered that the airlines have learned their lesson from past
overscheduling and are not likely to repeat that practice. However, if
delays were to reach unacceptable levels again, the City suggested that
the FAA negotiate a new temporary scheduling agreement like the one
that resulted in the August 2004 Order. The Airports Council
International-North America (ACI-NA) supported the comments filed by
the City.
The FAA has determined that a rule limiting arrivals at O'Hare is
necessary. After the phase-out of the HDR at O'Hare, carriers had the
opportunity to add flights and adjust schedules as they saw
appropriate, which resulted in extensive delays for all operators at
O'Hare and wide-ranging effects on the NAS. In contrast, since the
limits on scheduled and unscheduled arrivals took effect on November 1,
2004, air traffic delays have decreased and on-time arrival performance
has increased. Through October 2005, the average minutes of arrival
delay at O'Hare decreased by approximately 24 percent when compared to
the same 12-month period the year before. The longest arrival delays
lasting more than one hour have decreased by 28 percent. Overall, the
on-time arrival performance at O'Hare has increased by almost 7
percentage points. As a result, O'Hare is now performing near the
average of the rest of the major airports in the NAS, a dramatic
improvement from the airport's bottom-tier performance during much of
2004.
The FAA could permit the current scheduling limits to expire and
allow carriers to individually determine the number and timing of their
flights at O'Hare as advocated by some of the commenters. Safety would
be maintained through air traffic control (ATC) procedures and
congestion would be managed as needed through various traffic
management initiatives. However, based on the history of scheduled
demand, we forecast that flights would increase and that delays,
cancellations, and disruptions at O'Hare and other airports are likely
and would be unacceptable to the industry and the flying public. As
indicated by the previous statistics, the limits imposed by the August
2004 Order have resulted in measurable reductions in delay. We are
mindful that other factors have contributed to the decrease in delay,
including additional flight reductions by some carriers beyond those
specified in the Order, and increased operational capacity in some
periods due to improved weather and other system efficiency gains.
We are not persuaded by the City's argument that the carriers at
O'Hare will be able to resist the short-term marketplace incentives to
add flights during peak hours, particularly if one or more of the hub
carriers significantly changes its schedule or the other carriers
introduce new service to O'Hare. Carriers typically respond to
competition by matching frequency and/or fares. At O'Hare, the hubbing
carriers have reduced flights significantly since November 2003, and if
the Order expired, might resume previous flight frequencies or enter
new markets to respond to other carriers' schedules.
In the event that flights were added and delays increased
significantly, we could initiate schedule discussion meetings similar
to the August 2004 discussions while continuing to manage delays on a
daily basis. This process, however, would be counterproductive to our
mandate to manage the use of the navigable airspace efficiently,
particularly since it is very likely that carriers would launch new
operations once the August 2004 Order expired. Furthermore, our ability
to secure a new voluntary schedule reduction agreement is at best
uncertain in view of the comments submitted in this rulemaking.
Consequently, we dismissed this option as a feasible solution.
American noted that other airports experience more delay than
O'Hare and that the FAA has not intervened there. American questions
why O'Hare was singled out for such action. United commented that the
operational limits at O'Hare, which is its primary hub, limit its
ability to increase operations for new market opportunities or high
passenger load factors.
The agency is addressing congestion at other delay prone airports.
A single approach to manage congestion and delay at all airports cannot
be realistically achieved at present. As articulated previously and
elsewhere in the document, the deteriorating situation at O'Hare had
impacts far beyond that airport. Delays at other airports on the other
hand, generally do not lead to delays throughout the nation's air
transportation system. Given the competitive stance of the major
carriers, we believe that it was unlikely to be solved without
government intervention. Our preference is to use whichever methods for
addressing congestion are best suited for a particular airport. These
methods may include increasing airport capacity and system
efficiencies, or in the case at O'Hare, addressing through regulatory
limits the impact of schedule adjustments by the largest operators at
the airport.
Extend the August 2004 Order
No commenter specifically recommended that we simply extend the
August 2004 Order until 2008. The City did suggest this action as an
alternative if the current Order were allowed to expire and operations
grew causing the airport to return to a critical state. DOJ stated that
this option would be better than doing nothing; but it would lead to
inefficient use of the airport's limited capacity and is not likely to
result in any significant new entry or expansion by smaller carriers.
After considering this option, we concluded that it would be
difficult to maintain the current agreement or negotiate yet another
voluntary schedule reduction agreement that would limit operations
until new airport capacity is in place. We agree with DOJ that while
the continuation of the Order would achieve the objective of limiting
overall operations at the airport, it would not necessarily result in
any new entry by smaller carriers for the duration of the proposal.
Also, this option would not necessarily promote the most efficient use
of the operating authorities at O'Hare, given that the existing Order
does not include provisions for usage, allocation, or market-based
transfer mechanisms.
Any future scheduling discussions would start with current
operational levels and the FAA's scheduling targets proposed for those
discussions would apply.\2\ As indicated in the comments, carriers of
all sizes have expressed a desire to expand their operations at O'Hare,
or at least preserve their option to grow. A scheduling meeting would
confront us with complex and controversial determinations as to which
carriers would have access to new capacity as it became available and
how any new capacity would therefore be allocated. This is a
complicated obstacle to overcome in the context of attempting to obtain
a voluntary agreement from competing air carriers.
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\2\ The City comments that each carrier could be returned to
November 2004 flight levels to ensure that there are not incentives
for carriers to overschedule. However, if the August 2004 Order
expires, we expect the target and the base schedules would be issues
during the negotiations.
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The FAA and the Office of the Secretary of Transportation are
continuing the evaluation of market-based mechanisms, such as auctions
or congestion pricing that may improve on prior methods of allocating
available capacity at constrained airports. This evaluation includes an
assessment of the research conducted by the
[[Page 51386]]
Department's contractor, National Center of Excellence for Aviation
Operations Research (NEXTOR),\3\ in conjunction with various air
carriers and the Port Authority of New York and New Jersey, on options
to manage demand at LaGuardia upon the expiration of the HDR at that
airport. A market-based approach represents a much longer-term option
that is not needed at this point in time at O'Hare, given the
expectation of capacity improvement through the OMP.
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\3\ NEXTOR is a consortium of universities contracted by the FAA
to research various aviation issues.
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As it would be unwise to let the limits simply expire, we find it
necessary to invoke our authority to manage the efficient use of the
navigable airspace and to impose peak hour scheduling limits at O'Hare
so as to prevent overscheduling given the airport's current capacity.
Even with the FAA approval of the OMP, there are no viable capacity
enhancement efforts (procedural or technological) expected during the
effective period of this rule that will result in sufficient capacity
gains to completely meet the airport demand experienced during 2003 and
2004. Moreover, the uniqueness of O'Hare (as a major, dual hub airport)
and its critical role in the National Airspace System (NAS) warrant
special attention and careful measures to manage operations at that
airport until new capacity comes on-line.
We stress that as a policy matter the Department promotes the
efficient utilization of existing system capacity and the development
of new capacity to meet aviation demand. We also prefer to address
operational and airport congestion issues on a local level with airport
operators and customers to the greatest extent practicable. This rule
provides a temporary regulatory solution necessary to maintain an
acceptable level of operations at O'Hare without congestion and delay
impacting the entire NAS.
Authority To Cap Arrivals at the Airport
America West and Continental opposed all government-imposed
restrictions on airport access. These carriers, along with others,
argued that the NPRM is contrary to Congressional intent in the Wendell
H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-
21), which phased out the slot regulations at O'Hare. They also argue
that as the HDR has been eliminated at O'Hare, the FAA may not
implement a rule that is substantially similar to the HDR.
In carrying out our plenary authority to manage the safe and
efficient use of the navigable airspace,\4\ we properly may impose
limits on flights at O'Hare to reduce delays and congestion. The HDR,
which was also promulgated under this authority, addressed delays and
congestion at five main airports.\5\ While AIR-21 provided for the
termination of the HDR at O'Hare and the New York airports, it also
included a proviso that the FAA's ``authority for safety and the
movement of air traffic'' was not to be affected by the phase out and
termination of the HDR at O'Hare \6\ or other HDR airports. There is no
indication that Congress intended to narrow the FAA's authority to
manage the use of the navigable airspace or to prohibit its use of this
authority at O'Hare. AIR-21 by its terms only terminated the HDR then
in place and did not restrict the FAA's authority to regulate the use
of the airspace. The legislative history to the House version of AIR-21
(H.R. 1000), 106th Cong., Rpt. 106-167 indicates Congress' intent
simply to place O'Hare on the same ``playing field'' as other airports.
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\4\ 49 U.S.C. 40103.
\5\ 33 FR 17896; December 3, 1968.
\6\ 49 U.S.C. 41715(b)(1).
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Since AIR-21 the FAA has exercised its authority to manage the
efficient use of the navigable airspace by capping the flood of AIR-21
slot exemptions filed for LaGuardia Airport (in November 2000), and by
ordering schedule reductions in August 2004 at O'Hare.\7\ In Vision
100--Century of Aviation Reauthorization Act (Pub. L. 108-176),
Congress gave the Secretary and Administrator new authority to convene
industry-wide scheduling meetings at O'Hare and elsewhere; these
meetings, however, can only result in effective action if implemented
through orders limiting flight operations. This basis for this new
authority would not make sense if Congress had intended to take away
the Administrator's authority to restrict operations at O'Hare. In all
of these matters, as with the HDR in 1969, the agency was faced with
delays at certain key airports that transcended those airports and
disrupted the efficiency of the NAS. We conclude that the FAA retains
its full authority to adopt this rule limiting flights at O'Hare.
---------------------------------------------------------------------------
\7\ The schedule reduction meeting was convened under 49 U.S.C.
41722.
---------------------------------------------------------------------------
Operational Cap
The FAA proposed to limit the number of scheduled arrivals at
O'Hare to 88 per hour, between the hours of 7 a.m. and 7:59 p.m. Monday
through Friday and 12 p.m. and 7:59 p.m. Sunday.\8\ The limit on
scheduled arrivals would increase to 98 arrivals per hour in the 8 p.m.
hour, Monday through Friday. These are the same hourly quotas imposed
by the August 2004 Order. In setting the hourly arrival cap under the
Order and proposing the same for the NPRM, the FAA relied on analyses
of actual, weekday, hourly arrivals and departures at O'Hare in late
2003 and in 2004. (This is when scheduled demand at O'Hare was at its
peak and pressure on the ATC system to accommodate that demand is
reflected in actual airport hourly traffic counts.) We also relied on
analyses preformed by MITRE Corporation's Center for Advanced Aviation
System Development (CAASD), which ran computer modelling on behalf of
the FAA to simulate the effect of hypothetical schedule reductions on
the level of flight delays at O'Hare given the established air traffic
control procedures and airport capacity.\9\
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\8\ During this period, scheduled arrivals are not to exceed 50
during each half-hour beginning at 7 a.m. and ending at 7:59 p.m.
Scheduled arrivals are not to exceed 88 within any two consecutive
30-minute periods.
\9\ There were 89 arrivals modeled during the 1 p.m., 3 p.m.,
and 6 p.m. hours and 98 arrivals in the 8 p.m. hour. Four arrivals
per hour were added for unscheduled flights. The modeled results
also included the impact of schedule agreements based on a 15-minute
distribution. While that limitation was not incorporated as a
condition in the August 2004 Order, it largely has been maintained
by air carriers through on-going consultation with FAA on proposals
to move arrivals between 15 minute periods.
---------------------------------------------------------------------------
The models predicted that constraints used in the August 2004 Order
and the NPRM would reduce delays at the airport by approximately 20
percent from the levels attributed to schedules in effect at the time
the August 2004 Order was imposed. MITRE/CAASD also simulated the
results of a completely unconstrained schedule, using the industry's
proposed November 2004 schedules and calculated that delays under the
Order would be approximately 43 percent less than would be experienced
if no action were taken and schedules similar to the November 2003
schedules were allowed to take effect.
The City commented that the proposed hourly limits do not take
advantage of present available capacity at the airport. The City
contended that the airport could accommodate 92 scheduled arrivals per
hour and accommodate international and unscheduled arrivals above that
level. ACI-NA supports the City's comments.
We have reviewed the operational performance of O'Hare, including
the percentage of flights arriving and
[[Page 51387]]
departing the gate within 15 minutes of scheduled time, the percentage
of flights delayed for more than one hour, recent actual arrival and
departure rates, and have considered whether there have been any
material capacity enhancements that would provide a basis for a higher
hourly cap on scheduled arrivals. Our review indicated there have been
variations in delay levels, airport acceptance rates, and weather
patterns since the Order took effect in November 2004 but no
significant capacity enhancement measures have been realized.
As stated, the City proposed a new cap of 92 scheduled domestic
(and Canadian arrivals) per hour and no limits on international
arrivals of either domestic or foreign air carriers.\10\ The combined
arrival demand under such a scenario could be accommodated only under
optimal weather conditions and then, with some delays. Such a proposal
would significantly increase delays over current levels in non-optimal
conditions.
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\10\ We note that there would also be an average of four
unscheduled arrivals per hour.
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We noted in the NPRM that if during the pendency of this
rulemaking, the actual performance of O'Hare--as indicated in the
cumulative delay statistics and modeling results--demonstrated that an
increase in the cap on operations would still allow for acceptable
operational performance, then the arrival cap might be raised in the
final rule. The final rule, however, adopts the proposed limits of 88
scheduled arrivals per hour and no more than 50 scheduled arrivals in
each half-hour period beginning at 7 a.m. The final rule also adopts
the higher limit of 98 arrivals during the 8 p.m. hour but amends the
half-hour limit in that hour to be the same as in the other half-
hours.\11\ Accordingly, in the 8 p.m. hour, each half-hour cannot
exceed 50 scheduled arrivals.
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\11\ The NPRM proposed no more than 67 Arrival Authorizations
between 8 and 8:30 p.m.
---------------------------------------------------------------------------
The limits proposed in the NPRM mirror those reached during the
August 2004 schedule discussions and incorporated in the August 19,
2004 Order, as amended. We accepted the higher limit in the 8 p.m. hour
in the negotiated agreement and in recognition that the following hour
had sufficient capacity to quickly absorb any potential delays. The
actual flight schedules during the half-hour limits for 8 p.m. proposed
in the NPRM, however, were not balanced. In reviewing the operational
impact of the compression of arrivals in the first part of the 8 p.m.
hour, we conclude that it is not appropriate to adopt the proposed
higher, half-hour limit for this hour. While we will assign Arrival
Authorizations in accordance with the carrier limits established in the
Order, should any Arrival Authorizations in the 8 p.m. hour, or any
other hour, be returned or withdrawn, they will be reassigned but
within the half-hourly limit not to exceed 50 Arrival Authorizations.
Some periods may have minor variations from the adopted hourly or
half-hourly limits based on the Arrival Authorizations initially
assigned. Some periods may be slightly over the adopted limits, while
others are slightly under. We do not expect any new, major operational
impacts, but we expect that some of these variations will be resolved
over time as we consider schedule adjustments by carriers.
We are also adopting provisions to accommodate newly requested
international arrivals above the hourly limits,\12\ and we will also
assign Arrival Authorizations for international arrivals, as described
later. We have decided not to withdraw Arrival Authorizations from
domestic operations in order to accommodate new international arrivals,
as the Department expects the number of new international arrivals to
be minimal during the life of this rule. The FAA intends to work with
operators of international flights to minimize any potential impacts
during peak hours but ultimately expects to accommodate these new
flights even if there may be some operational or delay impacts.
Additional discussion on the adopted rules that apply to international
arrivals appears in a later section.
---------------------------------------------------------------------------
\12\ The hourly limit of 88 scheduled arrivals per hour includes
international arrivals scheduled for the Summer 2004 scheduling
season.
---------------------------------------------------------------------------
Although overall performance of the airport has exceeded the
modeled results, several hours have scheduled arrivals below the levels
permitted by the Order. Some carriers are not utilizing all their
authorized scheduled arrival times, resulting in periods when the
airport could accommodate additional flights. This rule adopts a usage
provision in addition to a blind buy/sell/lease provision, which we
expect to increase the actual utilization of the Authorizations
(because carriers will either use them for their own flights or sell/
lease them to other carriers). Some Arrival Authorizations are
available and will be assigned at the time of initial assignment under
this rule. Requests for Arrival Authorizations for new international
service will be accommodated first and any remaining Arrival
Authorizations will then be assigned using a preferred lottery. Both of
these assignment mechanisms and our rationale supporting the use of
these mechanisms are fully described further in this document.
In the third extension of the Order,\13\ the FAA specifically
addressed the ten Arrival Authorizations previously operated by
Independence Air and explained why those operations are not excess
capacity. Independence Air ceased operations all operations on January
6, and because Arrival Authorizations cannot be sold, leased, or
transferred except on a one-for-one basis under the August 2005 order,
they have been unused since that date. We concluded that all the
subject Arrival Authorizations may not be available for reallocation
because when negotiating scheduled reductions in anticipation of the
August 2004 order, the FAA had to allocate Arrival Authorization in
some peak afternoon and evening hours at levels that exceed the peak-
hour target of 88 scheduled arrivals per hour. Furthermore, foreign
carriers whose operations were not affected by the Order, have adjusted
their schedules from August 2004 resulting in increased scheduled
arrivals during certain hours. The Arrival Authorizations assigned to
Independence Air, particularly in the peak afternoon and evening hours
will offset these periods of continued scheduling over the operational
target. We expect that approximately four Arrival Authorizations that
were operated by Independence Air will be available in the morning
hours for assignment under this rule.
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\13\ Third extension of the Order dated March 27, 2006.
---------------------------------------------------------------------------
As proposed, the FAA will semi-annually review the operational
performance metrics for O'Hare, as well as any new, procedural or other
capacity enhancement measures, to determine if additional Arrival
Authorizations may be assigned. The FAA intends to increase the cap on
operations when doing so is supported by the operational analyses
performed in these reviews and our delay reduction objectives. We
believe that various provisions of this rule discussed above adequately
address the City's concern about utilizing existing capacity at the
airport.
This rule adopts a caveat in the provisions governing the initial
assignment of Arrival Authorizations that was not proposed in the
notice. The NPRM proposed that carriers conducting scheduled service to
O'Hare under the August 2004 Order would receive corresponding Arrival
Authorizations for that service. Recent
[[Page 51388]]
events have required that we contemplate a situation for which a
carrier was operating at ORD under the Order but has since terminated
all service at O'Hare prior to our concluding this rulemaking. In such
a case, we conclude such carrier(s) should not be entitled to
corresponding Arrival Authorizations under this rule. Arrival
Authorizations are not property and in view of such, the agency has
expressly limited opportunities to monetize and collateralize this
authority under the rule adopted here. In the above situation,
permitting a carrier to ``retain'' this authority under the rule would
provide the carrier with the ability to unfairly monetize its operating
authority at the expense of other carriers seeking to operate at O'Hare
or increase service. We do not find it fair or in the public interest
to provide a carrier that is not serving the airport with the
opportunity to monetize and collateralize the authority under the rule
adopted here. Consequently, we have included a provision to require
that for a carrier to receive an initial assignment of Arrival
Authorizations, the carrier must be conducting some level of service at
the airport as of October 29, 2006.
New Entrant/Limited Incumbent Preference for New Capacity
The proposal contemplated initially assigning all of the Arrival
Authorizations based on the airport's existing scheduling limits and
according to the carriers' existing operations. This assignment would
benefit all of the incumbent carriers, especially United and American,
which would hold the vast majority of Arrival Authorizations.
The Notice proposed that any Arrival Authorizations withdrawn or
returned to the FAA would be reallocated by lottery to new entrants and
to carriers with few operations (``limited incumbents''). In addition,
the Notice proposed that, with respect to additional capacity created
by an increase in operational caps from 88 to 89 or 90 arrivals per
hour, the resulting additional Arrival Authorizations also be assigned
by lottery to new entrants and limited incumbents. Under both
scenarios, those Arrival Authorizations remaining after lottery would
be assigned to incumbent carriers and then on an interim basis until
the next lottery. Under the proposal, with respect to additional
capacity created by an increase in operational caps above 90 arrivals
per hour, the additional Arrival Authorizations would be assigned by
lottery with no preference based on carrier identity.
We invited comments on whether the preference for new entrants and
limited incumbents would promote competition. Specifically, we asked
whether the service benefits potentially obtainable from incumbent
carriers' networks argue against use of a lottery that prefers new
entrant and limited incumbent carriers.
We first address our authority to adopt such a preference and then
address the policy considerations supporting the preference. Lastly, we
address arguments relating to allegations of an unconstitutional taking
of property or deprivation of due process.
1. Authority to impose a preference for new entrants/limited
incumbents.
American and United challenged the FAA's authority to impose a
preference and argued that the FAA cannot engage in economic regulation
by favoring some carriers over others to ``promote competition.''
Any scheme to limit flights at O'Hare must allocate those operating
authorities according to some criteria. We expect that any set of
criteria adopted would benefit certain carriers to the detriment of
others and no one formula would be universally acceptable to all
affected carriers. The FAA's statutory authority to regulate the
navigable airspace does not expressly direct the agency to consider any
specific factor in allocating airspace rights. Absent such expression,
we must look to the public interest in determining criteria for
assignment of these Arrival Authorizations. In considering the public
interest, we are guided by the policy goals prescribed for the
Secretary \14\ and the pro-competition policies followed by Congress in
adopting legislation on matters such as slot exemptions and airport
grant programs. See, e.g., Delta Air Lines v. CAB, 674 F.2d 1 (D.C.
Cir. 1982). The courts have approved the Secretary's reliance on the
pro-competition polices in allocating slots under the HDR. Northwest
Airlines v. Goldschmidt, 645 F.2d 1309, 1315 (8th Cir. 1980).
---------------------------------------------------------------------------
\14\ See 49 U.S.C. 40101(a)(4), (6), (10-13)).
---------------------------------------------------------------------------
As we articulated in the August 2004 Order, Congress has set forth
a policy of promoting deregulation and competition in the airline
industry by means of the Airline Deregulation Act of 1978 and
subsequent legislation. In AIR-21, Congress authorized the award of
slot exemptions at the HDR airports to new entrants and limited
incumbents--i.e., those carriers that have little or no presence at the
slot-controlled airports. (See 49 U.S.C. 41714(c), (h), 41716(b),
41717(c), 41718(b)(1).) Congress also included similar provisions in
statutes governing airport grants and passenger facilities charges,
designed to encourage airports to adopt policies that will promote
competition. (See 49 U.S.C. 40117(k), 47106(f), and 47107(s).)
The Department's prior pronouncements and decisions on the
efficient use of the airspace have frequently cited concerns about
airport access and competition. For example, under the HDR, we
established a regulatory framework that included a buy/sell provision
to address the goals of access, competition and small community
service. Also, under the HDR, the Department sought to alleviate the
advantage that incumbent carriers gained under the initial allocation
of the HDR--which ``grandfathered'' hundreds of slots for existing
operations)--and to afford new entry at the slot-controlled airports.
We did so by withdrawing up to 5 percent of the air carrier slots at
LaGuardia, O'Hare and Washington National Airport to allocate by
lottery to new entrants and limited incumbents.\15\ More recently, in
response to the escalating number of AIR-21 slot exemptions filed for
LaGuardia Airport in December 2000, the FAA issued orders governing the
allocation of those slot exemptions that took into account the need to
promote competition.\16\
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\15\ See FAA's ``Special Slot Withdrawal and Reallocation
Procedures,'' 51 FR 8632 (1986).
\16\ See High Density Airports; Notice of Extension for the
Lottery Allocation and Notice of Lottery for Limited Slot Exemptions
at LaGuardia Airport 66 FR 41294 (Aug. 7, 2001) (expanding the scope
of new entrants eligible to participate in the lottery to those that
did not participate in the Dec. 4, 2000 lottery and those that had
not applied for the AIR-21 slot exemptions by Dec. 4, 2000); High
Density Airports, 67 FR 65826 (Oct. 28, 2002) (adopting the new
entrant preference procedure for reallocating by lottery withdrawn
or returned exemption slots at LaGuardia).
---------------------------------------------------------------------------
2. Policy considerations concerning the new entrant/limited
incumbent preference.
This part of the proposal received the most comment. Support for
the preference came from those air carriers or their representatives
that could benefit from the proposal, such as Alaska Airlines, America
West, Independence Air, and ACAA. Those opposed to the preference
include American, Delta Air Lines (Delta), US Airways, United, LECG LLC
(in coordination with United), Regional Airline Association (RAA), the
City, and Members of Congress.
Alaska Airlines strongly supported our reliance on competition
considerations and argued that the preference is fair, appropriate and
supports a key public interest objective. America West urged the FAA to
[[Page 51389]]
establish a system by which Arrival Authorizations are withdrawn from
incumbent carriers if any new entrant or limited incumbent requests one
and none are available. America West further commented that new
entrants and limited incumbents should have first access to all new
Arrival Authorizations even if they exceed 90 per hour. ACAA supported
preferential treatment for new entrants and limited incumbents and
asked that Arrival Authorizations held by American and United be
withdrawn and redistributed at the rate of 2 additional Arrival
Authorizations per hour. Additionally, ACAA asked that 5% of those
Arrival Authorizations held by American and United be withdrawn and
redistributed to new entrants and limited incumbents each year the rule
is in place.
The City argued, in contrast, that the FAA should not discriminate
among types of carriers and noted that O'Hare is one of the most
competitive markets in the nation. The City also was concerned that the
proposed preference would discourage incumbent carriers from working on
meaningful delay reduction (that is, capacity enhancing) technological,
and/or procedural changes at O'Hare, given that any resulting new
capacity would initially benefit its competitors. The City also noted
that allocation by random lottery may not result in the highest and
best use of a limited resource.
Members of Congress commented that the proposal treats foreign
carriers, new entrants, and limited incumbents preferentially and
severely disadvantages the hub carriers, who have invested heavily in
O'Hare. They also commented that Chicago is a highly competitive
marketplace and all but four of the major U.S. carriers are represented
in this region.
American commented that it and United had both reduced operations
throughout 2004 while other carriers were allowed to increase
operations without any constraint. American refuted the assertion in
the NPRM that it can shift flights in response to consumer demand
stating that, as O'Hare is its hub airport, the timing of flights is
critically important to creating the maximum number of potential
connecting opportunities. American contended that it reduced its
schedule to meet the agency's scheduling target under the August 2004
Order and that Arrival Authorizations in excess of 88 per hour do not
realistically represent ``new'' capacity.
Delta commented that the preference for allocating capacity does
not place ``maximum reliance upon competitive market forces and
competition'' as stated in the NPRM. Delta argued that the proposal
undermines competition by favoring some carriers over others, and that
future capacity should be distributed using the same public auction
procedure proposed for buy/sell transactions, with all carriers
permitted to compete equally for those rights.
US Airways commented that it is uniquely disadvantaged by the
preference for new entrants and limited incumbents. US Airways argues
that new entrants and limited incumbents could get new capacity and
large incumbent carriers could operate flexibly with their larger
holdings, but it could not respond competitively because it is neither
a limited incumbent nor a large carrier at O'Hare.\17\ US Airways noted
that the NPRM did not provide any analysis indicating new entrant and
limited incumbent carriers would, in fact, offer the travelling public
more benefits than the network carriers or any analysis assessing the
impact of Midway Airport. US Airways would prefer that all additional
Arrival Authorizations be allocated through a no-preference lottery
available to all carriers. US Airways claimed the stated policy
directive to rely on competitive market forces and the pro-competition
policies in the Airline Deregulation Act are not served by the proposed
preferred lottery because it favors certain types of competitors at the
expense of others.
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\17\ US Airways does not indicate specifically why having 17
arrivals is unique relative to other non-hub carriers. Air Canada
has 16 arrivals; Northwest has 20; Delta has 21; and Continental has
22.
---------------------------------------------------------------------------
United also argued that adequate competition clearly exists at
O'Hare and that findings presented in comments filed by LECG show
Chicago to have the ``second highest penetration of low fare carriers
out of 11 major hub cities and it also has the lowest weighted average
fare of any of the 11 major hub cities examined.'' \18\ United
contended that the FAA offered contradictory arguments by acknowledging
Chicago as a competitive market in the cost-benefit analysis while
proposing preferential treatment for certain carriers in the name of
competition. Additionally, United asked the FAA to take Midway Airport
into account when considering competition.\19\
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\18\ Hub cities included in the LECG analysis include: New York,
Chicago, Denver, Philadelphia, Houston, Dallas, Charlotte, Detroit,
Minneapolis, Atlanta, and Cincinnati.
\19\ According to the LECG analysis, ``In 2004 Midway offered
non-stop service to all but two of the 25 large hubs with non-stop
service from O'Hare (Honolulu and Salt Lake City).''
---------------------------------------------------------------------------
United also expressed concern that the inability to obtain new
Arrival Authorizations could put it at a competitive disadvantage while
demand for international service grows and that it would have to
decrease its service to small and mid-size communities in order to
compete internationally.
We have decided to retain the proposed lottery preference. The rule
will give new entrants and limited incumbents a relatively small
advantage in obtaining additional Arrival Authorizations from a pool
that, at most, will be 30 Arrival Authorizations per day--out of the
more than 1,200 scheduled peak hour arrivals at O'Hare. By way of
contrast, American and United each operate more than 400 arrivals per
day. Additionally, both carriers conduct international operations and
might benefit by receiving Authorizations for those flights outside the
operational cap. (See discussion on international allocation in this
document.) Unlike airlines with only a few flights at O'Hare, these
carriers also have the ability to maintain their market presence by
substituting larger jets for regional jets on some of their flights.
New entrants and limited incumbents will receive a preference in
the reassignment of available Arrival Authorizations created by any
increase in the hourly limitation from 88 to 89 or 90 authorizations
per hour. In addition, we are adopting a ``blind'' buy/sell mechanism
for transactions involving Arrival Authorizations by shielding the
identity of parties to proposed transactions. This process should give
a greater opportunity for smaller carriers to purchase or lease
necessary arrival privileges. In this regard, we are influenced by the
views of DOJ and others criticizing the lack of a robust secondary
market under the HDR and urging us to adopt procedures that will result
in an efficient allocation of slots and competitive entry at
constrained airports.\20\ At the same time, however, by leaving the
current assignment of arrival privileges essentially unchanged from our
existing orders, the vast majority of operating privileges will be held
by the two largest carriers at the airport.
---------------------------------------------------------------------------
\20\ DOJ argued in its comments that transparency in the market,
market power vested in the incumbents, and repeated use of temporary
administrative allocation mechanisms (that do not create long-term
property rights) all contributed to the insufficiency liquidity of
the secondary market under the HDR.
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Entry, particularly by low-fare airlines, is an essential
ingredient for airline competition. Studies of airline industry
competition under deregulation have concluded that low-fare entry has a
substantial impact on price and service. For instance,
[[Page 51390]]
Southwest initiated service into Philadelphia in May 2004, and since
that time the fares in Philadelphia have shifted from being 19 percent
higher to 2 percent lower than fares in comparable domestic markets
(comparing the Fourth Quarter 2003 to the Fourth Quarter 2004). A
policy that fails to provide any special treatment for new entry, the
approach recommended by United and other larger incumbents, would
curtail competition that leads to substantial fare reductions,
increased service, and enables more people to travel.
The final rule also differs from our proposal in two other
respects: First, we are not adopting the provision that would have
required a new entrant or limited incumbent carrier to forfeit Arrival
Authorizations obtained in a preferred lottery upon an agreement
providing for the sale, merger, or acquisition by another person of
more than 50 percent ownership or control of that carrier. The final
rule provides for a 12-month limitation on the sale and lease of
Arrival Authorizations obtained in a preferred lottery and we do not
believe it is necessary to adopt further limitations, as doing so might
interfere with normal business decisions by a carrier. Second, we are
clarifying that an incumbent carrier who obtains Arrival Authorizations
on an interim basis may use them for at least a year before the
Authorizations would again be made available to new entrant and limited
incumbent carriers in another lottery. This should provide some
schedule stability without creating a material obstacle to potential
new entry.
3. Takings Clause and Due Process Claims
United has claimed that the FAA would be violating the carrier's
substantive due process rights by limiting its operations and giving
competitors preferential access to Arrival Authorizations. United also
argues that its flight schedules and operating rights at O'Hare are
intangible property that the FAA confiscated without due process of
law.\21\ U.S. Airways also argued that the proposal could violate the
takings clause of the Constitution, because ``an economically
unsupported government policy is undermining the value of years of
investment and business planning that was premised on the ability to
compete at ORD on a national and international basis.''
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\21\ 21 United states that the FAA Chief Counsel has
characterized airline operations as `valuable assets' [n. 62 to
United's Comments]. The Chief Counsel, however, stated instead that
the High Density buy-sell rule had the collateral effect of creating
a valuable asset. Andrew B. Steinberg & James W. Tegtimeier, Dealing
With Airport Congestion: The Regulatory Challenger of Demand
Management, 19 Air & Space Law. 1, 16 (Winter 2005).
---------------------------------------------------------------------------
We responded to a similar argument from United in the August 2004
Order. Our analysis set forth in that Order is essentially the same
here. The Supreme Court instructs us to consider three factors in
determining whether government action constitutes a taking requiring
compensation: the action's character, its economic impact, and the
extent to which the action interferes with investment-backed
expectations.\22\ These standards do not suggest a plausible Takings
Clause claim here.
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\22\ Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211,
224-225 (1986); Concrete Pipe & Products v. Construction Laborers
Pension Trust, 508 U.S. 602 (1993).
---------------------------------------------------------------------------
This rule, not unlike other rules or the August 2004 Order, adjusts
the benefits and burdens of economic life in order to promote the
common good. This rule limits flights at O'Hare in order to relieve the
congestion that choked a key airport and caused delays throughout the
NAS. This rule will benefit the industry and the travelling public.
This rule codifies the current level of operations mandated by the
August 2004 Order and does not require additional flight reductions.
Since the Order has been in effect, O'Hare has experienced more than a
20 percent delay reduction from the delays experienced prior to the
issuance of the Order. Furthermore, this rule will be in effect for a
relatively short period so as not to unduly interfere with the
marketplace more so than necessary. This type of regulation is not
normally deemed a taking of property.\23\ And, unlike the governmental
action in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), we are not
unfairly singling out an air carrier based on its conduct far in the
past and unrelated to any future commitments or injury it caused.
Rather, the two largest O'Hare air carriers significantly increased
their flights starting in late-2003, causing over scheduling and delay
conditions.
---------------------------------------------------------------------------
\23\ Connolly, 475 U.S. at 225.
---------------------------------------------------------------------------
The second element of the Court's standard involves the rule's
economic impact. There is no evidence that restricting O'Hare flights
for a limited period of time will have an unduly harmful impact on any
air carrier. To the extent there is an economic impact by virtue of
this rule, it may be mitigated and moderated by the reduced operating
costs resulting from prior congestion and the potential opportunities
for limited growth during the life of this rule.
The third element of the Court's standard concerns whether the rule
will interfere with a firm's investment expectations.\24\ That is not
the case here. We have repeatedly used our authority to manage the
efficient use of the airspace to administer the HDR at O'Hare and three
other major airports and done so over many years. More recently, we
imposed additional restrictions at LaGuardia because of increased
delays at that airport, and from time to time have taken other steps to
cause airlines to reduce flights in order to prevent unacceptable
levels of delays. Further, even though the Airline Deregulation Act of
1978 terminated the Government's regulation of air carriers' rates,
routes, and services, the Department and the FAA nonetheless have
extensive regulatory authority over domestic airline operations. The
Department and the FAA, for example, regulate in the areas of
certificates, compliance, handicapped discrimination, records on the
movement of traffic, carrier management, unfair and deceptive
practices, unfair methods of competition, and airline safety. The
Department and the FAA's regulation of airport development and noise
also affect an airline's investment expectations.
---------------------------------------------------------------------------
\24\ Cf. Connolly, 475 U.S. at 226-227.
---------------------------------------------------------------------------
As we stated in the August 2004 Order, no airline owns the airspace
at O'Hare and no airline has a license to operate a specific number of
flights at the airport. The circumstances at O'Hare do not indicate
that any carrier holds a cognizable ``property interest'' in
maintaining its schedules at the airport. O'Hare has long been subject
to slot rules, it has never had unlimited capacity, and carriers should
have known that large increases in service could lead to new controls
on the use of the airport's capacity. Therefore, United and U.S.
Airways could not have reasonably believed they would be able to add or
operate all the flights they wanted in perpetuity.
In any event, United's argument that the regulation is tantamount
to a taking without just compensation is contrary to Takings Clause
precedent. Continental Air Lines v. Dole, 784 F.2d 1245 (5th Cir.
1986). The Continental decision quoted Justice Holmes' statement,
``Government hardly could go on if to some extent values incident to
property could not be diminished without paying for every such change
in the general law.'' 784 F. 2d at 1252 (quoting Pennsylvania Coal Co.
v. Mahon, 260 U.S. 393, 413 (1922))
United also claimed that the regulation discriminates against
incumbents in violation of United's
[[Page 51391]]
Equal Protection rights. The test for determining whether an economic
classification is vulnerable to an Equal Protection clause challenge is
if it ``proceeds along suspect lines [or] infringes fundamental
constitutional rights'' and ``if there is any reasonably conceivable
state of facts that could provide a rational basis for the
classification.'' \25\ An incumbent air carrier is not a ``suspect''
class within the meaning of the Constitution's Equal Protection clause.
Further, an air carrier has no fundamental constitutional right to an
operation at a particular airport. There is a rational basis for the
preference in this regulation. The limited preference will benefit
consumers because it will promote entry and new competition at O'Hare
and new entry has the potential to lower airfares at O'Hare. It is
consistent with the public policies established by Congress. Finally,
it does not impose significant harm on the incumbent carriers since the
allocation to them of their November 2004 operations enables them to
continue to operate their networks. Further, United has not shown that
the regulation is ``so arbitrary or irrational that it runs afoul of
the Due Process Clause'' and ``fails to serve any legitimate
governmental objective.'' \26\ This regulation serves to meet the
recognized need of addressing persistent flight delays related to over
scheduling at O'Hare, and is intended as an interim measure because the
FAA anticipates that the rule will yield to longer-term solutions to
traffic congestion at the airport.
---------------------------------------------------------------------------
\25\ FCC v. Beach Communications, Inc., 508 U.S. 307, 313
(1993).
\26\ Lingle v. Chevron U.S.A. Inc., S. Ct. No. 04-163, slip op.
at 12 (2005).
---------------------------------------------------------------------------
Limited Incumbent Carriers
The NPRM proposed to define a limited incumbent carrier as a
carrier that operates eight or fewer Arrival Authorizations at O'Hare
and has never sold or given up an Arrival Authorization. In the
proposed rule we stated our belief that this approach represented a
fair approach to carriers that are not new entrants but should be
afforded some additional consideration due to their limited presence at
the airport. We also noted that the proposed term is consistent with
the August 2004 Order.
America West commented that a cap of eight Arrival Authorizations
for limited incumbents would be inadequate to generate sustained price
competition at O'Hare. Furthermore, the carrier argued that the
proposal does not satisfy Congress' objective to promote competition,
because Congress (in AIR-21) capped limited incumbents at 20 slot
exemptions at LaGuardia, which is a smaller airport than O'Hare.
America West then argued that Arrival Authorizations should be
withdrawn from incumbents to fulfill requests from new entrants and
limited incumbents.
Conversely, American argued that the definition of limited
incumbent should be consistent with the International Air Transport
Association (IATA) Worldwide Scheduling Guidelines and the European
Union's slot regulation (EU 793/2004), which define a new entrant
carrier as a carrier that holds fewer than five slots at an airport on
the day for which they are requested.
Independence Air and Alaska Airlines requested that the definition
be expanded to include a carrier that operates 10 or fewer flights.
Independence Air pointed out that the modest increase of two arrivals
would bring that carrier into the scope of the definition of this
category. The carrier also argued that this small change supports the
public interest of fostering competition by affording the carrier a
preference in a lottery to counter the vast number of Arrival
Authorizations held by the two dominant carriers.
We proposed eight Arrival Authorizations as the threshold for
determining limited incumbent status, as that was the number set forth
in the August 2004 Order. There is no bright line test for limited
incumbency and the initial selection of eight Arrival Authorizations
was consistent with the pro-competition goals of AIR-21. We do not view
it necessary to create a more generous exception for such carriers, nor
are we persuaded by the arguments of the carriers to increase this
number to 10. Had we proposed 10 Arrival Authorizations in the notice,
it is likely that carriers (other than Independence Air) would have
sought a higher number. We note that although AIR-21 changed the
definition of a ``new entrant/limited incumbent'' carrier to a carrier
that holds 20 slots and slot exemptions; it was very different in its
provisions for slot exemptions for new entrants at O'Hare. At O'Hare,
AIR-21 slot exemptions for new entrants were limited to 30 in total, in
contrast to the statutory provisions for LaGuardia and JFK, which
capped new entrants at 20 slot exemptions each. Consequently, we
reiterate the rationale behind our test for limited incumbency as
proposed in the NPRM and in the August 2004 Order and, with minor edits
for clarity, we adopt the definition of limited incumbent as proposed.
Alaska Airlines supported the proposal, as stated in the NPRM, to
allocate flights initially to the carrier actually operating the
flight, except where the operating carrier does not market its service
independently and in its own name. Alaska stated that it has full
control over the flights it operates at O'Hare and it should not be
penalized because some flights also carry the American code.
Alaska's comment is consistent with how we proposed to treat code
share arrangements in the NPRM. We proposed that, with limited
exception, Arrival Authorizations would be allocated solely to the
carrier that actually operated the flight, regardless of any code
sharing agreements. We further proposed that in making our initial
Arrival Authorization determinations, we do not intend to assign
Arrival Authorizations to a carrier that is essentially operating its
service as a contractor for another carrier and does not market its
service independently and in its own name. We have been presented with
no information that would suggest this distinction is invalid.
Therefore, this rule adopts our proposal that where the operating
carrier conducts the flight solely under the control of another
carrier, the carrier controlling the inventory of the flight will
receive the Arrival Authorization.
We also find it necessary to adopt some minor edits to the
definition for clarity. In defining this term, we resort to using the
phrase ``U.S. or Canadian air carrier that holds or operates, on its
own behalf, 8 or fewer Arrival Authorizations * * *'' As this rule also
permits leasing, it is critical to characterize a carrier's rights
respective to the operating authority accurately. In addition, the rule
clarifies that for an Arrival Authorization held or operated by a U.S.
or Canadian carrier to count towards limited incumbent status, the
relevant carrier must hold or operate that authorization on its own
behalf. This will not penalize a carrier that conducts service at
O'Hare primarily as a contractor for another carrier and does not
market its service independently and in its own name from the ability
to obtain authorizations in its own name in a lottery.
Blind Buy/Sell Market
Under the proposed rule, we provided that the purchase and sale of
Arrival Authorizations would be allowed to promote maximum reliance on
market forces and efficient utilization of the Arrival Authorizations.
To ensure that all carriers have a chance to obtain these valuable
privileges, sales of Arrival Authorizations would be permitted only
through a ``blind market'' overseen by
[[Page 51392]]
the FAA in which the only consideration for transactions would be
monetary. Thus, under the proposal, the identity of the bidder would be
confidential and the transaction could not involve real property, such
as gates, non-monetary assets, or other services in lieu of cash. In
the NPRM, we did not propose specific regulatory text to permit the
leasing of Arrival Authorizations but put out the concept for comment.
The majority of commenters did not object to use of a blind
secondary market as proposed for the buying and selling of Arrival
Authorizations. A majority of commenters did, however, object to the
prohibition on using non-monetary assets as payment and the proposed
limits on the use of Arrival Authorizations as collateral for loans.
DOJ urged the Department to move aggressively to adopt either
congestion pricing or an auction to allocate scarce airport/airspace
capacity at O'Hare, cautioning that anything short would lead to an
inefficient allocation. DOJ also stated that while the ``blind'' aspect
of the secondary market may remedy problems associated with the bidding
process, this proposal does nothing to encourage the two largest
carriers to sell Arrival Authorizations. According to DOJ, other
carriers that also have a presence at O'Hare, generally use that access
to connect their hubs with Chicago and therefore, place high value on
those Arrival Authorizations and thus are unlikely to sell.
Consequently, DOJ does not see that this rule would result in many
sales.
American supported the concept of a market for Arrival
Authorizations but opposed the proposal to regulate and govern the
operation of that market, arguing for an independent, free, and
competitive market similar to the HDR. U.S. Airways, United and Delta
argued that under the HDR, carriers selling slots in the secondary
market of necessity evaluated the total compensation package being
offered before choosing the successful bid. Moreover, U.S. Airways
believed that given the industry's liquidity problems and the
operational needs of carriers at various airports, an airline selling
or buying an Arrival Authorization ought to be able to accept or offer
non-monetary consideration (i.e. services, ground handling) as part of
the bid.
United suggested a revised approach to conducting the secondary
market and alternatively proposed that the FAA serve as the
clearinghouse through which sales of Arrival Authorizations are
completed. In this alternative, a carrier wishing to sell (or to buy)
an Arrival Authorization would notify the FAA of the relevant details
and the FAA would post such notice to potentially interested air
carriers. United suggested a similar process for carriers seeking to
obtain Arrival Authorizations. United also commented that restricting
the sale to an all-cash-basis unnecessarily limits the flexibility of
buyers and sellers and could effectively freeze some buyers out of the
bidding entirely. Under United's proposal, sellers would be presented
with all bids that are received by FAA, but the identity of the bidders
would not be disclosed. Once the seller selected the offer it deems
most attractive, the identity of the bidder would be disclosed to the
seller and the transaction could be completed. United similarly urged
the FAA to permit leasing/subleasing because it would allow carriers to
adjust their schedules based on seasonal and market fluctuations.
Lastly, United submitted that the secondary market will not be robust
as long as new entrants, limited incumbents, and foreign carriers get
Arrival Authorizations free of charge from the government.
RAA commented that the current system of buying, selling, leasing,
and sub-leasing slots at HDR airports has worked effectively and does
not warrant any change for the limited duration of this proposed rule.
At the very least, RAA suggested that if sales are to be blind, there
is no reason to preclude non-cash considerations for Arrival
Authorizations.
Independence Air contended that buyers will ``undoubtedly wish to
negotiate terms, including but not limited to, the terms of any
warranties, the definition of what constitutes a default under the
purchase agreement, limitations of liability, customary representations
as to corporate authorization, approval and agreement enforceability,
and damages for any breach of the agreement and other commercially and
legally important matters prudently included in any significant
purchase and sale agreement.'' Independence Air suggested that the FAA
is not in a position to broker the details of a commercial arrangement
and should not adopt a rule that cannot be readily enforced and that
can so easily be manipulated by carriers. Independence Air also did not
support the proposed cash only basis for transactions.
The ACAA supported the blind market system and stated that this
market mechanism is reasonable and available to all carriers. ACAA
further argued that American and United should be blocked from
acquiring additional Arrival Authorizations if any other carrier
submits a bid in any sale so that these two carriers cannot bid higher
to block entry of low-fare carriers.
The City supported the buying and selling of Arrival
Authorizations, but requested that as airport operator it be given a
consultative role with the airlines in the process of a significant
sale or lease of Arrival Authorizations (or at least advance notice of
such a sale or lease), with a portion of the funds reserved for the
airport.
America West also supported the proposed secondary market but
commented that the FAA, not the selling carrier, should keep the
proceeds of sales on the blind secondary market. America West explained
that proceeds from the sale of Arrival Authorizations could be directed
to enhancing capacity at O'Hare. Alternatively, if proceeds from the
sale went to the selling carrier(s), America West said there would be a
perverse incentive for airlines to resist expansion of airports because
such expansion would eliminate the ``paper value'' of their Arrival
Authorizations.
A constant criticism of the HDR buy/sell provision was that it did
not ensure a ``fair'' distribution of slots across the industry because
the largest slot-holders (typically, legacy carriers) could consider
the identity of would-be buyers or lessees and choose not to provide
them with slots--so as to deprive potential new entrants of airport
access. Smaller carriers informed us that they were not even made aware
when slots were available for sale or lease. The blind aspect of the
buy/sell provision established by this rule should ameliorate this
problem, at least to some degree, by making it more difficult for slot
holders to consider the would-be buyer/lessee's likely use of Arrival
Authorizations.
We acknowledge that our proposal to restrict the use of non-
monetary considerations in transactions involving Arrival
Authorizations (i.e., the ``cash-only'' aspect of our rule) was
unpopular among the commenters. Most of the comments suggested that
each air carrier should be allowed to consider the value of specific
gates, baggage handling, marketing arrangements, and other potential
offers in lieu of cash. (Under our proposal carriers may, of course,
continue to pursue business opportunities in the ordinary course so as
to exchange services or facilities at O'Hare or other airports, but
they cannot use Arrival Authorizations as part of any such
discussions.) Although there is merit to this position, nevertheless we
continue to be concerned that the uniqueness of non-monetary assets,
proposed as consideration in potential
[[Page 51393]]
transactions, would effectively undermine the ``blind'' nature of the
secondary market. The inclusion of such non-monetary assets would make
it virtually impossible to hide identities during the bid evaluation
process unless the FAA chose to ascribe a monetary value to non-
monetary assets, a difficult and protracted exercise that would not be
useful given the short duration of this rule. Therefore, the ``cash-
only'' aspect of our proposal is unchanged in the final rule.
We reject United's suggested approach for similar reasons. Under
United's approach, all bids would be forwarded to the selling carrier
for review and selection. Once the selling carrier selected a bid, the
identity of the selected bid would be released and the affected
carriers would be free to consummate the transaction. United's approach
only makes sense if non-monetary assets are permitted in the bidding
package. If, however, the bids are strictly limited to money, nothing
is gained by receiving all the bids because the only relevant bid is
the highest one.
United also suggested that the FAA establish a corresponding
process that would allow a carrier seeking to purchase or lease an
Arrival Authorization to advise the FAA with that information to be
made public in a similar (blind) manner. We accept this suggestion and
provide for such notification in this rule. As in the case for sales or
leases, we will not disclose the identity of the carrier but will
include information such as time and frequency desired, effective date,
reserve price, or other pertinent information. This information will be
posted within two business days and for a period of at least 10 days.
All offers of Arrival Authorizations for sale or lease will be
processed in accordance with the adopted rules.
America West recommended that the FAA retain all proceeds from the
sale of Arrival Authorizations for use in capacity expansion projects
at the airport. While this proposal has appeal, the FAA is currently
prohibited by statute from promulgating rules that result in the agency
collecting user-fees \27\ and accepting revenue for the sale of Arrival
Authorizations.
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\27\ Consolidated Appropriations Act, 2005, Pub. L. 108-447,
Federal Aviation Administration, Operations, Title I, Division H,
118 Stat. 2809, 3201 (2204)
---------------------------------------------------------------------------
With respect to the City's requests, the required public posting of
the available Arrival Authorizations will provide all interested
parties, including the City, with notice of transactions. The City may
exercise its proprietary powers as airport operator with respect to
managing the efficient utilization of gates and related facilities,
including directing sharing of unused gate space, overseeing subleasing
requests, and otherwise negotiating gate assignments or conversions to
common-use, where practicable. Requiring advance airline-airport
consultations otherwise would interfere with the efficient assignment
mechanism we anticipate to occur in the blind market. Given our limited
options, a lottery system provides the fairest and most unbiased
process for allocating new capacity while the blind buy-sell market
provides potential opportunities for carriers that value the Arrival
Authorizations the most.
Leasing of Arrival Authorizations
The comments supported allowing leasing of Arrival Authorizations
and cited positive experiences with leasing arrangements under the HDR.
Delta argued that if leasing is prohibited, incumbent carriers facing
temporary market conditions or seasonal fluctuations in demand for
their service at the airport would be forced to operate sub-optimal
service patterns to preserve their airport access rights until
conditions improved. Furthermore, Delta commented that the opportunity
to lease Arrival Authorizations gives carriers the flexibility to test
marginal new markets without committing the potentially significant
capital investment that a purchase-only rule would impose.
RAA commented that leasing and sub-leasing should be permitted as
they play a crucial role in allowing carriers to adopt seasonal changes
in demand.
Independence Air echoed other carriers and urged the agency to
permit leasing as it is a logical and necessary means to make an
efficient market and urged the FAA to allow leasing in the final rule.
However, Independence Air did not believe the FAA can effectively match
lessors and lessees simply on the basis of which lessee is willing to
pay the most for the Arrival Authorization. As with buying/selling
Arrival Authorizations, Independence Air contended that there are many
commercial and legal considerations that impact a lessor's motivation
to enter into an Arrival Authorization lease agreement.
As discussed in the NPRM, leasing of arrival privileges would allow
the carriers to accommodate seasonality and market fluctuations
inherent in airline operations. Leasing permits access to the airport
that some carriers may not otherwise have. Leasing also can result in
higher efficiencies and lower costs to the carriers holding the Arrival
Authorizations. Allowing leases and sub-leases of Arrival
Authorizations also makes sense given the minimum usage requirement.
As specified in the adopted regulations, leasing will be permitted
subject to the same conditions as the buying or selling of Arrival
Authorizations. A carrier seeking to lease Arrival Authorizations must
notify the FAA, and the agency will post the solicitation (including
relevant information) and accept all timely-filed bids. Only the
highest bid will be forwarded to the potential seller or lessor, and
the only permitted consideration is monetary. If the relevant carriers
agree to negotiate or contract other details of the transaction that do
not violate or infringe upon the applicable regulations, they may do so
without FAA involvement.
In addition, we adopt several modifications in this section.
First, carriers that have Arrival Authorizations available for sale
or lease may submit a base reserve price for Arrival Authorizations to
the FAA for posting on the Web site along with other relevant
information. Including a base reserve price provides a floor for the
bids and facilitates the process.
Second, we have deleted the requirement that a carrier must notify
the FAA 30 days before the planned sale date. Upon review, we concluded
that the 30 day requirement could be unduly restrictive, particularly
for carriers that may want to lease an Arrival Authorization and, for
scheduling reasons, may not be in a position to provide 30 days notice.
Third, as a usage requirement is also adopted in this rule,
carriers may need to shorten the duration of the bidding/selection
process. Therefore, we have included two modifications: (1) The FAA
will post notice of available Arrival Authorizations within two
business days; and (2) the bidding period will be open for 10 business
days. The NPRM did not specify the timeframe for bids to be submitted.
We chose 10 business days, which should allow carriers sufficient time
to assimilate data and make decisions. The 10 business-day period is
not excessive and is intended to expedite the transaction process.
Fourth and as discussed earlier, carriers may advise the FAA of
their interest in obtaining Arrival Authorizations in the market and
request that the agency post the information that a carrier is seeking
Arrival Authorizations.
The FAA will post listings of Arrival Authorizations for sale or
[[Page 51394]]
http://www.Demand-Management-Airports.faa.gov. Users may register with the Web
site to receive immediate notification of information posted on this
site.
Pledging of Arrival Authorizations
United, Delta, U.S. Airways, and JP Morgan Chase & Co. (JP Morgan)
all commented unfavourably on the proposal's prohibition on the
pledging of Authorizations as collateral. They argued that preventing
the collateralization of these ``assets'' will not reduce barriers to
entry but rather contribute to the barriers. They contended that
carriers may need access to this financing option in order to purchase
Authorizations under the rule and that this prohibition eliminates this
option for affected carriers.
We have withdrawn the prohibition on pledging Arrival
Authorizations as collateral in this rule. We do not seek to eliminate
options available to carriers to secure needed financing. Arrival
Authorizations are an operating privilege and we recognize that the
buying, selling and leasing of these privileges may be advantageous to
facilitate the carriers' efficient use of these privileges.
As proposed, the final rule permits Arrival Authorizations to be
assigned only to eligible air carriers and not other entities. Since
collateralization arrangements are strictly a matter of contract
between the affected carriers and other parties, we will not record
changes to the holder/operator status to reflect any pledging of these
Arrival Authorizations. Carriers are free to structure the pledging of
these Authorizations, subject to other requirements of this rule.
International Arrivals
In the NPRM, we proposed the following two options for assigning
Arrival Authorizations to foreign air carriers:
Administrative Option--The FAA would accommodate requests by
foreign air carriers for new or additional access administratively. If
an Arrival Authorization was not available within the time period
requested by a foreign carrier, an Arrival Authorization would be
withdrawn from a domestic carrier to accommodate that request.
Elective Option--Foreign air carriers seeking additional Arrival
Authorizations above the initial assignment of Arrival Authorizations
could elect: (1) To obtain Arrival Authorizations as described above
under the Administrative Option; or (2) or obtain Arrival
Authorizations in the same manner prescribed to U.S. and Canadian air
carriers, which is through the blind market and the lottery mechanisms.
Operations by Canadian air carriers were excluded from these
proposed options because Annex II of the 1995 bilateral aviation
agreement between the U.S. and Canadian governments provides that
Canadian air carriers be treated in the same manner as U.S. air
carriers under airport access rules for domestic operations at O'Hare.
Therefore, arrivals at O'Hare from Canada by U.S. and Canadian air
carriers are assigned under the same procedures that apply to domestic
and transborder flights.
The proposal treated foreign air carriers differently than U.S. and
Canadian air carriers for several reasons. First, air service
agreements between U.S. and foreign governments obligate both parties
to ensure fair and equal opportunity to compete in a market. Second,
foreign air carrier operations have remained relatively constant over
the last several years while at the same time, domestic operations have
increased significantly. Third, U.S. air carriers have the ability to
make international service decisions based on their allocated base of
total Arrival Authorizations if additional Arrival Authorizations were
not available for assignment by the FAA. This is not an option for
foreign air carriers that have a limited presence at O'Hare. For most
international operations, Chicago's Midway Airport is not a practical
alternative airport for serving Chicago since Midway's runways could
not accommodate the wide body aircraft serving many of the
international points from O'Hare.
Other elements of the NPRM applicable to Arrival Authorizations
assigned to foreign air carriers, irrespective of the option, were: (1)
Initial Arrival Authorizations would be assigned to foreign air
carriers based on historical seasonal schedules; (2) Arrival
Authorizations could not be bought, sold, or leased; (3) Arrival
Authorizations would not be subject to a minimum usage requirement.
However, if they are not used for more than a 15-day period, under the
proposal they must be returned to the FAA.
The Department faced this issue previously under the HDR. At
O'Hare, foreign and domestic carriers were initially treated equally in
that slots were withdrawn to accommodate international requests from
both foreign and domestic carriers if not otherwise available. We
subsequently amended the HDR to limit withdrawals for international
operations for the benefit of carriers with 100 or more slots at
O'Hare. Congress later capped the total number of domestic slots that
could be withdrawn and reallocated for international service.
Concurrently, Congress also authorized the Secretary of Transportation
to grant exemptions from the HDR for foreign air carriers serving
O'Hare. The Secretary exercised this authority as needed and until May
2000, when the slot requirements for international flights were
eliminated at O'Hare.
Several commenters supported preferences or exemptions from the
established cap for international arrivals without distinguishing
between operations conducted by U.S. carriers and foreign air carriers.
KLM Royal Dutch Airlines, as one of two foreign carriers to
comment, did not favor any particular allocation option for foreign
carriers. KLM did, however, support the August 2004 Order and suggested
that the FAA follow IATA Worldwide Scheduling Guidelines, which most
countries follow in allocating slots at constrained airports throughout
the world. IATA expressed concern that the proposals could discriminate
between U.S. and foreign air carriers.
The other foreign air carrier to comment was Air France, who
strongly supported an administrative assignment for new Arrival
Authorizations and acknowledged that this could be accomplished under
either Option 1 or 2. Air France currently operates one daily passenger
flight between O'Hare and Paris, but has offered two such flights in
the past. Air France stated that initiating international service
requires significant investment and that foreign carriers may hesitate
to make such an investment if they are unsure they can obtain an
Arrival Authorization at O'Hare under the market or lottery systems.
Air France argued that it is necessary to guarantee foreign carriers
access to an Arrival Authorization at O'Hare should they decide to
expand service there. Air France did not oppose the proposed
prohibition on buying/selling, or leasing assigned Arrival
Authorizations; nor did it oppose the return of Arrival Authorizations
to the FAA if not used for more than 15 consecutive days.
American and United agreed that the allocation provisions should
not discriminate against foreign carriers, but argued that the proposed
administrative option unduly rewards foreign carriers at the expense of
U.S. carriers. Furthermore, they complained that they would be
restricted from adding new international services unless they reduced
domestic flights. They
[[Page 51395]]
submitted that foreign air carriers providing similar international
services would continue to receive preferred treatment, which places
U.S. carriers at a competitive disadvantage.
United also pointed out that Congress had previously prohibited the
Secretary of Transportation from withdrawing slots from domestic
carriers to accommodate international operations while O'Hare was
limited under the HDR. (See 49 U.S.C. 41714(b)(2)). United disputed our
reliance on international air services agreements as a rationale for
the proposed Administrative Option, observing that other countries do
not interpret the bilateral agreements as requiring them to make slots
available for U.S. air carriers. United commented that this proposal is
not in the national interest because it weakens an already unfavorable
trade balance by shifting carriage of international passengers (and
their revenue) from U.S. carriers to foreign corporations. United
prefers exempting all international arrivals, which would not arguably
violate any international air service agreement. Lastly, United noted
that U.S. carriers have been denied access to foreign airports when
capacity is limited.
The City also argued for exempting all international flights
because international operations are a small portion of the total
flights at O'Hare and that the gate, immigration and terminal
facilities at Terminal 5 would provide a natural limit to these
flights.
We have reviewed the number of international arrivals conducted by
foreign air carriers and domestic carriers during the peak hours.
Together, these arrivals account for six percent of total arrivals at
O'Hare. This six percent is almost equally divided between foreign air
carrier arrivals and U.S. air carriers. We note that while some foreign
air carriers have periodically dropped service, other foreign air
carriers have added service, such that the overall level has remained
constant for several scheduling seasons. International operations by
U.S. air carriers have also been relatively constant over the past
several years.
We do not agree with United's assertion that our reliance on
international air service agreements was erroneous and misguided. We
are bound by our agreements with foreign governments to ensure that the
flag carriers of each party have a fair and equal opportunity to
compete in the market.\28\ In particular, as the Department seeks to
expand Open Skies agreements, we do not want to adopt limits that might
preclude either domestic or foreign air carriers from taking advantage
of new opportunities. At the same time, we are mindful that U.S.
carriers are also constrained by facilities or slot constraints at some
foreign airports and do not always get to operate their preferred
schedules. We prefer to address those issues on a case-by-case basis
rather than set up a regulatory framework that makes U.S.-constrained
airports more difficult to access.
---------------------------------------------------------------------------
\28\ Access to serve the Chicago area must generally be through
O'Hare due to runway or facility constraints at other Chicago area
airports.
---------------------------------------------------------------------------
In view of the comments, we are adopting a revised approach that
treats all international arrivals the same, regardless of whether
operated by a foreign or domestic air carrier, a position which is also
consistent with international air service agreements. An Arrival
Authorization will be required for any international arrival at O'Hare
and will be assigned at the requested time or in the adjacent hour if
one is not otherwise available. Under the rule we may also assign a
time for new or rescheduled international arrivals within an hour of
the requested time if needed to address operational efficiencies and
facilitate schedule de-peaking.
As this approach does not involve any withdrawal of Arrival
Authorizations from domestic carriers to accommodate new international
arrivals, it may result in operations exceeding the adopted hourly
limits. In adopting this approach, we weighed the public interest in
maintaining our international obligations under various air service
agreements with our congestion and delay reduction goals of this rule.
Given the relative stability in the number of international arrivals
since 2002 and the limited duration of this rule, we do not expect a
dramatic increase in requests for Arrival Authorizations. As this rule
is an interim measure, it is expected that new airport capacity will
address this issue for the longer-term. We acknowledge that this
approach may have some impact on the congestion and delay reduction
goals of this rule. However, we believe that the public interest
supports the offset of our delay reduction goals to accommodate our
international obligations. We will consider the effect of any
additional international arrivals as we conduct the semi-annual
operational performance and capacity review.
As a result of this new approach in addressing international
arrivals, we must modify how we proposed to initially assign Arrival
Authorizations for domestic use and for international use initially
under this rule. In calculating the proposed cap of 88 arrivals per
hour, we included all international operations scheduled for August
2004 during the O'Hare schedule reduction meeting. Foreign air
carriers, except Canadian air carriers, were not affected by the FAA's
Order, and subsequently have added new flights and adjusted schedule
times that will be reflected in the initial assignment under this rule.
International operations by U.S. carriers were included in the August
2004 Order as part of the overall carrier limits, and each carrier
could choose the international market, domestic market, or transborder
Canadian market to serve within those limits.\29\ Consequently, we will
review each U.S. air carrier's operations under the August 2004 Order
and assign Arrival Authorizations as either domestic or international,
as appropriate. New international arrivals by U.S. carriers after the
effective date of this rule will be eligible for assignment above the
operational limits. The combined total of each U.S. air carriers'
(initially assigned) Arrival Authorizations (domestic and
international) will not exceed the total authorized for that carrier
under the Order. We will make a similar determination to assign Arrival
Authorizations for foreign air carrier operations using published
schedules or other information available to the FAA for the base for
the Summer 2006 and Winter 2006 scheduling seasons.
---------------------------------------------------------------------------
\29\ Canadian carriers' scheduled arrivals were limited by the
Order but do not include arrivals from points outside Canada.
Therefore, no adjustments are needed under this provision.
---------------------------------------------------------------------------
Beginning with the Summer 2007 scheduling season, and for every
season thereafter, we will publish a notice in the Federal Register
announcing the submission deadline for priority consideration for the
assignment of historic and new international arrivals. This is similar
to the IATA process followed by most slot-constrained airports outside
the U.S. In assigning Arrival Authorizations for international
arrivals, we expect to follow the procedures and processes of the IATA
Guidelines to the extent those Guidelines do not conflict with this
rule. All carriers must request Arrival Authorizations, in accordance
with the scheduling season and information published by the FAA in the
Federal Register.
As proposed, we adopt the provision that the Secretary of
Transportation may withhold the assignment of an Arrival Authorization
to any foreign air carrier of a country that does not provide
[[Page 51396]]
equivalent rights of access to its airports for U.S. air carriers.
As proposed, Arrival Authorizations assigned for international use
may not be bought, sold, leased or otherwise transferred. Carriers may,
however, trade these Arrival Authorizations assigned for international
use on a one-for-one basis. We clarify that domestic Arrival
Authorizations may be traded within the carrier's base subject to FAA
approval. Arrival Authorizations assigned for international arrivals
must be returned if not used for a 15-day period.
Lastly, we revise the definition of the scheduling seasons to
recognize the change in U.S. daylight saving time start and end dates
beginning in March 2007 (Energy Policy Act of 2005, Pub. L. 109-58).
Minimum Usage Requirements
In the NPRM, we sought comment on whether a minimum usage
requirement would be necessary, and if so, whether an 80 percent or 90
percent usage requirement over a bimonthly reporting period would be
appropriate. As an alternative to the above usage requirement, we
proposed a periodic withdrawal of the least used Arrival Authorizations
for redistribution.
The majority of commenters objected to having no usage requirement.
The City argued that the landing rights represent scarce and valuable
assets under this rule and that it is not prudent to omit a usage
requirement. Delta commented that this option presented the risk that
carriers that have more Arrival Authorizations than they can profitably
use will simply hoard them and waste valuable capacity.
DOJ agreed that a usage requirement could prevent Arrival
Authorizations from going totally unused, but argued that a usage
requirement was unlikely to prevent the hoarding of Arrival
Authorizations to deprive competitors of these assets. DOJ also
maintained that a usage requirement does nothing to increase the
liquidity in the market and allow entry by more efficient carriers.
Most commenters responded that a usage requirement in the 80-90
percent range is appropriate. U.S. Airways, American, Delta and
Independence Air supported the 80 percent requirement. The City, RAA
and America West supported a 90 percent standard. United supported a
usage requirement of 85 percent.
American contended that the rule should conform to international
minimum usage standards and seasonality. American supported an 80
percent usage standard, which is used by IATA and the European Union
(EU) slot regulations on a seasonal basis. American also argued that
since the FAA conceded in the NPRM that most slots (under the HDR) were
operated 90 percent of the time, it is nonsensical to use a new
standard over one that is already universally known and accepted. In
addition, the usage period should be consistent with the IATA
designated summer (seven months) and winter (five months) scheduling
seasons. American stated that domestic service patterns now follow the
seasonality patterns for international operations and that failure to
recognize this is not efficient or equitable. Consequently, under
American's suggestion, it would be logical to lose an Arrival
Authorization for a season, if a carrier is not using it for that
period, rather than force the carrier to inefficiently schedule a
flight just to avoid losing the Arrival Authorization.
While American's suggestion to adopt a usage period similar to the
IATA bi-annual scheduling season may be of some benefit, no other
carrier has indicated that a two-month reporting period was unworkable.
We also believe that the adoption of leasing provisions will assist
carriers that experience some seasonal fluctuations in that they may
choose to lease the Arrival Authorizations for the relevant period.
We conclude that a minimum usage requirement is necessary, as these
Arrival Authorizations will represent a scarce resource and our desire
is to ensure the efficient utilization of these privileges for the
duration of this rule. Our experience at O'Hare under the August 2004
Order is that some carriers did not utilize their authorities and this
resulted in unused capacity. Moreover, adoption of a minimum usage
standard complements the ability to lease Arrival Authorizations, which
is adopted in this rule and previously discussed.
There is not a marked difference in projected slot utilization at a
90 percent versus an 80 percent usage requirement over a two-month
reporting period. We reviewed scenarios of an Arrival Authorization
held Monday through Friday over a two-month reporting cycle and found
that the difference in usage from 80 to 90 percent resulted in
approximately 3-4 additional operations over the reporting period.
Carriers, both domestic and foreign, have a lot of experience with an
80 percent usage requirement, as provided under the HDR and
internationally. As American argued, most carriers exceed the 80
percent usage standard under the HDR, and we do not see that increasing
the standard will result in a more efficient utilization record that
warrants deviation from the present industry standard. Consequently,
this rule adopts an 80 percent minimum usage requirement over a two-
month reporting period.
There was no support in the comments for the alternative of
periodically withdrawing the least utilized Arrival Authorizations.
Comments viewed this option as disruptive to their businesses. Also,
the City pointed out that even with the one percent withdrawal, there
may still be ``inefficiently'' utilized Arrival Authorizations that are
not withdrawn because they are not in the bottom one percent.
In the NPRM, we proposed that those Arrival Authorizations assigned
to new entrants and limited incumbents via lottery would not be subject
to the usage requirement for the first 90 days after assignment. For
Arrival Authorizations assigned to incumbent carriers via lottery, the
usage requirement would be waived only for the first 60 days. United
argued all carriers experience the same issues in starting new service,
including the publishing, promotion and selling of that service and
that incumbents should not be afforded less time to deal with similar
issues. Furthermore, United argued that this waiver period should apply
to Arrival Authorizations obtained via purchase, not just via lottery.
We agree with United that different waiver periods are not
warranted and that the 90-day waiver period should apply to Arrival
Authorizations received by lottery and by purchase. We have determined
not to extend this waiver to Arrival Authorizations involved in a lease
because carriers involved in the lease transaction can determine the
transaction effective date to include this issue.
Arrival Authorizations assigned for international use are not
subject to the usage requirement. Arrival Authorizations assigned for
international use are allocated seasonally and must be returned to the
FAA if not used for more than a two-week period. We think that this
approach adequately addresses usage for these operations.
In addition, we proposed two methods for reassigning Arrival
Authorizations that do not meet a usage minimum, if adopted. Under the
first method, the agency would conduct a lottery consisting of two
rounds. In the first round, only new entrants and limited incumbents
would be permitted to participate. In the second round, any remaining
Arrival Authorizations would be assigned by lottery to incumbent
carriers at the airport.
[[Page 51397]]
Under the second method, carriers losing Arrival Authorizations for
failing to meet the usage requirement would be required to sell them
using the blind market process. New entrants and limited incumbents
would have preference in purchasing the subject Arrival Authorizations
and the proceeds of a sale would go to the air carrier that lost the
Arrival Authorizations. Any unsold Arrival Authorizations would be
returned to the carrier that lost them.
Both Delta and United preferred the option that would permit
carriers to be compensated for the loss of the Arrival Authorization,
particularly if the Arrival Authorization was purchased on the market,
rather than have the Arrival Authorizations withdrawn by the FAA.
Furthermore, Delta contended that the mandatory sale will ensure that
the Arrival Authorizations go to the highest bidder--a lottery makes no
such assurance.
We have reviewed this proposal in light of the other amendments
adopted in this rule and conclude that neither option is necessary.
Since this rule adopts a provision that permits leasing, carriers have
an option that will result in compensation, and that can address market
fluctuations, seasonality, and simple usage issues. Carriers are far
more likely to lease Arrival Authorizations, rather than entertain a
forced sale and loss of the them. Therefore, this rule provides that
Arrival Authorizations not meeting the usage requirement will be
withdrawn by the FAA for reassignment.
America West also commented that carriers may circumvent a usage
requirement by using Arrival Authorizations originally allocated for
large aircraft operations with small aircraft. Consequently, America
West requested that the rule provide that an Arrival Authorization will
be withdrawn if its use is converted from large aircraft to small
aircraft.
ACAA supported a 90 percent usage requirement for air carriers with
more than 50 Arrival Authorizations because large carriers have too
many options to protect Arrival Authorizations if the usage requirement
is lower.
We do not support America West's suggestion that Arrival
Authorizations for larger aircraft should receive different treatment
under our usage requirements. This rule does not divide Arrival
Authorizations into separate categories based on aircraft size.
Furthermore, the initial assignment and subsequent reassignment of
Arrival Authorizations does not contemplate aircraft size for the
particular operation. Unlike the HDR, carriers have complete discretion
under this rule to operate the aircraft they see fit for the service
using the Arrival Authorizations. Regulating the aircraft size to use
these Arrival Authorizations is unnecessary at this airport to meet the
stated objectives of this rulemaking.
Likewise, we have not adopted ACAA's suggestion that the 90 percent
usage requirement apply to air carriers with more than 50 Arrival
Authorizations. The purpose of the usage requirement is to ensure that
these resources are being used efficiently, consistently and
universally. The rule offers some opportunity to new entrants and
limited incumbents to gain new or additional access to O'Hare. ACAA's
proposal could undermine the efficiency goal of the universal usage
requirement, and would not necessarily result in additional
Authorizations being available for new entrant and limited incumbents.
The City stated that given their fluidity, scheduled cargo
operations, in comparison to schedule passenger operations, merit a
lower usage minimum. We disagree. As discussed above, if cargo
operators find that their scheduled operation cannot use the
frequencies for which they hold the Arrival Authorization, the carriers
are encouraged to make the frequencies available to other carriers via
leasing. We do not see a need to establish a separate usage requirement
for these flights.
In the NPRM, we proposed to waive the usage requirement for a
specific carrier in the event of a strike or labor dispute. Although we
did not receive any comments on this provision, upon reconsideration,
we have decided to withdraw this part of the proposal as the term,
``labor dispute'' was so broad that it could apply to the filing of a
grievance, a stop work action or other events that may or may not
result in a strike. By including the provision that permits waiver in
the event of a highly unusual and unpredictable condition that exceeds
5 consecutive days, the rule provides carriers with latitude and
flexibility to deal with unpredictable conditions, while maintaining
the integrity and purpose of the usage requirement.
Finally, we will waive the usage requirement for all carriers
through December 31, 2006, which covers the first two months reporting
period under the rule. The August 2004 Order does not contain any usage
requirement and some carriers are not fully utilizing their permitted
number of arrivals. Carriers typically complete their schedule planning
process several months in advance of actual operations and most
carriers have already finalized their November /December 2006
schedules. While it is possible that some flights might be added to
meet the usage rules, other carriers may decide to use the sale/lease
options under the rule. We conclude that a limited waiver of the usage
requirement is warranted to provide for minimal disruption of carrier
schedules during the transition from the August 2004 Order and the rule
adopted here. Therefore, the first report detailing usage of the
Arrival Authorizations will be for the January-February 2007 period.
Sunset Date
We proposed to terminate this rule on April 6, 2008. This date was
selected for several reasons: (1) The City had proposed an O'Hare
Modernization Program (OMP) that would increase the airport capacity
and reduce the level of delays at the airport and the first phase would
come on-line by the beginning of 2008 (the proposal was subsequently
approved in the FAA's Record of Decision for the OMP dated September
30, 2005); (2) improvements in the Instrument Landing System for
runways 27L and 27R are expected to improve the performance of the
airport in adverse weather conditions; and (3) the proposed date in
2008 would allow regulation to address the present conditions at the
airport until the benefits of these capacity enhancements are realized
at the airport. Alternatively, if the OMP does not move forward in a
timely manner, the proposed date would allow the FAA time to develop an
alternative to this rulemaking.
Some carriers questioned whether the rule would really be
temporary. The City opposed the sunset date and argued that the date is
too long for ``an invasive rule to constrain operations at O'Hare.''
The City preferred termination of the rule after one year of the rule's
effective date and argued that the sunset provision should include a
contingency on changes in operating conditions at O'Hare, i.e., if
operations significantly decrease, the rule would sunset.
As stated in the Notice, the agency's preferred approach to
reducing delay and congestion is to enhance airport infrastructure, so
that capacity meets demand. See, 49 U.S.C. 47101(a)(9). If the desired
capacity does not materialize within the timeframe of this rule, we may
consider other congestion management techniques to replace this rule.
We are also open to revisiting this date if changes to the airline
industry obviate the need for a congestion management rule at O'Hare.
We cannot support a one-year rule at this point, as there will not
be any measurable increase in capacity in such
[[Page 51398]]
a short period. We find it appropriate to extend the termination date
of this rule through October 31, 2008, to reflect the current schedule
for commissioning of the first runway (Runway 9L/27R). This date
coordinates the rule with end of the summer scheduling season and U.S.
daylight savings time, as amended by Public Law 109-58.\30\ Therefore,
we adopt October 31, 2008 at 9 p.m., as the sunset date for this rule.
---------------------------------------------------------------------------
\30\ Public Law 109-58 amends the start and end dates of U.S.
daylight savings time beginning March 2007.
---------------------------------------------------------------------------
Paperwork Reduction Act
As required by the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)), the FAA submitted a copy of the new information collection
requirements(s) in this final rule to the Office of Management and
Budget (OMB) for its review. OMB is still reviewing the submission and
will provide an OMB Control Number when the review is complete.
An agency may not collect or sponsor the collection of information,
nor may it impose an information collection requirement unless it
displays a currently valid OMB control number.
International Compatibility
In keeping with U.S. obligations under the Convention on
International Civil Aviation, it is FAA policy to comply with
International Civil Aviation Organization (ICAO) Standards and
Recommended Practices to the maximum extent practicable. The FAA has
determined that there are no ICAO Standards and Recommended Practices
that correspond to these regulations.
Economic Assessment, Regulatory Flexibility Determination, Trade Impact
Assessment, and Unfunded Mandates Assessment
Changes to Federal regulations must undergo several economic
analyses. First, Executive Order 12866 directs that each Federal agency
shall propose or adopt a regulation only upon a reasoned determination
that the benefits of the intended regulation justify its costs. Second,
the Regulatory Flexibility Act of 1980 (5 U.S.C. 5601, et seq.)
requires agencies to analyze the economic impact of regulatory changes
on small entities. Third, the Trade Agreements Act (19 U.S.C. 4 2531-
2533) prohibits agencies from setting standards that create unnecessary
obstacles to the foreign commerce of the United States. In developing
U.S. standards, this Trade Act requires agencies to consider
international standards and, where appropriate, to be the basis of U.S.
standards. Fourth, the Unfunded Mandate Reform Act of 1995 (Public Law
104-4) requires agencies to prepare a written assessment of the costs,
benefits, and other effects of proposed or final rules that include a
Federal mandate likely to result in the expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of $100
million or more annually (adjusted for inflation).
In conducting these analyses, FAA has determined this final rule
(1) Has benefits that justify its costs; is not an economically
significant regulatory action as defined by Executive Order 12866; and
is ``significant'' as defined in DOT's Regulatory Policies and
Procedures; (2) will not have a significant economic impact on a
substantial number of small entities; (3) will not adversely affect
international trade; and (4) will not impose an unfunded mandate on
State, local, or tribal governments, or on the private sector. These
analyses, set forth in this document, are summarized below.
Total Costs and Benefits of this Rulemaking
FAA estimates that this final rule will result in a 32% reduction
in delay at O'Hare, generating present value benefits of $475.6 million
relative to November 2003 delays.
The estimated present value cost of this final rule is less than
$1.0 million.
Who Is Potentially Affected by This Rulemaking
Operators of scheduled, domestic and Canadian flights at
O'Hare.
Domestic and foreign air carriers.
All communities, including small communities with air
service to O'Hare.
Passengers of scheduled, domestic and Canadian flights to
O'Hare.
Chicago Department of Aviation.
FAA Air Traffic Control.
Key Assumptions
Baseline Flight Operations--Official Airline Guide (OAG)
Schedule November 20, 2003 of 1,464 daily arrival flights (OAG plus 96
unscheduled).
Daily Flight Completion Factor: 97%/Daily Flight
Cancellation Factor: 3%.
No lost revenue due to cancelled flights--All Passengers
are rebooked or rerouted to their destination.
Delay improvements are 9.6 minutes per flight and
equivalent to a 32% improvement in delay. We derive delay improvements
from MITRE's Queuing Delay Model, which measures queuing delays against
the OAG flight schedule.
For this evaluation, the effective date is 10/29/06 and
the sunset date is 10/31/08. We adjust annual estimates to reflect the
1.5 days per week when the limits are not in effect (all-day Saturday
and until noon on Sunday).
Other Important Assumptions
Discount Rate--7%.
Assumes 2005 Current Year Dollars.
Final rule will sunset October 31, 2008.
Ground and Airborne average cost per hour--$1,935.
Passenger Value of Time--$28.60 per hour.
Alternatives We Have Considered
Alternative 1--This alternative would have let
the August 18, 2004, order expire on April 30, 2005. Based on history,
FAA expects that operators would most likely continue to expand
operations, further increasing airport delays.
Alternative 2--The FAA is continuing to explore
the feasibility of a market-based solution such as an auction or
congestion pricing.
Alternative 3--The FAA implements this final rule
providing an interim solution while capacity enhancement measures and
market-based mechanisms are reviewed.
Benefits of This Rulemaking
The primary benefits of this rule will be the airline and passenger
delay cost savings. The benefits reflect a prorating of the 5.5 days
per week for which the operational limits are in effect, and the flight
completion factor of 97%. The total estimated benefits, shown in table
1 are $475.6 million in present value dollars.
[[Page 51399]]
Table 1.--Total Present Value Benefits of Final Rule
----------------------------------------------------------------------------------------------------------------
Airline delay cost Passenger delay
savings cost savings Total benefits
----------------------------------------------------------------------------------------------------------------
2006................................................ $19,094,170 $21,212,339 $40,306,510
2007................................................ 111,337,400 124,436,227 235,773,627
2008................................................ 82,300,269 117,219,790 199,520,059
-----------------------------------------------------------
Total........................................... 212,731,839 262,868,357 475,600,196
----------------------------------------------------------------------------------------------------------------
The total airline delay cost savings of $212.7 million is shown in
Table 2. The total passenger delay costs savings of $262.9 million is
shown in Table 3.
Table 2.--Airline Delay Cost Saving
----------------------------------------------------------------------------------------------------------------
Avg total Avg total Avg
delay delay variable Prorated annual Prorated present
(minutes) (hours) per cost per airline delay value of airline
per day Day hour cost savings delay cost saving
----------------------------------------------------------------------------------------------------------------
2006............................... 13,772 230 $1,935 $20,430,762 $19,094,170
2007............................... 13,772 230 1,935 127,470,189 111,337,400
2008............................... 13,772 230 1,935 100,821,369 82,300,269
----------------------------------------------------------------------------
Total.......................... ........... ........... ........... 248,722,320 212,731,839
----------------------------------------------------------------------------------------------------------------
Table 3.--Passenger Delay Cost Savings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Annual
daily Prorated
Total Average Total Total hours Daily pax annual pax Prorated PV of
daily Average AC load Passengers Passengers Avg delay delay delay (prorated Pax value delay passenger pax delay
arrivals AC seats factor per flight per day arrival minutes hours days rule of time costs delay reduction
is in reduction
effect)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2006.................................... 1,420 104.3 0.728 75 107,827 9.6 1,035,142 17,252 3,864,528 $28.60 $493,417 $22,697,203 $21,212,339
2007.................................... 1,420 104.5 0.731 76 108,479 9.6 1,041,400 17,357 4,981,365 28.60 496,401 142,467,037 124,436,227
2008.................................... 1,420 104.9 0.734 76 109,341 9.6 1,049,677 17,495 1,399,569 28.60 500,346 143,599,283 117,219,790
-------------------------------------------------------------------------------------------------------------------------------------------------------
Total............................... ........ ........ ........ .......... .......... ......... ......... ......... ......... ......... ......... 308,763,523 262,868,357
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Costs of This Rulemaking
The major costs of this final rule cover the blind market costs
incurred by buyers and sellers of Arrivals Authorizations, the public
costs of developing and managing the blind market, and other
administrative and compliance costs. FAA believes that market pressures
as well as provisions in this rule should mitigate the potential impact
of this final rule on competition and airfares at O'Hare. The total
present value costs of less than $1.0 million are shown in the last
column of Table 4.
Table 4.--Present Values of Total Annual Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
FAA E-Bid FAA E-Bid Other
develop. E-Bid system admin. admin. Reporting Total costs
costs operating costs costs costs costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
2006............................................................... $147,196 $23,364 $25,037 $125,183 $29,684 $350,464
2007............................................................... 0 43,672 46,797 233,987 15,734 340,189
2008............................................................... 0 20,407 21,868 109,339 12,254 163,868
------------------------------------------------------------------------------------
Total.......................................................... 147,196 87,444 93,702 468,509 57,672 854,522
--------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory Flexibility Determination
The Regulatory Flexibility Act of 1980 (RFA) establishes ``as a
principle of regulatory issuance that agencies shall endeavor,
consistent with the objective of the rule and of applicable statutes,
to fit regulatory and informational requirements to the scale of the
business, organizations, and governmental jurisdictions subject to
regulation''. To achieve that principle, the RFA requires agencies to
solicit and consider flexible regulatory proposals and to explain the
rationale for their actions. The RFA covers a wide-range of small
entities, including small businesses, not-for-profit organizations, and
small governmental jurisdictions.
Agencies must perform a review to determine whether a proposed or
final rule will have a significant economic impact on a substantial
number of small entities. If the agency determines that it will, the
agency must prepare a regulatory flexibility analysis as described in
the Act.
However, if an agency determines that a proposed or final rule is
not expected to have a significant economic impact on a substantial
number of small entities, section 605(b) of the 1980 RFA provides that
the head of the agency may so certify and a regulatory flexibility
analysis is not required. The certification must include a statement
providing the factual basis for this
[[Page 51400]]
determination, and the reasoning should be clear. The basis for such
FAA determination follows.
The final rule affects all scheduled operators at O'Hare, more than
just a few of which are small entities (where ``small entities'' are
firms with 1,500 or fewer employees). The arrivals of all carriers
currently providing service at O'Hare will be accommodated, thereby
minimizing the impact on their schedules. For their given schedules,
this final rule will lower their fuel burn costs substantially by
reducing the number and magnitude of delays below those experienced
prior to the August 2004 Order.
If Arrival Authorizations are returned or withdrawn for nonuse, new
entrants and limited incumbents (many of which are likely to be small
entities) receive a preference in the reassignment of those
authorities. If additional (new) capacity becomes available during the
duration of this final rule, new entrants, limited incumbents and
incumbents have equal opportunity to receive additional Arrival
Authorizations through a lottery. Carriers with a limited number of
operations at O'Hare are also protected from withdrawal of Arrival
Authorizations if the FAA determines it is operationally necessary to
reduce the number of flights at the airport. Therefore, this rule
affords limited preference to small entity operators for the assignment
of available capacity and again favors these small entity operators if
airport operations are reduced.
In ``grandfathering'' the air carriers' existing schedules, the
final rule enables airlines to continue operating all existing air
service to airports of communities with populations less than 50,000.
Consequently, we do not expect this final rule to negatively impact
airports in small communities.
Therefore, the FAA certifies that this final rule will not have a
significant economic impact on a substantial number of small entities.
International Trade Impact Assessment
The Trade Agreement Act of 1979 prohibits Federal agencies from
establishing any standards or engaging in related activities that
create unnecessary obstacles to the foreign commerce of the United
States. Legitimate domestic objectives, such as safety, are not
considered unnecessary obstacles. The statute also requires
consideration of international standards and, where appropriate, that
they be the basis for U.S. standards. This rule excludes future growth
in non-Canadian international arrivals from the hourly caps imposed.
Thus, the FAA has assessed the potential effect of this final rule and
determined that it will not create unnecessary obstacles to the foreign
commerce of the United States.
Unfunded Mandates Assessment
The Unfunded Mandates Reform Act of 1995 (the Act) is intended,
among other things, to curb the practice of imposing unfunded Federal
mandates on State, local, and tribal governments. Title II of the Act
requires each Federal agency to prepare a written statement assessing
the effects of any Federal mandate in a proposed or final agency rule
that may result in an expenditure of $100 million or more (adjusted
annually for inflation) in any one year by State, local, and tribal
governments, in the aggregate, or by the private sector; such a mandate
is deemed to be a ``significant regulatory action.'' The FAA currently
uses an inflation-adjusted value of $128.1 million in lieu of $100
million.
This final rule does not contain such a mandate. Therefore, the
requirements of Title II of the Unfunded Mandate Reform Act of 1995 do
not apply.
Executive Order 13132, Federalism
The FAA has analyzed this final rule under the principles and
criteria of Executive Order 13132, Federalism. We determined that this
action will not have a substantial direct effect on the States, or the
relationship between the national Government and the States, or on the
distribution of power and responsibilities among the various levels of
government, and therefore does not have federalism implications.
Environmental Analysis
FAA Order 1050.1E identifies FAA actions that are categorically
excluded from preparation of an environmental assessment or
environmental impact statement under the National Environmental Policy
Act in the absence of extraordinary circumstances. The FAA has
determined this rulemaking action qualifies for the categorical
exclusion identified in paragraph 312F, Regulations, standards, and
exemptions (excluding those which if implemented may cause a
significant impact on the human environment). It has been determined
that no extraordinary circumstances exist that may cause a significant
impact and therefore no further environmental review is required.
Regulations That Significantly Affect Energy Supply, Distribution, or
Use
The FAA has analyzed this final rule under Executive Order 13211,
Actions Concerning Regulations that Significantly Affect Energy Supply,
Distribution, or Use (May 18, 2001). We have determined that it is not
a ``significant energy action'' under the executive order because it is
not a ``significant regulatory action'' under Executive Order 12866,
and it is not likely to have a significant adverse effect on the
supply, distribution, or use of energy.
List of Subjects in 14 CFR Part 93
Air traffic control, Airports, Alaska, Navigation (air), Reporting
and recordkeeping requirements.
The Amendment
0
In consideration of the foregoing, the Federal Aviation Administration
adds Subpart B to part 93 of Chapter II of Title 14, Code of Federal
Regulations, as follows:
0
1. The authority citation for this amendment continues to read as
follows:
Authority: 49 U.S.C. 106(g), 40103, 40106, 40109, 40113, 44502,
44514, 44701, 44719, 46301
0
2. Subpart B is added to read as follows:
Subpart B--Congestion and Delay Reduction at Chicago O'Hare
International Airport
Sec.
93.21 Applicability.
93.22 Definitions.
93.23 Arrival Authorizations.
93.24 [Reserved]
93.25 Initial assignment of Arrival Authorizations to U.S. and
Canadian air carriers for domestic and U.S./Canada transborder
service.
93.26 Reversion and withdrawal of Arrival Authorizations.
93.27 Sale and lease of Arrival Authorizations.
93.28 One-for-one trade of Arrival Authorizations.
93.29 International Arrival Authorizations.
93.30 Assignment provisions for domestic and U.S./Canada transborder
service.
93.31 Minimum usage requirement.
93.32 Administrative provisions.
93.33 [Reserved]
Subpart B--Congestion and Delay Reduction at Chicago O'Hare
International Airport
Sec. 93.21 Applicability.
(a) This subpart prescribes the air traffic rules for the arrival
of aircraft used for scheduled service, other than helicopters, at
Chicago's O'Hare International Airport (O'Hare).
(b) This subpart also prescribes procedures for the assignment,
transfer, sale, lease, and withdrawal of Arrival Authorizations issued
by the FAA for
[[Page 51401]]
scheduled operations by U.S. and foreign air carriers at O'Hare.
(c) The provisions of this subpart apply to O'Hare during the hours
of 7 a.m. through 8:59 p.m. Central Time, Monday through Friday, and 12
p.m. through 8:59 p.m. Central Time on Sunday. No person shall operate
any scheduled arrival into O'Hare during such hours without first
obtaining an Arrival Authorization in accordance with this subpart.
(d) Carriers that have Common Ownership shall be considered to be a
single U.S. air carrier or foreign air carrier for purposes of this
rule.
(e) The provisions of this subpart are applicable beginning October
29, 2006, and terminate at 9 p.m. on October 31, 2008.
Sec. 93.22 Definitions.
For the purposes of this subpart, the following definitions apply:
Arrival Authorization is the operational authority assigned by the
FAA to a U.S. or foreign air carrier to conduct one scheduled arrival
operation on a specific day of the week during a specific 30-minute
period at O'Hare.
Carrier is a U.S. air carrier, Canadian air carrier or foreign air
carrier with authority to conduct scheduled service at O'Hare under
Parts 121, 129, 135 of the Chapter and the appropriate economic
authority for scheduled service under Title 49 of the United States
Code.
Common Ownership with respect to two or more carriers means having
in common at least 50 percent beneficial ownership or control by the
same entity or entities.
Incumbent is any U.S. or Canadian air carrier that is not a New
Entrant or Limited Incumbent.
International Arrival Authorization is the operational authority
assigned by the FAA to a Carrier to conduct one scheduled arrival
operation at O'Hare from a foreign point or a continuation of a flight
that began at a foreign point, except for arrivals at O'Hare from
Canada by U.S. and Canadian air carriers.
Limited Incumbent is any U.S. or Canadian air carrier that holds or
operates, on its own behalf, 8 or fewer Arrival Authorizations provided
that it has not sold or otherwise transferred Arrival Authorizations,
other than one-for-one transfers permitted in this subpart. Any Limited
Incumbent that sells or otherwise transfers an Arrival Authorization
shall thereafter be treated as an Incumbent for purposes of this rule.
New Entrant is any U.S. or Canadian air carrier that does not hold
or operate, and has never held or operated any Arrival Authorization at
O'Hare, on its own behalf.
Preferred Lottery is a lottery conducted by the FAA to assign
Arrival Authorizations, with initial preference for New Entrants and
Limited Incumbents.
Scheduled Arrival is the arrival segment of any operation regularly
conducted by a carrier between O'Hare and another point regularly
served by that carrier.
Summer Scheduling Season is the period of time from the first
Sunday in April until the last Sunday in October. Beginning March 11,
2007, the summer scheduling season is the period of time from the
second Sunday in March until the first Sunday in November.
Winter Scheduling Season is the period of time from the last Sunday
in October until the first Sunday in April. Beginning March 11, 2007,
the winter scheduling season is the first Sunday in November until the
second Sunday in March.
Sec. 93.23 Arrival Authorizations.
(a) Except as otherwise established by the FAA under paragraph (d)
of this section and Sec. 93.29 of this subpart, the number of Arrival
Authorizations shall be limited to:
(1) 88 per hour between the hours of 7 a.m. and 7:59 p.m. Monday
through Friday and 12 p.m. and 7:59 p.m. Sunday,
(i) Not to exceed 50 during each half-hour beginning at 7 a.m. and
ending at 7:59 p.m.
(ii) Not to exceed 88 within any two consecutive 30-minute periods.
(2) 98 between 8 p.m. and 8:59 p.m. Monday through Friday, and
Sunday, not to exceed 50 between 8 p.m. and 8:29 p.m. and 50 between
8:30 p.m and 8:59 p.m.
(b) An Arrival Authorization is a temporary operating privilege
subject to FAA control. Only Carriers may hold Arrival Authorizations.
Arrival Authorizations may not be bought, sold, leased, or otherwise
transferred to another Carrier, except as provided in Sec. Sec. 93.27
and 93.28 of this subpart.
(c) Beginning six months from the effective date of this rule and
on each six-month anniversary thereafter, the FAA shall conduct a
review of existing capacity at O'Hare, to determine whether to increase
the number of Arrival Authorizations. The FAA will consider the
following factors:
(1) The number of delays;
(2) The length of delays;
(3) Weather conditions;
(4) On-time arrivals and departures;
(5) The number of actual arrival operations;
(6) Runway utilization and capacity plans; and
(7) Other factors relating to the efficient management of the
national air space system.
(d) Notwithstanding paragraph (a), the Administrator may increase
the number of Arrival Authorizations based on the review conducted in
paragraph (c) of this section.
Sec. 93.24 [Reserved]
Sec. 93.25 Initial assignment of Arrival Authorizations to U.S. and
Canadian air carriers for domestic and U.S./Canada transborder service.
(a) The FAA shall assign to each U.S. and Canadian air carrier,
conducting scheduled service at O'Hare, as of the effective date of
this rule, Arrival Authorizations for each scheduled arrival that it
published for either domestic or U.S./Canada transborder service for
any day during the 7-day period of November 1 through 7, 2004, as
evidenced by the FAA's records, not to exceed the peak-day limits for
each carrier established under the August 18, 2004, ``Order Limiting
Scheduled Operations at O'Hare International Airport.'' A carrier's
total assignment under this paragraph will be reduced accordingly by
any international Arrival Authorizations assigned under Sec. 93.29(a).
(b) If a U.S. or Canadian air carrier did not publish a scheduled
domestic or U.S./Canada transborder arrival during the period of time
referenced in paragraph (a) of this section, but was entitled to do so
under the August 18, 2004, ``Order Limiting Scheduled Operations at
O'Hare International Airport,'' and is conducting scheduled service at
O'Hare as of the effective date of this rule, a corresponding Arrival
Authorization shall be assigned for that arrival.
(c) Arrival Authorizations will be assigned to the U.S. or Canadian
air carrier that actually operated the flight regardless of any
codeshare or marketing arrangement unless such carrier did not market
the flight under its own code and the inventory of the flight was under
the control of another Carrier. If the inventory was under the control
of another Carrier, the FAA shall assign the Arrival Authorization to
that Carrier. Carriers may subsequently transfer Arrival Authorizations
for use by other Carriers under their marketing control in accordance
with Sec. 93.2(m).
(d) Any Arrival Authorization not assigned under paragraphs (a) or
(b) of this section will be assigned to carriers conducting scheduled
international service under Sec. 93.29. Any remaining
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Arrival Authorizations will be assigned by preferred lottery under
Sec. 93.30.
(e) The FAA Vice President, System Operations Services, is the
final decision-maker for determinations under this section.
Sec. 93.26 Reversion and withdrawal of Arrival Authorizations.
(a) A U.S. or Canadian air carrier's Arrival Authorizations
assigned under Sec. Sec. 93.25 or 93.27 revert automatically to the
FAA 30 days after the Carrier has ceased all operations at O'Hare for
any reason other than a strike.
(b) The FAA may withdraw or temporarily suspend Arrival
Authorizations at any time as a result of reduced airport capacity or
to fulfill operational needs. Whenever Arrival Authorizations must be
withdrawn, they will be withdrawn in the required 30-minute Arrival
Authorization time periods in accordance with the priority list
established under Sec. 93.32 of this subpart.
(c) Any Arrival Authorization that is withdrawn or temporarily
suspended under paragraph (b) will, if reassigned, be reassigned to the
Carrier from which it was taken, provided that the Carrier continues to
conduct scheduled operations at O'Hare.
(d) The FAA shall not withdraw or temporarily suspend under
paragraph (b) any Arrival Authorizations if the result would be to
reduce a Carrier's total number of Arrival Authorizations below eight.
(e) Except as otherwise provided in paragraph (a) of this section,
the FAA will notify the affected Carrier before withdrawing or
temporarily suspending any Arrival Authorization and specify the date
by which operations under the authorizations must cease. The FAA will
provide at least 45 days' notice unless otherwise required by
operational needs.
Sec. 93.27 Sale and lease of Arrival Authorizations.
(a) No U.S. or Canadian air carriers may sell or lease its Arrival
Authorizations at O'Hare except in accordance with the procedures in
this section and in the manner prescribed by the FAA. Carriers may not
buy, sell, lease or otherwise transfer control of Arrival
Authorizations assigned under Sec. 93.29.
(b) Only monetary consideration may be provided in any transaction
conducted under this section.
(c) New Entrants and Limited Incumbents may not sell, lease, or
otherwise transfer control of any Arrival Authorizations assigned
through a Preferred Lottery within 12 months of such assignment, except
to another New Entrant or Limited Incumbent. One-for-one trades to
other Carriers under Sec. 93.28 are permitted.
(d) A U.S. or Canadian air carrier seeking to sell or lease an
Arrival Authorization must provide the following information in writing
to the FAA:
(1) Arrival Authorization number and time;
(2) Frequency;
(3) Planned effective date(s) of transfer;
(4) Minimum reserve price, if established by the offering carrier;
(5) Other pertinent information, if applicable; and
(6) Carrier's authorized representative.
(e) The FAA will post a notice of the available Arrival
Authorization and specific information concerning the proposed sale or
lease transaction on the FAA Web site at http://www.fly.faa.gov. The
Web site will include information regarding registration to be advised
of posted transactions, and other relevant information pertaining to
this section. The FAA will post the notice within two business days
after receipt of all required information from the U.S or Canadian air
carrier offering the Arrival Authorization for sale or lease. The
notice will provide ten business days for bids to be received and will
specify a bid closing date and time. Only U.S. and Canadian air
carriers may bid on Arrival Authorizations. Information identifying the
Carrier providing the Arrival Authorization for sale or lease will not
be posted or released by the FAA until after the FAA has approved the
transfer.
(f) All bids must be sent to the FAA electronically, via the FAA
Web site, by the closing date and time, and no extensions of time will
be granted. Late bids will not be considered. All bids will be held
confidential, with each bidder certifying in a form acceptable to the
FAA that its bid has not been disclosed to any person not its agent.
(g) The FAA will forward the highest qualifying bid to the selling
or leasing U.S. or Canadian air carrier without identifying the bidder.
The selling or leasing Carrier will have up to three business days to
accept or reject the bid. The selling or leasing Carrier must notify
the FAA via the Web site or in writing of its acceptance no later than
5 p.m. Eastern Time on the third business day. If the selling or
leasing Carrier does not notify the FAA of its acceptance within the
allotted time, the transaction will terminate.
(h) Upon acceptance, the FAA will notify the U. S. or Canadian air
carrier, who submitted the highest bid, and request that the buyer/
lessee and the seller/lessor submit to the FAA the information (such as
Arrival Authorization number, frequency and effective date(s) of
transfer) required to transfer the Arrival Authorization.
(i) Each U.S. or Canadian air carrier must provide the FAA evidence
of its consent and each Carrier must certify that only monetary
consideration will be or has been exchanged.
(j) The FAA will approve requested transfers of Arrival
Authorizations that comply with these regulations. The recipient U.S.
or Canadian air carrier of the transfer may not use the Arrival
Authorization until the conditions in paragraph (i) of this section
have been met and the FAA has approved the transfer.
(k) The FAA will keep a record of all bids received and of each
Arrival Authorization transfer, including the identity of both Carriers
and the winning bid price, all of which will be made available to the
public.
(l) U.S. or Canadian air carriers may request the FAA post notice
that it is seeking to lease or purchase an Arrival Authorization at
O'Hare. The Carrier may submit information in writing or via the FAA's
Web site. This information may include the effective date, number or
timing of Arrival Authorizations sought, whether a Carrier is seeking
to purchase or lease, maximum price offered, or other pertinent
information. The FAA may edit any submissions, or choose not to post
certain information, in order to ensure the integrity of the
solicitation process. Information identifying the Carrier seeking an
Arrival Authorization for sale or lease will not be posted or released
by the FAA. The FAA will post such requests within two business days of
receipt for a period of at least 30 days. Any resulting offers to sell
or lease Arrival Authorizations shall be conducted in accordance with
this subsection.
(m) A U.S. or Canadian air carrier may transfer an Arrival
Authorization to another U.S. or Canadian air carrier that conducts
operations at O'Hare solely under the transferring Carrier's marketing
control, including the entire inventory of the flight. Each Carrier
must provide written evidence of its consent to the transfer. The FAA
will approve requested transfers that comply with these regulations.
The FAA Vice President, System Operations Services, is the final
decision-maker for determinations under this subsection. The recipient
Carrier of the transfer may not use the Arrival Authorization until the
FAA has provided written confirmation. A record of each Arrival
Authorization will be kept on file by the
[[Page 51403]]
FAA and made available to the public on request.
Sec. 93.28 One-for-one trade of Arrival Authorizations.
(a) Except as otherwise provided in this subpart, any Carrier may
exchange an Arrival Authorization it has been assigned with another
Carrier on a one-for-one basis for the purpose of conducting that
operation in a different half-hour time period.
(b) Written evidence of each Carrier's consent to the transfer must
be provided to the FAA.
(c) The FAA will approve requested transfers of Arrival
Authorizations that comply with these regulations. The recipient
Carrier of the transfer may not use the Arrival Authorization until
written confirmation has been received from the FAA.
(d) A U.S. or Canadian air carrier assigned Arrival Authorizations
under Sec. 93.29 may trade on a one-for-one basis within its own base
of Arrival Authorizations subject to FAA approval, provided that the
purpose is to operate the arrival flight from a foreign point outside
Canada in a different half-hour time period than assigned. The FAA must
confirm the transfer prior to operation.
(e) A record of each Arrival Authorization exchange will be kept on
file by the FAA and made available to the public upon request.
(f) Carriers participating in a one-for-one transfer must certify
to the FAA that no other consideration will be or has been provided for
the exchange.
Sec. 93.29 International Arrival Authorizations.
(a) Except as otherwise provided in paragraph (d) of this section,
the FAA shall make an initial assignment of Arrival Authorizations to
U.S. and Canadian carriers arriving from a foreign point, excluding
Canada, or any other foreign carrier arriving from a foreign point or
the continuation of a flight that begins at a foreign point for the
winter and summer scheduling seasons as follows. This section does not
apply to arrivals at O'Hare from Canada by U.S. or Canadian air
carriers.
(1) Winter Scheduling Season. Upon request, the FAA shall assign to
each Carrier that published a scheduled arrival during the Winter 2006
Scheduling Season, as evidenced by the FAA's records, a corresponding
Arrival Authorization for the Winter 2007 Scheduling Season.
(2) Summer Scheduling Season. Upon request, the FAA shall assign to
each Carrier that published a scheduled arrival for the Summer 2006
Scheduling Season, as evidenced by the FAA's records, a corresponding
Arrival Authorization for the Summer 2007 Scheduling Season.
(3) Arrival Authorizations will be assigned to the Carrier that
actually operated the flight regardless of any codeshare or marketing
arrangement unless the flight was predominately marketed, by contract,
under the control of another Carrier. If the flight was under the
marketing control of another Carrier or the entire inventory was under
the control of another Carrier, the FAA shall assign the Arrival
Authorization to that Carrier.
(4) The FAA Vice President, System Operations Services, is the
final decision-maker for determinations under this subsection.
(b) Notwithstanding the limit on Arrival Authorization in Sec.
93.23(a), any U.S. or Canadian air carrier arriving at O'Hare from a
foreign point, excluding Canada, shall be assigned an Arrival
Authorization under this section for that flight.
(c) Notwithstanding the limit on Arrival Authorizations in Sec.
93.23(a), any non-Canadian, foreign air carrier conducting scheduled
service and arriving at O'Hare shall be assigned an Arrival
Authorization under this section for that flight.
(d) The Department of Transportation reserves the right to withhold
the assignment of an Arrival Authorization to any foreign air carrier
of a country that does not provide equivalent rights of access to its
airports for U.S. air carriers, as determined by the Secretary of
Transportation.
(e) For each scheduling season, Carriers must request Arrival
Authorizations under this section in accordance with the procedures
announced by the FAA in the Federal Register. A Carrier may request to
operate more flights from foreign points than the number for which it
received Arrival Authorizations under Sec. 93.29(a) or to operate
historic arrivals in a different half-hour than initially assigned for
the previous corresponding scheduling season. The Arrival
Authorizations will be assigned at the time requested unless:
(1) An Arrival Authorization is available within one hour of the
requested time, in which case, the unassigned Arrival Authorization
will be used to satisfy the request; or
(2) Operational efficiencies support assignment within one hour of
the requested period. The FAA Vice President, System Operations
Services, is the final decision-maker for determinations under this
subsection.
(f) Each request for Arrival Authorizations under this section
shall specify the complete flight information including the carrier
identifier, flight number, complete flight itinerary, frequency,
scheduled arrival time, aircraft and service type, effective dates and
whether the Arrival Authorization is for a new or historic flight.
(g) Arrival Authorizations assigned under this section cannot be
bought, sold, leased or transferred under Sec. 93.27 but subject to
FAA approval may be traded on a one-for-one basis under Sec. 93.28 to
meet the Carrier's operational needs.
(h) Arrival Authorizations assigned under this section are not
subject to minimum usage requirements of Sec. 93.31 of this subpart
but will revert to the FAA if not used for 15 consecutive days. Arrival
Authorizations assigned under this section may only be used for a
flight arriving from a foreign point or for non-Canadian, foreign air
carriers, the continuation of a flight that begins at a foreign point.
Sec. 93.30 Assignment provisions for domestic and U.S./Canada
transborder service.
(a) Whenever the FAA has determined that sufficient Arrival
Authorizations are available, they will be assigned by lottery in
accordance with this section. Only U.S. and Canadian air carriers are
eligible to participate in a lottery. U.S. and Canadian air carriers
must hold appropriate economic authority for scheduled service under
Title 49 of the U.S.C. and FAA operating authority under parts 121,
129, or 135 of this chapter to select Arrival Authorizations in a
lottery.
(b) Arrival Authorizations not assigned under Sec. 93.25, or
returned to the FAA under Sec. Sec. 93.26(a) or 93.31 for reassignment
shall be assigned by a Preferred Lottery.
(c) Any Arrival Authorization available as the result of an
increase in the hourly limits under Sec. 93.23(a) of this part from 88
Arrival Authorizations to 89 or 90 shall be assigned by Preferred
Lottery.
(d) Any Arrival Authorizations available as the result of an
increase above 90 in the hourly limits specified in Sec. 93.23(a) of
this subpart shall be assigned by lottery that is open to all U.S. and
Canadian air carriers eligible to participate.
(e) The FAA will publish a notice in the Federal Register
announcing the lottery dates and any special procedures for the
lotteries.
(f) Any U.S. or Canadian air carrier seeking to participate in any
lottery must notify the FAA in writing, and
[[Page 51404]]
such notification must be received by the FAA 15 days prior to the
lottery date. The U.S. or Canadian air carrier must specify if it is
requesting to participate in a lottery as a New Entrant or Limited
Incumbent. The U.S. or Canadian air carrier must also disclose in its
notification whether it has Common Ownership with any other Carrier
and, if so, identify such Carrier.
(g) A random lottery shall be held to determine the order in which
participating Carriers shall select an Arrival Authorization.
(h) In any Preferred Lottery, each New Entrant and Limited
Incumbent will have the opportunity to select Arrival Authorizations,
if available as provided in paragraph (i) of this section, until it
holds a total of eight Arrival Authorizations. Arrival Authorizations
remaining after all New Entrants and Limited Incumbents have been
accommodated may be assigned to any other Carrier participating in the
lottery. Arrival Authorizations remaining after all New Entrants and
Limited Incumbents have been accommodated may be assigned to any U.S.
or Canadian air carrier participating in the lottery for a minimum of
12 months, and then until the next lottery, when such Arrival
Authorizations would again be available on a preferred basis to New
Entrants and Limited Incumbents.
(i) At the lottery, each Carrier must make its selection within 5
minutes after being called or it shall lose its turn. If Arrival
Authorizations still remain after each Carrier has had an opportunity
to select Arrival Authorizations, the assignment sequence will be
repeated in the same order. A Carrier may select one Arrival
Authorization during each sequence, except that New Entrants may select
two Arrival Authorizations, if available, in the first sequence of a
Preferred Lottery.
(j) If there are available Arrival Authorizations for a temporary
period, for example, Arrival Authorizations pending assignment in a
lottery or international arrivals that are temporarily returned, the
FAA may assign these Authorizations on a non-permanent, first-come,
first-served basis.
Sec. 93.31 Minimum usage requirement.
(a) Except as provided in Sec. 93.29 and paragraphs (b) and (c) of
this section, any Arrival Authorizations not used at least 80 percent
of the time over a two-month period shall be withdrawn by the FAA.
(b) Paragraph (a) of this section does not apply to Arrival
Authorizations obtained under Sec. 93.30 or bought under Sec. 93.27
during the first 90 days after assignment.
(c) Paragraph (a) of this section does not apply to Arrival
Authorizations of U.S. or Canadian air carrier forced by a strike to
cease operations using those Arrival Authorizations.
(d) Every U.S. and Canadian air carrier holding Arrival
Authorizations shall forward in writing to the FAA Slot Administration
Office in a format specified by the FAA a list of all Arrival
Authorizations held by the Carrier along with a listing of the Arrival
Authorizations actually operated for each day of the 2-month reporting
period within 14 days after the last day of the 2-month reporting
period beginning January 1 and every 2 months thereafter. The report
shall identify for each assigned Arrival Authorization the withdrawal
priority number and half-hour period, the flight number, 3-letter
identifier of the operating Carrier used for air traffic control
communications, scheduled time of operation, origin airport, and
whether a scheduled arrival was actually operated by the Carrier on a
specified day. The report shall identify any Common Ownership or
control of, by, or with any other carrier. A senior official of the
Carrier shall sign the report.
(e) The Administrator may waive the requirements of paragraph (a)
of this section in the event of a highly unusual and unpredictable
condition which is beyond the control of the Carrier and which exists
for a period of 5 consecutive days or more. Examples of conditions that
could justify waiver under this paragraph are weather conditions that
result in the restricted operation of an airport for an extended period
of time or the grounding of any aircraft type.
(f) The FAA will treat as used any Arrival Authorization held by a
carrier on Thanksgiving Day, the Friday following Thanksgiving Day, and
the period from December 24 through the first Sunday in January.
Sec. 93.32 Administrative provisions.
(a) The FAA will assign, by random lottery, withdrawal priority
numbers for the recall priority of Arrival Authorizations at O'Hare.
The lowest numbered Arrival Authorization will be the last withdrawn.
Newly created Arrival Authorizations will be assigned a priority
withdrawal number and that number will be higher than any other Arrival
Authorization withdrawal number previously assigned. Each Arrival
Authorization will be assigned a designation consisting of the
applicable withdrawal priority number, and the 30-minute time period
for the Arrival Authorization. The designation will also indicate, as
appropriate, if the Arrival Authorization is daily or for certain days
of the week only; and is a summer or winter Arrival Authorization.
(b) All transactions regarding Arrival Authorizations under this
subpart must be in a written or electronic format approved by the FAA.
Sec. 93.33 [Reserved]
Issued in Washington, DC, on August 21, 2006.
Marion C. Blakey,
Administrator.
[FR Doc. 06-7138 Filed 8-23-06; 9:00 am]
BILLING CODE 4910-13-P